ZAP Preliminary Proxy Statement
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
Filed
by the Registrant ý
Filed
by a Party other than the Registrant ¨
Check
the appropriate box:
ý Preliminary
Proxy Statement
¨ Confidential,
For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
¨ Definitive
Proxy Statement
¨ Definitive
Additional Materials
¨ Soliciting
Materials Pursuant to § 240.14a-12
ZAP
(Name
of Registrant as Specified in Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
ý No
fee required.
¨ Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title
of each class of securities to which transaction applies:
______________________________________________________________________________________
(2) Aggregate
number of securities to which transaction applies:
______________________________________________________________________________________
(3) Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
______________________________________________________________________________________
(4) Proposed
maximum aggregate value of transaction:
______________________________________________________________________________________
(5) Total
fee paid:
______________________________________________________________________________________
¨ Fee
paid previously with preliminary materials.
¨ Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form
or
Schedule and the date of its filing.
(1) Amount
Previously Paid:
______________________________________________________________________________________
(2) Form,
Schedule or Registration Statement No.:
______________________________________________________________________________________
(3) Filing
Party:
______________________________________________________________________________________
(4) Date
Filed:
______________________________________________________________________________________
ZAP
501
Fourth Street
Santa
Rosa, California 95401
_______________________
NOTICE
OF SPECIAL MEETING OF SHAREHOLDERS
TO
BE HELD ON [__________], 2006
_______________________
To
Our Shareholders:
Notice
is hereby given that a special meeting of shareholders will be held
at [________] located
at [__________],
Santa Rosa, California [______________]
on [____________], 2006, at [____] [_].m., P.S.T., for the following
purposes:
1. to
approve the issuance and sale of up to 20,000,000 shares of common stock and
up
to 6,000,000 securities exercisable or convertible into shares of common stock
at below-market prices, as more fully described in the accompanying proxy
statement; and
2. to
act upon such other business as may properly come before the special meeting
or
any postponement or adjournment thereof.
Our
board of directors is not aware of any other business to come before the special
meeting.
Shareholders
of record as of the close of business on [____________], 2006 are entitled
to
the notice of and to vote their shares by proxy or at the special meeting.
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By
Order of the Board of Directors,
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Renay
Cude
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Corporate
Secretary
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Santa
Rosa, California
[____________],
2006
YOUR
VOTE IS IMPORTANT
IT
IS IMPORTANT THAT PROXY CARDS BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT
YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED RETURN ENVELOPE.
NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. SHAREHOLDERS WHO EXECUTE
A
PROXY CARD MAY NEVERTHELESS ATTEND THE SPECIAL MEETING, REVOKE THEIR PROXY
AND
VOTE THEIR SHARES IN PERSON.
TABLE
OF CONTENTS
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SPECIAL
MEETING OF SHAREHOLDERS
OF
ZAP
______________________________________
PROXY
STATEMENT
______________________________________
Our
board of directors solicits the accompanying proxy for use at a special meeting
of shareholders (the “Special Meeting”) to be held on [____________], 2006, at
[____] [ ].m., P.S.T, at [________]
located at [____________],
Santa Rosa, California [_______]
and at any adjournment or postponement thereof.
The
approximate date that this proxy statement and the enclosed form of proxy are
first being sent or given to our shareholders is [____________], 2006. Our
corporate headquarters is located at 501 Fourth Street, Santa Rosa, California
95401 and our telephone number is (707) 525-8658.
At
the Special Meeting, shareholders will vote on (i) the issuance and sale of
up
to 20,000,000 shares of common stock and up to 6,000,000 securities exercisable
or convertible into shares of common stock at below-market prices, as more
fully
described in Proposal 1 below; and (ii) such other business as may properly
come
before the Special Meeting or any postponement or adjournment thereof. Our
board
of directors is not aware of any matters that will be brought before the Special
Meeting, other than procedural matters, that are not referred to in the enclosed
notice of the Special Meeting.
We
require additional capital to expand our current operations and to capitalize
on
business opportunities associated with sales of our automobiles and consumer
transportation products. The capital will be used primarily: (i) to purchase
XebraTM
vehicles,
both sedan and utility truck models, from our Chinese partner to fulfill the
increasing demand for 100% electric vehicles in the United States, and (ii)
to
continue building our dealer network and expanding our marketing initiatives.
We
will also use the proceeds to purchase consumer product inventory for the
continued roll-out of new products, to add qualified sales and professional
staff to execute on our business plan, and to expand our efforts in the research
and development of advanced technology vehicles, such as the ethanol-driven
OBVIO! automobiles and other fuel efficient vehicles.
Only
shareholders of record at the close of business on the record date,
[____________], 2006, are entitled to receive notice of the Special Meeting
and
to vote shares of common stock held as of the record date at the Special
Meeting. Each outstanding share of common stock entitles its holder to cast
one
vote on each matter to be voted upon.
Please
note that if you hold shares in “street name” (that is, through a broker or
other nominee) and plan to attend and vote in person at the Special Meeting,
you
will need to bring evidence of your stock ownership, such as a copy of a
brokerage statement, reflecting your stock ownership as of the record
date.
Holders
of a majority of the outstanding shares of common stock must be present or
represented at the Special Meeting in order to have a quorum. Abstentions will
be treated as shares present for the purpose of determining the presence of
a
quorum for the transaction of business at the Special Meeting. Brokers with
no
discretion to vote on the proposal will not be counted towards quorum. If the
persons present or represented by proxy at the Special Meeting constitute the
holders of less than a majority of the outstanding shares of common stock as
of
the record date, the Special Meeting may be adjourned to a subsequent date
for
the purpose of obtaining a quorum.
If
you complete and properly sign the accompanying proxy card and return it to
us,
it will be voted as directed. If you are a shareholder of record and you attend
the Special Meeting, you may deliver your completed proxy card in person.
“Street name” shareholders who wish to vote at the Special Meeting will need to
obtain a proxy card from the institution that holds their shares as a holder
of
record. If
your proxy card is signed and returned by you or your broker or other nominee
without specifying choices, your shares will be voted “FOR” Proposal No.
1.
Yes.
Even after you have submitted your signed proxy, you may revoke your proxy
and
change your vote at any time before the proxy is exercised by filing with our
Corporate Secretary either a notice of revocation or a duly executed proxy
bearing a later date. The powers of the proxy holders will be suspended if
you
attend the Special Meeting in person and so request, although attendance at
the
Special Meeting will not by itself revoke a previously granted proxy.
Our
board of directors unanimously recommends that shareholders vote for Proposal
No. 1.
If
your proxy card is properly executed and received in time for voting, and not
revoked, such proxy card will be voted in accordance with your instructions
marked on the proxy card. In the absence of any instructions or directions
to
the contrary, persons named in the enclosed proxy will vote all shares of common
stock for Proposal No. 1.
The
board does not know of any other matters other than the proposal set forth
above
that may be brought before the Special Meeting or any postponement or
adjournment thereof. In the event that any other matters should come before
the
Special Meeting, the persons named in the enclosed proxy will have discretionary
authority to vote all proxies not marked to the contrary with respect to such
matters in accordance with their best judgment.
Per
NYSE Arca Rule 5.3(d), the proposal to approve the issuance and sale of up
to
20,000,000 shares of common stock and up to 6,000,000 securities exercisable
or
convertible into shares of common stock at below-market prices, referred to
as
Proposal No. 1, requires shareholder approval. Proposal
No. 1 requires the approval of the affirmative vote of a majority of the shares
of common stock present or represented and voting at the Special Meeting.
Abstentions are not considered shares voting on Proposal No. 1, but can have
the
effect of preventing approval of Proposal No. 1 where the number of affirmative
votes, although a majority of the votes cast for Proposal No. 1, does not
constitute a majority of the required quorum.
A
“broker non-vote” occurs when a bank, broker or other holder of record holding
shares for a beneficial owner does not vote on a particular proposal because
that holder does not have discretionary voting power for that particular item
and has not received instructions from the beneficial owner. “Broker non-votes”
are counted as present and entitled to vote for purposes of determining a quorum
if the broker has the discretion to vote on at least one proposal.
Under
NYSE Arca Rule 9.4, discretionary broker voting is generally prohibited on
all
proposals. However, the rule allows a holder of record, such as a broker, to
vote on a proposal without instruction from the beneficial owner if such person
has discretion to vote on the proposal pursuant to the rules of another national
securities exchange to which such record holder is a member.
Broker
Is a Member of the NYSE Arca and another national securities
exchange
A
broker who is a member of both the NYSE Arca and another national securities
exchange will have discretion to vote on Proposal No. 1. Therefore, a broker
that does not receive specific instructions from the beneficial owner will
have
discretion to vote on Proposal No. 1. Given such discretion, a broker who
returns a proxy signed, but with no vote indicated, will have its vote treated
as a vote “FOR” Proposal No. 1.
Broker
is Only a Member of the NYSE Arca
As
NYSE Arca Rule 9.4 generally prohibits discretionary broker voting unless the
broker has dual responsibilities on another exchange, a broker that is only
a
member of the NYSE Arca will not have discretion to vote on Proposal No. 1
without explicit directions from the beneficial owner. Where the broker does
not
receive instructions from the beneficial owner, those shares will not be counted
towards quorum or voted towards the proposal as it will be a broker non-vote
where the broker did not have discretion to vote on any proposal.
We
will pay the cost of the proxy solicitation, including the cost of preparing,
printing and mailing the notice of the Special Meeting, proxy statement and
enclosed proxy card. In addition to the use of mail, our employees may solicit
proxies personally and by telephone. Our employees will receive no compensation
for soliciting proxies other than their regular salaries. We may request banks,
brokers and other custodians, nominees and fiduciaries to forward copies of
the
proxy materials to beneficial owners of our common stock and to request
authority for the execution of proxies. We may reimburse such persons for their
expenses incurred in connection with these activities.
No
shareholder, whether abstaining, voting “FOR” or “AGAINST” Proposal No. 1 will
be entitled to appraisal rights or the right to receive cash for shares under
California law or otherwise. At the date this proxy statement went to press,
we
did not know of any matters to be raised at the Special Meeting other than
those
referred to in Proposal No. 1.
The
following table sets forth certain information, as of August 14,
2006, with respect to the holdings of (1) each person who is the beneficial
owner of more than five percent of our common stock, (2) each of our directors,
(3) our chief executive officer and each of our executive officers, and (4)
all
of our directors and executive officers as a group.
Beneficial
ownership of the common stock is determined in accordance with the rules of
the
Securities and Exchange Commission and includes any shares of common stock
over
which a person exercises sole or shared voting or investment powers, or of
which
a person has a right to acquire ownership at any time within 60 days of
August 14,
2006. Except as otherwise indicated, and subject to applicable community
property laws, the persons named in this table have sole voting and investment
power with respect to all shares of common stock held by them. Applicable
percentage ownership in the following table is based on 35,542,426
shares
of common stock outstanding as of August 14,
2006, plus, for each individual, any securities that individual has the right
to
acquire within 60 days of August 14,
2006.
Unless
otherwise indicated below, the address of each of the principal shareholders
is
c/o ZAP, 501 Fourth Street, Santa Rosa, California 95401.
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Name
and Address
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Shares Beneficially Owned
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Percentage of Class
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Beneficial
Owners of More than 5%:
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Sunshine
511 Holdings (1)
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3,000,000
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7.8%
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101
N. Clematis Street, Suite 511
West
Palm Beach, Florida 33401
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Daka
Development Ltd. (2)
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2,860,719
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7.5%
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8/F
Leroy Plaza, Unit C
15
Cheung Shun Street
Chung
Sha Wan Kin, Hong Kong
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Fusion
Capital Fund II, LLC (3)
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2,500,000
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6.6%
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222
Merchandise Mart Plaza, Suite 9-112
Chicago,
IL 60654
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Jeffrey
G. Banks (4)
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4,414,672
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11.6%
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1314
Sunny Hills Road
Oakland,
CA 94610
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Phi-Nest
Fund, LP (5)
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2,441,176
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6.9%
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2385
Executive Drive, Suite 100
Boca
Raton, Florida 33431
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Directors
and Executive Officers:
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Steven
Schneider (6)
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15,664,655
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32.4%
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Gary
Starr (7)
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7,362,182
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17.6%
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William
Hartman (8)
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706,806
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2.0%
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Renay
Cude (9)
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2,443,437
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6.4%
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Max
Scheder-Bieschin (10)
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569,167
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1.6%
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Guy
Fieri (11)
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102,186
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*
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Name
and Address
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Shares Beneficially Owned
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Percentage of Class
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Matthias
Heinze (12)
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251,111
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*
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Raymond
Byrne
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0
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*
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Peter
Scholl (13)
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600,000
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1.7%
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All
Directors and Executive Officers as a group (9 persons)
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27,699,544
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46.8%
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_______________
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(1)
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Includes
3,000,000 shares of common stock issuable upon the exercise of warrants.
The managing partner is Andrew Schneider, a cousin of ZAP’s CEO. The
address for Sunshine 511 Holdings is 101 N. Clematis Street, Suite
511,
West Palm Beach, FL 33401.
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(2)
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Includes
2,352,056 shares of common stock issuable upon the exercise of warrants.
The managing partner is Raymond Chow. The address for Daka Development
is
Unit C 8/F Leroy Plaza, 15 Cheung Shun Street, Chung Sha Wan Kin,
Hong
Kong.
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(3)
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Includes
2,500,000 shares of common stock issuable upon the exercise of warrants.
Pursuant to the terms of the warrants, Fusion Capital is not entitled
to
exercise the warrants to the extent such exercise would cause the
aggregate number of shares of common stock beneficially owned by
Fusion
Capital to exceed 9.9% of the outstanding shares of the common stock
following such exercise. Steve Martin is the managing partner. The
address
for Fusion Capital is 222 Merchandise Mart Plaza, Suite 9-112, Chicago,
IL
60654.
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(4)
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Includes
2,550,000 shares of common stock issuable upon the exercise of
warrants.
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(5)
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The
address for Phi-Nest Fund, L.P. is 2385 Executive Drive, Suite 100,
Boca
Raton, FL 33431. Mr. Howard Deverett is the Fund
Manager.
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(6)
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Includes
11,353,878 shares of common stock issuable upon the exercise of warrants
and 1,385,777 shares of stock issuable upon the exercise of stock
options.
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(7)
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Includes
4,946,509 shares of common stock issuable upon the exercise of warrants
and 1,452,444 shares of stock issuable upon the exercise of stock
options.
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(8)
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Includes
545,000 shares of common stock issuable upon the exercise of warrants
and
111,806 shares of stock issuable upon the exercise of stock
options.
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(9)
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Includes
1,387,078 shares of common stock issuable upon the exercise of warrants
and 1,000,994 shares of stock issuable upon the exercise of stock
options.
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(10)
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Includes
350,000 shares of common stock issuable upon the exercise of warrants
and
204,167 shares of stock issuable upon the exercise of stock
options.
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(11)
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Includes
65,278 shares of common stock issuable upon the exercise of stock
options.
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(12)
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Includes
100,000 shares of common stock issuable upon the exercise of warrants
and
150,000 shares of stock issuable upon the exercise of stock
options.
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(13)
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Includes
600,000 shares of common stock issuable upon the exercise of
warrants.
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See
Proposal No. 1 below for a description of transactions or arrangements that
may
result in the change in control of our company.
Subject
to shareholder approval at the Special Meeting, our board of directors has
determined that it is in the best interests of the company and our shareholders
to raise between $10.0 million and $15.0 million of capital by selling shares
of
our common stock and securities exercisable or convertible into shares of our
common stock at a price that will represent a discount from the market price
of
our common stock. We may offer these securities in one or more financing
transactions, all of which are collectively referred to in this proxy statement
as the financing transaction. We anticipate that the purchase price per share
of
common stock (assuming no value is attributed to any convertible securities
issued in the financing transaction) issued in the financing transaction will
represent a discount of between 10% to 50% from the market price of our common
stock on the date any agreement is signed to raise the funds. The actual
discount to the market price will be determined based on a number of factors,
including but not limited to market conditions, stock price, volume and similar
factors. For this purpose, the market price will be equal to the market price
of
a share of our common stock as reported on the NYSE Arca, or such other market
on which our common stock may be trading. The description of the potential
financing transaction in this proxy statement is not intended to constitute
an
offer, or the solicitation of an offer, to purchase our securities to be offered
in the financing transaction.
Reasons
for the Financing Transaction.
In reaching our decision to seek approval from our shareholders to potentially
raise between $10.0 million and $15.0 million in the financing transaction,
our
board of directors consulted with our senior management and considered a number
of factors in favor of the proposed financing. Currently, we require additional
capital to continue expanding our current operations. The capital will be used
primarily: (i) to purchase Xebra™
vehicles, both sedan and utility truck models, from our Chinese partner to
fulfill the increasing demand for 100% electric vehicles in the United States,
and (ii) to continue building our dealer network and expanding our marketing
initiatives. We will also use the proceeds to purchase consumer product
inventory for the continued roll-out of new products, to add qualified sales
and
professional staff to execute on our business plan, and to expand our efforts
in
the research and development of advanced technology vehicles, such as the
ethanol-driven OBVIO! automobiles and other fuel efficient
vehicles.
After
considering numerous potential financing alternatives, including alternate
financing structures, our board of directors determined that a potential private
placement of our common stock and other securities exercisable or convertible
into common stock was the best available alternative and would provide the
greatest potential value for the company and our shareholders, as well as
provide the necessary capital to pursue our long-term strategic
goals.
As
discussed below, on August 23, 2006, we received notice from NYSE Regulation,
Inc. that we are not in compliance with certain continued listing requirements.
We believe that an infusion of new capital will allow us to execute our business
plan, which we believe will assist us in regaining compliance with the NYSE
Arca’s continued listing requirements.
Use
of Proceeds. Under
our current business plan, we estimate that any net proceeds of the financing
transaction will be used as follows:
| · |
To
purchase additional Xebra™
vehicles,
both the sedan and the utility truck
models;
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| · |
To
continue building out our dealer network and expanding our marketing
initiatives regarding electric and other advanced technology
vehicles;
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To
purchase additional consumer product inventory, including our new
scooter
and portable energy products;
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To
attract and retain qualified sales and professional staff in order
to
execute on our business plan; and
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To
expand our efforts in research and development and to invest in ventures
focused on expanding our mission in advanced technology
vehicles.
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The
allocation of proceeds will be based on our assumptions concerning the timing
of
the receipt of proceeds in the financing transaction, our business objectives,
finances and other matters. If current assumptions are not accurate, or other
unforeseen conditions or opportunities affecting our business arise, there
could
be material
changes
to our operational expectations. Therefore, we could find it advisable to
allocate the proceeds of the financing transaction in a manner different from
that described.
Terms
of the Financing Transaction. The
final terms of the financing transaction are not currently known. However,
the
financing transaction will be subject to the requirements described in this
Proposal No. 1.
It
is anticipated that we will raise from $10.0 million to $15.0 million by
offering and selling securities consisting of common stock and warrants to
purchase shares of common stock. As of the date of this proxy statement, we
are
unable to provide you with an approximate price per share for the common stock
to be sold in the financing transaction. However, we do anticipate that the
price per share will be at a discount to the market price of our common stock
of
between 10% to 50% as of the date we sign any agreement to raise the funds.
Based upon the market price of our common stock, as reported on the NYSE Arca
on
the record date, the price per share would be between $[ ] to $[ ]. However,
this range is based on the market price of our common stock as of the record
date and could vary, perhaps substantially, depending upon the market price
of
our common stock as of the date we sign any agreement to raise the funds and
the
discount to market factors described above. We do not anticipate that we will
attribute any value to the warrants that we contemplate issuing in the financing
transaction. The maximum number of shares of common stock and warrants or other
securities exercisable or convertible into shares of common stock that we may
issue in the financing transaction will depend upon the market price of the
common stock on the date we sell the securities in the financing transaction.
However, the aggregate number of shares of common stock that we may issue shall
not exceed 20,000,000 shares of common stock and the total number of warrants
or
other securities exercisable or convertible into shares of common stock that
we
may issue shall not exceed 6,000,000,
including the issuance of securities to placement agents as compensation for
their services related to the financing transaction.
As
of the record date, the closing price of our common stock as reported on the
NYSE Arca was $[___]. The board of directors believes the ability to sell our
securities at a discount from the market price of our common stock as of the
date of an agreement with a placement agent is necessary to provide the board
with maximum flexibility in setting the terms of the financing transaction.
We
have not determined the final terms and conditions upon which we would issue
the
securities to be authorized for issuance in accordance with this Proposal No.
1.
The board of directors will determine the terms and conditions of any such
issuances in its sole discretion. We cannot assure you that we will be able
to
sell any or all of the securities on terms satisfactory to us.
Any
shares of common stock issued pursuant to the financing transaction will have
the rights and privileges, including the voting, dividend and liquidation rights
that the presently outstanding shares of common stock possess under our Articles
of Incorporation. Our shareholders generally do not have preemptive rights
with
respect to our common stock and existing holders of common stock would not
have
any preferential or participation rights if the board of directors issues
additional shares of common stock, warrants or other securities in the financing
transaction.
The
final terms of warrants or other securities exercisable or convertible into
shares of common stock that we may issue in the financing transaction,
including, but not limited to, any conversion or redemption prices and other
matters, will be determined by our board of directors. We estimate that any
warrants issued to a placement agent as placement agent compensation will be
at
a premium to the offering price, but will likely be at a discount to the market
price on the date of any agreement with a placement agent. We estimate that
any
warrants issued to investors in the financing transaction will be at a premium
to the market price of our common stock on the date any agreement is signed
to
raise the funds.
We
are asking for the flexibility to issue shares of common stock or other
securities exercisable or convertible into shares of our common stock on such
terms as our board of directors may determine to be appropriate from time to
time. If our shareholders approve this Proposal No. 1 at the Special Meeting,
we
will not solicit further authorization for the issuance of securities in the
financing transaction by a vote of shareholders prior to such issuance, unless
otherwise required under applicable laws, rules or regulations.
We
intend to offer these securities in an offering which is exempt from the
registration requirements of the Securities Act of 1933, as amended, referred
to
as the Securities Act, pursuant to Section 4(2) of the Securities Act and under
Regulation D promulgated under the Securities Act. These securities may not
be
offered and sold absent
registration
or exemption from such registration requirements. It is anticipated that we
will
register the resale of the securities sold in the financing transaction under
the Securities Act.
This
proxy statement is not an offer to sell or the solicitation of an offer to
buy
shares of common stock or any other securities. Offers and sales of shares
of
common stock and securities exercisable into shares of common stock will only
be
made in private placement transactions exempt from the registration requirements
of the Securities Act and applicable state securities laws on the terms and
subject to the conditions of the disclosure documents prepared for such offer
and sale.
Listing
on the NYSE Arca. Our
common stock is listed on the NYSE Arca. Subject to shareholder approval of
Proposal No. 1 and the consummation of the financing transaction, we intend
to
file an additional listing application with the NYSE Arca to list the shares
of
common stock and the common stock issuable upon exercise of warrants to be
issued in the financing transaction.
As
indicated in our Current Report on Form 8-K filed on August 29, 2006, we are
currently not in compliance with the continued listing standards of the NYSE
Arca. In particular, we are not in compliance with the requirement that we
have
total net tangible assets of at least $500,000, or a net worth of at least
$2,000,000. Further, from July 11, 2006 through August 17, 2006, our common
stock closed below the $1.00 per share minimum bid price
requirement.
We
intend to submit a plan to NYSE Regulation, Inc. by September 15, 2006 setting
forth the steps that we intend to take to regain compliance with the NYSE Arca’s
continued listing standards within 18 months. In order to be in compliance,
we
must, among other requirements, have total net tangible assets of at least
$500,000, or a net worth of at least $2,000,000, as well as maintain a minimum
bid price of at least $1.00 per share.
Shareholder
Approval Requirement. Under
NYSE Arca Rule 5.3(d), we are required to obtain shareholder approval in
connection with any transaction, other than a public offering, that involves
the
sale, issuance or potential issuance of common stock, or securities convertible
into common stock, that equals 20% or more of our then-outstanding common stock
if we issue the stock at a price below the greater of its book value or market
value at the time of issuance. As of the record date, we had [__________] shares
of common stock outstanding, and the book value of a share of common stock
was
$[____]. Accordingly, because our proposed issuance of up to 20,000,000 shares
of our common stock at a discount from the market price of our common stock
on
the date we sign any agreement to raise the funds will be in excess of the
NYSE
Arca 20% threshold, we submit this Proposal No. 1 for the shareholders’ approval
in order to comply with NYSE Arca rules.
In
addition, our issuance of securities in connection with the financing
transaction will require that we comply with the registration requirements
under
applicable federal and state securities laws or determine that the issuance
satisfies an applicable exemption from such registration requirements.
Shareholder approval does not obviate the need for compliance with the
requirements of the Securities Act, the Securities Exchange Act of 1934 or
other
NYSE Arca requirements. For example, if we issue all or a substantial portion
of
these 20,000,000 shares in a sale for cash to a single purchaser or to a group
of affiliated purchasers that could be deemed to control us as a result of
such
purchase, we may need to obtain further shareholder approval for such issuance,
and either we, or the purchasers, or both, may be required to file additional
reports with the SEC.
Dissenters’
Rights. Under
California law, shareholders will not have any dissenters’ or appraisal rights
in connection with this Proposal No. 1.
Dilutive
and Other Effects of the Approval of This Proposal No. 1. If
this Proposal No. 1 is approved, our company will have the authority to issue,
without further shareholder approval, up to 20,000,000 shares of common stock
and up to 6,000,000 securities exercisable or convertible into shares of our
common stock.
Potential
Dilutive Effect on Our Stock. As
a result of the financing transaction, the number of shares of outstanding
common stock will increase substantially and significantly dilute the ownership
interests and proportionate voting power of the existing shareholders. The
exercise or conversion of securities exercisable or convertible into shares
of
common stock and anti-dilution adjustments to the exercise or conversion price
of such securities could further dilute the ownership interests and voting
power
of existing shareholders.
If
this Proposal No. 1 is approved and we sell all 20,000,000 shares of common
stock, our shareholders will incur significant dilution of their interests
in
our company. As of the record date, there were [________]
shares of our common stock outstanding. Assuming the issuance of all 20,000,000
shares, purchasers of our common stock in the financing transaction will own
approximately [_____]% of our outstanding common stock immediately following
the
financing transaction. Current shareholders as of the record date will own
approximately [____]% of our outstanding common stock. Further dilution will
occur upon the exercise of any of the convertible securities, including the
warrants that may be issued in the financing transaction. Shareholders should
consider the potential dilution in determining whether to approve this Proposal
No. 1.
Potential
Negative Effect on Our Stock Price. As
a result of the financing transaction, we may issue a substantial number of
shares of our common stock and warrants or other securities exercisable or
convertible into shares of our common stock, at a per share price below the
market price of the common stock as of the date of issuance. The issuance of
common stock and shares of common stock issuable upon exercise of warrants
or
conversion of other securities could have a depressive effect on the market
price of our common stock by increasing the number of shares of common stock
outstanding. Such downward pressure could encourage short sales by certain
investors, which could place further downward pressure on the price of the
common stock.
If
we issue 20,000,000
additional shares of our common stock in the future, a substantial portion
of
those shares will become eligible for sale in the public markets, subject to
certain volume limitations, after expiration of the one-year holding period
required under Rule 144 of the Securities Act and all of the shares could be
eligible for sale in the public markets after two years pursuant to Rule 144(k),
without any volume limitations. These shares could become eligible for resale
in
the public markets earlier if, in connection with the sale of the shares, we
agree to file
a registration statement with the SEC covering the resale of the shares. Any
such sales, or the anticipation of the possibility of such sales, represent
an
overhang on the market and could depress the market price of our common stock.
Similarly, a continuous series of warrant exercises, followed by sales of the
common stock in the public markets might adversely impact the value of our
common stock. The board of directors may generally attempt to moderate the
timing and amount of sales of our common stock to the public in an effort to
minimize any adverse pressure on the value of the common stock. No assurance
can
be given, however, that these attempts will be successful.
Certain
Purchasers May Become Significant Shareholders.
As a result of the financing transaction, one or more persons could become
the
beneficial owner of a substantial amount of our common stock and, as such,
will
have significant voting power with respect to our shares and be able to exert
substantial influence over our business and affairs if they choose to do so.
Any
such person or persons will likely to be able to affect the outcome of all
matters brought before the shareholders, including the election of all directors
and the approval of mergers and other business combination
transactions.
Future
Stock Issuances Could Effect a Change in Control of Our
Company.
As a result of the financing transaction, we could issue 20,000,000 additional
shares of common stock, which is approximately [____]% of the number of shares
of common stock outstanding as of the record date. This would result in a change
in the persons having control of our company. The persons acquiring control
would have significant voting power and be able to control our business and
affairs if they choose to do so. Any such person or persons will determine
the
outcome of all matters brought before the shareholders, including the election
of all directors and the approval of mergers and other business combination
transactions.
Principal
Effect of Non-Approval of Proposal No. 1.
Absent shareholder approval of this Proposal No. 1, we will be unable to
consummate a financing transaction described in this Proposal No. 1 and
raise additional capital to purchase additional Xebra™ vehicle
inventory
to satisfy current demand, purchase consumer product inventory, fund research
and development of new vehicles and products, increase our marketing and
distribution efforts, or hire additional qualified sales and professional staff.
If we are unable to undertake these and similar initiatives, it could have
a
materially adverse effect on our business.
Interests
of Certain Persons in Proposal No. 1.
None of our directors or officers intends to purchase, directly or indirectly,
any securities to be issued by us in the financing transaction.
Recommendation
of the Board of Directors
THE
BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR”
THE APPROVAL OF PROPOSAL NO. 1.
Any
shareholder who intends to submit a proposal at the 2007 Annual Meeting of
Shareholders and who wishes to have the proposal considered for inclusion in
the
proxy statement and form of proxy for that meeting must, in addition to
complying with the applicable laws and regulations governing submission of
such
proposals, deliver the proposal to us for consideration no later than
December 31, 2006. Rule 14a-4 of the SEC’s proxy rules allows a company to
use discretionary voting authority to vote on matters coming before an annual
meeting of shareholders, if the company does not have notice of the matter
at
least 45 days before the date corresponding to the date on which the company
first mailed its proxy materials for the prior year’s annual meeting of
shareholders or the date specified by an overriding advance notice provision
in
the company’s bylaws. Our bylaws do not contain such an advance notice
provision. Accordingly, for our 2007 Annual Meeting of Shareholders,
shareholders’ written notices must be received by us before March 16, 2007
for any proposal a shareholder wishes to bring before the meeting but for which
such shareholder does not seek to have a written proposal considered for
inclusion in the proxy statement and form of proxy. Such proposals should be
sent to Renay Cude, Corporate Secretary, ZAP 501 Fourth Street, Santa Rosa,
California 95401.
We
file reports with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934. We
will, upon written request and without charge, provide to any person solicited
hereunder copies of any of our reports, as filed with the Securities and
Exchange Commission. Requests should be addressed to the Investor Relations
Department, ZAP, 501 Fourth Street, Santa Rosa, California, 95401. Also, such
reports may be obtained from our Internet homepage at
http://www.zapworld.com.
REVOCABLE
PROXY
ZAP
Special
Meeting of Shareholders - [__________],
2006
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned hereby constitutes and appoints Steven Schneider and Renay Cude
and
each of them, as attorneys-in-fact and proxies of the undersigned, with full
power of substitution for and in the name, place and stead of the undersigned
to
appear at the Special Meeting of Shareholders (the “Special Meeting”) of ZAP
(the “Company”) to be held at [_________]
located at [____________],
Santa Rosa, California [______],
on [__________], 2006 at [____] [ ].m., P.S.T., and at any postponement or
adjournment thereof, and to vote all of the shares of common stock (“Common
Stock”), of the Company which the undersigned is entitled to vote, with all the
powers and authority the undersigned would possess if personally present. The
undersigned directs this proxy to vote as indicated on the reverse side of
this
proxy card.
THIS
PROXY WILL, WHEN PROPERLY EXECUTED, BE VOTED AS DIRECTED. IF NO INSTRUCTIONS
TO
THE CONTRARY ARE INDICATED, THE PERSONS NAMED HEREIN INTEND TO VOTE FOR PROPOSAL
NO. 1. IF ANY OTHER BUSINESS IS PRESENTED AT THE SPECIAL MEETING, THIS PROXY
WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE
PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED
AT THE SPECIAL MEETING.
THE
PROXY AGENTS PRESENT AND ACTING IN PERSON OR BY THEIR SUBSTITUTES (OR, IF ONLY
ONE IS PRESENT AND ACTING, THEN THAT ONE) MAY EXERCISE ALL THE POWERS CONFERRED
BY THIS PROXY.
(Continued
and to be signed on reverse side)
The
Board of Directors recommends a vote “FOR” the proposal listed
below.
PLEASE
SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE
IN BLUE OR BLACK INK AS SHOWN HERE [X]
1. To
issue and sell up to 20,000,000 shares of Common Stock and up to 6,000,000
securities exercisable or convertible into shares of Common Stock at
below-market prices.
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¨
FOR
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¨
AGAINST
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¨
ABSTAIN
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2. In
their discretion, the proxies are authorized to vote on any other business
as
may properly come before the Special Meeting or any postponement or adjournment
thereof.
Should
the undersigned be present and choose to vote at the Special Meeting or at
any
postponement or adjournment thereof, and after notification to the Corporate
Secretary of the Company at the Special Meeting of the shareholder’s decision to
terminate this proxy, then the power of such attorneys or proxies shall be
terminated and shall have no force and effect. This proxy may also be revoked
by
filing a written notice of revocation with the Corporate Secretary or by duly
executing a proxy bearing a later date.
The
undersigned hereby acknowledges receipt of Notice of the Special Meeting and
the
Proxy Statement relating thereto.
PLEASE
DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID
ENVELOPE.
_________________________
_________________________
DATE:_________________,
2006
Signature(s)
(Please
date this Proxy)
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NOTE:
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Please
sign exactly as your name or names appear on this proxy. When shares
are
held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title
as
such. If the signer is a corporation, please sign full corporate
name by
duly authorized officer, giving full title as such. If signer is
a
partnership, please sign in partnership name by authorized
person.
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