Unassociated Document


     

    AMENDMENT AND WAIVER
AGREEMENT

     

    This
Amendment and Waiver Agreement (the “Agreement”)
is made and entered into as of February
24, 2010 (the “Effective
Date”), by and among China Architectural Engineering, Inc., a Delaware
corporation (the “Company”); The Royal Bank of Scotland
N.V., London Branch (formerly ABN AMRO Bank N.V., London Branch) (“RBS
N.V.”); CITIC
Capital China Mezzanine Fund Limited (formerly known as “CITIC Allco Investments
Limited.”) (“CITIC,”
and together with RBS N.V., the “Bondholders”); ABN AMRO Bank (China) Co.,
Ltd., Shenzhen Branch (the “Overdraft
Lender” and together with RBS N.V. and CITIC, the “Creditors”); Mr. Ken
Luo, an individual; Mr. Jun Tang, an individual; KGE Group Limited, a company
organized under the laws of Hong Kong (“KGE
Group”); and First Jet
Investments Limited, a company organized
under the laws of the British Virgin Islands (“First
Jet”).

     

    Recitals

     

    WHEREAS,
on April 12, 2007, the Company sold and issued to RBS N.V. 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, as may be amended from time to time
(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 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, as determined
pursuant to the terms and conditions of the Trust Deeds;

     

    WHEREAS,
paragraph 8.1(e) of the 2008 Warrant Instrument provides that 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,
RBS N.V. 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 is currently contemplating the issuance of up to 25,000,000 Shares
to First Jet as
consideration for the acquisition of First
Jet’s 60% equity interest in Shanghai ConnGame Network
Ltd., a company organized under the laws of the People’s Republic of China
(“ConnGame”),
on the terms and conditions described in Appendix A attached
to this Agreement (the “Proposed
Issuance”);

     

    WHEREAS,
if consummated, the Proposed Issuance (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;

     

    
      
        
        

      

      
        - 2
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    WHEREAS,
the Proposed Issuance is subject to the NASDAQ Stock Exchange and United States
federal securities law requirements described in Appendix
A;

     

    WHEREAS,
each of the Bondholders is requested to waive their Adjustment Rights only as it
relates to the Proposed Issuance and to waive their right to declare a
default as a result of a failure of KGE Group to maintain the minimum percentage
ownership required under Condition 12(A)(xiv) of
the 2008 Bonds only as it
relates to the Proposed Issuance, and only for the sole purpose of
allowing the Proposed Issuance to take place and be completed no later than
three (3) months from the effective date of this Agreement;

     

    WHEREAS,
if any but not all the portion of the Proposed Issuance is consummated or the
Agreed Payments, as defined in Appendix B, are not
paid to the Creditors in accordance with the time periods and amounts set forth
in Appendix B;
then no rights of the Bondholders, including those rights under Condition
12(A)(xiv) of the 2008 Bonds and
the
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 Issuance and an
event of default under Condition 12(A)(xiv) of the 2008 Bonds shall exist,
making the 2008 Bonds immediately due and payable; and

     

    WHEREAS,
immediately following the Proposed Issuance, Mr. Jun Tang
and Mr. Ken Luo will each beneficially own more than 20% and 15%, respectively,
of the outstanding shares of the
Company.

     

    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 with the terms and conditions set forth herein, and
for the sole purpose of allowing the Proposed Issuance to take place in full,
each of the parties hereby agrees that, with respect to Shares issued pursuant
to and in accordance with the terms of the Proposed Issuance 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 Issuance 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

     

    
      
        
        

      

      
        - 3
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               (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,

     

    in each
case provided, that the
Company shall comply with clause 2 of this Agreement.

     

    2.           Payment
of Agreed Payments.
The Company agrees to pay to the Creditors each of the Agreed Payments in
the amounts and on the dates indicated in
Appendix
B.

     

    3.           Failure to Pay
Agreed Payments.  If any portion of the Proposed Issuance
occurs or any of the
Agreed Payments are not paid to the Creditors in the amounts and by the
dates specified in Appendix B then no rights of the Bondholders, including those
rights under Condition 12(A)(xiv) of the 2008 Bonds and the 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
Warrants to reflect the impact of the Shares issued in the Proposed
Issuance as if this Agreement had never been executed and
an event of default
under Condition 12(A)(xiv) of the 2008 Bonds shall exist, making the 2008 Bonds
immediately due and payable.

     

    4.           Covenants of the
Company.

     

    (A)           The
Company will not repay or prepay any debt prior to its currently scheduled due
date until the Company makes all of the Agreed Payments specified in Appendix B and the
Bonds have been redeemed in full.

     

    (B)           The
Company agrees that any new indebtedness incurred by it for the purpose of
repaying Bank Overdraft Facilities shall (i) not exceed the outstanding amount
due and payable under the Bank Overdraft Facilities and (ii) be subordinated to
all amount owed under the Bonds.

     

    5.           Lock-Up of
Shares.  First
Jet and KGE Group each agree that, until all liabilities due to the
Creditors have been paid in full, they
shall
at all
times
maintain ownership of a number
of shares of common stock that is equal to at
least 20%
and 15%, respectively, of the shares outstanding immediately after the closing
of the Proposed Issuance (the “Company
Lock-Up Shares”) and they shall not
offer, sell, contract to sell, pledge, grant any option to purchase, make any
short sale or otherwise dispose of or encumber the Company Lock-Up Shares. Mr.
Jun Tang and Mr. Ken Luo each agree that, until all liabilities due to the
Creditors have been paid in
full, they shall at all times maintain beneficial ownership, as defined by the
rules and regulations of the SEC, of a number of shares of common
stock of the Company that is equal to at least 20% and 15%, respectively of the
shares then outstanding (the
“Individual
Lock-Up Shares”) and that they shall
not offer, sell, contract to sell, pledge, grant any option to purchase, make
any short sale or otherwise dispose of or encumber any of the Individual Lock-Up
Shares.

     

    
      
        
        

      

      
        - 4
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    6.           Reinstatement of
Waived Rights.  If (a)
any part of the Proposed Issuance is cancelled or not consummated within
three months from the effective date of this Agreement and otherwise in
accordance with the terms of this Agreement and Appendix A,  or (b) if the Company breaches any agreement contained herein
including clause 4 hereof, or (c) if any of KGE Group, First Jet, Mr. Ken Luo or
Mr. Jun Tang breaches the terms of clause 5 hereof, then all rights
previously waived or to be waived hereunder (including under clause 1), shall
not be waived and shall be reinstated, and any previous waivers shall be null
and void.

     

    7.           Continued Effect
of Trust Deeds and 2008 Warrant Instrument.  All terms and
conditions of the Trust Deeds and the
2008 Warrant Instrument, and related documents, not expressly amended or
waived by this Agreement remain unchanged and in full force and effect, and the
parties reserve all existing rights thereunder.  To the extent there
is any conflict between the terms of the Bonds or
those of the 2008 Warrants and the express terms hereof, the terms of
this Agreement shall take precedence.

     

    8.           No Negative
Impact on the Company’s Obligations.  The Company represents
and warrants to the Creditors that the acquisition of the equity interest in
ConnGame and the Proposed Issuance will not have a negative effect on
the Company’s or any of its Subsidiaries’ liabilities and obligations
owed to the Creditors.

     

    9.           Agreement to
Subsequent Negotiations.  Upon and contingent upon Company’s
timely payment of all of the Agreed Payments in accordance with Appendix B and
the successful completion of the Proposed Issuance as described in Appendix A,
each of the Bondholders agrees to commence negotiations in good faith with the
Company to waive (i) its right to declare a default as a result of a any
defaults under the Trust Deeds existing at the time of such negotiations,
including but not limited to Condition 10A (Undertakings Not to Take or Permit
Certain Changes) and Condition 10B (Financial Covenants) of the
Terms and Conditions of the 2008 Trust Deed, and (ii) its Put Option Rights
under the Trust Deeds.  Solely for purposes of this clause 9, “Put Option
Rights” refers to each of the Bondholders’ rights under the 2007 Trust
Deed to require the Company to redeem the 2007 Bonds at 126.51% of the principal
amount, plus all accrued but unpaid interest, at any time after April 12, 2010,
and each of the Bondholders’ rights under the 2008 Trust Deed to require the
Company to redeem the 2008 Bonds at 116.61% of the principal amount of the Bonds
redeemed, plus all accrued but unpaid interest, on any Interest Payment Date on
or after April 15, 2010.

     

    
      
        
        

      

      
        - 5
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    10.           Ownership of the
Bonds and 2008 Warrants.  As of the date of this Agreement, RBS
N.V. hereby represents and warrants that it owns 100% of the 2007 Bonds, 37.5%
of the 2008 Bonds and 37.5% of the 2008 Warrants.  As of the date of
this Agreement, CITIC represents and warrants that it owns 62.5% of the 2008
Bonds and 62.5% of the 2008 Warrants.  As of the date of this
Agreement, each of RBS N.V. and CITIC represents and warrants that it is the
sole and lawful owner of all rights, title and interest in and to all ownership
interests indicated in the immediately preceding sentence, and that
there has been no assignment or other transfer of any such
interests.

     

    11.           Accuracy of the
Appendices.  The Company (x) represents and warrants to each
Creditor that, as of the date of this Agreement, Appendix A and Appendix B are
accurate and complete descriptions of the Proposed Issuance and the required
approvals therefor and (y) covenants and agrees to use its
best efforts to consummate the Proposed Issuance and make the Agreed Payments in
accordance with such terms.  The Company acknowledges that the
Creditors are executing this Agreement in reliance on these representations and
warranties, covenants and agreements.

     

    12.           Compliance with
Laws and Regulations.  The Company shall comply with all
relevant Laws and Regulations applicable to it, including satisfying all
filings, notification and other requirements of Nasdaq, the United States
Securities and Exchange Commission and U.S. Securities Laws.

     

    13.           Duly
Authorized.  The execution, delivery and performance of this
Agreement have been duly authorized by all required corporate action by each of
the parties hereto.

     

    14.           Notice to
Trustee.  The execution of this Agreement, and instructions
related to the actions contemplated hereunder, shall be provided to the Trustee
in accordance with the terms of the Bonds and the
2008 Warrants.

     

    15.           Counterparts.  This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same Agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other party, it being understood that all parties need not sign the same
counterpart.

     

    
      
        
        

      

      
        - 6
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    16.           Successors and
Assigns.  It is expressly understood and agreed by the parties
that this Agreement and all of its terms shall be binding upon the parties’
respective representatives, executors, administrators, successors and
assigns.

     

    


     

    [SIGNATURE
PAGES TO FOLLOW]

     

     

     

    
      
        
        

      

      
        - 7
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    IN
WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by
their duly authorized respective officers, as of the date first written
above.

     

    
      
        	 	
                CHINA
      ARCHITECTURAL ENGINEERING, INC.

              	 
	 	 	 	 
	
              	
                By:
      

              	/s/  Luo
      Ken Yi	 
	 	Name:  	Luo
      Ken Yi	 
	 	Title:    	Chief
      Executive Officer	 


      

    

     

     

     

    
      
        
          	 	
                  The
      Royal Bank of Scotland N.V., LONDON BRANCH

                	 
	 	 	 	 
	
                	
                  By:
      

                	
                  [ILLEGIBLE]

                	 
	 	Name:  	
                	 
	 	Title:    	
                	 


        

      

       

      
         

        
          
            	
                  	
                    By:
      

                  	
                    /s/  James
      Kong

                  	 
	 	Name:  	
                    James
      Kong

                  	 
	 	Title:    	
                    Regional
      Counsel

                  	 


          

        

      

    

    
 

     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    
 

     

    [Amendment and Waiver Agreement –
Signature Page 1 of 4]

     

    
      
        
        

      

      
        - 8
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                  CITIC
      CAPITAL CHINA MEZZANINE FUND LIMITED (formerly known as CITIC Allco Investments
      Limited.)

                	 
	 	 	 	 
	
                	
                  By:
      

                	
                  /s/  MIU
      CHEUNG

                	 
	 	Name:  	
                  MIU
      CHEUNG

                	 
	 	Title:    	
                  AUTHORIZED
      SIGNATORY

                	 


        

      

       

      
         

        
          
            	
                  	
                    By:
      

                  	 	 
	 	Name:  	
                  	 
	 	Title:    	
                  	 


          

        

      

    

     

     

     

    
      
        
          	 	
                  ABN
      AMRO BANK (CHINA) CO., LTD., SHENZHEN BRANCH

                	 
	 	 	 	 
	
                	
                  By:
      

                	
                  /s/  Jeff
      Zhu

                	 
	 	Name:  	
                  Jeff
      Zhu

                	 
	 	Title:    	
                	 
	 	 	 	 
	 	[CORPORATE
    STAMP]	 


        

      

       

    

    
       

      
        
          	
                	
                  By:
      

                	
                  /s/
      CHEN HAN RUI

                	 
	 	Name:  	
                  CHEN
      HAN RUI

                	 
	 	Title:    	
                	 


        

      

      
 

    

    


    


    


    


    


    


    


    


    


    


    


    


    


     

    [Amendment
and Waiver Agreement – Signature Page 2 of 4]

     

    
      
        
        

      

      
        - 9
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          	 	MR. JUN TANG	 
	 	 	 	 
	
                	
                	
                  /s/
      Jun Tang

                	 


        

      

    

     

     

    
       

      
        
          	 	MR. KEN
LUO	 
	 	 	 	 
	
                	
                	/s/
      Luo
      Ken Y	 


        

      

    

     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    [Amendment and Waiver
Agreement – Signature Page 3 of
4]

     

    
      
        
        

      

      
        - 10
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                  FIRST
      JET INVESTMENTS LIMITED

                	 
	 	 	 	 
	
                	
                  By:
      

                	
                  /s/
      Jun Tang

                	 
	 	Name:  	
                  
                    JUN
      TANG

                  

                	 
	 	Title:    	
                  CHAIRMAN

                	 


        

      

      

         

        
          
            	
                  	
                    By:
      

                  	 	 
	 	Name:  	
                  	 
	 	Title:    	
                  	 


          

        

         

        

           

          
            
              	 	
                      KGE
      GROUP LIMITED

                    	 
	 	 	 	 
	
                    	
                      By:
      

                    	
                      /s/  Luo Ken
      Yi

                    	 
	 	Name:  	
                      Luo Ken
      Yi

                    	 
	 	Title:    	
                      Chairman

                    	 


            

          

          

             

            
              
                	
                      	
                        By:
      

                      	 	 
	 	Name:  	
                      	 
	 	Title:    	
                      	 


              

            

          

        

      

    

     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    [Amendment and Waiver
Agreement – Signature Page 4 of
4]

     

    
      
        
        

      

      
        - 11
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    APPENDIX
A

     

    PROPOSED
ISSUANCE

     

    The
Company intends to issue up to 25,000,000 shares of newly issued common stock of
the Company to acquire a 60% equity interest in
ConnGame from First
Jet.  The
Company expects that the consideration
per share at which the 25,000,000 shares will be issued will be less than the
current conversion price of the Bonds, as determined under the terms and
conditions of the Trust Deeds.

     

    Nasdaq
Marketplace Rules require that the Company complete and submit an additional
listing application to the Nasdaq Stock Market and receive approval from NASDAQ
before the Company may issues any new shares in the Proposed
Issuance.  In addition, Nasdaq Marketplace Rule 5635 requires that,
among other things, the Company obtain shareholder approval of the issuances of
securities in connection with the acquisition of the stock or assets of another
company where the number of shares of common stock to be issued is or will be
equal to or in excess of 20% of the number of shares of common stock outstanding
before the issuance of the stock or securities, in addition to other
restrictions if certain tests are met.  Because the 25,000,000 shares
of common stock the Company intends to issue exceeds the 20% threshold as set
forth in the Nasdaq Marketplace Rules, and may also trigger other tests, the
Company must obtain shareholder approval, which is subject to compliance with
Section 14 of the Securities Exchange Act of 1934, as amended.

     

    Upon
the issuance of the 25,000,000 shares of newly issued common stock in the
Proposed Issuance, KGE Group Limited will own approximately 31.2%
of the outstanding shares of the Company’s common stock, based on the
estimated 80,156,874 shares of common stock that
will be issued and outstanding  immediately
following the Proposed Issuance.

     

    
      
        
        

      

      
        A
-1

        
          

        

      

      
        
        

      

    

     

    APPENDIX
B

     

    PAYMENT
SCHEDULE FOR AMOUNTS DUE TO THE
CREDITORS

     

    The
Company agrees to make the following payments to the Creditors on the following
dates (collectively, the “Agreed
Payments”):

     

    1.           
 Payments to the
Bondholders

     

    The
Company agrees to pay to the Bondholders the following amounts on the following
dates:

     

     

    
      	
              Date
      of Payment

            	
              Amount
      of Payment

            
	
              March 31,
      2010

            	
              50%
      of the interest in arrears owed on the Bonds as of March 31,
      2010

            
	
              April
      15, 2010

            	
              100%
      of the interest payments on the Bonds that are scheduled to be paid in
      April 2010

            
	
              May
      31, 2010

            	
              50% of the
      interest in arrears owned on the Bonds as of March 31, 2010

            


    

    


    2.           
 Payments to the
Overdraft Lender

     

    The Company agrees to repay in total the principal
amount due and all accrued interest owed by the Company to the
Overdraft Lender (the “Total
Amount Owed”) in three separate
installments. The first installment shall be due on the
earlier of (a) within 30 days of the Company receiving a payment by or on behalf
of the Obayashi Corporation in respect to its claim in Dubai or (b) March 31,
2010.  The second installment shall be due on April 30, 2010. The
third installment shall be due on May 31,
2010.  The first installment shall equal 34%
of the Total Amount Owed and the second and third installments shall each equal
33% of the Total Amount Owed.