WHITEBOX
May 30, 2008
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 $10,000,000 investment in Quantum. The option will expire on August 31, 2009. Should Quantum exercise this option, Whitebox will choose the investment structure most suited to it, either:
- stock at a 25% discount to Market Price with 100% warrant coverage having same strike price as the stock purchase price. Market Price is the lower of A) average of 5 days closing price ending on the day of exercise of option, or B) closing price on day of exercise of option.
- a 2 year secured convertible note, the conversion price equal to a 10% discount to the Market Price, and the coupon equal to 12% payable in stock.
- a senior secured straight note that redeems in cash a 120% of face value after one year.
In exchange for extending the above option to Quantum, Quantum will grant to Whitebox the option to make a $10,000,000 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 Market Price.
Accepted by-
Whitebox Advisors LLC
/s/ Andrew Redleaf
Andrew Redleaf
Managing Member of the General Partner
Quantum Fuel Systems Technology
/s/ Brian Olson
Brian Olson
CFO/Treasurer
3033 Excelsior Boulevard * Suite 300 * Minneapolis, MN 55416
612-253-6001 *fax 612-253-6131 * www.whiteboxadvisors.com
