Zongshen PEM Power Systems Inc.

Zongshen PEM Power Systems Inc.

July 04, 2012 09:00 ET

ZPP Amends and Restates the Motorcycle Business Promissory Note

VANCOUVER, BRITISH COLUMBIA--(Marketwire - July 4, 2012) - Zongshen PEM Power Systems Inc. (TSX:ZPP) ("ZPP" or the "Company") announces today that it has approved the amended and restated promissory note ("Note") made to Hong Kong VAS International Development Limited ("HKVAS") an investment entity controlled indirectly by the Company's largest shareholder, Zongshen Industrial Group. The RMB 275.5 million ($43.6 million) loan is unsecured and is not convertible into shares or other securities of the Company. The Note restates the original promissory note dated as of July 2, 2010 and reduces the interest rate from 10.00% per annum to a per annum rate equal to the one-year lending rate quoted and automatically adjusted from time to time by the Bank of China, which is presently at 6.31% effective April 1, 2012. The Company's overall interest expense is expected to be reduced by $1.6 million on an annualized basis as calculated based on the current one-year lending rate quoted by the Bank of China. The Note also consolidates a previously disclosed amendment of the original promissory note, whereby HKVAS provided the Company with an option to defer the semi-annual interest payments. The loan is not due provided the Company either services the interest payments or elects to exercise its deferral option. The Company will continue to accrue the interest expense. Unpaid interest is excluded from the principal upon which interest is calculated.

The original promissory note was issued by the Company as partial consideration for the acquisition of the Motorcycle Business that closed on July 2, 2010. The Motorcycle Business transaction was subject to formal valuation and received disinterested shareholder approval in accordance with Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"). HKVAS is considered a "related party" of the Company under the definition of such term in MI 61-101. Under MI 61-101, the Company is not required to obtain a formal valuation or minority shareholder approval for the Note. Also, the Company is not required to call a shareholders meeting or send an information circular to shareholders. A material change report has been filed in connection with the Note.

About Zongshen PEM Power Systems Inc.

Zongshen PEM Power Systems Inc. is a public company trading under the symbol ZPP on the Toronto Stock Exchange. The Company manufactures low-cost, high quality, environmentally friendly gas motorbikes, electric motorcycles, electric bicycles and other e-vehicles in China for the Chinese domestic and international markets. Zongshen PEM Power System's largest shareholder is Zongshen Industrial Group, one of China's largest manufacturers and distributors of engines and power equipment.

Forward-looking Information

This Press Release contains within the meaning of Canadian securities legislation (hereinafter referred to as "forward-looking statements"). All statements, other than statements of historical fact, included herein including, without limitation statements relating to the estimated future performance of the Company and market performance, are forward-looking statements. All forward‐looking statements in this Press Release are based on management's reasonable beliefs, intentions, and expectations with respect to future events and are subject to certain risks, uncertainties, and assumptions as of the date of this release. This forward-looking information includes, among other things, statements with respect to the Company's expectation of the one-year lending rate quoted and automatically adjusted from time to time by the Bank of China (PRC) (the "1-year rate") and the fluctuation of the 1-year rate. The following factors, among others, could cause actual results or developments to differ materially from the results or developments expressed or implied by forward-looking statements: the fluctuation of the 1-year rate. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward looking statements. Some of these risks, uncertainties and factors include those disclosed herein and under the heading "Risk Factors" in the Company's Annual Information Form dated March 30, 2012 and those disclosed under the heading "Risk Factors" in the Company's Management's Discussion and Analysis - Year Ended December 30, 2011" dated March 30, 2012, both filed with the applicable Canadian securities regulatory authorities and are available under the Company's profile on SEDAR at www.sedar.com. The Company's forward-looking statements reflect the beliefs, opinions and projections on the date the statements are made. The Company assumes no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change, except as required by law.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the release.

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