FIFTEENTH AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT

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FIFTEENTH AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT

THIS FIFTEENTH AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT (this “Agreement”) is entered into June 19, 2017 by and among AIR INDUSTRIES MACHINING, CORP. (as successor by merger with Gales Industries Acquisition Corp., Inc.) (“Air”), a corporation organized under the laws of the State of New York, WELDING METALLURGY, INC. (as successor by merger with WMS Merger Corp.) (“WM”), a corporation organized under the laws of the State of New York, NASSAU TOOL WORKS, INC. (formerly known as NTW Operating Inc.) (“Nassau”), a corporation organized under the laws of the State of New York, WOODBINE PRODUCTS, INC. (“WP”), a corporation organized under the laws of the State of New York, EUR-PAC CORPORATION (“Eur-Pac”), a corporation organized under the laws of the State of Connecticut, ELECTRONIC CONNECTION CORPORATION (“ECC”), a corporation organized under the laws of the State of Connecticut, and THE STERLING ENGINEERING CORPORATION (“STERLING”), a corporation organized under the laws of the State of Connecticut, (“Sterling,” and collectively with Air, WM, Nassau, WP, EUR-PAC and ECC, the “Borrower”), a corporation organized under the laws of the State of New York, AIR INDUSTRIES GROUP (as successor by merger with Air Industries Group, Inc. f/k/a Gales Industries Incorporated, a Delaware corporation)(“AIR GROUP”) a corporation organized under the laws of the State of Nevada and AIR REALTY GROUP, LLC (“REALTY,” and collectively with AIR GROUP and with the Borrower, the “Obligor”), a limited liability company organized under the laws of the State of Connecticut, and PNC BANK, NATIONAL ASSOCIATION (“PNC”), the various financial institutions named therein or which hereafter become a party thereto, (together with PNC, collectively, “Lenders”) and PNC as agent for Lenders (in such capacity, “Agent”).

RECITALS

WHEREAS, Obligor and PNC entered into a certain Amended and Restated Revolving Credit, Term Loan and Security Agreement dated June 27, 2013 (which has been, is being and may be further amended, replaced, restated, modified and/or extended, the “Loan Agreement”);

WHEREAS, AIR GROUP has filed a registration statement on Form S-1, as amended (the “Registration Statement”), with the Securities and Exchange Commission (the “SEC”) for an underwritten public offering of shares of common stock, which provides gross cash proceeds of up to approximately $13,000,000, plus an over-allotment option (the “Offering”);

WHEREAS, AIR GROUP intends to apply the net cash proceeds of the Offering to, among other things, the following uses, as more fully described in the Registration Statement and related prospectus: (i) redeem shares of AIR GROUP’s Series A Convertible Preferred Stock, $0.0001 par value (the “Series A Preferred Stock”) issued in lieu of cash dividends at a redemption price of $10.00 per share, the stated value of a shares of Series A Preferred Stock; (ii) redeem AIR GROUP’s Subordinated Convertible Notes due May 12, 2018 in the aggregate principal amount of $4,158,624 as of the date hereof (the “May 2018 Notes”), and (iii) pay approximately $4,000,000 of outstanding trade payables, and approximately $510,000 in principal, plus accrued interest, as of the date hereof, on promissory notes issued in March 2017 to Michael N. Taglich and Robert F. Taglich, directors and principal stockholders of AIR GROUP; and

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WHEREAS, Obligor has requested modifications to the terms of the Loan Agreement as set forth in this Agreement.

Now, therefore, in consideration of PNC’s continued extension of credit and the agreements contained herein, the parties agree as follows:

AGREEMENT

“Fifteenth Amendment Closing Date” shall mean June 19, 2017.

(a) Fixed Charge Coverage Ratio. Maintain at all times a Fixed Charge Coverage Ratio, tested quarterly on a consolidated basis beginning September 30, 2017 as follows: (i) 1.00 to 1.00 for the quarter ending September 30, 2017, tested based upon the prior three (3) months, (ii) 1.05 to 1.00 for the quarter ending December 31, 2017, tested based upon the prior six (6) months and (iii) 1.05 to 1.00 for the quarter ending March 31, 2018, tested based upon the prior nine (9) months.

(b) Minimum EBITDA. Maintain EBITDA of not less than $345,000 for the period ending June 30, 2017.

(i)       by the sum of $25,000.00 to be paid on each Monday during the period May 22, 2017 through July 10, 2017; and

(ii)       by the sum of $100,000.00 to be paid on each Monday thereafter, and continuing until such Excess Advances have been repaid in full.

So long as Excess Advances remain outstanding, interest with respect to all such outstanding Excess Advances shall be charged at an interest rate at all times equal to the Revolving Interest Rate.

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(A) the Loan Agreement and Other Documents, as amended hereby, are in full force and effect without any defense, claim, counterclaim, right or claim of set-off;

(B)  to the best of its knowledge, no default by the Agent or Lenders in the performance of their duties under the Loan Agreement or the Other Documents has occurred;

(C)  all representations and warranties of the Borrower contained herein, in the Loan Agreement and in the Other Documents are true and correct in all material respects as of this date, except for any representation or warranty that specifically refers to an earlier date;

(D) Borrower has taken all necessary action to authorize the execution and delivery of this Agreement; and

(E)  this Agreement is a modification of an existing obligation and is not a novation.

(A) provide the Agent with this Agreement, properly executed;

(B)  pay to Agent an Amendment Fee in the amount of $50,000 on the Fifteenth Amendment Closing Date;

(C)  provide the Agent with Secretary’s Certificates and Resolutions of the Obligor approving the transaction;

(D) provide Agent with a copy of the filed Certificate of Merger relative to the merger of Miller Stuart Inc. into WM;

(E)  pay all legal fees incurred by the Agent in entering into this Agreement to Wilentz, Goldman & Spitzer; and

(F)  pay all other fees and costs incurred by the Lenders in entering into this Agreement.

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IN WITNESS WHEREOF, the undersigned have signed and sealed this Agreement the day and year above written.

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