Execution
      Copy 

     

    
      

      

    

     

    SUBSCRIPTION
      AGREEMENT 

     

     

    CHINA
      ARCHITECTURAL ENGINEERING, INC. 

     

    US$10,000,000
      VARIABLE RATE CONVERTIBLE BONDS DUE 2012 

     

    800,000
      WARRANTS EXPIRING 2010 

     

     

    March
      27,
      2007 

     

     

    
      

      

    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    CONTENTS
      

    


    
      	
              Clause

            	 	 	
              Page

            
	 	 	 	 
	
              1.

            	
              INTERPRETATION

            	 	
              1

            
	
              2.

            	
              ISSUE
                OF THE BONDS AND WARRANTS

            	 	
              1

            
	
              3.

            	
              AGREEMENTS
                BY THE SUBSCRIBER AND THE ISSUER

            	 	
              2

            
	
              4.

            	
              REPRESENTATIONS
                AND WARRANTIES

            	 	
              2

            
	
              5.

            	
              UNDERTAKINGS
                BY THE ISSUER

            	 	
              14

            
	
              6.

            	
              CONDITIONS
                PRECEDENT

            	 	
              16

            
	
              7.

            	
              CLOSING

            	 	
              18

            
	
              8.

            	
              COMMISSION

            	 	
              18

            
	
              9.

            	
              FEES
                AND EXPENSES

            	 	
              18

            
	
              10.

            	
              INDEMNIFICATION

            	 	
              19

            
	
              11.

            	
              TERMINATION

            	 	
              20

            
	
              12.

            	
              SURVIVAL
                OF REPRESENTATIONS AND OBLIGATIONS

            	 	
              21

            
	
              13.

            	
              COMMUNICATIONS

            	 	
              21

            
	
              14.

            	
              GOVERNING
                LAW AND JURISDICTION

            	 	
              22

            
	
              15.

            	
              COUNTERPARTS

            	 	
              22

            
	
              16.

            	
              CONTRACTS
                (RIGHTS OF THIRD PARTIES) ACT 1999

            	 	
              22

            
	
              17.

            	
              INVALIDITY

            	 	
              22

            
	
              18.

            	
              ENTIRE
                AGREEMENT

            	 	
              22

            
	
              SCHEDULE
                1   TERMS AND CONDITIONS OF THE BONDS

            	 	
              23

            
	
              SCHEDULE
                2   FORM OF WARRANT INSTRUMENT

            	 	
              24

            
	
              SCHEDULE
                3   FORM OF CERTIFICATE OF NO MATERIAL ADVERSE
                CHANGE

            	 	
              25

            


    

    


    
      
        
        

      

      
        -i-

        
          

        

      

      
        
        

      

    

    


    THIS
      SUBSCRIPTION AGREEMENT
      (this
“Agreement”)
      is
      made on March 27, 2007

     

    BETWEEN:
      

     

    
      	(1)	
              CHINA
                ARCHITECTURAL ENGINEERING, INC.
                (the “Issuer”);
                and 

            


    

     

    
      	(2)	
              ABN
                AMRO BANK N.V. (the
                “Subscriber”).
                

            


    

     

    The
      Issuer and the Subscriber wish to record the arrangements agreed among them
      in
      relation to an issue of (a) US$10,000,0000 Variable Rate Convertible Bonds
      due
      2012 of the Issuer (the “Bonds”,
      which
      expression where the context so admits shall include the global certificate
      (the
“Global
      Certificate”)
      to be
      delivered in respect of them) and (b) 800,000 warrants to purchase 800,000
      shares of common stock of the Issuer (the “Warrants”,
      which
      expression where the context so admits shall include the Warrant Instrument
      and
      certificate or certificates for the Warrants (the “Warrant
      Instrument”
and
      the
“Warrant
      Certificate(s)”)
      to be
      delivered in respect of them). The definitive Bonds, if required to be issued,
      will be in registered form in denominations of US$1,000 each. Each Bond will
      be
      convertible at the option of the holder thereof into fully paid shares of common
      stock of par value US$0.001 per share that will be listed on the AMEX (as
      defined below) (the “Shares”)
      of the
      Issuer at an initial conversion price equal to the IPO Price per share (as
      defined herein) in accordance with the Terms and Conditions of the Bonds (the
      “Terms
      and Conditions”).
      Each
      Warrant will be convertible at the option of the holder thereof into the Shares
      of the Issuer at an initial exercise price of US$0.01 per Warrant in accordance
      with the terms of the Warrant Instrument. 

     

    
      
        
          	1.	
                  INTERPRETATION
                    

                


        

      

    

     

    
      	1.1	
              Definitions
                

            


    

     

    Terms
      defined in the Terms and Conditions and the Warrant Instrument have, unless
      the
      context requires otherwise, the same meaning in this Agreement. 

     

    
      	1.2	
              Headings
                

            


    

     

    The
      headings in this Agreement are inserted for convenience only and shall be
      ignored in construing this Agreement. Unless the context otherwise requires,
      words denoting the singular number only shall include the plural and vice versa.
      References to Clauses
      and
Schedules
      are to
      be construed as references to clauses of, and schedules to, this Agreement.
      

     

    
      
        
          	2.	
                  ISSUE
                    OF THE BONDS AND WARRANTS


                


        

      

    

     

    
      	2.1	
              Agreement
                to Issue 

            


    

     

    The
      Issuer agrees to issue the Bonds on April 4, 2007, or such later date as the
      Issuer and the Subscriber may agree, (the “Closing
      Date”)
      to the
      Subscriber. The Bonds will be subscribed at a price equal to ninety-seven
      percent (97%) of their principal amount (the “Subscription
      Price”,
      being
      the issue price of one hundred percent (100%) less the commission referred
      to in
      Clause 8). The Warrants will be subscribed at US$0.0001 per Warrant (the
“Warrant
      Issue Price”).
      

     

    
      	2.2	
              The
                Bonds and the Warrants 

            


    

     

    The
      Bonds
      will be issued in accordance with the terms of a trust deed expected to be
      dated
      the Closing Date (the “Trust
      Deed”),
      in a
      form to be agreed by the parties hereto, to be entered into between the Issuer
      and a trustee to be appointed as trustee (the “Trustee”)
      and
      will be issued subject to
      and
      with the benefit of a Paying and Conversion Agency Agreement expected to be
      dated the Closing Date (the “Agency
      Agreement”),
      in a
      form to be agreed by the parties hereto, to be entered into between the Issuer,
      the Trustee, a principal paying and conversion agent to be appointed (the
“Principal
      Paying and Conversion Agent”)
      and
      the other agents named therein. The Warrants will be issued in accordance with
      the terms of the Warrant Instrument and will be issued subject to and with
      the
      benefit of a Warrant Agency Agreement expected to be dated the Closing Date
      (the
“Warrant
      Agency Agreement”).
      The
      Issuer and the Subscriber shall enter into a Registration Rights Agreement
      on
      the Closing Date (the “Registration
      Rights Agreement”),
      in a
      form to be agreed by the parties hereto. This Agreement, the Trust Deed, the
      Agency Agreement, the Warrant Instrument, the Warrant Agency Agreement and
      the
      Registration Rights Agreement are together referred to herein as the
“Contracts”.
      

     

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

     

    
      	2.3	
              Terms
                and Conditions 

            


    

     

    The
      Terms
      and Conditions shall be substantially in the form set out in Schedule 1 to
      this
      Agreement, with such changes as may be agreed in writing between the Issuer
      and
      the Subscriber. 

     

    
      	2.4	
              Warrant
                Instrument 

            


    

     

    The
      Warrant Instrument shall be substantially in the form set out in Schedule 2
      to
      this Agreement with such changes as may be agreed in writing between the Issuer
      and the Subscriber. 

     

    
      
        
          	3.	
                  AGREEMENTS
                    BY THE SUBSCRIBER AND THE ISSUER


                


        

      

    

     

    
      	3.1	
              Subscription
                

            


    

     

    The
      Subscriber agrees to subscribe and pay for, or to procure subscriptions and
      payment for, (a) the Bonds in full, on the Closing Date at the Subscription
      Price and (b) the Warrants in full, on the Closing Date at the aggregate Warrant
      Issue Price and, in each case, on the terms of this Agreement. 

     

    
      	3.2	
              Filings
                

            


    

     

    Notwithstanding
      any other provision of this Agreement, the Issuer shall timely make (i) all
      filings required by the securities laws and regulations of the United States
      of
      America, including all filings required for a company subject to the periodic
      reporting requirements of the Securities Exchange Act of 1934; and (ii) after
      the Shares are listed, all filings required by AMEX. 

     

    
      	3.3	
              No
                Fiduciary or Agency Relationship


            


    

     

    Nothing
      in this Agreement or the nature of the services provided by the Subscriber
      shall
      be deemed to create a fiduciary or agency relationship between the Subscriber
      and the Issuer or any of their respective stockholders, creditors, employees
      or
      any other party. 

     

    
      
        
          	4.	
                  REPRESENTATIONS
                    AND WARRANTIES


                


        

      

    

     

    
      	4.1	
              Warranties
                by the Issuer 

            


    

     

    The
      Issuer represents and warrants to the Subscriber that as at the date of this
      Agreement and as at the Closing Date (and at any time from the date hereof
      up to
      and including the Closing Date): 

     

    
      	
            	(a)	
              Incorporation
                

            


    

    


    Each
      of
      the Issuer and its Subsidiaries is duly incorporated and validly existing under
      the laws of the State of Delaware (in the case of the Issuer) and the relevant
      jurisdiction (in the case of each Subsidiary) with full power and authority
      to
      conduct its business presently carried on by it and is lawfully qualified to
      do
      business, and has all permits, licences and other authorisations required,
      in
      each jurisdiction in which business is conducted by it (except where the failure
      to be so qualified or have obtained such permits licenses or authorizations
      would not have a material adverse effect) and has been operating its business
      pursuant to and in material compliance with the terms of all such permits,
      licences and other authorisations; the Issuer has full power and authority,
      and
      is able lawfully, to enter into and perform its obligations under the Bonds,
      the
      Warrants and the Contracts; 

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    
      	
            	(b)	
              Receivership
                

            


    

     

    No
      encumbrancer has taken possession of, and no receiver has been appointed over,
      the whole or any substantial part of the assets or undertaking of the Issuer
      or
      any of its Subsidiaries; 

     

    
      	
            	(c)	
              Insolvency
                

            


    

     

    Each
      of
      the Issuer and its Subsidiaries is not (and is not, and could not be, deemed
      by
      law or a court to be) insolvent or bankrupt or unable to pay its debts, has
      not
      stopped, suspended or threatened (through an official action of its board of
      directors) to stop or suspend payment of all or a material part of (or of a
      particular type of) its debts, has not proposed or made any agreement for the
      deferral, rescheduling or other readjustment of all of (or all of a particular
      type of) its debts (or of any part which it will or might otherwise be unable
      to
      pay when due), has not proposed or made a general assignment or an arrangement
      or composition with or for the benefit of the relevant creditors in respect
      of
      any such debts and a moratorium has not been agreed or declared in respect
      of or
      affecting all or any part of (or of a particular type of) the debts of the
      Issuer or any of its Subsidiaries; 

     

    
      
        	
              	(d)	
                Winding-up
                  

              


      

    

     

    No
      order
      has been made and no effective resolution has been passed for the winding-up
      or
      dissolution or administration or receivership of the Issuer or any of its
      Subsidiaries, and none of the Issuer or any of its Subsidiaries has threatened
      (through an official action of its board of directors) to cease to carry on
      all
      or a material part of its business or operations except to the extent that
      it
      has made disposals of assets or shares in the normal course of its business
      for
      fair value; 

     

    
      	
            	(e)	
              Validity
                of Contracts 

            


    

     

    The
      Contracts have been duly authorised by the Issuer, this Agreement has been
      and
      the other Contracts will on the Closing Date have been duly executed and
      delivered by the Issuer and this Agreement constitutes and the other Contracts
      will on the Closing Date, constitute valid and legally binding obligations
      of
      the Issuer, enforceable in accordance with their respective terms subject to
      the
      laws of bankruptcy and other laws affecting the rights of creditors generally;
      

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    
      	
            	(f)	
              Validity
                of Bonds and Warrants 

            


    

    


    The
      Bonds
      and the Warrants have been duly authorised by the Issuer and, when the Bonds
      have been duly executed, authenticated, issued and delivered in accordance
      with
      the Trust Deed and the Agency Agreement and the Warrants have been duly
      executed, authenticated, issued and delivered in accordance with the Warrant
      Instrument and the Warrant Agency Agreement, each will constitute valid and
      legally binding obligations of the Issuer enforceable in accordance with their
      respective terms subject to the laws of bankruptcy and other laws affecting
      the
      rights of creditors generally; 

     

    
      	
            	(g)	
              Status
                of the Bonds and the Warrants 

            


    

     

    The
      Bonds
      and the Warrants will constitute direct, general, unsubordinated, unconditional
      and unsecured obligations of the Issuer which (i) rank pari
      passu
      and
      without preference among themselves and (ii) will at all times rank pari
      passu
      with all
      other present and future unsecured and unsubordinated obligations of the Issuer,
      save for such obligations as may be provided by mandatory provisions of
      applicable law; 

     

    
      	
            	(h)	
              Taxation

            


    

     

    With
      reference to the laws and regulations of the United States (and all applicable
      subdivisions thereof) subsisting on the date of this Agreement, all payments
      of
      principal, premium and interest in respect of the Bonds, and all payments by
      the
      Issuer under the Contracts, will be made free and clear of, and without
      withholding or making any deduction for or on account of, any taxes, duties,
      assessments or governmental charges of whatever nature imposed, levied,
      collected, withheld or assessed by or on behalf of the United States (and all
      applicable subdivisions thereof) or any political subdivision or authority
      thereof or therein having power to tax; 

     

    
      	
            	(i)	
              Stamp
                Duty 

            


    

     

    No
      stamp
      or other duty is assessable or payable in, and no withholding or deduction
      for
      any taxes, duties, assessment or governmental charges of whatever nature is
      imposed or made for or on account of any income, registration, transfer or
      turnover taxes, customs or other duties or taxes of any kind, levied, collected,
      withheld or assessed by or within, the United States, the State of Delaware
      or
      any other relevant jurisdiction in connection with the creation, issue, offering
      or sale of the Bonds or the Warrants or the execution or delivery of the
      Contracts; 

     

    
      	
            	(j)	
              Consents
                

            


    

     

    No
      action
      or thing is required to be taken, fulfilled or done (including without
      limitation the obtaining of any consent or licence or the making of any filing
      or registration) in the United States, the State of Delaware or elsewhere for
      the issue of the Bonds, the Warrants and the Shares to be issued on conversion
      of the Bonds or exercise of the Warrants, the carrying out of the other
      transactions contemplated by the Contracts or the compliance by the Issuer
      with
      the terms of the Bonds, the Warrants and the Contracts, as the case may be,
      other than consents which have already been obtained and remain effective;
      

     

    
      	
            	(k)	
              Compliance
                

            


    

     

    The
      execution and delivery of the Contracts, the issue of the Bonds, the Warrants
      and the Shares to be issued on conversion of the Bonds and exercise of the
      Warrants, the use of the proceeds
      from the issue of the Bonds and the Warrants as described in Clause 5.11, the
      carrying out of the other transactions contemplated by the Contracts and
      compliance with their terms do not and will not (a) conflict with or result
      in a
      breach of any of the terms or provisions of, or constitute a default under,
      the
      documents constituting the Issuer, or any indenture, trust deed, mortgage or
      other agreement or instrument to which the Issuer or any of its Subsidiaries
      or
      any of their respective affiliates is a party or by which either of them or
      any
      of their respective properties is bound, or (b) infringe any existing applicable
      law, rule, regulation, judgment, order or decree of any government, governmental
      body or court, domestic or foreign, having jurisdiction over the Issuer, any
      of
      its Subsidiaries or any of their respective affiliates or any of their
      respective properties or infringe the rules of any stock exchange on which
      securities of the Issuer is listed; 

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    
      	
            	(l)	
              Financial
                Statements

            


    

     

    (a)
      The
      audited consolidated financial statements of the Issuer and its consolidated
      subsidiaries taken as a whole (the “Consolidated
      Group”)
      in
      respect of the financial year ended 31 December, 2005 and the unaudited
      consolidated financial statements of the Consolidated Group in respect of the
      nine month period ended 30 September, 2006 have been prepared in accordance
      with
      generally accepted accounting principles in the United States of America
      (“US
      GAAP”)
      consistently applied (other than, in the case of the unaudited financials,
      the
      absence of notes thereto) and give a true and fair view in all material respects
      of the financial position of the Issuer and of the Consolidated Group as at
      the
      dates, and the results of operations and changes in financial position of the
      Issuer and of the Consolidated Group for the periods, in respect of which they
      will have been prepared, and (b) since 31 December, 2005, being the date of
      the
      latest audited consolidated financial statements of the Consolidated Group,
      there has been no change (nor any development or event involving a prospective
      change of which the Issuer is, or might reasonably be expected to be, aware)
      which is materially adverse to the condition (financial or other), business,
      prospects, results of operations or general affairs of the Consolidated Group;
      

     

    
      	
            	(m)	
              Contingent
                Liabilities 

            


    

     

    There
      are
      no outstanding guarantees or contingent payment obligations of the Issuer in
      respect of indebtedness of third parties;  

     

    
      	
            	(n)	
              Off-balance
                Sheet Arrangements 

            


    

     

    Neither
      the Issuer nor any of its Subsidiaries are engaged in, party to, or have any
      material off-balance sheet transactions, arrangements, and obligations other
      than hedging transactions in the ordinary course of business; and neither the
      Issuer nor any of its Subsidiaries has any material relationships with
      unconsolidated entities that are contractually limited to narrow activities
      that
      facilitate the transfer of or access to assets by the Issuer or any of its
      Subsidiaries, such as structured finance entities and special purpose entities
      that are reasonably likely to have a material effect on the liquidity of the
      Issuer or any of its Subsidiaries or the availability thereof or the
      requirements of the Issuer or any of its Subsidiaries for capital resources;
      

     

    
      	
            	(o)	
              Internal
                Accounting Controls 

            


    

     

    Each
      of
      the Issuer and its Subsidiaries maintains systems of internal accounting
      controls sufficient to provide reasonable assurance that (i) transactions are
      executed in accordance with
      management’s general or specific authorisations; (ii) transactions are recorded
      as necessary to permit preparation of financial statements in conformity with
      US
      GAAP and to maintain asset accountability; (iii) access to assets is permitted
      only in accordance with management’s general or specific authorisation; (iv) the
      recorded accountability for assets is compared with the existing assets at
      reasonable intervals and appropriate action is taken with respect to any
      differences; and (v) each of the Issuer and its Subsidiaries has made and kept
      books, records and accounts which, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of assets of such entity and provide
      a
      sufficient basis for the preparation of the Issuer’s consolidated financial
      statements in accordance with US GAAP; and the Issuer’s current management
      information and accounting control system has been in operation for at least
      twelve (12) months during which neither the Issuer nor any Subsidiary has
      experienced any material difficulties with regard to (i) through (v) above;
      

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    
      	
            	(p)	
              Auditors
                

            


    

     

    The
      auditors who certified the audited financial statements of the Consolidated
      Group and the notes for the financial year of the Consolidated Group ended
      31
      December 2005 are independent public accountants with respect to the
      Consolidated Group, as required by the American Institute of Certified Public
      Accountants and the applicable rules and regulations thereof; 

     

    
      	
            	(q)	
              Title
                

            


    

     

    (i)
      Each
      of the Issuer and its Subsidiaries has good and valid title to all real property
      and personal property material for the operation of its business and other
      assets owned by it and any rights or interests thereto and the Issuer or the
      relevant Subsidiary, as the case may be, has received all necessary approvals
      in
      order to have good and valid title to the foregoing property and assets,
      including without limitation, approvals relating to the evaluation, acquisition
      and perfection of title, (ii) there are no adverse rights that will interfere
      with use made or to be made by the Issuer or any of its Subsidiaries of all
      properties currently owned or occupied by them, the existence of which would
      have a material adverse effect, and (iii) where any such property and assets
      are
      held under lease by the Issuer or any of its Subsidiaries, each such lease
      is a
      legal, valid and binding lease enforceable in accordance with its terms subject
      to the laws of bankruptcy and other laws affecting the rights of creditors
      generally; 

     

    
      	
            	(r)	
              Insurance
                

            


    

     

    Each
      of
      the Issuer and its Subsidiaries has adequate insurance cover over all assets
      which are material to it and the Issuer and its Subsidiaries taken as a whole
      in
      an amount and against all risks and losses of the businesses carried on by
      it,
      which are prudent and customary for companies carrying on similar business;
      nothing has been done or has been omitted to be done whereby any of the said
      policies has or may become void or voidable and no notice of cancellation or
      termination has been received with respect to any such policies and the Issuer
      or the relevant Subsidiary, as the case may be, is entitled to the full benefits
      of such insurance; 

     

    
      	
            	(s)	
              Litigation
                

            


    

     

    There
      are
      no pending actions, suits or proceedings against or affecting the Issuer or
      any
      of its Subsidiaries or any of its properties which, if determined adversely
      to
      the Issuer or any such Subsidiary
      or property, would individually or in the aggregate have a material adverse
      effect on the condition (financial or other), business, prospects, property,
      shareholders’ equity, results of operations or general affairs of the Issuer or
      the Consolidated Group taken as a whole, or on the ability of the Issuer to
      perform its obligations under the Contracts, the Bonds or the Warrants, or
      which
      are otherwise material in the context of the issue of the Bonds and the Warrants
      and, to the Issuer’s knowledge, no such actions, suits or proceedings are
      threatened or contemplated; 

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    
      	
            	(t)	
              Labour
                Disputes 

            


    

     

    No
      labour
      dispute with the employees of the Issuer or any of its Subsidiaries exists
      or,
      to the Issuer’s knowledge, is imminent that might have a material adverse effect
      on the Issuer and its Subsidiaries taken as a whole; 

     

    
      	
            	(u)	
              Intellectual
                Property Rights 

            


    

     

    
      	
            	(i)	
              All
                Intellectual Property Rights are: 

            


    

     

    
      	
            	(A)	
              legally
                and beneficially owned by, and validly granted to the Issuer or any
                of its
                Subsidiaries alone and free from all material encumbrances, restrictions
                on use or obligations of disclosure, or licensed to, or used under
                the
                authority of the owner by, the Issuer or any of its Subsidiaries;
                

            


    

     

    
      	
            	(B)	
              valid
                and enforceable and nothing has been done or omitted to be done by
                the
                Issuer or any of its Subsidiaries by which they may cease to be valid
                and
                enforceable; and 

            


    

     

    
      	
            	(C)	
              not,
                to the Issuer’s knowledge, the subject of a claim from any person as to
                title, validity, enforceability, entitlement or otherwise;
                

            


    

     

    
      	
            	(ii)	
              To
                the Issuer’s knowledge, there is, and has been, no infringement of any of
                the Intellectual Property Rights; 

            


    

     

    
      	
            	(iii)	
              Neither
                the Issuer nor any of its Subsidiaries has received any communications
                alleging, nor has there been threatened any allegation, that any
                of the
                Intellectual Property Rights and/or the use thereof by the Issuer
                or any
                of its Subsidiaries has violated or infringed the intellectual property
                right, proprietary or other rights of any third party; and
                

            


    

     

    
      	
            	(iv)	
              In
                respect of the Intellectual Property Rights, the activities, processes,
                methods, products or services now or at any time used or supplied
                by the
                Issuer or any of its Subsidiaries: 

            


    

     

    
      	
            	(A)	
              are
                not now nor were they at the time used or supplied, subject to the
                license, consent or permission of, or payment to, any third party;
                and
                

            


    

     

    
      	
            	(B)	
              do
                not now nor did they at the time used or supplied, infringe any
                intellectual property rights or any other rights of any third
                party.

            


    

     

    “Intellectual
      Property”
means
      (i) copyright, patents, know-how, confidential information, database rights,
      rights in domain names and rights in trade marks and designs (whether
registered
      or unregistered), (ii) applications for registration, and the right to apply
      for
      registration, for any of the same and (iii) all other intellectual property
      rights and equivalent or similar forms of protection existing anywhere in the
      world, owned by the Issuer or any of its Subsidiaries. 

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

    
      	
            	(v)	
              Information
                Technology 

            


    

     

    For
      the
      purposes of this sub-clause, “Information
      Technology”
means
      all computer systems, communications systems, software and hardware owned,
      used
      or licensed by or to the Issuer or any of its Subsidiaries: 

     

    
      	
            	(i)	
              there
                are no bugs or viruses, logic bombs or other contaminants (including
                without limitation, “worms” or “trojan horses”) in or failures or
                breakdowns of any computer hardware or software or any other Information
                Technology equipment used in connection with the business of the
                Issuer or
                any of its Subsidiaries which (a) have caused any substantial disruption
                or interruption in or to the operations of the Issuer or any of its
                Subsidiaries or (b) have had a material adverse impact on the business
                of
                the Issuer and its Subsidiaries taken as a whole;
                

            


    

     

    
      	
            	(ii)	
              in
                the event that the persons providing maintenance or support services
                for
                the Information Technology cease or are unable to do so, the Issuer
                and
                its Subsidiaries have all the necessary rights and information to
                continue
                to maintain and support or have a third party maintain or support
                the
                Information Technology; and 

            


    

     

    
      	
            	(iii)	
              each
                of the Issuer and its Subsidiaries has in place procedures to prevent
                unauthorised access and the introduction of viruses and to enable
                the
                taking and storing on-site and off-site of back-up copies of the
                software
                and data; 

            


    

     

    
      	
            	(w)	
              Environmental
                Compliance 

            


    

     

    Neither
      the Issuer nor any of its Subsidiaries is in violation of any statute, any
      rule,
      regulation, decision or order of any governmental agency or body or any court,
      domestic or foreign, relating to the use, disposal or release of hazardous
      or
      toxic substances or relating to the protection or restoration of the environment
      or human exposure to hazardous or toxic substances (collectively, “environmental
      laws”),
      owns
      or operates any real property contaminated with any substance that is subject
      to
      any environmental laws, is liable for any off-site disposal or contamination
      pursuant to any environmental laws, or is subject to any claim relating to
      any
      environmental laws, which violation, contamination, liability or claim would
      individually or in the aggregate have a material adverse effect on the Issuer
      and its Subsidiaries taken as a whole; 

     

    
      	
            	(x)	
              Business
                Contracts 

            


    

     

    All
      contracts, agreements, leases and instruments (the “Business
      Contracts”)
      to
      which the Issuer or any of its Subsidiaries is a party to or otherwise bound
      and
      which are material to the assets, liabilities, condition (financial or other),
      business, prospects, properties, shareholders’ equity, results of operations or
      general affairs of the Issuer and its Subsidiaries are valid and are in full
      force and effect and constitute legal, valid and binding obligations of the
      Issuer and its Subsidiaries and are enforceable in accordance with their
      respective terms. The Issuer has no knowledge of any notice or threat to
      terminate any such Business Contracts which are material to the Issuer and
      its
      Subsidiaries. Neither the Issuer nor any other
      party is in material default in complying with any provisions of any such
      Business Contract, and no condition or event or fact exists which, with notice,
      lapse of time or both, could constitute a material default thereunder on the
      part of the Issuer or any of its Subsidiaries; 

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    
      	
            	(y)	
              Due
                Diligence 

            


    

     

    The
      information, answers and documents supplied or disclosed in response to the
      Subscriber’s due diligence questionnaire to be delivered to the Issuer and
      during the due diligence telephone call with the Subscriber to take place before
      the Closing Date (and any new or additional information serving to update or
      amend such information supplied or disclosed by the Issuer to the Subscriber
      or
      the legal and other professional advisers to the Subscriber prior to the Closing
      Date) and the information in the Periodic Reports of the Issuer do not contain
      any untrue statement of a material fact or omit to state a material fact
      required to be stated therein or necessary to make the statements therein,
      in
      the light of the circumstances under which they were made, not misleading.
      All
      forecasts and estimates relating to the Issuer and its Subsidiaries so supplied
      or disclosed have been made after due, careful and proper consideration, are
      based on reasonable assumptions and represent reasonable and fair expectations
      honestly held based on facts known to such persons (or any of them);


     

    
      	
            	(z)	
              Events
                of Default 

            


    

     

    No
      event
      has occurred or circumstance arisen which, had the Bonds and the Warrants
      already been issued, might (whether or not with the giving of notice and/or
      the
      passage of time and/or the fulfilment of any other requirement) constitute
      an
      event described under “Events of Default” in the Terms and Conditions or a
      Relevant Event (as defined in the Terms and Conditions) resulting in the
      entitlement of the Bondholders to exercise the put option under Condition 9(D)
      of the Terms and Conditions, or require an adjustment of the initial Conversion
      Price of the Bonds, or require an adjustment to the number of Warrant Shares
      issuable upon exercise of a Warrant; 

     

    
      	
            	(aa)	
              Directed
                Selling Efforts 

            


    

     

    Neither
      the Issuer nor its affiliates (as defined in Rule 405 under the United States
      Securities Act of 1933, as amended (the “Securities
      Act”)),
      nor
      any persons acting on its or their behalf have engaged or will engage in any
      directed selling efforts (as defined in Regulation S of the Securities Act)
      with
      respect to the Bonds and the Warrants and it and they have complied and will
      comply with the offering restrictions of such Regulation; 

     

    
      	
            	(bb)	
              Investment
                Company 

            


    

     

    The
      Issuer is not, and as a result of the offer and sale of the Bonds and the
      Warrants contemplated herein will not be, required to register as an “investment
      company” under, and as such term is defined in, the United States Investment
      Company Act of 1940, as amended (the “Investment
      Company Act”)
      in
      connection with or as a result of the offer and sale of the Bonds and the
      Warrants;

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    
      	
            	(cc)	
              Regulation
                S 

            


    

    


    The
      Issuer reasonably believes that there is no substantial U.S. market interest
      (as
      defined in Regulation S under the Securities Act) in the debt securities of
      the
      Issuer, and that the Issuer and its affiliates and any person acting on its
      or
      their behalf have complied with and will comply with the offering restrictions
      requirement of Regulation S under the Securities Act;

     

    
      	
            	(dd)	
              OFAC
                

            


    

     

    Neither
      the Issuer nor any of its Subsidiaries nor any director, officer, agent,
      employee or affiliate of the Issuer or any of its Subsidiaries are currently
      subject to any U.S. sanctions administered by the Office of Foreign Assets
      Control of the U.S. Department of the Treasury (“OFAC”).
      No
      part of the proceeds of the sale of the Bonds or the Warrants will be used,
      directly or indirectly, for any payments to: (i) any individual or entity listed
      on the Specially Designated Nationals and Blocked Persons List administered
      by
      the OFAC and/or any other similar lists administered by OFAC pursuant to any
      authorising statute, executive order or regulation; (ii) the government of
      any
      country subject to an OFAC Sanctions Program; (iii) any individual or entity
      included on any list of terrorists or terrorist organizations maintained by
      the
      United Nations, the European Union and or the countries in which the Issuer
      and
      its affiliates operate; or (iv) any governmental official or employee, political
      party, official of a political party, candidate for political office, anyone
      else acting in an official capacity, or any agent of any such individual or
      entity, in order to obtain, retain or direct business or obtain any improper
      advantage, in violation of the United States Foreign Corrupt Practices Act
      of
      1977, as amended (the “FCPA”);
      

     

    
      	
            	(ee)	
              FCPA
                

            


    

     

    Neither
      the Issuer nor any of its Subsidiaries nor any director, officer, agent,
      employee or other person associated with or acting on behalf of the Issuer
      or
      any of its Subsidiaries, has used any corporate funds for any unlawful
      contribution, gift, entertainment or other unlawful expense relating to
      political activity; made any direct or indirect unlawful payment to any foreign
      or domestic government official or employee from corporate funds; violated
      or is
      in violation of any provision of the FCPA, as amended; or made any bribe,
      rebate, payoff, influence payment, kickback or other unlawful payment prohibited
      under any applicable law or regulation equivalent to the FCPA. No part of the
      proceeds from the sale of the Bonds or the Warrants hereunder shall be used,
      directly or indirectly, for any payment to any governmental official or
      employee, political party, official of a political part, candidate for political
      office, or anyone else acting in an official capacity, in order to obtain,
      retain or direct business or obtain any improper advantage, in violation of
      the
      FCPA; 

     

    
      	
            	(ff)	
              Anti-Money
                Laundering 

            


    

     

    The
      operations of the Issuer and its Subsidiaries are and have been conducted at
      all
      times in compliance with applicable financial record keeping and reporting
      requirements and money laundering statutes in the United States (and all
      applicable subdivisions thereof), in the case of the Issuer, and the
      jurisdiction of its incorporation, in the case of each of the Issuer’s
      Subsidiaries, and of all jurisdictions in which the Issuer and its Subsidiaries
      conduct business, the rules and regulations thereunder and any related or
      similar rules, regulations or guidelines, issued, administered or enforced
      by
      any governmental agency (collectively, “Money
      Laundering Laws”)
      and no
      action, suit or proceeding by or before any court or governmental agency,
      authority or body or any arbitrator involving the Issuer or any of its
Subsidiaries
      with respect to Money Laundering Laws is pending and no such actions, suits
      or
      proceedings are threatened or contemplated; 

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    
      	
            	(gg)	
              Pre-emptive
                or Other Third Party Rights 

            


    

     

    The
      Issuer has available free from pre-emptive or other third party rights out
      of
      its authorised but unissued share capital such number of Shares as would or
      may
      be required to be issued upon conversion at the initial Conversion Price of
      all
      of the Bonds and exercise of the Warrants now being issued, and the Shares
      when
      issued and delivered in accordance with the Trust Deed and the Bonds or the
      Warrants, as the case may be, will be freely transferable (subject to compliance
      with applicable securities laws), duly and validly issued, fully paid and
      non-assessable and free and clear from all liens, charges, encumbrances,
      security interests and other third party rights, other than any created by
      the
      Bondholder or the Warrantholder, as the case may be; 

     

    
      	
            	(hh)	
              Ranking
                of the Shares 

            


    

     

    The
      Shares to be issued upon conversion of the Bonds or exercise of the Warrants
      will rank pari
      passu in
      all
      respects with all other common shares in issue of the Issuer and be entitled
      when issued to all dividends and other distributions declared, paid or made
      by
      the Issuer;

     

    
      	
            	(ii)	
              No
                Restrictions applicable to the Shares


            


    

     

    There
      are
      no restrictions which will be applicable to the Shares generally upon the voting
      or transfer of any the Shares pursuant to the Issuer’s constitutional documents
      or pursuant to any agreement or other instrument to which the Issuer is a party
      or by which the Issuer may be bound; 

     

    
      	
            	(jj)	
              Authorised
                Share Capital 

            


    

     

    The
      Issuer has an authorised share capital as disclosed to the Subscriber and all
      of
      the issued shares (or shares committed under any option or other rights) of
      the
      Issuer have been duly and validly authorised and issued and are fully paid
      and
      non-assessable; 

     

    
      	
            	(kk)	
              No
                Outstanding Securities

            


    

     

    Except
      as
      disclosed in the most recent annual report on Form 10-K (the “Annual
      Report”)
      filed
      by the Issuer with the United States Securities and Exchange Commission (the
      “Commission”)
      as at
      the date of this Agreement and the quarterly reports on Form 10-Q filed by
      the
      Issuer with the Commission subsequent to the filing of the Annual Report and
      prior to the date hereof (the “Quarterly
      Reports”,
      and
      together with the Annual Report, the “Periodic
      Reports”),
      there
      are no outstanding securities issued by the Issuer or its Subsidiaries
      convertible into or exchangeable for Shares, or warrants, rights or options
      to
      purchase Shares from the Issuer, nor are there other or similar arrangements
      approved by the board of directors of the Issuer or the general meeting of
      shareholders of the Issuer providing for the issue or purchase of Shares or
      the
      subscription for the Shares and no unissued share capital of the Issuer is
      under
      option or agreed conditionally or unconditionally to be put under option;


     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    
      	
            	(ll)	
              Conduct
                of Business

            


    

    


    Each
      of
      the Issuer and its Subsidiaries (i) possesses or has obtained all material
      licences, permits, concessions, certificates, consents, orders, approvals and
      other authorisations from, and has made all declarations and filings with,
      all
      national, state, local and other governmental authorities (including foreign
      regulatory agencies), all self-regulatory organisations and all courts and
      other
      tribunals, domestic or foreign, necessary to own or lease, as the case may
      be,
      and to operate its properties and to carry on its business as conducted as
      at
      the date hereof and (ii) has not received and does not expect to receive any
      notice of proceedings relating to the revocation or modification of any such
      license, permit, certificate, consent, order, approval or other authorisation;
      and (iii) is in compliance in all material respects with all laws and
      regulations relating to the conduct of its business as conducted as at the
      date
      hereof; 

     

    
      	
            	(mm)	
              Tax
                Returns 

            


    

     

    Each
      of
      the Issuer and its Subsidiaries has duly and timely filed all tax returns that
      are required to be filed in all relevant jurisdictions or has duly requested
      extensions thereof and has paid all taxes required to be paid by any of them
      in
      all relevant jurisdictions and any related assessments, fines or penalties,
      except for any such tax, assessment, fine or penalty that is being contested
      in
      good faith and by appropriate proceedings or where the failure to file or make
      payment would not, singly or in the aggregate, have a material adverse effect.
      There is no dispute or disagreement outstanding nor is any dispute or
      disagreement contemplated with any revenue authority in any jurisdiction
      regarding liability to any tax or duty (including in each case, penalties or
      interest) recoverable from the Issuer or any of its Subsidiaries or regarding
      the availability of any relief from tax or duty to the Issuer or any of its
      Subsidiaries and there are no circumstances which make it likely that any such
      dispute or disagreement will commence or that any claims are being or likely
      to
      be asserted against the Issuer or any of its Subsidiaries that would
      individually or in the aggregate have a material adverse effect; 

     

    
      	
            	(nn)	
              Related
                Party

            


    

     

    No
      material relationship, direct or indirect, exists between or among any of the
      Issuer or its Subsidiaries or any affiliate of the Issuer or its subsidiaries,
      on the one hand, and any current director, officer, stockholder, customer or
      supplier of any of them (including any member of their immediate family), on
      the
      other hand, which has not been disclosed in the Periodic Reports of the Issuer;
      

     

    
      	
            	(oo)	
              No
                Distribution of Other Offering Material


            


    

     

    Neither
      the Issuer nor any of its Subsidiaries or affiliates has distributed, nor will
      it distribute, any offering material in connection with the offer and sale
      of
      the Bonds, the Warrants and the Shares upon the conversion of the Bonds and
      the
      Warrants f; and 

     

    
      	
            	(pp)	
              Registration
                Statement Conformity to Requirements of the Act; No Untrue Statements
                or
                Omissions 

            


    

     

    The
      Issuer meets the requirements for use of Form S-1 under the Securities Act
      and
      has prepared and filed a registration statement on Form S-1 (No. 333-138603)
      (the “Registration
      Statement”)
      with
      the Commission, in the form heretofore delivered to the Subscriber. Each
      prospectus contained in the Registration Statement, at the time of filing
      thereof, conformed in all material respects to the requirements of the
      Securities Act and the rules
      and
      regulations of the Commission thereunder, and each such prospectus did not
      contain an untrue statement of a material fact or omit to state a material
      fact
      required to be stated therein or necessary to make the statements therein,
      in
      the light of the circumstances under which they were made, not misleading.
      

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

    
      	4.2	
              Warranties
                by the Subscriber 

            


    

     

    
      	
            	(a)	
              The
                Subscriber acknowledges that none of the Bonds, the Shares or the
                Warrants
                have been registered under the Securities Act and that the Bonds
                and the
                Warrants are being sold to the Subscriber in a non-public offering;
                

            


    

     

    
      	
            	(b)	
              The
                Subscriber has such knowledge and experience in financial, business
                and
                international investment matters that it is capable of evaluating
                the
                merits and risks of purchasing the Bonds and the Warrants, has had
                the
                opportunity to ask questions of, and receive answers and request
                information from the Issuer; 

            


    

     

    
      	
            	(c)	
              The
                Subscriber represents that it is an “accredited investor” as defined in
                Rule 501 of Regulation D of the Securities Act;


            


    

     

    
      	
            	(d)	
              The
                Subscriber is purchasing the Bonds and the Warrants for its own account
                and not with a view to any distribution thereof; and
                

            


    

     

    
      	
            	(e)	
              The
                Subscriber acknowledges, represents and agrees that:
                

            


    

     

    
      	
            	(i)	
              the
                Bonds and the Warrants offered outside the United States in reliance
                on
                Regulation S (“Regulation
                S”)
                of the Securities Act will be represented by Global Certificates;
                

            


    

     

    
      	
            	(ii)	
              it
                is, or at the time the Bonds and the Warrants are purchased will
                be, the
                beneficial owner of the Bonds and the Warrants and (a) it is outside
                the
                United States and is not a U.S. person (as defined in Regulation
                S); and
                (b) it is not an affiliate of the Issuer or a person acting on behalf
                of
                such an affiliate; and 

            


    

     

    
      	
            	(iii)	
              it
                understands that neither of the Bonds nor the Shares of the Issuer
                issuable upon conversion of the Bonds nor the Warrants have yet been
                registered under the Securities Act or any applicable U.S. state
                securities laws and, until 40 days after the settlement date of the
                sale
                of the Bonds, it agrees not to offer, sell, pledge or otherwise transfer
                the Bonds or the Shares or the Warrants except (a) inside the United
                States to a person whom the Subscriber reasonably believes is a qualified
                institutional buyer (a “QIB”)
                (as defined in Rule 144A of the Securities Act) pursuant to an exemption
                from registration under the Securities Act; (b) outside the United
                States
                to a non-U.S. person in compliance with Regulation S; (c) pursuant
                to
                another exemption from registration under the Securities Act (if
                available); or (d) pursuant to an effective registration statement
                under
                the Securities Act.

            


    

     

    
      
        	4.3	
                Interpretation
                  

              


      

       

      For
        the
        purpose of this Clause 4: 


      


      “Person”
        includes any individual, company, corporation, firm, partnership, joint venture,
        undertaking, association, organisation, trust, state or agency of a state
        (in
        each case, whether or not having separate legal personality); and


    

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

     

    “Subsidiary”
means
      in relation to any Person and at any particular time, any entity of which more
      than fifty percent (50%) of the issued share capital having ordinary voting
      power to elect a majority of the board of directors or other persons performing
      similar functions is then beneficially owned by such Person and/or one (1)
      or
      more of its Subsidiaries and “Subsidiaries”
means
      two (2) or more of such companies. 

     

    
      
        
          	5.	
                  UNDERTAKINGS
                    BY THE ISSUER

                


        

      

    

     

    The
      Issuer undertakes with the Subscriber as follows: 

     

    
      	5.1	
              Taxes
                

            


    

     

    The
      Issuer will pay (a) any stamp, issue, registration, documentary or other taxes
      and duties, including interest and penalties, payable in the United States
      on or
      in connection with the creation, issue and offering of the Bonds or the Warrants
      or the execution or delivery of the Contracts; and (b) in addition to any amount
      payable by it under this Agreement, any value added, turnover or similar tax
      (other than a tax levied on the overall tax income of the Subscriber) payable
      in
      respect of that amount. The Issuer shall indemnify the Subscriber against any
      claim, demand, action, liability, damages, cost, loss or expense (including,
      without limitation, reasonable legal fees) which it may incur as a result or
      arising out of or in relation to any failure to pay or delay in paying any
      of
      the same. 

     

    
      	5.2	
              Financial
                and Business Condition 

            


    

     

    The
      Issuer will forthwith notify the Subscriber promptly of any material development
      in the financial or business condition, or in the earnings, business affairs
      or
      business prospects of the Issuer or the Consolidated Group, whether or not
      arising in the ordinary course of business at any time prior to payment being
      made to the Issuer on the Closing Date. 

     

    
      
        	5.3	
                Delivery
                  of Bonds and Warrants


              


      

    

     

    The
      Issuer will make such reasonable arrangements satisfactory to the Subscriber
      as
      it can to ensure that the Global Certificate for the Bonds and the Global
      Certificate for the Warrants and any definitive Bonds and Warrants are delivered
      to, in the case of the Bonds, the Principal Paying and Conversion Agent for
      authentication in the form required by, and otherwise in accordance with, the
      Trust Deed and the Agency Agreement and, in the case of the Warrants, the
      Warrant Agent for authentication in the form required by the Warrant Instrument
      and the Warrant Agency Agreement. 

     

    
      	5.4	
              Due
                Diligence 

            


    

     

    The
      Issuer will co-operate with the Subscriber in respect of, and participate in,
      the due-diligence procedures required by the Subscriber in connection with
      the
      issue of the Bonds and the Warrants. 

     

    
      	5.5	
              Registration
                

            


    

     

    Within
      30
      days of the date hereof, the Issuer will amend the Registration Statement to
      register the Bonds, the Warrants and the Shares issuable upon conversion of
      the
      Bonds and exercise of the Warrants
      and file such amendment with the Commission. The Issuer shall use its best
      endeavours to cause the Registration Statement as so amended to become effective
      as promptly as possible. Each prospectus contained in the Registration Statement
      will conform in all material respects to the requirements of the Securities
      Act
      and the rules and regulations of the Commission thereunder, and each such
      prospectus will not contain an untrue statement of a material fact or omit
      to
      state a material fact required to be stated therein or necessary to make the
      statements therein, in the light of the circumstances under which they were
      made, not misleading.

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

    
      	5.6	
              Restrictions
                on Other Issues 

            


    

     

    The
      Issuer will not, for a period of ninety (90) days after the Closing Date, other
      than as contemplated by the form of the prospectuses included in the
      Registration Statement on the date hereof, without the prior written consent
      of
      the Subscriber, issue, offer, lend, sell, contract to sell, pledge, grant or
      otherwise dispose of or encumber (or publicly announce any (or any intention
      to
      make) such issue, offer, lease, sale, contract to sell, pledge, grant, disposal
      or encumbrance), any Shares or securities convertible or exchangeable into
      or
      exercisable for Shares or warrants or other rights to purchase Shares; save,
      in
      the case of (a) above, for the issue, offer, exercise, allotment, appropriation
      or grant of Shares to or for the benefit of employees of the Issuer (including
      directors holding office) or any subsidiary of the Issuer pursuant to any
      employees’ share scheme or plan which (i) is in compliance with the regulations
      and stock exchange rules governing the Issuer and its Shares and (ii) does
      not
      amount to, relate to, or entitle such persons to receive, Shares in excess
      of
      ten percent (10%) of the average number of issued and outstanding Shares during
      any twelve (12) months. 

     

    
      	5.7	
              No
                Actions Causing Adjustments to the Conversion Price or the Subscription
                Price 

            


    

     

    Between
      the date of this Agreement and the Closing Date (both dates inclusive), neither
      the Issuer nor any person acting on behalf of either of them will take, directly
      or indirectly, any action designed to or which constitutes or which might
      reasonably be expected to cause or result in an adjustment of the initial
      Conversion Price of the Bonds or the Subscription Price of the Warrants.


     

    
      	5.8	
              No
                Encumbrances

            


    

     

    The
      Issuer shall deliver the Shares free and clear of all liens, claims, charges,
      security, encumbrances or like interests upon conversion of the Bonds in
      accordance with the Trust Deed and the Terms and Conditions, and upon exercise
      of the Warrants in accordance with the Warrant Instrument. 

     

    
      	5.9	
              Listing
                

            


    

     

    The
      Issuer confirms that it shall use its best endeavours to promptly list the
      Shares into which the Bonds are or may be convertible pursuant to the Terms
      and
      Conditions and the Warrants are or may be exercisable pursuant to the Warrant
      Instrument, as the case may be, on the AMEX and in any event no later than
      three
      hundred and sixty-five (365) days after the Closing Date. The Issuer will use
      its best endeavours to maintain such listing, provided that, if the Issuer
      is
      unable to maintain such listing having used such endeavours, the Issuer shall
      use its best endeavours to obtain and maintain a listing of the Shares on such
      other stock exchange(s) as the Issuer may agree with the Subscriber or, after
      the Closing Date, the Trustee. 

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

    
      	5.10	
              No
                Announcements 

            


    

    


    The
      Issuer shall not, without the prior written consent of the Subscriber, make
      any
      public announcement with respect to the Bonds and the Warrants. This provision
      will not apply to any such public announcement required by any applicable law,
      regulation or listing rules governing the Issuer and its Shares provided that,
      subject to compliance with applicable laws, prior to the making or despatch
      thereof the Issuer shall (i) inform the Subscriber and (ii) consult (to the
      maximum extent practicable) with the Subscriber as to the content, timing and
      manner of making such public announcement or despatch thereof and the Issuer
      shall consider all reasonable requests of the Subscriber in relation thereto.
      

     

    
      	5.11	
              Use
                of Proceeds 

            


    

     

    The
      Issuer will use the net proceeds received by it from the issue of the Bonds
      and
      the Warrants for general corporate financing purposes of the Issuer and its
      Subsidiaries. The
      Issuer will ensure that proceeds raised in connection with the issue of the
      Bonds and the Warrants will not directly or indirectly be lent, contributed
      or
      otherwise made available to any person or entity (whether or not related to
      the
      Issuer) for the purpose of financing the activities of any person or for the
      benefit of any country currently subject to any United States sanctions
      administered by OFAC. 

     

    
      	5.12	
              Agreements
                

            


    

     

    The
      Issuer will execute the Trust Deed, the Agency Agreement, the Registration
      Rights Agreement, the Warrant Agency Agreement and the Warrant Instrument on
      or
      before the Closing Date.

     

    
      	5.13	
              Documents
                

            


    

     

    Up
      to the
      Closing Date, the Issuer will furnish to the Subscriber, copies of each document
      filed by it with the Commission as well as copies of any financial statements
      and other periodic reports that the Issuer furnishes to holders of its debt
      securities or to its shareholders. 

     

    
      	5.14	
              Liquidity
                

            


    

     

    The
      Issuer will not, and will procure that none of its Subsidiaries will, create
      any
      material relationships with any off-balance sheet entities that are
      contractually limited to narrow activities that facilitate the transfer of
      or
      access to assets or liabilities by the Issuer or any of its Subsidiaries, such
      as structured finance entities and special purpose entities, that are reasonably
      likely to have a material effect on the liquidity of the Issuer or any of its
      Subsidiaries or the availability thereof or the requirements of the Issuer
      or
      any of its Subsidiaries for capital resources. 

     

    
      
        
          	6.	
                  CONDITIONS
                    PRECEDENT 

                


        

      

    

     

    
      	6.1	
              Conditions
                Precedent 

            


    

     

    The
      obligations of the Subscriber to subscribe and pay for the Bonds and the
      Warrants are conditional upon: 

     

    
      	
            	(a)	
              Contracts

            


    

     

    The
      execution and delivery of the Trust Deed, the Agency Agreement, the Registration
      Rights Agreement, the Warrant Instrument and the Warrant Agency Agreement by
      the
      respective parties. 

    


    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    


    
      	
            	(b)	
              Compliance
                and Material Adverse Change 

            


    

     

    On
      the
      Closing Date (i) the representations and warranties of the Issuer in this
      Agreement being true, accurate and correct at, and as if made on, the Closing
      Date, (ii) the Issuer having performed all of its obligations under this
      Agreement to be performed on or before the Closing Date, (iii) there having
      been, as at the Closing Date, no change which is materially adverse to the
      condition (financial or other), business, prospects, properties, shareholders’
equity, results of operations or general affairs of the Issuer or of the
      Consolidated Group taken as a whole since 31 December, 2006 and (iv) there
      having been delivered to the Subscriber a certificate dated the Closing Date,
      signed by a duly authorised officer of the Issuer (substantially in the form
      of
      Schedule 3 to this Agreement) to the effect stated in (i), (ii) and
      (iii).

     

    
      	
            	(c)	
              Legal
                Opinion 

            


    

     

    On
      or
      before the Closing Date, there having been delivered to the Subscriber opinions
      in form and substance satisfactory to the Subscriber, dated the Closing Date
      of:

     

    
      	
            	(i)	
              Kirkpatrick
                & Lockhart Preston Gates Ellis LLP, legal advisers to the Issuer as
                to
                the laws of England; 

            


    

     

    
      	
            	(ii)	
              Kirkpatrick
                & Lockhart Preston Gates Ellis LLP, legal advisers to the Issuer as
                to
                the federal laws of the United States and the laws of the State of
                Delaware; and 

            


    

     

    
      	
            	(iii)	
              Paul,
                Hastings, Janofsky & Walker, legal advisers to the Subscriber as to
                the laws of England. 

            


    

     

    
      	
            	(d)	
              Ratings
                

            


    

     

    No
      rating
      agency having downgraded, nor given notice or made any public announcement
      of
      any intended or potential downgrading or of any review or surveillance with
      negative implications of, the rating accorded to any debt securities of the
      Issuer. 

     

    
      	
            	(e)	
              Due
                Diligence 

            


    

     

    The
      Subscriber having been reasonably satisfied with the results of its due
      diligence investigations on the Issuer and its Subsidiaries.

     

    
      	
            	(f)	
              Registration
                Rights Agreement 

            


    

     

    The
      Issuer executing the Registration Rights Agreement in form and substance
      satisfactory to the Subscriber.

     

    
      	
            	(g)	
              Others
                

            


    

     

    On
      or
      before the Closing Date, there having been delivered to the Subscriber any
      other
      documents (including, but not limited to, any resolutions, consents and
      authorities) relating to the issue of the Bonds or the Warrants which the
      Subscriber may reasonably require. 

     

    
      
        	6.2	
                Waiver
                  

              


      

      


      The
        Subscriber may, at its discretion and upon such terms as they think fit,
        waive
        compliance with the whole or any part of Clause 6.1. 

    

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

    
    

    
      
        
          	7.	
                  CLOSING
                    

                


        

      

    

     

    
      	7.1	
              Delivery
                of Global Certificate and Registration of Holdings
                

            


    

     

    Not
      later
      than 10:00 a.m. (New York time) on the Closing Date, the Issuer will issue
      the
      Bonds and the Warrants and procure the entry in the register of Bondholders
      (as
      defined in the Terms and Conditions) and the register of Warrantholders (as
      defined in the Warrant Instrument) of the name of the Subscriber to be the
      holder of the Bonds and the Warrants and the Registrar will deliver a Global
      Certificate duly executed and authenticated representing the aggregate principal
      amount of each of the Bonds and a Global Certificate duly executed and
      authenticated representing the Warrants to the nominee of a depositary (the
      “Common
      Depositary”)
      common
      to Euroclear and Clearstream in accordance with the Trust Deed and the Paying
      and Conversion Agency Agreement. Delivery of the Global Certificates for each
      of
      the Bonds and the Warrants and completion of the register of Bondholders and
      the
      register of Warrantholders shall constitute the issue and delivery of the Bonds
      and the Warrants, as the case may be.

     

    
      	7.2	
              Payment
                

            


    

     

    Immediately
      against such delivery and registration, the Subscriber shall, subject to the
      conditions mentioned in Clause 6, pay or procure to be paid to the Issuer,
      (a)
      the net subscription moneys (being the Subscription Price less any amount
      deductible under, or under any arrangement referred to in, Clause 9) for the
      Bonds and (b) the aggregate Warrant Issue Price for the Warrants to be
      subscribed by it to such bank account as shall be notified by the Issuer to
      the
      Subscriber. Such payment by or on behalf of the Subscriber for the Bonds and
      the
      Warrants to the Issuer pursuant to this Clause 7.2 shall be a complete discharge
      of the Subscriber’s obligation to make such payments.

     

    Payment
      under this Clause 7.2 shall be made in United States dollars by the Subscriber
      in United States dollars in same day settlement funds to such United States
      dollar account in New York City as shall have been notified by the Issuer to
      the
      Subscriber not later than five (5) days prior to the Closing Date, evidence
      of
      such payment taking the form of a confirmation from the Issuer that it has
      received such payment. 

     

    
      
        
          	8.	
                  COMMISSION
                    

                


        

      

    

     

    The
      Issuer agrees to pay to the Subscriber a commission of three percent (3%) of
      the
      principal amount of the Bonds. Such commission shall be deducted from the
      subscription moneys for the Bonds subscribed by the Subscriber. 

     

    
      
        
          	9.	
                  FEES
                    AND EXPENSES 

                


        

      

    

     

    
      	9.1	
              General
                Expenses 

            


    

     

    The
      Issuer agrees to pay, or in the case of expenses incurred by the Subscriber,
      reimburse promptly upon presentation of invoices, to the extent reasonably
      and
      properly incurred: 

     

    
      	
            	(a)	
              all
                costs and expenses in connection with (a) the preparation, production
                and
                (where appropriate) printing of the Bonds, the Warrants, the Contracts
                and
                all other documents relating to the issue of the Bonds or the Warrants,
                as
                the case may be, (b) the initial delivery and
                distribution (including transportation and packaging but not insurance
                (other than to the place of distribution)) of the Bonds or the Warrants
                and (c) the listing of the Shares on the AMEX; and
                

            


    

    


    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

     

    
      	
            	(b)	
              the
                fees and expenses of the Subscriber’s legal counsel and any other
                professional advisers engaged by the Subscriber in connection with
                the
                issue of the Bonds or the Warrants and all travelling, telecommunications,
                postage, accommodation, marketing and other out-of-pocket and roadshow
                and
                investor presentation expenses, disbursements of the Subscriber,
                any
                charges levied by regulators or the AMEX, any expenses relating to
                any
                stock lending incurred by the Subscriber in connection with the issue
                of
                the Bonds or the Warrants and any value added and goods and services
                tax
                thereon. 

            


    

     

    
      	9.2	
              Issuer’s
                Other Expenses 

            


    

     

    The
      Issuer shall bear and pay: 

     

    
      	
            	(a)	
              the
                fees and expenses of the Trustee and the agents appointed under the
                Trust
                Deed and the Agency Agreement in relation to the preparation and
                execution
                of the Contracts, the issue and authentication of the Bonds or the
                Warrants and the performance of their duties under the Contracts,
                including the legal fees and expenses of Trustee's counsel; and
                

            


    

     

    
      	
            	(b)	
              the
                fees and expenses of the legal, accountancy and any other professional
                advisers instructed by the Issuer in connection with the creation
                and
                issue of the Bonds or the Warrants and in each such case any value
                added
                tax thereon. 

            


    

     

    
      	9.3	
              Withholding
                Tax 

            


    

     

    All
      payments by the Issuer under this Agreement shall be paid without set-off or
      counterclaim, and free and clear of and without deduction or withholding for
      or
      on account of, any present or future taxes, levies, imports, duties, fees,
      assessments or other charges of whatever nature, imposed by the United States
      or
      any other relevant jurisdiction or by any department, agency or other political
      subdivision or taxing authority thereof or therein, and all interest, penalties
      or similar liabilities with respect thereto (“Taxes”).
      If
      any Taxes are required by law to be deducted or withheld in connection with
      any
      such payment, the Issuer will increase the amount paid so that the full amount
      of such payment is received by the payee as if no such deduction or withholding
      had been made. In addition, the Issuer agrees to indemnify and hold the
      Subscriber harmless against any Taxes which they are required to pay in respect
      of any amount paid by the Issuer under this Agreement. 

     

    
      	9.4	
              Stamp
                Duties 

            


    

     

    The
      Issuer shall pay all stamp, registration and other taxes and duties (including
      any interest and penalties thereon or in connection therewith) which may be
      payable upon or in connection with the creation and issue of the Bonds or the
      Warrants and the execution of the Contracts, and the Issuer shall indemnify
      the
      Subscribers against any claim, demand, action, liability, damages, cost, loss
      or
      expense (including, without limitation, reasonable legal fees) which it may
      incur as a result or arising out of or in relation to any failure to pay or
      delay in paying any of the same. 

     

    
      	10.	
              INDEMNIFICATION

            


    

     

    
      	10.1	
              Without
                prejudice to the other rights or remedies of the Subscriber, the
                Issuer
                undertakes to the Subscriber that if the Subscriber or any of its
                affiliates, directors, officers, employees, agents or controlling
                persons (within the meaning of Section 15 of the Securities Act and
                Section 20 of the U.S. Securities Exchange Act of 1934, as amended)
                (together with the Subscriber, each a “Relevant
                Party”)
                incurs any liability, damages, cost, loss or expense (including,
                without
                limitation, legal fees, costs and expenses) (a “Loss”)
                arising out of, in connection with, or based on, any actual or alleged
                breach of the representations, warranties and undertakings contained
                in,
                or made or deemed to be made by the Issuer under, this Agreement,
                the
                Issuer shall pay to the Subscriber on demand an amount equal to such
                Loss.
                The Subscriber shall not have any duty or obligation, whether as
                fiduciary
                or trustee for any Relevant Party or otherwise, to recover any such
                payment or to account to any other person for any amounts paid to
                it under
                this Clause 10.1. 

            


    

     

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

     

    
      	10.2	
              In
                case any action shall be brought against any Relevant Party in respect
                of
                which recovery may be sought from the Issuer under this Clause 10,
                the
                Subscriber shall promptly notify the Issuer in writing but failure
                to do
                so will not relieve the Issuer from any liability under this
                Agreement.

            


    

     

    
      	10.3	
              The
                Issuer shall not, without the prior written consent of the Relevant
                Party,
                settle or compromise or consent to the entry of any judgment with
                respect
                to any pending or threatened claim or action in respect of which
                recovery
                may be sought hereunder (whether or not any Relevant Party is an
                actual or
                potential party to such claim or action) unless such settlement,
                compromise or consent includes an unconditional release of each Relevant
                Party from all liability arising out of such claim or action and
                does not
                include a statement as to or an admission of fault, culpability or
                failure
                to act by or on behalf of a Relevant Party.


            


    

     

    
      	10.4	
              Indemnification
                for any Losses incurred in connection with an alleged breach (that
                is not
                also an actual breach) will only apply if the Subscriber or any other
                Relevant Party is not the party alleging the breach.
                

            


    

     

    
      	11.	
              TERMINATION
                

            


    

     

    
      	11.1	
              The
                Subscriber’s Ability to Terminate


            


    

     

    Notwithstanding
      anything contained in this Agreement, the Subscriber may, by giving notice
      to
      the Issuer at any time prior to payment of the net subscription moneys for
      the
      Bonds and the aggregate Warrant Issue Price for the Warrants to the Issuer
      on
      the Closing Date, terminate this Agreement in any of the following
      circumstances: 

     

    
      	
            	(a)	
              if
                there shall have come to the notice of the Subscriber any breach
                by the
                Issuer of any of the warranties and representations contained in
                Clause 4
                or any failure to perform any of the Issuer’s undertakings or agreements
                in this Agreement; 

            


    

     

    
      	
            	(b)	
              if
                any of the conditions specified in Clause 6 has not been satisfied
                or
                waived by the Subscriber by the Closing Date; or
                

            


    

     

    
      	
            	(c)	
              (i)
                if, in the opinion of the Subscriber, since the date of this Agreement,
                there shall have been such a change (whether or not foreseeable at
                the
                date of this Agreement) in national or international financial, political
                or economic conditions or currency exchange rates or exchange controls
                as
                would in its view be likely to prejudice materially dealings in the
                Bonds
                or the Warrants in the secondary market or (ii) if there occurs any
                disruption to trading generally on the New York Stock Exchange, NASDAQ,
                the AMEX, the London Stock Exchange plc’s market for listed securities,
                the Main Board or Growth Enterprises Market of The Stock Exchange
                of Hong
                Kong Limited. 

            


    

     

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

     

    
      	11.2	
              Consequences
                of Termination 

            


    

     

    Upon
      such
      notice being given this Agreement shall terminate and be of no further effect
      and no party shall be under any liability to any other in respect of this
      Agreement, except that the Issuer shall remain liable for the payment of all
      costs and expenses referred to in Clause 9 and any liabilities arising before
      or
      in relation to such termination, the Subscriber shall remain liable under
      Clauses 3.2 and 3.3 and the obligations of the Issuer pursuant to Clause 12,
      which would have continued had the arrangements for the subscription and issue
      of the Bonds been completed, shall continue. 

     

    
      	12.	
              SURVIVAL
                OF REPRESENTATIONS AND OBLIGATIONS


            


    

     

    The
      representations, warranties, agreements, undertakings and indemnities of the
      Issuer in this Agreement shall continue in full force and effect notwithstanding
      completion of the arrangements for the subscription and issue of the Bonds
      or
      the Warrants, the Subscriber’s actual or constructive knowledge with respect to
      any of the matters referred to in the representations and warranties, or any
      investigation made by or on behalf of the Subscriber or the termination of
      this
      Agreement pursuant to Clause 11. 

     

    
      	13.	
              COMMUNICATIONS
                

            


    

     

    
      	13.1	
              Addresses
                

            


    

     

    Any
      communication shall be given by letter, fax or telephone: 

     

    in
      the
      case of notices to the Issuer, to it care of: 

     

    China
      Architectural Engineering, Inc. 

    105
      Baishi Rd., Jiuzhou West Avenue 

    Zhuhai,
      519070

    China
      

    Telephone
      no.:  +86-756-853-8908
      

    Fax
      no. +86-756-853-8922
      

    Attention:
       Luo
      Ken
      Yi 

     

    and
      in
      the case of notices from the Issuer to the Subscriber, to the Subscriber at:
      

     

    ABN
      AMRO
      Bank N.V. 

    250
      Bishopsgate 

    London
      EC2M 4AA 

    United
      Kingdom 

    Telephone
      no.:  +44
      207
      678 3145 

    Fax
      no. +44
      207
      678 6484 

    Attention:
       Global
      Financial Markets 

     

    
      	13.2	
              Effectiveness
                

            


    

     

    Any
      communication shall take effect, in the case of a letter, at the time of
      delivery, in the case of fax, at the time of despatch or, in the case of
      telephone, when made. 

    


    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

    


    
      	13.3	
              Confirmations
                

            


    

     

    Any
      communication not by letter shall be confirmed by letter but failure to send
      or
      receive the letter of confirmation shall not invalidate the original
      communication. 

     

    
      	14.	
              GOVERNING
                LAW AND JURISDICTION 

            


    

     

    
      	14.1	
              Governing
                Law 

            


    

     

    This
      Agreement, as to which time shall be of the essence, shall be governed by and
      construed in accordance with English law. 

     

    
      	14.2	
              Jurisdiction
                

            


    

     

    Subject
      to sub-clause 14.3, the Issuer agrees for the benefit of the Subscriber that
      the
      courts of England are to have exclusive jurisdiction to settle any disputes
      which may arise out of or in connection with this Agreement and accordingly
      submit to the exclusive jurisdiction of the courts of England. 

     

    
      	14.3	
              The
                Subscriber may take any suit, action or proceedings (together referred
                to
                as Proceedings) against the Issuer in any other court of competent
                jurisdiction and concurrent Proceedings in any number of jurisdictions.
                The Issuer hereby appoints The
                London Law Agency of 69 Southampton Row, London WC1B 4ET for the time
                being in England, to accept service of any Proceedings on its behalf.
                

            


    

     

    
      	15.	
              COUNTERPARTS
                

            


    

     

    This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one (1)
      instrument. 

     

    
      	16.	
              CONTRACTS
                (RIGHTS OF THIRD PARTIES) ACT 1999


            


    

     

    A
      person
      who is not a party to this Agreement has no rights under the Contracts (Rights
      of Third Parties) Act 1999 to enforce any term of these presents, but this
      does
      not affect any right or remedy of a third party which exists or is available
      apart from that Act. 

     

    
      	17.	
              INVALIDITY
                

            


    

     

    If
      any
      provision in this Agreement shall be held to be illegal, invalid or
      unenforceable, in whole or in part, under any enactment or rule of law, such
      provision or part shall to that extent be deemed not to form part of this
      Agreement but the legality, validity and enforceability of the remainder of
      this
      Agreement shall not be affected. 

     

    
      	18.	
              ENTIRE
                AGREEMENT 

            


    

     

    This
      Agreement constitutes the whole and only agreement between the parties relating
      to the offering, issue and sale of the Bonds and the Warrants. 

     

    [Remainder
      of the page intentionally left blank] 

    


    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

    


    SCHEDULE
      1 

    TERMS
      AND CONDITIONS OF THE BONDS 


    


    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      2 

    FORM
      OF WARRANT INSTRUMENT 

    


    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

    


    SCHEDULE
      3 

    FORM
      OF CERTIFICATE OF NO MATERIAL ADVERSE CHANGE

     

    [l]
      2007

     

    
      	To:	
              ABN
                AMRO Bank N.V. 

              250
                Bishopsgate 

              London
                EC2M 4AA 

              United
                Kingdom 

            


      	 	 


      	 	
              Attention:
                Global Financial Markets 

            


    

     

    Dear
      Sirs


     

    China
      Architectural Engineering, Inc. (the Issuer) 

    US$10,000,000
      Variable Rate Convertible Bonds due 2012 (the Bonds) 

    800,000
      Warrants Expiring 2010 (the Warrants) 

     

    I,
      being
      a duly authorised officer of the Issuer, refer to the Subscription Agreement
      dated [l]
      2007
      (the “Subscription
      Agreement”)
      between the Issuer and ABN AMRO Bank N.V. relating to the issue of the Bonds
      and
      the Warrants. 

     

    As
      required by the Subscription Agreement, I certify that at today’s date (a) the
      representations and warranties of the Issuer contained in the Subscription
      Agreement are true, accurate and correct at, and as if made, today, (b) the
      Issuer has performed all of its obligations under the Subscription Agreement
      to
      be performed on or before today and (c) there has been no change which is
      materially adverse to the condition (financial or other), business, prospects,
      properties, shareholders' equity, results of operations or general affairs
      of
      the Issuer or of the Consolidated Group (as defined in the Subscription
      Agreement) taken as a whole since 31 December, 2006.

     

    Yours
      faithfully 

    
      	 	 	 	 
	
              China
                Architectural Engineering, Inc. 

            	 	 	 
	 	 	 	 
	
            	 	 	 
	By:	 	 	
            
	
              
                

              

              [name]

              Director

            	 	 	
            


    

     

    
      
        
        

      

      
        -25-

        
          

        

      

      
        
        

      

    

     

    This
      Agreement has
      been
      entered into on the date stated at the beginning. 

     

    The
      Issuer 

    
      	 	 	 	 
	
              CHINA
                ARCHITECTURAL ENGINEERING, INC. 

            	 
	 	 	 	 
	 	 	 	 
	By:    /s/
              Luo
              Ken Yi 	 	 	
            
	
              
                

              
Name:    Luo
              Ken
              Yi 	 	 	
            
	
              
                

              

              Title:    Chairman
                

            	 	 	March 27, 2007
	
              
                
 

            	 	 	 
	 	 	 	 
	
              The
                Subscriber 

            	 	 	 
	 	 	 	 
	
              ABN
                AMRO BANK N.V. 

            	 	 	 
	 	 	 	
              27
                March 2007 

            
	 	 	 	 
	By:    /s/ Graeme
              Booth 	 	 	By:    /s/ Fraser
              Ross  
	
              
                

              

              Name:    Graeme
                Booth 

            	 	 	
              
Name:    Fraser
              Ross  
	
              
                

              

              Title:    Head
                of Asian
                Equity Limited

            	 	 	
              

              Title:    Regional
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                Counsel

            
	
              
                

              

            	 	 	
              
                

              
                        


    

     

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