Document:

EX-10.2

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE 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 TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS
SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

Original Issue Date: July 27, 2010

Original Conversion Price (subject to adjustment herein): $0.13 $200,000.00

15% SENIOR SECURED

CONVERTIBLE NOTE DUE JULY 31, 2011

THIS NOTE is one of a series of duly authorized and issued Senior Secured Convertible Notes of
U.S. Aerospace, Inc., f/k/a New Century Companies, Inc., a Delaware corporation, having a principal
place of business at 9831 Romandel Avenue, Santa Fe Springs, CA 90670 (the
“Company”), designated as its 15% Senior Secured Convertible Notes, due July 31, 2011 (the
“Note(s)”).

FOR VALUE RECEIVED, the Company promises to pay to CAMOFI Master LDC or its registered assigns
(the “Holder”), the principal sum of $200,000 on July 31, 2011 or such earlier date as the
Notes are required or permitted to be repaid as provided hereunder (the “Maturity Date”),
and to pay interest to the Holder on the aggregate unconverted and then outstanding principal
amount of this Note at the rate of fifteen percent (15%) per annum (the “Interest Rate”) in
accordance with the provisions hereof. This Note is subject to the following additional
provisions:

Section 1. Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Note: (a) capitalized terms not otherwise defined herein have the
meanings given to such terms in the Purchase Agreement, and (b) the following terms shall have the
following meanings:

“Alternate Consideration” shall have the meaning set forth in Section
5(e)(iii).

“Business Day” means any day except Saturday, Sunday and any day which shall be
a federal legal holiday in the United States or a day on which banking institutions in the
State of New York are authorized or required by law or other government action to close.

“Change of Control Transaction” means the occurrence after the date hereof, of
any of (i) an acquisition after the date hereof by an individual or legal entity or “group”
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control
(whether through legal or beneficial ownership of capital stock of the Company, by contract
or otherwise) of in excess of 33% of the voting securities of the Company, (ii) a
replacement at one time or within a three year period of more than one-half of the members
of the Company’s board of directors which is not approved by a majority of those individuals
who are members of the board of directors on the date hereof (or by those individuals who
are serving as members of the board of directors on any date whose nomination to the board
of directors was approved by a majority of the members of the board of directors who are
members on the date hereof), or (iii) the execution by the Company of an agreement
to which the Company is a party or by which it is bound, providing for any of the events set
forth above in (i) or (ii) .

“Common Stock” means the common stock, $0.10 par value, of the Company and
stock of any other class into which such shares may hereafter have been reclassified or
changed.

“Conversion Date” shall have the meaning set forth in Section 4(a) hereof.

“Conversion Price” shall have the meaning set forth in Section 4(b).

“Conversion Shares” means the shares of Common Stock issuable upon conversion
of Notes or as payment of interest in accordance with the terms hereof.

“Event of Default” shall have the meaning set forth in Section 9.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Fundamental Transaction” shall have the meaning set forth in Section 5(e)(iii)
hereof.

“Interest Conversion Rate” means 85% of the volume-weighted average closing
price for the 10 Trading Days immediately prior to the applicable Interest Payment Date.

“Late Fees” shall have the meaning set forth in Section 2(d) of this Note.

“Mandatory Prepayment Amount” for any Notes shall equal the sum of (i) 120% of
the principal amount of Notes to be prepaid, plus all accrued and unpaid interest thereon,
and (ii) all other amounts, costs, expenses and liquidated damages due in respect of such
Notes.

“Original Issue Date” shall mean the date of the first issuance of the Notes
regardless of the number of transfers of any Note and regardless of the number of
instruments which may be issued to evidence such Note.

“Person” means a corporation, an association, a partnership, organization, a
business, an individual, a government or political subdivision thereof or a governmental
agency.

“Securities Act” means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.

“Trading Day” means a day on which the Common Stock is traded on a Trading
Market.

“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the Nasdaq SmallCap Market,
the American Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the
OTC Bulletin Board.

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the primary Trading Market on which the Common Stock is then listed or
quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. EST to
4:02 p.m. Eastern Time) using the VAP function; (b) if the Common Stock is not then listed
or quoted on the Trading Market and if prices for the Common Stock are then reported in the
“Pink Sheets” published by the Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (c) in all other cases, the fair market value of a share of
Common Stock as determined by a nationally recognized-independent appraiser selected in good
faith by Holders holding a majority of the principal amount of Notes then outstanding.

Section 2. Interest.

a) Payment of Interest in Cash. The Company shall pay interest to the Holder on
the aggregate unconverted and then outstanding principal amount of this Note at the Interest
Rate, payable on the Maturity Date (except that, if any such date is not a Business Day,
then such payment shall be due on the next succeeding Business Day) and on each Redemption
Date (as to that principal amount then being redeemed) ( each such date, an “Interest
Payment Date”), in cash.

b) (intentionally omitted)

c) Interest Calculations. Interest shall be calculated on the basis of a
360-day year and shall accrue daily commencing on the Original Issue Date until payment in
full of the principal sum, together with all accrued and unpaid interest and other amounts
which may become due hereunder, has been made. Interest shall be compounded monthly.
Interest hereunder will be paid to the Person in whose name this Note is registered on the
records of the Company regarding registration and transfers of Notes (the “Note
Register”).

d) Late Fee. All overdue accrued and unpaid interest to be paid hereunder
shall entail a late fee at the rate of 20% per annum (or such lower maximum amount of
interest permitted to be charged under applicable law) (“Late Fee”) which will
accrue daily, from the date such interest is due hereunder through and including the date of
payment.

e) Optional Prepayment. The Company will have the right to prepay in cash all
or a portion of the Notes at 120% of the outstanding principal amount thereof plus accrued
interest to the date of repayment. The Holder shall be given 10 days written notice prior to
any such optional prepayment during which period it may convert all or any amount
outstanding under this Note into Common Stock.

f) Mandatory Repayment. In the event that (i) the Company shall sell all or a
portion of its assets, or (ii) the Company shall be subject to a Change of Control
Transaction, then the Company shall be required to offer to repay the Notes at 120% of the
principal amount thereof plus accrued interest to the date of repayment. The Holder shall be
given 10 days written notice prior to any such mandatory prepayment offer during which
period it may convert all or any amount outstanding under this Note into Common Stock.

Section 3. Registration of Transfers and Exchanges.

a) Different Denominations. This Note is exchangeable for an equal aggregate
principal amount of Notes of different authorized denominations, as requested by the Holder
surrendering the same. No service charge will be made for such registration of transfer or
exchange.

b) Reliance on Note Register. Prior to due presentment to the Company for
transfer of this Note, the Company and any agent of the Company may treat the Person in
whose name this Note is duly registered on the Note Register as the owner hereof for the
purpose of receiving payment as herein provided and for all other purposes, whether or not
this Note is overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.

Section 4. Conversion.

a) Voluntary Conversion. At any time after the Original Issue Date until this
Note is no longer outstanding, this Note shall be convertible into shares of Common Stock at
the option of the Holder, in whole or in part at any time and from time to time (subject to
the limitations on conversion set forth in Section 4(d) hereof). The Holder shall effect
conversions by delivering to the Company the form of Notice of Conversion attached hereto as
Annex A (a “Notice of Conversion”), specifying therein the principal amount
of Notes to be converted and the date on which such conversion is to be effected (a
“Conversion Date”). If no Conversion Date is specified in a Notice of Conversion,
the Conversion Date shall be the date that such Notice of Conversion is provided hereunder.
To effect conversions hereunder, the Holder shall not be required to physically surrender
Notes to the Company unless the entire principal amount of this Note plus all accrued and
unpaid interest thereon has been so converted. Conversions hereunder shall have the effect
of lowering the outstanding principal amount of this Note in an amount equal to the
applicable conversion. The Holder and the Company shall maintain records showing the
principal amount converted and the date of such conversions. The Company shall deliver any
objection to any Notice of Conversion within 3 Business Days of receipt of such notice. In
the event of any dispute or discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error. The Holder and any assignee, by acceptance
of this Note, acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Note, the unpaid and unconverted principal amount
of this Note may be less than the amount stated on the face hereof. However, at the
Company’s request, the Holder shall surrender the Note to the Company within five (5)
Trading Days following such request so that a new Note reflecting the correct principal
amount may be issued to Holder.

b) Conversion Price. Subject to the provisions of Section 5(b) hereof, the
initial conversion price in effect on any Conversion Date shall be $0.13.

c) Reserved.

d) Conversion Limitations; Holder’s Restriction on Conversion. The
Company shall not effect any conversion of this Note, and the Holder shall not have the
right to convert any portion of this Note, pursuant to Section 4(a) or otherwise, to the
extent that after giving effect to such conversion, the Holder (together with the Holder’s
affiliates), as set forth on the applicable Notice of Conversion, would beneficially own in
excess of 4.99% of the number of shares of the Common Stock outstanding immediately after
giving effect to such conversion.  For purposes of the foregoing sentence, the number of
            shares of Common Stock beneficially owned by the Holder and its affiliates shall include the
number of shares of Common Stock issuable upon conversion of this Note with respect to which
the determination of such sentence is being made, but shall exclude the number of shares of
Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted
portion of this Note beneficially owned by the Holder or any of its affiliates and (B)
exercise or conversion of the unexercised or nonconverted portion of any other securities of
the Company (including, without limitation, any other Notes or the Warrants) subject to a
limitation on conversion or exercise analogous to the limitation contained herein
beneficially owned by the Holder or any of its affiliates.  Except as set forth in the
preceding sentence, for purposes of this Section 4(d), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act. To the extent that the
limitation contained in this section applies, the determination of whether this Note is
convertible (in relation to other securities owned by the Holder) and of which a portion of
this Note is convertible shall be in the sole discretion of such Holder. To ensure
compliance with this restriction, the Holder will be deemed to represent to the Company each
time it delivers a Notice of Conversion that such Notice of Conversion has not violated the
restrictions set forth in this paragraph and the Company shall have no obligation to verify
or confirm the accuracy of such determination. For purposes of this Section 4(d), in
determining the number of outstanding shares of Common Stock, the Holder may rely on the
number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent
Form 10-QSB or Form 10-KSB (or such related form), as the case may be, (y) a more recent
public announcement by the Company or (z) any other notice by the Company or the Company’s
Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the
written or oral request of the Holder, the Company shall within two Trading Days confirm
orally and in writing to the Holder the number of shares of Common Stock then outstanding. 
In any case, the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company, including this
Note, by the Holder or its affiliates since the date as of which such number of outstanding
            shares of Common Stock was reported. The provisions of this Section 4(d) may be waived by
the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the
Company, and the provisions of this Section 4(d) shall continue to apply until such 61st day
(or such later date, as determined by the Holder, as may be specified in such notice of
waiver).

e) Mechanics of Conversion

 

i. Conversion Shares Issuable Upon Conversion of Principal Amount. The
number of shares of Common Stock issuable upon a conversion hereunder shall be
determined by the quotient obtained by dividing (x) the outstanding principal amount
of this Note to be converted by (y) the Conversion Price.

i.

ii. Delivery of Certificate Upon Conversion. Not later than three
Trading Days after any Conversion Date, the Company will deliver to the Holder (A) a
certificate or certificates representing the Conversion Shares which shall be free
of restrictive legends and trading restrictions (other than those required by the
Purchase Agreement) representing the number of shares of Common Stock being acquired
upon the conversion of Notes (including, if so timely elected by the Company, shares
of Common Stock representing the payment of accrued interest) and (B) a bank check
in the amount of accrued and unpaid interest (if the Company is required to pay
accrued interest in cash). The Company shall, if available and if allowed under
applicable securities laws, use its best efforts to deliver any certificate or
certificates required to be delivered by the Company under this Section
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions.

 

iii. Failure to Deliver Certificates. If in the case of any Notice of
Conversion such certificate or certificates are not delivered to or as directed by
the applicable Holder by the third Trading Day after a Conversion Date, the Holder
shall be entitled by written notice to the Company at any time on or before its
receipt of such certificate or certificates thereafter, to rescind such conversion,
in which event the Company shall immediately return the certificates representing
the principal amount of Notes tendered for conversion.

iv. Obligation Absolute; Partial Liquidated Damages. If the Company
fails for any reason to deliver to the Holder such certificate or certificates
pursuant to Section 4(d)(ii) by the third Trading Day after the Conversion Date, the
Company shall pay to such Holder, in cash, as liquidated damages and not as a
penalty, for each $1000 of principal amount being converted, $10 per Trading Day
(increasing to $20 per Trading Day after 5 Trading Days after such damages begin to
accrue) for each Trading Day after such third Trading Day until such certificates
are delivered. The Company’s obligations to issue and deliver the Conversion Shares
upon conversion of this Note in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by the Holder to enforce the
same, any waiver or consent with respect to any provision hereof, the recovery of
any judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged breach
by the Holder or any other Person of any obligation to the Company or any violation
or alleged violation of law by the Holder or any other person, and irrespective of
any other circumstance which might otherwise limit such obligation of the Company to
the Holder in connection with the issuance of such Conversion Shares;
provided, however, such delivery shall not operate as a waiver by
the Company of any such action the Company may have against the Holder. In the
event a Holder of this Note shall elect to convert any or all of the outstanding
principal amount hereof, the Company may not refuse conversion based on any claim
that the Holder or any one associated or affiliated with the Holder of has been
engaged in any violation of law, agreement or for any other reason, unless, an
injunction from a court, on notice, restraining and or enjoining conversion of all
or part of this Note shall have been sought and obtained and the Company posts a
surety bond for the benefit of the Holder in the amount of 150% of the principal
amount of this Note outstanding, which is subject to the injunction, which bond
shall remain in effect until the completion of arbitration/litigation of the dispute
and the proceeds of which shall be payable to such Holder to the extent it obtains
judgment. In the absence of an injunction precluding the same, the Company shall
issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion.
Nothing herein shall limit a Holder’s right to pursue actual damages or declare an
Event of Default pursuant to Section 9 herein for the Company’s failure to deliver
Conversion Shares within the period specified herein and such Holder shall have the
right to pursue all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief. The exercise
of any such rights shall not prohibit the Holders from seeking to enforce damages
pursuant to any other Section hereof or under applicable law.

v. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the Holder, if the
Company fails for any reason to deliver to the Holder such certificate or
certificates pursuant to Section 4(d)(ii) by the third Trading Day after the
Conversion Date, and if after such third Trading Day the Holder is required by its
brokerage firm to purchase (in an open market transaction or otherwise) Common Stock
to deliver in satisfaction of a sale by such Holder of the Conversion Shares which
the Holder anticipated receiving upon such conversion (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder (in addition to any remedies available
to or elected by the Holder) the amount by which (x) the Holder’s total purchase
price (including brokerage commissions, if any) for the Common Stock so purchased
exceeds (y) the product of (1) the aggregate number of shares of Common Stock that
such Holder anticipated receiving from the conversion at issue multiplied by (2) the
actual sale price of the Common Stock at the time of the sale (including brokerage
commissions, if any) giving rise to such purchase obligation and (B) at the option
of the Holder, either reissue Notes in principal amount equal to the principal
amount of the attempted conversion or deliver to the Holder the number of shares of
Common Stock that would have been issued had the Company timely complied with its
delivery requirements under Section 4(e)(ii). For example, if the Holder purchases
Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect
to an attempted conversion of Notes with respect to which the actual sale price of
the Conversion Shares at the time of the sale (including brokerage commissions, if
any) giving rise to such purchase obligation was a total of $10,000 under clause (A)
of the immediately preceding sentence, the Company shall be required to pay the
Holder $1,000. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In. Notwithstanding anything
contained herein to the contrary, if a Holder requires the Company to make payment
in respect of a Buy-In for the failure to timely deliver certificates hereunder and
the Company timely pays in full such payment, the Company shall not be required to
pay such Holder liquidated damages under Section 4(d)(iv) in respect of the
certificates resulting in such Buy-In.

vi. Reservation of Shares Issuable Upon Conversion. The Company
covenants that it will at all times reserve and keep available out of its authorized
and unissued shares of Common Stock solely for the purpose of issuance upon
conversion of the Notes and payment of interest on the Note, each as herein
provided, free from preemptive rights or any other actual contingent purchase rights
of persons other than the Holders, not less than such number of shares of the Common
Stock as shall (subject to any additional requirements of the Company as to
reservation of such shares set forth in the Purchase Agreement) be issuable (taking
into account the adjustments and restrictions of Section 5) upon the conversion of
the outstanding principal amount of the Notes and payment of interest hereunder.
The Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid and
nonassessable.

vii. Fractional Shares. Upon a conversion hereunder the Company shall
not be required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the VWAP at such time. If the Company elects
not, or is unable, to make such a cash payment, the Holder shall be entitled to
receive, in lieu of the final fraction of a share, one whole share of Common Stock.

viii. Transfer Taxes. The issuance of certificates for shares of the
Common Stock on conversion of the Notes shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in respect of
the issue or delivery of such certificate, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved in
the issuance and delivery of any such certificate upon conversion in a name other
than that of the Holder of such Notes so converted and the Company shall not be
required to issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of such
tax or shall have established to the satisfaction of the Company that such tax has
been paid.

Section 5. Certain Adjustments.

a) Stock Dividends and Stock Splits. If the Company, at any time while the
Notes are outstanding: (A) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or equity equivalent
securities payable in shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company pursuant to this Note, including as
interest thereon), (B) subdivide outstanding shares of Common Stock into a larger number of
            shares, (C) combine (including by way of reverse stock split) outstanding shares of Common
Stock into a smaller number of shares, or (D) issue by reclassification of shares of the
Common Stock any shares of capital stock of the Company, then the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.

b) Subsequent Equity Sales. Notwithstanding the provisions of Section 4(b), if
the Company or any subsidiary thereof, as applicable, at any time while this Note is
outstanding, shall offer, sell, grant any option to purchase or offer, sell or grant any
right to reprice its securities, or otherwise dispose of or issue (or announce any offer,
sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock
Equivalents entitling any Person to acquire shares of Common Stock, at an effective price
per share less than the then Conversion Price (such lower price, the “Base Share Price” and
such issuances collectively, a “Dilutive Issuance”), as adjusted hereunder (if the holder of
the Common Stock or Common Stock Equivalents so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options or rights per share which is
issued in connection with such issuance, be entitled to receive shares of Common Stock at an
effective price per share which is less than the Conversion Price, such issuance shall be
deemed to have occurred for less than the Conversion Price), then, the Conversion Price
shall be reduced to equal the Base Share Price and the number of Conversion Shares issuable
hereunder shall be increased. Such adjustment shall be made whenever such Common Stock or
Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no
later than the Trading Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this section, indicating therein the applicable issuance price, or of
applicable reset price, exchange price, conversion price and other pricing terms (such
notice the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the
occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
entitled to receive a number of Conversion Shares based upon the Base Share Price regardless
of whether the Holder accurately refers to the Base Share Price in the Notice of Conversion.

c) Pro Rata Distributions. If the Company, at any time while Notes are
outstanding, shall distribute to all holders of Common Stock (and not to Holders) evidences
of its indebtedness or assets or rights or warrants to subscribe for or purchase any
security, then in each such case the Conversion Price shall be determined by multiplying
such Conversion Price in effect immediately prior to the record date fixed for determination
of stockholders entitled to receive such distribution by a fraction of which the denominator
shall be the VWAP determined as of the record date mentioned above, and of which the
numerator shall be such VWAP on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so distributed
applicable to one outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall be described in a statement
provided to the Holders of the portion of assets or evidences of indebtedness so distributed
or such subscription rights applicable to one share of Common Stock. Such adjustment shall
be made whenever any such distribution is made and shall become effective immediately after
the record date mentioned above.

d) Calculations. All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. The number of shares of
Common Stock outstanding at any given time shall not includes shares of Common Stock owned
or held by or for the account of the Company, and the description of any such shares of
Common Stock shall be considered on issue or sale of Common Stock. For purposes of this
Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding treasury
            shares, if any) issued and outstanding.

e) Notice to Holders.

i. Adjustment to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any of this Section 5, the Company shall promptly mail to each
Holder a notice setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment. If the Company
issues a variable rate security, the Company shall be deemed to have issued Common
Stock or Common Stock Equivalents at the lowest possible conversion or exercise
price at which such securities may be converted or exercised in the case of a
variable rate transaction, or the lowest possible adjustment price in the case of a
transaction which permits an investor the right to receive additional shares of
Common Stock based upon future transactions of the Company on terms more favorable
than those granted to such investor in such transaction.

ii. Notice to Allow Conversion by Holder. If (A) the Company shall
declare a dividend (or any other distribution) on the Common Stock; (B) the Company
shall declare a special nonrecurring cash dividend on or a redemption of the Common
Stock; (C) the Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of capital stock of
any class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or transfer of all
or substantially all of the assets of the Company, of any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property; (E)
the Company shall authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company; then, in each case, the Company shall
cause to be filed at each office or agency maintained for the purpose of conversion
of the Notes, and shall cause to be mailed to the Holders at their last addresses as
they shall appear upon the stock books of the Company, at least 20 calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of the Common Stock of record to be entitled
to such dividend, distributions, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the date as
of which it is expected that holders of the Common Stock of record shall be entitled
to exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided, that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. Holders are entitled to convert
Notes during the 20-day period commencing the date of such notice to the effective
date of the event triggering such notice.

iii. Fundamental Transaction. If, at any time while this Note is
outstanding, (A) the Company effects any merger or consolidation of the Company with
or into another Person, (B) the Company effects any sale of all or substantially all
of its assets in one or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant to
which holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (D) the Company effects any reclassification
of the Common Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other securities, cash or
property (in any such case, a “Fundamental Transaction”), then upon any
subsequent conversion of this Note, the Holder shall have the right to receive, for
each Conversion Share that would have been issuable upon such conversion absent such
Fundamental Transaction, the same kind and amount of securities, cash or property as
it would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction, the
holder of one share of Common Stock (the “Alternate Consideration”). For
purposes of any such conversion, the determination of the Conversion Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the amount
of Alternate Consideration issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the Conversion Price among
the Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration. If holders of Common Stock
are given any choice as to the securities, cash or property to be received in a
Fundamental Transaction, then the Holder shall be given the same choice as to the
Alternate Consideration it receives upon any conversion of this Note following such
Fundamental Transaction. To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new note consistent with the foregoing
provisions and evidencing the Holder’s right to convert such note into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this paragraph (c) and insuring
that this Note (or any such replacement security) will be similarly adjusted upon
any subsequent transaction analogous to a Fundamental Transaction.

Section 6. (intentionally omitted)

Section 7. Negative Covenants. So long as any portion of this Note is
outstanding, the Company will not and will not permit any of its subsidiaries to directly or
indirectly:

a) enter into, create, incur, assume or suffer to exist any indebtedness or liens of
any kind, on or with respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits therefrom that is senior to or
pari passu with, in any respect or subordinated to (unless on terms
satisfactory in all respects to the Holders), the Company’s obligations under the Notes;

b) amend its certificate of incorporation, bylaws or its charter documents so as to
adversely affect any rights of the Holder;

c) repay, repurchase or offer to repay, repurchase or otherwise acquire or make any
dividend or distribution in respect of any of its Common Stock, preferred stock, or other
equity securities;

d) engage in any transactions with any officer, director, employee or any affiliate of
the Company, 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, in each
case in excess of $10,000 other than (i) for payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) for other employee benefits, including stock option agreements under any stock option
plan of the Company;

e) create or acquire any subsidiary after the date hereof;

f) sell, transfer or otherwise dispose of any of its assets on terms where it is or may
be leased to or re-acquired or acquired by the Company or any of its subsidiaries;

g) dispose, in a single transaction, or in a series of transactions all or any part of
its assets unless such disposal is (i) in the ordinary course of business, (ii) for fair
market value, (iii) for cash and (iv) approved by the board of directors of the Company;

h) authorize or approve any reverse or forward stock split of the Common Stock;

i) enter into any agreement with respect to any of the foregoing; or

j) use the proceeds of the loan represented by this Note for any purpose other than
working capital.

Section 8. Affirmative Covenants. So long as any portion of this Note
is outstanding, the Company will deliver to the Holder the following:

a) as soon as practicable, but in any event within 90 days after the end of each
fiscal year of the, an income statement for such fiscal year, a balance sheet of the Company
and statement of stockholder’s equity as of the end of such year, and a statement of cash
flows for such year, such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles (“GAAP”), and audited and
certified by independent public accountants and an unqualified (except for contingent
liabilities) certified audit report from the Company’s auditors;

b) as soon as practicable, but in any event within 45 days after the end of each of the
first three quarters of each fiscal year of the Company, an unaudited income statement,
statement of cash flows for such fiscal quarter and an unaudited balance sheet as of the end
of such fiscal quarter;

c) Company shall continue the engagement of its current restructuring advisor until any
and all amounts due and owing by the Company to the Holder have been repaid in full. Such
advisor will receive all daily check runs and its approval will be required on all Company
disbursements over $5,000. The restructuring advisor will manage the Company from a
financial perspective, including, without limitation, having authority to deal with critical
vendors (including General Electric), approving financings, and sales of assets.
Failure to grant such advisor full authority in such matters shall result in all amounts
owing to the Holder being immediately due and payable at the Mandatory Prepayment Amount.

Section 9. Events of Default.

a) “Event of Default”, wherever used herein, means any one of the following
events (whatever the reason and whether it shall be voluntary or involuntary or effected by
operation of law or pursuant to any judgment, decree or order of any court, or any order,
rule or regulation of any administrative or governmental body):

i. any default in the payment of (A) the principal of amount of any Note, or
(B) interest (including Late Fees) on, or liquidated damages in respect of, any
Note, in each case free of any claim of subordination, as and when the same shall
become due and payable (whether on a Conversion Date or the Maturity Date or by
acceleration or otherwise) which default, solely in the case of an interest payment
or other default under clause (B) above, is not cured, within 3 Trading Days;

ii. the Company or any of its subsidiaries shall fail to observe or perform any
other covenant or agreement contained in this Note which failure is not cured, if
possible to cure, within the earlier to occur of (A) 5 Trading Days after notice of
such default sent by the Holder or by any other Holder and (B)10 Trading Days after
the Company shall become or should have become aware of such failure;

iii. a default or event of default (subject to any grace or cure period
provided for in the applicable agreement, document or instrument) shall occur under
any material agreement, lease, document or instrument to which the Company or any
subsidiary is bound, which default, solely in the case of a default under clause (B)
above, is not cured, within 10 Trading Days;

iv. any representation or warranty made herein, in any written statement
pursuant hereto or thereto, or in any other report, financial statement or
certificate made or delivered to the Holder or any other holder of Notes shall be
untrue or incorrect in any material respect as of the date when made or deemed made;

v. (i) the Company or any of its subsidiaries shall commence, or there shall be
commenced against the Company or any such subsidiary, a case under any applicable
bankruptcy or insolvency laws as now or hereafter in effect or any successor
thereto, or the Company or any subsidiary commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Company or any subsidiary thereof or (ii) there
is commenced against the Company or any subsidiary thereof any such bankruptcy,
insolvency or other proceeding which remains undismissed for a period of 60 days; or
(iii) the Company or any subsidiary thereof is adjudicated by a court of competent
jurisdiction insolvent or bankrupt; or any order of relief or other order approving
any such case or proceeding is entered; or (iv) the Company or any subsidiary
thereof suffers any appointment of any custodian or the like for it or any
substantial part of its property which continues undischarged or unstayed for a
period of 60 days; or (v) the Company or any subsidiary thereof makes a general
assignment for the benefit of creditors; or (vi) the Company shall fail to pay, or
shall state that it is unable to pay, or shall be unable to pay, its debts generally
as they become due; or (vii) the Company or any subsidiary thereof shall call a
meeting of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (viii) the Company or any subsidiary thereof shall by
any act or failure to act expressly indicate its consent to, approval of or
acquiescence in any of the foregoing; or (ix) any corporate or other action is taken
by the Company or any subsidiary thereof for the purpose of effecting any of the
foregoing;

vi. the Company or any subsidiary shall default in any of its obligations under
any mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there may
be secured or evidenced any indebtedness for borrowed money or money due under any
long term leasing or factoring arrangement of the Company in an amount exceeding
$50,000, whether such indebtedness now exists or shall hereafter be created and such
default shall result in such indebtedness becoming or being declared due and payable
prior to the date on which it would otherwise become due and payable;

vii. the Common Stock shall not be eligible for quotation on or quoted for
trading on a Trading Market and shall not again be eligible for and quoted or listed
for trading thereon within five Trading Days;

viii. the Company shall be a party to any Change of Control Transaction or
Fundamental Transaction, shall agree to sell or dispose of all or in excess of 33%
of its assets in one or more transactions (whether or not such sale would constitute
a Change of Control Transaction) or shall redeem or repurchase more than a de
minimis number of its outstanding shares of Common Stock or other equity securities
of the Company (other than redemptions of Conversion Shares and repurchases of
            shares of Common Stock or other equity securities of departing officers and
directors of the Company; provided such repurchases shall not exceed $100,000, in
the aggregate, for all officers and directors during the term of this Note);

ix. (intentionally omitted);

x. (intentionally omitted);

xi. the Company shall fail for any reason to deliver certificates to a Holder
prior to the fifth Trading Day after a Conversion Date pursuant to and in accordance
with Section 4(e) or the Company shall provide notice to the Holder, including by
way of public announcement, at any time, of its intention not to comply with
requests for conversions of any Notes in accordance with the terms hereof; or

xii. the Company shall fail for any reason to pay in full the amount of cash
due pursuant to a Buy-In within 5 Trading Days after notice therefor is delivered
hereunder or shall fail to pay all amounts owed on account of an Event of Default
within five days of the date due.

i.

b) Remedies Upon Event of Default. If any Event of Default occurs, the full
principal amount of this Note, together with interest and other amounts owing in respect
thereof, to the date of acceleration shall become, at the Holder’s election, immediately due
and payable in cash. The aggregate amount payable upon an Event of Default shall be equal
to the Mandatory Prepayment Amount. Commencing 5 days after the occurrence of any Event of
Default that results in the eventual acceleration of this Note, the interest rate on this
Note shall accrue at the rate of 20% per annum, or such lower maximum amount of interest
permitted to be charged under applicable law. All Notes for which the full Mandatory
Prepayment Amount hereunder shall have been paid in accordance herewith shall promptly be
surrendered to or as directed by the Company. The Holder need not provide and the Company
hereby waives any presentment, demand, protest or other notice of any kind, and the Holder
may immediately and without expiration of any grace period enforce any and all of its rights
and remedies hereunder and all other remedies available to it under applicable law. Such
declaration may be rescinded and annulled by Holder at any time prior to payment hereunder
and the Holder shall have all rights as a Note holder until such time, if any, as the full
payment under this Section shall have been received by it. No such rescission or annulment
shall affect any subsequent Event of Default or impair any right consequent thereon.

Section 10. Miscellaneous.

a) Notices. Any and all notices or other communications or deliveries to be
provided by the Holders hereunder, including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile, sent by a nationally recognized
overnight courier service, addressed to the Company, at the address set forth above,
facsimile number, 562-906-8459, Attn: David Duquette, or such other address or facsimile
number as the Company may specify for such purposes by notice to the Holders delivered in
accordance with this Section. Any and all notices or other communications or deliveries to
be provided by the Company hereunder shall be in writing and delivered personally, by
facsimile, sent by a nationally recognized overnight courier service addressed to each
Holder at the facsimile telephone number or address of such Holder appearing on the books of
the Company, or if no such facsimile telephone number or address appears, at the principal
place of business of the Holder. Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone number
specified in this Section prior to 5:30 p.m. (New York City time), (ii) the date after the
date of transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section later than 5:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the
second Business Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given.

b) Absolute Obligation. Except as expressly provided herein, no provision of
this Note shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, interest and liquidated damages (if any) on, this
Note at the time, place, and rate, and in the coin or currency, herein prescribed. This
Note is a direct debt obligation of the Company. This Note ranks pari passu
with all other Notes now or hereafter issued under the terms set forth herein.

c) Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or
destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen
or destroyed but only upon receipt of evidence of such loss, theft or destruction of such
Note, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory
to the Company.

d) Seniority. This Note is senior in right of payment to any and all other
indebtedness of the Company other than indebtedness owing to CAMHZN Master LDC (“CAMHZN”),
with respect to which it is pari passu in right of payment.

e) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Note shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the transactions contemplated by
any of the Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be commenced in
the state or federal courts sitting in the City of New York, Borough of Manhattan (the
“New York Courts”). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, or such New York
Courts are improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address in effect for
notices to it under this Note and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to this Note
or the transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of this Note, then the prevailing party in such action
or proceeding shall be reimbursed by the other party for its attorney’s fees and other costs
and expenses incurred with the investigation, preparation and prosecution of such action or
proceeding.

f) Waiver. Any waiver by the Company or the Holder of a breach of any
provision of this Note shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this Note. The failure
of the Company or the Holder to insist upon strict adherence to any term of this Note on one
or more occasions shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of this Note. Any
waiver must be in writing.

g) Severability. If any provision of this Note is invalid, illegal or
unenforceable, the balance of this Note shall remain in effect, and if any provision is
inapplicable to any person or circumstance, it shall nevertheless remain applicable to all
other persons and circumstances. If it shall be found that any interest or other amount
deemed interest due hereunder violates applicable laws governing usury, the applicable rate
of interest due hereunder shall automatically be lowered to equal the maximum permitted rate
of interest. The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay, extension or usury law or other law which would prohibit or forgive
the Company from paying all or any portion of the principal of or interest on this Note as
contemplated herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this indenture, and the Company (to the extent it
may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impeded the
execution of any power herein granted to the Holder, but will suffer and permit the
execution of every such as though no such law has been enacted.

h) Next Business Day. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the next succeeding
Business Day.

i) Headings. The headings contained herein are for convenience only, do not
constitute a part of this Note and shall not be deemed to limit or affect any of the
provisions hereof.

j) Security Interest. This Note is a direct debt obligation of the
Company and, pursuant to the Security Agreement executed by the Company previously in favor
of Holder, is secured by a first priority perfected security interest in all of the assets
of the Company and its subsidiaries for the benefit of the Holders, pari passu with the
security interest granted by the Company to CAMHZN.

k) Entire Agreement. This Note and the letter agreement of even date
herewith constitute the entire agreement among the parties and supersede all prior
agreements and understandings, both written and oral, with respect to the subject matter
hereof.

*********************IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed by a duly authorized officer as of the date first above indicated.

	 
	U.S. AEROSPACE, INC.

	     

Name:

	Title:

1

ANNEX A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the Senior Secured Convertible Note
of U.S. Aerospace, Inc., a Delaware corporation (the “Company”), due on July 31, 2011, into
shares of common stock, par value $0.10 (the “Common Stock”), of the Company according to
the conditions hereof, as of the date written below. If shares are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably requested by the
Company in accordance therewith. No fee will be charged to the holder for any conversion, except
for such transfer taxes, if any.

By the delivery of this Notice of Conversion the undersigned represents and warrants to the
Company that its ownership of the Common Stock does not exceed the amounts determined in accordance
with Section 13(d) of the Exchange Act, specified under Section 4 of this Note.

The undersigned agrees to comply with the prospectus delivery requirements under the
applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.

Conversion calculations:

Date to Effect Conversion:

Principal Amount of Notes to be Converted:

Payment of Interest in Common Stock        yes        no

If yes, $      of Interest Accrued on Account of
Conversion at Issue.

Number of shares of Common Stock to be issued:

Signature:

Name:

Address:

2

Schedule 1

CONVERSION SCHEDULE

The Senior Secured Convertible Note due on July 31, 2011, in the aggregate principal amount of
$200,000 issued by U.S. Aerospace, Inc., a Delaware corporation. This Conversion Schedule reflects
conversions made under Section 4 of the above referenced Note.

Dated:

	 	 	 	 	 	 	 
	Date of Conversion

(or for first

entry, Original

Issue Date)
	 	Amount of Conversion
	 	Aggregate Principal

Amount Remaining

Subsequent to

Conversion

(or original

Principal Amount)

	 	

Company Attest
	 
	 	 
	 	 

	 	 

3EX-10.3

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE 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 TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS
SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

Original Issue Date: July 27, 2010

Original Conversion Price (subject to adjustment herein): $0.13 $50,000.00

15% SENIOR SECURED

CONVERTIBLE NOTE DUE JULY 31, 2011

THIS NOTE is one of a series of duly authorized and issued Senior Secured Convertible Notes of
U.S. Aerospace, Inc., f/k/a New Century Companies, Inc., a Delaware corporation, having a principal
place of business at 9831 Romandel Avenue, Santa Fe Springs, CA 90670 (the
“Company”), designated as its 15% Senior Secured Convertible Notes, due July 31, 2011 (the
“Note(s)”).

FOR VALUE RECEIVED, the Company promises to pay to CAMHZN Master LDC or its registered assigns
(the “Holder”), the principal sum of $50,000 on July 31, 2011 or such earlier date as the
Notes are required or permitted to be repaid as provided hereunder (the “Maturity Date”),
and to pay interest to the Holder on the aggregate unconverted and then outstanding principal
amount of this Note at the rate of fifteen percent (15%) per annum (the “Interest Rate”) in
accordance with the provisions hereof. This Note is subject to the following additional
provisions:

Section 1. Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Note: (a) capitalized terms not otherwise defined herein have the
meanings given to such terms in the Purchase Agreement, and (b) the following terms shall have the
following meanings:

“Alternate Consideration” shall have the meaning set forth in Section
5(e)(iii).

“Business Day” means any day except Saturday, Sunday and any day which shall be
a federal legal holiday in the United States or a day on which banking institutions in the
State of New York are authorized or required by law or other government action to close.

“Change of Control Transaction” means the occurrence after the date hereof, of
any of (i) an acquisition after the date hereof by an individual or legal entity or “group”
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control
(whether through legal or beneficial ownership of capital stock of the Company, by contract
or otherwise) of in excess of 33% of the voting securities of the Company, (ii) a
replacement at one time or within a three year period of more than one-half of the members
of the Company’s board of directors which is not approved by a majority of those individuals
who are members of the board of directors on the date hereof (or by those individuals who
are serving as members of the board of directors on any date whose nomination to the board
of directors was approved by a majority of the members of the board of directors who are
members on the date hereof), or (iii) the execution by the Company of an agreement
to which the Company is a party or by which it is bound, providing for any of the events set
forth above in (i) or (ii) .

“Common Stock” means the common stock, $0.10 par value, of the Company and
stock of any other class into which such shares may hereafter have been reclassified or
changed.

“Conversion Date” shall have the meaning set forth in Section 4(a) hereof.

“Conversion Price” shall have the meaning set forth in Section 4(b).

“Conversion Shares” means the shares of Common Stock issuable upon conversion
of Notes or as payment of interest in accordance with the terms hereof.

“Event of Default” shall have the meaning set forth in Section 9.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Fundamental Transaction” shall have the meaning set forth in Section 5(e)(iii)
hereof.

“Interest Conversion Rate” means 85% of the volume-weighted average closing
price for the 10 Trading Days immediately prior to the applicable Interest Payment Date.

“Late Fees” shall have the meaning set forth in Section 2(d) of this Note.

“Mandatory Prepayment Amount” for any Notes shall equal the sum of (i) 120% of
the principal amount of Notes to be prepaid, plus all accrued and unpaid interest thereon,
and (ii) all other amounts, costs, expenses and liquidated damages due in respect of such
Notes.

“Original Issue Date” shall mean the date of the first issuance of the Notes
regardless of the number of transfers of any Note and regardless of the number of
instruments which may be issued to evidence such Note.

“Person” means a corporation, an association, a partnership, organization, a
business, an individual, a government or political subdivision thereof or a governmental
agency.

“Securities Act” means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.

“Trading Day” means a day on which the Common Stock is traded on a Trading
Market.

“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the Nasdaq SmallCap Market,
the American Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the
OTC Bulletin Board.

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the primary Trading Market on which the Common Stock is then listed or
quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. EST to
4:02 p.m. Eastern Time) using the VAP function; (b) if the Common Stock is not then listed
or quoted on the Trading Market and if prices for the Common Stock are then reported in the
“Pink Sheets” published by the Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (c) in all other cases, the fair market value of a share of
Common Stock as determined by a nationally recognized-independent appraiser selected in good
faith by Holders holding a majority of the principal amount of Notes then outstanding.

Section 2. Interest.

a) Payment of Interest in Cash. The Company shall pay interest to the Holder on
the aggregate unconverted and then outstanding principal amount of this Note at the Interest
Rate, payable on the Maturity Date (except that, if any such date is not a Business Day,
then such payment shall be due on the next succeeding Business Day) and on each Redemption
Date (as to that principal amount then being redeemed) ( each such date, an “Interest
Payment Date”), in cash.

b) (intentionally omitted)

c) Interest Calculations. Interest shall be calculated on the basis of a
360-day year and shall accrue daily commencing on the Original Issue Date until payment in
full of the principal sum, together with all accrued and unpaid interest and other amounts
which may become due hereunder, has been made. Interest shall be compounded monthly.
Interest hereunder will be paid to the Person in whose name this Note is registered on the
records of the Company regarding registration and transfers of Notes (the “Note
Register”).

d) Late Fee. All overdue accrued and unpaid interest to be paid hereunder
shall entail a late fee at the rate of 20% per annum (or such lower maximum amount of
interest permitted to be charged under applicable law) (“Late Fee”) which will
accrue daily, from the date such interest is due hereunder through and including the date of
payment.

e) Optional Prepayment. The Company will have the right to prepay in cash all
or a portion of the Notes at 120% of the outstanding principal amount thereof plus accrued
interest to the date of repayment. The Holder shall be given 10 days written notice prior to
any such optional prepayment during which period it may convert all or any amount
outstanding under this Note into Common Stock.

f) Mandatory Repayment. In the event that (i) the Company shall sell all or a
portion of its assets, or (ii) the Company shall be subject to a Change of Control
Transaction, then the Company shall be required to offer to repay the Notes at 120% of the
principal amount thereof plus accrued interest to the date of repayment. The Holder shall be
given 10 days written notice prior to any such mandatory prepayment offer during which
period it may convert all or any amount outstanding under this Note into Common Stock.

Section 3. Registration of Transfers and Exchanges.

a) Different Denominations. This Note is exchangeable for an equal aggregate
principal amount of Notes of different authorized denominations, as requested by the Holder
surrendering the same. No service charge will be made for such registration of transfer or
exchange.

b) Reliance on Note Register. Prior to due presentment to the Company for
transfer of this Note, the Company and any agent of the Company may treat the Person in
whose name this Note is duly registered on the Note Register as the owner hereof for the
purpose of receiving payment as herein provided and for all other purposes, whether or not
this Note is overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.

Section 4. Conversion.

a) Voluntary Conversion. At any time after the Original Issue Date until this
Note is no longer outstanding, this Note shall be convertible into shares of Common Stock at
the option of the Holder, in whole or in part at any time and from time to time (subject to
the limitations on conversion set forth in Section 4(d) hereof). The Holder shall effect
conversions by delivering to the Company the form of Notice of Conversion attached hereto as
Annex A (a “Notice of Conversion”), specifying therein the principal amount
of Notes to be converted and the date on which such conversion is to be effected (a
“Conversion Date”). If no Conversion Date is specified in a Notice of Conversion,
the Conversion Date shall be the date that such Notice of Conversion is provided hereunder.
To effect conversions hereunder, the Holder shall not be required to physically surrender
Notes to the Company unless the entire principal amount of this Note plus all accrued and
unpaid interest thereon has been so converted. Conversions hereunder shall have the effect
of lowering the outstanding principal amount of this Note in an amount equal to the
applicable conversion. The Holder and the Company shall maintain records showing the
principal amount converted and the date of such conversions. The Company shall deliver any
objection to any Notice of Conversion within 3 Business Days of receipt of such notice. In
the event of any dispute or discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error. The Holder and any assignee, by acceptance
of this Note, acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Note, the unpaid and unconverted principal amount
of this Note may be less than the amount stated on the face hereof. However, at the
Company’s request, the Holder shall surrender the Note to the Company within five (5)
Trading Days following such request so that a new Note reflecting the correct principal
amount may be issued to Holder.

b) Conversion Price. Subject to the provisions of Section 5(b) hereof, the
initial conversion price in effect on any Conversion Date shall be $0.13.

c) Reserved.

d) Conversion Limitations; Holder’s Restriction on Conversion. The
Company shall not effect any conversion of this Note, and the Holder shall not have the
right to convert any portion of this Note, pursuant to Section 4(a) or otherwise, to the
extent that after giving effect to such conversion, the Holder (together with the Holder’s
affiliates), as set forth on the applicable Notice of Conversion, would beneficially own in
excess of 4.99% of the number of shares of the Common Stock outstanding immediately after
giving effect to such conversion.  For purposes of the foregoing sentence, the number of
            shares of Common Stock beneficially owned by the Holder and its affiliates shall include the
number of shares of Common Stock issuable upon conversion of this Note with respect to which
the determination of such sentence is being made, but shall exclude the number of shares of
Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted
portion of this Note beneficially owned by the Holder or any of its affiliates and (B)
exercise or conversion of the unexercised or nonconverted portion of any other securities of
the Company (including, without limitation, any other Notes or the Warrants) subject to a
limitation on conversion or exercise analogous to the limitation contained herein
beneficially owned by the Holder or any of its affiliates.  Except as set forth in the
preceding sentence, for purposes of this Section 4(d), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act. To the extent that the
limitation contained in this section applies, the determination of whether this Note is
convertible (in relation to other securities owned by the Holder) and of which a portion of
this Note is convertible shall be in the sole discretion of such Holder. To ensure
compliance with this restriction, the Holder will be deemed to represent to the Company each
time it delivers a Notice of Conversion that such Notice of Conversion has not violated the
restrictions set forth in this paragraph and the Company shall have no obligation to verify
or confirm the accuracy of such determination. For purposes of this Section 4(d), in
determining the number of outstanding shares of Common Stock, the Holder may rely on the
number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent
Form 10-QSB or Form 10-KSB (or such related form), as the case may be, (y) a more recent
public announcement by the Company or (z) any other notice by the Company or the Company’s
Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the
written or oral request of the Holder, the Company shall within two Trading Days confirm
orally and in writing to the Holder the number of shares of Common Stock then outstanding. 
In any case, the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company, including this
Note, by the Holder or its affiliates since the date as of which such number of outstanding
            shares of Common Stock was reported. The provisions of this Section 4(d) may be waived by
the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the
Company, and the provisions of this Section 4(d) shall continue to apply until such 61st day
(or such later date, as determined by the Holder, as may be specified in such notice of
waiver).

e) Mechanics of Conversion

 

i. Conversion Shares Issuable Upon Conversion of Principal Amount. The
number of shares of Common Stock issuable upon a conversion hereunder shall be
determined by the quotient obtained by dividing (x) the outstanding principal amount
of this Note to be converted by (y) the Conversion Price.

i.

ii. Delivery of Certificate Upon Conversion. Not later than three
Trading Days after any Conversion Date, the Company will deliver to the Holder (A) a
certificate or certificates representing the Conversion Shares which shall be free
of restrictive legends and trading restrictions (other than those required by the
Purchase Agreement) representing the number of shares of Common Stock being acquired
upon the conversion of Notes (including, if so timely elected by the Company, shares
of Common Stock representing the payment of accrued interest) and (B) a bank check
in the amount of accrued and unpaid interest (if the Company is required to pay
accrued interest in cash). The Company shall, if available and if allowed under
applicable securities laws, use its best efforts to deliver any certificate or
certificates required to be delivered by the Company under this Section
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions.

 

iii. Failure to Deliver Certificates. If in the case of any Notice of
Conversion such certificate or certificates are not delivered to or as directed by
the applicable Holder by the third Trading Day after a Conversion Date, the Holder
shall be entitled by written notice to the Company at any time on or before its
receipt of such certificate or certificates thereafter, to rescind such conversion,
in which event the Company shall immediately return the certificates representing
the principal amount of Notes tendered for conversion.

iv. Obligation Absolute; Partial Liquidated Damages. If the Company
fails for any reason to deliver to the Holder such certificate or certificates
pursuant to Section 4(d)(ii) by the third Trading Day after the Conversion Date, the
Company shall pay to such Holder, in cash, as liquidated damages and not as a
penalty, for each $1000 of principal amount being converted, $10 per Trading Day
(increasing to $20 per Trading Day after 5 Trading Days after such damages begin to
accrue) for each Trading Day after such third Trading Day until such certificates
are delivered. The Company’s obligations to issue and deliver the Conversion Shares
upon conversion of this Note in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by the Holder to enforce the
same, any waiver or consent with respect to any provision hereof, the recovery of
any judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged breach
by the Holder or any other Person of any obligation to the Company or any violation
or alleged violation of law by the Holder or any other person, and irrespective of
any other circumstance which might otherwise limit such obligation of the Company to
the Holder in connection with the issuance of such Conversion Shares;
provided, however, such delivery shall not operate as a waiver by
the Company of any such action the Company may have against the Holder. In the
event a Holder of this Note shall elect to convert any or all of the outstanding
principal amount hereof, the Company may not refuse conversion based on any claim
that the Holder or any one associated or affiliated with the Holder of has been
engaged in any violation of law, agreement or for any other reason, unless, an
injunction from a court, on notice, restraining and or enjoining conversion of all
or part of this Note shall have been sought and obtained and the Company posts a
surety bond for the benefit of the Holder in the amount of 150% of the principal
amount of this Note outstanding, which is subject to the injunction, which bond
shall remain in effect until the completion of arbitration/litigation of the dispute
and the proceeds of which shall be payable to such Holder to the extent it obtains
judgment. In the absence of an injunction precluding the same, the Company shall
issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion.
Nothing herein shall limit a Holder’s right to pursue actual damages or declare an
Event of Default pursuant to Section 9 herein for the Company’s failure to deliver
Conversion Shares within the period specified herein and such Holder shall have the
right to pursue all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief. The exercise
of any such rights shall not prohibit the Holders from seeking to enforce damages
pursuant to any other Section hereof or under applicable law.

v. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the Holder, if the
Company fails for any reason to deliver to the Holder such certificate or
certificates pursuant to Section 4(d)(ii) by the third Trading Day after the
Conversion Date, and if after such third Trading Day the Holder is required by its
brokerage firm to purchase (in an open market transaction or otherwise) Common Stock
to deliver in satisfaction of a sale by such Holder of the Conversion Shares which
the Holder anticipated receiving upon such conversion (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder (in addition to any remedies available
to or elected by the Holder) the amount by which (x) the Holder’s total purchase
price (including brokerage commissions, if any) for the Common Stock so purchased
exceeds (y) the product of (1) the aggregate number of shares of Common Stock that
such Holder anticipated receiving from the conversion at issue multiplied by (2) the
actual sale price of the Common Stock at the time of the sale (including brokerage
commissions, if any) giving rise to such purchase obligation and (B) at the option
of the Holder, either reissue Notes in principal amount equal to the principal
amount of the attempted conversion or deliver to the Holder the number of shares of
Common Stock that would have been issued had the Company timely complied with its
delivery requirements under Section 4(e)(ii). For example, if the Holder purchases
Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect
to an attempted conversion of Notes with respect to which the actual sale price of
the Conversion Shares at the time of the sale (including brokerage commissions, if
any) giving rise to such purchase obligation was a total of $10,000 under clause (A)
of the immediately preceding sentence, the Company shall be required to pay the
Holder $1,000. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In. Notwithstanding anything
contained herein to the contrary, if a Holder requires the Company to make payment
in respect of a Buy-In for the failure to timely deliver certificates hereunder and
the Company timely pays in full such payment, the Company shall not be required to
pay such Holder liquidated damages under Section 4(d)(iv) in respect of the
certificates resulting in such Buy-In.

vi. Reservation of Shares Issuable Upon Conversion. The Company
covenants that it will at all times reserve and keep available out of its authorized
and unissued shares of Common Stock solely for the purpose of issuance upon
conversion of the Notes and payment of interest on the Note, each as herein
provided, free from preemptive rights or any other actual contingent purchase rights
of persons other than the Holders, not less than such number of shares of the Common
Stock as shall (subject to any additional requirements of the Company as to
reservation of such shares set forth in the Purchase Agreement) be issuable (taking
into account the adjustments and restrictions of Section 5) upon the conversion of
the outstanding principal amount of the Notes and payment of interest hereunder.
The Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid and
nonassessable.

vii. Fractional Shares. Upon a conversion hereunder the Company shall
not be required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the VWAP at such time. If the Company elects
not, or is unable, to make such a cash payment, the Holder shall be entitled to
receive, in lieu of the final fraction of a share, one whole share of Common Stock.

viii. Transfer Taxes. The issuance of certificates for shares of the
Common Stock on conversion of the Notes shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in respect of
the issue or delivery of such certificate, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved in
the issuance and delivery of any such certificate upon conversion in a name other
than that of the Holder of such Notes so converted and the Company shall not be
required to issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of such
tax or shall have established to the satisfaction of the Company that such tax has
been paid.

Section 5. Certain Adjustments.

a) Stock Dividends and Stock Splits. If the Company, at any time while the
Notes are outstanding: (A) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or equity equivalent
securities payable in shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company pursuant to this Note, including as
interest thereon), (B) subdivide outstanding shares of Common Stock into a larger number of
            shares, (C) combine (including by way of reverse stock split) outstanding shares of Common
Stock into a smaller number of shares, or (D) issue by reclassification of shares of the
Common Stock any shares of capital stock of the Company, then the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.

b) Subsequent Equity Sales. Notwithstanding the provisions of Section 4(b), if
the Company or any subsidiary thereof, as applicable, at any time while this Note is
outstanding, shall offer, sell, grant any option to purchase or offer, sell or grant any
right to reprice its securities, or otherwise dispose of or issue (or announce any offer,
sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock
Equivalents entitling any Person to acquire shares of Common Stock, at an effective price
per share less than the then Conversion Price (such lower price, the “Base Share Price” and
such issuances collectively, a “Dilutive Issuance”), as adjusted hereunder (if the holder of
the Common Stock or Common Stock Equivalents so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options or rights per share which is
issued in connection with such issuance, be entitled to receive shares of Common Stock at an
effective price per share which is less than the Conversion Price, such issuance shall be
deemed to have occurred for less than the Conversion Price), then, the Conversion Price
shall be reduced to equal the Base Share Price and the number of Conversion Shares issuable
hereunder shall be increased. Such adjustment shall be made whenever such Common Stock or
Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no
later than the Trading Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this section, indicating therein the applicable issuance price, or of
applicable reset price, exchange price, conversion price and other pricing terms (such
notice the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the
occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
entitled to receive a number of Conversion Shares based upon the Base Share Price regardless
of whether the Holder accurately refers to the Base Share Price in the Notice of Conversion.

c) Pro Rata Distributions. If the Company, at any time while Notes are
outstanding, shall distribute to all holders of Common Stock (and not to Holders) evidences
of its indebtedness or assets or rights or warrants to subscribe for or purchase any
security, then in each such case the Conversion Price shall be determined by multiplying
such Conversion Price in effect immediately prior to the record date fixed for determination
of stockholders entitled to receive such distribution by a fraction of which the denominator
shall be the VWAP determined as of the record date mentioned above, and of which the
numerator shall be such VWAP on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so distributed
applicable to one outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall be described in a statement
provided to the Holders of the portion of assets or evidences of indebtedness so distributed
or such subscription rights applicable to one share of Common Stock. Such adjustment shall
be made whenever any such distribution is made and shall become effective immediately after
the record date mentioned above.

d) Calculations. All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. The number of shares of
Common Stock outstanding at any given time shall not includes shares of Common Stock owned
or held by or for the account of the Company, and the description of any such shares of
Common Stock shall be considered on issue or sale of Common Stock. For purposes of this
Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding treasury
            shares, if any) issued and outstanding.

e) Notice to Holders.

i. Adjustment to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any of this Section 5, the Company shall promptly mail to each
Holder a notice setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment. If the Company
issues a variable rate security, the Company shall be deemed to have issued Common
Stock or Common Stock Equivalents at the lowest possible conversion or exercise
price at which such securities may be converted or exercised in the case of a
variable rate transaction, or the lowest possible adjustment price in the case of a
transaction which permits an investor the right to receive additional shares of
Common Stock based upon future transactions of the Company on terms more favorable
than those granted to such investor in such transaction.

ii. Notice to Allow Conversion by Holder. If (A) the Company shall
declare a dividend (or any other distribution) on the Common Stock; (B) the Company
shall declare a special nonrecurring cash dividend on or a redemption of the Common
Stock; (C) the Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of capital stock of
any class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or transfer of all
or substantially all of the assets of the Company, of any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property; (E)
the Company shall authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company; then, in each case, the Company shall
cause to be filed at each office or agency maintained for the purpose of conversion
of the Notes, and shall cause to be mailed to the Holders at their last addresses as
they shall appear upon the stock books of the Company, at least 20 calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of the Common Stock of record to be entitled
to such dividend, distributions, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the date as
of which it is expected that holders of the Common Stock of record shall be entitled
to exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided, that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. Holders are entitled to convert
Notes during the 20-day period commencing the date of such notice to the effective
date of the event triggering such notice.

iii. Fundamental Transaction. If, at any time while this Note is
outstanding, (A) the Company effects any merger or consolidation of the Company with
or into another Person, (B) the Company effects any sale of all or substantially all
of its assets in one or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant to
which holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (D) the Company effects any reclassification
of the Common Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other securities, cash or
property (in any such case, a “Fundamental Transaction”), then upon any
subsequent conversion of this Note, the Holder shall have the right to receive, for
each Conversion Share that would have been issuable upon such conversion absent such
Fundamental Transaction, the same kind and amount of securities, cash or property as
it would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction, the
holder of one share of Common Stock (the “Alternate Consideration”). For
purposes of any such conversion, the determination of the Conversion Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the amount
of Alternate Consideration issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the Conversion Price among
the Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration. If holders of Common Stock
are given any choice as to the securities, cash or property to be received in a
Fundamental Transaction, then the Holder shall be given the same choice as to the
Alternate Consideration it receives upon any conversion of this Note following such
Fundamental Transaction. To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new note consistent with the foregoing
provisions and evidencing the Holder’s right to convert such note into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this paragraph (c) and insuring
that this Note (or any such replacement security) will be similarly adjusted upon
any subsequent transaction analogous to a Fundamental Transaction.

Section 6. (intentionally omitted)

Section 7. Negative Covenants. So long as any portion of this Note is
outstanding, the Company will not and will not permit any of its subsidiaries to directly or
indirectly:

a) enter into, create, incur, assume or suffer to exist any indebtedness or liens of
any kind, on or with respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits therefrom that is senior to or
pari passu with, in any respect or subordinated to (unless on terms
satisfactory in all respects to the Holders), the Company’s obligations under the Notes;

b) amend its certificate of incorporation, bylaws or its charter documents so as to
adversely affect any rights of the Holder;

c) repay, repurchase or offer to repay, repurchase or otherwise acquire or make any
dividend or distribution in respect of any of its Common Stock, preferred stock, or other
equity securities;

d) engage in any transactions with any officer, director, employee or any affiliate of
the Company, 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, in each
case in excess of $10,000 other than (i) for payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) for other employee benefits, including stock option agreements under any stock option
plan of the Company;

e) create or acquire any subsidiary after the date hereof;

f) sell, transfer or otherwise dispose of any of its assets on terms where it is or may
be leased to or re-acquired or acquired by the Company or any of its subsidiaries;

g) dispose, in a single transaction, or in a series of transactions all or any part of
its assets unless such disposal is (i) in the ordinary course of business, (ii) for fair
market value, (iii) for cash and (iv) approved by the board of directors of the Company;

h) authorize or approve any reverse or forward stock split of the Common Stock;

i) enter into any agreement with respect to any of the foregoing; or

j) use the proceeds of the loan represented by this Note for any purpose other than
working capital.

Section 8. Affirmative Covenants. So long as any portion of this Note
is outstanding, the Company will deliver to the Holder the following:

a) as soon as practicable, but in any event within 90 days after the end of each
fiscal year of the, an income statement for such fiscal year, a balance sheet of the Company
and statement of stockholder’s equity as of the end of such year, and a statement of cash
flows for such year, such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles (“GAAP”), and audited and
certified by independent public accountants and an unqualified (except for contingent
liabilities) certified audit report from the Company’s auditors;

b) as soon as practicable, but in any event within 45 days after the end of each of the
first three quarters of each fiscal year of the Company, an unaudited income statement,
statement of cash flows for such fiscal quarter and an unaudited balance sheet as of the end
of such fiscal quarter;

c) Company shall continue the engagement of its current restructuring advisor until any
and all amounts due and owing by the Company to the Holder have been repaid in full. Such
advisor will receive all daily check runs and its approval will be required on all Company
disbursements over $5,000. The restructuring advisor will manage the Company from a
financial perspective, including, without limitation, having authority to deal with critical
vendors (including General Electric), approving financings, and sales of assets.
Failure to grant such advisor full authority in such matters shall result in all amounts
owing to the Holder being immediately due and payable at the Mandatory Prepayment Amount.

Section 9. Events of Default.

a) “Event of Default”, wherever used herein, means any one of the following
events (whatever the reason and whether it shall be voluntary or involuntary or effected by
operation of law or pursuant to any judgment, decree or order of any court, or any order,
rule or regulation of any administrative or governmental body):

i. any default in the payment of (A) the principal of amount of any Note, or
(B) interest (including Late Fees) on, or liquidated damages in respect of, any
Note, in each case free of any claim of subordination, as and when the same shall
become due and payable (whether on a Conversion Date or the Maturity Date or by
acceleration or otherwise) which default, solely in the case of an interest payment
or other default under clause (B) above, is not cured, within 3 Trading Days;

ii. the Company or any of its subsidiaries shall fail to observe or perform any
other covenant or agreement contained in this Note which failure is not cured, if
possible to cure, within the earlier to occur of (A) 5 Trading Days after notice of
such default sent by the Holder or by any other Holder and (B)10 Trading Days after
the Company shall become or should have become aware of such failure;

iii. a default or event of default (subject to any grace or cure period
provided for in the applicable agreement, document or instrument) shall occur under
any material agreement, lease, document or instrument to which the Company or any
subsidiary is bound, which default, solely in the case of a default under clause (B)
above, is not cured, within 10 Trading Days;

iv. any representation or warranty made herein, in any written statement
pursuant hereto or thereto, or in any other report, financial statement or
certificate made or delivered to the Holder or any other holder of Notes shall be
untrue or incorrect in any material respect as of the date when made or deemed made;

v. (i) the Company or any of its subsidiaries shall commence, or there shall be
commenced against the Company or any such subsidiary, a case under any applicable
bankruptcy or insolvency laws as now or hereafter in effect or any successor
thereto, or the Company or any subsidiary commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Company or any subsidiary thereof or (ii) there
is commenced against the Company or any subsidiary thereof any such bankruptcy,
insolvency or other proceeding which remains undismissed for a period of 60 days; or
(iii) the Company or any subsidiary thereof is adjudicated by a court of competent
jurisdiction insolvent or bankrupt; or any order of relief or other order approving
any such case or proceeding is entered; or (iv) the Company or any subsidiary
thereof suffers any appointment of any custodian or the like for it or any
substantial part of its property which continues undischarged or unstayed for a
period of 60 days; or (v) the Company or any subsidiary thereof makes a general
assignment for the benefit of creditors; or (vi) the Company shall fail to pay, or
shall state that it is unable to pay, or shall be unable to pay, its debts generally
as they become due; or (vii) the Company or any subsidiary thereof shall call a
meeting of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (viii) the Company or any subsidiary thereof shall by
any act or failure to act expressly indicate its consent to, approval of or
acquiescence in any of the foregoing; or (ix) any corporate or other action is taken
by the Company or any subsidiary thereof for the purpose of effecting any of the
foregoing;

vi. the Company or any subsidiary shall default in any of its obligations under
any mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there may
be secured or evidenced any indebtedness for borrowed money or money due under any
long term leasing or factoring arrangement of the Company in an amount exceeding
$50,000, whether such indebtedness now exists or shall hereafter be created and such
default shall result in such indebtedness becoming or being declared due and payable
prior to the date on which it would otherwise become due and payable;

vii. the Common Stock shall not be eligible for quotation on or quoted for
trading on a Trading Market and shall not again be eligible for and quoted or listed
for trading thereon within five Trading Days;

viii. the Company shall be a party to any Change of Control Transaction or
Fundamental Transaction, shall agree to sell or dispose of all or in excess of 33%
of its assets in one or more transactions (whether or not such sale would constitute
a Change of Control Transaction) or shall redeem or repurchase more than a de
minimis number of its outstanding shares of Common Stock or other equity securities
of the Company (other than redemptions of Conversion Shares and repurchases of
            shares of Common Stock or other equity securities of departing officers and
directors of the Company; provided such repurchases shall not exceed $100,000, in
the aggregate, for all officers and directors during the term of this Note);

ix. (intentionally omitted);

x. (intentionally omitted);

xi. the Company shall fail for any reason to deliver certificates to a Holder
prior to the fifth Trading Day after a Conversion Date pursuant to and in accordance
with Section 4(e) or the Company shall provide notice to the Holder, including by
way of public announcement, at any time, of its intention not to comply with
requests for conversions of any Notes in accordance with the terms hereof; or

xii. the Company shall fail for any reason to pay in full the amount of cash
due pursuant to a Buy-In within 5 Trading Days after notice therefor is delivered
hereunder or shall fail to pay all amounts owed on account of an Event of Default
within five days of the date due.

i.

b) Remedies Upon Event of Default. If any Event of Default occurs, the full
principal amount of this Note, together with interest and other amounts owing in respect
thereof, to the date of acceleration shall become, at the Holder’s election, immediately due
and payable in cash. The aggregate amount payable upon an Event of Default shall be equal
to the Mandatory Prepayment Amount. Commencing 5 days after the occurrence of any Event of
Default that results in the eventual acceleration of this Note, the interest rate on this
Note shall accrue at the rate of 20% per annum, or such lower maximum amount of interest
permitted to be charged under applicable law. All Notes for which the full Mandatory
Prepayment Amount hereunder shall have been paid in accordance herewith shall promptly be
surrendered to or as directed by the Company. The Holder need not provide and the Company
hereby waives any presentment, demand, protest or other notice of any kind, and the Holder
may immediately and without expiration of any grace period enforce any and all of its rights
and remedies hereunder and all other remedies available to it under applicable law. Such
declaration may be rescinded and annulled by Holder at any time prior to payment hereunder
and the Holder shall have all rights as a Note holder until such time, if any, as the full
payment under this Section shall have been received by it. No such rescission or annulment
shall affect any subsequent Event of Default or impair any right consequent thereon.

Section 10. Miscellaneous.

a) Notices. Any and all notices or other communications or deliveries to be
provided by the Holders hereunder, including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile, sent by a nationally recognized
overnight courier service, addressed to the Company, at the address set forth above,
facsimile number, 562-906-8459, Attn: David Duquette, or such other address or facsimile
number as the Company may specify for such purposes by notice to the Holders delivered in
accordance with this Section. Any and all notices or other communications or deliveries to
be provided by the Company hereunder shall be in writing and delivered personally, by
facsimile, sent by a nationally recognized overnight courier service addressed to each
Holder at the facsimile telephone number or address of such Holder appearing on the books of
the Company, or if no such facsimile telephone number or address appears, at the principal
place of business of the Holder. Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone number
specified in this Section prior to 5:30 p.m. (New York City time), (ii) the date after the
date of transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section later than 5:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the
second Business Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given.

b) Absolute Obligation. Except as expressly provided herein, no provision of
this Note shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, interest and liquidated damages (if any) on, this
Note at the time, place, and rate, and in the coin or currency, herein prescribed. This
Note is a direct debt obligation of the Company. This Note ranks pari passu
with all other Notes now or hereafter issued under the terms set forth herein.

c) Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or
destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen
or destroyed but only upon receipt of evidence of such loss, theft or destruction of such
Note, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory
to the Company.

d) Seniority. This Note is senior in right of payment to any and all other
indebtedness of the Company other than indebtedness owing to CAMOFI Master LDC (“CAMOFI”),
with respect to which it is pari passu in right of payment.

e) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Note shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the transactions contemplated by
any of the Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be commenced in
the state or federal courts sitting in the City of New York, Borough of Manhattan (the
“New York Courts”). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, or such New York
Courts are improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address in effect for
notices to it under this Note and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to this Note
or the transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of this Note, then the prevailing party in such action
or proceeding shall be reimbursed by the other party for its attorney’s fees and other costs
and expenses incurred with the investigation, preparation and prosecution of such action or
proceeding.

f) Waiver. Any waiver by the Company or the Holder of a breach of any
provision of this Note shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this Note. The failure
of the Company or the Holder to insist upon strict adherence to any term of this Note on one
or more occasions shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of this Note. Any
waiver must be in writing.

g) Severability. If any provision of this Note is invalid, illegal or
unenforceable, the balance of this Note shall remain in effect, and if any provision is
inapplicable to any person or circumstance, it shall nevertheless remain applicable to all
other persons and circumstances. If it shall be found that any interest or other amount
deemed interest due hereunder violates applicable laws governing usury, the applicable rate
of interest due hereunder shall automatically be lowered to equal the maximum permitted rate
of interest. The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay, extension or usury law or other law which would prohibit or forgive
the Company from paying all or any portion of the principal of or interest on this Note as
contemplated herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this indenture, and the Company (to the extent it
may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impeded the
execution of any power herein granted to the Holder, but will suffer and permit the
execution of every such as though no such law has been enacted.

h) Next Business Day. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the next succeeding
Business Day.

i) Headings. The headings contained herein are for convenience only, do not
constitute a part of this Note and shall not be deemed to limit or affect any of the
provisions hereof.

j) Security Interest. This Note is a direct debt obligation of the
Company and, pursuant to the Security Agreement executed by the Company previously in favor
of Holder, is secured by a first priority perfected security interest in all of the assets
of the Company and its subsidiaries for the benefit of the Holders, pari passu with the
security interest granted by the Company to CAMOFI.

k) Entire Agreement. This Note and the letter agreement of even date
herewith constitute the entire agreement among the parties and supersede all prior
agreements and understandings, both written and oral, with respect to the subject matter
hereof.

*********************IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed by a duly authorized officer as of the date first above indicated.

	 
	U.S. AEROSPACE, INC.

	     

Name:

	Title:

1

ANNEX A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the Senior Secured Convertible Note
of U.S. Aerospace, Inc., a Delaware corporation (the “Company”), due on July 31, 2011, into
shares of common stock, par value $0.10 (the “Common Stock”), of the Company according to
the conditions hereof, as of the date written below. If shares are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably requested by the
Company in accordance therewith. No fee will be charged to the holder for any conversion, except
for such transfer taxes, if any.

By the delivery of this Notice of Conversion the undersigned represents and warrants to the
Company that its ownership of the Common Stock does not exceed the amounts determined in accordance
with Section 13(d) of the Exchange Act, specified under Section 4 of this Note.

The undersigned agrees to comply with the prospectus delivery requirements under the
applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.

Conversion calculations:

Date to Effect Conversion:

Principal Amount of Notes to be Converted:

Payment of Interest in Common Stock        yes        no

If yes, $      of Interest Accrued on Account of
Conversion at Issue.

Number of shares of Common Stock to be issued:

Signature:

Name:

Address:

2

Schedule 1

CONVERSION SCHEDULE

The Senior Secured Convertible Note due on July 31, 2011, in the aggregate principal amount of
$50,000 issued by U.S. Aerospace, Inc., a Delaware corporation. This Conversion Schedule reflects
conversions made under Section 4 of the above referenced Note.

Dated:

	 	 	 	 	 	 	 
	Date of Conversion

(or for first

entry, Original

Issue Date)
	 	Amount of Conversion
	 	Aggregate Principal

Amount Remaining

Subsequent to

Conversion

(or original

Principal Amount)

	 	

Company Attest
	 
	 	 
	 	 

	 	 

3

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