Document:

Unassociated Document

    THIS
      WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT
      BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. EXCEPT AS OTHERWISE
      SET
      FORTH HEREIN, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD,
      TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
      FOR SUCH SECURITIES UNDER SAID ACT OR, AN OPINION OF COUNSEL, IN FORM, SUBSTANCE
      AND SCOPE, CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT
      REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE
      144
      UNDER SUCH ACT.

    

    

    AERO
      GROUP INCORPORATED

    

    Warrant
      to Purchase ________________ Shares of Common Stock of

    AERO
      GROUP INCORPORATED

    (a
      Utah corporation)

    

    THIS
      CERTIFIES THAT,
      for
      value received, __________________ or his registered assigns (the “Holder”),
      is
      entitled to purchase from Aero Group Incorporated, a Utah corporation (the
      “Company”),
      at
      any time or from time to time during the period specified in Paragraph 2 hereof,
      __________________________________ fully paid and nonassessable shares of the
      Company=s
      Common
      Stock, $0.005 par value per share (the “Common
      Stock”),
      at an
      exercise price per share equal to $0.003 (the “Initial
      Exercise Price”).
      The
      term “Warrant Shares,” as used herein, refers to the shares of Common Stock
      purchasable hereunder. The Warrant Shares and the Initial Exercise Price are
      subject to adjustment as provided in Paragraph 4 hereof.

    

    This
      Warrant is subject to the following terms, provisions, and conditions:

    1. Manner
      of Exercise; Issuance of Certificates; Payment for
      Shares.
      Subject
      to the provisions hereof, this Warrant may be exercised by the Holder hereof,
      in
      whole or in part, by the surrender of this Warrant, together with a completed
      exercise agreement in the form attached hereto (the “Exercise
      Agreement”),
      to
      the Transfer Agent during normal business hours on any business day at the
      Transfer Agent=s
      principal executive offices (or such other office or agency of the Transfer
      Agent as it may designate by notice to the Holder hereof), and upon payment
      to
      the Company in cash, by certified or official bank check or by wire transfer
      for
      the account of the Company of the Exercise Price for the Warrant Shares
      specified in the Exercise Agreement. The Warrant Shares so purchased shall
      be
      deemed to be issued to the Holder hereof or such Holder=s
      designee, as the record owner of such shares, as of the close of business on
      the
      date on which this Warrant shall have been surrendered, the completed Exercise
      Agreement shall have been delivered, and payment shall have been made for such
      shares as set forth above. Certificates for the Warrant Shares so purchased,
      representing the aggregate number of shares specified in the Exercise Agreement,
      shall be delivered by the Transfer Agent to the Holder hereof within a
      reasonable time, not exceeding three (3) business days, after this Warrant
      shall
      have been so exercised. The certificates so delivered shall be in such
      denominations as may be requested by the Holder hereof and shall be registered
      in the name of such Holder or such other name as shall be designated by such
      Holder. If this Warrant shall have been exercised only in part, then, unless
      this Warrant has expired, the Transfer Agent shall, at Company=s
      expense, at the time of delivery of such certificates, deliver to the Holder
      a
      new Warrant representing the number of shares with respect to which this Warrant
      shall not then have been exercised.

    

    
      
        
        

      

      
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    Notwithstanding
      anything in this Warrant to the contrary, in no event shall the Holder of this
      Warrant be entitled to exercise a number of Warrants (or portions thereof)
      in
      excess of the number of Warrants (or portions thereof) upon exercise of which
      the sum of (i) the number of shares of Common Stock beneficially owned by the
      Holder and his affiliates (other than shares of Common Stock which may be deemed
      beneficially owned through the ownership of the unexercised Warrants and the
      unexercised or unconverted portion of any other securities of the Company
      subject to a limitation on conversion or exercise analogous to the limitation
      contained herein) and (ii) the number of shares of Common Stock issuable upon
      exercise of the Warrants (or portions thereof) with respect to which the
      determination described herein is being made, would result in beneficial
      ownership by the Holder and his affiliates of more than 4.9% of the outstanding
      shares of Common Stock. For purposes of the immediately preceding sentence,
      beneficial ownership shall be determined in accordance with Section 13(d) of
      the
      Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder,
      except as otherwise provided in clause (i) of the preceding sentence.
      Notwithstanding anything to the contrary contained herein, the limitation on
      exercise of this Warrant set forth herein may not be amended without the written
      consent of the Holder hereof and the Company.

    

    2.    Period
      of Exercise.
      This
      Warrant is exercisable at any time or from time to time on or after the date
      on
      which this Warrant is issued and delivered and before 5:00 p.m., New York City
      time on [Five
      Years From Issuance Date]
      (the
“Exercise
      Period”).

    

    
      
        3.    Certain
          Agreements of the Company.
          The
          Company hereby covenants and agrees
          as
          follows:

      

    

    

    (a) Shares
      to be Fully Paid.
      All
      Warrant Shares will, upon issuance in accordance with the terms of this Warrant,
      be validly issued, fully paid, and nonassessable and free from all taxes, liens,
      and charges with respect to the issue thereof.

    

    (b) Reservation
      of Shares.
      During
      the Exercise Period, the Company shall at all times have authorized, and
      reserved for the purpose of issuance upon exercise of this Warrant, a sufficient
      number of shares of Common Stock to provide for the exercise of this
      Warrant.

    

    (c) Listing.
      The
      Company shall promptly secure the listing of the shares of Common Stock issuable
      upon exercise of the Warrant upon each national securities exchange or automated
      quotation system, if any, upon which shares of Common Stock are then listed
      (subject to official notice of issuance upon exercise of this Warrant) and
      shall
      maintain, so long as any other shares of Common Stock shall be so listed, such
      listing of all shares of Common Stock from time to time issuable upon the
      exercise of this Warrant; and the Company shall so list on each national
      securities exchange or automated quotation system, as the case may be, and
      shall
      maintain such listing of, any other shares of capital stock of the Company
      issuable upon the exercise of this Warrant if and so long as any shares of
      the
      same class shall be listed on such national securities exchange or automated
      quotation system.

    

    
      
        
        

      

      
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    (d) Certain
      Actions Prohibited.
      The
      Company will not, by amendment of its charter or through any reorganization,
      transfer of assets, consolidation, merger, dissolution, issue or sale of
      securities, or any other voluntary action, avoid or seek to avoid the observance
      or performance of any of the terms to be observed or performed by it hereunder,
      but will at all times in good faith assist in the carrying out of all the
      provisions of this Warrant and in the taking of all such action as may
      reasonably be requested by the Holder of this Warrant in order to protect the
      exercise privilege of the Holder of this Warrant against impairment, consistent
      with the tenor and purpose of this Warrant. Without limiting the generality
      of
      the foregoing, the Company (i) will not increase the par value of any shares
      of
      Common Stock receivable upon the exercise of this Warrant above the Exercise
      Price then in effect, and (ii) will take all such actions as may be necessary
      or
      appropriate in order that the Company may validly and legally issue fully paid
      and nonassessable shares of Common Stock upon the exercise of this
      Warrant.

    

    (e) Successors
      and Assigns.
      This
      Warrant will be binding upon any entity succeeding to the Company by merger,
      consolidation, or acquisition of all or substantially all the
      Company=s
      assets.

    

    4.    Antidilution
      Provisions.
      During
      the Exercise Period, the Initial Exercise Price, (in this section, the
AExercise
      Price@)
      and the
      number of Warrant Shares shall be subject to adjustment from time to time as
      provided in this Paragraph 4.

    

    In
      the
      event that any adjustment of the Exercise Price as required herein results
      in a
      fraction of a cent, such Exercise Price shall be rounded up to the nearest
      cent.

    

    (a) Adjustment
      of Exercise Price and Number of Shares upon Issuance of Common
      Stock.
      Except
      as otherwise provided in Paragraphs 4(c) and 4(e) hereof, if and whenever on
      or
      after the date of issuance of this Warrant, the Company issues or sells, or
      in
      accordance with Paragraph 4(b) hereof is deemed to have issued or sold, any
      shares of Common Stock for no consideration or for a consideration per share
      (before deduction of reasonable expenses or commissions or underwriting
      discounts or allowances in connection therewith) less than the Market Price
      (as
      hereinafter defined) on the date of issuance (a “Dilutive
      Issuance”),
      then
      immediately upon the Dilutive Issuance, the Exercise Price will be reduced
      to a
      price determined by multiplying the Exercise Price in effect immediately prior
      to the Dilutive Issuance by a fraction, (i) the numerator of which is an amount
      equal to the sum of (x) the number of shares of Common Stock actually
      outstanding immediately prior to the Dilutive Issuance, plus (y) the quotient
      of
      the aggregate consideration, calculated as set forth in Paragraph 4(b) hereof,
      received by the Company upon such Dilutive Issuance divided by the Market Price
      in effect immediately prior to the Dilutive Issuance, and (ii) the denominator
      of which is the total number of shares of Common Stock Deemed Outstanding (as
      defined below) immediately after the Dilutive Issuance. 

    

    
      
        
        

      

      
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    (b) Effect
      on Exercise Price of Certain Events.
      For
      purposes of determining the adjusted Exercise Price under Paragraph 4(a) hereof,
      the following will be applicable:

    

    (i) Issuance
      of Rights or Options.
      If the
      Company in any manner issues or grants any warrants, rights or options, whether
      or not immediately exercisable, to subscribe for or to purchase Common Stock
      or
      other securities convertible into or exchangeable for Common Stock (AConvertible
      Securities@)
      (such
      warrants, rights and options to purchase Common Stock or Convertible Securities
      are hereinafter referred to as AOptions@)
      and the
      price per share for which Common Stock is issuable upon the exercise of such
      Options is less than the Market Price on the date of issuance or grant of such
      Options, then the maximum total number of shares of Common Stock issuable upon
      the exercise of all such Options will, as of the date of the issuance or grant
      of such Options, be deemed to be outstanding and to have been issued and sold
      by
      the Company for such price per share. For purposes of the preceding sentence,
      the “price
      per
      share for which Common Stock is issuable upon the exercise of such Options” is
      determined by dividing (i) the total amount, if any, received or receivable
      by
      the Company as consideration for the issuance or granting of all such Options,
      plus the minimum aggregate amount of additional consideration, if any, payable
      to the Company upon the exercise of all such Options, plus, in the case of
      Convertible Securities issuable upon the exercise of such Options, the minimum
      aggregate amount of additional consideration payable upon the conversion or
      exchange thereof at the time such Convertible Securities first become
      convertible or exchangeable, by (ii) the maximum total number of shares of
      Common Stock issuable upon the exercise of all such Options (assuming full
      conversion of Convertible Securities, if applicable). No further adjustment
      to
      the Exercise Price will be made upon the actual issuance of such Common Stock
      upon the exercise of such Options or upon the conversion or exchange of
      Convertible Securities issuable upon exercise of such Options.

    

    (ii) Issuance
      of Convertible Securities.
      If the
      Company in any manner issues or sells any Convertible Securities, whether or
      not
      immediately convertible (other than where the same are issuable upon the
      exercise of Options) and the price per share for which Common Stock is issuable
      upon such conversion or exchange is less than the Market Price on the date
      of
      issuance, then the maximum total number of shares of Common Stock issuable
      upon
      the conversion or exchange of all such Convertible Securities will, as of the
      date of the issuance of such Convertible Securities, be deemed to be outstanding
      and to have been issued and sold by the Company for such price per share. For
      the purposes of the preceding sentence, the “price per share for which Common
      Stock is issuable upon such conversion or exchange” is determined by dividing
      (i) the total amount, if any, received or receivable by the Company as
      consideration for the issuance or sale of all such Convertible Securities,
      plus
      the minimum aggregate amount of additional consideration, if any, payable to
      the
      Company upon the conversion or exchange thereof at the time such Convertible
      Securities first become convertible or exchangeable, by (ii) the maximum total
      number of shares of Common Stock issuable upon the conversion or exchange of
      all
      such Convertible Securities. No further adjustment to the Exercise Price will
      be
      made upon the actual issuance of such Common Stock upon conversion or exchange
      of such Convertible Securities.

    

    
      
        
        

      

      
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    (iii) Change
      in Option Price or Conversion Rate.
      If there
      is a change at any time in (i) the amount of additional consideration payable
      to
      the Company upon the exercise of any Options; (ii) the amount of additional
      consideration, if any, payable to the Company upon the conversion or exchange
      of
      any Convertible Securities; or (iii) the rate at which any Convertible
      Securities are convertible into or exchangeable for Common Stock (other than
      under or by reason of provisions designed to protect against dilution), the
      Exercise Price in effect at the time of such change will be readjusted to the
      Exercise Price which would have been in effect at such time had such Options
      or
      Convertible Securities still outstanding provided for such changed additional
      consideration or changed conversion rate, as the case may be, at the time
      initially granted, issued or sold.

    

    (iv) Treatment
      of Expired Options and Unexercised Convertible
      Securities.
      If, in
      any case, the total number of shares of Common Stock issuable upon exercise
      of
      any Option or upon conversion or exchange of any Convertible Securities is
      not,
      in fact, issued and the rights to exercise such Option or to convert or exchange
      such Convertible Securities shall have expired or terminated, the Exercise
      Price
      then in effect will be readjusted to the Exercise Price which would have been
      in
      effect at the time of such expiration or termination had such Option or
      Convertible Securities, to the extent outstanding immediately prior to such
      expiration or termination (other than in respect of the actual number of shares
      of Common Stock issued upon exercise or conversion thereof), never been
      issued.

    

    (v) Calculation
      of Consideration Received.
      If any
      Common Stock, Options or Convertible Securities are issued, granted or sold
      for
      cash, the consideration received therefor for purposes of this Warrant will
      be
      the amount received by the Company therefor, before deduction of reasonable
      commissions, underwriting discounts or allowances or other reasonable expenses
      paid or incurred by the Company in connection with such issuance, grant or
      sale.
      In case any Common Stock, Options or Convertible Securities are issued or sold
      for a consideration part or all of which shall be other than cash, the amount
      of
      the consideration other than cash received by the Company will be the fair
      value
      of such consideration, except where such consideration consists of securities,
      in which case the amount of consideration received by the Company will be the
      Market Price thereof as of the date of receipt. In case any Common Stock,
      Options or Convertible Securities are issued in connection with any acquisition,
      merger or consolidation in which the Company is the surviving corporation,
      the
      amount of consideration therefor will be deemed to be the fair value of such
      portion of the net assets and business of the non-surviving corporation as
      is
      attributable to such Common Stock, Options or Convertible Securities, as the
      case may be. The fair value of any consideration other than cash or securities
      will be determined in good faith by the Board of Directors of the
      Company.

    

    
      
        
        

      

      
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    (vi) Exceptions
      to Adjustment of Exercise Price.
      No
      adjustment to the Exercise Price will be made (i) upon the exercise of any
      warrants, options or convertible securities granted, issued and outstanding
      on
      the date of issuance of this Warrant; (ii) upon the grant or exercise of any
      stock or options which may hereafter be granted or exercised under any employee
      benefit plan, stock option plan or restricted stock plan of the Company now
      existing or to be implemented in the future, so long as the issuance of such
      stock or options is approved by a majority of the independent members of the
      Board of Directors of the Company or a majority of the members of a committee
      of
      independent directors established for such purpose; or (iii) upon the exercise
      of the Warrants.

    

    (c) Subdivision
      or Combination of Common Stock.
      If the
      Company at any time subdivides (by any stock split, stock dividend,
      recapitalization, reorganization, reclassification or otherwise) the shares
      of
      Common Stock acquirable hereunder into a greater number of shares, then, after
      the date of record for effecting such subdivision, the Exercise Price in effect
      immediately prior to such subdivision will be proportionately reduced. If the
      Company at any time combines (by reverse stock split, recapitalization,
      reorganization, reclassification or otherwise) the shares of Common Stock
      acquirable hereunder into a smaller number of shares, then, after the date
      of
      record for effecting such combination, the Exercise Price in effect immediately
      prior to such combination will be proportionately increased.

    

    (d) Adjustment
      in Number of Shares.
      Upon
      each adjustment of the Exercise Price pursuant to the provisions of this
      Paragraph 4, the number of shares of Common Stock issuable upon exercise of
      this
      Warrant shall be adjusted by multiplying a number equal to the Exercise Price
      in
      effect immediately prior to such adjustment by the number of shares of Common
      Stock issuable upon exercise of this Warrant immediately prior to such
      adjustment and dividing the product so obtained by the adjusted Exercise
      Price.

    

    (e) Consolidation,
      Merger or Sale.
      In case
      of any consolidation of the Company with, or merger of the Company into any
      other corporation, or in case of any sale or conveyance of all or substantially
      all of the assets of the Company other than in connection with a plan of
      complete liquidation of the Company, then as a condition of such consolidation,
      merger or sale or conveyance, adequate provision will be made whereby the Holder
      of this Warrant will have the right to acquire and receive upon exercise of
      this
      Warrant in lieu of the shares of Common Stock immediately theretofore acquirable
      upon the exercise of this Warrant, such shares of stock, securities or assets
      as
      may be issued or payable with respect to or in exchange for the number of shares
      of Common Stock immediately theretofore acquirable and receivable upon exercise
      of this Warrant had such consolidation, merger or sale or conveyance not taken
      place if all shareholders of record of the Company=s
      Common
      Stock, as a result of such consolidation, merger or sale or conveyance, will
      exchange their shares for securities of any other corporation. In any such
      case,
      the Company will make appropriate provision to insure that the provisions of
      this Paragraph 4 hereof will thereafter be applicable as nearly as may be in
      relation to any shares of stock or securities thereafter deliverable upon the
      exercise of this Warrant. The Company will not effect any consolidation, merger
      or sale or conveyance unless prior to the consummation thereof, the successor
      corporation (if other than the Company) assumes by written instrument the
      obligations under this Paragraph 4 and the obligations to deliver to the Holder
      of this Warrant such shares of stock, securities or assets as, in accordance
      with the foregoing provisions, the Holder may be entitled to
      acquire.

    

    
      
        
        

      

      
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    (f) Distribution
      of Assets.
      In case
      the Company shall declare or make any distribution of its assets (including
      cash) to holders of Common Stock as a partial liquidating dividend, by way
      of
      return of capital or otherwise, then, after the date of record for determining
      stockholders entitled to such distribution, but prior to the date of
      distribution, the Holder of this Warrant shall be entitled upon exercise of
      this
      Warrant for the purchase of any or all of the shares of Common Stock subject
      hereto, to receive the amount of such assets which would have been payable
      to
      the Holder had such Holder been the holder of such shares of Common Stock on
      the
      record date for the determination of stockholders entitled to such
      distribution.

    

    (g) Notice
      of Adjustment.
      Upon the
      occurrence of any event which requires any adjustment of the Exercise Price,
      then, and in each such case, the Company shall give notice thereof to the Holder
      of this Warrant, which notice shall state the Exercise Price resulting from
      such
      adjustment and the increase or decrease in the number of Warrant Shares
      purchasable at such price upon exercise, setting forth in reasonable detail
      the
      method of calculation and the facts upon which such calculation is based. Such
      calculation shall be certified by the Chief Financial Officer of the
      Company.

    

    (h) Minimum
      Adjustment of Exercise Price.
      No
      adjustment of the Exercise Price shall be made in an amount of less than 1%
      of
      the Exercise Price in effect at the time such adjustment is otherwise required
      to be made, but any such lesser adjustment shall be carried forward and shall
      be
      made at the time and together with the next subsequent adjustment which,
      together with any adjustments so carried forward, shall amount to not less
      than
      1% of such Exercise Price.

    

    (i) No
      Fractional Shares.
      No
      fractional shares of Common Stock are to be issued upon the exercise of this
      Warrant, but the Company shall pay a cash adjustment in respect of any
      fractional share which would otherwise be issuable in an amount equal to the
      same fraction of the Market Price of a share of Common Stock on the date of
      such
      exercise.

    

    (j) Other
      Notices.
      In case
      at any time:

    

    (i) the
      Company shall declare any dividend upon the Common Stock payable in shares
      of
      stock of any class or make any other distribution (including dividends or
      distributions payable in cash out of retained earnings) to the holders of the
      Common Stock;

    

    
      
        
        

      

      
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    (ii) the
      Company shall offer for subscription pro rata to the holders of the Common
      Stock
      any additional shares of stock of any class or other rights;

    

    (iii) there
      shall be any capital reorganization of the Company, or reclassification of
      the
      Common Stock, or consolidation or merger of the Company with or into, or sale
      of
      all or substantially all its assets to, another corporation or entity;
      or

    

    (iv) there
      shall be a voluntary or involuntary dissolution, liquidation or winding-up
      of
      the Company;

    

    then,
      in
      each such case, the Company shall give to the Holder of this Warrant (a) notice
      of the date on which the books of the Company shall close or a record shall
      be
      taken for determining the holders of Common Stock entitled to receive any such
      dividend, distribution, or subscription rights or for determining the holders
      of
      Common Stock entitled to vote in respect of any such reorganization,
      reclassification, consolidation, merger, sale, dissolution, liquidation or
      winding-up and (b) in the case of any such reorganization, reclassification,
      consolidation, merger, sale, dissolution, liquidation or winding-up, notice
      of
      the date (or, if not then known, a reasonable approximation thereof by the
      Company) when the same shall take place. Such notice shall also specify the
      date
      on which the holders of Common Stock shall be entitled to receive such dividend,
      distribution, or subscription rights or to exchange their Common Stock for
      stock
      or other securities or property deliverable upon such reorganization,
      re-classification, consolidation, merger, sale, dissolution, liquidation, or
      winding-up, as the case may be. Such notice shall be given at least 30 days
      prior to the record date or the date on which the Company=s
      books
      are closed in respect thereto. Failure to give any such notice or any defect
      therein shall not affect the validity of the proceedings referred to in clauses
      (i), (ii), (iii) and (iv) above.

    

    (k) Certain
      Events.
      If any
      event occurs of the type contemplated by the adjustment provisions of this
      Paragraph 4 but not expressly provided for by such provisions, the Company
      will
      give notice of such event as provided in Paragraph 4(g) hereof, and the
      Company=s
      Board
      of Directors will make an appropriate adjustment in the Exercise Price and
      the
      number of shares of Common Stock acquirable upon exercise of this Warrant so
      that the rights of the Holder shall be neither enhanced nor diminished by such
      event.

    

    (l) Certain
      Definitions. 

    

    (i) “Common
      Stock Deemed Outstanding”
      shall
      mean the
      number of shares of Common Stock actually outstanding (not including shares
      of
      Common Stock held in the treasury of the Company), plus (x) pursuant to
      Paragraph 4(b)(i) hereof, the maximum total number of shares of Common Stock
      issuable upon the exercise of Options, as of the date of such issuance or grant
      of such Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the
      maximum total number of shares of Common Stock issuable upon conversion or
      exchange of Convertible Securities, as of the date of issuance of such
      Convertible Securities, if any. 

    

    
      
        
        

      

      
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    (ii) “Market
      Price,”
      as of
      any date, (i) means the average of the last reported sale prices for the shares
      of Common Stock on the Over-the-Counter Bulletin Board (the AOTC
      BB@)
      for the
      five (5) Trading Days immediately preceding such date as reported by Bloomberg,
      or (ii) if the OTC BB is not the principal trading market for the shares of
      Common Stock, the average of the last reported sale prices on the principal
      trading market for the Common Stock during the same period as reported by
      Bloomberg, or (iii) if market value cannot be calculated as of such date on
      any
      of the foregoing bases, the Market Price shall be the fair market value as
      reasonably determined in good faith by (a) the Board of Directors of the
      Corporation or, at the option of a majority-in-interest of the Holders of the
      outstanding Warrants by (b) an independent investment bank of nationally
      recognized standing in the valuation of businesses similar to the business
      of
      the corporation. The manner of determining the Market Price of the Common Stock
      set forth in the foregoing definition shall apply with respect to any other
      security in respect of which a determination as to market value must be made
      hereunder.

    

    (iii) “Common
      Stock,”
      for
      purposes of this Paragraph 4, includes the Common Stock, no par value per share,
      and any additional class of stock of the Company having no preference as to
      dividends or distributions on liquidation, provided that the shares purchasable
      pursuant to this Warrant shall include only shares of Common Stock, no par
      value
      per share, in respect of which this Warrant is exercisable, or shares resulting
      from any subdivision or combination of such Common Stock, or in the case of
      any
      reorganization, reclassification, consolidation, merger, or sale of the
      character referred to in Paragraph 4(e) hereof, the stock or other securities
      or
      property provided for in such Paragraph.

    

    5.    Issue
      Tax.
      The
      issuance of certificates for Warrant Shares upon the exercise of this Warrant
      shall be made without charge to the Holder of this Warrant or such shares for
      any issuance tax or other costs in respect thereof, provided that the Company
      shall not be required to pay any tax which may be payable in respect of any
      transfer involved in the issuance and delivery of any certificate in a name
      other than the Holder of this Warrant.

    

    6.    No
      Rights or Liabilities as a Shareholder.
      This
      Warrant shall not entitle the Holder hereof to any voting rights or other rights
      as a shareholder of the Company. No provision of this Warrant, in the absence
      of
      affirmative action by the Holder hereof to purchase Warrant Shares, and no
      mere
      enumeration herein of the rights or privileges of the Holder hereof, shall
      give
      rise to any liability of such Holder for the Exercise Price or as a shareholder
      of the Company, whether such liability is asserted by the Company or by
      creditors of the Company.

    

    7.    Transfer,
      Exchange, and Replacement of Warrant.

    

    (a) Restriction
      on Transfer.
      This
      Warrant and the rights granted to the Holder hereof are transferable, in whole
      or in part, upon surrender of this Warrant, together with a properly executed
      assignment in the form attached hereto, at the office or agency of the Company
      referred to in Paragraph 7(e) below, provided, however, that any transfer or
      assignment shall be subject to the conditions set forth in Paragraph 7(f)
      hereof. Until due presentment for registration of transfer on the books of
      the
      Company, the Company may treat the registered Holder hereof as the owner and
      Holder hereof for all purposes, and the Company shall not be affected by any
      notice to the contrary. 

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (b) Warrant
      Exchangeable for Different Denominations.
      This
      Warrant is exchangeable, upon the surrender hereof by the Holder hereof at
      the
      office or agency of the Company referred to in Paragraph 7(e) below, for new
      Warrants of like tenor representing in the aggregate the right to purchase
      the
      number of shares of Common Stock which may be purchased hereunder, each of
      such
      new Warrants to represent the right to purchase such number of shares as shall
      be designated by the Holder hereof at the time of such surrender.

    

    (c) 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 agreement reasonably
      satisfactory in form and amount to the Company, or, in the case of any such
      mutilation, upon surrender and cancellation of this Warrant, the Company, at
      its
      expense, will execute and deliver, in lieu thereof, a new Warrant of like
      tenor.

    

    (d) Cancellation;
      Payment of Expenses.
      Upon the
      surrender of this Warrant in connection with any transfer, exchange, or
      replacement as provided in this Paragraph 7, this Warrant shall be promptly
      canceled by the Company. The Company shall pay all taxes (other than securities
      transfer taxes) and all other expenses (other than legal expenses, if any,
      incurred by the holder or transferees) and charges payable in connection with
      the preparation, execution, and delivery of Warrants pursuant to this Paragraph
      7.

    

    (e) Register.
      The
      Company shall maintain, at its principal executive offices (or such other office
      or agency of the Company as it may designate by notice to the Holder hereof),
      a
      register for this Warrant, in which the Company shall record the name and
      address of the person in whose name this Warrant has been issued, as well as
      the
      name and address of each transferee and each prior owner of this
      Warrant.

    

    (f) Exercise
      or Transfer Without Registration.
      If, at
      the time of the surrender of this Warrant in connection with any exercise,
      transfer, or exchange of this Warrant, this Warrant (or, in the case of any
      exercise, the Warrant Shares issuable hereunder), shall not be registered under
      the Securities Act of 1933, as amended (the ASecurities
      Act@)
      and
      under applicable state securities or blue sky laws, the Company may require,
      as
      a condition of allowing such exercise, transfer, or exchange, (i) that the
      Holder or transferee of this Warrant, as the case may be, furnish to the Company
      a written opinion of counsel, which opinion and counsel are acceptable to the
      Company, to the effect that such exercise, transfer, or exchange may be made
      without registration under said Act and under applicable state securities or
      blue sky laws, (ii) that the Holder or transferee execute and deliver to the
      Company an investment letter in form and substance acceptable to the Company
      and
      (iii) that the transferee be an “accredited
      investor” as defined in Rule 501(a) promulgated under the Securities Act;
      provided that no such opinion, letter or status as an Aaccredited
      investor@
      shall be
      required in connection with a transfer pursuant to Rule 144 under the Securities
      Act. The first Holder of this Warrant, by taking and holding the same,
      represents to the Company that such Holder is acquiring this Warrant for
      investment and not with a view to the distribution thereof. 

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    8.    Notices.
      All
      notices, requests, and other communications required or permitted to be given
      or
      delivered hereunder to the Holder of this Warrant shall be in writing, and
      shall
      be personally delivered, or shall be sent by certified or registered mail or
      by
      recognized overnight mail courier, postage prepaid and addressed, to such Holder
      at the address shown for such Holder on the books of the Company, or at such
      other address as shall have been furnished to the Company by notice from such
      Holder. All notices, requests, and other communications required or permitted
      to
      be given or delivered hereunder to the Company shall be in writing, and shall
      be
      personally delivered, or shall be sent by certified or registered mail or by
      recognized overnight mail courier, postage prepaid and addressed, to the office
      of the Company at 6213 Aviation Avenue, Jacksonville, Florida 32221, Attention:
      Chief Executive Officer, or at such other address as shall have been furnished
      to the Holder of this Warrant by notice from the Company. Any such notice,
      request, or other communication may be sent by facsimile, but shall in such
      case
      be subsequently confirmed by a writing personally delivered or sent by certified
      or registered mail or by recognized overnight mail courier as provided above.
      All notices, requests, and other communications shall be deemed to have been
      given either at the time of the receipt thereof by the person entitled to
      receive such notice at the address of such person for purposes of this Paragraph
      8, or, if mailed by registered or certified mail or with a recognized overnight
      mail courier upon deposit with the United States Post Office or such overnight
      mail courier, if postage is prepaid and the mailing is properly addressed,
      as
      the case may be.

    

    9.    Governing
      Law.
      THIS
      WARRANT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
      LAWS
      OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
      ENTIRELY WITH SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
      THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED
      STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE
      ARISING UNDER THIS WARRANT, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH
      OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY
      WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT
      OR
      PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY
      MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE
      OF
      PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL
      AFFECT EITHER PARTY=S
      RIGHT
      TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT
      A
      FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE
      AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY
      OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING
      UNDER THIS WARRANT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
      ATTORNEYS=
      FEES,
      INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE.

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    11.    Miscellaneous.

    

    (a) Amendments.
      This
      Warrant and any provision hereof may only be amended by an instrument in writing
      signed by the Company and the Holder hereof.

    

    (b) Descriptive
      Headings.
      The
      descriptive headings of the several paragraphs of this Warrant are inserted
      for
      purposes of reference only, and shall not affect the meaning or construction
      of
      any of the provisions hereof.

    

    (c) Remedies.
      The
      Company acknowledges that a breach by it of its obligations hereunder will
      cause
      irreparable harm to the Holder, by vitiating the intent and purpose of the
      transaction contemplated hereby. Accordingly, the Company acknowledges that
      the
      remedy at law for a breach of its obligations under this Warrant will be
      inadequate and agrees, in the event of a breach or threatened breach by the
      Company of the provisions of this Warrant, that the Holder shall be entitled,
      in
      addition to all other available remedies at law or in equity, and in addition
      to
      the penalties assessable herein, to an injunction or injunctions restraining,
      preventing or curing any breach of this Warrant and to enforce specifically
      the
      terms and provisions thereof, without the necessity of showing economic loss
      and
      without any bond or other security being required.

    

    [This
      Space Intentionally Left Blank]

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF,
      the
      Company has caused this Warrant to be signed by its duly authorized
      officer.

     

     

    
      	 	 	 
	 	AEROGROUP
              INCORPORATED 
	 
 	 
 	 
 
	 	By:  	/s/ 
	 	
              
     
Mark
              Daniels
	 	       
              Chief Executive Officer

    

    

    Dated
      as
      of ______________, 200___

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    FORM
      OF EXERCISE AGREEMENT

    

    

    Dated:
      ________ __, 200_

    To: Aero
      Group Incorporated

    

    

    The
      undersigned, pursuant to the provisions set forth in the within Warrant, hereby
      agrees to purchase ________ shares of Common Stock covered by such Warrant,
      and
      makes payment herewith in full therefor at the price per share provided by
      such
      Warrant: in cash or by certified or official bank check in the amount of
      ____________ . Please issue a certificate or certificates for such shares of
      Common Stock in the name of and pay any cash for any fractional share
      to:

     

    
      	 	Name:______________________________
	 	 
	 	 
	 	Signature:
              ____________________________
	 	Address:  
              ____________________________
	 	
                                
                 ____________________________

            

    

    

    
      	 	
              Note:

            	
              The
                above signature should correspond exactly with the name on the face
                of the
                within Warrant, if applicable.

            

    

    

    and,
      if
      said number of shares of Common Stock shall not be all the shares purchasable
      under the within Warrant, a new Warrant is to be issued in the name of said
      undersigned covering the balance of the shares purchasable thereunder less
      any
      fraction of a share paid in cash.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

    FORM
      OF ASSIGNMENT

    

    

    FOR
      VALUE RECEIVED,
      the
      undersigned hereby sells, assigns, and transfers all the rights of the
      undersigned under the within Warrant, with respect to the number of shares
      of
      Common Stock covered thereby set forth hereinbelow, to:

     

    
      	
              Name
                of Assignee

            	
              Address

            	
              No
                of
                Shares

            

    

          

    

    

    

    

    

    

    ,
      and
      hereby irrevocably constitutes and appoints ___________________________________
      as agent and attorney-in-fact to transfer said Warrant on the books of the
      within named corporation, with full power of substitution in the
      premises.

    

    

    Dated: ______________,
      200_

    

    
       

      
        	In the presence of:	          
                ______________________________
	 	 
	 	Name:______________________________
	 	 
	 	 
	 	Signature:
                ____________________________
	 	Title of Signing Officer or Agent
                (if
                any):
	 	                  
                ____________________________
	
                 

              	Address:  
                ____________________________
	 	
                                  
                   ____________________________

              
	 	
                                  
                   ____________________________

              

      

       

      
        

        
          	 	
                  Note:

                	
                  The
                    above signature should correspond exactly with the name on the
                    face of the
                    within Warrant, if applicable.

                

        

         

        
          
            
            

          

          
            15Unassociated Document

    SECURED
      PROMISSORY NOTE

    
      	
               

               

              Dated
                as of: June 30, 2006

            	
               

               

              $1,100,000

            

    

    

    FOR
      VALUE RECEIVED,
      the
      undersigned, AeroGroup
      Incorporated,
      a Utah
      corporation (the “Maker”),
      hereby promises to pay to the order of Mark
      T. Daniels
      (“Payee”),
      in
      lawful money of the United States of America, the sum of ONE MILLION ONE HUNDRED
      THOUSAND AND 00/100 ($1,100,000.00) DOLLARS, plus any accrued interest owed
      to
      Payee prior to the date hereof, based on the date of cash advances made by
      Payee, together with interest thereon at the rate of Twelve (12%) Percent per
      annum, until paid in full, at the times and installments set forth below. All
      capitalized terms not defined herein shall have the meanings set forth in the
      Asset Purchase Agreement (as hereinafter defined).

    

    Beginning
      on July 1st
      2008 and
      monthly thereafter, (the first date thereof being referred to as the
“Maturity
      Date”),
      Maker
      shall pay to Payee a total of Thirty Six (36) monthly installments of principal,
      each in the amount of THIRTY THOUSAND FIVE HUNDRED AND FIFTY FIVE AND 55/100
      ($30,555.55) DOLLARS, each such installment of principle to be accompanied
      by
      payment of accrued and unpaid interest on the then unpaid principal balance
      of
      this Note. 

    

    Notwithstanding
      any provision contained herein, the total liability of Maker for payment of
      interest pursuant hereto, including late charges, shall not exceed the maximum
      amount of such interest permitted by law to be charged, collected, or received
      from Maker, and if any payments by Maker include interest in excess of such
      a
      maximum amount, Payee shall apply such excess to the reduction of the unpaid
      principal amount due pursuant hereto, or if none is due, such excess shall
      be
      refunded to Maker.

    

    This
      Note
      is secured by all of the assets of Maker and of each of its Subsidiaries
      pursuant to Security Agreements signed by such entity (the “Security
      Agreement”),
      delivered to the Payee by the Maker and its Subsidiaries pursuant to an Asset
      Purchase Agreement among the parties hereto, entered into contemporaneously
      herewith (the “Asset
      Purchase Agreement”).
      This
      Note is entitled to the benefit of any and all collateral and security interests
      now or hereafter pledged and/or assigned by Maker to Payee, including, without
      limitation, the collateral pledged pursuant to the Security Agreements, and
      any
      and all guaranties by third parties with respect to the Maker’s obligations to
      Payee, including, but not limited to the Guaranty executed by the Subsidiaries
      on an even date herewith (the “Guaranty”),
      and
      any collateral for such guaranties (the documents with respect to all such
      collateral, including the Security Agreement and the Guaranty are collectively
      referred to as the “Collateral
      Documents”).

    

    Maker
      waives presentment for payment, demand, notice of non-payment, notice of
      protest, and protest of this Note, and all other notices in connection with
      the
      delivery, acceptance, performance, default, dishonor, or enforcement of the
      payment of this Note except as otherwise provided herein.
      All
      rights and remedies available to the Payee pursuant to the provisions of
      applicable law, the Collateral Documents and
      otherwise, are cumulative and not exclusive of any thereof or of any other
      rights or remedies available to Payee, and no course of dealing between Maker
      and Payee, or any delay or omission in exercising any right or remedy shall
      operate as a waiver of any right or remedy, and every right and remedy may
      be
      exercised from time to time and as often as shall be deemed appropriate by
      Payee.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Upon
      the
      happening, with respect to the Maker, the Subsidiaries, or any assets of the
      Maker or of any of the Subsidiaries, of any of the following events: (i)
      dissolution; (ii) default in the payment of principal, interest or other amounts
      due with respect to this Note; (iii) the filing of a petition in bankruptcy
      whether voluntary or involuntary; (iv) the filing of an application, whether
      voluntary or involuntary, for reorganization or any arrangement or readjustment
      of indebtedness; (v) the appointment or the filing of an application for the
      appointment of any receiver, trustee, liquidator or any committee; or (vi)
      an
      assignment for the benefit of creditors, or upon sale or transfers of any
      securities of ay Subsidiary (or of any rights to above securities of any
      Subsidiary) then this Note, if not then due or payable on demand, shall become
      due and payable, with respect to any of the events set forth in (i), and (iii)
      through (vi), immediately without demand or notice to the Payee, and with
      respect to the event set forth in (ii), thirty (30) days following such event;
      provided, however, that the default set forth therein has not been cured within
      such thirty (30) day period.

    

    The
      Maker
      may prepay all or any part of the remaining principal balance of this Note
      at
      any time prior to the Maturity Date without penalty or premium. All payments
      on
      this Note shall be applied first to all accrued interest and then to principal.
      To the extent any prepayment is to be applied to principal hereunder, such
      amount shall be applied to the reduction of the monthly installments of
      principal payable hereunder in the inverse order of their maturity.

    

    At
      any
      time and from time to time, this note and all of the outstanding principal
      and
      interest may be converted, in whole or in part, from time to time, into shares
      of the Company’s common stock at a conversion price per share of $.01. This note
      shall automatically become a promissory note convertible into securities of
      any
      successor corporation, by merger or acquisition of assets without consent of
      Maker, and Maker shall require, as a condition to such transaction that this
      note be assumed as such, provided however that the conversion price shall be
      adjusted by multiplying the same by the exchange ratio offered to existing
      stockholders of the Maker for shares of Common Stock. The conversion Price
      shall
      be adjusted from time to time to reflect any adjustments to the Common Stock
      of
      the Maker generally resulting from stock splits, stock dividends, combinations,
      merger or similar actions. 

    

    This
      Note
      shall be governed, interpreted, and enforceable in accordance with the Laws
      of
      the State of New York. This note is an unconditional obligation of Maker for
      the
      payment of the above set forth amounts. 

    

    This
      Note
      may not be altered, modified, amended, terminated or discharged orally. This
      Note is non-negotiable and may not be sold, assigned, pledged, hypothecated,
      or
      transferred in any manner, in whole or in part, nor shall any interest herein
      be
      granted to any third party. 

    [continued
      on next page]

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    

    IN
      WITNESS WHEREOF,
      the
      undersigned has executed this Note on the date first above written

     

    
      	 	 	 
	 	AEROGROUP
              INCORPORATED
	 
 	 
 	 
 
	 	By:  	/s/ 
	 	
              
Name:
	 	Title 

    
      
         

      

      
        3

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