EXECUTION ORIGINAL

 
THIRTEENTH AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN AND
SECURITY AGREEMENT
 
THIS THIRTEENTH AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN
AND SECURITY AGREEMENT (this “Agreement”) is entered into September 16, 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.

 
 
1

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

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

 
(a)      Section 2.1 is hereby deleted and replaced with a new Subsection 2.1 to
read as follows:
 
2.1           Revolving Advances.

(a)           Amount of Revolving Advances.  Subject to the terms and conditions
set forth in this Agreement specifically including Section 2.1(b), each Lender,
severally and not jointly, will make Revolving Advances to Borrowers in
aggregate amounts outstanding at any time equal to such Lender’s Revolving
Commitment Percentage of the lesser of (x) the Maximum Revolving Advance Amount,
less the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit
or (y) an amount equal to the sum of:
 
(i)           up to the sum of (A) 85%, subject to the provisions of Section
2.1(b) hereof (the “Receivables Advance Rate A”), of Eligible Receivables that
do not constitute Eligible Unassigned Government Receivables (specifically
excluding all Eligible Receivables of Sigma) plus (B) the lesser of (I) 50%,
subject to the provisions of Section 2.1(b) hereof (the “Receivables Advance
Rate B” and collectively with the Receivables Advance Rate A, the “Receivables
Advance Rate”), of Eligible Unassigned Government Receivables (specifically
excluding all Eligible Unassigned Government Receivables of Sigma) and (II) the
Unassigned Government Receivables Sublimit, plus
 
(ii)           up to the lesser of (A) 75%, subject to the provisions of Section
2.1(b) hereof, of the value of the Eligible Inventory (specifically excluding
all Eligible Inventory of Sigma), (B) 90% of the appraised net orderly
liquidation value of Eligible Inventory (as evidenced by an Inventory appraisal
satisfactory to Agent in its sole discretion exercised in good faith and
specifically excluding all Eligible Inventory of Sigma) or (C) the Inventory
Sublimit in the aggregate at any one time (“Inventory Advance Rate” and together
with the Receivables Advance Rate, collectively, the “Advance Rates”), minus
 
(iii)           such reserves as Agent may reasonably deem proper and necessary
from time to time.
 
The amount derived from the sum of (x) Sections 2.1(a)(y)(i) and (ii) minus (y)
Section 2.1 (a)(y)(iii) at any time and from time to time shall be referred to
as the “Formula Amount”.  The Revolving Advances shall be evidenced by one or
more secured promissory notes (collectively, the “Revolving Credit Note”)
substantially in the form attached hereto as Exhibit 2.1(a).

(b)           Discretionary Rights.  The Advance Rates may be increased or
decreased by Agent at any time and from time to time in the exercise of its
reasonable discretion.  Each Borrower consents to any such increases or
decreases and acknowledges that decreasing the Advance Rates or increasing or
imposing reserves may limit or restrict Advances requested by Borrowing
Agent.  The rights of Agent under this subsection are subject to the provisions
of Section 16.2(b).
 
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.

 
 
2

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

 
 
EXECUTION ORIGINAL
 
4)
WAIVER OF DEFAULT.  Agent, on behalf of the Lenders, hereby waives Borrower’s
failure to comply with Subsection 6.5(b) of the Loan Agreement, the Minimum
EBITDA covenant, for the period ended June 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 AMEND CERTIFICATE OF INCORPORATION.  Notwithstanding any provision to
the contrary contained in the Loan Agreement, the Agent, on behalf of the
Lenders, hereby consents to Air Group amending its Certificate of Incorporation
to increase its authorized Stock to 30,000,000 shares of Capital Stock, of which
25,000,000 shares shall be Common Stock and 5,000,000 shall be Preferred Stock.

 
6)
CONSENT TO ISSUE CONVERTIBLE NOTES.  Notwithstanding any provision to the
contrary contained in the Loan Agreement, the Agent, on behalf of the Lender,
hereby consents to Air Group issuing up to $4,250,000 principal amount of 12%
Convertible (Subordinated) Notes due December 31, 2017 pursuant to the terms of
a certain Securities Purchase Agreement dated August 19, 2016.

 
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; and
 
(E) this Agreement is a modification of an existing obligation and is not a
novation.
 
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) provide the Agent with secretary’s certificates and resolutions from the
Borrower and Guarantor, in form and substance acceptable to the Agent;
 
(C) pay all legal fees incurred by the Agent in entering into this Agreement to
Wilentz, Goldman & Spitzer; and
 
(D) pay all other fees and costs incurred by the Lenders in entering into this
Agreement.
 
 
3

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

 
 
EXECUTION ORIGINAL
 
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.

 
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)
 
 
4

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

 
 
EXECUTION ORIGINAL

IN WITNESS WHEREOF, the undersigned have signed and sealed this Agreement the
day and year above written.
 
ATTEST:
 
By: /s/ Marianne Giglio
       Name:  MARIANNE GIGLIO
       Title:    Secretary
 
 
ATTEST:
 
 
By: /s/ Marianne Giglio
       Name:  MARIANNE GIGLIO
       Title:    Secretary
 
 
ATTEST:
 
 
By: /s/ Marianne Giglio
       Name:  MARIANNE GIGLIO
       Title:    Secretary
 
 
ATTEST:
 
By: /s/ Marianne Giglio
       Name:  MARIANNE GIGLIO
       Title:    Secretary
 
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)
 
 
5

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

 
 
EXECUTION ORIGINAL
 
ATTEST:
 
By: /s/ Marianne Giglio
       Name:   MARIANNE GIGLIO
       Title:    Secretary
 
ATTEST:
 
By: /s/ Marianne Giglio
       Name:   MARIANNE GIGLIO
       Title:    Secretary
 
ATTEST:
 
By: /s/ Marianne Giglio
       Name:   MARIANNE GIGLIO
       Title:    Secretary
 
ATTEST:
 
By: /s/ Marianne Giglio
       Name:   MARIANNE GIGLIO
       Title:    Secretary
 
ATTEST:
 
By: /s/ Marianne Giglio
       Name:   MARIANNE GIGLIO
       Title:    Secretary
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
 
AMK WELDING, INC.
 
By: /s/ Daniel R. Godin
       Name:  DANIEL R. GODIN
       Title:    President

(SIGNATURES CONTINUED ON NEXT PAGE)
 
 
6

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

 
 
EXECUTION ORIGINAL
 
ATTEST:
 
By: /s/ Marianne Giglio
       Name:   MARIANNE GIGLIO
       Title:    Secretary
 
ATTEST:
 
By: /s/ Marianne Giglio
       Name:   MARIANNE GIGLIO
       Title:    Secretary
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)
 
 
7

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

 
 
EXECUTION ORIGINAL
 

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

 
 
8

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