STOCK PURCHASE AGREEMENT

 

 

THIS STOCK PURCHASE AGREEMENT (the “Agreement”), dated as of November 6, 2007, is made and entered into by and among Ng Chi Sum, holder of Hong Kong Identity Card No. D289522(7) and Yam Mei Ling, holder of Hong Kong Identity Card No. G265499(6) (each a “Shareholder” and collectively, the “Shareholders”), solely for purposes of Article Six and Article Nine, China Architectural Engineering, Inc., a Delaware corporation (“CAE”), and Full Art International, Ltd., a Hong Kong corporation and wholly-owned subsidiary of CAE (“Full Art”).

 

 

WHEREAS, the Shareholders own one hundred percent (100%) of the issued and outstanding shares in the capital of Techwell Engineering Limited, a limited liability company incorporated in Hong Kong with Company No. 113922 (“Techwell”), with the number of such shares owned by each of the Shareholders set forth opposite the names of the respective Shareholders in Section 3.01(b) of the disclosure schedule attached hereto as Exhibit A (“Techwell Disclosure Schedule”);

 

WHEREAS, Techwell and the Techwell Subsidiaries (collectively, the “Techwell Group”) engage in the business of manufacturing and constructing external building facades, including roofing systems for buildings and curtain wall systems and accessories (the “Business”); and

 

WHEREAS, Full Art desires to acquire from the Shareholders and the Shareholders desire to sell to Full Art all of the issued and outstanding shares in the capital of Techwell (the “Techwell Shares”) (the “Techwell Acquisition”).

 

NOW, THEREFORE, in consideration of the promises and the respective representations, warranties, covenants, agreements and conditions hereinafter set forth, Full Art, CAE and the Shareholders, intending to be legally bound hereby, agree as follows:

 

 

1.01

Definitions.

 

In this Agreement, the following terms shall have the meanings set forth below unless the context provides or requires otherwise:

 

“1933 Act” means the Securities Act of 1933, as amended.

 

“Affiliate” means, with respect to any person, any other person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such person. “Control” for this purpose means possession, directly or indirectly, of more than fifty percent (50%) of the voting power of a person.

 

 

“Entity” means any sole proprietorship, corporation, partnership of any kind having a separate legal status, limited liability company, business trust, unincorporated organization or association, mutual company, joint stock company or joint venture.

 

“Environmental Law” means and includes all statutes, regulations, rules, policy, guidance, ordinances, codes, common law, licenses, permits, orders, approvals, plans, authorizations, concessions, franchises and similar items, of all Governmental Authorities and all judicial and administrative and regulatory writs, injunctions, decrees, judgments and orders to which Techwell or any Techwell Subsidiary or Full Art is a party or is otherwise directly bound, now or which becomes effective on or before the Closing Date relating to land use (other than zoning/planning), air, soil, surface water, groundwater (including the protection, cleanup, removal, remediation or damage thereof), human health and safety or any other environmental matter, including the following laws and all corresponding regulations and their equivalent or similar laws and regulations in any other jurisdiction, in each case as the same may be amended from time to time: Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), 42 U.S.C. §§ 9601 et seq.; Federal Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq.; Clean Water Act, 33 U.S.C. §§ 1251 et seq.; Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq.; Refuse Act 33 U.S.C. § 407; Occupational Safety and Health Act, 29 U.S.C. §§ 651 et seq.; Clean Air Act, 42 U.S.C. §§ 7401 et seq.; Environmental Protection Act 1990 (UK); the Water Resources Act 1990 (UK); and the Health and Safety at Work etc. Act 1974 (UK) and any state counterparts and equivalents thereto.

 

“GAAP” means (i) as it pertains to the financial statements or accounting of CAE, United States generally accepted accounting principles, (ii) as it pertains to the financial statements or accounting of Techwell or any Techwell Subsidiary incorporated in Hong Kong, Hong Kong generally accepted accounting principles comprising Hong Kong Financial Reporting Standards and interpretations issued by the Hong Kong Institute of Certified Public Accountants, and (iii) as it pertains to the financial statements or accounting of any Techwell Subsidiary incorporated or established outside Hong Kong, the generally accepted accounting principles of the jurisdiction or territory of the place of its incorporation or establishment.

 

“Governmental Authority” means (i) any federal, state, county, municipal or other government, domestic or foreign, or any agency, board, bureau, commission, court, department or other instrumentality of any such government, or (ii) any Person having the authority under any applicable Governmental Requirement to administer, assess, collect or impose Taxes.

 

“Governmental Requirement” means at any time (i) any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, writ, edict, award, authorization or other requirement of any Governmental Authority in effect at that time or (ii) any obligation included in any certificate, certification, franchise, permit or license issued by any Governmental Authority or resulting from binding arbitration, including any requirement under common law, at that time.

 

“Hazardous Substances” means and include any substance: (i) the presence of which requires reporting, investigation, removal or remediation under any Environmental Law; (ii) that is defined as a “hazardous waste,” “hazardous substance,” “toxic substance,” or “pollutant” or “contaminant” under any Environmental Law; (iii) the presence of which causes or threatens to cause a nuisance, trespass or other tortious condition or poses a hazard to the health or safety of persons; or (iv) that contains gasoline, diesel fuel or other petroleum hydrocarbons, PCBs, asbestos, silica or urea formaldehyde foam insulation.

 

 

“Hong Kong” means the Hong Kong Special Administrative Region of the PRC.

 

“Knowledge” means, as it relates to any Shareholder, Techwell or any Techwell Subsidiary, the actual knowledge of each Shareholder, plus such knowledge as any Shareholder would have acquired after due investigation of the relevant fact or matter (including making all necessary enquiries with the respective officers, directors and employees of Techwell and each Techwell Subsidiary), regardless of whether such investigation has actually occurred, and as to any other Person, the actual knowledge of a specified Person of any particular fact or other matter after due investigation, and the words “aware,” “known” or similar words, expressions or phrases shall be construed accordingly.

 

“Lease” means any lease, sub-lease, tenancy agreement, sub-tenancy agreement, licence or any other document (including any option for extension relating thereto) granted or agreed to be granted to Techwell or any Techwell Subsidiaries or pursuant to which any of them holds or occupies any Leased Property, details of which are set forth in Section 3.1(m) of the Techwell Disclosure Schedule.

 

“Legal Requirement” means any law, regulation, rule, ordinance, decree, order or other standard imposed by a Governmental Authority applicable to a party or the conduct or operation of its business or the ownership or use of any of its assets, including, in the case of Techwell or any Techwell Subsidiary, all those imposed under the Mandatory Provident Fund Schemes Ordinance of the laws of Hong Kong, or any equivalent or similar laws, rules, regulations or requirements of any other applicable jurisdiction.

 

“License” means any license, certification, permit or other authorization from any Governmental Authority necessary for Techwell or any Techwell Subsidiary to conduct the Business or any part thereof or own or operate any of its assets and properties.

 

“Material Adverse Effect” means (i) with respect to Full Art or CAE, as applicable, a material adverse effect on the business, operations, affairs, properties, assets or condition (financial or otherwise) of such party; and (ii) with respect to Techwell, any event, circumstance, occurrence, fact, condition, change or effect which, individually or in the aggregate (a) has or would be reasonably expected to have a material adverse effect on the business, operations, affairs, properties, assets or condition (financial or otherwise) of Techwell or any Techwell Subsidiary, or (b) will or would be reasonably expected to adversely affect the ability of Techwell or any Shareholder to consummate the transactions contemplated under this Agreement or any other Transaction Document to which it is a party.

 

“MPF Scheme” means a mandatory provident scheme within the meaning given to such term under the Mandatory Provident Fund Schemes Ordinance under the laws of Hong Kong in which Techwell or any Techwell Subsidiary has participated for the benefit of its employees or other statutorily required provident scheme under any law, rules or regulations applicable to Techwell or any Techwell Subsidiary for the benefit of any employee.

 

 

“ORSO Scheme” means an occupational retirement scheme registered as a registered scheme under section 18 of the Occupational Retirement Schemes Ordinance of the Laws of Hong Kong, in which Techwell or any Techwell Subsidiary has operated, contributed or participated for the benefit of any of its employees.

 

“Permitted Liens” means, with respect to the property or other assets of Techwell or any Techwell Subsidiary (or any revenues, income or profits of Techwell or any Techwell Subsidiary therefrom): (i) Liens for Taxes if the same are not at the time due and delinquent; (ii) Liens of carriers, warehousemen, mechanics, laborers and materialmen for sums not yet due; (iii) Liens incurred in the ordinary course of the Business in connection with workers’ compensation, unemployment insurance and other social security legislation; (iv) Liens incurred in the ordinary course of the Business in connection with deposit accounts or to secure the performance of bids, tenders, trade contracts, statutory obligations, surety and appeal bonds, performance and return of money bonds and other obligations of like nature; (v) easements, rights-of-way, reservations, restrictions and other similar encumbrances incurred in the ordinary course of the Business or existing on property and not interfering in any material respect with the ordinary conduct of the Business or the use of that property; and (vi) defects or irregularities in Techwell’s interest in its real properties which do not materially (A) diminish the value of the surface estate or (B) interfere with the ordinary conduct of the Business or the use of any of such properties.

 

“Person” means any natural person, Entity, estate, trust, union or employee organization or Governmental Authority.

 

“PRC” means the People’s Republic of China, excluding, for the purposes of this Agreement, the Macau Special Administrative Region, Hong Kong and Taiwan.

 

“Solvent” means, for any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe it will, incur debts and liabilities beyond such Person’s ability to pay as such debts and liabilities mature, (d) such Person is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Person’s property would constitute an unreasonably small capital, and (e) such Person is able to pay its debts as they become due and payable.

 

“Statutory Plans” means statutory or other benefit plans which Techwell or any Techwell Subsidiary is required to participate in or comply with pursuant to any applicable statutes, laws, rules, regulations, codes, notices, circulars, orders, edicts, decrees, practices or promulgations of any Governmental Authority in any jurisdiction, including plans administered pursuant to applicable health tax, workplace safety insurance and employment insurance legislation and, without any limitation to the foregoing, including any statutorily required employee compensation insurance, ORSO Schemes or MPF Schemes, and any social insurance, social security or welfare benefit contributions required under the laws of the PRC or any other applicable jurisdiction.

 

 

“Taxes” means and includes all forms of taxes, charges, fees, imposts, duties, levies, deductions, withholdings or other assessments of any nature imposed, levied, collected, withheld or assessed by any Governmental Authority or other taxing or similar authority in any part of the world, including income, gross receipts, excise, property, sales, use, transfer, payroll, licence, value added, social security, national insurance (or other similar contributions or payments), franchise, estimated, severance, customs and stamp taxes (including any interest, fines, penalties, charges or additions attributable to, claimed, payable or imposed on or with respect to, any such taxes, charges, fees, levies or other assessments).

 

“Tax Returns” means any return, statement, declaration, notice, certificate, report or other document that is or has been filed with or submitted to, or required to be filed with or submitted to, any Governmental Authority in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement or Governmental Requirement related to any Tax.

 

“Transaction Documents” means this Agreement, the Escrow Agreement, the Employment Agreement, and any other agreements, documents and instruments delivered under or pursuant to any of the foregoing.

 

 

2.01

Purchase and Sale of the Techwell Shares.

 

At the Closing, subject to the terms and conditions of this Agreement, the Shareholders shall sell, transfer, assign, convey and deliver to Full Art all of the Techwell Shares, free and clear of any liens, encumbrances, pledge, security interest, restrictive covenant, burden or charge of any kind or nature whatsoever, legal or equitable, or any item similar or related to the foregoing (“Liens”), together with all rights attaching thereto including the right to receive all dividends and distributions declared, made or paid on or after the date of Closing.

 

2.02

Delivery of Techwell Certificates.

 

At the Closing, the Shareholders shall deliver to Full Art:

 

(a) all original share certificates representing all of the Techwell Shares, which certificates shall be accompanied by instruments of transfer of the Techwell Shares duly executed by the respective registered holders thereof in favor of Full Art (or such other person(s) as it may direct); and

 

(b) to the extent any of the same shall not have been provided prior to Closing, all documents required in Section 8.01 and such other documents as Full Art may require evidencing the fulfilment of the conditions precedent thereunder.

 

 

2.03

Purchase Price; Payment.

 

 

(b) Payment of the Aggregate Purchase Price. 

 

(i) The portion of the Aggregate Purchase Price payable to Ng Chi Sum is Five Million Eight Hundred Twenty-Seven Thousand Two Hundred Eighty-Three U.S. Dollars (US$5,827,283), payable as follows: (A) an aggregate of Five Million Two Hundred Forty-Four Thousand Five Hundred Fifty-Four and 70/100 U.S. Dollars (US$5,244,554.70) in cash, to be delivered to such Shareholder at Closing by wire transfer of immediately available funds pursuant to written instructions provided by such Shareholder to Full Art, and (B) an aggregate of Five Hundred Eighty-Two Thousand Seven Hundred Twenty-Eight and 30/100 U.S. Dollars (US$582,728.30) in CAE Common Shares (the “Ng Share Purchase Price”), or 70,378 CAE Common Shares valued at Eight and 28/100 U.S. Dollars ($8.28), the closing price of the CAE Common Shares as listed on the American Stock Exchange one (1) day immediately preceding the date of the Closing (the “CAE Share Price”), with certificate(s) evidencing 49,264 CAE Common Shares, or an amount equal to seventy percent (70%) of the Ng Share Purchase Price, to be delivered to such Shareholder at Closing.

 

(ii) The portion of the Aggregate Purchase Price payable to Yam Mei Ling is Five Million Eight Hundred Twenty-Seven Thousand Two Hundred Eighty-Three U.S. Dollars (US$5,827,283), payable as follows: (A) an aggregate of Five Hundred Eighty-Two Thousand Seven Hundred Twenty-Eight and 30/100 U.S. Dollars (US$582,728.30) in cash, to be delivered to such Shareholder at Closing by wire transfer of immediately available funds pursuant to written instructions provided by such Shareholder to Full Art, and (B) an aggregate of Five Million Two Hundred Forty-Four Thousand Five Hundred Fifty-Four and 70/100 U.S. Dollars (US$5,244,554.70) in CAE Common Shares (the “Yam Share Purchase Price” and together with the Ng Share Purchase Price, collectively the “Aggregate Share Purchase Price”), or 633,400 CAE Common Shares valued at the CAE Share Price, with certificate(s) evidencing 443,380 CAE Common Shares, or an amount equal to seventy percent (70%) of the Yam Share Purchase Price to be delivered to the such Shareholder at Closing.

 

(c)

Escrow Funds; Disbursement.

 

(i) At Closing, CAE shall issue two (2) certificates representing an aggregate of 211,134 CAE Common Shares (the “Escrow Funds”), or thirty percent (30%) of the Aggregate Share Purchase Price, to Mellon Bank, N.A., as escrow agent (the “Escrow Agent”). The Escrow Funds will be held and disbursed as specified in this Agreement and in an escrow agreement substantially in the form attached hereto as Exhibit B (the “Escrow Agreement”). The parties understand and agree that 21,113 and 190,021 CAE Common Shares of the Escrow Funds each represent thirty percent (30%) of the Ng Share Purchase Price and Yam Share Purchase Price, respectively.

 

 

(ii) On the first (1^st) anniversary of the date of the Closing (the “First Disbursement Date”), the Shareholders and Full Art shall cause the Escrow Agent to deliver to CAE the original stock certificate constituting the Escrow Funds whereupon Full Art shall:

 

(1)

cause CAE to direct its transfer agent to reissue certificate(s) to the Shareholders representing two thirds (2/3) of the original number of CAE Common Shares constituting the Escrow Funds less any CAE Common Shares delivered to Full Art and/or otherwise sold in accordance with this Agreement and the Escrow Agreement through the First Disbursement Date; and

 

(2)

cause CAE to return to Escrow Agent a stock certificate for the remaining balance of those CAE Common Shares to be held as the Escrow Funds.

 

(iii) On the second (2^nd) anniversary of the date of the Closing, the Shareholders and Full Art shall cause the Escrow Agent to deliver to CAE the stock certificate for the remaining balance of CAE Common Shares held as Escrow Funds as of such date whereupon Full Art shall cause CAE to direct its transfer agent to reissue certificate(s) to the Shareholders representing such remaining balance of CAE Common Shares.

 

2.04

Closing.

 

The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Kirkpatrick & Lockhart Preston Gates Ellis LLP, 10100 Santa Monica Boulevard, 7^th Floor, Los Angeles, California 90067 at 10:00 a.m., Pacific Standard time on November 6, 2007, or such other place and date as the parties may mutually agree upon (the “Closing Date”).

 

 

3.01

Representations and Warranties of Shareholders relating to Techwell.

 

All references in this Section 3.01 to Techwell, other than those in paragraphs (b), (c), (d) and (g), shall be read and construed as a reference to Techwell and each of the Techwell Subsidiaries. The Shareholders hereby jointly and severally represent and warrant to Full Art as follows:

 

 

(a) Corporate Status. Techwell is a corporation duly incorporated, validly existing and in good standing under the laws of the place of its incorporation or establishment, with full corporate power and authority to own its property and to carry on its business as presently conducted. Techwell is qualified to do business as a foreign corporation in any other jurisdiction where the character or location of the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary. Techwell has made available to Full Art true and complete copies of its Memorandum and Articles of Association or equivalent constitutional documents, including any amendments thereto. The minute books of Techwell, as heretofore made available to Full Art, are correct and complete in all material respects.

 

(b) Capitalization of Techwell. The authorized share capital of Techwell consists solely of 3,500,000 ordinary shares of HK$1.00 par value each, all of which are issued and outstanding. Set forth in Section 3.01(b) of the Techwell Disclosure Schedule is a complete and correct list of the issued and outstanding shares in the capital of Techwell and the names, addresses and beneficial ownership of each Shareholder in such shares. The Techwell Shares represent all of the issued and outstanding share capital of Techwell and all of the Techwell Shares have been duly authorized and validly issued in compliance with applicable law (including federal and state securities laws), are fully paid and nonassessable, and were not issued in violation of any statutory, contractual or other preemptive rights, rights of first refusal or similar rights. There are no outstanding options, warrants, rights, puts, calls, commitments, conversion rights, plans or other agreements of any character to which Techwell or any Shareholder is a party or otherwise bound which provide for the acquisition, disposition or issuance of any issued but not outstanding, outstanding, or authorized and unissued shares, or any part of the share or equity capital of or any other securities exercisable or convertible into or exchangeable for any part of the capital of Techwell. There is no personal liability, and there are no preemptive or similar rights, statutory or otherwise, attached to the Techwell Shares. No Shareholder or any other holder of any of Techwell’s securities has any rights, “demand,” “piggy-back” or otherwise, to have such securities registered under the 1933 Act. 

 

(c) Ownership of Techwell Shares. Each Shareholder is the record and beneficial owner of the number of Techwell Shares set forth opposite its name in Section 3.01(b) of the Techwell Disclosure Schedule. Each Shareholder has good and marketable title to such Techwell Shares, free and clear of any Liens. All such Techwell Shares are duly authorized, validly issued, fully paid and nonassessable and each Shareholder has complete and unrestricted power and the unqualified right to sell, assign, transfer and deliver its Techwell Shares to Full Art.

 

 

(d) Subsidiaries. Section 3.01(d) of the Techwell Disclosure Schedule sets forth the name, jurisdiction of incorporation or establishment of each Entity in which Techwell owns of record or beneficially, directly or indirectly, any equity securities or similar interests of any person, or any interest in a partnership or joint venture of any kind (each a “Techwell Subsidiary” and collectively, the “Techwell Subsidiaries”). No Techwell Subsidiary has any discontinued operations, ceased doing business or sold all or substantially all of its operating assets, operates or formerly operated a business not related to the Business, or is otherwise inactive. Section 3.01(d) further identifies any Techwell Subsidiary that was merged, dissolved, liquidated (or terminated by similar means) at any time. Techwell owns, directly or indirectly, all of the share capital or other equity interests of each Techwell Subsidiary free and clear of any Liens, and all the issued and outstanding shares in the capital of and all other equity interests in each Techwell Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. Each Techwell Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. Each Techwell Subsidiary has the corporate power and authority to own or lease its properties, perform its obligations under the agreements, contracts or other instruments to which it is a party or by which it is bound and the Legal Requirements and Governmental Requirements to which it is subject and otherwise carry on its business as now conducted. Neither Techwell nor any Techwell Subsidiary is a party to any agreement, contract or other instrument to acquire any equity or other securities of any other person or ownership interest in any other business.

 

(e) Corporate Authority; Authorized and Effective Agreement. Each Shareholder has full legal capacity and power to execute and deliver this Agreement and each of the Shareholders and Techwell has full legal capacity and power to execute and deliver the Transaction Documents to which Techwell or any Shareholder is a party, which Agreement and Transaction Documents have been or will, on or prior to Closing, be duly executed and delivered by such parties and constitute the valid and binding obligation of such parties except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(f) No Conflict. The execution, delivery, performance and the consummation of the transactions contemplated by this Agreement and the Transaction Documents by Techwell and the Shareholders will not, directly or indirectly, (i) violate any Legal Requirement or any Governmental Requirement; (ii) violate the Memorandum and Articles of Association or equivalent constitutional documents of Techwell; (iii) violate any judgment, award or decree to which Techwell or any Shareholder is a party or by which Techwell or any Shareholder is bound; (iv) violate any provision of any material indenture, agreement or other instrument to which Techwell or any of the Shareholders is a party, or by which Techwell, any of the Shareholders, or any of its respective properties or assets is bound or affected, or result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, except any indenture, agreement or other instrument that will be satisfied in full at or before Closing; (v) result in the creation or imposition of any Lien upon any of the properties or assets of Techwell; or (vi) result in any suspension, revocation, impairment, forfeiture or non-renewal of any License of Techwell.

 

 

(g) Financial Statements of Techwell. Techwell has furnished to Full Art audited financial statements of Techwell prepared on a consolidated basis consisting of balance sheets as of December 31 for the years 2006 and 2005, and the related statements of income, changes in shareholders’ equity and cash flows for the two (2) years ended December 31, 2006 (the “Techwell Balance Sheet Date”) and the unaudited interim balance sheet and income statement as of September 30, 2007 (collectively, all of such consolidated financial statements are referred to as “Techwell Financial Statements”). The Techwell Financial Statements have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of Techwell as of the dates thereof and its consolidated results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to the absence of notes and normal year-end audit adjustments).

 

(h) Absence of Undisclosed Liabilities. Techwell has no liabilities or obligations (whether accrued, absolute, contingent or otherwise) except: (i) as set forth in Section 3.01(h) of the Techwell Disclosure Schedule, (ii) as set forth on the Techwell Financial Statements or (iii) as incurred since the Techwell Balance Sheet Date in the ordinary course of business and usual and normal in amount both individually and in the aggregate.

 

(i) Absence of Changes. Except as set forth in Section 3.01(i) of the Techwell Disclosure Schedule, since the Techwell Balance Sheet Date, Techwell has operated its business in the ordinary course consistent with Techwell’s past practice, and there has not been any Material Adverse Effect respecting Techwell.

 

(j) Reports and Records. Techwell and its employees have filed all reports and maintained all records and licenses required to be filed or maintained by it. All such documents and reports complied in all material respects with applicable requirements of law and rules and regulations in effect at the time such documents and reports were filed and contained in all material respects the information required to be stated therein.

 

(k)

Taxes.

 

(i) Techwell has timely filed all Tax Returns required to be filed on or before the date hereof and will timely file all Tax Returns required to be filed on or before Closing under any applicable laws and regulations. Such Tax Returns are true, correct and complete in all respects. All Taxes due and owing by Techwell (whether or not showing on any Tax Return) have been paid. Techwell is not currently the beneficiary of any extension of time in which to file any Tax Return. No written claim has ever been made by any authority in a jurisdiction where Techwell does not file Tax Returns that Techwell is or may be subject to taxation by that jurisdiction. There are no liens for Taxes (other than for Taxes not yet due and payable) upon any of the assets of Techwell. Techwell has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

 

(ii) Techwell has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party. Proper records have been maintained in respect of all such deductions and payments and all applicable laws, rules and regulations have been complied with.

 

 

(iii) Neither Techwell nor any director or officer (or employee responsible for Tax matters) of Techwell expects any authority to assess any additional Taxes for any period for which Tax Returns have been filed. No foreign, federal, state, or local tax audits or administrative or judicial Tax proceedings are pending or being conducted with respect to Techwell. Techwell has not received from any Governmental Authority (including jurisdictions where Techwell does not file Tax Returns) any (1) written notice indicating an intent to open an audit or other review, (2) request for information related to Tax matters, or (3) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any taxing authority against Techwell.

 

(iv) Techwell is not a party to any agreement, contract, arrangement or plan that has resulted or could result, separately or in the aggregate, in payment of (1) any “excess parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) from this transaction (or any corresponding provision of state, local or foreign Tax law) or (2) any amount that will not be fully deductible as a result of Code Section 162(m) (or any corresponding provision of state, local or foreign Tax law).

 

(v) Techwell has not been a member of an affiliated group filing a consolidated federal income Tax Return and Techwell has never been a member of any group for Tax purposes (other than the group comprising solely Techwell and Techwell Subsidiaries). Techwell does not have any liability for the Taxes of any Person or Entity under any applicable Legal Requirement as a transferee or successor, by contract, or otherwise. No act or transaction has been or will, either on or before the Closing, be affected by Techwell, any Shareholder or any other Person in consequence of which Techwell is or may be held liable for Taxes primarily chargeable against some other Person.

 

(vi) The unpaid Taxes of Techwell (1) did not, as of the date of the most recent balance sheet included in the Techwell Financial Statements, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of such balance sheet (rather than in any notes thereto) and (2) do not and will not exceed such reserve as adjusted for the passage of time through the date of the Closing in accordance with the past custom and practice of Techwell in filing its Tax Returns. Since the date of the most recent balance sheet included in the Techwell Financial Statements, Techwell has not incurred any liability for Taxes arising from extraordinary gains or losses, as that term is used in GAAP, outside the ordinary course of business consistent with past custom and practice.

 

(vii) No power of attorney has been granted by Techwell with respect to any matters relating to Taxes that is currently in effect.

 

(viii) Techwell has not filed any disclosures under Code Sections 6662 or 6011 or comparable provisions of state, local or foreign law to prevent the imposition of penalties with respect to any Tax reporting position taken on any Tax Return.

 

 

(ix) Techwell will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (A) change in method of accounting for a taxable period ending on or prior to the Closing Date; (B) “closing agreement” as described in Code Section 7121 (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; (C) intercompany transactions or any excess loss account described in Treasury Regulations under Code Section 1502 (or any corresponding similar provision of state, local or foreign income Tax law); (D) installment sale or open transaction disposition made on or prior to the Closing Date; or (E) prepaid amount received on or prior to the Closing Date.

 

(x) Techwell does not own an interest in real property in any jurisdiction in which a Tax is imposed, or the value of the interest is reassessed, on the transfer of any interest in real property and which treats the transfer of an interest in an entity that owns an interest in real property as a transfer of the interest in real property.

 

(xii) Techwell has not, in the past ten (10) years, (i) acquired assets from another corporation in a transaction in which the Tax basis of the acquired assets was determined, in whole or in part, by reference to the Tax basis of the acquired assets (or any other property) in the hands of the transferor or (ii) acquired the stock of any corporation which is a qualified subchapter S subsidiary.

(xiii) Techwell has not entered into or been engaged in or been a party to any transaction which is artificial or fictitious or any transaction or series of transactions or scheme or arrangement of which the main or dominant purpose or one of the main or dominant purposes was the avoidance or deferral of or reduction in the liability to Tax of Techwell, to the extent that such arrangement is prohibited under any Legal Requirement or Governmental Requirement. No Tax scheme in effect, as previously applied in the Techwell Financial Statements, has been or will be illegal under any Legal Requirement or Governmental Requirement or adversely affect the financial condition of Techwell or the operation of the Business. None of the assets and properties of Techwell has been purchased at an under value or been given to Techwell in circumstances where the gift or element of under value might be subject to or give rise to any form of Tax, estate duty chargeable or assessable against Techwell or on any of its assets.

(xiv) Techwell has sufficient records to permit accurate calculation of the Tax liability or relief which would arise upon a disposal or realisation on completion of each asset owned by Techwell at the Techwell Balance Sheet Date or acquired by Techwell before Closing and has otherwise maintained accurate and complete books of account and records with respect to all transactions and other matters occurring on or before Closing to enable the due and proper preparation and filing of all Tax Returns required of Techwell whether before or after Closing. Techwell has duly submitted all claims and disclaimers the making of which has been assumed for the purposes of the Techwell Financial Statements.

 

(l) Marketable Title; Condition of Assets. Techwell owns, and is in rightful possession of, and has good and marketable title to, all of its assets and properties used (other than the Techwell Real Properties, which is addressed in Section 3.01(m)), free and clear of any Lien or other interest of any persons whatsoever, except for Liens constituting Permitted Liens. The assets of Techwell are all the assets needed to continue to conduct the Business as it is presently being conducted. Except for any incidental repairs required in the ordinary course of business, each item of tangible personal property owned or used by Techwell in conducting the Business is in good operating condition and in a state of good maintenance and repair (ordinary wear and tear excepted) and is adequate and suitable for the purposes for which they are presently being used.

 

(m) Real Property.

 

(i) Section 3.01(m) of the Techwell Disclosure Schedule lists and describes any interest in real property held by Techwell, including all real properties and premises owned, leased, occupied or otherwise used by Techwell or in connection with the Business (the “Techwell Real Properties”). The Techwell Real Properties constitute all of the interests in real property used in the Business, including any land use rights granted with respect to any real property, and all deeds and documents necessary to prove the title of Techwell to the Techwell Real Properties are in the possession of Techwell. All of the buildings, structures and appurtenances situated on the Techwell Real Properties are (i) in good operating condition and in a state of good maintenance and repair (ordinary wear and tear excepted) and (ii) adequate and suitable for the purposes for which they are presently being used.

 

(ii) Techwell is not the registered or beneficial owner of any Techwell Real Properties.

 

(iii) The Techwell Real Properties in Section 3.01(m) of the Techwell Disclosure Schedule (“Leased Properties”) are all occupied under Leases and the particulars of all Leases are fully and accurately set out in that Section 3.01(m). The Techwell Real Properties in Section 3.01(m) of the Techwell Disclosure Schedule are all occupied pursuant to land use rights sold or granted to Techwell. Techwell possesses good leasehold to its Leased Properties pursuant to valid and subsisting Leases held by it. With respect to any land use rights sold or granted or purported to have been sold or granted to Techwell, such land use rights have been validly sold or granted by competent Governmental Authorities duly authorised so to do and Techwell has good and valid title thereto free from Liens (other than Permitted Liens) and enforceable against any other third Person under PRC laws or the laws of any other applicable jurisdiction.

 

 

(iv) The Leases are head leases, are properly completed and (where required) stamped and are in the possession and under the control of Techwell. The land use rights to any Techwell Real Property in the PRC are owned by Techwell for a period of not less than fifty (50) years from the relevant date as shown in Section 3.01(m) of the Techwell Disclosure Schedule.

 

(v) All necessary consents, permits, licenses, certificates, authorisations and approvals for the grant of the Leases and land use rights pertaining to any Techwell Real Property were obtained before such grant. The landlords named in the Leases were the registered owners of the Leased Properties at the time of the grant of the relevant Lease and all Leases are duly registered with the appropriate Governmental Authorities in accordance with applicable Legal Requirement or Governmental Requirement of the PRC or of any other applicable jurisdiction. With respect to the land use rights, Techwell has obtained and is in possession of the relevant land use right registration and other certificates and all other documents of title and such certificates and documents of title are valid and subsisting and in full force and effect.

 

(vi) Save for Permitted Liens, the Techwell Real Properties and the title deeds and documentation relating thereto are not subject to any debenture (whether fixed or floating), option, agreement for sale, condition, covenant, agreement, claim, overriding interest or any other Liens, nor is there any Person in possession or occupation of or who has or claims any right or easement of any kind in respect of any such properties adversely to the estate, interest, right or title therein of Techwell.

 

(vii) There are no rights, interests, covenants, restrictions, reservations, licenses or easements, nor any disputes or outstanding notices (whether given by a lessor or any other person) nor in the case of a Leased Property, rights for the lessor to break the term nor (without prejudice to the generality of the foregoing) any other matters or things which adversely affect the value of the Techwell Real Properties or the proper use and enjoyment thereof for the purpose of the business now being carried on at such properties.

 

(viii) The Leases contain no right of termination by the landlord thereof except on grounds of non-payment of rent, breach of covenant or insolvency. There are no circumstances which would entitle or require a lessor or any other Person to exercise any power of entry upon or of taking possession of any Techwell Real Properties or which would otherwise restrict or terminate the continued possession or occupation thereof.

 

(ix) The Leased Properties are not subject to any outgoings other than general and water rates, rent, management charges of a non-capital nature and utility charges. All land premiums and other Taxes and all rents, service charges and other outgoings payable by Techwell in respect of the Leased Properties or properties to Techwell holds land use rights have been duly and timely paid and will be paid up to the date of Closing and no amount is or will be due or payable by Techwell in respect thereof on or prior to Closing.

 

 

(x) Techwell has duly performed, observed and complied with all covenants, restrictions, reservations, conditions, agreements, statutory requirements, bye-laws, orders, building regulations and other stipulations and regulations affecting the Techwell Real Properties and their use, including the terms of all Leases, and the use of such properties does not contravene the same and no notice of any alleged breach of any of the terms of any such Lease has been served on Techwell. Without limiting the foregoing, the current use by Techwell of the Techwell Real Properties and all of the buildings, structures and appurtenances situated thereon is in compliance with all zoning or planning restrictions applicable thereto. All necessary certificates of compliance and other certificates, consents, occupation and other permits, licenses, authorisations and approvals for the user of any Techwell Real Properties and any and all buildings and structures thereon, as they are being used, have been duly obtained and are in full force, validity and effect and there are no circumstances known to any Shareholder which are likely to result in the forfeiture, avoidance, withdrawal or non-renewal of or restriction on or amendment to the same. All such properties are used by Techwell for legal purposes and Techwell has not violated any Legal Requirement or any Governmental Requirement of the PRC or elsewhere relating to land or property. None of the Shareholders is aware of any facts, matters or any notice or order served by any Governmental Authority which may adversely affect the right of Techwell to use such properties for the purpose for which they are presently being used or intended to be used. None of such properties is subject to any actual or threatened condemnation or other proceedings, notice or order given by any PRC or other Governmental Authority which would adversely affect such properties or any part thereof or preclude or impair the use of any such property by Techwell for the purposes for which it is currently used. None of the Techwell Real Properties is adversely affected or likely to be adversely affected by any planning, highways, transport, utility or other proposals.

 

(xi) Techwell is entitled to and has exclusive vacant possession of the Techwell Real Properties and, other than the Leases, no part of the Techwell Real Properties is subject to any lease, tenancy or licence or any agreement to grant such lease, tenancy or licence and no Person other than Techwell has a right to occupy or enter upon any of the Techwell Real Properties, other than the rights of landlords pursuant to the Leases. The Leases are not subject to any options or rights of pre-emption or first refusal in favour of any third parties.

 

(xii) There is no outstanding monetary claim or liability, contingent or otherwise, affecting the Techwell Real Properties and in the case of a Leased Property there are no rent reviews in the course of being determined or exercisable by the lessor from a date prior to the date of Closing.

 

(xiii) Techwell has maintained adequate insurance with respect to the Techwell Real Properties where the failure so to maintain would or could reasonably expected to have a Material Adverse Effect on Techwell. Where Techwell is responsible for maintaining insurance of the Leased Properties, the policy conforms in all respects with the requirements of the relevant Lease.

 

 

(n) Legal Proceedings and Insolvency.

 

(i) Except as set forth in Section 3.01(n) of the Techwell Disclosure Schedule, there are no actions, suits, proceedings, claims or investigations pending or, to the Knowledge of any Shareholder, threatened, in any court, before any governmental agency or instrumentality or other Governmental Authority or in any arbitration proceeding against or by Techwell or against any of its activities, assets and properties.

 

(ii) As of the date hereof, immediately prior to and immediately following Closing, Techwell and each Shareholder is and will be Solvent. None of Techwell and the Shareholders is contemplating the filing of any petition by it under any bankruptcy or insolvency laws or the liquidating of all or a substantial portion of its property, and none of the Shareholders has any knowledge of any third party contemplating the filing of any such petition against Techwell or any Shareholder.

 

(o) Regulatory Matters. Techwell is not a party to and neither Techwell nor any of its properties or assets is subject to any order, judgment, decree, agreement, memorandum of understanding or similar arrangement with any Governmental Authority charged with the supervision or regulation of Techwell or its business activities. Techwell has not been advised by any of the Governmental Authorities that any of such Governmental Authorities are contemplating issuing or requesting (or are considering the appropriateness of issuing or requesting) any such order, judgment, decree, agreement, memorandum of understanding, supervisory letter or similar submission.

 

(p) Brokers, Finders and Others. There are no fees or commissions claimed by, or payable by Techwell or any Shareholder to, any broker, finder, intermediary, or any other similar person in connection with effecting this Agreement or the transactions contemplated hereby, except for ordinary and customary legal and accounting fees which shall be paid in full at Closing.

 

(q) Employment Agreements. Except as disclosed in Section 3.01(q) of the Techwell Disclosure Schedule, Techwell is not a party to any employment, change in control, severance, consulting, non-compete, piracy or nonsolicitation agreement. Techwell is not a party to, bound by or negotiating any collective bargaining agreement, nor are any of its respective employees represented by any labor union or similar organization. Techwell is in compliance in all material respects with all its contractual obligations and all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including those pertaining to welfare funds, social benefits, social insurance contributions, provident fund or retirement scheme contributions, medical benefits, insurance, retirement benefits, pensions and the like, and has maintained current, adequate and suitable records regarding the same, and Techwell has not engaged in any unfair labor practice. Each of the employees of Techwell who is by law subject to immigration control, has been granted appropriate permission to remain in Hong Kong, PRC or any other applicable jurisdiction and has a valid work permit issued in relation to his employment with Techwell and has obtained all necessary extensions to his leave to remain in Hong Kong, PRC or any other applicable jurisdiction and so far as the Shareholders are aware there are in existence no grounds upon which any such leave to remain or work permit might be curtailed or the employee may be required to leave Hong Kong, PRC or any other applicable jurisdiction in which his services to Techwell are required to be performed.

 

 

(r)

Employee Benefit Plans

 

(i) Section 3.01(r)(i) of the Techwell Disclosure Schedule sets forth a list of all (a) stock option, stock purchase, restricted stock, equity compensation, deferred compensation, bonus, fringe benefit, sick leave, vacation, paid or unpaid leave, profit sharing, pension, retirement, deferred compensation, medical, life, disability, accident, salary continuation, supplemental retirement, severance, change-of-control and unemployment benefit plans, programs or agreements (whether or not insured), (b) employment agreement, and (c) Statutory Plans (collectively, the “Employee Benefit Plans”) that have been established, maintained, or sponsored by Techwell, or to which Techwell has contributed or into which Techwell has entered (the “Techwell Employee Benefit Plans”). “Techwell Employee Benefit Plans” shall not include any Employee Benefit Plan that is maintained under applicable law by a governmental body. Techwell has not announced or otherwise made a commitment to implement any arrangement that, if implemented, would be a Techwell Employee Benefit Plan or to improve or change the benefits provided under any Techwell Employee Benefit Plans, unless to the extent required under any applicable Legal Requirement or Governmental Requirement.

 

(ii) Techwell has made available to Full Art, to the extent applicable, true and complete copies of the following documents with respect to each Techwell Employee Benefit Plan, (A) the plan document (or, in the case of any unwritten Techwell Employee Benefit Plan, a written summary of the terms of such Techwell Employee Benefit Plan), (B) the summary plan description, (C) the trust agreement, and (D) all related agreements, insurance contracts and other agreements by which such Techwell Employee Benefit Plan is established, operated, administered or funded.

 

(iii) Each Techwell Employee Benefit Plan complies in form and has been maintained and operated in all respects in accordance with the requirements of all applicable laws, including all applicable laws, rules, regulations, codes and practices pertaining to any Statutory Plans, and each Techwell Employee Benefit Plan has been maintained and operated in accordance with its terms.

 

(iv) Neither Techwell nor any director, officer or employee of Techwell, nor any other person who participates in the operation of any Techwell Employee Benefit Plan has engaged in any transaction with respect to any Techwell Employee Benefit Plan, or breached any applicable fiduciary responsibility or obligation under any applicable Legal Requirement or Governmental Requirement that would subject any of them to a tax, penalty or liability for prohibited transactions or breach of any obligations under any applicable Legal Requirement or Governmental Requirement or would result in any claim being made under, by or on behalf of any such Techwell Employee Benefit Plan by any party with standing to make such a claim.

 

 

(v) There are no actions, suits or claims pending or, to the Knowledge of any Shareholder, threatened verbally or in writing against or with respect to any Techwell Employee Benefit Plan or the assets of any Techwell Employee Benefit Plan (other than routine claims for benefits and appeals of denied claims), and no civil or criminal action brought pursuant to the provisions of any applicable Legal Requirements or Governmental Requirements of any jurisdiction applicable to Techwell is pending or threatened verbally or in writing against Techwell or any fiduciary of any Techwell Employee Benefit Plan with respect to any Techwell Employee Benefit Plan. Techwell has not received any written notice that any Techwell Employee Benefit Plan or any fiduciary thereof is presently the subject of an audit, investigation or examination by any governmental or quasi-governmental agency, and, to the Shareholders’ Knowledge, no such action has been threatened.

 

(xii) Techwell has in place and maintained all Statutory Plans in full compliance with the Legal Requirements and Governmental Requirements of any jurisdiction applicable to Techwell, its Business or its operations. All employer and employee payments, contributions and premiums required to be remitted, paid to or in respect of each such Statutory Plan have been paid or remitted in a timely fashion in accordance with its terms and all such Legal Requirements and Governmental Requirements and no Taxes, penalties, fees, contributions or other payments are owing under or, in relation to, any such Statutory Plan. Without limiting the foregoing, all benefits and contributions payable to any employee of Techwell under any ORSO Scheme, MPF Scheme or any other Statutory Plan have been fully satisfied.

 

(s)

Compliance with Laws. Except as set forth in Section 3.01(s) of the Techwell Disclosure Schedule, Techwell:

 

(i) is in compliance, in all material respects, with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable to Techwell, its Business, operations and activities, or to the employees conducting such business;

 

(ii) has all material permits, licenses, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Authorities that are required in order to permit it to own or lease its properties and to conduct its business as presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and no suspension or cancellation of any of them has been threatened in writing; and

 

 

(iii) has received no written notification or communication from any Governmental Authorities since January 1, 2001, (A) asserting that Techwell or any subsidiary is not in compliance with any of the statutes, regulations or ordinances which such Governmental Authorities enforce, or (B) threatening to revoke any license, franchise, permit or governmental authorization which has not been resolved to the satisfaction of the Governmental Authorities which sent such notification or communication. There is no event which has occurred that, to the knowledge of Techwell, would reasonably be expected to result in the revocation of any such license, franchise, permit or governmental authorization.

 

(t)

Environmental Matters.

 

(i) Except as set forth in Section 3.01(t) of the Techwell Disclosure Schedule, neither Techwell, the Shareholders nor any Person acting at its direction has discharged, released or emitted, or has threatened to discharge, release or emit Hazardous Substances into the air, water, surface water, ground water, soil, land surface or subsurface strata or transported Hazardous Substances to or from property currently owned, leased or used by Techwell except in compliance with Environmental Law and except for claims or releases which have been remediated and for which the appropriate Governmental Authority has delivered a “no further action” letter or similar written indications that no additional action is required.

 

(ii) Except as set forth in Section 3.01(t) of the Techwell Disclosure Schedule, neither Techwell nor any Shareholder has received any written or verbal notification from a Governmental Authority that there is any violation of any Environmental Law with respect to the business and properties of Techwell and neither Techwell nor any of the Shareholders has received any written or verbal notification from a Governmental Authority pursuant to any Environmental Law, and with respect to any such matter notified, none of them remain open, active or require any further action on the part of Techwell.

 

(iii) Techwell has all licenses, certificates, consents, approvals, qualifications, filings, declarations, registrations, exemptions, permits and other authorizations from federal, state, foreign or local Governmental Authorities that are necessary with respect to the conduct of the Business and the ownership, use or operation of Techwell Real Properties and any other assets and properties of Techwell (each a “Permit” and collectively, the “Permits”). All such Permits and the continuing validity thereof will not be adversely affected by the consummation of the transactions contemplated hereby and, to the extent required for the conduct of the Business by Techwell or the ownership or use of any of its assets and properties after Closing, all such Permits may otherwise be transferred or assigned to Full Art in accordance with their terms and with applicable law. To the extent so required, Techwell and the Shareholders shall use their best efforts to cooperate with and assist Full Art so that the Permits can be conveyed, transferred and/or assigned to Full Art. The present conduct of the Business is not dependent upon any zoning variance or non-conforming use exception. Section 3.01(t) of the Techwell Disclosure Schedule contains a list of all Permits. There is no basis for the revocation or withdrawal of any Permit or any non-renewal thereof upon its expiry. Neither Techwell nor any of the Shareholders has received any written or verbal notification from the federal, state, foreign or local Governmental Authorities that there is a violation of any Permit with respect to the business and properties of Techwell and neither Techwell nor any of the Shareholders has received any written or verbal notification from the federal, state, foreign or local governments regarding any Permit, and with respect to any such matter notified, none of them remain open, active or require any further action on the part of Techwell or any of the Shareholders.

 

 

(iv) Except as set forth in Section 3.01(t) of the Techwell Disclosure Schedule, there are no underground storage tank systems or facilities on any portion of the property currently owned, leased or used by Techwell and any underground storage tank or facility previously located thereon has either been removed or closed in place, and Techwell has completed all applicable investigations and procedures required to close such tanks or tank systems in compliance with all applicable Environmental Laws. Section 3.01(t) of the Techwell Disclosure Schedule identifies all storage tanks or facilities that have been closed in place.

 

(v) Techwell has never manufactured, processed, handled or sold asbestos or products containing asbestos. Techwell has never manufactured or sold sand blasting sand to third parties for use outside of Techwell’s facilities. Except as set forth Section 3.01(t) of the Techwell Disclosure Schedule, neither Techwell nor any of the Shareholders has received notice of any claim or suit against Techwell or any of the Shareholders for asbestos- or silica-related exposure or injury, whether by current or former employees or third parties.

 

(u) Insurance. Section 3.01(u) of the Techwell Disclosure Schedule lists all of the insurance policies of fire, liability, workers’ compensation, fiduciary liability and other forms of insurance providing insurance coverage to or for Techwell in effect for the past five (5) years. Unless otherwise set forth in Section 3.01(u) of the Techwell Disclosure Schedule, (i) Techwell is named insured under such policies, (ii) all premiums required to be paid with respect thereto covering all periods up to and including the Closing Date have been paid, (iii) except for any directors’ and officers’ liability insurance policies, all of such insurance policies have been issued on an “occurrence” basis, (iv) there has been no complete lapse in insurance coverage at any time within the last ten (10) years, (v) there are not presently, and after the Closing Date there will not be, any retrospective premiums due under any of such policies, (vi) no notice of default, cancellation or termination has been received with respect to any such policy, (vii) and all claims thereunder have been filed in due and timely fashion. Techwell has delivered or caused to be delivered to Full Art true and complete copies of all current insurance policies, binders or bonds. Since January 1, 2007, no currently outstanding and unpaid claims have been made by Techwell on any of such policies. There are no claims outstanding against Techwell with respect to any period for which any lapse in insurance coverage occurred. No claims are being handled by an insurer of Techwell under a reservation of rights letter.

 

 

(v) Governmental and Third-Party Proceedings. Except as set forth in Section 3.01(v) of the Techwell Disclosure Schedule, no consent, approval, authorization of, or registration, declaration or filing with, any court, Governmental Authority or any other third party is required to be made or obtained by Techwell or any Shareholder in connection with the execution, delivery or performance by any of them of this Agreement and the Transaction Documents to which it is a party or the consummation by the Shareholders of the transactions contemplated hereby.

 

(w) Contracts. Section 3.01(w) of the Techwell Disclosure Schedule sets forth a list of all Contracts (as hereinafter defined) in existence as of the date of this Agreement (other than those which have been performed completely): (A) which involve the payment by or to Techwell of more than $10,000 in connection with the purchase of property or goods or the performance of services and (B) which are not in the ordinary course of its business consistent with past practice (such contracts referred to herein as “Contracts”). Complete copies of all such Contracts have been made available to Full Art. Neither Techwell nor, to the Knowledge of any Shareholder, any other party thereto, is in default under any contract listed in Section 3.01(w) of the Techwell Disclosure Schedule.

 

(x) Customer Relations. To the Shareholders’ Knowledge, there exists no consideration or state of facts or circumstances involving Techwell’s customers, insurance carriers (the “Carriers”), employees or sales representatives that could adversely affect Techwell after the date of Closing. No controversy or disagreement presently exists or has been threatened between Techwell and any customer or Carrier of Techwell (including but not limited to any allegations of errors and/or omissions). There has been no change in the commission structures of such Carriers, and to the Shareholders’ Knowledge, there is no pending change to the commission structure of such Carriers.

 

(y) Intellectual Property. Section 3.01(y) of the Techwell Disclosure Schedule sets forth a complete list of all of the registered trademarks, trademark registrations, applications for trademark registration, registered trade names, patents and registered copyrights owned by Techwell, all of which are owned by Techwell free and clear of any encumbrances. Techwell is not infringing any patent, copyright or trademark of any third party or otherwise violating the intellectual property rights of any third party nor has any claim been made or, threatened verbally or in writing against Techwell alleging any such violation, and there has been no violation by others of any right of Techwell in any trademark or copyright. Techwell is not a party to or bound by any license or other agreement requiring the payment by it of any royalty or similar payment in connection with its operations, except for commercially available software.

 

(z) Affiliate Transactions. Section 3.01(z) of the Techwell Disclosure Schedule contains a list of all Contracts, transfers of assets or liabilities or other commitments or transactions, whether or not entered into in the ordinary course of business, to or by which Techwell, on the one hand, and any of its Affiliates, on the other hand, are or have been a party or otherwise bound or affected. Except as disclosed in Section 3.01(z) of the Techwell Disclosure Schedule, each Contract, transfer of assets or liabilities or other commitment or transaction set forth or required to be set forth in Section 3.01(z) of the Techwell Disclosure Schedule was on terms and conditions as favorable to Techwell as would have been obtainable by it at the time in a comparable arm’s-length transaction with a Person other than Techwell or any of its Affiliates.

 

 

(aa) Access to Full Art and CAE Information. Each Shareholder has had the opportunity to conduct its own independent investigation of Full Art and CAE and collect and review all materials made available by Full Art and publicly available by CAE to evaluate the Techwell Acquisition. Each Shareholder, its officers and directors and its representatives have been provided the opportunity to ask questions of, and receive answers from, the directors and officers of Full Art concerning the business of Full Art and CAE. Each Shareholder acknowledges that it has had access to sufficient information to understand the merits and risks associated with the Techwell Acquisition. To the extent that any Shareholder has deemed it appropriate to do so, he or she has retained, and relied upon, appropriate professional advice concerning the tax, legal, business and financial merits and consequences of consummating the transactions contemplated by this Agreement and the Transaction Documents.

 

(bb) Disclosure. None of the representations or warranties of any Shareholder contained in this Article Three and none of the statements and information contained in the Techwell Disclosure Schedule referenced in Article Three or in any certificate, document or other instrument delivered by any Shareholder pursuant to this Agreement is false or misleading in any material respect or omits to state a fact necessary to make the statements therein not misleading in any material respect. None of the representations or warranties of any Shareholder contained in Article Four and none of the information contained in the Techwell Disclosure Schedule referenced in Article Four is false or misleading in any material respect or omits to state a fact necessary to make the statements in Article Four or in the Techwell Disclosure Schedule referenced in Article Four not misleading in any material respect.

 

(cc) Foreign Corrupt Practices Act. None of Techwell, the Shareholders, any director, officer, agent or employee of any of them, and any other Person associated with or acting for or on behalf of any of them has directly or indirectly (1) made any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other payment to any Person, private or public, regardless of form, whether in money, property, or services (i) to obtain favourable treatment in securing business, (ii) to pay for favourable treatment for business secured, (iii) to obtain special concessions or for special concessions already obtained, for or in respect of Techwell (or any Affiliate thereof), in violation of any law or otherwise constituting an offence under the Foreign Corrupt Practices Act of 1977 of the United States, as amended (assuming for these purposes that the Shareholders and Techwell were subject to that Act), or (iv) in violation of any law (including without limitation any relevant and applicable Tax laws or in relation to the payment or non-payment of any Taxes by Techwell or any Shareholder), or (2) established or maintained any fund or asset that has not been recorded in the books and records of Techwell, or (3) has violated any anti-corruption or anti-bribery laws or regulations of Hong Kong, the PRC or equivalent laws and regulations promulgated in any other jurisdictions. None of the assets and properties of Techwell were obtained or procured through any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other payment to any Person, private or public, regardless of form, whether in money, property, or services that would have violated the foregoing representations and warranties.

 

 

(dd) Account Receivables. Section 3.01(dd) of the Techwell Disclosure Schedule sets forth an accurate, correct and complete list of all account receivables of Techwell existing as of September 30, 2007 (“Receivables”).  Each Receivable is (1) a valid and legally binding obligation of the account debtor enforceable in accordance with its terms and not subject to set-offs, adverse claims, counterclaims, assessments, defaults, prepayments, defenses or conditions precedent; (2) a true and correct statement of the account for products actually sold and delivered to, or for services actually performed for and accepted by, such account debtor; and (3) except as set forth in Section 3.01(dd) of the Techwell Disclosure Schedule, fully collectible within twenty-four (24) months following the date of Closing, subject to trade discounts provided in the ordinary and usual course of the Business consistent with past practice and any allowance for doubtful accounts contained in the Techwell Financial Statements.

 

(ee) PRC Entities. Section 3.01(ee) of the Techwell Disclosure Schedule contains a complete list and accurate corporate particulars of each Techwell Subsidiary established or organized under the laws of the PRC, including details of the holders of any equity interest or joint venture parties therein and the extent of their respective interests. Without limiting the other provisions of this Section 3.01, the following representations and warranties shall apply to each Techwell Subsidiary established or organized under the laws of the PRC:

 

(i) The articles, other constitutional documents and certificates of approval and any related joint venture contracts of the Techwell Subsidiary are valid and have been duly approved and registered (as applicable) by competent PRC Governmental Authorities;

 

(ii) All business and other licenses, certificates, consents, approvals, qualifications, permits and other authorizations required from any Governmental Authority under any applicable Legal Requirements and Governmental Requirements in the PRC for the due and proper establishment and operation of the Techwell Subsidiary and its business have been duly obtained and made and are in full force and effect.

 

(iii) All filings, declarations, exemptions and registrations from or with all applicable and competent PRC Governmental Authorities required in respect of the Techwell Subsidiary and its operations including, without limitation, registrations with Foreign Economic Relations and Trade Commission, State or the relevant local Administration of Industry and Commerce, State Administration for Foreign Exchange, tax bureau and customs authorities have been duly completed in accordance with all applicable Legal Requirements and Governmental Requirements in the PRC.

 

(iv) Techwell has complied with all applicable Legal Requirements and Governmental Requirements in the PRC regarding the contribution and payment of the registered or share capital of any Techwell Subsidiary, the payment schedule of which has been approved by competent PRC Governmental Authorities, and all such contributions and payments due on or prior to the date of Closing have been fully paid. Particulars of any such contributions and payments that remain outstanding after the date of Closing are fully set forth in Section 3.01(ee) of the Techwell Disclosure Schedule.

 

 

(v) Techwell Subsidiary is not in receipt of any letter or notice from any PRC Governmental Authority notifying revocation of any Permits or Licenses issued to it by any PRC Governmental Authority for non-compliance or the need for compliance or remedial actions in respect of the activities carried out by it.

 

(vi) Techwell Subsidiary has been conducting and will conduct its business activities within the permitted scope of its business license or is otherwise operating its business in full compliance with all applicable Legal Requirements and Governmental Requirements and with all requisite Permits and Licenses granted by competent PRC Governmental Authorities or any other Person.

 

(vii) All Licenses and Permits required for the conduct of any part of the Business which are subject to periodic renewal have been obtained and there are no grounds on which such renewals will not be granted by the relevant PRC Governmental Authorities or other Persons.

 

(viii) Techwell Subsidiary has complied with all Legal Requirement and Governmental Requirement in the PRC with regard to employment, labour or labour contracts, staff or labour management or protection, including without limitation those pertaining to welfare funds, social benefits, social insurance contributions, medical benefits, insurance, retirement benefits, pensions and the like.

 

 

(ff) Due Diligence. None of the statements (whether written or oral) made by any Shareholder or employee of Techwell (including, without limitation, any documents and information supplied by such Persons) in response to the preliminary due diligence questionnaire (the “Diligence Request”) dated October 5, 2007 (including, without limitation, any oral statements made to CAE’s directors, officers, employees and/or legal representatives are untrue or misleading in ay manner or omit to state any material fact. A copy of Techwell’s response to the Diligence Request is attached hereto as Exhibit C.

 

 

4.01

Representations and Warranties of the Shareholders.

 

Each Shareholder hereby severally warrants and represents to Full Art and CAE that:

 

 

(a)

Investment Representations.

 

(i) Each Shareholder has received this Agreement and carefully read such Agreement; the decision to acquire CAE Common Shares has been taken solely in reliance upon the information contained in this Agreement, and such other written information supplied by an authorized representative of CAE as each Shareholder may have requested. Each Shareholder acknowledges that all documents, records and books pertaining to this investment have been made available for inspection by such Shareholder, its attorneys, accountants and purchaser representatives upon request prior to tendering this Agreement, and that it has been informed by CAE that its books and records will be available for inspection by each Shareholder or its agents and representatives at any time, and from time to time, during reasonable business hours and upon reasonable notice. Each Shareholder further acknowledges that it (or its advisors, agents and/or representatives) has had a reasonable and adequate opportunity to ask questions of and receive answers from CAE concerning the terms and conditions of the acquisition of CAE Common Shares, the nature of CAE Common Shares and the business and operations of CAE, and to obtain from CAE such additional information, to the extent possessed or obtainable without unreasonable effort or expense, as is necessary to verify the accuracy of the information contained in this Agreement or otherwise provided by CAE; all such questions have been answered by CAE to the full satisfaction of each Shareholder. No Shareholder is relying upon any oral information furnished by CAE or any other person in connection with its investment decision, and in any event, no such oral information has been furnished to any Shareholder which is in any way inconsistent with or contradictory to any information contained in this Agreement, or otherwise provided to any Shareholder by CAE in writing as described above.

 

(ii) Each Shareholder meets the criteria established in one or more of subsections (1) or (2) below:

 

(1)

Shareholder is an “accredited investor” as such term is defined in Rule 501 of Regulation D, promulgated under the 1933 Act.

 

(2)

Shareholder is not a U.S. Person, as defined in Rule 901 of Regulation S, promulgated under the 1933 Act and such Shareholder severally represents and warrants that:

 

(A) Shareholder is not acquiring the CAE Common Shares as a result of, and such Shareholder covenants that he, she or it will not engage in any “directed selling efforts” (as defined in Regulation S under the 1933 Act) in the United States in respect of the CAE Common Shares which would include any activities undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for the resale of any of the CAE Common Shares;

 

(B) Shareholder is not acquiring the CAE Common Shares for the account or benefit of, directly or indirectly, any U.S. Person;

 

 

(C) Shareholder is a resident of the jurisdiction in which such Shareholder resides;

 

(D) the offer and the sale of the CAE Common Shares to such Shareholder as contemplated in this Agreement complies with or is exempt from the applicable securities legislation of the jurisdiction in which the Shareholder resides;

 

(E) Shareholder is outside the United States when receiving and executing this Agreement and that the Shareholder will be outside the United States when acquiring the CAE Common Shares,

 

(F) and the Shareholder covenants with Full Art and CAE that:

 

(a) offers and sales of any of the CAE Common Shares prior to the expiration of a period of one year after the date of original issuance of the CAE Common Shares (the one year period hereinafter referred to as the “Distribution Compliance Period”) shall only be made in compliance with the safe harbor provisions set forth in Regulation S, pursuant to the registration provisions of the 1933 Act or an exemption therefrom, and that all offers and sales after the Distribution Compliance Period shall be made only in compliance with the registration provisions of the 1933 Act or an exemption therefrom and in each case only in accordance with applicable state securities laws; and

 

(b) Shareholder will not engage in hedging transactions with respect to the CAE Common Shares until after the expiration of the Distribution Compliance Period.

 

(iii) Each Shareholder: (1) has adequate net worth and means of providing for current financial needs and possible personal contingencies, (2) has no need for liquidity in this investment; and (3) is able to bear the economic risks of an investment in CAE Common Shares for an indefinite period of time, and of losing the entire amount of such investment.

 

 

(iv) Each Shareholder understands and acknowledges that an acquirer of CAE Common Shares must be prepared to bear the economic risk of such investment for an indefinite period because of: (A) the heightened nature of the risks associated with an investment in CAE due to its status as a development stage company; (B) illiquidity of the CAE Common Shares due to the fact such stock has not been registered under the 1933 Act or any state securities act (nor passed upon by the SEC or any state securities commission), and CAE Common Shares has not been registered or qualified by any Shareholder under federal or state securities laws solely in reliance upon an available exemption from such registration or qualification, and hence such CAE Common Shares cannot be sold unless it is subsequently so registered or qualified (which is not likely), or are otherwise subject to any applicable exemption from such registration requirements; and (C) substantial restrictions on the transfer of CAE Common Shares, as set forth in, among other documents, this Agreement and by legend on the face or reverse side of any certificate evidencing an ownership interest in CAE.

 

(v) Each Shareholder either (i) has a pre-existing personal or business relationship with Full Art, its officers, directors or affiliates; or (ii) alone or with its representatives, such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in CAE Common Shares.

 

(vi) Each Shareholder understands and acknowledges that an investment in CAE Common Shares is speculative in nature, and involves certain risks.

 

(vii)  No Shareholder is a member of the National Association of Securities Dealers, or of any other self-regulatory agency which would require approval prior to any acquisition of CAE Common Shares.

 

(viii) Each Shareholder is acquiring CAE Common Shares for its own investment, and not with a view toward the subdivision, resale, distribution, or fractionalization thereof. No Shareholder has any contract, undertaking, arrangement or obligation with or to any person to sell, transfer, or otherwise dispose of CAE Common Shares (or any portion thereof hereby acquired), nor has a present intention to enter into any such contract, undertaking, agreement or arrangement.

 

(ix) The offering of CAE Common Shares was made only through direct, personal communication between each Shareholder (or a representative thereof) and CAE; the acquisition of CAE Common Shares by each Shareholder is not the result of any form of general solicitation or general advertising including, but not limited to, the following: (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or other written communication, or broadcast over television, radio or any other medium; or (ii) any seminar or meeting to which the attendees had been invited by any general solicitation or general advertising.

 

 

(x) Each Shareholder has been advised to consult with an attorney regarding legal matters concerning the acquisition and ownership of CAE Common Shares, and with a tax advisor regarding the tax consequences of acquiring such stock.

 

(xi) No Shareholder has distributed this Agreement, or any other information pertaining to the acquisition of CAE Common Shares hereunder, to anyone other than its representative and/or its investment, legal or accounting advisors in connection with its consideration of an acquisition of CAE Common Shares.

 

(xii) No Shareholder was organized for the specific purpose of acquiring the CAE Common Shares subscribed for herein, and has other investments or business activities besides investing in CAE, unless any Shareholder has indicated the contrary to CAE in writing. Each Shareholder has specified in writing the number and character (i.e., individual, corporate, company, etc.) of the beneficial owners thereof.

 

 

(b) Third-Party Proceedings. No Shareholder is bound by or subject to any contract, agreement, law, court order or judgment, administrative ruling, regulation or any other item which prohibits or restricts it from entering into and performing this Agreement in accordance with its terms, or requiring the consent of any third party prior to the entry into or performance of this Agreement in accordance with its terms by such party.

 

 

(c)

Legal Proceedings; Compliance.

 

(i) There are no actions, suits, proceedings, or arbitrations or investigations pending, or to the Knowledge of each Shareholder, threatened in any court or before any governmental agency or instrumentality or arbitration panel or otherwise against such Shareholder (1) which seek to or could restrain, prohibit, rescind or declare unlawful, or result in substantial damage in respect of, the transfer of the Techwell Shares as contemplated by this Agreement, or (2) in which an adverse determination could reasonably be expected, singly or in the aggregate, to have a materially adverse effect on any Shareholder or its ability to perform its obligations under this Agreement.

 

(ii) No Shareholder is subject to any judgment, order, decree or governmental restriction which could reasonably be expected to have a materially adverse effect on the operations of such Shareholder or which would interfere with the sale of the Techwell Shares contemplated by this Agreement.

 

 

(d) Disclosure. None of the representations or warranties of any Shareholder contained in this Article Four and none of the information in respect of any Shareholder contained in the Techwell Disclosure Schedule referenced in this Article Four is false or misleading in any material respect or omits to state a fact necessary to make the statements in this Article Four or in the Techwell Disclosure Schedule to Article Four not misleading in any material respect.

 

 

 

5.01

Representations and Warranties of Full Art.

 

Full Art hereby warrants and represents to Techwell and the Shareholders that:

 

(a) Corporate Status. Full Art is a Hong Kong corporation duly organized and validly existing under the laws of Hong Kong and has the full corporate power and authority to own its property, to carry on its business as presently conducted and to enter into and to perform its obligations under this Agreement and consummate the transactions contemplated by this Agreement. Full Art is duly qualified to do business as a foreign corporation in each other jurisdiction where the character or location of the business conducted by it makes such qualifications necessary. Full Art has made available to the Shareholders true and complete copies of its Memorandum and Articles of Association, including any amendments thereto.

 

(b) Corporate Authority; Authorized and Effective Agreement. Full Art has full legal capacity and power to execute and deliver this Agreement and the Transaction Documents to which Full Art is a party, which Agreement and Transaction Documents have been or will, on or prior to Closing, be duly executed and delivered by Full Art and constitute the valid and binding obligation of Full Art enforceable against Full Art in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(c) Legal Proceedings. There are no actions, suits, proceedings, claims or investigations pending or, to the Knowledge of Full Art, threatened in any court, before any governmental agency or instrumentality or in any arbitration proceeding against or by Full Art which, individually or in the aggregate, would have a Material Adverse Effect on Full Art. 

 

(d) No Conflict. The execution, delivery and performance of this Agreement and the Transaction Documents, and the consummation of the transactions contemplated hereby, by Full Art do not and will not (i) conflict with, or result in a violation of, or result in the breach of or a default (or which with notice or lapse of time would result in a default) under, any provision of: (A) any federal, state or local law, regulation, ordinance, order, rule or administrative ruling of any Governmental Authorities applicable to Full Art or its properties; (B) the Memorandum and Articles of Association of Full Art; or (C) any material agreement, material indenture or material instrument to which Full Art is a party or by which it or its properties or assets may be bound; or (D) any order, judgment, writ, injunction or decree of any court, arbitration panel or any Governmental Authorities applicable to Full Art; (ii) result in the creation or acceleration of any security interest, mortgage, option, lien, or encumbrance upon any property of Full Art, or (iii) violate the terms or conditions of, or result in the cancellation, modification, revocation or suspension of, any contract, agreement, license, approval, certificate, permit or authorization held by Full Art.

 

 

(e) Brokers, Finders and Others. There are no fees or commissions of any sort whatsoever claimed by, or payable by Full Art to, any broker, finder, intermediary or any other similar person in connection with effecting this Agreement or the transactions contemplated hereby, except for ordinary and customary legal and accounting fees.

 

 

6.01

Representations and Warranties of CAE.

 

CAE hereby warrants and represents to Techwell and the Shareholders that:

 

(a) Subsidiaries. All of the subsidiaries of CAE (each a “CAE Subsidiary” and collectively, the “CAE Subsidiaries”) are set forth on Section 6.01(a) of the disclosure schedule attached hereto as Exhibit D (“Full Art Disclosure Schedule”). CAE owns, directly or indirectly, all of the capital stock or other equity interests of each CAE Subsidiary free and clear of any liens, and all the issued and outstanding shares of capital stock of each CAE Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.

 

(b) Corporate Status. Each of CAE and the CAE Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither CAE nor any CAE Subsidiary is in violation or default of any of the provisions of its respective certificate or Articles of Incorporation, Bylaws or other organizational or charter documents. CAE and each CAE Subsidiary is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not result in a Material Adverse Effect and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

(c) Corporate Authority; Authorized and Effective Agreement. CAE has full legal capacity and power to execute and deliver this Agreement and the Transaction Documents to which CAE is a party, which Agreement and such Transaction Documents have been duly executed and delivered by CAE and constitute the valid and binding obligation of CAE enforceable against CAE in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

 

(d) No Conflict. The execution, delivery and performance of this Agreement and the Transaction Documents, and the consummation of the transactions contemplated hereby, by CAE do not and will not (i) conflict with, or result in a violation of, or result in the breach of or a default (or which with notice or lapse of time would result in a default) under, any provision of: (A) any federal, state or local law, regulation, ordinance, order, rule or administrative ruling of any Governmental Authorities applicable to CAE or its properties; (B) the Articles of Incorporation or Bylaws of CAE; or (C) any material agreement, material indenture or material instrument to which CAE is a party or by which it or its properties or assets may be bound; or (D) any order, judgment, writ, injunction or decree of any court, arbitration panel or any Governmental Authorities applicable to CAE; (ii) result in the creation or acceleration of any security interest, mortgage, option, lien, or encumbrance upon any property of CAE, or (iii) violate the terms or conditions of, or result in the cancellation, modification, revocation or suspension of, any contract, agreement, license, approval, certificate, permit or authorization held by CAE.

 

(e)

Capitalization of CAE.

 

(i) As of the date hereof, the authorized capital stock of CAE consists of (A) 100,000,000 shares of common stock, no par value (the “CAE Common Shares”), of which 51,079,638 common shares are issued and outstanding and (B) 10,000,000 shares of preferred stock, $.001 par value (the “CAE Preferred Shares” and together with the CAE Common Shares, the “CAE Shares”), of which no shares are issued and outstanding. Section 6.01(e)(i) of the Full Art Disclosure Schedule sets forth a complete and correct list of the CAE Common Shares currently outstanding. All of the outstanding CAE Shares have been duly authorized and are validly issued, fully paid and non-assessable, and were not issued in violation of the preemptive rights of any person. All CAE Common Shares to be issued hereunder will be issued in compliance in all material respects with all applicable federal and state securities laws. As of the date of this Agreement, except as disclosed in CAE’s most recently filed periodic report with the Securities and Exchange Commission (the “Periodic Report”) and except for CAE Common Shares issuable pursuant to this Agreement and except as otherwise disclosed in Section 6.01(e)(i) of the Full Art Disclosure Schedule, CAE has no other commitment or obligation to issue, deliver or sell, or cause to be issued, delivered or sold, any CAE Common Shares. Except as set forth in the Periodic Report and except as otherwise disclosed in Section 6.01(e)(i) of the Full Art Disclosure Schedule, there are no bonds, debentures, notes or other indebtedness of CAE, and no securities or other instruments or obligations of CAE the value of which is in any way based upon or derived from any capital or voting stock of CAE, having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of CAE may vote. Except as set forth above, as of the date of this Agreement, there are no material contracts of any kind to which CAE is a party or by which CAE is bound obligating CAE to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock of, or other equity or voting interests in, or securities convertible into, or exchangeable or exercisable for, shares of capital stock of, or other equity or voting interests in, CAE or obligating CAE to issue, grant, extend or enter into any such security, option, warrant, call, right or contract. There are no outstanding contractual obligations of CAE to repurchase, redeem or otherwise acquire any shares of capital stock of, or other equity or voting interests in, CAE.

 

 

(ii) The CAE Common Shares to be issued in exchange for the Techwell Shares as a portion of the Aggregate Purchase Price, when issued in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid and non-assessable, and will not be subject to any preemptive or other statutory right of CAE stockholders.

 

(f) Financial Statements of CAE. CAE has furnished to the Shareholders financial statements of CAE consisting of the balance sheets as of December for each of the years 2006 and 2005, and the related statements of income, changes in shareholders’ equity and cash flows for the two (2) years ended December 31, 2006, including accompanying notes and the report thereon of Samuel H. Wong & Co., LLP, and the statement of financial condition as of September 30, 2007 (the “CAE Balance Sheet Date”) and the related statements of earnings, shareholders’ equity and cash flows for the nine (9) months then ended (collectively, all of such financial statements are referred to as the “CAE Financial Statements”). The CAE Financial Statements have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the financial position of CAE as of the dates thereof and their respective results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

 

(g) Absence of Undisclosed Liabilities. Except as disclosed in the Periodic Report and except as set forth in the CAE Financial Statements or in Section 6.01(g) of the Full Art Disclosure Schedule and except as arising hereunder, CAE has no liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) except as otherwise disclosed on the CAE Financial Statements, or incurred since CAE Balance Sheet Date in the ordinary course of business and usual and normal in amount both individually and in the aggregate.

 

(h) Absence of Changes. Since the CAE Balance Sheet Date, CAE has operated its business in the ordinary course consistent with past practice, and there has not been any Material Adverse Effect respecting CAE. 

 

(i) Taxes. CAE has timely filed or caused to be filed on a timely basis all Tax Returns with respect to all Taxes required to be filed under applicable laws and regulations. Such Tax Returns are true, correct and complete in all respects. All Taxes due and owing by CAE (whether or not showing on any Tax Return) have been paid. CAE is not currently the beneficiary of any extension of time in which to file any Tax Return. No written claim has ever been made by any authority in a jurisdiction where CAE does not file Tax Returns that Full Art is or may be subject to taxation by that jurisdiction. There are no liens for Taxes (other than for Taxes not yet due and payable) upon any of the assets of CAE. CAE has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

 

(j) Legal Proceedings. There are no actions, suits, proceedings, claims or investigations pending or, to the Knowledge of CAE, threatened in any court, before any governmental agency or instrumentality or in any arbitration proceeding against or by CAE, the effect of which would constitute a Material Adverse Effect on CAE.

 

 

(k) Regulatory Matters. CAE is not a party to and neither CAE nor any of its properties or assets is subject to any order, judgment, decree, agreement, memorandum of understanding or similar arrangement with any Governmental Authority charged with the supervision or regulation of CAE. CAE has not been advised by any of the Governmental Authorities that any of such Governmental Authorities are contemplating issuing or requesting (or are considering the appropriateness of issuing or requesting) any such order, judgment, decree, agreement, memorandum of understanding, supervisory letter or similar submission.

 

(l) Brokers, Finders and Others. There are no fees or commissions of any sort whatsoever claimed by, or payable by CAE to, any broker, finder, intermediary or any other similar person in connection with effecting this Agreement or the transactions contemplated hereby, except for ordinary and customary legal and accounting fees.

 

(m) Compliance with Laws. Except as disclosed in the Periodic Report and except as set forth in Section 6.01(m) of the Full Art Disclosure Schedule, CAE:

 

(i) is in compliance, in all material respects, with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable thereto or to the employees conducting such business;

 

(ii) has all material permits, licenses, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Authorities that are required in order to permit it to own or lease its properties and to conduct its business as presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and no suspension or cancellation of any of them has been threatened in writing; and

 

(iii) has received no written notification or communication from any Governmental Authorities since January 1, 2001, (A) asserting that CAE is not in compliance with any of the statutes, regulations or ordinances which such Governmental Authorities enforce, or (B) threatening to revoke any license, franchise, permit or governmental authorization which has not been resolved to the satisfaction of the Governmental Authorities which sent such notification or communication. There is no event which has occurred that, to the knowledge of CAE, would reasonably be expected to result in the revocation of any such license, franchise, permit or governmental authorization.

 

(n) Governmental and Third-Party Proceedings. Except as set forth in Section 6.01(n) of the Full Art Disclosure Schedule, no consent, approval, authorization of, or registration, declaration or filing with, any court, Governmental Authorities or any other third party is required to be made or obtained by CAE in connection with the execution, delivery or performance by CAE of this Agreement and the Transaction Documents or the consummation by CAE of the transactions contemplated hereby.

 

 

 

7.01

Necessary Further Action.

 

Each of Full Art and each Shareholder agrees to use its commercially reasonable efforts to take, or cause to be taken, all necessary actions and execute all additional documents, agreements and instruments required to consummate the transactions contemplated in this Agreement including taking all steps to secure promptly all consents, rulings and approvals of Governmental Authorities and Carriers which are necessary for the performance by each party of each of its obligations under this Agreement and the transactions contemplated hereby.

 

7.02

Press Releases.

 

Neither the Shareholders nor Full Art shall, and the Shareholders shall procure Techwell to not, make any press release or other public announcement concerning the transactions contemplated by this Agreement without the prior written consent of the other parties hereto as to the form and contents of such press release or public announcement.

 

7.03

Further Covenants.

 

(a) Each Shareholder covenants to Full Art that it will not, without the prior written consent of Full Art, for a period of two (2) years after the date of Closing, either solely or jointly with or on behalf of any other Person or otherwise, whether as a director, shareholder, employee, partner, agent or otherwise:

 

(i) carry on or be engaged or interested directly or indirectly in any capacity (except as the owner of shares or securities listed or dealt in on an internationally recognized stock exchange in Hong Kong or elsewhere held by way of investment only) in any business which may be in competition within Hong Kong, Macau or PRC with Techwell or any Techwell Subsidiaries in the carrying on of the Business;

 

(ii) solicit or entice or endeavor to solicit or entice away from Techwell or any Techwell Subsidiaries any employee, officer, manager, consultant (including employees who are directors) of Techwell or any Techwell Subsidiaries or any Persons whose services are otherwise made available to Techwell or any Techwell Subsidiaries on a full-time or substantially full-time basis;

 

(iii) deal with, canvass, solicit or approach or cause to be dealt with, canvassed or solicited or approached for business in respect of any trade or business carried on or service provided by Techwell or any Techwell Subsidiary any Person who at Closing or within two years prior to Closing was a customer, supplier, client, representative, agent of or in the habit of dealing under contract with Techwell or any Techwell Subsidiary.

 

 

(b) Each Shareholder further covenants to Full Art that:

 

(i) it will not at any time hereafter make use of or disclose or divulge to any Person other than to officers or employees of Techwell whose province it is to know the same any information relating to Techwell or any Techwell Subsidiary other than any information properly available to the public through no breach of its obligations hereunder or disclosed or divulged pursuant to an order of a court of competent jurisdiction;

 

(ii) it will not at any time hereafter in relation to any trade, business or company use a name including the word or symbol “Techwell”, “Techwell Engineering,” “Techwell Engineering Limited” or any Chinese equivalent thereof or any similar word or symbol in such a way as to be capable of or likely to be confused with the name of Techwell or any Techwell Subsidiary and shall use all reasonable endeavors to procure that no such name will be used by any Person with which it is connected;

 

(iii) it will not do anything which might prejudice the goodwill of Techwell or any Techwell Subsidiary;

 

(iv) it will procure that its Affiliates and their respective employees will observe the restrictions contained in this Section 7.03.

 

(c) Each and every obligation under this Section shall be treated as a separate obligation and shall be severally enforceable as such and in the event of any obligation or obligations being or becoming unenforceable in whole or in part such part or parts as are unenforceable shall be deleted from this Section and any such deletion shall not affect the enforceability of all such parts of this clause as remain not so deleted.

 

(d) The restrictions contained in this Section 7.03 are considered reasonable by the Shareholders and the other parties hereto, but in the event that any such restriction shall be found to be void but would be valid if some part thereof were deleted or the area of operation or the period of application reduced, such restriction shall apply with such modification as may be necessary to make it valid and effective.

 

7.04

Lock-Up Agreement.

 

(a) Each Shareholder agrees that other than as set forth below, such Shareholder shall not: (i) sell, assign, exchange, transfer, pledge, distribute or otherwise dispose of (X) any of the CAE Common Shares received by such Shareholder pursuant to this Agreement, or (Y) any interest (including, without limitation, an option to buy or sell) in any such CAE Common Shares, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose; or (ii) engage in any transaction in respect of any CAE Common Shares received by such Shareholder pursuant to this Agreement or any interest therein, the intent or effect of which is the effective economic disposition of such shares (including, but not limited to, engaging in put, call, short-sale, straddle or similar market transactions) (the foregoing restrictions are referred to herein as “Lock-Up Restrictions”).

 

 

(b) Each Shareholder’s CAE Common Shares acquired pursuant to this Agreement shall be released from the Lock-Up Restrictions on the first (1^st) anniversary of the Closing Date.

 

(c) The certificates evidencing the CAE Common Shares received by the Shareholders pursuant to this Agreement shall bear a legend as set forth below and such legend shall remain during the term of this Lock-Up Agreement as set forth above:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER RESTRICTIONS SET FORTH IN THAT CERTAIN STOCK PURCHASE AGREEMENT BY AND AMONG CHINA ARCHITECTURAL ENGINEERING, INC., A DELAWARE CORPORATION, FULL ART INTERNATIONAL, LTD., A HONG KONG CORPORATION, AND THE HOLDER HEREOF (THE “PURCHASE AGREEMENT”), AND MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED OR OTHERWISE DISPOSED OF PRIOR TO THAT CERTAIN TIME PERIOD DETAILED IN SECTION 7.04 OF THE PURCHASE AGREEMENT. THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) UPON THE EXPIRATION OF THE TIME PERIOD SPECIFIED IN SECTION 7.04 OF THE PURCHASE AGREEMENT. A COPY OF THE PURCHASE AGREEMENT IS AVAILABLE FOR YOUR REVIEW AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER.

 

7.05

Techwell Building Systems (Shenzhen) Ltd. and Techwell International Limited.

 

(a) Each Shareholder agrees to file, or cause to be filed, as soon as reasonably practicable and in any event within five (5) business days from the date of this Closing, any and all filings required by any Governmental Authority in connection with establishing Techwell’s ownership of the outstanding capital interests in each of Techwell Building Systems (Shenzhen) Ltd. (“Techwell Shenzhen”) and Techwell International Limited (“Techwell Macau”). Each Shareholder shall promptly notify Full Art upon completion of the filings and provide to Full Art evidence of such filings, including governmental acknowledgement of receipt of such filings, and each Shareholder shall promptly notify Full Art and provide proper documentation upon completion of the transfer of the capital interests of each of Techwell Shenzhen and Techwell Macau. In addition, each Shareholder shall take all efforts required to effect the fully, properly, and legally establish Techwell’s ownership of the outstanding capital interests in each of Techwell Shenzhen and Techwell Macau, as determined by Full Art’s legal counsel.

 

 

(b) Each Shareholder shall, as soon as reasonably practicable and in any event within seven (7) business days from the date of this Closing, cause to be delivered to Full Art (i) a legal opinion issued by Macau legal counsel with respect to Techwell Marcau (the “Macau Opinion”) and (ii) a legal opinion issued by PRC legal counsel with respect to Techwell Shenzhen (the “PRC Opinion”, and collectively with the Macau Opinion, the “Opinions”). The Opinions shall opine as to effectiveness and legality of the transfer of the capital equity interests of Techwell Shenzhen and Techwell Macau to Techwell, subject to the appropriate Governmental Authority’s processing of the transfer documents and filings as described in Section 7.05(a) above. In addition, the Opinions shall cover the incorporation, business operations, share capital, management, litigation, taxes, and social security of Techwell Shenzhen and Techwell Macau, respectively, and the Opinions shall be in the substantially the form as previously provided to each of the Shareholders and their legal counsel.

 

7.06

Additional Covenants and Agreements

 

Each of the Shareholders acknowledges and agrees to the following with respect to the sale of the Techwell Shares hereunder:

 

(a) Shareholders have not provided adequate assurances to Full Art that any outstanding loans of Techwell whether secured by the Shareholders, South Crown Aluminum Building Systems Limited, a Hong Kong corporation, or otherwise shall not become immediately due and payable in full or in part as a result of the Closing. To the extent such loans become due and payable and Full Art and/or CAE is required to make any accelerated payments thereunder where such accelerated payments were caused by Shareholders’ failure to obtain the consent of any lender, Shareholders shall be jointly and severally liable for any and all costs incurred by Full Art and/or CAE regardless of any surety or guaranty, if any.

 

(b) Shareholders acknowledge that there are several bank accounts relating to Techwell and/or the Techwell Subsidiaries on which one or both Shareholders are designated as authorized signatories. Immediately after the Closing, Shareholders shall take any and all action necessary to cause persons designated by Full Art to become authorized signatories on such accounts such that any disbursements made from said accounts can only be made pursuant to instructions from the authorized signatories as designated by Full Art.

 

(c) Pursuant to certain Chinese transfer documents dated October 25, 2007, Techwell Shenzhen agreed to pay Shareholders individual consideration in the aggregate amount of Ten Million Hong Kong Dollars (HK$10,000,000) upon the effectiveness of the transfer of such Shareholders’ capital interests in Techwell Shenzhen. Techwell Macau has also agreed to pay Geoffrey Ng consideration in the amount of Twenty-Two Thousand Five Hundred MOP (MOP$22,500) as consideration for the transfer of his capital interest in Techwell Macau. To the extent that this is not Full Art’s understanding and agreement with Shareholders as of the date hereof, Shareholders shall waive any and all rights to receive such consideration and Techwell Shenzhen and Techwell Macau, as applicable, shall have no further obligation to pay such consideration to any Shareholder as it relates to such Shareholders’ transfer of his/her interests in either of Techwell Shenzhen or Techwell Macau.

 

 

(d) Shareholders acknowledge that, notwithstanding the applicability of Macau laws regarding ownership of shares, a portion of Shareholders’ capital interests in Techwell Macau is currently held in trust. To the extent that CAE is unable to consolidate the financial statements of Techwell and the Techwell Subsidiaries in their entirety as a result of such trust or if such trust violates in any way the laws of Hong Kong, PRC or Macau, Shareholders shall take any and all action necessary to transfer such interests and shall be legally responsible for any failure to validly and legally effect the transfer of Shareholders’ capital interests in Techwell Macau. Further, Shareholders shall be jointly and severally liable for any damages to Full Art and/or CAE as a result of such transfer not being legally and validly effected.

 

(e) Shareholders acknowledge that Techwell Shenzhen’s environmental protection approval from Nanshan Environment Protection Bureau (“Environmental Permit”) expired in January 2007 and as such, Techwell Shenzhen does not currently have an effective Environmental Permit. Immediately after the Closing, Shareholders shall take any and all action necessary to file or cause, or cause to be filed, as soon as reasonably practicable and in any event within five (5) business days from the date of this Closing, any and all filings required by Governmental Authorities in connection with obtaining and/or renewing its Environmental Permit. Shareholders shall be jointly and severally liable for any and all damages to Full Art and/or CAE as a result of such Environmental Permit not being effective prior to the Closing.

 

(f) Shareholders acknowledge that to the extent that Techwell Shenzhen’s payments of social insurance to PRC Governmental Authorities do not meet the statutory requirements set forth under PRC law and Techwell Shenzhen is deemed liable for payments of social insurance with respect to any employees hired by Techwell Shenzhen on or prior to the Closing, Shareholders shall be jointly and severally liable for any and all such costs incurred by Full Art and/or CAE after the Closing with respect to such payments.

 

(g) Shareholders acknowledge that to the extent that Techwell Shenzhen does not have any written employment agreements executed with its employees as required under the PRC Labor Law, Shareholders shall be jointly and severally liable for any and all damages incurred by Full Art and/or CAE as a result of such employment agreements not being executed on or before the Closing.

 

 

8.01

Conditions to the Obligations of Full Art.

 

The obligations of Full Art under this Agreement shall be subject to the satisfaction, or written waiver by Full Art prior to the Closing, of each of the following conditions precedent:

 

(a) All material authorizations, consents, waivers and approvals required on the part of any Shareholder or Techwell in connection with the execution, delivery and performance of this Agreement or any Transaction Document to which it is a party shall have been duly obtained and shall be in form and substance reasonably satisfactory to Full Art and its counsel.

 

(b) No legal action, investigation (whether antitrust or otherwise) or proceeding (including any petition, action or proceeding for or in relation to the winding-up, insolvency, liquidation or dissolution of Techwell or for the appointment of any receiver, trustee or similar officer of Techwell or any of its assets and properties) shall have been instituted by or threatened by any Person or Governmental Authority, in either case seeking to restrain, prohibit, invalidate or otherwise affect the consummation of the transactions contemplated hereby or which would, if adversely decided, materially adversely affect Techwell or the Business after the Closing Date.

 

 

(c) The representations and warranties of the Shareholders set forth in this Agreement that are qualified with respect to materiality shall be true and correct as of the date of this Agreement and as of the Closing as though such representations and warranties were also made as of the Closing, except that those representations and warranties which by their terms speak as of a specific date shall be true and correct as of such date. The representations and warranties of the Shareholders set forth in this Agreement that are not qualified with respect to materiality shall be true and correct in all material respects as of the date of this Agreement and as of the Closing as though such representations and warranties were also made as of the Closing, except that those representations and warranties which by their terms speak as of a specific date shall be true and correct as of such date. Full Art shall have received a certificate, dated with the date of the Closing, signed by the Shareholders, to such effect.

 

(d) Each Shareholder shall have performed in all material respects all of its covenants and obligations under this Agreement to be performed by it on or prior to the Closing, including those relating to the Closing, and Full Art shall have received a certificate, dated with the date of the Closing, signed by the Shareholders, to such effect.

 

(e) The Transaction Documents shall have been duly executed and delivered by all parties hereto other than Full Art.

 

(f) Instruments of transfer of the Techwell Shares duly executed by the respective registered holders thereof in favor of Full Art (or such other person(s) as it may direct) and contract notes (in a form complying with the Stamp Duty Ordinance, Chapter 117 of the laws of Hong Kong) recording the sale and purchase of the Techwell Shares contemplated hereunder shall have been duly executed by the Shareholders and delivered to Full Art.

 

(g) The Shareholders shall have delivered to Full Art a cashier order in favor of the Government of the Hong Kong SAR on account of their share of Hong Kong stamp duty payable by them upon the sale and purchase of the Techwell Shares, together with a written undertaking on terms acceptable to Full Art by the Shareholders in favor of the Government of the Hong Kong SAR and/or Full Art to pay within forty-eight (48) hours after assessment fifty percent (50%) of any additional stamp duty which may be assessed payable in respect of the sale and purchase of the Techwell Shares.

 

(h) No event or circumstance shall have occurred that would constitute a Material Adverse Effect with respect to Techwell.

 

(i) The Shareholders shall have delivered to Full Art a certificate of continuing registration, dated as of a date not more than two (2) business days prior to the Closing Date (or such longer period as may be acceptable to Full Art), duly issued by the Registrar of Companies in Hong Kong and, if required by Full Art, any other certificate duly issued by the appropriate governmental authority in each state, if any, in which Techwell is authorized to do business, showing that Techwell is in good standing and authorized to do business.

 

 

(j) Full Art shall have received the following documents in form and substance satisfactory to Full Art:

 

(i) certificates in respect of all issued shares in the capital of each of the Techwell Subsidiaries held by Techwell or a subsidiary of Techwell and transfers of all shares in any Techwell Subsidiary held by any nominee of Techwell or of a subsidiary of Techwell in favour of Full Art or such other Person(s) as Full Art may direct;

 

(ii) such waivers or consents as Full Art may require to enable Full Art or its nominee(s) to be registered as the holder(s) of the Techwell Shares and shares in the Techwell Subsidiaries referenced in subsection (i) above, and such other documents as may be reasonably required to give good title to the Techwell Shares free from all claims, liens, charges, equities and encumbrances and third party rights of any kind and to enable Full Art (or as it may nominate) to become the registered holder thereof;

 

(iii) all title deeds and other documents of title to the Owned Properties and any other Techwell Real Properties to which Techwell or any Techwell Subsidiary holds land use rights, and all statutory books and records (including, without limitation, register of members, register of directors, register of secretaries and all minute books), duly written up to date, of Techwell and the Techwell Subsidiaries, their certificates of registration and securities and common seals;

 

(iv) all books and accounts and other records, including without limitation, the cheque books and bank records of Techwell and the Techwell Subsidiaries;

 

(v) if so required by Full Art, a letter of resignation from the auditors of Techwell and of its subsidiaries confirming that they have no outstanding claims of any kind against Techwell or any such subsidiaries;

 

(vi) to the extent required by Full Art, evidence that all guarantees given by Techwell and the Techwell Subsidiaries in favor of third parties in respect of the performance of the obligations of any Shareholder or any other Person not being Techwell or one of the Techwell Subsidiaries have been released;

 

(vii) to the extent required by Full Art, evidence that all loans or other indebtedness due or owing to Techwell or any of the Techwell Subsidiaries by any Shareholder or its Affiliate or by any directors or other officers of Techwell or any of the Techwell Subsidiaries have been repaid in full;

 

(viii) powers of attorney, if necessary, on terms acceptable to Full Art, under which any of the documents referred to in this Section 8.01(j) is executed;

 

 

(ix) duly executed resolutions of the board of directors of Techwell and, where required, of its Shareholders in accordance with its Memorandum and Articles of Association evidencing the following:

 

(1) the approval by the board of directors of Techwell of the transfers of the Techwell Shares to Full Art or its nominee(s) and (subject only to the production of duly stamped transfers) its/their registration as members of Techwell in respect of the Techwell Shares;

 

(2) such persons as Full Art may nominate to be validly appointed as directors of Techwell and Techwell Subsidiaries with effect from the date of Closing;

 

(3) such directors and the secretary of Techwell and/or the Techwell Subsidiaries as Full Art may require to resign from all their offices with Techwell and/or such Techwell Subsidiaries, delivering to Full Art a letter under seal from each of such directors and secretary acknowledging that he/she has no claim outstanding for compensation or otherwise against Techwell and the relevant Techwell Subsidiaries; and

 

(4) such person(s) as Full Art may nominate to be the authorised signatories for the operation of the bank accounts of Techwell and any Techwell Subsidiaries and cause the removal of such existing authorised signatories as Full Art may direct.

 

(k) Ng Chi Sum shall have entered into an employment agreement with Techwell to act as General Manager of Techwell in substantially the form attached hereto as Exhibit E (the “Employment Agreement”).

 

(l) The net assets of Techwell reflected on the Techwell Financial Statements as of September 30, 2007 shall equal at least thirty percent (30%) of the Aggregate Purchase Price.

 

8.02

Conditions to the Obligations of the Shareholders.

 

The obligations of the Shareholders under this Agreement shall be subject to satisfaction, or written waiver by the Shareholders prior to the Closing, of each of the following conditions precedent:

 

(a) All material authorizations, consents, waivers and approvals required on the part of Full Art in connection with the execution, delivery and performance of this Agreement shall have been duly obtained and shall be in form and substance reasonably satisfactory to the Shareholders and its counsel.

 

(b) No legal action, investigation (whether antitrust or otherwise) or proceeding shall have been instituted by or threatened by any Person or Governmental Authority, in either case seeking to restrain, prohibit, invalidate or otherwise affect the consummation by Full Art or CAE of the transactions contemplated hereby.

 

 

(c) The representations and warranties of Full Art and CAE set forth in this Agreement that are qualified with respect to materiality shall be true and correct as of the date of this Agreement and as of the Closing as though such representations and warranties were also made as of the Closing, except that those representations and warranties which by their terms speak as of a specific date shall be true and correct as of such date. The representations and warranties of Full Art and CAE set forth in this Agreement that are not qualified with respect to materiality shall be true and correct in all material respects as of the date of this Agreement and as of the Closing as though such representations and warranties were also made as of the Closing, except that those representations and warranties which by their terms speak as of a specific date shall be true and correct as of such date. The Shareholders shall have received a certificate, dated with the date of the Closing, signed on behalf of Full Art and CAE by its respective President and Chief Executive Officer, to such effect.

 

(d) Full Art shall have performed in all material respects all of its covenants and obligations under this Agreement to be performed by it on or prior to the Closing, including those related to the Closing, and the Shareholders shall have received a certificate, dated with the date of the Closing, signed on behalf of Full Art by Full Art’s President and Chief Executive Officer to such effect.

 

(e) The Transaction Documents shall have been duly executed and delivered by all parties hereto other than the Shareholders.

 

 

9.01

Survival of Representations, Warranties and Covenants.

 

Notwithstanding any investigation made on behalf of Full Art, CAE, or the Shareholders prior to or after the Closing Date, the representations and warranties of the Shareholders, Full Art and CAE set forth in this Agreement, or in any document delivered pursuant to the terms hereof or in connection with the transactions contemplated hereby, shall survive the date of the Closing but shall terminate on the date twenty-four (24) months following the Closing Date, provided, however that the representations and warranties contained in Sections 3.01(a), 3.01(b), 3.01(c), 3.01(e), 3.01(n), 3.01(cc), 3.01(dd), 5.01(b), 6.01(c) and 6.01(e) shall have no expiration date and the representations and warranties contained in Sections 3.01(k), 3.01(r) and 3.01(t) shall survive for the applicable statute of limitations period. All covenants and other agreements shall survive the Closing in accordance with the respective applicable statute of limitations.

 

 

9.02

Shareholders’ Indemnification.

 

(a) Subject to the terms and conditions of Sections 9.04 and 9.05, the Shareholders shall jointly and severally indemnify Full Art, CAE and its officers, directors, employees, Affiliates and agents and, upon and after the Closing, Techwell and Techwell Subsidiaries (collectively, “Full Art Indemnified Parties”) and hold each harmless from and against any and all losses, damages, actions, proceedings, causes of action, liabilities, claims, encumbrances, penalties, demands, assessments, settlements, judgments, costs and expenses including court costs and reasonable attorneys’ fees and disbursements (collectively, “Losses”) incurred by Full Art Indemnified Parties in connection with, arising out of, or resulting from any of the following:

 

(i) any breach or inaccuracy of any representation, warranty or statement made by any of the Shareholders in this Agreement or in any other Transaction Document to which he/she is a party;

 

(ii) any failure by any of the Shareholders to perform any agreement, covenant or obligation of any of the Shareholders pursuant to this Agreement or any Transaction Document to which he/she is a party;

 

(iii) any and all (1) Taxes (or the nonpayment thereof) of Techwell or any Techwell Subsidiary for all taxable periods ending on or before the date of the Closing and the portion through the end of the date of the Closing for any taxable period that includes (but does not end on) the date of the Closing (the “Pre-Closing Tax Period”), (2) all Taxes of any member of an unaffiliated, consolidated, combined or unitary group of which Techwell (or any predecessor of Techwell) is or was a member on or prior to the date of the Closing , including pursuant to Treasury Regulations Section 1.1502-6 or any analogous or similar state, local or foreign law or regulation, and (3) any and all Taxes of any Person (other than Techwell) imposed on Techwell as a transferee or successor, by contract or pursuant to any law, rule, or regulation, which Taxes relate to an event or transaction occurring before or at the Closing; provided, however, that in the case of clauses (1), (2), and (3) above, the Shareholders shall be liable only to the extent that such Taxes exceed the amount, if any, reserved for such Taxes (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) as reflected on the face of the most recent balance sheet included in the Techwell Financial Statements;

 

(iv) any and all (1) Environmental Laws applicable or any environmental liability related in any way to Techwell or any Shareholder or any of their properties, including without limitation, the presence, generation, storage, release, threatened release, use, transport, disposal, arrangement of disposal or treatment of oil, oil and gas wastes, solid wastes or hazardous substances on any of their properties, (2) breach or non-compliance by either Techwell or any Shareholder with any Environmental Law applicable to Techwell or any Shareholder, and (3) actual or alleged presence, use, release, storage, treatment, disposal, generation, threatened release, transportation, arrangement for transport or arrangement for disposal of oil, oil and gas wastes, solid wastes or hazardous substances on or at any of the properties owned or operated by Techwell or any Shareholder; or

 

 

(v) any action, litigation, suit, proceeding, investigation (civil, criminal, regulatory or otherwise), arbitration, claim, demand, grievance or inquiry, including any assessment, notice, demand or other document issued or action taken by or on behalf of any Governmental Authority in any part of the world, that is pending or threatened against Techwell or any Techwell Subsidiary prior to or on the date of Closing.

 

(b) Subject to the terms and conditions of Section 9.04 and without prejudice to the other provisions of this Section 9.02 or restricting the rights of Full Art Indemnified Parties or the ability of any of them to claim damages on any basis, in the event of any breach or inaccuracy of any representation, warranty or statement made by any of the Shareholders in this Agreement or in any other Transaction Document to which he/she is a party, each of the Shareholders hereby jointly and severally covenants to pay to Full Art:

 

(i) the amount necessary to put Techwell and each of Techwell Subsidiaries into the position which would have existed if such representation, warranty or statement had not been breached and had been true and not misleading; and

 

(ii) all costs and expenses incurred by Full Art, Techwell or any of the Techwell Subsidiaries, directly or indirectly, as a result of such breach.

 

(c) Subject to the terms and conditions of Sections 9.04 and 9.05 and without prejudice to the other provisions of this Section 9.02 or any other rights that any Full Art Indemnified Parties may have against the Shareholders, if on the second (2^nd) anniversary of the date of Closing, the actual amount of the Receivables collected by Techwell is less than the amount of the Receivables set forth in Section 3.01(dd) of the Techwell Disclosure Schedule, the Shareholders shall jointly and severally pay to Full Art an amount equal to the difference between the Receivables stated in Section 3.01(dd) of the Techwell Disclosure Schedule and the actual amount of the Receivables collected by Techwell.

 

9.03

Full Art Indemnification; CAE Indemnification.

 

(a) Full Art Indemnification. Subject to the terms and conditions of Section 9.04, Full Art shall indemnify the Shareholders, and their agents (“Shareholders’ Indemnified Parties”) and hold each harmless from and against any and all Losses, incurred by Shareholders’ Indemnified Parties in connection with, arising out of, or resulting from any of the following:

 

(i) any breach or inaccuracy of any representation or warranty made by Full Art in this Agreement; or

 

(ii) any failure by Full Art to perform any agreement, covenant or obligation of Full Art pursuant to this Agreement.

 

 

(b) CAE Indemnification. Subject to the terms and conditions of Section 9.04, CAE shall indemnify the Shareholders’ Indemnified Parties and hold each harmless from and against any and all Losses, incurred by Shareholders’ Indemnified Parties in connection with, arising out of, or resulting from any of the following:

 

(i) any breach or inaccuracy of any representation or warranty made by CAE in this Agreement; or

 

(ii) any failure by CAE to perform any agreement, covenant or obligation of CAE pursuant to this Agreement.

 

9.04

Indemnification Process.

 

(a) As promptly as is reasonably practicable after becoming aware of a claim for indemnification under this Agreement that does not involve a third party claim, Full Art shall give notice to the Shareholders of such claim or the Shareholders shall provide notice to Full Art or CAE (the “Claim Notice”), as the case may be, which Claim Notice shall, to the extent such information is reasonably available, specify the facts alleged to constitute the basis for such claim, the representations, warranties, covenants and obligations alleged to have been breached and the amount sought hereunder from the indemnifying persons. It is the intent of the parties that amounts paid under this Article Nine shall represent an adjustment to the Aggregate Purchase Price and the parties will report such payments consistent with such intent.

 

(b) The party seeking indemnification shall give notice as promptly as is reasonably practicable, but in any event no later than fifteen (15) business days after receiving notice thereof, to the Shareholders, Full Art or CAE, as the case may be, of the assertion of any claim, or the commencement of any suit, action or proceeding, by any Person not a party hereto in respect of which indemnity may be sought under this Agreement (which notice shall, to the extent such information is reasonably available, specify in reasonable detail the nature and amount of such claim). After such notice, the indemnifying party shall have the right to assume the defense; provided, however, that such indemnified party shall have the right to participate at its own expense in the defense of such action; and provided, further, that the indemnifying party shall not consent to the entry of any judgment or enter into any settlement, except with the written consent of such indemnified party (which consent shall not be unreasonably withheld), that (a) fails to include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of any such action or (b) grants the claimant or plaintiff any injunctive relief against the indemnified party.  Any failure to give prompt notice under this Section 9.04(b) shall not bar an indemnified party’s right to claim indemnification under this Article Nine, except to the extent that an indemnifying party shall have been harmed by such failure.

 

(c) Within ten (10) business days or the receipt of a Claim Notice, the Shareholders, Full Art or CAE, as the case may be, shall deliver to the Escrow Agent and Full Art, CAE or the Shareholders, as the case may be, a notice (“Objection Notice”) stating they intend to contest the claim (a “Contest”) or to accept liability thereunder.

 

(i) If the Shareholders, Full Art or CAE, as the case may be, do not give an Objection Notice within that ten (10) business day period, the Shareholders, Full Art or CAE, as the case may be, will be deemed to accept liability as it relates to such claim. To the extent the Shareholders are deemed liable for any Losses hereunder, such liability shall be satisfied pursuant to Section 9.05.

 

 

(ii) If Full Art or CAE gives a timely Objection Notice, then within thirty (30) business days of the receipt thereof, the Shareholders and Full Art or CAE, as the case may be, shall select an independent arbitrator (the “Independent Arbitrator”). The Independent Arbitrator shall be selected by the mutual agreement of the Shareholders and Full Art or CAE, as the case may be. If the parties cannot agree on the identity of an Independent Arbitrator within ten (10) business days of the date of an Objection Notice, then the Independent Arbitrator will be determined by an arbitrator selected by the Shareholders and an arbitrator selected by Full Art or CAE, as the case may be. The decision of the Independent Arbitrator shall be borne as directed by him. The Shareholders and Full Art or CAE, as the case may be, shall be entitled to make such representation and provide such information and reports to the Independent Arbitrator within twenty (20) business days of the date of agreement or, if later, determination of the identity of the Independent Arbitrator. The Shareholders and Full Art or CAE, as the case may be, shall use their respective commercially reasonable efforts to procure that the Independent Arbitrator issues his/her ruling within thirty (30) business days after the matter is submitted to him/her for consideration.

 

(iii) If the Shareholders give a timely Objection Notice, the Escrow Agent shall not take any further action with respect to the claim being Contested except as further provided in the Escrow Agreement.

 

9.05

Satisfaction of Shareholders’ Indemnification.

 

Whenever the Shareholders are deemed liable for any Losses for which indemnification is provided pursuant to this Article Nine, the Shareholders shall have ten (10) business days from such time such liability is deemed accepted to pay or satisfy such liability pursuant to one of the following methods:

 

(a) Shareholders may elect to pay by wire transfer of immediately available funds to Full Art;

 

(b) Shareholders may deliver a notice (“Claim Payment Notice”) to Escrow Agent instructing such agent to deliver to Full Art a stock certificate representing such amount of CAE Common Shares from the Escrow Funds required to satisfy the claim set forth in the Claim Payment Notice where such shares are valued at the CAE Share Price; or

 

(c) Shareholders may deliver a Claim Payment Notice instructing Escrow Agent to sell such amount of CAE Common Shares equal to an amount equal to 110% of the claim set forth in the Claim Payment Notice divided by the closing price of the CAE Common Shares as listed on the American Stock Exchange one (1) day immediately preceding the date of the Claim Payment Notice; provided, that Escrow Agent shall not sell such Common Stock until it shall have received an opinion from counsel to CAE and Full Art indicating that the proposed sale of such CAE Common Shares are not required to be registered under the 1933 Act, by reason of an exemption thereunder; provided, further, that to the extent the proceeds from such sale exceed the amount required to satisfy the claim set forth in the Claim Payment notice, such excess proceeds shall be delivered to Shareholders; provided, further, that to the extent the proceeds from such sale are not sufficient to satisfy the claim set forth in the Claim Payment Notice, Shareholders shall be required to satisfy the remainder of such claim by wire transfer of immediately available funds to Full Art.

 

 

To the extent that the Shareholders fail to timely designate one of the methods set forth above, Full Art shall have sole discretion to designate one of the above methods for satisfaction of Shareholders’ liability hereunder.

 

9.06

Exclusive Remedy.

 

Except (a) in the case of fraud or (b) for seeking specific performance or other form of equitable relief available at law or equity in connection with the enforcement of a covenant in this Agreement, the indemnification provided by this Article Nine shall be the sole and exclusive remedy for any Losses of the Full Art Indemnified Parties, on the one hand, or Shareholders’ Indemnified Parties, on the other, with respect to any misrepresentation or inaccuracy in, or breach of, any representations or warranties or any breach or failure in performance of, any covenants or agreements made by Full Art, CAE or any Shareholder under this Agreement or any other agreements delivered in conjunction with this Agreement.

 

 

10.01

Responsibility for Filing Tax Returns.

 

The Shareholders shall and shall cause Techwell to properly prepare and file all Tax Returns required on the part of Techwell at any time through the date of Closing in compliance with all applicable laws, rules and regulations. With respect to any Tax Return required of Techwell to be filed after the date of Closing covering any taxable period ending on or before the date of Closing or any taxable period that includes (but does not end on) the date of Closing, the Shareholders shall provide all assistance required by Full Art to enable it to prepare or cause to be prepared and file or cause to be filed all such Tax Returns for Techwell, including the provision of any books of account, records and other information with respect to any transactions and other matters occurring on or before Closing, in any case so to permit all such Tax Returns to be properly and accurately prepared and filed in compliance with all applicable laws, rules and regulations. Full Art shall permit the Shareholders to review and comment on each such Tax Return described in the preceding sentence prior to filing.

 

10.02

Certain Taxes and Fees.

 

All transfer, including real property, documentary, sales, use, stamp, registration and other such Taxes, and all conveyance fees, recording charges and other fees and charges (including any penalties and interest) incurred in connection with consummation of the transactions contemplated by this Agreement shall be paid by the Shareholders when due, and the Shareholders will, at their own expense, file all necessary Tax Returns and other documentation with respect to all such Taxes, fees and charges, except that all Hong Kong stamp duty arising from the transfer of the Techwell Shares payable or assessed to be payable shall be borne as to one-half by the Shareholders jointly and severally and as to the other half by Full Art.

 

 

 

11.01

Notices.

 

All notices, requests, demands and other communications required or permitted to be given under this Agreement shall be given in writing and shall be deemed to have been duly given (a) on the date of delivery if delivered by hand or by telecopy, in the case of telecopy upon confirmation of receipt, (b) on the date of delivery, if delivered by electronic mail, upon confirmation of receipt, or (c) on the first business day following the date of dispatch if delivered by a recognized next-day courier service. All notices thereunder shall be delivered to the following addresses:

 

If to Shareholders, to:

 

Ng Chi Sum HSE A4, Ville de Jardin 33-35 Sui Wo Road Shatin, Hong Kong Email: ***@***

 

and

Yam Mei Ling Flat 7, 11/F, Block F, Garden Vista 15-17 on King Street Shatin, Hong Kong Email: ***@***

 

with a copy to:

 

Donald Yap, Cheng & Kong, Solicitors & Notaries Rooms 2101-2, 21/F Far East Consortium Building 121 Des Veoux Road Central Hong Kong Attn: Anita S.W. Luk

 

If to Full Art, to:

Full Art International, Ltd. 105 Baishi Road Jiuzhou West Avenue Zhuhai 519070 People’s Republic of China 0086 ###-###-#### Attn: Luo Ken Yi Email:   ***@***

 

with a copy to:

Any party to this Agreement may, by notice given in accordance with this Section 11.01, designate a new address for notices, requests, demands and other communications to such party.

11.02

Counterparts.

This Agreement may be executed in one or more counterparts, each of which shall be deemed to be a duplicate original, but all of which taken together shall be deemed to constitute a single instrument.

 

11.03

Entire Agreement; No Third-Party Rights.

 

This Agreement and the Disclosure Schedules attached hereto constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter of this Agreement. This Agreement is not intended to confer upon any person other than the parties hereto (and their respective successors and assigns) any rights or remedies.

 

11.04

Successors and Assigns.

 

This Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns (including successive, as well as immediate, successors and assigns) of the parties hereto. This Agreement may not be assigned by any party hereto without the prior written consent of the other parties.

 

11.05

Captions

 

The captions contained in this Agreement are included only for convenience of reference and do not define, limit, explain or modify this Agreement or its interpretation, construction or meaning and are in no way to be construed as part of this Agreement.

 

 

11.06

Governing Law.

 

This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware without giving effect to principles of conflicts or choice of laws (except to the extent that mandatory provisions of Federal law are applicable).

 

11.07

Payment of Fees and Expenses.

 

Except as otherwise provided in Section 10.02 or otherwise agreed in writing, each party hereto shall pay its own costs and expenses, including legal and accounting fees, incurred in connection with the preparation, negotiation and execution of the Transaction Documents and the consummation of the transactions contemplated hereby and all expenses relating to its performance of, and compliance with, its undertakings herein.

 

11.08

Amendment.

 

From time to time and at any time prior to the Closing, this Agreement may be amended only by an agreement in writing executed by Full Art, CAE, and such Shareholders that constitute the holders of at least a majority in interest of the Techwell Shares.

 

11.09

WAIVER OF JURY TRIAL.

 

TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH PARTY HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING IN WHOLE OR IN PART UNDER, RELATED TO, BASED ON OR IN CONNECTION WITH THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 14.09 WITH ANY COURT AS WRITTEN EVIDECNE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

 

11.10

Waiver.

 

The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege.

 

 

11.11

Severability.

 

If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

 

 

 

 

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered on behalf of Full Art, CAE and the Shareholders as of the date set forth in the first paragraph above.

 

 

	FULL ART INTERNATIONAL, LTD.
	By:	/s/ Luo Ken Yi
		Name: Luo Ken Yi Title: Chairman

 

 

 

 

 

 

 

 

Techwell Shares	Issued and Outstanding
Ordinary Shares, HK$1.00 par value	3,500,000

 

Name	Address	Number of Shares Beneficially Owned
Ng Chi Sum	Hse A4, Ville de Jardin, 33 - 35 Sui Wo Road, Shatin, Hong Kong.	3,325,000
Yam Mei Ling	Flat 7, 11/F., Block F, Garden Vista, 15-17 On King Street, Shatin, Hong Kong	175,000

 

 

Techwell Building Systems (Shenzhen) Ltd.:

1/F., B1 Factory Building, Zone 5, Hung Hua Ling Industrial Zone, Xi Li Lu, Nanshan, Shenzhen, China

Techwell International Ltd.:

Ave. Horta Costa, No. 15, 1/F., “A”, Macau)

 

 

No liabilities or obligations except as set forth in the Techwell Financial Statements.

 

 

No Change.

 

 

 

No interest in Real Property, except leases for office spaces in Hong Kong, Macau and PRC for the purpose of business operation.

 

2.	Techwell Building Systems (Shenzhen) Ltd. 1/F., B1 Factory Building, Zone 5, Hung Hua Ling Industrial Zone, Xi Li Lu, Nanshan, Shenzhen, China

 

 

Techwell Engineering Ltd. had commenced a civil proceedings against Wishing Star Ltd. in the Court of First Instance in the Hong Kong SAR under Action No. HCA2604 of 2004. In the action, Techwell claimed against Wishing Star Ltd. for the outstanding sum of HK$1,852,624.84 being the outstanding costs for work done and material supplied for services provided by Techwell to Wishing Star. The stage of discovery has been completed and after the exchange of witness statements, the case shall be ready be set down for Trial.

 

 

 

 

Techwell is not a party to any employment, change in control, severance, consulting, and the like as identified in the SPA.

 

 

Not used / applicable.

 

 

All Employee Benefit Plans are maintained in accordance with applicable laws by the respective body of The Government of Hong Kong SAR:

 

Techwell operates in compliance with all laws, regulations, ordinances and rules applicable to offices of operations.

Techwell has in place and maintained all Statutory Plans in full compliance with the Legal Requirements and Governmental Requirements applicable to Techwell, its business and its operations.

 

 

Techwell operates in compliance with all regulations, ordinances and rules applicable to offices of operations.

 

 

Techwell Engineering Ltd. has been taking the following forms of insurance for the past five (5) years:

 

 

All as listed in Section 3.01(h) - Liabilities.

 

All contracts have been performed completely.

 

 

Techwell Engineering Ltd. registers the following trademarks in Hong Kong and PRC respectively:

 

Class

:

6

Particulars

:

corrugated, trapezoidal, textured metal sheets; custom fabricated panels for buildings; roof and wall cladding; all made of metal; all inclusive in Class 6.

 

 

2.

Bolzen Fassade

 

 

None.

 

 

All as disclosed in the Techwell Financial Statements.

 

 

Wholly owned subsidiary:

1/F., B1 Factory Building, Zone 5, Hung Hua Ling Industrial Zone, Xi Li Lu, Nanshan, Shenzhen, China

 

 

 

 

 

 

 

 

 

 

Subsidiary Name	Country
Full Art International, Ltd.	Hong Kong
Zhuhai King Glass Engineering Co., Ltd	People’s Republic of China
Zhuhai King General Glass Engineering Technology Co., Ltd	People’s Republic of China
King General Engineering (HK) Ltd.	Hong Kong
KGE Building System Ltd.	Hong Kong
KGE Australia Pty Ltd.	Australia

 

 

CAE Shares	Issued and Outstanding
Common Stock, US$0.001 par value	51,079,638(1)

(1) The number of shares of common stock outstanding excludes (i) 73,700 shares of common stock issuable upon exercise of outstanding warrants, (ii) 2,857,143 shares of common stock issuable upon the conversion of bonds, subject to adjustment, and (iii) 800,000 shares of common stock issuable upon the exercise of bond warrants, subject to adjustment, as discussed in CAE’s Form S-1 Registration Statement filed with the United States Securities and Exchange Commission on October 22, 2007.

The number of shares of common stock outstanding also excludes 140,000 shares of common stock issuable upon the exercise of warrants to be issued to Investor Relations International (“IRI”) pursuant to that certain letter of engagement and work authorization dated September 15, 2007 between IRI and CAE.

 

 

None.

 

 

None.

 

 

None.