THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID
ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE
TO THE BORROWER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.


                            SECURED CONVERTIBLE NOTE
July 22, 2002                                            $1,000,000
                                                          -------

         FOR VALUE RECEIVED, AVIATION GENERAL, INCORPORATED, a Delaware
corporation (hereinafter called the "Borrower"), hereby promises to pay to the
order of Nyltiak Investments, LLC or registered assigns (the "Holder") the sum
of One Million Dollars ($1,000,000), on December 31, 2004 (the "Maturity Date"),
and to pay interest on the unpaid principal balance hereof at the rate of six
percent (6%) per annum from July, 2002, (the "Issue Date") until the same
becomes due and payable, whether at maturity or upon acceleration or by
prepayment or otherwise. Any amount of principal or interest on the Note that is
not paid when due shall bear interest at the rate of ten percent (10%) per annum
from the due date thereof until the same is paid ("Default Interest"). Interest
shall commence accruing on July 22, 2002, shall be computed on the basis of a
365-day year and the actual number of days elapsed and shall be payable (i)
semi-annually on June 30 and December 31 of each year until the Maturity Date or
(ii) at the time of conversion of the principal to which such interest relates
in accordance with Article I below. All payments of principal and accrued
interest (to the extent not converted into common stock, par value $0.50 per
share, of the Borrower (the "Common Stock") in accordance with the terms hereof)
shall be made in lawful money of the United States of America. All payments
shall be made at such address as the Holder shall hereafter give to the Borrower
by written notice made in accordance with the provisions of this Note. Whenever
any amount expressed to be due by the terms of this Note is due on any day that
is not a business day, the same shall instead be due on the next succeeding day
that is a business day and, in the case of any interest payment due that is not
the date on which this Note is paid in full, the extension of the due date
thereof shall not be taken into account for purposes of determining the amount
of interest due on such date. As used in this Note, the term "business day"
shall mean any day other than a Saturday, Sunday or a day on which commercial
banks in the city of New York, New York are authorized or required by law or
executive order to remain closed. Each capitalized term used herein, and not
otherwise defined, shall have the meaning ascribed thereto in that certain
Securities Purchase Agreement, dated as of the date hereof, pursuant to which
this Note was originally issued (the "Purchase Agreement"). This Note is the
"Note" described in that certain "Security Agreement" dated as of the date
hereof by and between the Lender and the Borrower, and the indebtedness
evidenced by this Note is included within the meaning of the term "Borrower's
Obligations" in such agreement.

         The following terms shall apply to this Note:


                          ARTICLE I. CONVERSION RIGHTS

         1.1 Conversion Right. The Holder shall have the right from time to
time, and at any time on or prior to the day that all of the principal, accrued
interest and other amounts payable hereunder are paid in full, to convert at any
time all or from time to time any part of the outstanding and unpaid principal
amount of this Note of at least $50,000, or such lesser amount as shall remain
unpaid at the time of the conversion (together with accrued interest thereon),
into fully paid and non-assessable shares of Common Stock, as such Common Stock
exists on the date of issuance of this Note, or any shares of capital stock of
Borrower into which such Common Stock shall hereafter be changed or reclassified
at the conversion price determined as provided herein (the "Conversion Price").

         1.2 Conversion Price. The Conversion Price shall be $0.85 (subject to
adjustment as provided in Section 1.7 and subject to equitable adjustments for
stock splits, stock dividends or rights offerings by the Borrower relating to
the Borrower's securities or the securities of any subsidiary of the Borrower,
combinations, recapitalization, reclassifications, extraordinary distributions
and similar events).

         1.3 Authorized Shares. The Borrower covenants that during the period
the conversion right exists, the Borrower shall reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the full conversion of this Note and the other Notes issued
on the Issue Date. As of the date of issuance of this Note, 1,176,471 authorized
and unissued shares of Common Stock have been duly reserved for issuance upon
conversion of this Note (the "Reserved Amount"). The Borrower represents that
upon issuance such shares will be duly and validly issued, fully paid and
non-assessable and free and clear of all liens, encumbrances and rights of
others.

         1.4      Method of Conversion.
                  --------------------

                  (a) Subject to Section 1.1, this Note may be converted by the
Holder in whole or in part (provided such partial conversion is at least
$50,000, or such lesser amount as shall remain unpaid at the time of the
conversion (together with accrued and unpaid interest thereon)) at any time from
time to time after the Issue Date, by (A) submitting to the Borrower a Notice of
Conversion (by facsimile or other reasonable means of communication dispatched
on the Conversion Date prior to 11:00 p.m., New York City Time) and (B) subject
to Section 1.4(b), surrendering this Note at the principal office of the
Borrower.

                  (b) Notwithstanding anything to the contrary set forth herein,
upon conversion of this Note in accordance with the terms hereof, the Holder
shall not be required to physically surrender this Note to the Borrower unless
the entire unpaid principal amount of this Note is so converted. The Holder and
the Borrower shall maintain records showing the principal amount so converted
and the dates of such conversions or shall use such other method, reasonably
satisfactory to the Holder and the Borrower, so as not to require physical
surrender of this Note upon each such conversion. Notwithstanding the foregoing,
if any portion of this Note is converted as aforesaid, the Holder may not
transfer this Note unless the Holder first physically surrenders this Note to
the Borrower, whereupon the Borrower will forthwith issue and deliver upon the
order of the Holder a new note of like tenor, registered as the Holder (upon
payment by the Holder of any applicable transfer taxes) may request,
representing in the aggregate the remaining unpaid principal amount of this
Note. The Holder and any assignee, by acceptance of this Note, acknowledge and
agree that, by reason of the provisions of this paragraph, following conversion
of a portion of this Note, the unpaid and unconverted principal amount of this
Note represented by this Note may be less than the amount stated on the face
hereof.

                  (c) The Borrower shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issue and delivery of
shares of Common Stock or other securities or property on conversion of this
Note in a name other than that of the Holder (or in street name), and the
Borrower shall not be required to issue or deliver any such shares or other
securities or property unless and until the person or persons (other than the
Holder or the custodian in whose street name such shares are to be held for the
Holder's account) requesting the issuance thereof shall have paid to the
Borrower the amount of any such tax or shall have established to the
satisfaction of the Borrower that such tax has been paid.

                  (d) Upon receipt by the Borrower from the Holder of a
facsimile transmission (or other reasonable means of communication) of a Notice
of Conversion meeting the requirements for conversion as provided in this
Section 1.4, the Borrower shall issue and deliver or cause to be issued and
delivered to the Holder certificates for the Common Stock issuable upon such
conversion within twenty (20) business days after such receipt (and, solely in
the case of conversion of the entire unpaid principal amount hereof, surrender
of this Note) (such tenth business day being hereinafter referred to as the
"Deadline") in accordance with the terms hereof and the Purchase Agreement
(including, without limitation, in accordance with the requirement that
certificates for shares of Common Stock issued on or after the effective date of
a registration statement under the 1933 Act including those shares upon
conversion of this Note shall not bear any restrictive legend).

                  (e) Upon receipt by the Borrower of a Notice of Conversion,
the Holder shall be deemed to be the holder of record of the Common Stock
issuable upon such conversion, the outstanding principal amount and the amount
of accrued and unpaid interest on this Note shall be reduced to reflect such
conversion, and, unless the Borrower defaults on its obligations under this
Article I, all rights with respect to the portion of this Note being so
converted shall forthwith terminate except the right to receive the Common Stock
or other securities, cash or other assets, as herein provided, on such
conversion. If the Holder shall have given a Notice of Conversion as provided
herein, the Borrower's obligation to issue and deliver certificates for Common
Stock shall be absolute and unconditional, irrespective of the absence of any
action by the Holder to enforce the same, any waiver or consent with respect to
any provision thereof, the recovery of any judgment against any person or any
action to enforce the same, any failure or delay in the enforcement of any other
obligation of the Borrower to the holder of record, or any set off,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder of any obligation to the Borrower, and irrespective of any
other circumstance which might otherwise limit such obligation of the Borrower
to the Holder in connection with such conversion. The date of receipt of such
Notice of Conversion shall be the Conversion Date so long as it is received
before 11:00 PM, New York City Time, on such date.

                  (f) In lieu of delivering physical certificates representing
the Common Stock issuable upon conversion, provided the Borrower's transfer
agent is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the Holder and its
compliance with the provisions contained in Section 1.1 and in this Section 1.4,
the Borrower shall cause its transfer agent to electronically transmit the
Common Stock issuable upon conversion to the Holder by crediting the account of
Holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
("DWAC") system.

         1.5 Concerning the Shares. The shares of Common Stock issuable upon
conversion of this Note may not be sold or transferred unless either (i) such
shares shall have been included in an effective registration statement under the
1933 Act or (ii) the Borrower or its transfer agent shall have been furnished
with an opinion or other similar letter of legal counsel reasonably satisfactory
to Borrower to the effect that such sale or transfer is exempt from the
registration requirements of the 1933 Act or (iii) such shares are sold pursuant
to Rule 144 under the 1933 Act (or a successor rule) ("Rule 144"). Except as
otherwise provided in the Purchase Agreement (and subject to the removal
provisions set forth below), each certificate for shares of Common Stock
issuable upon conversion of this Note that has not been so included in an
effective registration statement or that has not been sold pursuant to an
effective registration statement or an exemption that permits removal of the
legend, shall bear a legend substantially in the following form, as appropriate:

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN
         ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
         THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
         UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE
         REASONABLY ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED
         UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD
         PURSUANT TO RULE 144 UNDER SAID ACT.

         The legend set forth above shall be removed and the Borrower shall
issue to the Holder of such shares of Common Stock a new certificate therefor
free of any transfer legend if (i) such shares of Common Stock are registered
for sale under an effective registration statement filed under the 1933 Act, or
(ii) such holder provides the Borrower with an opinion of counsel, in form,
substance and scope reasonably acceptable to the Borrower, to the effect that a
public sale or transfer of such shares of Common Stock may be made without
registration under the 1933 Act and such sale or transfer is effected or (iii)
such holder provides the Borrower with reasonable assurances that such shares
can be sold pursuant to Rule 144(k) under the 1933 Act (or a successor rule
thereto) without any restriction as to the number of shares acquired as of a
particular date that can then be immediately sold. Nothing in this Note shall
(i) limit the Borrower's obligation under the Registration Rights Agreement or
(ii) affect in any way the Holder's obligations to comply with applicable
prospectus delivery requirements upon the resale of the securities referred to
herein.

         1.6      Effect of Certain Events.
                  ------------------------

                  (a) At the option of the Holder, the sale, conveyance or
disposition of all or substantially all of the assets of the Borrower, the
effectuation by the Borrower of a transaction or series of related transactions
in which more than fifty percent (50%) of the voting power of the Borrower is
disposed of, the acquisition of more than fifty percent (50%) of the voting
power of the Borrower by one Person (as defined below) or Persons, a change in
persons constituting a majority of the board of directors in a single
stockholder meeting or action by consent, or the consolidation, merger or other
business combination of the Borrower with or into any other Person or Persons
when the Borrower is not the survivor shall either: (i) be deemed to be an Event
of Default (as defined in Article IV) pursuant to which the Borrower shall be
required to pay to the Holder an amount equal to the Default Amount (as defined
in Article IV) or (ii) be treated pursuant to Section 1.6(b) hereof. "Person"
shall mean any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.

                  (b) If, at any time when this Note is issued and outstanding,
there shall be any merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which shares of Common
Stock of the Borrower shall be changed into the same or a different number of
shares of another class or classes of stock or securities of the Borrower or
another Person, or in case of any sale or conveyance of all or substantially all
of the assets of the Borrower other than in connection with a plan of complete
liquidation of the Borrower, then the Holder of this Note shall thereafter have
the right to receive upon conversion of this Note, upon the bases and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such stock, securities or
assets which the Holder would have been entitled to receive in such transaction
had this Note been converted in full immediately prior to such transaction
(without regard to any limitations on conversion set forth herein), and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the Holder of this Note to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Conversion
Price and of the number of shares issuable upon conversion of the Note) shall
thereafter be applicable, as nearly as may be practicable in relation to any
securities or assets thereafter deliverable upon the exercise hereof. The
Borrower shall not effect any transaction described in this Section 1. 6(b)
unless (a) it first gives, to the extent practicable, forty-five (45) days prior
written notice (but in any event at least thirty (30) days prior written notice)
of the record date of the special meeting of stockholders to approve, or if
there is no such record date, the consummation of, such merger, consolidation,
exchange of shares, recapitalization, reorganization or other similar event or
sale of assets (during which time the Holder shall be entitled to convert this
Note) and (b) the resulting successor or acquiring entity (if not the Borrower)
assumes by written instrument the obligations of this Section 1.6(b). The above
provisions shall similarly apply to successive consolidations, mergers, sales,
transfers or share exchanges.

                  (c) If the Borrower shall declare or make any distribution of
its assets (or rights to acquire its assets) to holders of Common Stock as a
dividend, stock repurchase, by way of return of capital or otherwise (including
any dividend or distribution to the Borrower's stockholders in cash or shares
(or rights to acquire shares)) of capital stock of a subsidiary (i.e., a
spin-off) (a "Distribution"), the Holder of this Note shall be entitled, upon
any conversion of this Note after the date of record for determining
stockholders entitled to such Distribution, to receive the amount of such assets
which would have been payable to the Holder with respect to the shares of Common
Stock issuable upon such conversion 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.

                  (d) If, at any time when any Notes are issued and outstanding,
the Borrower issues any convertible securities or rights to purchase stock,
warrants, securities or other property (the "Purchase Rights") pro rata to the
record holders of any class of Common Stock, then the Holder of this Note upon
any conversion of this Note following the issuance of such Purchase Rights will
be entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such Holder could have acquired if such Holder
had held the number of shares of Common Stock acquirable upon complete
conversion of this Note (without regard to any limitations on conversion
contained herein) immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights.

                   (e) If the Borrower issues additional shares of Common Stock,
options to purchase or rights to subscribe for Common Stock, securities by their
terms convertible or exchangeable for Common Stock or options to purchase or
rights to subscribe for such convertible or exchangeable Securities ("Additional
Stock") without consideration or for a consideration per share less than the
Conversion Price in effect on the date of and immediately prior to such
issuance, then, in each such event, the Conversion Price then in effect shall be
reduced to a price (calculated to the nearest cent) determined by multiplying
the Conversion Price by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such issue plus the
number of shares of Common Stock that the aggregate consideration received by
the Borrower for such issuance would purchase at the Conversion Price in effect
immediately prior to such issuance, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
plus the number of shares of such Additional Stock; provided that, for the
purposes of this calculation, the number of shares of Common Stock outstanding
immediately prior to such issuance shall be calculated on a fully diluted basis,
as if the Note and all other outstanding convertible securities of the Borrower
had been fully converted into shares of Common Stock immediately prior to such
issuance and any outstanding options had been fully exercised immediately prior
to such issuance (and the resulting securities fully converted into shares of
Common Stock, if so convertible) as of such date, but such calculation shall not
include any additional shares of Common Stock issuable with respect to the Note,
other convertible securities or outstanding options, solely as a result of the
adjustment of the Conversion Price resulting from the issuance of additional
shares of Common Stock causing such adjustment. Notwithstanding the foregoing,
the following issuances of Common Stock or options to purchase Common Stock
shall not cause any adjustment of the Conversion Price: (i) the exercise of any
options to purchase Common Stock outstanding as of the date hereof and (ii) the
grant or exercise of up to 500,000 additional options to purchase Common Stock
having exercise prices of less than $1.00 per share that may be granted from
time to time to officers, directors, employees or consultants of the Company.

                  (f) In the case of the issuance of shares of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by the Borrower for any underwriting or otherwise in
connection with the issuance and sale thereof.

                  (g) In the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined in good
faith by the Board of Directors.

                  (h) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, securities by their terms convertible into
or exchangeable for Common Stock or options to purchase or rights to subscribe
for such convertible or exchangeable securities, the following provisions shall
apply when calculating the adjustment to the Conversion Price under Section
1.6(e):

         (i) In the case of options to purchase or rights to subscribe for
Common Stock, (x) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to subscribe for
Common Stock shall be deemed to have been issued at the time such options or
rights were issued, and (y) the aggregate consideration received by the Borrower
shall equal the consideration, if any, received by the Borrower upon the
issuance of such options or rights plus the minimum exercise price provided in
such options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby (the consideration in each
case to be determined in the manner provided in Sections 1.6(f) and (g).

         (ii) In the case of securities convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, (x) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities, or upon the exercise of options to purchase or rights
to subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof, shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued, and (y) the
aggregate consideration received by the Borrower shall equal the consideration,
if any, received by the Borrower for any such securities and related options or
rights (excluding any cash received on account of accrued interest or accrued
dividends), plus the minimum additional consideration, if any, to be received by
the Borrower (without taking into account potential antidilution adjustments)
upon the conversion or exchange of such securities or the exercise of any
related options or rights (the consideration in each case to be determined in
the manner provided in Sections 1.6(f) and (g).

         (iii) In the event of any change in the number of shares of Common
Stock deliverable or in the consideration payable to the Borrower upon exercise
of such options or rights or upon conversion of or in exchange for such
convertible or exchangeable securities, including, but not limited to, a change
resulting from the antidilution provisions thereof, the Conversion Price, to the
extent in any way affected by or computed using such options, rights or
securities, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such options or rights or
conversion or exchange of such securities.

         (iv) Upon the expiration of any such options or rights, the termination
of any such rights to convert or exchange or the expiration of any options or
rights related to such convertible or exchangeable securities, the Conversion
Price, to the extent in any way affected by or computed using such options,
rights or securities or options or rights related to such securities, shall be
recomputed to reflect the issuance of only the number of shares of Common Stock
(and convertible or exchangeable securities which remain in effect) actually
issued upon the exercise of such options or rights related to such securities
and the consideration deemed paid therefor shall be appropriately adjusted to
reflect such termination or expiration.

                  (i) Upon the occurrence of each adjustment or readjustment of
the Conversion Price as a result of the events described in this Section 1.6,
the Borrower, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to the Holder of a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Borrower shall, upon the written
request at any time of the Holder, furnish to such Holder, a like certificate
setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at
the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other securities or property which at the time would be
received upon conversion of the Note.

         1.7 Status as Stockholder. Upon submission of a Notice of Conversion by
a Holder, (i) the shares covered thereby shall be deemed converted into shares
of Common Stock and (ii) the Holder's rights as a Holder of such converted
portion of this Note shall cease and terminate, excepting only the right to
receive certificates for such shares of Common Stock and to any remedies
provided herein or otherwise available at law or in equity to such Holder
because of a failure by the Borrower to comply with the terms of this Note.
Notwithstanding the foregoing, if a Holder has not received certificates for all
shares of Common Stock prior to the tenth (10th) business day after the
expiration of the Deadline with respect to a conversion of any portion of this
Note for any reason, then (unless the Holder otherwise elects to retain its
status as a holder of Common Stock by so notifying the Borrower), the Holder
shall regain the rights of a Holder of this Note with respect to such
unconverted portions of this Note and the Borrower shall, as soon as
practicable, return such unconverted Note to the holder or, if the Note has not
been surrendered, adjust its records to reflect that such portion of this Note
has not been converted.

                         ARTICLE II. NEGATIVE COVENANTS

         So long as the Borrower shall have any obligation under this Note, the
Borrower shall not without the Holder's written consent (a) pay, declare or set
apart for such payment, any dividend or other distribution (whether in cash,
property or other securities) on shares of capital stock other than dividends on
shares of Common Stock solely in the form of additional shares of Common Stock,
(b) directly or indirectly or through any subsidiary make any other payment or
distribution in respect of its capital stock, or (c) redeem any shares of its
capital stock.

                       ARTICLE III. PAYMENT AND REDEMPTION

         3.1 Mandatory Payment. The Borrower shall be required to pay this Note
in accordance with this Section 3.1 to the extent the Holder hereof has not
previously converted the Note or any portion thereof outstanding on the Maturity
Date in accordance with Section 1.1. No later than five (5) business days after
the Maturity Date (the "Payment Date"), the Borrower shall make payment of the
Mandatory Payment Amount (as defined below) in cash to or upon the order of the
Holder as specified by the Holder in writing to the Borrower. The "Mandatory
Payment Amount" shall be equal to the sum of (a) the outstanding principal
amount of this Note plus (b) accrued and unpaid interest on the principal amount
of this Note plus (c) Default Interest, if any, on the interest referred to in
the immediately preceding clause.

         3.2 Optional Redemption. So long as no Event of Default shall have
occurred and be continuing, the Borrower may redeem all or any portion of this
Note upon ten (10) days prior written notice (a "Redemption Notice") delivered
prior to the Maturity Date in accordance with this Section 3.2. Any Redemption
Notice shall be delivered to the Holder at its registered address appearing on
the records of the Borrower and shall state (1) that the Borrower is exercising
its right to redeem this Note and (2) the date of redemption, which date must be
on or prior to the Maturity Date. On the date fixed for redemption (the
"Redemption Date"), the Borrower shall make payment of the Redemption Amount (as
hereinafter defined) in cash to or upon the order of the Holder as specified by
the Holder in writing to the Borrower at least one (1) business day prior to the
Redemption Date. The "Redemption Amount" shall be equal to the sum of (a) one
hundred fifteen percent (115%) of the then outstanding principal amount of this
Note plus (b) accrued and unpaid interest on the unpaid principal amount of this
Note to the date of payment plus (c) Default Interest, if any, on the interest
referred to in the immediately preceding clause. Notwithstanding anything to the
contrary contained in this Section 3.2, the Holder shall at all times following
the Issue Date and prior to the Redemption Date maintain the right to convert
all or any part of this Note in accordance with Article I and any amounts so
converted after receipt of a Redemption Notice and prior to the Redemption Date
set forth in such notice and payment of the aggregate Redemption Amount shall be
deducted from the amount which is otherwise subject to redemption pursuant to
the Redemption Notice.

         3.3 Deposit of Redemption Price. On or prior to the date of a
Redemption Notice, the Borrower shall deposit with an escrow agent or segregate
and hold in trust an amount of money sufficient to pay the Redemption Amount. If
the Note or any portion thereof is converted prior to its redemption, any money
deposited with the escrow agent or so segregated and held in trust for the
redemption of such portion of the Note shall be paid to the Borrower or, if then
held by he Borrower, discharged from such trust.

                          ARTICLE IV. EVENTS OF DEFAULT

                  If any of the following events of default (each, an "Event of
Default") shall occur:

         4.1 Failure to Pay Principal or Interest. The Borrower fails to pay the
principal hereof when due or fails to pay interest thereon within five (5)
business days of the date it is due, whether at maturity, upon acceleration, or
otherwise.

         4.2 Conversion and the Shares. The Borrower fails to issue shares of
Common Stock to the Holder upon exercise by the Holder of the conversion rights
of the Holder in accordance with the terms of this Note, fails to transfer any
certificate for shares of Common Stock issued to the Holder upon conversion of
this Note and when required by this Note or the Investor Rights Agreement, or
fails to remove any restrictive legend on any certificate for any shares of
Common Stock issued to the Holder upon conversion of this Note as and when
required by this Note, the Purchase Agreement or the Investor Rights Agreement
and any such failure shall continue uncured (or any announcement, statement or
threat not to honor conversions shall not be rescinded) for twenty (20) days
after the Borrower shall have been notified thereof in writing by the Holder.

         4.3 Breach. The Borrower breaches in any material respect any
representation, warranty, covenant or other term or condition contained in any
of the Transaction Documents or any document delivered by or on behalf of the
Borrower in connection therewith, and such breach continues for a period of ten
(10) business days after written notice thereof to the Borrower from the Holder.

         4.4 Receiver or Trustee. The Borrower or any subsidiary of the Borrower
shall make an assignment for the benefit of creditors, or apply for or consent
to the appointment of a receiver or trustee for it or for a substantial part of
its property or business, or such a receiver or trustee shall otherwise be
appointed.

         4.5 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower or any
subsidiary of the Borrower.

         4.6 Other Defaults. Failure by the Borrower to pay or perform any other
indebtedness or material obligation whether contingent or otherwise, or if any
such other indebtedness or material obligation shall be accelerated, or if there
exists any event of default under any instrument, document or agreement
governing, evidencing or securing such other indebtedness or material
obligation.

         4.7 Certain Legal Actions. Any levy, seizure, attachment, execution or
similar process shall be issued or levied on any of the Borrower's property,
which such process could have a Material Adverse Effect on the business of the
Borrower in the Holder's reasonable judgment.

then, upon the occurrence and during the continuation of any Event of Default
specified in Sections 4.1, 4.2, 4.3, 4.6 or 4.7, at the option of the Holder,
and upon the occurrence of an Event of Default specified in Sections 4.4 or 4.5,
the Notes shall become immediately due and payable and the Borrower shall pay to
the Holder, in full satisfaction of its obligations hereunder, an amount equal
to the sum of (w) the then outstanding principal amount of this Note plus (x)
accrued and unpaid interest on the unpaid principal amount of this Note to the
date of payment plus (y) Default Interest, if any, on the interest referred to
in the immediately preceding clause (the "Default Amount") and all other amounts
payable hereunder shall immediately become due and payable, all without demand,
presentment or notice, all of which hereby are expressly waived, together with
all costs, including, without limitation, legal fees and expenses, of
collection, and the Holder shall be entitled to exercise all other rights and
remedies available at law or in equity.

                            ARTICLE V. MISCELLANEOUS

         5.1 Failure or Indulgence Not Waiver. No failure or delay on the part
of the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privileges. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.

         5.2 Notices. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by courier or sent by
United States mail and shall be deemed to have been given upon receipt if
personally served (which shall include telephone line facsimile transmission) or
sent by courier or three (3) days after being deposited in the United States
mail, certified, with postage pre-paid and properly addressed, if sent by mail.
For the purposes hereof, the address of the Holder shall be as shown on the
records of the Borrower; and the address of the Borrower shall be Aviation
General, Incorporated, 7200 Northwest 63rd Street, Bethany, Oklahoma 73008,
facsimile number: (405) 495-8383. Both the Holder and the Borrower may change
the address for service by service of written notice to the other as herein
provided.

         5.3 Amendments. This Note and any provision hereof may only be amended
by an instrument in writing signed by the Borrower and the Holder. The term
"Note" and all reference thereto, as used throughout this instrument, shall mean
this instrument (and the other Notes issued pursuant to the Purchase Agreement)
as originally executed, or if later amended or supplemented, then as so amended
or supplemented.

         5.4 Assignability. Borrower may not assign this Note without the prior
written consent of the Holder. This Note shall be binding upon the Borrower and
its successors and assigns, and shall inure to be the benefit of the Holder and
its successors and assigns. Each transferee of this Note must be an "accredited
investor" (as defined in Rule 501(a) of the 1933 Act). Notwithstanding anything
in this Note to the contrary, this Note may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement.

         5.5 Cost of Collection. If default is made in the payment of this Note,
the Borrower shall pay the Holder hereof costs of collection, including
reasonable attorneys' fees.

         5.6 Governing Law. This Note shall be governed by the internal laws of
the State of New York, without regard to the principles of conflict of laws.

         5.7 Certain Amounts. Whenever pursuant to this Note the Borrower is
required to pay an amount in excess of the outstanding principal amount (or the
portion thereof required to be paid at that time) plus accrued and unpaid
interest plus Default Interest on such interest, the Borrower and the Holder
agree that the actual damages to the Holder from the receipt of cash payment on
this Note may be difficult to determine and the amount to be so paid by the
Borrower represents stipulated damages and not a penalty and is intended to
compensate the Holder in part for loss of the opportunity to convert this Note
and to earn a return from the sale of shares of Common Stock acquired upon
conversion of this Note at a price in excess of the price paid for such shares
pursuant to this Note. The Borrower and the Holder hereby agree that such amount
of stipulated damages is not plainly disproportionate to the possible loss to
the Holder from the receipt of a cash payment without the opportunity to convert
this Note into shares of Common Stock.

         5.8 Denominations. At the request of the Holder, upon surrender of this
Note, the Borrower shall promptly issue new Notes in the aggregate outstanding
principal amount hereof, in the form hereof, in such denominations of at least
$50,000 as the Holder shall request.

         5.9 Purchase Agreement. By its acceptance of this Note, the Holder
agrees to be bound by the applicable terms of the Purchase Agreement.

         5.10 Notice of Corporate Events. Except as otherwise provided below,
the Holder of this Note shall have no rights as a Holder of Common Stock unless
and only to the extent that it converts this Note into Common Stock. The
Borrower shall provide the Holder with prior notification of any meeting of the
Borrower's stockholders (and copies of proxy materials and other information
sent to stockholders). In the event of any taking by the Borrower of a record of
its stockholders for the purpose of determining stockholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation,
reclassification or recapitalization) any share of any class or any other
securities or property, or to receive any other right, or for the purpose of
determining stockholders who are entitled to vote in connection with any
proposed sale, lease or conveyance of all or substantially all of the assets of
the Borrower or any proposed liquidation, dissolution or winding up of the
Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20)
days prior to the record date specified therein (or thirty (30) days prior to
the consummation of the transaction or event, whichever is earlier), of the date
on which any such record is to be taken for the purpose of such dividend,
distribution, right or other event, and a brief statement regarding the amount
and character of such dividend, distribution, right or other event to the extent
known at such time. The Borrower shall make a public announcement of any event
requiring notification to the holder hereunder substantially simultaneously with
the notification to the Holder in accordance with the terms of this Section
5.10.

         IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its
name by its duly authorized officer this 22 day of July, 2002.

                                 AVIATION GENERAL, INCORPORATED




                              By:
                   -----------------------------------------------------------
                               Name:
                               Title:



<PAGE>



                                                               Exhibit A

                              NOTICE OF CONVERSION
                           OF SECURED CONVERTIBLE NOTE

TO:

                  (1) Pursuant to the terms of the attached Secured Convertible
Note (the "Note"), the undersigned hereby elects to convert $ principal amount
of the Note into shares of Common Stock of Aviation General, Incorporated, a
Delaware corporation (the "Borrower"). Capitalized terms used herein and not
otherwise defined herein have the respective meanings provided in the Note.

                  (2) Please issue a certificate or certificates for the number
of shares of Common Stock into which such principal amount of the Note (plus
interest thereon to the extent not paid in cash in accordance with the terms of
the Note) is convertible ( shares, based on the Holder's calculation attached
hereto) in the name(s) specified immediately below or, if additional space is
necessary, on an attachment hereto:


Name                                                          Name


Address                                                       Address


SS or Tax ID Number                                         SS or Tax ID Number


                  (3) Holder acknowledges and affirms that the Common Stock
issued pursuant to this Notice of Conversion has been or will be sold in
accordance with the requirements of the 1933 Act, if applicable, or pursuant to
an exemption under the 1933 Act.


Date                                                          Signature of
                                                              Registered Holder
                                                              (must be signed
                                                              exactly as name
                                                              appears in the
                                                              Note).