Document:

nlef_ex102.htm

EXHIBIT 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made and entered into as of December [l], 2010, between NEW LEAF BRANDS, INC., a Nevada corporation (the “Company”), and each of the several purchasers signatory hereto (each such purchaser, a “Purchaser” and, collectively, the “Purchasers”).

 

This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date hereof, between the Company and each Purchaser (the “Purchase Agreement”).

 

The Company and each Purchaser hereby agrees as follows:

 

	
1.  

	
Definitions.

 

Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement. 

 

In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings set forth in this Section 1:

 

“Effectiveness Date” means, with respect to the Initial Registration Statement required to be filed hereunder, the one hundred twentieth (120th) calendar day following the Filing Date and with respect to any additional Registration Statements which may be required pursuant to Section 3(c), the sixtieth (60th) calendar day following the date on which an additional Registration Statement is required to be filed hereunder; provided, however, that in the event the Company is notified by the Commission that the Initial Registration Statement will not be reviewed, the Effectiveness Date as to such Initial Registration Statement shall be the ninetieth (90th) calendar following the Filing Date.  Notwithstanding the foregoing, if the 120-day, 90-day or 60-day period shall expire during the period commencing on February 15, 2011 and ending on April 8, 2011, the Effectiveness Date shall be extended to the later of (i) the last day of such 120-day, 90-day or 60-day period and (ii) the earlier of (a) five (5) business days following the date the Company’s annual report on Form 10-K for the fiscal year ended on December 31, 2010 is filed and (b) April 8, 2011.

 

“Filing Date” means, with respect to the Initial Registration Statement required hereunder, the sixtieth (60th) calendar day following the initial Closing Date and, with respect to any additional Registration Statements which may be required pursuant to Section 3(c), the earliest practical date following the date on which the Company is permitted by SEC Guidance to file such additional Registration Statement related to the Registrable Securities that were not included in an earlier Registration Statement.

 

“Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.  A holder of securities exercisable for or convertible into Registrable Securities will be deemed a “Holder” of the underlying Registrable Securities and will be deemed to “hold” the underlying Registrable Securities for the purposes of this Agreement.

 

“Initial Registration Statement” means the initial Registration Statement filed pursuant to this Agreement.

 

“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A or 430B promulgated by the Commission pursuant to the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

 

  

 

  

 

“Registrable Securities” means, as of any date of determination, (a) any shares of Common Stock previously issued upon conversion of the Preferred Stock, plus one hundred twenty percent (120%) of the Conversion Shares (assuming on such date of determination all of the outstanding Preferred Stock are converted in full without regard to any exercise limitations therein), (b) any shares of Common Stock previously issued upon exercise of the Warrants, plus one hundred twenty percent (120%) of the Warrant Shares (assuming on such date of determination all Warrants are exercised in full without regard to any exercise limitations therein) and (c) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, that the Holder thereof has completed and delivered to the Company a Selling Stockholder Questionnaire; provided, further, that if (i) any such Registrable Securities are sold pursuant to a Registration Statement or Rule 144, or (ii) any such Registrable Securities become eligible for resale without condition pursuant to Rule 144, such eligibility confirmed in a written opinion by the Company’s counsel and reasonably acceptable to the Company’s transfer agent and the affected Holders, then the number of such outstanding securities satisfying clause (i) or (ii), plus one hundred twenty percent (120%) of such Conversion Shares or Warrant Shares satisfying clause (i) or (ii), shall cease to be Registrable Securities; and provided, further, that, solely for the purposes of calculating whether Holders of a given percentage of the Registrable Securities have consented, given direction, or otherwise taken action hereunder, one hundred percent (100%) of the Conversion Shares and Warrant Shares shall be considered Registrable Securities.

 

“Registration Statement” means any registration statement required to be filed hereunder pursuant to Section 2(a) and any additional registration statements contemplated by Section 3(c), including (in each case) the Prospectus, amendments and supplements to any such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in any such registration statement.

 

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

“SEC Guidance” means (i) any publicly-available written or oral guidance of the Commission staff (including any guidance relating to the registration of shares of capital stock in excess of the shares of capital stock authorized under an entity’s governing documents, as amended from time to time) and (ii) the Securities Act.

 

“Trading Day” means (a) a day on which the Common Stock is traded on the OTC Bulletin Board or a registered national securities exchange, or (b) if the Common Stock is not traded on the OTC Bulletin Board or a registered national securities exchange, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the Common Stock is not listed or quoted as set forth in (a) or (b) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close.

“Warrants” means (i) the “Warrants” as defined in the Purchase Agreement. (ii) the warrants issued upon the automatic conversion of the notes issued under the Note and Warrant Purchase Agreement, dated as of September 20, 2010, between the Company and each of the purchasers listed on Schedule A thereto (the “Bridge Agreement”) and (iii) the warrants issued to the Placement Agent in connection with any Closing under the Purchase Agreement, pursuant to the engagement letter, dated August 24, 2010, from the Placement Agent to the Company.  “Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.

 

 

  

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2.  

	
Shelf Registration.

 

(a) On or prior to each Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all, or such maximum portion as permitted by SEC Guidance (provided that, the Company shall use diligent efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the SEC Guidance, including without limitation, the SEC, Compliance and Disclosure Interpretations: Securities Act Rules 612.09), of the Registrable Securities that are not then registered on an effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415.  Each Registration Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith) and shall contain (unless otherwise directed by Holders of at least a majority in interest of the Registrable Securities) substantially the “Plan of Distribution” attached hereto as Exhibit A.  Subject to the terms of this Agreement, the Company shall use its best efforts to cause a Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event prior to or on the applicable Effectiveness Date, and shall use its best efforts to keep such Registration Statement continuously effective under the Securities Act from the date such Registration Statement is declared effective under the Securities Act until all Registrable Securities covered by such Registration Statement have been sold or may be sold without condition under Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the affected Holders (the “Effectiveness Period”).  The Company shall telephonically request effectiveness of a Registration Statement as of 5:00 p.m. New York City time on a Trading Day.  The Company shall as promptly as reasonably practicable under the circumstances notify the Holders via facsimile or by e-mail of the effectiveness of a Registration Statement on the same Trading Day that the Company telephonically confirms effectiveness with the Commission, which shall be the date requested for effectiveness of such Registration Statement.  The Company shall, by 9:30 a.m.  New York City time on the Trading Day after the effective date of such Registration Statement, file a final Prospectus with the Commission as required by Rule 424.  Notwithstanding any other provision of this Agreement, if any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater portion of Registrable Securities), unless otherwise directed in writing by a Holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will first be reduced by Registrable Securities represented by Warrant Shares (applied, if some Warrant Shares are registered, to the Holders on a pro rata basis based on the total number of unregistered Warrant Shares held by such Holders) and then by Conversion Shares (applied, if some Conversion Shares are registered, to the Holders on a pro rata basis based on the total number of unregistered Conversion Shares held by such Holders) and then by shares of Common Stock (applied, if some shares of Common Stock are registered, to the Holders on a pro rata basis based on the total number of shares of Common Stock held by such Holders).

 

(b) If:  (i) a Registration Statement is not filed on or prior to its Filing Date (if the Company files the Initial Registration Statement without affording the Holders the opportunity to review and comment on the same as required by Section 3(a) herein, the Company shall be deemed to have not satisfied this clause (i)), or (ii) prior to the effective date of a Registration Statement, the Company fails to file a pre-effective amendment and/or otherwise respond in writing to comments made by the Commission in respect of such Registration Statement within ten (10) Trading Days after the receipt of comments by or notice from the Commission that such amendment is required in order for such Registration Statement to be declared effective, provided, that, if a pre-amendment is required, such 10 Trading Day period shall be tolled during the period commencing on February 15, 2011 and ending on the earlier of the date the Company’s annual report on Form 10-K for the fiscal year ended on December 31, 2010 is filed and March 31, 2011 or (iii) the Initial Registration Statement registering for resale all of the Registrable Securities, or such maximum portion as permitted by SEC Guidance, or any additional Registration Statement is not declared effective by the Commission by its Effectiveness Date, or (iv) after the effective date of a Registration Statement, such Registration Statement ceases for any reason to remain continuously effective as to all Registrable Securities included in such Registration Statement, or the Holders are otherwise not permitted to utilize the Prospectus therein to resell such Registrable Securities, for more than thirty (30) consecutive calendar days or more than an aggregate of forty-five (45) calendar days (which need not be consecutive calendar days) during any 12-month period, (any such failure or breach being referred to as an “Event”, and for purposes of clauses (i) and (iii), the date on which such Event occurs, and for purpose of clause (iii) the date which such ten (10) Trading Day period is exceeded, and for purpose of clause (v) the date on which such thirty (30) or forty-five (45) calendar day period, as applicable, is exceeded being referred to as “Event Date”), then, in addition to any other rights the Holders may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as partial liquidated damages and not as a penalty, equal to one percent (1%) for each thirty (30) calendar day period or part thereof, of the aggregate purchase price paid by such Holder pursuant to the Purchase Agreement for any unregistered Registrable Securities then held by such Holder.  The parties agree that (1) the Company shall not be liable for liquidated damages under this Agreement with respect to any Registrable Securities that are not registered as a result of limitations set by SEC Guidance and (2) the maximum aggregate liquidated damages payable to a Holder under this Agreement shall be 12% of the aggregate Subscription Amount paid by such Holder pursuant to the Purchase Agreement.  If the Company fails to pay any partial liquidated damages pursuant to this Section in full within seven (7) Trading Days after the date payable, the Company will pay interest thereon at a rate of 18% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full.  The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro rata basis for any portion of a month prior to the cure of an Event.

 

  

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3.  

	
Registration Procedures.

 

In connection with the Company’s registration obligations hereunder, the Company shall:

 

(a) Not less than five (5) Trading Days prior to the initial filing of each Registration Statement and not less than one (1) Trading Day prior to the filing of any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall (i) furnish to each Holder copies of all such documents proposed to be filed (which shall be complete except for information that cannot reasonably be known at such time), which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of such Holders, and (ii) cause its officers and directors, counsel and independent registered public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to each Holder, to conduct a reasonable investigation within the meaning of the Securities Act.  The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority in interest of the Registrable Securities shall reasonably object in good faith, provided that, the Company is notified of such objection in writing no later than five (5) Trading Days after the Holders have been so furnished copies of a Registration Statement or one (1) Trading Day after the Holders have been so furnished copies of any related Prospectus or amendments or supplements thereto.  Each Holder agrees to furnish to the Company a completed questionnaire in the form attached to this Agreement as Exhibit B (a “Selling Stockholder Questionnaire”) on a date that is not less than two (2) Trading Days prior to the Filing Date or by the end of the second (2nd) Trading Day following the date on which such Holder receives draft materials in accordance with this Section.

 

(b) (i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities, (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424, (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto and provide as promptly as reasonably possible to the Holders true and complete copies of all correspondence from and to the Commission relating to a Registration Statement (provided that, the Company may excise any information contained therein which would constitute material non-public information as to any Holder which has not executed a confidentiality agreement with respect thereto with the Company), and (iv) comply in all material respects with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.

 

(c) If during the Effectiveness Period, the number of Registrable Securities at any time exceeds 100% of the number of shares of Common Stock then registered in a Registration Statement, file as soon as reasonably practicable, but in any case prior to the applicable Filing Date, an additional Registration Statement covering the resale by the Holders of not less than the number of such Registrable Securities.

 

  

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(d) Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in the case of (i)(A) below, not less than one (1) Trading Day prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed, (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement, and (C) with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose, (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and (vi) of the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the sole determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus, provided that, any notice delivered by the Company to the Holders notifying the Holders of such a suspension of the Registration Statement shall not disclose the details or content of such material event or occurrence, but shall only disclose that an event or occurrence exists which has caused the Company to determine to suspend the availability of the Registration Statement, the existence of such an event or occurrence shall remain confidential to each Holder until such information otherwise becomes public, unless disclosure by a Holder is required by law; provided, further, that notwithstanding each Holder’s agreement to keep such information confidential, each such Holder makes no acknowledgement that any such information is material, non-public information.

 

(e) Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

 

(f) Furnish to each Holder, upon request, without charge, at least one conformed copy of each such Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission; provided, that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form.

 

(g) Furnish to each Holder, upon request, copies of the Prospectus and each amendment or supplement thereto.  Subject to the terms of this Agreement, the Company hereby consents to the use of any Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(d).

 

(h) Cooperate with any broker-dealer through which a Holder proposes to resell its Registrable Securities in effecting a filing with the FINRA Corporate Financing Department pursuant to FINRA Rule 5110, as requested by any such Holder, and the Company shall pay the filing fee required by such filing within two (2) Business Days of request therefor.

 

(i) Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that, the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.

 

  

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(j) If requested by a Holder, cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request.

 

(k) Upon the occurrence of any event contemplated by Section 3(d), as promptly as reasonably possible under the circumstances, taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will 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 light of the circumstances under which they were made, not misleading.  If the Company notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(d) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus.  The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.  The Company shall be entitled to exercise its right under this Section 3(k) to suspend the availability of a Registration Statement and Prospectus for a period not to exceed 60 calendar days (which need not be consecutive days) in any 12-month period.

 

(l) Comply with all applicable rules and regulations of the Commission.

 

The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the shares.  If, as the result of any Holder’s failure to furnish such information, the Company would be in violation of this Agreement for failure to comply with any of its obligations hereunder, the Company shall remove such Holder from the Registration Statement and file such Registration Statement, and not be subject to any liquidated damages by any Holder.

 

	
4.  

	
Registration Expenses.

 

All fees and expenses incident to the performance of or compliance with, this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement.  The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed or quoted for trading and (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement.  The fees of GM as counsel for the Purchasers as a group shall be $10,000, for which the Company shall be responsible pursuant to the Purchase Agreement.  In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing or quotation of the Registrable Securities on any securities exchange as required hereunder.  In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.

 

  

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5.  

	
Indemnification.

 

(a) Indemnification by the Company.  The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, stockholders, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Exhibit A hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)-(vi), the use by such Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by such Holder and prior to the receipt by such Holder of the Advice contemplated in Section 6(d).  The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware.

 

(b) Indemnification by Holders.  Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon:  (x) such Holder’s failure to comply with the prospectus delivery requirements of the Securities Act or (y) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion in such Registration Statement or such Prospectus, (ii) to the extent that such information relates to such Holder’s proposed method of distribution of Registrable Securities, provided that such method of distribution was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Exhibit A hereto for this purpose), such Prospectus or in any amendment or supplement thereto or (iii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)-(vi), the use by such Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by such Holder and prior to the receipt by such Holder of the Advice contemplated in Section 6(d).  In no event shall the liability of any selling Holder under this Section 5(b) be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

 

  

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(c) Conduct of Indemnification Proceedings.  If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with the defense thereof; provided, that, the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially prejudiced the Indemnifying Party.

 

An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless:  (1) the Indemnifying Party has agreed in writing to pay such fees and expenses, (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding, or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party).  The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed.  No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

 

Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten (10) Trading Days of written notice thereof to the Indemnifying Party; provided, that, the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is judicially determined not to be entitled to indemnification hereunder.

 

(d) Contribution.  If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations.  The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission.  The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.

 

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph.  Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute pursuant to this Section 5(d), in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.

 

The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

 

  

8

  

 

	
6.  

	
Miscellaneous.

 

(a) Remedies.  In the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement.  Each of the Company and each Holder agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.

 

(b) Piggyback on Registrations; Prohibition on Filing Other Registration Statements. Any of the Company’s security holders who have the right, pursuant to agreements in effect as of the date hereof, to include securities of the Company (the “Piggyback Securities”) in any Registration Statement, including, without limitation, the holders of the “Registrable Securities" as defined in Exhibit C to the Bridge Agreement (the “Bridge Securities”), may include such Piggyback Securities in any Registration Statement in accordance with the terms of such agreements; provided , however, that in the event the Company is unable to include all of the Piggyback Securities and the Registrable Securities in a Registration Statement, the securities to be included in such Registration Statement shall be reduced, first, by the the Piggyback Securities other than the Bridge Securities, second, by the Bridge Securities, and, third, by the Registrable Securities in accordance with this Agreement.  The Company shall not file any other registration statements until all Registrable Securities are registered pursuant to a Registration Statement that is declared effective by the Commission, provided, that this Section 6(b) shall not prohibit the Company from filing amendments to registration statements filed prior to the date of this Agreement provided that no such amendment shall increase the number of securities registered by such registration statement.

 

(c) Compliance.  Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to a Registration Statement.

 

(d) Discontinued Disposition.  By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(d)(iii) through (vi), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed.  The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.  The Company agrees and acknowledges that any periods during which the Holder is required to discontinue the disposition of the Registrable Securities hereunder shall be subject to the provisions of Section 2(b).

 

(e) Piggy-Back Registrations Rights.  If, at any time during the Effectiveness Period, there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company’s stock option or other employee benefit plans, then the Company shall deliver to each Holder a written notice of such determination and, if within fifteen (15) days after the date of the delivery of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such Holder requests to be registered; provided, however, that the Company shall not be required to register any Registrable Securities pursuant to this Section 6(e) that are eligible for resale without condition pursuant to Rule 144 promulgated by the Commission pursuant to the Securities Act or that are the subject of a then effective Registration Statement.

 

  

9

  

 

(f) Amendments and Waivers.  The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of two-thirds or more of the Registrable Securities.  If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders and each Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement.  Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of a Holder or some Holders and that does not directly or indirectly affect the rights of other Holders may be given by such Holder or Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the first sentence of this Section 6(f).

 

(g) Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.

 

(h) Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder.  The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of the Holders of all of the Registrable Securities.  Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under Section 9.1 of the Purchase Agreement.

 

(i) No Inconsistent Agreements.  Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.  Except as set forth on Schedule 6(i), neither the Company nor any of its Subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been satisfied in full.

 

(j) Execution and Counterparts.  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

(k) Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the provisions of the Purchase Agreement.

 

(l) Cumulative Remedies.  The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.

 

(m) Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction.  It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

(n) Headings.  The headings in this Agreement are for convenience only, do not constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

(o) Independent Nature of Holders’ Obligations and Rights.  The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder.  Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holders are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement.  Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose.

 

(p) Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

********************

 

(Signature Pages Follow)

 

  

10

  

 

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

 

 

	 	NEW LEAF BRANDS, INC.	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	Name 	 
	 	 	Title 	 
	 	 	 	 

 

 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

 

  

11

  

 

[SIGNATURE PAGE OF HOLDERS TO REGISTRATION RIGHTS AGREEMENT]

 

	Name of Entity (if applicable):	 
	 	 
	Signature of Authorized Signatory of Holder:   	 
	 	 
	Name of Authorized Signatory:	 
	 	 
	Title of Authorized Signatory (if an entity):	 

 

[SIGNATURE PAGES CONTINUE]

 

  

12

  

 

Exhibit A

 

PLAN OF DISTRIBUTION

 

           We are registering the shares of common stock previously issued and the shares of common stock issuable upon exercise of the warrants to permit the resale of these shares of common stock by the holders of the warrants from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling stockholders of the shares of common stock. We will bear all fees and expenses incident to our obligation to register the shares of common stock.

 

           The selling stockholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent's commissions. The shares of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions,

 

	
·  

	
on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;

 

	
·  

	
in the over-the-counter market;

 

	
·  

	
in transactions otherwise than on these exchanges or systems or in the over-the-counter market;

 

	
·  

	
through the writing of options, whether such options are listed on an options exchange or otherwise;

 

	
·  

	
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

	
·  

	
block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

	
·  

	
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

	
·  

	
an exchange distribution in accordance with the rules of the applicable exchange;

 

	
·  

	
privately negotiated transactions;

 

	
·  

	
short sales;

 

	
·  

	
sales pursuant to Rule 144;

 

	
·  

	
broker-dealers may agree with the selling securityholders to sell a specified number of such shares at a stipulated price per share;

 

	
·  

	
a combination of any such methods of sale; and

 

	
·  

	
any other method permitted pursuant to applicable law.

 

           If the selling stockholders effect such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume. The selling stockholders may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.

 

  

13

  

 

           The selling stockholders may pledge or grant a security interest in some or all of the warrants or shares of Common Stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

 

           The selling stockholders and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be "underwriters" within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker- dealers or agents, any discounts, commissions and other terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.

 

           Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

 

           There can be no assurance that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement, of which this prospectus forms a part.

 

           The selling stockholders and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.

 

           We will pay all expenses of the registration of the shares of common stock pursuant to the registration rights agreement, estimated to be $__________ in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or "blue sky" laws and one counsel to the selling stockholders as a group; provided, however, that a selling stockholder will pay all underwriting discounts and selling commissions, if any. We will indemnify the selling stockholders against liabilities, including some liabilities under the Securities Act, in accordance with the registration rights agreements, or the selling stockholders will be entitled to contribution. We may be indemnified by the selling stockholders against civil liabilities, including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling stockholder specifically for use in this prospectus, in accordance with the related registration rights agreement, or we may be entitled to contribution.

 

           Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates.

 

  

14

  

 

Exhibit B

 

NEW LEAF BRANDS, INC.

 

Selling Stockholder Notice and Questionnaire

 

The undersigned beneficial owner of common stock (the “Registrable Securities”) of New Leaf Brands, Inc., a Nevada corporation (the “Company”), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”) a registration statement (the “Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement (the “Registration Rights Agreement”) to which this document is annexed.  A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below.  All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.

 

Certain legal consequences arise from being named as a selling stockholder in the Registration Statement and the related prospectus.  Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling stockholder in the Registration Statement and the related prospectus.

 

NOTICE

 

The undersigned beneficial owner (the “Selling Stockholder”) of Registrable Securities hereby elects to include the Registrable Securities owned by it in the Registration Statement.

QUESTIONNAIRE

 

The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate:

	
  

	
1.

	
Name:

 

	
  

	 	
(a)

	
Full Legal Name of Selling Stockholder:

 

	
  

	 	
 

	
 

 

	
  

	 	
(b)

	
Full Legal Name of Registered Holder (if not the same as (a) above) through which registrable securities Listed in Item 3 below are held:

 

	
  

	 	
 

	
 

	
  

	 	
(c)

	
Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly, alone or with others, has power to vote or dispose of the securities covered by this questionnaire):

 

	
  

	 	
 

	
 

  

15

  

 

	
  

	
2. 

	
Address for Notices to Selling Stockholder:

          

	 	  
	 	  
	 	  
	 	 
	 	
Telephone:__________________________________________________________________________________________________

	 	 
	 	
Fax:_______________________________________________________________________________________________________

	 	 
	 	
E-mail Address:______________________________________________________________________________________________

	 	 
	 	
Contact Person:______________________________________________________________________________________________

	
  

	
3.

	
Beneficial Ownership of Registrable Securities:

 

	
  

	 	
(a)

	
Type and amount of registrable securities beneficially owned:

 

	 	  
	 	  
	 	  

 

	
  

	
4.

	
Broker-Dealer Status:

 

	
  

	 	
(a)

	
Is the Selling Stockholder a registered broker-dealer?  Yes o      No o

 

	
  

	 	
Note:

	
If yes, the Commission’s staff has indicated that the Selling Stockholder should be identified as an underwriter in the Registration Statement.

 

	
  

	 	
(b)

	
Is the Selling Stockholder an affiliate of a broker-dealer?  Yes o       No o

 

	
  

	 	
(c)

	
If the Selling Stockholder is an affiliate of a broker-dealer, does the Selling Stockholder certify that it bought the registrable securities in the ordinary course of business, and at the time of the purchase of the registrable securities to be resold, it had no agreements or understandings, directly or indirectly, with any person to distribute the registrable securities?  Yes o      No o

     

	
  

	 	
Note:

	
If no, the Commission’s staff has indicated that the Selling Stockholder should be identified as an underwriter in the Registration Statement.

 

	
  

	
5.

	
Beneficial Ownership of Other Securities of the Company Owned by the Selling Stockholder:

 

Except as set forth below in this Item 5, the undersigned is not the beneficial or registered owner of any securities of the Company other than the registrable securities listed above in Item 3.

 

	
  

	 	
(a)

	
Type and Amount of Other Securities beneficially owned by the Selling Stockholder:

 

	 	  
	 	  
	 	  

 

  

16

  

 

	
  

	
6.

	
Relationships with the Company:

 

Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% or more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.

 

	
  

	 	
State any exceptions here:

 

	 	  
	 	  

 

The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof and prior to the effectiveness date for the Registration Statement.

 

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 6 and the inclusion of such information in the Registration Statement and the related prospectus.  The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus.

 

  

17

  

 

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.

 

 

	 Date________________________	 	Beneficial Owner:_______________________________________________   	 
	 	 	 	 
	 	
By: 

	 	 
	 	 	Name:	 
	 	 	Title:	 
	 	 	 	 

                                                                                                                      

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL ASAP, TO:

David Tsiang

Chief Financial Officer

New Leaf Brands, Inc.

One DeWolf Road

Old Tappan, NJ 07675

Telephone: [l]

Telecopier: [l]

 

 

18nlef_ex103.htm

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).

 

  

1

  

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.

 

  

2

  

 

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	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

 

 

 

 

5

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