FLYAWAY COST

The SM-74 is presently under development and is not currently in production. Upon entering production, the Per Unit Flyaway Cost (Flyaway Cost) of SM-74 aircraft will be dependent upon the specific model, model block configuration, customer selected avionics-instrumentation-main cabin furnishings package, and all related support equipment specific to an individual aircraft, not including fixed equipment, spares or ground support equipment.

Stavatti Commercial Aerospace is not publicly disclosing specific SM-74 Flyaway or Fleet Acquisition Costs at this time. Qualified Potential Customers interested in obtaining Flyway Cost Information regarding the SM-74 are encouraged to Contact Stavatti.

AVAILABILITY

The SM-74 is currently under development by STAVATTI COMMERCIAL AEROSPACE-Regional Aircraft Systems Division. The SM-74 is not presently in production and is not available for acquisition at this time. Stavatti is prepared to receive orders for the SM-74, hence initial production aircraft will be produced in satisfaction of backlog orders. As of First Quarter 2008, the SM-70 series, including the SM-72, SM-73 and SM-74 are undergoing development as specified in the accompanying Development Schedule:

Stavatti reserves the right to adjust, modify, expedite, cancel or otherwise enhance the projected dates for SM-74 LRIP, IOC or FRP at our discretion. All program phase time-frame estimates are for the benefit of airline budget planners and are non-contractually binding.

Stavatti projects the SM-74 will most likely be available for initial delivery to most qualified customers and enter Full-Rate Production (FRP) from 2015 through 2035 and beyond.
PURCHASE

SM-74 aircraft will be marketed and sold directly by STAVATTI COMMERCIAL AEROSPACE to the end user on a commercial basis.

Stavatti will structure SM-74 production contracts as Fixed Cost Contracts (FCC). Customers may elect to procure SM-74 Standard Configuration aircraft or SM-74s configured for customized end user requirements. In the event customers wish to procure SM-74 Standard Configuration aircraft, there is a distinct possibility that aircraft may be procured from existing Stavatti inventory, thereby significantly reducing delivery lead-time.
Customers who desire an SM-74 of custom configuration, the procurement lead-time will likely increase from 12 to 24 months due to the lead-times associated with the procurement of specific aircraft systems including powerplant, avionics, displays and cabin furnishings. It is for this reason that the Standard Lead Time for the procurement of SM-74 aircraft is estimated at 12 months from date of contract signing upon initiation of FRP. Stavatti’s standard SM-74 acquisition process is as summarized:

1) Customer provides Stavatti with a Letter of Intent (LOI). An LOI is a statement indicating that the customer intends to enter into a binding contract for the purchase of a specified number of SM-74 aircraft. The LOI must include information relating to the number, model and configuration which the customer wishes to procure, the address of the purchasing body, a signature of a qualified purchasing representative of the procurement body and the address of the delivery destination of the aircraft.
2) Customer and Stavatti draft and enter into/sign a SM-74 Purchase Contract (PC). The PC will specify the precise configuration of the aircraft to be procured including cabin configuration and furnishings, avionics, instrumentation, sensors, paint scheme and livery, warranty, associated support equipment, etc. Delivery destination, anticipated delivery date and total contact value will be specified, as well as all other information necessary to produce and deliver the contracted aircraft to the customer in their desired configuration. The executed PC must be accompanied by a Contract Initiation Payment (CIP) valued at ONE THIRD (1/3 or 33.3%) of the Total Contract Value, payable to Stavatti.

3) Stavatti completes the production of SM-74 aircraft to the "Green" or Un-Painted/Pre-Final Integration stage. Prior to "Painting" and completing final integration of aircraft cabin furnishings, sensor, avionic and related systems, the Customer is required to provide a Green Aircraft Payment (GAP) valued at ONE THIRD (1/3 or 33.3%) of the Total Contract Value to be paid to Stavatti. Once the GAP is received by Stavatti, "Green" aircraft enter the painting/final integration phase.

5) Stavatti completes and delivers the SM-74 aircraft as specified in the PC. Upon delivery (or upon completion in the event the Customer receives/takes possession of the completed aircraft directed at the factory) of the contracted aircraft to the customer, the balance of the total contract value, equal to the remaining ONE THIRD (1/3 or 33.3%) of the Total Contract Value, must be paid to Stavatti.

Stavatti will receive payment for domestic SM-74 sales by wire transfer of funds, certified check, United States Dollars/Federal Reserve Notes (USD/FeRNs), gold or alternate precious Platinum Group Metal (PGM). Stavatti will receive payment for foreign export SM-74 sales by wire transfer of funds, United States Dollars/Federal Reserve Notes (USD/FeRNs), gold or alternate precious Platinum Group Metal (PGM).
WARRANTY

Stavatti will assign each SM-74 aircraft with a 5,000 hour, Nose-to-Nozzle, Manufacturer’s Limited Warranty. Stavatti expressly warrants each new SM-74 aircraft (exclusive of powerplant and powerplant accessories as supplied by the powerplant supplier), including factory installed equipment, both standard to the type and optional, to be free from defects in material and workmanship under normal use and service for a period of 5,000 flight hours beginning upon delivery of the aircraft to the initial end user.

Stavatti‘s obligation under this warranty will be limited to repairing or replacing, at its sole option, any component or components which within the applicable warranty period are identified by the owner/operator. The repair or replacement of defective components under this warranty will be made by or through any Stavatti or Stavatti approved service facility without assessment of fee or cost to the warranty holder for components or labor for removal, installation and/or repair. All import duties, sales taxes and use taxes, if any, on such warranty repairs or replacement components are the sole responsibility of the warranty recipient.
The warranty will apply to any SM-74 aircraft, avionics and fixed aircraft equipment as integrated by Stavatti under production contract by the end user which has been flown, maintained and operated in accordance with Stavatti and other applicable manuals, bulletins, airworthiness directives and other written instructions. The warranty, however, will not apply to aircraft, avionics and fixed aircraft equipment as integrated by Stavatti under production contract by the end user which have been subject to misuse, abuse, negligence, or accident; or which have been altered other than by Stavatti, or contrary to applicable manuals, bulletins, and other written instructions provided by Stavatti, in any way that, in the sole judgement of Stavatti, adversely affects their performance, stability or reliability; or to normal maintenance services (such as powerplant adjustments, cleaning, control rigging, brake and other mechanical adjustments and maintenance inspections); or to the replacement of service items (such as brake linings, filters); or to normal deterioration of appurtenances (such as paint and livery) due to wear.

Each SM-74 purchase contract will incorporate a complete description of all aspects associated with the 5,000 hour `Nose-to-Nozzle’ manufacturers limited warranty. Customers will be able to extend their warranties in 500 hour blocks beyond 5,000 hours for a nominal fee.

LEASING

SM-74 aircraft will be made available for lease with customer approved credit directly from Stavatti or through an Approved Stavatti Financial Partner. Stavatti leases will involve the lease of Stavatti owned aircraft to the end user. Lease terms and arrangements must be negotiated on a case-by-case basis and are dependent upon the type and number of aircraft leased and the qualifications of the leasing body. Typical SM-74 Lease Terms will be 36, 60 and 120 months.

All Stavatti lease customers are subject to pre approval requirements. Additional requirements will also apply to qualify for the SM-74 lease program. All lease customers will be required to maintain current Hull and Liability insurance from a qualified aerospace insurance provider throughout the duration of the lease. All leased SM-74 aircraft must be operated by a qualified, SM-74 Type Certified pilot with a current U.S. First Class Medical or equivalent medical certification and no less than 2,000 hours high performance aircraft experience. A Stavatti lease maintenance agreement will be implemented in conjunction with the standard 5,000 hour ‘Nose-to-Nozzle’ Limited Manufacturer’s Warranty. In the event a SM-74 aircraft is destroyed and/or damaged to such an extent that the aircraft is considered a total loss, during either peace or war, the lease customer will responsible for the remainder of the lease owed due, plus the purchase price of the aircraft at lease end.

Additional requirements, limitations and restrictions will apply. Contact Stavatti for more information regarding the leasing of future production SM-74 aircraft.