Capital Markets Advisory Agreement
 
This Capital Market Advisory Agreement (the “Agreement") shall confirm the
engagement of Taglich Brothers, Inc. (“Taglich”) by Air Industries (the
“Company”) for the purpose of providing, on a non-exclusive basis, business
advisory services (the “Services”) as set forth below in consideration for the
fees and compensation described hereinafter:

 
1.
Services. Subject to the terms and conditions of this Agreement, Taglich will
use its best efforts to furnish ongoing business advisory services as the
Company may from time to time reasonably request.  The Services may include,
without limitation, the following

 
a)
Identify and evaluate financial transactions; including potential acquisitions
and/or mergers.

 
b)
Guide the Company in their message to the Investment Community.

 
c)
Introduction to Brokers and/or Investors that Taglich feel would be accretive to
the Company’s goals.

 
d)
Hold weekly strategy calls with the Company.

 
e)
Set up Investor road shows in various cities.

 
f)
Aid in sponsorship to targeted micro-cap conferences.

 
2.
Term. The term of this Agreement shall be for a twelve (12) months period
beginning on January 1, 2014. After such twelve (12) month period, this
agreement shall automatically be extend for a twelve (12) month period, unless
the Company provides thirty (30) days prior written notice to Taglich that the
Company does not wish to extend the term for a twelve (12) month period.  Such
extension shall be at the same Monthly Advisory Fee described in paragraph 3
below.

 
3.
Fees and Expenses. As compensation for the Services provided by Taglich, the
Company will pay a Monthly Advisory Fee of Seven Thousand Dollars ($7,000) per
month (“Monthly Advisory Fee”).  The first month’s advisory fee shall be paid to
Taglich on January 15, 2014 (the “Effective Date”) and thereafter no later than
the fifteenth (15th) day of each month after the Effective Date during the Term
of this Agreement. The Company agrees to reimburse Taglich for any reasonable
out of pocket expenses.

 
4.
Additional Compensation. The Company shall issue to Taglich Brothers CMA 10,000
warrants with a strike price of $8.72 and vesting quarterly over a twelve-month
period beginning three months after the effective date.

 
5.
Representations and Covenants. The Company recognized that Taglich now renders
and may continue to render financial consulting, management, investment banking
and other services to other companies that may or may not conduct business and
activities similar to those of the Company.  Taglich shall be free to render
such advice and other services and the Company hereby consents thereto.  Taglich
shall not be required to devote its full time and attention to the performance
of its duties under this Agreement, but shall devote only so much of it time and
attention as it deems reasonable or necessary to fulfill its obligation
hereunder.

 
 
 

--------------------------------------------------------------------------------

 
 
 
6.
Indemnification.   The Company and Taglich agree to indemnify the other party to
the extent of and in accordance with the provisions of Schedule A hereto, which
is incorporated by reference herein and made a part hereof and shall survive the
termination, expiration or supersession of this Agreement.

 

 
7.
Acknowledgement. The Company understands and acknowledges that Taglich Brothers
and its affiliates (collectively “Taglich”), provide investment banking,
securities trading, financing, and financial advisory services and other
commercial and investment banking products and services to a wide range of
institutions and individuals.  In the ordinary course of business, Taglich and
certain of its employees, as well as investment funds in which they may have
financial interests, may acquire, hold or sell, long or short positions, or
trade or otherwise effect transactions, in debt, equity, and other securities
and financial instruments (including bank loans and other obligations) of, or
investments in, a party that may be involved in the matters contemplated by this
Agreement.  The holder of such securities, financial instruments and/or
investments may and will exercise all voting and other rights in respect
thereof, in its sole discretion. The Company also understands and acknowledges
that Taglich is being engaged hereunder as an independent contractor to provide
the services described above solely to the Company, and that Taglich is not
acting as a fiduciary of the Company, any subsidiary or affiliate of the Company
(including the Company’s security holders) or creditors of the Company or any
other persons in connection with this engagement.

 
8.
Limitation on Services.  Taglich shall not be obligated to provide advice or
perform services to the Company that are not specifically addressed in this
Agreement.  The Company hereby acknowledges that Taglich is not a fiduciary of
the Company and that Taglich makes no representations or warranties regarding
the Company’s ability to secure financing, whether now or in the future.  The
obligations of Taglich described in this Agreement consist solely of
commercially reasonable best efforts services to the Company, and in no event
shall Taglich be required to act as the agent of the Company or to provide legal
or accounting services.  All final decisions with respect to acts of the Company
or its affiliates, whether or not made pursuant to or in reliance upon
information or advice furnished by Taglich hereunder, shall be those of the
Company or such affiliates, and Taglich shall under no circumstances be liable
for any expense incurred or loss suffered by the Company as a consequence of
such decisions.

 
 
9.
Governing Law.   This Agreement will be governed by and construed in accordance
with the laws of the State of New York, without giving effect to its conflict of
laws principles or rules.  If a dispute or claim shall arise with respect to any
of the terms or provisions of this Agreement, or with respect to the performance
by any of the parties under this Agreement, then the parties agree to submit the
dispute to binding and non-appealable arbitration in a venue located in New
York, NY in accordance with the rules of the American Arbitration Association
(“AAA”).  The prevailing party shall be reimbursed by the non-prevailing party
for all reasonable attorney's fees and costs (including all arbitration costs)
incurred by the prevailing party in resolving such dispute.  Any award rendered
in arbitration may be enforced in any court of competent
jurisdiction.  Notwithstanding the foregoing, any action by either Taglich or
the Company to obtain specific performance of any provision of this Agreement by
the other party may be brought in any appropriate judicial forum.

 
10.
Successors and Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and authorized
assigns.  Any attempt by either party to assign (other than by operation of law
pursuant to a merger) any rights, duties or obligations which may arise under
this Agreement without the prior written consent of the other party shall be
void.

 
 
 

--------------------------------------------------------------------------------

 
 
 
11.
Notices. Any notice given pursuant to this Agreement shall be in writing and
shall be effective immediately upon hand delivery or upon confirmation of
delivery by mail, facsimile or e-mail.  Notices under this agreement shall be
sent to the following:

 
12.
If to Taglich:

Taglich Brother, Inc.
790 New York Avenue, Suite 209
Huntington, NY 11743
Attention: Richard Oh
Email: ohr@taglichbrothers.com
Fax: 631-757-1500

If to the Company:

Air Industries Group, Inc.
1479 North Clinton Avenue
Bay Shore, NY  11706
Attn: Peter D. Rettaliata
Email: peter.rettaliata@airindmc.com
Fax: 631-206-9152

 
13.
Entire Agreement; Severability.  This document contains the entire agreement
between the parties with respect to the subject matter hereof, and neither party
is relying on any agreement, representation, warranty, or other understanding
not expressly stated herein.  No amendment to this Agreement shall be valid
unless such amendment is in writing and is signed by authorized representatives
of all the parties to this Agreement.  In the event that any provision of this
Agreement shall be held to be invalid, illegal or unenforceable in any
circumstances, the remaining provisions shall nevertheless remain in full force
and effect and shall be construed as if the unenforceable portion or portions
were deleted.

 
 
14.
Survival.  The parties acknowledge that certain provisions of this Agreement
must survive any termination or expiration thereof in order to be fair and
equitable to the party to whom any promise or duty to perform is owed under such
provision prior to such termination or expiration of the Agreement.  Therefore,
the parties agree that Sections 3, 4, 5, 6, and 9 shall survive the termination
or expiration of this Agreement for the period required to meet and satisfy any
obligations and promises arising therein and thereunder.

 
15.
Headings.  The headings contained herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

 
16.
Counterparts; Facsimile Signatures.  This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which
together will constitute one and the same instrument.  This Agreement may be
executed by signatures delivered by facsimile transmission or electronic mail
(e-mail) attachment.

 
 
 

--------------------------------------------------------------------------------

 
 
If the foregoing correctly sets forth our understanding with respect to the
subject matter hereto, please confirm the same by executing and returning to us
the duplicate copy of this Agreement.
 
Very truly yours,

TAGLICH BROTHERS, INC.
 
/s/ Richard Oh
By: Richard Oh
Its: Managing Director
 
AGREED AND ACCEPTED TO:
Air Industries Group, Inc.
 
/s/ Peter D. Rettaliata
By: Peter D. Rettaliata
Its: President and CEO
 
 
 

--------------------------------------------------------------------------------

 
 
SCHEDULE A TO AGREEMENT

INDEMNIFICATION

(a)           In connection with the Company’s engagement of Taglich Brothers,
Inc. (“Taglich”) as its capital markets advisor, the Company hereby agrees to
indemnify and hold harmless Taglich and its affiliates, and the respective
controlling persons (within the meaning of Section 15 of the Securities Act of
1933, as amended, or Section 20 of the Securities and Exchange Act of 1934, as
amended) directors, officers, shareholders, agents and employees of any of the
foregoing (collectively the “Indemnified Persons”), from and against any and all
claims, actions, suits, proceedings (including those of shareholders), damages,
liabilities and expenses incurred by any of them to a third party, including the
reasonable fees and expenses of counsel (collectively a “Claim”), which
are  related to or arise out of any actions taken or omitted to be taken
(including any untrue statements made or any statements omitted to be made) by
the Company, and the Company shall reimburse any Indemnified Person, not to
exceed the amount of fees actually paid to Taglich by the Company, for all
reasonable, out of pocket expenses (including the reasonable fees and expenses
of counsel) incurred by such Indemnified Person in connection with
investigating, preparing or defending any such claim, action, suit or
proceeding, whether or not in connection with pending or threatened litigation
in which any Indemnified Person is a party.  The Company will not, however, be
responsible for any Claim, which is finally judicially determined to have
resulted from the gross negligence, willful misconduct, dishonesty or fraud of
any Indemnified Person.  The Company further agrees that no Indemnified Person
shall have any liability to the Company for or in connection with the Company’s
engagement of Taglich except for any Claim incurred by the Company as a result
of such Indemnified Person’s gross negligence or willful misconduct.

(b)           The Company further agrees that it will not, without the prior
written consent of Taglich, settle, compromise or consent to the entry of any
judgment in any pending or threatened Claim in respect of which indemnification
may be sought hereunder (whether or not any Indemnified Person is an actual or
potential party to such Claim) ( collectively, a “Settlement”), unless such
Settlement compromise or consent includes an unconditional, irrevocable release
of each Indemnified Person from any and all liability arising out of such Claim.
No Indemnified Person shall enter into a Settlement without the prior written
consent of the Company.

(c)           Promptly upon receipt by an Indemnified Person of notice of any
complaint or the assertion or institution of any Claim with respect to which
indemnification is being sought hereunder, such Indemnified Person shall notify
the Company in writing of such complaint or of such assertion or institution,
but failure to so notify the Company shall not relieve the Company from any
obligation it may have hereunder, except and only to the extent such failure
results in the forfeiture by the Company of substantial rights and defenses.  If
the Company so elects, the Company will assume the defense of such Claim,
including the employment of counsel reasonably satisfactory to such Indemnified
Person and the payment of the reasonable fees and expenses of such counsel. In
the event, however, that legal counsel to such Indemnified Person reasonably
determines that having common counsel would present such counsel with a conflict
of interest or if the defendant in, or target of, any such Claim, includes an
Indemnified Person and the Company, and legal counsel to such Indemnified Person
reasonably concludes that there may be legal defenses available to it or other
Indemnified Persons different from or in addition to those available to the
Company, then such Indemnified Person may employ its own separate counsel to
represent or defend him, her or it in any such Claim and the Company shall pay
the reasonable fees and expenses of such counsel.  Notwithstanding anything
herein to the contrary, if the Company fails timely or diligently to defend,
contest, or otherwise protect against any Claim, the relevant Indemnified Party
shall have the right, but not the obligation, to defend, contest, compromise,
settle, assert cross claims, or counterclaims or otherwise protect against the
same, and shall be fully indemnified by the Company therefore, including without
limitation, for the reasonable fees and expenses of its counsel and all amounts
paid as a result of such Claim or the compromise or settlement thereof.  In
addition, with respect to any Claim in which the Company assumes the defense,
the Indemnified Person shall have the right to participate in such Claim and to
retain his, her or its own counsel therefore at his, her or its own expense.
 
 
 

--------------------------------------------------------------------------------

 
 
(d)           The Company agrees that if any indemnity sought by an Indemnified
Person hereunder is held by a court to be unavailable for any reason (other than
by reason of the last sentence of subsection (a)) then (whether or not Taglich
is the Indemnified Person), the Company and Taglich shall contribute to the
Claim for which such indemnity is held unavailable in such proportion as is
appropriate to reflect the relative benefits to the Company, on the one hand,
and Taglich on the other, in connection with Taglich’s engagement referred to
above, subject to the limitation that in no event shall the amount of Taglich or
the Company’s contribution to such Claim exceed the amount of fees actually
received by Taglich from the Company or paid to Taglich by the Company pursuant
to this Agreement.

(e)           The Company’s indemnity, reimbursement and contribution
obligations under this Agreement) shall be in addition to, and shall in no way
limit or otherwise adversely affect any rights that any Indemnified Party may
have at law or at equity and (b) shall be effective whether or not the Company
is at fault in any way.
 
(f)           The Company understands that Taglich shall not have any obligation
hereunder to purchase any of the Securities or to provide financing of any kind
to the Company.