8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 22, 2008

ZOOM TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	0-18672	51-0448969
(State or other	(Commission	(IRS Employer
jurisdiction of	File Number)	Identification No.)
incorporation)

207 South Street, Boston, MA 02111

(Address of principal executive offices, including zip code)

(617) 423-1072

(Registrant’s telephone number, including area code)

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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act

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

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

Item 1.01 Entry into a Material Definitive Agreement.

On January 22, 2008, Zoom Technologies, Inc. (the “Company”) and RedMoon, Inc., a provider of wireless networks headquartered in Plano, Texas (“RedMoon”), entered into a Convertible Note Purchase Agreement pursuant to which the Company made an initial investment of $300,000 in 6% convertible notes (the “Notes”) and agreed to purchase an additional $50,000 per month of 6% convertible notes beginning on May 1, 2008 and continuing until the earlier of (i) the Company’s election to exercise the option to purchase all outstanding stock of RedMoon contained in the Option Agreement described below or (ii) the Company’s election to terminate such Option Agreement, up to a maximum total investment of $500,000. The Notes are senior to all long term liabilities of RedMoon and all current liabilities of RedMoon in excess of $11,000 and are secured by certain equipment of RedMoon. The Notes have a term of three years, and, at the Company’s election, may be converted into shares of Series A Preferred Stock of RedMoon. If the Company purchases Notes with a total principal amount of $500,000, such Notes will be convertible into shares of Series A Preferred Stock representing 20% of the fully diluted capitalization of RedMoon. If the Company purchases Notes with a total principal amount of less than $500,000, the number of shares of Series A Preferred Stock issued upon conversion of the Notes will be pro-rated according to the amount of the actual investment.

On the same date, the Company, RedMoon and the holders of RedMoon’s outstanding capital stock entered into an Option Agreement pursuant to which the Company has the right to buy the balance of RedMoon any time prior to the close of business on August 31, 2008, unless the Company elects to terminate the Option Agreement prior to that date, at a price equal to 1,000,000 shares of the Company’s common stock plus up to 4,000,000 additional shares of the Company’s common stock, or cash or a combination of cash and stock of equivalent value, with any issuance of some or all of the 4,000,000 additional shares or share equivalents based on RedMoon’s performance during the five calendar quarters beginning with the quarter ending June 30, 2008.

Finally, on the same date the Company and RedMoon entered into a Security Agreement granting the Company a security interest in certain equipment of RedMoon, and the Company, RedMoon, and certain of RedMoon’s stockholders entered into a Voting Agreement whereby the Company and certain stockholders of RedMoon agreed to elect Frank Manning, Chief Executive Officer of the Company, and Bryan Thompson, Chief Executive Officer of RedMoon, to the Board of Directors of RedMoon.

The foregoing description of the transaction, the Convertible Note Purchase Agreement, the Notes, the Option Agreement, the Security Agreement and the Voting Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of each such agreement, copies of which are filed as exhibits hereto and are incorporated herein by reference.

Item 8.01Other Events

On January 28, 2008, the Company issued a press release reporting on the transactions with RedMoon described in Item 1.01. See Exhibit 99.1, which is incorporated herein by reference.

Item 9.01Financial Statements and Exhibits.

(c) Exhibits.

The following exhibit is filed with this report:

Exhibit No.	Exhibit Description
10.1	Convertible Note Purchase Agreement, dated as of January 22, 2008, by and between Zoom Technologies, Inc. and RedMoon, Inc.
10.2	Form of 6% Convertible Note.
10.3	Option Agreement, dated as of January 22, 2008, by and among Zoom Technologies, Inc., RedMoon, Inc. and certain stockholders of RedMoon, Inc.
10.4	Security Agreement, dated as of January 22, 2008, by and between Zoom Technologies, Inc. and RedMoon, Inc.
10.5	Voting Agreement, dated as of January 22, 2008, by and among Zoom Technologies, Inc., RedMoon, Inc. and certain stockholders of RedMoon, Inc.
99.1	Press release issued by Zoom Technologies, Inc., dated January 28, 2008

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SIGNATURES

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

ZOOM TECHNOLOGIES, INC.
(Registrant)
By:	/s/Robert A. Crist
	Robert A. Crist
	Chief Financial Officer

Date: January 28, 2008

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EX-10.1

CONVERTIBLE NOTE PURCHASE AGREEMENT

CONVERTIBLE NOTE PURCHASE AGREEMENT

THIS CONVERTIBLE NOTE PURCHASE AGREEMENT is made as of the 22^nd day of January 2008 by and between Red Moon, Inc., a Delaware corporation (the “Company”) and Zoom Technologies, Inc., a Delaware corporation (the “Purchaser”).

The parties hereby agree as follows:

1.Purchase and Sale of Convertible Promissory Notes.

1.1.Sale and Issuance of Convertible Promissory Notes. Subject to the terms and conditions of this Agreement, the Purchaser agrees to purchase and the Company agrees to sell and issue to the Purchaser:

(a)at the Initial Closing (as defined below) a Convertible Promissory Note in the aggregate principal amount of $300,000, which note shall be in substantially the form of the Convertible Promissory Note attached hereto as Exhibit A (the “Initial Note”). The purchase price of the Initial Note shall be $300,000 (the “Initial Purchase Price”); and

(b)on the first of each month beginning on May 1, 2008 and continuing until the earlier of (i) the date the Purchaser elects to exercise its option pursuant to the Option Agreement or (ii) the date the Purchaser notifies the Company in writing of its election to terminate the Option Agreement, a Convertible Promissory Note in the aggregate principal amount of $50,000, which note shall be in substantially the form of the Convertible Promissory Note attached hereto as Exhibit A (the “Monthly Note,” and together with the Initial Note, the “Notes”). The purchase price of each Monthly Note shall be $50,000 (the “Monthly Purchase Price”).

1.2.The Note.  At the sole option of the Purchaser, the Notes may be converted into shares of Series A Convertible Preferred Stock of the Company at any time prior to the Maturity Date (as defined in the Notes) of each Note in the manner provided in the Notes.

1.3.Closing; Delivery.

(a)Thepurchase and sale of the Initial Note shall take place remotely via the exchange of documents and signatures, at 10:00 a.m., on January 22, 2008, or at such other time and place as the Company and the Purchaser mutually agree upon, orally or in writing (which time and place are designated as the “Initial Closing”).

(b)The purchase and sale of each Monthly Note shall take place remotely via the exchange of documents and signatures, at 10:00 a.m., on the first day of each month beginning on May 1, 2008, or at such other time and place as the Company and the Purchaser mutually agree upon, orally or in writing (which time and place are designated as the “Monthly Closing”). The term “Closing” shall apply to the Initial Closing and each Monthly Closing unless otherwise specified.

(c)At the Initial Closing, the Company shall deliver to the Purchaser the Initial Note, payable to the order of the Purchaser, in the principal amount of $300,000, and the Purchaser shall make payment of the Initial Purchase Price therefor by a wire transfer to a bank account designated by the Company.

(d)At each Monthly Closing, the Company shall deliver to the Purchaser a Monthly Note, payable to the order of the Purchaser, in the principal amount of $50,000, and the Purchaser shall make payment of the Monthly Purchase Price therefor by a wire transfer to a bank account designated by the Company.

1.3Use of Proceeds. In accordance with the directions of the Company’s Board of Directors, as it shall be constituted in accordance with the Voting Agreement, the Company will use the proceeds from the sale of the Notes for product development and other general corporate purposes and not for the repayment of debt outstanding as of the date of the Initial Closing.

1.4Defined Terms Used in this Agreement. In addition to the terms defined above, the following terms used in this Agreement shall be construed to have the meanings set forth or referenced below.

“Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including, without limitation, any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.

“Code” means the Internal Revenue Code of 1986, as amended.

“Company Intellectual Property” means all patents, patent applications, trademarks, trademark applications, service marks, tradenames, copyrights, trade secrets, licenses, domain names, mask works, information and proprietary rights and processes as are necessary to the conduct of the Company’s business as now conducted and as presently proposed to be conducted.

“Key Employee” means any executive-level employee (including division director and vice president-level positions) as well as any employee or consultant who either alone or in concert with others develops, invents, programs or designs any Company Intellectual Property.

“Knowledge,” including the phrase “to the Company’s knowledge,” shall mean the actual knowledge after reasonable investigation of the following officers: Bryan Thompson.

“Material Adverse Effect” means a material adverse effect on the business, assets (including intangible assets), liabilities, financial condition, property, prospectsor results of operations of the Company.

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“Option Agreement” means the Option Agreement dated as of the date hereof among the Company, the Purchaser and the stockholders of the Company.

“Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Transaction Agreements” means this Agreement, the Notes, the Voting Agreement, the Option Agreement and any other agreements, instruments or documents entered into in connection with this Agreement.

“Voting Agreement” means the agreement among the Company, the Purchaser and certain other stockholders of the Company, dated as of the date hereof.

2.Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchaser that, except as set forth on the Disclosure Schedule attached as Exhibit B to this Agreement, which exceptions shall be deemed to be part of the representations and warranties made hereunder, the following representations are true and complete as of the date of the Initial Closing and each Monthly Closing, except as otherwise indicated. The Disclosure Schedule shall be arranged in sections corresponding to the numbered and lettered sections and subsections contained in this Section 2, and the disclosures in any section or subsection of the Disclosure Schedule shall qualify other sections and subsections in this Section 2 only to the extent it is readily apparent from a reading of the disclosure that such disclosure is applicable to such other sections and subsections.

For purposes of these representations and warranties, the term “the Company” shall include any subsidiaries of the Company, unless otherwise noted herein.

2.1.Organization, Good Standing, Corporate Power and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to carry on its business as presently conducted and as proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect.

2.2.Capitalization.The authorized capital stock of the Company consists, immediately prior to the Initial Closing, of:

(a)70,000,000 shares of Common Stock, $.0001 par value per share, of which 45,805,925 shares are issued and outstanding (the “Common Stock”); and 30,000,000 shares of Series A Preferred Stock, $.0001 par value per share, of which 29,926,909 shares are issued and outstanding All of the outstanding shares of Common Stock have been duly authorized, are fully paid and nonassessable and were issued in compliance with all applicable federal and state securities laws. The Company holds no treasury stock.

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(b)The Company does not have any stock option, stock purchase or similar stock plan for issuances of its Common Stock to officers, directors, employees and consultants of the Company.

(c)Section 2.2(c) of the Disclosure Schedule sets forth the capitalization of the Company immediately following the Initial Closing. Except as provided on Section 2.2(c) of the Disclosure Schedule and except for the conversion privileges of the Notes to be issued under this Agreement, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally or in writing, to purchase or acquire from the Company any capital stock, or any securities convertible into or exchangeable for capital stock. All outstanding capital stock and all capital stock underlying outstanding options are subject to (i) a right of first refusal in favor of the Company upon any proposed transfer (other than transfers for estate planning purposes); and (ii) a lock-up or market standoff agreement of not less than 180 days following the Company’s initial public offering pursuant to a registration statement filed with the Securities and Exchange Commission under the Securities Act.

(d)None of the Company’s restricted stock purchase agreements or option documents contains a provision for acceleration of vesting (or lapse of a repurchase right) or other changes in the vesting provisions or other terms of such agreement or understanding upon the occurrence of any event or combination of events. The Company has never adjusted or amended the exercise price of any outstanding stock options previously awarded, whether through amendment, cancellation, replacement grant, repricing, or any other means. The Company has no obligation (contingent or otherwise) to purchase or redeem any of its capital stock.

(e)The Company believes in good faith that any “nonqualified deferred compensation plan” (as such term is defined under Section 409A(d)(1) of the Code and the guidance thereunder) under which the Company  makes, is obligated to make or promises to make, payments (each, a “409A Plan”) complies in all material respects, in both form and operation, with the requirements of Section 409A of the Code and the guidance thereunder. To the knowledge of  the Company, no payment to be made under any 409A Plan is, or will be, subject to the penalties of Section 409A(a)(1) of the Code.

2.3.Subsidiaries.The Company does not currently own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, limited liability company, association, or other business entity. The Company is not a participant in any joint venture, partnership or similar arrangement.

2.4.Authorization. All corporate action required to be taken by the Company’s Board of Directors and stockholders in order to authorize the Company to enter into the Transaction Agreements, and to issue the Notes at the Closing, has been taken or will be taken prior to the Closing. All action on the part of the Board of Directors and stockholders of the Company necessary for the execution and delivery of the Transaction Agreements, the performance of all obligations of the Company under the Transaction Agreements to be performed as of the Closing, and the issuance and delivery of the Notes has been taken or will be taken prior to the Closing. The Transaction Agreements, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, or (iii) to the extent the indemnification provisions contained in the Transaction Agreements may be limited by applicable federal or state securities laws.

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2.5.Valid Issuance of Notes.The Notes, when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under the Transaction Agreements, applicable state and federal securities laws and liens or encumbrances created by or imposed by a Purchaser. Assuming the accuracy of the representations of the Purchasers in Section 3 of this Agreement and subject to the filings described in Section 2.6 below, the Notes will be issued in compliance with all applicable federal and state securities laws.

2.6.Governmental Consents and Filings. Assuming the accuracy of the representations made by the Purchasers in Section 3 of this Agreement, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of the Company in connection with the consummation of the transactions contemplated by this Agreement, except for filings pursuant to Regulation D of the Securities Act, and applicable state securities laws, which have been made or will be made in a timely manner.

2.7.Litigation. There is no claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or to the Company’s knowledge, currently threatened (i) against the Company or any officer, director or Key Employee of the Company; or (ii) that questions the validity of the Transaction Agreements or the right of the Company to enter into them, or to consummate the transactions contemplated by the Transaction Agreements; or (iii) to the Company’s knowledge, that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. Neither the Company nor, to the Company’s knowledge, any of its officers, directors or Key Employees is a party or is named as subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality (in the case of officers, directors or Key Employees, such as would affect the Company). There is no action, suit, proceeding or investigation by the Company pending or which the Company intends to initiate. The foregoing includes, without limitation, actions, suits, proceedings or investigations pending or threatened in writing (or any basis therefor known to the Company) involving the prior employment of any of the Company’s employees, their services provided in connection with the Company’s business, or any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers.

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2.8.Intellectual Property. The Company owns or possesses or can acquire on commercially reasonable terms sufficient legal rights to all Company Intellectual Property without any known conflict with, or infringement of, the rights of others. No product or service marketed or sold (or proposed to be marketed or sold) by the Company violates or will violate any license or infringes or will infringe any intellectual property rights of any other party. Other than with respect to commercially available software products under standard end-user object code license agreements, there are no outstanding options, licenses, agreements, claims, encumbrances or shared ownership interests of any kind relating to the Company Intellectual Property, nor is the Company bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, proprietary rights and processes of any other Person. The Company has not received any communications alleging that the Company has violated or, by conducting its business, would violate any of the patents, trademarks, service marks, tradenames, copyrights, trade secrets, mask works or other proprietary rights or processes of any other Person. The Company has obtained and possesses valid licenses to use all of the software programs present on the computers and other software-enabled electronic devices that it owns or leases or that it has otherwise provided to its employees for their use in connection with the Company’s business. To the Company’s knowledge, it will not be necessary to use any inventions of any of its employees or consultants (or Persons it currently intends to hire) made prior to their employment by the Company. Each employee and consultant has assigned to the Company all intellectual property rights he or she owns that are related to the Company’s business as now conducted and as presently proposed to be conducted. The Company has not embedded any open source, copyleft or community source code in any of its products generally available or in development, including but not limited to any libraries or code licensed under any General Public License, Lesser General Public License or similar license arrangement. For purposes of this Section 2.8, the Company shall be deemed to have knowledge of a patent right if the Company has actual knowledge of the patent right or would be found to be on notice of such patent right as determined by reference to United States patent laws.

2.9.Compliance with Other Instruments. The Company is not in violation or default (i) of any provisions of its Certificate of Incorporation of By-laws, (ii) of any instrument, judgment, order, writ or decree, (iii) under any note, indenture or mortgage, or (iv) under any lease, agreement, contract or purchase order to which it is a party or by which it is bound that is required to be listed on the Disclosure Schedule,or, of any provision of federal or state statute, rule or regulation applicable to the Company, the violation of which would have a Material Adverse Effect. The execution, delivery and performance of the Transaction Agreements and the consummation of the transactions contemplated by the Transaction Agreements will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either (i) a default under any such provision, instrument, judgment, order, writ, decree, contract or agreement or (ii) an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company or the suspension, revocation, forfeiture, or nonrenewal of any material permit or license applicable to the Company.

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2.10.Agreements; Actions.

(a)Except for the Transaction Agreements, there are no agreements, understandings, instruments, contracts or proposed transactions to which the Company is a party or by which it is bound that involve (i) obligations (contingent or otherwise) of, or payments to, the Company in excess of $15,000, (ii) the license of any patent, copyright, trademark, trade secret or other proprietary right to or from the Company, (iii) the grant of rights to manufacture, produce, assemble, license, market, or sell its products to any other Person that limit the Company’s exclusive right to develop, manufacture, assemble, distribute, market or sell its products, or (iv) indemnification by the Company with respect to infringements of proprietary rights.

(b)The Company has not (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock, (ii) incurred any indebtedness for money borrowed or incurred any other liabilities individually in excess of $15,000 or in excess of $50,000 in the aggregate, (iii) made any loans or advances to any Person, other than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business. For the purposes of subsections (b) and (c) of this Section 2.10, all indebtedness, liabilities, agreements, understandings, instruments, contracts and proposed transactions involving the same Person (including Persons the Company has reason to believe are affiliated with each other) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such subsection.

(c)The Company is not a guarantor or indemnitor of any indebtedness of any other Person.

(d)Since November 1, 2007, the Company has not engaged in any discussion with any representative of any Person regarding (i) a sale or exclusive license of all or substantially all of the Company’s assets, or (ii) any merger, consolidation or other business combination transaction of the Company with or into another Person.

2.11.Certain Transactions.

(a)Other than (i) standard employee benefits generally made available to all employees, (ii) standard director and officer indemnification agreements approved by the Board of Directors, and (iii) the purchase Common Stock and the issuance of options to purchase Common Stock, in each instance, approved in the written minutes of the Board of Directors (previously provided to the Purchaser or its counsel), there are no agreements, understandings or proposed transactions between the Company and any of its officers, directors, consultants or Key Employees, or any Affiliate thereof.

(b)The Company is not indebted, directly or indirectly, to any of its directors, officers or employees or to their respective spouses or children or to any Affiliate of any of the foregoing, other than in connection with expenses or advances of expenses incurred in the ordinary course of business or employee relocation expenses and for other customary employee benefits made generally available to all employees. None of the Company’s directors, officers or employees, or any members of their immediate families, or any Affiliate of the foregoing are, directly or indirectly, indebted to the Company or have any (i) material commercial, industrial, banking, consulting, legal, accounting, charitable or familial relationship with any of the Company’s customers, suppliers, service providers, joint venture partners, licensees and competitors, (ii) direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the Company except that directors, officers or employees or stockholders of the Company may own stock in (but not exceeding two percent (2%) of the outstanding capital stock of) publicly traded companies that may compete with the Company or (iii) financial interest in any contract with the Company.

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2.12.Rights of Registration and Voting Rights.

The Company is not under any obligation to register under the Securities Act any of its currently outstanding securities or any securities issuable upon exercise or conversion of its currently outstanding securities. To the Company’s knowledge, except as contemplated in the Voting Agreement, no stockholder of the Company has entered into any agreements with respect to the voting of capital shares of the Company.

2.13.Absence of Liens. The property and assets that the Company owns are free and clear of all mortgages, deeds of trust, liens, loans and encumbrances, except for statutory liens for the payment of current taxes that are not yet delinquent and encumbrances and liens that arise in the ordinary course of business and do not materially impair the Company’s ownership or use of such property or assets. With respect to the property and assets it leases, the Company is in compliance with such leases and, to its knowledge, holds a valid leasehold interest free of any liens, claims or encumbrances other than those of the lessors of such property or assets.

2.14.Financial Statements. The Company has delivered to the Purchaser its unaudited financial statements as of and for the period ended December 15, 2007 (collectively, the “Financial Statements”). The Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated, except that the unaudited Financial Statements may not contain all footnotes required by generally accepted accounting principles. The Financial Statements fairly present in all material respects the financial condition and operating results of the Company as of the dates, and for the periods, indicated therein, subject in the case of the unaudited Financial Statements to normal year-end audit adjustments. Except as set forth in the Financial Statements, the Company has no material liabilities or obligations, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to December 15, 2007 (ii) obligations under contracts and commitments incurred in the ordinary course of business and (iii) liabilities and obligations of a type or nature not required under generally accepted accounting principles to be reflected in the Financial Statements, which, in all such cases, individually and in the aggregate would not have a Material Adverse Effect. The Company maintains and will continue to maintain a standard system of accounting established and administered in accordance with generally accepted accounting principles.

2.15.Changes. Since December 15, 2007there has not been:

(a)any change in the assets, liabilities, financial condition or operating results of the Company from that reflected in the Financial Statements, except changes in the ordinary course of business that have not caused, in the aggregate, a Material Adverse Effect;

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(b)any damage, destruction or loss, whether or not covered by insurance, that would have a Material Adverse Effect;

(c)any waiver or compromise by the Company of a valuable right or of a material debt owed to it;

(d)any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by the Company, except in the ordinary course of business and the satisfaction or discharge of which would not have a Material Adverse Effect;

(e)any material change to a material contract or agreement by which the Company or any of its assets is bound or subject;

(f)any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;

(g)any resignation or termination of employment of any officer or Key Employee of the Company;

(h)any mortgage, pledge, transfer of a security interest in, or lien, created by the Company, with respect to any of its material properties or assets, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and do not materially impair the Company’s ownership or use of such property or assets;

(i)any loans or guarantees made by the Company to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;

(j)any declaration, setting aside or payment or other distribution in respect of any of the Company’s capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by the Company;

(k)any sale, assignment or transfer of any Company Intellectual Property that could reasonably be expected to result in a Material Adverse Effect;

(l)receipt of notice that there has been a loss of, or material order cancellation by, any major customer of the Company;

(m)to the Company’s knowledge, any other event or condition of any character, other than events affecting the economy or the Company’s industry generally, that could reasonably be expected to result in a Material Adverse Effect; or

(n)any arrangement or commitment by the Company to do any of the things described in this Section 2.15.

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2.16.Employee Matters.

(a)As of the date hereof, the Company employs eight full-time employees and no part-time employees and engages no consultants or independent contractors. Section 2.16 of the Disclosure Schedule sets forth a detailed description of all compensation, including salary, bonus, severance obligations and deferred compensation paid or payable for each officer, employee, consultant and independent contractor of the Company who received compensation in excess of $20,000 for the fiscal year ended December 31, 2007 or is anticipated to receive compensation in excess of $20,000 for the fiscal year ending December 31, 2008.

(b)To the Company’s knowledge, none of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would materially interfere with such employee’s ability to promote the interest of the Company or that would conflict with the Company’s business. Neither the execution or delivery of the Transaction Agreements, nor the carrying on of the Company’s business by the employees of the Company, nor the conduct of the Company’s business as now conducted and as presently proposed to be conducted, will, to the Company’s knowledge, conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant or instrument under which any such employee is now obligated.

(c)The Company is not delinquent in payments to any of its employees, consultants, or independent contractors for any wages, salaries, commissions, bonuses, or other direct compensation for any service performed for it to the date hereof or amounts required to be reimbursed to such employees, consultants, or independent contractors. The Company has complied in all material respects with all applicable state and federal equal employment opportunity laws and with other laws related to employment, including those related to wages, hours, worker classification, and collective bargaining. The Company has withheld and paid to the appropriate governmental entity or is holding for payment not yet due to such governmental entity all amounts required to be withheld from employees of the Company and is not liable for any arrears of wages, taxes, penalties, or other sums for failure to comply with any of the foregoing.

(d)To the Company’s knowledge, no Key Employee intends to terminate employment with the Company or is otherwise likely to become unavailable to continue as a Key Employee, nor does the Company have a present intention to terminate the employment of any of the foregoing. The employment of each employee of the Company is terminable at the will of the Company. Except as set forth in Section 2.16 of the Disclosure Schedule or as required by law, upon termination of the employment of any such employees, no severance or other payments will become due. Except as set forth in Section 2.16 of the Disclosure Schedule, the Company has no policy, practice, plan, or program of paying severance pay or any form of severance compensation in connection with the termination of employment services.

(e)The Company has not made any representations regarding equity incentives to any officer, employees, director or consultant that are inconsistent with the share amounts and terms set forth in the minutes of meetings of the Company’s board of directors.

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(f)Each former Key Employee whose employment was terminated by the Company has entered into an agreement with the Company providing for the full release of any claims against the Company or any related party arising out of such employment.

(g)Section 2.16 of theDisclosure Schedule sets forth each employee benefit plan maintained, established or sponsored by the Company, or which the Company participates in or contributes to, which is subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Company has made all required contributions and has no liability to any such employee benefit plan, other than liability for health plan continuation coverage described in Part 6 of Title I(B) of ERISA, and has complied in all material respects with all applicable laws for any such employee benefit plan.

(h)The Company is not bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union, and no labor union has requested or, to the knowledge of the Company, has sought to represent any of the employees, representatives or agents of the Company. There is no strike or other labor dispute involving the Company pending, or to the Company’s knowledge, threatened, which could have a Material Adverse Effect, nor is the Company aware of any labor organization activity involving its employees.

2.17.Tax Returns and Payments. There are no federal, state, county, local or foreign taxes dues and payable by the Company which have not been timely paid. There are no accrued and unpaid federal, state, country, local or foreign taxes of the Company which are due, whether or not assessed or disputed. There have been no examinations or audits of any tax returns or reports by any applicable federal, state, local or foreign governmental agency. The Company has duly and timely filed all federal, state, county, local and foreign tax returns required to have been filed by it and there are in effect no waivers of applicable statutes of limitations with respect to taxes for any year.

2.18.Insurance. The Company has in full force and effect fire and casualty insurance policies with extended coverage, sufficient in amount (subject to reasonable deductions) to allow it to replace any of its properties that might be damaged or destroyed.

2.19.Confidential Information and Invention Assignment Agreements. Each current and former employee, consultant and officer of the Company has executed an agreement with the Company regarding confidentiality and proprietary information substantially in the form or forms delivered to the counsel for the Purchasers (the “Confidential Information Agreements”). No current or former Key Employee has excluded works or inventions from his or her assignment of inventions pursuant to such Key Employee’s Confidential Information Agreement. The Company is not aware that any of its Key Employees is in violation thereof.

2.20.Permits.  The Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business, the lack of which could reasonably be expected to have a Material Adverse Effect. The Company is not in default in any material respect under any of such franchises, permits, licenses or other similar authority.

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2.21.Corporate Documents. The Certificate of Incorporation and the By-laws are in the form provided to the Purchasers. The copy of the minute books of the Company provided to the Purchasers contains minutes of all meetings of the Board of Directors and the stockholders and all actions by written consent without a meeting by the Board of Directors and the stockholders since the date of formation and accurately reflects in all material respects all actions by the directors (and any committee of directors) and stockholders with respect to all transactions referred to in such minutes.

2.22Environmental and Safety Laws.  Except as could not reasonably be expected to have a Material Adverse Effect (a) the Company is and has been in compliance with all Environmental Laws; (b) there has been no release or threatened release of any pollutant, contaminant or toxic or hazardous material, substance or waste, or petroleum or any fraction thereof, (each a “Hazardous Substance”) on, upon, into or from any site currently or heretofore owned, leased or otherwise used by the Company; (c) there have been no Hazardous Substances generated by the Company that have been disposed of or come to rest at any site that has been included in any published U.S. federal, state or local “superfund” site list or any other similar list of hazardous or toxic waste sites published by any governmental authority in the United States; and (d) there are no underground storage tanks located on, no polychlorinated biphenyls (“PCBs”) or PCB-containing equipment used or stored on, and no hazardous waste as defined by the Resource Conservation and Recovery Act, as amended, stored on, any site owned or operated by the Company, except for the storage of hazardous waste in compliance with Environmental Laws. The Company has made available to the Purchasers true and complete copies of all material environmental records, reports, notifications, certificates of need, permits, pending permit applications, correspondence, engineering studies, and environmental studies or assessments.

For purposes of this Section 2.22, “Environmental Laws” means any law, regulation, or other applicable requirement relating to (a) releases or threatened release of Hazardous Substance; (b) pollution or protection of employee health or safety, public health or the environment; or (c) the manufacture, handling, transport, use, treatment, storage, or disposal of Hazardous Substances.

2.23Disclosure. The Company has made available to the Purchaser all the information reasonably available to the Company that the Purchaser has requested for deciding whether to acquire the Notes, including certain of the Company’s projections describing its proposed business plan (the “Business Plan”). No representation or warranty of the Company contained in this Agreement, as qualified by the Disclosure Schedule, and no certificate furnished or to be furnished to Purchasers at the Closing contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. The Business Plan was prepared in good faith; however, the Company does not warrant that it will achieve any results projected in the Business Plan. It is understood that this representation is qualified by the fact that the Company has not delivered to the Purchasers, and has not been requested to deliver, a private placement or similar memorandum or any written disclosure of the types of information customarily furnished to purchasers of securities.

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3.Representations and Warranties of the Purchasers. The Purchaser hereby represents and warrants to the Company that:

3.1Authorization. The Purchaser has full power and authority to enter into the Transaction Agreements. The Transaction Agreements to which the Purchaser is a party, when executed and delivered by the Purchaser, will constitute valid and legally binding obligations of the Purchaser, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, or (b) to the extent the indemnification provisions contained in the Transaction Agreements may be limited by applicable federal or state securities laws.

3.2Purchase Entirely for Own Account. This Agreement is made with the Purchaser in reliance upon the Purchaser’s representation to the Company, which by the Purchaser’s execution of this Agreement, the Purchaser hereby confirms, that the Notes to be acquired by the Purchaser will be acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Purchaser further represents that the Purchaser does not presently have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of the Notes. The Purchaser has not been formed for the specific purpose of acquiring the Notes.

3.3Disclosure of Information. The Purchaser has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Notes with the Company’s management and has had an opportunity to review the Company’s facilities. The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 2 of this Agreement or the right of the Purchaser to rely thereon.

3.4Restricted Securities. The Purchaser understands that the Notes have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser’s representations as expressed herein. The Purchaser understands that the Notes are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Purchaser must hold the Notes indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Purchaser acknowledges that the Company has no obligation to register or qualify the Notes, or the shares of Series A Preferred Stock into which it may be converted, for resale except as set forth in the Transaction Agreements. The Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Notes, and on requirements relating to the Company which are outside of the Purchaser’s control, and which the Company is under no obligationand may not be able to satisfy.

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3.5No Public Market. The Purchaser understands that no public market now exists for the Notes, and that the Company has made no assurances that a public market will ever exist for the Notes.

3.6Legends. The Purchaser understands that the Notes and any securities issued in respect of or exchange for the Notes, may bear one or all of the following legends:

(a) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

(b)Any legend set forth in, or required by, the other Transaction Agreements.

(c)Any legend required by the securities laws of any state to the extent such laws are applicable to the Notes represented by the certificate so legended.

3.7Accredited Investor. The Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

3.8No General Solicitation. Neither the Purchaser, nor any of its officers, directors, employees, agents, stockholders or partners has either directly or indirectly, including through a broker or finder (a) engaged in any general solicitation, or (b) published any advertisement in connection with the offer and sale of the Notes.

3.9Exculpation Among Purchasers. The Purchaser acknowledges that it is not relying upon any Person, other than the Company and its officers and directors, in making its investment or decision to invest in the Company.

3.10Residence. The office of the Purchaser in which its principal place of business is identified in the address or addresses of the Purchaser set forth herein.

4.Conditions to the Purchaser’s Obligations at Closing. The obligations of the Purchaser to purchase the Notes at the Initial Closing and each Monthly Closing are subject to the fulfillment, on or before each such Closing, of each of the following conditions, unless otherwise waived:

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4.1Representations and Warranties. The representations and warranties of the Company contained in Section 2shall be true and correct in all respects as of such Closing.

4.2Performance. The Company shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by the Company on or before such Closing.

4.3Compliance Certificate. The President of the Company shall deliver to the Purchasers at each such Closing a certificate certifying that the conditions specified in Section 4 have been fulfilled.

4.4Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Notes pursuant to this Agreement shall be obtained and effective as of each such Closing.

4.5Board of Directors. As of the Initial Closing, the authorized size of the Board shall be two, and the Board shall be comprised of Bryan Thompson and Frank Manning.

4.6Option Agreement. The Company shall have executed and delivered the Option Agreement.

4.7Voting Agreement. The Company and the other stockholders of the Company named as parties thereto shall have executed and delivered the Voting Agreement.

4.8Secretary’s Certificate. The Secretary of the Company shall have delivered to the Purchasers at the Closing a certificate certifying (i) the By-laws, (ii) resolutions of the Board of Directors of the Company approving the Transaction Agreements and the transactions contemplated under the Transaction Agreements, and (iii) resolutions of the stockholders of the Company approving the Certificate of Incorporation and the Transaction Agreements and the transactions contemplated under the Transaction Agreements.

4.9Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to the Purchaser, and the Purchaser (or its counsel) shall have received all such counterpart original and certified or other copies of such documents as reasonably requested. Such documents may include good standing certificates.

4.10Preemptive Rights. The Company shall have fully satisfied (including with respect to rights of timely notification) or obtained enforceable waivers in respect of any preemptive or similar rights directly or indirectly affecting any of its securities.

5.Conditions of the Company’s Obligations at Closing. The obligations of the Company to sell the Notes to the Purchaser at the Initial Closing and at each Monthly Closing are subject to the fulfillment, on or before each such Closing, of each of the following conditions, unless otherwise waived:

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5.1Representations and Warranties. The representations and warranties of each Purchaser contained in Section 3 shall be true and correct in all respects as of such Closing.

5.2Performance. The Purchaser shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before such Closing.

5.3Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Notes pursuant to this Agreement shall be obtained and effective as of the Closing..

5.4Option Agreement. The Purchaser shall have executed and delivered the Option Agreement.

5.5Voting Agreement. The Purchase shall have executed and delivered the Voting Agreement.

6.Miscellaneous.

6.1Survival of Warranties. Unless otherwise set forth in this Agreement, the representations and warranties of the Company and the Purchasers contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation or knowledge of the subject matter thereof made by or on behalf of the Purchasers or the Company.

6.2Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

6.3Governing Law. This Agreement and any controversy arising out of or relating to this Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts, without regard to conflict of law principles that would result in the application of any law other than the law of the Commonwealth of Massachusetts.

6.4Counterparts; Facsimile. This Agreement may be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

6.5Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

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6.6Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (i) personal delivery to the party to be notified; (ii) when sent, if sent by electronic mail or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their addresses as set forth on the signature pages or Schedule A (as applicable) hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Section 6.5. If notice is given to the Investor, a copy shall also be given to Morse, Barnes-Brown & Pendleton, P.C., Reservoir Place, 1601 Trapelo Road, Waltham, Massachusetts 02451, Attention: Jeffrey P. Steele.

6.7No Finder’s Fees. Each party represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction. The Purchaser agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which the Purchaser or any of its officers, employees, or representatives is responsible. The Company agrees to indemnify and hold harmless the Purchaser from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.

6.8Fees and Expenses. Each party hereto shall bear its own fees and expenses relating to the Transaction Agreements.

6.9Attorneys’ Fees. If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of any of the Transaction Agreements, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

6.10Amendments and Waivers. Any term of this Agreement may be amended, terminated or waived solely with the written consent of the Company and the Purchaser.

6.11Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

6.12Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

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6.13Entire Agreement. This Agreement (including the Exhibits hereto), the Operating Agreement and the other Transaction Agreements constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties are expressly canceled.

6.14Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the federal and state courts located within the geographic boundaries of the United States District Court for the District of Massachusetts for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the federal and state courts located within the geographic boundaries of the United States District Court for the District of Massachusetts, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.

6.15No Commitment for Additional Financing. The Company acknowledges and agrees that the Purchaser has not made any representation, undertaking, commitment or agreement to provide or assist the Company in obtaining any financing, investment or other assistance, other than the purchase of the Notes as set forth herein and subject to the conditions set forth herein. In addition, the Company acknowledges and agrees that (i) no statements, whether written or oral, made by the Purchaser or its representatives on or after the date of this Agreement shall create an obligation, commitment or agreement to provide or assist the Company in obtaining any financing or investment, (ii) the Company shall not rely on any such statement by the Purchaser or its representatives and (iii) an obligation, commitment or agreement to provide or assist the Company in obtaining any financing or investment may only be created by a written agreement, signed by the Purchaser and the Company, setting forth the terms and conditions of such financing or investment and stating that the parties intend for such writing to be a binding obligation or agreement. The Purchaser shall have the right, in its sole and absolute discretion, to refuse or decline to participate in any other financing of or investment in the Company, and shall have no obligation to assist or cooperate with the Company in obtaining any financing, investment or other assistance.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties have executed this Convertible Note Purchase Agreement as of the date first written above.

COMPANY:

By: /s/Bryan Thompson                                                                     

Name: Bryan Thompson                                                                    

(print) 

Title: President                                                                                    

Address:

PURCHASER:

ZOOM TECHNOLOGIES, INC.

/s/Frank Manning                                                                                 

By: Frank Manning, President                                                            

EX-10.2

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS SO REGISTERED OR AN EXEMPTION FROM REGISTRATION UNDER SAID ACT AND LAWS IS AVAILABLE.

RED MOON, INC.

6% CONVERTIBLE NOTE

$300,000.00 January 22, 2008

Red Moon, Inc., a Delaware corporation (the "Company"), for value received hereby promises to pay to Zoom Technologies, Inc. (such person or any permitted transferee, the "Holder"), the principal sum of Three Hundred Thousand Dollars ($300,000) on the Maturity Date (as defined below) together with simple interest on the principal amount outstanding at the rate of six percent (6%) per annum, which interest shall be calculated on the basis of actual days elapsed and a 360-day year. Interest accrued on the outstanding principal amount shall be payable quarterly to the Holder within seven (7) days after each December 31, March 31, June 30 and September 30, commencing on June 30, 2008. This Note is issued by the Company pursuant to a Convertible Note Purchase Agreement of even date herewith by and among the Company and the original holder of this Note (the “Purchase Agreement”). Reference is made to the Purchase Agreement for a statement of certain additional rights and benefits to which the Holder is entitled. For purposes of this Note, “Maturity Date” shall mean the third annual anniversary of the date hereof. The obligations of the Company hereunder are secured by a first priority lien on certain equipment of the Company, as set forth in that certain Security Agreement, dated of even date hereof, and by and between the Company and the Holder.

1.Payment Provisions.

1.1Payments on this Note. The Company shall make payments of principal of, and any interest on, this Note when due.

1.2Prepayment of Principal. The principal indebtedness represented by this Note may be prepaid in whole or in part at any time and from time to time, without premium, at the option of the Company without the consent of the Holder hereof.

2.Default. The entire unpaid principal of this Note, together with all accrued and unpaid interest on the original principal amount, shall become and be immediately due and payable upon written demand of the Holder, without any other notice or demand of any kind or any presentment or protest, if any one of the following events (an "Event of Default") shall occur and be continuing at the time of such demand, whether voluntarily or involuntarily, or, without limitation, occurring or brought about by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any governmental body:

2.1Payment Defaults. If the Company shall fail to pay any installment of principal of or interest on this Note when due and such failure continues for ten (10) business days;

2.2Voluntary Reorganization, etc. If the Company (i) makes a general assignment for the benefit of creditors, (ii) applies for, consents to, acquiesces in, files a petition or an answer seeking, or admits (by answer, default or otherwise) the material allegations of a petition filed against it seeking the appointment of a trustee, receiver, liquidator, debtor in possession, or assignee in bankruptcy or insolvency of itself or of all or a substantial portion of its assets, or a reorganization, arrangement with creditors or other remedy, relief or adjudication available to or against a debtor under any bankruptcy or insolvency law or any law relating to relief of debtors, or (iii) admits in writing its inability to pay its debts generally as they become due;

2.3Involuntary Reorganization, etc. If a decree, order or judgment shall have been entered adjudging the Company as bankrupt or insolvent, or appointing a receiver, liquidator, trustee, debtor in possession or assignee in bankruptcy or insolvency for it or for all or a substantial portion of its assets, or approving a petition seeking a reorganization, arrangement, or the winding up or liquidation of its affairs on the grounds of insolvency or nonpayment of debts, and such decree, order or judgment shall remain undischarged and unstayed for a period of 120 days; or if any substantial part of the property of the Company is sequestered or attached and shall not be returned to the possession of the Company or released from such attachment within 120 days;

2.4Liquidation or Organic Transaction. If the Company voluntarily begins the process of liquidation, winding up or dissolving the Company (which events are not part of those set forth in Section 2.2 or 2.3 above) or consummates an Organic Transaction. For purposes of this Note, an Organic Transaction shall mean (i) the sale of all or substantially all of the stock or assets of the Company, (ii) the consummation of a merger or consolidation in which either the Company is not the surviving entity or a majority of the stockholders of the Company immediately prior to such merger or consolidation are no longer a majority of the stockholders of the Company after such merger or consolidation, or (iii) the consummation of an initial public offering by the Company that results in gross proceeds to the Company or its stockholders of at least $10,000,000 and a share price of at least $10.00 per share;

2.5Failure to Deliver Financial Statements. If the Company fails to (i) deliver to the Holder audited financial reports within 90 days after the end of the Company’s fiscal year, prepared by an accounting firm reasonably acceptable to the Holder; (ii) deliver to the Holder quarterly unaudited financial reports within 40 days after the end of each of the Company’s first three fiscal quarters, reviewed by an accounting firm reasonably acceptable to the Holder; (iii) use its best efforts to deliver to the Holder monthly unaudited financial reports within 30 days after the end of each month and an annual budget and business plan 30 days prior to the beginning of a fiscal year.

2.6Subordination of Other Debt.This Note shall be senior to all long term liabilities of the Company and senior to all current liabilities of the Company over $11,000. Failure of the Company to deliver agreements from all holders of such debt of the Company acknowledging the priority of the Note to such debt and subordinating such debt to the Note shall be deemed an Event of Default. In addition, it shall be deemed an Event of Default if the Company shall incur any additional indebtedness without the prior written consent of the Holder, except for indebtedness in the ordinary course of business and in individual amounts not to exceed $50,000. It will be a condition to the purchase of the Note that the holders of all of the currently outstanding investor notes of the Company agree to freeze the accrual of interest under such notes as of January 1, 2008 and agree that from and after such date, no further interest will accrue or be payable under such notes beyond that which has accrued as of December 31, 2007, and failure to obtain or comply with such agreements shall be deemed an Event of Default.

2.7Interest after an Event of Default. From and after the date of an Event of Default and through the date on which the Holder is paid in full, the interest rate applicable to the amounts due hereunder shall be the higher of eighteen percent per annum (18%) or the highest rate allowable by law.

2.8Failure to Comply with Certain Covenants. If the Company fails to perform any of its obligations under Section 7.1 of that certain Option Agreement, dated as of even date hereof, and by and among the Company, the Holder and the “Holder” parties thereto.

3.Conversion.

3.1 Conversion. At any time that there are amounts outstanding under this Note, the Holder has the right, at its option, to convert the full outstanding aggregate principal amount of this Note and any like notes (collectively, the “Conversion Amount”) into fully paid and non-assessable shares of the Company’s Series A Preferred Stock (“Series A Stock). In order to exercise this conversion privilege, the Holder shall surrender this Note to the Company during normal business hours at the Company’s principal executive offices, accompanied by written notice in form reasonably satisfactory to the Company that the Holder elects to convert the Conversion Amount specified in such notice. As soon as practicable, the Company shall issue a stock certificate in the name of the Holder of this Note for the shares of Series A Stock issuable upon conversion.

3.2Shares Issuable Upon Conversion.The number of shares of Series A Stock to be issued upon conversion shall be based on the Conversion Amount. If the Conversion Amount is equal to or greater than Five Hundred Thousand Dollars ($500,000) (the “Target Amount”), the Company shall issue the Holder shares of Series A Stock equal to twenty percent (20%) of the fully diluted capitalization of the Company at the time of issuance (the “Base Amount”). If the Conversion Amount is less than Five Hundred Thousand Dollars ($500,000), the shares of Series A Stock to be issued shall be equal to the Base Amount multiplied by a percentage determined by dividing the Conversion Amount by the Target Amount.

3.3Fractional Shares. No fractional shares of Series A Stock, as applicable, shall be issued upon conversion of this Note but a cash payment will be made with respect to any fraction of a share which would otherwise be issued upon the surrender of this Note, or portion thereof, for conversion.

3.4Accrued Interest. Upon conversion of this Note, the Company shall not be required to pay any accrued but unpaid interest on the amount so converted up to the date that this Note is converted into Series A Stock.

3.5Rights upon issuance of Stock. Upon conversion of any portion of this Note, the parties agree that they will use good faith efforts to negotiate and execute all documentation reasonably requested by Holder. It is agreed and acknowledged that the parties will use the National Venture Capital Association (“NVCA”) forms as the basis for any document for which there is a reasonably applicable NVCA form, with such additions, deletions, modifications and the like as may be necessary to reflect the transaction between the parties. Any shares of Series A Stock issued to the Holder upon conversion shall have the same rights, preferences, restrictions and obligations as all other shares of Series A Stock.

4.Loss, Theft, Destruction or Mutilation. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and, in the case of such loss, theft or destruction, upon delivery to the Company of an indemnity undertaking reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender of this Note to the Company, the Company will issue a new note, of like tenor and principal amount, in lieu of or in exchange for such lost, stolen, destroyed or mutilated Note.

5.Notices and Demands. All notices, demands and communications provided for in this Note or made under this Note shall be delivered, mailed registered or certified mail with postage prepaid, or telegraphed, addressed in each case as follows:

(a)	To the Company:
	Red Moon, Inc.
	625 Digital Drive, Suite 500
	Plano, Texas 75075
	Attn: Bryan Thompson, President and CEO
(b)	To the Holder of this Note:
	Zoom Technologies, Inc.
	207 South Street
	Boston, MA 02111
	Attn: Frank Manning, President and CEO
	with a copy to:
	Morse, Barnes-Brown & Pendleton, P.C.
	Reservoir Place
	1601 Trapelo Road
	Waltham, MA 02451
	Attention: Jeffrey P. Steele, Esq.

or such other address as may, after the date of this Note, be designated by the Holder or the Company by notice given to the other party as the address to which communications under this Note shall thereafter be delivered or mailed.

Notices, demands and communications shall be deemed to have been given or made when so delivered, mailed or telegraphed.

6.Present Intent. By acceptance of this Note, the Holder acknowledges that this Note is being acquired without a present intention of resale or distribution, and that this Note will not be transferred, pledged or otherwise disposed of by the Holder in the absence of an effective registration statement under the Securities Act of 1933, as amended, or an opinion of counsel reasonably satisfactory to the Company that such registration is, under the circumstances, not required.

7.Miscellaneous Provisions.

7.1No Oral Modifications. Neither this Note nor any term of this Note may be changed, waived, discharged or terminated orally, but may only be amended or modified by an instrument in writing signed by all of the parties hereto.

7.2Binding Effect. This Note shall be binding upon and inure to the benefit of the Company, the Holder of this Note and their respective heirs, successors and assigns.

7.3Governing Law. This Note shall be governed by the laws of the Commonwealth of Massachusetts. To the extent permitted by applicable law, the Company waives the right to trial by jury in any such action or proceeding.

7.4Recourse. Recourse under this Note shall be to the assets of the Company only and in no event to the officers, directors or stockholders of the Company.

7.5Costs. The undersigned will pay all reasonable costs and expenses of collection, including attorneys' fees and disbursements, appraiser's fees and court costs, incurred or paid by the Holder in enforcing this Note, to the extent permitted by law, including all costs and reasonable attorneys' fees incurred in any appeal, bankruptcy proceeding, or other proceeding.

7.6Transfer. This Note may be transferred in whole or in part by the Holder with the prior written consent of the Company, which shall not be unreasonably withheld.

IN WITNESS WHEREOF, the Company has caused this Note to be executed in its corporate name by its duly authorized officer this 22^nd day of January, 2008.

	RED MOON, INC.
[Corporate Seal]	By:	/s/Bryan Thompson
		Bryan Thompson, President and CEO

Attest:

    /s/Bryan Thompson

Secretary

EX-10.3

OPTION AGREEMENT

OPTION AGREEMENT

THIS OPTION AGREEMENT is made and entered into as of this 22^nd day of January, 2008, by and among Red Moon, Inc., a Delaware corporation (the “Company”), Zoom Technologies, Inc., a Delaware corporation (the “Option Holder”), and each of the stockholders of the Company listed on Schedule A (together with any subsequent stockholders, or any transferees, who become parties hereto as “Holders” pursuant to Sections 7.1 or 7.2 below, the “Holders”).

RECITALS

A.Concurrently with the execution of this Agreement, the Company and the Option Holder are entering into a Convertible Promissory Note Purchase Agreement (the “Purchase Agreement”) providing for the sale of a Convertible Promissory Note in original principal amount of $300,000 to the Option Holder.

B.The parties desire to enter into this Agreement to set forth their agreements and understandings with respect to the Option Holder’s right and option (the “Option”) to purchase the Company (whether by means of a purchase of the assets, a merger or consolidation, a purchase of all outstanding capital stock of the Company not then owned by the Option Holder, or otherwise, as determined pursuant to this Agreement) on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, the parties agree as follows:

1.The Option.

1.1The Option. The Option Holder shall have the right, exercisable during the period (the “Option Period”) commencing with the date of this Agreement and ending at the close of the business day, 5:00 p.m. Plano, Texas time, on August 31, 2008, to purchase the Company. Such purchase (the “Transaction”), to take the form of either (i) the purchase of all of the capital stock of the Company then outstanding and not then held by the Option Holder such that, upon such purchase, the Option Holder will own all of the outstanding shares of the capital stock of the Company of any and all classes and series; or, (ii) such other form as both of the Option Holder and the Company may agree, including without limitation: (a) the purchase of all or substantially all of the assets of the Company; or (b) the merger or consolidation of the Company with or into the Option Holder or other entity. It is hereby agreed and acknowledged that, in selecting the form of the Transaction, the parties hereto desire that such form accommodate, as much as possible, the desire of all parties to limit or reduce then current taxation to the Company and the holders of its capital stock and to provide the best possible long term tax and accounting treatment for the Transaction to the Option Holder and the selling stockholders of the Company. The Option may be exercised by the Option Holder at any time during the Option Period by providing written notice (the “Exercise Notice”) to the Company of the Option Holder’s exercise of the Option. Upon receipt of the Exercise Notice, the Company shall promptly provide notice to all Holders of the exercise of the Option. In the event the Option Holder’s common stock is not listed for trading on either of the NASDAQ Capital Market or the OTC Bulletin Board at the time of exercise of the Option, the Option will terminate.

1.2Option Price. The aggregate price (the “Purchase Price”) the Option Holder shall pay upon exercise of the Option will be (i) 1,000,000 shares of the Common Stock of the Option Holder (the “Initial Payment”); and (ii) the Earn-Out Payments (as defined below), if any. Notwithstanding the terms and conditions of any (i) long term debt; (ii) current liability notes over $11,000 and (iii) accrued interest payable to note holders of the Company assumed by the Option Holder in acquiring the Company pursuant to the exercise of the Option, such assumed debt will be paid in cash in eight (8) equal quarterly installments commencing thirty (30) days after the Closing.

1.3Payment of Purchase Price; Closing. No part of the Purchase Price will be paid or distributed to the Option Holder as a stockholder of the Company. In connection with the exercise of the Option, the Company and the Option Holder shall negotiate in good faith a purchase agreement containing customary and reasonable representations, warranties and covenants. The closing (the “Closing”) of the exercise of the Option will occur within thirty (30) days of the date of the Exercise Notice. “Transferee” shall mean any an individual, firm, corporation, partnership, association, limited liability company, trust or any other entity (each of which, a “Person”) to which the Option has been transferred pursuant to the terms of Section 7.2 hereof. Shares of the common stock of the Option Holder constituting a portion of the Purchase Price are hereinafter referred to as “Consideration Shares”).

1.4Earn-Out Payments. In addition to the Initial Payment, the stockholders of the Company other than the Option Holder are entitled to receive an aggregate of up to four (4) million additional shares of the Common Stock of the Option Holder or, at the Option Holder’s option, “share equivalents” as earn-out payments (the “Earn-Out Payments”) on the terms and conditions set forth in this Section 1.4. A “share equivalent” is defined as $1.25 per share if the Option Holder’s Common Stock remains listed for trading on the NASDAQ CM; provided, however, if the Option Holder’s Common Stock is only listed for trading on the OTCBB as of the date the Option is exercised, the “share equivalent” shall instead be equal to $1.50. From zero (0) to four (4) million shares or share equivalents may be earned as summarized in the Performance Earn-out below. At the time of an Earn-Out Payment, the stockholders of the Company other than the Option Holder (by means of a stockholder representative) may request that any Earn-Out Payment be a specific combination of stock and cash ranging from 100% cash to 100% stock. Such request must be made by written notice to the Option Holder within thirty (30) days of the end of the quarter to which such Earn-Out Payment relates. In the event the stockholders of the Company request a combination of stock and cash that is 50/50, the Option Holder will pay any earn-out 50/50 cash and stock. In the event the stockholders of the Company request that the combination include more than 50% cash or more than 50% stock, the Option Holder will pay at least 50% of the Earn-Out Payment in the form of consideration so requested by the stockholders of the Company, but will retain the right to pay less of the Earn-Out Payment in the form of consideration requested by the stockholders of the Company than such stockholders may request provided such form of consideration is at least 50% of the Earn-Out Payment. For example, if stockholders of the Company specify payment of at least 60% in stock, the Option Holder may elect to either grant such request or make the Earn-Out Payment in some other mix of cash and stock, provided such payment is at least 50% stock. If the stockholders of the Company elect to receive any portion of an Earn-Out Payment in cash, the Option Holder may, at its option, pay such cash earn-out amount in eight (8) equal quarterly installments, with simple interest at six percent (6%) per annum, starting 60 days after the end of the quarter, pursuant to a promissory note in form and substance reasonably acceptable to the Company.

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An Earn-Out Payment will be made for a given quarter if and only if:

a)EBITDA of the Redmoon division is positive for the quarter; and

b)The accumulated EBITDA of the Redmoon division is positive starting with the quarter ending June 30, 2008; and

c)The quarter ends between June 30th, 2008 through June 30, 2009.

If an Earn-Out Payment is to be made for a quarter, its dollar value will equal seven (7) times the accumulated EBITDA less the total earn-out already paid, not to exceed one (1) million shares or share-equivalents in any quarter and not to allow the total accumulated earn-out to exceed four (4) million shares or share-equivalents. As an example, the Option Holder’s payment of $1.25 million cash and 1 million shares would be equivalent to the Option Holder paying 2 million “shares or share-equivalents” if the Option Holder’s Common Stock is then listed for trading on the NASDAQ CM; however, if the Option Holder’s Common Stock is instead then only listed for trading on the OTCBB, $1.5 million would be 1 million share equivalents. Further examples are set forth in Exhibit B attached hereto. Each Earn-Out Payment to be made in stock will be made within sixty (60) days after the end of the quarter to which it relates.

2.Holder Covenants.

2.1Actions to be Taken. In the event of the exercise of the Option, then each Holder hereby agrees:

(a)if the Transaction requires approval of the stockholders of the Company or any of them, with respect to all capital stock that such Holder owns or over which such Holder otherwise exercises voting power, to vote (in person, by proxy or by action by written consent, as applicable) all such capital stock in favor of, and adopt, the Transaction (together with any related amendment or waiver to the Company’s Certificate of Incorporation, as amended to date and as the same may be further amended and/or restated from time to time (as the same may be so amended and/or restated, the “Charter”)) and to vote in opposition to any and all other proposals that could delay or impair the ability to consummate the Transaction;

(b)if the Transaction is a sale of the outstanding capital stock, to sell all of its capital stock to the Option Holder in connection with and at the Closing of the Transaction;

(c)to execute and deliver all related documentation and take such other action in support of the exercise of the Option and the closing of the Transaction contemplated thereunder as shall reasonably be requested by the Company or the Option Holder in order to carry out the terms and provision of this Section 2, including without limitation executing and delivering instruments of conveyance and transfer, and any purchase agreement, merger agreement, indemnity agreement, escrow agreement, consent, waiver, governmental filing, share certificates duly endorsed for transfer (free and clear of impermissible liens, claims and encumbrances) and any similar or related documents;

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(d)not to deposit, and to cause its Affiliates not to deposit, except as provided in this Agreement or the Charter, any capital stock of the Company owned by such party or Affiliate in a voting trust or subject any capital stock to any arrangement or agreement with respect to the voting of such capital stock, unless specifically requested to do so by the Option Holder;

(e)to refrain from exercising any dissenters’ rights or rights of appraisal under applicable law at any time with respect to the exercise of the Option and the closing of the Transaction; and

(f)if the consideration to be paid in exchange for the capital stock includes any securities and due receipt thereof by any Holder would require under applicable law (x) the registration or qualification of such securities or of any person as a broker or dealer or agent with respect to such securities or (y) the provision to any Holder of any information other than such information as a prudent issuer would generally furnish in an offering made solely to “accredited investors” as defined in Regulation D promulgated under the Securities Act of 1933, as amended, the Option Holder may cause to be paid to any such Holder in lieu thereof, against surrender of the capital stock which would have otherwise been sold by such Holder, an amount in cash equal to the fair value (as determined in good faith by the Company) of the securities which such Holder would otherwise receive as of the date of the issuance of such securities in exchange for the Capital stock.

2.2Exceptions. Notwithstanding the foregoing Section 2.1, a Holder will not be required to comply with Section 2.1 above in connection with any exercise of the Option unless:

(a)any representations and warranties to be made by such Holder in connection with the Transaction are limited to representations and warranties related to authority, ownership and the ability to convey title to such Holder’s capital stock, including but not limited to representations and warranties that (i) the Holder holds all right, title and interest in and to the capital stock such Holder purports to hold, free and clear of all liens and encumbrances, (ii) the obligations of the Holder in connection with the Transaction have been duly authorized, if applicable, (iii) the documents to be entered into by the Holder have been duly executed by the Holder and delivered to the acquirer and are enforceable against the Holder in accordance with their respective terms and (iv) neither the execution and delivery of documents to be entered into in connection with the Transaction, nor the performance of the Holder’s obligations thereunder, will cause a breach or violation of the terms of any agreement, law or judgment, order or decree of any court or governmental agency;

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(b)the Holder shall not be liable for the inaccuracy of any representation or warranty made by any other person in connection with the Transaction, other than the Company (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any stockholder of any of identical representations, warranties and covenants provided by all stockholders);

(c)the liability for indemnification, if any, of such Holder in the Transaction and for the inaccuracy of any representations and warranties made by the Company in connection with the Transaction, is several and not joint with any other Person (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any Holder of any of identical representations, warranties and covenants provided by all Holders), and is pro rata in proportion to the amount of consideration paid to such Holder in connection with such Transaction (in accordance with the provisions of the Charter);

(d)liability shall be limited to such Holder's applicable share (determined based on the respective proceeds payable to each Holder in connection with such Transaction in accordance with the provisions of the Charter) of a negotiated aggregate indemnification amount that applies equally to all Holders but that in no event exceeds the amount of consideration otherwise payable to such Holder in connection with such Transaction, except with respect to claims related to fraud by such Holder, the liability for which need not be limited as to such Holder;

(e)upon or after (as appropriate) the consummation of the Transaction, (i) each holder of each class or series of the Company’s capital stock will receive the same form of consideration for their capital stock of such class or series as is received by other holders in respect of their capital stock of such same class or series; and (ii) the aggregate Purchase Price shall be allocated among the Holders on the basis of the relative ownership percentages in accordance with the Charter; and

(f)subject to clause (e) above, requiring the same form of consideration to be available to the holders of any single class or series of capital stock, if any Holders are given an option as to the form and amount of consideration to be received as a result of the Transaction, all Holders of such class or series of capital stock will be given the same option.

3.Remedies.

3.1Covenants of the Company. Each of the Option Holder and the Company agrees to use its best efforts, within the requirements of applicable law, to ensure that the rights granted under this Agreement are effective and that the parties enjoy the benefits of this Agreement and to take such actions as may be required and to grant such waivers and consents as may be necessary or required, whether under the Charter or otherwise, to effectuate the closing of the Transaction upon and after the exercise of the Option.

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3.2Irrevocable Proxy. Each Holder hereby constitutes and appoints the Treasurer of the Company, and in such officer’s absence, the President of the Company, and a designee of the Option Holder, and each of them, with full power of substitution, as the proxies of the Holder with respect to the votes regarding any exercise of the Option pursuant to Section 2 hereof, and hereby authorizes each of them to represent and to vote, if and only if the party (i) fails to vote or (ii) attempts to vote (whether by proxy, in person or by written consent), in a manner which is inconsistent with the terms of this Agreement, all of such party’s capital stock pursuant to and in accordance with the terms and provisions of said Section 2. The proxy granted pursuant to the immediately preceding sentence is given in consideration of the agreements and covenants of the parties in connection with the transactions contemplated by this Agreement and, as such, is coupled with an interest and shall be irrevocable unless and until this Agreement terminates or expires pursuant to Section 6 hereof. Each party hereto hereby revokes any and all previous proxies with respect to the shares of capital stock of the Company and shall not hereafter, unless and until this Agreement terminates or expires pursuant to Section 6 hereof, purport to grant any other proxy or power of attorney with respect to any of such shares of capital stock, deposit any of such shares of capital stock into a voting trust or enter into any agreement (other than this Agreement), arrangement or understanding with any person, directly or indirectly, to vote, grant any proxy or give instructions with respect to the voting of any of such shares of capital stock, in each case, with respect to any of the matters set forth herein.

3.3Specific Enforcement. Each party acknowledges and agrees that each party hereto will be irreparably damaged in the event any of the provisions of this Agreement are not performed by the parties in accordance with their specific terms or are otherwise breached. Accordingly, it is agreed that each of the Company and the Option Holder shall be entitled to an injunction to prevent breaches of this Agreement, and to specific enforcement of this Agreement and its terms and provisions in any action instituted in any court of the United States or any state having subject matter jurisdiction.

3.4Remedies Cumulative. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

4.Option Holder Covenants.

4.1Registration.

(a)The following terms have the following meanings for purposes of this Section 4:

“Business Day” shall mean a day other than a Saturday, Sunday or other day on which commercial banks in Boston, Massachusetts are authorized or required by law to close.

“Commission” means the United States Securities and Exchange Commission, or any successor governmental agency or authority.

“Effectiveness Period” means the period beginning on the date the Registration Statement is declared effective by the Commission and ending on the earlier of (i) the date when all Registrable Securities covered by the Registration Statement (A) cease to be outstanding or otherwise to be Registrable Securities or (B) may be resold pursuant to Rule 144(k) under the Securities Act or (ii) all Registrable Securities have been sold.

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“Exchange Act”means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Person” means any individual, sole proprietorship, partnership, corporation, limited liability entity, joint venture, unincorporated society or association, trust or other legal entity or Governmental Authority.

“Prospectus” means the prospectuses included in any Registration Statement, as amended or supplemented by any amendment or prospectus supplement, including post-effective amendments, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such Prospectus.

“Registrable Securities” means the Consideration Shares until the earliest of (a) their resale in accordance with a Registration Statement covering such securities and (b) their sale pursuant to an exemption from registration under the Securities Act or in any other transaction in which the applicable purchaser does not receive “restricted securities” (as such term is defined for the purposes of Rule 144 under the Securities Act).

“Registration Expenses”means all fees and expenses incurred by the Option Holder in connection with the performance of its obligations under Section 4, whether or not a Registration Statement is filed or becomes effective, including (i) all preparation, registration and filing fees, (ii) printing expenses, (iii) all listing fees and expenses, if any and (iv) fees and disbursements of counsel for the Option Holder in connection with the Registration Statements relating to the Registrable Securities, but not including any and all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of legal counsel for any selling security holder.

“Registration Statement” means any registration statement of the Option Holder that covers any of the Registrable Securities pursuant to the provisions of this Agreement, including a Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such registration statement.

“Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

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(b)In the event of the exercise of the Option and Consideration Shares constitute a portion of the Purchase Price, the Option Holder shall, for the benefit of the Holders, at the Option Holder’s cost, (A) as soon as practicable, but not later than 180 days following the date on which the final aggregate amount of Consideration Shares, including Consideration Shares issued as Earn-Out Payments, is determined, prepare and file with the Commission, a Registration Statement on an appropriate form under the Securities Act permitting registration of the Registrable Securities for resale by the Holders to be made on a delayed or continuous basis, (B) use its best efforts to cause the Registration Statement to be declared effective as soon as practicable, but in any event not later than 180 days after the date hereof, and (C) use its best efforts to keep the Registration Statement (or any Subsequent Registration Statement) continuously effective under the Securities Act until the expiration of the Effectiveness Period. Notwithstanding the above, no Holder shall be entitled to have the Registrable Securities held by such Holder covered by the Registration Statement unless such Holder agrees in writing to be bound by the provisions of this Section 4 applicable to such Holder.

(c)At the time the Registration Statement is declared effective, each Holder shall be named as a selling securityholder in the Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of Registrable Securities in accordance with applicable law.

(d)If the Registration Statement ceases to be effective for any reason at any time during the Effectiveness Period, the Option Holder shall use its best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within 30 days of such cessation of effectiveness amend the Registration Statement in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or promptly file an additional Registration Statement covering all of the securities that as of the date of such filing are Registrable Securities (a “SubsequentRegistration Statement”). If a Subsequent Registration Statement is filed, the Option Holder shall use its best efforts to cause the Subsequent Registration Statement to become effective as promptly as is practicable after such filing and to keep such Subsequent Registration Statement continuously effective under the Securities Act until the expiration of the Effectiveness Period.

(e)The Option Holder shall supplement and amend the Registration Statement (or any Subsequent Registration Statement) if required by the rules, regulations or instructions applicable to the registration form used by The Option Holder for such Registration Statement, if required by the Securities Act or as reasonably requested by a Holder.

(f)Notwithstanding any other provisions of this Agreement to the contrary, the Option Holder shall cause the Registration Statement and the Prospectus and any amendment or supplement thereto, as of the effective date of the Registration Statement, amendment or supplement, (A) to comply in all material respects with the applicable requirements of the Securities Act, and (B) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

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4.2Registration Procedures. In connection with the registration obligations of the Option Holder under Section 4.1:

(a)As far in advance as practical, but not less than 10 Business Days as such term is defined below), before filing a Prospectus, Registration Statement or any amendment or supplement thereto, the Option Holder shall furnish to the Holders copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits) and shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as any counsel for the Holders’ reasonably may propose.

(b)As promptly as practicable, the Option Holder shall give notice to Holders (A) when any Prospectus, prospectus supplement, Registration Statement or post-effective amendment to a Registration Statement has been filed with the Commission and, with respect to a Registration Statement or any post-effective amendment, when the same has been declared effective, (B) of any request, following the effectiveness of a Registration Statement under the Securities Act, by the Commission or any other Federal or state governmental authority for amendments or supplements to any Registration Statement or related Prospectus or for additional information, (C) of the issuance by the Commission or any other Federal or state governmental authority of any stop order suspending the effectiveness of any Registration Statement or the initiation or threatening of any proceedings for that purpose, (D) of the receipt by the Option Holder of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (E) of the occurrence of and details concerning a Material Event and (F) of the determination by the Option Holder that a post-effective amendment to a Registration Statement will be filed with the Commission, which notice may, at the discretion of the Option Holder (or as required pursuant to Section 4.2(f), state that it constitutes a Deferral Notice, in which event the provisions of Section 4.2(f)shall apply. As promptly as practicable after receipt thereof, the Option Holder shall give Holders copies of any comments received from the Commission with respect to any Registration Statement and responses thereto.

(c)The Option Holder shall use its best efforts to obtain the prompt withdrawal of any order suspending the effectiveness of a Registration Statement or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction in which they have been qualified for sale.

(d)During the Effectiveness Period, the Option Holder shall deliver to each Holder in connection with any sale of Registrable Securities pursuant to a Registration Statement, without charge, as many copies as such Holder may reasonably request, of (A) the Prospectus or Prospectuses relating to such Registrable Securities and any amendment or supplement thereto and (B) such other documents and information as the Option Holder may be required to deliver with the Prospectus under the Securities Act, including, but not limited to, copies of the Option Holder’s latest Annual Report on Form 10-K or annual report to securityholders meeting the requirements of Rule 14a-3 and latest Quarterly Report on Form 10-Q.

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(e)Prior to any public offering of the Registrable Securities pursuant to any Registration Statement, the Option Holder shall register or qualify or cooperate with the Holders and their counsel in connection with the registration or qualification of the Registrable Securities for offer and sale under the securities or “blue sky” laws of such states of the United States as any Holder reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Registrable Securities covered by the Registration Statement; provided, however, that the Option Holder shall not be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified or (B) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject. In the event that the Option Holder’s common stock is listed or admitted for trading on any national securities exchange or quotation on any national-automated quotation system, the Option Holder shall cause all Registrable Securities to be included in such listing or admission.

(f)Upon (A) the issuance by the Commission of a stop order suspending the effectiveness of the Registration Statement (or any Subsequent Registration Statement) or the initiation of proceedings with respect to the Registration Statement (or any Subsequent Registration Statement) under the Securities Act, (B) the occurrence of any event or the existence of any fact (a “Material Event”) as a result of which (1) any Registration Statement shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or (2) any Prospectus shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (C) the occurrence or existence of any pending corporate development with respect to the Option Holder that may (1) interfere with or affect the negotiation or completion of a transaction that is being contemplated by the Option Holder or (2) involve initial or continuing disclosure obligations that are not in the best interests of the Option Holder’s stockholders at such time, that, in the reasonable discretion of the Option Holder, makes it appropriate to suspend the availability of the Registration Statement (or any Subsequent Registration Statement) and the related Prospectus(es), then (y) in the case of clause (B) above, the Option Holder shall, as promptly as practicable, prepare and file a post-effective amendment to such Registration Statement or a supplement to the related Prospectus or any document incorporated therein by reference or file any other required document that would be incorporated by reference into such Registration Statement and Prospectus so that such Registration Statement does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and such Prospectus does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, and, in the case of a post-effective amendment to a Registration Statement, use its best efforts to cause it to be declared effective as promptly as is reasonably practicable, and (z) the Option Holder shall give notice to Holders that the availability of the Registration Statement (or any Subsequent Registration Statement) is suspended (a “Deferral Notice”) and, upon receipt of any Deferral Notice, each Holder agrees not to sell any Registrable Securities pursuant to such Registration Statement until such Holder’s receipt of copies of the supplemented or amended Prospectus provided for in clause (y) above, and until such Holder is advised in writing by the Option Holder that the existing, supplemented or amended Prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in the applicable Prospectus, provided, that, in the case of a Deferral Notice with respect to clause (C) above, no such suspension of the availability of the Registration Statement (or any Subsequent Registration Statement) or the related Prospectus(es) shall extend for a period of more than 45 consecutive days or an aggregate of 90 days in any twelve-month period. If the Option Holder provides the Holders with a Deferral Notice, then the date set forth in clause (ii) of the definition of Effectiveness Period shall be extended by the number of days from and including the date of the giving of such Deferral Notice to and including the date when the Holders shall have received such amended or supplemented Prospectus pursuant to this Section 6.15(c)(vi). The Option Holder shall use its best efforts to ensure that the use of the Prospectus may be resumed (1) in the case of clause (A) above, as promptly as is practicable, (2) in the case of clause (B) above, as soon as, in the good faith judgment of the Option Holder, public disclosure of such Material Event would not be materially prejudicial to or contrary to the interests of the Option Holder or, if necessary to avoid unreasonable burden or expense, as soon as reasonably practicable thereafter and (3) in the case of clause (C) above, as soon as, in the good faith judgment of the Option Holder, such suspension is no longer appropriate.

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(g)The Option Holder shall cooperate with each Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities sold pursuant to a Registration Statement free of any restrictive legends and in such denominations and registered in such names as such Holder may request a reasonable period of time prior to sales of the Registrable Securities pursuant to the Registration Statement (or any Subsequent Registration Statement).

4.3Registration Expenses. The Option Holder shall be responsible for and shall pay all Registration Expenses. In addition, the Option Holder shall be responsible for and shall reimburse the Holders the reasonable fees and disbursements of not more than one counsel (in an amount not to exceed $20,000), exclusive of underwriting discounts and commissions and stock transfer taxes, designated by the Seller Representative to act as counsel for the Holders in connection with this Section 4.3 (“Holders’ Counsel”).

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4.4Indemnification.

(a)The Option Holder agrees to indemnify and hold harmless each Holder and each person, if any, who controls the Holder within the meaning of the Securities Act or the Exchange Act (each Holder, and such controlling persons are referred to collectively as the “Holder Indemnified Parties”) from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Registrable Securities) to which each Holder Indemnified Party may become subject under the Securities Act, the Securities Exchange Act of 1934 or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus including any document incorporated by reference therein, or in any amendment or supplement thereto or in any preliminary Prospectus relating to the Registration Statement, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse, as incurred, the Holder Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that the Option Holder shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in any Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary Prospectus relating to the Registration Statement in reliance upon and in conformity with written information pertaining to the Holder furnished to the Option Holder by or on behalf of the Holder specifically for inclusion therein; provided, further, that this indemnity agreement will be in addition to any liability which the Option Holder may otherwise have to the Holder Indemnified Party. The Option Holder shall also indemnify any underwriters, their officers and directors and each person who controls such underwriters within the meaning of the Securities Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the holders of the Registrable Securities if requested by the Holders.

(b)Each Holder, severally and not jointly, will indemnify and hold harmless the Option Holder, its officers and directors and each person, if any, who controls the Option Holder within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Option Holder or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary Prospectus relating to the Registration Statement, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder furnished to the Option Holder by or on behalf of such Holder specifically for inclusion therein and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Option Holder for any legal or other expenses reasonably incurred by the Option Holder or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be a part of any liability which the Holder may otherwise have to the Option Holder or any of its controlling persons.

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(c)Promptly after receipt by an indemnified party under this Section 4.4 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 4.4, notify the indemnifying party of the commencement thereof; but the failure to notify the indemnifying party shall not relieve it from any liability that it may have under Section 4.4(a)or Section 4.4(b) above except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under Section 4.4(a)or Section 4.4(b)above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 4.4 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (x) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action, and (y) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. No indemnified party shall effect any settlement of any pending or threatened action without the prior written consent of the indemnifying party, which such consent shall not be unreasonably withheld or delayed.

(d)If (A) the indemnification provided for in this Section 4.4 is unavailable or insufficient to hold harmless an indemnified party under Section 4.4(a) or Section 4.4(b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in Section 4.4(a) or Section 4.4(b) above in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the sale of the Registrable Securities, pursuant to the Registration Statement, or (B) the allocation provided by the foregoing clause (A) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (A) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this Section 4.4(d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this Section 4.4(d). Notwithstanding any other provision of this Section 4.4(d), no Holder shall be required to contribute any amount in excess of the amount by which the net proceeds received by such Holder from the sale of the Registrable Securities pursuant to the Registration Statement exceeds the amount of damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

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(e)The agreements contained in this Section 4.4 shall survive the sale of the Registrable Securities pursuant to the Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party.

4.5Holders’ Obligations. Each Holder agrees promptly to furnish to the Option Holder all information with respect to such Holder as may be required to be disclosed in the Registration Statement under applicable law or pursuant to Commission comments or as the Option Holder may reasonably request and all material information with respect to such Holder required to be disclosed in order to make the information previously furnished to the Option Holder by such Holder not false or misleading.

4.6“Market Stand-off” Agreement.Each Holder hereby agrees that it will not, without the prior written consent of Option Holder, during the period commencing on the date of the final prospectus relating to the registration by the Option Holder of shares of its Common Stock or any other equity securities under the Securities Act on a registration statement on Form S-1, Form S-2, Form S-3 or Form SB-2,and ending on the date specified by the Option Holder (such period not to exceed ninety (90) days), which period may be extended, to the extent required by any NASD rules, for an additional period of up to fifteen (15) days if the Option Holder issues or proposes to issue an earnings or other public release within fifteen (15) days of the expiration of the 90-day lockup period, (i) lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock held immediately before the effective date of the registration statement for such offering or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise.

4.7Volume Trading Limitations. Collectively, the amount of the Option Holder’s securities registered hereunder sold by the Holders during any one week period shall not exceed ten percent (10%) of the Option Holder’s Average Weekly Trading Volume. For purposes hereof, “Average Weekly Trading Volume” shall mean the number of shares (excluding those shares traded by the Holders) traded on NASDAQ Small Cap on a weekly basis for the four weeks immediately prior to the week in which securities are to be sold. In the event that the Holders wish to sell more than ten percent (10%) of the Option Holder’s Average Weekly Trading Volume, the Holders shall agree among those Holders wishing to sell such shares.

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4.8Board Representation and Employment Agreements. Upon the acquisition of the balance of the Company pursuant to the exercise of the Option, the Option Holder will promptly take all reasonable actions to have Bryan Thompson nominated and appointed to the Board of Directors of the Option Holder. Bryan Thompson or other designee of the stockholders of the Company will be entitled to remain on the Board of Directors of the Option Holder for so long as the stockholders of the Company collectively continue to own at least 50% of the Consideration Shares received by them. Bryan Thompson or such other designee shall serve subject to the Certificate of Incorporation and By-laws of the Option Holder, as each may be amended from time to time.

In connection with the acquisition of the Company pursuant to the exercise of the Option, the Option Holder will offer employment agreements to Bryan Thompson and any other key employees of the Company (as determined by the Option Holder) upon terms and conditions determined by the Option Holder but including in any event significant employment related options in the Option Holder’s common stock pursuant to the Option Holder’s employee option plan.

5.Company Covenants.

5.1Audited Financial Statements. The Company hereby acknowledges that the Option Holder is a company subject to the periodic reporting requirements of the Securities Exchange Act of 1934, and, as such, will be required following the exercise of the Option to timely file certain audited historical financial statements of the Company as required by Item 9.01 of Form 8-K pursuant to the Securities Exchange Act of 1934 (or any successor or other requirement)(the “Required Financial Statements”). It is understood and acknowledged that the Company currently has audited financial statements for its 2004 and 2005 fiscal years and that the Company can obtain audited financial statements for its 2006 fiscal year within 30 days or less of paying its auditors approximately $15,000 in overdue fees. The Company hereby agrees, in addition to complying with its obligations under section the financial statements set forth in Section 3.1(a) of the Investor’s Rights Agreement, to use its commercially reasonable efforts to deliver to the Option Holder as soon as practicable, but in any event within 120 days after the end of the Company’s 2007 fiscal year, (i) balance sheets as of December 31, 2006 and as of December 31, 2007, and (ii) statements of income and of cash flows for such years, all such financial statements audited and certified by the Company’s independent public accountants.The Option Holder agrees and consents to the payment by the Company from the initial investment made by the Option Holder under the Purchase Agreement of the auditor’s fees and any other fees for professional services then outstanding or incurred in connection with the transactions contemplated herein.

6.Term. This Agreement shall be effective as of the date hereof and shall continue in effect until and shall terminate at and upon 5:01 p.m., Plano, Texas time, on the last day of the Option Period, unless the Option shall have been exercised prior to such time in which event this Agreement shall not terminate until the earlier of the consummation of the transaction contemplated by the Option or its earlier abandonment by the Option Holder (as evidenced only by written notice from the Option Holder to such effect).

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7.Miscellaneous.

7.1Additional Parties. Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of capital stock after the date hereof, as a condition to the issuance of such capital stock the Company shall require the recipient of such capital stock become a Holder party to this Agreement by executing and delivering (i) the Adoption Agreement attached to this Agreement as Exhibit A, or (ii) a counterpart signature page hereto agreeing to be bound by and subject to the terms of this Agreement as a Holder hereunder. In addition, the Company shall (i) within thirty (30) days of the date of this Agreement, cause the following stockholders of the Company to become a Holder party to this Agreement by executing and delivering a counterpart signature page hereto agreeing to be bound by and subject to the terms of this Agreement as a Holder hereunder: Chris Barnhart, Matt Barnes, Bill Bredy, Sten Carlson, Steve Dunn, Todd Feldman, David McMillan, Wendy McMillan/Sean Briggs, Greg Nelson, Loyal M. Nordstrom, John Nordstrom, John R. Troup and Vicki Winn-Didio (together, the “Preferred Holders”); and (ii) use its best efforts to cause, within ninety (90) days of the date of this Agreement, the following stockholders of the Company to become a Holder party to this Agreement by executing and delivering a counterpart signature page hereto agreeing to be bound by and subject to the terms of this Agreement as a Holder hereunder: Don Hudnall and New Market Technology. In any such event, each such person shall thereafter shall be deemed a Holder for all purposes under this Agreement. . In addition, the Company shall, within thirty (30) days of the date of this Agreement, cause the Preferred Holders to become Stockholder parties to the Voting Agreement, dated as of even date hereof, by and among the Company, the Option Holder and the other Stockholder parties thereto.

7.2Transfers. Each transferee or assignee of any capital stock subject to this Agreement shall continue to be subject to the terms hereof, and, as a condition precedent to the Company’s recognizing such transfer, each transferee or assignee shall agree in writing to be subject to each of the terms of this Agreement by executing and delivering an Adoption Agreement substantially in the form attached hereto as Exhibit A. Upon the execution and delivery of an Adoption Agreement by any transferee, such transferee shall be deemed to be a Holder party hereto as if such transferee were the transferor and such transferee’s signature appeared on the signature pages of this Agreement. The Company shall not permit the transfer of the shares of capital stock subject to this Agreement on its books or pursuant to the Charter or issue a new certificate representing any such shares of capital stock unless and until such transferee shall have complied with the terms of this Section 7.2. Each certificate representing the shares of capital stock subject to this Agreement if issued on or after the date of this Agreement shall be endorsed by the Company with the legend set forth in Section 7.12. The Option Holder may transfer its rights and obligations under this Agreement, including its rights under the Option, to any Person, subject to the Company’s consent as to the transferee, such consent not to be unreasonably withheld.

7.3Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. The Option Holder may transfer and assign its rights hereunder, including its rights under the Option, subject to the Company’s consent which shall not be unreasonably withheld. The rights of the Option Holder hereunder, including its rights under the Option, may be transferred by the Option Holder without the consent of the Company to an acquirer in the event of the acquisition of the Option Holder.

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7.4Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.

7.5Counterparts; Facsimile. This Agreement may be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

7.6Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

7.7Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (a) personal delivery to the party to be notified, (b) when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address as set forth on Schedule A hereto, or to such email address, facsimile number or address as subsequently modified by written notice given in accordance with this Section 7.7. If notice is given to the Option Holder, a copy shall also be given to Morse, Barnes-Brown & Pendleton, P.C., Reservoir Place, 1601 Trapelo Road, Waltham, Massachusetts 02451, Attention: Jeffrey P. Steele.

7.8Consent Required to Amend, Terminate or Waive. This Agreement may be amended or terminated and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively)only by a written instrument executed by (a) the Company; (b) the Option Holder; and (c) the Holders holding a majority of the then outstanding shares of the capital stock then held by the Holders. Notwithstanding the foregoing, (i) the consent of the Holders shall not be required for any amendment or waiver if such amendment or waiver either (A) is not directly applicable to the rights or obligations of the Holders hereunder or (B) does not adversely affect the rights or obligations of the Holders; (ii) Schedule A hereto may be amended by the Company from time to time to add information regarding additional stockholders without the consent of the other parties hereto; and (iii) any provision hereof may be waived by the waiving party on such party’s own behalf, without the consent of any other party.

The Company shall give prompt written notice of any amendment, termination or waiver hereunder to any party that did not consent in writing thereto. Any amendment, termination or waiver effected in accordance with this Section 7.8 shall be binding on each party and all of such party’s successors and permitted assigns, whether or not any such party, successor or assignee entered into or approved such amendment, termination or waiver.

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7.9Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default previously or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

7.10Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

7.11Entire Agreement. This Agreement (including the Exhibits hereto), constitutes the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.

7.12Legend on Certificates. Each certificate representing any shares of the capital stock issued after the date hereof shall be endorsed by the Company with a legend reading substantially as follows:

“THE SHARES EVIDENCED HEREBY ARE SUBJECT TO AN OPTION AGREEMENT, AS MAY BE AMENDED FROM TIME TO TIME, (A COPY OF WHICH MAY BE OBTAINED UPON WRITTEN REQUEST FROM THE COMPANY), AND BY ACCEPTING ANY INTEREST IN SUCH SHARES THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF THAT OPTION AGREEMENT, INCLUDING CERTAIN OBLIGATIONS OF THE HOLDER OF THE SHARES SET FORTH THEREIN.”

The Company, by its execution of this Agreement, agrees that it will cause the certificates evidencing the shares of the capital stock issued after the date hereof to bear the legend required by this Section 7.12 of this Agreement, and it shall supply, free of charge, a copy of this Agreement to any holder of a certificate evidencing shares of the capital stock upon written request from such holder to the Company at its principal office. The parties to this Agreement do hereby agree that the failure to cause the certificates evidencing the shares of the capital stock to bear the legend required by this Section 7.12 herein and/or the failure of the Company to supply, free of charge, a copy of this Agreement as provided hereunder shall not affect the validity or enforcement of this Agreement.

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7.13Stock Splits, Stock Dividends, etc. In the event of any issuance of shares of capital stock of the Company hereafter to any of the holders thereof (including, without limitation, in connection with any stock split, stock dividend, recapitalization, reorganization, or the like), such shares of capital stock shall become subject to this Agreement and shall be endorsed with the legend set forth in Section 7.12.

7.14Manner of Voting. The voting of shares of capital stock pursuant to this Agreement may be effected in person, by proxy, by written consent or in any other manner permitted by applicable law.

7.15Further Assurances. At any time or from time to time after the date hereof, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder.

7.16Costs of Enforcement. If any party to this Agreement seeks to enforce its rights under this Agreement by legal proceedings, the non-prevailing party shall pay all costs and expenses incurred by the prevailing party, including, without limitation, all reasonable attorneys’ fees.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties have executed this Option Agreement as of the date first written above.

Red Moon, Inc.
By:	/s/Bryan Thompson
Name:	Bryan Thompson
Title:	President
OPTION HOLDER:
Zoom Technologies, Inc.
By:	/s/Frank Manning
Name:	Frank Manning
Title:	President
HOLDERS:
Signature:	/s/Bryan Thompson
Name: Bryan Thompson
Signature:	/s/John McMillan
Name: John McMillan
Signature:
Name: Chris Barnhart
Signature:
Name: Matt Barnes
Signature:
Name: Bill Bredy

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Signature:
Name: Sten Carlson
Signature:
Name: Steve Dunn
Signature:
Name:	Todd Feldman
Signature:
Name: David McMillan
Signature:
Name: Wendy McMillan/Sean Briggs
Signature:
Name: Greg Nelson
Signature:
Name: Loyal M. Nordstrom
Signature:
Name:	John Nordstrom
Signature:
Name: John R. Troup
Signature:
Name: Vicki Winn-Didio
Signature:
Name: Don Hudnall
Signature:
Name: New Market Technology
By:
Title

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SCHEDULE A

HOLDERS

Name and Address	Capital stock Held
Bryan Thompson	33,278,000 shares Common Stock
John McMillan	15,393,677 shares Preferred Stock
Chris Barnhart	860,000 shares Preferred Stock
Matt Barnes	400,000 shares Preferred Stock
Bill Bredy	480,000 shares Preferred Stock
Sten Carlson	574,022 shares Preferred Stock
Steve Dunn	400,000 shares Preferred Stock
Todd Feldman	200,000 shares Preferred Stock
David McMillan	1,562,000 shares Preferred Stock
Wendy McMillan/Sean Briggs	700,000 shares Preferred Stock
Greg Nelson	4,861,932 shares Preferred Stock
Loyal M. Nordstrom	2,995,278 shares Preferred Stock 1,210,200 shares Common Stock
John Nordstrom	1,200,000 shares Preferred Stock
John R. Troup	100,000 shares Preferred Stock
Vicki Winn-Didio	200,000 shares Preferred Stock
Don Hudnall	1,537,500 shares Common Stock
New Market Technology	8,032,817 shares Common Stock

EXHIBIT A

ADOPTION AGREEMENT

This Adoption Agreement (“Adoption Agreement”) is executed on ___________________, 20__, by the undersigned (the “New Party”) pursuant to the terms of that certain Option Agreement dated as of January 22, 2008 (the “Agreement”), by and among the Company and the Option Holder and Holder parties thereto, as such Agreement may be amended or amended and restated hereafter. Capitalized terms used but not defined in this Adoption Agreement shall have the respective meanings ascribed to such terms in the Agreement. By the execution of this Adoption Agreement, the New Party agrees as follows.

1.1Acknowledgement. Holder acknowledges that New Party is acquiring certain shares of the capital stock of the Company, for one of the following reasons (Check the correct box):

¨ as a new Holder in accordance with Section 7.1 of the Agreement, in which case New Party will be a “Holder” for all purposes of the Agreement.

¨ as a transferee of Capital stock from a party in such party’s capacity as a “Holder” bound by the Agreement in accordance with Section 7.2 of the Agreement, and after such transfer, New Party shall be considered a “Holder” for all purposes of the Agreement.

1.2Agreement. New Party hereby (a) agrees that the shares of the capital stock, and any other securities required by the Agreement to be bound thereby, shall be bound by and subject to the terms of the Agreement and (b) adopts the Agreement with the same force and effect as if New Party were originally a “Holder” party thereto.

1.3Notice. Any notice required or permitted by the Agreement shall be given to New Party at the address or facsimile number listed below New Party’s signature hereto.

NEW PARTY: ACCEPTED AND AGREED:

By:	Red Moon, Inc.
Name and Title of Signatory
Address:	By:
	Title:

Facsimile Number:

EXHIBIT B

EARN-OUT EXAMPLES.

Quarter	EBITDA	Earnout	Comments
1	$360K	1 million shares or $1.25 million	$360Kx7=$2.52 million Max payout is 1 million shares
2	-$200K	0	EBITDA must be positive
3	$100K	$.57 million or (570K/1.25) shares	7x$260K = $1.82 million New Earn ($1.82million-$1.25 million already paid out)
4	$200K	1 million shares or $1.25 million	New Earn ($3.22 million -$1.82 Mil. already paid out)=$1.35 Million. Cap $1.25 million

· Assumes Zoom shares remain listed on the NASDAQ CM.

(This continues until 4 million shares or share-equivalents are reached or until the quarter ending June 30, 2009 is reached.)

EX-10.4

SECURITY AGREEMENT

THIS SECURITY AGREEMENT, dated as of January 22, 2008, is made by Red Moon, Inc., a Delaware corporation (the “Borrower”), in favor of Zoom Technologies, Inc., a Delaware corporation (the “Lender”).

RECITALS

WHEREAS, on the date hereof the Lender will make a loan in the amount of Three Hundred Thousand Dollars ($300,000.00) to the Borrower, which loan is evidenced by a Promissory Note of even date hereof (the “Initial Note”). After the date of this Agreement, the Lender may make further loans to the Borrower pursuant to the terms of a Convertible Note Purchase Agreement, of even date hereof, and by and between the Borrower and the Lender, which loans shall be evidenced by one of more additional promissory notes (the “Additional Notes” and, together with the Initial Note, the “Notes”). The obligation of the Borrower under the Notes, including the payment of the outstanding principal and accrued but unpaid interest thereunder is secured as set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and to induce the Lender to make such loans to the Borrower, the Borrower hereby agrees with the Lender as follows:

1. Defined Terms. Unless otherwise defined herein, terms which are defined in the Notes and used herein are so used as so defined, and terms which are defined in the Uniform Commercial Code in effect in the State of Texas on the date hereof are used herein as therein defined, and the following terms shall have the following meanings:

“Code” means the Uniform Commercial Code as from time to time in effect in the State of Texas.

“Collateral” shall have the meaning assigned to it in Section 2 of this Security Agreement.

“Default” and “Event of Default” shall have the meanings assigned to such terms in the Notes and shall include any breach of the Borrower’s obligations under this Agreement.

“Lien” means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, charge, claim or other encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any agreement to give or refrain from giving a lien, mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, charge, claim or other encumbrance of any kind.

“Permitted Liens” means: (i) Liens imposed by law, such as carriers’, warehousemen’s, materialmen’s and mechanics’ liens, or Liens arising out of judgments or awards against Borrower with respect to which Borrower at the time shall currently be prosecuting an appeal or proceedings for review, (ii) Liens for taxes not yet subject to penalties for nonpayment and Liens for taxes the payment of which is being contested in good faith and by appropriate proceedings and for which, to the extent required by generally accepted accounting principles then in effect, proper and adequate book reserves relating thereto are established by Borrower, (iii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (iv) Liens to which the Lender has expressly consented in writing; and (v) Liens in favor of the Lender.

“Obligations” means the unpaid principal amount of, and interest on, the Notes and any additional costs and expenses incurred by the Lender pursuant to the Notes.

“Security Agreement” means this Security Agreement, as amended or restated from time to time.

2. Grant of Security Interest. As collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations, the Borrower hereby grants to the Lender a security interest in and a Lien on all right, title and interest of the Borrower in all of the property set forth on Schedule A hereto (collectively, the “Collateral”) now owned or at any time hereafter acquired by the Borrower or in which the Borrower now has or at any time in the future may acquire any right, title or interest. The Borrower represents and warrants to the Lender that it has good title to all of the Collateral, free and clear of all liens, security interests and adverse interests, in favor of any person or entity other than the Lender.

3. Covenants. The Borrower covenants and agrees with the Lender that, from and after the date of this Security Agreement until the principal and any interest under the Notes are paid in full:

(a)Further Documentation; Pledge of Instruments and Chattel Paper. At any time and from time to time, upon the written request of the Lender, and at the sole expense of the Borrower, the Borrower will promptly and duly execute and deliver such instruments and documents and take such action as the Lender may reasonably request for the purpose of obtaining or preserving the full benefits of this Security Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the security interests and liens created hereby. The Borrower also hereby authorizes the Lender to file any such financing or continuation statement without the signature of the Borrower to the fullest extent permitted by applicable law. A carbon, photographic or other reproduction of this Security Agreement shall be sufficient as a financing statement for filing in any jurisdiction. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument or Chattel Paper, such Instrument or Chattel Paper shall be immediately delivered to the Lender, duly endorsed in a manner satisfactory to the Lender, to be held as Collateral pursuant to this Security Agreement.

(b)Indemnification. The Borrower agrees to pay, and to save the Lender harmless from, any and all liabilities, reasonable costs and expenses (including, without limitation, reasonable legal fees and expenses) (i) with respect to, or resulting from, any delay in paying, any and all excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral; (ii) with respect to, or resulting from, any delay in complying with any law, rule, regulation or order of any court, arbitrator or governmental entity, jurisdiction or authority applicable to any of the Collateral or (iii) in connection with any of the transactions contemplated by this Security Agreement. In any suit, proceeding or action brought by the Lender under any Account for any sum owing thereunder, or to enforce any provisions of any Account, the Borrower will save, indemnify and keep the Lender harmless from and against all expense, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction or liability whatsoever of the account debtor or obligor thereunder, arising out of a breach by the Borrower of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or obligor or its successors from the Borrower. The foregoing indemnification shall not apply to any liabilities, costs or expenses resulting directly from the gross negligence, actual willful misconduct or bad faith of the Lender.

(c)Maintenance of Records. The Borrower will keep and maintain at its own cost and expense satisfactory and complete records of the Collateral. For the Lender’s further security, the Borrower hereby grants to the Lender a security interest in all of the Borrower’s books and records pertaining to the Collateral, and upon the occurrence and during the continuance of an Event of Default, the Borrower shall turn over any such books and records to the Lender or to its representatives during normal business hours at the request of the Lender.

(d)Compliance with Laws, etc. The Borrower will comply in all material respects with all laws, rules, regulations and orders of any court, arbitrator or governmental entity, jurisdiction or authority applicable to the Collateral or any part thereof or to the operation of the Borrower’s business; provided, however, that the Borrower may contest any such law, rule, regulation or order in any reasonable manner which shall not, in the reasonable opinion of the Lender, adversely affect the Lender’s rights or the priority of their liens on the Collateral.

(e)Payment of Obligations. The Borrower will pay promptly when due all taxes, assessments and governmental charges or levies imposed upon the Collateral or in respect of its income or profits therefrom, as well as all claims of any kind (including, without limitation, claims for labor, materials and supplies) against or with respect to the Collateral, except that no such charge need be paid if (i) the validity thereof is being contested in good faith by appropriate proceedings; (ii) such proceedings do not involve any material danger of the sale, forfeiture or loss of any of the Collateral or any interest therein and (iii) such charge is adequately reserved against on the Borrower’s books in accordance with GAAP.

(f)Limitation on Liens on Collateral. The Borrower will not create or permit to be created or suffer to exist any Lien, except Permitted Liens, of any kind on any of the Collateral.

(g)Limitations on Dispositions of Collateral. The Borrower will not sell, transfer, lease or otherwise dispose of any of the Collateral, or attempt, offer or contract to do so, except for sales and non-exclusive licenses of Collateral in the ordinary course of business.

(h)Further Identification of Collateral. The Borrower will furnish to the Lender from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Lender may reasonably request, all in reasonable detail. Furthermore, the Borrower will notify the Lender of any material claim made or asserted against the Collateral by any person or entity and of any change in the composition of the Collateral or other event which could materially adversely affect the value of the Collateral or the Lender's Lien thereon.

4. Lender’s Appointment as Attorney-in-Fact.

(a)Powers. The Borrower hereby irrevocably constitutes and appoints the Lender and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Borrower and in the name of the Borrower or in its own name, from time to time in the Lender’s discretion, for the purpose of carrying out the terms of this Security Agreement, to take any and all appropriate action and to execute any and all instruments which may be necessary or desirable to accomplish the purposes of this Security Agreement, and, without limiting the generality of the foregoing, the Borrower hereby gives the Lender the power and right, on behalf of the Borrower, without notice to or assent by the Borrower, to do the following:

(i) to pay or discharge taxes and liens levied or placed on or threatened against the Collateral, to effect any repairs or any insurance called for the terms of this Security Agreement and to pay all or any part of the premiums therefor and the costs thereof; and

(ii) Upon the occurrence and during the continuance of any Event of Default, (A) to direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Lender, or as the Lender shall direct; (B) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any thereof and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against the Borrower with respect to any Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described in clause (E) above and, in connection therewith, to give such discharges or releases as the Lender may deem appropriate; and (G) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Lender was the absolute owner thereof for all purposes, and to do, at the Lender’s option and the Borrower’s expense, at any time, or from time to time, all acts and things which the Lender deem necessary to protect, preserve or realize upon the Collateral and the Lender’ liens thereon and to effect the intent of this Security Agreement, all as fully and effectively as the Borrower might do.

At the reasonable request of the Lender, the Borrower shall deliver to the Lender, one or more further documents ratifying any and all actions that said attorneys shall lawfully take or do or cause to be taken or done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable.

(b)Other Powers. The Borrower also authorizes the Lender, at any time and from time to time, to execute, in connection with the sales provided for in Section 7 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral.

(c)No Duty on Lender’s Part. The powers conferred on the Lender hereunder are solely to protect the Lender’s interests in the Collateral and shall not impose any duty upon it to exercise any such powers. The Lender shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or Lender shall be responsible to the Borrower for any act or failure to act hereunder, except for its own gross negligence or willful misconduct.

5. Performance by Lender of Borrower’s Obligations. If the Borrower fails to perform or comply with any of its agreements contained herein and the Lender, as provided for by the terms of this Security Agreement, shall itself perform or comply, or otherwise cause performance or compliance, with such agreement, the reasonable expenses of the Lender incurred in connection with such performance or compliance shall be payable by the Borrower to the Lender on demand and shall constitute obligations secured hereby.

6. Remedies. If an Event of Default shall occur and be continuing, the Lender may exercise, in addition to all other rights and remedies granted to it in this Security Agreement, the Notes and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Code. Without limiting the generality of the foregoing, the Lender, without demand of performance or other demand, presentment, protest, or notice of any kind (except any notice required by law referred to below) to or upon the Borrower or any other person or entity (all and each of which are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of the Lender or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity or redemption in the Borrower, which right or equity is hereby waived or released. The Borrower further agrees, at the Lender’s request, to assemble the Collateral and make it available to the Lender at places which the Lender shall reasonably select, whether at the Borrower’s premises or elsewhere. The Lender shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable costs and expenses of every kind incurred therein or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Lender hereunder, including, without limitation, reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Lender may elect, and only after such application and after the payment by the Lender of any other amount required by any provision of law, including, without limitation, Section 9-615 of the Code, need the agent account for the surplus, if any, to the Borrower. To the extent permitted by applicable law, the Borrower waives all claims, damages and demands it may acquire against the Lender arising out of the exercise by the Lender of any of its rights hereunder, provided that such release shall not apply to any claim, damage or demand resulting directly from the gross negligence, actual willful misconduct or bad faith of the Lender. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least seven days before such sale or other disposition. The Borrower shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Obligations and the fees and disbursements of any attorneys employed by the Lender to collect such deficiency. Any sale, whether under any power of sale hereby given or by virtue of judicial proceedings, shall operate to divest all Borrower’s right, title, interest, claim and demand whatsoever, either at law or in equity, in and to the Collateral sold, and shall be a perpetual bar, both at law and in equity, against Borrower, its successors and assigns, and against all persons and entities claiming the Collateral sold or any part thereof under, by or through Borrower, its successors or assigns.

7. Limitation on Duties Regarding Preservation of Collateral. The Lender’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to deal with it in the same manner as the Lender deals with similar property for its own account. Neither the Lender nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Borrower or otherwise.

8. Powers Coupled with an Interest. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest.

9. Severability. Any provision of this Security Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

10. Paragraph Headings. The paragraph headings used in this Security Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.

11. No Waiver; Cumulative Remedies. The Lender shall not by any act (except by a written instrument pursuant to Section 12 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Lender would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law.

12. Waivers and Amendments; Successors and Assigns. None of the terms or provisions of this Security Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Borrower and the Lender, provided that any provision of this Security Agreement may be waived by the Lender in a written letter or agreement executed by the Lender or by e-mail or facsimile transmission from the Lender. This Security Agreement shall be binding upon the successors and assigns of the Borrower and shall inure to the benefit of the Lender and its successors and assigns.

13. Governing Law. This Security Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Texas.

14. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

15. Waiver of Jury Trial. TO THE EXTENT EACH MAY LEGALLY DO SO, EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO THIS AGREEMENT, OR IN ANY WAY CONNECTED WITH, OR RELATED TO, OR INCIDENTAL TO, THE DEALING OF THE PARTIES HERETO WITH RESPECT TO THIS AGREEMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. TO THE EXTENT EACH MAY LEGALLY DO SO, EACH PARTY HERETO HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT EITHER PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF ANY OTHER PARTY HERETO TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the Borrower has caused this Security Agreement to be duly executed and delivered in favor of the Lender as of the date first above written.

BORROWER:
RED MOON, INC.
By:	/s/Bryan Thompson
Name:	Bryan Thompson
Title:	President
LENDER:
ZOOM TECHNOLOGIES, INC.
By:	/s/Frank Manning
Name:	Frank Manning
Title:	President

Schedule A

Redmoon Colo Equipment List
Server Farm Rack
Device	Description	Serial
Catalyst 2924 XL	Server Farm Switch	FAB0430NOR5
Catalyst 2924 XL	Private Switch
Barracuda 400	Email Firewall	L14804A5080405
MBX 3U Server	MySQL	S6023P815A03098 / 150262-1
SuperMicro SuperServer 5010E	Graphs	SE5011099
MBX 3U Server	MSSQL 2005	S6023P8253043291 144216-2
MBX 3U Server	Tropos-EMS	S6023P825302271 1144216-1
Compaq Proliant DL38OR01	Redmoon-Web	D012DKN1L187
1U Server	Colo-Sensor	1MC203502479 AA A09188-301
Sun Netra T1 105	NS1	O24COFBF
Sun Netra Ti 105,	NS2	024C0F7B
VA Linux System 501	WebMD	SXO81 1 9921 37
1U Rackable Server	IDS	29022
Dell PowerEdge 750	Addison	J24WS71
VA Linux System 501	Rad1	SX0921993200
SonicWall Pro 3060	Firewall	USM511031 H
SuperMicro SuperServer 6041	Mail	S60410335
SuperMicro SuperServer 6041	MSSQL 2000 / Rodopi	$60410336

Hosting Rack
Cisco RPS	Server Farm and Hosting RPS	CAH03520228
Philips 15inch monitor		63519850
Master View Plus	Top 8 port KVM	IALEAO74001 G
(SSD Iview	Bottom 8 port KVM	NA0117DE00031
3U Rackable System	DotNet -1	29023
1U Rackable Server	Win-1	29024

Communications Rack
Catalyst 3512 XL	Edge Switch	FAA0446Y17P
Catalyst 2912 XL	ColoCustomer Master Switch	FABO523YOV7
Allot NetEnforcer AC-201		992635
Cisco 3640 Router	Core Router	JABO524816H
SuperMicro SuperSery 5012E-E	Dyband	E51201906
Cisco 7206 VXR Router	Distro	72794892
Cisco 1841 Router	Emdeon Router	FTXO951W2WO
Cisco RPS	Comm Rack RPS	CAH03520544
3Comm Total Control	Redmoon Dial up	1261 B80908G

ColoCustomer Rack #1
Catalyst 2924 XL Switch	CaloCust 1 Switch	FAB0447T323
MBX 1U Server	GinGon Solutions Dedicated Server Hosting	155099-1

ColoCustomer Rack #2
Catalyst 2924 XL Switch	ColoCust 2 Switch	FABO6O2Y2UM
MBX 1U Server	Cshore-Mail Dedicated Server Hosting	228 1 153949-1
MBX 1 U Server	Cshore-Newsvues Dedicated Server Hosting	155049-1

oloCustomer Rack #3
Catalyst 2924 XL Switch	ColoCust 3 Switch	FABO411VOEG
Cisco RPS	ColoCust 2 and 3 RPS	CAH03320275

EX-10.5

VOTING AGREEMENT

VOTING AGREEMENT

THIS VOTING AGREEMENT is made and entered into as of this 22^nd day of January, 2008, by and among Red Moon, Inc., a Delaware corporation (the “Company”), Zoom Technologies, Inc., a Delaware corporation (the “Investor”), the holder of a certain Convertible Promissory Note or Notes (the “Notes”) issued by the Company pursuant to a Convertible Promissory Note Purchase Agreement of even date hereof, by and between the Company and the Investor (the “Purchase Agreement”), and those certain stockholders of the Company listed on Schedule A (together with any subsequent stockholders, or any transferees, who become parties hereto as “Key Holders” pursuant to Sections 5.1 and 5.2 below, the “Key Holders”, and together collectively with the Investor, the “Stockholders”).

RECITALS

.Concurrently with the execution of this Agreement, the Company and the Investor are entering into the Purchase Agreement and in connection with that agreement the parties desire to provide the Investors with the right, among other rights, to designate the election of certain members of the board of directors of the Company (the “Board”) in accordance with the terms of this Agreement.

NOW, THEREFORE, the parties agree as follows:

1.Voting Provisions Regarding Board of Directors.

1.1Size of the Board. Each Stockholder agrees to vote, or cause to be voted, all Shares (as defined below) owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that the size of the Board shall be set and remain at two (2) directors and may be increased only with the written consent of Investor. For purposes of this Agreement, the term “Shares” shall mean and include any securities of the Company the holders of which are entitled to vote for members of the Board, including without limitation, all shares of Common Stock and Preferred Stock by whatever name called, now owned or subsequently acquired by a Stockholder, however acquired, whether through stock splits, stock dividends, reclassifications, recapitalizations, similar events or otherwise.

1.2Board Composition. Each Stockholder agrees to vote, or cause to be voted, all Shares owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that at each annual or special meeting of stockholders at which an election of directors is held or pursuant to any written consent of the stockholders, the following persons shall be elected to the Board:

(a)One person designated by the Investor (the “Zoom Designee”), which individual shall initially be Frank Manning; and

(b)One individual designated by the holders of a majority of the Shares of Common Stock held by the Key Holders, which individual shall initially be Bryan Thompson.

For purposes of this Agreement, an individual, firm, corporation, partnership, association, limited liability company, trust or any other entity (collectively, a “Person”) shall be deemed an “Affiliate” of another Person who, directly or indirectly, controls, is controlled by or is under common control with such Person, including, without limitation, any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.

1.3Failure to Designate a Board Member. In the absence of any designation from the Persons or groups with the right to designate a director as specified above, the director previously designated by them and then serving shall be reelected if still eligible to serve as provided herein.

1.4Removal of Board Members. Each Stockholder also agrees to vote, or cause to be voted, all Shares owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that:

(a)no director elected pursuant to Sections 1.2 or 1.3 of this Agreement may be removed from office unless (i) such removal is directed or approved by the affirmative written consent of the Person, or of the holders of at least a majority of the shares of stock, as applicable, entitled under Section 1.2 to designate that director or (ii) the Person(s) originally entitled to designate or approve such director pursuant to Section 1.2 is no longer so entitled to designate or approve such director;

(b)any vacancies created by the resignation, removal or death of a director elected pursuant to Sections 1.2 or 1.3 shall be filled pursuant to the provisions of this Section 1; and

(c)upon the request of any party entitled to designate a director as provided in Section 1.2(a) or 1.2(b) to remove such director, such director shall be removed.

All Stockholders agree to execute any written consents required to perform the obligations of this Agreement, and the Company agrees at the request of any party entitled to designate directors to call a special meeting of stockholders for the purpose of electing directors. So long as the stockholders of the Company are entitled to cumulative voting, if less than the entire Board is to be removed, no director may be removed without cause if the votes cast against his or her removal would be sufficient to elect such director if then cumulatively voted at an election of the entire Board.

1.5No Liability for Election of Recommended Directors. No Stockholder, nor any Affiliate of any Stockholder, shall have any liability as a result of designating a person for election as a director for any act or omission by such designated person in his or her capacity as a director of the Company, nor shall any Stockholder have any liability as a result of voting for any such designee in accordance with the provisions of this Agreement.

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1.6Board Committees. The Zoom Designee shall be a member of every committee of the Board (other than an independent committee formed exclusively for the reason of addressing a conflict of interest situation in which the Zoom Designee is an interested party).

2.Vote to Authorized Preferred Stock. Each Stockholder agrees to vote or cause to be voted all Shares owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to authorize the new series of Preferred Stock of the Company, to be known as the “Series A Convertible Preferred Stock”, receivable upon conversion of the Notes upon the conversion of the Notes or any of them, such that there will be sufficient shares of Series A Convertible Preferred Stock available for conversion of the Notes to be converted.

3.Remedies.

3.1Covenants of the Company. The Company agrees to use its best efforts, within the requirements of applicable law, to ensure that the rights granted under this Agreement are effective and that the parties enjoy the benefits of this Agreement. Such actions include, without limitation, the use of the Company’s best efforts to cause the nomination and election of the directors as provided in this Agreement.

3.2Irrevocable Proxy. Each Key Holder hereby constitutes and appoints the President and Treasurer of the Company, and a designee of the Investor, and each of them, with full power of substitution, as the proxies of the party with respect to the matters set forth herein, including without limitation, election of persons as members of the Board in accordance with Section 1 hereto and votes to authorize the Series A Convertible Preferred Stock pursuant to Section 2 hereof, and hereby authorizes each of them to represent and to vote, if and only if the party (i) fails to vote or (ii) attempts to vote (whether by proxy, in person or by written consent), in a manner which is inconsistent with the terms of this Agreement, all of such party’s Shares in favor of the election of persons as members of the Board determined pursuant to and in accordance with the terms and provisions of this Agreement or the authorization of the Series A Convertible Preferred Stock pursuant to and in accordance with the terms and provisions of Section 2 of this Agreement. The proxy granted pursuant to the immediately preceding sentence is given in consideration of the agreements and covenants of the Company and the parties in connection with the transactions contemplated by this Agreement and, as such, is coupled with an interest and shall be irrevocable unless and until this Agreement terminates or expires pursuant to Section 5 hereof. Each party hereto hereby revokes any and all previous proxies with respect to the Shares and shall not hereafter, unless and until this Agreement terminates or expires pursuant to Section 5 hereof, purport to grant any other proxy or power of attorney with respect to any of the Shares, deposit any of the Shares into a voting trust or enter into any agreement (other than this Agreement), arrangement or understanding with any person, directly or indirectly, to vote, grant any proxy or give instructions with respect to the voting of any of the Shares, in each case, with respect to any of the matters set forth herein.

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3.3Specific Enforcement. Each party acknowledges and agrees that each party hereto will be irreparably damaged in the event any of the provisions of this Agreement are not performed by the parties in accordance with their specific terms or are otherwise breached. Accordingly, it is agreed that each of the Company and the Stockholders shall be entitled to an injunction to prevent breaches of this Agreement, and to specific enforcement of this Agreement and its terms and provisions in any action instituted in any court of the United States or any state having subject matter jurisdiction.

3.4Remedies Cumulative. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

4Term. This Agreement shall be effective as of the date hereof and shall continue in effect until and shall terminate upon the earliest to occur of (a) the consummation of the Company’s first underwritten public offering of its Common Stock (other than a registration statement relating either to the sale of securities to employees of the Company pursuant to its stock option, stock purchase or similar plan or an SEC Rule 145 transaction); (b) the consummation of a Sale of the Company; (c) at and upon such time as none of the Notes shall remain issued and outstanding; and (d) termination of this Agreement in accordance with Section 5.8 below.

5Miscellaneous.

5.1Additional Parties.In the event that after the date of this Agreement, the Company enters into an agreement with any Person to issue shares of capital stock to such Person following which such Person shall hold Shares constituting one percent (1%) or more of the Company’s then outstanding capital stock (treating for this purpose all shares of Common Stock issuable upon exercise of or conversion of outstanding options, warrants or convertible securities, as if exercised and/or converted or exchanged), then, the Company shall cause such Person, as a condition precedent to entering into such agreement, to become a party to this Agreement by executing an Adoption Agreement in the form attached hereto as Exhibit A, agreeing to be bound by and subject to the terms of this Agreement as a Stockholder and thereafter such person shall be deemed a Stockholder for all purposes under this Agreement.

5.2Transfers. Each transferee or assignee of any Shares subject to this Agreement shall continue to be subject to the terms hereof, and, as a condition precedent to the Company’s recognizing such transfer, each transferee or assignee shall agree in writing to be subject to each of the terms of this Agreement by executing and delivering an Adoption Agreement substantially in the form attached hereto as Exhibit A. Upon the execution and delivery of an Adoption Agreement by any transferee, such transferee shall be deemed to be a party hereto as if such transferee were the transferor and such transferee’s signature appeared on the signature pages of this Agreement and shall be deemed to be an Investor and Stockholder, or Key Holder and Stockholder, as applicable. The Company shall not permit the transfer of the Shares subject to this Agreement on its books or issue a new certificate representing any such Shares unless and until such transferee shall have complied with the terms of this Section 5.2. Each certificate representing the Shares subject to this Agreement if issued on or after the date of this Agreement shall be endorsed by the Company with the legend set forth in Section 5.12.

5.3Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

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5.4Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.

5.5Counterparts; Facsimile. This Agreement may be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

5.6Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

5.7Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (a) personal delivery to the party to be notified, (b) when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address as set forth below their signature on the signature pages hereof or on Schedule A hereto, as applicable, or to such email address, facsimile number or address as subsequently modified by written notice given in accordance with this Section 5.7. If notice is given to the Investor, a copy shall also be given to Morse, Barnes-Brown & Pendleton, P.C., 1601 Trapelo Road, Waltham, Massachusetts 02451, Attention: Jeffrey P. Steele.

5.8Consent Required to Amend, Terminate or Waive. This Agreement may be amended or terminated and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively)only by a written instrument executed by (a) the Company; (b) the Key Holders holding a majority of the Shares then held by the Key Holders; and (c) the Investor. Notwithstanding the foregoing:

(i)this Agreement may not be amended or terminated and the observance of any term of this Agreement may not be waived with respect to any Key Holder without the written consent of such Key Holder unless such amendment, termination or waiver applies to all Key Holders in the same fashion;

(ii)the consent of the Key Holders shall not be required for any amendment or waiver if such amendment or waiver either (A) is not directly applicable to the rights of the Key Holders hereunder or (B) does not adversely affect the rights of the Key Holders in a manner that is different than the effect on the rights of the other parties hereto ;

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(iii)Schedule A hereto may be amended by the Company from time to time in accordance with Sections 5.1 or 5.2 hereto to add information regarding additional parties hereto without the consent of the other parties hereto; and

(iv)any provision hereof may be waived by the waiving party on such party’s own behalf, without the consent of any other party.

The Company shall give prompt written notice of any amendment, termination or waiver hereunder to any party that did not consent in writing thereto. Any amendment, termination or waiver effected in accordance with this Section 5.8 shall be binding on each party and all of such party’s successors and permitted assigns, whether or not any such party, successor or assignee entered into or approved such amendment, termination or waiver.

5.9Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default previously or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

5.10Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

5.11Entire Agreement. This Agreement (including the Exhibits hereto) constitutes the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.

5.12Legend on Share Certificates. Each certificate representing any Shares issued after the date hereof shall be endorsed by the Company with a legend reading substantially as follows:

“THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A VOTING AGREEMENT, AS MAY BE AMENDED FROM TIME TO TIME, (A COPY OF WHICH MAY BE OBTAINED UPON WRITTEN REQUEST FROM THE COMPANY), AND BY ACCEPTING ANY INTEREST IN SUCH SHARES THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF THAT VOTING AGREEMENT, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER AND OWNERSHIP SET FORTH THEREIN.”

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The Company, by its execution of this Agreement, agrees that it will cause the certificates evidencing the Shares issued after the date hereof to bear the legend required by this Section 5.12 of this Agreement, and it shall supply, free of charge, a copy of this Agreement to any holder of a certificate evidencing Shares upon written request from such holder to the Company at its principal office. The parties to this Agreement do hereby agree that the failure to cause the certificates evidencing the Shares to bear the legend required by this Section 5.12 herein and/or the failure of the Company to supply, free of charge, a copy of this Agreement as provided hereunder shall not affect the validity or enforcement of this Agreement.

5.13Stock Splits, Stock Dividends, etc. In the event of any issuance of Shares of the Company’s voting securities hereafter to any of the Stockholders (including, without limitation, in connection with any stock split, stock dividend, recapitalization, reorganization, or the like), such Shares shall become subject to this Agreement and shall be endorsed with the legend set forth in Section 5.12.

5.14Manner of Voting. The voting of Shares pursuant to this Agreement may be effected in person, by proxy, by written consent or in any other manner permitted by applicable law.

5.15Further Assurances. At any time or from time to time after the date hereof, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder.

5.16Dispute Resolution. The parties hereby irrevocably and unconditionally submit to the jurisdiction of the federal and state courts located within the geographical boundaries of the United States District Court for the District of Massachusetts for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the federal and state courts located within the geographical boundaries of the United States District Court for the District of Massachusetts, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court. The prevailing party shall be entitled to reasonable attorney’s fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled. Each of the parties to this Agreement consents to personal jurisdiction for any equitable action sought in the U.S. District Court for the District of Massachusetts or any court of the Commonwealth of Massachusetts having subject matter jurisdiction.

5.17Costs of Enforcement. If any party to this Agreement seeks to enforce its rights under this Agreement by legal proceedings, the non-prevailing party shall pay all costs and expenses incurred by the prevailing party, including, without limitation, all reasonable attorneys’ fees.

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5.18Aggregation of Stock. All Shares held or acquired by a Stockholder and/or its Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement, and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.

5.19Spousal Consent. If any individual Stockholder is married on the date of this Agreement, such Stockholder’s spouse shall execute and deliver to the Company a consent of spouse in the form of Exhibit B hereto (“Consent of Spouse”), effective on the date hereof. Notwithstanding the execution and delivery thereof, such consent shall not be deemed to confer or convey to the spouse any rights in such Stockholder’s Shares that do not otherwise exist by operation of law or the agreement of the parties. If any individual Stockholder should marry or remarry subsequent to the date of this Agreement, such Stockholder shall within thirty (30) days thereafter obtain his/her new spouse’s acknowledgement of and consent to the existence and binding effect of all restrictions contained in this Agreement by causing such spouse to execute and deliver a Consent of Spouse acknowledging the restrictions and obligations contained in this Agreement and agreeing and consenting to the same.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties have executed this Voting Agreement as of the date first written above.

RED MOON, INC.
By:	/s/Bryan Thompson
Name:	Bryan Thompson
Title:	President
INVESTOR:
ZOOM TECHNOLOGIES, INC.
By:	/s/Frank Manning
Name:	Frank Manning
Title:	President
Address:	207 South Street
	Boston, Massachusetts 02111
KEY HOLDERS:

Signature:	/s/Bryan Thompson
Name: Bryan Thompson
Signature:	/s/John McMillan
Name: John McMillan

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SCHEDULE A

KEY HOLDERS

Name:	Number of Shares Held
Bryan Thompson	33,278,000 shares of Common Stock
John McMillan	15,393,677 shares of Preferred Stock

EXHIBIT A

ADOPTION AGREEMENT

This Adoption Agreement (“Adoption Agreement”) is executed on ___________________, 20__, by the undersigned (the “Holder”) pursuant to the terms of that certain Voting Agreement dated as of January 22, 2008 (the “Agreement”), by and among the Company and certain of its Stockholders, as such Agreement may be amended or amended and restated hereafter. Capitalized terms used but not defined in this Adoption Agreement shall have the respective meanings ascribed to such terms in the Agreement. By the execution of this Adoption Agreement, the Holder agrees as follows.

1.1Acknowledgement. Holder acknowledges that Holder is acquiring certain shares of the capital stock of the Company (the “Stock”), for one of the following reasons (Check the correct box):

¨ as a transferee of Shares from a party in such party’s capacity as a “Key Holder” bound by the Agreement, and after such transfer, Holder shall be considered a “Key Holder” and a “Stockholder” for all purposes of the Agreement.

¨ in accordance with Section 5.1 of the Agreement, as a new party who is not a new Investor, in which case Holder will be a “Stockholder” for all purposes of the Agreement.

1.2Agreement. Holder hereby (a) agrees that the Stock, and any other shares of capital stock or securities required by the Agreement to be bound thereby, shall be bound by and subject to the terms of the Agreement and (b) adopts the Agreement with the same force and effect as if Holder were originally a party thereto.

1.3Notice. Any notice required or permitted by the Agreement shall be given to Holder at the address or facsimile number listed below Holder’s signature hereto.

HOLDER: ACCEPTED AND AGREED:

By:	RED MOON, INC.
Name and Title of Signatory
Address:	By:
	Title:

Facsimile Number:  

EXHIBIT B

CONSENT OF SPOUSE

I, [____________________], spouse of [______________], acknowledge that I have read the Voting Agreement, dated as of January 22, 2008, to which this Consent is attached as Exhibit B (the “Agreement”), and that I know the contents of the Agreement. I am aware that the Agreement contains provisions regarding the voting and transfer of shares of capital stock of the Company that my spouse may own, including any interest I might have therein.

I hereby agree that my interest, if any, in any shares of capital stock of the Company subject to the Agreement shall be irrevocably bound by the Agreement and further understand and agree that any community property interest I may have in such shares of capital stock of the Company shall be similarly bound by the Agreement.

I am aware that the legal, financial and related matters contained in the Agreement are complex and that I am free to seek independent professional guidance or counsel with respect to this Consent. I have either sought such guidance or counsel or determined after reviewing the Agreement carefully that I will waive such right.

Dated:
	[Name of Key Holder’s Spouse]

EX-99.1

Zoom Technologies Invests In RedMoon, a Wireless Mesh Network Provider

Secured $300,000 loan is convertible to equity, and has option for 100% purchase of RedMoon

Boston, MA. January 28, 2008 - Zoom Technologies, Inc. (NASDAQ: ZOOM), a leading producer of modems, wireless products, and other communication products, today announced that it has made an initial investment of $300,000 in RedMoon Inc., a leading provider of wireless mesh networks for a wide range of applications including automatic meter reading, security surveillance, emergency response, other public safety applications, and high-speed Internet service.

Founded in 2000 and headquartered in Plano, Texas, RedMoon has wireless networks installed in a number of Texas cities and planned installations in other parts of Texas and the US, as well as in Latin America. RedMoon holds a contract with the State of Texas, Department of Information Resources to provide Wireless Mesh Network Solutions. The contract allows state, county, and city entities throughout Texas and certain other states to purchase telecommunications products from RedMoon, eliminating the competitive bid process. RedMoon’s revenues in 2007 were in excess of $1.3 million, and RedMoon anticipates dramatic growth in 2008 and beyond.

This investment is in the form of a convertible note that is secured by certain assets of RedMoon and is convertible into equity of RedMoon. Zoom has also entered into an Option Agreement with RedMoon which provides Zoom with the option to purchase 100% of RedMoon under the terms and conditions there under. In addition, Zoom has agreed to purchase an additional $50,000 per month of convertible notes beginning on May 1, 2008 and continuing until the earlier of Zoom’s election to exercise its option to buy RedMoon or Zoom’s election to terminate such Option Agreement, up to a maximum total investment of $500,000. Finally, Zoom is entitled to designate and have elected a representative to the Board of Directors of RedMoon. This representative will initially be Frank Manning. This transaction and all of these agreements are more fully described in Zoom’s 8-K filing today with the SEC.

“We are impressed by RedMoon’s President and CEO, Bryan Thompson, and the strong team he’s built,” said Frank Manning, Zoom’s President and CEO. “RedMoon has a proven track record of installing high-performance wireless networks, and has strong links to Texas communities, powerful business partners, and suppliers. We are particularly excited about RedMoon’s prospects in the wireless meter reading and public safety areas. We believe that Zoom’s investment and experience will help accelerate RedMoon’s growth, potentially making RedMoon an attractive acquisition for Zoom. If successful, the RedMoon investment will result in Zoom becoming a significant provider of wireless mesh networks. This investment also helps Zoom’s development of new wireless hardware products by giving Zoom better insight into the needs of wireless network providers.”

“We continue to see growth in the wireless broadband industry, especially in public safety, surveillance and automatic meter reading,” said Bryan Thompson. “We are excited about our relationship with Zoom Technologies, and we look forward to the significant business opportunities in front of us.”

“Zoom has a track record of successful investments,” said Frank Manning, “including the asset purchases of Hayes and Boca Research, our $0.44 million investment in Intermute in 1999 which yielded a profit of $5.6 million, and the purchase and sale of our headquarters building which brought a profit of $5.5 million. We hope that our RedMoon investment and our June 2007 Unity investment, both with 100% purchase options, continue this strong investment track record and help Zoom expand into new growth areas.”

For additional information please contact Robert Crist, Zoom’s CFO at (617) 423-1072 or email investor@zoom.com or visit Zoom’s website at www.zoom.com.

About Zoom Technologies

Zoom Technologies, Inc. designs, produces, markets, and supports communication products under the Zoom, Hayes^®, and Global Village^® brands. Zoom is headquartered in Boston, and its European sales and support center is in the UK. Zoom markets its products in over forty countries, and provides multi-lingual support from its offices in Boston and the UK. For more information about Zoom and its products, please see www.zoom.com.

About RedMoon

RedMoon designs, engineers, constructs and maintains wireless networks for security surveillance, automatic meter reading, public safety, high-speed Internet access, and a host of other applications, making it possible for cities and other government entities to save time, money and lives. For more information about RedMoon, please visit www.redmoonbroadband.com.

Forward Looking Statements

This release contains forward-looking information relating to Zoom’s plans, expectations, and intentions, including statements relating to Zoom’s hopes for RedMoon, Unity and potential future investments. Actual results may be materially different from expectations as a result of known and unknown risks, including: the need for additional funding which Zoom may be unable to obtain; declining demand for certain of Zoom’s products; delays, unanticipated costs, interruptions or other uncertainties associated with Zoom’s production and shipping capabilities in Mexico; Zoom’s reliance on an outsourcing partner to conduct production operations in Mexico; Zoom’s dependence on key employees; the uncertainty of future demand from any specific customer or for all of Zoom’s customers as a group; Zoom’s reliance on a relatively limited number of customers for sale of its products; Zoom’s reliance on international sales; the uncertainty of the regulatory environment for Zoom’s products; uncertainty of new product development and introduction, including budget overruns, project delays, and the risk that newly introduced products may contain undetected errors or defects or otherwise not perform as anticipated; Zoom’s dependence on one or a limited number of suppliers for certain key components; rapid technological change; competition; factors affecting Zoom’s liquidity; and other risks set forth in Zoom’s filings with the Securities and Exchange Commission. Zoom cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Zoom expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in the Zoom’s expectations or any change in events, conditions or circumstance on which any such statement is based.