AMENDMENT AND WAIVER
AGREEMENT
This Amendment and Waiver
Agreement (the “ Agreement ”) is made and
entered into as of August 6, 2009, by and among China Architectural
Engineering, Inc., a Delaware corporation (the “
Company ”), KGE Group Limited (“
KGE Group ”), ABN AMRO Bank N.V., London Branch
(“ ABN AMRO ”), and CITIC Capital China
Mezzanine Fund Limited (formerly known as “CITIC Allco
Investments Limited.”) (“ CITIC ,”
and together with ABN AMRO, the “ Bondholders
”) and ABN AMRO Bank (China) Co., Ltd., Shenzhen Branch (the
“ Overdraft Lender ” and together with
ABN AMRO and CITIC, the “ Creditors
”).
Recitals
WHEREAS, on April 12, 2007, the Company sold and
issued to ABN AMRO US $10,000,000 Variable Rate Convertible Bonds
due 2012 (the “ 2007 Bonds ”) and
warrants to purchase 800,000 shares of common stock of the Company
expiring 2010 (the “ 2007 Warrants
”);
WHEREAS, the 2007 Bonds were issued pursuant to
a trust deed dated April 12, 2007, as amended and restated on
August 29, 2007 (the “ 2007 Trust Deed
”), entered into by and between the Company and The Bank of
New York, London Branch (the “ Trustee
”);
WHEREAS, the 2007 Warrants have been fully
exercised pursuant to the terms of the 2007 Warrants and are no
longer outstanding;
WHEREAS, on April 15, 2008, the Company issued
to the Bondholders an aggregate amount of US$20,000,000 12%
Convertible Bonds due 2011 (the “ 2008 Bonds
,” and together with the 2007 Bonds, the “
Bonds ”) and 300,000 warrants to purchase
300,000 shares of common stock of the Company expiring 2013 (the
“ 2008 Warrants ”);
WHEREAS, the 2008 Bonds were issued pursuant to
a trust deed dated April 15, 2008, as amended and restated on
September 29, 2008 (the “ 2008 Trust Deed
,” and together with the 2007 Trust Deed, the “
Trust Deeds ”), entered into by and between the
Company and the Trustee;
WHEREAS, the 2008 Warrants, none of which have
been exercised as of the date of this Agreement, were issued
pursuant to a Warrant Instrument dated April 15, 2008 (the “
2008 Warrant Instrument ”) entered into by and
between the Bondholders and the Company;
WHEREAS, the 2007 Trust Deed and 2008 Trust Deed
each provide that the then-current conversion price of the
respective Bonds shall be adjusted downward upon certain triggering
events, including upon the sale and issuance by the Company of
shares of the Company’s common stock, $0.001 par value per
share (“ Shares ”) for consideration per
Share that is less than the then-current conversion price of the
respective Bonds;
WHEREAS, paragraph 8.1(e) of the 2008 Warrant
Instrument provides that an the occurrence of an adjustment to the
conversion price of the 2008 Bonds shall result in an identical
adjustment to the exercise price of the 2008 Warrants;
WHEREAS, the Company has agreed to provide a
guarantee over an Overdraft Facility letter (reference number
CZ2008003C) provided by ABN AMRO Bank (China), Shenzhen Branch,
dated 13 May 2009 (the “ Bank Overdraft
Facilities ”);
WHEREAS, Condition 12(A)(xiv) of the Terms and
Conditions of the 2008 Trust Deed provide that it is an event of
default if KGE Group ceases to own at least 45% of the outstanding
Shares;
WHEREAS, ABN AMRO holds 100% of the issued and
outstanding 2007 Bonds, and the Bondholders in aggregate hold 100%
of the issued and outstanding 2008 Bonds and 100% of the 2008
Warrants;
WHEREAS, the Company and KGE Group are currently
contemplating the issue and sale by the Company and the sale by KGE
Group of Shares to certain investors on the terms and conditions
described in Appendix A attached to this Agreement (the
“ Proposed Sale ”) ;
WHEREAS, if consummated, the Proposed Sale (a)
would trigger a reduction in the conversion price of each of the
Bonds and a reduction in the exercise price of the 2008 Warrants
pursuant to the terms of the Bonds and the 2008 Warrants (the
“ Adjustment Rights ”) and (b) would
result in an event of default under Condition 12(A)(xiv) of the
2008 Bonds;
WHEREAS, the proceeds of the Proposed Sale will
be applied in accordance with the terms hereof and as specifically
set forth in Appendix B , and the Proposed Sale will provide
the Company with additional resources to assist the Company in
strengthening its financial position and operations;
WHEREAS, the Proposed Sale is subject to the
NASDAQ Stock Exchange and United States federal securities law
requirements described in Appendix A ;
WHEREAS, the Proposed Sale is expected to occur
in two separate steps and consummation of the second step is
subject to certain approvals that may not be received;
WHEREAS, the use of the net proceeds of the
Proposed Sale shall be applied in the order described in
Appendix B ;
WHEREAS, each of the Bondholders desires to
waive their Adjustment Rights only as it relates to the Proposed
Offering and Condition 12(A)(xiv) of the 2008 Bonds, and only for
the sole purpose of allowing the Proposed Sale to take place and be
completed no later than Three (3) months from the effective date of
this Agreement; and
WHEREAS, if any portion of the Proposed Sale is
consummated but the Agreed Bondholder Payments, as defined in
Appendix B , are not paid to the Creditors in accordance
with the time periods, amounts and order set forth in Appendix
B ; then no rights of the Bondholders, including those rights
under Condition 12(A)(xiv) of the 2008 Bonds and Adjustment Rights,
shall be waived and appropriate adjustments shall be made to the
conversion prices of the Bonds and the exercise price of the 2008
Warrant to reflect the Shares sold by the Company in the Proposed
Sale, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE , in consideration of the mutual promises and
agreements hereinafter set forth, the parties hereto, intending to
be legally bound, agree as follows:
1.
Waivers. Subject to compliance by the
Company and KGE Group with the terms and conditions set forth
herein, and for the sole purpose of allowing the Proposed Sale to
take place, each of the parties hereby agrees that, with respect to
Shares sold pursuant to and in accordance with the terms for the
Proposed Sale set forth herein (including in Appendix A and
Appendix B ):
(A) notwithstanding
any provisions of the Trust Deeds or the 2008 Warrant Instrument,
or any other related documents or agreements, the Adjustment Rights
that would otherwise be triggered by the Proposed Sale shall not be
applicable and shall be waived, and there shall be no adjustment to
the conversion price of the Bonds or the exercise price of the 2008
Warrants; and
(B) no
default shall occur under Condition 12(A)(xiv) of the 2008 Trust
Deed relating to the minimum percentage ownership requirements by
KGE Group due to the sale of such Shares,
in each case provided, that the Company
and KGE Group shall comply with Section 2 of this
Agreement.
2.
Agreed Use of Net Proceeds. The Company and KGE Group
hereby agree to use the net proceeds of the Proposed Sale strictly
in accord
