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Exhibit 4.1
WARRANT AGREEMENT ("Agreement"), dated as of December 31, 2008
by
and between AIR INDUSTRIES GROUP INC., a Delaware 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 Warrantholder
137,138
warrants ("Warrants") to purchase shares of Series B Convertible
Preferred Stock
of the Company (the "Preferred Stock"). Each Warrant shall
entitle the holder,
subject to the satisfaction of the conditions to exercise set
forth in Section 7
of this Agreement, to purchase on or after the date hereof until
December 31,
2015 (the "Warrant Expiration Date") one share of Preferred
Stock (the shares of
Preferred Stock issuable upon exercise of the Warrants being
collectively
referred to herein as the "Warrant Shares") at an exercise price
of $0.01 per
Warrant Share (the "Exercise Price"). The shares of Preferred
Stock issuable
upon exercise of the Warrants shall have the terms, preferences,
rights and be
subject to the limitations set forth in the Certificate of
Designation
previously filed with the Office of the Secretary of State of
Delaware. 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.
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.
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.
1. 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:
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(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 of any 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.
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 an exchange or are quoted on the National
Association of
Securities Dealers, Inc. automated quotation ("NASDAQ") National
Market System,
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
an exchange or
on the NASDAQ National Market System 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.
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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 Preferred
Stock, or its authorized and issued Preferred 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.
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.
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<PAGE>
(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 Preferred
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,
reclassificatio
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