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 Bruce J. Stone (“ Stone ”), to record the agreement regarding Stone’s willingness to make a loan (the “Loan” ) to the Company on the terms and conditions set forth in this Agreement:

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 Stone 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.

“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 Stone 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 Stone, 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 Stone 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.

“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 $1,000,000.

“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 $1,000,000, to be issued to Stone at the Closing by the Company and the Subsidiaries in the form of Exhibit 1 .

“Other Lenders” mean the Redmond Family Investments, LLLP 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).

“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 Stone pursuant to this Agreement to evidence the number of Warrants issue to Stone 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.

“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.

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.

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.

2.1           Loan; Warrants; Drawdown Shares.

Subject to the terms and conditions of this Agreement:  Stone 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 Stone, (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)           Stone 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 Stone (which notice must be received by Stone no later than 10:00 a.m. (Tampa time) on the fifth (5 ^th ) 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 Stone’s election, in lieu of delivering the above-described Borrowing Notice, any Authorized Person may give Stone 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) , Stone 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 Stone shall have no obligation to make any Advance if Stone 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 Stone 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.

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 Stone.

3.2           Obligations of the Company.

At the Closing, the Company shall deliver to Stone:

(a)         a Note  in the form of Exhibit 1 that is payable to Stone in the principal amount of $1,000,000 and duly executed by the Company and the Subsidiaries in favor of Stone;

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

(c)         a Warrant Certificate for Stone in the form of Exhibit 2 that is issued in the name of Stone, duly executed by the Company, and exercisable for the number of Warrant Shares specified for Stone 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;

(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; and

(g)         payment to Stone of costs and expenses incurred by Stone to negotiate, document, and close the Transactions in accordance with Section 7.7 , up to a maximum of $5,000.00, based upon documented expenses.

3.3           Obligations of Stone.

(a)         the first Advance to the Company; and

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

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 Stone 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 .  Stone 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)          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

(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 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 Stone.

The obligations of Stone 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 Stone:

(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 .  Stone 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 .  Stone 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 Stone 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.

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

The Company represents and warrants to Stone 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 tha