Document:

Exhibit
10.3

    

    The
warrants represented by this Warrant Certificate and the shares of Common Stock
of Aerosonic Corporation that are issuable pursuant to them have not been
registered under either the United States Securities Act of 1933 or the
securities laws of any state of the United States.  The warrants and
the shares issuable pursuant to them cannot be offered for sale or sold at any
time, as a whole or in part, unless the transaction is registered under the
United States Securities Act of 1933 and every applicable state securities law
or qualifies for an available exemption from registration under those
laws.  As a condition to allowing any transfer of the warrants and the
shares issuable pursuant to them, Aerosonic Corporation may require the
transferee or transferor to deliver to it an opinion of counsel or other
evidence satisfactory to it that confirms that the transfer has been registered
under all applicable state and federal securities laws of the United States or
is exempt from registration under those laws.

    

    

    FORM
OF

    

    WARRANT
CERTIFICATE

    

    
      	
              No.
      _____

            	
                 ________
      Warrants

            

    

    

    AEROSONIC
CORPORATION

    

    COMMON
STOCK PURCHASE WARRANTS

    

    Void
after 5:00 P.M., New York City time, on April 10, 2015.

    

    AEROSONIC CORPORATION (the
“Company”),
a Delaware corporation, certifies that Bruce J. Stone or registered
assigns (the “Registered
Owner”) is the owner of _____________ Common Stock Purchase Warrants of
the Company, each of which entitles the Registered Owner to purchase from the
Company pursuant to the terms and conditions of this Warrant Certificate one
share of the Common Stock of the Company at a purchase price of $.64 (the “Warrant
Price”).  The Common Stock Purchase Warrants represented by
this Warrant Certificate (each a “Warrant”
and, collectively, the “Warrants”)
expire at 5:01 P.M., New York City time, on April 10, 2015 (the “Expiration
Date”), and are subject to the terms and conditions set forth in this
Warrant Certificate.  The Warrant Price and the amount and character
of securities issuable pursuant to the exercise of the Warrants are subject to
adjustment as provided in Sections 7, 8, and 9 of this
Warrant Certificate.  This Warrant Certificate constitutes an
agreement between the Company and the Registered Owner.

    

    
      	
              1.

            	
              Separately
      Transferable Warrants.

            

    

    

    The
Warrants were issued in connection with the issuance by the Company and its
subsidiaries (as co-obligors) of a 14% Subordinated Note due April 10, 2010,
(the “Subordinated
Note” and
pursuant to that certain loan agreement executed as of May 14, 2009 (the “Loan
Agreement”) with Common Stock Purchase Warrants issued to the Registered Owner
(0.25 shares of Common Stock of the Company for each $1.00 of principal amount
of Subordinated Note on the date of each Borrowing).  The Warrants
collectively evidence, as of the date when they were originally issued, as
stated at the end of this Warrant Certificate (the “Original Issue
Date”), the right to purchase up to _________ shares of Common Stock of
the Company at the Warrant Price for each share, subject to adjustment as
provided in Sections
7, 8, and 9 of this Warrant Certificate.  The Warrants are
detached and separately transferable from the Subordinated Note at any time
after the Original Issue Date.

    

    
      	
              2.

            	
              Common Stock
      Issuable.

            

    

    

    As used
in this Warrant Certificate, “Common
Stock” means all the authorized capital stock of the Company (however
classified or designated and whether authorized on or after the Original Issue
Date) that confers on the holders of it, as a class, the following
rights:

    
      
         

      

      
        -1-

        
          

        

      

      
         

      

    

    

    
      	
               
      

            	
              (a)

            	
              the
      right to all or a portion of the current dividends and liquidating
      distributions of the Company, without limitation as to amount, but after
      the payment of dividends and distributions on any shares of capital stock
      entitled to preference; and

            

    

    

    
      	
               
      

            	
              (b)

            	
              in
      the absence of contingencies, the right to vote for the election of a
      majority of the directors of the Company (even if those voting rights have
      been suspended by the occurrence of a
  contingency).

            

    

    

    On the
Original Issue Date, the Common Stock consisted of the Company’s $.40 par value
common stock.

    

    
      	
              3.

            	
              Exercise of
      Warrants.

            

    

    

    The
Warrants are exercisable by the Registered Owner, as a whole, in part, or in
increments at any time or from time to time during the period beginning on the
one-year anniversary of the Original Issue Date and ending on the Expiration
Date. To validly
exercise a Warrant, the Registered Owner must deliver to the Company at its
principal office at 1212 North Hercules Avenue, Clearwater, Florida 33765, this
Warrant Certificate and a Subscription Notice in substantially the form appended
to this Warrant Certificate, duly executed by the Registered Owner or a duly
authorized attorney-in-fact for the Registered Owner, and full payment of the
Warrant Price for each share of Common Stock to be purchased pursuant to the
exercise of the Warrant. The Registered Owner may pay the aggregate Warrant
Price for the shares of Common Stock to be purchased pursuant to the exercise of
any of the Warrants by any combination of the following methods:

    

    
      	
               
      

            	
              (a)

            	
              delivery
      to the Company of a bank draft, official bank check, or personal or
      corporate check payable to the order of the
  Company;

            

    

    

    
      	
               
      

            	
              (b)

            	
              transfer
      to the Company of outstanding shares of Common Stock at the then current
      market price of the Common Stock on the date of the exercise of the
      Warrants (calculated based upon the volume weighted average sales price of
      a share of Common Stock for the five-trading days preceding the date of
      the exercise of the Warrants);

            

    

    

    
      	
               
      

            	
              (c)

            	
              delivery
      to the Company of the Registered Owner’s written election to withhold a
      portion of the shares of Common Stock otherwise issuable pursuant to the
      exercise of the Warrants; or

            

    

    

    
      	
               
      

            	
              (d)

            	
              delivery
      to the Company of a copy of irrevocable instructions that have been
      provided by the Registered Owner to a financial institution or a
      securities broker-dealer to pay promptly to the Company all or a portion
      of the proceeds from either a sale of the shares of Common Stock to be
      purchased pursuant to the exercise of the Warrants or a loan to be secured
      by a pledge of all or a portion of those
shares.

            

    

    

    Shares of
Common Stock that are withheld by the Company or delivered to the Company by the
Registered Owner in payment of all or any portion of the aggregate Warrant Price
will be valued for purposes of the payment at their Market Value on the exercise
date of the Warrants, as determined in accordance with Section 4 of this
Warrant Certificate.  The date when the Registered Owner has satisfied
all the preceding requirements will constitute the exercise date of the
Warrants.  If the Registered Owner exercises fewer than all the
Warrants and the Warrants have not expired, the Company promptly shall reissue
and deliver to the Registered Owner at the Company’s sole expense, in exchange
and substitution for this Warrant Certificate, a new Warrant Certificate of like
tenor in the name of the Registered Owner (or as the Registered Owner otherwise
directs) that specifies on its face the number of Warrants that remain
exercisable.

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    

    
      	
              4.

            	
              Delivery
      of Stock Certificates.

            

    

    

    Upon the
exercise of any of the Warrants, the Company shall issue and deliver to the
Registered Owner within five (5) calendar days after the exercise date one or
more stock certificates in the name of the Registered Owner or its assigns for
that number of fully paid and non-assessable shares of Common Stock that the
Registered Owner purchased pursuant to the exercise of the Warrants, plus,
instead of any fractional share of Common Stock to which the Registered Owner
otherwise would be entitled, a cash sum equal to the product of (a) that
fraction, multiplied by (b) the “Market Value” of one full share of Common Stock
as of the exercise date of the Warrants.  The Company shall pay all
costs and taxes associated with the issuance of every stock
certificate.

    

    For purposes of the Warrants and this
Warrant Certificate, the “Market
Value” of one full share of Common Stock on the exercise date of a
Warrant means: (i) the volume weighted average sales price of a share of Common
Stock on the NYSE Amex or other principal national securities exchange on which
the Common Stock is then traded for the five consecutive trading days preceding
the exercise date of the Warrant, or (ii) if the Common Stock is not traded on a
national securities exchange, the mean arithmetic average of the high bid and
the low asked quotations for a share of Common Stock in the “over-the-counter”
market, as reported on the OTC Bulletin Board or, if quotations are not
available on the OTC Bulletin Board, as reported in the “pink sheets” compiled
by Pink Sheets, LLC, for the five consecutive trading days preceding the
exercise date of the Warrant.  If the Common Stock is not publicly
traded, the “Market Value” of one full share of Common Stock on the exercise
date of a Warrant will be its fair market value, as determined in good faith by
an independent appraisal or by agreement between the Company and the Registered
Owner.

    

    
      	
              5.

            	
              Exchange or Transfer of
      Warrants.

            

    

    

    Subject
to the transfer restrictions set forth in Section 6 of this
Warrant Certificate, the Warrants are transferable at any time and from time to
time, as a whole or in part, but only on the books of the Company and only by
the Registered Owner or the duly authorized attorney-in-fact of the Registered
Owner.  The Company may treat the Registered Owner as the absolute
owner of the Warrants for all purposes, notwithstanding any notice to the
contrary.  If the Registered Owner properly endorses and surrenders
this Warrant Certificate to the Company for exchange, the Company shall issue
and deliver to, or on the order of, the Registered Owner one or more new Warrant
Certificates of like tenor in the name of the Registered Owner (or as the
Registered Owner otherwise directs) that specify on their face the aggregate
number of Warrants that remain exercisable.  The Company shall pay all
costs and taxes associated with the exchange or transfer of the
Warrants.

    

    
      	
              6.

            	
              Transfer
      Restrictions.

            

    

    

       
(a)         General
Restrictions.  The Registered
Owner is permitted to transfer all or any portion of the Warrants to an
affiliate (as defined below).  For purposes of this Warrant
Certificate, “affiliate”
means: (a) a person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with
the Registered Owner, (b) a spouse or lineal descendant of the Registered Owner,
or (c) any trust principally for the benefit of the Registered Owner or any
person described in the preceding clauses (a) or  (b).

    

       
(b)         Securities
Law Restrictions.  The Warrants and
the shares of Common Stock issuable pursuant to the exercise of the Warrants
were not registered under the United States Securities Act of 1933 or the
securities laws of any state of the United States when the Warrants were
originally issued.  Consequently, the Warrants and the shares of
Common Stock that are issued on exercise of the Warrants without registration
under the United States Securities Act of 1933 cannot be offered for sale, sold,
assigned, or otherwise transferred at any time, unless the transaction is
registered under the United States Securities Act of 1933 and any applicable
state securities laws or qualifies for an available exemption from registration
under those laws.  Each Warrant Certificate issued in exchange or
substitution for this Warrant Certificate will bear a legend substantially
identical to the one appearing on the face of this Warrant
Certificate.  In addition, the stock certificate representing any
shares of Common Stock that are issued pursuant to the exercise of the Warrants
will bear the following legend, unless those shares are registered under the
United States Securities Act of 1933 when issued:

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

    

    The
shares of common stock of Aerosonic Corporation that are represented by this
certificate have not been registered under the United States Securities Act of
1933 or the securities laws of any state of the United States.  The
shares cannot be offered for sale or sold at any time, as a whole or in part,
unless the transaction is registered under the United States Securities Act of
1933 and every applicable state securities law or qualifies for an available
exemption from registration under those laws.  As a condition to
allowing any transfer of the shares, Aerosonic Corporation may require the
transferee or transferor to deliver to it an opinion of counsel or other
evidence satisfactory to it that confirms that the transfer has been registered
under all applicable state and federal securities laws of the United States or
is exempt from registration under those laws.

    

    The
Company may require, as a condition to allowing any exercise, exchange, or
transfer of a Warrant or any shares of Common Stock previously issued pursuant
to the exercise of the Warrant (and not registered under the United States
Securities Act of 1933 when issued) that the transferee or the Registered Owner
(as the case might be) deliver to the Company either (a) evidence that the
exercise, exchange, or transfer has been registered under the United States
Securities Act of 1933 and every applicable state securities law or (b) an
opinion of legal counsel or other evidence satisfactory to the Company that the
transaction is exempt from registration under those laws.  The first
Registered Owner of the Warrants represents to the Company that it is acquiring
the Warrants for its own account, as principal, with the intent of holding the
Warrants for investment, and is not acquiring the Warrants as an agent, nominee,
or representative for the account and benefit of another person or with the
intent of participating directly or indirectly in any distribution or
underwriting of the Warrants or the shares of Common Stock issuable on exercise
of the Warrants in contravention of the registration requirements of the state
and federal securities laws of the United States.

    

    
      	
              7.

            	
              Anti-Dilution.

            

    

    

    If the
Company does any of the following dilutive acts (a “Dilutive
Event”) at any time before the exercise or expiration of the
Warrants:

    

    
      	
               
      

            	
              (a)

            	
              declares
      or distributes to all the holders of Common Stock a dividend payable in
      shares of Common Stock;

            

    

    

    
      	
               
      

            	
              (b)

            	
              subdivides
      the number of outstanding shares of Common Stock into a greater number of
      shares of Common Stock pursuant to a stock
  split;

            

    

    

    
      	
               
      

            	
              (c)

            	
              contracts
      the number of outstanding shares of Common Stock into a fewer number of
      shares of Common Stock pursuant to a reverse stock
  split;

            

    

    

    
      	
               
      

            	
              (d)

            	
              makes
      a distribution of cash, property, or securities (other than Common Stock)
      to all the holders of Common Stock as a return of capital or as a partial
      or complete liquidation;

            

    

    

    
      	
               
      

            	
              (e)

            	
              reclassifies
      all the outstanding shares of Common Stock into the same or a different
      number of shares of Common Stock, with or without par value, or into
      shares of any other class or classes of
stock;

            

    

    

    
      	
               
      

            	
              (f)

            	
              becomes
      a subsidiary of any other entity pursuant to a tender offer or exchange
      offer, or merges into, consolidates with, effects a share exchange with,
      or transfers all or substantially all its assets to, any other entity;
      or

            

    

    
      	
               
      

            	 	 

    

    
      	
               
      

            	
              (g)

            	
              declares
      or distributes to all the holders of Common Stock, without their payment
      therefor, (i) a noncash dividend payable in any property or securities of
      the Company (other than Common Stock), or (ii) cash, property, or
      securities (other than Common Stock) pursuant to a spin-off, split-up,
      reclassification, recapitalization, combination of shares, or similar
      rearrangement of the Company’s capital
stock;

            

    

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    

    then, on
the exercise of a Warrant after the record date or occurrence of each Dilutive
Event, the Registered Owner will be entitled to receive in exchange for the
Warrant Price, in addition to, or in substitution for, each share of Common
Stock otherwise issuable pursuant to the exercise of the Warrant, the additional
or different amount of shares of Common Stock and other securities and property
(including cash) that the Registered Owner would have been entitled to receive
if the Registered Owner had (A) exercised the Warrant immediately before the
record date or occurrence of the first Dilutive Event and had been the record
owner of one share of Common Stock during the period beginning on that date and
ending on the actual exercise date of the Warrant, and (B) had participated in
every ensuing Dilutive Event and retained all shares of Common Stock and all
other or additional securities and property (including cash) receivable during
that period as a result of those Dilutive Events.

    

    
      	
              8.

            	
              Warrant
      Shares Adjustment.

            

    

    

    If the
Company does any of the following dilutive acts (a “Share Adjustment
Event”) at any time after the Original Issue Date:

    

    
      	
               
      

            	
              (a)

            	
              issues
      to anyone shares of its Common Stock without
  consideration;

            

    

    

    
      	
               
      

            	
              (b)

            	
              issues
      to anyone any securities that are convertible into, or exchangeable for,
      shares of Common Stock (“Convertible
      Securities”) without consideration;
or

            

    

    

    
      	
               
      

            	
              (c)

            	
              grants
      or issues to anyone any right, option, warrant, or other agreement to
      purchase, subscribe for, or otherwise acquire any shares of Common Stock
      (“Derivative
      Securities”) without
consideration;

            

    

    

    then, in
each case, and regardless of whether the Registered Owner has or exercises any
statutory or contractual preemptive right, the number of shares of Common Stock
then issuable on exercise of a Warrant will be increased simultaneously with the
Share Adjustment Event to the number of shares determined by the following
formula:

    

    
      	
               
      

            	
              NWS
      = [(CSO + WS + NSI) ÷ (CSO + WS)] x WS –
WS

            

    

    

    
      	
               
      

            	
              Where:

            

    

    

    
      	
               
      

            	
              NWS     
      =

            	
              The
      number of additional shares of Common Stock issuable on exercise of the
      Warrants as a result of the Share Adjustment
  Event.

            

    

     

    
      
        	
                 
      

              	
                CSO

              	
                =

              	
                The
      number of shares of Common Stock outstanding, excluding (A) the shares of
      Common Stock issuable on exercise of the Warrants, (B) the shares of
      Common Stock issued separately to the original Registered Owner of the
      Warrant on the Original Issue Date in connection with the issuance of the
      Subordinated Note, and (C) any other shares of Common Stock issuable on
      the exercise of any other rights, options, or warrants or on the exchange
      or conversion of any other securities of the Company.

              
	 	 	 	 
	 	WS 	= 	The
      number of shares of Common Stock issuable on exercise of the Warrant
      immediately before the Share Adjustment
Event. 

      

    

     

    
      	
               
      

            	
              NSI

            	
              =

            	
              The
      number of new shares of Common Stock issued in the Share Adjustment Event
      or issuable pursuant to the Convertible Securities or Derivative
      Securities issued in the Share Adjustment
Event.

            

    

     

    All
Warrant share adjustment calculations under this Warrant Certificate are to be
rounded up to the nearest one hundredth of a share.

     

    An
issuance of Convertible Securities that are convertible into, or exchangeable
for, shares of Common Stock without consideration will constitute for purposes
of this Warrant Certificate an issuance of the maximum number of shares of
Common Stock that are issuable on the exchange or conversion of the Convertible
Securities, effective as of the date when the Convertible Securities are sold or
issued.  Similarly, a grant or issuance of Derivative Securities to
purchase, subscribe for, or otherwise acquire shares of Common Stock without
consideration will constitute for purposes of this Warrant Certificate an
issuance of the maximum number of shares of Common Stock issuable pursuant to
the exercise of the Derivative Securities, effective as of the date when the
Derivative Securities were granted or issued.  No further adjustment
of the Warrant Price will be required on the subsequent actual issuance of
shares of Common Stock pursuant to the exercise of the Derivative Securities or
the exchange or conversion of the Convertible Securities.

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

     

    
      	
              9.

            	
              Warrant Price
      Adjustment.

            

    

    

    If the
Company does any of the following (a “Price Adjustment
Event”) at any time after the Original Issue Date:

    

    
      	
               
      

            	
              (a)

            	
              issues
      to anyone shares of its Common Stock for a purchase price per share lower
      than $2.84 (the “Protected Price”),
      subject to adjustment as provided below;

            

    

    

    
      	
               
      

            	
              (b)

            	
              issues
      to anyone any Convertible Securities that are convertible into shares of
      Common Stock at an exchange or conversion price per share (determined as
      provided below) lower than the Protected Price then in effect;
      or

            

    

    

    
      	
               
      

            	
              (c)

            	
              grants
      to anyone any Derivative Securities to purchase, subscribe for, or
      otherwise acquire any shares of Common Stock at an exercise or purchase
      price per share (determined as provided below) lower than the Protected
      Price then in effect;

            

    

    

    then in
each case, and regardless of whether the Registered Owner has or exercises any
statutory or contractual preemptive right, the Warrant Price then in effect will
be reduced simultaneously with the Price Adjustment Event to a per share price
determined by multiplying the Warrant Price then in effect by the following
fraction:

    

    NWP = OWP
x [(CSO + CSP) ÷ (CSO + CSAP)]

    

    Where:

    

    
      	
               
      

            	
              NWP

            	
              =

            	
              The
      new Warrant Price as a result of the Price Adjustment
    Event.

            

    

    

    
      	
               
      

            	
              OWP

            	
              =

            	
              The
      old Warrant Price immediately before the Price Adjustment
      Event.

            

    

    

    
      	
               
      

            	
              CSO

            	
              =

            	
              The
      number of shares of Common Stock outstanding, excluding (A) the shares of
      Common Stock issuable on exercise of the Warrants, (B) the shares of
      Common Stock issued separately to the original Registered Owner of the
      Warrant on the Original Issue Date in connection with the issuance of the
      Subordinated Note, and (C) any other shares of Common Stock issuable on
      the exercise of any other rights, options, or warrants or on the exchange
      or conversion of any other securities of the
  Company.

            

    

    

    
      
        	
                 
      

              	
                CSP

              	
                =

              	
                The
      number of shares of Common Stock that the purchaser or purchasers of the
      Convertible Securities, Derivative Securities, or shares of Common Stock
      pursuant to the Price Adjustment Event would have received for their
      aggregate investment if the exercise, purchase, exchange, or conversion
      price per share for the shares of Common Stock issued or issuable pursuant
      to the Price Adjustment Event were the Protected Price, instead of the
      lower exercise, purchase, exchange, or conversion price per share actually
      paid or to be paid.

              
	 	 	 	 
	 	CSAP 	= 	The
      number of shares of Common Stock actually issued or issuable pursuant to
      the Price Adjustment
Event. 

      

    

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

    

    All
Warrant Price adjustment calculations under this section are to be rounded down
to the nearest whole cent.

     

    The
Protected Price also will be adjusted following every Price Adjustment Event
according to the formula set forth above, except that “NWP” will refer to the
new Protected Price after the Price Adjustment Event, and “OWP” will refer to
the Protected Price in effect at the time of the Price Adjustment
Event.

     

    A sale or
issuance of Convertible Securities with an exchange or conversion price per
share (determined as provided below) that is lower than the Warrant Price then
in effect will constitute for purposes of this Warrant Certificate a cash sale
or issuance of the maximum number of shares of Common Stock issuable on the
exchange or conversion of the Convertible Securities, effective as of the date
when the Convertible Securities are sold or issued.  Similarly, a
grant or issuance of Derivative Securities with an exercise price per share
(determined as provided below) that is lower than the Warrant Price then in
effect will constitute for purposes of this Warrant Certificate a cash sale or
issuance of the maximum number of shares of Common Stock issuable pursuant to
the exercise of the Derivative Securities, effective as of the date when the
Derivative Securities were granted or issued.  No further adjustment
of the Warrant Price will be required on the subsequent issuance of additional
shares of Common Stock pursuant to the exercise of any Derivative Securities or
the exchange or conversion of any Convertible Securities.  For
purposes of adjusting the Warrant Price to account for a Price Adjustment
Event:

     

    
      	
               
      

            	
              (i)

            	
              the
      exercise price per share of any Derivative Security will be the sum of (A)
      the price per share at which shares of Common Stock are issuable pursuant
      to the exercise of the Derivative Security, plus (B) the consideration per
      share (if any) received by the Company for the grant or issuance of the
      Derivative Security, and

            

    

     

    
      	
               
      

            	
              (ii)

            	
              the
      exchange or conversion price per share of any Convertible Security will be
      the quotient determined by dividing (A) the sum of (1) the consideration
      (if any) received or receivable by the Company for the sale or issuance of
      the Convertible Security, plus (2) the aggregate amount of additional
      consideration (if any) then payable to the Company on the exchange or
      conversion of the Convertible Security, by (B) the number of shares of
      Common Stock then issuable on the exchange or conversion of the
      Convertible Security.

            

    

    

     

    The value
of any non-cash consideration received or receivable by the Company for the
sale, grant, or issuance of any shares of Common Stock, any Convertible
Securities, or any Derivative Securities will be the fair market value of the
consideration, as determined in good faith by an independent appraisal or by
unanimous approval of the Board of Directors of the Company.

     

    If and to
the extent that shares of Common Stock issuable pursuant to any Derivative or
Convertible Securities are not issued when the exercise, purchase, exchange, or
conversion rights under the Derivative or Convertible Securities expire or
terminate, the Warrant Price will be readjusted to the Warrant Price that would
then be in effect if the Warrant Price adjustment that was made when the
Derivative or Convertible Securities were granted or issued had been made on the
basis of the number of shares of Common Stock actually issued pursuant to the
exercise, purchase, exchange, or conversion rights under the Derivative or
Convertible Securities.

     

    
      	
              10.

            	
              Notice of Dilutive Events and
      Price Adjustments.

            

    

    

    Whenever
there is an adjustment in the number or kind of securities and other property
(including cash) issuable pursuant to the exercise of the Warrants, the Company
promptly shall deliver to the Registered Owner a notice describing in reasonable
detail the facts requiring the adjustment and the number and kind of securities
and other property (including cash) issuable pursuant to the exercise of the
Warrants after the adjustment.

    

    The
Company shall give the Registered Owner at least 15 days’ advance written notice
of any proposed action that would require an adjustment to either the Warrant
Price or the amount of Common Stock (or other securities or property) issuable
pursuant to the exercise of a Warrant, stating in the notice the proposed issue,
record, or effective date for the action, although any failure to notify the
Registered Owner of a proposed action or any defect in the notice will not
affect the validity of the action.  Concurrently with the occurrence
of a Dilutive Event, a Share Adjustment Event, or Price Adjustment Event, the
Company, at its sole expense, shall cause to be promptly computed in accordance
with the terms of this Warrant Certificate the requisite adjustment to the
Warrant Price or the amount of Common Stock (or other securities or property)
issuable pursuant to the exercise of a Warrant and deliver to the Registered
Owner a certificate that describes the Dilutive Event, Share Adjustment Event,
or Price Adjustment Event requiring the adjustment, sets forth the calculation
of the adjustment, and states the new Warrant Price resulting from the Price
Adjustment Event or the additional number of shares of Common Stock (or other
securities or property) issuable to the Registered Owner pursuant to the
exercise of this Warrant as a result of the Dilutive Event or Share Adjustment
Event.

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

    

    
      	
              11.

            	
              Listing,
      Reservation and Registration of
Shares.

            

    

    

    The
Company shall list on the NYSE Amex all shares of Common Stock issuable pursuant
to the exercise of the Warrants, and the Company shall maintain that listing
until the Warrants expire or, if sooner, are fully exercised.  The
Company shall reserve from its authorized but unissued shares of Common Stock
and keep available until the Expiration Date, solely for issuance and delivery
pursuant to the exercise of the Warrants, the total number of shares of Common
Stock issuable from time to time pursuant to the Warrants, taking into account
all adjustments pursuant to Sections 7 and 8 of
this Warrant Certificate.  Furthermore, the Company shall take all
necessary or appropriate action to assure that shares of Common Stock that are
issued pursuant to the exercise of the Warrants are validly and legally issued,
fully paid, and nonassessable.

    

    If there is a change in control of the
Company, or if the Company files for bankruptcy, the Company will immediately
register, on behalf of the Registered Owner, the sale of the shares of Common
Stock issued upon exercise of the Warrants and the shares of Common Stock
issued  in connection with the Subordinated Note (together, the
“Registered Owner Shares”).  Further, in the event the Company does
not pay the interest on the Subordinated Note in full when due on the first day
of each month, as required by the Subordinated Note, or if the Subordinated Note
is not paid in full when due, whether at the Maturity Date or upon acceleration
of the Maturity Date as a result of a Default by the Company, as required by the
Subordinated Note, the Company will immediately register, on behalf of the
Registered Owner, the sale of the Registered Owner Shares.  The
Company’s obligations pursuant to this Section 11 relating
to the registration of the sale of the Registered Owner Shares are as follows:
The Company shall use commercially reasonable efforts to (a) prepare and file
with the U.S. Securities and Exchange Commission (the “SEC”) a Registration
Statement  (the “Registration Statement”) in accordance with the
Securities Act of 1933 as soon as practicable after it is obligated to pursuant
to one of the events described above in this Section 11
(“Registration Event”), (b) have the Registration Statement declared effective
by SEC under the Securities Act of 1933 as promptly as practicable, and in any
event within 90 days after the Registration Event, (c) to respond to comments of
the SEC (if any) in connection with that filing, and (d) take all action
necessary or appropriate to obtain all permits, approvals, and registrations
under applicable state securities or “Blue Sky” laws to ensure that the
Registered Owner’s sale of the Registered Owner Shares complies with those
laws.  The Company shall promptly notify the Registered Owner, after
it receives the information, of the time when the Registration Statement becomes
effective or any supplement or amendment to it is filed with the SEC, the
issuance of any stop order, the suspension of the qualification of the shares of
Common Stock for offering or sale in any jurisdiction, any request by the SEC
for amendment of the Registration Statement, or any comments by the SEC on the
Registration Statement, requests by the SEC for additional information, and all
responses to SEC comments or requests for additional information.

    

    
      	
              12.

            	
              Replacement of Warrant
      Certificate.

            

    

    

    On its
receipt of reasonable evidence of the loss, theft, destruction, or mutilation of
this Warrant Certificate and (in the case of any loss, theft, or destruction) a
written indemnity agreement from the Registered Owner in favor of the Company,
or (in the case of any mutilation) on surrender and cancellation of the
mutilated Warrant Certificate, the Company shall execute and deliver to the
Registered Owner at the Company’s sole expense a new Warrant Certificate of like
tenor in exchange or substitution for the Warrant Certificate that has been
lost, stolen, destroyed, or mutilated.

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

    

    
      	
              13.

            	
              Stockholder
      Communications.

            

    

     

    The
Company promptly (and in any event within ten days thereafter) shall notify the
Registered Owner of any change in the address of its principal office and of
every record date established by the Company for any Dilutive Event, for any
Price Adjustment Event, or for otherwise determining stockholders entitled to
vote at any meeting or to receive payment of any dividend or other distribution,
whether made in cash, property, or securities.  In addition, the
Company promptly (and in any event within ten calendar days thereafter) shall
furnish to the Registered Owner (a) all forms, notices, reports, schedules,
proxy statements, and (b) all notices, reports, statements, and other
communications furnished to stockholders of the Company.  The Warrants
and this Warrant Certificate do not confer on the Registered Owner, however, any
rights as a stockholder of the Company.

    

    
      	
              14.

            	
              Anti-Avoidance.

            

    

    

    The
Company shall not avoid or seek to avoid (by merger, dissolution,
reorganization, consolidation, sale of assets, amendment of its Articles of
Incorporation, or any other voluntary act, deed, or means) the performance or
observance of any covenant, condition, or stipulation to be performed or
observed by it under this Warrant Certificate, but shall act in good faith at
all times to carry out all provisions of this Warrant Certificate and to take
all other action that is necessary to protect the rights of the Registered
Owner.  In particular, and without limiting the generality of the
foregoing, the Company shall not do any of the following:

    

    
      	
               
      

            	
              (a)

            	
              authorize
      any shares of another class of common stock that has the right, in the
      absence of contingencies, to elect a majority of the directors of the
      Company (even if those voting rights have been suspended by the occurrence
      of a contingency) or to receive all or any portion of the current
      dividends and liquidating distributions of the Company after the payment
      of dividends and distributions in respect of any shares of capital stock
      entitled to preferences; or

            

    

    

    
      	
               
      

            	
              (b)

            	
              sell,
      exchange, or transfer all or substantially all the assets of the Company
      to any other person or effect a share exchange with any other entity,
      unless the acquiring party expressly assumes in writing and agrees to be
      bound by all of the terms of this Warrant Certificate, or unless adequate
      provision is made (as determined in the sole discretion of the Registered
      Owner) in connection with the sale, exchange, or transfer to assure that
      the Registered Owner receives pursuant to the exercise of a Warrant the
      securities and property (including cash) to which the Registered Owner is
      entitled pursuant to the Warrant.

            

    

    

    The
foregoing restrictions are not to be construed, however, to preclude the Company
from entering into a transaction (including a merger, sale of assets, share
exchange, reorganization, or other similar transaction) that would result in a
transfer of all or some of the stock or assets of the Company, unless the
transaction is entered into primarily for the purpose of avoiding the
performance of this Warrant Certificate.

    

    
      	
              15.

            	
               Specific
      Performance.

            

    

    

    The
Company stipulates that any default or threatened default by it in performing or
complying with any term of this Warrant Certificate will cause irreparable harm
and continuing injury to the Registered Owner for which damages and other
remedies at law will be inadequate.  Consequently, if the Company
breaches or threatens to breach any term of this Warrant Certificate, the
Registered Owner will be entitled, without limiting any other available legal or
equitable remedy, to specific performance of this Warrant Certificate or
injunctive relief without proof of actual monetary damage, and reimbursement
from the Company of all costs (as defined in Section 17 of the Warrant
Certificate) incurred by the Registered Owner in enforcing the terms of this
Warrant Certificate.

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

    

    
      	
              16.

            	
              Notices.

            

    

    

    Any
notice, consent, demand, approval, or other communication that is required or
permitted to be given or delivered by the Company to the Registered Owner, or by
the Registered Owner to the Company, under this Warrant Certificate will be
validly given and delivered only if it is in writing (whether or not this
Warrant Certificate expressly provides for it to be in writing) and delivered
personally, by commercial courier, or by first class, postage prepaid, certified
or registered United States mail (whether or not a return receipt is requested
or received by the Company), and addressed to the appropriate party at its
address that is listed in this Warrant Certificate or that is subsequently
designated by a party to the other party by notice given in accordance with this
section.  A validly given notice, consent, demand, approval, or other
communication will be effective and “received” for purposes of this Warrant
Certificate on the earlier of (i) the day when it is actually received, if it is
delivered personally or by commercial courier or (ii) the fifth day after it is
postmarked by the United States Postal Service, if it is delivered by first
class, postage prepaid, United States mail.  The Company and the
Registered Owner shall promptly notify one another of any change in their
mailing addresses that are listed in this Warrant Certificate.

    

    
      	
              17.

            	
              Miscellaneous.

            

    

    

    The
validity, construction, interpretation, and enforcement of the Warrants and this
Warrant Certificate are governed by the laws of the State of Delaware and the
federal laws of the United States of America, excluding the laws of those
jurisdictions pertaining to the resolution of conflicts with laws of other
jurisdictions.  A waiver, amendment, modification, or termination of
the Warrants or this Warrant Certificate will be valid and effective only if it
is in writing and signed by the Company and the Registered Owner.  In
any litigation between the Company and the Registered Owner that arises out of
the issuance or exercise of the Warrants, the losing party shall reimburse the
prevailing party on demand for all costs incurred by the prevailing party in
connection with the litigation.  The headings of the sections of this
Warrant Certificate are solely for convenient reference and do not constitute
part of the terms and conditions of the Warrants.  This Warrant
Certificate is binding on the successors and assigns of the Company (by
operation of law or otherwise).  Wherever used in this Agreement, (a)
the word “including”
is always without limitation, (b) neuter words should be construed to included
correlative feminine and masculine words, (c) words in the singular number
include words in the plural number and vice versa, (d) the word “person”
includes a group, trust, syndicate, corporation, cooperative, association,
partnership, business trust, joint venture, limited liability company,
unincorporated organization, governmental authority, as well as a natural
person, and (e) the word “costs”
includes all internal expenses, the fees, costs, and expenses of experts,
attorneys, mediators, witnesses, consultants, arbitrators, investigators,
collection agents, and supersedes bonds that are incurred in connection with
settling,
defending, prosecuting, administering, investigating, preparing to defend or
prosecute, or participating in (as a party, witness, or otherwise) any
proceeding, including trial, appellate, mediation, arbitration, bankruptcy, and
administrative proceedings.  Terms not otherwise defined herein shall
have the meanings attributed to those terms in the Loan Agreement, and those
definitions are incorporated by reference into this Warrant
Certificate.

     

    ORIGINAL ISSUE
DATE:  May__, 2009.

     

      
        

      

    

    [Signature
pages follow]

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

    

    
      
        
          
            
              	
                      AEROSONIC
      CORPORATION

                    
	 
      	 
      
	
                      By:

                    	 
      
	 
      	
                      Name:
      Douglas J. Hillman

                    
	 
      	
                      Title:
      President and
CEO

                    

            

          

        

      

    

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  WITNESSES:

                                	 
	 	 
	 
      	 
	
                                  Name:

                                	
                                   

                                	 
	 
      	 
	 	 	 
	
                                  Name:

                                	
                                   

                                	 

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    [Signatures
continued on next page]

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Name
and address of Registered Owner:

    

    Bruce J.
Stone

    c/o
Gregory M. Levy

    Kaufman,
Rossin & co.

    225 N.E.
Mizner Blvd., Suite 250

    Boca
Raton, FL  33432

    

    
      
        
          
            	 
      	 	 
      
	 
      	
                    Bruce
      J. Stone

                  

          

        

      

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    

    AEROSONIC
CORPORATION

    

    SUBSCRIPTION
NOTICE

    (To be
executed by the Registered Owner)

    

    

    TO:         AEROSONIC
CORPORATION

    

    The
undersigned registered owner of the accompanying Common Stock Purchase Warrant
(the “Warrant”)
exercises the right to purchase the number of shares of the Common Stock of
Aerosonic Corporation set forth below pursuant to the terms and conditions of
the Warrant and tenders payment of the purchase price for those shares (the
“Purchase
Price”) by the following means:

    

    Single Payment Options
(select
one):

    

    
      	
               
      

            	
              o

            	
              The
      undersigned encloses a check or bank draft payable to Aerosonic
      Corporation in the sum of the Purchase
Price.

            

    

    

    
      	
               
      

            	
              o

            	
              The
      undersigned instructs Aerosonic Corporation to withhold in full payment of
      the Purchase Price __________ of the shares of the Common Stock that are
      issuable pursuant to this exercise of the Warrant and have an aggregate
      Market Value (as determined pursuant to Section 4 of the Warrant
      Certificate) equal to the Purchase
Price.

            

    

    

    
      	
               
      

            	
              o

            	
              The
      undersigned transfers to Aerosonic Corporation in full payment of the
      Purchase Price _________ shares of Common Stock of Aerosonic Corporation
      that are registered in the name of the undersigned, represented by the
      enclosed stock certificate, and have an aggregate Market Value (as
      determined pursuant to Section 4 of the Warrant Certificate) equal to the
      Purchase Price.

            

    

    

    Combination Payment Options
(select
all that apply):

    

    
      	
               
      

            	
              o

            	
              The
      undersigned encloses a bank check or bank draft payable to Aerosonic
      Corporation in the sum of $ __________ as a partial payment of the
      Purchase Price.

            

    

    

    
      	
               
      

            	
              o

            	
              The
      undersigned instructs Aerosonic Corporation to withhold as partial payment
      of the Purchase Price __________ shares of the Common Stock that are
      issuable pursuant to this exercise of the Warrant and have an aggregate
      Market Value (as determined pursuant to Section 4 of the Warrant
      Certificate) equal to $___________.

            

    

    

    
      	
               
      

            	
              o

            	
              The
      undersigned transfers to Aerosonic Corporation as partial payment of the
      Purchase Price __________ shares of the Common Stock of Aerosonic
      Corporation that are registered in the name of the undersigned,
      represented by the enclosed stock certificate, and have an aggregate
      Market Value (as determined pursuant to Section 4 of the Warrant
      Certificate) equal to $
___________.

            

    

    

    Please
issue and register in the name or names stated below and deliver to the address
listed below a certificate or certificates representing the number of shares of
Common Stock to be issued pursuant to this exercise of the
Warrant.  If the number of shares of Common Stock to be issued
pursuant to this exercise of the Warrant is fewer than all the shares of Common
Stock that can be purchased pursuant to the Warrant, please reissue to the
undersigned at the address listed below a new Warrant of like tenor for the
remaining shares of Common Stock that can be purchased under the
Warrant.

    
      
         

      

      
        -1-

        
          

        

      

      
         

      

    

    

    INSTRUCTION:  Include
the following representations and warranties if the issuance of the shares to
the Registered Owner pursuant to the exercise of the Warrant is not covered by
an effective registration statement that has been filed by the issuer with the
United States Securities and Exchange Commission pursuant to the Securities Act
of 1933.

    

    The
undersigned represents and warrants to you the following: (a) the undersigned is
purchasing the shares of Common Stock issuable pursuant to this exercise of the
Warrant (the “Warrant
Shares”) for its own account, as principal and not as an agent, nominee,
or representative for the account or benefit of another person or entity, and
with the intent of holding the Warrant Shares for investment purposes without
participating, directly or indirectly, in a distribution or underwriting of any
of the Warrant Shares in contravention of the registration requirements of state
and federal securities laws of the United States; (b) the undersigned is able to
bear the economic risk of an investment in the Warrant Shares and has sufficient
knowledge and experience in financial and business matters to be able to
evaluate the merits, risks, and other factors bearing on the suitability of the
Warrant Shares as an investment for the undersigned, and undersigned has been
afforded an adequate opportunity to evaluate the investment in the Warrant
Shares in light of those factors; (c) the acknowledges understands that the
Warrant Shares have not been registered with either the United States Securities
and Exchange Commission (the “SEC”)
under the Securities Act of 1933 or with the applicable regulatory body under
the securities laws of any state of the United States (collectively, the “State Securities
Laws”), including the Securities and Investor Protection Act of the State
of Florida and, therefore, cannot be offered for sale or sold, unless the
transaction is registered under those laws or qualifies for an available
exemption from registration under those laws; (d) the undersigned shall not
offer to sell or sell at any time all or any part of the Warrant Shares, unless
the transaction is registered with the SEC under the Securities Act of 1933 and
the applicable regulatory body under all applicable State Securities Laws or the
undersigned delivers to Aerosonic Corporation an opinion of counsel or other
evidence satisfactory to it that registration is not required under any of those
laws; and (e) the undersigned consents to the placement of the following
restrictive legend on every stock certificate issued to it for the Warrant
Shares:

    

    The
shares of Aerosonic Corporation that are represented by this certificate have
not been registered under either the United States Securities Act of 1933 or the
securities laws of any state of the United States.  These shares
cannot be offered for sale or sold, as a whole or in part, unless the
transaction is registered under the Securities Act of 1933 and every applicable
state securities law or qualifies for an available exemption from registration
under those laws.  As a condition to allowing any transfer of the
securities represented by this certificate, Aerosonic Corporation may require
the transferee or transferor to deliver to it an opinion of legal counsel or
other evidence satisfactory to it that confirms that the transfer has been
registered under all applicable state and federal securities laws of the United
States or is exempt from registration under those laws.

     

    
      
        
          	
                  No.
      of Shares: ______________

                	 	
                  Purchase
      Price: $
______________

                

        

      

    

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

     

    EXECUTION
CLAUSE – PARTNERSHIP

     

    Date:______________________________

    _______________________________________________

    (Name of Partnership)

    

    WITNESS:                                                                By:_________________________________________

      
   Name:___________________________________

       
  Title:  ___________________________________

    ________________________

    Name:___________________

    

    

    ________________________                                         
_______________________________________________

    Name:___________________                                                                          
Street Address

    

    ________________________________________________

      City                                     State                        
Zip Code

    

    (______)_________________________________________

    Area
Code                                                 Telephone
Number

    

    ________________________________________________

    Employer I.D.
Number

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    EXECUTION
CLAUSE - INDIVIDUAL

    
      

      Date:____________________

      

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  	
                                                                          Joint Subscriber

                                                                        	 
      	
                                                                          Subscriber

                                                                        
	
                                                                          (if
      applicable)

                                                                        	 
      	 
      
	 
      	 
      	 
      
	
                                                                           

                                                                        	 
      	
                                                                           

                                                                        
	
                                                                          Full
      Name (please print)

                                                                        	 
      	
                                                                          Full
      Name (please print)

                                                                        
	 
      	 
      	 
      
	
                                                                           

                                                                        	 
      	
                                                                           

                                                                        
	
                                                                          Signature

                                                                        	 
      	
                                                                          Signature

                                                                        
	 
      	 
      	 
      
	
                                                                           

                                                                        	   
      	
                                                                           
      

                                                                        
	
                                                                          Social
      Security Number

                                                                        	 
      	
                                                                          Social
      Security Number

                                                                        
	 
      	 
      	 
      
	 
      	 
      	
                                                                           

                                                                        
	 
      	 
      	
                                                                          Street
      Address

                                                                        
	 
      	 
      	 
      
	 
      	 
      	 
        
	 
      	 
      	
                                                                          City

                                                                        	
                                                                          State

                                                                        	
                                                                          Zip
      Code

                                                                        
	 
      	 
      	 
      
	 
      	 
      	
                                                                          (_______)

                                                                        	 
      
	 
      	 
      	
                                                                          Area Code

                                                                        	
                                                                          Telephone
      Number

                                                                        
	 
      	 
      	 
      	 
      
	
                                                                          Form of ownership (check one):  

                                                                        	 
      	
                                                                          ___  Individual 
      ___  Tenants in common   ___  Tenants
      by the entirety

                                                                        
	 	 	 
	 
      	 
      	
                                                                          ___  Joint
      tenants with right of survivorship

                                                                        
	 
      	 
      	 
      
	
                                                                          Register
      stock certificate

                                                                        	 
      	
                                                                          Register
      warrant certificate

                                                                        
	
                                                                          in
      the following name(s):

                                                                        	 
      	
                                                                          in
      the following name(s):

                                                                        
	 	 	 
	 	 	 
	 	 	 
	 
      	 
      	 
      
	 	 	 
	
                                                                          Deliver
      stock certificate

                                                                        	 
      	
                                                                          Deliver
      warrant certificate

                                                                        
	
                                                                          to
      the following address:

                                                                        	 
      	
                                                                          to
      the following address:

                                                                        
	 	 	 
	 	 	 
	 
      	 
      	 
      
	 	 	 

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

      

        
          
             

          

          
            
            

            
              

            

          

          
             

          

        

      

    

    

    EXECUTION
CLAUSE - CORPORATION

    

    Date:____________________                                             _______________________________________

    (Name of Corporation)

    

    By:__________________________________________

    Name:____________________________________

    Title:_____________________________________

    

    (CORPORATE
SEAL)

    

    _______________________________________________

                                                         Street
Address

    

    _______________________________________________

      City                                     State                      Zip
Code

    

    (______)________________________________________

    Area
Code                                               Telephone
Number

    

    _______________________________________________

    Employer I.D. Number

    

    WITNESSES:

    
________________________

    Name:___________________

     

    ________________________

    Name:___________________

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    (e)           ASSIGNMENT

    

    For value received, the undersigned
sells, assigns, and transfers unto _______________________ the rights to
purchase up to _________ shares of the Common Stock of Aerosonic Corporation that are
represented by the foregoing Common Stock Purchase Warrant and appoints
________________________ as the undersigned’s agent and attorney-in-fact, with
full power of substitution, to transfer those rights on the books of that
corporation.

    

    Date:____________________

    

    SIGNATURE
GUARANTEED:

    
________________________________________

    Signature

    

    ________________________________________

    Full Name (please
print)

    

    WITNESSES:

    
________________________

    Name:___________________

     

    ________________________

    Name:___________________Exhibit
10.4

    

    AEROSONIC
CORPORATION

    

    LOAN
AGREEMENT

    

    This Loan
Agreement (this “Agreement”) is executed as of
May 14, 2009 (the “Effective Date”), by and between Aerosonic Corporation (the
“Company”), a Delaware
corporation and Redmond Family
Investments, LLLP (“Redmond”), to record the
agreement regarding Redmond’s willingness to make a loan (the “Loan”) to the Company on the
terms and conditions set forth in this Agreement:

    

    ARTICLE
1

    DEFINITIONS

    

    1.1          Defined Terms.

    

    As used
in this Agreement and the exhibits to this Agreement, the following capitalized
terms have the respective definitions attributed to them:

       

    “Advances”
has the meaning set forth in Section 2.2.

    

    “Advance
Shares” means shares of Common
Stock to be issued to Redmond by the Company pursuant to Section 2.1, and includes any
additional Shares issued in respect of those Shares.

    

    
      “Balance
Sheet” means the consolidated balance sheet of the Company and its
Subsidiaries for the period ended January 31, 2009.

    

    

    “Balance Sheet
Date” means the period ended January 31, 2009.

    

    “Benefit
Plan” means every previous and current employee benefit, pension,
welfare, or compensation plan, trust, program, practice, agreement, or
arrangement that provides benefits, compensation, or deferred compensation to
any current or former officer, director, or employee of the Company, any
predecessor, or any subsidiary of the Company or any predecessor or his or her
survivors, including any bonus, thrift, pension, savings, incentive, insurance,
retirement, stock bonus, stock option, stock purchase, profit sharing, loan
guarantee, early retirement, deferred compensation, medical reimbursement,
relocation assistance, supplemental retirement, stock appreciation right,
severance or termination compensation, employee loan or credit extension, and
dental, vision, medical, or other health care plan.

     

    “Borrowing” means a borrowing hereunder
consisting of Advances made on the same day by Redmond to the
Company.

     

    “Business
Day” means any day that is not a Sunday, Saturday, or holiday observed by
commercial banks in Tampa, Florida.

    

    “Closing”
means the consummation of the Transactions.

    

    “Closing
Date” means
the date which is no later than one Business Day after all the conditions
precedent set forth in Sections
3.4 and 3.5 have
been satisfied or waived by Redmond, but in no event later than May 15,
2009.

    

    “Closing
Price” means the volume weighted average sales price of a share of the
Common Stock on the Stock Exchange or other principal national securities
exchange on which the Common Stock is then traded for the 15 trading days
preceding the Closing Date.

    

    “Code”
means the United States Internal Revenue Code of 1986, as amended from time to
time, and any regulations (including Temporary Regulations) under that Code that
are promulgated.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Common
Stock” means the common stock, par value $.40 per share, of the
Company.

    

    “Company SEC
Documents” means all forms,
notices, reports, schedules, statements, and other documents filed by the
Company with the SEC during the period beginning on February 1, 2007, and ending
on the Effective Date, whether or not constituting a “filed” document, and
includes all proxy statements, registration statements, amendments to
registration statements, periodic reports on Forms 10-K, 10-Q, and 8-K, and
annual and quarterly reports to shareholders.

    

    “Default” has the meaning
indicated in the Note, and the definition of “Default” in the Note is
incorporated by reference into this Agreement.

    

    “Drawdown
Shares” means shares of Common
Stock to be issued to Redmond by the Company pursuant to Section 2.1, and includes any
additional Shares issued in respect of those Shares.

    

     “Exchange
Act” means
the United States Securities Exchange Act of 1934, as amended, and includes all
rules and regulations of the SEC promulgated under that act.

    

    “Existing
Lender” means Wachovia Bank, N.A., a national banking association, and
includes its assignees and successors in interest by operation of law or
otherwise.

    

    “Existing
Loans” means the loans made by the Existing Lender to the Company
pursuant to the Existing Loan Documents, as amended and restated through the
Closing Date, including the Renewal and Future Advance Term Loan in the original
principal amount of $3,920,000, the Renewal and Amended Term Loan in the
original principal amount of $2,000,000, and the Revolving Loan in the maximum
principal amount of $2,500,000.

    

    “Existing Loan
Documents” means the Revolving and Term Credit and Security Agreement
dated February 24, 2004, among the Company, the Existing Lender, and Avionics
Specialties, Inc., as amended through the Closing Date, and every document,
mortgage, deed of trust, agreement, and instrument executed pursuant to that
agreement on or before the Closing Date, as renewed, extended, or waived from
time to time on the same terms and conditions that were in effect on the
Effective Date (including any extension  or forbearance agreements
executed in connection with those documents).

    

    “Financing
Documents” mean the Note, the Warrants, this Agreement, and every
document, agreement, and instrument executed pursuant to any of the foregoing
documents, and all renewals, extensions, amendments, modifications, and
supplements to any of the foregoing documents.

    

    “Funding
Date” means the date on which a Borrowing occurs.

    

    “GAAP”
means generally accepted accounting principles of the United States, as in
effect from time to time.

    

    “Governmental
Authority” means a government, a central bank, a securities exchange, a
public body or authority, a self-regulatory organization, and any governmental
body, agency, authority, commission, department, or subdivision, whether
domestic or foreign or local, state, regional, or national.

    

    “Governmental
Authorization” means any and every order, right, permit, waiver, consent,
license, variance, approval, exemption, certificate, designation, registration,
and other authorization given, issued, granted, or otherwise made available by
or under the authority of any Governmental Authority pursuant to any law or
order.

    

    “IRS”
means the United States Internal Revenue Service.

    

    “Lien” means a restriction on
the use or transferability of property and any claim or charge on any interest
in property securing an obligation owed to, or claimed by, a person other than
the owner of the property, whether the claim or charge exists by reason of
statute, contract, or common law, and includes a construction lien, a lien or
security interest arising from a pledge, mortgage, indenture, encumbrance,
hypothecation, trust receipt, deed of trust, conditional sale, security
agreement, or collateral assignment and a lease, bailment, or consignment for
security purposes.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    

    “Loan
Documents” means the Note, this Agreement, and every document, agreement,
and instrument executed pursuant to any of those documents or with respect to
the Liabilities, and all renewals, extensions, amendments, modifications, and
supplements to any of the foregoing documents.

    

    “Material Adverse
Effect” means any  material adverse effect upon the validity,
performance or enforceability of any of the Loan Documents or any of the
transactions contemplated hereby or thereby,  material adverse effect upon
the properties, business, prospects or condition (financial or otherwise) of
Borrower and its Subsidiaries, taken as a whole, or  material adverse
effect upon the ability of Borrower and its Subsidiaries, taken as a whole, to
fulfill any obligation under any of the Loan Documents.

    

    “Maximum
Availability Amount” means $500,000.

    

    “Note”
means the 14% Subordinated Note due April 10, 2010, as extended pursuant to the
terms and conditions of the Note, in the aggregate principal amount of $500,000,
to be issued to Redmond at the Closing by the Company and the Subsidiaries in
the form of Exhibit
1.

    

    “Other
Lenders” mean Bruce J. Stone and Martin J. Schaffel.

    

    “Permitted
Liens” means any of the following:  (a) the leasehold interests
of lessors and landlords in any property leased to the Company or any
Subsidiary; (b) statutory vendor, carrier, landlord, mechanic, repairmen,
warehousemen, and similar Liens that arise or are incurred in good faith in the
usual and ordinary course of business for payments that are not delinquent;
(c) Liens for Taxes that either are not yet delinquent or are being
contested in good faith by appropriate proceedings and for which adequate
accruals or reserves have been recorded in the Company’s books of account in
accordance with GAAP; (d) statutory Liens arising or incurred in the
ordinary course of business in connection with workers’ compensation,
unemployment insurance, old-age pensions, and social security benefits for
payments that are not delinquent; (e) Liens arising out of awards or judgments
against the Company with respect to which the Company is proceeding with an
appeal or other proceeding for review or time for appeal has not yet expired;
(f) Liens in favor of issuers of surety bonds and letters of credit issued
pursuant to and for the account of the Company in the ordinary course of
business; (g) the Liens in favor of the Existing Lender on assets of the Company
and the Subsidiaries on the Effective Date that are created under the Existing
Loan Documents and secure the Existing Loans; and (h) Liens in favor of a third
party in connection with the purchase of equipment or machinery used in the
operations of the Company and its Subsidiaries and in the production of
products, including equipment used to replace obsolete equipment, equipment used
to test and produce products and to maintain or increase capacity.

    

    “Proceeding” means an audit, claim, action,
demand, inquiry, lawsuit, proceeding, or investigation by a third party or
Governmental Authority (whether formal or informal, pending, threatened, or
completed, or civil, criminal, or administrative), and includes asserted claims
and assessments and trial, appellate, mediation, arbitration, bankruptcy, and
administrative proceedings of every kind.

    

    “Restricted
Information” means all information concerning the Company and the
Subsidiaries that is confidential, proprietary, or not readily available to the
general public, however and whenever acquired, whether furnished or made
available in writing, electronic, or any other media format, through inspection
of written or electronic documents, or orally in meetings, presentations, and
conversations, whether or not a trade secret or designated “secret” or
“confidential,” and whether obtained before or after the Effective Date; but
excludes in each case information that is publicly available, or is required to
be disclosed by law, by a court having jurisdiction, or to respond in good faith
to a valid inquiry by a Governmental Authority, or that has been intentionally
disclosed by the Company to the public or to a person who does not have either a
duty to keep the information confidential or a relationship of privity with the
Company as a lender, tenant, partner, employee, customer, professional advisor,
or participant in a joint venture (whatever the form of business
organization).

    
      
         

      

      
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    “SEC”
means the United States Securities and Exchange Commission.

    

    “Securities”
means the Note, the Warrants, and the Drawdown Shares.

    

    “Securities Act”
means the United States Securities Act of 1933, as amended, and includes
all rules and regulations of the SEC promulgated under that Act.

    

    “Shares”
means the Drawdown Shares and the Warrant Shares.

    

    “Stock
Exchange” means the NYSE Amex, the securities exchange on which the
Common Stock is traded on the Effective Date.

    

    “Stock Option
Plan” means the Aerosonic Corporation 2004 Stock Incentive Plan, as
amended and restated on July 26, 2007.

    

    “Subsidiaries”
means OP Technologies, Inc., an Oregon corporation, and Avionics Specialties,
Inc., a Virginia corporation, both of which are wholly owned subsidiaries of the
Company.

    

    “Tax”
means any taxes, assessments, fees, or other charges from time to time or at any
time imposed by any law or by any state, commonwealth, federal, foreign,
territorial, regulatory, or other court or governmental department, commission,
board, bureau, agency or instrumentality.

    

    “Tax
Return” means any form, notice, report, return, schedule, statement or
declaration filed or required to be filed in connection with the reporting,
collection, assessment, or determination of any Tax or the administration of any
law or order relating to any Tax.

    

    “Transactions”
means the acquisition of the Securities pursuant to this Agreement and the other
Financing Documents.

    

    “Warrant
Shares” means the shares of Common Stock issuable on exercise of the
Warrants.

    

    “Warrant”
means a Common Stock Purchase Warrant of the Company to purchase at any time
after the one-year anniversary date of their original issue date until April 10,
2015, one share of the Common Stock for a purchase price of $.64 per share,
subject to anti-dilution protection and adjustment of the warrant price and
number of shares as provided in the Warrant Certificate.

    

    “Warrant
Certificate” means a warrant certificate in the form of Exhibit
2, to be issued
by the Company to Redmond pursuant to this Agreement to evidence the number of
Warrants issue to Redmond and the terms and conditions of the
Warrants.

    

    1.2          Recurring
Words.

    

    As used throughout this Agreement, (a)
the words “consent”
and “approval”
are synonymous, (b) the word “including”
is always without limitation, (c) neuter words should be construed to include
correlative feminine and masculine words, (d) words in the singular number
include words in the plural number and vice versa, (e) references to “$” are to
dollars of the United States of America, and (f) the following common words and
terms have the meanings attributed to them, unless expressly stated to the
contrary:

    

    “affiliate”
means, with respect to any specified person,  any person directly or
indirectly owning 10% or more of the voting stock or rights of such named person
or of which the named Person owns 10% or more of such voting stock or rights;
any Person controlling, controlled by or under common control with such named
Person; any officer, director or employee of such named Person or any Affiliate
of the named Person; and any family member of the named Person or any Affiliate
of such named Person, including any successor or assign of such
affiliate.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

    “days”
means calendar days, including Sundays, Saturdays, and holidays.

    

    “knowledge”
when used in reference to the Company, means the current actual awareness of a
particular fact or matter by any executive officer of the Company, after due
inquiry of all the officers of the Company and those employees of the Company
who are reasonably likely to have knowledge of the subject matter as to whether
they are aware of any information that would cause any warranty or
representation by the Company in this Agreement to be inaccurate in any material
respect and includes the content of all correspondence (whether in printed or
electronic form) that has been delivered to any officer or employee of the
Company, but does not otherwise include any imputed or constructive knowledge of
any fact or matter.

    

    “law”
includes a local, state, or national code, rule, treaty, statute, ordinance, or
regulation and the common law arising from final, non-appealable decisions of
Governmental Authorities and state or federal courts in the United States or any
other country.

    

    “liability”
means a liability, indebtedness, accrued expense, or financial obligation of any
kind whatsoever, whether direct or indirect, joint or several, known or unknown,
fixed or contingent, accrued or unaccrued, due or to become due, asserted or
unasserted, matured or unmatured, recorded or unrecorded, or liquidated or
unliquidated.

    

    “order” includes an order,
decree, ruling, judgment, or injunction.

    

    “person”
includes, in addition to a natural person, a group, trust, syndicate,
corporation, cooperative, association, partnership, business trust, joint
venture, limited liability company, unincorporated organization, and
Governmental Authority, as well as a natural person and two or more natural
persons who agree to act in concert for any particular purpose.

    

    1.3          Accounting
Terms.

    

    Accounting terms used, but not defined,
in this Agreement are to be construed and interpreted in accordance with GAAP as
in effect on the Effective Date.

    

    1.4          Exhibits;
Headings; References.

    

    The
headings preceding the articles and sections of this Agreement are solely for
convenient reference and neither constitute a part of this Agreement nor affect
its meaning, interpretation, or effect.  All exhibits and schedules
referred to in this Agreement are an integral part of it and are incorporated by
reference in it.  Unless otherwise expressly stated, a reference in
this Agreement to an article, section, schedule, or exhibit is to an article,
section, schedule, or exhibit of this Agreement.

    

    1.5          Severability.

    

    Each
provision of this Agreement should be construed and interpreted so it is valid
and enforceable under applicable law.  If a provision of this
Agreement (or the application of it) is held by a court to be invalid or
unenforceable under applicable law, that provision will be deemed separable from
the remaining provisions of this Agreement and will not affect the validity or
interpretation of the other provisions of this Agreement or the application of
that provision to a person or circumstance to which it is valid and
enforceable.

    

    
      
        
        

      

      
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    ARTICLE
2

    THE
LOAN

    

    2.1          Loan;
Warrants; Drawdown Shares.

    Subject
to the terms and conditions of this Agreement:  Redmond will lend to
the Company and the Company will borrow an aggregate of up to the Maximum
Availability Amount, and the Company shall deliver to Redmond, (a) on the
Closing Date, a Note in the principal amount equal to the Maximum Availability
Amount, executed by the Company and each Subsidiary, (b) with respect to each
Borrowing, Warrants that are exercisable for the number of Warrant Shares as
described on Schedule
1, and (c) with respect to each Borrowing, the number of Drawdown Shares
as set forth on Schedule
1.  The Loan will be senior to all other indebtedness of the
Company or any Subsidiary, other than (i) the Existing Loans and, (ii) the
unsecured loans made by the Other Lenders to the Company and its Subsidiaries,
each of such unsecured loans which shall be pari passu with this
Loan.  The Advance Shares shall be listed for trading on the Stock
Exchange upon approval of the Stock Exchange.

    

    2.2          Availability.

    

    (a)           Redmond
agrees to make Advances to the Company in an amount at any one time outstanding
not to exceed the Maximum Availability Amount.  Each Borrowing shall
be made by an irrevocable duly executed Borrowing Notice delivered to Redmond
(which notice must be received by Redmond no later than 10:00 a.m. (Tampa
time) on the fifth (5th)
Business Day prior to the date that is the requested Funding Date specifying
(i) the amount of such Borrowing, and (ii) the requested Funding Date,
which shall be a Business Day.  At Redmond’s election, in lieu of
delivering the above-described Borrowing Notice, any Authorized Person may give
Redmond telephonic notice of such request by the required time.  In
such circumstances, Borrower agrees that any such telephonic notice will be
confirmed with a Borrowing Notice within 24 hours of the giving of such notice
and the failure to provide such Borrowing Notice shall not affect the validity
of the request.

    

    (b)           After
receipt of a request for a Borrowing pursuant to Section 2.2(a), Redmond
shall, by not later than 3:00 p.m. (Tampa time) on the applicable Funding
Date, make available to Borrower by transferring immediately available funds
equal to such requested Borrowing to the Designated Accounts designated by the
Borrower for such purpose; provided, however, that Redmond
shall have no obligation to make any Advance if Redmond shall have actual
knowledge that (1) one or more of the applicable conditions precedent set
forth in Section 3
will not be satisfied on the requested Funding Date for the applicable Borrowing
unless such condition has been waived, or (2) the requested Borrowing would
exceed the Maximum Availability Amount on such Funding Date.  If at
any time Redmond fails to make available to Borrower on an Applicable Funding
Date an Advance in accordance with the provisions of this Section 2.2(b), the Company
shall be permitted to borrow the amount of the Advance from the Other
Lenders.

    

    2.3          Subordination.

    

    Payment
of the Note will be subordinate to the Existing Loans as set forth in the
Note.

    

    2.4          Use
of Proceeds.

    

    The
Company shall use the proceeds from Loan for working capital.

    

    ARTICLE
3

    CLOSING
OF TRANSACTIONS

    

    3.1          Closing
Time and Place.

    

    The
parties shall close the Transactions at 10:00 a.m., Tampa, Florida time, on the
Closing Date at the offices of the Company, or at any other time and place
mutually acceptable to the Company and Redmond.

    

    3.2          Obligations
of the Company.

    

    At the
Closing, the Company shall deliver to Redmond:

    

    (a)         a
Note in the form of Exhibit
1 that is payable to Redmond in the principal amount of $500,000.00 and
duly executed by the Company and the Subsidiaries in favor of
Redmond;

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    

    (b)         a
stock certificate of the Company for Redmond that is issued in the name of
Redmond, duly executed by the Company, and represents the number of Drawdown
Shares specified for Redmond on Schedule
1, and in
accordance with the terms set forth in Schedule
1;

    

    (c)        a
Warrant Certificate for Redmond in the form of Exhibit
2 that is issued in the name of Redmond, duly executed by the Company,
and exercisable for the number of Warrant Shares specified for Redmond on Schedule
1, and in
accordance with the terms set forth in
Schedule1;

    

    (d)        a
Closing Certificate in the form of Exhibit
3 that is signed by the Company’s President and Chief Executive
Officer;

    

    (e)        an
Officer’s Certificate in the form of Exhibit
4 that is signed by the Company’s acting Chief Financial Officer;
and

    

    (f)         a
certified copy of the resolutions adopted by the Company’s Board of Directors
authorizing and approving (i) the execution, delivery, and performance by the
Company of the Note, the Warrants, and this Agreement, (ii) the issuance of the
Securities and the Warrant Shares, and (iii) the other transactions contemplated
by this Agreement and the other Financing Documents.

    

    3.3          Obligations
of Redmond.

    

    At the
Closing, Redmond shall deliver to the Company:

    

    (a)       
 the first Advance to the Company;

    

    (b)        a
counterpart of a Warrant Certificate in the form of Exhibit
2 that is issued in the name of Redmond, duly executed by Redmond, and
exercisable for the number of Warrant Shares specified for Redmond on Schedule 1, and in accordance with the
terms set forth in Schedule
1;

    

    (c)        a
Closing Certificate in the form of Exhibit
3 that is signed by Redmond’s General Partner;

    

    (d)        an
Officer’s Certificate in the form of Exhibit
4 that is signed by Redmond’s General Partner; and

    

    (e)        a
certified copy of the resolutions adopted by Redmond’s General Partner
authorizing and approving (i) the execution, delivery, and performance by the
Redmond of Loan Documents and (iii) the other transactions contemplated by this
Agreement and the other Loan Documents;

    

    3.4          Conditions
Precedent of the Company.

    

    The
closing obligations of the Company under this Agreement are subject to the
following conditions precedent, each of which must be satisfied on or before the
Closing Date, unless waived in writing by the Company:

    

    (a)         Representations and
Warranties.  Each representation and warranty of Redmond in
this Agreement must be accurate in all material respects as of the Effective
Date and as of the Closing Date;

    

    (b)         Performance of
Agreement.  Redmond must have performed in all material
respects every obligation required by this Agreement to be performed or
satisfied by it at or before the Closing;

    

    (c)         Good Standing
Certificates.  The Company must have received a good standing
certificate for Redmond from the appropriate Governmental Authority, dated as of
a recent date, and certifying that it is an active limited liability partnership
under the laws of its jurisdiction and has filed all annual reports and paid all
annual report fees that are due through the date of the
certificate;

    
      
         

      

      
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    (d)        
Consents and
Approvals.  The Company must have received all consents and
approvals that are necessary to close the Transactions, including approval of
the Transactions by the Board of Directors of the Company and the Subsidiaries;
and

    

    (e)         Adverse
Proceeding.  A Proceeding must not be pending or threatened
before, and a law or order must not have been issued, adopted, enacted, entered,
enforced, or held applicable to the Transactions by, any Governmental Authority
or any state or federal court in the United States of America or other
government that directly or indirectly does or seeks to do any of the following:
(i) declare the offer or sale of the Note, the Warrants, or the Drawdown Shares
to be illegal; or (ii) permanently enjoin, restrain, or otherwise prohibit the
sale of the Note, the Warrants, or the Drawdown Shares pursuant to this
Agreement.

    

    A waiver
of any condition precedent to the closing obligations of the Company will be
valid and effective if approved in writing by the President and Chief Executive
Officer of the Company, and any unsatisfied condition precedent will be deemed
waived (without further action) by the closing of the
Transactions.  The President and Chief Executive Officer of the
Company may waive any condition precedent to the Company’s closing obligations
without any notice to, or further approval of, the Company’s stockholders or
board of directors.

    

    3.5          Conditions
Precedent of Redmond.

    

    The
obligations of Redmond to make any Advance under this Agreement are subject to
the following conditions precedent, each of which must be satisfied on the
Closing Date and as of the date of each Advance, unless waived in writing by
Redmond:

    

    (a)        Compliance with
Agreement.  The Company must have performed in all material
respects every obligation required by this Agreement to be performed by it on or
before the Closing Date and as of the date of each Advance;

    

    (b)        Representations and
Warranties.  Each representation and warranty of the Company
contained in this Agreement must be accurate in all material respects as of the
as of the Closing Date and as of the date of each Advance, except to the extent
the representation or warranty expressly addresses an earlier date, in which
case the representation and warranty must be true and accurate as of that
earlier date;

    

    (c)        Good Standing
Certificates.  Redmond must have received a good standing
certificate for the Company and each Subsidiary from the appropriate
Governmental Authority, dated as of a recent date, and certifying that each of
those corporations is an active corporation incorporated under the laws of its
jurisdiction and has filed all annual reports and paid all annual report fees
that are due through the date of the certificate;

     

    (d)        Adverse
Proceeding.  A Proceeding must not be pending or threatened
before, and a law or order must not have been issued,
adopted,  enacted, entered, enforced, or held applicable to the
Transactions by, any Governmental Authority or any state or federal court in the
United States or other government that directly or indirectly does or seeks to
do any of the following: (i) declare the offer or sale of the Note, the
Warrants, or the Drawdown Shares to be illegal; or (ii) permanently enjoin,
restrain, or otherwise prohibit the sale of the Note, the Warrants, or the
Drawdown Shares pursuant to this Agreement;

    

    (e)        Existing
Loans.  Redmond must have received written evidence
satisfactory to him that confirms the following:  (i) the Existing
Lender has consented to the Transactions; (ii) the Existing Lender has entered
into the extension agreement provided to Redmond on the date hereof with respect
to the Existing Loans; (iii) the Existing Lender has agreed that any future
insurance proceeds received by the Company in connection with the August 2008
fire at its Clearwater, Florida, facilities will be paid to and become an asset
of the Company without any restrictions imposed by the Existing Lender on the
use of those funds; and (iv) the Existing Lender has agreed that any proceeds
received by the Company from the sale of its Earlysville, Virginia, real
property that are in excess of the mortgage balance will become an asset of the
Company without restrictions by the Existing Lender on the use of those
funds.

    
      
         

      

      
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    A waiver
of any condition precedent to the closing obligations of Redmond will be valid
and effective, if approved in writing by Redmond, and any unsatisfied condition
precedent will be deemed waived (without further action) by the closing of the
Transactions.

    

    ARTICLE
4

    REPRESENTATIONS
AND WARRANTIES OF THE COMPANY

    

    The
Company represents and warrants to Redmond the accuracy of the following
statements as of the Effective Date and as of the Closing Date:

    

    4.1          Organization
and Authority.

    

    (a)         The
Company is a corporation that is duly incorporated and validly existing in good
standing under the laws of the State of Delaware.  The Company is
qualified or registered to do business as a foreign corporation and is in good
standing in each jurisdiction in which the failure to be so qualified could
reasonably be expected to have a Material Adverse Effect.

    

    (b)         Avionics
Specialties, Inc. is a corporation that is duly incorporated and validly
existing in good standing under the laws of the State of
Virginia.  Avionics Specialties, Inc. is in good standing in each
jurisdiction in which the failure to be so qualified could reasonably be
expected to have a Material Adverse Effect.

    (c)         OP
Technologies, Inc. is a corporation that is duly incorporated and validly
existing in good standing under the laws of the State of Oregon. OP
Technologies, Inc. is in good standing in each jurisdiction in which the failure
to be so qualified could reasonably be expected to have a Material Adverse
Effect.

    

    (d)         The
Company has all requisite corporate power and authority and the full legal right
to own, lease, and operate its properties, to issue the Note, the Shares, and
the Warrants, to conduct its business as presently conducted, and to execute,
deliver, and perform this Agreement and the other Financing
Documents.  Each of the Subsidiaries has all requisite corporate power
and authority and the full legal right to own, lease, and operate its
properties, to conduct its business as presently conducted, and to execute,
deliver, and perform the Financing Documents to which it is a
party.

    

    (e)         The
Company does not own any capital stock, membership interest, partnership
interest, or other ownership interest in any person, except for the
Subsidiaries.

    

    (f)         None
of the Company or the Subsidiaries is a “foreign person” within the meaning of
Section 1445 of the Code.

    

    4.2          Authorization
and Validity.

    

    (a)           This
Agreement has been duly and validly executed and delivered on behalf of the
Company, and each of the other Financing Documents to which the Company is a
party will be duly and validly executed by the Company when it is delivered to
Redmond at the Closing.

    

    (b)           This
Agreement is, and (when executed and delivered to Redmond at the Closing) each
other Financing Document to which the Company is a party will be, a valid and
binding obligation of the Company that is enforceable by Redmond against the
Company in accordance with their respective terms, except in each case to the
extent limited by application of general principles of equity and by bankruptcy,
insolvency, debtor relief, and similar laws of general application affecting the
enforcement of creditors’ rights and debtors’ obligations.

    
      
         

      

      
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    (c)           The
Advance Shares are duly authorized for issuance and, when issued to Redmond,
will be validly issued, fully paid, and non-assessable, free and clean of any
Liens, preemptive rights, or restriction on transfer, except for transfer
restrictions imposed by state and federal securities laws.

    

    (d)           The
Warrants have been duly authorized and, when issued to Redmond, will be validly
issued, free and clean of any Liens, preemptive rights, or restriction on
transfer, except for any transfer restrictions imposed by state and federal
securities laws.

    

    (e)           The
Warrant Shares have been duly authorized for issuance, reserved for issuance on
exercise of the Warrants, and, when issued in exchange for payment of the
warrant exercise price, will be validly issued, free and clean of any Liens,
preemptive rights, or restriction on transfer, except for any transfer
restrictions imposed by state and federal securities laws.

    

    (f)           The
issuance, execution, delivery, and performance of the Note by the Subsidiaries
have been duly authorized by all requisite corporate action of the Subsidiaries,
and no other action on the part of the Subsidiaries or their respective
directors, affiliates, or shareholders is necessary for either of the
Subsidiaries to issue the Note.

    

    (g)           The
Note will be duly and validly executed by the Company and the Subsidiaries when
it is delivered to Redmond at the Closing.

    

    (h)           When
executed and delivered by the Company and the Subsidiaries to Redmond at the
Closing, the Note will be valid and binding obligations of the Company and the
Subsidiaries that are enforceable by Redmond against the Company and the
Subsidiaries in accordance with its terms, except to the extent limited by
application of general principles of equity and by bankruptcy, insolvency,
debtor relief, and similar laws of general application affecting the enforcement
of creditors’ rights and debtors’ obligations.

    

    4.3          Noncontravention.

    

    The
execution, delivery, and performance by the Company of this Agreement and the
other Financing Documents to which it is a party, the issuance, execution,
delivery, and performance of the Note by the Company and the Subsidiaries, and
the Closing of the Transactions will not:

    

    (a)           contravene
any law or order;

    

    (b)           conflict
with any provision of the Bylaws or Articles or Certificate of Incorporation of
the Company or any Subsidiary;

    

    (c)           violate
or result in the suspension, revocation, termination, or cancellation of any
Governmental Authorization that is necessary for the operation of the business
of the Company or any Subsidiary;

    

    (d)           result
in the vesting, creation, or exercise of any option to purchase, right of first
offer or refusal, or other right to purchase any common stock of the Company or
any Subsidiary;

    

    (e)           require
any filing, notice, report, application, registration, or other submission of
any kind to be made by the Company or any Subsidiary with any Governmental
Authority or other person (other than the SEC and the Stock
Exchange);

    

    (f)           require
any Governmental Authorization to be obtained by the Company or any Subsidiary
from any Governmental Authority or any consent, approval, or authorization to be
obtained by the Company or any Subsidiary from any other person; or

    

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    (g)           conflict
with or result in a breach or default, the imposition of a penalty, the creation
or attachment of a Lien on any of the Company’s or any Subsidiary’s assets, a
suspension, cancellation, or termination (or the creation of any right of
suspension, cancellation, or termination), or the acceleration of the maturity
of any liability, obligation, or indebtedness of the Company or any Subsidiary,
under or pursuant to any order or contract.

    

    4.4          Capitalization.

    

    (a)       The
authorized capital stock of the Company consists of 8,000,000 shares of common
stock, par value $.40 per share, of which 4,051,110 shares are issued and
3,620,343 shares are outstanding, all of which are fully paid and
nonassessable.  All the issued and outstanding shares of Common Stock
have been duly authorized and validly issued and were not issued in
contravention of any preemptive rights.  The Company does not have
authorized or outstanding any other class of debt or equity securities, any
right, option, warrant, agreement, commitment, or subscription of any kind
obligating it to sell, issue, redeem, transfer, repurchase, or otherwise acquire
any shares of its capital stock, or any securities convertible into or
exchangeable for shares of its capital stock or any right, option, warrant, or
subscription to acquire any of its capital stock, other than options issued or
to be issued under the Stock Option Plan.  To the Company’s knowledge,
no proxy, voting trust, voting agreement, shareholder agreement, or other
agreement, arrangement, or understanding of any kind exists that entitles any
person other than the record owner of any shares of capital stock of the Company
to vote those shares or to exercise any right or power (including a right of
consent or approval) in respect of those shares.

    

    (b)         All
the issued and outstanding capital stock of the Subsidiaries has been duly
authorized and validly issued and is fully paid, nonassessable, and owned of
record and beneficially by the Company, free and clean of any Lien (other than
Liens in favor of the Existing Lender), assessment, adverse claim, preemptive
right, contract for sale, option to purchase, right of first refusal, or
restriction on transfer, except for transfer restrictions imposed by state and
federal securities laws, and are not subject to any proxy, voting trust,
shareholder agreement, or other agreement with respect to the voting or transfer
of any of the stock.  Except for the class of capital stock owned by
the Company, neither of the Subsidiaries has authorized or outstanding any other
class of debt or equity securities, any right, option, warrant, agreement,
commitment, or subscription of any kind obligating it to sell, issue, redeem,
transfer, repurchase, or otherwise acquire any shares of its capital stock or
any securities convertible into or exercisable or exchangeable for shares of its
capital stock or any right, option, warrant, or subscription to acquire any of
its capital stock.

    

    4.5          SEC
Filings.

    

    The Company shall deliver to Redmond as
soon as they become available accurate and complete copies of any report or
statement that it mails to its stockholders generally or files with the SEC
during the period after the Effective Date and before the Closing
Date.  As of their respective dates, these reports and statements will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated in them or necessary to make the statements in them
not misleading, in light of the circumstances under which they are made, and
these reports and statements will comply in all material respects with all
applicable requirements of the Exchange Act and the Securities Act.

    

    4.6          Financial
Statements.

    

    (a)         The
audited consolidated financial statements and unaudited consolidated interim
financial statements of the Company and its Subsidiaries that are included or
incorporated in the Company SEC Documents were prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except as otherwise
indicated in the notes to them) and fairly present the consolidated financial
position, results of operations, and cash flows from operating, investing, and
financing activities of the Company and its Subsidiaries as of the dates and for
the periods indicated, except that the unaudited consolidated interim financial
statements in the Company SEC Documents are subject to normal year-end
adjustments and were prepared in accordance with the instructions to SEC Form
10-Q and, accordingly, omit or condense certain footnotes and other information
normally included in financial statements prepared in accordance with generally
accepted accounting principles.  The consolidated financial statements
of the Company and its Subsidiaries that are included or incorporated in any
subsequent report or statement that the Company mails to its shareholders
generally or files with the SEC during the period after the Effective Date and
before the Closing Date will be prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as otherwise indicated in
them, the notes to them, or any related report of the Company’s independent
accountants) and will fairly present the financial information that they purport
to present, except that the unaudited, consolidated interim financial statements
will be subject to normal year-end adjustments and will omit or condense certain
footnotes and other information normally included in financial statements
prepared in accordance with GAAP.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    

    (b)         All
the books of account and financial records of the Company and the Subsidiaries
are in the possession of the Company and located at its principal business
office, are accurate and complete in all material respects, and have been
maintained in accordance with good business practices, and every material
transaction affecting the Company’s or a Subsidiary’s business has been recorded
in them.

    

    (c)         Any
financial projections of the Company or any Subsidiary that have been provided
to Redmond are reasonable, are based on reasonable assumptions and historical
results, can be supported by the Company’s or the Subsidiary’s existing customer
contracts and business arrangements, and describe in reasonable detail all
material assumptions on which they are based.

    

    (d)         Except
to the extent of the stated amount of the allowance for doubtful accounts, all
the accounts receivable and notes receivable reflected in the most recent
balance sheet included in the Company SEC Documents, and all accounts receivable
that have arisen since January 31, 2009, constitute valid and bona fide rights
to collect payments from the sale of goods and services in the ordinary course
of the business of the Company or a Subsidiary or other valid claims for which
all requisite performance has been rendered by the Company or a Subsidiary, will
be collectible by the Company or the Subsidiary in the usual and ordinary course
of business, and are not subject to any setoff, defense, or
counterclaim.  The allowance for doubtful accounts reflected on the
most recent balance sheet included in the Company SEC Documents was determined
by the Company in a manner consistent with past practices.

    

     (e)         Except
for any liabilities that are accrued, reflected, reserved, or disclosed in the
Balance Sheet, that have been incurred in immaterial amounts in the usual and
ordinary course of business since the Balance Sheet Date, or that do not exceed
$300,000 in the aggregate, the Company and the Subsidiaries do not have any
liabilities.  The Company has provided to Redmond all detail and
information relating to any material liability that is accrued, reflected,
reserved, or disclosed in the Balance Sheet.  The Company is not in
violation of, or default under, any contract that could give rise to any
material liability that is not accrued, reflected, or reserved, and clearly
disclosed on the Balance Sheet.

     

    4.7          Brokerage.

    

    Neither the Company nor any Subsidiary
has incurred any liability to a broker, finder, investment banker, or other
intermediary who is entitled to be paid a fee, commission, or other remuneration
in connection with this Agreement or the Transactions.

    

    4.8          Status
of Note.

    

    The indebtedness evidenced by the Note,
when issued, will not be subordinate to any other liability, obligation, or
indebtedness of the Company or any Subsidiary other than the Existing Loans to
the extent and only to the extent expressly provided in the Note.

    

    4.9          Affiliate
Transactions.

    

    Except as
described in the Company SEC Documents, no director, employee, shareholder, or
other affiliate of the Company is a party to any agreement, contract,
commitment, or transaction with the Company, or has any interest in any property
(whether real, personal, or mixed, or tangible or intangible) used in or
necessary to the Company’s or any Subsidiary’s business.

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    

    4.10       Claims
and Litigation.

    

    No
Proceeding affecting the Company, a Subsidiary, or the assets or business of the
Company or a Subsidiary is pending before any court, mediator, arbitrator, or
Governmental Authority or, to the knowledge of the Company, threatened by any
person, or otherwise reasonably foreseeable, except as disclosed in the Company
SEC Documents and except for any Proceeding pending or threatened that has been
fully disclosed to Redmond and that would not have a Material Adverse Effect,
and the Company is not in default with respect to any order of any court or
Governmental Authority.

    

    4.11       Absence
of Undisclosed Liabilities.

    

    Except
for liabilities, obligations, and Financial Contingencies disclosed in the
Company SEC Documents, incurred in immaterial amounts in the usual and ordinary
course of business since the Balance Sheet Date, and any others that in the
aggregate do not exceed $300,000, neither the Company nor any Subsidiary has any
liabilities, obligations, or indebtedness of any nature whatsoever (whether
absolute, accrued, direct, indirect, perfected, inchoate, unliquidated, or
otherwise, and whether due or to become due).

    

    4.13       Title
to Assets; Liens.

    

    The
Company and each Subsidiary has good, valid, and marketable record and equitable
title to all its assets, free and clear of any Lien (other than Permitted
Liens), assessment, adverse claim, preemptive right, contract for sale, option
to purchase, or right of first offer or refusal, or any other transfer
restriction of any kind whatsoever.  All of the assets of the Company
and each Subsidiary are located in the States of Florida, Oregon, or
Virginia.

    

    4.14       Governmental
Authorizations.

    

    The Company and the Subsidiaries
possess all Governmental Authorizations that are legally required for the
operation of their respective businesses and their use and ownership of their
respective assets.  The Company has furnished to Redmond accurate and
complete copies of all the Governmental Authorizations, and each of those
Governmental Authorizations is in full force and effect, has been duly and
validly issued, is not subject to any conditions that are not stated in the
authorization, has not been amended, annulled, or revoked in any respect, and
will not be cancelled, impaired, or adversely affected in any way by the
execution of this Agreement or the Closing of the Transactions.

    

    4.15       Tax Matters.

    

    The Company and each Subsidiary have
filed (or will file) with the proper governmental authorities all Tax Returns
required by law, except with respect to tax periods for which the applicable
statute of limitations (including any waiver or extensions) has expired
and:  (a) all the Tax Returns have been prepared in material
compliance with all applicable laws and are true and accurate in all material
respects;  (b) all Taxes reported on those Tax Returns have been fully
paid; (c) no unpaid Tax deficiency has been assessed or to the knowledge of the
Company is proposed against the Company or any Subsidiary by any taxing
authority; and (d) to the knowledge of the Company, no basis exists for any
taxing authority to claim or assess any additional Taxes against the Company or
any Subsidiary for any period.

    

    4.16       Accuracy
of Representations.

    

    None of the information contained in
the representations and warranties made by the Company in this Agreement
(including any exhibit incorporated by reference into this Agreement) or in any
certificate delivered or to be delivered to Redmond by the Company pursuant to
this Agreement contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact that is necessary to make the
statements made, in light of the circumstances under which they were made, not
misleading.

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    

    ARTICLE
5

    REPRESENTATIONS
AND WARRANTIES OF REDMOND

    

    Redmond
represents and warrants to the Company the accuracy of the following statements
as of the Effective Date and as of the Closing Date:

    

    5.1         Organization
and Authority.

    

    (a)         Redmond
is a limited liability partnership that is duly incorporated and validly
existing in good standing under the laws of the State of Florida.  The
Company is qualified or registered to do business as a foreign corporation and
is in good standing in each jurisdiction in which the failure to be so qualified
could reasonably be expected to have a Material Adverse Effect.

    

    (b)         Redmond
has all requisite corporate power and authority to execute, deliver, and perform
this Agreement and every other Financing Documents to which it is a
party.

    

    (c) The execution, delivery, and
performance by Redmond of this Agreement and every other Financing Document to
which it is a party will not:

    

    (i)         violate
any law or order of any court or Governmental Authority;

    

    (ii)         require
any notice to, filing or registration with, or consent, license, approval, or
authorization of, any Governmental Authority or other person; or

    

    (iii)         result
in a breach or default, the imposition of a penalty, the creation or attachment
of a Lien on any of Redmond’s assets, a suspension, cancellation, or termination
(or create any right of suspension, cancellation, or termination), or the
acceleration of the maturity of any liability, obligation, or indebtedness of
Redmond, under or pursuant to any order or contract to which Redmond is a
party.

    

    This
Agreement has been duly and validly executed and delivered to the Company by
Redmond, and Redmond will have duly and validly executed each of the other
Financing Documents to which it is a party before that Financing Document is
delivered to the Company at the Closing.  This Agreement is, and (when
executed and delivered to the Company at the Closing) each other Financing
Document to which Redmond is a party will be, valid, effective, and enforceable
by the Company against Redmond in accordance with its terms, except in each case
to the extent limited by application of general principles of equity and by
bankruptcy, insolvency, debtor relief, and similar laws of general application
affecting the enforcement of creditors’ rights and debtors’
obligations.

    

    5.2          Litigation.

    

    No Proceeding is pending before any
court, mediator, arbitrator, or Governmental Authority or (to the knowledge of
Redmond) asserted or threatened by any person that could adversely affect in any
way Redmond’s right to purchase and own the Note, the Warrants, and the Advance
Shares.

    

    5.3          Brokerage.

    

    Redmond has not incurred any liability
to a broker, finder, investment banker, or other intermediary who is entitled to
be paid by a fee, commission, or other remuneration in connection with this
Agreement or the Transactions.

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    5.4          Communication by
Redmond.

     

    Redmond
has had a reasonable opportunity to ask questions of and receive answers from
the Company concerning the Transactions, and all such questions have been
answered to the full satisfaction of Redmond.  Furthermore, Redmond
represents that in connection with its review of this Agreement and the
transactions contemplated hereby, he either: (i) has not been represented by
counsel and assumes all risks thereto, or (ii) has been represented by counsel
other than counsel for the Company.

    

    ARTICLE
6

    COVENANTS
OF THE COMPANY

    

    6.1          Affirmative
Covenants.

    

    From the
date of this Agreement and for as long as any of the Liabilities remain unpaid,
the Company shall, and shall cause each of the Subsidiaries to:

     

    (a)         unless
otherwise waived by the Existing Lender, comply with all of the affirmative
covenants set forth in Section 5 of the Existing Loan Documents;
and

    

    (b)         provide
Redmond with copies of all information required to be provided to the Existing
Lender under the Existing Loan Documents.

    

    6.2          Negative
Covenants.

    

    From the
date of this Agreement and for as long as any of the Liabilities remain unpaid,
the Company and its Subsidiaries shall:

     

    (a)         unless
otherwise waived by the Existing Lender, comply with each negative covenant set
forth in Section 6 of the Existing Loan Documents; or

     

     (b)        not
incur, create, assume, or permit to exist a commitment to make a payment under a
lease or any other arrangement for the use of property of another person if,
immediately thereafter, the aggregate of all such payments to be made during any
consecutive 12-month period would exceed $100,000, or enter into any transaction
in which it sells, leases, transfers, or exchanges any of its property to a
third party and then leases back the same or similar property except for (i)
current capital and operating leases existing as of the Closing Date or (ii) any
lease or other arrangement entered into with third parties in connection with
the use of property of another person for equipment or machinery used in the
operations of the Company and its Subsidiaries and in the production of
products, including equipment used to replace obsolete equipment, equipment used
to test and produce products and to maintain or increase capacity;
or

    

    (c)         not,
unless approved by Redmond, issue (i) any shares of any class of stock, (ii) any
other equity securities, or (iii) any debt or equity securities convertible
into, or exchangeable for, equity securities (including warrants and stock
options), other than the Warrants, the Advance Shares, and awards issued under
the Stock Option Plan or to be issued under the Stock Option Plan or to be
issued under an amendment to the Stock Option Plan as approved by the
stockholders of the Company; or

    

    (d)         not
incur, issue, create, assume, or permit to exist any indebtedness for money
borrowed from anyone other than Redmond, except:  (i) the
Liabilities; (ii) the Existing Loans; (iii) the purchase of equipment or
machinery used in the operations of the Company and its Subsidiaries and in the
production of products, including equipment used to replace obsolete equipment,
equipment used to test and produce products and to maintain or increase
capacity; (iv) accounts payable to trade creditors and current operating
expenses that are not aged more than 120 days from billing date or more
than 30 days from the due date, in each case incurred in the ordinary
course of business and paid within that time period; (v) obligations to pay
rent in connection with its business operations; (vi) contingent
liabilities arising out of endorsements of checks and other negotiable
instruments for deposit or collection in the ordinary course of business; and
(vii) the indebtedness to the Other Lenders in an aggregate amount equal to
$1,500,000; or

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    

    (e)         not
refinance the outstanding loans with the Senior Lender unless the refinancing is
on more favorable terms to the Company and its Subsidiaries.

    

    ARTICLE
7

    FURTHER
AGREEMENTS

    

    7.1          Transfer
Agent.

    

    The
Company will serve as the initial transfer agent for the Note and the
Warrants.  The Company may, in its sole discretion, appoint at any
time a commercial transfer agent for the Note and Warrants.

    

    7.2          Brokerage
Fees.

    

    The Company and the Subsidiaries shall
not pay any fee, commission, or other remuneration to any broker, finder,
investment banker, or other intermediary in connection with this Agreement or
the Transactions.

    

    7.3          Survival
of Provisions.

    

    The respective warranties, obligations,
and representations of the parties under this Agreement will survive the Closing
and the consummation of the Transactions.  All the obligations of a
party under this Agreement will expire when fully paid, performed, or
discharged.

    

    7.4          Further
Assurances.

    

    At any time and from time to time after
the Closing Date, each party to this Agreement shall furnish to any other party
to this Agreement any reasonable further assurance of the Transactions that the
other party requests, if the requested assurance does not enlarge or extend any
existing liability or obligation of the party or impose on the party any new or
additional liability or obligation.

    

    7.5          Listing and Reservation of
Shares.

    

    The Company shall list the Advance
Shares for trading on the Stock Exchange on or before they are issued to
Redmond.  In addition, the Company shall reserve the Warrant Shares
for listing on the Stock Exchange upon official notice of
issuance.  Also, the Company shall reserve from its authorized but
unissued Common Stock and keep available for issuance until all the Warrants
expire or are exercised that number of shares of the Common Stock that will be
issuable on exercise of the Warrants.

    

    7.6          Indemnity.

    

    The
Company shall indemnify Redmond against any and all costs, claims, losses,
damages, expenses, and liabilities incurred by Redmond and arising out of, in
connection with, or as a result of any breach or inaccuracy of any covenant,
warranty, or representation of the Company in this Agreement or any other
Financing Document.  Redmond shall indemnify the Company against any
and all costs, claims, losses, damages, expenses, and liabilities incurred by
the Company and arising out of, in connection with, or as a result of any breach
or inaccuracy of any covenant, warranty, or representation of Redmond in this
Agreement or any other Financing Document.

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    

    7.7          Transaction
Expenses.

    

    Each
party shall be responsible for their own attorneys’ fees, costs, taxes, charges
and expenses incurred by them, in connection with the preparation, negotiation,
and consummation of the Financing Documents and the Transactions.

    

    7.8         Confidentiality.

    

    Redmond acknowledges that he has been
or will be given access to Restricted Information in its capacity as the owner
of a Note, Shares, and Warrant and that it is essential to the successful
conduct of the Company’s business that all Restricted Information remain
protected and strictly confidential.  Accordingly, Redmond shall treat
all Restricted Information as strictly confidential and use it only in
connection with its evaluation of the Company’s business and exercising his
rights under the Financing Documents.  Redmond shall not at any time,
reveal, discuss, divulge, disclose, or duplicate any Restricted Information in
any way, at any time, for any reason, or to any person who is not an officer,
director, or professional advisor of the Company who is authorized by the
Company to have access to the information and needs to know the information for
the purposes of performing its, her, or his responsibilities on behalf of the
Company, except to the extent expressly authorized in writing by the Company,
and except for any disclosure that is required by law, by a court of competent
jurisdiction, or to respond in good faith to a valid inquiry by a Governmental
Authority.  Redmond shall not use and shall not permit any of his
affiliates to use any Restricted Information for any other purpose whatsoever,
including the use of any Restricted Information in any way to compete unfairly
or improperly with the Company or to purchase or sell any securities of the
Company in violation of any applicable law.  The provisions of this
Section 7.8 shall
survive the payment in full of the obligations under the Loan.

    

    7.9          Registration
Rights.

    

    If there
is a change in control of the Company, or if the Company files for bankruptcy,
the Company will immediately register, on behalf of Redmond, the sale of the
shares of Common Stock issued upon exercise of the Warrants and the shares of
Common Stock issued pursuant to this Agreement (together, the “Redmond
Shares”).  Further, in the event the Company does not pay the
interest on the Subordinated Note in full when due on the first day of each
month, as required by the Subordinated Note, or if the Subordinated Note is not
paid in full when due, whether at the Maturity Date or upon acceleration of the
Maturity Date as a result of a Default by the Company, as required by the
Subordinated Note, the Company will immediately register, on behalf of Redmond,
the sale of the Redmond Shares.  The Company’s obligations pursuant to
this Section 7.9
relating to the registration of the sale of the Redmond Shares are as
follows:

    

    The
Company shall use commercially reasonable efforts to (a) prepare and file with
the U.S. Securities and Exchange Commission (the “SEC”) a Registration Statement
(the “Registration
Statement”) in accordance with the Securities Act as soon as practicable
after it is obligated to pursuant to one of the events described above in this
Section 7.9 (“Registration Event”), (b) have
the Registration Statement declared effective by SEC under the Securities Act as
promptly as practicable, and in any event within 90 days after the Registration
Event, (c) to respond to comments of the SEC (if any) in connection with that
filing, and (d) take all action necessary or appropriate to obtain all permits,
approvals, and registrations under applicable state securities or “Blue Sky”
laws to ensure that Redmond’s sale of the Redmond Shares complies with those
laws.  The Company shall promptly notify Redmond, after it receives
the information, of the time when the Registration Statement becomes effective
or any supplement or amendment to it is filed with the SEC, the issuance of any
stop order, the suspension of the qualification of the shares of Common Stock
for offering or sale in any jurisdiction, any request by the SEC for amendment
of the Registration Statement, or any comments by the SEC on the Registration
Statement, requests by the SEC for additional information, and all responses to
SEC comments or requests for additional information.

    

    7.10       Anti-Dilution
Protection for Advance Shares.

    

    If the
Company does any of the following dilutive acts (a “Share Adjustment
Event”) at any time during the period after the Closing Date and before
the date when all the Liabilities have been paid in full:

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    

    
      	
               
      

            	
              (a)

            	
              issues
      to anyone shares of its Common Stock without consideration or for a
      purchase price lower than the Closing
Price;

            

    

    

    
      	
               
      

            	
              (b)

            	
              issues
      to anyone any securities that are convertible into, or exchangeable for,
      shares of its Common Stock (“Convertible
      Securities”) without consideration or at an exchange or conversion
      price lower than the Closing Price;
or

            

    

    

    
      	
               
      

            	
              (c)

            	
              grants
      or issues to anyone any right, option, warrant, or other agreement to
      purchase, subscribe for, or otherwise acquire any shares of its Common
      Stock (“Derivative
      Securities”) without consideration or at an exercise price lower
      than the Closing Price;

            

    

    

    then, in
each case, the Company shall issue to each holder of Advance Shares within ten
days after the occurrence of the Share Adjustment Event additional shares of the
Common Stock determined by the following formula:

    

    
      	
            	
              NCS   
      =

            	
              [(CSO
      + CSP) ÷ (CSO + CSAP)] x CS - CS

            

    

    

    Where:

     

    
      
        	
              	
                NCS   
      =

              	
                The
      aggregate number of additional shares of Common Stock issuable to a holder
      of Advance Shares as a result of the Share Adjustment
    Event.

              

      

    

     

    
      
        	
              	
                CS      
      =

              	
                The
      number of Advance Shares owned by the shareholder on the date of the Share
      Adjustment Event, taking into account all previous Share Adjustment
      Events.

              

      

    

     

    
      
        	
              	
                CP      
      =

              	
                The
      Closing Price.

              

      

    

     

    
      
        	
              	
                CSO   
      =

              	
                The
      number of shares of Common Stock outstanding, excluding (a) the Advance
      Shares, (b) unissued Warrant Shares, (c) the shares of Common Stock issued
      pursuant to the Share Adjustment Event, and (d) any other shares of Common
      Stock issuable on the exercise of any other rights, options, or warrant or
      on the exchange or conversion of any other securities of the
      Company.

              

      

    

     

    
      
        	
              	
                CSP    
      =

              	
                The
      number of shares of Common Stock that the purchaser or purchasers of the
      Convertible Securities, Derivative Securities, or shares of Common Stock
      pursuant to the Share Adjustment Event would have received for their
      aggregate investment, if the exercise, purchase, exchange, or conversion
      price per share for the shares of Common Stock issued or issuable pursuant
      to the Share Adjustment Event were the Closing Price, instead of the lower
      exercise, purchase, exchange, or conversion price per share actually paid
      or to be paid.  If the shares of Common Stock are issued without
      consideration, the CSP will be
zero.

              

      

    

     

    
      
        	
              	
                CSAP =

              	
                Number
      of shares of Common Stock actually issuable on exercise of the new
      securities

              

      

    

    

    All share
adjustment calculations under this Section are to be rounded up
to the nearest one hundredth of a share.

     

    An
issuance of Convertible Securities that are convertible into, or exchangeable
for, shares of Common Stock without consideration will constitute for purposes
of this Section an
issuance of the maximum number of shares of Common Stock that are issuable on
the exchange or conversion of the Convertible Securities, effective as of the
date when the Convertible Securities are sold or issued.  Similarly, a
grant or issuance of Derivative Securities to purchase, subscribe for, or
otherwise acquire shares of Common Stock without consideration will constitute
for purposes of this Section an issuance of the
maximum number of shares of Common Stock issuable pursuant to the exercise of
the Derivative Securities, effective as of the date when the Derivative
Securities were granted or issued.  No further adjustment will be
required on the subsequent actual issuance of shares of Common Stock pursuant to
the exercise of the Derivative Securities or the exchange or conversion of the
Convertible Securities.

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    

    ARTICLE
8

    GENERAL
PROVISIONS

    

    8.1          Counterparts.

    

    The
parties to this Agreement may execute this Agreement in counterparts by manual
or facsimile signature.  Each executed counterpart of this Agreement
will constitute an original document, and all executed counterparts,
collectively, will constitute the same agreement.

    

    8.2          Governing
Law

    

    The validity, construction,
enforcement, and interpretation of this Agreement are governed by the laws of
the State of Florida and the federal laws of the United States of America,
excluding the laws of those jurisdictions pertaining to the resolution of
conflicts with laws of other jurisdictions.

    

    8.3          Complete
Agreement.

    

    This Agreement records the entire
understanding among the parties regarding the Transactions and supersedes any
previous or contemporaneous agreement, understanding, or representation, oral or
written, by any of them.  The terms of the other Financing Documents
are an integral part of this Agreement and are incorporated by reference into
this Agreement.

    

    8.4          Rights
of Third Parties.

    

    Nothing in this Agreement, whether
express or implied, is intended or should be construed to confer or grant to any
person, except the parties to this Agreement and their respective assignees and
successors in interest (by operation of law or otherwise), any claim, right,
remedy, or privilege under, or because of, this Agreement or any provision of
it.

    

    8.5          Venue
and Jurisdiction.

    

    The parties (a) consent to the personal
jurisdiction of the state and federal courts having jurisdiction over Pinellas
County, Florida, (b) stipulate that the proper, exclusive, and convenient venues
for all legal proceedings arising out of this Agreement are the Circuit Court
for Pinellas County, Florida, for state court proceedings, and the United States
District Court for the Middle District of Florida - Tampa Division, for federal
court proceedings, and (c) waive any defense, whether asserted by motion or
pleading, that those venues are improper or inconvenient.  In any
lawsuit arising out of this Agreement, the losing party shall reimburse the
prevailing party, on demand, for all costs incurred by the prevailing party in
enforcing, defending, or prosecuting the lawsuit.

    

    8.6          Assignment;
Binding Effect.

    

    This
Agreement is not assignable (by operation of law or otherwise) by any party
without the advance written approval of all other parties to this
Agreement.  This Agreement shall be binding on each party’s assignees
and successors in interest (by operation of law or otherwise) and inure to the
benefit of each party’s authorized assignees and successors in
interest.

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    

    8.7          Waivers,
Amendments, and Extensions.

    

    An
amendment, extension, or modification of this Agreement or any provision of it
will be valid and effective only if it is signed by all the parties to this
Agreement.  A waiver of any provision of this Agreement will be valid
and effective only if it is evidenced by a writing signed by or on behalf of the
party against whom the waiver is sought to be enforced.  At any time
on or before the Closing Date, and regardless of whether this Agreement has been
approved by any third party or by the members, managers, partners, trustees,
shareholders, or board of directors of a party to this Agreement, the parties to
this Agreement may in writing: (a) extend the time for performance of any of the
obligations or other actions of the other parties; (b) waive any inaccuracies of
the representations or warranties of the other parties contained in this
Agreement; (c) waive compliance with any of the covenants of the other parties
contained in this Agreement; (d) waive performance of any of the obligations of
the other parties created under this Agreement; or (e) waive any of the
conditions precedent to its own obligations under this Agreement.  No
delay or course of dealing by a party to this Agreement in exercising a power,
right, or remedy under this Agreement will operate as a waiver of any power,
right, or remedy of that party, except to the extent expressly manifested in a
writing signed by or on behalf of that party.  In addition, the
written waiver by a party of a power, right, or remedy under any provision of
this Agreement will not constitute a waiver of any succeeding exercise of the
power, right, or remedy or a waiver of the provision itself.

    

    8.8          Notices.

    

    Any
notice, demand, waiver, consent, approval, or other communication that is
required or permitted to be given to any party under this Agreement will be
validly given and delivered only if it is in writing (whether or not this
Agreement expressly provides for it to be in writing), delivered personally or
sent by fax, email, commercial courier, or first-class, postage prepaid, United
States mail (whether or not certified or registered, and whether or not a return
receipt is requested or received by the sender) to the appropriate
party  at its fax number, email address, or street address that is
listed below or that is designated by the party after Closing by a notice to all
the other parties to this Agreement that is validly given in accordance with the
provisions of this Section:

    

    (a)           If to the
Company:

    

    Aerosonic Corporation

    1212 North Hercules Avenue

    Clearwater, Florida 33765

    Fax No.: (727) 447-5926

    Email:  dhillman@aerosonic.com

    Attention:  Douglas
J. Hillman, Chief Executive Officer

    

    with a copy
to:

    

    Arent Fox
LLP

    1675
Broadway, 31st Floor

    New York,
NY 10019-5820

    Fax:
(212) 484-3990

    Email:  hausner.sanford@arentfox.com

    Attention:  Sanford
G. Hausner

    

     (b)         If
to Redmond:

    

    Redmond
Family Investments, LLLP2514 Prospect Road

    Tampa,
FL  33629

    Attn:  David
L. Redmond

    Fax:
(813)________

    david.redmond@viant.com

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    

    A validly given and delivered notice,
request, demand, waiver, consent, approval, or other communication under this
Agreement will be effective and “received” for purposes of this Agreement on the
earlier of (i) the day when it is actually received, if it is delivered
personally or by commercial courier, (ii) the second day after it is sent, if it
is delivered by fax, email, or other means of electronic communication and a
copy is also delivered by U.S. mail, or (iii) the fifth day after it is
postmarked by the United States Postal Service, if it is delivered by first
class, postage prepaid, United States mail.  Each party promptly shall
notify the other parties of any change in its fax number, email address, or
mailing address for notices.  The delivery to a party’s legal counsel
of a copy of a notice, request, demand, waiver, consent, approval, or other
communication will not constitute delivery of the notice, request, demand,
waiver, consent, approval, or other communication to the party, unless so
confirmed in writing by the party’s counsel.

    

                                      

    Exhibits:

    Exhibit 1
– Form of 14% Subordinated Note

    Exhibit 2
– Form of Warrant Certificate

    Exhibit 3
– Company Closing Certificate

    Exhibit 4
– Officer’s Certificate

    

    [Signature
pages follow]

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    

    
      
        
          
            
              	 
      	 
      	
                      AEROSONIC
      CORPORATION

                    	 
	 
      	 
      	 
      	 
      	 
	
                      WITNESSES:

                    	 
      	
                      By:

                    	
                      /s/ Douglas J. Hillman

                    	 
	 
      	 
      	 
      	
                      Douglas
      J. Hillman

                    	 
	 
      	 
      	 
      	
                      President
      and Chief Executive Officer

                    	 
	
                      _____________________________

                    	 
      	 
      	 
      	 
	
                      Name:________________________

                    	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	
                      _____________________________

                    	 
      	 
      	 
      	 
	
                      Name:________________________

                    	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	
                      WITNESSES:

                    	 
      	
                      REDMOND
      FAMILY INVESTMENTS, LLLP

                    	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	
                      By:

                    	
                      /s/ David L. Redmond

                    	 
	 
      	 
      	 
      	
                      DAVID
      L. REMOND

                    	 
	 
      	 
      	
                      Title:  General
      Partner

                    	 
	
                      _____________________________

                    	 
      	 
      	 
      	 
	
                      Name:________________________

                    	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	
                      _____________________________

                    	 
      	 
      	 
      	 
	
                      Name:________________________

                    	 
      	 
      	 
      	 

            

          

        

      

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    SCHEDULE
1

    

    
      
        
          
            
              
                
                  
                    
                      
                        	
                                Maximum Availability

                              	 	
                                Advance Shares

                              	 	
                                Warrants

                              
	
                                $500,000

                              	 	
                                (1/10th)
      of one (1) share of Common Stock for each $1.00 in principal amount of
      each Borrowing.

                              	 	
                                to
      purchase 0.25 shares of Common Stock for each $1.00 of principal amount of
      each
Borrowing.

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