Document:

Exhibit
4.5

 

American
Utilicraft Corporation

 

Private
Placement Loan December 2004

 

Memorandum
of Understanding

 

THIS MEMORANDUM OF UNDERSTANDING (“MOU”) IS
ENTERED INTO ON THIS DATE DECEMBER 14, 2004, FOR THE PURPOSE OF DEFINING
AND FORMALIZING THE BUSINESS RELATIONSHIP OF AMERICAN UTILICRAFT CORPORATION (“AUC”)
AND NATHAN L. GROVES (“THE INVESTOR”) WITH RESPECT TO THE DEVELOPMENT BY
AUC OF A FREIGHT FEEDER AIRCRAFT DESIGNATED THE FF-1080.

 

THIS TRANSACTION IS SUBJECT TO
UNITED STATES SECURITIES LAWS GOVERNING THE SALE OF UNREGISTERED SECURITIES.

 

SUMMARY
OF TERMS

 

Issuer:                                                                                                                                                         American
Utilicraft Corporation (the “Company” or “AUC”).

 

Securities Offered:                                                                                      Common Stock at
$0.25 per share. The investor (a current shareholder) will receive 1 (one)
share for each $0.25 Loaned.

 

Warrants:                                                                                                                                      N/A

 

Registration Rights:                                                                               The Company
agrees to use its best efforts to register the Common Stock purchased under
this investment within 6 months. This offering will also have piggy-back
registration rights.

 

Loan Repayment:                                                                                                  Loan repayment
is scheduled for the week of December 27, 2004.

 

                1.             The Investor (a current
shareholder) will loan $25,000 in
AUC upon signing of this MOU. Wiring instructions are attached as “Attachment I”
to this MOU.

 

                2.             AUC will issue to the Investor 100,000 shares of common stock in
AUC, as per the terms of the Private Placement described above.

 

                3.             The Investor understands that the investment
contemplated by this MOU may not be transferred, assigned, or sold to a third
party without the written approval of the AUC board of directors.

 

1

 

                4.             (a) At the request of the Investor,
AUC will include the Investor’s shares of common stock in any future
registration of AUC stock intended for public offering.

 

                                (b)
AUC is anticipating a spin-off with Utilicraft Aerospace Industries, Inc. (“Utilicraft”)
within the next 180 days. As a condition of this MOU, and in addition to the
AUC shares issued to the investor as called out in this MOU, the Investor will
also receive Utilicraft shares on a 1-to-1 basis by February 17, 2005
regardless of AUC having effected its anticipated Utilicraft spin-off by that
time. Upon AUC successfully effecting the Utilicraft spin-off, all such issued
Utilicraft shares will stand to represent that the shareholder has already
received any entitled distribution.

 

                5.             The Investor represents that he/she
is acquiring the shares of common stock acquired under this MOU for
himself/herself and agrees that the shares of common stock issued to him/her under
the terms of this MOU are not transferable except under the following
conditions:

a)             The
Investor must offer a 30 day first right of refusal to the other existing
shareholders for an amount equivalent to the transfer offer.

b)            After
such a first right of refusal is offered to and/or exercised by the other
existing shareholders, the remaining portion of the stock may be transferred to
a third party, which transaction is subject to approval by the AUC board of
directors.

c)             The
shares of common stock acquired hereunder cannot be resold without registration
under the Securities and Exchange Act (a United States law) or an exemption
there from.

d)            A
legend will be placed on the stock certificate stating that the shares of
common stock have not been registered under the Securities and Exchange Act and
setting forth the restrictions on transferability and sale of the shares of
common stock set forth in this paragraph.

 

                6.             The loan to AUC contemplated by
this MOU will be used by AUC, at its discretion, for daily operations, for its
benefit and profit.

 

                7.             The Investor represents that he/she
is a sophisticated investor and that he/she fully understands the risk involved
in this transaction and that his/her equity, as well as the other current
shareholders’ equity, may effectively dilute as much as 50% or more, or
depending upon the financing requirements for the $75 million Phase I and Phase
II development loans required by AUC to develop and FAA certify the FF-1080
aircraft. Such substantial dilution may occur as the result of the sale of a
major portion of AUC, merger, acquisition, international joint-venture, or a
combination thereof, which may also possibly cause the division of a
substantially increased profit amount between AUC and a joint venture partner/merger
partner.

 

                8.             Any return on investment of AUC
stock is dependent upon the ability of AUC to secure the above mentioned major
financing loans (Phase I $30 million and Phase II $45 million) needed to
complete the design, to build the prototype and conformity aircraft, to
complete the development of the FF-1080 aircraft and obtain an FAA aircraft
type certificate on it, to successfully produce the aircraft or to have the
aircraft produced under subcontract, and to sell the aircraft in the commercial
marketplace, which all of the above may or may not occur.

 

                9.             As part of its full disclosure
effort, AUC has provided a full disclosure briefing to the Investor on AUC. The
Investor has also been provided a Business Plan, and a disclosure of AUC’s
management in previous aircraft development programs. The Investor acknowledges
that he/she has reviewed the contents of the above documents and acknowledges
that he/she has had the opportunity to obtain any additional information which
AUC possesses or can acquire 

 

 

2

 

without unreasonable effort or expense that
is necessary to verify the accuracy of information furnished by AUC.

 

                10.           The Investor fully understands the
risk involved in this investment and also understands that the figures and
estimates in the business plan provided by AUC, are only AUC’s best current
projections and that there are no orders for aircraft to date and that there
are no pending or imminent orders for aircraft at this time and that there are
no assurances by AUC that such sales of aircraft, if any, will be obtained by
AUC at any time in the future.

 

                11.           Employment agreements with present
management, and two multiple year facility leases, are in force with AUC and
are the only significant contracts outstanding.

 

 

IN WITNESS WHEREOF the parties to this MOU
have affixed their signatures hereto on the dates indicated.

 

	
  THE INVESTOR

  	
   

  
	
   

  	
   

  
	
  12-14-04

  	
   

  	
  /s/ Nathan L. Groves

  
	
  Date

  	
   

  
	
   

  	
   

  
	
  For AMERICAN UTILICRAFT
  CORPORATION

  
	
   

  	
   

  
	
  12-14-04

  	
   

  	
  /s/ Thomas A. Dapogny

  
	
  Date

  	
  Thomas A. Dapogny, VP -
  Operations AUC Corp Sec.

  
	
   

  	
   

  

 

 

 

3Exhibit 10.18

 

ORIGINAL

 

AMENDED MASTER FINANCING AGREEMENT

 

BETWEEN

 

PACIFICORP FUNDING PARTNERS TRUST

 

AND

 

UTILICRAFT AEROSPACE INDUSTRIES, INC.

 

This Amended Master Financing Agreement (“Agreement”) is made effective
as of this 12th of September 2005, by and between PacifiCorp
Funding Partners Trust (“Trust”), a trust formed under the laws of the Republic
of Mauritius, and Utilicraft Aerospace Industries, Inc. (“Company), a
Nevada corporation. Further consideration for this Agreement has been provided
by John J. Dupont and R. Darby Boland, as set out below. Collectively, Trust,
Company Dupont and Boland are, where appropriate, referred to as “Parties.”
This Agreement supplements and amends that previous agreement dated effective
as of May 6, 2005.

 

BACKGROUND

 

WHEREAS, Trust has contacts and relationships with brokers, investment
bankers and qualified investors throughout Europe, Asia and Africa who desire
to fund start-up U.S. business enterprises through the sale and purchase of
securities issued by such entities, and has agreed to employ these contacts and
relationships to fund the initiatives set out in this Agreement pursuant to the
terms hereof.

 

WHEREAS, Company, Dupont and Boland are willing and have agreed to
contribute a total of 80 million shares of Company common stock, newly issued
by the Company and transferred from Dupont and Boland, to forward the
initiatives set out in this Agreement pursuant to the terms hereof.

 

WHEREAS, Company is willing and has agreed to issue to Trust Warrants,
in the form provided herewith, for the purchase of 60 million shares of Company
stock in accordance with the schedule and at prices set out in this
Agreement for the purpose of providing capital to Company pursuant to the terms
hereof.

 

AGREEMENT

 

NOW THEREFORE, in consideration of the mutual covenants and
undertakings and the terms and conditions contained herein, the parties hereto
agree as follows:

 

1.                                       General Definitions and Terms; Rules of
Construction.

 

(a) General
Definitions. Capitalized terms used in this Agreement shall have the meanings
commonly used for such terms in the English language.

 

(b) Accounting
Terms. Any accounting terms used in this Agreement that are not specifically
defined shall have the meanings customarily given them in accordance with GAAP
and all financial computations shall be computed, unless specifically provided
herein, in accordance with GAAP consistently applied.

 

(c) Other
Terms. All other terms used in this Agreement and defined in the UCC or the
United States Federal Securities Laws, shall have the meaning given therein
unless otherwise defined herein.

 

 

(d) Rules of
Construction. All Schedules, Addenda, Annexes and Exhibits hereto or expressly
identified to this Agreement are incorporated herein by reference and taken
together with this Agreement constitute but a single agreement. The words “herein”,
“hereof” and “hereunder” or other words of similar import refer to this
Agreement as a whole, including the Exhibits, Addenda, Annexes and Schedules
thereto, as the same may be from time to time amended, modified, restated or
supplemented, and not to any particular section, subsection or clause
contained in this Agreement. Wherever from the context it appears appropriate,
each term stated in either the singular or plural shall include the singular
and the plural, and pronouns stated in the masculine, feminine or neuter gender
shall include the masculine, the feminine and the neuter. The term “or” is not
exclusive. The term “including” (or any form thereof) shall not be limiting or
exclusive. All references to statutes and related regulations shall include any
amendments of same and any successor statutes and regulations. All references
in this Agreement or in any Schedules, Addenda, Annexes and Exhibits to this
Agreement to sections, schedules, disclosure schedules, exhibits, and
attachments shall refer to the corresponding sections, schedules, disclosure
schedules, exhibits, and attachments of or to this Agreement. All references to
any instruments or agreements, including references to any of this Agreement or
the Ancillary Agreements shall include any and all modifications or amendments
thereto and any and all extensions or renewals thereof. There are no Ancillary
Agreements at this time; any such Ancillary Agreements may, with the parties’
consent, be made part of this Agreement and be subject to the terms and
conditions hereof. All references to monetary amounts in this Agreement shall
refer to U.S. Dollars.

 

2.                                       Funding Facility.

 

(a)                                  Delivery of Shares; Terms of Issuance.

 

Subject to the terms and conditions set forth herein and in any
Ancillary Agreements, Company, Dupont and Boland shall deliver to Trust a total
of 80 million common shares of Company’s stock. As to these shares, 60,584,260
have been newly issued by the Company, 11,660,000 have been transferred from
Dupont, and 7,755,740 have been transferred by Boland (the “Shares”).  The Shares issued or transferred are not and
have not been subject of a registration statement deemed effective by the
Securities and Exchange Commission and are issued and transferred in accordance
with one or more exemptions provided under the Securities Act of 1933. The
Shares will be issued or transferred to Trust, and registered on the Company’s
share ledger with restrictions on resale as set out in this Agreement. The
Shares will have full voting rights to be exercised by the Trustee, as well as
rights to any lawfully declared dividends, provided that in the event of Trust’s
failure to meet its funding obligations and the subsequent return of any
portion of the Shares that Trust will have an obligation to repay any dividends
on returned Shares to Company, Dupont and Boland, pro rota. The Shares will not have any pre-emptive rights
and will be subject to dilution upon the issuance of any additional shares by
the Company. Company specifically disclaims any obligation to register the
Shares in any registration statement filed with the Securities and Exchange
Commission, but the parties reserve the right, but not the obligation, to
negotiate such registration rights for some or all of the Shares pursuant to an
Ancillary Agreement.

 

(b)                                 Delivery of Warrants; Terms of Issuance and
Exercise.

 

Subject to the terms and conditions set forth herein and in any
Ancillary Agreements, Company shall deliver to Trust Warrants for the purchase
of 60 million common shares of Company’s stock. Such Warrants shall be in the
form attached hereto and shall be exercisable pursuant to the provisions of
this Agreement. The shares issued upon exercise of the Warrants shall have full
voting rights, as well as rights to any lawfully declared dividend, and shall
have no pre-emptive rights. Shares issued upon exercise of the Warrants shall
be subject to dilution upon the issuance of any additional shares by the
Company. Shares to be issued upon the exercise of the Warrants are not subject
of a registration statement deemed effective by the Securities and Exchange
Commission and will be issued in accordance with one or more exemptions
provided under the Securities Act of 1933. The shares to be issued upon
exercise of the Warrants will be registered on the Company’s share ledger with
restrictions on resale as set out in this Agreement. Company specifically
disclaims any obligation to register shares issued upon exercise of the Warrants
in any registration statement filed with the Securities and Exchange
Commission, but the parties reserve the right, but not the obligation, to
negotiate such registration rights for some or all of such shares pursuant to
an Ancillary Agreement.

 

2

 

Notwithstanding
the limitations set forth herein, Trust and Company may agree to the issuance
and sale of additional shares, warrants or other rights pursuant to any
Ancillary Agreements.

 

(c)                                  Terms of the Warrants.

 

Subject to the terms and conditions set forth herein and in any
Ancillary Agreement the Warrants shall be exercised in accordance with the
following provisions:

 

(i)                                     Warrants for the purchase of 20 million
shares shall be exercisable at $.50 per share; these Warrants shall be
exercisable for a period of 360 days after execution of this Agreement.

 

(ii)                                  Warrants for the purchase of 30 million
shares shall be exercisable at $ 1.50 per share; these Warrants shall be
exercisable for a period of 540 days after execution of this Agreement.

 

(iii)                               Warrants for the purchase of 10 million
shares shall be exercisable at $2.50 per share; these Warrants shall be
exercisable for a period of 720 days after execution of this Agreement.

 

The
Warrants are not assignable, nor can they be resold, absent the parties’
execution of an Ancillary Agreement permitting such assignment or sale.

 

Pursuant
to this Agreement, Trust is to provide a minimum of $40,000,000 and a maximum
of $80,000,000 in funding to the Company by exercise of the Warrants. Further
pursuant to this Agreement or any Ancillary Agreement, in the event that Trust
fails to exercise Warrants sufficient to generate the minimum funding provided
herein within 540 days following execution of this Agreement, Trust shall, upon
demand, return all shares held by it to Company, Dupont and Boland,pro
rota, and return all unexercised Warrants to the Company for
cancellation or resale. In furtherance of this provision, the parties agree
that any transfer of the Shares during the period this Agreement is in effect
shall require a counter-party signature from an Officer of the Company. Company
specifically disclaims any manner of security interest in the Shares or
Warrants, reserving the right only to return of the Shares in the event of a
funding obligation failure. The parties expressly reserve the right, without
obligation, to renegotiate the terms of exercise of the Warrants, whether as to
exercise price or period, in the event of the establishment and based on the
condition (price and volume) of a public market for Company’s common stock.

 

3.                                       Resale of Shares by Trust.

 

The parties understand and agree that the Trust may, in its discretion
offer and sell some or all of the Shares in private transactions or in lawful
public transactions, so long as none of these transactions are effected with
U.S. Persons, as that term is defined in Securities and Exchange Commission
Regulation S, do not involve U.S.-directed selling efforts, and are effected in
accordance with the applicable laws of the jurisdiction in or from any such
offer or sale is effected.

 

(a)                                  Regulation S Reselling.

 

Trust may, from time-to-time, resell some or all of the Shares in
qualifying transactions effected pursuant to Securities and Exchange Commission
Regulation S. In such event, Trust shall have the sole responsibility to
ensure, among other things, that any sales made by it directly or by brokers
employed by it will be effected to non-U.S. Persons, that any brokers employed
by it are qualified to effect such resales by the applicable laws of the
jurisdiction in which the broker operates and the purchasers reside, and that
it will provide instructions to the Company’s transfer agent that the Shares
shall contain an appropriate legend restricting further resale. Trust
furthermore agrees that any disclosure statement used by it in connection with
any such offer or sale shall be limited solely to documents either prepared by
the Company (although the Company specifically disclaims any obligation to
prepare such document), or filed by the Company with the Securities and
Exchange Commission. Provided that resale is conducted in accordance with the
restrictions provided for herein, Company agrees to register any Shares sold by
Trust in its share ledger in the name of the purchaser. Trust understands and
agrees that the sale of any Shares under these provisions

 

3

 

will
not establish any rights in favor of the purchaser beyond those rights granted
to Trust, and further agrees to inform any broker or purchaser with respect to
the rights, obligations and limitations applicable to it as set out in this
Agreement.

 

(b)                                 Private Reselling.

 

Trust may, from time-to-time, resell, grant rights to, barter, swap or
otherwise exchange the Shares with qualified purchasers, partners or
counter-parties on such terms as Trust and such parties may agree. Trust agrees
that it will not enter into any such transaction with a U.S. Person or engage
in U.S.-directed selling efforts in connection with any such transaction, and
that it will provide instructions to the Company’s transfer agent that the
Shares shall contain an appropriate legend restricting further resale. Company
agrees to register any Shares sold by Trust in its share ledger in the name of
the purchaser. Trust understands and agrees that the sale of any Shares under
these provisions will not establish any rights in favor of the purchaser beyond
those rights granted to Trust, and further agrees to inform any broker or
purchaser with respect to the rights, obligations and limitations applicable to
it as set out in this Agreement.

 

(c)                                  Use of Shares as Collateral.

 

In consideration of the return provisions, Trust may not use the Shares
or any part thereof, as collateral for lending facilities absent consent of the
Company. Any such hypothecation of the Shares shall be effected in such a
manner that the Company’s rights to return of the shares in the event of a
funding obligation failure shall be primary to the collateral interest of a lender.
Furthermore, any such lending facility shall not be effected with a U.S.
Person, or by use of any U.S.-directed selling efforts.

 

4.                                       Conditions, Representations and Warranties.

 

(a)                                  Financial, Reporting.

 

Company
will deliver, or cause to be delivered, to Trust each of the following, which
shall be in form and detail acceptable to Trust:

 

(i) As soon as available, and in any event within ninety (90) days
after the end of each fiscal year of Company (or to the extent an automatic
filing extension has been requested by Company, 105 days after the end of each
fiscal year of the Company) audited financial statements with a report of
PCAOB-approved independent certified public accountants of recognized standing
selected by Company (the “Accountants”), which annual financial statements
shall be without qualification, excepting a “going concern” qualification, and
shall include Company’s balance sheet as at the end of such fiscal year and the
related statements of Company’s income, retained earnings and cash flows for
the fiscal year then ended, prepared, on a consolidating and consolidated basis
to include all Subsidiaries and Affiliates of Company (if any), all in
reasonable detail and prepared in accordance with GAAP, together with (i) if
and when available, copies of any management letters prepared by the
Accountants; and (ii) a certificate of Company’s President, Chief
Executive Officer or Chief Financial Officer stating that such financial
statements have been prepared in accordance with GAAP and whether or not such
officer has knowledge of the occurrence of any Default or Event of Default
hereunder and, if so, stating in reasonable detail the facts with respect
thereto;

 

(ii) As soon as available and in any event within forty five (45)
days after the end of each quarter, an unaudited/internal balance sheet and
statements of income, retained earnings and cash flows of Company as at the end
of and for such quarter and for the year to date period then ended, prepared on
a consolidating and consolidated basis to include all Subsidiaries and
Affiliates of Company (if any), in reasonable detail and stating in comparative
form the figures for the corresponding date and periods in the previous year,
all prepared in accordance with GAAP, subject to year-end adjustments and
accompanied by a certificate of Company’s President, Chief Executive Officer or
Chief Financial Officer, stating (i) that such financial statements have
been prepared in accordance with GAAP, subject to year-end audit adjustments,
and (ii) whether or not such officer has

 

4

 

knowledge of the occurrence of any Default or Event of Default
hereunder not theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto.

 

These
obligations may be satisfied by provision of copies of Company’s most recent
registration statements and annual, quarterly, monthly or other regular reports
that Company files with the Securities and Exchange Commission (the “SEC”), and
(ii) the issuance thereof, copies of such financial statements, reports
and proxy statements as the Company shall send to its stockholders.

 

5.
Additional Representations and Warranties.

 

Company
hereby represents and warrants to Trust as follows:

 

(a)                                  Organization, Good Standing and Qualification.

 

It
is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of the State of Nevada and, as the case may be,
has the power and authority to own and operate its properties and assets and,
insofar as it is or shall be a party thereto, to (i) execute and deliver
this Agreement and any Ancillary Agreements, (ii) to issue the Shares,
(Hi) to issue the Warrants and the shares of common stock issuable upon
conversion of the Warrants, and to (iv) carry out the provisions of this
Agreement and any Ancillary Agreements and to carry on its business as
presently conducted.

 

(b)                                 Capitalization; Voting Rights.

 

(i)                                     The authorized capital stock of the Company,
as of the date hereof consists of 500,000,000 shares, of which 475,000,000 are
shares of Common Stock, par value $0.0001 per share, 190,826,106 shares of
which are issued and outstanding (including the Shares), and 25,000,000 are
shares of preferred stock, par value $0.0001 per share of which no shares of preferred stock are issued and outstanding.

 

(ii)                                  There are no shares reserved for issuance
under any stock option plans, although Company reserves the right to adopt any
such lawful plan.

 

(iii)                               There are 17,287,664 shares reserved for
issuance upon the exercise of warrants granted by Company; these shares will be
issued for cash at prices ranging from $1.00 to $5.00, but without cashless
exercise rights. There are an additional 60,000,000 shares reserved for
issuance upon the exercise of the Warrants.

 

(iv)                              There are no outstanding options, warrants,
rights (including conversion or preemptive rights and rights of first refusal),
proxy or stockholder agreements, or arrangements or agreements other than those
set out herein, and neither the issuance of the Shares or the issuance of
shares upon the exercise of the Warrants will result in a change in the price
or number of any securities of the Company outstanding under anti-dilution or
other similar provisions contained in or affecting any such securities.

 

(v)                                 All issued and outstanding shares of the
Company’s common stock: Have been duly authorized and validly issued and are
fully paid and non-assessable; and were issued in compliance with all
applicable state and federal laws concerning the issuance of securities.

 

(vi)                              The rights, preferences, privileges and
restrictions of the Shares or shares to be issued upon the exercise of the
Warrants are as stated in Company’s Articles of Incorporation, as amended (the “Charter”),
and the shares to be issued upon exercise of the Warrants have been duly and
validly reserved for issuance. When issued in compliance with the provisions of
this Agreement and Company’s Charter, the Shares and shares to be issued upon
exercise of the Warrants will be validly issued, fully paid and non-assessable,
and will be free of any liens or encumbrances; provided, however, that such
securities may be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein or as otherwise required by such
laws

 

5

 

at the time a transfer is proposed. 

 

(c)                                  Authorization; Binding Obligations.

 

All corporate action necessary for the authorization of this Agreement
and any Ancillary Agreements, the performance of all of its obligations
hereunder on the Closing Date and the authorization, issuance and delivery of
the Shares and the Warrants has been taken or will be taken prior to the
Closing Date. This Agreement, when executed and delivered and to the extent it
is a party thereto, will be its valid and binding obligation enforceable in
accordance with the terms hereof, except:

 

(i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting enforcement
of creditors’ rights; and

 

(ii) general principles of equity that restrict the availability
of equitable or legal remedies. 

 

(d)                                 Liabilities and Pending Litigation.

 

The Company has no liabilities except current liabilities incurred in
the ordinary course of business, excepting the following: liabilities under its
lease agreement with the City of Albuquerque for the Double Eagle-II airport
hanger and office facilities; any successor liabilities arising from or assumed
under its settlement and spin-off agreement with American Utilicraft Corp.;
amounts due to any officer, director or employee under Employment Agreements or
deferred compensation agreements; and amounts due to related parties under an
airplane lease agreement. Trust acknowledges that it has been provided with
copies of each of these contracts or agreements sufficient to determine the
status and amounts of each such liability, as well as a draft copy of the
Company’s Form SB-2 registration statement, which provides additional
details as to the Company’s financial condition and business prospects. Company
is not party to any litigation as to which a negative outcome would have any
material impact on its financial condition.

 

(e)                                  Agreements;
Action:

 

Excepting
those liabilities set out herein, there are no agreements, understandings,
instruments, contracts, proposed transactions, judgments, orders, writs or
decrees to which it is a party or to its knowledge by which it is bound which
may involve:

 

(i)                                     Obligations (contingent or otherwise) of, or
payments to, it in excess of $50,000 (other than obligations of, or payments
to, it arising from purchase or sale agreements or agreements evidencing
Purchase Money Indebtedness, in each case, entered into in the ordinary course
of business); or the transfer or license of any patent, copyright, trade secret
or other proprietary right to or from it; or

 

(ii)                                  provisions restricting the development,
manufacture or distribution of the FF-1080-300 aircraft

 

(iii)                               indemnification by it with respect to infringements
of proprietary rights.

 

Since
June 30, 2005, the Company has not declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock; incurred any indebtedness for money borrowed or any other
liabilities (other than ordinary course obligations or as set out above)
individually in excess of $50,000 or, in the case of indebtedness and/or
liabilities individually less than $50,000, in excess of $100,000 in the
aggregate; made any loans or advances to any Person not in excess, individually
or in the aggregate, of $100,000,
other than ordinary advances for travel expenses; or sold, exchanged or
otherwise disposed of any of its assets or rights, other than the sale of its
Inventory and/or disposition of outdated, surplus or worn out equipment, so
long as, in each case, such sale or disposition is in the ordinary course of
business.

 

(f)                                    The Company will, upon the effectiveness of
any registration statement pertaining to an offering

 

6

 

of
its securities or the registration of any class of its securities, establish
and maintain disclosure controls and procedures (“Disclosure Controls”)
designed to ensure that information required to be disclosed by the Company in
the reports that it may file or submit under the Securities Act or Exchange Act
is recorded, processed, summarized, and reported, within the time periods
specified in the rules and forms of the SEC.

 

(g)                                 The Company makes and keeps books, records,
and accounts that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of its assets. It maintains internal control over
financial reporting (“Financial Reporting Controls”) designed by, or under the
supervision of, its principal executive and principal financial officers, and
effected by its board of directors, management, and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
GAAP, including that:

 

(i) transactions are executed in accordance with management’s
general or specific authorization;

 

(ii) unauthorized acquisition, use, or disposition of Company
assets that could have a material effect on the financial statements are
prevented or timely detected;

 

(iii) transactions are recorded as necessary to permit preparation
of financial statements in accordance with GAAP, and that its receipts and
expenditures are being made only in accordance with authorizations of Company’s
management and board of directors;

 

(iv) transactions are recorded as necessary to maintain
accountability for assets; and

 

(v) the recorded accountability for assets is compared with the
existing assets at reasonable intervals, and appropriate action is taken with
respect to any differences.

 

(h)                                 Obligations to Related Parties.

 

Except
as set forth above it has no obligations to its officers, directors,
stockholders or employees other than:

 

(i) for payment of salary for services rendered and for bonus
payments, including under Employment Agreements and deferred compensation
agreements;

 

(ii) reimbursement for reasonable expenses incurred on its behalf;

 

(iii) for other standard employee benefits made generally available
to all employees; and

 

(iv) obligations listed in its financial statements or to be
disclosed in any of Company’s Securities Act or Exchange Act Filings.

 

Except
as described above, none of its officers, directors or, to the best of its
knowledge, key employees or stockholders, or any members of their immediate
families, are indebted to it, individually or in the aggregate, in excess of
$50,000 or have any direct or indirect ownership interest in any Person with
which it is affiliated or with which it has a business relationship, or any
Person which competes with it, other than passive investments in publicly
traded companies (representing less than one percent (1%) of such company)
which may compete with it. Except as described above, none of its officers,
directors or stockholders, or any member of their immediate families, is,
directly or indirectly, interested in any material contract with it and no
agreements, understandings or proposed transactions are contemplated between it
and any such Person. Except as set forth above, it is not a guarantor or
indemnitor of any indebtedness of any other Person.

 

(i)                                     Changes.

 

Since
June 30, 2005, except as disclosed above, there has not been:

 

7

 

(i) any change in its business, assets, liabilities, condition
(financial or otherwise), properties, operations or prospects, which,
individually or in the aggregate, has had, or could reasonably be expected to
have, a Material Adverse Effect;

 

(ii) any resignation or termination of any of its officers, key
employees or groups of employees;

 

(iii) any material change, except in the ordinary course of
business, in its contingent obligations by way of guaranty, endorsement,
indemnity, warranty or otherwise;

 

(iv) any damage, destruction or loss, whether or not covered by
insurance, which has had, or could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect;

 

(v) any waiver by it of a valuable right or of a material debt
owed to it;

 

(vi) any direct or indirect material loans made by it to any of
its stockholders, employees, officers or directors, other than advances made in
the ordinary course of business;

 

(vii) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;

 

(viii) any declaration or payment of any dividend or other
distribution of its assets;

 

(ix) any labor organization activity related to it;

 

(x) any debt, obligation or liability incurred, assumed or guaranteed
by it, except those for immaterial amounts and for current liabilities incurred
in the ordinary course of business;

 

(xi) any sale,
assignment or transfer of any Intellectual Property or other intangible assets;

 

(xii) any change in any material agreement to which it is a party or by
which either it is bound which,
either individually or in the aggregate, has had, or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect;

 

(xiii) any other event or condition of any character that, either
individually or in the aggregate, has had, or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect; or

 

(j)                                     Title to Properties and Assets; Liens, Etc.

 

Except
as set forth above, it has good and marketable title to its respective
properties and assets, and good title to its leasehold interests, in each case
subject to no Lien, other than Permitted Liens.

 

All
facilities, Equipment, Fixtures, vehicles and other properties owned, leased or
used by it are in good operating condition and repair and are reasonably fit
and usable for the purposes for which they are being used subject to normal
wear and tear. The Company is in compliance with all material terms of each
lease to which it is a party or is otherwise bound.

 

(k)                                  Intellectual Property.

 

The
Company holds a license from Dupont for certain Intellectual Property related
to the development and manufacture of the FF-1080-300 aircraft, and certain
related systems. Subject to the terms of such license and related Employment
Agreement:

 

(i)                                     It owns or possesses sufficient legal rights
to all Intellectual Property necessary for its businesses as now conducted and,
to its knowledge as presently proposed to be conducted, without any known
infringement of the rights of others. There are no outstanding options,
licenses or

 

8

 

agreements of any kind relating to its Intellectual Property, nor is it
bound by or a party to any options, licenses or agreements of any kind with
respect to the Intellectual Property of any other Person other than as set
forth above.

 

(ii)                                  It has not received any communications
alleging that it has violated any of the Intellectual Property or other
proprietary rights of any other Person, nor is it aware of any basis therefore.

 

(iii)                               It does not believe it is or will be
necessary to utilize any inventions, trade secrets or proprietary information
of any of its employees made prior to their employment by it, except for
inventions, trade secrets or proprietary information that have been rightfully
licensed or assigned to it.

 

(l)                                     Compliance with Other Instruments.

 

It
is not in violation or default of any term of its Charter or Bylaws, or any
provision of any indebtedness, mortgage, indenture, contract, agreement or
instrument to which it is party or by which it is bound or of any judgment,
decree, order or writ, which violation or default, in the case of this clause,
has had, or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect. The execution, delivery and performance
of and compliance with this Agreement, and the issuance of the Shares and
Warrants each pursuant hereto and thereto, will not, with or without the
passage of time or giving of notice, result in any such material violation, or
be in conflict with or constitute a default under any such term or provision,
or result in the creation of any Lien upon any of its properties or assets or
the suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
license, authorization or approval applicable to it, its businesses or
operations or any of its assets or properties.

 

(m)                               Litigation.

 

There is no action, suit,
proceeding investigation pending or, to its knowledge, currently threatened
against it that prevents it from entering into this Agreement or from
consummating the transactions contemplated hereby or thereby, or which has had,
or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect, or could result in any change in its
current equity ownership,
nor is it aware that there is any basis to assert any of the foregoing. It is
not a party to or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality.

 

(n)                                 Tax Returns and Payments.

 

It
has timely filed all tax returns (federal, state and local) required to be
filed by it. All taxes shown to be due and payable on such returns, any
assessments imposed, and all other taxes due and payable by it on or before the
Closing Date, have been paid or will be paid prior to the time they become
delinquent. It has not been advised:

 

(i) that any of its returns, federal, state or other, have been or
are being audited as of the date hereof; or

 

(ii) of any adjustment, deficiency, assessment or court decision
in respect of its federal, state or other taxes.

 

(o)                                 Registration Rights and Voting Rights.

 

Trust
has been advised that Company intends to file a Form SB-2 registration
statement with the Securities and Exchange Commission covering 101,462,848 of
its common shares held by non-affiliated shareholders, and 10,030,356 shares to
be issued upon the exercise of certain warrants. Excepting this registration
statement, Company has not granted any rights to register any of its presently
outstanding securities or any of its securities that may hereafter be issued.
20,000,000 of the shares to be registered are subject to a voting agreement
that reserves to Dupont the right to vote such shares until such time as they
are resold.

 

9

 

(p)                                 Compliance with Laws; Permits.

 

Company
is not in violation of the Sarbanes-Oxley Act of 2002, to the extent
applicable, or any SEC related regulation or rule or any other applicable
statute, rule, regulation, order or restriction of any domestic or foreign
government or any instrumentality or agency thereof in respect of the conduct
of its business or the ownership of its properties which has had, or could
reasonably be expected to have, either individually or in the aggregate, a
material adverse effect. No governmental orders, permissions, consents,
approvals or authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution and
delivery of this Agreement and the issuance of any of the Shares or Warrants,
except such as have been duly and validly obtained or filed, or with respect to
any filings that must be made after the Closing Date, as will be filed in a
timely manner. It has all material franchises, permits, licenses and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

 

(q)                                 Environmental and Safety Laws.

 

Company
is not in violation of any applicable statute, law or regulation relating to
the environment or occupational health and safety, and to its knowledge, no
material expenditures are or will be required in order to comply with any such
existing statute, law or regulation. Except in the ordinary course of its
business, no Hazardous Materials (as defined below) are used or have been used,
stored, or disposed of by it or any of its Subsidiaries or, to its knowledge,
by any other Person on any property owned, leased or used by it or any of its
Subsidiaries. For the purposes of the preceding sentence, “Hazardous Materials”
shall mean:

 

(i) materials which are listed or otherwise defined as “hazardous”
or “toxic” under any applicable local, state, federal and/or foreign laws and regulations that govern
the existence and/or remedy of contamination
on property, the protection of the environment from contamination, the control
of hazardous wastes, or other activities involving hazardous substances,
including building materials; and

 

(ii) any petroleum products or nuclear materials.

 

(r)                                    Valid Offering.

 

Assuming
the accuracy of the representations and warranties of Trust contained in this
Agreement, the offer and issuance of the Shares and Warrants to Trust will be
exempt from the registration requirements of the Securities Act of 1933, as
amended (the “Securities Act”), and will have been registered or qualified (or
are exempt from registration and qualification) under the registration, permit
or qualification requirements of all applicable state securities laws.

 

(s)                                  Full Disclosure.

 

Company
has provided Trust with all information requested in connection with Trust’s
decision to enter into this Agreement, including all information Company
believes is reasonably necessary to make such investment decision. To the best
of Company’s knowledge, neither this Agreement nor any other document delivered
by it or its attorneys or agents in connection herewith or therewith or with
the transactions contemplated hereby or thereby, contain any untrue statement
of a material fact nor omit to state a material fact necessary in order to make
the statements contained herein or therein, in light of the circumstances in
which they are made, not misleading. Any financial projections and other
estimates provided to Trust by it were based on its experience in the industry
and on assumptions of fact and opinion as to future events which it, at the
date of the issuance of such projections or estimates, believed to be
reasonable and have been prepared in accordance with the standards applicable
to the preparation of projections for publicly traded companies.

 

10

 

(t)                                    Insurance.

 

Company
has general commercial, product liability, fire and casualty insurance policies
with coverages that it believes are customary for companies similarly situated
to it in the same or similar business.

 

(u)                                 No Integrated Offering.

 

Neither
Company nor any Person acting on its or their behalf has directly or indirectly
made any offers or sales of any security or solicited any offers to buy any
security under circumstances that would cause the offering of the Shares and
Warrants pursuant to this Agreement to be integrated with prior offerings by it
for purposes of the Securities Act which would prevent it from issuing the
Securities pursuant to exemptions available under the Securities Act, or any
applicable exchange-related stockholder approval provisions, nor will it or any
of its Affiliates take any action or steps that would cause the offering of the
Securities to be integrated with other offerings.

 

(v)                                 Stop Transfer.

 

The
Shares and Warrants, and any shares issued upon exercise of the Warrants, are
or will be restricted securities as of the date of this Agreement. Company will
not issue any stop transfer order or other order impeding the sale and delivery
of any of the Shares, Warrants, and any shares issued upon exercise of the
Warrants, at such time as these securities are registered for public sale or an
exemption from registration is available, except as required by state and
federal securities laws.

 

(x)                                   Dilution.

 

Company
specifically acknowledges that its obligation to issue shares of common stock
upon exercise of the Warrants is binding and enforceable regardless of the
dilution such issuance may have on the ownership interests of other
shareholders of Company.

 

(y)                                 Patriot Act.

 

Company
certifies that, to the best of its knowledge, it has not been designated, nor
is or shall be owned or controlled, by a “suspected terrorist” as defined in
Executive Order 13224. It hereby acknowledges that Trust seeks to comply with
all applicable laws concerning money laundering and related activities. In
furtherance of those efforts, it hereby represents, warrants and covenants
that: (i) none of the cash or property that it will pay or will contribute
to Trust has been or shall be derived from, or related to, any activity that is
deemed criminal under United States law; and (ii) no contribution or
payment by it to Trust to the extent that they are within its control shall
cause Trust to be in violation of the United States Bank Secrecy Act, the
United States International Money Laundering Control Act of 1986 or the United
States International Money Laundering Abatement and Anti-Terrorist Financing
Act of 2001. It shall promptly notify Trust if any of these representations,
warranties and covenants ceases to be true and accurate.

 

6.                                       Additional Representations and Warranties.

 

Trust
represents and warrants to Company as follows: 

 

(a)                                  Organization, Good Standing and
Qualification.

 

It
is a trust duly organized, validly existing and in good standing under the laws
of its jurisdiction of the Republic of Mauritius and, as the case may be, has
the power and authority to own and operate its properties and assets and,
insofar as it is or shall be a party thereto, to (i) execute and deliver
this Agreement and any Ancillary Agreements, (ii) to receive and hold the
Shares, (iii) to receive and hold the Warrants and the shares of common
stock issuable upon conversion of the Warrants, and to (iv) carry out the
provisions of this Agreement and any Ancillary Agreements and to carry on its business
as presently conducted.

 

11

 

(b)                                 Authorization; Binding Obligations.

 

All action necessary for the authorization of this Agreement and any
Ancillary Agreements, the performance of all of its obligations hereunder on
the Closing Date and the receipt of the Shares and the Warrants has been taken
or will be taken prior to the Closing Date. This Agreement, when executed and
delivered and to the extent it is a party thereto, will be its valid and
binding obligation enforceable in accordance with the terms hereof, except:

 

(i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors’ rights; and

 

(ii) general principles of equity that restrict the availability
of equitable or legal remedies.

 

(c)                                  Compliance with Other Instruments.

 

It
is not in violation or default of any term of its Trust Agreement, or any
provision of any indebtedness, mortgage, indenture, contract, agreement or
instrument to which it is party or by which it is bound or of any judgment,
decree, order or writ, which violation or default, in the ease of this clause,
has had, or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect. The execution, delivery and performance
of and compliance with this Agreement, and the receipt of the Shares and
Warrants each pursuant hereto and thereto, will not, with or without the
passage of time or giving of notice, result in any such material violation, or
be in conflict with or constitute a default under any such term or provision,
or result in the creation of any Lien upon any of its properties or assets or
the suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
license, authorization or approval applicable to it, its businesses or
operations or any of its assets or properties.

 

(d)                                 Patriot Act.

 

Trust
certifies that, to the best of its knowledge, it has not been designated, nor
is or shall be owned or controlled, by a “suspected terrorist” as defined in
Executive Order 13224. It hereby acknowledges that Company seeks to comply with
all applicable laws concerning money laundering and related activities. In
furtherance of those efforts, it hereby represents, warrants and covenants
that: (i) none of the cash or property that it will pay or will contribute
to Company has been or shall be derived from, or related to, any activity that
is deemed criminal under United States law; and (ii) no contribution or
payment by Trust to Company to the extent that they are within its control
shall cause Company to be in violation of the United States Bank Secrecy Act,
the United States International Money Laundering Control Act of 1986 or the
United States International Money Laundering Abatement and Anti-Terrorist
Financing Act of 2001. It shall promptly notify Company if any of these
representations, warranties and covenants ceases to be true and accurate.

 

(e)                                  Investment Representations.

 

Trust
understands that the Shares and Warrants are being offered pursuant to an
exemption from registration contained in the Securities Act based in part upon
Trust’s representations contained in this Agreement, including, without
limitation, that Trust is an “accredited investor” within the meaning of
Regulation D under the Securities Act, and not a “U.S. Person” within the
meaning of Regulation S under the Securities Act. Trust has received or has had
full access to all the information it considers necessary or appropriate to
make an informed investment decision with respect to the Shares and Warrants to
be issued to it under this Agreement and the shares to be acquired by it upon
the exercise of the Notes.

 

(f)                                    Trust Bears Economic Risk.

 

Trust
has substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to Company so that it is
capable of evaluating the merits and risks of its investment in Company and has
the capacity to protect its own interests. Trust must bear the economic risk of
this

 

12

 

(d)                                 Any representation, warranty or statement
made by Company or Trust in any certificate, statement or document delivered
pursuant to the terms hereof, or in connection with the transactions
contemplated by this Agreement should prove to be false or misleading in any
material respect on the date as of which made or deemed made.

 

(e)                                  Attachments or levies in excess of $100,000
in the aggregate are made upon Company’s assets or a judgment is rendered
against any Company’s property involving a liability of more than $100,000
which shall not have been vacated, discharged, stayed or bonded within thirty
(30) days from the entry thereof.

 

(f)                                    Any change in any Company’s condition or
affairs (financial or otherwise) which in Trust’s reasonable, good faith
opinion, could reasonably be expected to have a Material Adverse Effect;

 

(g)                                 Company shall (i) apply for, consent to
or suffer to exist the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property, (ii) make a general assignment for the benefit of
creditors, (iii) commence a voluntary case under the federal bankruptcy
laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or
insolvent, (v) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vi) acquiesce to without challenge
within ten (10) days of the filing thereof, or failure to have dismissed
within forty-five (45) days, any petition filed against it in any involuntary
case under such bankruptcy laws, or (vii) take any action for the purpose
of effecting any of the foregoing.

 

(h)                                 Company shall admit in writing its inability,
or be generally unable, to pay its debts as they become due or cease operations
of its present business.

 

(i)                                     Company directly or indirectly sells,
assigns, transfers, conveys, or suffers or permits to occur any sale,
assignment, transfer or conveyance of any assets of Company or any interest
therein, except as permitted herein.

 

(j)                                     The occurrence of (i) a change in the
controlling ownership of Company or (ii) the departure of either Dupont or Boland from senior
management of the Company; provided that, an Event of Default under clause (j)(ii) shall
not arise solely as a result of the departure of either Dupont or Boland to the
extent a successor thereto, reasonably satisfactory to Trust, shall be
appointed within ninety (90) days thereof.

 

(k)                                  The indictment or threatened indictment of
Company or any executive officer of Company under any criminal statute, or
commencement or threatened commencement of criminal or civil proceeding against
Company or any executive officer of Company pursuant to which statute or
proceeding penalties or remedies sought or available include forfeiture of any
of the property of Company to the extent, in the case of civil proceedings
only, such forfeiture could reasonably be expected to result in a Material
Adverse Effect.

 

(1)                                  Company’s attempt to terminate, challenges
the validity of, or its liability under this Agreement or any Ancillary
Agreement, or any proceeding shall be brought to challenge the validity,
binding effect of any Ancillary Agreement or any Ancillary Agreement ceases to
be a valid, binding and enforceable obligation of Company (to the extent such
Persons are a party thereto).

 

(m)                               An SEC stop trade order or trading suspension
of the Common Stock shall be in effect for twenty (20) consecutive days,
excluding in all cases a suspension of all trading in the trading markets,
provided that Company shall not have been able to cure such trading suspension
within thirty (30) days of the notice thereof or list the Common Stock on
another principal market within sixty (60) days of such notice.

 

(n)                                 Company’s failure to deliver common stock to
Trust pursuant to and in the form required by the Warrants and this Agreement,
if such failure to deliver common stock shall not be cured within two (2) Business Days.

 

13

 

9.                                       Remedies.

 

Following
the occurrence and during the continuance of an Event of Default, Company shall
have the right to demand repayment in full of all obligations, whether or not
otherwise due, and return of all Shares and unexercised Warrants from Newhaven
Group, Trust shall have, in addition to all other rights provided herein and in
each Ancillary Agreement, the rights and remedies for breach, including for
specific performance by delivery of shares to be issued upon exercise of the
Warrants under other applicable law, all other legal and equitable rights to
which Trust may be entitled, including the right to take immediate possession
of any Shares necessary to effect the exercise. Trust further reserves the
right to apply for the appointment of a receiver for Company or its property.

 

10.                                 Waivers.

 

To
the full extent permitted by applicable law, Company hereby waives (a) presentment,
demand and protest, and notice of presentment, dishonor, intent to accelerate,
acceleration, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all of this Agreement and any
Ancillary Agreements or any other notes, commercial paper, Accounts, contracts,
Documents, Instruments, Chattel Paper and guaranties at any time held by Trust
on which Company may in any way be liable, and hereby ratifies and confirms
whatever Trust may do in this regard; (b) all rights to notice and a
hearing prior to Trust taking possession or control of any Shares in equal amounts
to any validly exercised Warrants; and (c) the benefit of all valuation,
appraisal and exemption laws. Company acknowledges that it has been advised by
counsel of its choices and decisions with respect to this Agreement and the
transactions evidenced hereby and thereby.

 

11.                                 Expenses.

 

Each
party shall bear its own out-of-pocket costs and expenses, including reasonable
fees and disbursements of in-house or outside counsel and appraisers, in connection with
the preparation, execution and delivery of this Agreement and in connection
with the prosecution or defense of any action, contest, dispute, suit or
proceeding concerning any matter in any way arising out of, related to or
connected with this Agreement or any Ancillary Agreement. The parties shall each
pay actual charges for all bank related services (including wire transfers)
performed or caused to be performed by either of them, but Company shall be
responsible for any fees charged by its Transfer Agent in connection with its
compliance with the terms of this Agreement. If any tax by any Governmental
Authority is or may be imposed on or as a result of any transaction between any
Company and Trust, the parties each agree to pay such amounts as may be imposed
or levied.

 

12.                                 Assignment By Trust.

 

Without
consent of Company, Trust may not transfer or assign the Warrants, or suffer
the Shares to any manner of hypothecation.

 

13.                                 No Waiver; Cumulative Remedies.

 

Failure
by Trust or Company to exercise any right, remedy or option under this
Agreement, any Ancillary Agreement or any supplement hereto or thereto or any
other agreement between or among Company and Trust or delay by either of them
in exercising the same, will not operate as a waiver. No waiver will be
effective unless it is in writing and then only to the extent specifically
stated. The parties’ rights and remedies under this Agreement and any Ancillary
Agreements will be cumulative and not exclusive of any other right or remedy
which either of them may have.

 

14.                                 Indemnity.

 

Each
party Company hereby jointly and severally indemnify and hold the other, and
its respective affiliates, employees, attorneys and agents (each, an “Indemnified
Person”), harmless from and against any and all

 

14

 

suits,
actions, proceedings, claims, damages, losses, liabilities and expenses of any
kind or nature whatsoever (including reasonable attorneys’ fees and
disbursements and other costs of investigation or defense, including those
incurred upon any appeal) which may be instituted or asserted against or
incurred by any such Indemnified Person as the result of the other’s failure
with respect to the execution, delivery, enforcement, performance and
administration of, or in any other way arising out of or relating to, this Agreement,
any Ancillary Agreements or any other documents or transactions contemplated by
or referred to herein or therein and any actions or failures to act with
respect to any of the foregoing, except to the extent that any such indemnified
liability is finally determined by a court of competent jurisdiction to have
resulted solely from such Indemnified Person’s gross negligence or willful
misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY COMPANY
OR TO ANY OTHER PARTY OR TO ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY
OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR
INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE
ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED
UNDER THIS AGREEMENT OR ANY ANCILLARY AGREEMENT OR AS A RESULT OF ANY OTHER
TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

 

15.                                 Revival.

 

The
parties agree that to the extent any delivery of securities or compliance with
a funding obligation that is subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy act, state or federal
law, common law or equitable cause, then, to the extent of such payment or
repayment, the obligation or part thereof intended to be satisfied shall be
revived and continued in full force and effect as if said delivery or payment
had not been made.

 

16.
Notices. Any notice or request hereunder may be given to Company, Company Agent
or Trust at the respective addresses set forth below or as may hereafter be
specified in a notice designated as a change of address under this Section. Any
notice or request hereunder shall be given by registered or certified mail,
return receipt requested, and delivery, overnight mail or telecopy (confirmed
by mail). Notices and requests shall be, in the case of those by hand delivery,
deemed to have been given when delivered to any officer of the party to whom it
is addressed, in the case of those by mail or overnight mail, deemed to have
been given three (3) Business Days after the date when deposited in the
mail or with the overnight mail carrier, and, in the case of a telecopy, when
confirmed.

 

Notices
shall be provided as follows:

 

	
  If
  to Trust:

  	
   

  	
  PacifiCorp
  Funding Partners Trust

  
	
   

  	
   

  	
  c/o
  The Newhaven Group

  
	
   

  	
   

  	
  40
  Gerard Street

  
	
   

  	
   

  	
  London,
  England W1V 7 LP

  
	
   

  	
   

  	
  Attention:

  	
  Fergus
  Anstock, Esq.

  
	
   

  	
   

  	
  Telephone:

  	
  +444
  (0) 20 7287 5688

  
	
   

  	
   

  	
  Telecopier:
  

  	
  +44
  (0) 14 8171 3112

  
	
   

  	
   

  	
   

  
	
  If
  to any Company,

  	
   

  	
   

  
	
  or
  Company Agent:

  	
   

  	
  c/o
  Utilicraft Aerospace Corp.

  
	
   

  	
   

  	
  554
  Briscoe Boulevard

  
	
   

  	
   

  	
  Lawrenceville,
  GA 30045

  
	
   

  	
   

  	
  Attention:

  	
  John
  J. Dupont

  
	
   

  	
   

  	
   

  	
  R.
  Darby Boland

  
	
   

  	
   

  	
  Telephone:

  	
    (678)
  376-0898

  
	
   

  	
   

  	
  Facsimile:

  	
    (678)
  376-9093

  
					

 

15

 

	
  With
  a copy to:

  	
   

  	
  Phillip
  W. Offill, JR.

  
	
   

  	
   

  	
  Godwin
  Gruber LLP

  
	
   

  	
   

  	
  1201
  Elm St., 17th Fl.

  
	
   

  	
   

  	
  Dallas,
  TX 75270

  
	
   

  	
   

  	
  Telephone:     (214)
  939-4469

  
	
   

  	
   

  	
  Facsimile:      (214)
  760-7332

  

 

or
such other address as may be designated in writing hereafter in accordance with
this Section 16 by such Person.

 

17.
Governing Law, Jurisdiction and Waiver of Jury Trial.

 

(a) THIS
AGREEMENT AND THE ANCILLARY AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEVADA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH
STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

 

(b) TRUST
AND COMPANY HEREBY CONSENT AND AGREE THAT THE STATE OR FEDERAL COURTS LOCATED
IN LAS VEGAS, CLARK COUNTY, NEVADA SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR
AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY COMPANY, ON THE ONE HAND, AND
TRUST, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE ANCILLARY
AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY
OF THE ANCILLARY AGREEMENTS; PROVIDED, THAT TRUST AND COMPANY ACKNOWLEDGE THAT
ANY APPEALS FROM THOSE
COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNT OF
CLARK, STATE OF NEVADA; AND FURTHER PROVIDED, THAT NOTHING IN THIS AGREEMENT
SHALL BE DEEMED OR OPERATE TO PRECLUDE TRUST FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR
ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF TRUST. TRUST AND COMPANY EXPRESSLY SUBMIT AND CONSENT IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,
AND EACH OF THEM HEREBY WAIVES ANY OBJECTION THAT IT MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON-CONVENIENT. EACH OF
THEM HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS
ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS,
COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO COMPANY AGENT AT THE ADDRESS SET FORTH IN SECTION 16 AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF COMPANY AGENT’S
ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS,
PROPER POSTAGE PREPAID.

 

(c) THE
PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS, THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY
DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN LAURUS, AND/OR
ANY COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, ANY
ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

 

16

 

18.                                 Limitation of Liability.

 

Company
and Trust acknowledge and understand that in order to assure payment of the
Obligations hereunder Trust may be required to exercise any and all of its
rights and remedies hereunder and agree that, except as limited by applicable
law, neither Trust nor any of Trust’s agents shall be liable for acts taken or
omissions made in connection herewith or therewith except for actual bad faith.

 

19.                                 Entire Understanding; Maximum Interest.

 

This
Agreement and any Ancillary Agreements contain the entire understanding among
between Company and Trust as to the subject matter hereof and thereof and any
promises, representations, warranties or guarantees not herein contained shall
have no force and effect unless in writing, signed by Company’s and Trust’s
respective officers. Neither this Agreement, any Ancillary Agreements, nor any
portion or provisions thereof may be changed, modified, amended, waived,
supplemented, discharged, cancelled or terminated orally or by any course of
dealing, or in any manner other than by an agreement in writing, signed by the
party to be charged. Nothing contained in this Agreement, any Ancillary
Agreement or in any document referred to herein or delivered in connection
herewith shall be deemed to establish or require the payment of a rate of
interest or other charges in excess of the maximum rate permitted by applicable
law.

 

20.                                 Severability.

 

Wherever
possible each provision of this Agreement or any Ancillary Agreements shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement or the Ancillary Agreements shall be
prohibited by or invalid under applicable law such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions
thereof.

 

21.                                 Survival.

 

The
representations, warranties, covenants and agreements made herein shall survive
any investigation made by Company or Trust and the closing of the transactions
contemplated hereby to the extent provided therein. All statements as to
factual matters contained in any certificate or other instrument delivered by
or on behalf of Company or Trust pursuant hereto in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by Company or Trust hereunder solely as of the date of such
certificate or instrument. All indemnities set forth herein shall survive the
execution, delivery and termination of this Agreement and any Ancillary
Agreements and the making and payment of the Obligations.

 

22.                                 Captions.

 

All
captions are and shall be without substantive meaning or content of any kind
whatsoever.

 

23.                                 Counterparts; Telecopier Signatures.

 

This
Agreement may be executed in one or more counterparts, each of which shall
constitute an original and all of which taken together shall constitute one and
the same agreement. Any signature delivered by a party via telecopier
transmission shall be deemed to be any original signature hereto.

 

24.                                 Construction.

 

The
parties acknowledge that each party and its counsel have reviewed this
Agreement and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments, schedules or
exhibits thereto.

 

17

 

25.                                 Publicity.

 

Trust
hereby authorizes Company to make appropriate announcements of the financial
arrangement entered into by and between Company and Trust, including, without
limitation, announcements which are commonly known as tombstones, in such
publications and to such selected parties as Company shall in its sole and
absolute discretion deem appropriate, or as required by applicable law.

 

26.                                 Legends.

 

The
Shares, Warrants and any shares issued upon execution of the Warrants shall
bear legends as follows; 

 

(a) The
Warrants shall bear substantially the following legend:

 

“THIS
WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE, STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE
UPON EXERCISE OF THE WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
NOTE OR SUCH SHARES UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO UTILICRAFT AEROSPACE CORP. THAT
SUCH REGISTRATION IS NOT REQUIRED.”

 

(B) The
Shares shall bear substantially the following legend:

 

“THESE
COMMON SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THESE COMMON SHARES MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THESE COMMON SHARES UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO UTILICRAFT AEROSPACE CORP. THAT SUCH REGISTRATION IS NOT
REQUIRED.”

 

[Balance
of page intentionally left blank; signature page follows.]

 

18

 

IN
WITNESS WHEREOF, the parties have executed this Master Financing Agreement as
of the date first written above.

 

	
   

  	
  UTILICRAFT AEROSPACE CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John J. Dupont

  	
   

  
	
   

  	
  Name:  John J. Dupont

  
	
   

  	
  Title:   President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PACIFICORP FUNDING PARTNERS TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Fergus Anstock, FOR AND ON BEHALF OF [ILLEGIBLE], LTD.

  
	
   

  	
  Name:  Fergus
  Anstock

  
	
   

  	
  Title:  
  Trustee/Protector (AUTHORISED SIGNATORY)

  

 

19

 

 

 

 

WARRANT
FORMS

 

 

 

THIS WARRANT AND THE COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS.
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THE WARRANT MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES UNDER SAID ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO UTILICRAFT AEROSPACE CORP. THAT SUCH REGISTRATION IS NOT
REQUIRED.

 

Warrant No. ____                                                                                                         Issue Date: September 12, 2005

 

UTILICRAFT AEROSPACE INDUSTRIES,
INC.

Warrant
to Purchase Twenty Million (20,000,000) Shares of Common Stock

FOR VALUE RECEIVED, UTILICRAFT AEROSPACE INDUSTRIES, INC.,
a Nevada corporation (the “Company”), hereby issues to PacifiCorp Partners
Trust or its permitted and
registered transferee (the “Holder”) the right to purchase from the Company
Twenty Million (20,000,000) shares of fully paid and non-assessable Common
stock, par value $0.0001 per share (“Common Stock”) of the Company (the
“Shares”), at a purchase price per Share of Fifty Cents ($0.50) (the “Warrant
Price”).  The number of Shares and the
Warrant Price shall be subject to adjustment from time to time pursuant to the
terms and conditions hereof.

1.             Term. Subject to the terms
and conditions set forth below, this Warrant shall be exercisable in whole or
in part at any time and from time to time on and after the date hereof and on
or before the Expiration Date (as defined in Section 2.4 hereof), and shall be
void thereafter.

2.         Exercise of Warrant.

2.1.          Mechanics of Exercise.  The Holder may exercise this Warrant in whole
or in part by surrendering this Warrant, a duly executed Notice of Exercise in
substantially the form attached hereto as Exhibit A and the Investment
Representation Statement in the form annexed hereto as Exhibit B at the
principal executive offices of the Company. 
The Holder shall also deliver to the Company simultaneously with the
Holder’s Notice of Exercise and Investment Representation Statement payment of
the aggregate Warrant Price for the Shares being purchased.  The consideration for the exercise of this
Warrant may be in the form of a bank, 

 

 

 

 

cashier’s or certified
check payable to the order of the Company, or by wire transfer to an account
designated in writing by the Company.  In
the event that the Holder elects to exercise less than the full number of Shares
recorded above, the Company will execute and deliver to the Holder a Warrant of
like tenor in the number of Shares granted by the Company (as recorded above)
less the number of Shares exercised.

2.2.          When Exercise Effective.  The exercise of this Warrant shall be deemed
to have been effective for the Holder immediately prior to the close of
business on the business day on which this Warrant is surrendered to the
Company as provided in Section 2.1, and at such time the person or persons in
whose name or names any certificate or certificates for Shares shall be
issuable upon such exercise as provided in Section 2.3 shall be deemed to have
become the holder or holders of record thereof.

2.3.          Delivery of Stock Certificates,
Etc.  As soon as practicable after
the surrender of this Warrant, the Company will cause to be issued in the name
of, and delivered to, the Holder a certificate or certificates for the number
of fully paid and non-assessable Shares which the Holder has purchased.

 

2.4.          Expiration Date.  This Warrant shall expire on the earliest of
(i) 360 days of the grant of this Warrant to the Holder, as recorded above,
(ii) the effective date of the first registration statement of the Company to
become effective under the Securities Act of 1933, as amended (the “Securities
Act”), that includes securities to be sold on behalf of the Company to the
public in an underwritten public offering (the “IPO”), and (iii) the closing of
the acquisition of the Company by another entity by means of merger,
consolidation or other transaction or series of related transactions, resulting
in the exchange of the outstanding shares of the Company’s capital stock that
the stockholders of the Company prior to such transaction own, directly or
indirectly, less than fifty percent (50%) of the voting power of the surviving
entity (the earliest such date is referred to herein as the “Expiration Date”).

3.             Adjustments.

3.1.          Subdivisions, Combinations and
Other Issuances.  If the Company
shall at any time prior to the Expiration Date subdivide its Common Stock, by
stock split or otherwise, or combine its Common Stock, or issue additional
shares of its Common Stock as a dividend with respect to any shares of its
Common Stock, the number of Shares issued upon the exercise of this Warrant
shall forthwith be proportionately increased in the case of a subdivision or
stock dividend, or proportionately decreased in the case of a combination.  Appropriate adjustments shall also be made to
the Warrant Price, but the aggregate Warrant Price shall remain the same.  Any adjustment under this Section 3.1 shall
become effective at the close of business on the date the subdivision or
combination becomes effective, or as of the record date of such dividend, or in
the event that no record date is fixed, upon the making of such dividend.

 

 

 

 

3.2.          Adjustment for Reorganization,
Consolidation, and Merger.  In case
of any reclassification, reorganization or change of the Common Stock of the
Company (other than as a result of a subdivision, combination or stock dividend
provided for in Section 3.1), then, as a condition to such reclassification,
reorganization or change, provision shall be made so that the Holder shall have
the right to purchase prior to the Expiration Date at an aggregate price equal
to the aggregate Warrant Price, the kind and amount of shares of stock and
other securities and property receivable in connection with such
reclassification, reorganization or change by a holder of the same number of
shares of Common Stock as were purchasable by the Holder immediately prior to
such reclassification, reorganization or change.  In each such case, the terms of this Warrant
shall be applicable to the shares of stock or other securities or property
receivable upon the exercise of this Warrant after such consummation.

4.             No Assignment. 
This Warrant is not assignable, nor can it be resold absent subsequent
agreement between the Company and the Holder as specified in that certain
Amended Master Financing Agreement Between PacifiCorp Funding Partners Trust
and Utilicraft Aerospace Industries, Inc. dated effective as of
September 12, 2005.

5.             Market Stand Off Agreement. The Holder hereby
agrees that if so requested by the Company or any representative of the
underwriters (the “Managing Underwriter”) in connection with any registration
of the offering of any securities of the Company under the Securities Act of
1933, as amended (the “Securities Act”), the Holder shall not, during the
180-day period (or such longer period as may be requested in writing by the
Managing Underwriter and agreed to in writing by the Company) (the “Market
Standoff Period”) following the effective date of a registration statement of
the Company filed under the Securities Act, offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend or otherwise
transfer or dispose of any Shares or other securities of the Company, or enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Shares or other
securities of the Company, whether any such previously described transaction is
to be settled by delivery of the Shares or other securities, in cash or
otherwise; provided, however, that the foregoing such restriction shall apply
only to the first registration statement of the Company to become effective
under the Securities Act that includes securities to be sold on behalf of the
Company to the public in an underwritten public offering under the Securities
Act.  The Holder further agrees that the
Holder shall execute any “lock-up letter” or similar instrument submitted by
the Managing Underwriter to the Holder that reflects the foregoing restrictions
or any part thereof and that the Managing Underwriter shall be a third party
beneficiary of the provisions of this Section 5 and shall be fully entitled to
enforce all rights set forth herein. The Holder hereby irrevocably appoints the
Company and its President, or either of them, as the Holder’s agents and
attorneys-in-fact, with full power of substitution for and in the
Holder’s name, to execute any such “lock-up letter” or similar instrument
submitted by the Managing Underwriter and to do any and all things in
connection therewith, it being understood and acknowledged by the Holder that
such power of attorney shall not impose or be deemed to impose any fiduciary
duty or any other or obligation on either the Company or its President, shall
be irrevocable and coupled with an 

 

 

 

interest and shall not terminate by operation of law,
whether by the death, bankruptcy or adjudication of incompetency or insanity of
the Holder or the occurrence of any other event.  The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such Market Standoff Period. 
The Holder further agrees that without the prior written consent of the
Managing Underwriter, the Holder shall not, during the Market Standoff Period,
make any demand for or exercise any right (to the extent the Holder shall have
any such right) with respect to, the registration of any Shares or other
securities of the Company.

6.             Replacement of Warrant.  Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity bond (or, in the case of any institutional holder, an
indemnity agreement) reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Company at its expense will execute and deliver, in lieu thereof,
a new Warrant of like tenor and date.

7.             Covenant of Company.  The Company hereby covenants and agrees that
at all times during the term of this Warrant there shall be reserved for
issuance such number of shares of its Common Stock as shall be required to be
issued upon exercise of this Warrant.

8.             Representation and Warranty of
Holder.  The Holder hereby represents
and warrants to the Company that the Holder is an “accredited investor” within
the meaning of Regulation D promulgated under the Securities Act, and
acknowledges that the Company is relying upon this representation and warranty
in the issuance of this Warrant to the Holder.

9.             Legends.  The certificate(s) representing the Shares
shall be imprinted with a legend in substantially the following form:

 

“THESE COMMON SHARES HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS. THESE COMMON SHARES MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THESE COMMON SHARES UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO UTILICRAFT
AEROSPACE INDUSTRIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

10.           Notices.  All notices, consents and other
communications under this Warrant shall be in writing and shall be deemed given
when delivered personally or when mailed by registered mail, return receipt
requested, or reputable overnight delivery service, to the Company at its
principal executive offices (Attn: 
President) and to the Holder at PacifiCorp Funding Partners 

 

 

 

Trust c/o The Newhaven Group, 40 Gerard Street, London
W1V 7 LP (or such other address as the Holder may designate by notice given to
the Company pursuant to this Section 10 and shall be registered on the books of
the Company).

11.           Miscellaneous.

11.1.        Termination.  Neither this Warrant nor any term hereof may
be amended, modified, waived, discharged or terminated orally.

11.2.        Applicable Law.  This Warrant shall be construed and enforced
in accordance with and governed by the laws of the jurisdiction of
incorporation of the Company without regard to provisions thereof relating to
choice of law or conflicts of law.

11.3.        Headings.  The headings in this Warrant are for
convenience of reference only and shall not limit or otherwise affect the
meaning of any provision of this Warrant.

11.4.        No Fractional Shares.  No fractional shares of Common Stock or scrip
representing fractional shares shall be issued in connection with the exercise
of this Warrant.  In lieu of any
fractional shares which would otherwise be issuable, the Company shall pay cash
equal to the product of such fraction multiplied by the fair market value of
one Share as determined in good faith by the Company’s Board of Directors.

11.5.        No Rights as Stockholder.  Until the exercise of this Warrant, the
Holder shall not have or exercise any rights as a stockholder of the Company by
virtue of this Warrant.

12.           Expiration.  The right to exercise this Warrant shall
expire at 5:00 p.m., Eastern Time, on the Expiration Date.

 

IN WITNESS WHEREOF, the Company has caused this Warrant to
be issued by a duly authorized officer thereof as of the date set forth above.

 

	
   

  	
  UTILICRAFT
  AEROSPACE INDUSTRIES, INC., a Nevada corporation

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  John J. Dupont,
  President

  

 

 

AGREED AND ACCEPTED:

 

PACIFICORP PARTNERS TRUST

 

 

HOLDER:

 

 

	
  By:

  	
   

  
	
  Title:

  	
   

  
	
   

  	
  (Authorized Person)

  

 

 

 

EXHIBIT A

 

NOTICE OF EXERCISE

[To be signed only upon
exercise of Warrant]

TO:   Utilicraft Aerospace Industries, Inc.

The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder
___________ shares of Common Stock, as provided for therein, and tenders
herewith payment of the purchase price in full for such shares of $__________,
representing the full purchase price for such shares at the price per share
provided for in such warrant.

and

shall tender payment of
all applicable issuance and transfer taxes, if any.

Please issue a certificate or certificates for such shares of Common
Stock in the name of: _____________________________.

	
   

  	
   

  	
   Name: 

  	
   

  
	
   

  	
   

  	
  Address: 

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature: 

  	
   

  

 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Note: The above
  signature should correspond exactly with the name on the face of this Warrant
  or with the name of assignee appearing in the assignment form below.

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
  , 20

  	
   

  	
   

  
					

 

 

EXHIBIT B

 

INVESTMENT REPRESENTATION
STATEMENT

(to be executed
upon exercise of Warrant)

 

_______ Shares of Company Common Stock

 

To:  Utilicraft Aerospace Industries, Inc.:

In connection with
the purchase of the above-listed securities pursuant to exercise of the Warrant
referred to herein, the undersigned (the “Holder”) hereby represents to
Utilicraft Aerospace Industries, Inc. (the “Company”) as follows:

1.             Receipt
of Information. The Holder has received all the information it considers
necessary or appropriate to determine whether to purchase the shares of Common
Stock (the “Shares”) issuable upon exercise of the Warrant dated __________
(the “Warrant”).

 

2.             Investment
Representations.

 

(a)           The Holder is acquiring the Shares to
be received upon exercise of this Warrant for the Holder’s own account as
principal, for investment purposes and not with a view to any distribution
thereof in violation of the Securities Act of 1933, as amended (the “Securities
Act”), or any other securities laws, and further understands and acknowledges
that the offer and sale of the Shares to the Holder pursuant to this Warrant
will not be registered under the Securities Act or any state securities laws on
the assumption that the offer and sale of the Shares are exempt from
registration pursuant to Section 4(2) of the Securities Act and Regulation D
thereunder and that Company’s reliance upon such exemption is predicated upon
such Holder’s representations set forth herein.

 

(b)           The Holder is an “accredited investor”
within the meaning of Rule 501(a) of Regulation D under the Securities Act, and
by virtue of such Holder’s experience in financial and business matters, is
capable of evaluating the merits and risks of such Holder’s investment in the
Shares, has the ability to bear the economic risks of such an investment,
including a complete loss of the investment, and has the capacity to protect
the Holder’s own interests.

 

(c)           The Holder acknowledges that the
certificates representing the Shares shall bear a legend substantially as set
forth below indicating the restrictions on transfers to which the Shares are
subject, and instructions shall be given to the transfer agent for the Common
Stock, or other equity security being issued, that no transfer is to be effected
except in compliance with such transfer restrictions:

 

 

 

“THESE COMMON SHARES HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS. THESE COMMON SHARES MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THESE COMMON SHARES UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO UTILICRAFT
AEROSPACE INDUSTRIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

(d)           Because the Shares have not been
registered under the Securities Act or applicable state securities laws, the
Holder acknowledges that the economic risk of the investment must be borne
indefinitely by such Holder, the Shares cannot be sold by the Holder unless
subsequently registered under the Securities Act and such laws or unless an
exemption from such registration is available, and there is no assurance that
the Shares will ever be so registered in the future.

 

(e)           The Holder hereby acknowledges that
the Company has made available to such Holder such books, records, corporate
documents and other information as such Holder considers necessary to evaluate
the merits and risks of an investment in the Shares.  The Holder and the Holder’s representatives
have had the opportunity to ask questions of representatives of the Company and
have received satisfactory responses thereto, and to request and receive all
documents concerning the Company and the terms and conditions of such Holder’s
investment in the Shares.  The Holder
acknowledges that the Holder has not been offered the Shares by any means of
general solicitation or advertisement, and that no commission or sales charges
is payable to any third party in connection with the exercise of the Warrant.

 

(f)            The Holder recognizes that
investment in the Shares involves a high degree of risk.  Such Holder is aware that no federal or state
agency has made any finding or determination as to the fairness of the Shares
for investment, nor any recommendation or endorsement of the Shares.

 

	
  Dated:

  	
   

  	
  , 200

  	
   

  	
   

  	
  HOLDER:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Typed or Printed Name

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title

  

 

 

 

THIS WARRANT AND THE COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS.
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THE WARRANT MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES UNDER SAID ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO UTILICRAFT AEROSPACE CORP. THAT SUCH REGISTRATION IS NOT
REQUIRED.

 

Warrant No. ____                                                                                                         Issue Date: September 12, 2005

 

UTILICRAFT AEROSPACE INDUSTRIES,
INC.

Warrant
to Purchase Thirty Million (30,000,000) Shares of Common Stock

FOR VALUE RECEIVED, UTILICRAFT AEROSPACE INDUSTRIES, INC.,
a Nevada corporation (the “Company”), hereby issues to PacifiCorp Partners
Trust or its permitted and
registered transferee (the “Holder”) the right to purchase from the Company
Thirty Million (30,000,000) shares of fully paid and non-assessable Common
stock, par value $0.0001 per share (“Common Stock”) of the Company (the “Shares”),
at a purchase price per Share of One Dollar Fifty Cents ($1.50) (the “Warrant
Price”).  The number of Shares and the
Warrant Price shall be subject to adjustment from time to time pursuant to the
terms and conditions hereof.

13.           Term. Subject to the terms and
conditions set forth below, this Warrant shall be exercisable in whole or in
part at any time and from time to time on and after the date hereof and on or
before the Expiration Date (as defined in Section 2.4 hereof), and shall be
void thereafter.

14.           Exercise of Warrant.

14.1.        Mechanics of Exercise.  The Holder may exercise this Warrant in whole
or in part by surrendering this Warrant, a duly executed Notice of Exercise in
substantially the form attached hereto as Exhibit A and the Investment
Representation Statement in the form annexed hereto as Exhibit B at the
principal executive offices of the Company. 
The Holder shall also deliver to the Company simultaneously with the
Holder’s Notice of Exercise and Investment Representation Statement payment of
the aggregate Warrant Price for the Shares being purchased.  The consideration for the exercise of this
Warrant may be in the form of a bank, 

 

 

 

cashier’s or certified
check payable to the order of the Company, or by wire transfer to an account
designated in writing by the Company.  In
the event that the Holder elects to exercise less than the full number of
Shares recorded above, the Company will execute and deliver to the Holder a
Warrant of like tenor in the number of Shares granted by the Company (as
recorded above) less the number of Shares exercised.

14.2.        When Exercise Effective.  The exercise of this Warrant shall be deemed
to have been effective for the Holder immediately prior to the close of
business on the business day on which this Warrant is surrendered to the
Company as provided in Section 2.1, and at such time the person or persons in
whose name or names any certificate or certificates for Shares shall be
issuable upon such exercise as provided in Section 2.3 shall be deemed to have
become the holder or holders of record thereof.

14.3.        Delivery of Stock Certificates, Etc.  As soon as practicable after the surrender of
this Warrant, the Company will cause to be issued in the name of, and delivered
to, the Holder a certificate or certificates for the number of fully paid and
non-assessable Shares which the Holder has purchased.

 

14.4.        Expiration Date.  This Warrant shall expire on the earliest of
(i) 540 days of the grant of this Warrant to the Holder, as recorded above,
(ii) the effective date of the first registration statement of the Company to
become effective under the Securities Act of 1933, as amended (the “Securities
Act”), that includes securities to be sold on behalf of the Company to the
public in an underwritten public offering (the “IPO”), and (iii) the closing of
the acquisition of the Company by another entity by means of merger,
consolidation or other transaction or series of related transactions, resulting
in the exchange of the outstanding shares of the Company’s capital stock that
the stockholders of the Company prior to such transaction own, directly or
indirectly, less than fifty percent (50%) of the voting power of the surviving
entity (the earliest such date is referred to herein as the “Expiration Date”).

15.           Adjustments.

15.1.        Subdivisions, Combinations and Other
Issuances.  If the Company shall at
any time prior to the Expiration Date subdivide its Common Stock, by stock
split or otherwise, or combine its Common Stock, or issue additional shares of
its Common Stock as a dividend with respect to any shares of its Common Stock,
the number of Shares issued upon the exercise of this Warrant shall forthwith
be proportionately increased in the case of a subdivision or stock dividend, or
proportionately decreased in the case of a combination.  Appropriate adjustments shall also be made to
the Warrant Price, but the aggregate Warrant Price shall remain the same.  Any adjustment under this Section 3.1 shall
become effective at the close of business on the date the subdivision or
combination becomes effective, or as of the record date of such dividend, or in
the event that no record date is fixed, upon the making of such dividend.

 

 

 

15.2.        Adjustment for Reorganization,
Consolidation, and Merger.  In case
of any reclassification, reorganization or change of the Common Stock of the
Company (other than as a result of a subdivision, combination or stock dividend
provided for in Section 3.1), then, as a condition to such reclassification,
reorganization or change, provision shall be made so that the Holder shall have
the right to purchase prior to the Expiration Date at an aggregate price equal
to the aggregate Warrant Price, the kind and amount of shares of stock and
other securities and property receivable in connection with such
reclassification, reorganization or change by a holder of the same number of
shares of Common Stock as were purchasable by the Holder immediately prior to
such reclassification, reorganization or change.  In each such case, the terms of this Warrant
shall be applicable to the shares of stock or other securities or property
receivable upon the exercise of this Warrant after such consummation.

16.           No Assignment.  This Warrant is not assignable, nor can it be
resold absent subsequent agreement between the Company and the Holder as
specified in that certain Amended Master Financing Agreement Between PacifiCorp
Funding Partners Trust and Utilicraft Aerospace Industries, Inc. dated
effective as of September 12, 2005.

17.           Market Stand Off Agreement.
The Holder hereby agrees that if so requested by the Company or any
representative of the underwriters (the “Managing Underwriter”) in connection
with any registration of the offering of any securities of the Company under
the Securities Act of 1933, as amended (the “Securities Act”), the Holder shall
not, during the 180-day period (or such longer period as may be requested in
writing by the Managing Underwriter and agreed to in writing by the Company)
(the “Market Standoff Period”) following the effective date of a registration
statement of the Company filed under the Securities Act, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend or
otherwise transfer or dispose of any Shares or other securities of the Company,
or enter into any swap or other arrangement that transfers to another, in whole
or in part, any of the economic consequences of ownership of the Shares or
other securities of the Company, whether any such previously described
transaction is to be settled by delivery of the Shares or other securities, in
cash or otherwise; provided, however, that the foregoing such restriction shall
apply only to the first registration statement of the Company to become
effective under the Securities Act that includes securities to be sold on
behalf of the Company to the public in an underwritten public offering under
the Securities Act.  The Holder further
agrees that the Holder shall execute any “lock-up letter” or similar instrument
submitted by the Managing Underwriter to the Holder that reflects the foregoing
restrictions or any part thereof and that the Managing Underwriter shall be a
third party beneficiary of the provisions of this Section 5 and shall be fully
entitled to enforce all rights set forth herein. The Holder hereby irrevocably
appoints the Company and its President, or either of them, as the Holder’s
agents and attorneys-in-fact, with full power of substitution for
and in the Holder’s name, to execute any such “lock-up letter” or similar
instrument submitted by the Managing Underwriter and to do any and all things
in connection therewith, it being understood and acknowledged by the Holder
that such power of attorney shall not impose or be deemed to impose any
fiduciary duty or any other or obligation on either the Company or its
President, shall be irrevocable and coupled with an 

 

 

 

interest and shall not terminate by operation of law,
whether by the death, bankruptcy or adjudication of incompetency or insanity of
the Holder or the occurrence of any other event.  The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such Market Standoff Period. 
The Holder further agrees that without the prior written consent of the
Managing Underwriter, the Holder shall not, during the Market Standoff Period,
make any demand for or exercise any right (to the extent the Holder shall have
any such right) with respect to, the registration of any Shares or other
securities of the Company.

18.           Replacement of Warrant.  Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity bond (or, in the case of any institutional holder, an
indemnity agreement) reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Company at its expense will execute and deliver, in lieu thereof,
a new Warrant of like tenor and date.

19.           Covenant of Company.  The Company hereby covenants and agrees that
at all times during the term of this Warrant there shall be reserved for
issuance such number of shares of its Common Stock as shall be required to be
issued upon exercise of this Warrant.

20.           Representation and Warranty of
Holder.  The Holder hereby represents
and warrants to the Company that the Holder is an “accredited investor” within
the meaning of Regulation D promulgated under the Securities Act, and
acknowledges that the Company is relying upon this representation and warranty
in the issuance of this Warrant to the Holder.

21.           Legends.  The certificate(s) representing the Shares
shall be imprinted with a legend in substantially the following form:

 

“THESE COMMON SHARES HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS. THESE COMMON SHARES MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THESE COMMON SHARES UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO UTILICRAFT
AEROSPACE INDUSTRIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

22.           Notices.  All notices, consents and other
communications under this Warrant shall be in writing and shall be deemed given
when delivered personally or when mailed by registered mail, return receipt
requested, or reputable overnight delivery service, to the Company at its
principal executive offices (Attn: 
President) and to the Holder at PacifiCorp Funding Partners 

 

 

 

Trust c/o The Newhaven Group, 40 Gerard Street, London
W1V 7 LP (or such other address as the Holder may designate by notice given to
the Company pursuant to this Section 10 and shall be registered on the books of
the Company).

23.           Miscellaneous.

23.1.        Termination.  Neither this Warrant nor any term hereof may
be amended, modified, waived, discharged or terminated orally.

23.2.        Applicable Law.  This Warrant shall be construed and enforced
in accordance with and governed by the laws of the jurisdiction of
incorporation of the Company without regard to provisions thereof relating to
choice of law or conflicts of law.

23.3.        Headings.  The headings in this Warrant are for
convenience of reference only and shall not limit or otherwise affect the
meaning of any provision of this Warrant.

23.4.        No Fractional Shares.  No fractional shares of Common Stock or scrip
representing fractional shares shall be issued in connection with the exercise
of this Warrant.  In lieu of any
fractional shares which would otherwise be issuable, the Company shall pay cash
equal to the product of such fraction multiplied by the fair market value of
one Share as determined in good faith by the Company’s Board of Directors.

23.5.        No Rights as Stockholder.  Until the exercise of this Warrant, the
Holder shall not have or exercise any rights as a stockholder of the Company by
virtue of this Warrant.

24.           Expiration.  The right to exercise this Warrant shall
expire at 5:00 p.m., Eastern Time, on the Expiration Date.

 

IN WITNESS WHEREOF, the Company has caused this Warrant to
be issued by a duly authorized officer thereof as of the date set forth above.

 

	
   

  	
  UTILICRAFT
  AEROSPACE INDUSTRIES, INC., a Nevada corporation

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  John J. Dupont,
  President

  

 

 

 

AGREED AND ACCEPTED:

 

PACIFICORP PARTNERS TRUST

 

 

HOLDER:

 

	
  By:

  	
   

  
	
  Title:

  	
   

  
	
   

  	
  (Authorized Person)

  

 

 

 

EXHIBIT A

 

NOTICE OF EXERCISE

[To be signed only upon
exercise of Warrant]

TO:   Utilicraft Aerospace Industries, Inc.

The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder
___________ shares of Common Stock, as provided for therein, and tenders
herewith payment of the purchase price in full for such shares of $__________,
representing the full purchase price for such shares at the price per share
provided for in such warrant.

and

shall tender payment of
all applicable issuance and transfer taxes, if any.

Please issue a certificate or certificates for such shares of Common
Stock in the name of: _____________________________.

	
   

  	
   

  	
   Name: 

  	
   

  
	
   

  	
   

  	
  Address: 

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature: 

  	
   

  

 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Note: The above signature
  should correspond exactly with the name on the face of this Warrant or with
  the name of assignee appearing in the assignment form below.

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
  , 20

  	
   

  	
   

  
					

 

EXHIBIT B

 

INVESTMENT REPRESENTATION
STATEMENT

(to be executed
upon exercise of Warrant)

 

_______ Shares of Company Common Stock

 

To:  Utilicraft Aerospace Industries, Inc.:

In connection with
the purchase of the above-listed securities pursuant to exercise of the Warrant
referred to herein, the undersigned (the “Holder”) hereby represents to
Utilicraft Aerospace Industries, Inc. (the “Company”) as follows:

1.             Receipt
of Information. The Holder has received all the information it considers
necessary or appropriate to determine whether to purchase the shares of Common
Stock (the “Shares”) issuable upon exercise of the Warrant dated __________
(the “Warrant”).

 

2.             Investment
Representations.

 

(a)           The Holder is acquiring the Shares to
be received upon exercise of this Warrant for the Holder’s own account as
principal, for investment purposes and not with a view to any distribution
thereof in violation of the Securities Act of 1933, as amended (the “Securities
Act”), or any other securities laws, and further understands and acknowledges
that the offer and sale of the Shares to the Holder pursuant to this Warrant
will not be registered under the Securities Act or any state securities laws on
the assumption that the offer and sale of the Shares are exempt from
registration pursuant to Section 4(2) of the Securities Act and Regulation D
thereunder and that Company’s reliance upon such exemption is predicated upon
such Holder’s representations set forth herein.

 

(b)           The Holder is an “accredited
investor” within the meaning of Rule 501(a) of Regulation D under the
Securities Act, and by virtue of such Holder’s experience in financial and
business matters, is capable of evaluating the merits and risks of such
Holder’s investment in the Shares, has the ability to bear the economic risks
of such an investment, including a complete loss of the investment, and has the
capacity to protect the Holder’s own interests.

 

(c)           The Holder acknowledges that the
certificates representing the Shares shall bear a legend substantially as set
forth below indicating the restrictions on transfers to which the Shares are
subject, and instructions shall be given to the transfer agent for the Common
Stock, or other equity security being issued, that no transfer is to be
effected except in compliance with such transfer restrictions:

 

“THESE COMMON SHARES HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS. THESE COMMON SHARES MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN 

 

 

 

EFFECTIVE
REGISTRATION STATEMENT AS TO THESE COMMON SHARES UNDER SAID ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
UTILICRAFT AEROSPACE INDUSTRIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

(d)           Because the Shares have not been
registered under the Securities Act or applicable state securities laws, the
Holder acknowledges that the economic risk of the investment must be borne
indefinitely by such Holder, the Shares cannot be sold by the Holder unless
subsequently registered under the Securities Act and such laws or unless an
exemption from such registration is available, and there is no assurance that
the Shares will ever be so registered in the future.

 

(e)           The Holder hereby acknowledges that
the Company has made available to such Holder such books, records, corporate
documents and other information as such Holder considers necessary to evaluate
the merits and risks of an investment in the Shares.  The Holder and the Holder’s representatives
have had the opportunity to ask questions of representatives of the Company and
have received satisfactory responses thereto, and to request and receive all
documents concerning the Company and the terms and conditions of such Holder’s
investment in the Shares.  The Holder
acknowledges that the Holder has not been offered the Shares by any means of
general solicitation or advertisement, and that no commission or sales charges
is payable to any third party in connection with the exercise of the Warrant.

 

(f)            The Holder recognizes that
investment in the Shares involves a high degree of risk.  Such Holder is aware that no federal or state
agency has made any finding or determination as to the fairness of the Shares
for investment, nor any recommendation or endorsement of the Shares.

 

	
  Dated:

  	
   

  	
  , 200

  	
   

  	
   

  	
  HOLDER:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Typed or Printed Name

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title

  

 

 

 

THIS WARRANT AND THE COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS.
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THE WARRANT MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES UNDER SAID ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO UTILICRAFT AEROSPACE CORP. THAT SUCH REGISTRATION IS NOT
REQUIRED.

 

Warrant No. ____                                                                                                         Issue Date: September 12, 2005

 

UTILICRAFT AEROSPACE INDUSTRIES,
INC.

Warrant
to Purchase Ten Million (10,000,000) Shares of Common Stock

FOR VALUE RECEIVED, UTILICRAFT AEROSPACE INDUSTRIES, INC.,
a Nevada corporation (the “Company”), hereby issues to PacifiCorp Partners
Trust or its permitted and
registered transferee (the “Holder”) the right to purchase from the Company Ten
Million (10,000,000) shares of fully paid and non-assessable Common stock, par
value $0.0001 per share (“Common Stock”) of the Company (the “Shares”), at a
purchase price per Share of Two Dollars Fifty Cents ($2.50) (the “Warrant
Price”).  The number of Shares and the
Warrant Price shall be subject to adjustment from time to time pursuant to the
terms and conditions hereof.

25.           Term. Subject to the terms and
conditions set forth below, this Warrant shall be exercisable in whole or in
part at any time and from time to time on and after the date hereof and on or
before the Expiration Date (as defined in Section 2.4 hereof), and shall be
void thereafter.

26.           Exercise of Warrant.

 

26.1.        Mechanics of Exercise.  The Holder may exercise this Warrant in whole
or in part by surrendering this Warrant, a duly executed Notice of Exercise in
substantially the form attached hereto as Exhibit A and the Investment
Representation Statement in the form annexed hereto as Exhibit B at the
principal executive offices of the Company. 
The Holder shall also deliver to the Company simultaneously with the
Holder’s Notice of Exercise and Investment Representation Statement payment of
the aggregate Warrant Price for the Shares being purchased.  The consideration for the exercise of this
Warrant may be in the form of a bank, cashier’s or certified check payable to
the order of the Company, or by wire transfer to an account designated in
writing by the Company.  In the event
that the Holder elects to exercise less than the full number of Shares recorded
above, the Company will execute and deliver to the 

 

 

 

Holder a Warrant of like tenor in the number of Shares
granted by the Company (as recorded above) less the number of Shares exercised.

26.2.        When Exercise Effective.  The exercise of this Warrant shall be deemed
to have been effective for the Holder immediately prior to the close of
business on the business day on which this Warrant is surrendered to the
Company as provided in Section 2.1, and at such time the person or persons in whose
name or names any certificate or certificates for Shares shall be issuable upon
such exercise as provided in Section 2.3 shall be deemed to have become the
holder or holders of record thereof.

26.3.        Delivery of Stock Certificates, Etc.  As soon as practicable after the surrender of
this Warrant, the Company will cause to be issued in the name of, and delivered
to, the Holder a certificate or certificates for the number of fully paid and
non-assessable Shares which the Holder has purchased.

 

26.4.        Expiration Date.  This Warrant shall expire on the earliest of
(i) 720 days of the grant of this Warrant to the Holder, as recorded above,
(ii) the effective date of the first registration statement of the Company to
become effective under the Securities Act of 1933, as amended (the “Securities
Act”), that includes securities to be sold on behalf of the Company to the
public in an underwritten public offering (the “IPO”), and (iii) the closing of
the acquisition of the Company by another entity by means of merger,
consolidation or other transaction or series of related transactions, resulting
in the exchange of the outstanding shares of the Company’s capital stock that
the stockholders of the Company prior to such transaction own, directly or
indirectly, less than fifty percent (50%) of the voting power of the surviving
entity (the earliest such date is referred to herein as the “Expiration Date”).

27.           Adjustments.

27.1.        Subdivisions, Combinations and Other
Issuances.  If the Company shall at
any time prior to the Expiration Date subdivide its Common Stock, by stock
split or otherwise, or combine its Common Stock, or issue additional shares of
its Common Stock as a dividend with respect to any shares of its Common Stock,
the number of Shares issued upon the exercise of this Warrant shall forthwith
be proportionately increased in the case of a subdivision or stock dividend, or
proportionately decreased in the case of a combination.  Appropriate adjustments shall also be made to
the Warrant Price, but the aggregate Warrant Price shall remain the same.  Any adjustment under this Section 3.1 shall
become effective at the close of business on the date the subdivision or
combination becomes effective, or as of the record date of such dividend, or in
the event that no record date is fixed, upon the making of such dividend.

27.2.        Adjustment for Reorganization,
Consolidation, and Merger.  In case
of any reclassification, reorganization or change of the Common Stock of the
Company (other than as a result of a subdivision, combination or stock dividend
provided for in Section 3.1), then, as a condition to such reclassification,
reorganization or change, provision shall be made so that the 

 

 

 

Holder shall have the right to purchase prior to the
Expiration Date at an aggregate price equal to the aggregate Warrant Price, the
kind and amount of shares of stock and other securities and property receivable
in connection with such reclassification, reorganization or change by a holder
of the same number of shares of Common Stock as were purchasable by the Holder
immediately prior to such reclassification, reorganization or change.  In each such case, the terms of this Warrant
shall be applicable to the shares of stock or other securities or property
receivable upon the exercise of this Warrant after such consummation.

28.           No Assignment.  This Warrant is not assignable, nor can it be
resold absent subsequent agreement between the Company and the Holder as
specified in that certain Amended Master Financing Agreement Between PacifiCorp
Funding Partners Trust and Utilicraft Aerospace Industries, Inc. dated
effective as of September 12, 2005.

29.           Market Stand Off Agreement.
The Holder hereby agrees that if so requested by the Company or any
representative of the underwriters (the “Managing Underwriter”) in connection
with any registration of the offering of any securities of the Company under
the Securities Act of 1933, as amended (the “Securities Act”), the Holder shall
not, during the 180-day period (or such longer period as may be requested in
writing by the Managing Underwriter and agreed to in writing by the Company)
(the “Market Standoff Period”) following the effective date of a registration
statement of the Company filed under the Securities Act, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend or
otherwise transfer or dispose of any Shares or other securities of the Company,
or enter into any swap or other arrangement that transfers to another, in whole
or in part, any of the economic consequences of ownership of the Shares or
other securities of the Company, whether any such previously described
transaction is to be settled by delivery of the Shares or other securities, in
cash or otherwise; provided, however, that the foregoing such restriction shall
apply only to the first registration statement of the Company to become
effective under the Securities Act that includes securities to be sold on
behalf of the Company to the public in an underwritten public offering under
the Securities Act.  The Holder further
agrees that the Holder shall execute any “lock-up letter” or similar instrument
submitted by the Managing Underwriter to the Holder that reflects the foregoing
restrictions or any part thereof and that the Managing Underwriter shall be a
third party beneficiary of the provisions of this Section 5 and shall be fully
entitled to enforce all rights set forth herein. The Holder hereby irrevocably
appoints the Company and its President, or either of them, as the Holder’s
agents and attorneys-in-fact, with full power of substitution for
and in the Holder’s name, to execute any such “lock-up letter” or similar
instrument submitted by the Managing Underwriter and to do any and all things
in connection therewith, it being understood and acknowledged by the Holder
that such power of attorney shall not impose or be deemed to impose any
fiduciary duty or any other or obligation on either the Company or its
President, shall be irrevocable and coupled with an interest and shall not
terminate by operation of law, whether by the death, bankruptcy or adjudication
of incompetency or insanity of the Holder or the occurrence of any other
event.  The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.  The Holder further agrees 

 

 

 

that without the prior written consent of the Managing
Underwriter, the Holder shall not, during the Market Standoff Period, make any
demand for or exercise any right (to the extent the Holder shall have any such
right) with respect to, the registration of any Shares or other securities of
the Company.

30.           Replacement of Warrant.  Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity bond (or, in the case of any institutional holder, an
indemnity agreement) reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Company at its expense will execute and deliver, in lieu thereof,
a new Warrant of like tenor and date.

31.           Covenant of Company.  The Company hereby covenants and agrees that
at all times during the term of this Warrant there shall be reserved for
issuance such number of shares of its Common Stock as shall be required to be
issued upon exercise of this Warrant.

32.           Representation and Warranty of
Holder.  The Holder hereby represents
and warrants to the Company that the Holder is an “accredited investor” within
the meaning of Regulation D promulgated under the Securities Act, and
acknowledges that the Company is relying upon this representation and warranty
in the issuance of this Warrant to the Holder.

33.           Legends.  The certificate(s) representing the Shares
shall be imprinted with a legend in substantially the following form:

 

“THESE COMMON SHARES HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS. THESE COMMON SHARES MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THESE COMMON SHARES UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO UTILICRAFT
AEROSPACE INDUSTRIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

34.           Notices.  All notices, consents and other
communications under this Warrant shall be in writing and shall be deemed given
when delivered personally or when mailed by registered mail, return receipt
requested, or reputable overnight delivery service, to the Company at its
principal executive offices (Attn:  President)
and to the Holder at PacifiCorp Funding Partners Trust c/o The Newhaven Group,
40 Gerard Street, London W1V 7 LP (or such other address as the Holder may
designate by notice given to the Company pursuant to this Section 10 and shall
be registered on the books of the Company).

 

 

 

35.           Miscellaneous.

35.1.        Termination.  Neither this Warrant nor any term hereof may
be amended, modified, waived, discharged or terminated orally.

35.2.        Applicable Law.  This Warrant shall be construed and enforced
in accordance with and governed by the laws of the jurisdiction of
incorporation of the Company without regard to provisions thereof relating to
choice of law or conflicts of law.

35.3.        Headings.  The headings in this Warrant are for
convenience of reference only and shall not limit or otherwise affect the
meaning of any provision of this Warrant.

35.4.        No Fractional Shares.  No fractional shares of Common Stock or scrip
representing fractional shares shall be issued in connection with the exercise
of this Warrant.  In lieu of any
fractional shares which would otherwise be issuable, the Company shall pay cash
equal to the product of such fraction multiplied by the fair market value of
one Share as determined in good faith by the Company’s Board of Directors.

35.5.        No Rights as Stockholder.  Until the exercise of this Warrant, the
Holder shall not have or exercise any rights as a stockholder of the Company by
virtue of this Warrant.

36.           Expiration.  The right to exercise this Warrant shall
expire at 5:00 p.m., Eastern Time, on the Expiration Date.

 

IN WITNESS WHEREOF, the Company has caused this Warrant to
be issued by a duly authorized officer thereof as of the date set forth above.

 

	
   

  	
  UTILICRAFT
  AEROSPACE INDUSTRIES, INC., a Nevada corporation

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  John J. Dupont,
  President

  

 

 

 

AGREED AND ACCEPTED:

 

PACIFICORP PARTNERS TRUST

 

 

	
  By:

  	
   

  
	
   

  	
   

  

 

 

	
  Title:

  	
   

  
	
   

  	
  (Authorized Person)

  

 

EXHIBIT A

 

NOTICE OF EXERCISE

[To be signed only upon
exercise of Warrant]

TO:   Utilicraft Aerospace Industries, Inc.

The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder
___________ shares of Common Stock, as provided for therein, and tenders
herewith payment of the purchase price in full for such shares of $__________,
representing the full purchase price for such shares at the price per share
provided for in such warrant.

and

shall tender payment of
all applicable issuance and transfer taxes, if any.

Please issue a certificate or certificates for such shares of Common
Stock in the name of: _____________________________.

	
   

  	
  

  Name: __________________________

  
	
   

  	
  Address: ________________________

  ________________________

  ________________________

  
	
   

  	
  Signature: ______________________

  
	
   

  	
  _______________________________

  Note:  The
  above signature should correspond exactly with the name on the face of this
  Warrant or with the name of assignee appearing in the assignment form below.

  

Dated:  _____________, 20___

 

EXHIBIT B

 

INVESTMENT REPRESENTATION
STATEMENT

(to be executed
upon exercise of Warrant)

 

_______ Shares of Company Common Stock

 

To:  Utilicraft Aerospace Industries, Inc.:

In connection with
the purchase of the above-listed securities pursuant to exercise of the Warrant
referred to herein, the undersigned (the “Holder”) hereby represents to
Utilicraft Aerospace Industries, Inc. (the “Company”) as follows:

1.             Receipt
of Information. The Holder has received all the information it considers
necessary or appropriate to determine whether to purchase the shares of Common
Stock (the “Shares”) issuable upon exercise of the Warrant dated __________
(the “Warrant”).

 

2.             Investment
Representations.

 

(a)           The Holder is acquiring the Shares to
be received upon exercise of this Warrant for the Holder’s own account as
principal, for investment purposes and not with a view to any distribution
thereof in violation of the Securities Act of 1933, as amended (the “Securities
Act”), or any other securities laws, and further understands and acknowledges
that the offer and sale of the Shares to the Holder pursuant to this Warrant
will not be registered under the Securities Act or any state securities laws on
the assumption that the offer and sale of the Shares are exempt from
registration pursuant to Section 4(2) of the Securities Act and Regulation D
thereunder and that Company’s reliance upon such exemption is predicated upon
such Holder’s representations set forth herein.

 

(b)           The Holder is an “accredited
investor” within the meaning of Rule 501(a) of Regulation D under the
Securities Act, and by virtue of such Holder’s experience in financial and
business matters, is capable of evaluating the merits and risks of such
Holder’s investment in the Shares, has the ability to bear the economic risks
of such an investment, including a complete loss of the investment, and has the
capacity to protect the Holder’s own interests.

 

(c)           The Holder acknowledges that the
certificates representing the Shares shall bear a legend substantially as set
forth below indicating the restrictions on transfers to which the Shares are
subject, and instructions shall be given to the transfer agent for the Common
Stock, or other equity security being issued, that no transfer is to be
effected except in compliance with such transfer restrictions:

 

“THESE COMMON SHARES HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS. THESE COMMON SHARES MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THESE COMMON SHARES UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO UTILICRAFT
AEROSPACE INDUSTRIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

(d)           Because the Shares have not been
registered under the Securities Act or applicable state securities laws, the
Holder acknowledges that the economic risk of the investment must be borne
indefinitely by such Holder, the Shares cannot be sold by the Holder unless
subsequently registered under the Securities Act and such laws or unless an
exemption from such registration is available, and there is no assurance that
the Shares will ever be so registered in the future.

 

(e)           The Holder hereby acknowledges that
the Company has made available to such Holder such books, records, corporate
documents and other information as such Holder considers necessary to evaluate
the merits and risks of an investment in the Shares.  The Holder and the Holder’s representatives
have had the opportunity to ask questions of representatives of the Company and
have received satisfactory responses thereto, and to request and receive all
documents concerning the Company and the terms and conditions of such Holder’s
investment in the Shares.  The Holder acknowledges
that the Holder has not been offered the Shares by any means of general
solicitation or advertisement, and that no commission or sales charges is
payable to any third party in connection with the exercise of the Warrant.

 

(f)            The Holder recognizes that
investment in the Shares involves a high degree of risk.  Such Holder is aware that no federal or state
agency has made any finding or determination as to the fairness of the Shares
for investment, nor any recommendation or endorsement of the Shares.

 

	
  Dated: _________________, 200___

  	
   

  	
  HOLDER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ________________________________________ 

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ________________________________________ 

  
	
   

  	
   

  	
  Typed or Printed Name

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ________________________________________ 

  
	
   

  	
   

  	
  Title

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