EXECUTION ORIGINAL
 
FOURTEENTH AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT

THIS FOURTEENTH AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN
AND SECURITY AGREEMENT (this “Agreement”) is entered into January __, 2017 by
and among AIR INDUSTRIES MACHINING, CORP. (as successor by merger with Gales
Industries Acquisition Corp., Inc.) (“Air”), a corporation organized under the
laws of the State of New York, WELDING METALLURGY, INC. (as successor by merger
with WMS Merger Corp.) (“WM”), a corporation organized under the laws of the
State of New York, NASSAU TOOL WORKS, INC. (formerly known as NTW Operating
Inc.) (“Nassau”), a corporation organized under the laws of the State of New
York, WOODBINE PRODUCTS, INC. (“WP”), a corporation organized under the laws of
the State of New York, MILLER STUART INC. (“MS”), a corporation organized under
the laws of the State of New York, EUR-PAC CORPORATION (“Eur-Pac”), a
corporation organized under the laws of the State of Connecticut, ELECTRONIC
CONNECTION CORPORATION (“ECC”), a corporation organized under the laws of the
State of Connecticut, and THE STERLING ENGINEERING CORPORATION (“STERLING”  and
collectively with Air, WM, Nassau, WP, MS, EUR-PAC and ECC, the “Borrower”), a
corporation organized under the laws of the State of Connecticut, AIR INDUSTRIES
GROUP (as successor by merger with Air Industries Group, Inc. f/k/a Gales
Industries Incorporated, a Delaware corporation)(“AIR GROUP”) a corporation
organized under the laws of the State of Nevada and AIR REALTY GROUP, LLC
(“REALTY”, and collectively with Air Group and  with the Borrower, the
“Obligor”), a limited liability company  organized under the laws of the State
of Connecticut, and PNC BANK, NATIONAL ASSOCIATION (“PNC”), the various
financial institutions named therein or which hereafter become a party thereto,
(together with PNC, collectively, “Lenders”) and PNC as agent for Lenders (in
such capacity, “Agent”).
 
RECITALS
 
Whereas, Obligor and PNC entered into a certain Amended and Restated Revolving
Credit, Term Loan and Security Agreement dated June 27, 2013 (which has been, is
being and may be further amended, replaced, restated, modified and/or extended,
the “Loan Agreement”); and
 
Whereas, Obligor and PNC have agreed to modify the terms of the Loan Agreement
as set forth in this Agreement.
 
Now, therefore, in consideration of PNC’s continued extension of credit and the
agreements contained herein, the parties agree as follows:
 
AGREEMENT
 
1)  
ACKNOWLEDGMENT OF BALANCE. Obligor acknowledges that the most recent statement
of account sent to Obligor with respect to the Obligations is correct.

 
2)  
MODIFICATIONS.  The Loan Agreement be and hereby is modified as follows:

 
 
 
(a)
A new definition is hereby added to Section 1.2 of the Loan Agreement to read as
follows:
 
“Fourteenth Amendment Closing Date” shall mean January __, 2017.

 
 
(b)
Subsections 6.5(a) and 6.5(b) of the Loan Agreement are hereby deleted in their
entirety and replaced with new Subsections 6.5(a) and 6.5(b) to read as follows:

 
 
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EXECUTION ORIGINAL
 
(a) Fixed Charge Coverage Ratio.  Maintain a Fixed Charge Coverage Ratio, of not
less than 1.25 to 1.00, tested quarterly on a consolidated rolling twelve (12)
month basis; however, for the quarter ending June 30, 2017, which shall be
tested based upon the prior six (6) months,  the Fixed Charge Coverage Ratio
shall not be less than 1.00 to 1.00 and for the quarter ending September 30,
2017, which shall be tested based upon the prior nine (9) months, the Fixed
Charge Coverage Ratio shall not be less than 1.10 to 1.00.
 
(b)  Minimum EBITDA.  Minimum EBITDA to be determined after receipt of the draft
fiscal year end financial statements and review of the same by RAS Management
Advisors.
 
3)  
GUARANTOR’S RATIFICATION.  (A) Air Industries Group, a corporation organized
under the laws of the State of Nevada (as successor by merger with Air
Industries Group, Inc. f/k/a Gales Industries Incorporated, a Delaware
corporation) hereby reaffirms its continuing obligations under the terms of that
certain Guaranty and Suretyship Agreement dated August 24, 2007 executed by Air
Industries Group, Inc. f/k/a Gales Industries Incorporated, a Delaware
corporation, and (B) Air Realty Group, LLC, a Connecticut limited liability
company hereby reaffirms its continuing obligations under the terms of that
certain Continuing Unlimited Guaranty dated March 9, 2015 (collectively, the
“Guaranty”), and acknowledge that (i) they have read this Agreement, (ii) the
Obligations under the Loan Agreement are secured by the Guaranty, and (iii) they
make such reaffirmation with full knowledge of the terms thereof.

 
4)  
WAIVER OF DEFAULT.  Agent, on behalf of the Lenders, hereby waives Borrower’s
failure to comply with Subsections 6.5(a) and 6.5(b) of the Loan Agreement, the
Fixed Charge Coverage Ratio and the Minimum EBITDA covenant for the period ended
September 30, 2016.  Such waiver is solely for such periods and does not extend
to any other default which might exist now or in the future.

 
5)  
CONSENT TO SALE OF STOCK.  Agent, on behalf of the Lenders, hereby consents to
the sale by AIR GROUP of all of the issued and outstanding capital stock of AMK
pursuant to a Stock Purchase Agreement dated January __, 2017 (“Stock Purchase
Agreement”) between AIR GROUP as seller and Meyer Tool, Inc., as purchaser,
provided, that, such consent is conditioned upon a portion of the sales price
being utilized as follows: (A) $1,700,000 being applied to the Term Loan, (B)
$1,800,000 being applied to outstanding Revolving Advances, and (C) $1,000,000
being applied to pay down Borrower’s existing accounts payable as follows: (i)
$500,000 on the Fourteenth Amendment Closing Date, and (ii) $500,000 on a future
date to be determined by the Agent in its sole discretion.  Upon consummation of
the transaction contemplated by the Stock Purchase Agreement and satisfaction of
the conditions set forth in clauses (A), (B), and (C)(i) above, AMK is released
from all of its Obligations pursuant to the Loan Agreement.

 
6)  
REPAYMENT OF OUTSTANDING EXCESS ADVANCES.  Borrower and Agent recognize that as
of the Fourteenth Amendment Closing Date, and after utilization of the proceeds
from the transaction contemplated by the Stock Purchase Agreement, there are
outstanding excess advances as defined by Subsection 2.8 of the Loan Agreement
(“Excess Advances”) in the amount of $5,294,071.19, and Borrower hereby agrees
that such Excess Advances shall be reduced as follows:

 
(i)      by the sum of $50,000.00 to be paid on each Monday during the months of
January, February and March of 2017; and
 
 
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EXECUTION ORIGINAL
 
(ii)      by the sum of $100,000.00 to be paid on each Monday thereafter, and
continuing until such Excess Advances have been repaid in full.
 
So long as Excess Advances remain outstanding, interest with respect to all such
outstanding Excess Advances shall be charged at an interest rate at all times
equal to the Revolving Interest Rate.
 
7)  
ACKNOWLEDGMENTS.  Borrower acknowledges and represents that:

 
(A) the Loan Agreement and Other Documents, as amended hereby, are in full force
and effect without any defense, claim, counterclaim, right or claim of set-off;
 
(B) to the best of its knowledge, no default by the Agent or Lenders in the
performance of their duties under the Loan Agreement or the Other Documents has
occurred;
 
(C) all representations and warranties of the Borrower contained herein, in the
Loan Agreement and in the Other Documents are true and correct in all material
respects as of this date, except for any representation or warranty that
specifically refers to an earlier date;
 
(D) Borrower has taken all necessary action to authorize the execution and
delivery of this Agreement;
 
(E) this Agreement is a modification of an existing obligation and is not a
novation; and
 
(F) it has authorized the Agent to engage RAS Management Advisors to perform a
comprehensive evaluation of the Borrower’s operations, at Borrower’s sole cost
and expense.
 
8)  
PRECONDITIONS.  As preconditions to the effectiveness of any of the
modifications, consents, or waivers contained herein, the Borrower agrees to:

 
(A) provide the Agent with this Agreement, properly executed;
 
(B) pay to the Agent an Amendment Fee in the amount of $50,000.00 on the
Fourteenth Amendment Closing Date;
 
(C) provide the Agent with all information and documentation required by the
Agent;
 
(D) pay all legal fees incurred by the Agent in entering into this Agreement to
Wilentz, Goldman & Spitzer; and
 
(E) pay all other fees and costs incurred by the Lenders in entering into this
Agreement.
 
9)  
MISCELLANEOUS.  This Agreement shall be construed in accordance with and
governed by the laws of the State of New York, without reference to that state’s
conflicts of law principles.  This Agreement, the Loan Agreement and the Other
Documents constitute the sole agreement of the parties with respect to the
subject matter thereof and supersede all oral negotiations and prior writings
with respect to the subject matter thereof.  No amendment of this Agreement, and
no waiver of any one or more of the provisions hereof shall be effective unless
set forth in writing and signed by the parties hereto.  The illegality,
unenforceability or inconsistency of any provision of this Agreement shall not
in any way affect or impair the legality, enforceability or consistency of the
remaining provisions of this Agreement, the Loan Agreement or the Other
Documents.  This Agreement, the Loan Agreement and the Other Documents are
intended to be consistent.  However, in the event of any inconsistencies among
this Agreement, the Loan Agreement and/or any of the Other Documents, the terms
of this Agreement, then the Loan Agreement, shall control.  This Agreement may
be executed in any number of counterparts and by the different parties on
separate counterparts.  Each such counterpart shall be deemed an original, but
all such counterparts shall together constitute one and the same agreement.

 
 
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EXECUTION ORIGINAL
 
10)  
DEFINITIONS.  The terms used herein and not otherwise defined or modified herein
shall have the meanings ascribed to them in the Loan Agreement.  The terms used
herein and not otherwise defined or modified herein or defined in the Loan
Agreement shall have the meanings ascribed to them by the Uniform Commercial
Code as enacted in State of New York.

 
(SIGNATURES ON NEXT PAGE)
 
 
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EXECUTION ORIGINAL
 
IN WITNESS WHEREOF, the undersigned have signed and sealed this Agreement the
day and year above written.
 
ATTEST:
 
By: /s/ Michael Recca
   Name:   MICHAEL RECCA
   Title:    Chief Financial Officer
 
ATTEST:
 
 
By: /s/ Michael Recca
   Name:   MICHAEL RECCA
   Title:    Chief Financial Officer
 
ATTEST:
 
 
By: /s/ Michael Recca
   Name:   MICHAEL RECCA
   Title:    Chief Financial Officer
 
ATTEST:
 
By: /s/ Michael Recca
   Name:   MICHAEL RECCA
   Title:    Chief Financial Officer
AIR INDUSTRIES MACHINING, CORP.
 
By:  /s/ Daniel R. Godin
   Name:  DANIEL R. GODIN
   Title:    President
 
WELDING METALLURGY, INC.  (as
successor by merger with WMS Merger Corp.)
 
By:  /s/ Daniel R. Godin
   Name:  DANIEL R. GODIN
   Title:    President
 
NASSAU TOOL WORKS, INC.
(formerly known as NTW Operating Inc.)
 
By:  /s/ Daniel R. Godin
   Name:  DANIEL R. GODIN
   Title:    President
 
AIR INDUSTRIES GROUP
 
By:  /s/ Daniel R. Godin
   Name:  DANIEL R. GODIN
   Title:    President

 
(SIGNATURES CONTINUED ON NEXT PAGE)
 
 
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EXECUTION ORIGINAL
 
ATTEST:
 
By: /s/ Michael Recca
   Name:   MICHAEL RECCA
   Title:    Chief Financial Officer
 
ATTEST:
 
By: /s/ Michael Recca
   Name:   MICHAEL RECCA
   Title:    Chief Financial Officer
 
ATTEST:
 
By: /s/ Michael Recca
   Name:   MICHAEL RECCA
   Title:    Chief Financial Officer
 
ATTEST:
 
By: /s/ Michael Recca
   Name:   MICHAEL RECCA
   Title:    Chief Financial Officer
MILLER STUART INC.
 
By:  /s/ Daniel R. Godin
   Name:  DANIEL R. GODIN
   Title:    President
 
WOODBINE PRODUCTS, INC.
 
By:  /s/ Daniel R. Godin
   Name:  DANIEL R. GODIN
   Title:    President
 
EUR-PAC CORPORATION
 
By:  /s/ Daniel R. Godin
   Name:  DANIEL R. GODIN
   Title:    President
 
ELECTRONIC CONNECTION CORPORATION
 
By:  /s/ Daniel R. Godin
   Name:  DANIEL R. GODIN
   Title:    President

 
(SIGNATURES CONTINUED ON NEXT PAGE)
 
 
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EXECUTION ORIGINAL
 
ATTEST:
 
By: /s/ Michael Recca
   Name:   MICHAEL RECCA
   Title:    Chief Financial Officer
 
ATTEST:
 
By: /s/ Michael Recca
   Name:   MICHAEL RECCA
   Title:    Chief Financial Officer
THE STERLING ENGINEERING CORPORATION
 
By:  /s/ Daniel R. Godin
   Name:  DANIEL R. GODIN
   Title:    President
 
AIR REALTY GROUP, LLC
 
By:  /s/ Daniel R. Godin
   Name:  DANIEL R. GODIN
   Title:    President

 
(SIGNATURES CONTINUED ON NEXT PAGE)
 
 
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EXECUTION ORIGINAL
 

 
PNC BANK, NATIONAL ASSOCIATION
Lender and as Agent
 
By: /s/ Victor Alarcon
   Name:  VICTOR ALARCON
   Title:     SeniorVice President

 
 
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