THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Comtech Group, Inc. (COGO)

12/1/2005 Proxy Information

Share Exchange Agreement

On May 25, 2004, the Company, which was then a public company that had ceased operations in 2000, entered into a share exchange agreement with Comtech Cayman, the CompanyŐs immediate predecessor, and its shareholders, Comtech Global Investment Ltd., Purple Mountain Holding Ltd., and Ren International Investment Ltd. Under the agreement, the Company agreed to acquire all of the issued and outstanding shares of stock of Comtech Cayman in exchange for the issuance in the aggregate of 21,000,000 of its shares of common stock to Comtech CaymanŐs shareholders. The transaction was consummated on July 22, 2004. In accordance with the provisions in the agreement, the number of shares to be issued to Comtech CaymanŐs shareholders was adjusted at closing to 20,251,075. As a result of the transaction, Comtech Cayman became a wholly-owned subsidiary of the Company and Comtech CaymanŐs shareholders owned approximately 91.2% of all of our issued and outstanding stock. On August 2, 2004, we changed our name from Trident Rowan Group, Inc. to Comtech Group, Inc.

The Company and its shareholders prior to the share exchange, Emanuel Arbib, Gianni Bulgari, Mark S. Hauser and Mark B. Segall (Trident shareholders), and Comtech CaymanŐs shareholders executed a stockholdersŐ agreement, which provided for the designation of Trident shareholder representatives to serve on our board of directors. Under the stockholdersŐ agreement, until July 22, 2006, the Trident shareholders and Comtech CaymanŐs shareholders will be permitted to nominate two and five persons, respectively, to our board of directors at each annual meeting of shareholders, and will be required to vote their shares of common stock for all such nominees. Currently, Messrs. Hauser and Segall are the representatives of the Trident shareholders on our board of directors.

The terms of the share exchange agreement provide for the issuance of up to 30,173,047 additional shares to Comtech CaymanŐs shareholders in the event there is a breach of any representations, warranties, covenants or obligations made by Trident in the share exchange agreement for an amount of damages in excess of US$625,000. This indemnification provision expired on April 30, 2005, except in the case of known claims, which will survive until such matters are resolved finally by a court of law.

Shareholder Loans and Financing Transactions; Dividends and Distributions

During the year ended December 31, 2003, Comtech Global Investment Ltd., which is controlled by Mr. Kang and his wife, made working capital advances to us in the aggregate amount of RMB50.4 million (US$6.1 million). In addition, during 2003, we deferred payment of a dividend payable to Comtech Global in the amount of RMB41.4 million (US$5.0 million). In September 2004, we repaid the zero interest shareholder loan from, and dividends payable to, Comtech Global. There are no amounts currently outstanding to Comtech Global.

In July 2004, our Hong Kong subsidiary entered into a US$4.0 million revolving credit facility with the Bank of Communications, Hong Kong branch, which was subsequently increased to US$10.0 million on September 14, 2004, and was terminated on November 10, 2005. The facility was secured by funds on deposit owned by Mr. Kang in an amount equal to the outstanding borrowings. The outstanding balance under the facility was RMB23.2 million (US$2.8 million) as of December 31, 2004.

In June 2004, our Shenzhen subsidiary borrowed for working capital purposes RMB3.6 million (US$435,000) from Viewtran Technology Limited, an entity in which Mr. Kang has an approximately 6.1% interest and for which he is chairman of the board of directors. The loan was unsecured, non-interest bearing and had no fixed repayment terms. We repaid RMB3.0 million (US$362,000) of this loan on June 30, 2004. The balance in the amount of RMB600,000 (US$73,000) was outstanding as of December 31, 2004.

Since the time of the share exchange, there have been no dividends or distributions paid to us from entities owned by our affiliates.

Commercial Transactions

In 2001, we purchased a small office suite located in Shenzhen from Matsunichi Electronics, an entity owned by Mr. Kang. The purchase price of RMB1.7 million was based on the carrying value of the property at the time. As at March 31, 2005, there was a unsettled payable to Matsunichi, with no fixed repayment date, amounting to RMB1.6 million in connection with this purchase.

In 2003, we acted as an agent for Viewtran, a technology design firm, for various sales transactions, totaling RMB5.4 million (US$0.7 million). The sales transactions made on behalf of Viewtran were for our business promotion purposes. We did not charge Viewtran any service fee since we expected to have further business opportunities with Viewtran at a time when, prior to the share exchange transaction, Comtech Cayman was a private company. We recorded no profit or loss on these transactions. The agreement under which we carried out these transactions expired on December 31, 2003, and has not been renewed.

On April 1, 2005, we entered into an operating lease with Viewtran with respect to a property to be used for research and development purposes. The property is located at High-Tech Industrial Park in Shenzhen, with a total area of approximately 4,000 square feet. The monthly rental is RMB28,000 (US$3,400), including property management fee and utility charges, and the lease period ends on March 31, 2006. There are no specific provisions for extending the lease beyond its expiry date, except that at the end of the rental period, we have a priority right to continue leasing the space.

Other Related Party Transactions

Mr. Segall, one of our directors, is the founder and chief executive officer of Kidron Corporate Advisors LLC, which performed financial advisory services for Trident in 2003 and 2004, for which Kidron received US$360,000 in cash and warrants to purchase (a) 37,500 shares of our common stock at an exercise price of US$3.00 per share and (b) 37,500 shares of our common stock at an exercise price of US$2.50 per share.

Mr. Kang and his wife own, for the benefit of our subsidiary, Comtech China, all of the equity interest in our PRC operating company, Shenzhen Comtech, which in turn owns 60% equity interest in another of our PRC operating companies, Shanghai E&T. The equity interest in Shanghai E&T was acquired by Shenzhen Comtech in January 2004 for RMB1.2 million from the current minority shareholders, Michael Shao and Sun Jun, employees of Shanghai E&T, in order to provide a larger sales force, advanced technology know-how and a potential customer base in Shanghai. The registered capital of Shanghai E&T was RMB2 million.

While we do not have any equity interest in Shenzhen Comtech, through the contractual agreements among Comtech China, Mr. Kang and his wife, we enjoy voting control over and are entitled to all economic interests associated with Mr. KangŐs and his wifeŐs equity interest in Shenzhen Comtech. These contractual agreements were put in place as part of an overall group restructuring undertaken in 2002 to consolidate all of our businesses under one company, Comtech Cayman in preparation for a possible public listing of our shares. There was no consideration involved, as Mr. Kang and his wife were 100% owners of Shenzhen Comtech prior to the group restructuring undertaken in 2002 and still retained 100% interest in Shenzhen Comtech through their 100% ownership of the CompanyŐs predecessors following the 2002 reorganization.

At present, most of our business in China is done through Shenzhen Comtech and its affiliate, Shenzhen Communication, except for business in Shanghai, which is conducted mostly through Shanghai E&T. No dividends have been paid or distributions made by Shenzhen Comtech to Comtech China thus far.