AMENDMENT NO. 1 TO MAKE GOOD ESCROW AGREEMENT
 
This Amendment No. 1 to Make Good Escrow Agreement (this “Amendment”) is dated
September 18, 2008, by and among China Water and Drinks Inc., a Nevada
corporation (the “Company”), The Pinnacle Fund, L.P., as agent (“Agent”), Mr. Xu
Hong Bin, in his individual capacity (“Make Good Pledgor”), and Loeb & Loeb LLP,
as escrow agent (“Escrow Agent”) and amends that certain Make Good Escrow
Agreement (the “Escrow Agreement”) dated May 31, 2007, by and among the parties
hereto.

WHEREAS, Pursuant to Section 14 of the Escrow Agreement, the Escrow Agreement
may be amended in writing provided such amendment is signed by the parties
hereto; and

WHEREAS, except as otherwise stated herein, capitalized terms not otherwise
defined in this Amendment shall have the definition given to such terms in that
certain Securities Purchase Agreement dated May 31, 2007, by and among the
Company and the investors identified on the signature pages thereto;

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 parties hereto agree
as follows:

2. Amendment. Section 4(a) of the Escrow Agreement is hereby amended and
restated in its entirety to read as follows (with changes in italics):

“(a) Fiscal Year Ended December 31, 2007. Make Good Pledgor agrees that if the
After-Tax Net Income for the fiscal year ended December 31, 2007 reported in the
Company’s Annual Report on Form 10-KSB for the fiscal year ending December 31,
2007, as filed with the Commission (the “2007 Annual Report”), 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 2007 Guaranteed
ATNI, is less than $19,000,000 (the “2007 Guaranteed ATNI”), Agent shall provide
written instruction (with a copy to the Company) to the Escrow Agent to release
to each Investor on a pro rata basis (based upon such Investor’s Investment
Amount specified on Exhibit A attached hereto relative to the aggregate
Investment Amounts of all Investors specified on Exhibit A attached hereto), for
no additional consideration, 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”) and shall instruct the Transfer
Agent to transfer into the name of each Investor, the number of 2007 Make Good
Shares released to such Investor. The Escrow Agent need only rely on the letter
of instruction from Agent in this regard and will disregard any contrary
instructions. The Escrow Agent shall be entitled to rely on the calculations
provided by Agent with the letter of instruction in releasing the Escrow Shares
for disbursement, with no further responsibility to calculate or confirm
amounts. If the Company’s audited consolidated financial statements for the
fiscal year ended December 31, 2007 specify that the 2007 Guaranteed ATNI shall
have been achieved, the Agent shall provide written instruction (with a copy to
the Company) to the Escrow Agent to release all 2007 Make Good Shares deposited
with the Escrow Agent to the Make Good Pledgor within 10 Business Days after the
date which the 2007 Annual Report is filed with the Commission, provided that
Escrow Agent is given notice of the 2007 Annual Report’s filing and results. Any
releases of 2007 Make Good Shares to Investors required under this Section shall
be made to Investors within 10 Business Days after the date which the 2007
Annual Report is filed with the Commission, provided that Escrow Agent is given
notice of the 2007 Annual Report’s filing and results.”  

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Additionally, Section 4(b) of the Escrow Agreement is hereby amended and
restated in its entirety to read as follows (with changes in italics):

“(b) Fiscal Year Ending December 31, 2008. Make Good Pledgor agrees that in the
event that either (i) the After-Tax Net Income for the fiscal year ended
December 31, 2008 reported in the Company’s Annual Report on Form 10-KSB for the
fiscal year ending December 31, 2008, as filed with the Commission (the “2008
Annual Report”) is less than $30,000,000 (the “2008 Guaranteed ATNI”) or (ii)
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”), 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 expenses
relating to the beneficial conversion feature attributable to the Company’s 5%
convertible notes issued in January, 2008, Agent shall provide written
instruction (with a copy to the Company) to the Escrow Agent to release to each
Investor on a pro rata basis (based upon such Investor’s Investment Amount
specified on Exhibit A attached hereto relative to the aggregate Investment
Amounts of all Investors specified on Exhibit A attached hereto), for no
additional consideration, 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”) and shall instruct the Transfer
Agent to transfer into the name of each Investor, the number of 2008 Make Good
Shares released to such Investor. The Escrow Agent need only rely on the letter
of instruction from Agent in this regard and will disregard any contrary
instructions. The Escrow Agent shall be entitled to rely on the calculations
provided by Agent with the letter of instruction in releasing the Escrow Shares
for disbursement, with no further responsibility to calculate or confirm
amounts. If the Company’s audited consolidated financial statements for the
fiscal year ended December 31, 2008 specify that both (i) the 2008 Guaranteed
ATNI and (ii) 2008 Guaranteed EPS, 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 expenses relating to the beneficial conversion
feature attributable to the Company’s 5% convertible notes issued in January,
2008, shall each have been achieved, the Agent shall provide written instruction
(with a copy to the Company) to the Escrow Agent to release all 2008 Make Good
Shares deposited with the Escrow Agent to the Make Good Pledgor within 10
Business Days after the date which the 2008 Annual Report is filed with the
Commission, provided that Escrow Agent is given notice of the 2008 Annual
Report’s filing and results. Any releases of 2008 Make Good Shares required to
be made to Investors under this Section shall be made to Investors within 10
Business Days after the date which the 2008 Annual Report is filed with the
Commission, provided that Escrow Agent is given notice of the 2008 Annual
Report’s filing and results.”

2. Effectiveness. This Amendment shall become effective upon execution.

3. Limited Nature of Amendment. Except as expressly amended hereby, the Escrow
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 Escrow 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.

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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.

        COMPANY:       CHINA WATER AND DRINKS INC.  
   
   
    By: /s/ Xu Hong Bin   Name: Xu Hong Bin    Title: President

 

            AGENT:               THE PINNACLE FUND, L.P.  
   
   
        By: Pinnacle Advisors, L.P., its General Partner               By:
Pinnacle Fund Management, LLC, its
General Partner
                By: /s/ Barry M. Kitt       Name: Barry M. Kitt       Title:
Sole Member

 

        ESCROW AGENT:       LOEB & LOEB LLP  
   
   
    By: /s/ Mitchell Nussbaum   Name: Mitchell Nussbaum   Title: Partner        
      MR. XU HONG BIN         /s/ Xu Hong Bin   Mr. Xu Hong Bin