Document:

Exhibit
10.1

 

PLACEMENT
AGENCY AGREEMENT

 

September
28, 2018

 

Taglich
Brothers, Inc.

790
New York Avenue, Suite 209

Huntington,
New York 11743

Attn:
Robert Schroeder, Vice President Investment Banking

 

Ladies
and Gentlemen:

 

Introduction.
Subject to the terms and conditions herein (this “Agreement”), Air Industries Group, a Nevada corporation (the
“Company”), hereby agrees to offer and sell up to an aggregate of 800,000 shares (the “Shares”)
of its common stock, $0.001 par value (“Common Stock”), together with five-year warrants (the “Warrants”)
to purchase an additional 350 shares of Common Stock for each 1,000 shares of Common Stock purchased, or a total of up to 280,000
shares of Common Stock (the “Warrant Shares”) if all 800,000 Shares are purchased, directly to one or more
accredited investors (as defined in Rule 501 (a) of Regulation D under the Securities Act of 1933, as amended) (each, an “Investor”
and, collectively, the “Investors”) through Taglich Brothers, Inc. (“Taglich Brothers”),
as the exclusive placement agent (the “Placement Agent”). The Offering will commence on September 17, 2018,
and terminate on the close of business on September 30, 2018 (the “Initial Offering Period”), which period
may be extended by the Company for up to an additional 15 days (this additional period and the Initial Offering Period shall be
referred to as the “Offering Period”). The Company may hold a closing at any time during the Offering Period
(each, a “Closing” and the first of which is referred to as the “First Closing”).

 

The
purchase price for the Shares and Warrants (the “Securities”) will be $1.25 per Share purchased (the “Purchase
Price”).

 

The
exercise price of the Warrants shall be the closing price of a share of Common Stock on the NYSE American on the trading day immediately
prior to the First Closing of the purchase of the Securities, subject to certain adjustments in accordance with the terms of the
Warrant.

 

Concurrently
with the Offering, the Company shall solicit the holders of its outstanding 8% Subordinated Convertible Notes (the “8%
Notes”) to, among other things, postpone the due date thereof to December 31, 2020, decrease the interest payable thereon
to 6%, if paid in cash, decrease the conversion price to $1.50 per share and pay the interest accrued thereon through September
30, 2018, in shares of Common Stock valued at the market price thereof.

 

The
Company will enter into subscription agreements with the Investors for the purchase of the Securities (the “Subscription
Agreements”). The Placement Agent may retain other brokers or dealers to act as co-placement agents, sub-agents or selected-dealers
on its behalf in connection with the Offering.

 

The
Company hereby confirms its agreement with the Placement Agent as follows:

 

Section
1. Agreement to Act as Placement Agent.

 

(a)
On the basis of the representations, warranties and agreements of the Company herein contained, and subject to all the terms and
conditions of this Agreement, the Placement Agent shall be the exclusive Placement Agent in connection with the offering and sale
by the Company of the Securities. The Placement Agent shall act solely as the Company’s agent and not as principal. The
Placement Agent shall have no authority to bind the Company with respect to any prospective offer to purchase the Securities and
the Company shall have the sole right to accept offers to purchase the Securities and may reject any such offer, in whole or in
part. Subject to the terms and conditions hereof, payment of the purchase price for, and delivery of, the Securities shall be
made at one or more closings. As compensation for services rendered, on the date of each Closing (each, a “Closing Date”),
the Company shall pay to the Placement Agent an amount equal to seven percent (7%) of the gross proceeds received by the Company
from the sale of the Securities at each Closing of the Offering, payable at the Company’s option, in cash or additional
shares of Common Stock and warrants having the same terms and conditions as the Shares and Warrants.

 

     

     

    

 

(b)
The term of the Placement Agent’s exclusive engagement will be until the completion of the Offering (the “Exclusive
Term”); provided, however, that either the Company or the Placement Agent may terminate the engagement
with respect to itself at any time upon 10 days written notice to the other parties. Notwithstanding anything to the contrary
contained herein, the provisions concerning confidentiality, indemnification and contribution contained herein and the Company’s
obligations contained in the indemnification provisions will survive any expiration or termination of this Agreement, and the
Company’s obligation to pay fees actually earned and payable and to reimburse expenses actually incurred and reimbursable
pursuant to Section 1 hereof, will survive any expiration or termination of this Agreement. Nothing in this Agreement shall be
construed to limit the ability of the Placement Agent or its Affiliates to pursue, investigate, analyze, invest in, or engage
in investment banking, financial advisory or any other business relationship with Persons (as defined below) other than the Company.
As used herein (i) “Persons” means an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or
other entity of any kind and (ii) “Affiliate” means any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under
the Securities Act of 1933, as amended (the “Securities Act”).

 

(c)       The
Company also hereby engages Taglich Brothers to assist it in soliciting consents to the proposed amendments to the 8% Notes from
the registered holders of the 8% Notes. The Company shall pay Taglich Brothers a solicitation fee equal to two percent (2%) of
the principal amount of 8% Notes of registered holders who consent to the proposed amendments to the 8% Notes, payable, at the
Company’s option, in 6% Notes in principal amount equal to the solicitation fee due the placement agent..

 

Section
2. Representations, Warranties and Covenants of the Company. The Company hereby represents, warrants and covenants to the
Placement Agent as of the date hereof, and as of each Closing Date, as follows:

 

(a)
Organization and Qualification. The Company and each of its direct and indirect subsidiaries (the “Subsidiaries”)
is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction
of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry
on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company
and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result
in: (i) a material adverse effect on the legality, validity or enforceability of this Agreement or any other agreement entered
into between the Company and the Investors, (ii) a material adverse effect on the results of operations, assets, business, prospects
or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect
on the Company’s ability to perform in any material respect on a timely basis its obligations under this Agreement or the
Subscription Agreements (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no action, claim, suit,
investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition),
whether commenced or threatened (“Proceeding”) has been instituted in any such jurisdiction revoking, limiting
or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

    	 	2	 

     

    

 

(b)
Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate
the transactions contemplated by this Agreement, the Warrants and the Subscription Agreements and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby and under the Warrants and Subscription Agreements have been duly authorized by all necessary
action on the part of the Company and no further action is required by the Company, the Company’s Board of Directors (the
“Board of Directors”) or the Company’s stockholders in connection therewith other than in connection
with the Required Approvals (as defined below). This Agreement has been duly executed by the Company and, when delivered in accordance
with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance
with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification
and contribution provisions may be limited by applicable law.

 

(c)
No Conflicts. The execution, delivery and performance by the Company of this Agreement and the transactions contemplated
pursuant to the Subscription Agreements, the issuance and sale of the Securities and the Common Stock issuable upon exercise of
the Warrants, and the consummation by it of the transactions contemplated hereby and thereby to which it is a party do not and
will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s articles or certificate of
incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, result in the creation of any lien, charge, encumbrance,
security interest, encumbrance or other restriction (collectively, “Lien”) upon any of the properties or assets
of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset
of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in
a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

 

(d)
Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority
or other Person in connection with the execution, delivery and performance by the Company of this Agreement , the Warrants and
the Subscription Agreements, other than: (i) the filing of Form D with the Unites States Securities and Exchange Commission (“Commission”),
(ii) the filing with the Commission pursuant to Section 4(a); (iii) application(s) to the NYSE AMERICAN (the “Trading
Market”) for the listing of the Shares and Warrant Shares for trading thereon in the time and manner required thereby,
and (iv) such filings as are required to be made under applicable state securities laws (collectively, the “Required
Approvals”).

 

(e)
Issuance of the Securities; Registration. The Shares and Warrants have been duly authorized, and when issued in accordance
with the terms set forth in the Subscription Agreements, will be duly and validly issued, and the Warrants will constitute legal,
valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. The Warrant Shares
have been duly authorized, and when issued in accordance with the terms thereof, will be duly and validly issued, fully paid and
non-assessable, free and clear of all Liens imposed by the Company, other than restrictions on transfer provided for in this Agreement
and the Subscription Agreements. The Company has reserved from its duly authorized capital stock a sufficient number of shares
of Common Stock for issuance upon the exercise of the Warrants.

 

    	 	3	 

     

    

 

(f)
SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents
required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation
to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein,
being collectively referred to herein as the “SEC Reports”). As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of
the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time
of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles
applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in
such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required
by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as
of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments.

 

(g)
Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof, (i)
there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, and (iii) the Company
has not altered its method of accounting.

 

(h)
Compliance. Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred
that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary
under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation
of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any
of its properties is bound (whether or not such default or violation has been waived), other than such matters as have been waived
by PNC Bank or as disclosed in the SEC Reports, (ii) is in violation of any judgment, decree or order of any court, arbitrator
or governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental
authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection,
occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not
have or reasonably be expected to result in a Material Adverse Effect.

 

(i)
Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by this Agreement
and the Subscription Agreements, the Company confirms that neither it nor any other Person acting on its behalf has provided any
of the Investors or their agents or counsel with any information that it believes constitutes or might constitute material, non-public
information which is not otherwise disclosed in the Subscription Agreements. The Company understands and confirms that the Investors
will rely on the foregoing representation in effecting transactions in securities of the Company. All of the disclosure furnished
by or on behalf of the Company to the Investors regarding the Company and, its Subsidiaries, their respective businesses and the
transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain
any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.

 

(j)
No Integrated Offering. Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances
that would cause this offering of the Securities to be integrated with prior offerings by the Company under the applicable rules
of the Trading Market.

 

    	 	4	 

     

    

 

(k)
Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary,
any agent or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii)
made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties
or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made
by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material
respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

 

(l)
Office of Foreign Assets Control. Neither the Company nor any Subsidiary, to the Company's knowledge, any director, officer,
agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office
of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).

 

 

(m)
Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance
with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of
1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money
Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body
or any arbitrator involving the Company with respect to the Money Laundering Laws is pending or, to the knowledge of the Company,
threatened.

 

(n)
No General Solicitation. Neither the Company nor any Person acting on behalf of the Company has offered or sold any of
the Securities by any form of general solicitation or general advertising. The Company has offered the Securities for sale only
to the Investors and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

 

(o)
No Disqualification Events. With respect to the Shares and Warrants to be offered and sold pursuant to the Subscription
Agreements in reliance on Rule 506 under the Securities Act, none of the Company, any of its predecessors, any affiliated issuer,
any director, executive officer, other officer of the Company participating in the offering hereunder, any beneficial owner of
20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter
(as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale
(each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to
any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification
Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Investors a copy of any disclosures provided
thereunder.

 

(p)
Other Covered Persons. Other than the Placement Agent, the Company is not aware of any person that has been or will be
paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of the Securities.

 

(q)
Notice of Disqualification Events. The Company will notify the Placement Agent in writing, prior to the Closing Date of
(i) any Disqualification Event relating to any Issuer Covered Person and (ii) any event that would, with the passage of time,
become a Disqualification Event relating to any Issuer Covered Person.

 

Section
3. Delivery and Payment. Each Closing shall occur at the offices of the Company, 360 Motor Parkway, Suite 100, Hauppauge,
N.Y. 11788, or at such other place as shall be agreed upon by the Placement Agent and the Company. Subject to the terms and conditions
hereof, at each Closing payment of the purchase price for the Securities sold on such Closing Date shall be made by Federal Funds
wire transfer to the Company against delivery of such Securities or as otherwise set forth in the Subscription Agreements, and
such Securities shall be registered in such name or names and shall be in such denominations, as the Placement Agent may request
at least one business day before the time of purchase (as defined below).

 

    	 	5	 

     

    

 

Section
4. Covenants and Agreements of the Company. The Company further covenants and agrees with each of the Placement Agents as
follows:

 

(a)
Securities Laws Disclosure; Publicity. The Company shall file a Current Report on Form 8-K, including this Agreement, the
form of Subscription Agreement and the form of Warrants as exhibits thereto, with the Commission within the time required by the
Exchange Act.

 

(b)
Form D. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof upon request of the Placement Agent.

 

(c)
Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Shares and Warrants
in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated
with the offer or sale of the Securities for purposes of the rules and regulations of the Trading Market such that it would require
shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing
of such subsequent transaction.

 

(d)
Transfer Agent. The Company will maintain, at its expense, a registrar and transfer agent for the Common Stock.

 

(e)
Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities pursuant to the Subscription Agreements
for working capital purposes.

 

(f)
Periodic Reporting Obligations. While any of the Securities remain outstanding, the Company will duly file, on a timely
basis, with the Commission all reports and documents required to be filed under the Exchange Act within the time periods and in
the manner required by the Exchange Act.

 

(g)
Additional Documents. The Company will enter into any subscription, purchase or other customary agreements as the
Placement Agent or the Investors deem necessary or appropriate to consummate the Offering, all of which will be in form and substance
reasonably acceptable to the Placement Agent and the Investors. The Company agrees that the Placement Agent may rely upon, and
each is a third party beneficiary of, the representations and warranties, and applicable covenants, set forth in any such purchase,
subscription or other agreement with Investors in the Offering.

 

(h)
No Manipulation of Price. The Company will not take, directly or indirectly, any action designed to cause or result
in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.

 

(i)
Acknowledgment. The Company acknowledges that any advice given by each of the Placement Agent to the Company is solely
for the benefit and use of the Board of Directors of the Company and may not be used, reproduced, disseminated, quoted or referred
to, without the Placement Agent’s prior written consent.

 

(j)
Confidentiality. The Company acknowledges that this Agreement and all opinions and advice (whether written or oral) given
by the Placement Agent to the Company in connection with the Placement Agent’s engagement are intended solely for the benefit
and use of the Company. The Company further acknowledges that neither the terms of this Agreement nor any of the Placement Agent’s
opinions or financial advice will be disclosed to any third party (other than the Company’s officers, directors, employees
and advisors), without the prior written consent of the Placement Agent, except as required by law, regulation, legal or regulatory
process, or any order or other action of a court or administrative agency of competent jurisdiction. The Placement Agent agrees
that any non-public information relating to the Company or any potential investor received by the Placement Agent from or at the
direction of the Company will be used by the Placement Agent solely for the purpose of performing its roles contemplated hereunder
and that the Placement Agent will maintain the confidentiality thereof. Notwithstanding the foregoing, the Placement Agent may
disclose confidential information hereunder (i) to such of its employees and advisors as the Placement Agent determines have a
need to know and who are bound to hold such information confidential, and (ii) to the extent necessary to comply with any order
or other action of a court or administrative agency of competent jurisdiction.

 

    	 	6	 

     

    

 

(l)
No Partnership. The Company is a sophisticated business enterprise that has retained the Placement Agent for the limited
purposes set forth in this Agreement. The parties acknowledge and agree that their respective rights and obligations are contractual
in nature. Each party disclaims an intention to impose fiduciary obligations on the other by virtue of the engagement contemplated
by this Agreement.

 

(m)
Research Matters. By entering into this Agreement, the Placement Agent does
not provide any promise, either explicitly or implicitly, of favorable or continued research coverage of the Company and the Company
hereby acknowledges and agrees that the Placement Agent’s selection as a placement agent for the Offering was in no way
conditioned, explicitly or implicitly, on the Placement Agent providing favorable or any research coverage of the Company. In
accordance with FINRA Rule 2711(e), the parties acknowledge and agree that the Placement Agent has not directly or indirectly
offered favorable research, a specific rating or a specific price target, or threatened to change research, a rating or a price
target, to the Company or inducement for the receipt of business or compensation.

 

Section
5. Conditions of the Obligations of the Placement Agent. The obligations of the Placement Agent hereunder shall be subject
to the accuracy of the representations and warranties on the part of the Company set forth in Section 2 hereof, in each case as
of the date hereof and as of each Closing Date as though then made, to the timely performance by each of the Company of its covenants
and other obligations hereunder on and as of such dates, and to each of the following additional conditions:

 

(a)
Corporate Proceedings. All corporate proceedings and other legal matters in connection with this Agreement, and the sale
and delivery of the Securities, shall have been completed or resolved in a manner reasonably satisfactory to the Investors and
the Placement Agent, and the Placement Agent shall have been furnished with such papers and information as it may reasonably have
requested to enable it to pass upon the matters referred to in this Section 5.

 

(b)
No Material Adverse Change. Subsequent to the execution and delivery of this Agreement and prior to each Closing Date,
in the Placement Agent’s sole judgment after consultation with the Company, there shall not have occurred any Material Adverse
Change or Material Adverse Effect.

 

(c)
Additional Documents. On or before each Closing Date, the Placement Agent shall have received such information and documents
as the Placement Agent may reasonably require for the purposes of enabling it to pass upon the issuance and sale of the Securities
as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction
of any of the conditions or agreements, herein contained.

 

If
any condition specified in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated
by the Placement Agent by notice to the Company at any time on or prior to a Closing Date, which termination shall be without
liability on the part of any party to any other party, except that Section 6 (Payment of Expenses), Section 7 (Indemnification
and Contribution) and Section 8 (Representations and Indemnities to Survive Delivery) shall at all times be effective and shall
survive such termination.

 

Section
6. Payment of Expenses. The Company agrees to pay all costs, fees and expenses incurred by the Company in connection with
the performance of its obligations hereunder and in connection with the transactions contemplated hereby, including, without limitation:
(i) all expenses incident to the issuance, delivery and qualification of the Securities (including all printing and engraving
costs); (ii) all fees and expenses of the registrar and transfer agent of the Common Stock; (iii) all necessary issue, transfer
and other stamp taxes in connection with the issuance and sale of the Securities; (iv) all fees and expenses of the Company’s
counsel, independent public or certified public accountants and other advisors; and (v) the fees and expenses associated with
the listing of the Shares and the Warrant Shares on the Trading Market.

 

    	 	7	 

     

    

 

Section
7. Indemnification and Contribution.

 

(a)
The Company agrees to indemnify and hold harmless the Placement Agent, its affiliates and each person controlling the Placement
Agent (within the meaning of Section 15 of the Securities Act), and the directors, officers, agents and employees of the Placement
Agent, their affiliates and each such controlling person (the Placement Agent, and each such entity or person. an “Indemnified
Person”) from and against any losses, claims, damages, judgments, assessments, costs and other liabilities (collectively,
the “Liabilities”), and shall reimburse each Indemnified Person for all fees and expenses (including the reasonable
fees and expenses of one counsel for all Indemnified Persons, except as otherwise expressly provided herein) (collectively, the
“Expenses”) as they are incurred by an Indemnified Person in investigating, preparing, pursuing or defending
any Actions, whether or not any Indemnified Person is a party thereto, (i) caused by, or arising out of or in connection with,
any untrue statement or alleged untrue statement of a material fact contained in any SEC Report or Transaction Document or by
any omission or alleged omission to state therein a material fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading or (ii) otherwise arising out of or in connection with advice or services rendered
or to be rendered by any Indemnified Person pursuant to this Agreement, the transactions contemplated thereby or any Indemnified
Person's actions or inactions in connection with any such advice, services or transactions; provided, however, that,
in the case of clause (ii) only, the Company shall not be responsible for any Liabilities or Expenses of any Indemnified Person
that are finally judicially determined to have resulted solely from such Indemnified Person's (x) gross negligence or willful
misconduct in connection with any of the advice, actions, inactions or services referred to above or (y) use of any offering materials
or information concerning the Company in connection with the offer or sale of the Securities in the Offering which were not authorized
for such use by the Company and which use constitutes gross negligence or willful misconduct. The Company also agrees to reimburse
each Indemnified Person for all Expenses as they are incurred in connection with enforcing such Indemnified Person's rights under
this Agreement.

 

(b)
Upon receipt by an Indemnified Person of actual notice of an Action against such Indemnified Person with respect to which indemnity
may be sought under this Agreement, such Indemnified Person shall promptly notify the Company in writing; provided that failure
by any Indemnified Person so to notify the Company shall not relieve the Company from any liability which the Company may have
on account of this indemnity or otherwise to such Indemnified Person, except to the extent the Company shall have been prejudiced
by such failure. The Company shall, if requested by the Placement Agent, assume the defense of any such Action including the employment
of counsel reasonably satisfactory to such Placement Agent, which counsel may also be counsel to the Company. Any Indemnified
Person shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person unless: (i) the Company has failed promptly to
assume the defense and employ counsel or (ii) the named parties to any such Action (including any impeded parties) include such
Indemnified Person and the Company, and such Indemnified Person shall have been advised in the reasonable opinion of counsel that
there is an actual conflict of interest that prevents the counsel selected by the Company from representing both the Company (or
another client of such counsel) and any Indemnified Person; provided that the Company shall not in such event be responsible hereunder
for the fees and expenses of more than one firm of separate counsel for all Indemnified Persons in connection with any Action
or related Actions, in addition to any local counsel. The Company shall not be liable for any settlement of any Action effected
without its written consent (which shall not be unreasonably withheld). In addition, the Company shall not, without the prior
written consent of the Placement Agent (which shall not be unreasonably withheld), settle, compromise or consent to the entry
of any judgment in or otherwise seek to terminate any pending or threatened Action in respect of which indemnification or contribution
may be sought hereunder (whether or not such Indemnified Person is a party thereto) unless such settlement, compromise, consent
or termination includes an unconditional release of each Indemnified Person from all Liabilities arising out of such Action for
which indemnification or contribution may be sought hereunder. The indemnification required hereby shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.

 

    	 	8	 

     

    

 

(c)
In the event that the foregoing indemnity is unavailable to an Indemnified Person other than in accordance with this Agreement,
the Company shall contribute to the Liabilities and Expenses paid or payable by such Indemnified Person in such proportion as
is appropriate to reflect (i) the relative benefits to the Company, on the one hand, and to the Placement Agent and any other
Indemnified Person, on the other hand, of the matters contemplated by this Agreement or (ii) if the allocation provided by the
immediately preceding clause is not permitted by applicable law, not only such relative benefits but also the relative fault of
the Company, on the one hand, and the Placement Agent and any other Indemnified Person, on the other hand, in connection with
the matters as to which such Liabilities or Expenses relate, as well as any other relevant equitable considerations; provided
that in no event shall the Company contribute less than the amount necessary to ensure that all Indemnified Persons, in the aggregate,
are not liable for any Liabilities and Expenses in excess of the amount of fees actually received by the Placement Agent pursuant
to this Agreement. For purposes of this paragraph, the relative benefits to the Company, on the one hand, and to the Placement
Agent on the other hand, of the matters contemplated by this Agreement shall be deemed to be in the same proportion as (a) the
total value paid or contemplated to be paid to or received or contemplated to be received by the Company in the transaction or
transactions that are within the scope of this Agreement, whether or not any such transaction is consummated, bears to (b) the
fees paid to the Placement Agent under this Agreement.

 

(d)
The Company also agrees that no Indemnified Person shall have any liability (whether direct or indirect, in contract or tort or
otherwise) to the Company for or in connection with advice or services rendered or to be rendered by any Indemnified Person pursuant
to this Agreement, the transactions contemplated thereby or any Indemnified Person's actions or inactions in connection with any
such advice, services or transactions except for Liabilities (and related Expenses) of the Company that are finally judicially
determined to have resulted solely from such Indemnified Person's gross negligence or willful misconduct in connection with any
such advice, actions, inactions or services.

 

(e)
The reimbursement, indemnity and contribution obligations of the Company set forth herein shall apply to any modification of this
Agreement and shall remain in full force and effect regardless of any termination of, or the completion of any Indemnified Person's
services under or in connection with, this Agreement.

 

Section
8. Representations and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties
and other statements of the Company or any person controlling the Company, of its officers, and of the Placement Agent set forth
in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf
of the Placement Agent, the Company, or any of its partners, officers or directors or any controlling person, as the case may
be, and will survive delivery of and payment for the Shares and Warrants sold hereunder and any termination of this Agreement.
A successor to the Placement Agent, or to the Company, its directors or officers or any person controlling the Company, shall
be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Agreement.

 

Section
9. Notices. All communications hereunder shall be in writing and shall be mailed, hand delivered or sent by recognized overnight
courier and confirmed to the parties hereto as follows:

 

If
to the Placement Agent:

 

Taglich
Brothers, Inc.

790
New York Avenue

Huntington,
NY 11743

Facsimile:
631 757 2100

Attention:
Michael Taglich

 

    	 	9	 

     

    

 

If
to the Company:

 

360
Motor Parkway, Suite 100

Hauppauge,
New York 11788

Facsimile:
631 206 9152

Attention:
Michael Recca, CFO

 

With
a copy to: 

 

Mandelbaum
Salsburg, P.C.

1270
Avenue of the Americas, Suite 1808

New
York, New York 10020

Facsimile:

Attention:
Vincent J. McGill

E-mail:
vmcgill@lawfirm.ms

 

Any
party hereto may change the address for receipt of communications by giving written notice to the others.

 

Section
10. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto, and to the benefit of
the employees, officers and directors and controlling persons referred to in Section 7 hereof, and to their respective successors,
and personal representative, and no other person will have any right or obligation hereunder.

 

Section
11. Partial Unenforceability. The invalidity or unenforceability of any section, paragraph or provision of this Agreement
shall not affect the validity or enforceability of any other section, paragraph or provision hereof. If any Section, paragraph
or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid and enforceable.

 

Section
12. Governing Law Provisions. This Agreement shall be deemed to have been made and delivered in New York City and both this
engagement letter and the transactions contemplated hereby shall be governed as to validity, interpretation, construction, effect
and in all other respects by the internal laws of the State of New York, without regard to the conflict of laws principles thereof.
Each of the Placement Agent and the Company: (i) agrees that any legal suit, action or proceeding arising out of or relating to
this engagement letter and/or the transactions contemplated hereby shall be instituted exclusively in New York Supreme Court,
County of New York, or in the United States District Court for the Southern District of New York, (ii) waives any objection which
it may have or hereafter to the venue of any such suit, action or proceeding, and (iii) irrevocably consents to the jurisdiction
of the New York Supreme Court, County of New York, and the United States District Court for the Southern District of New York
in any such suit, action or proceeding. Each of the Placement Agents and the Company further agrees to accept and acknowledge
service of any and all process which may be served in any such suit, action or proceeding in the New York Supreme Court, County
of New York, or in the United States District Court for the Southern District of New York and agrees that service of process upon
the Company mailed by certified mail to the Company’s address shall be deemed in every respect effective service of process
upon the Company, in any such suit, action or proceeding, and service of process upon the Placement Agent mailed by certified
mail to the Placement Agent’s address shall be deemed in every respect effective service process upon the Placement Agent,
in any such suit, action or proceeding. Notwithstanding any provision of this engagement letter to the contrary, the Company agrees
that neither the Placement Agent nor its affiliates, and the respective officers, directors, employees, agents and representatives
of the Placement Agent, its affiliates and each other person, if any, controlling the Placement Agent or any of their affiliates,
shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company for or in connection with
the engagement and transaction described herein except for any such liability for losses, claims, damages or liabilities incurred
by us that are finally judicially determined to have resulted from the bad faith or gross negligence of such individuals or entities.
If either party shall commence an action or proceeding to enforce any provision of this Agreement, then the prevailing party in
such action or proceeding shall be reimbursed by the other party for its reasonable attorney’s fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

 

    	 	10	 

     

    

 

Section
13. General Provisions.

 

(a)
This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and
all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement
may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition
is meant to benefit. Section headings herein are for the convenience of the parties only and shall not affect the construction
or interpretation of this Agreement.

 

(b)
The Company acknowledges that in connection with the offering of the Securities (i) the Placement Agent has acted at arms’
length, is not an agent of, and owes no fiduciary duties to the Company or any other person, (ii) the Placement Agent owes the
Company only those duties and obligations set forth in this Agreement and (iii) the Placement Agent may have interests that differ
from those of the Company. The Company waives to the full extent permitted by applicable law any claims it may have against the
Placement Agent arising from an alleged breach of fiduciary duty in connection with the offering of the Securities.

 

[The
remainder of this page has been intentionally left blank.]

 

    	 	11	 

     

    

 

If
the foregoing is in accordance with your understanding of our agreement, please sign below whereupon this instrument, along with
all counterparts hereof, shall become a binding agreement in accordance with its terms.

 

	 	Very
    truly yours,
	 	 	 
	 	AIR
    INDUSTRIES GROUP
	 	a
    Nevada corporation
	 	 	 
	 	By:	/s/
    Michael E. Recca 
	 	 	Name:
    Michael Recca
	 	 	Title:
    Chief Financial Officer

 

The
foregoing Placement Agency Agreement is hereby confirmed and accepted as of the date first above written.

 

	TAGLICH
    BROTHERS, INC.	 
	 	 	 
	By:	/s/
    Robert Schroeder	 
	 	Robert
    Schroeder	 
	 	Vice
    President, Investment Banking	 

  

    	 	12Exhibit 10.2

 

 

SUBSCRIPTION AGREEMENT

 

This Subscription Agreement
(this “Agreement”) is dated as of the date set forth on the signature page hereto between Air Industries Group,
a Nevada corporation (the “Company”), and the party identified on the signature page hereto as the “Purchaser.”

 

R E C I T A L S:

 

The Company is offering
(the “Offering”) for purchase pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 promulgated
thereunder, 800,000 shares of its Common Stock and warrants in the form of Exhibit A hereto (the “Warrants”) to purchase
280,000 shares of its Common Stock. The exercise price of the Warrants will be equal to the closing price of the Common Stock as
of the market close immediately prior to the closing hereunder. The Common Stock, the Warrants and the Common Stock issuable upon
exercise of the Warrants are referred to as the “Securities.”

 

Concurrently herewith,
the Company is soliciting the holders of its outstanding 8% Subordinated Convertible Notes to, among other things, postpone the
due date thereof to December 31, 2020, decrease the interest payable thereon to 6%, if paid in cash, decrease the conversion price
to $1.50 per share and pay the interest accrued thereon through September 30, 2018, in shares of Common Stock valued at the market
price thereof

 

The aggregate purchase
price for the 800,000 shares of Common Stock and the 280,000 Warrants (collectively, the “Purchased Securities”)
is One Million ($1,000,000) Dollars (the “Purchase Price”).

 

 

NOW, THEREFORE, IN
CONSIDERATION of the mutual covenants contained in this Agreement, and for good and valuable consideration the receipt and adequacy
of which are hereby acknowledged, the Company and Purchaser agree as follows:

 

ARTICLE I.

DEFINITIONS

 

1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement the following terms have the meanings set forth in this Section 1.1:

 

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

 

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

 

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

 

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

 

“Common
Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which
such securities may hereafter be reclassified or changed.

 

     

     

    

 

“Exchange
Act” 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 liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Placement
Agent” means Taglich Brothers, Inc.

 

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

 

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

 

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

 

“Subsidiary”
means any subsidiary of the Company and shall, where applicable, also include any direct or indirect subsidiary of the Company
formed or acquired after the date hereof.

 

“Transfer
Agent” means Broadridge Corporate Issuer Solutions, Inc., the current transfer agent of the Company, with a mailing address
of P. O. Box 1342, Brentwood, New York 11717 and a facsimile number of (215) 553-5402, and any successor transfer agent of the
Company.

 

ARTICLE II.

PURCHASE AND SALE

 

2.1 Purchase of
the Securities. Subject to the terms and conditions of this Agreement, the Purchaser, intending to be legally bound, hereby
irrevocably subscribes for and agrees to purchase the Purchased Securities and the Company agrees to issue the Purchased Securities
against receipt of the Purchase Price.

 

2.2 Deliveries.
The Purchaser will remit the Purchase Price to an account designated by the Company by wire transfer of immediately available funds.
The Company will deliver the Purchased Securities against the Company’s receipt of the Purchase Price.

 

    2

     

    

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1 Representations
and Warranties of the Company. The Company hereby makes the following representations and warranties to Purchaser:

 

(a) Subsidiaries.
All of the direct and indirect subsidiaries of the Company are set forth on Exhibit 21.1 to the Annual Report on Form 10-K filed
with the SEC on April 18, 2018, as amended (the “10-K”). The Company owns, directly or indirectly, all of the capital
stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of
capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights
to subscribe for or purchase securities.

 

(b) Organization
and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power
and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company
nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity
or enforceability of any this Agreement or the Securities, (ii) a material adverse effect on the results of operations, assets,
business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material
adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under this Agreement
or the Securities (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted
in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

(c) Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated
by this Agreement and the Securities, and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement and the Securities by the Company and the consummation by it of the transactions contemplated hereby have been
duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board
of Directors or the Company’s stockholders in connection herewith or therewith, except as may be required in connection with
the Required Approvals. This Agreement and the Securities have been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with their terms, except: (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’
rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(d) No
Conflicts. The execution, delivery and performance by the Company of this Agreement and the Securities, the issuance and sale
of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not: (i) conflict
with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company
or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company
or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which
the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property
or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could
not have or reasonably be expected to result in a Material Adverse Effect.

 

    3

     

    

 

(e) Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company of this Agreement and the Securities, other than:
(i) the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing
of the Shares in the time and manner required thereby, (ii) the filing of Form D with the Commission and such filings as are required
to be made under applicable state securities laws; and (iv) the consent of PNC Bank, National Association, as the Company’s
senior lender, under the Amended and Restated Revolving Credit, Term Loan and Security Agreement, as amended (collectively, the
“Required Approvals”).

 

(f) Issuance
of the Securities. The Securities have been duly authorized, and when issued in accordance with the terms set forth in this
Agreement and the Warrants, will be duly and validly issued, and constitute the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with their terms.

 

(g) Capitalization.
The authorized capital stock of the Company consists of 50,000,000 shares of Common Stock and 3,000,000 shares of preferred stock,
$.001 par value per share. No Person has any right of first refusal, preemptive right, right of participation, or any similar right
to participate in the transactions contemplated by this Agreement. Except as a result of the purchase and sale of the Securities
and the issuance of shares to Taglich Brothers, Inc., placement agent for the Securities and solicitation agent in respect of the
conversion of the 8% Subordinated Convertible Notes (the “Placement Agent”), the conversion of the outstanding 8% Subordinated
Convertible Notes into 6% Subordinated Convertible Notes, and the issuance of Common Stock in satisfaction of interest accrued
on such Notes through September 30, 2018, and as set forth in the SEC Reports, there are no outstanding options, warrants, scrip
rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible
into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock
or the capital stock of any Subsidiary, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary
is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents or capital stock of any Subsidiary.
The issuance and sale of the Securities will not obligate the Company or any Subsidiary to issue shares of Common Stock or other
securities to any Person (other than the Purchaser and the other holders of the Notes and the Placement Agent) and will not result
in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities.
There are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions,
and there are no contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become
bound to redeem a security of the Company or such Subsidiary. The Company does not have any stock appreciation rights or “phantom
stock” plans or agreements or any similar plan or agreement. All of the outstanding shares of capital stock of the Company
are duly authorized, validly issued, fully paid and non-assessable, have been issued in compliance with all federal and state securities
laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or
purchase securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s
stockholders.

 

    4

     

    

 

(h) SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively
referred to herein as the “SEC Reports”). As of their respective dates, the SEC Reports complied in all material
respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and
the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.

 

(i) Material
Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof: (i) there has
been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the
Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property
to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v)
the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the Commission any request for confidential treatment of information. Except
for the issuance of the Securities and the issuance of securities to the Placement Agent in lieu of fees due in connection with
this transaction and serving as solicitation agent, no event, liability, fact, circumstance, occurrence or development has occurred
or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses,
properties, operations, assets or financial condition, that would be required to be disclosed by the Company under applicable securities
laws at the time this representation is made or deemed made that has not been publicly disclosed at least 1 Trading Day prior to
the date that this representation is made.

 

    5

     

    

 

(j) Litigation.
Except as disclosed in the SEC Reports, there is no action, suit, inquiry, notice of violation, proceeding or investigation pending
or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local
or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or
enforceability of this Agreement or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof, is
or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or
a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated,
any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission
has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or
any Subsidiary under the Exchange Act or the Securities Act.

 

(k) Labor
Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’
employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure
or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant
in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of
its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance
with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

(l) Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), except for claims underlying the action commenced by CPI Aerospace
as disclosed in the SEC Reports, (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental
authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including
without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except in each case as could not have or reasonably be
expected to result in a Material Adverse Effect.

 

    6

     

    

 

(m) Environmental
Laws. The Company and its Subsidiaries (i) are in compliance with all federal, state, local and foreign laws relating to pollution
or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface
strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants,
or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice
letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder (“Environmental Laws”);
(ii) have received all permits licenses or other approvals required of them under applicable Environmental Laws to conduct their
respective businesses; and (iii) are in compliance with all terms and conditions of any such permit, license or approval, where
in each clause (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually or in the aggregate,
a Material Adverse Effect.

 

(n) Regulatory
Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation
or modification of any Material Permit.

 

(o) Title
to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them
and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries,
in each case free and clear of all Liens, except for (i) Liens set forth in the SEC Reports, (ii) such Liens as do not materially
affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by
the Company and the Subsidiaries and (iii) Liens for the payment of federal, state or other taxes, for which appropriate reserves
have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable
leases with which the Company and the Subsidiaries are in compliance.

 

(p) Intellectual
Property. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights
and similar rights as described in the SEC Reports as necessary or required for use in connection with their respective businesses
and which the failure to so have could have a Material Adverse Effect.

 

(q) Insurance.
The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and
in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged. Neither the
Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without
a significant increase in cost.

 

(r) Transactions
With Affiliates and Employees. Except as set forth in the SEC Reports and for such amounts as are payable to the Placement
Agent in connection with this Offering and for acting as solicitation agent in respect of the 8% Subordinated Convertible Notes,
none of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees
of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services
as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services
to or by, providing for rental of real or personal property to or from, providing for the borrowing of money from or lending of
money to or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company,
any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee,
stockholder, member or partner, in each case in excess of $120,000 other than for: (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including
stock option agreements under any stock option plan of the Company.

 

    7

     

    

 

(s) Sarbanes-Oxley;
Internal Accounting Controls. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization,
and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company and the Subsidiaries have established disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls
and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules
and forms. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of
the Company and the Subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange
Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under
the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over
financial reporting (as such term is defined in the Exchange Act) of the Company and its Subsidiaries that have materially affected,
or is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries.

 

(t) Certain
Fees. Except for (i) a sales commission to be paid to the Placement Agent in an amount equal to 7% of the Purchase Price of
the Securities, payable at the Company’s option, in cash or Common Stock, no brokerage or finder’s fees or commissions
are or will be payable by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. The Purchaser shall have
no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated by this Agreement.

 

(u) Private
Placement. Assuming the accuracy of the Purchaser’s representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchaser as contemplated hereby.
The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.

 

(v) Investment
Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will
not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject
to registration under the Investment Company Act of 1940, as amended.

 

    8

     

    

 

(w) Registration
Rights. Except as disclosed in the Company’s SEC Reports, no Person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company or any Subsidiary.

 

(x) Listing
and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) of the Exchange Act, and the Company
has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating
such registration. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance requirements. The Common Stock is currently eligible
for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company is current
in payment of the fees to the Depository Trust Company (or such other established clearing corporation) in connection with such
electronic transfer.

 

(y) Disclosure.
All of the disclosure furnished by or on behalf of the Company to the Purchaser regarding the Company and its Subsidiaries, their
respective businesses and the transactions contemplated hereby, is true and correct and does not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.

 

(z) No
Integrated Offering. Assuming the accuracy of the Purchaser’s representations and warranties set forth in Section 3.2,
neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering
of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require
the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any
Trading Market on which any of the securities of the Company are listed or designated.

 

(aa)
Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result
in a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and
local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it
is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined
to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the
payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There
are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the
Company or of any Subsidiary know of no basis for any such claim.

 

(bb)
No General Solicitation. Neither the Company nor any Person acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general advertising. The Company has offered the Securities for sale only to
the Purchaser and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

 

    9

     

    

 

(cc)
Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary,
any agent or other person acting on behalf of the Company or any Subsidiary, has: (i) directly or indirectly, used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii)
made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties
or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made
by any person acting on its behalf of which the Company is aware) which is in violation of law or (iv) violated in any material
respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

 

(dd)
Regulation M Compliance.  The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly
or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another
to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Placement
Agent in connection with the placement of the Securities.

 

(ee)
Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company's knowledge, any director,
officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered
by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).

 

(ff) 
Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance
with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970,
as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money
Laundering Laws”), and no Action or Proceeding by or before any court or governmental agency, authority or body or any
arbitrator involving the Company and any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of
the Company or any Subsidiary, threatened.

 

(gg) 
No Disqualification Events. With respect to the Notes to be offered and sold hereunder in reliance on Rule 506 under
the Securities Act, none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other
officer of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company’s outstanding
voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under
the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person”
and, together, “Issuer Covered Persons”) is subject to any of the "Bad Actor" disqualifications described
in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification
Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person
is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under
Rule 506(e), and has furnished to the Purchaser a copy of any disclosures provided thereunder.

 

(hh) Other
Covered Persons. Other than the Placement Agent, the Company is not aware of any person (other than any Issuer Covered Person)
that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale
of any Securities.

 

    10

     

    

 

3.2 Representations
and Warranties of the Purchaser. Purchaser hereby represents and warrants to the Company as follows:

 

(a) Organization;
Authority. Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability
company or similar power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise
to carry out its or his obligations hereunder. The execution and delivery of this Agreement and performance by Purchaser of the
transactions contemplated by this Agreement have been duly authorized by all necessary corporate, partnership, limited liability
company or similar action, as applicable, on the part of Purchaser. This Agreement, when delivered by Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding obligation of Purchaser, enforceable against it or him in accordance
with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification
and contribution provisions may be limited by applicable law.

 

(b) Own
Account. Purchaser understands that the Securities are “restricted securities” and have not been registered under
the Securities Act or any applicable state securities law and Purchaser is acquiring the Securities as principal for its own account
and not with a view to or for distributing or reselling the Securities or any part thereof in violation of the Securities Act or
any applicable state securities law, has no present intention of distributing any of the Securities in violation of the Securities
Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities
law.

 

(c) Purchaser
Status. At the time Purchaser was offered the Securities it was, and as of the date hereof it is, either: (i) an “accredited
investor” as defined in Rule 501(a) under the Securities Act or (ii) a “qualified institutional buyer” as defined
in Rule 144A(a) under the Securities Act.

 

(d) Experience
of Purchaser. Purchaser, either alone or together with its or his representatives, has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities.
Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete
loss of such investment.

 

(e) General
Solicitation. Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented
at any seminar or any other general solicitation or general advertisement.

 

(f) Access
to Information. Purchaser acknowledges that it or he has had the opportunity to review this Agreement (including all exhibits
and schedules thereto) and the SEC Reports and has been afforded (i) the opportunity to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of the Company concerning the terms and conditions of the Securities and the merits
and risks of investing in the securities of the Company; (ii) access to information about the Company and its financial condition,
results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii)
the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision with respect to the investment. 

 

    11

     

    

 

(g) Purchaser
represents, warrants and covenants that: (i) he has not been designated by the OFAC as a Specially Designated National or blocked
person, that he has no reason to believe that he would be considered a blocked person by OFAC and the undersigned does not reside
in a restricted country. The undersigned also represents that he is not employed by, acting as an agent of, or partially owned
or controlled by a government, a government-controlled entity or a government corporation; and (ii) to the extent the undersigned
has any beneficial owners, (a) he has carried out thorough due diligence to establish the identities of such beneficial owners,
(b) based on such due diligence, the undersigned reasonably believes that no such beneficial owners are or are (i) acting in contravention
of any U.S. or international laws and regulations, including anti-money laundering regulations or conventions, (ii) acting on behalf
of terrorists or terrorist organizations, including those persons or entities that are included on the List of Specially Designated
Nationals and Blocked Persons maintained by OFAC, (iii) acting for a senior foreign political figure, any member of a senior foreign
political figure’s immediate family or any close associate of a senior foreign political figure or (iv) acting for a foreign
shell bank (such persons or entities in (i) - (iv) are collectively referred to as "Prohibited Persons"), (c) he holds
the evidence of such identities and status and will maintain all such evidence for at least five years from the date hereof and
(d) he will make available such information and any additional information that the Company may require upon request.

 

(h) Purchaser
is not currently the subject or target of and has not been designated a “specially designated national” or “blocked
person” by the United Nations Security Council, the European Union, Her Majesty’s Treasury or any other sanctions authority,
nor is the undersigned located, organized or resident in a country or territory that is the subject or a target of a comprehensive
embargo or prohibiting trade with that country.

 

(i) The Purchaser
has not engaged in any business or activity prohibited by the Trading with the Enemy Act, that is the foreign assets control regulations
of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any enabling legislation or executive
order relating thereto. The Purchaser has not (i) used any funds for any unlawful contribution or other unlawful political activity;
(ii) made any direct or indirect unlawful payment to a foreign or domestic government official or agent; or (iii) violated any
provision of any law or regulation implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International
Business Transaction or the Foreign Corrupt Practices Act of 1977.

 

    12

     

    

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES 

 

4.1 Transfer Restrictions.

 

(a) The Securities
only may be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser, the Company
may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable
to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any
such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of
a Purchaser under this Agreement.

 

(b) The Purchaser
agrees to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following form:

 

THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES 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 STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

 

ARTICLE V.

MISCELLANEOUS

 

5.1 Indemnity.
The Purchaser agrees to indemnify and hold harmless the Company, its officers and directors, employees and its affiliates and their
respective successors and assigns and each other person, if any, who controls any thereof, against any loss, liability, claim,
damage and expense whatsoever (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating,
preparing or defending against any litigation commenced or threatened or any claim whatsoever) arising out of or based upon any
false representation or warranty or breach or failure by the Purchaser to comply with any covenant or agreement made by the Purchaser
herein or in any other document furnished by the Purchaser to any of the foregoing in connection with this transaction.

 

5.2 Modification.
Neither this Agreement nor any provisions hereof shall be modified, discharged or terminated except by an instrument in writing
signed by the party against whom any waiver, change, discharge or termination is sought.

 

5.3 Notices.
Any notice, demand or other communication which any party hereto may be required, or may elect, to give to anyone interested hereunder
shall be sufficiently given if (a) deposited, prepaid, with a recognized international courier service, (b) delivered personally,
(c) upon the expiration of twenty four (24) hours after transmission, if sent by facsimile if a confirmation of transmission is
produced by the sending machine (and a copy of each facsimile promptly shall be sent as provided in clause (a), in each case to
the parties at their respective addresses set forth below their signatures to this Agreement (or at such other address for a party
as shall be specified by like notice; provided that the notices of a change of address shall be effective only upon receipt thereof).

 

5.4 Counterparts.
This Agreement may be executed through the use of separate signature pages or in any number of counterparts and by facsimile, and
each of such counterparts shall, for all purposes, constitute one agreement binding on all parties, notwithstanding that all parties
are not signatories to the same counterpart. Signatures may be facsimiles.

 

    13

     

    

 

5.5 Binding Effect.
Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives and assigns.

 

5.6 Entire Agreement.
This Agreement (including the exhibits and schedules hereto) contain the entire agreement of the parties and there are no representations,
covenants or other agreements except as stated or referred to herein and therein.

 

5.7 Assignability.
This Agreement is not transferable or assignable by the undersigned.

 

5.8 Applicable Law;
Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without
giving effect to conflicts of law principles. If there is any litigation relating to this Agreement or the transaction contemplated
hereby, the parties hereto irrevocably consent to the jurisdiction of the courts of the State of New York and of any federal court
located in such State in connection with any action or proceeding arising out of or relating to this Agreement, any document or
instrument delivered pursuant to, in connection with or simultaneously with this Agreement, or a breach of this Agreement or any
such document or instrument. In any such action or proceeding, each party hereto waives personal service of any summons, complaint
or other process and agrees that service thereof may be made in accordance with Section 5.3. Within 30 days after such service,
or such other time as may be mutually agreed upon in writing by the attorneys for the parties to such action or proceeding, the
party so served shall appear or answer such summons, complaint or other process. EACH PARTY HERETO WAIVES TRIAL BY JURY IN ANY
ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR ANY BREACH OR ALLEGED BREACH HEREOF.

 

(Signature Pages Follow)

 

    14

     

    

 

[Signature Page to Subscription Agreement
for 6% Subordinated Convertible Notes]

 

IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of September       , 2018.

 

Name of Purchaser: ____________________________________________________

 

Name of Purchaser, if Joint: _____________________________________________

 

Signature of Individual or Authorized Signatory: __________________________

 

Signature of Purchaser, if Joint Individuals: ________________________________________

 

Name of Authorized Signatory, if Entity: ____________________________________

 

Title of Authorized Signatory, if Entity: _____________________________________

 

Email Address of Authorized Signatory: ___________________________________________

 

Facsimile Number of Authorized Signatory: _________________________________________

 

Address for Notices to Purchaser: 

 

__________________________________

 

__________________________________

 

Address for Delivery of Securities to Purchaser (if not same
as address for notice):

 

__________________________________

 

__________________________________

 

Social Security or EIN Number: _______________________

 

ACCEPTANCE OF SUBSCRIPTION

 

	 	AIR INDUSTRIES GROUP
	 	 
	 	By: 	 
	 	 	Michael Recca
	 	 	Chief Financial Officer

 

Date: September       , 2018

 

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EXHIBIT A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    16

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