EXHIBIT 10.20

                         MORTGAGE AND SECURITY AGREEMENT

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                        AIR INDUSTRIES MACHINING, CORP.,

                                    Mortgagor

                                       AND

                         PNC BANK, NATIONAL ASSOCIATION,

                                    Mortgagee

                      ------------------------------------

                                   Return to:

                         Wilentz, Goldman & Spitzer P.A.
                           90 Woodbridge Center Drive
                          Woodbridge, New Jersey 07095
                         Attn: Stuart A. Hoberman, Esq.

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Mortgage and Security Agreement                                [LOGO OF PNCBANK]

      THIS MORTGAGE AND SECURITY AGREEMENT (this "Mortgage") is made as of the
30th day of November, 2005, by AIR INDUSTRIES MACHINING, CORP., a New York
corporation (the "Mortgagor" and the "Borrower"), with an address at 1479
Clinton Avenue, Bay Shore, New York 11706 in favor of PNC BANK, NATIONAL
ASSOCIATION (the "Mortgagee"), with an address at Two Tower Center Boulevard,
East Brunswick, New Jersey 08816.

      WHEREAS, the Mortgagor is the owner of a certain tract or parcel of land
described in Exhibit A attached hereto and made a part hereof, together with the
improvements now or hereafter erected thereon; and

      WHEREAS, pursuant to a certain Revolving Credit, Term Loan, Equipment Line
of Credit and Security Agreement by and among the Mortgagor, the Mortgagee, the
other financial institutions named therein (collectively with the Mortgagee, the
"Lenders"), and the Mortgagee as Agent for the Lenders (Mortgagee in such
capacity, the "Agent") dated the date hereof (as may be amended, modified,
restated, replaced, increased and/or extended from time to time, the "Loan
Agreement"), the Borrower has borrowed from the Lenders certain loans in the
original principal amount of $14,000,000 (as such amount may be increased and/or
decreased from time to time, the "Loan") as evidenced by a certain Revolving
Credit Note executed by the Borrower in favor of the Agent for the benefit of
the Lenders in the original principal amount of $9,000,000 dated the date
hereof, a certain Term Note executed by the Borrower in favor of the Agent for
the benefit of the Lenders in the original principal amount of $3,500,000 dated
the date hereof, a certain Equipment Line of Credit Note executed by the
Borrower in favor of the Agent for the benefit of the Lenders in the original
principal amount of $1,500,000 dated the date hereof and certain Converted
Equipment Line of Credit Notes executed by the Borrower in favor of the Agent
for the benefit of the Lenders from time to time (collectively and with any and
all other notes that may be delivered from time to time in connection with any
obligation of the Borrower to the Lenders, as all may be amended, modified,
restated, replaced, increased and/or extended from time to time, the "Note"),
which Loan Agreement and Note are incorporated herein by reference and made a
part hereof;

      NOW, THEREFORE, for the purpose of securing the payment and performance of
the following obligations (collectively called the "Obligations"):

(A) The Loan, the Note and all other loans, advances, debts, liabilities,
obligations, covenants and duties owing by the Mortgagor to the Mortgagee or to
any other direct or indirect subsidiary of The PNC Financial Services Group,
Inc., of any kind or nature, present or future (including any interest accruing
thereon after maturity, or after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding relating
to the Mortgagor, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether direct or indirect (including
those acquired by assignment or participation), absolute or contingent, joint or
several, due or to become due, now existing or hereafter arising, whether or not
(i) evidenced by any note, guaranty or other instrument, (ii) arising under any
agreement, instrument or document, (iii) for the payment of money, (iv) arising
by reason of an extension of credit, opening of a letter of credit, loan,
equipment lease or guarantee, (v) under any interest or currency swap, future,
option or other interest rate protection or similar agreement, (vi) under or by
reason of any foreign currency transaction, forward, option or other similar
transaction providing for the purchase of one currency in exchange for the sale
of another currency, or in any other manner, or (vii) arising out of overdrafts
on deposit or other accounts or out of electronic funds transfers (whether by
wire transfer or through automated clearing houses or otherwise) or out of the
return unpaid of, or other failure of the Mortgagee to receive final payment
for, any check, item, instrument, payment order or other deposit or credit to a
deposit or other account, or out of the Mortgagee's non-receipt of or inability
to collect funds or otherwise not being made whole in connection with depository
or other similar arrangements; and any amendments, extensions, renewals and
increases of or to any of the foregoing, and all costs and expenses of the
Mortgagee incurred in the documentation, negotiation, modification, enforcement,
collection and otherwise in connection with any of the foregoing, including
reasonable attorneys' fees and expenses. Notwithstanding anything to the
contrary in this Mortgage, the maximum aggregate principal amount of the

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Obligations that is, or under any contingency may be, secured by this Mortgage
(including Borrower's obligation to reimburse advances made by any Lender),
either at execution or any time thereafter is $4,000,000 (collectively, with the
following, the "Secured Amount"), plus amounts that any Lender expends after a
declaration of default under this Mortgage to the extent that any such amounts
shall constitute payment of (i) taxes, charges or assessments that may be
imposed by law upon any of the Property; (ii) premiums on insurance policies
covering any of the Property; (iii) expenses incurred in upholding the lien of
this Mortgage, including the expenses of any litigation to prosecute or defend
the rights and lien created by this Mortgage; or, (iv) any amount, cost or
charge to which any Lender becomes subrogated, upon payment, whether under
recognized principles of law or equity, or under express statutory authority;
then, in each such event, such amounts or costs, together with interest thereon,
shall be added to the Obligations secured hereby and shall be secured by this
Mortgage.

      (B) Any sums advanced by the Mortgagee or which may otherwise become due
pursuant to the provisions of the Note or this Mortgage or pursuant to any other
document or instrument at any time delivered to the Mortgagee to evidence or
secure any of the Obligations or which otherwise relate to any of the
Obligations (as the same may be amended, supplemented or replaced from time to
time, the "Loan Documents").

The Mortgagor, for good and valuable consideration, receipt of which is hereby
acknowledged, and intending to be legally bound hereby, does hereby give, grant,
bargain, sell, convey, assign, transfer, mortgage, hypothecate, pledge, set over
and confirm unto the Mortgagee and does agree that the Mortgagee shall have a
security interest in the following described property, all accessions and
additions thereto, all substitutions therefor and replacements and proceeds
thereof, and all reversions and remainders of such property now owned or held or
hereafter acquired (the "Property"), to wit:

            (a) All of the Mortgagor's estate in the premises described in
Exhibit A, together with all of the easements, rights of way, privileges,
liberties, hereditaments, gores, streets, alleys, passages, ways, waters,
watercourses, rights and appurtenances thereunto belonging or appertaining, and
all of the Mortgagor's estate, right, title, interest, claim and demand therein
and in the public streets and ways adjacent thereto, either in law or in equity
(the "Land");

            (b) All the buildings, structures and improvements of every kind and
description now or hereafter erected or placed on the Land, and all facilities,
fixtures, machinery, apparatus, appliances, installations, machinery and
equipment, including all building materials to be incorporated into such
buildings, all electrical equipment necessary for the operation of such
buildings and heating, air conditioning and plumbing equipment now or hereafter
attached to, located in or used in connection with those buildings, structures
or other improvements (the "Improvements");

            (c) All rents, issues and profits arising or issuing from the Land
and the Improvements (the "Rents") including the Rents arising or issuing from
all leases, licenses, subleases or any other use or occupancy agreement now or
hereafter entered into covering all or any part of the Land and Improvements
(the "Leases"), all of which Leases and Rents are hereby assigned to the
Mortgagee by the Mortgagor. The foregoing assignment shall be an absolute
assignment of all of the Mortgagor's entire interest in the Rents. The foregoing
assignment shall also include all fees, charges, accounts or other payments for
the use or occupancy of rooms and other public facilities in hotels, motels, or
other lodging properties, and all cash or securities deposited under Leases to


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secure performance of lessees of their obligations thereunder, whether such cash
or securities are to be held until the expiration of the terms of such leases or
applied to one or more installments of rent coming due prior to the expiration
of such terms. The foregoing assignment extends to Rents arising both before and
after the commencement by or against the Mortgagor of any case or proceeding
under any Federal or State bankruptcy, insolvency or similar law, and is
intended as an absolute assignment and not merely the granting of a security
interest. The Mortgagor, however, shall have a license to collect, retain and
use the Rents so long as no Event of Default shall have occurred and be
continuing or shall exist. The Mortgagor will execute and deliver to the
Mortgagee, on demand, such additional assignments and instruments as the
Mortgagee may require to confirm, maintain and continue the assignment of Rents
hereunder;

            (d) All proceeds of the conversion, voluntary or involuntary, of any
of the foregoing into cash or liquidated claims; and

            (e) Without limiting any of the other provisions of this Mortgage,
the Mortgagor, as debtor, expressly grants unto the Mortgagee, as secured party,
a security interest in all personal property of the Mortgagor, including the
following, all whether now owned or hereafter acquired or arising and wherever
located: (i) accounts (including health-care-insurance receivables and credit
card receivables); (ii) securities entitlements, securities accounts, commodity
accounts, commodity contracts and investment property; (iii) deposit accounts;
(iv) instruments (including promissory notes); (v) documents (including
warehouse receipts); (vi) chattel paper (including electronic chattel paper and
tangible chattel paper); (vii) inventory, including raw materials, work in
process, or materials used or consumed in Mortgagor's business, items held for
sale or lease or furnished or to be furnished under contracts of service, sale
or lease, goods that are returned, reclaimed or repossessed; (viii) goods of
every nature, including stock-in-trade, goods on consignment, standing timber
that is to be cut and removed under a conveyance or contract for sale, the
unborn young of animals, crops grown, growing, or to be grown, manufactured
homes, computer programs embedded in such goods and farm products; (ix)
equipment, including machinery, vehicles and furniture; (x) fixtures; (xi)
agricultural liens; (xii) as-extracted collateral; (xiii) letter of credit
rights; (xiv) general intangibles, of every kind and description, including
payment intangibles, software, computer information, source codes, object codes,
records and data, all existing and future customer lists, choses in action,
claims (including claims for indemnification or breach of warranty), books,
records, patents and patent applications, copyrights, trademarks, tradenames,
tradestyles, trademark applications, goodwill, blueprints, drawings, designs and
plans, trade secrets, contracts, licenses, license agreements, formulae, tax and
any other types of refunds, returned and unearned insurance premiums, rights and
claims under insurance policies; (xv) all supporting obligations of all of the
foregoing property; (xvi) all property of the Mortgagor now or hereafter in the
Mortgagee's possession or in transit to or from, or under the custody or control
of, the Mortgagee or any affiliate thereof; (xvii) all cash and cash equivalents
thereof; and (xviii) all cash and noncash proceeds (including insurance
proceeds) of all of the foregoing property, all products thereof and all
additions and accessions thereto, substitutions therefor and replacements
thereof. The Mortgagor will execute and deliver to the Mortgagee on demand such
financing statements and other instruments as the Mortgagee may require in order
to perfect, protect and maintain such security interest under the Uniform
Commercial Code ("UCC") on the aforesaid collateral.

      To have and to hold the same unto the Mortgagee, its successors and
assigns, forever.

      Provided, however, that if the Mortgagor shall pay to the Mortgagee the
Obligations, and if the Mortgagor shall keep and perform each of its other
covenants, conditions and agreements set forth herein and in the other Loan
Documents, then, upon the termination of all obligations, duties and commitments
of the Mortgagor under the Obligations and this Mortgage, and subject to the
provisions of the paragraph entitled "Survival; Successors and Assigns", the
estate hereby granted and conveyed shall become null and void.


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      1. Representations and Warranties. The Mortgagor represents and warrants
to the Mortgagee that (i) the Mortgagor has good and marketable title to an
estate in fee simple absolute in the Land and Improvements and has all right,
title and interest in all other property constituting a part of the Property, in
each case free and clear of all liens and encumbrances, except as may otherwise
be set forth on an Exhibit B hereto and (ii) its name, type of organization,
jurisdiction of organization and chief executive office are true and complete as
set forth in the heading of this Mortgage. This Mortgage is a valid and
enforceable first lien on the Property and the Mortgagee shall, subject to the
Mortgagor's right of possession prior to an Event of Default, quietly enjoy and
possess the Property. The Mortgagor shall preserve such title as it warrants
herein and the validity and priority of the lien hereof and shall forever
warrant and defend the same to the Mortgagee against the claims of all persons.

      2. Affirmative Covenants. Until all of the Obligations shall have been
fully paid, satisfied and discharged the Mortgagor shall:

            (a) Payment and Performance of Obligations. Pay or cause to be paid
and perform all Obligations when due as provided in the Loan Documents.

            (b) Legal Requirements. Promptly comply with and conform to all
present and future laws, statutes, codes, ordinances, orders and regulations and
all covenants, restrictions and conditions which may be applicable to the
Mortgagor or to any of the Property (the "Legal Requirements").

            (c) Impositions. Before interest or penalties are due thereon and
otherwise when due, the Mortgagor shall pay all taxes of every kind and nature,
all charges for any easement or agreement maintained for the benefit of any of
the Property, all general and special assessments (including any condominium or
planned unit development assessments, if any), levies, permits, inspection and
license fees, all water and sewer rents and charges, and all other charges and
liens, whether of a like or different nature, imposed upon or assessed against
the Mortgagor or any of the Property (the "Impositions"). Within thirty (30)
days after the payment of any Imposition, the Mortgagor shall deliver to the
Mortgagee written evidence acceptable to the Mortgagee of such payment. The
Mortgagor's obligations to pay the Impositions shall survive the Mortgagee's
taking title to (and possession of) the Property through foreclosure,
deed-in-lieu or otherwise, as well as the termination of the Mortgage including,
without limitation, by merger into a deed.

            (d) Maintenance of Security. Use, and permit others to use, the
Property only for its present use or such other uses as permitted by applicable
Legal Requirements and approved in writing by the Mortgagee. The Mortgagor shall
keep the Property in good condition and order and in a rentable and tenantable
state of repair and will make or cause to be made, as and when necessary, all
repairs, renewals, and replacements, structural and nonstructural, exterior and
interior, foreseen and unforeseen, ordinary and extraordinary, provided,
however, that no structural repairs, renewals or replacements shall be made
without the Mortgagee's prior written consent. The Mortgagor shall not remove or
demolish the Property nor commit or suffer waste with respect thereto, nor
permit the Property to become deserted or abandoned. The Mortgagor covenants and
agrees not to take or permit any action with respect to the Property which will
in any manner impair the security of this Mortgage or the use of the Property as
set forth in the Loan Documents.


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      3. Leases. The Mortgagor shall not (a) execute an assignment or pledge of
the Rents or the Leases other than in favor of the Mortgagee; (b) accept any
prepayment of an installment of any Rents prior to the due date of such
installment; or (c) enter into or amend any of the terms of any of the Leases
without the Mortgagee's prior written consent. Any or all leases or subleases of
all or any part of the Property shall be subject in all respects to the
Mortgagee's prior written consent, shall be subordinated to this Mortgage and to
the Mortgagee's rights and, together with any and all rents, issues or profits
relating thereto, shall be assigned at the time of execution to the Mortgagee as
additional collateral security for the Obligations, all in such form, substance
and detail as is satisfactory to the Mortgagee in its sole discretion.

      4. Due on Sale Clause. The Mortgagor shall not sell, convey or otherwise
transfer any interest in the Property (whether voluntarily or by operation of
law), or agree to do so, without the Mortgagee's prior written consent,
including (a) any sale, conveyance, assignment, or other transfer of (including
installment land sale contracts), or the grant of a security interest in, all or
any part of the legal or equitable title to the Property; (b) any lease of all
of the Property; or (c) any sale, conveyance, encumbrance, assignment, or other
transfer of, or the grant of a security interest in, any share of stock of the
Mortgagor, if a corporation or any partnership interest in the Mortgagor, if a
partnership, or any membership interest, if a limited liability entity, except
in favor of the Mortgagee. Any default under this Section shall cause an
immediate acceleration of the Obligations without any demand by the Mortgagee.

      5. Insurance. The Mortgagor shall keep the Property continuously insured,
in an amount not less than the cost to replace the Property or an amount not
less than eighty percent (80%) of the full insurable value of the Property,
whichever is greater, covering such risks and in such amounts and with such
deductibles as are satisfactory to the Mortgagee and its counsel including,
without limitation, insurance against loss or damage by fire, with extended
coverage and against other hazards as the Mortgagee may from time to time
require. With respect to any property under construction or reconstruction, the
Mortgagor shall maintain builder's risk insurance. The Mortgagor shall also
maintain comprehensive general public liability insurance, in an amount of not
less than One Million Dollars ($1,000,000) per occurrence and Two Million
Dollars ($2,000,000) general aggregate per location, which includes contractual
liability insurance for the Mortgagor's obligations under the Leases, and
worker's compensation insurance. All property and builder's risk insurance shall
include protection for continuation of income for a period of twelve (12)
months, in the event of any damage caused by the perils referred to above. All
policies, including policies for any amounts carried in excess of the required
minimum and policies not specifically required by the Mortgagee, shall be with
an insurance company or companies satisfactory to the Mortgagee, shall be in
form satisfactory to the Mortgagee, shall meet all coinsurance requirements of
the Mortgagee, shall be maintained in full force and effect, shall be assigned
to the Mortgagee, with premiums prepaid, as collateral security for payment of
the Obligations, shall be endorsed with a standard mortgagee clause in favor of
the Mortgagee and shall provide for at least thirty (30) days notice of
cancellation to the Mortgagee. Such insurance shall also name the Mortgagee as
an additional insured, lender loss payee and mortgagee under the comprehensive
general public liability and property insurance policies and the Mortgagor shall
also deliver to the Mortgagee a copy of the replacement cost coverage
endorsement. If the Property is located in an area which has been identified by
any governmental agency, authority or body as a flood hazard area or the like,
then the Mortgagor shall maintain a flood insurance policy covering the Property
in an amount not less than the original principal amount of the Loan or the
maximum limit of coverage available under the federal program, whichever amount
is less.

      6. Rights of Mortgagee to Insurance Proceeds. In the event of loss, the
Mortgagee shall have the exclusive right to adjust, collect and compromise all
insurance claims, and the Mortgagor shall not adjust, collect or compromise any
claims under said policies without the Mortgagee's prior written consent. Each
insurer is hereby authorized and directed to make payment under said policies,
including return of unearned premiums, directly to the Mortgagee instead of to


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the Mortgagor and the Mortgagee jointly, and the Mortgagor appoints the
Mortgagee as the Mortgagor's attorney-in-fact to endorse any draft therefor. All
insurance proceeds may, at the Mortgagee's sole option, be applied to all or any
part of the Obligations and in any order (notwithstanding that such Obligations
may not then otherwise be due and payable) or to the repair and restoration of
any of the Property under such terms and conditions as the Mortgagee may impose.

      7. Installments for Insurance, Taxes and Other Charges. Upon the
Mortgagee's request, the Mortgagor shall pay to the Mortgagee monthly, an amount
equal to one-twelfth (1/12) of the annual premiums for the insurance policies
referred to hereinabove and the annual Impositions and any other item which at
any time may be or become a lien upon the Property (the "Escrow Charges"). The
amounts so paid shall be used in payment of the Escrow Charges so long as no
Event of Default shall have occurred. No amount so paid to the Mortgagee shall
be deemed to be trust funds, nor shall any sums paid bear interest. The
Mortgagee shall have no obligation to pay any insurance premium or Imposition if
at any time the funds being held by the Mortgagee for such premium or Imposition
are insufficient to make such payments. If, at any time, the funds being held by
the Mortgagee for any insurance premium or Imposition are exhausted, or if the
Mortgagee determines, in its sole discretion, that such funds will be
insufficient to pay in full any insurance premium or Imposition when due, the
Mortgagor shall promptly pay to the Mortgagee, upon demand, an amount which the
Mortgagee shall estimate as sufficient to make up the deficiency. Upon the
occurrence of an Event of Default, the Mortgagee shall have the right, at its
election, to apply any amount so held against the Obligations due and payable in
such order as the Mortgagee may deem fit, and the Mortgagor hereby grants to the
Mortgagee a lien upon and security interest in such amounts for such purpose.

      8. Condemnation. The Mortgagor, immediately upon obtaining knowledge of
the institution of any proceedings for the condemnation or taking by eminent
domain of any of the Property, shall notify the Mortgagee of the pendency of
such proceedings. The Mortgagee may participate in any such proceedings and the
Mortgagor shall deliver to the Mortgagee all instruments requested by it to
permit such participation. Any award or compensation for property taken or for
damage to property not taken, whether as a result of such proceedings or in lieu
thereof, is hereby assigned to and shall be received and collected directly by
the Mortgagee, and any award or compensation shall be applied, at the
Mortgagee's option, to any part of the Obligations and in any order
(notwithstanding that any of such Obligations may not then be due and payable)
or to the repair and restoration of any of the Property under such terms and
conditions as the Mortgagee may impose.

      9. Environmental Matters. (a) For purposes of this Section 9, the term
"Environmental Laws" shall mean all federal, state and local laws, regulations
and orders, whether now or in the future enacted or issued, pertaining to the
protection of land, water, air, health, safety or the environment. The term
"Regulated Substances" shall mean all substances regulated by Environmental
Laws, or which are known or considered to be harmful to the health or safety of
persons, or the presence of which may require investigation, notification or
remediation under the Environmental Laws. The term "Contamination" shall mean
the discharge, release, emission, disposal or escape of any Regulated Substances
into the environment.

            (b) The Mortgagor represents and warrants to Borrower's knowledge
(i) that no Contamination is present at, on or under the Property and that no
Contamination is being or has been emitted onto any surrounding property; (ii)
all operations and activities on the Property have been and are being conducted
in accordance with all Environmental Laws, and the Mortgagor has all permits and
licenses required under the Environmental Laws; (iii) except as set forth on
Exhibit C attached hereto, no underground or aboveground storage tanks are or
have been located on or under the Property; and (iv) no legal or administrative
proceeding is pending or threatened relating to any environmental condition,
operation or activity on the Property, or any violation or alleged violation of
Environmental Laws. These representations and warranties shall be true as of the
date hereof, and shall be deemed to be continuing representations and warranties
which must remain true, correct and accurate during the entire duration of the
term of this Mortgage.


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            (c) The Mortgagor shall ensure, at its sole cost and expense, that
the Property and the conduct of all operations and activities thereon comply and
continue to comply with all Environmental Laws. The Mortgagor shall notify the
Mortgagee promptly and in reasonable detail in the event that the Mortgagor
becomes aware of any violation of any Environmental Laws, the presence or
release of any Contamination with respect to the Property, or any governmental
or third party claims relating to the environmental condition of the Property or
the conduct of operations or activities thereon. The Mortgagor also agrees not
to permit or allow the presence of Regulated Substances on any part of the
Property, except for (i) those Regulated Substances which are used in the
ordinary course of the Mortgagor's business, but only to the extent they are in
all cases used in a manner which complies with all Environmental Laws; and (ii)
those Regulated Substances which are naturally occurring on the Property. The
Mortgagor agrees not to cause, allow or permit the presence of any Contamination
on the Property.

            (d) The Mortgagee shall not be liable for, and the Mortgagor shall
indemnify, defend and hold the Mortgagee and the Indemnified Parties (as
hereinafter defined) and all of their respective successors and assigns harmless
from and against all losses, costs, liabilities, damages, fines, claims,
penalties and expenses (including reasonable attorneys', consultants' and
contractors' fees, costs incurred in the investigation, defense and settlement
of claims, as well as costs incurred in connection with the investigation,
remediation or monitoring of any Regulated Substances or Contamination) that the
Mortgagee or any Indemnified Party may suffer or incur (including as holder of
the Mortgage, as mortgagee in possession or as successor in interest to the
Mortgagor as owner of the Property by virtue of a foreclosure or acceptance of a
deed in lieu of foreclosure) as a result of or in connection with (i) any
Environmental Laws (including the assertion that any lien existing or arising
pursuant to any Environmental Laws takes priority over the lien of the
Mortgage); (ii) the breach of any representation, warranty, covenant or
undertaking by the Mortgagor in this Section 9; (iii) the presence on or the
migration of any Contamination or Regulated Substances on, under or through the
Property; or (iv) any litigation or claim by the government or by any third
party in connection with the environmental condition of the Property or the
presence or migration of any Regulated Substances or Contamination on, under, to
or from the Property.

            (e) Upon the Mortgagee's request, the Mortgagor shall execute and
deliver an Environmental Indemnity Agreement satisfactory in form and substance
to the Mortgagee, to more fully reflect the Mortgagor's representations,
warranties, covenants and indemnities with respect to the Environmental Laws.

      10. Inspection of Property. The Mortgagee shall have the right to enter
the Property at any reasonable hour for the purpose of inspecting the order,
condition and repair of the buildings and improvements erected thereon, as well
as the conduct of operations and activities on the Property. The Mortgagee may
enter the Property (and cause the Mortgagee's employees, agents and consultants
to enter the Property), upon prior written notice to the Mortgagor, to conduct
any and all environmental testing deemed appropriate by the Mortgagee in its
sole discretion. The environmental testing shall be accomplished by whatever
means the Mortgagee may deem reasonably appropriate, including the taking of
soil samples and the installation of ground water monitoring wells or other
intrusive environmental tests. The Mortgagor shall provide the Mortgagee (and
the Mortgagee's employees, agents and consultants) reasonable rights of access
to the Property as well as such information about the Property and the past or
present conduct of operations and activities thereon as the Mortgagee shall
reasonably request.


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      11. Events of Default. The occurrence of any one or more of the following
events shall constitute an "Event of Default" hereunder: (a) any Event of
Default (as defined in any of the Obligations); (b) any default under any of the
Obligations that does not have a defined set of "Events of Default" and the
lapse of any notice or cure period provided in such Obligations with respect to
such default; (c) demand by the Mortgagee under any of the Obligations that have
a demand feature; (d) the Mortgagor's failure to perform any of its obligations
under this Mortgage or under any Environmental Indemnity Agreement executed and
delivered pursuant to Section 9(e); (e) falsity, inaccuracy or material breach
by the Mortgagor of any written warranty, representation or statement made or
furnished to the Mortgagee by or on behalf of the Mortgagor; (f) an uninsured
material loss, theft, damage, or destruction to any of the Property, or the
entry of any judgment against the Mortgagor or any lien against or the making of
any levy, seizure or attachment of or on the Property; (g) the Mortgagee's
failure to have a mortgage lien on the Property with the priority required under
Section 1; (h) any indication or evidence received by the Mortgagee that the
Mortgagor may have directly or indirectly been engaged in any type of activity
which, in the Mortgagee's discretion, might result in the forfeiture of any
property of the Mortgagor to any governmental entity, federal, state or local;
(i) foreclosure proceedings are instituted against the Property upon any other
lien or claim, whether alleged to be superior or junior to the lien of this
Mortgage; (j) the failure by the Mortgagor to pay any Impositions as required
under Section 2(c), or to maintain in full force and effect any insurance
required under Section 5.

      12. Rights and Remedies of Mortgagee. If an Event of Default occurs, the
Mortgagee may, at its option and without demand, notice or delay, do one or more
of the following:

            (a) The Mortgagee may declare the entire unpaid principal balance of
the Obligations, together with all interest thereon, to be due and payable
immediately.

            (b) The Mortgagee may (i) institute and maintain an action of
mortgage foreclosure against the Property and the interests of the Mortgagor
therein, (ii) institute and maintain an action on any instruments evidencing the
Obligations or any portion thereof, and (iii) take such other action at law or
in equity for the enforcement of any of the Loan Documents as the law may allow,
and in each such action the Mortgagee shall be entitled to all costs of suit and
attorneys' fees.

            (c) The Mortgagee may, in its sole and absolute discretion: (i)
collect any or all of the Rents, including any Rents past due and unpaid, (ii)
perform any obligation or exercise any right or remedy of the Mortgagor under
any Lease, or (iii) enforce any obligation of any tenant of any of the Property.
The Mortgagee may exercise any right under this subsection (c), whether or not
the Mortgagee shall have entered into possession of any of the Property, and
nothing herein contained shall be construed as constituting the Mortgagee a
"mortgagee in possession", unless the Mortgagee shall have entered into and
shall continue to be in actual possession of the Property. The Mortgagor hereby
authorizes and directs each and every present and future tenant of any of the
Property to pay all Rents directly to the Mortgagee and to perform all other
obligations of that tenant for the direct benefit of the Mortgagee, as if the
Mortgagee were the landlord under the Lease with that tenant, immediately upon
receipt of a demand by the Mortgagee to make such payment or perform such
obligations. The Mortgagor hereby waives any right, claim or demand it may now
or hereafter have against any such tenant by reason of such payment of Rents or
performance of obligations to the Mortgagee, and any such payment or performance
to the Mortgagee shall discharge the obligations of the tenant to make such
payment or performance to the Mortgagor.

            (d) The Mortgagee shall have the right, in connection with the
exercise of its remedies hereunder, to the appointment of a receiver to take
possession and control of the Property or to collect the Rents, without notice
and without regard to the adequacy of the Property to secure the Obligations.
The Mortgagee or a receiver, while in possession of the Property, shall have the
right to make repairs and to make improvements necessary or advisable in its or
his opinion to preserve the Property, or to make and keep them rentable to the
best advantage, and the Mortgagee may advance moneys to a receiver for such
purposes. Any moneys so expended or advanced by the Mortgagee or by a receiver
shall be added to and become a part of the Obligations secured by this Mortgage.


                                      -8-
<PAGE>

      13. Application of Proceeds. The Mortgagee shall apply the proceeds of any
foreclosure sale of, or other disposition or realization upon, or Rents or
profits from, the Property to satisfy the Obligations in such order of
application as the Mortgagee shall determine in its exclusive discretion.

      14. Mortgagee's Right to Protect Security. The Mortgagee is hereby
authorized to do any one or more of the following, irrespective of whether an
Event of Default has occurred: (a) appear in and defend any action or proceeding
purporting to affect the security hereof or the Mortgagee's rights or powers
hereunder; (b) purchase such insurance policies covering the Property as it may
elect if the Mortgagor fails to maintain the insurance coverage required
hereunder; and (c) take such action as the Mortgagee may determine to pay,
perform or comply with any Impositions or Legal Requirements, to cure any Events
of Default and to protect its security in the Property.

      15. Appointment of Mortgagee as Attorney-in-Fact. The Mortgagee, or any of
its officers, is hereby irrevocably appointed attorney-in-fact for the Mortgagor
(without requiring any of them to act as such), such appointment being coupled
with an interest, to do any or all of the following: (a) collect the Rents after
the occurrence of an Event of Default; (b) settle for, collect and receive any
awards payable under Section 8 from the authorities making the same; and (c)
execute, deliver and file, at Mortgagor's sole cost and expense such financing,
continuation or amendment statements and other instruments as the Mortgagee may
require in order to perfect, protect and maintain its security interest under
the UCC on any portion of the Property.

      16. Certain Waivers. The Mortgagor hereby waives and releases all benefit
that might accrue to the Mortgagor by virtue of any present or future law
exempting the Property, or any part of the proceeds arising from any sale
thereof, from attachment, levy or sale on execution, or providing for any stay
of execution, exemption from civil process or extension of time for payment or
any rights of marshalling in the event of any sale hereunder of the Property,
and, unless specifically required herein, all notices of the Mortgagor's default
or of the Mortgagee's election to exercise, or the Mortgagee's actual exercise
of any option under this Mortgage or any other Loan Document.

      17. No Merger. There shall be no merger of the interest or estate created
by this Mortgage with any other interest or estate in the Property at any time
held by or for the benefit of the Mortgagee or any subsidiary or affiliate in
any capacity, without the express prior written consent of the Mortgagee.

      18. Mortgage Secures Future Advances. This Mortgage is given for the
purpose of creating a lien on real property in order to secure not only existing
indebtedness, but also future advances, whether such advances are obligatory or
to be made at the option of the Mortgagee, or otherwise, and whether made before
or after a default or Event of Default or maturity or other similar events, to
the same extent as if such future advances were made on the date of the
execution hereof, although there may be no advance made at the time of the
execution hereof and although there may be no indebtedness outstanding at the
time any advance is made. The types of future advances secured by and having
priority under this Mortgage shall include, without limitation, (i) advances and
readvances of principal under the Note or other Loan Documents and (ii)
disbursements and other advances for the payment of taxes, assessments,
maintenance charges, insurance premiums or costs relating to the Property, for
the discharge of liens having priority over the lien of this Mortgage, for the
curing of waste of the Property and for the payment of service charges and
expenses incurred by reason of default and including late charges, attorneys'
fees and court costs, together with interest thereon. The lien of this Mortgage,
as to third persons with or without actual knowledge thereof, shall be valid as
to all such indebtedness and future advances, from the date of recordation, to


                                      -9-
<PAGE>

the extent permitted by the laws of the state in which the Property is situated.
Pursuant to the Loan Agreement, the amount of the Obligations may increase and
decrease from time to time as the Lenders advance, Borrower repays, and Lenders
readvance sums on account of the Loan, all as more fully described in the Loan
Agreement. For purposes of this Mortgage, so long as the balance of the Loan
equals or exceeds the Secured Amount, the amount of the Loan secured by this
Mortgage shall at all times equal only the Secured Amount as more fully
described herein. Such Secured Amount represents only a portion of the first
sums advanced by Lenders with respect to the Loan.

      19. Notices. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder ("Notices") must be in writing
and will be effective upon receipt. Notices may be given in any manner to which
the parties may separately agree, including electronic mail. Without limiting
the foregoing, first-class mail, facsimile transmission and commercial courier
service are hereby agreed to as acceptable methods for giving Notices.
Regardless of the manner in which provided, Notices may be sent to a party's
address as set forth above or to such other address as any party may give to the
other for such purpose in accordance with this section.

      20. Further Acts. By its signature hereon, the Mortgagor hereby
irrevocably authorizes the Mortgagee to execute (on behalf of the Mortgagor) and
file against the Mortgagor one or more financing, continuation or amendment
statements pursuant to the UCC in form satisfactory to the Mortgagee, and the
Mortgagor will pay the cost of preparing and filing the same in all
jurisdictions in which such filing is deemed by the Mortgagee to be necessary or
desirable in order to perfect, preserve and protect its security interests. If
required by the Mortgagee, the Mortgagor will execute all documentation
necessary for the Mortgagee to obtain and maintain perfection of its security
interests in the Property. The Mortgagor will, at the cost of the Mortgagor, and
without expense to the Mortgagee, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages, assignments, notices of
assignment, transfers and assurances as the Mortgagee shall, from time to time,
require for the better assuring, conveying, assigning, transferring or
confirming unto the Mortgagee the property and rights hereby mortgaged, or which
Mortgagor may be or may hereafter become bound to convey or assign to the
Mortgagee, or for carrying out the intent of or facilitating the performance of
the terms of this Mortgage or for filing, registering or recording this
Mortgage. The Mortgagor grants to the Mortgagee an irrevocable power of attorney
coupled with an interest for the purpose of exercising and perfecting any and
all rights and remedies available to the Mortgagee under the Note, this
Mortgage, the other Loan Documents, at law or in equity, including, without
limitation, the rights and remedies described in this paragraph.

      21. Changes in the Laws Regarding Taxation. If any law is enacted or
adopted or amended after the date of this Mortgage which deducts the Obligations
from the value of the Property for the purpose of taxation or which imposes a
tax, either directly or indirectly, on the Mortgagor or the Mortgagee's interest
in the Property, the Mortgagor will pay such tax, with interest and penalties
thereon, if any. If the Mortgagee determines that the payment of such tax or
interest and penalties by the Mortgagor would be unlawful or taxable to the
Mortgagee or unenforceable or provide the basis for a defense of usury, then the
Mortgagee shall have the option, by written notice of not less than ninety (90)
days, to declare the entire Obligations immediately due and payable.

      22. Documentary Stamps. If at any time the United States of America, any
State thereof or any subdivision of any such State shall require revenue or
other stamps to be affixed to the Note or this Mortgage, or impose any other tax
or charge on the same, the Mortgagor will pay for the same, with interest and
penalties thereon, if any.


                                      -10-
<PAGE>

      23. Preservation of Rights. No delay or omission on the Mortgagee's part
to exercise any right or power arising hereunder will impair any such right or
power or be considered a waiver of any such right or power, nor will the
Mortgagee's action or inaction impair any such right or power. The Mortgagee's
rights and remedies hereunder are cumulative and not exclusive of any other
rights or remedies which the Mortgagee may have under other agreements, at law
or in equity.

      24. Illegality. If any provision contained in this Mortgage should be
invalid, illegal or unenforceable in any respect, it shall not affect or impair
the validity, legality and enforceability of the remaining provisions of this
Mortgage.

      25. Changes in Writing. No modification, amendment or waiver of, or
consent to any departure by the Mortgagor from, any provision of this Mortgage
will be effective unless made in a writing signed by the Mortgagee, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice to or demand on the Mortgagor will
entitle the Mortgagor to any other or further notice or demand in the same,
similar or other circumstance.

      26. Entire Agreement. This Mortgage (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the Mortgagor and the Mortgagee with respect to the subject matter hereof.

      27. Survival; Successors and Assigns. This Mortgage will be binding upon
and inure to the benefit of the Mortgagor and the Mortgagee and their respective
heirs, executors, administrators, successors and assigns; provided, however,
that the Mortgagor may not assign this Mortgage in whole or in part without the
Mortgagee's prior written consent and the Mortgagee at any time may assign this
Mortgage in whole or in part; and provided, further, that the rights and
benefits under the Paragraphs entitled "Environmental Matters", "Inspection of
Property" and "Indemnity" shall also inure to the benefit of any persons or
entities who acquire title or ownership of the Property from or through the
Mortgagee or through action of the Mortgagee (including a foreclosure, sheriff's
or judicial sale). The provisions of Paragraphs entitled "Environmental
Matters", "Inspection of Property" and "Indemnity" shall survive the
termination, satisfaction or release of this Mortgage, the foreclosure of this
Mortgage or the delivery of a deed in lieu of foreclosure.

      28. Interpretation. In this Mortgage, unless the Mortgagee and the
Mortgagor otherwise agree in writing, the singular includes the plural and the
plural the singular; words importing any gender include the other genders;
references to statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; the word "or"
shall be deemed to include "and/or", the words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections) or exhibits are
to those of this Mortgage; and references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications to such instruments, but only to the extent such amendments and
other modifications are not prohibited by the terms of this Mortgage. Section
headings in this Mortgage are included for convenience of reference only and
shall not constitute a part of this Mortgage for any other purpose. If this
Mortgage is executed by more than one party as Mortgagor, the obligations of
such persons or entities will be joint and several. Capitalized terms not
otherwise defined herein shall have the meaning ascribed to them in the Loan
Agreement.

      29. Indemnity. The Mortgagor agrees to indemnify each of the Mortgagee,
each legal entity, if any, who controls, is controlled by or is under common
control with the Mortgagee and each of their respective directors, officers,
employees and agents (the "Indemnified Parties"), and to hold each Indemnified
Party harmless from and against, any and all claims, damages, losses,
liabilities and expenses (including all fees and charges of internal or external
counsel with whom any Indemnified Party may consult and all expenses of


                                      -11-
<PAGE>

litigation and preparation therefor) which any Indemnified Party may incur, or
which may be asserted against any Indemnified Party by any person, entity or
governmental authority (including any person or entity claiming derivatively on
behalf of the Mortgagor), in connection with or arising out of or relating to
the matters referred to in this Mortgage or in the other Loan Documents, whether
(a) arising from or incurred in connection with any breach of a representation,
warranty or covenant by the Mortgagor, or (b) arising out of or resulting from
any suit, action, claim, proceeding or governmental investigation, pending or
threatened, whether based on statute, regulation or order, or tort, or contract
or otherwise, before any court or governmental authority; provided, however,
that the foregoing indemnity agreement shall not apply to any claims, damages,
losses, liabilities and expenses solely attributable to an Indemnified Party's
gross negligence or willful misconduct. The indemnity agreement contained in
this Section shall survive the termination of this Mortgage, payment of any
Obligations and assignment of any rights hereunder. The Mortgagor may
participate at its expense in the defense of any such action or claim.

      30. Governing Law and Jurisdiction. This Mortgage has been delivered to
and accepted by the Mortgagee and will be deemed to be made in the State where
the Mortgagee's office indicated above is located. THIS MORTGAGE WILL BE
INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCLUDING ITS CONFLICT OF
LAWS RULES, EXCEPT THAT THE LAWS OF THE STATE WHERE THE PROPERTY IS LOCATED (IF
DIFFERENT FROM THE STATE WHERE SUCH OFFICE OF THE MORTGAGEE IS LOCATED) SHALL
GOVERN THE CREATION, PERFECTION AND FORECLOSURE OF THE LIENS CREATED HEREUNDER
ON THE PROPERTY OR ANY INTEREST THEREIN. The Mortgagor hereby irrevocably
consents to the exclusive jurisdiction of any state or federal court for the
county or judicial district where the Mortgagee's office indicated above is
located; provided that nothing contained in this Mortgage will prevent the
Mortgagee from bringing any action, enforcing any award or judgment or
exercising any rights against the Mortgagor individually, against any security
or against any property of the Mortgagor within any other county, state or other
foreign or domestic jurisdiction. The Mortgagee and the Mortgagor agree that the
venue provided above is the most convenient forum for both the Mortgagee and the
Mortgagor. The Mortgagor waives any objection to venue and any objection based
on a more convenient forum in any action instituted under this Mortgage.

      31. Authorization to Obtain Credit Reports. By signing below, each
Mortgagor who is an individual provides written authorization to the Mortgagee
or its designee (and any assignee or potential assignee hereof) authorizing
review of the Mortgagor's personal credit profile from one or more national
credit bureaus. Such authorization shall extend to obtaining a credit profile in
considering the Obligations and/or this Mortgage and subsequently for the
purposes of update, renewal or extension of such credit or additional credit and
for reviewing or collecting the resulting account.


      32. Change in Name or Locations. The Mortgagor hereby agrees that if the
location of any of the Property changes from the Land or its chief executive
office, or if the Mortgagor changes its name, its type of organization, its
state of organization (if Mortgagor is a registered organization), its principal
residence (if Mortgagor is an individual), its chief executive office (if
Mortgagor is a general partnership or non-registered organization) or
establishes a name in which it may do business that is not the current name of
the Mortgagor, the Mortgagor will immediately notify the Mortgagee in writing of
the additions or changes.

      33. WAIVER OF JURY TRIAL. THE MORTGAGOR IRREVOCABLY WAIVES ANY AND ALL
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY
NATURE RELATING TO THIS MORTGAGE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS
MORTGAGE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE MORTGAGOR
ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.


                                      -12-
<PAGE>

      34. TRUE AND CORRECT COPY. THE MORTGAGOR ACKNOWLEDGES THAT THE MORTGAGOR
HAS RECEIVED, WITHOUT CHARGE, A TRUE AND CORRECT COPY OF THIS MORTGAGE.

      35. Miscellaneous. (a) The Mortgagor covenants that the Mortgagor will, in
compliance with Section 13 of the New York State Lien Law, receive the advances
secured hereby and will hold the right to receive such advances as a trust fund
to be applied first for the purpose of paying the cost of the improvement and
will apply the same first to the payment of the cost of the improvement before
using any part of the total of the same for any other purpose.

      (b) This Mortgage does not cover real property principally improved or to
be improved by one or more structures containing in the aggregate not more than
six residential dwelling units, each having their own separate cooking
facilities."

      (c) The Secured Amount shall be reduced only by the last and final sums
that Borrower repays with respect to the Loan and shall not be reduced by any
intervening repayments of the Loan by Borrower. As of the Closing Date, the
total amount of the Loan exceeds the Secured Amount, so that the Secured Amount
represents only a portion of the Obligations actually outstanding.

      (d) So long as the balance of the Loan exceeds the Secured Amount, any
payments and repayments of the Loan by Borrower shall not be deemed to be
applied against, or to reduce, the portion of the Obligations secured by this
Mortgage, as more fully described herein. Such payments shall instead be deemed
to reduce only such portions of the Obligations as are secured by mortgages
encumbering real property located outside the State of New York, if any, which
mortgages secure the entire Obligations (except to the extent, if any, that
specific mortgages in such states contain specific limitations on the amount
secured).

WITNESS the due execution hereof as a document under seal, as of the date first
written above, with the intent to be legally bound hereby.

ATTEST:                                          AIR INDUSTRIES MACHINING, CORP.


/s/ Louis A. Giusto                              By: /s/ Michael A. Gales
---------------------------                          ---------------------------
Name: LOUIS A. GIUSTO                            Name: MICHAEL A. GALES
Title: Secretary                                 Title: President


                                      -13-
<PAGE>

                                 ACKNOWLEDGMENTS

STATE OF NEW YORK      )
                       )    ss:
COUNTY OF NEW YORK     )

On the 30th day of November in the year 2005 Before me, the undersigned,
personally appeared MICHAEL A. GAINES, personally known to me or proved to me on
the basis of satisfactory evidence to be the President of AIR INDUSTRIES
MACHINING, CORP., individual(s) whose name(s) is (are) subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their capacity(ies), and that by his/her/their signature(s) on the
instrument, the individual(s), or the person upon behalf of which the
individual(s) acted, executed the instrument.


                                              __________________________________
                                              Notary Public

<PAGE>

                                    EXHIBITS

      A.    Legal Description

      B.    Permitted Encumbrances

      C.    Underground Storage Tanks

<PAGE>

                                   EXHIBIT B
                            (Permitted Encumbrances)

                                      NONE

<PAGE>

                                    EXHIBIT C
                           (Underground Storage Tanks)

      As set forth in that certain Phase 1 Environmental Site Assessment dated
October 12, 2005 prepared by CA Rich Consultants, Inc. and that certain letter
from the County of Suffolk, New York with regard to Project No. 226-97-86 dated
January 8, 1998.