Employment, Termination and Change of Control Agreements

 

On December 12, 2006 the Compensation Committee of the Board of Directors of Zoom approved certain compensatory arrangements for each of the named executive officers. The purpose of these arrangements is to encourage the named executive officers to continue as employees and/or assist in the event a change-in-control of Zoom. Zoom has entered into agreements with each of the named executive officers formalizing the compensation arrangement described below.

 

The arrangements approved by the Board of Directors are as follows:

 

·

If the named executive officer is terminated by Zoom for any reason other than for cause or within six months after a change-in-control or liquidation of Zoom, then (i) all outstanding stock options issued after December 7, 2006 held by the named executive officer will become immediately vested and will be exercisable for a period of up to 30 days after termination and (ii) Zoom will pay severance to the named executive officer in an amount equal to the greater of three months’ base salary or a number of weeks of base salary equal to the number of full years employed by Zoom divided by two.

 

·

Each named executive officer will receive severance pay equal to six months’ base salary if (i) the named executive officer’s employment is terminated without cause within six months after a change-in-control, (ii) the named executive officer’s job responsibilities, reporting status or compensation are materially diminished and the named executive officer leaves the employment of the acquiring company within six months after the change-in-control, or (iii) Zoom is liquidated. In addition, in the event of a change-in-control or liquidation of Zoom, outstanding stock options granted on or after December 7, 2006 will become immediately vested.

 

Potential Termination and Change-in Control Payments

As of December 31, 2006 in the event a named executive officer is terminated by Zoom for any reason other than cause or a change-in-control or liquidation of Zoom the named executive officer would receive the following cash payments: Mr. Frank Manning $36,047; Mr. Kramer $36,047; Mr. Crist $33,984; Ms. Randall $35,786 and Mr. Terry Manning $28,500. These amounts represent the greater of three months salary or the number of weeks of base salary equal to the number of years employed by Zoom divided by two. In the event of termination as a result of a change-in-control or liquidation, the named executive officers would receive the following cash payments: Mr. Frank Manning $59,664; Mr. Kramer $59,664; Mr. Crist $67,698; Ms. Randall $59,232 and Mr. Terry Manning $57,000. These amounts represent six months’ base salary. In the event of either termination of employment, all options held by the named executive officers that were issued after December 7, 2006 would become immediately vested. The value of the acceleration of vesting would equal the number of shares multiplied by the excess of the then current stock price over the exercise price of the options. For the following example we have computed the value of the acceleration of vesting using the excess of the closing price of the stock on the last business day of 2006, which was $1.12, over the exercise price of the options. The value of acceleration of vesting for each named executive officer is: Mr. Frank Manning $9,000; Mr. Kramer $7,200; Mr. Crist $3,600; Ms. Randall $4,500 and Mr. Terry Manning $3,600.

  

Director Compensation

The following table sets forth information concerning the compensation of our Directors who are not named executive officers for the fiscal year ended December 31, 2006.

Name		Fees Earned or Paid in Cash			Option Awards (1)(2)(3)			All Other Compensation			Total
Bernard Furman		$	2,500		$	11,575			ំ		$	14,075
J. Ronald Woods		$	2,000		$	11,575			ំ		$	13,575
Joseph J. Donovan		$	2,500		$	11,575			ំ		$	14,075

(1)

The amounts in the Option Awards column reflect the dollar amount recognized as compensation cost for financial statement reporting purposes for the fiscal year ended December 31, 2006, in accordance with SFAS 123(R) for all stock options granted in 2006. The calculation in the table above excludes all assumptions with respect to forfeitures. There can be no assurance that the amounts set forth in the Option Awards column will ever be realized. A forfeiture rate was used in the expense calculation in the financial statements.

 

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(2)	As of December 31, 2006, each non-employee director holds the following aggregate number of shares under outstanding stock options:

 

Name		Number of Shares Underlying Outstanding Stock Options
Bernard Furman			48,000
J. Ronald Woods			48,000
Joseph J. Donovan			36,000

(3) The number of shares underlying stock options granted to each non-employee director in 2006 and the grant date fair market value of such stock options is:

Name		Grant Date			Number of Shares underlying Stock Options Grants in 2006			Grant Date Fair Value of Stock Option Grants in 2006
Bernard Furman			1/10/2006 7/10/2006			12,000 12,000		$ $	6,845 4,730
J. Ronald Woods			1/10/2006 7/10/2006			12,000 12,000		$ $	6,845 4,730
Joseph J. Donovan			1/10/2006 7/10/2006			12,000 12,000		$ $	6,845 4,730

Each non-employee director of Zoom receives a fee of $500 per quarter plus a fee of $500 for each meeting at which the director is personally present. Travel and lodging expenses are also reimbursed.

Each non-employee director of Zoom is also granted stock options under Zoom's 1991 Directors Stock Option Plan, as amended (the "Directors Plan"). The Directors Plan provides in the aggregate that 450,000 shares of Common Stock (subject to adjustment for capital changes) may be issued upon the exercise of options granted under the Directors Plan. Each non-employee director automatically receives an option to purchase 12,000 shares of Common Stock on January 10 and July 10 of each year. The exercise price for the options granted under the Directors Plan is the fair market value of the Common Stock on the date the option is granted. During 2006 Messrs. Furman, Woods, and Donovan each received options to purchase 24,000 shares of Common Stock at an average exercise price of $1.275 per share.

 

The current members of the Compensation Committee are Messrs. Donovan, Furman and Woods. No member of the Compensation Committee was at any time during 2006, or formerly, an officer or employee of Zoom or any subsidiary of Zoom, nor has any member of the Compensation Committee had any relationship with Zoom requiring disclosure under Item 404 of Regulation S-K under the Exchange Act.

 

No executive officer of Zoom has served as a director or member of the Compensation Committee (or other committee serving an equivalent function) of any other entity, one of whose executive officers served as a director of or member of our Compensation Committee.

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Pursuant to Section 16(a) of the Securities Exchange Act of 1934, Zoom directors and officers, as well as any person holding more than ten percent (10%) of Zoom's Common Stock, are required to report initial statements of ownership of Zoom's securities and any subsequent changes in such ownership to the Securities and Exchange Commission. Specific filing deadlines of these reports have been established and Zoom is required to disclose in this proxy statement any failure to file by these dates during the year ending December 31, 2006. Based on a review of such reports, and on written representations from reporting persons, Zoom believes that all Section 16(a) filing requirements were complied with during 2006.

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PROPOSAL NO. 2

PROPOSAL TO AMEND THE ZOOM TECHNOLOGIES, INC.

1990 STOCK OPTION PLAN

 

The Board of Directors believes that the future success of Zoom depends, in large part, upon the ability of the Company to attract, retain and motive key employees and that the granting of stock options serves as an important factor in retaining key employees. In addition, the Board of Directors believes it is important to have a pool of options available for issuance in the event the Company considers potential acquisitions. On April 30, 2007, Zoom’s Board of Directors approved, subject to stockholder approval, an amendment to the Zoom Technologies, Inc. 1990 Stock Option Plan, as amended (the “1990 Stock Option Plan”), to (i) increase the number of shares reserved for issuance under the 1990 Stock Option Plan from 3,300,000 to 4,800,000 shares and (ii) extend the expiration date of the Plan from March 31, 2008 to March 31, 2018. As of April 10, 2007, there were 531,646 shares remaining available for issuance under the 1990 Stock Option Plan.

If the amendment is approved by the stockholders, the 1990 Stock Option Plan would be amended as follows:

·	the second paragraph of Section 5 of the 1990 Stock Option Plan would be deleted in its entirety and replaced with the following:

“The aggregate number of Shares for which Options may be granted shall not exceed 4,800,000 Shares, but in no event shall the aggregate number of Shares under the Plan that may be subject, from time to time, to outstanding options granted to any one Employee exceed 5% of the Shares of the Company then outstanding.”

·	the first paragraph of Section 17 of the 1990 Stock Option Plan would be deleted in its entirety and replaced with the following:

“The Plan shall expire on March 31, 2018 unless terminated earlier by resolution of the Shareholders of the Company.”

Purpose of Plan

The purpose of the 1990 Stock Option Plan is to advance the interests of Zoom by encouraging equity participation in Zoom by directors (excluding non-employee directors), officers and employees of Zoom through the acquisition of shares of Common Stock upon the exercise of options granted under the 1990 Stock Option Plan.

General Provisions

Any individuals in the full-time or part-time employment of Zoom or an affiliate of Zoom including Board members who are also employees, consultants and any other individuals the Board deems to be an employee for the purposes of the 1990 Stock Option Plan, is eligible to receive options under the 1990 Stock Option Plan. As of April 10, 2007, there were approximately 64 persons eligible to participate in the 1990 Stock Option Plan.

The 1990 Stock Option Plan is currently administered by the Compensation Committee, which is a committee consisting of three independent directors designated by the Board of Directors. The members of the Compensation Committee are not eligible to receive options under the 1990 Stock Option Plan. The Compensation Committee determines the persons to whom stock options are granted, the number of shares covered by the options, the term of any option and the time during which any option is exercisable. The 1990 Stock Option Plan provides that the number of shares of Common Stock of Zoom that may be subject, from time to time, to outstanding options granted to any one employee shall not exceed five percent (5%) of the outstanding shares of Zoom.

The options granted under the 1990 Stock Option Plan may not be granted at an exercise price less than the fair market value of the Common Stock on the date of grant. In order to assist an optionee in the acquisition of shares of Common Stock pursuant to the exercise of an option granted under the 1990 Stock Option Plan, the Compensation Committee may authorize payment of the exercise price in cash, by delivery of shares of Common Stock having a fair market value equal to the purchase price of the shares, or a combination of cash and shares of Common Stock.

 

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Subject to the earlier termination of an option in the event of termination of employment, death or disability, as described below, the Compensation Committee may, in its sole discretion, at the time of the grant of an option, specify a particular time period during which the optionee must exercise its option and the number of options which may be exercised during such designated time period; provided, however, that no option may expire more than ten (10) years from the date of grant.

Options granted under the 1990 Stock Option Plan may not be transferred.

In the event an option holder ceases to be an eligible employee of Zoom for any reason other than death or disability, the holder’s options will terminate one month following the date of termination of employment. If an option holder ceases to be an eligible employee of Zoom as a result of death or disability, the holder’s options will terminate upon the earlier to occur of (i) the passage of sixty (60) days after the grant of probate of the holder’s will or letters of administration in the case of the death of the holder or (ii) one year after the date of the holder’s death or disability.

Currently the 1990 Stock Option Plan is scheduled to expire on March 31, 2008. The Board has approved an amendment to the 1990 Stock Option Plan which, if approved by the stockholders, would extend the term of the 1990 Stock Option Plan until March 31, 2018.

In the event that any option granted under the 1990 Stock Option Plan shall expire, terminate or be cancelled for any reason without having been exercised in full, or shall cease for any reason to be exercisable in whole or in part, the unpurchased shares subject to such option shall be available for subsequent option grants.

As of April 10, 2007, options to purchase an aggregate of 670,000 shares of Common Stock (net of terminations) were outstanding under the 1990 Stock Option Plan, including those set forth below:

Name		Number of Shares Subject to Options Granted			Average Exercise Price
Frank B. Manning			200,000		$	1.74
Peter R. Kramer			160,000		$	1.74
Robert A. Crist			80,000		$	1.74
Deena M. Randall			100,000		$	1.74
Terry Manning			80,000		$	1.74
All current executive officers as a group (6 persons)			670,000		$	1.74
All current employees who are not executive officers, as a group			50,000		$	1.74

No options have been or will be granted under the 1990 Stock Option Plan to any director or associate thereof who is not an executive officer of Zoom. No options have been or will be granted under the 1990 Stock Option Plan to any associate of an executive officer.

 

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On April 10, 2007 the closing price of Zoom’s Common Stock on the Nasdaq Stock Capital Market was $1.79 per share.

The Compensation Committee may amend, alter, suspend or discontinue the 1990 Stock Option Plan; provided, however, that the Compensation Committee may not without stockholder approval make any alteration that would materially increase the benefits to participants under the l990 Stock Option Plan, including any amendment which (i) increases the number of shares of Common Stock for which options may be granted; (ii) reduces the option price of any option; (iii) alters the eligibility provisions of the 1990 Stock Option Plan, or (iv) changes the expiration date of the 1990 Stock Option Plan.

 

New Plan Benefits

 

Zoom is unable to determine the dollar value and number of stock awards that may be received by or allocated to (i) any of our named executive officers, (ii) our current executive officers, as a group and (iii) our employees who are not executive officers, as a group, as a result of the approval of the amendment to the 1990 Stock Option Plan because all stock awards are granted by the Compensation Committee on a discretionary basis. No stock awards will be make under the 1990 Stock Option Plan to any current directors who are not executive officers.

 

Federal Tax Consequences of the 1990 Stock Option Plan

The following general discussion of the federal income tax consequences of the issuance and exercise of options granted under the 1990 Stock Option Plan is based upon the provisions of the Internal Revenue Code as in effect on the date hereof, current, promulgated and proposed regulations thereunder, existing administrative rulings and pronouncements of the Internal Revenue Service, and judicial decisions, all of which are subject to change (perhaps with retroactive effect). This discussion is not intended to be a complete discussion of all of the federal income tax consequences of the 1990 Stock Option Plan or of all of the requirements that must be met in order to qualify for the tax treatment described herein. In addition, because tax consequences may vary, and certain exceptions to the general rules discussed herein may be applicable, depending upon the personal circumstances of individual holders of securities, each option holder should consider his personal situation and consult with his own tax advisor with respect to the specific tax consequences applicable to him. No information is provided as to state tax laws. The 1990 Stock Option Plan is not qualified under Section 401 of the Code, nor is it subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended.

The recipient of a stock option under the 1990 Stock Option Plan will not recognize any taxable income upon the grant of an option under the 1990 Stock Option Plan. Generally, an option holder recognizes ordinary taxable income at the time an option is exercised in an amount equal to the excess of the fair market value of the shares of Common Stock on the date of exercise over the exercise price. However, participants in the 1990 Stock Option Plan, may be subject to Section 16(b) of the Securities Exchange Act of 1934 (“Section 16(b)”) upon the sale of their shares of Common Stock. Different tax rules apply with respect to option holders who are subject to Section 16(b) when they acquire Common Stock in a transaction deemed to be a nonexempt purchase under that statute and this may affect their tax liability.

An option holder who pays the exercise price, in whole or in part, by delivering shares of Common Stock already owned by him will recognize no gain or loss for federal income tax purposes on the shares surrendered, but otherwise will be taxed according to the rules described above. To the extent the shares acquired upon exercise are equal in number to the shares surrendered, the basis of the shares received will be equal to the basis of the shares surrendered. The basis of shares received in excess of the shares surrendered upon exercise will be equal to the fair market value of the shares on the date of exercise, and the holding period for the shares received will commence on that date.

Zoom will generally be entitled to a compensation deduction for federal income tax purposes in an amount equal to the taxable income recognized by the option holder, provided it reports the income on a W-2 or Form 1099, whichever is applicable, that is timely provided to the option holder and filed with the IRS.

 

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When an option holder subsequently disposes of the shares of Common Stock received upon exercise of an option, he will recognize capital gain or loss equal to the difference between the amount realized and the fair market value on the date on which the option holder recognized ordinary taxable income as a result of the exercise of the option. Any such capital gain or loss would be long term if the holding period for the shares is more than one year. The holding period for the shares generally would begin on the date the shares were acquired and would not include the period of time during which the option was held.

 

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Vote Required to Approve the Amendment to the 1990 Stock Option Plan

The affirmative vote of the holders of a majority of shares of Common Stock present, in person or by proxy, and entitled to vote at the meeting, is required to approve the proposal to amend the 1990 Stock Option Plan. Proxies will be voted in favor of the action unless otherwise instructed by the stockholders.

The Board of Directors recommends a vote FOR the approval of Proposal No. 2, the amendment to the Zoom Technologies, Inc. 1990 Stock Option Plan.

 

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PROPOSAL NO. 3

PROPOSAL TO AMEND THE ZOOM TECHNOLOGIES, INC.

1998 EMPLOYEE EQUITY INCENTIVE PLAN

 

The Board of Directors believes that the future success of Zoom depends, in large part, upon the ability of the Company to attract, retain and motive key employees and that the granting of stock options serves as an important factor in retaining key employees. In addition, the Board of Directors believes it is important to have a pool of options available for issuance in the event the Company considers potential acquisitions. On April 30, 2007, Zoom’s Board of Directors approved, subject to stockholder approval, an amendment to the Zoom Technologies, Inc. 1998 Employee Equity Incentive Plan, as amended (the “1998 Plan”), to increase the number of shares reserved for issuance under the 1998 Plan from 1,200,000 to 2,700,000 shares. As of April 10, 2007, there were 141,550 shares remaining available for issuance under the 1998 Plan.

If the amendment is approved by the stockholders, the 1998 Plan would be amended as follows:

·	the first sentence of Section 5(a) of the 1998 Plan would be deleted in its entirety and replaced with the following:

“Subject to adjustment under subsection (b), Awards may be made under the Plan of Options to acquire not in excess of 2,700,000 shares of Common Stock.”

Purpose of Plan

The purpose of the 1998 Plan is to attract and retain employees and provide an incentive for them to assist Zoom to achieve long-range performance goals, and to enable them to participate in the long-term growth of the Company.

 

General Provisions

All employees of Zoom, other than officers and directors, are eligible to receive options under the 1998 Plan. As of April 10, 2007, there were approximately 58 persons eligible to participate in the 1998 Plan.

 

The Board of Directors has the authority to adopt, alter and repeal the 1998 Plan, as it shall from time to time consider advisable, and to interpret the provisions of the 1998 Plan. The decisions of the Board of Directors shall be final and binding. To the extent permitted by applicable law, the Board of Directors may delegate to the Compensation Committee the power to grant options under the plan.

 

The 1998 Plan is currently administered by the Compensation Committee, which is a committee consisting of three independent directors designated by the Board of Directors. The members of the Compensation Committee are not eligible to receive options under the 1998 Plan. The Compensation Committee determines the persons to whom stock options are granted, the number of shares covered by the options, the term of any option and the time during which any option is exercisable.

 

The Compensation Committee establishes the exercise price for all options granted under the 1998 Plan. In order to assist an optionee in the acquisition of shares of Common Stock pursuant to the exercise of an option granted under the 1998 Plan, the Compensation Committee may authorize payment of the exercise price in cash, by delivery of shares of Common Stock having a fair market value equal to the purchase price of the shares, by delivery of a promissory note, by the reduction of the shares of Common Stock the holder of the option would be entitled to receive upon exercise of the option, or by any combination of the above.

 

In the event of a change in control of Zoom, the Board of Directors may, at the time an option is granted or at any time thereafter: (i) provide for the acceleration of any time period relating to the exercise of the option, (ii) provide for the purchase of the option upon the holder's request for an amount of cash or other property that could have been received upon the exercise of the option had the option been currently exercisable, (iii) adjust the terms of the option in a manner determined by the Board of Directors to reflect the change in control, (iv) cause the option to be assumed, or new rights substituted therefor, by another entity, or (v) make such other provision as the Board of Directors may consider equitable and in the best interests of Zoom.

 

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As of April 10, 2007, options to purchase an aggregate of 542,250 shares of Common Stock (net of terminations) were outstanding under the 1998 Plan. The average exercise price of the 542,250 shares subject to options granted under the 1998 Plan is $1.864.

 

No director or executive officer hold any options granted under the 1998 Plan. All options granted under the 1998 Plan are held by employees who are not executive officers. No options have been or will be granted under the 1998 Plan to any director or executive officer of Zoom or any associate of a director or executive officer of Zoom.

On April 10, 2007 the closing price of Zoom’s Common Stock on the Nasdaq Capital Market was $1.79 per share.

 

New Plan Benefits

 

Zoom is unable to determine the dollar value and number of stock awards that may be received by or allocated to our employees who are not executive officers as a result of the approval of the amendment to the 1998 Plan because all stock awards are granted by the Compensation Committee on a discretionary basis. No stock awards will be made under the 1998 Plan to (i) any of our named executive officers, (ii) our current executive officers, as a group or (iii) any current directors who are not executive officers.

Federal Tax Consequences of the 1998 Employee Equity Incentive Plan

The following general discussion of the federal income tax consequences of the issuance and exercise of options granted under the 1998 Plan is based upon the provisions of the Internal Revenue Code as in effect on the date hereof, current, promulgated and proposed regulations thereunder, existing administrative rulings and pronouncements of the Internal Revenue Service, and judicial decisions, all of which are subject to change (perhaps with retroactive effect). This discussion is not intended to be a complete discussion of all of the federal income tax consequences of the 1998 Plan or of all of the requirements that must be met in order to qualify for the tax treatment described herein. In addition, because tax consequences may vary, and certain exceptions to the general rules discussed herein may be applicable, depending upon the personal circumstances of individual holders of securities, each option holder should consider his personal situation and consult with his own tax advisor with respect to the specific tax consequences applicable to him. No information is provided as to state tax laws. The 1998 Plan is not qualified under Section 401 of the Code, nor is it subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended.

The recipient of a stock option under the 1998 Plan will not recognize any taxable income upon the grant of an option under the 1998 Plan. Generally, an option holder recognizes ordinary taxable income at the time an option is exercised in an amount equal to the excess of the fair market value of the shares of Common Stock on the date of exercise over the exercise price.

An option holder who pays the exercise price, in whole or in part, by delivering shares of Common Stock already owned by him will recognize no gain or loss for federal income tax purposes on the shares surrendered, but otherwise will be taxed according to the rules described above. To the extent the shares acquired upon exercise are equal in number to the shares surrendered, the basis of the shares received will be equal to the basis of the shares surrendered. The basis of shares received in excess of the shares surrendered upon exercise will be equal to the fair market value of the shares on the date of exercise, and the holding period for the shares received will commence on that date.

Zoom will generally be entitled to a compensation deduction for federal income tax purposes in an amount equal to the taxable income recognized by the option holder, provided it reports the income on a W-2 or Form 1099, whichever is applicable, that is timely provided to the option holder and filed with the IRS.

 

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When an option holder subsequently disposes of the shares of Common Stock received upon exercise of an option, he will recognize capital gain or loss equal to the difference between the amount realized and the fair market value on the date on which the option holder recognized ordinary taxable income as a result of the exercise of the option. Any such capital gain or loss would be long term if the holding period for the shares is more than one year. The holding period for the shares generally would begin on the date the shares were acquired and would not include the period of time during which the option was held.

In certain cases, awards granted under the 1998 Plan may be treated as deferred compensation subject to the rules under Code Section 409A. These rules (i) impose restrictions on the timing of elections to defer the receipt of income, (ii) prohibit, with certain exceptions, the acceleration of payment of deferred compensation, and (ii) restrict the timing of the distribution of deferred compensation. Should any award under the 1998 Plan which is treated as deferred compensation for purposes of Code Section 409A fail to comply with these requirements, the option holder would be required to recognize as ordinary income the full value of the non-compliant award (and the full value of all similar awards that are treated as deferred compensation, whether or not they comply with the requirements of Code Section 409A) in the year such award vest. In addition to the inclusion in income, the option holder would also be subject to additional tax penalties and interest on the amount included in income under Section 409A of the Code.

Vote Required to Approve the Amendment to the 1998 Employee Equity Incentive Plan

The affirmative vote of the holders of a majority of shares of Common Stock present, in person or by proxy, and entitled to vote at the meeting, is required to approve the proposal to amend the 1998 Plan. Proxies will be voted in favor of the action unless otherwise instructed by the stockholders.

The Board of Directors recommends a vote FOR the approval of Proposal No. 3, the amendment to the Zoom Technologies, Inc. 1998 Employee Equity Incentive Plan.

 

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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has appointed UHY LLP (“UHY”) as Zoom’s principal accountants and independent registered public accounting firm, to audit the consolidated financial statements of Zoom for the year ending December 31, 2007. A representative of UHY LLP will be present at the meeting and will have the opportunity to make a statement if such representative desires to do so and will be available to respond to appropriate questions.

Previous independent registered public accounting firm

On April 6, 2006 KPMG LLP (“KPMG”) was terminated as Zoom’s principal accountants and independent registered public accounting firm. This action was approved by Zoom’s Audit Committee. KPMG’s reports on Zoom’s consolidated financial statements for the fiscal years ended December 31, 2005 and 2004 did not contain any adverse opinion or a disclaimer of opinion, nor were the reports qualified or modified as to uncertainty, audit scope or accounting principle.

In connection with the audits of Zoom’s fiscal years ended December 31, 2005 and 2004 and through April 6, 2006, there were no disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of KPMG, would have caused it to make reference thereto in its reports on Zoom’s financial statements for such years. In connection with the audits of Zoom’s fiscal years ended December 31, 2005 and 2004 and through April 6, 2006, there were no reportable events as described in Item 304(a)(1)(v) of Regulation S-K.

Zoom requested that KPMG furnish it with a letter addressed to the Securities and Exchange Commission stating whether or not it agrees with the above statements. A copy of such letter, dated April 12, 2006, was filed as Exhibit 16.1 to Zoom’s Current Report on Form 8-K filed with the SEC on April 12, 2006.

New independent registered public accounting firm

On April 6, 2006 upon the approval of Zoom’s Audit Committee, UHY LLP was engaged as its principal accountants and the independent registered public accounting firm. The appointment became effective on April 21, 2006. During Zoom’s fiscal years ended December 31, 2005 and 2004 and through April 6, 2006, Zoom did not consult with UHY LLP regarding any of the matters or events set forth in Item 304(a)(2)(i) and Item 304(a)(2)(ii) of Regulation S-K. The principal reason for the new engagement of UHY LLP was the substantially lower fees expected to be charged by UHY LLP in connection with Zoom’s 2006 audit as compared to the fees quoted by KPMG.

Through March 31, 2007 UHY LLP had a continuing relationship with UHY Advisors, Inc. (Advisors). Under this relationship UHY LLP leased auditing staff who were full time, permanent employees of Advisors. UHY LLP partners provide non-audit services through Advisors. UHY LLP has only a few full time employees. Therefore, few, if any, of the audit services performed were provided by permanent full time employees of UHY LLP. UHY LLP manages and supervises the audit services and the audit staff and is exclusively responsible for the opinion rendered in connection with its audit.

Principal Accountant Fees and Services

The following table summarizes the fees for audit services and for other services billed to us of Zoom’s principal accountants and independent registered pubic accounting firm: KPMG for the fiscal year ended December 31, 2005 and UHY and KPMG for its consent for the fiscal year ended December 31, 2006:

FEE CATEGORY		2005			2006
Audit fees (1)		$	134,991		$	148,131
Audit-related fees (2)			2,500			-
Tax fees (3)			22,040		$	10,400
All other fees (4)			-			-
Total fees		$	159,531		$	158,531

 

(1)

Audit Fees. Consists of fees billed for professional services rendered for the audit of Zoom’s consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided in connection with statutory filings and engagements. UHY’s fees were $138,131 and KPMG’s fees were $10,000.

 

2

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(2)	Audit-Related Fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of Zoom’s consolidated financial statements and are not reported under "Audit Fees".

(3)	Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services were comprised primarily of services for federal, state and international tax compliance.

(4)	All Other Fees. Consists of fees for products and services other than the services reported above.

Audit Committee Policy on Pre-Approval of Services of Independent Registered Public Accounting Firm

The Audit Committee's policy is to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year. The Audit Committee may also pre-approve particular services on a case-by-case basis. During our fiscal year ended December 31, 2006, no services were provided to us by UHY other than in accordance with the pre-approval procedures described herein.

 

CODE OF ETHICS

Zoom has adopted a Code of Ethics for Senior Financial Officers that applies to Zoom's principal executive officer and its principal financial officer, principal accounting officer and controller, and other persons performing similar functions. Zoom's Code of Ethics for Senior Financial Officers is publicly available on its website at www.zoom.com. If Zoom makes any amendments to this Code of Ethics or grants any waiver, including any implicit waiver, from a provision of this Code of Ethics to Zoom's principal executive officer, principal financial officer, principal accounting officer, controller or other persons performing similar functions, Zoom will disclose the nature of such amendment or waiver, the name of the person to whom the waiver was granted and the date of waiver in a current report on Form 8-K.

 

DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS AND RECOMMENDATIONS FOR DIRECTOR

Stockholder proposals for inclusion in Zoom's proxy materials for Zoom's 2008 Annual Meeting of Stockholders must be received by Zoom no later than January 14, 2008. These proposals must also meet the other requirements of the rules of the Securities and Exchange Commission relating to stockholder proposals.

Stockholders who wish to make a proposal at Zoom's 2008 Annual Meeting - other than one that will be included in Zoom's proxy materials - should notify Zoom no later than April 4, 2008. If a stockholder who wishes to present such a proposal fails to notify Zoom by this date, the proxies that management solicits for the meeting will have discretionary authority to vote on the stockholder's proposal if it is properly brought before the meeting. If a stockholder makes a timely notification, the proxies may still exercise discretionary voting authority under circumstances consistent with the proxy rules of the Securities and Exchange Commission.

Stockholders may make recommendations to the Nominating Committee of candidates for its consideration as nominees for director at Zoom's 2008 Annual Meeting of Stockholders by submitting the name, qualifications, experience and background of such person, together with a statement signed by the nominee in which he or she consents to act as such, to the Nominating Committee, c/o Secretary, Zoom Technologies, Inc., 207 South Street, Boston, Massachusetts 02111. Notice of such recommendations should be submitted in writing as early as possible, but in any event not later than 120 days prior to the anniversary date of the immediately preceding annual meeting or special meeting in lieu thereof and must contain specified information and conform to certain requirements set forth in Zoom's Bylaws. In addition, any persons recommended should at a minimum meet the criteria and qualifications referred to in the Nominating Committee's charter, a copy of which is publicly available on Zoom's website at www.zoom.com. The letter of recommendation from one or more stockholders should state whether or not the person(s) making the recommendation have beneficially owned 5% or more of Zoom's Common Stock for at least one year. The Nominating Committee may refuse to acknowledge the nomination of any person not made in compliance with the procedures set forth herein, in the Nominating Committee's Charter or in Zoom's Bylaws.

 

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STOCKHOLDER COMMUNICATIONS

Any stockholder wishing to communicate with any of Zoom's directors regarding Zoom may write to the director c/o Investor Relations, Zoom Technologies, Inc., 207 South Street, Boston, Massachusetts 02111. Investor Relations will forward these communications directly to the director(s).

 

OTHER MATTERS

The Board of Directors knows of no other business to be presented for consideration at the Annual Meeting other than described in this proxy statement. However, if any other business should come before the Annual Meeting, it is the intention of the persons named in the proxy to vote, or otherwise act, in accordance with their best judgment on such matters.

 

INCORPORATION BY REFERENCE

To the extent that this proxy statement has been or will be specifically incorporated by reference into any filing by Zoom under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, the sections of the Proxy Statement entitled "Compensation Committee Report on Executive Compensation," and "Audit Committee Report" shall not be deemed to be so incorporated, unless specifically otherwise provided in any such filing.

ANNUAL REPORT ON FORM 10-K

Copies of Zoom's Annual Report on Form 10-K for the year ending December 31, 2006, as filed with the Securities and Exchange Commission, are provided herewith and available to stockholders without charge upon written request addressed to Zoom Technologies, Inc., 207 South Street, Boston, Massachusetts 02111, Attention: Investor Relations.

IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS ARE URGED TO FILL IN, SIGN, AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE ENCLOSED ENVELOPE.

	By order of the Board of Directors
	Frank B. Manning, President
Boston, Massachusetts May 18, 2007

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ZOOM TECHNOLOGIES, INC.

 

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS

 

JUNE 22, 2007

 

The undersigned stockholder of ZOOM TECHNOLOGIES, INC., a Delaware corporation (the “Company”), acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement, dated May 18, 2007, and hereby appoints Frank B. Manning and Robert A. Crist, and each of them acting singly, with full power of substitution, attorneys and proxies to represent the undersigned at the Annual Meeting of Stockholders of the Company to be held at the offices of the Company, 207 South Street, Boston, Massachusetts 02111, on Friday, June 22, 2007, at 10:00 A.M. Eastern Time, and at any adjournment or adjournments thereof, with all power which the undersigned would possess if personally present, and to vote all shares of stock which the undersigned may be entitled to vote at said meeting upon the matters set forth in the Notice of Meeting in accordance with the following instructions and with discretionary authority upon such other matters as may come before the meeting. All previous proxies are hereby revoked.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IT WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED AND IF NO DIRECTION IS INDICATED, IT WILL BE VOTED FOR THE ELECTION OF THE NOMINEES AS DIRECTORS AND FOR THE PROPOSALS TO AMEND THE 1990 STOCK OPTION PLAN AND THE 1998 EMPLOYEE EQUITY INCENTIVE PLAN.

 

DETACH PROXY CARD HERE

v                    v

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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES AS DIRECTORS, AND FOR THE TWO STOCK OPTION AMENDMENTS PROPOSTED BELOW.

 

1. ELECTION OF DIRECTORS:

o

FOR ALL NOMINEES except as marked to the contrary below

o

WITHHOLD AUTHORITY  to vote for all nominees

 

Nominees: JOSEPH J. DONOVAN, BERNARD FURMAN, PETER R. KRAMER, FRANK B. MANNING,  AND J. RONALD WOODS

Vote withheld from the following Nominee(s): ____________________________________________________________

Instructions: To withhold authority to vote for any individual nominee write that nominee's name in the space provided above.

2. TO AMEND THE COMPANY'S 1990 STOCK OPTION PLAN AS DESCRIBED IN THE PROXY STATEMENT.

o FOR

o AGAINST

o ABSTAIN

 

3. TO AMEND THE COMPANY'S 1998 EMPLOYEE EQUITY INCENTIVE PLAN AS DESCRIBED IN THE PROXY STATEMENT.

o FOR

o AGAINST

o ABSTAIN

	If the address shown is not correct, please check this box & show the correct address at left.	o
	Signatures should be the same as the name printed hereon. Executors, administrators, trustees, guardians, attorneys, and officers of corporations should add their titles when signing.   Signature: ___________________________________Date:_____________   Signature: ___________________________________Date:_____________

 

Please Detach Here

You Must Detach This Portion of the Proxy Card

Before Returning it in the Enclosed Envelope

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