FORM OF SUBORDINATED CONVERTIBLE NOTE


 


NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS NOTE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR (B) AN OPINION OF COUNSEL SELECTED BY THE HOLDER, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT, OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 19(a) HEREOF. THE
PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE
AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.


 


Air
Industries Group


 


SUBORDINATED
CONVERTIBLE NOTE


 


	Issuance Date:  May [  ], 2017	Original Principal Amount: U.S. $[          ]


 


FOR VALUE RECEIVED,
Air Industries Group, a Nevada corporation (the "Company"), hereby promises to pay to [BUYER]
or registered assigns (the "Holder") in cash and/or in shares of Common Stock (as defined below), the amount set
out above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise
or as increased pursuant to the terms hereof, the "Principal") when due, whether upon the Maturity Date (as defined
below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay default interest ("Interest")
on any outstanding Principal at the applicable Default Rate, whether upon the Maturity Date, acceleration, conversion, redemption
or otherwise (in each case in accordance with the terms hereof). This Subordinated Convertible Note (including all Subordinated
Convertible Notes issued in exchange, transfer or replacement hereof, this "Note") is one of an issue of Subordinated
Convertible Notes issued pursuant to the Securities Purchase Agreement on the Closing Date (collectively, the "Notes"
and such other Subordinated Convertible Notes, the "Other Notes"). Certain capitalized terms used herein are defined
in Section 32.


 


(1)   PAYMENTS
OF PRINCIPAL; PREPAYMENT. The Company acknowledges and agrees that this Note was issued at an original issue discount. On
the Maturity Date, the Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued and
unpaid Interest, if any, and accrued and unpaid Late Charges, if any (as defined in Section 25(b)) on such Principal and
Interest. The "Maturity Date" shall be May [  ], 20181 Other
than as specifically permitted by this Note, the Company may not prepay or redeem any portion of the outstanding Principal,
accrued and unpaid Interest or accrued and unpaid Late Charges on Principal and Interest, if any.


 






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(2)  
DEFAULT INTEREST. This Note shall not bear any ordinary interest. Interest on this Note shall commence accruing immediately
upon the occurrence of, and shall continue accruing during the continuance of, an Event of Default, at the Default Rate and shall
be computed on the basis of a 360-day year of twelve 30-day months and shall be payable, if applicable, on the Maturity Date to
the record holder of this Note on the Maturity Date in cash by wire transfer of immediately available funds pursuant to wire instructions
provided by the Holder in writing to the Company. Upon the occurrence and during the continuance of an Event of Default, Interest
on this Note shall accrue at the Default Rate and be payable by way of inclusion of the Interest in the Conversion Amount (as defined
in Section 3(b)(i)) on each (i) Conversion Date (as defined in Section 3(c)(i)) in accordance with Section 3(c)(i) and/or (ii)
Redemption Date. In the event that an Event of Default is subsequently cured, the Interest shall cease to accrue as of the date
of such cure; provided, that the Interest as calculated and unpaid as of the cure of such Event of Default shall continue
to be due and payable as set forth above.


 


(3)  
CONVERSION OF NOTES. At any time or times after the date set out above as the Issuance Date (the "Issuance
Date"), this Note shall be convertible into shares of Common Stock on the terms and conditions set forth in this Section
3.


 


(a)  
Conversion Right. Subject to the provisions of Section 3(d), at any time or times on or after the Issuance Date,
the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount into fully paid and nonassessable
shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below). The Company shall not issue
any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share
of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall
pay any and all transfer, stamp and similar taxes that may be payable with respect to the issuance and delivery of Common Stock
upon conversion of any Conversion Amount.


 


(b)  
Conversion Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant
to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the "Conversion
Rate").


 


(i)            "Conversion
Amount" means the sum of (A) the portion of the Principal to be converted, redeemed or otherwise with respect to which
this determination is being made, (B) accrued and unpaid Interest, if any, with respect to such Principal and (C) accrued and
unpaid Late Charges, if any, with respect to such Principal and Interest.


 


___________________________


1
Insert date that is the one (1) year anniversary of the Issuance Date.


 






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(ii)          "Conversion
Price" means, as of any Conversion Date or other date of determination, (x) from the date hereof through November [●],
20172, inclusive, $[●]3
per share, subject to adjustment as provided herein (the price set forth in this clause (x), the "Fixed Conversion
Price") and (y) thereafter, the lowest of (I) the Fixed Conversion Price, and (II) 75% of the arithmetic average of the
five (5) Weighted Average Prices of the Common Stock during the five (5) consecutive Trading Day period ending on the Trading
Day immediately preceding the delivery of the applicable Conversion Notice to the Company. For the avoidance of doubt, all such
foregoing determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification
or similar transaction during the applicable calculation period.


 


(c)  
Mechanics of Conversion.


 


(i)            Optional
Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a "Conversion Date"),
the Holder shall (A) transmit by facsimile or electronic mail (or otherwise deliver), for delivery on or prior to 5:00 p.m., New
York time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the "Conversion
Notice") to the Company and (B) if required by Section 3(c)(iii), but without delaying the Company's requirement to deliver
shares of Common Stock on the applicable Share Delivery Date (as defined below), surrender this Note to a common carrier for delivery
to the Company as soon as practicable on or following such date (or an indemnification undertaking with respect to this Note in
the case of its loss, theft or destruction). The Holder may also indicate in a Conversion Notice the number of shares of Common
Stock it seeks to receive upon conversion of any portion of this Note and the reduction of the Conversion Amount pursuant to such
conversion shall be determined at the end of such Conversion Date by multiplying such number of shares of Common Stock by the
applicable Conversion Price. No ink-original Conversion Notice shall be required, nor shall any medallion guarantee (or other
type of guarantee or notarization) of any Conversion Notice be required. On or before the first (1st) Business Day following the
date of delivery of a Conversion Notice, the Company shall transmit by facsimile or electronic mail a confirmation of receipt
of such Conversion Notice to the Holder and the Company's transfer agent (the "Transfer Agent"). On or before
the earlier of (i) the third (3rd) Trading Day and (ii) the number of Trading Days comprising the Standard Settlement Period,
in each case, following the date of delivery of a Conversion Notice (a "Share Delivery Date"), the Company shall
(x) provided that the Transfer Agent is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the
Holder's or its designee's balance account with DTC through its Deposit Withdrawal At Custodian system or (y) if the Transfer
Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified
in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common
Stock to which the Holder shall be entitled. If this Note is physically surrendered for conversion as required by Section 3(c)(iii)
and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then
the Company shall as soon as practicable and in no event later than three (3) Business Days after delivery of this Note and at
its own expense, issue and deliver to the Holder a new Note (in accordance with Section 19(d)) representing the outstanding Principal
not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall
be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date, if such day
is a Business Day, and if not, then on the next Business Day, irrespective of the date such shares of Common Stock are credited
to the Holder's account with DTC or the date of delivery of the certificates evidencing such shares of Common Stock, as the case
may be.


 


___________________________


2
Insert the date that is six (6) months following the Issuance Date.


 


3
Insert the Weighted Average Price of the Common Stock for the five trading days immediately prior to signing definitive documents.



 






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(ii)          Company's
Failure to Timely Convert. If the Company shall fail on or prior to the applicable Share Delivery Date to issue and deliver
a certificate to the Holder, if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program,
or credit the Holder's balance account with DTC, if the Transfer Agent is participating in the DTC Fast Automated Securities Transfer
Program, for the number of shares of Common Stock to which the Holder is entitled upon the Holder's conversion of any Conversion
Amount (a "Conversion Failure"), and if on or after such Trading Day on which the certificate was to have been
delivered to the Holder or the number of shares of Common Stock to which the Holder is entitled were to have been deposited in
its account the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale
by the Holder of Common Stock issuable upon such conversion that the Holder anticipated receiving from the Company (a "Buy-In"),
then the Company shall, within three (3) Trading Days after the Holder's request promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such shares of Common Stock or credit the Holder's balance account with DTC
for such shares of Common Stock and pay cash to the Holder in an amount equal to the excess (if any) of the Holder’s total
purchase price (including brokerage commissions and other out of pocket expenses, if any) for the shares of Common Stock so purchased
(the “Buy-In Price”) over the product of (A) such number of shares of Common Stock, times (B) the price at which the
sell order giving rise to such purchase obligation was executed.. Nothing herein shall limit the Holder's right to pursue any
other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Company's failure to timely deliver shares of Common Stock upon conversion of this
Note as required pursuant to the terms hereof.


 


(iii)         Registration;
Book-Entry. The Company shall maintain a register (the "Register") for the recordation of the names and addresses
of the holders of each Note and the Principal amount of the Notes (and stated interest thereon) held by such holders (the "Registered
Notes"). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company
and the holders of the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes,
including, without limitation, the right to receive payments of Principal and Interest, if any, hereunder, notwithstanding notice
to the contrary. A Registered Note may be assigned or sold in whole or in part only by registration of such assignment or sale
on the Register. Upon its receipt of a request to assign or sell all or part of any Registered Note by the Holder, the Company
shall record the information contained therein in the Register and issue one or more new Registered Notes in the same aggregate
Principal amount as the Principal amount of the surrendered Registered Note to the designated assignee or transferee pursuant
to Section 18. Notwithstanding anything to the contrary in this Section 3(c)(iii), the Holder may assign any Note or any portion
thereof to an Affiliate of such Holder or a Related Fund of such Holder without delivering a request to assign or sell such Note
to the Company and the recordation of such assignment or sale in the Register (a "Related Party Assignment");
provided, that (x) the Company may continue to deal solely with such assigning or selling Holder unless and until such
Holder has delivered a request to assign or sell such Note or portion thereof to the Company for recordation in the Register;
(y) the failure of such assigning or selling Holder to deliver a request to assign or sell such Note or portion thereof to the
Company shall not affect the legality, validity, or binding effect of such assignment or sale and (z) such assigning or selling
Holder shall, acting solely for this purpose as a non-fiduciary agent of the Company, maintain a register (the "Related
Party Register") comparable to the Register on behalf of the Company, and any such assignment or sale shall be effective
upon recordation of such assignment or sale in the Related Party Register. Notwithstanding anything to the contrary set forth
herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically
surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the
Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance
of this Note upon physical surrender of this Note. The Holder and the Company shall maintain records showing the Principal, Interest
and Late Charges, if any, converted and the dates of such conversions or shall use such other method, reasonably satisfactory
to the Holder and the Company, so as not to require physical surrender of this Note upon conversion.


 






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(iv)          Pro
Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from the Holder of this Note and one
or more holders of Other Notes for the same Conversion Date and the Company can convert some, but not all, of such portions of
this Note and the Other Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from the Holder and
each holder of Other Notes electing to have this Note or the Other Notes converted on such date a pro rata amount of such holder's
portion of the Note and its Other Notes submitted for conversion based on the Principal amount of this Note and the Other Notes
submitted for conversion on such date by such holder relative to the aggregate Principal amount of this Note and all Other Notes
submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder
in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in
dispute and resolve such dispute in accordance with Section 24.


 


(d)  
Beneficial Ownership. Notwithstanding anything to the contrary contained herein, the Company shall not effect the
conversion of any portion of this Note, and the Holder shall not have the right to convert any portion of this Note pursuant to
the terms and conditions of this Note and any such conversion shall be null and void and treated as if never made, to the extent
that after giving effect to such conversion, the Holder together with the other Attribution Parties whose identities and beneficial
ownership of Common Stock have been made known to the Company, collectively would beneficially own in excess of 4.99% (the "Maximum
Percentage") of the shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes
of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by the Holder and the other Attribution
Parties shall include the number of shares of Common Stock held by the Holder and all other Attribution Parties plus the number
of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being
made, but shall exclude shares of Common Stock which would be issuable upon (i) conversion of the remaining, nonconverted portion
of this Note beneficially owned by the Holder or any of the other Attribution Parties and (ii) exercise or conversion of the unexercised
or nonconverted portion of any other securities of the Company (including, without limitation, any convertible notes or convertible
preferred stock or warrants, including the Other Notes and Warrants) beneficially owned by the Holder or any other Attribution
Party subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 3(d). For purposes
of this Section 3(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. For purposes
of determining the number of outstanding shares of Common Stock the Holder may acquire upon the conversion of the Note without
exceeding the Maximum Percentage, the Holder may rely on the number of


 






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outstanding shares of Common Stock as reflected in (i) the
Company's most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing
with the SEC, as the case may be, (ii) a more recent public announcement by the Company or (iii) any other written notice by the
Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding (the "Reported Outstanding
Share Number"). If the Company receives a Conversion Notice from the Holder at a time when the actual number of outstanding
shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall notify the Holder in writing of the
number of shares of Common Stock then outstanding and, to the extent that such Conversion Notice would otherwise cause the Holder's
beneficial ownership, as determined pursuant to this Section 3(d), to exceed the Maximum Percentage, the Holder must notify the
Company of a reduced number of shares of Common Stock to be purchased pursuant to such Conversion Notice. For any reason at any
time, upon the written or oral request of the Holder, the Company shall within one (1) Trading Day confirm orally and in writing
or by electronic mail to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including
this Note, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number was reported.
In the event that the issuance of shares of Common Stock to the Holder upon conversion of this Note results in the Holder and the
other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of
outstanding shares of Common Stock (as determined under Section 13(d) of the Exchange Act), the number of shares so issued by which
the Holder's and the other Attribution Parties' aggregate beneficial ownership exceeds the Maximum Percentage (the "Excess
Shares") shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have the power to vote
or to transfer the Excess Shares. Upon delivery of a written notice to the Company, the Holder may from time to time increase or
decrease the Maximum Percentage to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any
such increase in the Maximum Percentage will not be effective until the sixty-first (61st) day after such notice is
delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other Attribution Parties
and not to any other holder of Notes that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common
Stock issuable pursuant to the terms of this Note in excess of the Maximum Percentage shall not be deemed to be beneficially owned
by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the Exchange Act. The provisions of
this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section
3(d) to the extent necessary to correct this paragraph (or any portion of this paragraph) which may be defective or inconsistent
with the intended beneficial ownership limitation contained in this Section 3(d) or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply
to a successor holder of this Note.


 






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(4)   SUBORDINATION.


 


(a)   
This Note will be subordinate and junior to the Company’s Senior Indebtedness. The Company for itself, its successors and
assigns, covenants and agrees and the Holder of this Note, for itself, its successors and assigns, by its acceptance of this Note
likewise covenants and agrees that, to the extent provided below, the payment of all amounts due pursuant to this Note is hereby
expressly subordinated and junior in right of payment to the extent and in the manner hereinafter set forth, to the Company’s
Senior Indebtedness.


 


(b)   
Upon the acceleration of any Senior Indebtedness or upon the maturity of all or any portion of the principal amount of any Senior
Indebtedness by lapse of time, acceleration or otherwise, all such Senior Indebtedness which has been so accelerated or matured
shall first indefeasibly be paid in full before any payment is made by the Company or any person acting on behalf of the Company
on account of any obligations evidenced by this Note.


 


(c)   
The Company shall not pay any principal portion of this Note, or interest accrued hereon, if at such time there exists a Blockage
Event (as hereafter defined) and written notice thereof has been given to the Company and the Holder by the holders of the Senior
Indebtedness.


 


(d)   
A “Blockage Event” is deemed to exist for the period of time commencing on the date of receipt by the Holder of written
notice of the occurrence of a Default or an Event of Default (as defined in the instruments evidencing the Senior Indebtedness),
provided that the failure to pay accrued interest on this Note when due shall not give rise to a Blockage Event in the absence
of another Default or Event of Default, which notice shall specify such Default or Event of Default, and ending on:


 


(i)   
the date such Default or Event of Default under the Senior Indebtedness, as applicable, is cured or waived, provided that such
Default or Event of Default is in the payment of any amount due thereunder; or (ii)   in the case of any other Default
or Event of Default under the Senior Indebtedness, the earlier of (A) the date on which Holder has received written notice of such
Default or Event of Default shall have been cured or waived and (B) the date that is 365 days after the occurrence of such Default
or Event of Default, provided that a Blockage Event with respect to a single specified Default or Event of Default may be deemed
to occur only once for each twelve-month period, provided, further, that no Default or Event of Default that existed at the commencement
of, or during the pendency of, a Blockage Event shall serve as the basis for the institution of any subsequent Blockage Event.


 


A Blockage Event shall
not be deemed to have existed during the period of time commencing on the date upon which the holder of this Note accelerates payment
of the principal amount of this Note or such other Notes as a result of any Event of Default hereunder and ending on the 365th
day after written notice of such acceleration given by the holder or such other holders to the Company and the holders of the instruments
evidencing the Senior Indebtedness; provided that in no event shall the Company pay the holder of this Note or the holders of any
other Notes the principal amount so accelerated if a Blockage Event then exists until the Senior Indebtedness has been paid in
full.


 






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(e)    At
any time there exists a Blockage Event, (i) the Company shall not, directly or indirectly, make any payment of any part of this
Note, (ii) the Holder shall not demand or accept from the Company or any other person any such payment or cancel, set-off or otherwise
discharge any part of the indebtedness represented by this Note, and (iii) neither the Company nor the Holder shall otherwise take
or permit any action prejudicial to or inconsistent with the priority position of any holder of Senior Indebtedness over the Holder
of this Note.


 


(f)    No
right of any holder of Senior Indebtedness to enforce the subordination provisions of this obligation shall be impaired by any
act or failure to act by the Company or the Holder or by their failure to comply with this Note or any other agreement or document
evidencing, related to or securing the obligations hereunder. Without in any way limiting the generality of the preceding sentence,
the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Holder, without
incurring responsibility to the Holder and without impairing or releasing the subordination provided in this Note or the obligations
of the Holder to the holders of Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms
of payment of any Senior Indebtedness provided that such change does not materially impact Holder in an adverse manner; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing any Senior Indebtedness; (iii) release
any person or entity liable in any manner for the collection of any Senior Indebtedness; and (iv) exercise or refrain from exercising
any rights against the Company or any other person or entity.


 


(g)   In
the event that the Company shall make any payment or prepayment to the Holder on account of the obligations under this Note which
is prohibited by this Section, such payment shall be held by the Holder, in trust for the benefit of, and shall be paid forthwith
over and delivered to, the holders of Senior Indebtedness (pro rata as to each of such holders on the basis of the respective amounts
and priorities of Senior Indebtedness held by them) to the extent necessary to pay all Senior Indebtedness due to such holders
of Senior Indebtedness in full in accordance with its terms (whether or not such Senior Indebtedness is due and owing), after giving
effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness.


 


(h)   After
all Senior Indebtedness indefeasibly is paid in full and until the obligations under the Note are paid in full, the Holder shall
be subrogated to the rights of holders of Senior Indebtedness to the extent that distributions otherwise payable to the Holder
have been applied to the payment of Senior Indebtedness. For purposes of such subrogation, no payments or distributions to holders
of such Senior Indebtedness of any cash, property or securities to which the Holder would be entitled except for the provisions
of this Section and no payment over pursuant to the provisions of this Section to holders of such Senior Indebtedness by the Holder,
shall, as between the Company, its creditors other than holders of such Senior Indebtedness, and the Holder, be deemed to be a
payment by the Company to or on account of such Senior Indebtedness, it being understood that the provisions of this Section are
solely for the purpose of defining the relative rights of the holders of such Senior Indebtedness, on the one hand and the Holder,
on the other hand.


 






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(i)    In
any insolvency, receivership, bankruptcy, dissolution, liquidation or reorganization proceeding, or in any other proceeding, whether
voluntary or involuntary, by or against the Company under any bankruptcy or insolvency law or laws relating to relief of debtors,
to compositions, extensions or readjustments of indebtedness:


 


(i)   the
claims of any holders of Senior Indebtedness against the Company shall be paid indefeasibly in full in cash or such payment shall
have been provided for in a manner acceptable to the holders of at least a majority of the then outstanding principal amount of
the Senior Indebtedness before any payment is made to the Holder;


 


(ii)  until all
Senior Indebtedness is indefeasibly paid in full in cash or such payment shall have been provided for in a manner acceptable to
the holders of at least a majority of the then outstanding principal amount of the Senior Indebtedness before any payment is made
to the Holder, any distribution to which the Holder would be entitled but for this Section shall be made to holders of Senior Indebtedness,
except for distribution of securities issued by the Company which are subordinate and junior in right of payment to the Senior
Indebtedness; and


 


(iii)  the
holders of Senior Indebtedness shall have the right to enforce, collect and receive every such payment or distribution and give
acquittance therefor. If, in or as a result of any action case or proceeding under Title 11 of the United States Code, as amended
from time to time, or any comparable statute, relating to the Company, the holders of the Senior Indebtedness return, refund or
repay to the Company, or any trustee or committee appointed in such case or proceeding receive any payment or proceeds of any collateral
in connection with such action, case or proceeding alleging that the receipt of such payments or proceeds by the holders of the
Senior Indebtedness was a transfer voidable under state or federal law, then the holders of the Senior Indebtedness shall not be
deemed ever to have received such payments or proceeds for purposes of this Note in determining whether and when all Senior Indebtedness
has been paid in full and the Company shall pay or cause to be paid, and the Holder shall be entitled to receive any such funds,
proceeds or collateral to satisfy all amounts due hereunder. In the event the holders of Senior Indebtedness receive amounts in
excess of payment in full (cash) of amounts outstanding in respect of Senior Indebtedness (without giving effect to whether claims
in respect of the Senior Indebtedness are allowed in any insolvency proceeding), the holders of Senior Indebtedness shall pay such
excess amounts to the Holder. 


 


(j)    By
its acceptance of this Note, the Holder agrees to execute and deliver such documents as may be reasonably requested from time to
time by the Company or the holder of any Senior Indebtedness in order to implement the foregoing provisions of this Section.


 


(5)   RIGHTS UPON EVENT
OF DEFAULT.


 


(a) Event of Default.
Each of the following events shall constitute an "Event of Default":


 


(i)            (A)
the suspension of the Common Stock from trading on an Eligible Market for a period of two (2) consecutive Trading Days or for
more than an aggregate of ten (10) Trading Days in any 365-day period or (B) the failure of the Common Stock to be listed on an
Eligible Market;


 






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(ii)          the
Company's (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock within five (5)
Business Days after the applicable Conversion Date or (B) notice, written or oral, to the Holder or any holder of the Other Notes,
including by way of public announcement or through any of its agents, at any time, of its intention not to comply with a request
for conversion of this Note or any Other Notes into shares of Common Stock that is tendered in accordance with the provisions
of this Note or the Other Notes, other than pursuant to Section 3(d) (and analogous provisions under the Other Notes);


 


(iii)         the
Company's failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under
this Note or the Other Notes (including, without limitation, the Company's failure to pay any redemption amounts hereunder) or
any other Transaction Document or any other agreement, document, certificate or other instrument delivered in connection with
the transactions contemplated hereby and thereby to which the Holder is a party, except, in the case of a failure to pay Interest
and/or Late Charges when and as due, in which case only if such failure continues for a period of no more than an aggregate of
five (5) Business Days;


 


(iv)          any
default under any Senior Indebtedness of the Company or any of its Subsidiaries other than with respect to this Note or any Other
Notes which results in the acceleration of such Senior Indebtedness;


 


(v)           the
Company or any of its Subsidiaries, pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal, foreign
or state law for the relief of debtors (collectively, "Bankruptcy Law"), (A) commences a voluntary case, (B)
consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver,
trustee, assignee, liquidator or similar official (a "Custodian"), (D) makes a general assignment for the benefit
of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due;


 


(vi)         a
court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company
or any of its Subsidiaries in an involuntary case, (B) appoints a Custodian of the Company or any of its Subsidiaries or (C) orders
the liquidation of the Company or any of its Subsidiaries;


 


(vii)        a
final judgment or judgments for the payment of money aggregating in excess of $250,000 are rendered against the Company or any
of its Subsidiaries and which judgments are not, within sixty (60) days after the entry thereof, bonded, discharged or stayed
pending appeal, or are not discharged within sixty (60) days after the expiration of such stay; provided, however,
that any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating
the $250,000 amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity
provider (which written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered
by insurance or an indemnity and the Company will receive the proceeds of such insurance or indemnity within thirty (30) days
of the issuance of such judgment;


 






     -10-


    


    

 


(viii)       other
than as specifically set forth in another clause of this Section 4(a), the Company or any of its Subsidiaries breaches any representation,
warranty, covenant or other term or condition of any Transaction Document, except, in the case of a breach of a covenant or other
term or condition of any Transaction Document which is curable, only if such breach continues for a period of at least an aggregate
of five (5) Business Days;


 


(ix)          any
breach or failure in any respect to comply with Sections 16 or 17 of this Note;


 


(x)           any
material damage to, or loss, theft or destruction of, a material amount of property of the Company, whether or not insured, or
any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty which causes, for more
than fifteen (15) consecutive days, the cessation or substantial curtailment of revenue producing activities at any facility of
the Company or any Subsidiary, if any such event or circumstance could reasonably be expected to have a Material Adverse Effect
(as defined in the Securities Purchase Agreement);


 


(xi)         a
false or inaccurate certification by the Company as to whether any Event of Default has occurred; or


 


(xii)        any
Event of Default (as defined in the Other Notes) occurs with respect to any Other Notes.


 


(b) Redemption
Right. Upon the occurrence of an Event of Default with respect to this Note or any Other Note, the Company shall within one
(1) Business Day deliver written notice thereof via facsimile or electronic mail and overnight courier (an "Event of Default
Notice") to the Holder. At any time after the earlier of the Holder's receipt of an Event of Default Notice and the Holder
becoming aware of an Event of Default, the Holder may require the Company to redeem (an "Event of Default Redemption")
all or any portion of this Note by delivering written notice thereof (the "Event of Default Redemption Notice")
to the Company and the holders of the Senior Indebtedness, which Event of Default Redemption Notice shall indicate the portion
of this Note the Holder is electing to require the Company to redeem. Each portion of this Note subject to redemption by the Company
pursuant to this Section 5(b) shall be redeemed by the Company in cash by wire transfer of immediately available funds at a price
equal to the Conversion Amount being redeemed (the "Event of Default Redemption Price"). Redemptions required
by this Section 5(b) shall be made in accordance with the provisions of Section 13. To the extent redemptions required by this
Section 5(b) are deemed or determined by a court of competent jurisdiction to be prepayments of the Note by the Company, such redemptions
shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this Section 5, but subject to Section
3(d), until the Event of Default Redemption Price (together with any interest thereon) is paid in full, the Conversion Amount submitted
for redemption under this Section 5(b) (together with any interest thereon) may be converted, in whole or in part, by the Holder
into Common Stock pursuant to Section 3. Notwithstanding anything to the contrary in the foregoing, the right of the Holder to
require redemption of all or a portion of this Note is subject to the subordination provisions of Section 4 hereof.


 






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6.   RIGHTS
UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.


 


(e)  
Assumption. The Company shall not enter into or be party to a Fundamental Transaction unless the Successor Entity
assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance with
the provisions of this Section 6(a) pursuant to written agreements in form and substance reasonably satisfactory to the Required
Holders, including agreements, if so requested by the Holder, to deliver to each holder of Notes in exchange for such Notes a security
of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including,
without limitation, having a principal amount and interest rate equal to the Principal amounts and the Default Rate of the Notes
then outstanding held by such holder, having similar conversion rights and having similar ranking to the Notes, and reasonably
satisfactory to the Required Holders. No later than (i) thirty (30) days prior to the occurrence or consummation of any Fundamental
Transaction or (ii) if later, the first Trading Day following the date the Company first becomes aware of the occurrence or potential
occurrence of a Fundamental Transaction, the Company shall deliver written notice thereof via facsimile or electronic mail and
overnight courier to the Holder. Upon the occurrence or consummation of any Fundamental Transaction, the Company and the Successor
Entity or Successor Entities, jointly and severally, shall succeed to, and the Company shall cause any Successor Entity or Successor
Entities to jointly and severally succeed to, and be added to the term "Company" under this Note (so that from and after
the date of such Fundamental Transaction, each and every provision of this Note referring to the "Company" shall refer
instead to each of the Company and the Successor Entity or Successor Entities, jointly and severally), and the Company and the
Successor Entity or Successor Entities, jointly and severally, may exercise every right and power of the Company prior thereto
and shall assume all of the obligations of the Company prior thereto under this Note with the same effect as if the Company and
such Successor Entity or Successor Entities, jointly and severally, had been named as the Company in this Note, and, solely at
the request of the Holder, if the Successor Entity and/or Successor Entities is a publicly traded corporation whose common capital
stock is quoted on or listed for trading on an Eligible Market, shall deliver (in addition to and without limiting any right under
this Note) to the Holder in exchange for this Note a security of the Successor Entity and/or Successor Entities evidenced by a
written instrument substantially similar in form and substance to this Note and convertible for a corresponding number of shares
of capital stock of the Successor Entity and/or Successor Entities (the "Successor Capital Stock") equivalent
(as set forth below) to the shares of Common Stock acquirable and receivable upon conversion of this Note (without regard to any
limitations on the conversion of this Note) prior to such Fundamental Transaction (such corresponding number of shares of Successor
Capital Stock to be delivered to the Holder shall equal the greater of (I) the quotient of (A) the aggregate dollar value of all
consideration (including cash consideration and any consideration other than cash ("Non-Cash Consideration"),
in such Fundamental Transaction, as such values are set forth in any definitive agreement for the Fundamental Transaction that
has been executed at the time of the first public announcement of the Fundamental


 






     -12-


    


    

 


Transaction
or, if no such value is determinable from such definitive agreement, as determined in accordance with Section 24 with the term
"Non-Cash Consideration" being substituted for the term "Conversion Price") that the Holder would have been
entitled to receive upon the happening of such Fundamental Transaction or the record, eligibility or other determination date
for the event resulting in such Fundamental Transaction, had this Note been converted immediately prior to such Fundamental Transaction
or the record, eligibility or other determination date for the event resulting in such Fundamental Transaction (without regard
to any limitations on the conversion of this Note) (the "Aggregate Consideration") divided by (B) the per share
Closing Sale Price of such Successor Capital Stock on the Trading Day immediately prior to the consummation or occurrence of the
Fundamental Transaction and (II) the product of (A) the quotient obtained by dividing (x) the Aggregate Consideration, by (y)
the Closing Sale Price of the Common Stock on the Trading Day immediately prior to the consummation or occurrence of the Fundamental
Transaction and (B) the highest exchange ratio pursuant to which any shareholder of the Company may exchange Common Stock for
Successor Capital Stock) (provided, however, to the extent that the Holder's right to receive any such shares of
publicly traded common stock (or their equivalent) of the Successor Entity would result in the Holder and its other Attribution
Parties exceeding the Maximum Percentage, if applicable, then the Holder shall not be entitled to receive such shares to such
extent (and shall not be entitled to beneficial ownership of such shares of publicly traded common stock (or their equivalent)
of the Successor Entity as a result of such consideration to such extent) and the portion of such shares shall be held in abeyance
for the Holder until such time or times, as its right thereto would not result in the Holder and its other Attribution Parties
exceeding the Maximum Percentage, at which time or times the Holder shall be delivered such shares to the extent as if there had
been no such limitation), and such security shall be satisfactory to the Holder, and with an identical conversion price to the
Conversion Price hereunder (such adjustments to the number of shares of capital stock and such conversion price being for the
purpose of protecting after the consummation or occurrence of such Fundamental Transaction the economic value of this Note that
was in effect immediately prior to the consummation or occurrence of such Fundamental Transaction, as elected by the Holder solely
at its option). Upon occurrence or consummation of the Fundamental Transaction, the Company and the Successor Entity or Successor
Entities shall deliver to the Holder confirmation that there shall be issued upon conversion of this Note at any time after the
occurrence or consummation of the Fundamental Transaction, as elected by the Holder solely at its option, shares of Common Stock,
Successor Capital Stock or, in lieu of the shares of Common Stock or Successor Capital Stock (or other securities, cash, assets
or other property purchasable upon the conversion of this Note prior to such Fundamental Transaction), such shares of stock, securities,
cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights), which for purposes
of clarification may continue to be shares of Common Stock, if any, that the Holder would have been entitled to receive upon the
happening of such Fundamental Transaction or the record, eligibility or other determination date for the event resulting in such
Fundamental Transaction, had this Note been converted immediately prior to such Fundamental Transaction or the record, eligibility
or other determination date for the event resulting in such Fundamental Transaction (without regard to any limitations on the
conversion of this Note), as adjusted in accordance with the provisions of this Note. The provisions of this Section 6(a) shall
apply similarly and equally to successive Fundamental Transactions.


 


(f)   
Redemption Right. No sooner than twenty-five (25) days nor later than twenty (20) days prior to the consummation
of a Change of Control, but not prior to the public announcement of such Change of Control, the Company shall deliver written notice
thereof via facsimile or electronic mail and overnight courier to the Holder (a "Change of Control Notice"). At
any time during the period beginning on the earlier to occur of (x) any oral or written agreement by the Company or any of its
Subsidiaries, upon consummation of which the transaction contemplated thereby would reasonably be expected to result in a Change
of Control, (y) the Holder becoming aware of a Change of Control and (z) the Holder's receipt of a Change of Control Notice and
ending twenty-five (25) Trading Days after the date of the consummation of such Change of Control, the Holder may require the Company
to redeem (a "Change of Control Redemption") all or any portion of this Note by delivering written notice thereof
("Change of Control Redemption Notice") to the Company, which Change of Control Redemption Notice shall indicate
the Conversion Amount the Holder is electing to require the Company to redeem. The portion of this Note subject to redemption pursuant
to this Section 6(b) shall be redeemed by the Company in cash by wire transfer of immediately available funds at a price equal
to the Conversion Amount being redeemed (the "Change of Control Redemption Price"). Redemptions required by this
Section 6 shall be made in accordance with the provisions of Section 13 and shall have priority to payments to shareholders in
connection with a Change of Control, but shall be subject to the subordination provisions of Section 4 hereof. To the extent redemptions
required by this Section 6(b) are deemed or determined by a court of competent jurisdiction to be prepayments of the Note by the
Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this Section
6, but subject to Section 3(d), until the Change of Control Redemption Price (together with any interest thereon) is paid in full,
the Conversion Amount submitted for redemption under this Section 6(b) (together with any interest thereon) may be converted, in
whole or in part, by the Holder into Common Stock pursuant to Section 3.


 






     -13-


    


    

 


(4) 
DISTRIBUTION OF ASSETS; RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.


 


(a)  
Distribution of Assets. If the Company shall declare or make any dividend or other distributions of its assets (or
rights to acquire its assets) to any or all holders of shares of Common Stock, by way of return of capital or otherwise (including
without limitation, any distribution of cash, stock or other securities, property, Options, evidence of Indebtedness or any other
assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction)
(the "Distributions"), then the Holder will be entitled to such Distributions as if the Holder had held the number
of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions
on the convertibility of this Note) immediately prior to the date on which a record is taken for such Distribution or, if no such
record is taken, the date as of which the record holders of Common Stock are to be determined for such Distributions (provided,
however, that to the extent that the Holder's right to participate in any such Distribution would result in the Holder and
the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution
to such extent (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Distribution
(and beneficial ownership) to such extent) and the portion of such Distribution shall be held in abeyance for the Holder until
such time or times as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum
Percentage, at which time or times the Holder shall be granted such rights (and any rights under this Section 7(a) on such initial
rights or on any subsequent such rights to be held similarly in abeyance) to the same extent as if there had been no such limitation).


 


(b)  
Purchase Rights. If at any time the Company grants, issues or sells any Options, Convertible Securities or rights
to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the "Purchase
Rights"), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon
complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility of this Note)
immediately prior to the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights (provided, however, that to the extent that the Holder's right to participate in any
such Purchase Right would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder
shall not be entitled to participate in such Purchase Right to such extent (and shall not be entitled to beneficial ownership of
such shares of Common Stock as a result of such Purchase Right (and beneficial ownership) to such extent) and such Purchase Right
to such extent shall be held in abeyance for the Holder until such time or times as its right thereto would not result in the Holder
and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such right
(and any Purchase Right granted, issued or sold on such initial Purchase Right or on any subsequent Purchase Right to be held similarly
in abeyance) to the same extent as if there had been no such limitation).


 






     -14-


    


    

 


(c)  
Other Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the occurrence
or consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities,
cash, assets or other property with respect to or in exchange for shares of Common Stock (a "Corporate Event"),
the Company shall make appropriate provision to ensure that, and any applicable Successor Entity or Successor Entities shall ensure
that, the Holder will thereafter have the right to receive upon conversion of this Note at any time after the occurrence or consummation
of the Corporate Event, shares of Common Stock or Successor Capital Stock or, if so elected by the Holder, in lieu of the shares
of Common Stock (or other securities, cash, assets or other property) purchasable upon the conversion of this Note prior to such
Corporate Event (but not in lieu of such items still issuable under Sections 7(a) and 7(b), which shall continue to be receivable
on the Common Stock or on such shares of stock, securities, cash, assets or any other property otherwise receivable with respect
to or in exchange for shares of Common Stock), such shares of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights and any shares of Common Stock) which the Holder would have been entitled
to receive upon the occurrence or consummation of such Corporate Event or the record, eligibility or other determination date for
the event resulting in such Corporate Event, had this Note been converted immediately prior to such Corporate Event or the record,
eligibility or other determination date for the event resulting in such Corporate Event (without regard to any limitations on conversion
of this Note). Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Required
Holders. The provisions of this Section 7 shall apply similarly and equally to successive Corporate Events.


 


(5)  
RIGHTS UPON ISSUANCE OF OTHER SECURITIES.


 


(a)  
Adjustment of Fixed Conversion Price upon Subdivision or Combination of Common Stock. If the Company at any time
on or after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes
of its outstanding shares of Common Stock into a greater number of shares, the Fixed Conversion Price in effect immediately prior
to such subdivision will be proportionately reduced. If the Company at any time on or after the Subscription Date combines (by
combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number
of shares, the Fixed Conversion Price in effect immediately prior to such combination will be proportionately increased.


 






     -15-


    


    

 


(b)  
Voluntary Adjustment by Company. The Company may at any time during the term of this Note, with the prior written
consent of the Required Holders, reduce the then current Fixed Conversion Price to any amount and for any period of time deemed
appropriate by the Board of Directors of the Company.


 


(6)  
OPTIONAL REDEMPTION AT THE COMPANY'S ELECTION.


 


(a)  
General. At any time and from time to time after the Issuance Date, the Company shall have the right to redeem all
or any portion of the Conversion Amount then remaining under this Note and the Other Notes (the "Company Optional Redemption
Amount") as designated in the applicable Company Optional Redemption Notice on a Company Optional Redemption Date (each
as defined below) (a "Company Optional Redemption"). The portion of this Note and the Other Notes subject to redemption
pursuant to this Section 9(a) shall be redeemed by the Company on the applicable Company Optional Redemption Date (as defined below)
in cash by wire transfer of immediately available funds pursuant to wire instructions provided by the Holder in (a "Company
Optional Redemption Price"). The Company may exercise its right to require redemption under this Section 9 by delivering
prior written notice thereof three (3) Trading Days prior to the applicable Company Optional Redemption Date (as defined below)
by facsimile or electronic mail and overnight courier to the Holder and all, but not less than all, of the holders of the Other
Notes (a "Company Optional Redemption Notice" and the date all of the holders of the Notes received such notice
is referred to as a "Company Optional Redemption Notice Date"). Each Company Optional Redemption Notice shall
be irrevocable. Each Company Optional Redemption Notice shall (i) state the date on which the applicable Company Optional Redemption
shall occur (a "Company Optional Redemption Date"), which date shall be three (3) Trading Days following the applicable
Company Optional Redemption Notice Date or and (ii) state the aggregate Conversion Amount of the Notes which the Company has elected
to be subject to Company Optional Redemption from the Holder and all of the holders of the Other Notes pursuant to this Section
9(a) (and analogous provisions under the Other Notes) on such Company Optional Redemption Date. Notwithstanding anything to the
contrary in this Section 9, until the applicable Company Optional Redemption Price is paid in full, such Company Optional Redemption
Amount may be converted, subject to Section 3(d), in whole or in part, by the Holder into shares of Common Stock pursuant to Section
3. All Conversion Amounts converted by the Holder after a Company Optional Redemption Notice Date shall reduce the Company Optional
Redemption Amount of this Note required to be redeemed on such Company Optional Redemption Date, unless the Holder otherwise indicates
in the applicable Conversion Notice. Company Optional Redemptions made pursuant to this Section 9 shall be made in accordance with
Section 13. To the extent redemptions required by this Section 9 are deemed or determined by a court of competent jurisdiction
to be prepayments of the Note by the Company, such redemptions shall be deemed to be voluntary prepayments.


 






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(b)  
Pro Rata Redemption Requirement. If the Company elects to cause a Company Optional Redemption pursuant to Section
9(a), then it must simultaneously take the same action in the same proportion with respect to the Other Notes. If the Company elects
to cause a Company Optional Redemption pursuant to Section 9(a) (or similar provisions under the Other Notes) with respect to less
than all of the Conversion Amounts of the Notes then outstanding, then the Company shall require redemption of a Conversion Amount
from each of the holders of the Notes equal to the product of (i) the aggregate Company Optional Redemption Amount of Notes which
the Company has elected to cause to be redeemed pursuant to Section 9(a), multiplied by (ii) the fraction, the numerator of which
is the sum of the aggregate Original Principal Amount of the Notes purchased by such holder of outstanding Notes and the denominator
of which is the sum of the aggregate Original Principal Amount of the Notes purchased by all holders holding outstanding Notes
(such fraction with respect to each holder is referred to as its "Company Optional Redemption Allocation Percentage",
and such amount with respect to each holder is referred to as its "Pro Rata Company Optional Redemption Amount");
provided, however that in the event that any holder's Pro Rata Company Optional Redemption Amount exceeds the outstanding
Principal amount of such holder's Note, then such excess Pro Rata Company Optional Redemption Amount shall be allocated amongst
the remaining holders of Notes in accordance with the foregoing formula. In the event that the initial holder of any Notes shall
sell or otherwise transfer any of such holder's Notes, the transferee shall be allocated a pro rata portion of such holder's Company
Optional Redemption Allocation Percentage and Pro Rata Company Optional Redemption Amount.


 


(7)  
ADJUSTMENT OF PRINCIPAL. On August [●], 20174
and on the end of each thirty (30) day period thereafter or, if any such date falls on a Holiday, the next day that is not a Holiday,
through the Maturity Date, the principal amount under this Note shall automatically be increased by $[●]5
without any further action by the Holder or the Company.


 


(8)  
NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles
of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution,
issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the
terms of this Note, and will at all times in good faith carry out all of the provisions of this Note and take all action as may
be required to protect the rights of the Holder of this Note.


 


(9)  
RESERVATION OF AUTHORIZED SHARES.


 


(a)  
Reservation. The Company shall initially reserve out of its authorized and unissued shares of Common Stock a number
of shares of Common Stock for each of this Note and the Other Notes equal to 150% of the Conversion Rate with respect to the Conversion
Amount of each such Note as of the Issuance Date. So long as any of this Note and the Other Notes are outstanding, the Company
shall take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose
of effecting the conversion of this Note and the Other Notes, the number of shares of Common Stock as shall from time to time be
necessary to effect the conversion of all of the Notes then outstanding; provided, that at no time shall the number of shares
of Common Stock so reserved be less than the number of shares required to be reserved pursuant hereto (in each case, without regard
to any limitations on conversions) (the "Required Reserve Amount"). The initial number of shares of Common Stock
reserved for conversions of this Note and the Other Notes and each increase in the number of shares so reserved shall be allocated
pro rata among the Holder and the holders of the Other Notes based on the Principal amount of this Note and the Other Notes held
by each holder at the Closing (as defined in the Securities Purchase Agreement) or increase in the number of reserved shares, as
the case may be (the "Authorized Share Allocation"). In the event that a holder shall sell or otherwise transfer
this Note or any of such holder's Other Notes, each transferee shall be allocated a pro rata portion of such holder's Authorized
Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Notes shall be allocated
to the Holder and the remaining holders of Other Notes, pro rata based on the Principal amount of this Note and the Other Notes
then held by such holders.


 


___________________________


4
Insert date that is ninety one (91) days immediately following the Issuance Date or, if such date falls on a Holiday, the next
day that is not a Holiday.


 


5
Insert dollar amount equal to 2% of the Original Principal Amount of this Note.


 






     -17-


    


    

 


(b)  
Insufficient Authorized Shares. If at any time while any of the Notes remain outstanding the Company does not have
a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon
conversion of the Notes at least a number of shares of Common Stock equal to the Required Reserve Amount (an "Authorized
Share Failure"), then the Company shall immediately take all action necessary to increase the Company's authorized shares
of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes then outstanding.
Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized
Share Failure, but in no event later than seventy-five (75) days after the occurrence of such Authorized Share Failure, the Company
shall either (x) obtain the written consent of its shareholders for the approval of an increase in the number of authorized shares
of Common Stock and provide each shareholder with an information statement with respect thereto or (y) hold a meeting of its shareholders
for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company
shall provide each shareholder with a proxy statement and shall use its best efforts to solicit its shareholders' approval of such
increase in authorized shares of Common Stock and to cause its Board of Directors to recommend to the shareholders that they approve
such proposal. Notwithstanding the foregoing, if during any such time of an Authorized Share Failure, the Company is able to obtain
the written consent of a majority of the shares of its issued and outstanding Common Stock to approve the increase in the number
of authorized shares of Common Stock, the Company may satisfy this obligation by obtaining such consent and submitting for filing
with the SEC an Information Statement on Schedule 14C. If, upon any conversion of this Note, the Company does not have sufficient
authorized shares to deliver in satisfaction of such conversion, then unless the Holder elects to rescind such attempted conversion,
the Holder may require the Company to pay to the Holder within three (3) Trading Days of the applicable attempted conversion, cash
in an amount equal to the product of (i) the number of shares of Common Stock that the Company is unable to deliver pursuant to
this Section 12, and (ii) the highest Closing Sale Price of the Common Stock during the period beginning on the date of the applicable
Conversion Date and ending on the date the Company makes the applicable cash payment.


 






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(10) 
REDEMPTIONS.


 


(a)  
Mechanics. Subject to the subordination provisions of Section 4 hereof, the Company shall deliver the applicable
Event of Default Redemption Price to the Holder within three (3) Business Days after the Company's receipt of the Holder's Event
of Default Redemption Notice (the "Event of Default Redemption Date"). If the Holder has submitted a Change of
Control Redemption Notice in accordance with Section 6(b), the Company shall deliver the applicable Change of Control Redemption
Price to the Holder (i) concurrently with the consummation of such Change of Control if such notice is received prior to the consummation
of such Change of Control and (ii) within three (3) Business Days after the Company's receipt of such notice otherwise (such date,
the "Change of Control Redemption Date"). The Company shall deliver the applicable Company Optional Redemption
Price to the Holder on the applicable Company Optional Redemption Date. The Company shall pay the applicable Redemption Price to
the Holder in cash by wire transfer of immediately available funds pursuant to wire instructions provided by the Holder in writing
to the Company on the applicable due date. In the event of a redemption of less than all of the Conversion Amount of this Note,
the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 20(d)) representing
the outstanding Principal which has not been redeemed and any accrued Interest on such Principal which shall be calculated as if
no Redemption Notice has been delivered. In the event that the Company does not pay the applicable Redemption Price to the Holder
within the time period required, at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder
shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or any portion of this
Note representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption Price has not
been paid. Upon the Company's receipt of such notice, (x) the applicable Redemption Notice shall be null and void with respect
to such Conversion Amount, and (y) the Company shall immediately return this Note, or issue a new Note (in accordance with Section
20(d)) to the Holder representing such Conversion Amount to be redeemed. The Holder's delivery of a notice voiding a Redemption
Notice shall not affect the Company's obligations to make any payments of Late Charges which have accrued prior to the date of
such notice with respect to the Conversion Amount subject to such notice.


 


(b)  
Redemption by Other Holders. Upon the Company's receipt of notice from any of the holders of the Other Notes for
redemption or repayment as a result of the occurrence of one of the events or occurrences described in Section 5(b) or Section
6(b) or pursuant to equivalent provisions set forth in the Other Notes (each, an "Other Redemption Notice"), the
Company shall immediately, but no later than one (1) Business Day of its receipt thereof, forward to the Holder by facsimile or
electronic mail a copy of such notice. If the Company receives a Redemption Notice and one or more Other Redemption Notices, during
the seven (7) Business Day period beginning on and including the date which is three (3) Business Days prior to the Company's receipt
of the Holder's Redemption Notice and ending on and including the date which is three (3) Business Days after the Company's receipt
of the Holder's Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such
Redemption Notice and such Other Redemption Notices received during such seven (7) Business Day period, then the Company shall
redeem a pro rata amount from the Holder and each holder of the Other Notes based on the Principal amount of this Note and the
Other Notes submitted for redemption pursuant to such Redemption Notice and such Other Redemption Notices received by the Company
during such seven (7) Business Day period.


 






     -19-


    


    

 


(c)  
Insufficient Assets. If upon a Redemption Date, the assets of the Company are insufficient to pay the applicable
Redemption Price, the Company shall (i) take all appropriate action reasonably within its means to maximize the assets available
for paying the applicable Redemption Price, (ii) redeem out of all such assets available therefor on the applicable Redemption
Date the maximum possible portion of the applicable Redemption Price that it can redeem on such date, pro rata among the Holder
and the holders of the Other Notes to be redeemed in proportion to the aggregate Principal amount of this Note and the Other Notes
outstanding on the applicable Redemption Date and (iii) following the applicable Redemption Date, at any time and from time to
time when additional assets of the Company become available to pay the balance of the applicable Redemption Price of this Note
and the Other Notes, the Company shall use such assets, at the end of the then current fiscal quarter, to pay the balance of such
Redemption Price of this Note and the Other Notes, or such portion thereof for which assets are then available, on the basis set
forth above at the applicable Redemption Price, and such assets will not be used prior to the end of such fiscal quarter for any
other purpose. Interest on the Principal amount of this Note and the Other Notes that have not been redeemed shall continue to
accrue until such time as the Company redeems this Note and the Other Notes. The Company shall pay to the Holder the applicable
Redemption Price without regard to the legal availability of funds unless expressly prohibited by applicable law or unless the
payment of the applicable Redemption Price could reasonably be expected to result in personal liability to the directors of the
Company.


 


(11) 
VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law and as
expressly provided in this Note.


 


(12)  RANK.All
payments due under this Note shall be (i) subordinate and junior to all Senior Indebtedness, and (ii) pari passu with all
other Indebtedness of the Company, including without limitation, the Company’s 8% Subordinated Convertible Promissory Notes
due November 30, 2018 and February 28, 2019, respectively, outstanding on the date hereof or issued after the date hereof in lieu
of payment of accrued interest thereon (collectively, the “8% Notes”) and all of the Other Notes..


 


(13) 
NEGATIVE COVENANTS. Until all of the Notes have been converted, redeemed or otherwise satisfied in accordance with
their terms, the Company shall not, and the Company shall not permit any of its Subsidiaries without the prior written consent
of the Required Holders to, directly or indirectly:


 


(a)  
incur or guarantee, assume or suffer to exist any Indebtedness, other than Permitted Indebtedness;


 


(b)  
allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property
or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, "Liens")
other than Permitted Liens;


 






     -20-


    


    

 


(c)  
redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole
or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any
Indebtedness (other than this Note and the Other Notes and the Senior Indebtedness), whether by way of payment in respect of principal
of (or premium, if any) or interest on, such Indebtedness if at the time such payment is due or is otherwise made or, after giving
effect to such payment, an event constituting, or that with the passage of time and without being cured would constitute, an Event
of Default has occurred and is continuing;


 


(d)  
redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole
or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any
Indebtedness (including, without limitation Permitted Indebtedness other than this Note and the Other Notes), by way of payment
in respect of principal of (or premium, if any) such Indebtedness other than the Senior Indebtedness. For clarity, such restriction
shall not preclude the payment of regularly scheduled interest payments which may accrue under such Permitted Indebtedness;


 


(e)  
redeem or repurchase its Equity Interest (except on a pro rata basis among all holders thereof);


 


(f)   
declare or pay any cash dividend or distribution on any Equity Interest of the Company or of its Subsidiaries;


 


(g)  
make, or permit any of its Subsidiaries to make, any change in the nature of its business as described in the Company's
most recent Annual Report filed on Form 10-K with the SEC or modify its corporate structure or purpose; or


 


(h)  
encumber or allow any Liens on, any of its own or its licensed copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, patent applications
and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part
of the same, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered
or not, and the goodwill of the business of the Company and its Subsidiaries connected with and symbolized thereby, know-how, operating
manuals, trade secret rights, rights to unpatented inventions, and any claims for damage by way of any past, present, or future
infringement of any of the foregoing, other than Permitted Liens; or


 


(i)    
enter into, renew, extend or be a party to, any transaction or series of related transactions (including, without limitation,
the purchase, sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with
any Affiliate, except in the ordinary course of business in a manner and to an extent consistent with past practice and necessary
or desirable for the prudent operation of its business, for fair consideration and on terms no less favorable to it or its Subsidiaries
than would be obtainable in a comparable arm's length transaction with a Person that is not an Affiliate thereof.


 






     -21-


    


    

 


(14) 
AFFIRMATIVE COVENANTS. Until all of the Notes have been converted, redeemed
or otherwise satisfied in accordance with their terms, the Company shall, and the Company shall cause each Subsidiary to, directly
or indirectly:


 


(a)  
maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges,
and become or remain, and cause each of its Subsidiaries to become or remain, duly qualified and in good standing in each jurisdiction
in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification
necessary;


 


(b)  
maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties which are necessary
or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply,
and cause each of its Subsidiaries to comply, at all times with the provisions of all leases to which it is a party as lessee or
under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder; and


 


(c)  
maintain, insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive
general liability, hazard, rent and business interruption insurance) with respect to its properties (including all real properties
leased or owned by it) and business, in such amounts and covering such risks as is required by any governmental authority having
jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar
businesses similarly situated.


 


(15) 
VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote of the Required Holders at a meeting duly called
for such purpose or the written consent without a meeting of the Required Holders shall be required for any change or amendment
or waiver of any provision to this Note or any of the Other Notes. Any change, amendment or waiver by the Company and the Required
Holders shall be binding on the Holder of this Note and all holders of the Other Notes.


 


(16) 
TRANSFER. This Note and any shares of Common Stock issued upon conversion of this Note may be offered, sold, assigned
or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 2(f) of the Securities
Purchase Agreement.


 


(17) 
REISSUANCE OF THIS NOTE.


 


(a)  
Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 20(d) and subject to Section
3(c)(iii)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if
less than the entire outstanding Principal is being transferred, a new Note (in accordance with Section 20(d)) to the Holder representing
the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree
that, by reason of the provisions of Section 3(c)(iii) following conversion or redemption of any portion of this Note, the outstanding
Principal represented by this Note may be less than the Principal stated on the face of this Note.


 






     -22-


    


    

 


(b)  
Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification
undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this
Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 20(d)) representing the outstanding
Principal.


 


(c)  
Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder
at the principal office of the Company, for a new Note or Notes (in accordance with Section 20(d) representing in the aggregate
the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is
designated by the Holder at the time of such surrender.


 


(d)  
Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such
new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal
remaining outstanding (or in the case of a new Note being issued pursuant to Section 20(a) or Section 20(c), the Principal designated
by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does
not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have
an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have
the same rights and conditions as this Note, and (v) shall represent accrued and unpaid Interest and Late Charges, if any, on the
Principal and Interest of this Note, from the Issuance Date.


 


(18) 
REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note
shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents
at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit
the Holder's right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note.
Amounts set forth or provided for herein with respect to payments, conversion, redemption and the like (and the computation thereof)
shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation
of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that,
in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies,
to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security
being required.


 






     -23-


    


    

 


(19) 
PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection
or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts
due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership
of the Company or other proceedings affecting Company creditors' rights and involving a claim under this Note, then the Company
shall pay the reasonable costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy,
reorganization, receivership or other proceeding, including, but not limited to, attorneys' fees and disbursements.


 


(20) 
CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and all the purchasers of
the Notes pursuant to the Securities Purchase Agreement (the "Purchasers") and shall not be construed against
any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect
the interpretation of, this Note.


 


(21) 
FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right
or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right, power or privilege.


 


(22) 
DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Closing Bid Price or the Closing Sale
Price or the arithmetic calculation of the Conversion Rate, the Conversion Price or any Redemption Price, the Company shall submit
the disputed determinations or arithmetic calculations via facsimile or electronic mail within one (1) Business Day of receipt,
or deemed receipt, of the Conversion Notice or Redemption Notice or other event giving rise to such dispute, as the case may be,
to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation within one (1) Business
Day of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within one
(1) Business Day submit via facsimile or electronic mail (a) the disputed determination of the Closing Bid Price or the Closing
Sale Price to an independent, reputable investment bank selected by the Holder and approved by the Company, such approval not to
be unreasonably withheld, conditioned or delayed, or (b) the disputed arithmetic calculation of the Conversion Rate, Conversion
Price or any Redemption Price to an independent, outside accountant, selected by the Holder and approved by the Company, such approval
not to be unreasonably withheld, conditioned or delayed. The Company, at the Company's expense, shall cause the investment bank
or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the
results no later than five (5) Business Days from the time it receives the disputed determinations or calculations. Such investment
bank's or accountant's determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable
error.


 


(23) 
NOTICES; PAYMENTS.


 


(a)  
Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall
be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt
written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the
reason therefore. Without limiting the generality of the foregoing, the Company shall give written notice to the Holder (i) immediately
upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment
and (ii) at least twenty (20) days prior to the date on which the Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the Common Stock, (B) with respect to any pro rata subscription offer to holders of Common Stock
or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each
case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the
Holder.


 






     -24-


    


    

 


(b)  
Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment
shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight
courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of
each of the Purchasers, shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement);
provided, that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing
the Company with prior written notice setting out such request and the Holder's wire transfer instructions. Whenever any amount
expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the
next succeeding day which is a Business Day. Any amount of Principal or other amounts due under the Transaction Documents which
is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on
such amount at the rate of ten percent (10.0%) per annum from the date such amount was due until the same is paid in full ("Late
Charge").


 


(24) 
CANCELLATION. After all Principal, accrued Interest and other amounts at any time owed on this Note have been paid
in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be
reissued.


 


(25) 
WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities
Purchase Agreement.


 


(26) 
GOVERNING LAW; JURISDICTION; JURY TRIAL. This Note shall be construed and enforced in accordance with, and all questions
concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New
York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New
York. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City
of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is improper. The Company hereby irrevocably waives
personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof
to such party at the address set forth in Section 9(f) of the Securities Purchase Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude
the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company's
obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or
other court ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST,
A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION
CONTEMPLATED HEREBY.


 






     -25-


    


    

 


(27) 
Severability. If any provision of this Note is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be
prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Note
so long as this Note as so modified continues to express, without material change, the original intentions of the parties as to
the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially
impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would
otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid
or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited,
invalid or unenforceable provision(s).


 


(28) 
DISCLOSURE. Upon receipt or delivery by the Company of any notice in accordance with the terms of this Note, unless
the Company has in good faith determined that the matters relating to such notice do not constitute material, nonpublic information
relating to the Company or its Subsidiaries, the Company shall within one (1) Business Day after any such receipt or delivery publicly
disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise. In the event that the Company believes
that a notice contains material, nonpublic information relating to the Company or its Subsidiaries, the Company so shall indicate
to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed
to presume that all matters relating to such notice do not constitute material, nonpublic information relating to the Company or
its Subsidiaries.


 


(29) 
USURY. This Note is subject to the express condition that at no time shall the Company be obligated or required to
pay interest hereunder at a rate or in an amount which could subject the Holder to either civil or criminal liability as a result
of being in excess of the maximum interest rate or amount which the Company is permitted by applicable law to contract or agree
to pay. If by the terms of this Note, the Company is at any time required or obligated to pay interest hereunder at a rate or in
an amount in excess of such maximum rate or amount, the rate or amount of interest under this Note shall be deemed to be immediately
reduced to such maximum rate or amount and the interest payable shall be computed at such maximum rate or be in such maximum amount
and all prior interest payments in excess of such maximum rate or amount shall be applied and shall be deemed to have been payments
in reduction of the principal balance of this Note.


 






     -26-


    


    

 


(30) 
CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:


 


(a)  
"Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is
controlled by, or is under common control with, such Person, it being understood for purposes of this definition that "control"
of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the
election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by
contract or otherwise.


 


(b)  
"Attribution Parties" means, collectively, the following Persons and entities, which the Holder shall identify
in writing to the Company on the Closing Date and from time to time thereafter, together with the number of shares of Common Stock
beneficially owned: (i) any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time
to time after the Issuance Date, directly or indirectly managed or advised by the Holder's investment manager or any of its Affiliates
or principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could
be deemed to be acting as a Group together with the Holder or any of the foregoing and (iv) any other Persons whose beneficial
ownership of the Company's Common Stock would or could be aggregated with the Holder's and the other Attribution Parties for purposes
of Section 13(d) of the Exchange Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other
Attribution Parties to the Maximum Percentage.


 


(c)  
"Bloomberg" means Bloomberg Financial Markets.


 


(d)  
"Business Day" means any day other than Saturday, Sunday or other day on which commercial banks in The
City of New York are authorized or required by law to remain closed.


 


(e)  
"Change of Control" means any Fundamental Transaction other than (i) any reorganization, recapitalization
or reclassification of the Common Stock in which holders of the Company's voting power immediately prior to such reorganization,
recapitalization or reclassification continue after such reorganization, recapitalization or reclassification to hold publicly
traded securities and, directly or indirectly, are, in all material respect, the holders of the voting power of the surviving entity
(or entities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than
a corporation) of such entity or entities) after such reorganization, recapitalization or reclassification or (ii) pursuant to
a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company.


 


(f)   
"Closing Bid Price" and "Closing Sale Price" means, for any security as of any date, the
last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg,
or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing
trade price, as the case may be, then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m.,
New York Time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market
for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last
closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for
such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security
as reported in the OTC Link or "pink sheets" by OTC Markets Group Inc. (formerly Pink OTC Markets Inc.). If the Closing
Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the
Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value
of such security, then such dispute shall be resolved pursuant to Section 24. All such determinations to be appropriately adjusted
for any stock dividend, stock split, stock combination, reclassification or similar transaction during the applicable calculation
period.


 






     -27-


    


    

 


(g)  "Closing
Date" shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially
issued Notes pursuant to the terms of the Securities Purchase Agreement.


 


(h)  "Common
Stock" means (i) the Company's shares of Common Stock, par value $0.001 per share, and (ii) any share capital
into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.


 


(i)    "Contingent
Obligation" means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect
to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring
such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will
be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will
be protected (in whole or in part) against loss with respect thereto.


 


(j)    "Convertible
Securities" means any stock or securities (other than Options) directly or indirectly convertible into or exercisable
or exchangeable for shares of Common Stock.


 


(k)  
"Default Rate" means 10.0% per annum.


 


(l)    
"Designee" means Empery Asset Management, LP.


 


(m)  
"Eligible Market" means the Principal Market, The New York Stock Exchange, The Nasdaq
Global Market, The Nasdaq Global Select Market or The NASDAQ Capital
Market.


 


(n)  
"Equity Interests" means (a) all shares of capital stock (whether denominated as common capital stock or
preferred capital stock), equity interests, beneficial, partnership or membership interests, joint venture interests, participations
or other ownership or profit interests in or equivalents (regardless of how designated) of or in a Person (other than an individual),
whether voting or non-voting and (b) all securities convertible into or exchangeable for any of the foregoing and all warrants,
Options or other rights to purchase, subscribe for or otherwise acquire any of the foregoing, whether or not presently convertible,
exchangeable or exercisable.


 






     -28-


    


    

 


(o)  
"Exchange Act" means the Securities Exchange Act of 1934, as amended.


 


(p)  "Fundamental
Transaction" means (A) that the Company shall, directly or indirectly, including through Subsidiaries, Affiliates or
otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving
corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of
the properties or assets of the Company or any of its "significant subsidiaries" (as defined in Rule 1-02 of Regulation
S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be
subject to or have its Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange
offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding
shares of Common Stock calculated as if any shares of Common Stock held by all Subject Entities making or party to, or Affiliated
with any Subject Entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number
of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party
to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the Exchange
Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a stock purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or
more Subject Entities whereby such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50% of the
outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of
Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such
stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such
that the Subject Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of at least
50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the Company
shall, directly or indirectly, including through Subsidiaries, Affiliates or otherwise, in one or more related transactions allow any
Subject Entity individually or the Subject Entities in the aggregate to be or become the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance,
tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination,
reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise
in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding
Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held
by all such Subject Entities as of the Subscription Date calculated as if any shares of Common Stock held by all such Subject
Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding
shares of Common Stock or other equity securities of the Company sufficient to allow such Subject Entities to effect a statutory
short form merger or other transaction requiring other shareholders of the Company to surrender their shares of Common Stock without
approval of the shareholders of the Company or (C) directly or indirectly, including through Subsidiaries, Affiliates or otherwise,
in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a
manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and
implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct
this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument
or transaction.


 






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(q)  
"GAAP" means United States generally accepted accounting principles, consistently applied.


 


(r)   
"Group" means a "group" as that term is used in Section 13(d) of the Exchange Act and as defined
in Rule 13d-5 thereunder.


 


(s)   
"Holiday" means a day other than a Business Day or on which trading does not take place on the Principal
Market.


 


(t)    
"Indebtedness" of any Person means, without duplication (i) all indebtedness for borrowed money, (ii) all
obligations issued, undertaken or assumed as the deferred purchase price of property or services, including (without limitation)
"capital leases" in accordance with GAAP (other than trade payables entered into in the ordinary course of business consistent
with past practice), (iii) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar
instruments, (iv) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses, (v) all indebtedness created or arising under any
conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets
acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement
in the event of default are limited to repossession or sale of such property), (vi) all monetary obligations under any leasing
or similar arrangement which, in connection with GAAP, consistently applied for the periods covered thereby, is classified as a
capital lease, (vii) all indebtedness referred to in clauses (i) through (vi) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, deed of trust, lien, pledge, charge,
security interest or other encumbrance of any nature whatsoever in or upon any property or assets (including accounts and contract
rights) with respect to any asset or property owned by any Person, even though the Person which owns such assets or property has
not assumed or become liable for the payment of such indebtedness, and (viii) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (i) through (vii) above.


 


(u)  
"Options" means any rights, warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities.


 


(v)  
"Parent Entity" of a Person means an entity that, directly or indirectly, controls the applicable Person,
including such entity whose common capital stock or equivalent equity security is quoted or listed on an Eligible Market (or, if
so elected by the Required Holders, any other market, exchange or quotation system), or, if there is more than one such Person
or such entity, the Person or entity designated by the Required Holders or in the absence of such designation, such Person or such
entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.


 






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(w) "Permitted Indebtedness"
means (i) the Senior Indebtedness, (ii) the Indebtedness evidenced by the Company’s 8% Subordinated Convertible Promissory
Notes due November 30, 2018 and February 28, 2019 respectively, outstanding on the date hereof or issued after the date hereof
in lieu of payment of accrued interest thereon (collectively, the “8% Notes”), and any indebtedness issued in
exchange for or to refinance the Indebtedness evidenced by the 8% Notes, (iii) Indebtedness evidenced by this Note and the Other
Notes(iv) trade payables incurred in the ordinary course of business consistent with past practice, (v) unsecured Indebtedness
incurred by the Company that is made expressly subordinate in right of payment to the Indebtedness evidenced by this Note, as reflected
in a written agreement acceptable to the Required Holders and approved by the Required Holders in writing, and which Indebtedness
does not provide at any time for (a) the payment, prepayment, repayment, repurchase or defeasance, directly or indirectly, of any
principal or premium, if any, thereon until ninety-one (91) days after the Maturity Date or later and (b) total interest and fees
at a rate in excess of five percent (5.0%) per annum and (vi) Indebtedness secured by Permitted Liens described in clauses (iv)
and (v) of the definition of Permitted Liens.


 


(x)  
"Permitted Liens" means (i) any Lien for taxes not yet due or delinquent or being contested in good faith
by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising
in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any
Lien created by operation of law, such as materialmen's liens, mechanics' liens and other similar liens, arising in the ordinary
course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate
proceedings, (iv) Liens (A) upon or in any equipment acquired or held by the Company or any of its Subsidiaries to secure the purchase
price of such equipment or Indebtedness incurred solely for the purpose of financing the acquisition or lease of such equipment,
or (B) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment, (v) Liens incurred in connection with the extension, renewal
or refinancing of the Indebtedness secured by Liens of the type described in clause (iv) above, provided that any extension, renewal
or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness
being extended, renewed or refinanced does not increase, (vi) leases or subleases and licenses and sublicenses granted to others
in the ordinary course of the Company's business, not interfering in any material respect with the business of the Company and
its Subsidiaries taken as a whole, (vii) Liens in favor of customs and revenue authorities arising as a matter of law to secure
payments of custom duties in connection with the importation of goods, and (viii) Liens arising from judgments, decrees or attachments
in circumstances not constituting an Event of Default under Section 4(a)(viii).


 


(y)  
"Person" means an individual, a limited liability company, a partnership, a joint venture, a corporation,
a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.


 


(z)  
"Principal Market" means the NYSE MKT LLC.


 






     -31-


    


    

 


(aa)     "Redemption
Dates" means, collectively, the Event of Default Redemption Dates, the Change of Control Redemption Dates and the Company
Optional Redemption Dates, each of the foregoing, individually, a Redemption Date.


 


(bb)    "Redemption
Notices" means, collectively, the Event of Default Redemption Notices, the Change of Control Redemption Notices and the
Company Optional Redemption Notices, each of the foregoing, individually, a Redemption Notice.


 


(cc)     "Redemption
Prices" means, collectively, the Event of Default Redemption Prices, the Change of Control Redemption Prices and the
Company Optional Redemption Prices, each of the foregoing, individually, a Redemption Price.


 


(dd)    "Related
Fund" means, with respect to any Person, a fund or account managed by such Person or an Affiliate of such Person.


 


(ee)     "Required
Holders" means the holders of Notes representing at least a majority of the aggregate principal amount of the Notes then
outstanding and shall include the Designee so long as the Designee or any of its Affiliates holds any Notes.


 


(ff)   
"SEC" means the United States Securities and Exchange Commission.


 


(gg)   "Securities
Purchase Agreement" means that certain securities purchase agreement dated as of the Subscription Date by and among the
Company and the Purchasers of the Notes pursuant to which the Company issued the Notes and Warrants.


 


(hh)    “Senior
Indebtedness” means the principal of, and interest and premium, if any, on any and all, (i) indebtedness of the Company
for borrowed money or obligations with respect to which the Company is a guarantor, to banks, insurance companies, or other financial
institutions or entities regularly engaged in the business of lending money, in each case as in effect as of the date hereof,
or as may be borrowed hereafter, including without limitation, indebtedness incurred by one or more of the Company’s subsidiaries
under the Amended and Restated Revolving Credit, Term Loan, Equipment Line and Security Agreement, dated as of June 27, 2013 among
Air Industries Machining, Corp., Welding Metallurgy, Inc., Nassau Tool Works, Inc., Woodbine Products Inc., Eur-Pac Corporation,
Electronic Connection Corporation, The Sterling Engineering Corporation, and PNC Bank, National Association, as agent for the
various lenders named therein, as amended as of the date hereof, the payment of which has been guaranteed by the Company and Air
Realty Group, LLC (the “Guarantors”), (ii) any such indebtedness or any debentures, notes or other evidence of indebtedness
issued in exchange for or to refinance such Senior Indebtedness, or any indebtedness arising from the satisfaction of such Senior
Indebtedness by a Guarantor, provided that such indebtedness issued in exchange for or to refinance Senior Indebtedness or arising
from the satisfaction of Senior Indebtedness by a Guarantor is on commercially reasonable terms as of the date of incurrence not
to exceed the principal amount under such Senior Indebtedness and provided further that the Company provides the Holder with prior
written notice of such action.


 


(i)"Standard
Settlement Period" means the standard settlement period, expressed in a number of Trading Days, on the Company's primary
trading market with respect to the Common Stock as in effect on the date of delivery of the applicable Conversion Notice.


 






     -32-


    


    

 


(ii) 
"Subject Entity" means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons
or Group.


 


(jj) 
"Subscription Date" means May [  ], 2017.


 


(kk) "Subsidiary"
has the meaning ascribed to such term in the Securities Purchase Agreement.


 


(ll) 
"Successor Entity" means one or more Person or Persons (or, if so elected by the Required Holders, the
Company or Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or one or more Person or Persons (or,
if so elected by the Required Holders, the Company or the Parent Entity) with which such Fundamental Transaction shall have been
entered into.


 


(i)                
"Trading Day" means any day on which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock on such day, then on the principal securities exchange or securities
market on which the Common Stock is then traded.


 


(mm)  
"Transaction Document" has the meaning ascribed to such term in the Securities Purchase Agreement.


 


(nn)    "Warrants"
has the meaning ascribed to such term in the Securities Purchase Agreement, and shall include all warrants issued in exchange
therefor or replacement thereof.


 


[Signature Page Follows]


 






     -33-


    


    

 


IN WITNESS WHEREOF, the
Company has caused this Note to be duly executed as of the Issuance Date set out above.


 


	 	Air Industries Group
	 	By:_________________________________
	 	Name:
	 	Title:


 






     


    


    

 


EXHIBIT I



AIR INDUSTRIES GROUP


 


CONVERSION NOTICE


 


Reference is made to the Senior Convertible
Note (the "Note") issued to the undersigned by Air Industries Group, a Nevada corporation (the "Company").
In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the
Note) of the Note indicated below into shares of Common Stock par value $0.001 per share (the "Common Stock")
of the Company, as of the date specified below.


 


	Date of Conversion:	 
	Aggregate Conversion Amount to be converted or number of Conversion Shares to be issued upon conversion:	 
	Please confirm the following information:
	Conversion Price:	 
	If Aggregate Conversion Amount is provided above, number of shares of Common Stock to be issued:	 
	Please issue the Common Stock into which the Note is being converted in the following name and to the following address:
	Issue to:	 
	 	 
	 	 
	Facsimile Number and Electronic Mail:	 
	Authorization:	 
	By:	 
	Title:	 
	Dated:	 
	Account Number:	 
	  (if electronic book entry transfer)	 
	Transaction Code Number:	 
	  (if electronic book entry transfer)	 
	 	 	 	 	 	 	 	 	 	 	 	 


 






     


    


    

 


ACKNOWLEDGMENT


 


The Company hereby acknowledges
this Conversion Notice and hereby directs Broadridge Investor Communication Solutions Inc. to issue the above indicated number
of shares of Common Stock in accordance with the Transfer Agent Instructions dated May __, 2017 from the Company and acknowledged
and agreed to by Broadridge Investor Communication Solutions Inc.


 


	 	Air Industries Group
	 	By:_________________________________
	 	Name:
	 	Title: