KongZhong Corporation Announces Acquisition of Shanghai Dacheng Network

BEIJING, Dec. 15 /PRNewswire-Asia/ — KongZhong Corporation (Nasdaq: KONG),
a leading mobile Internet company in China, today announced that it has
entered into a definitive agreement to acquire Shanghai Dacheng Network
Technology Co., Ltd. (Dacheng), a leading developer of three-dimensional (3D)
massively multi-player online role-playing games (MMORPGs) based in Beijing
and Shanghai. Based on Dacheng’s 2010 net profit after tax (NPAT), as
calculated under US GAAP, the Company would pay up to US$80.0 million, in a
mix of cash and the Company’s ordinary shares, to Dacheng’s shareholders. The
transaction has been approved by the Company’s Board of Directors. The Company
expects that the transaction will close in the first quarter of 2010.

“With the strong performance of Dacheng’s newest 3D online game, Loong
(http://www.loong3d.com ), Dacheng is becoming one of China’s leading 3D
online game developers,” said Jay Chang, the Chief Financial Officer of the
Company. “By combining our leading mobile game business with Dacheng’s
self-developed 3D game engine and game development skills, the
post-acquisition Company is poised to become a leading multi-platform digital
entertainment and gaming company with focus on two of the fastest growing
segments in China’s game market, 3D MMORPGs and mobile games. KongZhong’s
previous experience in operating some of China’s largest Internet sites will
also help to support the rapid development of our combined gaming business in
the coming years.”

“Dacheng was founded with the goal of becoming China’s leading 3D online
game developer for both the Chinese and overseas online game markets,” said

Zhen Yang, the chief executive officer and founder of Dacheng. “We believe
that the success of Loong, one of the most anticipated games in China for 2009,
reflects the strength of our proprietary 3D game engine, Dazzler3D, and of our
development capabilities. By joining forces with KongZhong, we believe we will
be able to more rapidly build up a robust portfolio of 3D MMORPGs and to
further extend KongZhong’s leadership in the Chinese mobile game sector.”

The following are some of the key terms and features of the transaction:

First Payment

Upon the closing of the transaction, US$9.58 million in cash and 42.76
million of the Company’s ordinary shares (equivalent to 1.07 million ADS), for
a combined value of US$24.12 million, will be paid to the shareholders of
Dacheng.

Second Contingent Payment

If the NPAT of Dacheng for the first six months of 2010 exceeds US$5.0
million, then a payment of US$5.45 million in cash and US$10.42 million worth
of the Company’s ordinary shares will be paid to the shareholders of Dacheng.
The number of ordinary shares issued will be determined based upon the average
closing price of the Company’s ADSs over a 30-day period prior to this second
contingent payment.

Final Contingent Payment and Total Consideration

The total consideration for the acquisition of Dacheng will be based on
Dacheng’s NPAT for the entire 2010. If Dacheng’s NPAT for 2010 equals to or
exceeds US$6.5 million, a multiple of 8 will be applied to Dacheng’s NPAT for
2010 to arrive at the total consideration. If Dacheng’s NPAT for 2010 is less
than US$6.5 million, then a multiple of 5 will be applied to Dacheng’s NPAT
for 2010 to arrive at the total consideration. The final payment to Dachang’s
shareholders will be equal to the total consideration as calculated in the
foregoing manner less the first and second payments. For shareholders of
Dacheng (except as otherwise disclosed below), 50% of the final contingent
payment will be made in cash and the other 50% in the Company’s ordinary
shares. As with the second contingent payment, the number of ordinary shares
issued in this final contingent payment will be determined based upon the
average closing price of the Company’s ADSs over a 30-day period prior to this
final contingent payment.

Cap on Consideration and Share/Cash Mix

In no event will the total consideration paid to Dacheng’s shareholders
exceed US$80.0 million. Of the total consideration, 62.42% will be made in the
Company’s ordinary shares and 37.58% will be made in cash.

Related Party Transaction

The Company’s Chief Executive Officer and Chairman of the Board of
Directors, Leilei Wang, holds a minority equity interest of approximately
24.8% in Dacheng. Mr. Wang made his investment in Dacheng prior to his
employment by the Company, and he has never held any management positions at
Dacheng. The Audit Committee of the Company’s Board of Directors, whose
membership consists exclusively of independent directors, has approved this
related party transaction. Mr. Wang also recused himself from any
consideration of, and voting on, the transaction by the Company’s Board of
Directors. The Audit Committee and the Board of Directors of the Company
approved the transaction based on its commercial merits and considered the
terms of the transaction to be at arm’s length.

Payments to Mr. Wang

Unlike other shareholders of Dacheng, Mr. Wang will not receive any cash
under this transaction and will receive only the Company’s ordinary shares.

Share Lock-Up

The Company’s ordinary shares issued to Mr. Wang and Mr. Yang in the first
payment, second contingent payment and final contingent payment will be
subject to restrictions on transfers and disposition for 18 months, 12 months
and 6 months, respectively, after the issuance of such shares. The Company’s
ordinary shares issued to the other shareholders of Dacheng in the first
payment, second contingent payment and final contingent payment will be
subject to restrictions on transfers and disposition for 6 months after the
issuance of such shares.

Reorganization

Prior to the closing of the transaction, Dacheng will engage in a
reorganization whereby an offshore holding company will be established, and
Dacheng will enter into certain contractual arrangements with such holding
company and/or its subsidiaries. The Company will purchase 100% of the
outstanding equity interest of such holding company upon the completion of the
reorganization.

Conference Call Details

The Company plans to host a conference call at 7:00am (EST) on
December 17, 2009.

Speakers:

Leilei Wang, Chairman of the Board of Directors and Chief Executive
Officer of KongZhong Corporation

Jay Chang, Chief Financial Officer of KongZhong Corporation

    Zhen Yang, Chief Executive Officer and Founder of Shanghai Dacheng Network
Technology Co., Ltd.

    Hong Kong Time:    December 17, 2009, Thursday, 8:00 pm
    Eastern Time:      December 17, 2009, Thursday, 7:00 am
    Pacific Time:      December 17, 2009, Thursday, 4:00 am

    CONFERENCE CALL ACCESS NUMBERS:

    China Toll Free Number:
        South China toll free / China Telecom - 10 800 130 0399
        South China toll free / China Netcom - 10 800 852 1490
        North China toll free / China Telecom - 10 800 152 1490
        Hong Kong Toll Free Number:      +852-800-963-844

    US Toll Free Number:   1.800.901.5241
    US Toll Number:        1.617.786.2963
    PASSCODE:              89392306
    Pre Registration:      No

    REPLAY ACCESS NUMBERS (FOR 4 WEEKS):

    US Toll Free Number:   1-888-286-8010
    US Toll Number         1-617-801-6888
    PASSCODE:              60803940

    WEBCAST:

http://phx.corporate-ir.net/phoenix.zhtml?p=irol-

eventDetails&c=180513&eventID=2605135

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    Related Document
    Presentation to Investors is available at http://ir.kongzhong.com .

About KongZhong

KongZhong Corporation is a leading mobile Internet company in China. The
Company delivers wireless value-added services to consumers in China through
multiple technology platforms, including wireless application protocol (WAP),
multimedia messaging service (MMS), JAVA(TM), short messaging service (SMS),
interactive voice response (IVR) and color ring-back tone (CRBT). The Company
operates three wireless Internet sites, Kong.net, Ko.cn and cn.NBA.com, which
enable users to access media, entertainment and community content directly
from their mobile phones. The Company also designs and operates mobile games,
including mobile online games, JAVA games and WAP games.

About Dacheng

Originally founded in 2004, Shanghai Dacheng Network Technology Co., Ltd.
is a leading developer of 3D MMORPGs with offices in both Beijing and Shanghai.
With its self-developed 3D game engine, Dazzler3D, Dacheng is able to produce
and operate 3D games for the unique technical requirements of the Chinese
MMORPG market. Dacheng’s first game, World of Kung Fu (http://www.wokchina.com ), was one of the most popular games in the Taiwan
market in 2008. Dacheng currently has over 200 employees with over 100 staff
focused on research and development.

About Loong

Loong (http://www.loong3d.com ), a martial arts themed game, is Dacheng’s
flagship 3D MMORPG developed for both the Chinese and international online
game markets. Dacheng independently developed the game with its proprietary 3D
game engine, Dazzler3D. Loong was released to pre-open beta in China on
October 28, 2009. After pre-open beta, Loong was one of the most downloaded
games on http://www.17173.com and was ranked the most anticipated game in
China by http://www.qq.com . Loong currently has approximately 100,000 peak
concurrent users per day. In addition, Dacheng has signed agreements to
license and operate Loong in over 40 countries. It is expected that Loong will
be released to open beta in China on December 29, 2009.

Safe Harbor Statement

This press release contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such forward-looking
statements include, without limitation, statements regarding trends in the
wireless value-added services, wireless media and mobile games industries and
our future business, financial conditions, results of operations and prospects.
Although such statements are based on our own information and information from
other sources we believe to be reliable, you should not place undue reliance
on them. These statements involve risks and uncertainties, and actual market
trends and our results may differ materially from those expressed or implied
in these forward-looking statements for a variety of reasons. Potential risks
and uncertainties include, but are not limited to, our failure to fully
realize the anticipated synergies or benefits from our mergers and
acquisitions; continued competitive pressures in China’s wireless value-added
services, wireless media and mobile games industries and the effect of such
pressure on prices; unpredictable changes in technology, consumer demand and
usage preferences in the market; the state of and any change in our
relationship with China’s telecommunications operators; our dependence on the
billing systems of telecommunications operators for our performance; the
outcome of our investment of operating income generated from the wireless
value-added services segment into the development of our wireless Internet
segment and mobile games segment; changes in the regulations or policies of
the Ministry of Industry and Information Technology and other relevant
government authorities in China or elsewhere; and changes in political,
economic, legal and social conditions in China, including the government’s
policies with respect to economic growth, foreign exchange, foreign investment
and entry by foreign companies into China’s telecommunications market. For
additional discussion of these risks and uncertainties and other factors,
please see our most recent Annual Report on Form 20-F filed with the
Securities and Exchange Commission. We assume no obligation to update any
forward-looking statements, which apply only as of the date of this press
release.

SOURCE KongZhong Corporation