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Delaware
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0-18672
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51-0448969
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(State
or other
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(Commission
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(IRS
Employer
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jurisdiction
of
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File
Number)
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Identification
No.)
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incorporation)
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Written
communications pursuant to Rule 425 under the Securities
Act
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Soliciting
material pursuant to Rule 14a-12 under the Exchange
Act
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange
Act
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange
Act
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Distributions:
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Non-liquidating
distributions are pari-passu with no permitted distributions on any
other
membership interests in Unity (the “Other Interests”) unless a pro rata
distribution (on an as converted to Common Shares basis) is made
on the
Series A Preferred Shares other than distributions for payment of
income
tax (computed for each member of Unity based upon that member’s ownership
percentage of Unity, the percentage of the year that member was a
member
of Unity, and at a rate equal to the highest marginal tax rate of
all of
the members).
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Liquidation
Preference:
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In
the event of any liquidation or winding up of Unity, the holders
of the
Series A Preferred Shares shall be entitled to receive, in preference
to
the holders of the Other Interests, an amount equal to the original
purchase price of the Series A Preferred Shares (to the extent not
previously returned). After the payment of the liquidation preference
to
the holders of Series A Preferred Shares, the remaining assets shall
be
distributed to the holders of the Other Interests. A merger or
consolidation of Unity in which the then-holders of the membership
interests of Unity do not retain a majority of the voting power in
the
surviving or resulting entity, the exclusive licensing of substantially
all of Unity’s intellectual property or the sale of all or substantially
all of Unity’s assets, will be treated as a
liquidation.
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Conversion:
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The
holders of the Series A Preferred Shares shall have the right to
convert
the Series A Preferred Shares, at any time, into Common Shares of
Unity.
The initial conversion rate will be 1:1, subject to adjustment as
provided
below.
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Automatic
Conversion:
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All
Series A Preferred Shares automatically convert into Common Shares
of the
Company upon the earliest of occur of (i) the election of a majority
of
the outstanding Series A Preferred Shares (voting together as a single
class on an as-converted basis); (ii) the consummation of an underwritten
public offering with aggregate proceeds in excess of $25,000,000;
or (iii)
30 days following the date on which Unity’s audited financial statements
for the Fiscal Year 2009 are delivered to the holders of the Series
A
Preferred Shares.
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In
addition, in the event Unity’s 2008 revenues are $9 million or more
(calculated pursuant to the revenue calculation rules set forth under
“The
Option” below), and the Company’s option to purchase the remainder of
Unity expires unexercised, the veto rights of the Series A Preferred
Shares will terminate effective upon such event.
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Adjustments:
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The
conversion price of the Series A Preferred Shares will be subject
to
proportional adjustment for limited liability company unit splits,
unit
distributions, recapitalizations and the like.
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Voting
Rights:
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The
Series A Preferred Shares will vote on an as-converted to Common
Shares
basis, with the holders of the Other Interests on all matters on
which
holders of membership interests in Unity vote. In addition, approval
of a
majority of the outstanding Series A Preferred Shares will be required
on
(i) the creation of any senior or pari passu security, (ii) payment
of
dividends or distributions on any class or series of membership interest
unless a pari passu dividend or distribution is paid to the holders
of the
Series A Preferred Shares, (iii) any redemptions or repurchases of
membership interests in Unity except for purchases at cost upon
termination of service or the exercise by Unity of contractual rights
of
first refusal over such membership interests, (iv) any liquidation
event,
(v) an increase or decrease in the number of authorized number of
Series A
Preferred Shares or Other Interests, (vi) any adverse change to the
rights, preferences, and privileges of the Series A Preferred Interests,
(vii) an increase or decrease in the size of the Board of Managers
of
Unity, (viii) any amendment of the Operating Agreement of Unity,
(ix) an
increase in new indebtedness for borrowed money in excess of $500,000,
(x)
make any payment under a certain outstanding note payable by Unity
other
than pursuant to its payment schedule or upon exercise of the Company’s
option to acquire the remaining interests in Unity and (xi) a decision
to
conduct the initial public offering of Unity or register any class
or
series of Unity’s membership interests or stock under the Securities
Exchange Act of 1934 (except, in the latter case, as may be required
by
law). The Company’s right to approve (via a majority vote) the items
listed in (i) through (xi) above will terminate upon the earlier
to occur
of a liquidation event, an initial public offering of Unity's shares,
or
if Unity's revenue for fiscal year 2008 exceeds $9,000,000 and the
Company
does not exercise the Option.
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Board
Seat:
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The
Company has the right to designate one member to sit on Unity’s Board of
Managers. Frank Manning, the Company’s President and CEO, will immediately
become a member of Unity’s 5-member Board of
Managers.
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| Exhibit No. |
Exhibit Description
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| 99.1 |
Press
release issued by Zoom Technologies, Inc., dated July 31,
2007
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ZOOM
TECHNOLOGIES, INC.
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| By: | /s/Robert A. Crist | |
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Robert A. Crist |
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| Chief Financial Officer | ||