Stock Exchange Agreement Dated February 6, 1998

EYE TECHNOLOGY, INC.


STOCK EXCHANGE AGREEMENT


FEBRUARY 6, 1998


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TABLE OF CONTENTS


ARTICLE I - TRANSFER AND EXCHANGE..........................................1
Section 1.1 Transfer and Exchange; Stock for Stock..........1
Section 1.2 Closing.........................................2
Section 1.3 Transactions at Closing.........................2


ARTICLE II - REPRESENTATIONS AND WARRANTIES OF COMPANY.....................2
Section 2.1 Organization, Standing and Qualification........2
Section 2.2 Capitalization..................................2
Section 2.3 Post Closing Issuance of Stock..................3
Section 2.4 Validity of Stock...............................3
Section 2.5 Authorization, Approvals........................3
Section 2.6 No Conflict with Other Instruments..............4
Section 2.7 Private Offering................................4
Section 2.8 Fees and Commissions............................4
Section 2.9 Minute Books....................................4


ARTICLE III - REPRESENTATION, WARRANTEE AND COVENANT OF THE PURCHASERS
Section 3.1 Authorization...................................5
Section 3.2 Investment Representations......................5
Section 3.3 Restrictions on Transfer........................5
Section 3.4 Fees and Commissions............................5


ARTICLE IV - MISCELLANEOUS.................................................6
Section 4.1 Entire Agreement................................6
Section 4.2 Survival of Warranties..........................6
Section 4.3 Notices.........................................7
Section 4.4 Amendments......................................7
Section 4.5 Waiver and Consent..............................7
Section 4.6 Attorneys' Fees.................................7
Section 4.7 Successors and Assigns..........................7
Section 4.8 Rights of Purchaser.............................8
Section 4.9 Execution and Counterparts......................8
Section 4.10 No Third Party Beneficiaries....................8
Section 4.11 Severability....................................8
Section 4.12 Rules of Construction...........................8


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SCHEDULES 1.1 - Purchasers 2.2 - Security Holders 2.3 - Common Stock in Satisfaction of Debt


EXHIBITS


A - Form of Certificate of Designation


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STOCK EXCHANGE AGREEMENT


This STOCK EXCHANGE AGREEMENT (the "Agreement") dated as of February 6, 1998, is entered into by and between EYE TECHNOLOGY, INC., a Delaware corporation (the "Company"), and the entities and/or individuals listed on Schedule 1.1 attached hereto (collectively referred to herein as the "Purchasers" and individually as "Purchaser").


RECITAL


WHEREAS, the Purchasers own 100% of the issued shares of common stock of Star Tobacco & Pharmaceutical, Inc., a Delaware Corporation ("Star Tobacco"), and desire to exchange all such shares for shares of Series B Convertible Voting Preferred Stock, par value $.01 per share, of the Company (the "Series B Preferred Stock"), having the rights, preferences, privileges and restrictions set forth in the Company's Certificate of Designations, substantially in the form attached hereto as Exhibit A (the "Certificate of Designations"), in such amount which, if converted into shares of Common Stock of the Company pursuant to the terms thereof, would equal the product of nine multiplied by (a) all issued and outstanding shares of Common Stock of the Company as of the Closing Date, plus (b) the number of shares of Common Stock of the Company currently reserved for issuance pursuant to any options, warrants, conversion rights, and/or purchase rights as set forth in Schedule 2.2 attached hereto, and the Company desires to transfer to the Purchasers such number of shares of Series B Preferred Stock in exchange for the 100% of the issued common stock of Star Tobacco (the "Star Tobacco Common Stock") on the terms and subject to the conditions set forth herein;


AGREEMENT


NOW, THEREFORE, in consideration of the premises, mutual covenants and agreements hereinafter contained and for other good and valuable consideration, the Company and the Purchasers hereby agree as follows:


ARTICLE I - TRANSFER AND EXCHANGE


Section 1.1 Transfer and Exchange; Stock for Stock . Subject to the provisions of this Agreement, on the Closing Date (as hereinafter defined) the Company will transfer to the Purchasers the number of such shares of Series B Preferred Stock in such amount which, if converted into shares of Common Stock of the Company pursuant to the terms thereof, would equal the product of nine multiplied by (a) all issued and outstanding shares of Common Stock of the Company as of the Closing Date, plus (b) the number of shares of Common Stock of the Company currently reserved for issuance pursuant to any options, warrants, conversion rights, and/or purchase rights as set forth in Schedule 2.2 attached hereto, in exchange for the transfer of the respective Purchaser's shares of Star Tobacco Common Stock in the amounts as set forth and described in Schedule 1.1, attached hereto. Such transfer of Series B Preferred Stock to Purchasers by the Company shall be deemed a partial transfer subject to adjustment in the number of Series B Preferred Stock to be transferred


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pursuant to Section 2.3 below.


Section 1.2 Closing. The transfer and exchange of the Series B Preferred Stock for the Star Tobacco Common Stock pursuant to Section 1.1 (the "Closing") shall take place at the offices of Star Tobacco, 16 South Market St. Petersburg, Virginia or at such other place as may be agreed upon by the Company and the Purchasers, at 2:00 p.m. local time on February 6, 1998, or at such other time and date as may be agreed upon by the Company and the Purchasers (the "Closing Date").


Section 1.3 Transactions at Closing. At the Closing, the Company shall deliver to each Purchaser a certificate or certificates for the shares of Series B Preferred Stock to be issued and transferred to such Purchaser hereunder duly registered in the Purchaser's name as provided in Schedule 1.1, or in such other name as the Purchaser shall have specified in writing to the Company prior to the Closing Date, against the transfer and delivery by each Purchaser of a certificate or certificates for all such Purchaser's shares of Star Tobacco common stock.


ARTICLE II - REPRESENTATIONS AND WARRANTIES OF COMPANY


The Company represents and warrants to the Purchasers that:


Section 2.1 Organization, Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its property and assets and to conduct its business as presently conducted and as proposed to be conducted by it. The Company has all requisite corporate power and authority to enter into and perform its obligations under this Agreement, and to carry out the transactions contemplated hereby and thereby. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its assets, properties, condition (financial or otherwise), operating results, prospects or business. Complete and correct copies of the Certificate of Incorporation and Bylaws of the Company, each as amended to date, have been delivered to the Purchasers.


Section 2.2 Capitalization. On the Closing Date, the authorized capital stock of the Company will consist of (a) 100,000 shares of preferred stock, par value $.01 per share, of which 15,000 shares will be designated "Series B Convertible Preferred Stock," and of which no shares shall be issued or outstanding prior to the Closing, (b) 4,000 shares of Class A Preferred Stock, par value $.01 per share, of which 2,570 shares are issued and outstanding, and (c) 10,000,000 shares of common stock, par value $.01 per share ("Common Stock"), of which 3,438,656 shares are issued and outstanding. In addition, there are shares of Common Stock reserved for issuance pursuant to employee or director stock purchase and/or option plans or agreements and convertible notes, which have been adopted by the Company and are identified on Schedule 2.2 hereto. In addition, there are 205,600 shares of Common Stock reserved for issuance upon conversion of the Class A Preferred Stock. Schedule 2.2 sets forth a complete and correct list of the number of issued and outstanding shares of Common Stock or other Company securities (including options) as of the date of this Agreement. The outstanding shares of Common Stock and Preferred Stock are duly authorized and validly issued in accordance with applicable law, fully paid and nonassessable.


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Section 2.3 Post-Closing Issuance of Stock. As described on Schedule 2.3 attached hereto, the Company may issue to certain individuals shares of the Company's Common Stock, and if so issued, Purchasers shall be entitled to receive additional shared of Series B Preferred Stock in accordance with this section. In addition, if there are options, warrants, conversion rights or similar rights, outstanding as of the Closing Date and not specifically listed on Schedule 2.2, the Purchasers shall also be entitled to receive additional shares of Series B Preferred Stock in accordance with this section.


The number of shares of Series B Preferred Stock of the Company to be transferred to Purchasers pursuant to this Section 2.3, if any, shall be equal to such number (including any fractional share) of said shares of Series B Preferred Stock which, if converted into shares of Common Stock of the Company pursuant to the terms thereof, would equal the product of nine multiplied by the number of shares of Common Stock of the Company (a) which are issued within thirty (30) days of the Closing Date to the individuals listed in Schedule 2.3 in satisfaction of all or a portion of debt owed by the Company to such individuals, plus (b) which are subject to options, warrants, conversion rights, or similar rights, or are outstanding as of the Closing Date and not listed on Schedule 2.2. The number of shares of Common Stock of the Company which may be issued within thirty (30) days of the Closing Date to the individuals listed in Schedule 2.3 in satisfaction of all or a portion of debt owed by the Company shall not exceed 300,000 shares. The Company shall within a reasonable time issue the additional shares of Series B Preferred Stock to the Purchasers pursuant to this Section 2.3, if any.


Section 2.4 Validity of Stock. The Series B Preferred Stock, when issued, sold, and de ...