Investor's Rights Agreement

AIRPORT SYSTEMS INTERNATIONAL, INC.


INVESTOR'S RIGHTS AGREEMENT


THIS INVESTOR'S RIGHTS AGREEMENT (this "Agreement") is made and entered into as of the 7th day of February, 2000, by and among AIRPORT SYSTEMS INTERNATIONAL, INC., a Kansas corporation (the "Company"), and KCEP VENTURES II, L.P., a Kansas limited partnership (the "Investor").


RECITALS


A. The Company proposes to sell and issue 198,413 shares of its common stock (the "Initial Shares"), a convertible subordinated debenture in the amount of $500,000 (the "Convertible Debenture"), and a warrant to purchase 45,635 shares of its common stock (the "Warrant") (the Initial Shares, the Convertible Debenture and the Warrant are collectively referred to herein as the "Securities") pursuant to that certain Investment Agreement of even date herewith (the "Investment Agreement").


B. As a condition of entering into the Investment Agreement, the Investor has requested that the Company grant to it certain rights (including, without limitation, registration rights) as set forth below.


SECTION 1


RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
REGISTRATION RIGHTS


1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall have the meanings set forth below:


(a) "Board of Directors" shall mean the Company's board of
directors, as it may exist from time to time.


(b) "Closing" shall mean the date as set forth in the Investment
Agreement.


(c) "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.


(d) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to
time.


(e) "DCI Stockholders" shall mean Chris I. Hammond, Larry C. Klusman
and William D. Cook who, by virtue of agreements with the Company, are
entitled to include their securities in certain registrations hereunder.


(f) "Registrable Securities" shall mean (i) any Initial Shares, (ii)
shares of common stock issued or issuable pursuant to the conversion of
the Convertible Debenture (the "Debenture Shares"), (iii) shares of common
stock issued or issuable pursuant to the exercise of the Warrant, and (iv)
any common stock issued as a dividend or other distribution with respect
to or in exchange for or in replacement of the shares of common stock of
the Company referenced in (i)-(iii) above; provided, however, that
Registrable Securities shall not include any shares of common stock that
have previously been registered or which have been sold to the public.


(g) The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the
effectiveness of such registration statement.


(h) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company,
blue sky fees and expenses, and expenses of any regular or special audits
incident to or required by any such registration (including all pre- and
post-effective amendments to the registration statements), and expenses
associated with the listing for quotation on the American Stock Exchange
of the Registrable Securities, but shall not include Selling Expenses and
fees and disbursements of counsel for the Investor, except for fees and
disbursements of counsel for the Investor or the Stockholders as provided
in Section 1.4 hereof, and shall not include the compensation of regular
employees of the Investor or the Stockholders, which shall be paid in any
event by the Investor or the Stockholders.


(i) "Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time,
or any similar successor rule that may be promulgated by the Commission.


(j) "Rule 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time,
or any similar successor rule that may be promulgated by the Commission.


(k) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to
time.


(l) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to a sale of Registrable Securities, fees
and disbursements of counsel for the Investor or the Stockholders, any
fees and expenses incurred in order to amend or supplement the
registration statement or prospectus to reflect transferees, donees, or
pledgees, or any costs or


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expenses related to any road shows or similar sales efforts on behalf of
the Investors or Stockholders.


(m) "Stockholders" shall mean the Investor and any persons or
entities to whom the registration rights conferred by this Agreement have
been transferred in compliance with Section 1.10 hereof.


1.2 REQUESTED REGISTRATION.


(a) REQUEST FOR REGISTRATION. If the Company shall receive at any
time a written request from the Investor that the Company effect any
registration with respect to at least thirty percent (30%) of the
Registrable Securities, the Company will:


(i) promptly give written notice of the proposed registration
to all Stockholders and the DCI Stockholders; and


(ii) as soon as practicable, use commercially reasonable
efforts to effect such registration (including, without limitation,
filing post-effective amendments, obtaining appropriate
qualifications under applicable blue sky or other state securities
laws, and ensuring appropriate compliance with the Securities Act)
as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such
request by the Investor, together with all or such portion of the
Registrable Securities of any Stockholder joining in such request as
are specified in a written request received by the Company within
thirty (30) days after the written notice from the Company referred
to in subclause (i) above is mailed or delivered.


The Company shall not be obligated to effect, or to take any action to effect, any such registration pursuant to this Section 1.2:


(A) (i) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process
in effecting such registration, qualification, or compliance, unless
the Company is already subject to service in such jurisdiction and
except as may be required by the Securities Act, or (ii) in any
particular jurisdiction in which the Company is not qualified to do
business or would be required to do business as a foreign
corporation and where it would not otherwise be required to so
qualify, or (iii) subject itself to taxation in any such
jurisdiction;


(B) After the Company has initiated two such registrations
pursuant to this Section 1.2(a) (counting for these purposes only
registrations which have been declared or ordered effective and
registrations which have been withdrawn by the Investor or the
Stockholders and as to which the Investor or any other Stockholder
has not elected to bear the Registration Expenses pursuant to
Section 1.4); or


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(C) If the Company is unable to obtain the commitment of an
underwriter to firmly underwrite the offering.


(b) FILING OF REGISTRATION STATEMENT. Subject to the foregoing
clauses (A) through (C), the Company shall file a registration statement
covering the Registrable Securities so requested to be registered as soon
as practicable after receipt of the request or requests of the Investor;
PROVIDED, HOWEVER, the Company: (i) at its sole discretion, may offer a
right to participate in such registration statement at such time to the
DCI Stockholders, (ii) shall be entitled to postpone for a reasonable
period of time, but not in excess of ninety (90) days, the filing of any
registration statement otherwise required to be prepared pursuant to this
Section 1.2 if Company is, at such time, conducting or about to conduct an
underwritten public offering of equity securities (or securities
convertible into equity securities) and is advised in writing by its
managing underwriter that such offering would in its opinion be adversely
affected by the registration so requested, and (iii) shall be entitled to
postpone such required registration for up to ninety (90) days if the
Company determines reasonably and in good faith, in view of the
advisability of deferring public disclosure of material corporate
developments or other information that such registration and the
disclosure required to be made pursuant thereto would not be in the best
interest of the Company at such time.


The registration statement filed pursuant to the request of the Investor may, subject to the provisions of Sections 1.2(b) and 1.12 hereof, include other securities of the Company, with respect to which registration rights have been granted, and may include securities of the Company being sold for the account of the Company.


(c) PROCEDURES. If Stockholders or the DCI Stockholders shall
request inclusion in any registration pursuant to this Section 1.2, the
Company shall offer to include such securities in the underwriting and may
condition such offer on its acceptance of the further applicable
provisions of this Section 1 (including Section 1.12 hereof). The Company
shall (together with all Stockholders) enter into an underwriting
agreement in customary form with the representative of the underwriter or
underwriters selected by the Company for such underwriting.
Notwithstanding any other provision of this Section 1.2, if the
representative of the underwriters advises the Investor in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the number of shares to be included in the underwriting or
registration shall be allocated as set forth in Section 1.12 hereof. If a
person who has requested inclusion in such registration as provided above
does not agree to the terms of any such underwriting, such person shall be
excluded therefrom by written notice from the Company or the underwriter.
Any Registrable Securities or other securities excluded shall also be
withdrawn from such registration. If shares are so withdrawn from the
registration and if the number of shares to be included in such
registration was previously reduced as a result of marketing factors
pursuant to this Section 1.2(c), then the Company shall offer to all
Stockholders who have retained rights to include securities in the
registration the right to include additional securities in the
registration in an aggregate amount equal to the number of shares so
withdrawn, with such shares to be allocated among such Stockholders
requesting additional inclusion in accordance with Section 1.12 hereof.


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1.3 COMPANY REGISTRATIONS.


(a) If the Company shall determine to register any of its securities
either for its own account or the account of a security holder exercising
demand registration rights (other than pursuant to Section 1.2 hereof),
other than a registration relating solely to employee benefit plans, a
registration relating solely to a Rule 145 transaction, or a registration
on any registration form that does not permit secondary sales, the Company
will:


(i) promptly give to all Stockholders written notice thereof;
and


(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), except as
set forth in Section 1.3(b) and Section 1.12 hereof, and in any
underwriting involved therein, all the Registrable Securities
specified in a written request or requests, made by any Stockholder
and received by the Company within thirty (30) days after the
written notice from the Company described in clause (i) above is
mailed or delivered by the Company. Such written request may specify
all or a part of a Stockholder's Registrable Securities.


(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Stockholders as a part of the written notice
given pursuant to Section 1.3(a)(i) hereof. In such event, the right of
any Stockholder to registration pursuant to this Section 1.3 shall be
conditioned upon such Stockholder's participation in such underwriting and
the inclusion of such Stockholder's Registrable Securities in the
underwriting to the extent provided herein. All Stockholders proposing to
distribute their securities through such underwriting shall (together with
the Company) enter into an underwriting agreement in customary form with
the representative of the underwriter or underwriters selected by the
Company.


Notwithstanding any other provision of this Section 1.3, if the representative of the underwriters advises the Company in writing that marketing factors require a limitation on the number of shares to be underwritten, the representative may exclude all Registrable Securities from, or limit the number of Registrable Securities to be included in, the registration and underwriting. The Company shall so advise all Stockholders of securities holders requesting registration, and the number of shares that are entitled to be included in the registration and underwriting (other than on behalf of the Company) as set forth in Section 1.12 hereof. If any person does not agree to the terms of any such underwriting, he shall be excluded therefrom by written notice from the Company or the underwriter. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration.


If shares are so withdrawn ...