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;


      
        
           


        

        
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      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


      
        
           


        

        
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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 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 accordance with the terms set forth in
Appendix
B.

       

      3.           Failure to Pay
Agreed Bondholder Payments.  If any portion of the Proposed
Sale occurs and the Agreed Bondholders Payments are not paid to the Creditors in
the amounts, within the stipulated time periods and order provided 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 sold in the
Proposed Sale.

       

      4.           No Prepayment of
Other Debt.  Until those certain Agreed Bondholders Payments
specified in Step No. 2 of Appendix B are made
by the Company after the sale of the Company Shares, as defined in Appendix B, the
Company agrees that the Company will not use its proceeds from the Proposed Sale
to repay or prepay any debt prior to its currently scheduled due
date.

       

      5.           Reinstatement of
Waived Rights.  If any part of the Proposed Sale 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, then all
rights previously waived or to be waived hereunder (including under Section 1),
shall not be waived and shall be reinstated, and any previous waivers shall be
null and void.

       

      6.           Failure to Use
Proceeds as Agreed.  The parties hereby agree that the terms of
each of the Bonds and of the Bank Overdraft Facility are hereby amended so that
it shall be an immediate event of default under each if any applicable Agreed
Bondholder Payments are not paid to the relevant Creditor in the amount, within
the stipulated time periods  and order provided in Appendix
B.


      
        
           


        

        
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      7.           Continued Effect
of Trust Deeds and 2008 Warrant Instrument.  All terms and
conditions of the Trust Deeds and 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 and the 2008 Warrants and the express terms hereof, the terms of this
Agreement shall take precedence.

       

      8.           Ownership of
the
Bonds and 2008 Warrants.  ABN AMRO 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.  CITIC represents and warrants that it owns
62.5% of the 2008 Bonds and 62.5% of the 2008 Warrants.  Each of ABN
AMRO 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 there has been no assignment or other
transfer of any such interests.

       

      9.           Accuracy of the
Appendices.  The Company and KGE Group (x) represent and
warrant to each Creditor that, as of the date of this Agreement, Appendix A and
Appendix B are accurate and complete descriptions of the Proposed Sale, the use
of proceeds therefrom and the required approvals therefor and (y) covenant and
agree to use their best efforts to consummate the Proposed Sale and use the
proceeds therefrom in accordance with such terms.  The Company and KGE
Group acknowledge that the Creditors are executing this Agreement in reliance on
these representations and warranties, covenants and agreements.

       

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

       

      11.           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.

       

      12.           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 2008 Warrants.

       

      13.           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.


      
        
           


        

        
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      14.           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]


      
        
           


        

        
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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

                      
	 
      	 
      	 
      
	 
      	
                        KGE
      GROUP LIMITED

                      
	 
      	 
      	 
      
	 
      	
                        By:

                      	
                        /s/  Luo Ken
Yi

                      
	 
      	
                        Name:

                      
	 
      	
                        Title:

                      
	 
      	 
      	 
      
	 
      	
                        ABN
      AMRO BANK N.V., LONDON BRANCH

                      
	 
      	 
      	 
      
	 
      	
                        By:

                      	
                        /s/  Peter
      [ILLIGIBLE]

                      
	 
      	
                        Name:  Peter
      [ILLEGIBLE]

                      
	 
      	
                        Title:   
      Head of Equities

                      
	 
      	 
      	 
      
	 
      	
                        By:

                      	
                        /s/  James
      [ILLEGIBLE]

                      
	 
      	
                        Name:  James
      [ILLEGIBLE]

                      
	 
      	
                        Title:   
      Regional
Counsel

                      


              

            

          

        

      

       

      [Amendment and Waiver Agreement
– Page 1 of 2]

       

      
        
          
          

        

        
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                                            CITIC
      CAPITAL CHINA MEZZANINE FUND

                                            LIMITED
      (formerly known as CITIC
      Allco

                                            Investments Limited.)

                                          
	 
      	 
      	 
      
	 
      	
                                            By:

                                          	
                                            [ILLEGIBLE SIGNATURE]

                                          
	 
      	
                                            Name:

                                          
	 
      	
                                            Title:

                                          
	 
      	 
      	 
      
	 
      	
                                            By:

                                          	 
      
	 
      	
                                            Name:

                                          
	 
      	
                                            Title:

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

                                            SHENZHEN
      BRANCH

                                          
	 
      	 
      	 
      
	 
      	
                                            By:

                                          	       /s/  Chen
      Han Rui
	 
      	
                                            Name:  Chen
      Han Rui

                                          
	 
      	
                                            Title:   
      Vice President

                                          
	 
      	 
      	 
      
	 
      	
                                            By:

                                          	
                                            /s/  Moy
      Chin Khan

                                          
	 
      	
                                            Name:  Moy
      Chin Khan

                                          
	 
      	
                                            Title:    Vice
      President

                                          


                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

       

      [Amendment
and Waiver Agreement – Page 2 of 2]


      
        
           


        

        
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      APPENDIX
A

      PROPOSED
SALE

       

      KGE Group
intends to sell 5,000,000 previously-issued shares of common stock of the
Company to an investor at a per share price of US$0.90.  In addition,
the Company intends to sell approximately 17,000,000 shares of newly issued
shares of common stock to certain investors at a per share price of
$1.65.  Accordingly, a total of approximately 22,000,000 shares of
common stock of the Company is intended be sold to the investors.

       

      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 Sale.  In
addition, Nasdaq Marketplace Rule 5635 requires that, among other things, the
Company obtain shareholder approval of the issuances of securities in private
placements where (i) the issuance (together with sales by officers, directors,
or substantial shareholders), equals 20% or more of the pre-transaction
outstanding shares; and (ii) the sales price is less than the greater of book or
market value.  Because the 22,000,000 shares of common stock of the
Company intended to be sold exceeds the 20% threshold as set forth in the Nasdaq
Marketplace Rules, the Company must obtain shareholder approval, which is
subject to compliance with Section 14 of the Securities Exchange Act of 1934, as
amended.

       

      The sale
of shares is intended to occur as follows:

       

      
        
          
            
              	
                      Step
      1.

                    	 	
                      Private
      Sale of Shares by KGE Group to Investor

                    	 	
                      5.0
      million shares

                    
	 
      	 	 
      	 	 
      
	 
      	 	
                      This
      sale is intended to occur as soon as practicable after the execution of
      this Amendment and Waiver Agreement and the completion of sale transaction
      documents and required processing in connection therewith.  Upon
      completion of this step, the percentage ownerships of the Company share
      capital by KGE Group and the new investor are expected to be approximately
      49.1% and 9.4%, respectively, based on 53,256,874 shares of common stock
      outstanding.

                    	 	 
      


            

          

        

      


      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

       

      APPENDIX
A (cont.)

      


      
        
          
            
              	
                      Step
      2.

                    	 	
                      Private
      Placement of Company  Shares by the Company to certain
      Investors

                    	 	
                      17
      million shares

                    
	 
      	 	 
      	 	 
      
	 
      	 	
                      This
      private placement of shares is intended to occur after the Nasdaq Stock
      Market reviews and approves an additional listing application for the
      shares to be sold by the Company, and after execution of a Securities
      Purchase Agreement between the Company and the investors and after
      shareholder approval of the transaction is obtained in accordance with
      Nasdaq Marketplace Rules.  Approval from Nasdaq of the
      additional listing application for the shares is expected to take
      approximately two weeks from date of application, depending on Nasdaq
      requests for information. Shareholder approval is subject to US Federal
      Securities laws and is expected to take approximately seven weeks, which
      is subject to review and comments from the Securities and Exchange
      Commission.  Upon completion of this step, the percentage
      ownership of the Company by KGE Group is expected to be approximately
      37.2%, based on 70,256,874 shares of common stock
    outstanding.

                    	 	 
      


            

          

        

      


      
        
           


        

        
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      APPENDIX
B

       

      USE
OF PROCEEDS

       

      The net
proceeds from the Proposed Sale shall be used as follows:

       

      
        
          
            
              	
                      1.

                    	 	
                      Private
      Sale of Shares by KGE Group to Investor

                    	 	
                      5.0
      million shares

                    
	 
      	 	
                      Net
      proceeds from this sale of these shares shall be used to fund the
      operations of KGE Group itself, including salary and rent, or in the
      discretion of the Board of Directors and Management, in the best interests
      of KGE Group and its shareholders.

                    	 	 
      
	 
      	 	 
      	 	 
      
	
                      2.

                    	 	
                      Private
      Placement of Company Shares by the Company to the
Investosr

                    	 	
                      17  million
      shares

                    
	 
      	 	
                      Net
      proceeds from this sale of these shares (the “Company Shares”) shall be
      used solely for the following purposes and in the following
      order:

                       

                      (i)   to
      pay the interest payments of the Bonds that are outstanding and due for
      payment in accordance with the terms of the Trust Deeds; and
      (ii)  to pay all amounts owed to ABN AMRO Bank (China) Co. Ltd.,
      Shenzhen Branch or any other ABN AMRO affiliate in connection with the
      Bank Overdraft Facility in the amount of CNY33,628,983.88 and any
      outstanding interest on the facility as at the date of payment
      (collectively, the “Agreed Bondholder Payments”). Such payments shall be
      made no later than the earlier of (i) Seven (7) Business Days after the
      sale of the Company Shares and (ii) three (3) months from the date of this
      Amendment and Waiver Agreement.  Remaining net proceeds shall be
      used to fund the operations of the Company, or in the discretion of the
      Board of Directors and Management, in the best interests of the Company
      and its shareholders. Until
      the Agreed Bondholders Payments of are made by the Company after the sale
      of the Company Shares, the Company agrees that the Company will not use
      its proceeds from the sale of the Company Shares to repay or prepay any
      debt prior to its currently scheduled due date.