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

THIS TWELFTH AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN AND
SECURITY AGREEMENT (this “Agreement”) is entered into May 26, 2016 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, AMK
WELDING, INC., (“AMK”) 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, ECC and AMK, 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)      The following definitions in Section 1.2 of the Loan Agreement are
hereby deleted:
 
“Term Loan A”
 
“Term Loan A Rate”
 
 
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EXECUTION ORIGINAL
 
“Term Loan B”
 
“Term Loan B Rate”
 
“Term Loan C”
 
“Term Loan C Rate”
 
“Term Loan D”
 
“Term Loan D Rate”
 
(b)      The following definitions in Section 1.2 of the Loan Agreement are
hereby deleted, andare replaced to read as follows:
 
“Maximum Loan Amount” shall mean $40,387,854.33 less repayments of the Term
Loan.
 
“Maximum Revolving Advance Amount” shall mean $33,000,000.00.
 
“Revolving Interest Rate” shall mean an interest rate per annum equal to (a) the
sum of the Alternate Base Rate plus one and three-quarters percent (1.75%) with
respect to Domestic Rate Loans; and (b) the sum of LIBOR Rate plus four and
one-half percent (4.50%) with respect to LIBOR Rate Loans.
 
“Termination Date” shall mean April 30, 2018 or such other date as the Lenders
may agree in writing to extend the Termination Date until, without there being
any obligation on the part of the Lenders to extend the Termination Date.
 
“Term Loan” shall mean the advances made pursuant to Section 2.3.
 
“Term Loan Rate” shall mean an interest rate per annum equal to (a) the sum of
the Alternate Base Rate plus one and three-quarters percent (1.75%) with respect
to Domestic Rate Loans; and (b) the sum of the LIBOR Rate plus four and one-half
percent (4.50%) with respect to LIBOR Rate Loans.
 
 
(c)
A new definition is hereby added to Section 1.2 of the Loan Agreement to read as
follows:

 
“Twelfth Amendment Closing Date” shall mean May 26, 2016.
 
 
(d)
Subsections 2.3(A), (B) and (C) are hereby deleted and replaced with a new
Subsection 2.3 to read as follows:

 
2.3.  Term Loan.  Subject to the terms and conditions of this Agreement, each
Lender, severally and not jointly, will make a Term Loan to Borrower in the sum
equal to such Lender’s Commitment Percentage of $7,387,854.33, which is a
consolidation of existing Term Loans A, B, C and D.  The Term Loan shall be
advanced on the Twelfth Amendment Closing Date and shall be, with respect to
principal, payable as follows, subject to acceleration upon the occurrence of an
Event of Default under this Agreement or termination of this Agreement: sixty
(60)  consecutive monthly principal installments, the first fifty-nine (59) of
which shall be in the amount of $123,133.33 commencing on the first Business Day
of July, 2016, and continuing on the first Business Day of each month
thereafter, with a sixtieth (60th) and final payment of any unpaid balance of
principal and interest payable on the last business Day of June, 2021, subject
to mandatory prepayment and acceleration upon the occurrence of an Event of
Default hereunder or earlier termination of the Loan Agreement pursuant to the
terms hereof.  Notwithstanding anything to the contrary herein, in the Term Note
and/or in any Other Document, all outstanding principal and interest hereunder
is due and payable on the Termination Date.  The Term Loan shall be evidenced by
one or more secured promissory notes (collectively, the “Term Note”) in
substantially the form attached hereto as Exhibit 2.3.
 
 
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EXECUTION ORIGINAL
 
 
(e)
Subsection 6.5(a) of the Loan Agreement is hereby deleted in its entirety and
replaced with  a new Subsection 6.5(a) to read as follows:

 
(a) Fixed Charge Coverage Ratio.  Maintain at all times 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, the quarter ending September 30, 2016 shall be
tested based upon the prior three (3) months, the quarter ending December 31,
2016 shall be tested based upon the prior six (6) months and the quarter ending
March 31, 2017 shall be tested based upon the prior  nine (9) months.
 
 
(f)
A new Subsection 6.5(b) is hereby added to the Loan Agreement to read as
follows:

 
(b)  Minimum EBITDA.  Maintain EBITDA of not less than: $1,500,000 for the three
month period ending June 30, 2016, $4,000,000 for the six month period ending
September 30, 2016, $6,500,000 for the nine month period ending December 31,
2016, and on a trailing twelve month basis, $8,000,000 for the period ending
March 31, 2017, $9,000,000 for the period ending June 30, 2017, $9,000,000 for
the period ending September 30, 2017, $9,000,000 for the period ending December
31, 2017, $10,000,000 for the period ending March 31, 2018 and $10,000,000 for
the period ending June 30, 2018.
 
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 Subsection 6.5(a) of the Loan Agreement, the Fixed Charge
Coverage Ratio for the period ended December 31, 2015 and the period ended March
31, 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)
REPAYMENT OF OUTSTANDING EXCESS ADVANCES.  Borrower and Agent recognize that
there are outstanding excess advances as defined by Subsection 2.8 of the Loan
Agreement (“Excess Advances”) in the amount of $12,500,000.00, and Borrower
hereby agrees that such Excess Advances shall be reduced as follows:

 
(i)      by the sum of $1,500,000.00 to be paid on the Twelfth Amendment Closing
Date.
 
 
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EXECUTION ORIGINAL
 
(ii)      by the sum of $100,000.00 to be paid on each Monday thereafter,
beginning on the second Monday following the Twelfth Amendment Closing Date 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.
 
6)
REDUCTION OF OUTSTANDING REVOLVING ADVANCES.  On the Twelfth Amendment Closing
Date, outstanding Revolving Advances shall be reduced by $2,500,000.00.

 
7)
RESERVATION OF RIGHTS LETTER.  Borrower and Agent agree that all terms and
conditions of that certain reservation of rights letter from Agent to Borrower
dated April 28, 2016 shall remain in full force and effect.

 
8)
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; and
 
(E)      this Agreement is a modification of an existing obligation and is not a
novation.
 
9)
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 and the Term Note, properly
executed;
 
(B)      provide the Agent with secretary’s certificates and resolutions from
the Borrower and Guarantor, in form and substance acceptable to the Agent;
 
(C)      pay to the Agent an Amendment Fee in the amount of $100,000.00 on the
first Monday following the Twelfth Amendment Closing Date;
 
(D)      provide the Agent with all information and documentation required by
the Agent;
 
(E)      pay all legal fees incurred by the Agent in entering into this
Agreement to Wilentz, Goldman & Spitzer; and
 
(F)      pay all other fees and costs incurred by the Lenders in entering into
this Agreement.
 
10)
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
 
11)
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:
AIR INDUSTRIES MACHINING, CORP.
       
By:  /s/ Kristie Petersen
By: /s/ Daniel R. Godin
      Name:  KRISTIE PETERSEN
      Name:  DANIEL R. GODIN
      Title:    Secretary
      Title:    President
       
ATTEST:
WELDING METALLURGY, INC.  (as
 
successor by merger with WMS Merger Corp.)
   
By:  /s/ Kristie Petersen
By: /s/ Daniel R. Godin
      Name:  KRISTIE PETERSEN
      Name:  DANIEL R. GODIN
      Title:    Secretary
      Title:    President
           
ATTEST:
NASSAU TOOL WORKS, INC.
 
(formerly known as NTW Operating Inc.)
   
By:  /s/ Kristie Petersen
By: /s/ Daniel R. Godin
      Name:  KRISTIE PETERSEN
      Name:  DANIEL R. GODIN
      Title:    Secretary
      Title:    President
       
ATTEST:
AIR INDUSTRIES GROUP
       
By:  /s/ Kristie Petersen
By: /s/ Daniel R. Godin
      Name:  KRISTIE PETERSEN
      Name:  DANIEL R. GODIN
      Title:    Secretary
      Title:    President

 
(SIGNATURES CONTINUED ON NEXT PAGE)
  
 
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EXECUTION ORIGINAL
 
ATTEST:
MILLER STUART INC.
       
By:  /s/ Kristie Petersen
By: /s/ Daniel R. Godin
      Name:  KRISTIE PETERSEN
      Name:  DANIEL R. GODIN
      Title:    Secretary
      Title:    President
           
ATTEST:
WOODBINE PRODUCTS, INC.
       
By:  /s/ Kristie Petersen
By: /s/ Daniel R. Godin
      Name:  KRISTIE PETERSEN
      Name:  DANIEL R. GODIN
      Title:    Secretary
      Title:    President
           
ATTEST:
EUR-PAC CORPORATION
       
By:  /s/ Kristie Petersen
By: /s/ Daniel R. Godin
      Name:  KRISTIE PETERSEN
      Name:  DANIEL R. GODIN
      Title:    Secretary
      Title:    President
           
ATTEST:
ELECTRONIC CONNECTION CORPORATION
       
By:  /s/ Kristie Petersen
By: /s/ Daniel R. Godin
      Name:  KRISTIE PETERSEN
      Name:  DANIEL R. GODIN
      Title:    Secretary
      Title:    President
           
ATTEST:
AMK WELDING, INC.
       
By:  /s/ Kristie Petersen
By: /s/ Daniel R. Godin
      Name:  KRISTIE PETERSEN
      Name:  DANIEL R. GODIN
      Title:    Secretary
      Title:    President

 
(SIGNATURES CONTINUED ON NEXT PAGE)
 
 
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EXECUTION ORIGINAL
 
ATTEST:
THE STERLING ENGINEERING CORPORATION
   
By:  /s/ Kristie Petersen
By: /s/ Daniel R. Godin
      Name:  KRISTIE PETERSEN
      Name:  DANIEL R. GODIN
      Title:    Secretary
      Title:    President
       
ATTEST:
AIR REALTY GROUP, LLC
   
By:  /s/ Kristie Petersen
By: /s/ Daniel R. Godin
      Name:  KRISTIE PETERSEN
      Name:  DANIEL R. GODIN
      Title:    Secretary
      Title:    President

 
(SIGNATURES CONTINUED ON NEXT PAGE)
 
 
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EXECUTION ORIGINAL
 

 
PNC BANK, NATIONAL ASSOCIATION
 
Lender and as Agent
         
By: /s/ Mitchell Rubin
 
      Name:  MITCHELL RUBIN
 
      Title:   Assistant

 
 
 
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