EXHIBIT 10.3
 
AMENDMENT TO
ASSET PURCHASE AGREEMENT

This Amendment (this “Amendment”) to that certain Asset Purchase Agreement dated
September 9, 2008 (the “Agreement”) is entered into by and between New Leaf
Brands, Inc., a Nevada corporation (“Company””), Baywood New Leaf Acquisition,
Inc., a Nevada corporation and a wholly owned subsidiary of Company
(“Subsidiary”), Skae Beverage International, LLC, a Delaware limited liability
company (“Beverage”), and Eric Skae, an individual (“Skae”). Company,
Subsidiary, Beverage and Skae are each referred to herein individually as a
“Party” and collectively as the “Parties”.

W I T N E S S E T H:
 
WHEREAS, The Agreement contemplated the raising of additional capital that was
never raised; and
 
WHEREAS, as a result of the failure to raise the capital, Skae could not execute
his original business plan and was also placed in an executive position beyond
his original mandate; and
 
WHEREAS, Skae had to lead a major restructuring effort which began in 2009 and
into 2010 and had to partially fund operations personally for 2009 and 2010; and
 
WHEREAS, As a result, it has become necessary to restructure the obligations of
the Company to Skae as set forth herein;
 
NOW, THEREFORE, in consideration of the benefits conferred upon each Party, and
for other good and valuable consideration, the sufficiency of which is hereby
mutually acknowledged, the Parties agree to amend the Agreement as follows:
 
1. Amendment of Agreement.  Paragraph 2.6 of the Agreement is hereby deleted in
its entirety and shall now read as follows:

a. Earn Out Payment
Within ninety (90) days after each of the first two (2) twelve (12) month
anniversaries of December 31, 2010 (each such anniversary, an “Earn Out
Reference Date”), Company shall calculate the Earn Out Payment Amount (as
defined in Section (b) below) for the twelve (12) month period ended on such
Earn Out Reference Date (each such twelve (12) month period, a “Reference Year”;
the first and second Reference Years, respectively, are herein referred to as
the “First Reference Year” and the “Second Reference Year”) and shall provide
Skae with a written notice detailing such Earn Out Payment Amount and the
calculation thereof (an “Earn Out Notice”).  Subject to Sections (f) and (g),
Company shall pay Skae, in accordance with Section (e), an Earn Out Payment
twenty (20) days after delivery of the Earn Out Notice (each an “Earn Out
Payment Date”) in an amount equal to the Earn Out Payment Amount due and
payable, if any, with respect to the applicable Reference Year; provided,
however, that Company shall in no event pay to Skae any amounts under this
Amendment, regardless of the form of payment, in excess of  $3,271,761 in the
two-Reference Year aggregate (inclusive of the $500,000 earn out bonus payment
described in Section (c)).  It is recognized by all Parties that Skae has earned
an aggregate of $260,000 in Earn Out Payments from the date of the Agreement
through December 31, 2009  (“Deferred Payment”), which shall be payable in cash
or in Shares, at the market price on the date of issuance, as provided in
subsection (d)(iv) below. Any Earn Out Payment made pursuant to this Amendment
shall be treated for all Tax purposes as an adjustment to the Purchase Price
(subject to the requirements of Section 483 of the Code).
 
 
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b. Definitions
For purposes of this Amendment:
(i) “Gross Profit”, means, with respect to a particular Reference Year, the
gross sales of the Company attributable to the Company Business minus the cost
of goods sold, determined in accordance with GAAP.
 (ii)“Actual Gross Profit Delta” means, with respect to a particular Reference
Year, the increase in Gross Profit during such Reference Year when compared with
the prior twelve (12) month period ended December 31.
 (iii)“Reference Year Factor” means, (a), with respect to the First Reference
Year, 23.6%,  and (b), with respect to the Second Reference Year, 16.1% .
 (iv)“Earn Out Payment Amount” means, with respect to a particular Reference
Year, the Reference Year Actual Gross Profit Delta with respect to such
Reference Year times the Reference Year Factor with respect to such Reference
Year.
Exhibit A sets forth a series of examples showing various Earn Out Payment
Amount scenarios using a variety of Actual Gross Profit Delta results.

c. Bonus
In the event that aggregate Earn Out Payment Amounts earned by Skae is equal to
or exceeds $1,847,841, Company shall pay Skae an earn out bonus payment (a
“Bonus”) in the amount of $500,000, due and payable on the second Earn Out
Payment Date.

d. Board Determination of Payments
The Board of Directors (the “Board”), with Skae abstaining, shall determine the
composition of each Earn Out Payment and Bonus, if any.  If the Board elects to
convert all or part of any Earn Out Payment Amount due on such Earn Out Payment
Date from cash into Shares, the shares shall be issued at a conversion price
equal to the average of the last sale price for the five (5) days prior to the
Earn Out Payment Date, provided, however, that the conversion prices set forth
above shall be ratably adjusted to take into account any stock splits, reverse
stock splits, consolidations or other similar actions taken by Company with
respect to its outstanding capital stock.

e. Payment Method
Each Earn Out Payment and Bonus, if any, shall be paid by delivery from Company
to Skae, or his assignee, of certificates representing any amount of Shares
which the Board has elected to distribute pursuant to Section (d) and, in
respect of any remaining balance of such Earn Out Payment, a promissory note in
a form reasonably satisfactory to Skae, or his assignee, with interest payable
at the Prime Rate of CitiBank plus two percent (2%) calculated on the basis of a
360 day year and:
(i) in respect of any Earn Out Payment relating to the First Reference Year,
payment in four (4) equal quarterly installments commencing on the date which is
three (3) months after the applicable Earn Out Payment Date;
(ii) in respect of any Earn Out Payment relating to the Second Reference Year,
payment in four (4) equal quarterly installments commencing on the date which is
three (3) months after the applicable Earn Out Payment Date; and
(iii) in respect of any Bonus, payment in four (4) equal quarterly installments
commencing on the date which is three (3) months after the applicable Earn Out
Payment Date.
(iv) in respect of any Deferred Payment, payment in four (4) equal quarterly
installments commencing on the date which is three (3) months after the
effective date hereof.
 
 
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f. Audit
Upon the written request of Skae provided to Company no later than ten (10)
business days following delivery of an Earn Out Notice to Skae, Company shall
permit an independent certified public accounting firm of recognized standing
selected by Skae to have access during normal business hours and for a period
not exceeding ten (10) business days to such of the records of Company as may be
reasonably necessary to verify the accuracy of Company’s compliance with this
Section (f) (the “Audit Right”).   The fees charged by such accounting firm
shall be paid by Skae, except to the extent of an error greater than seven (7%)
percent in which case Company shall reimburse Skae for the reasonable fees and
expenses of such audit.  If such accounting firm concludes that the amount
contained in any Earn Out Notice made to Skae was incorrect, then, within ten
(10) days of the date Skae delivers to Company such accounting firm’s written
report so concluding, Company or Skae, as applicable, shall remit such payment
to the other party, together with interest from the date on which such unpaid
amount was so payable at the rate per annum (adjusted quarterly) equal to the
“prime rate” of CitiBank as reported by The Wall Street Journal, such rate being
based on corporate loans posted by at least seventy five percent (75%) of the
nation’s thirty (30) largest banks.  The Audit Right may be exercised once each
year.  Upon expiration of this ten (10) day period without exercise of the Audit
Right, the applicable Earn Out Payment provided by Company shall be deemed
correct. Skae’s accountant is not permitted to disclose to Skae any confidential
information of the Company and must execute a non-disclosure agreement to the
reasonable satisfaction of Company. Skae’s accountant may only report whether or
not there is a discrepancy in the calculation of the applicable Earn Out Payment
and the dollar value of such discrepancy.

g. Offset
The Company shall be entitled to offset against any Earn Out Payment (i) any
indemnification payments to which the Company becomes entitled pursuant to
Section 9 of the Agreement, and (ii) any payments owed by Skae to Company in
respect of proration of Taxes pursuant to Section 7.5(c) of the Agreement that
were not previously paid by Skae; provided, however, that such offset right
shall terminate with respect Earn Out Payments earned in any Reference Year
three (3) months after the Earn Out Payment Date applicable to each such Earn
Out Payment.

h. Breach
Notwithstanding anything to the contrary set forth in this Section, Skae shall
not have the right to receive, and shall be deemed to have not earned, any Earn
Out Payment in the event that Skae is then in material breach of Section 5.7
(Non-Competition) of the Agreement and such material breach, if reasonably
capable of being cured, remains uncured thirty (30) days after Skae’s receipt of
written notice of such material breach from Company.
 
 
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2. Effective Date.  This Agreement shall become effective without further act as
soon as the Company consummates an aggregate of at least $3,000,000 in financing
in its current private placement of Series K Preferred Shares and including the
face amount of the 12% OID Notes issued in September and October 2010.

3. Agreement Intact.  The Agreement as modified by this Amendment, sets forth
the Parties’ entire understanding and agreement with respect to the subject
matter hereof.  Except as expressly modified by this Amendment, each and every
term and condition set forth in the Agreement, and each Party’s rights and
obligations hereunder, shall remain in full force and effect.  In the event of a
conflict between any term or condition set forth in this Amendment and the
Agreement, the terms and conditions of this Amendment shall govern and prevail.

IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed by
their duly authorized officers as of the date set forth above.

NEW LEAF BRANDS, INC.   BAYWOOD NEW LEAF ACQUISITION, INC.           By: 
 
  By:  
 
  Its:
 
  Its:
 
             
SKAE BEVERAGE INTERNATIONAL,  L.L.C.
  ERIC SKAE               By:      By:      Its:          

 
 
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EXHIBIT A
 

Two Year Summary   Earn Out     Bonus     Total                                
                                      High Payment   $ 2,771,762     $ 500,000  
  $ 3,271,762                           Intended Pmt   $ 1,847,841     $ 500,000
    $ 2,347,841                           Low Payment   $ 923,921             $
923,921                                                                        
    1/01/11 to 12/31/11                      Perf Vs Actual                    
    50 %     75 %     100 %     125 %     150 % Gross Profit Delta     3,528,945
              1,764,473       2,646,709       3,528,945       4,411,181      
5,293,418   Payment 23.6% of GDP     832,831               416,416       624,623
      832,831       1,041,039       1,249,247                                  
                              High Payment     $ 1,249,247                      
                        Intended Pmt     $ 832,831                              
                Low Payment     $ 416,416                                      
                                                              1/01/12 to
12/31/12                       Perf Vs Actual                         50 %    
75 %     100 %     125 %     150 % Gross Profit Delta     6,304,410            
  3,152,205       4,728,308       6,304,410       7,880,513       9,456,615  
Payment 16.1% of GDP     1,015,010               507,505       761,258      
1,015,010       1,268,763       1,522,515                                      
                          High Payment     $ 1,522,515                          
                    Intended Pmt     $ 1,015,010                                
              Low Payment     $ 507,505                                        
 

 
 
 
 
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