Document:

Unassociated Document

 

WARRANT AGREEMENT ("Agreement"), dated as of January 1, 2014 by and between AIR INDUSTRIES GROUP, a Nevada corporation (the "Company"), and TAGLICH BROTHERS, INC. ("Warrantholder").

 

In consideration of the mutual terms, conditions, representations, warranties and agreements herein set forth, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

Section 1.  Issuance of Warrants.

            The Company hereby issues and grants to the Warrantholder 10,000 warrants ("Warrants") to purchase shares of the Company’s common stock, par value $0.001(“Common Stock”),  subject to the vesting requirements set forth below and the satisfaction of the conditions to exercise set forth in Section 7 of this Agreement, to purchase the number of shares of Common Stock issuable upon exercise of the Warrants (“Warrant Shares”) set forth in the following sentence commencing April 1, 2014 until December 31, 2019 (the "Warrant Expiration Date") at an exercise price of $8.72 per Warrant Share (the "Exercise Price"). The number of Warrant Shares issuable on exercise of each Warrant and the Exercise Price are all subject to adjustment pursuant to Section 8 of this Agreement. The Warrants may be exercised as to 2,500 Warrant Shares commencing April 1, 2014, a total of 5,000 Warrant Shares commencing on July 1, 2014, a total of 7,500 Warrant Shares commencing on October 1, 2014 and as to all 10,000 Warrant Shares commencing on January 1, 2015.

Section 2.  Form of Warrant Certificates.

              Promptly after the execution and delivery of this Agreement by the parties hereto, the Company shall cause to be executed and delivered to Warrantholder one or more certificates evidencing the Warrants (the "Warrant Certificates"). Each Warrant Certificate delivered hereunder shall be substantially in the form set forth in Exhibit A attached hereto and may have such letters, numbers or other identification marks and legends, summaries or endorsements printed thereon as the Company may deem appropriate and that are not inconsistent with the terms of this Agreement or as may be required by applicable law, rule or regulation. Each Warrant Certificate shall be dated the date of execution by the Company.

Section 3.  Execution of Warrant Certificates.

            Each Warrant Certificate delivered hereunder shall be signed on behalf of the Company by its President or Chief Executive Officer and by its Secretary or an Assistant Secretary. Each such signature may be in the form of a facsimile thereof and may be imprinted or otherwise reproduced on the Warrant Certificates.

            If any officer of the Company who signed any Warrant Certificate ceases to be an officer of the Company before the Warrant Certificate so signed shall have been delivered by the Company, such Warrant Certificate nevertheless may be delivered as though such person had not ceased to be such officer of the Company.

 

  

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Section 4.  Registration.

            Warrant Certificates shall be issued in registered form only. The Company will keep or cause to be kept books for registration of ownership and transfer of each Warrant Certificate issued pursuant to this Agreement. Each Warrant Certificate issued pursuant to this Agreement shall be numbered by the Company and shall be registered by the Company in the name of the holder thereof (initially the Warrantholder). The Company may deem and treat the registered holder of any Warrant Certificate as the absolute owner thereof (notwithstanding any notation of ownership or other writing thereon made by anyone) for the purpose of any exercise thereof and for all other purposes, and the Company shall not be affected by any notice to the contrary.

Section 5.  Restrictions on Transfer.

            No Warrant may be sold, pledged, hypothecated, assigned, conveyed, transferred or otherwise disposed of (each a "transfer") unless (i) the transfer complies with all applicable securities laws and (ii) the transferee agrees in writing to be bound by the terms of this Agreement and executes and delivers to the Company any documents and instruments requested by the Company, including without limitation, an opinion of counsel satisfactory to the Company, that such transfer does not violate any applicable federal or state securities laws.

Section 6.  Mutilated or Missing Warrant Certificates.

            If any Warrant Certificate is mutilated, lost, stolen or destroyed, the Company shall issue, upon surrender and cancellation of any mutilated Warrant Certificate, or in lieu of and substitution for any lost, stolen or destroyed Warrant Certificate, a new Warrant Certificate of like tenor and representing an equal number of Warrants. In the case of a lost, stolen or destroyed Warrant Certificate, a new Warrant Certificate shall be issued by the Company only upon the Company's receipt of reasonably satisfactory evidence of such loss, theft or destruction and, if requested, an indemnity or bond reasonably satisfactory to the Company.

Section 7.  Exercise of Warrants.

            A. Exercise. Subject to the terms and conditions set forth in this Section 7, Warrants may be exercised, in whole or in part (but not as to any fractional part of a Warrant), at any time or from time to time after the date hereof until on or prior to the Warrant Expiration Date.

            In order to exercise any Warrant, Warrantholder shall deliver to the Company at its office referred to in Section 16 the following: (i) a written notice in the form of the Election to Purchase appearing at the end of the form of Warrant Certificate attached as Exhibit A hereto of such Warrantholder's election to exercise the Warrants, which notice shall specify the number of such Warrantholder's Warrants being exercised; (ii) the Warrant Certificate or Warrant Certificates evidencing the Warrants being exercised; and (iii) payment of the aggregate Exercise Price.

 

  

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            All rights of Warrantholder with respect to any Warrant that has not been exercised on or prior to the Warrant Expiration Date shall immediately cease and such Warrants shall be automatically cancelled and void.

             B. Payment of Exercise Price. Payment of the Exercise Price with respect to Warrants being exercised hereunder shall be by the payment to the Company, in cash, by check or wire transfer, of an amount equal to the Exercise Price multiplied by the number of Warrants then being exercised. The Warrants also may be exercised at such time by means of a "cashless exercise" in which the Holder shall be entitled to receive a certificate for the number of Warrant

Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

                  (A) = the Fair Market Value of a Warrant Share as of the date of exercise of the Warrants then being exercised;

                  (B) = the Exercise Price of this Warrant, as adjusted; and

                  (X) = the number of Warrant Shares issuable upon exercise of the Warrant Certificates surrendered for exercise in accordance with the terms of this Warrant Agreement by means of a cash exercise rather than a cashless exercise.

            C. Delivery of Warrant Shares. Upon receipt of the items referred to in Section 7A, subject to any withholding that may be required by law and the payment by the Warrantholder ofany transfer taxes due if the warrant Shares are to be registered in a name other than that of Warrantholder, the Company shall, as promptly as practicable, execute and deliver or cause to be executed and delivered, to or upon the written order of Warrantholder, and in the name of Warrantholder or Warrantholder's designee, a stock certificate or stock certificates representing the number of Warrant Shares to be issued on exercise of the Warrant(s). The certificates issued to Warrantholder or its designee shall bear any restrictive legend required under applicable law, rule or regulation. A Warrant shall be deemed to have been exercised and such stock certificate or stock certificates shall be deemed to have been issued, and such holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date that such notice, together with payment of the aggregate Exercise Price and the Warrant Certificate or Warrant Certificates evidencing the Warrants to be exercised, is received by the Company as aforesaid. If the Warrants evidenced by any Warrant Certificate are exercised in part, the Company shall, at the time of delivery of the stock certificates, deliver to the holder thereof a new Warrant Certificate evidencing the Warrants that were not exercised or surrendered, which shall in all respects (other than as to the number of Warrants evidenced thereby) be identical to the Warrant Certificate being exercised. Any Warrant Certificates surrendered upon exercise of Warrants shall be canceled by the Company.

 

  

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            D. Fair Market Value. For purposes of determining the number of Warrant Shares issuable upon exercise of Warrants in accordance with the preceding Subsection C, the Fair Market Value of the Warrant Shares shall mean as of the date of exercise (the "Determination Date"): (i) if the Warrant Shares are traded on the NYSE MKT or another national securities exchange, the average of the closing or last sale price, respectively, of the Warrant Shares as reported for the ten (10) trading days immediately preceding the Determination Date; (ii) if the Warrant Shares are not traded on a national securities exchange but are traded in the over-the-counter market, then the average of the mean of the closing bid and asked prices for a share of such stock reported for the ten (10) trading days immediately preceding the Determination Date; and (iii) if the Warrant Shares are not publicly traded, then as determined in good faith by the disinterested members of the Company's Board of Directors as being the price per share which the Company could reasonably obtain from a willing buyer (who is not an employee or director) for authorized but unissued shares of Warrant Shares.

Section 8.  Adjustment of Number of Warrant Shares Issuable Upon Exercise of a Warrant and Adjustment of Exercise Price.

            A. Adjustment for Stock Splits, Stock Dividends, Recapitalizations. The number of Warrant Shares issuable upon exercise of each Warrant and the Exercise Price shall each be proportionately adjusted to reflect any stock dividend, stock split, reverse stock split, recapitalization or the like affecting the number of outstanding shares of Preferred Stock that occurs after the date hereof.

            B. Adjustments for Reorganization, Consolidation, Merger. If after the date hereof, the Company (or any other entity, the stock or other securities of which are at the time receivable on the exercise of the Warrants), consolidates with or merges into another entity or conveys all or substantially all of its assets to another entity, then, in each such case, Warrantholder, upon any permitted exercise of a Warrant (as provided in Section 7), at any time after the consummation of such reorganization, consolidation, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise of the Warrant prior to such consummation, the stock or other securities or property to which such Warrantholder would have been entitled upon the consummation of such reorganization, consolidation, merger or conveyance if such Warrantholder had exercised the Warrant immediately prior thereto, subject to such further adjustments as may be required as a result of the occurrence after such consolidation or merger of the events described in this Section 8. The successor or purchasing entity in any such reorganization, consolidation, merger or conveyance (if other than the Company) shall duly execute and deliver to Warrantholder a written acknowledgment of such entity's obligations under the Warrants and this Agreement.

Section 9.  Reservation of Shares.

            The Company shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock, or its authorized and issued Common Stock held in its treasury, the aggregate number of the Warrant Shares deliverable upon the exercise of all outstanding Warrants, for the purpose of enabling it to satisfy any obligation to issue the Warrant Shares upon the due and punctual exercise of the Warrants, through the Warrant Expiration Date.

 

  

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Section 10. No Impairment.

            The Company shall not, by amendment of its certificate of incorporation or bylaws, or through reorganization, consolidation, merger, dissolution, issuance or sale of securities, sale of assets or any other voluntary action, willfully avoid or seek to avoid the observance or performance of any of the terms of the Warrants or this Agreement, and shall at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of Warrantholder under the Warrants and this Agreement against wrongful impairment. Without limiting the generality of the foregoing, the Company: (i) shall not set or increase the par value of any Warrant Shares above the amount payable therefor upon exercise, and (ii) shall take all actions that are necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of the Warrants.

Section 11. Representations and Warranties of Warrantholder.

            Warrantholder represents and warrants to the Company that, on the date hereof and on the date the Warrantholder exercises the Warrant pursuant to the terms of this Agreement:

 

(i) Warrantholder is an "accredited investor", as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

 

(ii) Warrantholder understands that the Warrants and the Warrant Shares have not been registered under the Securities Act and acknowledges that the Warrants and the Warrant Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration becomes available.

 

(iii) Warrantholder is acquiring the Warrants for Warrantholder's own account for investment and not with a view to, or for sale in connection with, any distribution thereof.

Section 12. No Rights or Liabilities as Stockholder.

            No holder, as such, of any Warrant Certificate shall be entitled to vote, receive dividends or be deemed the holder of Common Stock which may at any time be issuable on the exercise of the Warrants represented thereby for any purpose whatever, nor shall anything contained herein or in any Warrant Certificate be construed to confer upon the holder of any Warrant Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value or change of stock to no par value, consolidation, merger, conveyance or otherwise), or to receive notice of meetings or other actions affecting stockholders or to receive dividend or subscription rights, or otherwise, until such Warrant Certificate shall have been exercised in accordance with the provisions hereof and the receipt and collection of the Exercise Price and any other amounts payable upon such exercise by the Company. No provision hereof, in the absence of affirmative action by Warrantholder to purchase Warrant Shares shall give rise to any liability of such holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

  

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Section 13. Definitions.

            Unless the context otherwise requires, the terms defined in this Section 13, whenever used in this Agreement shall have the respective meanings hereinafter specified and words in the singular or in the plural shall each include the singular and the plural and the use of any gender shall include all genders.

            "Business Day" shall mean any day on which banking institutions are generally open for business in New-York.

            "Exercise Price" shall be the price per Warrant Share at which Warrantholder is entitled to purchase Warrant Shares upon exercise of any Warrant determined in accordance with Section 7 and subject to adjustment as provided in this Agreement.

            "Person" shall mean any corporation, association, partnership, limited liability company, joint venture, trust, organization, business, individual, government or political subdivision thereof or governmental body.

            "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute as at the time in effect, and any reference to a particular section of such Act shall include a reference to the comparable section, if any, of such successor federal statute.

            "Warrant Shares" shall mean the shares Common Stock issuable upon exercise of the Warrants represented by the Warrant certificates issued hereunder.

Section 15. Notices.

            All notices, consents, requests, waivers or other communications required or permitted under this Agreement (each a "Notice") shall be in writing and shall be sufficiently given (a) if hand delivered, (b) if sent by nationallyrecognized overnight courier, or (c) if sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

                           if to the Company:

                           Air Industries Group

                           1479 Clinton Avenue

                           Bay Shore, New York 11706

                           Fax: 631-968-5377

                           Attention:  Chief Accounting Officer

                           With a copy to:

 

  

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                           Eaton & Van Winkle, LLP

                           Three Park Avenue, 16th floor

                           New York, New York 10016

                           Fax: 212-979-9928

                           Attention: Vincent J. McGill, Esq.

                           if to Warrantholder:

                           Taglich Brothers, Inc.

                           405 Lexington Avenue, 51st floor

                           New York, New York 10174

                           Fax: 1-212-661-6824 or 631-757-1333

                           Attention: Richard Oh

or such other address as shall be furnished by any of the parties hereto in a Notice. Any Notice shall be deemed given upon receipt.

Section 15. Supplements, Amendments and Waivers.

            This Agreement may be supplemented or amended only by a subsequent writing signed by the Company and the Warrantholder (or their successors or permitted assigns), and any provision hereof may be waived only by a written instrument signed by the party charged therewith.

Section 16. Successors and Assigns.

            Except as otherwise provided herein, the provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors and permitted assigns of the parties hereto. Warrants issued under this Agreement may be assigned by Warrantholder only to the extent such assignment satisfies the restrictions on transfer set forth in this Agreement; any attempted assignment of Warrants in violation of the terms hereof shall be void ab initio.

Section 17. Termination.

            This Agreement (other than Sections 11, 13 and Sections 14 through 25, inclusive, and all related definitions, all of which shall survive such termination) shall terminate on the earlier of (i) the Warrant Expiration Date and (ii) the date on which all Warrants have been exercised.

Section 18. Governing Law; Jurisdiction.

            A. Governing Law. This Agreement and each Warrant Certificate issued hereunder shall be governed by and construed in accordance with the laws of the State of Nevada.

 

  

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            B. Submission to Jurisdiction. Each party to this Agreement hereby irrevocably and unconditionally submits, for itself and its property, to the jurisdiction of the pertinent courts in the State of New York, County of New York and any appellate court from any thereof, in respect of actions brought against it as a defendant, in any action, suit or proceeding arising out of or relating to this Agreement or the Warrant Certificates and Warrants to be issued pursuant hereto, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action, suit or proceeding may be heard and determined in such courts. Each of the parties hereto agrees that a final judgment in any such action, suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

            C. Venue. Each party hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any action, suit or proceeding arising out of or relating to this Agreement, or the Warrant Certificates and Warrants to be issued pursuant hereto, in any court referred to in Subsection B. Each of the parties hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action, suit proceeding in any such court and waives any other right to which it may be entitled on account of its place of residence or domicile.

Section 19. Third Party Beneficiaries.

            Each party intends that this Agreement shall not benefit or create any right or cause of action in or on behalf of any Person other than the parties hereto and their successors and permitted assigns.

Section 20. Headings

            The headings in this Agreement are for convenience only and shall not affect the construction or interpretation of this Agreement.

Section 21. Entire Agreement.

            This Agreement, together with the Warrant Certificates and Exhibits, constitutes the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and shall supersede any prior agreements and understandings between the parties hereto with respect to such subject matter.

Section 22. Expenses.

            Each of the parties hereto shall pay its own expenses and costs incurred or to be incurred in negotiating, closing and carrying out this Agreement and in consummating the transactions contemplated herein, except as otherwise expressly provided for herein.

Section 23. Neutral Construction.

            The parties to this Agreement agree that this Agreement was negotiated fairly between them at arm's length and that the final terms of this Agreement are the product of the parties' negotiations. Each party represents and warrants that it has sought and received legal counsel of its own choosing with regard to the contents of this Agreement and the rights and obligations affected hereby. The parties agree that this Agreement shall be deemed to have been jointly and equally drafting by them, and that the provisions of this Agreement therefore should not be construed against a party or parties on the grounds that such party or parties drafted or was more responsible for the drafting of any such provision(s).

 

  

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Section 24. Representations and Warranties.

            The Company hereby represents and warrants to the Warrantholder that:

            (a) the Company has all requisite corporate power and authority to (i) execute and deliver this Agreement and (ii) issue and sell the Common  Stock upon the exercise of the Warrant Certificates and carry out provisions of this Agreement. All corporate action on the part of the Company necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder, and the authorization (or reservation for issuance), sale and issuance of the Common Stock upon the exercise of the Warrant Certificates to be sold hereunder has been taken or will be taken prior to the date hereof;

            (b) this Agreement constitutes a valid and legally binding obligation of the Company, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws relating to application affecting enforcement of creditor's rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief of other equitable remedies;

            (c) the Common Stock issuable upon the exercise of the Warrant Certificates that is being purchased hereunder, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued and fully paid and will be free of restrictions on transfer, other than restrictions on transfer under applicable state and federal securities laws;

            (d) subject in part to the truth and accuracy of Warrantholder's representations set forth in Section 11 of this Agreement, the offer, sale and issuance of the Common Stock issuable upon the exercise of the Warrant Certificates as contemplated by this Agreement are exempt from the registration requirements of the Securities Act; and

            (e) the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not result in any such violation, or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision or an event that results in creation of any lien, charge or encumbrance upon any assets of the Company or the suspension, revocation, impairment, forfeiture or nonremoval of any material permit, license, authorization or approval applicable to the Company, its business or operations or any of its assets or properties.

 

  

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Section 25. Counterparts.

            This Agreement may be executed in counterparts and in facsimile and each such counterpart shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

 

	
TAGLICH BROTHERS, INC.

 

By:__________________

      Name:

      Title:

	
AIR INDUSTRIES GROUP

 

By: Peter D. Rettaliata

       Peter D. Rettaliata

President and Chief Executive Officer

 

  

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EXHIBIT A

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE 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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO AIR INDUSTRIES GROUP (THE "COMPANY"). THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE ARE SUBJECT TO THE TERMS AND CONDITIONS OF, AND MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH, A WARRANT AGREEMENT BETWEEN THE COMPANY AND TAGLICH BROTHERS, INC. DATED AS OF JANUARY 1, 2014. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE COMPANY.

FORM OF

WARRANT CERTIFICATE

AIR INDUSTRIES GROUP

COMMON STOCK PURCHASE WARRANT

 

	NO. _____	_______ WARRANTS

 

            This Warrant Certificate certifies that Taglich Brothers, Inc. is the registered holder of 10,000 Warrants (the "Warrantholder") to purchase shares of Common Stock of Air Industries Group (the "Company"). Each Warrant entitles the holder, subject to the vesting terms set forth in the following sentence and the satisfaction of the conditions to exercise set forth in Section 7 of the Warrant Agreement referred to below, to purchase from the Company commencing April 1, 2014, the number of shares of Common Stock (“Warrant Shares”) set forth in the following sentence until December 31, 2019 (the "Warrant Expiration Date") at the Exercise Price set forth in the Warrant Agreement. The Warrants may be exercised as to 2,500 Warrant Shares commencing April 1, 2014, a total of 5,000 Warrant Shares commencing on July 1, 2014, a total of 7,500 Warrant Shares commencing on October 1, 2014 and as to all 10,000 Warrant Shares commencing on January 1, 2015. The number of Warrant Shares for which each Warrant is exercisable and the Exercise Price are subject to adjustment as provided in the Warrant Agreement.

 

  

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            The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants to purchase Warrant Shares and are issued pursuant to a Warrant Agreement, dated as of January 1, 2014 (the "Warrant Agreement"), between the Company and Taglich Brothers, Inc., which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and Warrantholder.

            Warrantholder may exercise Warrants by surrendering this Warrant Certificate, with the Election to Purchase attached hereto properly completed and executed, together with payment of the aggregate Exercise Price, at the offices of the Company specified in Section 14 of the Warrant Agreement. If upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall beissued to the holder hereof or its assignee a new Warrant Certificate evidencing the number of Warrants not exercised.

            This Warrant Certificate, when surrendered at the offices of the Company specified in Section 14 of the Warrant Agreement, by the registered holder thereof in person, by legal representative or by attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, for one or more other Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants.

            WITNESS the signatures of the duly authorized officers of the Company.

 

	
Dated:  January 1, 2014

 

 

 

 

 

	AIR INDUSTRIES GROUP 

By:________________________

Peter D. Rettaliata

President and Chief Executive Officer

 

  

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NOTICE OF EXERCISE

To:      Air Industries Group

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

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

                o in lawful money of the United States; or

                o the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in Section 7B of the warrant Agreement, to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in Section 7B of the Warrant Agreement.

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

 

	_______________________________ 

The Warrant Shares shall be delivered to the following:

_______________________________

_______________________________

_______________________________

	 

              

(4) Accredited Investor. The undersigned is an "accredited investor" as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended.

[PURCHASER]

 

  

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	 	By: ______________________________ 
Name:

Title:

Dated: ___________________________

  

 

ASSIGNMENT FORM

                    (To assign the foregoing warrant, execute this form and supply required information. Do not use this form to exercise the warrant.)

      FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

	 
____________________________________________________________________ whose address is

	 
	 
__________________________________________________________________________________.

	 
	 
__________________________________________________________________________________

 

Dated:  ______________, _______

 

	 	Holder's Signature: _____________________________ 
 

Holder's Address:   _____________________________

   _____________________________

 

	 
Signature Guaranteed:  ___________________________________________

 

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

  

14Exhibit

Exhibit 10.1

HUDSON GLOBAL, INC.
RESTRICTED STOCK UNIT AWARD AGREEMENT

RESTRICTED STOCK UNIT AWARD AGREEMENT (“Agreement”) made as of the [DAY] day of [MONTH], [YEAR] and effective as of the seventh calendar day following the date of the [QUARTER] quarter [YEAR] earnings release of the Company (the “Grant Date”), by and between HUDSON GLOBAL, INC., a Delaware corporation (the “Company”) and [NAME] (the “Grantee”).
W I T N E S S E T H:

WHEREAS, pursuant to the Hudson Global, Inc. 2009 Incentive Stock and Awards Plan, as amended and restated (the “Plan”), the Company desires to grant to the Grantee and the Grantee desires to accept an award of restricted stock units representing the right to receive shares of common stock, $.001 par value, of the Company (the “Common Stock”) upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1.Award.  Subject to the terms and conditions set forth herein, the Company hereby awards the Grantee [NUMBER OF RESTRICTED STOCK UNITS] restricted stock units (the “Restricted Stock Units,” or the “Units”).
2.Restrictions; Vesting.  Except as otherwise provided herein or in the Plan, the Restricted Stock Units may not be sold, transferred, pledged, encumbered, assigned or otherwise alienated or hypothecated.  The Restricted Stock Units will vest upon satisfaction of [both] the [performance vesting conditions and] the service vesting conditions set forth below.  [The performance vesting conditions with respect to the Restricted Stock Units shall be satisfied as follows]:  

[VESTING CONDITIONS]

3.Settlement of Restricted Stock Units.  Vested Restricted Stock Units shall be settled by the delivery to the Grantee or a designated brokerage firm of one share of Common Stock per vested Restricted Stock Unit as soon as reasonably practicable following the vesting of such Restricted Stock Units, and in all events no later than March 15 of the year following the year of vesting (unless delivery is deferred pursuant to a nonqualified deferred compensation plan in accordance with the requirements of Section 409A of the Code), subject to applicable withholding. In the event of the Grantee’s death before the Company has distributed shares in settlement of vested Restricted Stock Units, the Company will issue the shares to the Grantee’s estate.  [To the extent required in order to receive favorable tax treatment under applicable law, the shares of Common Stock issued in settlement of vested Restricted Stock Units may not be sold or otherwise transferred for two years.]
4.Tax Withholding.  Notwithstanding anything herein to the contrary, shares of Common Stock shall not be delivered to the Grantee unless and until the Grantee has delivered to the Executive Vice President, Human Resources of the Company (or such other executive officer of the Company performing a similar function), at its corporate headquarters in New York, New York, such cash payment, 

if any, deemed necessary by the Company to enable it to satisfy any federal, foreign or other tax withholding obligations with respect to such shares or the Restricted Stock Units that have vested (the “Tax Amount”) (unless other arrangements acceptable to the Company in its sole discretion have been made).  Notwithstanding anything herein to the contrary, the Company may (but shall not be required to), in its sole discretion, at any time by notice to the Grantee, choose to satisfy its withholding obligation by unilaterally withholding a number of shares of Common Stock otherwise deliverable with respect to vested Restricted Stock Units having a value equal to the minimum Tax Amount the Company is required to withhold.  For purposes of the preceding sentence, each share of Common Stock shall be deemed to have a value equal to the average closing price of a share of the Common Stock on the Nasdaq Global Market (or such other U.S. exchange or market on which the Common Stock is then primarily traded) on the five (5) trading days up to and including the date the withholding tax is to be determined.  The Company may from time to time change (or provide alternatives to) the method of tax withholding on the Restricted Stock Units granted hereunder by notice to the Grantee, it being understood that from and after such notice the Grantee will be bound by the method (or alternatives) specified in any such notice.  The Company (in its sole and absolute discretion) may permit all or part of the Tax Amount to be paid with shares of Common Stock owned by the Grantee, or in installments (together with interest) evidenced by the Grantee’s secured promissory note.  In addition, if the Company is required to withhold amounts with respect to the Restricted Stock Units other than as described in the preceding sentences, then the Grantee shall deliver to the Company at the time the Company is obligated to withhold amounts, such amount as the Company requires to meet the statutory withholding obligation under applicable tax laws or regulations, and if the Grantee fails to do so, the Company has the right and authority to deduct or withhold from amounts under this award or other compensation payable to the Grantee an amount sufficient to satisfy its withholding obligations.
5.Termination of Employment.  If the Grantee’s employment or service with the Company or its Affiliates is terminated for any reason other than death, including but not limited to by reason of disability, then the Restricted Stock Units that have not yet become fully vested in accordance with Section 2 will automatically be forfeited by the Grantee (or the Grantee’s successors).  If the Grantee’s employment terminates by reason of the Grantee’s death, then the Restricted Stock Units that have not yet become fully vested as a result of a service vesting condition contained in Section 2 not being satisfied will automatically become fully vested, but only if and to the extent that the performance vesting conditions contained in Section 2 shall have been achieved on or prior to the date of such termination of employment.  
6.No Voting Rights; Dividend Equivalents and Other Distributions.
(a)The Grantee shall not have voting rights with respect to shares of Common Stock subject to the Restricted Stock Units unless and until such shares of Common Stock are reflected as issued and outstanding shares on the Company’s stock ledger following vesting and settlement.
(b)The Grantee shall not be entitled to receive any cash payment equivalent to any dividends or other distributions paid with respect to the shares of Common Stock subject to the Restricted Stock Units unless and until such shares of Common Stock are reflected as issued and outstanding shares on the Company’s stock ledger following vesting and settlement.
(c)Except to the extent otherwise expressly provided in this Agreement, the Grantee shall have, with respect to the Restricted Stock Units, no rights as a holder of Common Stock.
7.Securities Law Restrictions.  Notwithstanding anything herein to the contrary, shares of Common Stock shall not be issued hereunder if, in the opinion of counsel to the Company, such issuance 

may result in a violation of federal or state securities laws or the securities laws of any other relevant jurisdiction.
8.Change in Control.  If, within twelve (12) months following the date of a Change in Control (as defined in the Plan), the Grantee’s employment or service with the Company or its Affiliates is terminated without Cause (as defined below) by the Company or is terminated for Good Reason (as defined below) by the Grantee, then the Restricted Stock Units will fully vest and be settled with shares of Common Stock or, in the Committee’s discretion, be cancelled in exchange for payment of the same consideration to be received by stockholders of the Company for shares of Common Stock in the Change in Control transaction. 
(a)  Definition of Cause.  For purposes of this Agreement, Cause shall be defined as:  
i.the willful or negligent failure of the Grantee to perform the Grantee’s duties and obligations in any material respect (other than any failure resulting from Grantee’s disability), which failure is not cured within fifteen (15) days after receipt of written notice thereof, provided that there shall be no obligation to provide any additional written notice if the Grantee’s failure to perform is repeated and the Grantee has previously received one (1) or more written notices; 
ii.acts of dishonesty or willful misconduct by the Grantee with respect to the Company; 
iii.conviction of a felony or violation of any law involving moral turpitude, dishonesty, disloyalty or fraud, or a pleading of guilty or nolo contendere to such charge; 
iv.repeated refusal to perform the reasonable and legal instructions of the Grantee’s supervisors;
v.any material breach of this Agreement; or
vi.failure to confirm compliance with the Company’s Code of Conduct after 10 days’ written notice requesting confirmation.
(b)Definition of Good Reason.  The Grantee shall have “Good Reason” for termination of employment in connection with a Change in Control of the Company in the event of: 
(i)    any breach of this Agreement by the Company, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith that the Company remedies promptly after receipt of notice thereof given by the Grantee;
(ii)    any reduction in the Grantee’s base salary, percentage of base salary available as incentive compensation or bonus opportunity or benefits, in each case 

relative to those most favorable to the Grantee in effect at any time during the 180-day period prior to the Change in Control;
(iii)    the removal of the Grantee from, or any failure to reelect or reappoint the Grantee to, any of the positions held with the Company on the date of the Change in Control or any other positions with the Company to which the Grantee shall thereafter be elected, appointed or assigned, except in the event that such removal or failure to reelect or reappoint relates to the termination by the Company of the Grantee’s employment for Cause or by reason of disability pursuant to the Grantee’s Employment Agreement;
(iv)    a good faith determination by the Grantee that there has been a material adverse change, without the Grantee’s written consent, in the Grantee’s working conditions or status with the Company relative to the most favorable working conditions or status in effect during the 180-day period prior to the Change in Control, including but not limited to (A) a significant change in the nature or scope of the Grantee’s authority, powers, functions, duties or responsibilities, or (B) a significant reduction in the level of support services, staff, secretarial and other assistance, office space and accoutrements, but in each case excluding for this purpose an isolated, insubstantial and inadvertent event not occurring in bad faith that the Company remedies within ten (10) days after receipt of notice thereof given by the Grantee;
(v)    the relocation of the Grantee’s principal place of employment to a location more than 50 miles from the Grantee’s principal place of employment on the date 180 days prior to the Change in Control; or
(vi)    the Company requires the Grantee to travel on Company business 20% in excess of the average number of days per month the Grantee was required to travel during the 180-day period prior to the Change in Control.
9.No Employment Rights.  Nothing in this Agreement shall give the Grantee any right to continue in the employment of the Company or any Affiliate, or interfere in any way with the right of the Company or any Affiliate to terminate the employment of the Grantee.
10.Plan Provisions.  The provisions of the Plan shall govern if and to the extent that there are inconsistencies between those provisions and the provisions hereof.  The Grantee acknowledges receipt of a copy of the Plan prior to the execution of this Agreement.  Capitalized terms used in this Agreement but not defined herein shall have the meaning given to them in the Plan. 
11.Administration.  The Committee will have full power and authority to interpret and apply the provisions of this Agreement and act on behalf of the Company and the Board in connection with this Agreement, and the decision of the Committee as to any matter arising under this Agreement shall be binding and conclusive as to all persons.
12.Binding Effect; Headings.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.  The subject headings of Sections of this Agreement are included for the purpose of convenience only and shall not affect the construction or interpretation of any of its provisions.  All references in this Agreement to “$” or “dollars” are to United States dollars.

13.Employee Handbook and Arbitration Agreements.  As a material inducement to the Company to grant this award of Restricted Stock Units and to enter into this Agreement, the Grantee hereby expressly agrees to (a) comply with and abide by the terms and conditions of, and rules relating to, such Grantee’s employment with the Company or an Affiliate set forth in the applicable employee handbook and (b) be bound by the terms and provisions of any arbitration or similar agreement to which the Grantee is or becomes a party with the Company or an Affiliate.
14.Confidentiality, Non-Solicitation and Work Product Assignment.  As a material inducement to the Company to grant this award of Restricted Stock Units and enter into this Agreement, the Grantee hereby expressly agrees to be bound by the following covenants, terms and conditions:
(a)Definition.  “Confidential Information” consists of all information or data relating to the business of the Company, including but not limited to, business and financial information; new product development and technological data; personnel information and the identities of employees; the identities of clients and suppliers and prospective clients and suppliers; client lists and potential client lists; development, expansion and business strategies, plans and techniques; computer programs, devices, methods, techniques, processes and inventions; research and development activities; trade secrets as defined by applicable law and other materials (whether in written, graphic, audio, visual, electronic or other media, including computer software) developed by or on behalf of the Company which is not generally known to the public, which the Company has and will take precautions to maintain as confidential, and which derives at least a portion of its value to the Company from its confidentiality.  Additionally, Confidential Information includes information of any third party doing business with the Company (actively or prospectively) that the Company or such third party identifies as being confidential.  Confidential Information does not include any information that is in the public domain or otherwise publicly available (other than as a result of a wrongful act by the Grantee or an agent or other employee of the Company).  For purposes of this Section 14, the term “the Company” also refers to each of its officers, directors, employees and agents, all subsidiary and affiliated entities, all benefit plans and benefit plans’ sponsors and administrators, fiduciaries, affiliates, and all successors and assigns of any of them.
(b)Agreement to Maintain the Confidentiality of Confidential Information.  The Grantee acknowledges that, as a result of his/her employment by the Company, he/she will have access to such Confidential Information and to additional Confidential Information which may be developed in the future.  The Grantee acknowledges that all Confidential Information is the exclusive property of the Company, or in the case of Confidential Information of a third party, of such third party.  The Grantee agrees to hold all Confidential Information in trust for the benefit of the owner of such Confidential Information.  The Grantee further agrees that he/she will use Confidential Information for the sole purpose of performing his/her work for the Company, and that during his/her employment with the Company, and at all times after the termination of that employment for any reason, the Grantee will not use for his/her benefit, or the benefit of others, or divulge or convey to any third party any Confidential Information 

obtained by the Grantee during his/her employment by the Company, unless it is pursuant to the Company’s prior written permission.
(c)Return of Property.  The Grantee acknowledges that he/she has not acquired and will not acquire any right, title or interest in any Confidential Information or any portion thereof.  The Grantee agrees that upon termination of his/her employment for any reason, he/she will deliver to the Company immediately, but in no event later that the last day of his/her employment, all documents, data, computer programs and all other materials, and all copies thereof, that were obtained or made by the Grantee during his/her employment with the Company, which contain or relate to Confidential Information and will destroy all electronically stored versions of the foregoing.
(d)Disclosure and Assignment of Inventions and Creative Works.  The Grantee agrees to promptly disclose in writing to the Company all inventions, ideas, discoveries, developments, improvements and innovations (collectively “Inventions”), whether or not patentable and all copyrightable works, including but limited to computer software designs and programs (“Creative Works”) conceived, made or developed by the Grantee, whether solely or together with others, during the period the Grantee is employed by the Company.  The Grantee agrees that all Inventions and all Creative Works, whether or not conceived or made during working hours, that:  (1) relate directly to the business of the Company or its actual or demonstrably anticipated research or development, or (2) result from the Grantee’s work for the Company, or (3) involve the use of any equipment, supplies, facilities, Confidential Information, or time of the Company, are the exclusive property of the Company.  The Grantee hereby assigns and agrees to assign all right, title and interest in and to all such Inventions and Creative Works to the Company.  The Grantee understands that he/she is not required to assign to the Company any Invention or Creative Work for which no equipment, supplies, facilities, Confidential Information or time of the Company was used, unless such Invention or Creative Work relates directly to the Company’s business or actual or demonstrably anticipated research and development, or results from any work performed by the Grantee for the Company.
(e)Non-Solicitation of Clients.  During the period of the Grantee’s employment with the Company and for a period of one year from the date of termination of such employment for any reason, the Grantee agrees that he/she will not, directly or indirectly, for the Grantee’s benefit or on behalf of any person, corporation, partnership or entity whatsoever, call on, solicit, perform services for, interfere with or endeavor to entice away from the Company any client to whom the Grantee provides services at any time during the 12 month period preceding the date of termination of the Grantee’s employment with the Company, or any prospective client to whom the Grantee had made a presentation at any time during the 12 month period preceding the date of termination of the Grantee’s employment with the Company.
(f)Non-Solicitation of Employees.  For a period of one year after the date of termination of the Grantee’s employment with the Company for any reason, the Grantee agrees that he/she will not, directly or indirectly, hire, attempt to hire, solicit for employment or encourage the departure of any employee of the Company, to leave employment with the Company, or any individual who was employed by the Company as of the last day of the Grantee’s employment with the Company.
(g)Enforcement.  If, at the time of enforcement of this Section 14, a court holds that any of the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum period, scope or geographical area deemed reasonable under such circumstances will be substituted for the stated period, scope or area as contained 

in this Section 14.  Because money damages would be an inadequate remedy for any breach of the Grantee’s obligations under this Agreement, in the event the Grantee breaches or threatens to breach this Section 14, the Company, or any successors or assigns, may, in addition to other rights and remedies existing in its favor, apply to any court of competent jurisdiction for specific performance, or injunctive or other equitable relief in order to enforce or prevent any violations of this Section 14.
(h)Miscellaneous.  The Grantee acknowledges and agrees that the provisions of this Section 14 are in addition to, and not in lieu of, any confidentiality, non-solicitation, work product assignment and/or similar obligations that the Grantee may have with respect to the Company and/or its Affiliates, whether by agreement, fiduciary obligation or otherwise and that the grant and the vesting of the Restricted Stock Units contemplated by this Agreement are expressly made contingent on the Grantee's compliance with the provisions of this Section 14.  Without in any way limiting the provisions of this Section 14, the Grantee further acknowledges and agrees that the provisions of this Section 14 shall remain applicable in accordance with their terms after the Grantee's termination of employment with the Company, regardless of whether (1) the Grantee's termination or cessation of employment is voluntary or involuntary or (2) the Restricted Stock Units have not vested or will not vest.
15.Applicable Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflict of law principles thereof.  This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and controls and supersedes any prior understandings, agreements or representations by or between the parties, written or oral with respect to its subject matter and may not be modified except by written instrument executed by the parties.  The Grantee has not relied on any representation not set forth in this Agreement.

IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written.
HUDSON GLOBAL, INC.

By:    ___________________        
Name:  
Title:      

_____________________________                    
Grantee - Signature

_____________________________                    
Grantee - Print Name

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