NEITHER THIS SECURITYNOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THESECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENTUNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTSOF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISEOF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

**COMMON STOCK PURCHASE WARRANT**

 

**AIRINDUSTRIES GROUP**

 

 

THIS COMMON STOCK PURCHASEWARRANT (the “Warrant”) certifies that, for value received, Taglich Brothers, Inc. or its assigns (the “Holder”)is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time onor after April 15, 2014 (the “Initial Exercise Date”) and on or prior to the close of business on May 15, 2019(the “Termination Date”) but not thereafter, to subscribe for and purchase from Air Industries Group, a Nevadacorporation (the “Company”), up to 10,000 shares (as subject to adjustment hereunder, the “WarrantShares”) of the Company’s common stock (“Common Stock”). The purchase price of one share ofCommon Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1.         	Definitions.In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated in this Section 1:

 

“Affiliate”means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under commoncontrol with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

“Boardof Directors” means the board of directors of the Company.

 

“BusinessDay” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States orany day on which banking institutions in the State of New York are authorized or required by law or other governmental action toclose.

 

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“Commission”means the United States Securities and Exchange Commission.

 

“ExchangeAct” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Liens”means a lien, charge pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

“Person”means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liabilitycompany, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Proceeding”means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partialproceeding, such as a deposition), whether commenced or threatened.

 

“Rule144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpretedfrom time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purposeand effect as such Rule.

 

“SecuritiesAct” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“TradingDay” means a day on which the Common Stock is traded on a Trading Market.

 

“TradingMarket” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading onthe date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the NewYork Stock Exchange or the OTCQB or OTCQX (or any successors to any of the foregoing.

 

“TransferAgent” means Broadridge Corporate Issuer Solutions, Inc., the current transfer agent of the Company, with a mailing addressof PO Box 1342, Brentwood, New York 11717 and a facsimile number of 215 553 5402, and any successor transfer agent of the Company.

 

“VWAP”means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listedor quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest precedingdate) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a TradingDay from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the OTCQB or OTCQX is not a Trading Market,the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTCQB or OTCQX, (c)if the Common Stock is not then listed or quoted for trading on the OTCQB or OTCQX and if prices for the Common Stock are thenreported in the “Pink Sheets” published by Pink OTC Markets Group, Inc. (or a similar organization or agency succeedingto its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in allother cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faithby the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

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Section 2.	         Exercise.

 

a)        Vesting.This Warrant shall vest and become exercisable with respect to 2,500 shares of Common Stock commencing on April 15, 2014 (the “InitialExercise Date”), a cumulative total of 5,000 Warrants Shares commencing on July 15, 2014, a cumulative total of 7,500Warrants Shares commencing on October 15, 2014 and as to all 10,000 Warrants Shares commencing on January 15, 2015.

 

b)        Procedurefor Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at anytime or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such otheroffice or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holderappearing on the books of the Company) of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise formannexed hereto. Within three (3) Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregateExercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn ona United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Noticeof Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guaranteeor notarization) of any Notice of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shallnot be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares availablehereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company forcancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercisesof this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effectof lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of WarrantShares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the dateof such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt ofsuch notice. **The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisionsof this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares availablefor purchase hereunder at any given time may be less than the amount stated on the face hereof.**

 

c)         ExercisePrice. The exercise price per share of the Common Stock under this Warrant shall be **$**8.72, subject to adjustment hereunder(the “Exercise Price”).

 

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d)         Cashless Exercise.If at the time of exercise hereof there is no effective registration statement registering for sale or resale the Warrant Shares,then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in whichthe Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A),where:

 

(A) = thelast VWAP immediately preceding the time of delivery of the Notice of Exercise giving rise to the applicable “cashless exercise”,as set forth in the applicable Notice of Exercise (to clarify, the “last VWAP” will be the last VWAP as calculatedover an entire Trading Day such that, in the event that this Warrant is exercised at a time that the Trading Market is open, theprior Trading Day’s VWAP shall be used in this calculation);

 

(B) = theExercise Price of this Warrant, as adjusted hereunder; and

 

(X) =the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrantif such exercise were by means of a cash exercise rather than a cashless exercise.

 

IfWarrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9)of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised, and theholding period of the Warrants being exercised may be tacked on to the holding period of the Warrant Shares.  The Companyagrees not to take any position contrary to this Section 2(d).

 

e)         Mechanics of Exercise.

 

i.        Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmittedby the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account withThe Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company isthen a participant in such system and either (A) there is an effective registration statement permitting the issuance of the WarrantShares to or resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwiseby physical delivery of a certificate, registered in the Company’s share register in the name of the holder or its designee,for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holderin the Notice of Exercise by the date that is three (3) Trading Days after the delivery to the Company of the Notice of Exercise(such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise the Holder shall bedeemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warranthas been exercised, irrespective of the date of delivery of the Warrant Shares; provided payment of the aggregate Exercise Price(other than in the case of a Cashless Exercise) is received within three Trading Days of delivery of the Notice of Exercise. TheCompany agrees to maintain a transfer agent that is a participant in the FAST program so long as this warrant remains outstandingand exercisable.

 

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ii.            Deliveryof New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holderand upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrantevidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shallin all other respects be identical with this Warrant.

 

iii.         Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Sharespursuant to Section 2(e)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

iv.       Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rightsavailable to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordancewith the provisions of Section 2(e)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if aftersuch date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokeragefirm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares whichthe Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash tothe Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) forthe shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that theCompany was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell ordergiving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of theWarrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemedrescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely compliedwith its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchaseprice of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale pricegiving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall berequired to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holderin respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’sright to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specificperformance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock uponexercise of the Warrant as required pursuant to the terms hereof.

 

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v.    No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued uponthe exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon suchexercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equalto such fraction multiplied by the Exercise Price or round up to the next whole share.

 

vi.       Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issueor transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expensesshall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as maybe directed by the Holder; provided, however, that in the event Warrant Shares are to be issued in a name other thanthe name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached heretoduly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse itfor any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of anyNotice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similarfunctions) required for same-day electronic delivery of the Warrant Shares.

 

vii.       Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timelyexercise of this Warrant, pursuant to the terms hereof.

 

Section 3.   	      CertainAdjustments.

 

a)       Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividendor otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securitiespayable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Companyupon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines(including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues byreclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Priceshall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares,if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstandingimmediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjustedsuch that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a)shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividendor distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

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b)       Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Companygrants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro ratato the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will beentitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could haveacquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant immediatelybefore 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 PurchaseRights.

 

c)       Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make anydividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way ofreturn of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property oroptions by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction)(a "Distribution"), at any time after the issuance of this Warrant, then, in each such case, the Holder shallbe entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holderhad held the number of shares of Common Stock acquirable upon complete exercise of this Warrant immediately before the date ofwhich a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of sharesof Common Stock are to be determined for the participation in such Distribution.

 

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d)       Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly,in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company,directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantiallyall of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchangeoffer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell,tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of theoutstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification,reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectivelyconverted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or morerelated transactions consummates a stock or share purchase agreement or other business combination (including, without limitation,a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such otherPerson or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock heldby the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to,such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then,upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would havebeen issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder(without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of thesuccessor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the“Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the numberof shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regardto any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of theExercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Considerationissuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the ExercisePrice among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of theAlternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be receivedin a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives uponany exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a FundamentalTransaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of theobligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (withoutunreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchangefor this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substanceto this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parententity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to anylimitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies theexercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stockpursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stockand such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummationof such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrenceof any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after thedate of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company”shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of theobligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entityhad been named as the Company herein.

 

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e)       Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of ashare, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstandingas of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

f)        Notice to Holder.

 

i.           Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3,the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustmentand any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

ii.           Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whateverform) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the CommonStock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchaseany shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be requiredin connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any saleor transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stockis converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution,liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimileor email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company,at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the dateon which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a recordis not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions,redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale,transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of theCommon Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverableupon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver suchnotice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specifiedin such notice. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such noticeto the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

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Section 4.	         Transferof Warrant.

 

a)        Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section4(d) hereof, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, inwhole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together witha written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorneyand funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required,such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable,and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrantevidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. The Warrant, if properlyassigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrantissued.

 

b)       New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaidoffice of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued,signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involvedin such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant orWarrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be datedthe Initial Exercise Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuantthereto.

 

c)       Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for thatpurpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company maydeem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or anydistribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

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d)       Transfer Restrictions. (i) If, at the time of the surrender of this Warrant in connection with any transfer of thisWarrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement underthe Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-salerestrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowingsuch transfer, that the Holder or transferee of this Warrant, as the case may be, provides to the Company an opinion of counsel,the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that the transfer of thisWarrant does not require registration under the Securities Act.

 

(ii) Neitherthis Warrant nor the Warrant Shares and any other securities issuable upon exercise hereof, may be transferred whether by saleassignment, gift or otherwise, by the Holder prior to July 15, 2014 (such period, the “Restriction Period”),except for transfers to employees of the original Holder who will be subject to the provisions of this subsection. The Holder willnot offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of (or enter into any transaction which is designedto, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic dispositiondue to cash settlement or otherwise) by the Holder of this Warrant, the Warrant Shares and any other securities issuable upon exercisehereof.

 

e)       Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiringthis Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account andnot with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Actor any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.

 

Section 5.         	Miscellaneous.

 

a)       No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividendsor other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(e)(i), except as expresslyset forth in Section 3.

 

b)       Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidencereasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating tothe Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, inthe case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stockcertificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of suchcancellation, in lieu of such Warrant or stock certificate.

 

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c)       Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration ofany right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercisedon the next succeeding Business Day.

 

d)       Authorized Shares.

 

The Company covenantsthat, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficientnumber of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are chargedwith the duty of executing stock certificates to execute and issue the necessary Warrant Shares upon the exercise of the purchaserights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Sharesmay be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Marketupon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exerciseof the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and paymentfor such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free fromall taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transferoccurring contemporaneously with such issue).

 

Except andto the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amendingits certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue orsale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of thisWarrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actionsas may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limitingthe generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payabletherefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriatein order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrantand (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatorybody having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

Before takingany action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in theExercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessaryfrom any public regulatory body or bodies having jurisdiction thereof.

 

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e)       Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Warrantshall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard tothe principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcementand defense of this Warrant shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan(the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the NewYork Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated herebyor discussed herein (including with respect to the enforcement of any of the Transaction Documents), 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 ofsuch New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereto herebyirrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceedingarising out of or relating to this Warrant. If any party shall commence an action or proceeding to enforce any provisions of thisWarrant, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

f)        Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if notregistered and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securitieslaws.

 

g)       Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the partof Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies, notwithstandingthe fact that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply withany provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amountsas shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, includingthose of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcingany of its rights, powers or remedies hereunder.

 

a)       Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including,without limitation, any Notice of Exercise, shall be in writing and delivered personally, by facsimile, or sent by a nationallyrecognized overnight courier service, addressed to the Company, at the address set forth above **Attention:**Daniel R. Godin,facsimile number 631-206-9152, email address kpetersen@airindustriesgroup.com, with a copy to Daniel R. Godin at Dgodin@airindustriesgroup.comor such other facsimile number, email address or address as the Company may specify for such purposes by notice to the Holders.Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and deliveredpersonally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimilenumber or address of such Holder appearing on the books of the Company, or if no such facsimile number or address appears on thebooks of the Company. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliestof (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth inthis Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, ifsuch notice or communication is delivered via facsimile at the facsimile number set forth in this Section on a day that is nota Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the dateof mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom suchnotice is required to be given.

 

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h)       Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercisethis Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise toany liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liabilityis asserted by the Company or by creditors of the Company.

 

i)        Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery ofdamages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages wouldnot be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agreesto waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

j)        Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidencedhereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successorsand permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to timeof this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

 

k)       Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of theCompany and the Holder.

 

l)        Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effectiveand valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, suchprovision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisionsor the remaining provisions of this Warrant.

 

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m)    Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose,be deemed a part of this Warrant.

 

********************

 

*(Signature Page Follows)*

* *

**

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** 

IN WITNESS WHEREOF, theCompany has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

 

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**NOTICE OF EXERCISE**

 

To:	AIRINDUSTRIES GROUP

 

(1)  The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant(only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfertaxes, if any.

 

(2)  Payment shall take the form of (check applicable box):

 

  ☐ in lawfulmoney of the United States; or

 

  ☐ [if permitted]the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c),to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedureset forth in subsection 2(c).

 

(3)  Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

_______________________________

 

The Warrant Shares shall be delivered tothe following DWAC Account Number:

 

_______________________________

 

_______________________________

 

_______________________________

 

[SIGNATUREOF HOLDER]

 

Name of Investing Entity: ________________________________________________________________________

 

*Signature of Authorized Signatory ofInvesting Entity*: _________________________________________________

 

Name of Authorized Signatory: ___________________________________________________________________

 

Title of Authorized Signatory: ____________________________________________________________________

 

Date: ________________________________________________________________________________________

 

 

**ASSIGNMENT FORM**

 

(To assign the foregoing warrant, execute