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EXCHANGE AGREEMENT
DATED AS OF JUNE 30, 1998
AMONG
UNITED STATES AIRCRAFT CORPORATION,
XXXXXXX XXXXXXXXXXX,
XXXXXX X. XXXXXXXXX,
LEC & ASSOCIATES, L.L.C.,
XXXXXX XXXXXXX,
XXXX XXXXXXXX,
AND
A. XXXXXXXXX XXXXXXXX, XX.
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TABLE OF CONTENTS
SECTION 1 EXCHANGE OF SHARES.......................................................1
1.1 Exchange of Shares.......................................................1
SECTION 2 REPRESENTATIONS AND WARRANTIES...........................................1
2.1 Representations and Warranties of Sellers................................1
(a) Due Incorporation, Good Standing, and Qualification............1
(b) Capital Stock..................................................1
(c) Options, Warrants, and Rights..................................1
(d) Subsidiaries...................................................2
(e) Financial Statements...........................................2
(f) Books and Records..............................................2
(g) No Material Change.............................................2
(h) Actions in the Ordinary Course of Business.....................2
(i) Title to Properties............................................2
(j) Litigation.....................................................2
(k) Rights and Licenses............................................3
(l) No Violation...................................................3
(m) Taxes..........................................................3
(n) Accounts Receivable............................................3
(o) Contracts......................................................3
(p) Compliance with Law and Other Regulations......................3
(q) Insurance......................................................4
(r) Articles, Bylaws, and Minute Books.............................4
(s) Employees......................................................4
(t) No Payments to Directors, Officers, Shareholders or Others.....4
(u) Status of NEO Common Stock Being Acquired......................4
(v) Accuracy of Statements.........................................4
2.2 Further Representations and Warranties of Sellers........................4
(a) Ownership of Capital Stock of NEO..............................4
(b) Rights to Acquire Shares.......................................4
(c) Power to Execute Agreement.....................................4
(d) Agreement Not in Breach of Other Instruments...................4
(e) Reliance Upon Seller's Advisors................................5
(f) Intent and Access..............................................5
2.3 Representations and Warranties of Buyer..................................5
(a) Due Incorporation, Good Standing, and Qualification............5
(b) Corporate Authority............................................5
(c) Capital Stock..................................................5
(d) Options, Warrants, and Rights..................................6
(e) Subsidiaries...................................................6
(f) Financial Statements...........................................6
(g) Books and Records..............................................6
(h) No Material Change.............................................6
(i) Actions in the Ordinary Course of Business.....................6
(j) Title to Assets and Properties.................................6
(k) Litigation.....................................................7
(l) Rights and Licenses............................................7
(m) No Violation...................................................7
(n) Taxes..........................................................7
(o) Accounts Receivable............................................7
(p) Contracts......................................................7
(q) Compliance with Law and Other Regulations......................8
(r) Insurance......................................................8
(s) Certificate, Bylaws, and Minute Books..........................8
(t) Employees......................................................8
(u) SEC Reports....................................................8
(v) Status of Class A Common Stock Being Issued....................8
(w) Accuracy of Statements.........................................8
2.4 Survival of Representations and Warranties...............................8
SECTION 3 COVENANTS OF SELLERS.....................................................9
3.1 Covenants of Sellers.....................................................9
(a) Filing of Tax Returns and Payment of Taxes.....................9
(b) Conversion of NEO Convertible Securities.......................9
SECTION 4 COVENANTS OF BUYER.......................................................9
4.1 Covenants of Buyer.......................................................9
(a) Operation of NEO...............................................9
(b) Board of Directors of Buyer....................................9
(c) Employment Contracts...........................................9
(d) Additional Shares of Common Stock Issued to Sellers...........10
(e) Stockholders' Approval........................................10
SECTION 5 RIGHT OF SELLERS TO RESCIND TRANSACTION.................................11
SECTION 6 FURTHER ASSURANCES......................................................11
SECTION 7 GENERAL.................................................................11
7.1 Costs and Indemnity Against Finders.....................................11
7.2 Controlling Law.........................................................11
7.3 Notices.................................................................11
7.4 Binding Nature of Agreement; No Assignment..............................12
7.5 Entire Agreement........................................................12
7.6 Paragraph Headings......................................................12
7.7 Counterparts............................................................12
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT ("Agreement") entered into this 30th day of June,
1998, among UNITED STATES AIRCRAFT CORPORATION, a Delaware corporation
("Buyer"); and XXXXXXX XXXXXXXXXXX, XXXXXX X. XXXXXXXXX, LEC & ASSOCIATES,
L.L.C., XXXXXX XXXXXXX, XXXX XXXXXXXX, AND A. XXXXXXXXX XXXXXXXX, XX. (each, a
"Seller" and collectively, "Sellers").
Buyer and Sellers desire that Buyer acquire all of Sellers' shares of
capital stock (the "Shares") of Neo Vision, Inc., an Arizona corporation
("NEO"), in exchange for shares of Buyer's Class A Common Stock and shares of
New Common Stock (each as defined herein), all on the terms and conditions set
forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants set forth herein, the parties agree as follows:
SECTION 1
EXCHANGE OF SHARES
1.1 Exchange of Shares. Based upon and subject to the representations,
warranties, covenants, agreements, and other terms and conditions set forth in
this Agreement, as of the date of this Agreement (the "Closing Date"), the
Sellers hereby convey, transfer, assign, and deliver the Shares to Buyer in
exchange for an aggregate of 2,000,000 shares of Buyer's Class A Common Stock,
par value $.50 per share (the "Class A Common Stock"). Each Seller hereby
conveys, transfers, assigns, and delivers to Buyer the number of Shares set
forth beside such Seller's name on Schedule 1.1 hereto, in exchange for the
number of shares of Class A Common Stock set forth beside such Seller's name on
Schedule 1.1 hereto. Buyer and each of the Sellers hereby acknowledges receipt
of the Shares and the shares of Class A Common Stock, respectively. Buyer and
each of the Sellers acknowledge and agree that shares of a New Common Stock
shall be issued to Sellers in accordance with Section 4 of this Agreement.
SECTION 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Sellers. Except as otherwise set
forth in the Sellers' Disclosure Schedule delivered herewith by Sellers to and
acknowledged as received by Buyer, Sellers jointly and severally represent and
warrant to Buyer as follows:
(a) Due Incorporation, Good Standing, and Qualification. NEO
is a corporation duly organized, validly existing, and in good standing under
the laws of Arizona with all requisite corporate power and authority to own,
operate, and lease its assets and properties and to carry on its business as now
being conducted. NEO is not subject to any material disability by reason of the
failure to be duly qualified as a foreign corporation for the transaction of
business or to be in good standing under the laws of any jurisdiction. Sellers
have heretofore delivered to Buyer a list setting forth, as of the date of this
Agreement, each jurisdiction in which (i) NEO currently conducts its business or
has in the past conducted its business on any basis, (ii) NEO is qualified to do
business, and (iii) NEO is qualified for the purposes of sales and income taxes.
(b) Capital Stock. As of the date hereof, NEO has an
authorized capital stock consisting of 25,000,000 shares of Common Stock, $.001
par value, of which 6,250,000 shares are issued and outstanding and all of which
are owned by Sellers, free and clear of all claims, liens, charges, and
encumbrances. All of the issued and outstanding shares of capital stock of NEO
have been validly authorized and issued and are fully paid and nonassessable.
(c) Options, Warrants, and Rights. All options, warrants, or
other rights to purchase, or securities or other obligations convertible into or
exchangeable for, or contracts, commitments, agreements,
arrangements, or understandings to issue, any shares of its capital stock or
other securities of NEO are set forth in Seller's Disclosure Schedule.
(d) Subsidiaries. Subsidiaries. The outstanding shares of
capital stock or other equity interests of the subsidiaries of NEO owned by NEO
or any of its subsidiaries are owned free and clear of all claims, liens,
charges, and encumbrances. NEO does not own, directly or indirectly, any capital
stock or other equity securities of any other corporation or have any direct or
indirect equity or ownership interest in any other corporation or other
business.
(e) Financial Statements. The Consolidated Balance Sheet of
NEO as of April 30, 1998 and the Consolidated Statements of Operations, the
Consolidated Statements of Shareholders' Equity, and the Consolidated Statements
of Cash Flows of NEO from inception through April 30, 1998, and all related
schedules and notes to the foregoing, have been prepared in accordance with
generally accepted accounting principles, which were applied on a consistent
basis (except as described therein), are correct and complete, and present
fairly, in all material respects, the financial position, results of operations,
and changes of financial position of NEO as of their respective dates and for
the periods indicated. NEO does not have any material liabilities or obligations
of a type that would be included in a balance sheet prepared in accordance with
generally accepted accounting principles, whether related to tax or non-tax
matters, accrued or contingent, due or not yet due, liquidated or unliquidated
or otherwise, except as and to the extent disclosed or reflected in the
Consolidated Balance Sheet of NEO as of April 30, 1998, or incurred since April
30, 1998, in the ordinary course of business or as contemplated by this
Agreement.
(f) Books and Records. The books of account and other
corporate records of NEO are complete and accurate, have been maintained in
accordance with good business practices, and the matters contained therein are
appropriately reflected in NEO's financial statements.
(g) No Material Change. Since April 30, 1998, there has not
been and there is not threatened (i) any material adverse change in the
business, assets, properties, financial condition, or operating results of NEO,
(ii) any loss or damage (whether or not covered by insurance) to any of the
assets or properties of NEO, which materially affects or impairs its ability to
conduct its business, or (iii) any mortgage or pledge of any assets or
properties of NEO, or any indebtedness incurred by NEO other than indebtedness,
not material in the aggregate, incurred in the ordinary course of business.
(h) Actions in the Ordinary Course of Business. Since April
30, 1998, NEO has not (i) taken any action outside of the ordinary and usual
course of business; (ii) borrowed any money or become contingently liable for
any obligation or liability of another; (iii) failed to pay any of its debts and
obligations as they became due; (iv) incurred any debt, liability or obligation
of any nature to any party except for obligations arising from the purchase of
goods or the rendition of services in the ordinary course of business, none of
which aggregate more than $10,000 with respect to the same supplier or customer;
(v) knowingly waived any right of substantial value; (vi) failed to use its best
efforts to preserve its business organization intact, to keep available the
services of its employees, or to preserve its relationships with its customers,
suppliers and others with which it deals; or (vii) increased or committed to
increase the salary, fee or compensation of any officer, employee, independent
contractor, agent, firm or person performing services for it.
(i) Title to Properties. NEO has good and marketable title to
all of its real and personal assets and properties, including all assets and
properties reflected in its April 30, 1998 Consolidated Balance Sheet or
acquired subsequent to April 30, 1998, except assets or properties disposed of
subsequent to that date in the ordinary course of business. Such assets and
properties are subject to no mortgage, indenture, pledge, lien, claim,
encumbrance, charge, security interest, or title retention or other security
arrangement, except for liens for the payment of federal, state, and other
taxes, the payment of which is neither delinquent nor subject to penalties, and
except for other liens and encumbrances incidental to the conduct of the
business of NEO or the ownership of its assets or properties, which were not
incurred in connection with the borrowing of money or the obtaining of advances
and which do not in the aggregate materially detract from the value of the
assets or properties of NEO or materially impair the use thereof in the
operation of its business, except in each case as disclosed in the April 30,
1998 Consolidated Balance Sheet. All leases pursuant to which NEO leases any
substantial amount of real or personal property are valid and effective in
accordance with their respective terms.
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(j) Litigation. There are no actions, suits, proceedings, or
other litigation pending or, to the knowledge of Sellers, threatened against
NEO, at law or in equity, or before or by any federal, state, municipal, or
other governmental department, commission, board, bureau, agency, or
instrumentality that, if determined adversely to NEO, would individually or in
the aggregate have a material adverse effect on the business, assets,
properties, operating results, prospects, or condition, financial or otherwise,
of NEO.
(k) Rights and Licenses. NEO has provided Buyer with a list of
all of its trademarks, trademark rights, trade names, trade name rights, and
licenses.
(l) No Violation. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will not violate or
result in a breach by NEO of, or constitute a default under, or conflict with,
or cause any acceleration of any obligation with respect to, (i) any provision
or restriction of any charter, bylaw, loan, indenture, or mortgage of NEO, or
(ii) any provision or restriction of any lien, lease agreement, contract,
instrument, order, judgment, award, decree, ordinance, or regulation or any
other restriction of any kind or character to which any assets or properties of
NEO is subject or by which NEO is bound.
(m) Taxes. NEO has duly filed in correct form all Tax Returns
(as defined below) relating to the activities of NEO required or due to be filed
(with regard to applicable extensions) on or prior to the Closing Date. All such
Tax Returns are accurate and complete in all material respects, and NEO has paid
or made provision for the payment of all Taxes (as defined below) that have been
incurred or are due or claimed to be due from it by federal, state, or local
taxing authorities for all periods ending on or before the Closing Date, other
than Taxes or other charges that are not delinquent or are being contested in
good faith and have not been finally determined and have been disclosed to
Buyer. The amounts set up as reserves for Taxes on the books of NEO are
sufficient in the aggregate for the payment of all unpaid Taxes (including any
interest or penalties thereon), whether or not disputed, accrued, or applicable.
No claims for taxes or assessments are being asserted or threatened against NEO.
Sellers have furnished to Buyer copies of all Tax Returns filed for or by NEO
since its inception. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies, or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, transfer, license,
payroll, and franchise taxes, imposed by the United States, or any state, local
or foreign government or subdivision or agency thereof and any interest,
penalties or additions attributable thereto, and the term "Tax Return" shall
mean any report, return, or other information required to be supplied to any
taxing authority or required by any taxing authority to be supplied to any other
person.
(n) Accounts Receivable. The accounts receivable of NEO have
been acquired in the ordinary course of business and, to the knowledge of
Seller, are valid and enforceable, and are fully collectible, subject to no
known defenses, set-offs, or counterclaims, except to the extent of the reserve
reflected in the books of NEO or in Sellers' Disclosure Schedule or in such
other amount not greater than $10,000 unless subject to setoff as a result of
actions by Buyer.
(o) Contracts. NEO is not a party to (i) any plan or contract
providing for bonuses, pensions, options, stock purchases, deferred
compensation, retirement payments, or profit sharing, (ii) any collective
bargaining or other contract or agreement with any labor union, (iii) any lease,
installment purchase agreement, or other contract with respect to any real or
personal property used or proposed to be used in its operations, excepting, in
each case, items included within aggregate amounts disclosed or reflected in the
April 30, 1998 Consolidated Balance Sheet, (iv) any employment agreement or
other similar arrangement not terminable by it upon 30 days or less notice
without penalty to it, (v) any contract or agreement for the purchase of any
commodity, material, fixed asset, or equipment in excess of $10,000, (vi) any
contract or agreement creating an obligation of $10,000 or more, (vii) any
contract or agreement that by its terms does not terminate or is not terminable
by it upon 30 days or less notice without penalty to it, (viii) any loan
agreement, indenture, promissory note, conditional sales agreement, or other
similar type of arrangement, (ix) any material license agreement, or (x) any
contract that may result in a material loss or obligation to it. All material
contracts, agreements, and other arrangements to which NEO is a party are valid
and enforceable in accordance with their terms; NEO and, to Sellers' knowledge,
all other parties to each of the foregoing have performed in any material
respects all obligations required to be performed to date; and neither NEO nor,
to Sellers' knowledge, any such other party is in default or in arrears under
the terms of any of the foregoing.
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(p) Compliance with Law and Other Regulations. NEO is not
subject to nor has NEO been threatened with any material fine, penalty,
liability, or disability as the result of its failure to comply with any
requirement of federal, state, local, or foreign law or any regulation or any
requirement of any governmental body or agency having jurisdiction over it, the
conduct of its business, the use of its assets and properties, or any premises
occupied by it.
(q) Insurance. NEO maintains in full force and effect
insurance coverage on its assets, properties, premises, operations, and
personnel in such amounts as NEO deems appropriate, all as set forth on Sellers'
Disclosure Schedule.
(r) Articles, Bylaws, and Minute Books. Sellers have
heretofore delivered to Buyer true and complete copies of the Articles of
Incorporation and Bylaws of NEO as currently in effect. The minute books of NEO
contain complete and accurate records of all meetings and other corporate
actions held or taken by the Board of Directors (or committees of the Board of
Directors) and shareholders of NEO since its incorporation.
(s) Employees. NEO has never maintained or contributed to any
"employee benefit plan," as such term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), including, without
limitation, any stock option plan, stock purchase plan, deferred compensation
plan, or other similar employee benefit plan. NEO never contributed to any
"multi-employer pension plan," as such term is defined in Section 3(37)(A) of
ERISA.
(t) No Payments to Directors, Officers, Shareholders or
Others. Except to the extent that the following will have no material adverse
effect on the purchase by Buyer of the Shares or the business, assets, or
properties of NEO pursuant to this Agreement, since April 30, 1998, there has
not been any purchase or redemption of any shares of capital stock of NEO or any
transfer, distribution or payment by NEO, directly or indirectly, of any money
or other assets or properties to any director, officer, shareholder or any of
their affiliates or other person other than the payment of compensation for
services actually rendered at rates not in excess of the rates prevailing on the
March 31, 1998 balance sheet or payments in the ordinary course of business or
for goods or services in other than arm's length transactions.
(u) Status of NEO Common Stock Being Acquired. The Shares
being acquired in exchange for shares of Class A Common Stock and shares of New
Common Stock were validly authorized and issued, fully paid, and nonassessable.
(v) Accuracy of Statements. Neither this Agreement nor any
statement, list, certificate, or other information furnished by NEO or Sellers
to Buyer in connection with this Agreement or any of the transactions
contemplated hereby contains an untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein or
therein, in light of circumstances in which they are made, not misleading.
2.2 Further Representations and Warranties of Sellers. Each Seller
makes the following further representations and warranties as to himself:
(a) Ownership of Capital Stock of NEO. Such Seller owns the
number of Shares set forth beside such Seller's name on Schedule 1.1 hereto.
Such Seller has good, marketable and unencumbered title to such Shares, and
there are no restrictions on his right to transfer such Shares to Buyer pursuant
to this Agreement.
(b) Rights to Acquire Shares. Such Seller does not have any
outstanding options, warrants, or other rights to purchase or subscribe for or
contracts or commitments to sell, or any interests, instruments, evidences of
indebtedness or other securities convertible in any manner into, any shares of
NEO's capital stock.
(c) Power to Execute Agreement. Such Seller has full power and
authority to execute, deliver, and perform this Agreement, and this Agreement is
the legal and binding obligation of such Seller, enforceable against such Seller
in accordance with its items, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium, or other similar laws now or
hereafter in effect relating to creditors' rights, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefore may be brought.
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(d) Agreement Not in Breach of Other Instruments. The
execution and delivery of this Agreement, the consummation of the transactions
hereby contemplated, and the fulfillment of the terms hereof, will not result in
the breach of any term or provision of, or constitute a default under, or
conflict with, or cause the acceleration of any obligation under, any agreement
or other instrument of any description to which such Seller is a party or by
which such Seller is bound, or any judgment, decree, order or award of any
court, governmental body or arbitrator, or any law, rule or regulation
applicable to such Seller.
(e) Reliance Upon Seller's Advisors. Such Seller acknowledges
that he has been encouraged to rely upon the advice of his legal counsel and
accountants or other financial advisers with respect to the financial, tax, and
other considerations relating to the acquisition of the shares of Class A Common
Stock and shares of New Common Stock. Such Seller represents and warrants that
he has reviewed with the his own tax advisors the federal, state, local, and
foreign tax consequences of the investment in shares of Class A Common Stock and
shares of New Common Stock. Such Seller is relying solely on such advisors and
not on any statements or representations of Buyer or any of its officers,
directors, employees, or agents and understands that such Seller (and not Buyer)
shall be responsible for his own tax liability, if any, that may arise as a
result of the acquisition of Class A Common Stock and New Common Stock or the
transactions contemplated by this Agreement.
(f) Intent and Access. Such Seller is acquiring the shares of
Class A Common Stock without a view to the public distribution or resale in
violation of any applicable federal or state securities laws. Such Seller
acknowledges that the shares of Buyer's Class A Common Stock are not registered
under the Securities Act of 1933, as amended or any state securities laws and
cannot be sold publicly without registration thereunder or an exemption from
such registration. Such Seller understands that certificates for such shares
will contain a legend with respect to the restrictions on transfer under federal
and applicable state securities laws as well as the fact that the shares are
"restricted securities" under such federal and state laws. Such Seller has been
furnished with such information, both financial and non-financial, with respect
to the operations, business, capital structure, and financial position of Buyer
and its subsidiaries as he believes necessary and has been given the opportunity
to ask questions of and receive answers from Buyer and its subsidiaries and
their officers concerning Buyer and its subsidiaries. Without limiting the
foregoing, such Seller specifically acknowledges the receipt of Buyer's Form
10-K Report for the fiscal year ended September 30, 1997.
2.3 Representations and Warranties of Buyer. Except as otherwise set
forth in the Buyer Disclosure Schedule heretofore delivered by Buyer to Sellers,
and except as disclosed in any document heretofore filed by Buyer with the
Securities and Exchange Commission ("SEC"), Buyer represents and warrants to
Sellers as follows:
(a) Due Incorporation, Good Standing, and Qualification. Buyer
and each of its subsidiaries are corporations duly organized, validly existing,
and in good standing under the laws of their jurisdictions of incorporation with
all requisite corporate power and authority to own, operate, and lease their
assets and properties and to carry on their business as now being conducted.
Neither Buyer nor any of its subsidiaries is subject to any material disability
by reason of the failure to be duly qualified as a foreign corporation for the
transaction of business or to be in good standing under the laws of any
jurisdiction. As used in this Agreement with reference to Buyer, the term
"subsidiaries" shall include all direct or indirect subsidiaries of Buyer.
(b) Corporate Authority. Buyer has the corporate power and
authority to enter into this Agreement and carry out the transactions
contemplated hereby. The Board of Directors of Buyer has duly authorized the
execution, delivery, and performance of this Agreement. No other corporate
proceedings on the part of Buyer are necessary to authorize the execution and
delivery by Buyer of this Agreement or the consummation by Buyer of the
transactions contemplated hereby, except that a meeting of Buyer's stockholders
shall be required to approve those items set forth in Section 4.1(e) of this
Agreement and the Board of Directors of Buyer must adopt and approve the form of
the certificate of incorporation to be submitted to the stockholders and the
related matters in connection thereof. This Agreement has been duly executed and
delivered by, and constitutes a legal, valid, and binding agreement of, Buyer,
enforceable against it in accordance with its terms, except that (i) Buyer must
obtain the approvals referred to in the immediately preceding sentence, (ii)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium, or other similar laws now or hereafter in effect relating to
creditors' rights, and (iii) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefore may be
brought.
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(c) Capital Stock. As of the date hereof, Buyer has authorized
capital stock consisting of 10,000,000 shares of Class A Common Stock, of which
7,927,504 shares are issued and outstanding, and 5,000,000 shares of Class B
Common Stock, $.01 par value (the "Class B Common Stock"), of which 4,962,801
shares are issued and outstanding. As of the date hereof, 275,267 shares of
Class A Common Stock were reserved for issuance upon the exercise of outstanding
convertible debentures and the last installment of contingent shares pursuant to
the Western College, Inc. acquisition. All of the issued and outstanding shares
of capital stock of Buyer and each of its subsidiaries have been, and when
issued pursuant to this Agreement, each share of Class A Common Stock and New
Common Stock to be issued pursuant to this Agreement will be, validly authorized
and issued and fully paid and nonassessable.
(d) Options, Warrants, and Rights. Neither Buyer nor any of
its subsidiaries has outstanding any options, warrants, or other rights to
purchase, or securities or other obligations convertible into or exchangeable
for, or contracts, commitments, agreements, arrangements or understandings to
issue, any shares of their capital stock or other securities, other than those
referred to in Section 2.2(c).
(e) Subsidiaries. The outstanding shares of capital stock or
other equity interest of the subsidiaries of Buyer owned by Buyer or any of its
subsidiaries are owned free and clear of all claims, liens, charges, and
encumbrances. Buyer does not own, directly or indirectly, any capital stock or
other equity securities of any other corporation or have any direct or indirect
equity or ownership interest in any other corporation or other business.
(f) Financial Statements. The Consolidated Balance Sheets of
Buyer and its subsidiaries as of September 30, 1996 and September 30, 1997 and
the Consolidated Statements of Operations, the Consolidated Statements of
Shareholders' Equity, and the Consolidated Statements of Cash Flows of Buyer and
its subsidiaries for the three years ended September 30, 1997, and all related
schedules and notes to the foregoing, have been reported on by Xxxxxx Xxxxxx,
independent public accountants. All of the foregoing financial statements have
been prepared in accordance with generally accepted accounting principles, which
were applied on a consistent basis (except as described therein), are correct
and complete, and present fairly, in all material respects, the financial
position, results of operations, and changes of financial position of Buyer and
its subsidiaries as of their respective dates and for the periods indicated.
Neither Buyer nor any of its subsidiaries has any material liabilities or
obligations of a type that would be included in a balance sheet prepared in
accordance with generally accepted accounting principles, whether related to tax
or non-tax matters, accrued or contingent, due or not yet due, liquidated or
unliquidated or otherwise, except as and to the extent disclosed or reflected in
the Consolidated Balance Sheet of Buyer and its subsidiaries as of September 30,
1997, or incurred since September 30, 1997, in the ordinary course of business
or as contemplated by this Agreement.
(g) Books and Records. The books of account and other
corporate records of Buyer are complete and accurate, have been maintained in
accordance with good business practices, and the matters contained therein are
appropriately reflected in Buyer's financial statements.
(h) No Material Change. Since September 30, 1997, there has
not been and there is not threatened (i) any material adverse change in the
business, assets, properties, financial condition, or operating results of Buyer
or its subsidiaries taken as a whole, (ii) any loss or damage (whether or not
covered by insurance) to any of the assets or properties of Buyer or its
subsidiaries, which materially affects or impairs their ability to conduct their
business, or (iii) any mortgage or pledge of any material amount of the assets
or properties of Buyer or any of its subsidiaries, or any indebtedness incurred
by Buyer or any of its subsidiaries, other than indebtedness, not material in
the aggregate, incurred in the ordinary course of business.
(i) Actions in the Ordinary Course of Business. Since
September 30, 1997, Buyer has not (i) taken any action outside of the ordinary
and usual course of business; (ii) borrowed any money or become contingently
liable for any obligation or liability of another; (iii) failed to pay any of
its debts and obligations as they became due; (iv) incurred any debt, liability
or obligation of any nature to any party except for obligations arising from the
purchase of goods or the rendition of services in the ordinary course of
business, none of which aggregate more than $10,000 with respect to the same
supplier or customer; (v) knowingly waived any right of substantial value; (vi)
failed to use its best efforts to preserve its business organization intact, to
keep available the services of its employees, or to preserve its relationships
with its customers, suppliers and others with which it deals; or (vii)
6
increased or committed to increase the salary, fee or compensation of any
officer, employee, independent contractor, agent, firm or person performing
services for it.
(j) Title to Assets and Properties. Buyer and its subsidiaries
have good and marketable title to all of their respective real and personal
assets and properties, including all assets and properties reflected in the
Consolidated Balance Sheet of Buyer and its subsidiaries as of September 30,
1997, or acquired subsequent to September 30, 1997, except assets or properties
disposed of subsequent to that date in the ordinary course of business. Such
assets and properties are subject to no mortgage, indenture, pledge, lien,
claim, encumbrance, charge, security interest, or title retention or other
security arrangement, except for liens for the payment of federal, state, and
other taxes, the payment of which is neither delinquent nor subject to
penalties, and except for other liens and encumbrances incidental to the conduct
of the business of Buyer and its subsidiaries or the ownership of their assets
or properties, which were not incurred in connection with the borrowing of money
or the obtaining of advances, and which do not in the aggregate materially
detract from the value of the assets or properties of Buyer and its subsidiaries
taken as a whole or materially impair the use thereof in the operation of their
respective businesses, except in each case as disclosed in the Consolidated
Balance Sheet as of September 30, 1997. All leases pursuant to which Buyer or
any of its subsidiaries lease any substantial amount of real or personal
property are valid and effective in accordance with their respective terms.
Buyer and each of its subsidiaries own or have the right to use all assets and
properties necessary to conduct their business as currently conducted.
(k) Litigation. There are no actions, suits, proceedings, or
other litigation pending or, to the knowledge of Buyer, threatened against Buyer
or any of its subsidiaries, at law or in equity, or before or by any federal,
state, municipal, or other governmental department, commission, board, bureau,
agency, or instrumentality that, if determined adversely to Buyer or its
subsidiaries, would individually or in the aggregate have a material adverse
effect on the business, assets, properties, operating results, prospects, or
condition, financial or otherwise, of Buyer and its subsidiaries taken as a
whole.
(l) Rights and Licenses. Neither Buyer nor any of its
subsidiaries is subject to any material disability or liability by reason of its
failure to possess any trademark, trademark right, trade name, trade name right,
or license.
(m) No Violation. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will not violate or
result in a breach by Buyer or any of its subsidiaries of, or constitute a
default under, or conflict with, or cause any acceleration of any obligation
with respect to, (i) any provision or restriction of any charter, bylaw, loan,
indenture, or mortgage of Buyer or any of its subsidiaries, or (ii) any
provision or restriction of any lien, lease agreement, contract, instrument,
order, judgment, award, decree, ordinance, or regulation or any other
restriction of any kind or character to which any assets or properties of Buyer
or any of its subsidiaries is subject or by which Buyer or any of its
subsidiaries is bound.
(n) Taxes. Buyer has duly filed in correct form all Tax
Returns relating to the activities of Buyer and its subsidiaries required or due
to be filed (with regard to applicable extensions) on or prior to the Closing
Date. All such Tax Returns are accurate and complete in all material respects,
and Buyer has paid or made provision for the payment of all Taxes that have been
incurred or are due or claimed to be due from it by federal, state, or local
taxing authorities for all periods ending on or before the Closing Date, other
than Taxes or other charges that are not delinquent or are being contested in
good faith and have not been finally determined and have been disclosed to
Seller. The amounts set up as reserves for Taxes on the books of Buyer and its
subsidiaries are sufficient in the aggregate for the payment of all unpaid Taxes
(including any interest or penalties thereon), whether or not disputed, accrued,
or applicable. No claims for taxes or assessments are being asserted or
threatened against Buyer or any of its subsidiaries.
(o) Accounts Receivable. The accounts receivable of Buyer and
its subsidiaries have been acquired in the ordinary course of business, are
valid and enforceable, and are fully collectible, subject to no known defenses,
setoffs, or counterclaims, except to the extent of the reserve reflected in the
books of Buyer and its subsidiaries or in such other amount that is not material
in the aggregate.
(p) Contracts. Neither Buyer nor any of its subsidiaries is a
party to (i) any plan or contract providing for bonuses, pensions, options,
stock purchases, deferred compensation, retirement payments, or profit sharing,
(ii) any collective bargaining or other contract or agreement with any labor
union, (iii) any lease,
7
installment purchase agreement, or other contract with respect to any real or
personal property used or proposed to be used in its operations excepting, in
each case, items included within aggregate amounts disclosed or reflected in the
Consolidated Balance Sheet of Buyer and its subsidiaries as of September 30,
1997, (iv) any employment agreement or other similar arrangement not terminable
by it upon 30 days or less notice without penalty to it, (v) any contract or
agreement for the purchase of any commodity, material, fixed asset, or equipment
in excess of $10,000, (vi) any contract or agreement creating an obligation of
$10,000 or more, (vii) any contract or agreement that by its terms does not
terminate or is not terminable by it upon 30 days or less notice without penalty
to it, (viii) any loan agreement, indenture, promissory note, conditional sales
agreement, or other similar type of arrangement, (ix) any material license
agreement, or (x) any contract that may result in a material loss or obligation
to it. All material contracts, agreements, and other arrangements to which Buyer
or any of its subsidiaries is a party are valid and enforceable in accordance
with their terms; Buyer, its subsidiaries, and all other parties to each of the
foregoing have performed all obligations required to be performed to date;
neither Buyer, nor any of its subsidiaries, nor any such other party is in
default or in arrears under the terms of any of the foregoing; and no condition
exists or event has occurred that, with the giving of notice or lapse of time or
both, would constitute a default under any of them.
(q) Compliance with Law and Other Regulations. Neither Buyer
nor any of its subsidiaries is subject to or has been threatened with any
material fine, penalty, liability, or disability as the result of its failure to
comply with any requirement of federal, state, local, or foreign law or any
regulation or any requirement of any governmental body or agency having
jurisdiction over it, the conduct of its business, the use of its assets and
properties, or any premises occupied by it.
(r) Insurance. Buyer and each of its subsidiaries maintains in
full force and effect insurance coverage on their assets, properties, premises,
operations, and personnel in such amounts as Buyer deems appropriate.
(s) Certificate, Bylaws, and Minute Books. Buyer has
heretofore delivered to Sellers true and complete copies of its Certificate of
Incorporation and Bylaws of Buyer as currently in effect. The minute books of
Buyer contain complete and accurate records of all meetings and other corporate
actions held or taken by the Board of Directors (or committees of the Boards of
Directors) and stockholders of Buyer since its incorporation.
(t) Employees. Neither Buyer nor any of its subsidiaries has
ever maintained or contributed to any "employee benefit plan," as such term is
defined in Section 3(3) of ERISA, including, without limitation, any stock
option plan, stock purchase plan, deferred compensation plan, or other similar
employee benefit plan, other than Buyer's Stock Option Plans. Neither Buyer nor
any of its subsidiaries has ever contributed to any "multi-employer pension
plan," as such term is defined in Section 3(37)(A) of ERISA.
(u) SEC Reports. Buyer's report on Form 10-K for the fiscal
year ended September 30, 1997 filed with the SEC does not contain a misstatement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading as of the
time the document was filed. Since the filing of such report on Form 10-K, no
other report, proxy statement, or other document has been required to be filed
by Buyer pursuant to Section 13(a) or 14(a) of the Securities Exchange Act of
1934 that has not been filed.
(v) Status of Class A Common Stock Being Issued. The shares of
Class A Common Stock issued in exchange for the Shares are validly authorized
and when issued in accordance with this Agreement shall be validly issued, fully
paid, nonassessable, authorized for trading on the Nasdaq Bulletin Board, and
free of preemptive or other similar rights, but subject to the resale
restrictions required by Rule 144 promulgated pursuant to the Securities Act of
1933, as amended ("Rule 144").
(w) Accuracy of Statements. Neither this Agreement nor any
statement, list, certificate, or other information furnished by Buyer to Sellers
in connection with this Agreement or any of the transactions contemplated hereby
contains an untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they are made, not misleading.
2.4 Survival of Representations and Warranties. Each of the
representations and warranties contained in this Agreement shall survive the
consummation of the transactions contemplated by this Agreement irrespective of
any investigations or inquiries made by any party or any knowledge that any
party may possess, and each party
8
shall be entitled to rely upon such representations and warranties irrespective
of any investigations, inquiries, or knowledge. Notwithstanding the foregoing,
no claims for indemnity arising out of a false, misleading, or otherwise
incorrect representation or warranty may be made after one year from the Closing
Date, and neither Buyer nor Sellers shall be responsible for any indemnity claim
for an amount less than $25,000 or greater than $500,000 arising out of a false,
misleading, or otherwise incorrect representation or warranty relating to this
Agreement.
SECTION 3
COVENANTS OF SELLERS
3.1 Covenants of Sellers. Each Seller further agrees, unless Buyer
otherwise agrees in writing, subsequent to the Closing Date:
(a) Filing of Tax Returns and Payment of Taxes. As promptly as
practicable after the Closing Date, Sellers shall, at their cost and expense,
prepare or cause to be prepared all federal, state, and local corporation Tax
Returns for all periods prior to the Closing Date. Not less than 30 days prior
to the anticipated date for filing such returns, Sellers shall provide a copy of
each such Tax Returns to Buyer for its review and consent or approval. Sellers
shall make any revisions to such Tax Returns that Buyer may reasonably request.
Upon approval of such Tax Returns by Buyer, such approval not to be unreasonably
withheld, Sellers shall promptly file such Tax Returns or cause them to be
filed.
(b) Conversion of NEO Convertible Securities. Seller shall use
its best efforts to cause any securities convertible into NEO common stock to
become convertible into shares of New Common Stock on terms reasonably
acceptable to Buyer.
SECTION 4
COVENANTS OF BUYER
4.1 Covenants of Buyer. Buyer further agrees, unless Sellers otherwise
agree in writing, subsequent to the Closing Date:
(a) Operation of NEO. Unless otherwise determined by the Board
of Directors of Buyer following the stockholder approvals referred to in Section
4.1(e) hereof, NEO shall be operated as a separate subsidiary of Buyer with its
existing officers and management, except that the Board of Directors of NEO
shall consist of Xxxxxxx Xxxxxxxxxxx, Chairman, Xxxxxx X. Xxxxxxxxx, Xxxx
Eberentz, and Xxxxx X. Xxxxxxxx. Xxxxx X. Xxxxxxxx also shall serve as the
Treasurer and Chief Financial Officer of NEO.
(b) Board of Directors of Buyer. The Board of Directors of
Buyer shall be increased to nine members immediately following the date hereof
(the "Closing") and shall immediately following the Closing include the
following persons serving in the following capacities:
Name Position(s)
---- -----------
(i) Xxxxxxx Xxxxxxxxxxx Chairman of the Board of Directors
(ii) Xxxxxx X. Xxxxxxxxx President and Chief Executive Officer/
Director
9
(iii) Xxxxx X. Xxxxxxxx Executive Vice President, Treasurer, and
Chief Operating and Financial
Officer/Director
(iv) Xxxx Xxxxxxx Executive Vice President and Secretary/
Director
(v) Xxxxxx X. Xxxxx Director
(vi) Xxxx X. Xxxxxx Director
(vii) Xxxxxxx X. Xxxxxxx Director
(viii) Xxxx X. Xxxxxx Director
One of the existing outside directors shall resign
immediately following the Closing and two new outside directors will be
nominated by Sellers and elected by the Board of Directors of Buyer.
(c) Employment Contracts. Buyer shall execute employment
contracts with Xxxxxxx Xxxxxxxxxxx, Xxxxxx Xxxxxxxxx, Xxxx Xxxxxxx , and Xxxxx
X. Xxxxxxxx attached hereto as Schedule 4.1(c).
(d) Additional Shares of Common Stock Issued to Sellers. Buyer
shall issue to Sellers (collectively, in the ratio equal to the ratio of the
shares of Class A Common Stock issued between Sellers as set forth in Schedule
1.1 hereto) up to 4,577,560 shares of New Common Stock, which amount the parties
acknowledge, has been adjusted to reflect the current reclassification ratio of
Class A Common Stock into New Common Stock set forth in Section 4.1(e)(iii)
hereof, upon the occurrence of the following events:
Additional Shares
(i) Approval by stockholders of the actions set forth 3,500,000
in Section 4.1(e).
(ii) Installation of the two screens in the "D" 2,000,000
concourse at the McCarran Airport in Las Vegas,
Nevada and program screening for a period of 30
days
(iii) Obtaining positive cash flow from operations for 1,000,000
a 30-day period from the operation of the
Xxxxxxx Mall Screen or comparable location
(e) Stockholders' Approval. Promptly following the Closing,
Buyer shall prepare and file with the Securities and Exchange Commission (the
"SEC") a preliminary proxy statement and shall use its best efforts to have the
SEC and any applicable state regulatory authorities approve as soon as
practicable a final proxy statement/prospectus for a meeting of Buyer's
stockholders, to approve the following actions by Buyer:
(i) Approval of this Exchange Agreement and the
transactions contemplated herein.
(ii) Authorization of a single new class of common stock,
$.001 par value per share, totaling 100,000,000 shares (the "New Common Stock"),
or as otherwise mutually agreed to by the Buyer and Sellers.
10
(iii) Reclassification of the currently outstanding Class
A Common Stock into New Common Stock on the basis of 10 shares of the Class A
Common Stock into one share of the New Common Stock or such other ratio as may
be agreed between Buyer and Sellers.
(iv) Reclassification of the currently outstanding Class
B Common Stock into New Common Stock on the basis of 13 shares of the Class B
Common Stock into one share of the New Common Stock or such other ratio as may
be agreed between Buyer and Sellers.
(v) Approval of "Neo Vision Systems, Inc." as the new
name of Buyer or such other name mutually agreeable to Buyer and Sellers.
(vi) Adoption of a stock option plan and approval of
initial grants thereunder.
(vii) Authorization of preferred stock of Buyer of
75,000,000 shares with the Board of Directors being authorized to establish the
preferences for separate classes of preferred stock.
(viii) The amendment and restatement of Buyer's
certificate of incorporation as necessary to accomplish the foregoing
transactions.
(ix) Such other matters as shall be mutually agreed upon
by the Board of Directors of Buyer following the Closing.
SECTION 5
RIGHT OF SELLERS TO RESCIND TRANSACTION
Buyer agrees that if the stockholders of Buyer do not approve the New
Common Stock, any Seller may rescind the exchange of the Shares under Section 1
of this Agreement, in which case this Agreement and the transactions hereunder
shall be deemed null and void as to that Seller.
SECTION 6
FURTHER ASSURANCES
On and after the Closing Date, Sellers and Buyer shall execute and
deliver all such deeds, bills of sale, assignments, and other instruments and
shall take or cause to be taken such further or other actions as any party may
reasonably request from time to time in order to effectuate the transactions
provided for herein. The parties shall cooperate with each other and with their
respective counsel and accountants in connection with any steps to be taken as a
part of their respective obligations under this Agreement.
SECTION 7
GENERAL
7.1 Costs and Indemnity Against Finders. Each party hereto shall be
responsible for its own costs and expenses in negotiating and performing this
Agreement and hereby indemnifies and holds the other parties harmless against
any claim for finders' fees based on alleged retention of a finder by it.
7.2 Controlling Law. This Agreement and all questions relating to its
validity, interpretation, performance, and enforcement shall be governed by and
construed in accordance with the laws of the state of Delaware, notwithstanding
any Delaware or other conflict-of-law provisions to the contrary.
11
7.3 Notices. All notices, requests, demands, and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received when delivered against receipt
or when deposited in the United States mails, first class postage prepaid,
addressed as set forth below:
If to Buyer: If to Sellers:
United States Aircraft Corporation
0000 X. Xxxxxxxx Xxxx Neo Vision
Xxxxx 000 0000 X. 00xx Xxxxxx, Xxxxx 000
Attention: Xxxxx Xxxxxxxx Xxxxxxx, Xxxxxxx 00000
Xxxxxxx, Xxxxxxx 00000 Attention: Xxxxxx X. Xxxxxxxxx
Tel: (000) 000-0000 Tel: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
With a copy given in the manner With a copy given in the manner
prescribed above, to: prescribed above, to:
X'Xxxxxx, Cavanagh, Anderson, Xxxxxxx X. Xxxx, Xx., Esq.
Xxxxxxxxxxxxx & Xxxxxxxx, P.A. 0000 X. 00xx Xxxxxx, Xxxxx 000
One East Camelback Road Phoenix, Arizona 85020
Xxxxxxx, Xxxxxxx 00000 Tel: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx Fax: (000) 000-0000
Tel: (000) 000-0000
Fax: (000) 000-0000
Any party may alter the address to which communications or copies are
to be sent by giving notice to such other parties of change of address in
conformity with the provisions of this paragraph for the giving of notice.
7.4 Binding Nature of Agreement; No Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, successors, and assigns, except that no party may assign, delegate, or
transfer its rights or obligations under this Agreement without the prior
written consent of the other parties hereto. Any assignment, delegation, or
transfer made in violation of this Section 7.4 shall be null and void.
7.5 Entire Agreement. This Agreement contains the entire understanding
among the parties hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
inducements, and conditions, express or implied, oral or written, except as
herein contained. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof.
This Agreement may not be modified or amended other than by an agreement in
writing.
7.6 Paragraph Headings. The paragraph headings in this Agreement are
for convenience only; they form no part of this Agreement and shall not affect
its interpretation.
7.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
12
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BUYER:
------
UNITED STATES AIRCRAFT CORPORATION
By:/s/ Xxxxx Xxxxxxxx
----------------------------------------
Name: Xxxxx Xxxxxxxx
--------------------------------------
Its: President
--------------------------------------
SELLERS:
--------
/s/ Xxxxxxx Xxxxxxxxxxx
-------------------------------------------
Xxxxxxx Xxxxxxxxxxx
/s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxxxxx
LEC & ASSOCIATES, L.L.C.
By:/s/ Xxxx Xxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxx
--------------------------------------
Its: Member
---------------------------------------
/s/ Xxxxxx Xxxxxxx
-------------------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxx Xxxxxxxx
-------------------------------------------
Xxxx Xxxxxxxx
/s/ A. Xxxxxxxxx Xxxxxxxx, Xx.
-------------------------------------------
A. Xxxxxxxxx Xxxxxxxx, Xx.
13
SCHEDULE 1.1
------------
Number of
Number of Initial Shares of
Shares of Class A Common Stock of
NEO to be Buyer to be
Seller Percent Transferred Acquired
------ ------- ----------- --------
Xxxxxxx Xxxxxxxxxxx 68.58% 4,286,500 1,371,600
Xxxxxx X. Xxxxxxxxx 25.58% 1,598,750 511,600
LEC & Associates, L.L.C. 05.12% 319,750 102,400
Xxxxxx Xxxxxxx .24% 15,000 4,800
Xxxx Xxxxxxxx .24% 15,000 4,800
A. Xxxxxxxxx Xxxxxxxx, Xx. .24% 15,000 4,800
------ -----
6,250,000 2,000,000
========= =========
