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Exhibit 10.1
 
SECURITIES EXCHANGE AGREEMENT
 
This SECURITIES EXCHANGE AGREEMENT (this “Agreement”) dated as of May 5, 2014,
is by and among Drone Aviation Corp., a Nevada corporation (the “Parent”),
Lighter Than Air Systems Corp., a Florida corporation (the “Company”) and World
Surveillance Group Inc., a Delaware corporation and sole shareholder of the
Company (the “Shareholder”).  Each of the parties to this Agreement is
individually referred to herein as a “Party” and collectively as the “Parties.”
 
BACKGROUND

The Shareholder holds 100% of the outstanding capital in the Company (the
“Company Shares”).  The Shareholder has agreed to transfer the Company Shares to
the Parent in exchange for (i) a cash payment of $335,000 (the “Cash Payment”)
and (ii) an aggregate of 10,000,000 newly issued shares of common stock, par
value $0.0001 per share, of the Parent, (the “Parent Stock”).  The exchange of
Company Shares for the Parent Stock is intended to constitute a reorganization
within the meaning of the Internal Revenue Code of 1986, as amended (the
“Code”), or such other tax free reorganization or restructuring provisions as
may be available under the Code.
 
The Board of Directors of each of the Parent, the Shareholder and the Company
have each determined that it is desirable to effect this plan of reorganization
and share exchange.
 
AGREEMENT

NOW THEREFORE, for good and valuable consideration the receipt and sufficiency
is hereby acknowledged, the Parties hereto intending to be legally bound hereby
agree as follows:
 
ARTICLE I
 
Exchange of Shares
 
SECTION 1.01.   Exchange by the Shareholder.  At the Closing (as defined in
Section 1.02), the Shareholder shall sell, transfer, convey, assign and deliver
to the Parent all of the Company Shares free and clear of all Liens in exchange
for (i) the Cash Payment and (ii) 10,000,000 shares of Parent Stock.
 
SECTION 1.02.   Closing.  The closing (the “Closing”) of the transactions
contemplated by this Agreement (the “Transactions”) shall take place on such
date that all conditions precedent and obligations of the Parties to consummate
such Transactions contemplated hereby and set forth in Article VI are satisfied
or waived, at such location to be determined by the Shareholder and Parent, or
such other date and time as the Parties may mutually determine (the “Closing
Date”).
 

 
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ARTICLE II
 
 
Representations and Warranties of the Shareholder
 
The Shareholder hereby represents and warrants to the Parent, that except as set
forth in a disclosure schedule delivered by Shareholder to Parent (the
“Shareholder Disclosure Schedule”), as follows:
 
SECTION 2.01.   Good Title.  The Shareholder is the record and beneficial owner,
and has good and marketable title to the Company Shares, with the right and
authority to sell and deliver such Company Shares to Parent as provided
herein.  The Shareholder owns the Company Shares free and clear of any and all
liens, claims, encumbrances, preemptive rights, right of first refusal and
adverse interests of any kind. Upon the purchase and payment of the Cash Payment
and the issuance of 10,000,000 shares of Parent Stock to Shareholder and upon
registering of the Parent as the new owner of such Company Shares in the
register of the Company, the Parent will receive good title to such Company
Shares, free and clear of all liens, security interests, pledges, equities and
claims of any kind, voting trusts, and other encumbrances, excluding for this
purpose, any applicable securities laws restrictions (collectively,
“Liens”).  The Company Shares are and will be at Closing, all of the outstanding
capital of the Company.
 
SECTION 2.02.   Power and Authority.  All acts required to be taken by the
Shareholder to enter into this Agreement and to carry out the Transactions have
been properly taken.  This Agreement, when executed by all of the Parties
hereto, will constitute a legal, valid and binding obligation of the
Shareholder, enforceable against the Shareholder in accordance with the terms
hereof, subject to applicable bankruptcy, insolvency and similar laws of general
applicability and to general principles of equity.
 
SECTION 2.03.   No Conflicts.  The Shareholder has the requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby and otherwise to carry out the Shareholder’s obligations
hereunder.  No consent, approval or agreement of any individual or entity is
required to be obtained by the Shareholder in connection with the execution and
performance by the Shareholder of this Agreement or the execution and
performance by the Shareholder of any agreements, instruments or other
obligations entered into in connection with this Agreement.  The execution and
delivery of this Agreement by the Shareholder and the performance by the
Shareholder of its obligations hereunder in accordance with the terms hereof:
(i) will not require the consent of any third party or any federal, state, local
or foreign government or any court of competent jurisdiction, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign (“Governmental Entity”) under any Laws (as defined below);
(ii) to Shareholder’s knowledge, will not violate any Laws applicable to
Shareholder; (iii) will not require the approval of the shareholders of the
Shareholder and (iv) will not violate or breach any contractual obligation to
which Shareholder is a party, except as set forth on the Shareholder Disclosure
Schedule.
 
SECTION 2.04.   No Finder’s Fee.  The Shareholder has not created any obligation
for any finder’s, investment banker’s or broker’s fee in connection with the
Transactions that the Company or the Parent will be responsible for.
 
 
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SECTION 2.05.   Purchase Entirely for Own Account.  The Parent Stock proposed to
be acquired by the Shareholder hereunder will be acquired for investment for its
own account, and not with a view to the resale or distribution of any part
thereof, and the Shareholder has no present intention of selling or otherwise
distributing the Parent Stock except in compliance with applicable securities
laws.
 
SECTION 2.06.   Non-Registration. The Shareholder understands that the shares of
Parent Stock have not been registered under the Securities Act of 1933, as
amended (the “Securities Act”) and, if issued in accordance with the provisions
of this Agreement, will be issued by reason of a specific exemption from the
registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of the
Shareholder’s representations as expressed herein.
 
SECTION 2.07.   Restricted Securities. The Shareholder understands that the
Parent Stock is characterized as “restricted securities” under the Securities
Act inasmuch as this Agreement contemplates that, if acquired by the Shareholder
pursuant hereto, the Parent Stock would be acquired in a transaction not
involving a public offering.  The Shareholder further acknowledges that if the
Parent Stock is issued to the Shareholder in accordance with the provisions of
this Agreement, such Parent Stock may not be resold without registration under
the Securities Act or the existence of an exemption therefrom.  The Shareholder
represents that it is familiar with Rule 144 promulgated under the Securities
Act, as presently in effect, and understands the resale limitations imposed
thereby and by the Securities Act.
 
SECTION 2.08.   Legends.  It is understood that the shares of Parent Stock will
bear the following legend or another legend that is similar to the following:
 
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY.
 
THESE SECURITIES ARE SUBJECT TO THE TERMS OF A LOCK-UP AGREEMENT AND MAY NOT BE
TRASFERRED, SOLD OR ASSIGNED OTHER THAN AS PERMITTED THEREIN, A COPY OF WHICH IS
ON FILE WITH THE SECRETARY OF THE COMPANY.
 
and any legend required by the “blue sky” laws of any state to the extent such
laws are applicable to the securities represented by the certificate so
legended.
 
 
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SECTION 2.09.   Accredited Investor.  The Shareholder is an “accredited
investor” within the meaning of Rule 501 under the Securities Act.
 
SECTION 2.11            Shareholder Acknowledgment.  There is no private or
governmental action, suit, proceeding, claim, arbitration or investigation
pending before any agency, court or tribunal, foreign or domestic, or, to the
Shareholder’s knowledge, threatened against the Company, or any of the Company’s
assets or properties.  There is no judgment, decree or order against the
Shareholder or the Company that could prevent, enjoin, alter or delay any of the
transactions contemplated by this Agreement. There are no material claims,
actions, suits, proceedings, inquiries, labor disputes or investigations pending
or, to the Shareholder’s or to the Company’s knowledge, threatened against the
Company or any of the Company's assets, at law or in equity or by or before any
governmental entity or in arbitration or mediation. No bankruptcy, receivership
or debtor relief proceedings are pending or, to the Shareholder’s knowledge,
threatened against the Company.   To the Shareholder’s knowledge, the Company
has complied with, is not in violation of, and has not received any written
notices of violation with respect to, any federal, state, local or foreign Law,
judgment, decree, injunction or order, applicable to it, the conduct of its
business, or the ownership or operation of its business.  References in this
Agreement to “Laws” shall refer to any laws, rules or regulations of any
federal, state or local government or any governmental or quasi-governmental
agency, bureau, commission, instrumentality or judicial body (including, without
limitation, any federal or state securities law, regulation, rule or
administrative order). The Shareholder is aware of the Company’s business
affairs and financial condition and has reached an informed and knowledgeable
decision to sell the Company Shares. The Shareholder has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in the Parent.

The Shareholder acknowledges that it has read the representations and warranties
of the Company set forth in Article III herein and such representations and
warranties are, to its knowledge, true and correct as of the date hereof.  The
Shareholder further acknowledges and confirms that the representations and
warranties made by the Shareholder in this Article II and by the Company in
Article III may be relied upon by any subsequent third party purchaser or
acquirer (the “Acquirer”) of the Parent or the post-Closing assets of the Parent
and that such Acquirer shall be a third party beneficiary to the representations
and warranties made by the Shareholder and the Company herein.

ARTICLE III

 
Representations and Warranties of the Company
 
The Company represents and warrants, to its knowledge, to the Parent, except as
set forth in a schedule (the “Company Disclosure Schedule”), regardless of
whether or not the Company Disclosure Schedule is referenced with respect to any
particular representation or warranty, as follows:
 
 
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SECTION 3.01.   Organization, Standing and Power.  The Company is duly
incorporated or organized, validly existing and in good standing under the laws
of its state of incorporation and has the corporate power and authority and
possesses all governmental franchises, licenses, permits, authorizations and
approvals necessary to enable it to own, lease or otherwise hold its properties
and assets and to conduct its businesses as presently conducted, other than such
franchises, licenses, permits, authorizations and approvals the lack of which,
individually or in the aggregate, has not had and would not reasonably be
expected to have a material adverse effect on the Company, a material adverse
effect on the ability of the Company to perform its obligations under this
Agreement or on the ability of the Company to consummate the Transactions (a
“Company Material Adverse Effect”).  The Company is duly qualified to do
business in each jurisdiction where the nature of its business or its ownership
or leasing of its properties make such qualification necessary, except where the
failure to so qualify would not reasonably be expected to have a Company
Material Adverse Effect.  The Company has delivered to the Parent true and
complete copies of the articles of incorporation and bylaws of the Company, each
as amended to the date of this Agreement (as so amended, the “Company Charter
Documents”).  The Company does not own, directly or indirectly, any capital
stock, membership interest, partnership interest, joint venture interest or
other equity interest in any person.
 
SECTION 3.02.   Capital Structure.  The authorized capital structure of the
Company consists of 2,000 shares of common stock, 100 of which are outstanding
and held by the Shareholder.  All outstanding capital of the Company is duly
authorized, validly issued, fully paid and non assessable and not subject to or
issued in violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision of
the applicable corporate laws of its state of incorporation, the Company Charter
Documents or any Contract (as defined in Section 3.04) to which the Company is a
party or otherwise bound.  No other capital stock of the Company is issued,
reserved for issuance or outstanding. There are no bonds, debentures, notes or
other indebtedness of the Company having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which holders of the Company’s capital stock may vote (“Voting Company
Debt”).  Except as otherwise set forth herein, as of the date of this Agreement,
there are no options, warrants, rights, convertible or exchangeable securities,
“phantom” stock rights, stock appreciation rights, stock-based performance
units, commitments, Contracts, arrangements or undertakings of any kind to which
the Company is a party or by which the Company is bound (i) obligating the
Company to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other equity interests in, or any security
convertible or exercisable for or exchangeable into any capital stock or other
equity interest in, the Company or any Voting Company Debt, (ii) obligating the
Company to issue, grant, extend or enter into any such option, warrant, call,
right, security, commitment, Contract, arrangement or undertaking or (iii) that
give any person the right to receive any economic benefit or right similar to or
derived from the economic benefits and rights occurring to holders of the
Company Shares of the Company.
 
SECTION 3.03.   Authority; Execution and Delivery; Enforceability.  The Company
has all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the Transactions.  The execution and delivery by the
Company of this Agreement and the consummation by the Company of the
Transactions have been duly authorized and approved by the Board of Directors of
the Company and the Shareholder and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement and the
Transactions.  When executed and delivered, this Agreement will be enforceable
against the Company in accordance with its terms, subject to bankruptcy,
insolvency and similar laws of general applicability as to which the Company is
subject and to general principles of equity.
 
 
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SECTION 3.04.   No Conflicts; Consents.
 
(a)  The execution and delivery by the Company of this Agreement does not, and
the consummation of the Transactions and compliance with the terms hereof and
thereof will not, conflict with, or result in any violation of or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or to loss
of a material benefit under, or result in the creation of any Lien upon any of
the properties or assets of the Company under any provision of (i) the Company
Charter Documents, (ii) any material contract, lease, license, indenture, note,
bond, agreement, permit, concession, franchise or other instrument (a
“Contract”) to which the Company is a party or by which any of its respective
properties or assets is bound or (iii) subject to the filings and other matters
referred to in Section 3.04(b), any material judgment, order or decree
(“Judgment”) or material Law applicable to the Company or its properties or
assets, other than, in the case of clauses (ii) and (iii) above, any such items
that, individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
 
(b)  No material consent, approval, license, permit, order or authorization
(“Consent”) of, or registration, declaration or filing with, or permit from, any
Governmental Entity is required to be obtained or made by or with respect to the
Company in connection with the execution, delivery and performance of this
Agreement or the consummation of the Transactions, other than filings by
Shareholder of requisite forms with the Securities and Exchange Commission.
 
SECTION 3.05.   Taxes.
 
(a)  The Company has timely filed, or has caused to be timely filed on its
behalf, all Tax Returns required to be filed by it, except as set forth on the
Company Disclosure Schedule, and all such Tax Returns are true, complete and
accurate, except to the extent any failure to file or any inaccuracies in any
filed Tax Returns, individually or in the aggregate, have not had and would not
reasonably be expected to have a Company Material Adverse Effect.  All Taxes
shown to be due on such Tax Returns, or otherwise owed, have been timely paid,
except to the extent that any failure to pay, individually or in the aggregate,
has not had and would not reasonably be expected to have a Company Material
Adverse Effect.  To the Company’s knowledge, there are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and to the Company’s knowledge, there is no basis for any such claim.
 
(b)  If applicable, the Company has established an adequate reserve reflected on
its financial statements for all Taxes payable by the Company (in addition to
any reserve for deferred Taxes to reflect timing differences between book and
Tax items) for all Taxable periods and portions thereof through the date of such
financial statements.  No deficiency with respect to any Taxes has been
proposed, asserted or assessed against the Company, and no requests for waivers
of the time to assess any such Taxes are pending, except to the extent any such
deficiency or request for waiver, individually or in the aggregate, has not had
and would not reasonably be expected to have a Company Material Adverse Effect.
 
 
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(c)  For purposes of this Agreement:
 
“Taxes” includes all forms of taxation, whenever created or imposed, and whether
of the United States or elsewhere, and whether imposed by a local, municipal,
governmental, state, foreign, federal or other Governmental Entity, or in
connection with any agreement with respect to Taxes, including all interest,
penalties and additions imposed with respect to such amounts.
 
“Tax Return” means all federal, state, local, provincial and foreign Tax
returns, declarations, statements, reports, schedules, forms and information
returns and any amended Tax return relating to Taxes.
 
SECTION 3.06.   Benefit Plans.  The Company does not have or maintain any
collective bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, share ownership, share purchase, share
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or former
employee, officer or director of the Company (collectively, “Company Benefit
Plans”), except as set forth in the Company Disclosure Schedule.  As of the date
of this Agreement, there are no employment, consulting, indemnification,
severance or termination agreements or arrangements between the Company and any
current or former employee, officer or director of the Company, nor does the
Company have any general severance plan or policy, except as set forth in the
Company Disclosure Schedule.
 
SECTION 3.07.   Litigation.  There is no action, suit, inquiry, notice of
violation, proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting the Company,
or any of its properties before or by any court, arbitrator, governmental or
administrative agency, regulatory authority (federal, state, county, local or
foreign), stock market, stock exchange or trading facility (“Action”).  Neither
the Company nor any director or officer thereof (in his or her capacity as
such), is or has been the subject of any Action involving a claim or violation
of or liability under federal or state securities laws or a claim of breach of
fiduciary duty.
 
SECTION 3.08.   Compliance with Applicable Laws.  To the Company’s knowledge,
the Company is in material compliance with all applicable Laws, including those
relating to occupational health and safety and the environment, except for
instances of noncompliance that, individually and in the aggregate, have not had
and would not reasonably be expected to have a Company Material Adverse
Effect.  This Section 3.08 does not relate to matters with respect to Taxes,
which are the subject of Section 3.05.
 
SECTION 3.09.   Brokers; Schedule of Fees and Expenses.  No broker, investment
banker, financial advisor or other person is entitled to any broker’s, finder’s,
financial advisor’s or other similar fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of the Company.
 
 
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SECTION 3.10.   Contracts.  The Company Disclosure Schedule sets forth all
Contracts that are material to the business, properties, assets, condition
(financial or otherwise), or results of operations of the Company.  The Company
is not in violation of or in default under (nor does there exist any condition
which upon the passage of time or the giving of notice would cause such a
violation of or default under) any Contract to which it is a party or by which
it or any of its properties or assets is bound, except for violations or
defaults that would not, individually or in the aggregate, reasonably be
expected to result in a Company Material Adverse Effect.  The Company’s
execution of this Agreement and the consummation of the Transactions
contemplated herein would not violate any Contract to which the Company is a
party nor will the execution of this Agreement or the consummation of the
Transactions consummated hereby violate or trigger any “change in control”
provision or covenant in any Contract to which the Company is a party.
 
SECTION 3.11.   Title to Properties.  The Company does not own any real
property.  The Company has sufficient title to, or valid leasehold interests in,
all of its properties and assets used in the conduct of its businesses.  All
such assets and properties, other than assets and properties in which the
Company has leasehold interests, are free and clear of all Liens other than
those Liens that, in the aggregate, do not and will not materially interfere
with the ability of the Company to conduct business as currently conducted.
 
SECTION 3.12.   Intellectual Property.  The Company owns, or is validly licensed
or otherwise has the right to use, all Intellectual Property (the “Intellectual
Property Rights”) which are material to the conduct of the business of the
Company taken as a whole, except as set forth in the Company Disclosure
Schedule.  The Company Disclosure Schedule sets forth a description of all
Intellectual Property Rights which are material to the conduct of the business
of the Company taken as a whole.  No claims are pending or, to the knowledge of
the Company, threatened that the Company is infringing or otherwise adversely
affecting the rights of any person with regard to any Intellectual Property
Right.  To the knowledge of the Company, no person is infringing the rights of
the Company with respect to any Intellectual Property Right other than as to
which the Company has the full right and power to bring action and to enforce
such Intellectual Property Right, and receive the entirety of the proceeds
thereof, by way of judgment settlement or otherwise, and no third-party has any
such claims or rights.
 
SECTION 3.13.   Insurance.  The Company has provided to Parent all insurance
policies held by the Company.
 
SECTION 3.14.   Transactions With Affiliates and Employees.  Except as set forth
in the Company Disclosure Schedule, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
 
 
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SECTION 3.15.   Application of Takeover Protections.  The Company has taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company
Charter Documents or the laws of its state of incorporation that is or could
become applicable to the Shareholder as a result of the Shareholder and the
Company fulfilling their obligations or exercising their rights under this
Agreement, including, without limitation, the issuance of the Parent Stock and
the Shareholder’s ownership of the Parent Stock.
 
SECTION 3.16.   Labor Matters.  There are no collective bargaining or other
labor union agreements to which the Company is a party or by which it is
bound.  No material labor dispute exists or, to the knowledge of the Company, is
imminent with respect to any of the employees of the Company.
 
SECTION 3.17.   ERISA Compliance; Excess Parachute Payments. Except as set forth
in the Company Disclosure Schedule, the Company does not, and since its
inception never has, maintained, or contributed to any “employee pension benefit
plans” (as defined in Section 3(2) of ERISA), “employee welfare benefit plans”
(as defined in Section 3(1) of ERISA) or any other Company Benefit Plan for the
benefit of any current or former employees, consultants, officers or directors
of Company.
 
SECTION 3.18.   No Additional Agreements.  The Company does not have any
agreement or understanding with the Shareholder with respect to the Transactions
other than as specified in this Agreement.
 
SECTION 3.19.   Investment Company.  The Company is not, and is not an affiliate
of, and immediately following the Closing will not have become, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
 
SECTION 3.20.   Disclosure.  All disclosure provided to the Parent regarding the
Company, its business and the Transactions, furnished by or on behalf of the
Company (including the Company’s representations and warranties set forth in
this Agreement) are true and correct in all material respects and do not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
 
SECTION 3.21.   Absence of Certain Changes or Events.  Except in connection with
the Transactions, since December 31, 2013, the Company has conducted its
business only in the ordinary course, and during such period there has not been:
 
(a)  any change in the assets, liabilities, financial condition or operating
results of the Company, except changes in the ordinary course of business, or
that have not caused, in the aggregate, a Company Material Adverse Effect;
 
(b)      any damage, destruction or loss, whether or not covered by insurance,
that would have a Company Material Adverse Effect;
 
 
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(c)      any waiver or compromise by the Company of a valuable right or of a
material debt owed to it;
 
(d)  any satisfaction or discharge of any lien, claim, or encumbrance or payment
of any obligation by the Company, except in the ordinary course of business and
the satisfaction or discharge of which would not have a Company Material Adverse
Effect;
 
(e)  any material change to a material Contract by which the Company or any of
its assets is bound or subject;
 
(f)       any mortgage, pledge, transfer of a security interest in, or lien,
created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable and liens that arise in
the ordinary course of business and does not materially impair the Company’s
ownership or use of such property or assets;
 
(g)  any loans or guarantees made by the Company to or for the benefit of its
employees, officers or directors, or any members of their immediate families,
other than travel advances and other advances made in the ordinary course of its
business;
 
(h)  any alteration of the Company’s method of accounting or the identity of its
auditors;
 
(i)       any declaration or payment of dividend or distribution of cash or
other property to the Shareholder or any purchase, redemption or agreements to
purchase or redeem any capital stock;
 
(j)  any issuance of equity securities to any officer, director or affiliate; or
 
(k)  any arrangement or commitment by the Company to do any of the things
described in this Section.
 
SECTION 3.22.   Foreign Corrupt Practices.  Neither the Company, nor, to the
Company’s knowledge, any director, officer, agent, employee or other person
acting on behalf of the Company has, in the course of its actions for, or on
behalf of, the Company (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
 
SECTION 3.23            Licenses and Permits.  The Company has obtained and
maintains all federal, state, local and foreign licenses, permits, consents,
approvals, registrations, memberships, authorizations and qualifications
required to be maintained in connection with the operations of the Company as
presently conducted, where the failure to so obtain would be reasonably expected
to have a Company Material Adverse Effect.  The Company is not in default under
any of such licenses, permits, consents, approvals, registrations, memberships,
authorizations and qualifications, where the default would be reasonably
expected to have a Company Material Adverse Effect.
 
 
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SECTION 3.24             Environmental Laws.  The Company (i) is in compliance
in all material respects with any and all Environmental Laws (as hereinafter
defined), (ii) has received all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct its businesses and (iii) is
in compliance in all material respects with all terms and conditions of any such
permit, license or approval where, in each of the foregoing clauses (i), (ii)
and (iii), the failure to so comply would be reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect.  The term
“Environmental Laws” means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic
or hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

SECTION 3.25             Indebtedness. All  outstanding material Indebtedness
(as defined below) of the Company is set forth in on the Company Disclosure
Schedule.  The Company (i) is not in violation of any term of or is in default
under any contract, agreement or instrument relating to any Indebtedness, except
where such violations and defaults would not result, individually or in the
aggregate, in a Company Material Adverse Effect, and (ii) is not a party to any
contract, agreement or instrument relating to any Indebtedness, the performance
of which, in the judgment of the Company's officers, has or is expected to have
a Company Material Adverse Effect.    For purposes of this Agreement:  (x)
“Indebtedness” of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business), (C) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) “Contingent Obligation” means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z)
“Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, a
government or any department or agency thereof and any other legal entity.
 
 
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  The Company acknowledges and confirms that the representations and warranties
made by the Company in this Article III may be relied upon by any Acquirer of
the Parent or the post-Closing assets of the Parent and that such Acquirer shall
be a third party beneficiary to the representations and warranties made by the
Company herein.

ARTICLE IV

 
Representations and Warranties of the Parent
 
The Parent represents and warrants as follows to the Shareholder and the
Company, that, except as set forth in a Disclosure Schedule delivered by the
Parent to the Company and the Shareholder (the “Parent Disclosure Schedule”):
 
SECTION 4.01.   Organization, Standing and Power.  The Parent is duly organized,
validly existing and in good standing under the laws of the State of Nevada and
has full corporate power and authority and possesses all governmental
franchises, licenses, permits, authorizations and approvals necessary to enable
it to own, lease or otherwise hold its properties and assets and to conduct its
businesses as presently conducted, other than such franchises, licenses,
permits, authorizations and approvals the lack of which, individually or in the
aggregate, has not had and would not reasonably be expected to have a material
adverse effect on the Parent, a material adverse effect on the ability of the
Parent to perform its obligations under this Agreement or on the ability of the
Parent to consummate the Transactions (a “Parent Material Adverse Effect”).  The
Parent is duly qualified to do business in each jurisdiction where the nature of
its business or their ownership or leasing of its properties make such
qualification necessary and where the failure to so qualify would reasonably be
expected to have a Parent Material Adverse Effect.  The Parent has delivered to
the Company true and complete copies of the Articles of Incorporation of the
Parent, as amended to the date of this Agreement (as so amended, the “Parent
Charter”), and the Bylaws of the Parent, as amended to the date of this
Agreement (as so amended, the “Parent Bylaws”).
 
SECTION 4.02.   Subsidiaries; Equity Interests.  The Parent does not own,
directly or indirectly, any capital stock, membership interest, partnership
interest, joint venture interest or other equity interest in any person.
 
 
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SECTION 4.03.   Capital Structure.  The authorized capital stock of the Parent
consists of One Hundred Million (100,000,000) shares of common stock, par value
$0.0001 per share, and One Hundred Million (100,000,000) shares of preferred
stock, par value $0.0001 per share, of which (i) 34,100,000 shares of Parent
Stock are issued and outstanding; (ii) no shares of Parent preferred stock are
issued and outstanding and (iii) no shares of Parent Stock or preferred stock
are held by the Parent in its treasury.  Parent does not have any stock purchase
warrants or stock options outstanding.  No other shares of capital stock or
other voting securities of the Parent are issued, reserved for issuance or
outstanding.  All outstanding shares of the capital stock of the Parent are, and
all such shares that may be issued prior to the date hereof will be when issued,
duly authorized, validly issued, fully paid and non-assessable and not subject
to or issued in violation of any purchase option, call option, right of first
refusal, preemptive right, subscription right or any similar right under any
provision of the Nevada Revised Statutes, the Parent Charter, the Parent Bylaws
or any Contract to which the Parent is a party or otherwise bound.  There are no
bonds, debentures, notes or other indebtedness of the Parent having the right to
vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which holders of Parent Stock may vote (“Voting Parent
Debt”).  As of the date of this Agreement, there are no options, warrants,
rights, convertible or exchangeable securities, “phantom” stock rights, stock
appreciation rights, stock-based performance units, commitments, Contracts,
arrangements or undertakings of any kind to which the Parent is a party or by
which it is bound (i) obligating the Parent to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock or other
equity interests in, or any security convertible or exercisable for or
exchangeable into any capital stock of or other equity interest in, the Parent
or any Voting Parent Debt, (ii) obligating the Parent to issue, grant, extend or
enter into any such option, warrant, call, right, security, commitment,
Contract, arrangement or undertaking or (iii) that give any person the right to
receive any economic benefit or right similar to or derived from the economic
benefits and rights occurring to holders of the capital stock of the
Parent.   The Parent is not a party to any agreement granting any security
holder of the Parent the right to cause the Parent to register shares of the
capital stock or other securities of the Parent held by such security holder
under the Securities Act.
 
SECTION 4.04.   Authority; Execution and Delivery; Enforceability.  The Parent
has all requisite corporate power and authority to execute and deliver this
Agreement and consummate the Transactions. The execution and delivery by the
Parent of this Agreement and the consummation by the Parent of the Transactions
have been duly authorized and approved by the Board of Directors of the Parent
and no other corporate proceedings on the part of the Parent are necessary to
authorize this Agreement and the Transactions. This Agreement constitutes a
legal, valid and binding obligation of the Parent, enforceable against the
Parent in accordance with the terms hereof, subject to applicable bankruptcy,
insolvency and similar laws of general applicability and to general principles
of equity.
 
SECTION 4.05.           No Conflicts; Consents.
 
(a)  The execution and delivery by the Parent of this Agreement, does not, and
the consummation of Transactions and compliance with the terms hereof and
thereof will not, conflict with, or result in any violation of or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or to increased, additional, accelerated or guaranteed
rights or entitlements of any person under, or result in the creation of any
Lien upon any of the properties or assets of the Parent under, any provision of
(i) the Parent Charter or Parent Bylaws, (ii) any material Contract to which the
Parent is a party or by which any of its properties or assets is bound or (iii)
subject to the filings and other matters referred to in Section 4.05(b), any
material Judgment or material Law applicable to the Parent or its properties or
assets, other than, in the case of clauses (ii) and (iii) above, any such items
that, individually or in the aggregate, have not had and would not reasonably be
expected to have a Parent Material Adverse Effect.
 
 
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(b)  No Consent of, or registration, declaration or filing with, or permit from,
any Governmental Entity is required to be obtained or made by or with respect to
the Parent in connection with the execution, delivery and performance of this
Agreement or the consummation of the Transactions, other than filings under
state “blue sky” laws, as each may be required in connection with this Agreement
and the Transactions.
 

SECTION 4.06.   Undisclosed Liabilities.  The Parent has no liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a balance sheet of the Parent or in the
notes thereto.  All Parent Liabilities due after the date hereof are set forth
in the Parent Disclosure Schedule.
 
SECTION 4.07.   Taxes.
 
(a)  The Parent has timely filed, or has caused to be timely filed on its
behalf, all Tax Returns required to be filed by it, and all such Tax Returns are
true, complete and accurate, except to the extent any failure to file, any
delinquency in filing or any inaccuracies in any filed Tax Returns, individually
or in the aggregate, have not had and would not reasonably be expected to have a
Parent Material Adverse Effect.  All Taxes shown to be due on such Tax Returns,
or otherwise owed, has been timely paid, except to the extent that any failure
to pay, individually or in the aggregate, has not had and would not reasonably
be expected to have a Parent Material Adverse Effect.
 
(b)  Parent has an adequate reserve for all Taxes payable by the Parent (in
addition to any reserve for deferred Taxes to reflect timing differences between
book and Tax items) for all Taxable periods and portions thereof.  No deficiency
with respect to any Taxes has been proposed, asserted or assessed against the
Parent, and no requests for waivers of the time to assess any such Taxes are
pending, except to the extent any such deficiency or request for waiver,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Parent Material Adverse Effect.
 
(c)  There are no Liens for Taxes (other than for current Taxes not yet due and
payable) on the assets of the Parent.  The Parent is not bound by any agreement
with respect to Taxes.
 
SECTION 4.08.   Absence of Changes in Benefit Plans.  The Parent does not have
or maintain any collective bargaining agreement or any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other plan, arrangement
or understanding (whether or not legally binding) providing benefits to any
current or former employee, officer or director of Parent (collectively, “Parent
Benefit Plans”).  As of the date of this Agreement, there are not any
employment, consulting, indemnification, severance or termination agreements or
arrangements between the Parent and any current or former employee, officer or
director of the Parent, nor does the Parent have any general severance plan or
policy.
 
 
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SECTION 4.09.   ERISA Compliance; Excess Parachute Payments.  The Parent does
not, and since its inception never has, maintained, or contributed to any
“employee pension benefit plans” (as defined in Section 3(2) of ERISA),
“employee welfare benefit plans” (as defined in Section 3(1) of ERISA) or any
other Parent Benefit Plan for the benefit of any current or former employees,
consultants, officers or directors of Parent.
 
SECTION 4.10.   Litigation.  There is no Action which (i) adversely affects or
challenges the legality, validity or enforceability of any of this Agreement or
the Parent Stock or (ii) could, if there were an unfavorable decision,
individually or in the aggregate, have or reasonably be expected to result in a
Parent Material Adverse Effect and neither the Parent nor any director or
officer thereof (in his or her capacity as such), is or has been the subject of
any Action involving a claim or violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty.
 
SECTION 4.11.   Compliance with Applicable Laws.  Parent is in compliance with
all applicable Laws, including those relating to occupational health and safety,
the environment, export controls, trade sanctions and embargoes, except for
instances of noncompliance that, individually and in the aggregate, have not had
and would not reasonably be expected to have a Parent Material Adverse
Effect.  The Parent has not received any written communication during the past
two years from a Governmental Entity that alleges that the Parent is not in
compliance in any material respect with any applicable Law.  The Parent is in
compliance with all effective requirements of the Sarbanes-Oxley Act of 2002, as
amended, and the rules and regulations thereunder, that are applicable to it,
except where such noncompliance could not have or reasonably be expected to
result in a Parent Material Adverse Effect.
 
SECTION 4.12.   Contracts.  There are no Contracts that are material to the
business, properties, assets, condition (financial or otherwise), results of
operations or prospects of the Parent taken as a whole.  The Parent is not in
violation of or in default under (nor does there exist any condition which upon
the passage of time or the giving of notice would cause such a violation of or
default under) any Contract to which it is a party or by which it or any of its
properties or assets is bound, except for violations or defaults that would not,
individually or in the aggregate, reasonably be expected to result in a Parent
Material Adverse Effect. The Parent’s execution of this Agreement and the
consummation of the Transactions contemplated herein would not violate any
Contract to which the Parent is a party nor will the execution of this Agreement
or the consummation of the Transactions consummated hereby violate or trigger
any “change in control” provision or covenant in any Contract to which the
Parent is a party.
 
SECTION 4.13.   Title to Properties.  The Parent does not own any real property.
 
SECTION 4.14.   Intellectual Property.  The Parent does not own any Intellectual
Property Rights.
 
 
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SECTION 4.15.           Labor Matters.  There are no collective bargaining or
other labor union agreements to which the Parent is a party or by which it is
bound.  No material labor dispute exists or, to the knowledge of the Parent, is
imminent with respect to any of the employees of the Parent.
 
SECTION 4.16.   Transactions With Affiliates and Employees.  None of the
officers or directors of the Parent and, to the knowledge of the Parent, none of
the employees of the Parent is presently a party to any transaction with the
Parent (other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Parent, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
 
SECTION 4.17.   Application of Takeover Protections.  The Parent has taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Parent’s
charter documents or the laws of its state of incorporation that is or could
become applicable to the Shareholder as a result of the Shareholder and the
Parent fulfilling their obligations or exercising their rights under this
Agreement, including, without limitation, the issuance of the Parent Stock and
the Shareholder’s ownership of the Parent Stock.
 
SECTION 4.18.   No Additional Agreements.  The Parent does not have any
agreement or understanding with the Shareholder with respect to the Transactions
other than as specified in this Agreement.
 
SECTION 4.19.   Investment Company.  The Parent is not, and is not an affiliate
of, and immediately following the Closing will not have become, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
 
SECTION 4.20.   Brokers; Schedule of Fees and Expenses.  No broker, investment
banker, financial advisor or other person is entitled to any broker’s, finder’s,
financial advisor’s or other similar fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of the Parent.
 
SECTION 4.21            Issuance of the Parent Stock. The 10,000,000 shares of
Parent Stock are duly authorized and, when issued in accordance with this
Agreement against delivery of the Company Shares by the Shareholder, Shareholder
will receive good title to such shares of Parent Stock, and such shares will be
duly and validly issued, fully paid and nonassessable, free and clear of all
Liens, other than restrictions generally imposed by federal and state securities
laws.  The issuance of the shares of Parent Stock to Shareholder is not subject
to any preemptive or similar rights to subscribe for or purchase securities.

SECTION 4.22            Indebtedness.  All outstanding Indebtedness of the
Parent is set forth in the Parent Disclosure Schedule.

 
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ARTICLE V
 

 
Deliveries
 
SECTION 5.01.   Deliveries of the Shareholder.
 
Unless such deliveries are waived by Parent, in whole or in part, at Closing as
a further condition thereof, at or prior to the Closing, the Shareholder shall
deliver to the Parent:
 
(a)  a copy of this Agreement executed by the Shareholder;
 
(b)  a certificate executed by Shareholder confirming the accuracy in all
material respects of each of the representations and warranties of Shareholder
herein as of the Closing Date, except the representations and warranties of
Shareholder otherwise qualified by materiality shall be true and correct in all
respects, and stating that Shareholder is the only owner of the Company Shares
(or any other ownership interest of any class or character) and covering such
additional matters as the Parent may request; and
 
(c)  a Lockup Agreement, substantially in the form attached hereto as Exhibit A
executed by the Shareholder, which Lockup Agreement may only be released by the
Board of Directors of Parent;
 
SECTION 5.02.   Deliveries of the Parent.  At Closing, the Parent shall deliver
to the Shareholder:
 
(a)  a copy of this Agreement executed by the Parent;
 
(b)  a certificate from the Parent, signed by its Secretary or Assistant
Secretary certifying that the attached copies of the Parent Charter, Parent
Bylaws and resolutions of the Board of Directors of the Parent approving this
Agreement and the Transactions contemplated hereunder, are all true, complete
and correct and remain in full force and effect;
 
(c)  promptly following the Closing, the Parent shall deliver to the
Shareholder, a certificate representing the new shares of Parent Stock issued to
the Shareholder; and
 
(d)  the Cash Payment, by wire transfer of immediately available funds;
 
SECTION 5.03. Deliveries of the Company.  At Closing, the Company shall deliver
to the Parent:
 
(a) a copy of this Agreement executed by the Company.
 
 
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(b)  a certificate from the Company, signed by its Secretary certifying that the
attached copies of the Company’s Charter Documents and resolutions of the Board
of Directors of the Company approving this Agreement and the Transactions, are
all true, complete and correct and remain in full force and effect;
 
(c)  if requested, the results of UCC, judgment lien and tax lien searches with
respect to the Company, the results of which indicate no liens on the assets of
the Company; and
 
(d)  a certificate certified by an officer of the Company certifying that, at
Closing, such Company shall own and possess valid title to each of the patents
and applications set forth on the Company Disclosure Schedule and all of the
Intellectual Property Rights.
 

ARTICLE VI

 
Conditions to Closing
 
SECTION 6.01.   Shareholder and Company Conditions Precedent.  The obligations
of the Shareholder and the Company to enter into and complete the Closing is
subject, at the option of the Shareholder and the Company, to the fulfillment on
or prior to the Closing Date of the following conditions.
 
(a)  Representations and Covenants. The representations and warranties of the
Parent contained in this Agreement shall be true in all material respects on and
as of the Closing Date with the same force and effect as though made on and as
of the Closing Date, except the representations and warranties of Parent
otherwise qualified by materiality shall be true and correct in all
respects.  The Parent shall have performed and complied in all material respects
with all covenants and agreements required by this Agreement to be performed or
complied with by the Parent on or prior to the Closing Date.  The Parent shall
have delivered to the Shareholder and the Company, a certificate, dated the
Closing Date, to the foregoing effect.
 
(b)  Litigation.  No action, suit or proceeding shall have been instituted
before any court or governmental or regulatory body or instituted or threatened
by any governmental or regulatory body to restrain, modify or prevent the
carrying out of the Transactions or to seek damages or a discovery order in
connection with such Transactions, or which has or may have, in the reasonable
opinion of the Company or the Shareholder, a materially adverse effect on the
assets, properties, business, operations or condition (financial or otherwise)
of the Parent.
 
(c)  Intentionally Omitted.
 
(d)  Post-Closing Capitalization.  At Closing, the authorized capitalization
shall be as described in Section 4.03, and the number of issued and outstanding
shares of capital stock of the Parent, on a fully-diluted basis, shall be as
described in Section 4.03.
 
(e)  Deliveries.  The deliveries specified in Section 5.02 shall have been made
by the Parent.
 
 
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(f)  Satisfactory Completion of Due Diligence.  The Company and the Shareholder
shall have completed their legal, accounting and business due diligence of the
Parent and the results thereof shall be satisfactory to the Company and the
Shareholder in their sole and absolute discretion.
 
                                (g)     No Injunction.  There shall be no
injunction or order in effect by any Governmental Entity prohibiting the
Transactions.

SECTION 6.02.   Parent Conditions Precedent.  The obligations of the Parent to
enter into and complete the Closing are subject, at the option of the Parent, to
the fulfillment on or prior to the Closing Date of the following conditions, any
one or more of which may be waived by the Parent in writing.
 
(a)  Representations and Covenants.  The representations and warranties of the
Shareholder and the Company contained in this Agreement shall be true in all
material respects on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date, except the representations and
warranties of Shareholder and the Company otherwise qualified by materiality
shall be true and correct in all respects.  The Shareholder and the Company
shall have performed and complied in all material respects with all covenants
and agreements required by this Agreement to be performed or complied with by
the Shareholder and the Company on or prior to the Closing Date.  The Company
shall have delivered to the Parent a certificate, dated the Closing Date, to the
foregoing effect.
 
(b)  Litigation.  No action, suit or proceeding shall have been instituted
before any court or governmental or regulatory body or instituted or threatened
by any governmental or regulatory body to restrain, modify or prevent the
carrying out of the Transactions or to seek damages or a discovery order in
connection with such Transactions, or which has or may have, in the reasonable
opinion of the Parent, a materially adverse effect on the assets, properties,
business, operations or condition (financial or otherwise) of the Company.
 
(c)  Intentionally Omitted.
 
(d)  Deliveries.  The deliveries specified in Section 5.01 and Section 5.03
shall have been made by the Shareholder and the Company respectively.
 
(e)  Post-Closing Capitalization.  At Closing, the authorized capitalization,
and the number of issued and outstanding Company Shares, on a fully-diluted
basis for the Company, shall be as described in Section 3.02.
 
(f)  Satisfactory Completion of Due Diligence.  The Parent shall have completed
its legal, accounting and business due diligence of the Company and the results
thereof shall be satisfactory to the Parent in its sole and absolute discretion.
 
(g)      Shareholder Lockup Agreement.  The Shareholder shall have executed and
delivered the Lockup Agreement, in the form attached hereto as Exhibit A, to the
Parent, at the Closing.
 
 
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(h)  Indebtedness.  The Company shall have no material Indebtedness or
liabilities in excess of its current assets.
 
(i)       No Injunction.  There shall be no injunction or order in effect by any
Governmental Entity prohibiting the Transactions.

 

ARTICLE VII

 
Covenants
 
SECTION 7.01.   Company Financial Statements.  The Company shall deliver to
Parent audited financial statements for the two prior fiscal years ended
December 31, 2013 and any unaudited financial statements for any subsequent
interim period within twenty one (21) days from Closing.
 
SECTION 7.02.   Fees and Expenses.  Other than the audit fees incurred to audit
the financial statements of the Company which shall be borne by Parent, all fees
and expenses incurred in connection with this Agreement shall be paid by the
Party incurring such fees or expenses, whether or not this Agreement is
consummated.
 

ARTICLE VIII
 
Miscellaneous
 
SECTION 8.01.   Notices.  All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given upon receipt by the Parties at the following addresses (or at such other
address for a Party as shall be specified by like notice):
 
If to the Parent, to:

Drone Aviation Corp.
127 North Street
Lexington, MA 02420
Attn: Chief Executive Officer

If to Lighter Than Air Systems Corp., to:
11653 Central Parkway
Jacksonville, FL 32224
Attn: President

If to the Shareholder by courier or personal delivery to:
 
World Surveillance Group Inc.
State Road 405, Building M6-306A, Room 1400
Kennedy Space Center, FL 32815
Attn: General Counsel

 
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Or if by mail delivery to:

World Surveillance Group Inc.
Mail Code: SWC
Kennedy Space Center, FL 32899
Attn: General Counsel

SECTION 8.02.   Amendments; Waivers; No Additional Consideration.  No provision
of this Agreement may be waived or amended except in a written instrument signed
by the Company, Parent and the Shareholder.  No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any Party to exercise any right hereunder in any
manner impair the exercise of any such right.
 
SECTION 8.03.   Replacement of Securities.  If any certificate or instrument
evidencing any Parent Stock is mutilated, lost, stolen or destroyed, the Parent
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefore, a new
certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Parent of such loss, theft or destruction and customary and
reasonable indemnity, if requested.  The applicants for a new certificate or
instrument under such circumstances shall pay any reasonable third-party costs
associated with the issuance of such replacement certificate or instrument.  If
a replacement certificate or instrument evidencing any Parent Stock is requested
due to a mutilation thereof, the Parent may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
 
SECTION 8.04.   Remedies.  In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the
Shareholder, Parent and the Company will be entitled to specific performance
under this Agreement.  The Parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
 
SECTION 8.05.   Interpretation.  When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated.  Whenever the words “include,” “includes” or “including” are used in
this Agreement, they shall be deemed to be followed by the words “without
limitation.”
 
SECTION 8.06.   Severability.  If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule or Law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the Transactions contemplated hereby is not affected in any manner materially
adverse to any Party.  Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the Parties as closely as possible in an acceptable manner to the end that
Transactions contemplated hereby are fulfilled to the extent possible.
 
 
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SECTION 8.07.   Counterparts; Facsimile Execution.  This Agreement may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or more counterparts have
been signed by each of the Parties and delivered to the other
Parties.  Facsimile execution and facsimile or electronic delivery of this
Agreement is legal, valid and binding for all purposes.
 
SECTION 8.08.   Entire Agreement; Third Party Beneficiaries. This Agreement,
taken together with the Shareholder Disclosure Schedule, Company Disclosure
Schedule and the Parent Disclosure Schedule, (a) constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the Parties with respect to the Transactions and (b) are not
intended to confer upon any person other than the Parties any rights or
remedies. All provisions of this Agreement that by their nature are intended to
survive the Closing and the termination of this Agreement shall so survive,
including, without limitation, the representations and warranties contained
herein.
 
SECTION 8.09.   Governing Law.  This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York,
without reference to principles of conflicts of laws.  Any action or proceeding
brought for the purpose of enforcement of any term or provision of this
Agreement shall be brought only in the Federal or state courts sitting in New
York and the parties hereby waive any and all rights to trial by jury.
 
SECTION 8.10.   Assignment.  Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the Parties without the prior
written consent of the other Parties.  Any purported assignment without such
consent shall be void.  Subject to the preceding sentences, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by, the Parties and
their respective successors and assigns.
 
SECTION 8.11            Additional Deliverables.   From time to time after the
date hereof and without further consideration, the parties shall execute and
deliver, or cause to be executed and delivered, to any other party such further
instruments of sale, assignment, transfer and delivery, and take such other
action as such other party may reasonably request in order to consummate the
transactions contemplated hereby.

 
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Share
Exchange Agreement as of the date first above written.
 

The Parent:
DRONE AVIATION CORP.
 
By: /s/ Glenn Kesner
Name: Glenn Kesner
Title:   President
 
The Company:
LIGHTER THAN AIR SYSTEMS CORP.
 
By: /s/ Felicia Hess
Name: Felicia Hess
Title: President

 
The
Shareholder:                                                                WORLD
SURVEILLANCE GROUP INC.
 
By: /s/ Glenn D. Estrella
Name: Glenn D. Estrella
Title:  President and CEO
 
 
 

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