8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported):  August 5, 2008

ZAP

(Exact name of Registrant as specified in its charter)

California	001-32534		94-3210624
(State or other jurisdiction of incorporation or organization)	Commission File Number		IRS Employer Identification Number
501 Fourth Street Santa Rosa, CA		95401
(Address of principal executive offices)		(Zip Code)

(707) 525-8658

(Registrant’s telephone number, including area code)

not applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ZAP

This Current Report on Form 8-K and other reports filed by the Registrant from time to time with the Securities and Exchange Commission (collectively the “Filings”) contain forward looking statements and information that are based upon beliefs of, and information currently available to, the Registrant’s management, as well as estimates and assumptions made by the Registrant’s management. When used in the Filings the words “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan” or the negative of these terms and similar expressions as they relate to the Registrant or the Registrant’s management identify forward looking statements. Such statements reflect the current view of the Registrant with respect to future events and are subject to risks, uncertainties, assumptions and other factors relating to the Registrant’s industry, operations and results of operations and any businesses that may be acquired by the Registrant. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

Item 1.01     Entry into a Material Definitive Agreement

On July 30, 2008, ZAP (the “Company”) executed a Promissory Note for a credit line (the “Note”) and a Deed of Trust, Assignment of Leases and Rents and Security Agreement and Fixture Filing (the “Security Agreement”), both in favor of Al Yousuf LLC (the “Lender”).

The Al Yousuf Group is a Dubai-based conglomerate and a major shareholder of ZAP. The President of Al Yousuf LLC is Mr. Eqbal Al Yousuf who is also the Chairman of the Board of ZAP.

The following description is a summary of the material terms and conditions of both the Note and the Security Agreement. The summary is not intended to be complete and it is qualified in its entirety by reference to the Note and the Security Agreement included as Exhibits 10.1 and 10.2 to this report and incorporated herein by reference. Capitalized terms not defined herein have the meaning ascribed to them in the Note and the Security Agreement.

The maximum principal loan under the Note is $10,000,000.  The initial outstanding principal sum advanced to the Company is $1,760,000.  Advances shall be for (i) the purposes of inventory from June 1, 2008 consistent with the currently applicable budget of the Company, as approved by its board of directors (an “Inventory Advance”) or (ii) general working capital to be used consistently with the Company’s budget (a “Working Capital Advance”).  The interest rate shall accrue daily at a rate per annum equal to the greater of (i) one month LIBOR plus 3% per annum and (ii) eight percent (8.00%) per annum, commencing on the date of the Note.

The Note matures February 28, 2010. Interest only payments are due under the Note monthly commencing August 30, 2008.  Repayment of an Inventory Advance is due four (4) months after the date of such Advance.  Repayment of a Working Capital Advance is due six (6) months after the date of such Advance.  The repayment term may be extended upon written request of the Company and at the Lender’s sole discretion. The Note is pre-payable in whole or in part without penalty and upon 30 days’ written notice to Lender.

The Note contains customary Events of Default, including but not limited to the following: (i) failure by the Company to make any scheduled payment of principal, interest or other amounts due under the Note, (ii) failure to pay-off the Note upon the Maturity Date, (iii) any representation or warranty made in the Loan Documents by the Company being found false in any material respect, (iv) consent by the Company to appoint a conservator or liquidator in a bankruptcy proceeding relating to the Company or all or substantially all of its assets and (v) failure of the Company to maintain insurance required pursuant to the Loan Documents.  Upon the occurrence of an Event of Default, the Note shall become due and payable and the interest rate shall increase by 3.00% per annum.

All principal and interest due under the Note is secured by certain of the Company’s real property, a legal description of which is further described in the Security Agreement.

Item 2.03     Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The disclosure in response to Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.

Item 9.01     Financial Statements and Exhibits

(d)   Exhibits
Exhibit Number	Exhibit Title or Description
10.1	Promissory Note by Zap in favor of Al Yousuf LLC, dated July 30, 2008
10.2	Deed of Trust, Assignment of Leases and Rents and Security Agreement and Fixture Filing by Zap to Fidelity National Title Company in favor of Al Yousuf LLC, dated July 30, 2008

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ZAP
Date:   August 5, 2008	By:	/s/ Steven M. Schneider
		Steven M. Schneider
		Chief Executive Officer

EX-10.1

EXHIBIT 10.1

EXECUTION VERSION

PROMISSORY NOTE

Initial Principal Sum: $1,760,000

Maximum Principal Sum: $10,000,000 

July 30, 2008

FOR VALUE RECEIVED, Zap, a California corporation (“Maker”), promises to pay to the order of Al Yousuf LLC (together with any subsequent holder of this Promissory Note (this “Note”), and their respective successors and assigns, “Holder”) at such address as Holder may from time to time designate in writing, the principal sum outstanding from time to time hereunder as provided below in paragraph 2 (the “Debt”) together with interest thereon and all other sums due and payable under any Loan Document; such principal and other sums to be calculated and payable as provided in this Note. Capitalized terms used herein without definition shall have the meanings ascribed to such terms in Exhibit A, attached hereto.

Maker agrees to pay the principal sum of this Note together with interest thereon and/or all other sums due and payable under any Loan Document in accordance with the following terms and conditions:

1. Interest Rate.Interest shall accrue daily on the Debt at a rate per annum equal to the greater of (i) One-Month LIBOR plus 3% per annum and (ii) eight percent (8.00%) per annum (the “Interest Rate”), commencing on the date of this Note; provided, however, that upon the occurrence of an Event of Default the Interest Rate shall increase as described in paragraph 4 hereof. Interest shall be computed on the actual number of days elapsed based on a 360 day year.

2. Principal.The initial outstanding principal sum of the Debt shall be equal to one million, seven hundred sixty thousand dollars ($1,760,000), which amount shall be released from escrow and delivered to Maker in accordance with the escrow instructions delivered by the Holder to the escrow agent, Fidelity National Title Company . Maker may request additional advances of the principal sum of the Debt evidenced by this Note (each, an “Advance”) from time to time by submitting to Holder a written request signed by a duly authorized representative of the Maker (each, a “Request for Advance”). Advances shall be for the purposes of (x) the purchase of inventory from June 1, 2008 consistent with the currently applicable budget approved by the board of directors of Maker (“Maker’s Budget”) (such Advances, “Inventory Advances”) or (y) general working capital to be used consistent with Maker’s Budget (such Advances, “Working Capital Advances”). Each Request for Advance shall include a written statement certified by a duly authorized representative of the Maker (each, a “Certificate”) describing in reasonable detail how the Advance will be used either for purchases of inventory or as general working capital, in either case consistent with Maker’s Budget. Holder shall be obligated to make an Advance within twelve (12) calendar days of the receipt of a Request for

Advance and corresponding Certificate if (i) the amount of the requested Advance is not less than fifty thousand dollars ($50,000), (ii) the total of all such Advances (including the amount of the proposed Advance) and the initial outstanding principal sum does not exceed ten million dollars ($10,000,000), (iii) no Event of Default has occurred, (iv) no material adverse change occurs in the Maker’s assets, liabilities, financial position or business, (v) the date of the request is on or before July 30, 2009, and (vi) Maker shall have provided to Holder any additional deliverables reasonably required by Holder.

3.Payments.Maker shall make the following payments to Holder:

(a)On August 30, 2008 and on the same calendar day of each calendar month (or, in the case of the month of February, on the last day of the month) (each, a “Payment Date”) through and including the Payment Date occurring in February 2010, Maker shall pay to Holder a monthly payment of interest only equal to the sum of, for each day in the Interest Accrual Period ending on the calendar day preceding such Payment Date, the product of (x) the aggregate outstanding principal sum of the Debt on such day, (y) the Interest Rate on such day and (z) 1/3 60.

(b)Subject to paragraph (d) below, with respect to each Inventory Advance made hereunder, the Maker shall make a payment to Holder of the outstanding principal sum of such Advance on the date which occurs four (4) months from the making of such Advance; provided, that the date of such payment may be extended at the request of the Maker if the Holder provides its prior written consent thereto, which consent shall be delivered or withheld in the Holder’s sole discretion.

(c)Subject to paragraph (d) below, with respect to each Working Capital Advance made hereunder, on the date which occurs six (6) months after the making of such Advance, the Maker shall make a payment to Holder of the outstanding principal sum of such Advance.

(d)On the Maturity Date, Maker shall pay to Holder a payment in an amount equal to the sum of (i) interest accrued on the Debt during the Interest Accrual Period ending on the calendar day preceding the Maturity Date (as determined above in paragraph (a)) and (ii) the aggregate outstanding principal sum of the Debt.

(e)The Debt shall be prepayable in whole or in part by the Maker at its option without penalty upon its providing 30 days written notice to Holder of its election to do so.

4.Gross-up.In addition, Maker agrees to the following:

(a) Subject to clause (b) below, all payments by the Maker to the Holder hereunder shall be made in U.S. Dollars and without set-off or counterclaim, fully grossed up for the amount of any taxes, levies or imposts imposed by any U.S. Governmental Authority to the extent not explicitly

2

excluded herein. The Maker’s obligations hereunder shall not be satisfied by any tender or recovery of another currency except to the extent such tender or recovery results in receipt of the full amount of U.S. Dollars.

(b) Except to the extent required by applicable law, any and all payments and deposits required to be made hereunder, under any other Loan Document or under any instrument delivered hereunder or thereunder to the Holder or otherwise hereunder or thereunder by the Maker shall be made free and clear of, and without deduction for, any and all present or future Taxes or any other taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto (other than any such Excluded Taxes). If the Maker shall be required by law to make any such deduction, (i) the Maker shall make an additional payment to the Holder, in an amount sufficient such that, after making all required deductions (including deductions applicable to additional sums payable under this Section 4(b)), the Holder receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Maker shall make such deductions and (iii) the Maker shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.

5. Costs and Expenses.The Maker shall promptly pay all expenses in connection with the making and closing of the Loan Documents, including, without limitation, all charges for all report fees (including property condition, structural, engineering and termite), title examination, title insurance and survey, appraisal, recording and filing fees, inspection fees, mortgage and documentary stamp taxes and mortgage recording taxes and fees, if any, note intangible taxes, if any, costs of tax lien searches, brokerage fees and commissions, the reasonable fees and costs charged by Holder’s counsel (including Holder’s local counsel, if any), all of Holder’s out-of-pocket expenses in connection with the Loan Documents and the Debt, and to pay interest (accrued at the Interest Rate) on any escrowed funds held overnight. The Maker covenants to pay all amounts required to be paid by the Maker under this Section 5 within ten (10) days after written demand by the Holder.

6. Event of Default; Default Interest; Late Charge.Upon the occurrence of an Event of Default, (a) the Debt shall become due and payable, and (b) the Interest Rate shall increase by three percent (3.00%) per annum. Maker will also pay to Holder, after an Event of Default occurs, in addition to the amount due, all reasonable costs of collecting, securing, or attempting to collect or secure this Note or any other Loan Document, including, without limitation, court costs and reasonable attorneys’ fees (including reasonable attorneys’ fees on any appeal by either Maker or Holder and in any bankruptcy proceedings).

7.Representations and Warranties.Maker represents and warrants to Holder as of the Closing Date and as of each date on which an additional Advance is made hereunder as follows:

(a)  Organization.Maker (a) is a duly organized and validly existing corporation in good standing under the laws of the State of California, (b) is duly qualified to do

3

business in each jurisdiction in which the nature of its business or the Mortgaged Property makes such qualification necessary, (c) has the requisite power and authority to carry on its business as now being conducted, and (d) has the requisite power to execute and deliver, and perform its obligations under, the Loan Documents.

(b)   Authorization.The execution and delivery by Maker of the Loan Documents, Maker’s performance of its obligations thereunder and the creation of the liens provided for in the Loan Documents (a) have been duly authorized by all requisite action on the part of Maker, (b) will not violate any provision of any applicable legal requirements, and (c) will not be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or result in the creation or imposition of any lien of any nature whatsoever upon any of the property or assets of Maker pursuant to, any indenture or agreement or instrument. Except for those obtained or filed on or prior to the Closing Date, Maker is not required to obtain any consent, approval or authorization from, or to file any declaration or statement with, any governmental authority in connection with or as a condition to the execution, delivery or performance of the Loan Documents. The Loan Documents to which Maker is a party have been duly executed and delivered by the Maker.

(c)   Enforceability.The Loan Documents executed by Maker are the legal, valid and binding obligations of Maker, enforceable against Maker in accordance with their terms, subject only to bankruptcy, insolvency and other limitations on creditors’ rights generally and to equitable principles. Such Loan Documents are, as of the Closing Date, not subject to any right of rescission, set-off, counterclaim or defense by Maker, including the defense of usury.

(d)   Litigation.There are no actions, suits or proceedings at law or in equity by or before any governmental authority or other agency now pending and served or, to Maker’s knowledge, threatened, involving or concerning Maker or the Mortgaged Property.

(e)   Full and Accurate Disclosure.No statement of fact made by or on behalf of Maker in the Loan Documents or in any other document or certificate delivered to Holder by Maker contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading. There is no fact presently known to Maker which has not been disclosed to Holder which materially adversely affects, nor as far as Maker can foresee, might materially adversely affect the business, operations or condition (financial or otherwise) of Maker. Maker has not incurred any obligation or liability, contingent or otherwise, not reflected in such financial data which might materially adversely affect its business operations or the Mortgaged Property.

(f)   Compliance.To Maker’s knowledge, Maker, the Mortgaged Property and Maker’s use thereof and operations thereat comply in all material respects with all applicable legal requirements. Maker has obtained (in its own name) all permits necessary to

4

use and operate the Mortgaged Property, and all such permits are in full force and effect.

(g)   Not Foreign Person.Maker is not a “foreign person” within the meaning of § 1445(f)(3) of the Code.

(h)   Investment Company Act; Public Utility Holding Company Act.Maker is not (i) an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended, (ii) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.

  (i)  Title to the Mortgaged Property; Liens.Maker owns good, indefeasible, marketable and insurable title to the Mortgaged Property, free and clear of all liens, other than the liens contemplated by the Loan Documents. The Deed of Trust creates a valid and enforceable first lien on the Mortgaged Property. and a valid and enforceable first priority security interest in the personal property constituting part of the Mortgaged Property, subject to no Liens other than the Permitted Encumbrances.

(j)   Condemnation.No taking has been commenced or, to Maker’s knowledge, is contemplated with respect to all or any portion of the Mortgaged Property or for the relocation of roadways providing access to the Mortgaged Property.

(k)   Utilities and Public Access.The Mortgaged Property has adequate rights of access to public ways and is served by all utilities required for the current use thereof.

(l)   Physical Condition.The Mortgaged Property is free of material structural defects and all building systems contained therein are in good working order in all material respects subject to ordinary wear and tear.

(m)   Title Insurance.The Mortgaged Property is covered by an American Land Title Association mortgagee’s title insurance policy insuring a valid first lien on the Mortgaged Property, which (a) is in full force and effect, (b) is freely assignable to and will inure to the benefit of Holder, (c) has been paid in full, (d) is issued by a title company licensed in the State where the Mortgaged Property is located, (e) has had no claims made against it, (f) contains no exclusions for (i) access or (ii) survey, and (g) lists only the security interests related to this transaction as exceptions.

8.    Covenants.

Maker covenants and agrees that, from the Closing Date and until payment in full of the Debt:

5

(a)   Compliance with Legal Requirements; Impositions and Other Claims;Contests.Maker shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence, rights, licenses, permits and franchises necessary for the conduct of its business and comply in all respects with all applicable legal requirements, contracts, permits, and private covenants, conditions and restrictions that at any time apply to Maker or the Mortgaged Property. Maker shall notify Holder promptly of any written notice or order that Maker receives from any governmental authority relating to Maker’s failure to comply with such applicable legal requirements.

(b)   Maintenance; Waste; Alterations.Maker shall at all times keep the Mortgaged Property in good repair, working order and condition, except for reasonable wear and use. Maker shall not permit improvements, equipment or inventory to be removed or demolished or otherwise altered (provided, however, that Maker may remove, demolish or alter worn out or obsolete improvements, equipment and inventory that are promptly replaced with improvements, equipment or inventory, as applicable, of equivalent value and functionality). Maker shall not perform any material alteration unless approved in writing by Holder in Holder’s reasonable discretion. Maker shall reimburse Holder for all actual costs and expenses incurred by Holder, including the fees charged by any professional engaged by Holder in connection with any such material alteration.

(c)   Access to Mortgaged Property and Records.Maker shall permit agents, representatives and employees of Holder (at Holder’s cost and expense if no Event of Default has occurred), to inspect (a) the Mortgaged Property or any part thereof, and (b) such books, records and accounts of Maker and to make such copies or extracts thereof as Holder shall desire, in each case at such reasonable times as may be requested by Holder upon reasonable advance notice, subject to the rights of tenants under leases.

(d)   Financial and Other Reporting.Maker shall keep and maintain or shall cause to be kept and maintained, on a fiscal year basis, in accordance with generally accepted accounting principles consistently applied, books, records and accounts. Maker shall furnish to Holder: (i) annually within ninety (90) days following the end of each fiscal year, a copy of Maker’s audited financial statements for such period and (ii) on a weekly basis within seven (7) days of the end of each calendar week, a reasonably detailed statement of cash flows, together with such reasonable supporting documentation and such other information or reports as shall be requested by Holder.

All financial statements and other documents to be delivered pursuant to this Agreement shall (A) be in form and substance acceptable to Holder in its reasonable discretion, (B) be prepared in accordance with generally accepted accounting principles consistently applied, and (C) be certified by Maker as being true, correct, complete and accurate in all material respects and fairly reflecting the results of operations and financial condition of Maker for the relevant period, as applicable.

6

(e)   Place of Business; State of Organization.Maker shall not change its (a) principal place of business or place where its books and records are kept, or (b) the jurisdiction in which it is organized, in each case without giving Holder at least thirty (30) days’ prior written notice thereof and promptly providing Holder such information as Holder may reasonably request in connection therewith.

(f)   Zoning; Joint Assessment.Maker shall not materially change the Mortgaged Property’s use or initiate, join in or consent to any (a) change in any private restrictive covenant, zoning ordinance or other public or private restrictions limiting or defining the Mortgaged Property’s uses or any part thereof, except those necessary in connection with the uses permitted pursuant to this Agreement, or (b) joint assessment of the Mortgaged Property with any other real or personal property.

9.   Events of Default.

The occurrence of one or more of the following events shall be an “Event of Default” hereunder:

(a)if Maker fails to (i) make any scheduled payment of principal, interest, or any amounts due under this Note on any Payment Date (including all amounts due on the Maturity Date) and, in the case of any payment to be made on a Payment Date other than the Maturity Date, such failure continues for three (3) Business Days after such Payment Date, or (ii) pay any other amount payable pursuant to the Loan Documents within five (5) days after written notice from Holder;

(b)if Maker fails to pay the outstanding Debt on the Maturity Date;

(c)if any representation or warranty made herein or in any other Loan Document, or in any report, certificate, financial statement or other Instrument, agreement or document furnished by Maker in connection with this Note or any other Loan Document shall be false in any material respect as of the date such representation or warranty was made or remade and, in the case of any such representation or warranty which may be corrected, has not been corrected within thirty (30) days after written notice from Holder;

(d)the consent by any the Maker to the appointment of a conservator or receiver or liquidator or similar official in any bankruptcy, insolvency, readjustment of debt, marshaling of assets and liabilities, or similar proceedings of or relating to the Maker or relating to all or substantially all of its property; or the failure by Maker generally to pay its debts as they become due, files a petition to take advantage of any applicable bankruptcy, insolvency or

7

reorganization statute, make an assignment for the benefit of its creditors or voluntarily suspends payment of its obligations;

(e)the failure of Maker to obtain dismissal or a stay within 60 days of the commencement of or the filing by Maker of an answer or other pleading admitting or failing to contest the material allegations of a petition filed against Maker in any proceeding against Maker seeking (i) reorganization, liquidation, dissolution or similar relief under any statute, law or regulation or (ii) the appointment of a trustee, liquidator, receiver or similar official of Maker or of all or any substantial part of Maker’s assets;

(f)the failure of Maker to maintain the insurance required pursuant to the Loan Documents; or

(g)a default shall be continuing under any of the other obligations, agreements, undertakings, terms, covenants, provisions or conditions of this Note, or under any other Loan Document, for ten (10) days after notice to Maker, in the case of any default which can be cured by the payment of a sum of money or for thirty (30) days after written notice, in the case of any other default (unless otherwise provided herein or in such other Loan Document).

10.     Method and Place of Payments; Application of Payments; Maker ObligationsAbsolute.

(a)Except as otherwise specifically provided herein, all payments under this Note and the other Loan Documents shall be made to Holder not later than 12:00 noon, New York City time, on the date when due, and shall be made in lawful currency of the United States of America in immediately available funds to an address specified to Maker by Holder in writing, and any funds received by Holder after such time, for all purposes hereof, shall be deemed to have been paid on the next succeeding Business Day.

(b)All proceeds of payment, including any payment or recovery on the Mortgaged Property, shall be applied to the Debt in such order and in such manner as Holder shall elect in Holder’s discretion.

(c)Except as specifically set forth in any Loan Document, all sums payable by Maker under any Loan Document shall be paid without notice, demand, counterclaim (other than mandatory counterclaims), setoff, deduction

8

or defense and without abatement, suspension, deferment, diminution or reduction.

11. Security.The obligations of Maker under this Note are secured by, among other things, the Deed of Trust granted in favor of Holder by Maker and encumbering or affecting the Mortgaged Property.

12. Waivers. With respect to the amounts due pursuant to this Note or any other Loan Document, Maker waives the following: (a) all rights of exemption of property from levy or sale under execution or other process for the collection of debts under the Constitution or laws of the United States or any State thereof; (b) demand, presentment, protest, notice of dishonor, notice of nonpayment, notice of protest, notice of intent to accelerate, notice of acceleration, suit against any party, diligence in collection of this Note and in the handling of securities at any time existing in connection herewith, and all other requirements necessary to enforce this Note except for notices required by governmental authorities; and (c) any further receipt by Holder or acknowledgment by Holder of any collateral now or hereafter deposited as security for the Loan.

13. Usury Savings Clause.This Note and the other Loan Documents are subject to the express condition that at no time shall Maker be obligated or required to pay interest on the Debt at a rate which could subject Holder to either civil or criminal liability as a result of being in excess of the maximum rate of interest designated by applicable laws relating to payment of interest and usury (the “Maximum Amount”). If, by the terms of this Note or the other Loan Documents, Maker is at any time required or obligated to pay interest on the Debt at a rate in excess of the Maximum Amount, the Interest Rate shall be deemed to be immediately reduced to the Maximum Amount and all previous payments in excess of the Maximum Amount shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to Holder for the use, forbearance, or detention of the sums due under the Loan, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Loan does not exceed the Maximum Amount from time to time in effect and applicable to the Loan for so long as the Loan is outstanding.

14. Modifications; Remedies Cumulative; Setoffs.Holder shall not by any act, delay, omission or otherwise be deemed to have modified, amended, waived, extended, discharged or terminated any of its rights or remedies, and no modification, amendment, waiver, extension, discharge or termination of any kind shall be valid unless in writing and signed by Holder and Maker. All rights and remedies of Holder under the terms of this Note and applicable statutes or rules of law shall be cumulative, and may be exercised successively or concurrently. Maker agrees that there are no defenses, equities or setoffs with respect to the obligations set forth herein as of the date hereof, and to the extent any such defenses, equities, or setoffs may exist, the same are hereby expressly released, forgiven, waived and forever discharged.

15.Delay Not a Waiver.Neither any failure nor any delay on the part of Holder in insisting upon strict performance of any term, condition, covenant or agreement, or exercising

9

any right, power, remedy or privilege under any Loan Document, or any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under any Loan Document, Holder shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under any Loan Document, or to declare a default for failure to effect prompt payment of any such other amount.

16. Severability.If any provision of this Note shall be held invalid by a court of competent jurisdiction, such invalidation shall not effect the enforceability of the remaining provisions of this Note.

17.Release.Holder may, at its option, release any Mortgaged Property given to secure the Debt, and no such release shall impair the obligations of Maker to Holder.

18. Governing Law.This Note and each of the other Loan Documents shall be interpreted and enforced according to the laws of the state where the Mortgaged Property is located (without giving effect to rules regarding conflict of laws).

19. Venue. Maker hereby consents and submits to the exclusive jurisdiction and venue of any state or federal court sitting in the county and state where the Mortgaged Property is located with respect to any legal action or proceeding arising with respect to the Loan Documents and waives all objections which it may have to such jurisdiction and venue. Nothing herein shall, however, preclude or prevent Holder from bringing actions against Maker in any other jurisdiction as may be necessary to enforce or realize upon the security for the Loan provided in any of the Loan Documents.

20.Waiver of Jury Trial.MAKER AND HOLDER TO THE FULLEST EXTENT THAT THEY MAY LAWFULLY DO SO, WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS NOTE OR THE OTHER LOAN DOCUMENTS. EACH OF MAKER AND HOLDER AGREES THAT THE OTHER MAY FILE A COPY OF THIS WAIVER WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED AGREEMENT OF THE OTHER IRREVOCABLY TO WAIVE ITS RIGHT TO TRIAL BY JURY, AND THAT, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, ANY DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN MAKER AND HOLDER SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

21. Sales and Assignments.Holder may assign, sell, securitize, participate, pledge and/or otherwise transfer all or any portion of Holder’s right, title and interest in, to and under this Note and/or the other Loan Documents in one or more transactions.

22.Due on Sale; Due on Encumbrance.Maker understands that in making the Loan, Holder is relying to a material extent upon the business expertise and/or net worth of

10

Maker and, its partners, members, officers or principals and upon the continuing interest which Maker or its partners, members, officers or principals will have in the Mortgaged Property and in Maker, respectively. Therefore, Maker agrees that it will not allow any conveyance, transfer, sale, lease, assignment or lien, whether by operation of law or otherwise, of, on or affecting all or any portion of the Mortgaged Property, to occur. Maker further agrees that a violation of the previous sentence may significantly and materially alter or reduce Holder’s security for this Note. Accordingly, in the event that a violation of the second proceeding sentence occurs, then the same shall be deemed to increase the risk of Holder and Holder may then, or at any time thereafter, declare the entire Debt immediately due and payable.

[Signatures Commence on the Following Page]

11

IN WITNESS WHEREOF, Maker has caused this Note to be properly executed as of the date first above written and has authorized this Note to be dated as of the day and year first above written.

  MAKER:

  ZAP, a California corporation

By:  /s/ Steven Schneider                       

Name: Steven Schneider                         

Title:  CEO                                                 

Acknowledged and, solely with respect to its obligations set forth in paragraph 2 of this Note, agreed:

HOLDER:

AL YOUSUF, LLC

By: /s/ Eqbal Al Yousuf                          

Name: Eqbal Al Yousuf                           

Title: President                                          

EXHIBIT A

DEFINITIONS

“Business Day” means any day other than a Saturday, Sunday or other day on which banks are authorized or required by law to be closed in New York City, New York.

“Closing Date” means July 30, 2008.

“Deed of Trust” means that certain Deed of Trust, dated July 30, 2008, granted by Zap, in favor of Fidelity National Title Company, as trustee, for the benefit of Al Yousuf LLC.

“Excluded Taxes” means, with respect to the Holder, Taxes which are both (a) imposed by the jurisdiction in which the Holder is organized, a taxing authority thereof or therein or by a taxing authority of any other jurisdiction as a result of the Holder’s doing business or maintaining an office in such jurisdiction (other than such Taxes that would not have been imposed but for (i) the Holder having executed, or enforced, a Loan Document or (ii) any of the transactions contemplated herein or in the other Loan Documents) and also (b) imposed on, based on or measured by net income, capital or net worth of the Holder (other than Taxes that are, or are in the nature of, sales, use, rental, property or value added or similar taxes).

“Interest Accrual Period” means, initially, the period commencing on the date that funds are delivered by Holder to the escrow company, Fidelity National Title Company, and continuing to and including the calendar day preceding the next Payment Date, and thereafter each period running from and including a Payment Date to and including the calendar day preceding the next Payment Date during the term of the Loan.

“LIBOR” means, with respect to any Interest Accrual Period, the rate per annum (rounded upwards, if necessary, to the nearest one-sixteenth (1/16th) of one percent (1%)) reported on the day that is two (2) LIBOR Business Days prior to the thirtieth (30th) day of the month during which the applicable Interest Accrual Period begins by the British Bankers Association as the non-reserve adjusted London Interbank Offered Rate for U.S. dollar deposits having a one (1) month term and in an amount of $1,000,000.00 or more (all as determined by Holder in its sole but good faith discretion). In the event that (i) more than one such rate is provided, the average of such rates shall apply, or (ii) no such rate is published, then LIBOR shall be determined from such comparable financial reporting company as Holder in its sole but good faith discretion shall determine. LIBOR for any Interest Accrual Period shall be adjusted from time to time by increasing the rate thereof to compensate Holder for any aggregate reserve requirements (including, without limitation, all basic, supplemental, marginal and other reserve requirements and taking into account any transitional adjustments or other scheduled changes in reserve requirements during any Interest Accrual Period) which are required to be maintained by Holder with respect to “Eurocurrency Liabilities” (as presently defined in Regulation D of the Board of Governors of the Federal Reserve System) of the same term under Regulation D, or any other regulations of a governmental authority having jurisdiction over Holder of similar effect. The

establishment of LIBOR by Holder and the Holder’s calculation of the rate of interest applicable to this Note shall, in the absence of manifest error, be final and binding.

“LIBOR Business Day” means any day on which banks are open for dealing in foreign currency and exchange in London, England.

“Loan Documents” means (i) the Promissory Note, (ii) the Deed of Trust, and (iii) the UCC-1 financing statements to be filed against Zap, as debtor.

“Maturity Date” means February 28, 2010.

“Mortgaged Property” means that property described on Exhibit A to the Deed of Trust.

“Taxes” means all income, gross receipts, rental, franchise, excise, occupational, capital, value added, sales, use, ad valorem (real and personal), property (real and personal) and excise taxes, fees, levies, imposts, charges or withholdings of any nature whatsoever, together with any assessments, penalties, fines, additions to tax and interest thereon, howsoever imposed (whether imposed upon the Maker, the Holder, or all or any portion of the Mortgaged Property or otherwise), by any governmental authority or other taxing authority in the United States or by any foreign government, foreign governmental subdivision or other foreign or international taxing authority.

“U.S. Governmental Authority” means any federal, state or local government, authority, agency, central bank, quasi-governmental authority, court or other body or entity, and any arbitrator with authority to bind a party at law.

EX-10.2

EXHIBIT 10.2

EXECUTION VERSION

PREPARED BY AND,

WHEN RECORDED, RETURN TO:

Dewey & LeBoeuf LLP

333 S. Grand Ave., Ste. 2600 Los Angeles, CA 90071 Attention: Michael du Quesnay

Space Above This Line For Recorder’s Use

DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,

SECURITY AGREEMENT AND FIXTURE FILING

by

ZAP,

a California corporation

(Trustor)

to

Fidelity National Title Company

having an address at:

400 Pitt Avenue

Sebastopol, CA 95472

(Trustee)

for the benefit of

Al Yousuf LLC (Beneficiary)

Dated:	As of July 30, 2008
Location:	501 Fourth Street Santa Rosa Sonoma County, California 95401

DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,

SECURITY AGREEMENT AND FIXTURE FILING

THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (this “Deed of Trust”) is made as of July 30, 2008 by Zap, a California corporation, having an address at 501 4th Street, Santa Rosa, California 95401 (“Trustor”) to Fidelity National Title Company (“Trustee”), in favor of Al Yousuf LLC, having an address of Mezzanine Floor, Yamaha Showroom, Sheikh Zayed Road, Dubai, United Arab Emirates (together with its successors and assigns, “Beneficiary”).

STATEMENT OF PURPOSE

Trustor and Beneficiary are parties to a Promissory Note dated as of the date hereof (the “Note”), which Note provides for a loan in the initial principal amount of one million seven hundred and sixty thousand dollars ($1,760,000), and a maximum principal amount not to exceed, at any one time, ten million dollars ($10,000,000) (the “Loan”) to be made by Beneficiary to Trustor; and

It is a condition to the obligation of Beneficiary to make the loan to Trustor pursuant to the Note that Trustor execute and deliver this Deed of Trust.

AGREEMENT

NOW, THEREFORE, in consideration of the making of the Loan by Beneficiary to Trustor and the covenants, agreements, representations and warranties set forth in the Loan Documents, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and for the purpose of securing the payment and performance of the following (collectively, the “Loan Obligations”): (a) all principal (including, without limitation, any advance to Trustor now or hereafter made), interest thereon and all other sums due and/or payable, and all obligations owing by Trustor, under any Loan Document and amendments, modifications, extensions, substitutions, exchanges and renewals thereof (each of which shall enjoy the same priority as the advance made on the Closing Date as evidenced by the Note); and (b) all covenants, agreements and other obligations of Trustor under the Loan Documents;

Trustor hereby irrevocably grants, bargains, sells, releases, conveys, warrants, assigns, transfers, mortgages, pledges, sets over and confirms unto Trustee, its successors and assigns, in trust, WITH POWER OF SALE AND RIGHT OF ENTRY AND POSSESSION, to have and to hold forever for the security and benefit of Beneficiary and its successors and assigns, all of Trustor’s right, title and interest in and to the following property, rights, interests and estates, now existing or hereafter coming into existence (the property, rights, interests and estates hereinafter described are collectively referred to herein as the “Mortgaged Property”): (i) all the land located in the County and State identified on Exhibit A attached hereto, as more particularly described on such Exhibit A (the “Land”), (ii) the Contracts; (iii) the Appurtenant Rights, (iv) the Equipment, (v) the General Intangibles, (vi) the Improvements, (vii) the Leases, (viii) the Permits (to the fullest extent assignable), (ix) the Rents, (x) the Proceeds, and (xi) any and all other rights of Trustor in

Deed of Trust, Assignment of Leases and Rents,

Security Agreement and Fixture Filing

and to the items set forth in clauses (i) through (x) above, all whether now owned or hereafter acquired, and all other property which is or hereafter may become subject to a lien in favor of Beneficiary pursuant to any Loan Document.

TO HAVE AND TO HOLD the Mortgaged Property and all parts thereof unto Trustee, its successors and assigns, for the benefit of Beneficiary, their successors and assigns forever;

This Deed of Trust secures all present and future loan disbursements or advances made by Beneficiary under the Note, and all other sums from time to time owing to Beneficiary by Trustor under the Loan Documents and under the Debt. The amount of the present disbursement or advance secured is one million seven hundred and sixty thousand dollars ($1,760,000), and the maximum principal amount which may be secured at any one time is ten million dollars ($10,000,000). The time period within which such future disbursements or advances are to be made is the period between the date of this Deed of Trust and July 30, 2009;

PROVIDED, HOWEVER, that these presents are upon the express condition that, if Trustor shall pay or cause to be paid to Beneficiary all sums due Beneficiary with respect to the Loan under the Loan Documents and keep, perform and observe all the covenants and promises in each of the Loan Documents, all without fraud and delay, then this Deed of Trust, and all the properties, interests, and rights hereby granted, bargained, and sold shall cease, terminate and be void and Beneficiary shall instruct Trustee to effect a full and proper termination, release and reconveyance; otherwise the same shall remain in full force and effect.

TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR HEREBY COVENANTS AND AGREES AS FOLLOWS:

ARTICLE 1

DEFINITIONS

Section 1.1. Certain Defined Terms. For all purposes of this Deed of Trust, all capitalized terms shall have the meaning ascribed in this Section 1.1 or if not defined herein, then as defined in the Note:

“Appurtenant Rights” means all easements, rights-of-way, strips and gores of land, vaults, streets, ways, alleys, passages, sewer rights, waters, water courses, water rights, air rights, development rights and powers, and, to the extent now or hereafter owned by Trustor, all minerals, flowers, shrubs, crops, trees, timber and other emblements now or hereafter appurtenant to, or used in connection with, or located on, under or above the Land or any part or parcel thereof, and all “as extracted collateral” (as defined in the UCC), and all ground leases, subleases, estates, rights, titles, interests, privileges, liberties, tenements, hereditaments and appurtenances, reversions, and remainders whatsoever, in any way belonging, relating or appertaining to the Land or any part thereof.

“Contracts” means, collectively, (a) all contracts between Trustor and third parties in connection with the management, construction, repair, renovation, use, operation or maintenance of the Mortgaged Property, in each case as the same may thereafter from time to time be amended or modified; and (b) all warranties, guarantees, and other rights of Trustor, direct and indirect, against manufacturers, dealers, suppliers, and others in connection with the above

2

contracts and agreement or the work done or to be done and the materials supplied or to be supplied to or for the Mortgaged Property.

“Equipment” means all of Trustor’s “equipment,” as such term is defined in the UCC, and, to the extent not included in such definition, all fixtures, appliances, machinery, “software” (as defined in the UCC), furniture, furnishings, decorations, tools and supplies, now owned or hereafter acquired by Trustor, including without limitation, all beds, linens, radios, televisions, carpeting, telephones, cash registers, computers, electronic data-processing or other office equipment, lamps, glassware, restaurant and kitchen equipment, and building equipment, including, without limitation, all heating, lighting, incinerating, waste removal and power equipment, engines, pipes, tanks, motors, conduits, switchboards, security and alarm systems, plumbing, lifting, cleaning, fire prevention, fire extinguishing, refrigeration, washing machines, dryers, stoves, refrigerators, ventilating, and communications apparatus, air cooling and air conditioning apparatus, escalators, elevators, ducts, and compressors, materials and supplies, and all other machinery, apparatus, equipment, fixtures and fittings now owned or hereafter acquired by Trustor to the extent that the same are located at the Mortgaged Property, any portion thereof or any appurtenances thereto, together with all additions, replacements, parts, fittings, accessions, attachments, accessories, modifications and alterations of any of the foregoing.

“General Intangibles” means all of Trustor’s “general intangibles,” as such term is defined in the UCC, and, to the extent not included in such definition, all intangible personal property of Trustor (other than Accounts, Rents, Instruments, Inventory, money and Permits), including, without limitation, choses in action, settlements, judgments, contract rights, rights to performance (including, without limitation, rights under warranties) refunds of real estate taxes and assessments and other rights to payment of money, copyrights, trademarks, trade names, service marks, trade secrets, and patents, the goodwill associated with any of the foregoing, and all applications for any of the foregoing, in each case whether now existing or hereafter in existence, in each case to the extent that such General Intangibles are related to the Mortgaged Property.

“Improvements” means all buildings, structures and improvements of every nature whatsoever situated on the Land on the Closing Date or thereafter, including, without limitation, to the extent of Trustor’s right, title or interest therein or thereto, all gas and electric fixtures, radiators, heaters, washing machines, dryers, refrigerators, ovens, engines and machinery, boilers, ranges, elevators and motors, plumbing and heating fixtures, antennas, carpeting and other floor coverings, water heaters, awnings and storm sashes, and cleaning apparatus which are or shall be attached to the Land or said buildings, structures or improvements.

“Leases” means all leases and other agreements or arrangements, if any, affecting the use or occupancy of all or any portion of the Mortgaged Property now in effect or hereafter entered into (including all lettings, subleases, licenses, concessions, tenancies and other occupancy agreements covering or encumbering all or any portion of the Mortgaged Property), together with any guarantees, supplements, amendments, modifications, extensions and renewals of the same.

“Permits” means all licenses, registrations, permits, allocations, filings, authorizations, approvals and certificates used in connection with the ownership, operation, construction,

3

renovation, use or occupancy of the Mortgaged Property, including, without limitation, building permits, business licenses, state health department licenses, food service licenses, liquor licenses, licenses to conduct business and all such other permits, licenses and rights, obtained from any governmental authority or private person concerning the ownership, construction, operation, renovation, use or occupancy of the Mortgaged Property.

“Proceeds” means all of Trustor’s “proceeds” as such term is defined in the UCC and, to the extent not included in such definition, all proceeds, whether cash or non-cash, movable or immovable, tangible or intangible (including insurance proceeds, condemnation proceeds, and proceeds of proceeds), from the Security Interest Property, including, without limitation, those from the sale, exchange, transfer, collection, loss, damage, disposition, substitution or replacement of any of the Security Interest Property and all income, gain, credit, distributions and similar items from or with respect to the Security Interest Property.

“Rents” means, with respect to the Mortgaged Property, all rents (whether denoted as advance rent, minimum rent, percentage rent, additional rent or otherwise), receipts, issues, income, royalties, profits, revenues, proceeds, bonuses, deposits (whether denoted as security deposits or otherwise), lease termination fees or payments, rejection damages, buy-out fees and any other fees made or to be made in lieu of rent, any award made hereafter to Trustor in any court proceeding involving any tenant, lessee, licensee or concessionaire under any of the Leases in any bankruptcy, insolvency or reorganization proceedings in any state or federal court, and all other payments, rights and benefits of whatever nature from time to time due under the Leases.

“UCC” means the Uniform Commercial Code in effect in the jurisdiction in which the Mortgaged Property or any of the Security Interest Property is located, as applicable.

ARTICLE 2

COVENANTS AND AGREEMENTS OF TRUSTOR

Section 2.1. Payment of Secured Loan Obligations; Incorporation by Reference. Trustor shall pay when due the principal, interest thereon and all other sums, charges, fees and other Loan Obligations due and/or payable under any Loan Document all as in accordance with the Loan Documents. All of the covenants, conditions and agreements contained in the Loan Documents are hereby made a part of this Deed of Trust to the same extent and with the same force as if fully set forth herein.

Section 2.2. No Transfer. Trustor shall not and shall not cause, allow, or permit, and shall prevent from occurring, a transfer of the Mortgaged Property, except as expressly permitted pursuant to the Note. In the event of any violation of this Section 2.2, Beneficiary may, at its option, accelerate and declare the outstanding Debt immediately due and payable, without notice or demand, and whether or not Beneficiary shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any Loan Document with respect to any Mortgaged Property or all or any portion of the Security Interest Property.

4

Section 2.3. Duty to Defend; Filing; Re-Filing; Etc.

(a)Trustor will forever defend the title to the Mortgaged Property and the validity and priority of the lien or estate hereof against the claims and demands of all persons whomsoever.

(b)Trustor shall execute, acknowledge and deliver, from time to time, such further instruments as Trustee or Beneficiary may reasonably require to accomplish the purposes of this Deed of Trust. Trustor hereby irrevocably authorizes and appoints Beneficiary as its attorney-in­fact, coupled with an interest, for the purpose of exercising and perfecting any and all rights and remedies available to Beneficiary at law and in equity, including, without limitation, such rights and remedies available to Beneficiary pursuant to this Deed of Trust.

(c)Trustor shall pay all intangible taxes, recording taxes, filing, registration and recording fees, all refiling, re-registration and re-recording fees, and all expenses incident to the execution, filing, recording and acknowledgment of this Deed of Trust, any security agreement, mortgage, modification or amendment supplemental hereto and any document, instrument and agreement of further assurance, and all federal, state, county and municipal stamp taxes and other taxes, duties, imposts, assessments and charges arising out of the execution, delivery, filing, registration and recording of the Note, this Deed of Trust or any of the other Loan Documents, any security agreement or mortgage or deed of trust modification or amendment supplemental hereto or any document instrument or agreement of further assurance.

(d)Trustor hereby indemnifies and holds Beneficiary harmless from any sales or use tax that may be imposed on Beneficiary by virtue of the Loan other than taxes imposed on the income, stock or assets of Beneficiary.

ARTICLE 3

ASSIGNMENT OF RENTS, ISSUES, PROFITS AND CONTRACTS

Section 3.1. Assignment of Rents, Issues and Profits. Trustor hereby absolutely and unconditionally assigns to Beneficiary all of Trustor’s right, title and interest in all current and future Leases and Rents, it being intended that this Deed of Trust constitute a present, absolute assignment and not an assignment for additional security only. This Article 3 presently gives Beneficiary the right to collect Rents and to apply Rents in partial payment of the Loan Obligations and otherwise in accordance with the Note. Trustor intends that the Rents and Leases be absolutely assigned and no longer be, during the term of this Deed of Trust, property of Trustor or Trustor’s estate, as defined by 11 U.S.C. §541. If any law exists requiring Beneficiary to take actual possession of the Mortgaged Property (or some action equivalent to taking possession of the Mortgaged Property, such as securing the appointment of a receiver) for Beneficiary to “perfect” or “activate” the rights and remedies of Beneficiary as provided herein, Trustor waives the benefit of such law. Such assignment to Beneficiary shall not be construed to bind Beneficiary to perform any covenants, conditions or provisions contained in any Lease or otherwise impose any obligation upon Beneficiary, and notwithstanding this Deed of Trust, Trustor shall remain liable for any obligations undertaken by Trustor pursuant to any Lease. Subject to the terms of this Article 3 and the Note, Beneficiary grants to Trustor a license, revocable as hereinafter provided, to operate and manage the Mortgaged Property and to collect

5

and use the Rents. If an Event of Default occurs, the license granted to Trustor herein may, at Beneficiary’s election, be revoked by Beneficiary, and Beneficiary shall immediately be entitled to possession of all Rents then or thereafter payable (including Rents past due and unpaid) whether or not Beneficiary enters upon or takes control of the Mortgaged Property. Any Rents collected by Trustor from and after the date on which an Event of Default occurred and is continuing shall be held by Trustor in trust for Beneficiary. Trustor hereby grants and assigns to Beneficiary the right, at Beneficiary’s option, upon revocation of the license granted herein, to enter upon the Mortgaged Property in person, by agent or by court appointed receiver to collect Rents with or without taking the actual possession of the Mortgaged Property or any equivalent action. Beneficiary may apply any Rents collected after the license granted herein is revoked in Beneficiary’s sole and absolute discretion to pay the Loan Obligations in such order and in such manner as Beneficiary shall elect.

Section 3.2. Assignment of Contracts. Trustor hereby absolutely and unconditionally assigns to Beneficiary all of Trustor’s right, title and interest in and to the Contracts to the maximum extent allowable by law and to the maximum extent allowable under the terms of each individual Contract, it being intended that this assignment be an absolute assignment from Trustor to Beneficiary and not merely the granting of a security interest. Until the occurrence of an Event of Default, Trustor may retain, use and enjoy the benefits of the Contracts. Upon the occurrence and during the continuance of an Event of Default, the license described in the preceding sentence shall, upon Beneficiary’s election, be automatically revoked, and Beneficiary may elect to exercise any and all of Beneficiary’s rights and remedies hereunder.

ARTICLE 4

SECURITY AGREEMENT AND FIXTURE FILING

As additional security, Trustor, as debtor, hereby grants to Beneficiary, as secured party, a continuing security interest in the portion of the Mortgaged Property which is or may be subject to the provisions of the UCC which are applicable to secured transactions, and in any property as to which a security interest can be created or perfected, now existing or hereafter coming into existence, and all substitutions replacements, renewals and additions to and all products and Proceeds of the foregoing (collectively, the “Security Interest Property”). This Deed of Trust is intended to be and shall be effective as a security agreement and “fixture filing” under the UCC or other law applicable to the creation of liens on and security interests in personal property and fixtures. As further security for the payment and performance of the Loan Obligations, this Deed of Trust shall constitute a financing statement under the UCC with Trustor, as debtor, and Beneficiary, as secured party. To the extent permitted by law, Trustor hereby authorizes Beneficiary to file financing and continuation statements necessary to continue the lien of and security interest evidenced by this Deed of Trust with respect to the Security Interest Property (and confirms that Beneficiary is a person entitled to file a record, and that Trustor has authorized all such filings, within the meaning of Section 9-509 of the UCC). The principal places of business and mailing addresses of Trustor, as debtor, and Beneficiary, as secured party, respectively, are as set forth on page one hereof. Trustor’s location, for purposes of Section 9-307 of the UCC, is Trustor’s state of incorporation as set forth on page 1 hereof. Information relative to the security interest created hereby may be obtained by application to Beneficiary.

6

ARTICLE 5

REMEDIES

Section 5.1. Acceleration of Maturity. If an Event of Default shall have occurred, then the entire Debt and all other Loan Obligations shall, at the option of Beneficiary, become due and payable without notice or demand, time being of the essence; and any omission on the part of Beneficiary to exercise such option when entitled to do so shall not be considered as a waiver of such right. Trustor hereby expressly waives presentment, demand for payment, notice of protest, notice of dishonor, notice of intent to accelerate the maturity of the Debt and notice of acceleration of the maturity of the indebtedness secured hereby.

Section 5.2. Default Remedies.

(a) If an Event of Default shall have occurred and be continuing, this Deed of Trust may, to the maximum extent permitted by law, be enforced, and Beneficiary, or Trustee in response to Beneficiary’s request (which Trustor agrees shall be presumed to have been made), may exercise any right, power or remedy permitted to it hereunder, under the Note or under any of the other Loan Documents or at law or in equity, and, without limiting the generality of the foregoing, Trustee or Beneficiary may, personally or by their agents, to the maximum extent permitted by law:

(i)enter into and take possession of the Mortgaged Property or any part thereof, exclude Trustor and all persons claiming under Trustor whose claims are junior to this Deed of Trust, wholly or partly therefrom, and use, operate, manage and control the Mortgaged Property or any part thereof either in the name of Trustor or otherwise as Beneficiary shall deem best, and upon such entry, from time to time at the expense of Trustor and the Mortgaged Property, make all such repairs, replacements, alterations, additions or improvements to the Mortgaged Property or any part thereof as Beneficiary may reasonably deem proper and, whether or not Beneficiary has so entered and taken possession of the Mortgaged Property or any part thereof, collect and receive all Rents and apply the same to the payment of all expenses that Trustee or Beneficiary may be authorized to make under this Deed of Trust, the remainder to be applied to the payment of the Loan Obligations until the same shall have been repaid in full, take possession of all security deposits held with respect to the Mortgaged Property, whether or not Trustee or Beneficiary enters upon or takes control of the Mortgaged Property and regardless of where any such security deposits are deposited or located; if Beneficiary demands or attempts to take possession of the Mortgaged Property or any part thereof in the exercise of any rights hereunder, Trustor shall promptly turn over and deliver complete possession thereof to Beneficiary;

(ii)effect new Permits and Contracts; amend, alter, renew, cancel or surrender existing Permits and Contracts; and make concessions to the governmental authorities, the Contractors, warrantors and others; and

(iii)personally or by agents, with or without entry:

7

(x)invoke the power of sale and pursuant to the procedures prescribed by law as a result thereof, sell the Mortgaged Property or any part thereof, or cause the Mortgaged Property or any part thereof to be sold at a sale or sales held at such place or places and time or times and upon such notice and otherwise in such manner and in such order as may be required by law, or, in the absence of any such requirements, as Beneficiary may deem appropriate and from time to time adjourn any such sale by announcement at the time and place specified for such sale or for such adjourned sale without further notice, except such as may be required by law;

(y)proceed to protect and enforce Beneficiary’s rights under this Deed of Trust, by suit for specific performance of any covenant contained herein or in the Loan Documents or in aid of the execution of any power granted herein or in the Loan Documents, or for the foreclosure of this Deed of Trust (as a mortgage or otherwise) and the sale of the Mortgaged Property or any part thereof under the judgment or decree of a court of competent jurisdiction, or for the enforcement of any other right as Beneficiary shall elect, provided, that in the event of a sale, by foreclosure or otherwise, of less than all of the Mortgaged Property, this Deed of Trust shall continue as a lien on, and security interest in, the remaining portion of the Mortgaged Property; or

(z)exercise any or all of the remedies available to a secured party under the UCC, including, without limitation:

(1)either personally or by means of a court appointed receiver, take possession of all or any of the Security Interest Property and exclude therefrom Trustor and all persons claiming under Trustor, and thereafter hold, store, use, operate, manage, maintain and control, make repairs, replacements, alterations, additions and improvements to and exercise all rights and powers of Trustor in respect of the Security Interest Property, or any part thereof; if Beneficiary demands or attempts to take possession of the Security Interest Property in the exercise of any rights hereunder, Trustor shall promptly turn over and deliver complete possession thereof to Beneficiary;

(2)without further notice to or demand upon Trustor (except those otherwise required hereby or by the Note), make such payments and do such acts as Trustee or Beneficiary may deem necessary to protect its security interest in the Security Interest Property, including, without limitation, paying, purchasing, contesting or compromising any encumbrance that is prior to or superior to the security interest granted hereunder, and in exercising any such powers or authority paying all expenses incurred in connection therewith, which expenses shall thereafter become part of the Loan Obligations secured by the lien of this Deed of Trust;

(3)require Trustor to assemble the Security Interest Property or any portion thereof, at a place designated by Trustee or Beneficiary and reasonably convenient to both parties, and promptly to deliver the Security Interest Property to Beneficiary, or an agent or representative designated by Beneficiary, and its agents and representatives, shall have the right to enter upon the premises and property of Trustor to exercise Beneficiary’s rights hereunder;

8

(4)sell, lease or otherwise dispose of the Security Interest Property, with or without having the Security Interest Property at the place of sale, and upon such terms and in such manner as Beneficiary may determine (and Beneficiary may be a purchaser at any such sale, provided, however, that Trustee, at the request and direction of Beneficiary, may dispose of the Security Interest Property in accordance with Beneficiary’s rights and remedies in respect of the Mortgaged Property pursuant to the provisions of this Deed of Trust in lieu of proceeding under the UCC); and

(5)unless the Security Interest Property is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Beneficiary, as the case may be, shall give Trustor at least ten (10) days prior notice of the time and place of any sale of the Security Interest Property or other intended disposition thereof, which notice Trustor agrees is commercially reasonable.

(b)If an Event of Default shall have occurred, Beneficiary, to the maximum extent permitted by law, shall be entitled, as a matter of right, to the appointment of a receiver of the Mortgaged Property, without notice or demand, and without regard to the adequacy of the security for the Loan Obligations or the solvency of Trustor. Trustor hereby irrevocably consents to such appointment and waives notice of any application therefor. Any such receiver or receivers shall have all the usual powers and duties of receivers in like or similar cases and all the powers and duties of Beneficiary in case of entry and shall continue as such and exercise all such powers until the date of confirmation of sale of the Mortgaged Property, unless such receivership is sooner terminated.

(c)In any sale under any provision of this Deed of Trust or pursuant to any judgment or decree of court, the Mortgaged Property, to the maximum extent permitted by law, may be sold in one or more parcels or as an entirety and in such order as Beneficiary may elect, without regard to the right of Trustor or any person claiming under Trustor to the marshalling of assets. The purchaser at any such sale shall take title to the Mortgaged Property or the part thereof so sold free and discharged of the estate of Trustor therein, the purchaser being hereby discharged from all liability to see to the application of the purchase money. Upon the completion of any such sale by virtue of this Section 5.2(c), Trustee or Beneficiary, as the case may be, shall execute and deliver to the purchaser an appropriate instrument that shall effectively transfer all of Trustor’s estate, right, title, interest, property, claim and demand in and to the Mortgaged Property or portion thereof so sold, but without any covenant or warranty, express or implied. Trustor shall ratify and confirm, or cause to be ratified and confirmed, any such sale or sales by executing and delivering, or by causing to be executed and delivered to Beneficiary or to such purchaser or purchasers all such instruments as may be advisable, in the reasonable judgment of Beneficiary, for such purpose, and as may be designated in such request. Any sale or sales made under or by virtue of this Deed of Trust, to the extent not prohibited by law, shall operate to divest all the estate, right, title, interest, property, claim and demand whatsoever, whether at law or in equity, of Trustor in, to and under the Mortgaged Property, or any portions thereof so sold, and shall be a perpetual bar both at law and in equity against Trustor and against any and all persons claiming or who may claim the same, or any part thereof, by, through or under Trustor. The powers and agency herein granted are coupled with an interest and are irrevocable.

9

(d)All rights of action under any Loan Document may be enforced by Trustee or Beneficiary without the possession of the original Loan Documents and without the production thereof at any trial or other proceeding relative thereto.

Section 5.3. Application of Proceeds.

(a)All proceeds of any repayment of or recoveries on the Loan shall be applied to repay the Debt in such order and in such manner as Beneficiary shall elect in Beneficiary’s discretion.

(b)No sale or other disposition of all or any part of the Mortgaged Property pursuant to this Section 5.3 shall be deemed to relieve Trustor of its obligations under any Loan Document except to the extent the proceeds thereof are applied to the payment of such obligations. If the proceeds of sale, collection or other realization of or upon the Mortgaged Property are insufficient to cover the costs and expenses of such realization and the payment in full of the Loan Obligations, Trustor shall remain liable for any deficiency subject to Section 7.11.

(c)Upon any sale made under the powers of sale herein granted and conferred, the receipt given by Beneficiary (or Trustee) will be sufficient discharge to the purchaser or purchasers at any sale for the purchase money, and such purchaser or purchasers and their heirs, devisees, personal representatives, successors and assigns thereof will not, after paying such purchase money and receiving such receipt of Beneficiary, be obligated to see to the application thereof or be in any way answerable for any loss, misapplication or non-application thereof.

Section 5.4. Powers of Beneficiary. Beneficiary may at any time or from time to time renew or extend (and direct Trustee to renew or extend) this Deed of Trust or (with the agreement of Trustor) alter or modify the same in any way, or waive any of the terms, covenants or conditions hereof or thereof, in whole or in part, and may release or reconvey, or cause Trustee to release or reconvey, any portion of the Mortgaged Property or any other security, and grant such extensions and indulgences in relation to the Loan Obligations, or release any person liable therefor as Beneficiary may determine without the consent of any junior lienor or encumbrancer, without any obligation to give notice of any kind thereto, without in any manner affecting the priority of the lien and estate of this Deed of Trust on or in any part of the Mortgaged Property, and without affecting the liability of any other person liable for any of the Loan Obligations.

Section 5.5. Right to Sue. Trustee and Beneficiary shall each have the right from time to time to sue for any sums required to be paid by Trustor under the terms of this Deed of Trust as the same become due, without regard to whether or not the entire Loan Obligations shall be, or have become, due and without prejudice to the right of Beneficiary thereafter to bring any action or proceeding of foreclosure or any other action upon the occurrence of any Event of Default existing at the time such earlier action was commenced.

Section 5.6. Remedies Cumulative.

(a)   No right or remedy herein conferred upon or reserved to Trustee or Beneficiary is intended to be exclusive of any other right or remedy, and each and every right and remedy shall

10

be cumulative and in addition to any other right or remedy under this Deed of Trust, or under applicable law, whether now or hereafter existing; the failure of Trustee or Beneficiary to insist at any time upon the strict observance or performance of any of the provisions of this Deed of Trust or to exercise any right or remedy provided for herein or under applicable law, shall not impair any such right or remedy nor be construed as a waiver or relinquishment thereof.

(b) To the maximum extent permitted by law, Trustee and Beneficiary shall each be entitled to enforce payment and performance of any of the obligations of Trustor and to exercise all rights and powers under this Deed of Trust or under any Loan Document or any laws now or hereafter in force, notwithstanding that some or all of the Loan Obligations may now or hereafter be otherwise secured, whether by mortgage, deed of trust, pledge, lien, assignment or otherwise; neither the acceptance of this Deed of Trust nor its enforcement, whether by court action or pursuant to the power of sale or other powers herein contained, shall prejudice or in any manner affect the right of either Trustee or Beneficiary to realize upon or enforce any other security now or hereafter held by Trustee or Beneficiary, it being stipulated that Trustee and Beneficiary shall be entitled to enforce this Deed of Trust and any other security now or hereafter held by Trustee or Beneficiary in such order and manner as Beneficiary, in its discretion, may determine; every power or remedy given by any Loan Documents to Trustee or Beneficiary, or to which Trustee or Beneficiary is otherwise entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by Beneficiary, and Trustee or Beneficiary may pursue inconsistent remedies.

Section 5.7. Waiver of Stay, Extension, Moratorium Laws; Equity of Redemption. To the maximum extent permitted by law, Trustor shall not at any time insist upon, or plead, or in any manner whatsoever claim or take any benefit or advantage of any applicable present or future stay, extension or moratorium law, that may affect observance or performance of the provisions of this Deed of Trust; nor claim, take or insist upon any benefit or advantage of any present or future law providing for the valuation or appraisal of the Mortgaged Property or any portion thereof prior to any sale or sales thereof that may be made under or by virtue of Section 5.2; and Trustor, to the maximum extent permitted by law, hereby waives all benefit or advantage of any such law or laws. Trustor, for itself and all who may claim under it, hereby waives, to the maximum extent permitted by law, any and all rights and equities of redemption from sale under the power of sale created hereunder or from sale under any foreclosure of this Deed of Trust and (if an Event of Default shall have occurred) all notice or notices of seizure, and all right to have the Mortgaged Property marshalled upon any foreclosure hereof. Neither Trustee nor Beneficiary shall be obligated to pursue or exhaust their rights or remedies as against any other part of the Mortgaged Property, and Trustor hereby waives any right or claim of right to have Trustee or Beneficiary proceed in any particular order.

Section 5.8. Waiver of Homestead. Trustor hereby waives and renounces all homestead and exemption rights provided for by the Constitution and the laws of the United States and of any state, in and to the Mortgaged Property as against the collection of the Loan Obligations, or any part thereof.

Section 5.9. No Assumption by Beneficiary. Except as otherwise expressly set forth in any Loan Document, Beneficiary will not be deemed in any manner to have assumed any liabilities or obligations relating to the Mortgaged Property or any portion thereof. Trustor

11

agrees that the exercise by Beneficiary of one or more of its rights and remedies under this Deed of Trust shall in no way be deemed or construed to make Beneficiary a mortgagee-in-possession.

Section 5.10. Discontinuance of Proceedings. If either Trustee or Beneficiary shall have proceeded to enforce any right, power or remedy under this Deed of Trust by foreclosure, power of sale, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to Beneficiary, then in every such case, Trustor, Trustee and Beneficiary shall be restored to their former positions and rights hereunder, and all rights, powers and remedies of Trustee and Beneficiary shall continue as if no such proceedings had occurred.

ARTICLE 6

TRUSTEE

Section 6.1. Trustee’s Powers. At any time, or from time to time without liability therefor and without notice, upon written request of Beneficiary and presentation of this Deed of Trust and the Note secured hereby for endorsement, and without affecting the personal liability of any person for payment of the indebtedness secured hereby or the effect of this Deed of Trust upon the remainder of the Mortgaged Property, Trustee may (a) reconvey any part of the Mortgaged Property, (b) consent in writing to the making of any map or plat thereof, (c) join in granting any easement thereon, or (d) join in any extension agreement or any agreement subordinating the lien or charge hereof.

Section 6.2. Trustee’s Fees. No fees or expenses shall become payable to Trustee under this Deed of Trust other than those reasonable fees and expenses incurred by Trustee in connection with the reconveyance of the Mortgaged Property pursuant to Section 6.3, or the exercise by Trustee of any remedy permitted to it hereunder, under the Note or under any of the other Loan Documents or at law or in equity. Trustor shall pay all such reasonable fees and expenses incurred by Trustee and Trustee’s agents and counsel in connection with the foregoing and all such costs, fees and expenses shall be secured by this Deed of Trust.

Section 6.3. Full Reconveyance by Trustee. To the extent Trustee’s signature is necessary on any full reconveyance of this Deed of Trust then, upon written request of Beneficiary stating that all sums secured hereby have been paid and upon surrender of this Deed of Trust and the Note to Trustee for cancellation and retention (or disposal in accordance with applicable law) and upon payment by Trustor of Trustee’s fees, Trustee shall reconvey to Trustor, or to the person or persons legally entitled thereto, without warranty, any portion of the Mortgaged Property then held hereunder. The recitals in such reconveyance of any matters or facts shall be conclusive proof of the truthfulness thereof. The grantee in any reconveyance may be described as “the person or persons legally entitled thereto”.

Section 6.4. Indemnity. Trustor shall indemnify Trustee against all claims, actions, liabilities, judgments, costs, attorneys’ fees or other charges of whatsoever kind or nature made against or incurred by Trustee, and arising out of the performance by Trustee of the duties of Trustee hereunder, other than those arising solely due to Trustee’s gross negligence or wanton or willful misconduct.

12

Section 6.5. Successor Trustee. Trustee may resign in writing addressed to Beneficiary or be removed at any time with or without cause by an instrument in writing duly executed by Beneficiary and recorded in the office of the county recorder where the Land is situated. In case of the death, resignation or removal of Trustee, a successor Trustee may be appointed by Beneficiary without other formality than an appointment and designation in writing unless otherwise required by applicable law. Such appointment and designation will be full evidence of the right and authority to make the same and of all facts therein recited, and upon the making of any such appointment and designation, this Deed of Trust will vest in the named successor trustee all the right, title and interest of Trustee in the Mortgaged Property, and said successor will thereupon succeed to all the rights, powers, privileges, immunities and duties hereby conferred upon Trustee; provided, however, that Beneficiary may at its option, appoint and designate several successor trustees, and in such manner, appoint and designate a different successor trustee for each county wherein a portion of the Mortgaged Property is located, as described in such written appointment and designation, and upon the making of any such appointment and designation, this Deed of Trust will vest in each such named successor trustee all of the right, title and interest of Trustee in that portion of the Mortgaged Property ascribed to such named successor trustee, and each such named successor trustee will thereupon succeed to all the rights, powers, privileges, immunities and duties hereby conferred upon Trustee in that portion of the Mortgaged Property ascribed to such named successor trustee. All references herein to Trustee will be deemed to refer to the trustee or trustees from time to time acting hereunder.

ARTICLE 7

MISCELLANEOUS

Section 7.1. Captions. The captions or headings at the beginning of each Article and Section hereof are for the convenience of the parties hereto and are not a part of this Deed of Trust.

Section 7.2. Amendments; Waivers; Etc. This Deed of Trust cannot be modified, changed or discharged except by an agreement in writing, duly acknowledged in proper form for recording, signed by Trustor and Beneficiary.

Section 7.3. Successors and Assigns. This Deed of Trust applies to, inures to the benefit of and binds Trustor and Beneficiary and each of their respective successors and assigns, and shall run with the Land.

Section 7.4. Notices. All notices, demands, consents, requests or other communications that are permitted or required to be given by any party to the other hereunder shall be in writing and delivered or mailed to each party at the following addresses:

(a)      If to the Trustor:   Zap 501 4th Street Santa Rosa, California, 95401

13

(b)      If to the Trustee:   Fidelity National Title Company 400 Pitt Avenue Sebastopol, California 95472

(c)      If to the Beneficiary:   Al Yousuf LLC c/o Dewey & LeBoeuf LLP 333 South Grand Avenue, Suite 2600 Los Angeles, California 90071-1530 Attention: Michael du Quesnay   With an additional copy to:   Al Yousuf LLC Mezzanine Floor Yamaha Showroom Sheikh Zayed Road Dubai, United Arab Emirates Attention: Iqbal al Yousuf

Section 7.5. Time of the Essence. Time is of the essence with respect to each and every covenant, agreement and obligation of Trustor under all Loan Documents.

Section 7.6. Applicable Law. This Deed of Trust shall be governed by and construed in accordance with the laws of the state in which the Mortgaged Property is located.

Section 7.7. Limitation of Interest. This Deed of Trust is subject to the limitations on the payment of interest set forth in the Note.

Section 7.8. Severability. If any term or provision of this Deed of Trust or the application thereof to any person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Deed of Trust, or the application of such term or provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Deed of Trust shall be valid and enforceable to the maximum extent permitted by law. If any portion of the Loan Obligations shall for any reason not be secured by a valid and enforceable lien upon any part of the Mortgaged Property, then any payments made in respect of the Loan Obligations (whether voluntary or under foreclosure or other enforcement action or procedure or otherwise) shall, for purposes of this Deed of Trust (except to the extent otherwise required by applicable law) be deemed to be made (a) first, in respect of the portion of the Loan Obligations not secured by the lien of this Deed of Trust, (b) second, in respect of the portion of the Loan Obligations secured by the lien of this Deed of Trust, but which lien is on less than all of the Mortgaged Property, and (c) last, to the portion of

14

the Loan Obligations secured by the lien of this Deed of Trust, and which lien is on all of the Mortgaged Property.

Section 7.9. Reconveyance by Beneficiary. Upon payment in full of the Loan Obligations, Beneficiary (and Trustee, to the extent required by law to effect a full and proper termination, release and reconveyance) shall release the lien of this Deed of Trust, or upon the request of Trustor, and at Trustor’s expense, assign this Deed of Trust without recourse to Trustor’s designee, or to the person or persons legally entitled thereto, by an instrument duly acknowledged in proper form for recording.

Section 7.10. WAIVER OF JURY TRIAL. TRUSTOR, TRUSTEE AND BENEFICIARY HEREBY WAIVE ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY RELATED TO THIS DEED OF TRUST OR THE LOAN, OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS OF TRUSTOR, TRUSTEE AND/OR BENEFICIARY WITH RESPECT TO ANY LOAN DOCUMENT OR THE EXERCISE OF ANY PARTY’S RIGHTS AND REMEDIES UNDER THIS DEED OF TRUST OR OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. EACH OF TRUSTOR, TRUSTEE AND BENEFICIARY AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS DEED OF TRUST WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY, AND BARGAINED AGREEMENT OF TRUSTOR, TRUSTEE AND BENEFICIARY IRREVOCABLY TO WAIVE ITS RIGHTS TO TRIAL BY JURY AS AN INDUCEMENT TO BENEFICIARY TO MAKE THE LOAN, AND THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY DISPUTE OR CONTROVERSY WHATSOEVER (WHETHER OR NOT MODIFIED HEREIN) BETWEEN TRUSTOR, TRUSTEE AND/OR BENEFICIARY SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

Section 7.11. Exhibits. The information set forth on the cover, heading and recitals hereof, and the Exhibits attached hereto, are hereby incorporated herein as a part of this Deed of Trust with the same effect as if set forth in the body hereof.

ARTICLE 8

STATE-SPECIFIC PROVISIONS

Section 8.1. Principles of Construction. In the event of any inconsistencies between the terms and conditions of this Article 8 and the other terms and conditions of this Security Instrument, the terms and conditions of this Article 8 shall control and be binding.

Section 8.2. Certain Matters Relating to Property Located in the State of California. With respect to the Mortgaged Property which is located in the State of California, notwithstanding anything contained herein to the contrary (a) Trustor waives to the extent permitted by law (i) the benefit of all laws now existing or that may hereafter be enacted

15

providing for any appraisal before sale of any portion of the Mortgaged Property, and (ii) all rights of redemption, valuation, appraisal, stay of execution, foreclosure of the liens hereby created, and (iii) all rights and remedies which Trustor may have or be able to assert by reason of the laws of the State of California pertaining to the rights and remedies of sureties; provided, however, nothing contained herein shall be deemed to be a waiver of Trustor's rights under Section 2924c of the California Civil Code.

[Signatures Commence on the Following Page]

16

IN WITNESS WHEREOF, this Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing has been duly executed by Trustor as of the day and year first above written.

TRUSTOR:

ZAP, a California corporation

By:  /s/ Steven Schneider                       

Name: Steven Schneider                         

Title:  CEO                                                 

Deed of Trust, Assignment of Leases and Rents,

Security Agreement and Fixture Filing

ACKNOWLEDGMENT

STATE OF CALIFORNIA                               )

COUNTY OF                                                      )

On ______________________, 2008, before me, ______________________________________________________, personally appeared _____________________________________________________

personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

Signature
	Notary Public

(seal)

Deed of Trust, Assignment of Leases and Rents,

Security Agreement and Fixture Filing

Exhibit A

LEGAL DESCRIPTION OF MORTGAGED PROPERTY

Lot 388, the West one-half of Lot 389, the Southerly 40 feet of Lot 397 and the Southerly 40 feet of the West one-half of Lot 398, all in Block 12 of the Map of Santa Rosa made by John A. Brewster, and recorded December 7, 1854 in Book 9 of Deeds, at Page 1, Sonoma County Records.

A-1