Asset Purchase Agreement, Swiss Research, Inc., December 24, 2004

Exhibit 10.47


AGREEMENT

OF

PURCHASE AND SALE OF ASSETS


SELLER:

SWISS RESEARCH, INC.,

a California corporation


SHAREHOLDER:

LOREN MILES

BUYER:

HEALTH SCIENCES GROUP, INC.,

a Colorado corporation


AGREEMENT OF PURCHASE AND SALE OF ASSETS


THIS AGREEMENT (" Agreement" ) is made as of this 24th day of December, 2004, at Los Angeles, California, by and among SWISS RESEARCH, INC., a California corporation (" Seller" ), having its principal office in the County of Los Angeles, State of California, and the sole shareholder of Seller, Loren Miles (" Shareholder" ) on the one hand, and HEALTH SCIENCES GROUP, INC., a Colorado corporation (" Buyer" ), having its principal office in the County of Los Angeles, State of California, on the other hand, with reference to the following facts.


RECITALS


A.

Swiss Research markets and sells branded nutraceutical products, which address a variety of major health needs such as weight management, arthritis support and cholesterol reduction, and also develops and markets its own line of products, including the weight-loss product Swiss Diet, and Shugr, a natural zero-calorie sweetener (the " Business" ).


B.

Buyer desires to purchase from Seller and Seller desires to sell to Buyer, on the terms and subject to the conditions of this Agreement, the Business in exchange for the consideration described in Article I below.


NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties contained in this Agreement, the parties agree as follows:


ARTICLE I

PURCHASE AND SALE OF ASSETS


1.1.

Incorporation of Preceding Language . The provisions and recitals hereinabove stated are hereby referred to, incorporated herein and made a part hereof by this reference.


1.2.

Sale and Transfer of Assets . Subject to the terms and conditions set forth in this Agreement, Seller agrees to sell, convey, transfer, assign and deliver to Buyer (or a wholly-owned subsidiary of Buyer), and Buyer agrees to purchase from Seller, all the assets, properties, and business of Seller used in the Business of every kind, character, and description, whether tangible, intangible, real, personal, or mixed, and wherever located, all of which are collectively referred to herein as the " Purchased Assets", including but not limited to, the following:


1.2.1

All property listed as assets of the Seller in Schedule 1.2. attached to this Agreement, and incorporated herein by reference;


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1.2.2

Any and all rights in the trade names "SWISS RESEARCH", " SWISS DIET" and any names confusingly similar thereto, any other names used by Seller in the Business, and other intellectual property associated with the Business, including without limitation, all copyrights, service marks, trade marks, trade names, trade secrets, patents, patent applications, licenses, royalty rights, and all of the goodwill and going concern value of the Business.


1.2.3

All cash, cash equivalents, deposits, supplies, materials, equipment, machinery, tools, supplies, furniture, fixtures, inventory, files, customer lists (including former customers), records, claims and rights contracts, notes, evidences of indebtedness, purchase and sale orders, rights and claims to refunds and adjustments of any kind and other tangible personal property of Seller used in the Business, whether known or unknown to Seller or Buyer.


1.3.

Consideration from Buyer .


1.3.1

Payment . Buyer shall pay Seller the sum of $300,000.00 (" Purchase Price" ).


(a)

Closing Payment . At Closing, Buyer shall pay Seller $200,000 (" Closing Purchase Price" ) which shall be allocated and paid directly in the following manner:


a.

To First Mission Group (" First Mission" ), the amount that constitutes payment in full of all obligations owed to First Mission by Seller, as set forth in a letter from First Mission. Such letter shall also provide that immediately following such payment, First Mission shall file the appropriate UCC form or other certifications required to release First Missions' security interests in the Purchased Assets.


b.

To Seller, for the purpose of paying its other outstanding liabilities, the balance of the Closing Purchase Price.


(b)

Installment Payment. Buyer agrees it shall pay Seller $100,000 on or before the 12-month anniversary of the Closing Date, for the purpose of paying its remaining creditors, including without limitation, M Advertising. In the event that the Buyer closes on a financing equal to or greater than $3 million, the Installment Payment


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shall be accelerate to include the entire balance at the time of Closing.


(c)

Tax Liabilities . Shareholder has represented that he may incur certain federal and state income tax liabilities resulting from the repayment of the Seller' s liabilities by Buyer and the purchase of Seller' s assets by Buyer. Buyer agrees it shall reimburse Seller for such that liabilities (" Tax Payment" ) provided that, (i) the Tax Payment shall not exceed $60,000, (ii) Seller provides a certification from Shareholder' s or Seller' s tax advisor and accountant regarding Shareholder' s or Seller' s tax liability, (iii) Seller provides tax filings for any previous or subsequent fiscal year periods of Seller or Shareholder.


1.3.2

Warrants . Buyer shall deliver to the Shareholder, in accordance with the provisions of this Agreement an unvested warrant to purchase 150,000 shares of Buyer common stock at $1.00 per share; a second unvested warrant to purchase 150,000 shares of Buyer common stock at $2.00 per share; and a third unvested warrant to purchase 150,000 shares of Buyer common stock at $3.00 per share. Each warrant shall vest and become exerciseable if the Buyer satisfies certain Consolidated EBITDA (as defined in such warrants) conditions in 2005, 2006 and 2007, respectively.


1.3.3

Alternate Transaction Structure . Shareholder and Seller agree to restructure the asset purchase transaction as a merger, stock purchase or other equivalent form, if Buyer determines, that such alternate structure is preferable in limiting the amount of taxes that Shareholder would incur in Section 1.3.1(c).


1.4.

Assumption of Liabilities . Subject to the terms and conditions of this Agreement, Buyer agrees to assume only the liabilities set forth in Schedule 1.4 (" Assumed Liabilities" ).


1.5

No Assumption of Other Liabilities . Buyer shall in no event assume or be responsible for any other liabilities, liens, security interests, claims, obligations or encumbrances of Seller, contingent or otherwise, and the Purchased Assets transferred to Buyer shall be transferred to Buyer free and clear of all liabilities, liens, security interests, claims, obligations, and encumbrances of any kind whatsoever, upon completion of the $300,000 payment provided in paragraph 1.3 and disbursement thereof . Without limiting the generality of the foregoing, in no event shall Buyer assume or be responsible for: (i) any income, property, franchise, use or other tax of Seller or any filing requirements or obligations with respect thereto arising out of or resulting from the sale of the Purchased Assets hereunder (all such taxes to be paid by Seller) or any transaction of Seller prior to or subsequent to the execution of this Agreement or (ii) any liabilities, obligations, or costs resulting from any claim or lawsuit or other proceeding relating to the Business or naming Seller or any successor thereof as a party and arising out of events, transactions, or circumstances occurring or existing prior to the Closing Date.


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1.6.

Allocation of Purchase Price .


1.6.1

The purchase price of the Purchased Assets shall be allocated for tax purposes in a manner reasonably determined by Buyer.


1.6.2

The allocation of the consideration paid by Buyer for the Purchased Assets shall be made in a manner which is consistent with the requirements of Section 1060 of the Internal Revenue Code (" Code" ) and the regulations thereunder. Each party hereto agrees (I) to complete jointly and to file separately Federal Income Tax Form 8594 with its federal income Tax Return consistent with such allocation for the tax year in which the Closing Date occurs and neither party will take a position on any income, transfer or gains Tax Return, before any governmental or regulatory authority charged with the collection of any such Tax or in any judicial proceeding, that is in any manner inconsistent with the terms of such allocation without the consent of the other party.


1.7.

Taxes . Any Sales or Use Tax obligation resulting from the sale of the Purchased Assets, if any, shall be borne by the Buyer. Buyer shall not be responsible for any income, business, occupation, withholding, or similar tax, or taxes of any kind related to any period before the Closing Date This shall not be applicable to tax liabilities referred to in paragraph 1.3.1(c)


ARTICLE II

CLOSING


2.1.

Time and Place . The transfer of Purchased Assets by Seller to Buyer (the "Closing") shall take place at 10:00 a.m. on ________, 200__ at the offices of Richardson & Patel LLP, 10900 Wilshire Boulevard, Suite 500, Los Angeles, California or at such other time and place as parties may agree (the "Closing Date").

2.2.

Seller's Obligations at Closing . Upon the satisfaction of the closing conditions set forth in Article VII at the Closing, Seller shall deliver or cause to be delivered to Buyer:

2.2.1. Instruments transferring to Buyer all right, title and interest in and to Purchased Assets, or such other forms as Buyer may reasonably request.

2.2.2. A Bill of Sale transferring all of the Purchased Assets being purchased hereunder in a form acceptable to Buyer and its counsel.

2.2.3. The Employment Agreement by and between Loren Miles and Buyer in a form set forth in Exhibit A (" Employment Agreement" ) executed by


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Loren Miles.

2.2.4. The various letters, clearances, releases and certificates required to be delivered by Seller to Buyer hereunder.

2.2.5. The consents required to be delivered hereunder.

2.2.6. Such other items as may be reasonably necessary for the Closing to occur.

2.3.

Cooperation by Seller . Seller, at any time before or after the Closing Date, will execute, acknowledge, and deliver any further assignments, conveyances, and other assurances, documents, and instruments of transfer, reasonably requested by Buyer, and will take any other action consistent with the terms of this Agreement that may reasonably be requested by Buyer for the purpose of assigning, transferring, granting, conveying, and confirming to Buyer, or reducing to possession, any or all property to be conveyed and transferred by this Agreement. If requested by Buyer, Seller further agrees to prosecute or otherwise enforce in its own name for the benefit of Buyer any claims, rights, or benefits that are transferred to Buyer by this Agreement and that require prosecution or enforcement in Seller's name. Any prosecution or enforcement of claims, rights, or benefits under this Agreemen t shall be solely at Buyer's expense, unless the prosecution or enforcement is made necessary by a breach of this Agreement by Seller.

2.4.

Buyer's Obligations at Closing . Upon the satisfaction of the closing conditions set forth in Article VIII at the Closing, Buyer will deliver to the Shareholder:

2.4.1.

The Warrants, executed by Buyer.

2.4.2.

The Employment Agreement executed by Buyer.

2.4.3.

Such other items as may be reasonably necessary for the Closing to occur.


2.5

Possession of Assets . Simultaneously with the consummation of the transfer herein, Seller, through its agents and employees, will put Buyer into full possession and enjoyment of all properties and assets to be conveyed and transferred by this Agreement.


ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER


Seller and Shareholder, jointly and severally, agree as follows:


3.1.

Financial Statements . Schedule 3.1 to this Agreement sets forth the balance sheets of Seller as of January 1, 2001, 2002, 2003, and 2004 and as of August 31, 2004, together with statements of profit and loss from January through December for


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2001, 2002 and 2003 and from January through August 2004. The financial statements in Schedule 3.1 are hereinafter referred to as the financial statements. The financial statements present fairly the financial position of Seller as of the respective dates of the balance sheets included in the financial statements, and the results of its operations for the respective periods indicated.


3.2.

Absence of Specified Changes . Since August 31, 2004, there has not been any:

3.2.1

material adverse change in the financial condition, liabilities, assets, business, or prospects of Seller;


3.2.2

destruction, damage to, or loss of any assets of Seller (whether or not covered by insurance), which are the subject of this Agreement, that materially and adversely affects the financial condition, business or prospects of Seller;


3.2.3

sale or transfer of any asset of Seller or cancelled any debts or claims except in each case in the ordinary course of business; and in any event, not in an aggregate amount which is material;


3.2.4

amendment or termination of any contract, agreement, or license to which the Seller is a party, except in the ordinary course of business;


3.2.5

loan by Seller to any person or entity or guaranty by Seller of any loan which affects Buyer's liability under this Agreement;


3.2.6

mortgage, pledge, or other encumbrance of any of the assets of Seller which are the subject of this Agreement;


3.2.7

waiver or release of any right or claim of Seller which affects Buyer's liability under this Agreement except in the ordinary course of business;


3.2.8

other event or condition of any character that has or might reasonable have a material and adverse effect on the financial condition, business, assets or prospects of Seller, which would affect Buyer's liability under this Agreement;


3.2.9 agreement by Seller to do any of the things described in the preceding clauses.


3.3.

Seller' s Liabilities . Schedule 3.3 to this Agreement contains a true and complete schedule of all liabilities and obligations of Seller of any nature, whether accrued, absolute, contingent, or otherwise, and whether due or to become due.


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3.4.

Tax Returns and Audits . Within the times and in the manner prescribed by law, Seller has filed all federal, state and local tax returns required by law and has paid all taxes, assessments, and penalties due and payable.


3.5.

Assets of Business .


3.5.1

Inventory . The inventory referred to in Paragraph 1.5.1 of this Agreement is anticipated to be primarily Swiss Research' s consumer-oriented products that may be related to weight and cholesterol management, arthritis and diabetes relief and immune support, and will consist of items of a quality and quantity useable and saleable in the ordinary course of business by Seller. All items to be included in said inventory are or will be the property of Buyer. No items to be included in said inventory have been or will be pledged as collateral or are or will be held by Seller on consignment from others. Buyer shall not be obligated to acquire inventory that is not used in the normal course and scope of the Business.


3.5.2

Other Tangible Personal Property . Schedule 3.5.2 to this Agreement is a complete and accurate schedule describing and specifying the location of all equipment, furniture, supplies, tools and all other tangible personal property owned by, in the possession of, or used by Seller in connection with its business. The property listed in Schedule 3.5.2 constitutes all such tangible personal property necessary for the conduct by Seller of its business as now conducted. Except as stated in Schedule 3.5.2 , no personal property used by Seller in connection with its business is held under any lease, security agreement, conditional sales contract, or other title retention or security arrangement, or is located other than in the possession of Seller.


3.5.4

Trade Names, Trademarks and Copyrights . Schedule 3.5.4 to this Agreement is a schedule of all trade names, trademarks, service marks, and copyrights and their registrations, owned by Seller or in which Seller has any rights or licenses, together with a brief description of each and used by Seller in the Business. Seller to the best of its knowledge, has not infringed, and is not now infringing, on any trade name, trademark, service mark, or copyright belonging to any other person, firm, or corporation. Except as set forth in Schedule 3.5.4.1 , Seller is not a party to any license, agreement, or arrangement, whether as license or, licensee, or otherwise, with respect to any trademarks, service marks, trade names, or applications for them, or any copyrights. Seller owns, or holds adequate licenses or other rights to use, all t rademarks, service marks, trade names, and copyrights necessary for its


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business as now conducted by Seller, and that use does not, and will not, conflict with, infringe on, or otherwise violate any rights of others.


3.5.5

Trade Secrets . Schedule 3.5.5 to this Agreement is a true and complete list of Seller's trade secrets, including all customer lists, computer programs, routines, and other data. The specific location of each trade secret's documentation, including its complete description, specifications, charts, procedures, and other material relating to it, is also set forth with it in that Exhibit. This documentation is incorporated by reference into and made a part of this Agreement. Each trade secret's documentation is current and accurate so as to allow its full and proper use by Buyer without reliance on the special knowledge or memory of others. Seller is the sole owner of these trade secrets, free and clear of any liens, encumbrances, restrictions, or legal or equitable claims of others, except as specifically stated in Schedule 3.5.5 . Seller has taken all reasonable security measures to protect the secrecy, confidentiality, and value of these trade secrets; any of its employees and any other persons who, either alone or in concert with others, developed, discovered, or derived these secrets, or who have knowledge of or access to information relating to them, have been put on notice and, if appropriate, have entered into agreements that these secrets are proprietary to Seller and not to be divulged or misused. All these trade secrets are presently valid and protectible, and are not part of the public knowledge or literature, nor to Seller's knowledge have they been used, divulged, or appropriated for the benefit of any past or present employees or other persons, or to the detriment of Seller.


3.5.6

Other Intangible Property . A true and complete list of all intangible assets, other than those specifically referred to elsewhere in this Agreement, is set forth in Schedule 3.5.6 to this Agreement.


3.6.

Title to Purchased Assets . Seller has good and marketable title to all its assets and interest in assets, whether real, personal, mixed, tangible and intangible, which constitute all the assets in interests in asse ...