Zongshen PEM Power Systems Inc. completes $35.19 million "bought deal" private placement financing and signs memorandum of understanding with Zongshen Industrial Group


    TSX Venture Exchange: ZPP

    RICHMOND, BC, Nov. 14 /CNW/ - Zongshen PEM Power Systems Inc. (the
"Company") is pleased to announce that it has completed its previously
announced "bought deal" private placement financing. The Underwriters (as
defined below) exercised the over-allotment option in full, and the Company
issued 11,500,000 common shares (the "Common Shares") at a price of
CDN$3.06 per Common Share (the "Offering") to raise aggregate gross proceeds
of CDN$35,190,000.
    GMP Securities L.P. acted as lead underwriter in connection with the
Offering, with Canaccord Capital Corporation, Laurentian Bank Securities Inc.,
Orion Securities Inc. and Research Capital Corporation comprising the
remainder of the syndicate (collectively the "Underwriters"). The Underwriters
received warrants to purchase 690,000 Common Shares at an exercise price of
CDN$3.06 (the "Underwriters' Warrants"). The Underwriters' Warrants are
exercisable until November 14, 2008.
    The Common Shares were offered on a private placement basis to Canadian
residents who are accredited investors under applicable securities laws, and
in the United States on a private placement basis pursuant to an exemption
from the registration requirements of the United States Securities Act of
1933, as amended.
    Both the Common Shares and the Underwriters' Warrants issued pursuant to
the Offering are subject to a hold period in accordance with applicable
Canadian securities laws which expires on March 15, 2008.
    The Company also announces that it has entered into a Memorandum of
Understanding with Zongshen Industrial Group ("Zongshen Group") pursuant to
which Zongshen Group agrees to conduct all alternative power source business
through the Company, including all products and services related to electric
vehicles, fuel cells, solar power and wind power, and to not compete with the
Company in such business. Zongshen Group also agrees to introduce the Company
to its network of distributors and dealers and provide certain services to the
Company including design, engineering and production on a costs basis.
Intellectual property relating to the alternative power source business will
be owned by the Company, subject to the Company reimbursing Zongshen Group for
all expenses incurred in developing such intellectual property. The Company
will also have the right to use the Zongshen brand in perpetuity with no
license fees. In return, the Company will grant Zongshen Group the right to
participate in all future equity financings, such that Zongshen Group shall be
able to maintain a minimum 25% interest in the Company on a fully-diluted
    The terms of the Memorandum of Understanding will be formalized in an
agreement or series of agreements to be entered into between the Company and
Zongshen Industrial Group.
    "This funding provides us with the capital we need to launch our Blue Sea
e-bikes and position ZPP as a leader for premium e-bikes in China and selected
international markets," noted Mr. Yao Li, President of Zongshen PEM Power
Systems Inc., "In addition, the funding provides a reserve for potential
acquisitions in the e-bike and solar power sectors. The MOU sets out the
framework for our relationship with Zongshen Industrial Group, whereby ZPP can
leverage its brand, distribution, design, production expertise and research
and development resources to become a leader in alternative power technology
and products."

    Zongshen PEM Power Systems Inc.

    Zongshen PEM Power Systems Inc. is a public company trading under the
symbol ZPP on the TSX Venture Exchange. The Company is engaged in the
commercialization of alternate power systems including batteries, fuel cells
and solar power, for a variety of consumer and industrial applications. The
Company manufactures high quality, environmentally friendly electric
motorcycles, electric bicycles and other e-vehicles in China for the domestic
and international markets. Zongshen PEM Power System's largest shareholder is
Zongshen Industrial Group, one of China's largest manufacturers and
distributors of motorcycles, engines, and power equipment.

    About Zongshen Industrial Group

    Zongshen Industrial Group was founded in 1992, and consists of 30 wholly
or majority owned subsidiaries, including Chongqing Zongshen Power Machinery
Co., which is listed on the Shenzhen Stock Exchange. The Company employs in
excess of 13,000 employees with assets exceeding RMB 4 billion Yuan. Zongshen
Industrial Group's engine products include motorcycles, compact cars,
speedboats, and general purpose engines. Zongshen Industrial Group currently
has an annual production capacity of 2,000,000 motorcycles, 3,000,000
motorcycle engines, 5,000,000 general purpose engines, and 100,000 car
engines. Zongshen Industrial Group is an established, leading motorcycle brand
in China, with joint ventures with some of the world's leading motorcycle

    This press release shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of the securities
in any state in which such offer, solicitation or sale would be unlawful. The
securities have not been registered under the United States Securities Act of
1933, as amended, and may not be offered or sold in the United States absent
registration or an applicable exemption from registration requirements.

For further information:

For further information: Ali Mahdavi, Vice President, Corporate Finance
& Investor Relations, Zongshen PEM Power Systems Inc., (416) 962-3300,
1-877-775-8734, amahdavi@genoa.ca

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