Binding Commitment Letter between Whitebox Advisors LLC and Quantum Fuel Systems Technology for $5 Million Investment Option
Whitebox Advisors LLC grants Quantum Fuel Systems Technology the option to request a $5 million investment before August 1, 2008. If Quantum exercises this option, Whitebox can choose from three investment structures, including discounted stock with warrants, a secured convertible note, or a senior secured note with specific interest and payment terms. In return, Quantum grants Whitebox the option to invest $5 million in a 0% note, redeemable at a premium or convertible into stock. Both parties have signed to confirm these mutual investment options and terms.
Exhibit 4.1
WHITEBOX
July 16, 2007
Brian Olson, CFO/ Treasurer
Quantum Fuel Systems Technology
17872 Cartwright Road
Irvine, CA 92614
Brian Olson-
This letter describes the terms under which Whitebox grants to Quantum the option to call on Whitebox for a further $5,000,000 investment in Quantum. The option will expire on August 1, 2008. Should Quantum exercise this option, Whitebox will choose the investment structure most suited to it, either:
| 1) | stock at a 25% discount to market price with 100% warrant coverage. |
| 2) | a 2 year secured convertible note, the conversion price equal to a 10% discount to the last 10 days trading price, and the coupon equal to 12% payable in stock. |
| 3) | a senior secured straight note at 18% interest rate due in 2 years, that amortizes monthly in stock at a 10% discount if the stock is trading above $1.00. If the stock is below a dollar, it will be at debt holders option whether or not to skip the amortization payment. The interest would be paid quarter in stock at a 10% if above a $1, or at debt holders option if below a dollar to add the coupon payment to the outstanding principle of the note. |
In exchange for extending the above option to Quantum, Quantum will grant to Whitebox the option to make a $5,000,000 investment in a 0% note priced at 100% of par and redeemable at 120% of par 24 months after the funding date. The note will be convertible into stock at the 10 day VWAP of stock prior to exercise of the option.
| Accepted by- | ||||
 |  | |||
| Whitebox Advisors LLC | Quantum Fuel Systems Technology | |||
| Andrew Redleaf, Managing Member of the General Partner | Brian Olson, CFO/Treasurer | |||
3033 Excelsior Boulevard | Suite 300 | Minneapolis, MN 55416
612 ###-###-#### | fax 612 ###-###-#### | www.whitBbox-advisors.com
