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UNITED STATES FORM 8-K
CURRENT REPORT
Date of Report (Date of earliest event reported)
April 29, 2010
ZOOM TECHNOLOGIES, INC.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Exact Name of Registrant as Specified in Charter)
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No.6 Zhongguancun South Street, CEC Bldg Room 708
Haidian District, Beijing, China 100086
U.S. correspondence office:
c/o Ellenoff Grossman & Schole LLP
150 East 42nd Street
New York, NY 10017
(Address of principal executive offices including zip code)
(917) 609-0333
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
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))
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Item 1.01 |
Entry into a Material Definitive Agreement |
On April 29, 2010, Zoom Technologies, Inc. (the "Company") executed a share exchange agreement (the "Agreement") to acquire 100% of the shares of Nollec Wireless Company Ltd., ("Nollec Wireless") a mobile phone and wireless communication design company located in Beijing, China (the "Acquisition"). The parties to the Agreement include the Company as the acquirer of Nollec Wireless and:
a) Silver Tech Enterprises, Ltd. ("Silver Tech"), a holding company founded in July 2005, organized and existing under the laws of the British Virgin Islands, which owns 100% of Ever Elite Corporation, Ltd.;
b) Ever Elite Corporation, Ltd. ("Ever Elite"), a holding company founded in June 2007, organized under the laws of Hong Kong Special Administrative Region which owns 100% of Nollec Wireless Company, Ltd.;
c) Nollec Wireless Company, Ltd., the operating company founded in June 2007, organized under the laws of the People's Republic of China;
d) Key Network Holdings, Ltd. ("KNH"), a BVI company, owner of 76.8% of the outstanding stock of Silver Tech; and
e) Better Day Finance, Ltd. ("BDF"), a BVI company, owner of 23.2% of the outstanding stock of Silver Tech.
Following the closing of the acquisition of Nollec Wireless, each of Silver Tech, Ever Elite and Nollec Wireless will be wholly owned subsidiaries of Zoom, as described in the diagram below:

Under the terms of the Agreement, KNH and BDF will sell their combined 100% ownership of Silver Tech to the Company. The consideration paid for Silver Tech, which owns 100% of Ever Elite which in turn owns 100% of Nollec Wireless will be US$10.96 million in cash and stock. The consideration agreed upon by Zoom, KNH and BDF is based on an appraisal report conducted by Beijing Jingdu Zhongxin Assets Valuation Company Ltd., an affiliate of Grant Thornton. Pursuant to the Agreement, $1.37 million of the total consideration will be paid in cash by the Company and the balance of $9.59 million will be paid by the issuance of 1,342,599 shares of the Company's common stock ("Payment Shares"). The price of the Payment Shares was based on the weighted average closing price of Zoom shares as traded on Nasdaq for the 10 consecutive trading days prior and leading up to the day immediately before the date of the Agreement. The sellers in the Transaction, KNH and BDF, will execute lock up agreements which restrict them from transferring the Payment Shares for a period of 6 months from the closing date of the transaction. Closing of the Transaction is subject to customary closing conditions and deliverables by the Company, KNH and BDF.
Nollec Wireless primarily focuses on research and development of mobile phones, and hardware and software solutions for domestic Chinese and oversea customers. Its design team includes experienced engineers in the core technologies of wireless communication and mobile phone development. Nollec provides state of the art industrial, user inter-phase, mechanical and engineering designs and software and hardware integration. Its clients include certain domestic and international mobile phone manufacturers including Philips, Lenovo, Sonim, Gionee and Borqs.
Nollec Wireless generates revenues by charging clients a design fee plus a royalty fee based on the number of units of phones actually sold. Its unaudited financial results for the years ended December 31, 2009 and 2008 showed revenues of $6.2 million and $7.1 million respectively, and net income of $1.3 million and $0.9 million respectively.
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Item 9.01 |
Financial Statements and Exhibits |
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Exhibit Number |
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Exhibit Description |
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10.1 |
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Share Exchange Agreement, dated April 29, 2010, by and among the Company, Silver Tech Enterprise, Ltd., Ever Elite Corporation Ltd., Nollec Wireless Company, Ltd., Key Network Holdings, Ltd. and Better Day Finance, Ltd. |
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10.2 |
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Form of Lock-up Agreement to be entered between the Company and Key Network Holdings, Ltd., and the Company and Better Day Finance, Ltd. |
Required Audited financial statements will be filed in an amendment on Form 8-K not later than 71 calendar days after the date of closing.
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 thereunto duly authorized.
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Date: April 30, 2010 |
By: /s/ Anthony K. Chan
Anthony K. Chan Chief Financial Officer |
EXHIBITS
EXHIBIT 10.1 SHARE EXCHANGE AGREEMENT SILVER TECH ENTERPRISES LIMITED, KEY NETWORK HOLDINGS LIMITED BETTER DAY FINANCE LIMITED Ever Elite Corporation Limited
PURCHASE AND SALE OF SHARES vii REPRESENTATIONS AND WARRANTIES OF THE NOLLEC PARTIES viii ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS xx ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER xxi ARTICLE VI COVENANTS OF THE NOLLEC PARTIES PENDING CLOSING xxiii ARTICLE VII COVENANTS OF THE PURCHASER xxvi ARTICLE VIII COVENANTS OF ALL PARTIES HERETO xxvii ARTICLE IX CONDITIONS TO CLOSING xxviii ARTICLE X RELIANCE ON REPRESENTATIONS AND WARRANTIES xxx ARTICLE XI INDEMNIFICATION xxx ARTICLE XII DISPUTE RESOLUTION xxxi ARTICLE XIII TERMINATION xxxii SHARE EXCHANGE AGREEMENT, dated as of April _28__, 2010 (this
"Agreement"), is hereby entered into by and among:
dated
April _28___ 2010,
by and among
Zoom Technologies, Inc.,
Nollec Wireless Co., Ltd ,
Under this Agreement, the Company, the Sellers, the HKco and the Operation Company shall be referred to as the "Nollec Parties".
WHEREAS, the Sellers collectively own 100% of the issued and outstanding shares of the Company (the "Shares"); the Company conducts the operations of a wireless telecommunication handset designing business (the "Business") in the PRC through the HKco and the Operation Company;
WHEREAS, BDL and KNH hold respectively 23.2% and 76.8% issued and outstanding shares in Company;
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WHEREAS, the Company directly holds 100% issued and outstanding shares of the HKco and the HKco directly holds 100% shares of the Operation Company;
WHEREAS, the Operation Company primarily conducts the Business in the PRC;
WHEREAS, the Purchaser is a company with its shares listed on the NASDAQ Capital Market with the ticker symbol "ZOOM";
WHEREAS, with the Purchase Price as considerations, the Purchaser desires to acquire all of the shares of the Company (the "Shares") in accordance with and subject to the terms and conditions of this Agreement (the "Transaction").
NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. The following terms, as used herein, have the following meanings:
"Unaudited Financial Statements" means the consolidated financial statements of Company for the years from its incorporation date to the each date ended December 31 of each fiscal year, including the consolidation of financial statements of HKco and the Operation Company.
"Act" or "Securities Act" means United States Securities Act of 1933, as amended.
"Action" means any action, suit, investigation, hearing or proceeding, including any audit for taxes or otherwise.
"Additional Agreements" means any other agreement and/or instruments that all parties hereto agree to enter into for the deal contemplated in this Agreement.
"Affiliate" means, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with such other Person. With respect to any natural person, the term Affiliate shall also include any member of said person's immediate family, any family limited partnership, limited liability company or other entity in which said person owns any beneficial interest and any trust, voting or otherwise, of which said person is a trustee or of which said person or any of said person's immediate family is a beneficiary.
"Agreement" means this Share Exchange Agreement.
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"Arbitrator" has the meaning set forth in Section 12.1(b).
"Appraised Value" means the market value of the Company which is determined by an independent appraiser in accordance with common practice appraisal procedures in the industry on the market value and prospects of the Company.
"Authority" shall mean any governmental, regulatory or administrative body, agency or authority, any court or judicial authority, any arbitrator, or any public, private or industry regulatory authority, whether international, national, Federal, state, or local.
"Books and Records" means all books and records, ledgers, employee records, customer lists, files, correspondence, and other records of every kind (whether written, electronic, or otherwise embodied) owned or used by the Company and its Subsidiaries or in which the Company's or any Subsidiaries' assets, business, or transactions are otherwise reflected.
"Business" has the meaning set forth in the Recitals.
"Business Day" means any day other than a Saturday, Sunday or a legal holiday on which commercial banking institutions in Beijing are not open for business.
"Charter Documents" has the meaning set forth in Section 3.3.
"Closing" has the meaning set forth in Section 2.2
"Closing Date" has the meaning set forth in Section 2.2
"Closing Share Price" means, with respect to each Trading Day, the closing price of the shares of the Purchaser as reported on the NASDAQ Capital Market.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the Preamble.
"Company Consent" has the meaning set forth in Section3.8.
"Company Indemnitees" has the meaning set forth in Section 11.2.
"Contracts" has the meaning set forth in Section 3.16(a).
"Core Employees" means any employee of the Operation Company who is a department manager or above level of management personnel, or a senior engineer of the Operation Company.
"Employment Agreements" means the agreements between the Operation Company and the Core Employees.
"Exchange Act" means the Securities Exchange Act of 1934.
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"Exchange Act Filings" means filings under the Exchange Act made by the Purchaser prior to the Closing Date.
"GAAP" means generally accepted accounting principles, consistently applied and interpreted in the People's Republic of China.
"Interim Financial Statements" means the unaudited consolidated financial statements of the Company for the month ended February 28, 2010 or as of the date of February 28, 2010, including the consolidation of financial statements of HKco and the Operation Company.
"Indebtedness" includes with respect to any Person, (a) all obligations of such Person for borrowed money, or with respect to deposits or advances of any kind (including amounts by reason of overdrafts and amounts owed by reason of letter of credit reimbursement agreements) including with respect thereto, all interest, fees and costs, (b) all obligations of such Person evidenced by bonds, debentures, notes, liens, mortgages or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person, (d) all obligations of such Person issued or assumed as the deferred purchase price of property or services (other than accounts payable to creditors for goods and services incurred in the ordinary course of business), (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any lien or security interest on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (f) all obligations of such Person under leases required to be accounted for as capital leases under GAAP, and (g) all guarantees by such Person.
"Intellectual Property" means any and all of the following: (A) U.S., international and foreign patents, patent applications and statutory invention registrations; (B) trademarks, licenses, inventions, service marks, trade names, trade dress, slogans, logos and Internet domain names, including registrations and applications for registration thereof; (C) copyrights, including registrations and applications for registration thereof, the software and copyrightable materials; (D) trade secrets, know-how and similar confidential and proprietary information; (E) u.r.l.s, Internet domain names and Websites; and (F) any other type of Intellectual Property right in each case which is owned or filed by the Company (or by the Sellers with respect to the Company) or any Subsidiaries whether registered or unregistered or domestic or foreign.
"Knowledge of the Company" or "Company's Knowledge" means, with respect to any matter in question, the actual knowledge of any executive officer of the Company after reasonable inquiry.
"Law" means, with respect to any Person, any national, provincial or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Authority that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.
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"Leases" has the meaning set forth in Section 3.12.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, including any agreement to give any of the foregoing and any conditional sale and including any voting agreement or proxy.
"Lock-Up Agreements" means each of the Lock-Up Agreements for lock up of the shares of Purchaser as hold by the Sellers, between the Purchaser, the Sellers and other relevant parties in the form to be agreed to by Sellers after the date of this Agreement.
"Losses" has the meaning set forth in Section 11.1.
"Material Adverse Change" means a material adverse change in the business, assets, condition (financial or otherwise), liabilities, results of operations or prospects of the Business individually or in the aggregate; provided, however, without prejudicing whether any other matter qualifies as a Material Adverse Change, any matter individually or in the aggregate involving a loss or payment in excess of $100,000 shall constitute a Material Adverse Change, per se, provided that, except to the extent that any of the following disproportionately affect the Company and the Subsidiaries, taken as a whole, compared to similarly situated businesses, none of the following shall be deemed to constitute a Material Adverse Effect or shall be taken into account in determining whether a Material Adverse Change has occurred or would reasonably be expected to occur (A) any changes (after the date hereof) in GAAP or applicable Law, (B) any acts of God or acts of war, armed hostilities, sabotage or terrorism, (C) any changes in general economic, business or market conditions or affecting United States or foreign economies in general or (D) any changes in conditions affecting the industries or markets in which the Company operates.
"Material Adverse Effect" means a material adverse effect on the business, assets, condition (financial or otherwise), liabilities, results of operations or prospects of the Business individually or in the aggregate; provided, however, without prejudicing whether any other matter qualifies as a Material Adverse Effect, any matter individually or in the aggregate involving a loss or payment in excess of $100,000 shall constitute a Material Adverse Effect, per se, provided that, except to the extent that any of the following disproportionately affect the Company and the Subsidiaries, taken as a whole, compared to similarly situated businesses, none of the following shall be deemed to constitute a Material Adverse Effect or shall be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur (A) any changes (after the date hereof) in GAAP or applicable Law, (B) any acts of God or acts of war, armed hostilities, sabotage or terrorism, (C) any changes in general economic, business or market conditions or affecting United States or foreign economies in general or (D) any changes in conditions affecting the industries or markets in which the Company operates.
"Offices" means offices, warehouses or business locations of the Company and each Subsidiaries.
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"Order" means any decree, order, judgment, writ, award, injunction, rule or consent of or by an Authority.
"Outside Closing Date" has the meaning set forth in Section 13.1.
"Owned Intellectual Property" has the meaning set forth in Section 3.14(a).
"Permits" has the meaning set forth in Section 3.17.
"Person" means an individual, a corporation, a partnership, a limited liability company, an association, a trust or other entity or organization, including a government, domestic or foreign, or political subdivision thereof, or an agency or instrumentality thereof.
"PRC" means the People's Republic of China, but solely for the purposes of this Agreement and the other Additional Agreements, excluding Hong Kong, Macau and Taiwan.
"Proceeding" has the meaning set forth in Section 3.22(b).
"Purchaser" has the meaning set forth in the Preamble.
"Purchaser Common Shares" means the common stock, $0.01 par value per share, of Purchaser which is issued to Sellers or its nominees as part of the Purchase Price.
"Purchase Price" has the meaning set forth in Section 2.3(a)
"Real Property" means, collectively, all real properties and interests therein (including the right to use), together with all buildings, fixtures, trade fixtures, plant and other improvements located thereon or attached thereto; all rights arising out of the use thereof (including air, water, oil and mineral rights); and all subleases, franchises, licenses, permits, easements and rights-of-way which are appurtenant thereto.
"Reg. D" has the meaning set forth in Section 4.5(a).
"SEC" means the Securities and Exchange Commission.
"Shares" means all the issued and outstanding shares of the Company, which is currently owned by BDL as to 23.2% of equity interest and KNH as to 76.8% of equity interest, free and clear of any Liens.
"Subsidiary" or "Subsidiaries" means one of the Company's direct or indirect subsidiaries or all of the Company's direct and indirect subsidiaries, as applicable.
"Tangible Assets" means all tangible personal property and interests therein, including inventory, machinery, computers and accessories, furniture, office equipment, communications equipment, and other tangible property.
"Tax" has the meaning set forth in Section 3.22(c).
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"Tax Liability" has the meaning set forth in Section 3.22(b).
"Tax Return" has the meaning set forth in Section 3.22(c).
"Third Party Claim" has the meaning set forth in Section 11.3(a).
"Trading Day" means any day when the NASDAQ Capital Market is open for trading.
"Transaction" has the meaning set forth in the Recitals.
"Website(s)" shall mean all of the internet domain names for the Company.
ARTICLE II
2.1. Purchase and Sale of the Shares. Subject to the terms and conditions herein stated, subject to delivery of the Purchase Price to the Sellers and listing the Purchaser Common Shares (as defined below) within six (6) months after Closing, the Sellers agrees to sell, assign, transfer and deliver to the Purchaser on the Closing Date, and the Purchaser agrees to purchase on the Closing Date, free and clear of all Liens, the Shares, which represent all of the issued and outstanding ownership interests in the Company.
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2.3. Purchase Price.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE NOLLEC PARTIES
The Nollec Parties hereby represent and warrant to the Purchaser:
3.3. Charter Documents; Legality. The Company has heretofore made available to the Purchaser true and complete copies of the certificate of incorporation, articles of association, bylaws, operating agreements or other comparable organizational documents minute books and stock books, if applicable (the "Charter Documents"), as in effect or constituted on the date hereof. The execution, delivery, and performance by the Nollec Parties of this Agreement and any Additional Agreement to which the Company or any other party hereto is to be a party has not violated and will not violate, and the consummation of the transactions contemplated hereby or thereby will not violate, any of the Charter Documents or any Law. The Company has not taken any action that is in violation of its Charter Documents.
3.4. Subsidiaries. The Company and each of the Subsidiaries are not a party to any agreement relating to the formation of any joint venture, association or other Person. The Exhibit B of this Agreement discloses all of the outstanding shares of such Subsidiaries, which are validly issued, fully paid and non-assessable and are held free and clear of any Liens; (ii) there are no consignments, contracts and/or equity transfer arrangements, options, warrants or other contractual rights or arrangements outstanding which give any Person the right to acquire or Control any capital stock or any substantial part of assets of any such Subsidiaries whether or not such right is presently exercisable; and (iii) there are no contracts and/or equity transfer arrangements, options, warrants or other contractual rights (oral or written), trusts or other arrangements of any nature which give any Person the right to any stock rights or equity interests in or from any such Subsidiaries.
3.5. Capitalization and Ownership. No Person other than the Sellers owns any securities of the Company. There is no Contract that requires or under any circumstance would require the Company or any Subsidiaries to issue, or grant any right to acquire, any securities of the Company or any Subsidiaries, or any security or instrument exercisable or exchangeable for or convertible into, the capital stock or membership interest of the Company or any Subsidiaries or to merge, consolidate, dissolve, liquidate, restructure, or recapitalize the Company or any Subsidiaries. The Shares and the securities of each Subsidiaries (i) have been duly authorized and validly issued and are fully paid and nonassessable, and (ii) were issued in compliance with all applicable Laws.
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3.8. Consents. The Contracts listed on Schedule 3.8 are the only on-going material agreements, commitments, arrangements, contracts or other instruments binding upon the Company, any Subsidiaries or any of their respective properties requiring a consent, approval, authorization, order or other action of or filing with any Person as a result of the execution, delivery or performance of this Agreement or any of the Additional Agreements or the consummation of the transactions contemplated hereby or thereby (each of the foregoing, a "Company Consent").
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3.10. Books and Records.
3.11. Absence of Certain Changes.
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3.12. Real Property.
The use and operation of the Real Property or real property lease (the "Leases") by the Company or its Subsidiaries are in full compliance in all material respects with covenants, conditions, restrictions, easements, disposition agreements and similar matters affecting the Real Property and, effective as of the Closing, each of the Company and its Subsidiaries shall have the right under all Laws to continue the use and operation of the Real Property in the conduct of their businesses. Neither the Company nor any Subsidiaries have breached or violated and is not in default under any of the Leases, the breach or violation of which could individually or in the aggregate have a Material Adverse Effect, and no notice from any Person has been received by the Company or any Subsidiaries or served upon the Company, any Subsidiaries or the Sellers claiming any violation of any Lease.
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3.13. Tangible Property.
3.14. Intellectual Property.
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3.16. Contracts.
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3.17. Licenses and Permits. Each of the Company and its Subsidiaries possess all permits necessary for the ownership and operation of their businesses (the "Permits"). True, complete and correct copies of the Permits issued to the Company and its Subsidiaries have previously been delivered to the Purchaser. Such Permits are valid and in full force and effect and, assuming the related Company Consents, if any, have been obtained or waived prior to the Closing Date, none of the Permits will be terminated or impaired or become terminable as a result of the transactions contemplated hereby. The Company or any Subsidiaries has all Permits necessary to operate the Business other than those Permits whose absence individually or in the aggregate would not cause a Material Adverse Effect.
3.19. Employment Contracts The Core Employees shall have entered into employment agreements, including customary confidentiality clauses, non-competition clauses and Intellectual Property assignment clauses with the Company or any of Subsidiaries (the "Employment Agreements"), the terms and conditions of which may ensure that the Core Employees keep confidential of information of Operation Company during the employment
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period and after the employment period, the Core Employees shall not directly or indirectly conduct the compete Business with the Operation Company during the employment period and within two (2) years after the employment period, all the Intellectual Property developed by the Core Employees during the employment period shall be owned by the Operation Company. The photocopies of such Employment Agreements have been delivered to the Purchaser.
In addition, to the Company's Knowledge: (i) none of the matters specified in Sections (a) through (e) above is threatened against the Company or any Subsidiaries; (ii) no union organizing activities have taken place with respect to the Company or any Subsidiaries; and (iii) no basis exists for which a claim may be made under any collective bargaining agreement to which the Company or any Subsidiaries are a party.
3.21. Employment Matters. The Unaudited Financial Statements contain an accurate and complete list of each director's and officer's incentive, bonus, profit sharing, retirement, deferred compensation, equity, phantom equity, option, equity purchase, equity appreciation right or severance plan of the Company now in effect or under which the Company has or might have any obligation, or any understanding between the Company and any employee concerning the terms of such employee's employment that does not apply to such company's employees generally.
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3.22. Tax Matters.
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3.23. Business Operations; Servers. The Company and each Subsidiaries owns all of its servers and other computer equipment (other than webservers) necessary to operate its Business as conducted as of the date hereof and as such Business will be conducted as of the Closing.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE
SELLERS
The Sellers represents to the Purchaser as follows, and at the Closing the Sellers will represent:
4.1. Ownership of Shares; Authority.
4.5. Investment Representations.
The Sellers are "accredited investors" as such term is defined in Rule 501 of Regulation D promulgated under the Act ("Reg. D"), or are not U.S. persons as defined in Regulation S promulgated under the Act ("Reg S").. The Sellers acknowledges that the Purchaser has the right to require evidence of its status as an accredited investor, if necessary.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER
The Purchaser represents and warrants to the Nollec Parties as follows:
5.3. Governmental Authorization. None of the execution, delivery or performance by the Purchaser of this Agreement or any Additional Agreement requires any consent, approval, license or other action by or in respect of, or registration, declaration or filing with, any Authority by Purchaser, other than those required under U.S. laws and regulations including but not limited to the filings with the U.S. Securities and Exchange Commission (the "SEC").
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5.9. Litigation. There is no action, suit, investigation, hearing or proceeding pending against any of its officers or directors, or the business of Purchaser, before any court or arbitrator or any governmental body, agency or official which if adversely determined against Purchaser, has or could reasonably be expected to have a Material Adverse Effect on the business, assets, condition (financial or otherwise), liabilities, results or operations or prospects of Purchaser, or which in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated hereby. There are no outstanding judgments against the Purchaser.
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5.10. Compliance with Charter Documents. Provided that the Purchaser presents the transactions contemplated by this Agreement to internal approval of the transaction contemplated by this Agreement in accordance with the Charter Documents of the Purchaser , the execution, delivery, and performance by the Purchaser of this Agreement and any Additional Agreement to which the Purchaser is to be a party has not violated and will not violate, and the consummation by the Purchaser of the transactions contemplated hereby or thereby will not violate, any of the Purchaser Charter Documents or any Law.
ARTICLE VI
COVENANTS OF THE
NOLLEC PARTIES PENDING CLOSING
The Nollec Parties covenant and agree that:
6.1. Conduct of the Business. From the date hereof through the Closing Date, the Company and each Subsidiaries shall conduct the Business only in the ordinary course (including the payment of accounts payable and the collection of accounts receivable), consistent with past practices, and shall not enter into any material transactions without the prior written consent of the Purchaser, and use its commercially reasonable efforts to preserve intact the Company's business relationships with employees, suppliers, customers and other third parties. Without limiting the generality of the foregoing, from the date hereof until the Closing Date, without the Purchaser's prior written consent, neither the Company nor any Subsidiaries shall:
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None of the Nollec Parties will (i) take or agree to take any action that might make any representation or warranty of the Company, any Subsidiaries or the Sellers hereunder inaccurate in any respect at, or as of any time prior to, the Closing Date or (ii) omit to take, or agree to omit to take, any action necessary to prevent any such representation or warranty from being inaccurate in any respect at any such time.
6.2. Access to Information. From the date hereof until and including the Closing Date, the Company and each Subsidiaries shall (a) continue to give the Purchaser, its counsel and other representatives full access to the Books and Records of each of them, (b) furnish to the Purchaser, its counsel and other representatives such information relating to the Business as such Persons may request and (c) cause the employees, counsel, accountants and representatives of the Company and each Subsidiaries to cooperate with Purchaser in its investigation of the Business.
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6.3. Notices of Certain Events. The Company and any Subsidiaries shall promptly notify the Purchaser of:
6.4. Retaining the Core Employees BDL shall cause Mr. Sun to maintain the employment relationship with the Operation Company for a period no less than three (3) years. The Parties agree that KNH shall not be hold liable for any breach of the above covenant and the breach of this obligation shall constitute a material breach of this Agreement by BDL.
6.6. Post Closing Obligations. Immediately after the Closing Date, the Nollec Parties shall deliver common seals, all original corporate documents, financial documents, commercial agreements and/or other documents relating to the Company, the HK Company and the Operation Company to the Purchaser, subject to requirement of the Purchaser at the time of delivery of such documents.
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ARTICLE VII
COVENANTS OF THE PURCHASER
7.1. Conduct of Business. The Purchaser covenants and agrees it shall not take or agree to take any actions that would cause a breach in Purchaser's representations or warranties contained in this Agreement or prevent the Purchaser from performing its covenants hereunder.
7.2. Fulfillment of Conditions. From the date hereof to the Closing Date, the Purchaser shall use its commercially reasonable efforts to fulfill the conditions specified in ARTICLE IX to the extent that the fulfillment of such conditions is within its control. The foregoing obligation includes (a) the execution and delivery of documents necessary or desirable to consummate the transactions contemplated hereby, and (b) taking or refraining from such actions as may be necessary to fulfill such conditions (including conducting the business of the Purchaser in such manner that on the Closing Date the representations and warranties of the Purchaser contained herein shall be accurate as though then made).
7.3. Repayment of Loans Within 720 days following the Closing Date, the Purchaser, by itself or through its Affiliates, shall by single payment repay, together with the accrued interests at the repayment day calculated on daily basis at a rate of 6% per annum, the principal of the loan at amount of US$ 715,064, which is currently outstanding to KNH by the Company or its Subsidiaries. The accrued interest by now at an amount of US$ 298,989 shall be repaid within 90 days following the Closing Date.
7.4. Non-Solicitation. The Purchaser and its Affiliates, prior to the Closing or in any future time within three (3) years after the execution date of this Agreement if the deal contemplated in this Agreement fails to close, may not directly or indirectly through any other individual, person or entity, maliciously employ, solicit or induce any individual who is, or was at any time during the period from the execution date of this Agreement to the Closing Date ("Restriction Period"), an employee or consultant of the Operation Company to terminate or refrain from renewing or extending his or her employment by or consulting relationship with the Operation Company, or to become employed or enter into a consulting relationship with the Purchaser or any of its Affiliates immediately prior to the Closing Date, or any other individual, person or entity.
7.5. Disclosure of Certain Matters. The Purchaser shall give the Sellers prompt written notice of any event or development that occurs that had it existed or been known on the date hereof (a) would cause any of the representations and warranties of the Purchaser contained herein to be materially inaccurate or otherwise misleading, or (b) would require any amendment or supplement to this Agreement.
7.6. Rule 144 Facilitate Obligation The Purchaser warrants that all Purchaser Common Shares to be issued to the Sellers as contemplated in this Transaction can be sold without registration in compliance with Rule 144 under the Securities Act ("Rule 144") in accordance with the terms of Rule 144. In order for the Sellers to be able to sell the
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Purchaser Common Shares, without an effective registration statement, in compliance with Rule 144 promulgated under the Securities Act, the Purchaser agrees to: (a) use reasonable, diligent efforts to maintain compliance with the filing requirements of the SEC and to keep adequate current information about the Purchaser which is the issuer of the securities, within the time frame as defined by Rule 144; (b) and so long as any member of the Seller's party owns any Purchaser Common Shares within the period from the completion of six months after the Closing of this Transaction until the first anniversary of the Closing, to furnish to such Seller upon request: (i) a certificate by the Purchaser as to its compliance with the reporting requirements of the Securities Act (including, without limitation, Rule 144 requirements) and the Exchange Act, (ii) a copy of the most recent annual report of the Purchaser and such other reports and documents as may be filed by the Purchaser with the SEC, and (iii) such other reports, documents or information of the Purchaser, that is not confidential or containing non-public inside information, as the Sellers may reasonably request in availing themselves or itself of any rule or regulation of the SEC that permits the selling of any such securities without registration. If for whatever reason, upon the expiration of the lockup period set forth in the Section 6.5, the Sellers cannot sell the securities without registration and in accordance with the applicable provisions under Rule 144, with no limitations as to the amount to be sold each time, then the Purchaser will use reasonable effort to get the Shares registered by filing a registration statement with the SEC within 6 months from the expiry of such lock-up period. Expenses incurred by Sellers in the registration of the securities shall be borne by the Purchaser.
ARTICLE VIII
COVENANTS OF ALL
PARTIES HERETO
The parties hereto, as applicable, covenant and agree that:
8.2. Confidentiality of
Transaction. Any information (except publicly available or freely usable material obtained from another source)
respecting any party or its Affiliates will be kept in strict confidence by all other parties to this Agreement and their
agents. Except as required by Law or Authority, neither the Purchaser nor the Nollec Parties, nor any of their respective
Affiliates, directors, officers, employees or agents will disclose the terms of the transactions contemplated hereunder at
any time, currently, or on or after the Closing, regardless of whether the Closing takes place, except as necessary to
their attorneys, accountants and professional advisors, in which instance such persons and any employees or agents of
the Purchaser or Sellers, as the case may be, shall be advised of the confidential nature of the terms of the transaction
and shall themselves be required by the Purchaser nor the Nollec Parties, as the case may be, to keep such information
confidential. Except as required
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by Law or Authority, each party shall retain all information obtained from the other and
their lawyers on a confidential basis except such information may be discussed as necessary to their attorneys,
accountants and professional advisors, in which instance such persons and any employees or agents of such party shall
be advised of the confidential nature of the terms of the transaction and shall themselves be required by such party to
keep such information confidential.
ARTICLE IX
CONDITIONS TO CLOSING
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Directors of the Company and the HK Company reflecting the change of members and directors for the purpose of this Transaction, which shall be certified by their registered agents, (iii) a share certificate of Company reflecting owning all the Shares by the Purchaser; (iv) a PRC legal opinions on the Operation Company, the form and content of which has been attached hereto as Exhibit F (v) a certificate of the chairman or person in the similar position of the Sellers, the Company and each of Subsidiaries certifying each of the foregoing, completion of covenants and correctness of representations and warranties and as to signatures of the officer(s) authorized to execute this Agreement and any certificate or document to be delivered pursuant hereto.
9.3. Conditions to Obligations of the Nollec Parties. In addition to the terms and provisions of Section 2.3, the obligation of the Nollec Parties to consummate the Closing is subject to the satisfaction, or the waiver at the Nollec Parties' discretion, of all the following further conditions:
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organization and each other jurisdiction in which each of Purchaser is qualified to do business, (v) share certificates of the Purchaser reflecting owning the Purchaser Common Shares pursuant to this Agreement by the Sellers and/or its nominees, (vi) the payment evidence of USD five hundred thousand (US$ 500,000) to KNH pursuant to this Agreement.
ARTICLE X
RELIANCE ON REPRESENTATIONS AND
WARRANTIES
ARTICLE XI
INDEMNIFICATION
11.2. Indemnification of the Sellers. In addition to other indemnity expressly provided in this Agreement, the Sellers' sole indemnity under this Agreement is to rescind the agreement and request for delivering back of any and all Share as delivered to the Purchaser.
11.3. Insurance. Any indemnification payments hereunder shall be reduced by any insurance proceeds or other third party reimbursement actually received by an Indemnified Party.
11.4. Survival of Indemnification Rights. The representations and warranties of the Nollec Parties and the Purchaser shall survive until the 18 month anniversary of the Closing Date. The indemnification to which any Indemnified Party is entitled from the Indemnifying Parties pursuant to Section 11.1 or 11.2 for Losses shall be effective so long as it is asserted prior to the 18 month anniversary of the Closing Date in the case of all representations and warranties of the Company, the Operation Company, the Sellers and Purchaser hereunder.
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ARTICLE XII
DISPUTE
RESOLUTION
12.1. Arbitration.
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costs for the reasons set forth in such decision. The determination of the Arbitrator shall be final and binding upon the parties and not subject to appeal.
ARTICLE XIII
TERMINATION
13.1. Termination Without Default. In the event that the Closing of the transactions contemplated hereunder has not occurred within ninety (90) days following the execution of this Agreement(the "Outside Closing Date") and no material breach of this Agreement by the party seeking to terminate this Agreement shall have occurred or have been made (as provided in Section 13.2 hereof), the Purchaser, on the one hand, and the Nollec Parties, on the other hand, shall have the right, at its or their sole option, to terminate this Agreement without liability to the other side. Such right may be exercised by the Purchaser, on the one hand, or the Operation Company and the Sellers, on the other, as the case may be, giving written notice to the other at any time after the Outside Closing Date.
13.2. Termination Upon Default.
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ARTICLE XIV
MISCELLANEOUS
14.1. Notices. All notices, requests, demands and other communications to any party hereunder shall be in writing and shall be given to such party at its address or telecopier number set forth below, or such other address or telecopier number as such party may hereinafter specify by notice to each other party hereto:
if to the Purchaser, to:
Zoom Technologies, Inc.
Address: C/o Ellenoff Grossman & Schole LLP,150 East 42nd Street, 11th Floor, New York, NY 10017, U. S. A
Attn: Anthony Chan
Telephone: 1-917-609-0333
Fax: 1-917-591-3351
if to any of the Nollec Parties:
Address: No.3 Building, No.4 west Bajiao street, Shijingshan District, Beijing, P.R. China
Attn: SUN Jiqun (Simon), Nollec Wireless Co., Ltd.
Telecopy: +86 10 68886299
With a copy to Kit Wah Lee:
Address: same as Nollec Parties
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Each such notice, request or other communication shall be effective (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified herein and the appropriate answer back is received or, (ii) if given by certified mail, 180 hours after such communication is deposited in the mails with first class postage prepaid, properly addressed or, (iii) if given by any other means, when delivered at the address specified herein.
14.2. Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by each party hereto, or in the case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
14.4. Publicity. Except as required by Law or the rules and regulations of the SEC and/or the Nasdaq Stock Market, the parties agree that neither they nor their agents shall issue any press release or make any other public disclosure concerning the transactions contemplated hereunder without the prior approval of the other party hereto.
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IN WITNESS WHEREOF, the Purchaser and the Nollec Parties have caused this Agreement to be duly executed by their respective authorized officers or by himself have executed this Agreement as of the day and year first above written.
|
Zoom Technologies, Inc. By:_______________________ |
|
NOLLEC WIRELESS CO., LTD(北京景山创新通信技术有༈ 0;公司) By:_______________________ |
|
Key Network Holdings Limited By:_______________________ |
|
Better Day Finance Limited By:_______________________ Silver Tech Enterprises Limited By:_______________________ |
|
Ever Elite Corporation Limited By:_______________________ |
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Exhibit A Considerations Sharing Table
For the purpose of the Section 2.3 of this Agreement, the Parties agree that the Purchase Price and the payment schedule under this Agreement shall follow the following requirements:
|
Parties |
Cash |
Purchaser Common Shares |
|
KNH |
USD five hundred thousand (US$ 500,000) shall be paid to a valid and legal bank account designated by KNH at the Closing Date. |
The number of the Purchaser Common Shares, which shall be paid to KNH at the Closing, shall be calculated by the following fraction: numerator shall be the product of the Purchase Price minus USD one million three hundred and seventy thousand (US$ 1,370,000), the denominator shall be the weighted average of the Closing Share Price of the Purchaser Ordinary Share for ten (10) Trading Days up to the date immediately prior to the date of this Agreement, with the number of Purchaser Common Shares rounded up to the nearest whole number. |
|
BDL |
USD eight hundred and seventy thousand (US$ 870,000) shall be paid to BDL or its designated parties in six tranches within 3 years after the Closing Date, with one sixth (1/6) of USD eight hundred and seventy thousand (US$ 870,000) ("Each Tranche Payment") being paid to the BDL's designated parties at the end of each every 6 months after the Closing Date, provided, however, that 50% of Each Tranche Payment shall be paid to BDL and the other 50% of Each Tranche Payment shall be paid to bank accounts of other part of Core Employees excluding the legal representative of the Operation Company satisfying the following requirements: (i) such Core Employees shall be act as a head of department or a senior engineer of Operation Company for a period no less than six (6) months, (ii) such Core Employees shall not a Related Party (as defined under the Securities Act) of Sun Jiqun (孙继群) (the "Qualified Core Employees"). BDL agree to cause the legal representative of the Operation Company to provide the names, their respective bank accounts and interest distribution proportion to each Qualified Core Employees within ten (10) days before the payment date of Each Tranche Payment. BDL agree that the Purchaser may directly pay Each Tranche Payment to the Core Employees it selected at its discretion if the legal representative of the Operation Company fail to provide such information within three (3) days after the payment date of Each Tranche Payment and the Purchaser's payment obligation under this Agreement would be released thereafter. |
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|
Zoom Technologies, Inc. By:_______________________ |
|
NOLLEC WIRELESS CO., LTD(北京景山创新通信技术有༈ 0;公司) By:_______________________ |
|
Key Network Holdings Limited By:_______________________ |
|
Better Day Finance Limited By:_______________________ Silver Tech Enterprises Limited By:_______________________ |
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|
Ever Elite Corporation Limited By:_______________________ |
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Exhibit B Share Structure of the Subsidiaries
Corporate Structure
PRC(Mainland)
i
Exhibit C Disclosure Schedule
i
Exhibit D Lock-up Agreement
i
Exhibit E Appraisal Report
i
Exhibit F PRC Legal Opinions
Zoom Technologies, Inc.
a Delaware company currently listed at NASDAQ stock exchange
April [ ] , 2010
Re: Nollec Wireless Co., Ltd(北京景山创新通信技术有༈ 0;公司)
Ladies and Gentlemen:
We are qualified lawyers in the People's Republic of China (which, for the purpose of this legal opinion, does not include the laws of Taiwan, Hong Kong SAR and/or Macao SAR) . We have been requested by Silver Tech Enterprises Limited, a company organized under the laws of the British Virgin Islands (the "Company") to render this opinion in connection with the sale of all the Shares of the Company pursuant to the terms and conditions of that certain Share Exchange Agreement, dated [execution date of the Share Exchange Agreement], by and among the Company, Zoom Technologies, Inc., a company listed at Nasdaq Stock Exchange (the "Stock Exchange") (the "Transaction").
In such capacity, we have examined the originals or copies of documents provided to us by the Company and its subsidiaries, Nollec Telecommunications Technologies Co., Ltd. (in Chinese "北京景山创新通信技术有༈ 0;公司")( "Nollec"), are hereinafter collectively referred to as "Subsidiaries" and each a "Subsidiary", and representation of their managements and other personnel, and such other documents we have deemed necessary or advisable for the purpose of this opinion (the "Documents").
In giving this opinion, we have assumed that:-
(
a)Scanned documents: each Document having been disclosed to and reviewed by us in scanned copy is the same as original(
b)Foreign law(s): (1) the rights and obligations of the parties to any Document governed by any law other than PRC Law are, when such Document has been duly executed, will be, legal, valid, binding and enforceable in accordance with their terms under that governing law, (2) neither execution nor performance nor observance of any Document is contrary to any law other than PRC Law, (3) nothing in any law other than PRC Law affects this opinion, (4) the documents governed by laws other than PRC are legal, true and correct and sufficient as to the purpose of this opinion;(
c)Authenticity of original documents: all signatures, seals and markings on original documents we have reviewed and such documents themselves are, as appears to us, authentic; and(
d)Conformity of copies: each copy document we have reviewed conforms to its original.For the facts which are critical to the issuance of this legal opinion but are not supported by independent evidence, this firm's lawyers will resort to the special reports, explanations and other documentations, and representation and warranty provided by relevant government agencies, accounting firms, asset appraisal offices and the management and shareholders of the Company, and nothing has come to our attention that would cause our reliance of such to be unreasonable.
i
In rendering the following opinion, we declare that we are not admitted to practice law in any country other than the People's Republic of China, and we express no opinion as to any laws other than the laws of the People's Republic of China. To the extent the Share Exchange Agreement, or any other document referred therein or herein, is governed by any law other than that of the People's Republic of China, we have assumed with your permission, and without any representation regarding the reasonableness of such assumption that the People's Republic of PRC Law is identical to the laws governing the particular agreement. Any opinion of us is subject to the disclosure of the parties in related transaction agreements and other documents.
Based upon and subject to the foregoing, we are of the opinion that:
ii
In rendering this legal opinion, we disregard the existence of any other private agreement, if any, which is not disclosed to us which may affect our legal opinion. It may not be read as extending by implication to any other matter or document. The opinions expressed herein are as of the date hereof, and we assume no obligation to update or supplement such opinions based upon any fact or circumstance hereafter coming to our attention or any change in law which hereafter occurs. We express no opinion as to circumstances or events which may occur subsequent to such date.
We hereby consent to the use of this opinion by Zoom Technologies, Inc. for the purpose of this Transaction. In giving such consent, we do not thereby concede that we are expert or within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Securities and Exchange Commission thereunder.
Yours Faithfully,
SINOWING LAW LLP
By: ZOU Zhendong
Title: Senior Partner
iii
EXHIBIT 10.2 LOCK-UP AND VOTING AGREEMENT This LOCK-UP AND VOTING AGREEMENT
WHEREAS, concurrently with the execution of this Agreement, Zoom, the KNH and other parties are entering into a Share Exchange Agreement ( the "Share Exchange Agreement"), pursuant to which KNH shall become a stockholder of Zoom;
WHEREAS, KNH owns and has sole voting power with respect to the number of shares of Common Stock, with par value US $0.01 per share, of Zoom in accordance with the Share Exchange Agreement (the "Shares"); and
WHEREAS, it is a condition to the willingness of Zoom to enter into the Share Exchange Agreement that KNH execute and deliver this Agreement.
NOW, THEREFORE, in consideration of, and as a condition to, Zoom entering into the Share Exchange Agreement and proceeding with the transactions contemplated thereby, and in consideration of the expenses incurred and to be incurred by Zoom in connection therewith, KNH and Zoom agree as follows:
Section 1. Restriction on Transfer. KNH agrees not to offer, sell, contract to sell, assign, transfer, hypothecate, pledge or grant a security interest in, hedge or otherwise dispose of, or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition of (whether by actual disposition or effective economic disposition due to cash settlement or otherwise by KNH or any affiliate of KNH or any person in privity with KNH or any affiliate of KNH), directly or indirectly, any of the Shares from the period commencing on the Closing Date and expiring on the date after the six months from the Closing Date ("Lock-up Period"). Any transfer or other disposition in violation of the terms of this Section 1 shall be null and void.
Section 2. Representations and Warranties of KNH. KNH represents and warrants to and agrees with Zoom as follows:
2
of general applicability relating to or affecting creditors' rights and to general equity principles.
Section 3. Covenants of KNH. KNH covenants to and agrees with Zoom as follows:
2
Section 4. Specific Performance; Remedies; Attorneys Fees. KNH acknowledges that it is a condition to the willingness of Zoom to enter into the Share Exchange Agreement that KNH execute and deliver this Agreement and that it will be impossible to measure in money the damage to Zoom if KNH fails to comply with the obligations imposed by this Agreement and that, in the event of any such failure, Zoom will not have an adequate remedy at law or in equity. Accordingly, KNH agrees that injunctive relief or other equitable remedy is the appropriate remedy for any such failure and will not oppose the granting of such relief on the basis that Zoom has an adequate remedy at law. KNH further agrees that KNH will not seek, and agrees to waive any requirement for, the securing or posting of a bond in connection with Zoom's seeking or obtaining such equitable relief. In addition, after providing written notification to KNH, Zoom shall have the right to inform any third party that Zoom reasonably believes to be, or to be participating with KNH or receiving from KNH assistance in violation of this Agreement, of the terms of this Agreement and of the rights of Zoom hereunder, and that participation by any such persons with KNH in activities in violation of KNH's agreement with Zoom set forth in this Agreement may give rise to claims by Zoom against such third party.
Section 5. Term of Agreement; Termination. Except as otherwise provided in this Section 5, the term of this Agreement shall commence on the date hereof and shall expire upon the date after the six (6) months after the Closing. This Agreement shall be automatically terminated in the event that the Closing under the Share Exchange Agreement fail to occur or the Share Exchange Agreement being terminated. Upon termination, no party shall have any further obligations or liabilities hereunder; provided, however, such termination shall not relieve any party from liability for any willful breach of this Agreement prior to such termination.
Section 6. Entire Agreement; Amendments. This Agreement supersedes all prior agreements, written or oral, among the parties hereto with respect to the subject matter hereof and contains the entire agreement among the parties with respect to the subject matter hereof. This Agreement may not be amended, supplemented or modified, and no provisions hereof may be modified or waived, except by an instrument in writing signed by each party hereto. No waiver of any provisions hereof by either party shall be deemed a waiver of any other provision hereof by any such party, nor shall any such waiver be deemed a continuing waiver of any provision hereof by such party.
Section 7. Severability. In the event that any one or more provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, by any court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement and the parties shall use their reasonable efforts to substitute a valid, legal and enforceable provision which, insofar as practical, implements the purposes and intents of this Agreement.
Section 8. Governing Law. This Agreement shall be governed by, and interpreted in accordance with, the laws of the State of Delaware, without regard for conflict of law provisions.
[Remainder of page intentionally left blank]
3
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first written above.
|
Zoom Technologies, Inc. By: ____________________________ |
|
Key Network Holdings Limited By: ____________________________ |
4
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