Document:

NEITHER THIS SECURITY
NOR THE SECURITIES FOR 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. 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.

 

COMMON STOCK PURCHASE WARRANT

 

AIR
INDUSTRIES GROUP

 

	Warrant Shares: 10,000	Initial Exercise Date: April 15, 2014

 

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

 

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

 

“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under 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, any Sunday, 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.

 

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

 

“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.

 

“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.

 

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

 

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

 

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

 

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

 

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Section 2.         Exercise.

 

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

 

b)        Procedure
for Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any
time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other
office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder
appearing on the books of the Company) of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise form
annexed hereto. Within three (3) Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate
Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on
a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice
of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee
or notarization) of any Notice of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall
not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available
hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for
cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises
of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect
of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant
Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date
of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of
such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions
of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available
for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

e)         Mechanics of Exercise.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 3.         Certain
Adjustments.

 

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

 

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b)       
Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company
grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata
to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant immediately
before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights.

 

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

 

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

 

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

 

f)        
Notice to Holder.

 

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

 

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

 

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Section 4.         Transfer
of Warrant.

 

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

 

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

 

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

 

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

 

(ii) Neither
this Warrant nor the Warrant Shares and any other securities issuable upon exercise hereof, may be transferred whether by sale
assignment, gift or otherwise, by the Holder prior to July 15, 2014 (such period, the “Restriction Period”),
except for transfers to employees of the original Holder who will be subject to the provisions of this subsection. The Holder will
not offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of (or enter into any transaction which is designed
to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition
due to cash settlement or otherwise) by the Holder of this Warrant, the Warrant Shares and any other securities issuable upon exercise
hereof.

 

e)       
Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring
this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and
not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act
or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.

 

Section 5.         Miscellaneous.

 

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

 

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

 

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

 

d)       
Authorized Shares.

 

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

 

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

 

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

 

    12

    

    

 

e)       
Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Warrant
shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to
the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement
and defense of this Warrant shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan
(the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New
York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives,
and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of
such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Warrant. If any party shall commence an action or proceeding to enforce any provisions of this
Warrant, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’
fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

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

 

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

 

a)       
Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including,
without limitation, any Notice of Exercise, shall be in writing and delivered personally, by facsimile, or sent by a nationally
recognized overnight courier service, addressed to the Company, at the address set forth above Attention: Daniel R. Godin,
facsimile number 631-206-9152, email address kpetersen@airindustriesgroup.com, with a copy to Daniel R. Godin at Dgodin@airindustriesgroup.com
or such other facsimile number, email address or address as the Company may specify for such purposes by notice to the Holders.
Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered
personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile
number or address of such Holder appearing on the books of the Company, or if no such facsimile number or address appears on the
books of the Company. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest
of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in
this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number set forth in this Section on a day that is not
a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date
of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.

 

    13

    

    

  

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

 

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

 

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

 

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

 

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

 

    14

    

    

 

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

 

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

 

(Signature Page Follows)

 

    15

    

    

 

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

 

	 	
        AIR INDUSTRIES GROUP

         

	 	
        By:/s/ Peter D. Rettaliata

        Name: Peter D. Rettaliata

        Title: President and CEO

 

    16

    

    

 

NOTICE OF EXERCISE

 

To:AIR
INDUSTRIES GROUP

 

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

 

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

 

  ☐ in lawful
money of the United States; or

 

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

 

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

 

_______________________________

 

The Warrant Shares shall be delivered to
the following DWAC Account Number:

 

_______________________________

 

_______________________________

 

_______________________________

 

[SIGNATURE
OF HOLDER]

 

Name of Investing Entity: ________________________________________________________________________

 

Signature of Authorized Signatory of
Investing Entity: _________________________________________________

 

Name of Authorized Signatory: ___________________________________________________________________

 

Title of Authorized Signatory: ____________________________________________________________________

 

Date: ________________________________________________________________________________________

 

    

    

    

 

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, _____
shares of Common Stock underlying the foregoing Warrant and all rights evidenced thereby are hereby assigned to _____________.

 

Dated:

 

Taglich Brothers, Inc.

 

Holder’s Signature:
By:__________________________

 

Holder’s Address:790 New
York Ave Suite 209

   Huntington, NY 11743

 

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.
Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority
to assign the foregoing Warrant.THIS NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE BE DISPOSED
OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO AIR
INDUSTRIES GROUP, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

 

	Principal Amount: $1,000,000	Issue Date: August 4, 2016

 

Subordinated Promissory Note due December
31, 2016

 

FOR VALUE RECEIVED,
AIR INDUSTRIES GROUP, a Nevada corporation (the “Company”) hereby promises to pay to the order of MICHAEL N. TAGLICH
or his assigns (the "Holder"), without demand, the sum of ONE MILLION Dollars ($1,000,000), together with accrued interest
thereon from the date hereof at the rate of seven percent (7%) per annum, on the earlier of (i) December 31, 2016 (the "Maturity
Date") or (ii) such date following the date hereof on which the Company shall consummate a debt or equity financing in one
or a series of related transactions in an aggregate amount of $2,000,000 or more, if not paid sooner.

 

This Note may be prepaid
in whole or in part at any time. All payments made pursuant to this Note shall be applied first to reimbursable expenses, interest
accrued, if any, and then principal.

 

The following is a
statement of rights of the Holder and the conditions to which this Note is subject, and to which the Holder, by acceptance of this
Note, agrees:

 

1.    Subordination. (a)   This
Note will be subordinate and inferior to the Company’s Senior Indebtedness (as hereinafter defined). The Company for itself,
its successors and assigns, covenants and agrees and the Holder of this Note, for himself, his successors and assigns, by his acceptance
of this Note likewise covenants and agrees that, to the extent provided below, the payment of all amounts due pursuant to this
Note is hereby expressly subordinated and junior in right of payment to the extent and in the manner hereinafter set forth, to
the Company’s Senior Indebtedness. As used herein, the term “Senior Indebtedness” shall mean the principal of,
and interest and premium, if any, on any and all, (i) indebtedness of the Company for borrowed money or obligations with respect
to which the Company is a guarantor, to banks, insurance companies, or other financial institutions or entities regularly engaged
in the business of lending money, in each case as in effect as of the date hereof, or as may be borrowed hereafter, including without
limitation, indebtedness incurred by one or more of the Company’s subsidiaries under the Amended and Restated Revolving Credit,
Term Loan, Equipment Line and Security Agreement, dated as of June 27, 2013 among Air Industries Machining, Corp., Welding Metallurgy,
Inc., Nassau Tool Works, Inc., Woodbine Products Inc., Eur-Pac Corporation, Electronic Connection Corporation, AMK Welding, Inc.,
The Sterling Engineering Corporation, and PNC Bank, National Association, as agent for the various lenders named therein, as amended
as of the date hereof, the payment of which has been guaranteed by the Company and Air Realty Group, LLC (the “Guarantors”),
(ii) any such indebtedness or any debentures, notes or other evidence of indebtedness issued in exchange for or to refinance such
Senior Indebtedness, or any indebtedness arising from the satisfaction of such Senior Indebtedness by a Guarantor, provided that
such indebtedness issued in exchange for or to refinance Senior Indebtedness or arising from the satisfaction of Senior Indebtedness
by a Guarantor is on commercially reasonable terms as of the date of incurrence not to exceed the principal amount under such Senior
Indebtedness and provided further that the Company provides the Holder with prior written notice of such action.

 

    

    

    

 

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

 

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

 

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

 

(i)   the date
such Default or Event of Default under the Senior Indebtedness, as applicable, is cured or waived, provided that such Default or
Event of Default is in the payment of any amount due thereunder; or

 

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

 

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

 

    

    

    

 

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

 

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

 

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

 

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

 

    

    

    

 

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

 

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

 

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

 

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

 

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

 

2.    Events of Default. The occurrence of any of the following events of default ("Event of Default") shall,
at the option of the Holder hereof and subject to the provisions of section 1 (a) hereof, make all sums of principal and interest
then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, upon demand, without presentment,
or grace period, all of which hereby are expressly waived, except as set forth below:

 

    

    

    

 

(a)    Failure
to Pay Principal or Interest. The Company fails to pay any installment of principal, interest or other sum due under this Note
when due.

 

(b)    Receiver
or Trustee. The Company shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of
a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise
be appointed without the consent of the Company is not dismissed within sixty (60) days of appointment.

 

(c)    Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any
law, or the issuance of any notice in relation to such event, for the relief of debtors shall be instituted by or against the Company
and if instituted against Company are not dismissed within sixty (60) days of initiation.

 

The holder of this Note shall give the
Company and the holders of the Senior Indebtedness written notice of any Event of Default hereunder.

 

3.    Miscellaneous.

 

(a)  
 Waiver. No failure or delay on the part of Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise available.

 

(b)  
Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered
or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid,
or (iv) transmitted by hand delivery or e-mail, addressed as set forth below or to such other address as such party shall have
specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall
be deemed effective (a) upon hand delivery or delivery by e-mail, at the address or number designated below (if delivered on a
business day during normal business hours where such notice is to be received), or the first business day following such delivery
(if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: (i) if to the Company to:
Air Industries Group, 360 Motor Parkway, Suite 100, Hauppauge, New York 11788, Attn: Daniel R. Godin, President and CEO, e-mail:
dgodin@airindustriesgroup.com, with a copy by e-mail only to: Eaton & Van Winkle LLP, Three
Park Avenue, 16th floor, New York, NY 10016, Attn: Vincent J. McGill, Esq., e-mail: vmcgill@evw.com, and (ii) if to
the Holder, to c/o Taglich Brothers, Inc., 790 New York Avenue, Huntington, NY 11743, with a copy to c/o Taglich Brothers, Inc.,
790 New York Avenue, Huntington, NY 11743, Attn: Mr. Richard Oh, e-mail: roh@taglichbrothers.com.

 

(c)    Terms.
The term "Note" and all reference thereto, as used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or supplemented.

 

(d)    Successors
and Assigns. This Note shall be binding upon the Company and its successors and assigns, and shall inure to the benefit of
the Holder and its successors and assigns.

 

    

    

    

 

(e)    Expenses.
The Company shall reimburse Holder for all reasonable costs and expenses, including without limitation, reasonable attorneys’
fees and expenses, incurred in connection with (i) drafting, negotiating, executing and delivering any amendment, modification
or waiver of, or consent with respect to, any matter relating to the rights of Holder hereunder and (ii) enforcing any provisions
of this Note and/or collecting any amounts due under this Note.

 

(f)   Governing
Law. This Note shall be governed by and construed in accordance with the laws of the State of New York. Any action brought
by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the civil
or state courts of New York or in the federal courts located in the State and county of New York. Both parties and the individual
signing this Agreement on behalf of the Company agree to submit to the jurisdiction of such courts. The prevailing party shall
be entitled to recover from the other party its reasonable attorney's fees and costs.

 

(g)   Savings
Clause. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges
in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges
hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed
by the Company to the Holder and thus refunded to the Company.

 

IN WITNESS WHEREOF,
Company has caused this Note to be signed in its name by an authorized officer as of the 4th day of August, 2016.

 

	 	AIR
INDUSTRIES GROUP

 

By:
/s/ Daniel R. Godin 

Daniel
R. Godin 

President and Chief Executive Officer

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