AMENDMENT NO. 1 TO SECURITIES PURCHASE AGREEMENT
AMENDMENT
NO. 1 TO SECURITIES PURCHASE AGREEMENT
This
Amendment No. 1 to Securities Purchase Agreement (this “Amendment”)
is
dated September 18, 2008, by and among China Water and Drinks Inc., a Nevada
corporation (the “Company”)
and
certain of the Investors (as defined below), and amends that certain Securities
Purchase Agreement (the “Agreement”)
dated
May 31, 2007 by and among the Company and the investors identified on the
signature pages thereto (collectively, the “Investors”).
WHEREAS,
Pursuant to Section 6.4 of the Agreement, the Agreement may be amended in
writing provided such amendment is signed by the Company and the Investors
holding a majority of the Securities (as such term is defined in the
Agreement);
WHEREAS,
the Investors signatory hereto, in the aggregate, own a majority of the
Securities;
WHEREAS,
each Investor signatory hereto is signing only on its own behalf, and not on
behalf of any other Investor;
WHEREAS,
except as otherwise stated herein, capitalized terms not otherwise defined
in
this Amendment shall have the definition given to such terms in the
Agreement;
NOW,
THEREFORE, IN CONSIDERATION of the foregoing and the mutual agreements contained
in this Amendment, and for other good and valuable consideration the receipt
and
adequacy of which are hereby acknowledged, the Company and Pinnacle, on behalf
of the Investors, hereby agree as follows:
1. Amendment.
Section
4.11(a) of the Agreement is hereby amended and restated in its entirety to
read
as follows (with changes in italics):
“(a)
The
Make Good Pledgor agrees that in the event that the After-Tax Net Income
reported in the 2007 Annual Report, after
adding back any compensation expenses relating to the Escrow Shares (as defined
in the Make Good Escrow Agreement) or the return of any Escrow Shares to the
Make Good Pledgor due to the achievement of 2007 Guaranteed
ATNI,
is less
than $19,000,000 (the “2007
Guaranteed ATNI”),
the
Agent will instruct the Make Good Escrow Agent to release to the Investors
(in
accordance with the Make Good Escrow Agreement) on a pro-rata basis (determined
by dividing each Investor’s Investment Amount as of the Closing Date by the
aggregate of all Investment Amounts delivered to the Company by the Investors
hereunder) for no consideration other than their part of their respective
Investment Amount at Closing, 11,194,030 shares of Common Stock (as equitably
adjusted for any stock splits, stock combinations, stock dividends or similar
transactions) (the “2007
Make Good Shares”).
In
the event that either (i) the earnings per share reported in the 2008 Annual
Report is less than $0.300 on a fully diluted basis (as equitably adjusted
for
any stock splits, stock combinations, stock dividends or similar transactions)
(the “2008
Guaranteed EPS”)
or
(ii) the After-Tax Net Income reported in the 2008 Annual Report is less than
$30,000,000 (the “2008
Guaranteed ATNI”),
in
each case after adding back any compensation expense relating to the Escrow
Shares or the return of any Escrow Shares to the Make Good Pledgor due to the
achievement of 2008 Guaranteed ATNI and 2008 Guaranteed EPS, or any expense
relating to the beneficial conversion feature attributable to the Company’s 5%
convertible notes issued in January, 2008,
the
Agent will instruct the Make Good Escrow Agent to release to the Investors
(in
accordance with the Make Good Escrow Agreement) on a pro rata basis (determined
by dividing each Investor’s Investment Amount as of the Closing Date by the
aggregate of all Investment Amounts delivered to the Company by the Investors
hereunder) for no consideration other than their part of their respective
Investment Amount at Closing, 11,194,030 shares of Common Stock (as equitably
adjusted for any stock splits, stock combinations, stock dividends or similar
transactions) (the “2008
Make Good Shares”).
In
the event that the After-Tax Net Income reported in the 2007 Annual Report
is
equal to or greater than the 2007 Guaranteed ATNI, the Agent shall instruct
the
Make Good Escrow Agent to release the 2007 Make Good Shares to the Make Good
Pledgor in accordance with the Make Good Escrow Agreement. In the event
that both (i) the earnings per share reported in the 2008 Annual Report is
equal
to or greater than the 2008 Guaranteed EPS and (ii) the After-Tax Net Income
reported in the 2008 Annual Report is equal to or greater than the 2008
Guaranteed ATNI, in
each case after adding back any compensation expense relating to the Escrow
Shares or the return of any Escrow Shares to the Make Good Pledgor due to the
achievement of 2008 Guaranteed ATNI and 2008 Guaranteed EPS, or any expense
relating to the beneficial conversion feature attributable to the Company’s 5%
convertible notes issued in January, 2008,
the
Agent shall instruct the Make Good Escrow Agent to release the 2008 Make Good
Shares to the Make Good Pledgor in accordance with the Make Good Escrow
Agreement. Any such release to the Investors or to the Make Good Pledgor of
the
2007 Make Good Shares or the 2008 Make Good Shares shall be made to the
Investors or the Make Good Pledgor, as applicable, within 10 Business Days
after
the date which the 2007 Annual Report or 2008 Annual Report, as applicable,
is
filed.”
2. Effectiveness.
This
Amendment shall become effective upon execution.
3. Limited
Nature of Amendment.
Except
as expressly amended hereby, the Agreement remains in full force and effect
in
accordance with its terms and this Amendment shall not by implication or
otherwise alter, modify, amend or in any way affect any of the terms,
conditions, obligations, covenants or agreements contained in the Agreement,
all
of which are ratified and affirmed in all respects and shall continue in full
force and effect.
4. Counterparts.
This
Amendment may be executed in several counterparts, each of which shall be deemed
an original and all of which shall constitute one and the same instrument,
and
shall become effective when counterparts have been signed by each of the parties
and delivered to the other parties; it being understood that all parties need
not sign the same counterpart.
[Remainder
of page intentionally left blank - signature page follows]
2
IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed by their respective authorized signatories as of the date first
indicated above.
CHINA WATER AND DRINKS INC. | ||
|
|
|
By: | /s/ Xu Hong Bin | |
Name: | Xu Hong Bin | |
Title: | President |
MAJORITY IN INTEREST OF THE INVESTORS | ||||
THE PINNACLE FUND, L.P. | ||||
|
|
|
||
By: | Pinnacle Advisors, L.P., its General Partner | |||
By: |
Pinnacle Fund Management, LLC, its
General Partner
|
|||
By: | /s/ Xxxxx X. Xxxx | |||
Name: | Xxxxx X. Xxxx | |||
Title: | Sole Member |
PINNACLE CHINA FUND, L.P. | |||||
|
|
|
|||
By: |
Pinnacle
China Advisors, L.P., its
General
Partner
|
||||
By: |
Pinnacle China Management LLC, its
General Partner
|
||||
By: |
Kitt
China Management, LLC, its
Manager
|
||||
By: | /s/ Xxxxx X. Xxxx | ||||
Name: | Xxxxx X. Xxxx | ||||
Title: | Manager |