SUBSCRIPTION AGREEMENT CHINA ARCHITECTURAL ENGINEERING, INC. US$10,000,000 VARIABLE RATE CONVERTIBLE BONDS DUE 2012 800,000 WARRANTS EXPIRING 2010 March 27, 2007
Execution
Copy
US$10,000,000
VARIABLE RATE CONVERTIBLE BONDS DUE 2012
800,000
WARRANTS EXPIRING 2010
March
27,
2007
CONTENTS
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Clause
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Page
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1.
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INTERPRETATION
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1
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2.
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ISSUE
OF THE BONDS AND WARRANTS
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1
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3.
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AGREEMENTS
BY THE SUBSCRIBER AND THE ISSUER
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2
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4.
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REPRESENTATIONS
AND WARRANTIES
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2
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5.
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UNDERTAKINGS
BY THE ISSUER
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14
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6.
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CONDITIONS
PRECEDENT
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16
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7.
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CLOSING
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18
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8.
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COMMISSION
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18
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9.
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FEES
AND EXPENSES
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18
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10.
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INDEMNIFICATION
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19
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11.
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TERMINATION
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20
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12.
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SURVIVAL
OF REPRESENTATIONS AND OBLIGATIONS
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21
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13.
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COMMUNICATIONS
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21
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14.
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GOVERNING
LAW AND JURISDICTION
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22
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15.
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COUNTERPARTS
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22
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16.
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CONTRACTS
(RIGHTS OF THIRD PARTIES) ACT 1999
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22
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17.
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INVALIDITY
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22
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18.
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ENTIRE
AGREEMENT
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22
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SCHEDULE
1 TERMS AND CONDITIONS OF THE BONDS
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23
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SCHEDULE
2 FORM OF WARRANT INSTRUMENT
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24
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SCHEDULE
3 FORM OF CERTIFICATE OF NO MATERIAL ADVERSE
CHANGE
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25
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-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) |
▇▇▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ LLP, legal advisers to the Issuer as
to
the laws of England;
|
| (ii) |
▇▇▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ 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, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, 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:
▇▇▇
▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Zhuhai,
519070
China
Telephone
no.: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
Fax
no. ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
Attention:
▇▇▇
▇▇▇
▇▇
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.: ▇▇▇
▇▇▇
▇▇▇ ▇▇▇▇
Fax
no. ▇▇▇
▇▇▇
▇▇▇ ▇▇▇▇
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 ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ 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.
▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇ ▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇
|
|
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
| By: | |||
|
[name]
Director
|
-25-
This
Agreement has
been
entered into on the date stated at the beginning.
The
Issuer
| By: /s/ ▇▇▇ ▇▇▇ ▇▇ | |||
|
|
|||
|
Title: Chairman
|
March 27, 2007 | ||
|
|
|||
|
The
Subscriber
|
|||
|
ABN
AMRO BANK N.V.
|
|||
|
27
March 2007
|
|||
| By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇ | By: /s/ ▇▇▇▇▇▇ ▇▇▇▇ | ||
|
Name: ▇▇▇▇▇▇
▇▇▇▇▇
|
Name: ▇▇▇▇▇▇ ▇▇▇▇ |
||
|
Title: Head
of Asian
Equity Limited
|
Title: Regional
Legal
Counsel
|
||
|
|
|
||
Signature
Page of Subscription Agreement