CVD EQUIPMENT CORP (Form: 10-K, Received: 04/02/2018 16:09:38)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)
☑	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

	For the fis cal year ended December 31, 20 1 7

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

	For the transition period from ____ to _____

Commission file number: 1-16525

CVD EQUIPMENT CORPORATION

( Exact n ame of registrant as specified in its c harter)

New York	11-2621692
(State or Other Jurisdiction of	(I.R.S. Employer Identification No.)
Incorporation or Organization)
355 South Technology Drive
Central Islip , New York 117 22
(Address including zip code of registrant ’ s Principal Executive Offices)

(631) 981-7081
(Registrant’s Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered

Common Stock, Par value $0.01	NASDAQ Capital Market

Securities registered under Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ☐ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days .

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months/ (or for such shorter period that the registrant was required to submit and post such files).

Yes ☑ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer a smaller reporting company or an emerging growth company . See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and emerging growth company in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☑ Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

State the aggregate market value of the voting and non-voting common equity held by non -affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $58,029,593 at June 30, 2017

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 6,458,714 shares of Common Stock, $0.01 par value at March 15, 2018.

DOCUMENTS INCORPORATED BY REFERENCE: None.

PART I

INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS

Except for historical information contained herein, this Annual Report on Form 10-K contains forward –looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. These statements involve known and unknown risks and uncertainties that may cause our actual results or outcomes to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on various factors and are derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Important assumptions and other factors that could cause actual results to differ materially from those in the forward-looking statements, include, but are not limited to: competition in our existing and potential future product lines of business; our ability to obtain financing on acceptable terms if and when needed; uncertainty as to our future profitability, uncertainty as to the future profitability of acquired businesses or product lines, uncertainty as to any future expansion of the Company. Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements and the failure of such assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. We assume no obligation to update these forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting such forward-looking statements. Past performance is no guaranty of future results.

Item 1. Description of Business .

The use of the words “CVD,” “we,” “us” or “our” refers to CVD Equipment Corporation, a New York corporation incorporated on October 13, 1982, and its wholly owned subsidiaries, CVD Materials Corporation (including its wholly owned subsidiaries CVD Tantaline ApS, and CVD Mesoscribe Technologies Corporation) collectively “CVD Materials”), FAE Holdings 411519R LLC and 555 N Research Corporation except where the context otherwise requires.

We design, develop and manufacture a broad range of chemical vapor deposition, gas control and other state-of-the-art equipment and process solutions used to develop and manufacture materials and coatings for research and industrial applications. This equipment is used by our customers to research, design, and manufacture these materials or coatings for aerospace engine components, medical implants, semiconductors, solar cells, smart glass, carbon nanotubes, nanowires, LEDs, MEMS and other applications. Through CVD Materials and our Application Laboratory, we provide material coatings, process development support and process startup assistance with the focus on enabling tomorrow ’s technologies ^TM .

Based on more than 35 years of experience, we use our engineering, manufacturing and process development to transform new applications into leading-edge manufacturing solutions. This enables university, research and industrial scientists at the cutting edge of technology to develop next generation aerospace, medical, solar, nano, LEDs, semiconductors and other electronic components. We develop, manufacture and provide equipment for research and production based on our proprietary designs. We have built a significant library of design expertise, know-how and innovative solutions to assist our customers in developing these intricate processes and to accelerate their commercialization. This library of solutions, along with our vertically integrated manufacturing facilities, allows us to provide superior design, process and manufacturing solutions to our customers on a cost effective basis.

Our strategy is to target opportunities in the research and development and production equipment market, with a focus on higher-growth applications such as aerospace, medical, solar, smart glass, carbon nanotubes, nanowires, graphene, MEMS and LEDs. To expand our penetration into these growth markets, we have developed a line of proprietary standard products and custom systems. Historically, we manufactured products for research and development on a custom one-at-a-time basis to meet an individual customer ’s specific research requirements. Our proprietary systems leverage the technological expertise that we have developed through designing these custom systems onto a standardized basic core. This core is easily adapted through a broad array of available add-on options to meet the diverse product and budgetary requirements of the research community. By manufacturing the basic core of these systems in higher volumes, we are able to reduce both the cost and delivery time for our systems. These systems, which we market and sell under the EasyTube® product line, are sold to researchers at universities, research laboratories, and startup companies in the United States and throughout the world.

Sales of our proprietary standard, custom systems and process solutions have been driven by our installed customer base, which includes several Fortune 500 companies. The strong performance and success of our products has historically driven repeat orders from existing customers as well as business from new customers. However, with our proprietary solutions and expanded focus on “ accelerating the commercialization of tomorrow’s technologies ” ^TM we have been developing a new customer base in addition to growing with our existing customers. We have generally gained new customers through word of mouth, limited print advertising and trade show attendance. We are now also gaining new customers by their awareness of our company in the marketplace with results from our Application Laboratory, partnerships with startup companies, increased participation in trade shows and expanded internet advertising.

The core competencies we have developed in equipment and software design, as well as in systems manufacturing and process solutions, are used to engineer our finished products and to accelerate the commercialization path of our customer base. Our proprietary-real-time, software allows for rapid configuration, and provides our customers with powerful tools to understand, optimize and repeatedly control their processes. Our vertically integrated structure allows us to control the manufacturing process, from bringing raw metal and components into our manufacturing facilities to shipping out finished products. These factors significantly reduce cost, improve quality and reduce the time it takes from customer order to shipment of our products. Our Application Laboratory allows selected customers to bring up their process tools in our Application Laboratory and to work together with our scientists and engineers to optimize process performance.

Business D evelopments

On October 31, 2017, through our newly formed and wholly-owned subsidiary, CVD Mesoscribe Technologies Corporation (“MesoScribe Technologies”), we acquired substantially all of the operating assets and business of Mesoscribe Technologies, Inc. (“MTI ”). Formed in 2002, by a group from Stony Brook University, MTI established itself as a pioneer and leader in the direct deposition of thermal sensors, heaters, and instrumentation for harsh environments.

MTI specialized in materials processing using Direct Write MesoPlasma™ printing technology. This technology is an enabling additive manufacturing process whereby materials are printed onto conformal components in precise patterns. MTI has provided MesoPlasma™ printing services and products to its customers for use in aerospace, power generation, satellite, and defense markets, focusing on developing and manufacturing innovative products for advanced sensing, heating, and communication.

This acquisition provides CVD access to additional materials deposition technology, a presence in new markets, and additional applications. In addition, the proprietary MesoPlasma™ technology complements our Tantaline® business which we acquired in Q4 2016. The two technologies when combined provide a treatment and coating which provides both corrosion resistance and now wear resistance. This is consistent with our strategic plan to leverage our equipment know-how, business infrastructure and proven ability to scale up new technologies, all offering high value-added materials, products, and services and is another step in our combined organic and acquisition growth strategy.

On November 30, 2017, we closed on the purchase of the premises located at 555 North Research Place, Central Islip, NY 11722 (the “Premises”). The purchase price of the building was $13,850,000 exclusive of closing costs.

On November 30, 2017, the Company ’s newly formed wholly-owned subsidiary, 555 N Research Corporation (the “Assignee”) and the Islip IDA, entered into a Fee and Leasehold Mortgage and Security Agreement (the ”Loan”) with HSBC Bank USA, N.A. (the “Bank”) in the amount of $10,387,500, which was used to finance a portion of the purchase price to acquire the Premises. The Loan was evidenced by the certain Note, dated November 30, 2017 (the “Note”), by and between Assignee and the Bank, and secured by a certain Fee and Leasehold Mortgage and Security Agreement, dated November 30, 2017 (the “Mortgage”), as well as a collateral Assignment of Leases and Rents (“Assignment of Leases”).

The Loan is payable in sixty (60) consecutive equal monthly installments of $62,777.60 including interest. The Loan shall bear interest for each Interest Period (as defined in the Note), at the fixed rate of 3.9148%. The maturity date for the Note is December 1, 2022.

As a condition of the Bank making the Loan, the Company was required to guaranty Assignee ’s obligations under the Loan pursuant to that certain Unlimited Guaranty, dated November 30, 2017 (the “Guaranty”).

With the completed purchase of the additional facility at the Premises, we now have the manufacturing space to accelerate our capabilities of providing materials, coatings and surface treatments to meet our customers’ needs. We have now positioned ourselves for the expansion of our carbon composites and electronic material, Tantaline ^® and Mesoscribe Technologies product lines.

Segments

CVD/First Nano supplies state-of-the-art chemical vapor deposition systems for use in the research, development and manufacturing of aerospace and medical components, semiconductors, LEDs, carbon nanotubes, nanowires, solar cells and a number of other industrial applications. We utilize our expertise in the design and manufacture of chemical vapor deposition systems to work with laboratory scientists to bring state-of-the-art processes from the research laboratory into production, as well as to provide production equipment and process solutions based on our designs. CVD/First Nano also operates our Application Laboratory where our personnel interact effectively with the scientists and engineers of our customer base. CVD/First Nano operates out of our main facility in Central Islip, New York.

S DC designs and manufactures ultra-high purity gas and chemical delivery control systems for state-of-the-art semiconductor fabrication processes, solar cells, LEDs, carbon nanotubes, nanowires, and a number of industrial applications. Our SDC products are sold on either a stand-alone basis, or together with our CVD/First Nano systems. SDC operates out of a 22,000 square foot facility fitted with Class 10 and Class 100 clean room manufacturing space located in Saugerties, New York.

CVD Materials Tantaline® treatment is a diffusion bonded protective layer of tantalum formed by chemical vapor deposition on the surface of common materials. Tantalum is the most corrosion resistant metal commercially available. This surface layer provides protection against many of the most aggressive environments including high temperature, concentrated acid. Global sales and technical support comes out of our facility in Central Islip, New York with production provided out of our European facility located in Nordborg, Denmark. Future expansion of production capacity in the US has previously been announced. Although revenues have not been significant, we have incurred approximately $1.2 million in costs through December 31, 2017.

MesoScribe Technologies provides MesoPlasma™ printing services and products (heaters, antennas, & sensors) to aerospace, satellite, power generation, defense, and other markets requiring high performance. MesoScribe Technologies operates out of a 22,000 square foot facility located in Huntington Beach, CA with sales and marketing support out of our main facility in Central Islip, New York. Revenues and costs have not been material through December 31, 2017.

Principal Products

Chemical Vapor Deposition - A process which passes a gaseous compound over a target material surface that is heated to such a degree that the compound decomposes and deposits a desired layer onto substrate material. The process is accomplished by combining appropriate gases in a reaction chamber, of the kind produced by the Company, at elevated temperatures (typically 150-1,800° Celsius). Our chemical vapor deposition systems are complete and include all necessary instrumentation, subsystems and components and include state-of-the-art process control software. We provide both standard and specifically engineered products for particular customer applications. Some of the standard systems we offer are for silicon, silicon-germanium, silicon dioxide, silicon nitride, polysilicon, liquid phase epitaxial, metalorganic chemical vapor deposition, carbon nanotubes, graphene nanowires, solar cell research and solar material quality control.

Chemical Vapor Deposition Systems - Used in a variety of models for laboratory research and production. All models are offered with total system automation, a microprocessor control system by which the user can measure, predict and regulate gas flow, temperature, pressure and chemical reaction rates, thus controlling the process in order to enhance the quality of the materials produced. Our standard microprocessor control system is extremely versatile and capable of supporting the complete product line and most custom system requirements. These chemical vapor deposition systems are typically priced between $80,000 and $1,500,000, but can go significantly higher.

Rapid Thermal Processing (“RTP”) - Used to heat semiconductor materials to elevated temperatures of up to 1,000 ^° Celsius at rapid rates of up to 200° Celsius per second. Our RTP systems are offered for implant activation, oxidation, silicide formation and many other processes. We offer systems that can operate both at atmospheric or reduced pressures. Our RTP systems are priced up to $600,000.

Annealing , Diffusion and Low Pressure Chemical Vapor Deposition (LPCVD) Furnaces - Used for diffusion, oxidation, implant anneal, solder reflow, solar cell manufacturing and other processes. The systems are normally operated at atmospheric and/or reduced pressure with gaseous atmospheres related to the process. An optional feature of the system allows for the heating element to be moved away from the process chamber allowing the wafers to rapidly cool or be heated in a controlled environment. Our cascade temperature control system enables more precise control of the wafers. The systems are equipped with an automatic process controller, permitting automatic process sequencing and monitoring with safety alarm provisions. Our annealing and diffusion furnace systems are priced up to $900,000.

Ultra-high Purity Gas and Liquid Control Systems - Our standard and custom designed gas and liquid control systems, which encompass gas cylinder storage cabinets, custom gas and chemical delivery systems, gas and liquid valve manifold boxes and gas isolation boxes, provide safe storage and handling of pressurized gases and chemicals. Our system design allows for automatic or manual control from both a local and remote location. A customer order often includes multiple systems and can total up to $1,000,000.

Quartz - ware - We provide standard and custom fabricated quartz-ware used in our equipment and other customer tools. We also provide repair and replacement of existing quartz-ware.

MesoPlasma™ Direct Write Printing: A materials deposition process that provides high definition traces, fine feature patterns, and coatings onto conformal components. Powder materials are injected into a thermal plasma where they are rapidly heated and deposited onto the substrate or component. A 6-axis robotic system ensures pattern placement accuracy and manufacturing consistency. The versatility of the process enables a wide range of materials to be deposited including ceramic dielectrics, nickel based sensor alloys, metallic conductors, precious metals, and protective coatings. Products include temperature sensors, heaters, antennas and patterns per customer specifications. Products range in price from $100s-$1,000s of dollars depending on specific materials, pattern complexity, quantity and other factors.

Tantaline® Corrosion Resistant Coating: Tantaline® treatment is provided as part of either a finished product or as a service applied to customer sourced components. These include valves, fittings, fasteners, vessels, bellows, and a wide range of custom designed items. The Tantaline® treatment drastically improves the corrosion resistance of these base stainless steel parts extending the service life and increasing value in a wide range of applications.

Markets and Marketing

Due to the highly technical nature of our products, we believe it is essential to contact customers directly through our sales personnel and through a network of domestic and international independent sales representatives and distributors specializing in the type of equipment, products and services that we sell. In addition to our traditional customer base, we are now accessing new markets and new customers through Tantaline,® MesoScribe,® and other components of our expanding materials business. Our primary marketing activities include direct sales contacts, participation in trade shows and our internet websites. We are also focusing our efforts on being in the top listings on many search engines in order to increase the number of “hits” to our websites.

Customers

We continu e to work on expanding our product offerings. Many of these products are used in research and in production applications. We sell our products primarily to electronic component manufacturers, institutions involved in electronic component research (such as universities, government and industrial laboratories) and to industries such as aerospace and medical that require specialized coatings. We have both a domestic and international customer base with hundreds of installed systems.

Given the complexity of some of the systems we sell, revenue from a single customer in any one year can exceed 10.0% of our total sales. In fiscal years 2017 and 2016 one customer represented 66.1% and 45.3% of our annual revenues respectively. The loss of such a key customer, if not replaced by others with a similar amount of revenue, will have a material adverse effect on our business and financial condition.

For the twelve months ended December 31, 20 17, approximately $3.0 million or 9.6% of our revenues were generated by sales to customers outside the U.S., compared to $ approximately $2.4 million or 11.9% for the twelve months ended December 31, 2016.

Warranties

Warranties on our equipment can range up to twenty-four months from shipment and we pass along any warranties from original manufacturers of components used in our products. We provide service and support for our installed base of equipment with in-house field service personnel. Warranty costs, including those incurred in fiscal years 2017 and 2016, have been historically insignificant and expensed as incurred.

Competition

We are subject to intense competition. We are aware of other competitors that offer a substantial number of products and services comparable to ours. Many of our competitors (including customers who may elect to manufacture systems for internal use) have financial, marketing and other resources greater than ours. To date, we believe that each of our two segments has been able to compete favorably in markets that include these competitors, primarily on the basis of know-how, technical performance, quality, delivery price and aftermarket support.

CVD/First Nano competes primarily with in-house design and engineering personnel at research and university laboratories with the capacity to design and build their own equipment internally. Due to budgetary and funding constraints, many of these customers are extremely price sensitive. We believe that our systems are among the most advanced available for the targeted market space.

SDC ’s gas management and chemical delivery control systems are among the most advanced available. We further believe that SDC is differentiated from our competitors through our intimate understanding of how the systems in which our products are incorporated are actually used in field applications. We have gained this understanding as a result of having designed and built complex process gas systems for CVD/First Nano as well as for a number of the world’s leading semiconductor, aerospace, medical, solar manufacturers, research laboratories and universities.

Sources of Supply

Many of the components used in producing our products are purchased from unrelated suppliers. We have OEM status with our suppliers but we are not obligated to purchase a pre-determined quantity. We are not dependent on a principal or major supplier and alternate suppliers are available. Subject to lead times, the components and raw materials we use in manufacturing our products are readily obtainable.

We maintain a fully-equipped machine shop that we use to fabricate most of our metal components in-house, including the most complex designed parts of our equipment. The investment in our machine shop has significantly helped in increasing our efficiencies while significantly reducing labor costs and time in production. Similarly, our quartz fabrication capability is sufficient to meet our quartz-ware needs.

Materials procured from the outside and/or manufactured internally undergo a rigorous quality control process to ensure that the parts meet or exceed our requirements and those of our customers. Upon final assembly, all equipment undergoes a final series of complete testing to ensure maximum product performance.

Backlog

As of December 31, 2017, our order backlog was approximately $15.5 million compared to approximately $27.8 million at December 31, 2016, a decrease of $12.3 million, or 44.2%. We received approximately $29.5 million in orders for the twelve months ended December 31, 2017, compared to $42.6 million in orders for the twelve months ended December 31, 2016, a decrease of $13.1 million or 30.8%. Approximately $19.5 million or 64.4% of our orders received for the twelve months ended December 31, 2017 was from other than our largest customer compared to $9.4 million or 22.0% having been received from other than our largest customer during the year ended December 31, 2016. The December 31, 2017 backlog consists of $6.6 million or 42.3% from one customer as compared with the December 31, 2016 backlog which consisted of $23.3 million or 84% from that same customer. Although the overall backlog has decreased year over year we have diversified our cusomter base away from one customer as we focus on new opportunities with new and existing customers. The timing for completion of the backlog varies depending on the product mix and can be as long as two years. Order backlog is usually a reasonable management tool to indicate expected revenues, however, it does not provide an assurance of future achievement or profits as order cancellations or delays are possible.

Intellectual Property

Our success is dependent, in part on our proprietary technology and other proprietary rights. We have historically protected our proprietary information and intellectual property such as design specifications, blueprints, technical processes and employee know-how through the use of non-disclosure agreements. In addition, where we deem appropriate, we file for patent and trademark protection of our proprietary technology and intellectual property that has the potential to be incorporated into our products and can be sold to multiple customers. We also maintain and/or assert rights in certain trademarks relating to certain of our products and product lines, and claim copyright protection for certain proprietary software and documentation.

While patent, copyright and trademark protections for our intellectual property are important to different degrees for our various products and solutions, we believe our future success in highly dynamic markets is most dependent upon the technical competence and creative skills of our personnel and our ability to accelerate the commercialization of next generation intellectual properties. We attempt to protect our trade secrets and other proprietary information through non-disclosure agreements with our customers, suppliers, employees and consultants and other security measures.

Research and Development

The university research community is at the forefront of nanotechnology research, and we are focused on providing state-of-the-art systems to this market that will help bridge the gap between pioneering research and marketable products. Our Application Laboratory, together with a number of leading universities and startup companies with whom we partner from time to time, conducts cutting-edge research on the growth of carbon nanotubes, graphene and nanowires as well as on selected solar cell manufacturing processes and smart glass coating processes. The results of this research could have far reaching implications concerning the use and manufacture of carbon nanotubes, graphene and nanowires, solar cell and glass coatings for many markets. Our intention is that together with these leading universities and start-up companies, we will leverage our collective expertise in this field, which will allow us to capitalize on commercial opportunities in the future. This relationship has thus far produced leading edge results, including what we believe are the tallest carbon nanotube arrays yet developed.

In 201 7, we incurred approximately $1.8 million in research and development expenses of which $437,000 was independent of external customer orders compared to 2016, when we incurred $2.4 million of research and development expenses, $434,000 of which was independent of external customer orders.

Government Regulation

We are subject to a variety of federal, state and local government regulations, such as environmental, labor and export control. We believe that we have obtained all necessary permits to operate our business and that we are in material compliance with all laws and regulations applicable to us.

We are not aware of any government regulations or requirements necessary for the sale of our products, except that certain approvals or permits may be required for the export of certain of our products to particular foreign countries (depending on the type and specification of the equipment ordered).

Insurance

O ur products are used in our customers’ manufacturing processes which in some cases contain explosive, flammable, corrosive and toxic gases. There are potential exposures to personal injury as well as property damage, particularly if operated without regard to the design limits of the systems and components. Additionally, the end products of some of our customers are used in areas such as aerospace and high tech devices where safety is of great concern. Management reviews its insurance coverage on an annual basis or more frequently if appropriate and we believe we have the types and amounts of insurance coverage that are sufficient for our business.

Employees

At December 31, 20 17, we had 231 employees, including 16 interns and three part time personnel. We had 124 people in manufacturing, 53 in engineering (including research and development and efforts related to product improvement) 9 in field service, 16 in sales and marketing and 29 in general management, maintenance and administration.

Item 1A. Risk Factors

In addition to the other information set forth in this Annual Report on Form 10-K , our shareholders should carefully consider the risk factors described below. The risks set forth below may not be the only risk factors relating to the Company. Any of these factors, many of which are beyond our control, could materially adversely affect our business, financial condition, operating results, cash flow and stock price.

If demand declines for chemical vapor deposition, gas control and related equipment, or for carbon nanotube and nanowire deposition systems, our financial position and results of operations could be materially adversely affected.

Our products are utilized to develop and manufacture materials and coatings for industrial and research applications that are used in numerous markets including but not limited to aerospace, medical, solar, nano and advanced electronic components. A significant part of our growth strategy involves continued expansion of the sales of our products for industrial as well as research and development purposes by companies, universities and government-funded research laboratories. The availability of funds for these purposes may be subject to budgetary and political restrictions, as well as cost-cutting measures by manufacturers in the markets in which we operate.

If the availability of funds or the demand for capital equipment in the markets in which we operate declines, the demand for our products would also decline and our financial position and results of operations could be harmed.

We have a highly concentrated customer base so that changes in ordering patterns, delays or order cancellations could have a material adverse effect on our business and results of operations .

In fiscal 2017, approximately 66.0% of our net sales was accounted for by one customer. We expect that contracts or orders from a relatively limited number of customers will continue to account for a substantial portion of our business. The mix and type of customers, and sales to any single customer, may vary significantly from quarter to quarter and from year to year. If any of our significant customers do not place orders, or they substantially reduce, delay or cancel orders, we may not be able to replace the business in a timely manner or at all, which could have a material adverse effect on our results of operations and financial condition. Major customers may also seek, and on occasion receive, pricing, payment, intellectual property-related, or other commercial terms that are less favorable to us and can hurt our competitive position.

The conditions of the markets in which we operate are volatile. The demand for our products and the profitability of our products can change significantly from period to period as a result of numerous factors.

The industries in which we operate are characterized by ongoing changes, including:

●

the availability of funds for research and development;

●

global and regional economic conditions;

●

governmental budgetary and political constraints ;

●

changes in the capacity utilization and production volume for research and industrial applications in the markets in which we operate ;

●

the profitability and capital resources of manufacturers in the markets in which we operate ; and

●

changes in technology .

For these and other reasons, our results of operations for past periods may not necessarily be indicative of future operating results.

Volatile and cyclical demand for our products may make it difficult for us to accurately budget our expense levels, which are based in part on our projections of future revenues.

Demand for our equipment and related consumable products may be volatile as a result of sudden changes in supply and demand, and other factors in the manufacturing process. Our orders tend to be more volatile than our revenue, as any change in demand is reflected immediately in orders booked, which are net of cancellations, while revenue, tends to be recognized over multiple quarters as a result of procurement and production lead times, and the deferral of certain revenue under our revenue recognition policies. The fiscal period in which we are able to recognize revenue is also at times subject to the length of time that our customers require to evaluate the performance of our equipment. This could cause our quarterly operating results to fluctuate.

When cyclical fluctuations result in lower than expected revenue levels, operating results may be materially adversely affected and cost reduction measures may be necessary in for us to remain competitive and financially sound. During a down cycle, we must be able to make timely adjustments to our cost and expense structure to correspond to the prevailing market conditions. In addition, during periods of rapid growth, we must be able to increase manufacturing capacity and the number of our personnel to meet customer demand, which may require additional liquidity. We can provide no assurance, that these objectives can be met in a timely manner in response to changes within the industry cycles in which we operate. If we fail to respond to these cyclical change, our business could be seriously harmed.

We do not have long-term volume production contracts with our customers, and we do not control the timing or volume of orders placed by our customers. Whether and to what extent our customers place orders for any specific products, and the mix and quantities of products included in those orders are factors beyond our control. Insufficient orders would result in under-utilization of our manufacturing facilities and infrastructure, and will negatively affect our financial position and results of operations.

We face significant competition and we are relatively small in size and have fewer resources in comparison with many of our competitors.

We face significant competition throughout the world, which may increase as certain markets in which we operate continue to evolve. Our future performance depends, in part, upon our ability to continue to compete successfully worldwide. Some of our competitors are diversified companies that have substantially greater financial resources and more extensive research, engineering, manufacturing, marketing and customer service and support capabilities than we can provide. We face competition from companies whose strategy is to provide a broad array of products, some of which compete with the products and services that we offer, as well as companies, universities and research laboratories that have the capacity to design and build their own equipment internally. These competitors may bundle their products and services in a manner that may discourage customers from purchasing our products. In addition, we face competition from smaller emerging processing equipment companies, whose strategy is to provide a portion of the products and services that we offer at often lower prices than ours, using innovative technology to sell products into specialized markets. Loss of competitive position could impair our prices, customer orders, revenue, gross margin and market share, any of which would negatively affect our financial position and results of operations. Our failure to compete successfully with these other companies would seriously harm our business. There is a risk that larger, better financed competitors will develop and market more advanced products than those we currently offer, or that competitors with greater financial resources may decrease prices, thereby putting us under financial pressure.

The health and environmental effects of nanotechnology are unknown, and this uncertainty could adversely affect the expansion of our business.

The health and environmental effects of nanotechnology are unknown. There is no scientific agreement on the health effects of nanomaterials in general and carbon nanotubes, in particular, but some scientists believe that in some cases, nanomaterials may be hazardous to an individual’s health or to the environment. The science of nanotechnology is based on arranging atoms in such a way as to modify or build materials not made in nature; therefore, the effects are unknown. Future research into the effects of nanomaterials in general, and carbon nanotubes in particular, on health and environmental issues, may have an adverse effect on products incorporating nanotechnology. Since part of our growth strategy is based on sales of research equipment for the production of carbon nanotubes and the sale of such materials, the determination that these materials are harmful could adversely affect the expansion of our business.

We may experience increasing price pressure.

Our historical business strategy for many of our products has focused on product performance and customer service rather than on price. As a result of budgetary constraints, many of our customers are extremely price sensitive when purchasing of capital equipment. If we are unable to obtain prices that allow us to continue to compete on the basis of product performance and customer service, our profit margins will be reduced.

We may not be able to keep pace with the rapid change in the technology we use in our products.

We believe that our continued success in the markets in which we operate depends, in part, on our ability to continually improve existing technologies and to develop and manufacture new products and product enhancements on a timely and cost-effective basis. We must be able to introduce these products and product enhancements into the market in a timely manner, in response to customer ’s demands for higher-performance research and assembly equipment, customized to address rapid technological advances in capital equipment designs.

Technological innovations are inherently complex, and require long development cycles and appropriate professional staffing. Our future business success depends on our ability to develop and introduce new products , or new uses for existing products, that successfully address changing customer needs. Our success also depends on our ability to achieve market acceptance of our new products. In order to maintain our success in the marketplace, we may have to substantially increase our expenditures on research and development. If we do not develop and introduce new products, technologies or uses for existing products in a timely manner and continually find ways to reduce the cost of developing and producing them in response to changing market conditions or customer requirements, our business could be seriously harmed.

Manufacturing interruptions or delays could affect our ability to meet customer demand and lead to higher costs, while the failure to estimate customer demand accurately could result in excess or obsolete inventory.

Our business depends on timely supply of equipment, services and related products that meet the rapidly changing technical and volume requirements of our customers. Some key parts to our products are subject to long lead-times and/or obtainable only from a single supplier or limited group of suppliers. Cyclical industry conditions and the volatility of demand for manufacturing equipment increase capital, technical, operational and other risks for us and for companies throughout our supply chain. Further, these conditions may cause some suppliers to scale back operations, exit businesses, merge with other companies, or file for bankruptcy protection and possibly cease operations. We may also experience significant interruptions of our manufacturing operations, delays in our ability to deliver products or services, increased costs or customer order cancellations as a result of:

●

The failure or inability of suppliers to timely deliver sufficient quantities of quality parts on a cost-effective basis;

●

Volatility in the availability and cost of materials, including rare earth elements;

●

Difficulties or delays in obtaining required import or export approvals;

●

Information technology or infrastructure failures; and

●

Natural disasters or other events beyond our control (such as earthquakes, floods or storms, regional economic downturns, pandemics, social unrest, political instability, terrorism, or acts of war) .

If a supplier fails to meet our requirements concerning quality, cost, socially-responsible business practices, or other performance factors, we may transfer our business to alternative sources, which could entail manufacturing delays, additional costs, or other difficulties. In addition, if we need to rapidly increase our business and manufacturing capacity to meet increases in demand or expedited shipment schedules, this may exacerbate any interruptions in our manufacturing operations and supply chain and the associated effect on our working capital.

If any of our customers cancel or fail to accept a large system order, our financial position and results of operations could be materially and adversely affected.

Our backlog, largely consists of orders for customized systems includ ing our chemical vapor deposition equipment and annealing and diffusion furnaces which are built to client specifications. We also have a significant concentration of revenue in a single customer. In 2017, our largest customer accounted for 66.1% of our revenue. These customized systems can have prices that range from $100,000 to several million dollars, depending on the configuration, specific options included and any special requirements of the customer. Because our orders are subject to cancellation or delay by the customer, our backlog at any particular point in time is not necessarily representative of actual sales for succeeding periods, nor does our backlog provide any assurance of achievement of revenues or that we will realize a profit from completing these orders. Since revenues on long-term contracts are recognized by the percentage-of-completion method, if a contract is canceled, we may have to reverse revenue at such time. Our financial position and results of operations could be materially and adversely affected should any large system order be cancelled prior to shipment, or not be accepted by the customer due to alleged non-conformity with product specifications or otherwise. Likewise, a significant change in the liquidity or financial position of any of our customers that purchase large systems, could have a material impact on the collectability of our accounts receivable and our future operating results. Our backlog does not provide any assurance that we will realize a profit from those orders, or indicate in which period revenue will be recognized.

Our success is highly dependent on the technical, sales, marketing and managerial contributions of key individuals, including Leonard A. Rosenbaum, Chairman of the Board of Directors, Chief Executive Officer and President, and we may be unable to retain these individuals or recruit others.

We depend on our senior executives, including Leonard A. Rosenbaum, our Chairman of the Board of Directors, Chief Executive Officer and President, and certain key managers as well as, engineering, research and development, sales, marketing and manufacturing personnel, who are critical to our business. We do not have long-term employment agreements with our key employees . We presently have a key person life insurance policies on the life of Leonard A. Rosenbaum, for a total insured amount of $5 million, which may not be sufficient to cover our loss of Mr. Rosenbaum’s services. Furthermore, larger competitors may be able to offer more generous compensation packages to our executives and key employees, and therefore we risk losing key personnel to those competitors. If we were to lose the services of any of our key personnel, our engineering, product development, manufacturing and sales efforts could be slowed. We may also incur increased operating expenses, and be required to divert the attention of our senior executives to search for their replacements. The integration of any new personnel could disrupt our ongoing operations.

We may not be able to hire or retain the number of qualified personnel, particularly engineering personnel, required for our business, which would harm the development and sales of our products and limit our ability to grow.

Competition in our industry for senior management, technical, sales, marketing and other key personnel is intense. If we are unable to retain our existing personnel, or attract and train additional qualified personnel, our growth may be limited due to a lack of capacity to develop and market our products.

In particular, we have, from time to time, experienced difficulty in hiring and retaining skilled engineers with appropriate qualifications to support our growth strategy. Our success depends on our ability to identify, hire, train and retain qualified engineering personnel with experience in equipment design. Specifically, we need to continue to attract and retain mechanical, electrical, software and field service engineers to work with our direct sales force to technically qualify and perform on new sales opportunities and orders, and to demonstrate our products.

The substantial lead-time required for ordering parts and materials may lead to inventory problems.

The lead-time for ordering parts and materials for some of our products can be several months. As a result, we must order some components based on forecasted demand. If demand for our products lags significantly behind our forecasts, we may order more components than we require, which would result in cash flow problems as well as excess or obsolete inventory.

Acquisitions can result in an increase in our operating costs, divert management ’s attention away from other operational matters and expose us to other associated risks.

In December 2016, we purchased certain assets formally owned by Tantaline A/S, which we incorporated into a facility in Denmark which is operated by our subsidiary, Tantaline CVD ApS.

We continually evaluate potential acquisitions of businesses and technologies, and we consider targeted acquisitions that expand our core competencies to be an important part of our future growth strategy. In the past, we have made acquisitions of other businesses with synergistic products, services and technologies, and plan to continue to do so in the future.

Acquisitions involve numerous risks, which include but are not limited to:

●

d ifficulties and increased costs in connection with the integration of the personnel, operations, technologies, services and products of the acquired companies into our existing facilities and operations;

●

diversion of management ’s attention from other operational matters;

●

failure to commercialize the acquired technology;

●

the potential loss of key employees of the acquired companies

●

lack of synergy, or inability to realize expected synergies, resulting from the acquisitions;

●

the risk that the issuance of our common stock, if any, in an acquisition or merger could be dilutive to our shareholders;

●

the inability to obtain and protect intellectual property rights in key technologies;

●

the acquired assets becoming impaired as a result of technological advancements or worse-than-expected performance of the acquired assets.

Our financial position and results of operations may be materially harmed if we are unable to recoup our investment in research and development.

The rapid change in technology in our industry requires that we continue to make substantial investments in research and development and selective acquisitions of technologies and products, in order to enhance the performance and functionality of our product line, to keep pace with competitive products and to satisfy customer demands for improved performance, features and functionality. These efforts include those related to the development of technology for the commercialization of carbon nanotubes. There can be no assurance that revenue from future products or enhancements will be sufficient to recover the development costs associated with such products, enhancements or acquisitions, or that we will be able to secure the financial resources necessary to fund future research and development or acquisitions. Research and development costs are typically incurred before we confirm the technical feasibility and commercial viability of a product, and not all development activities result in commercially viable products. In addition, we cannot ensure that products or enhancements will receive market acceptance, or that we will be able to sell these products at prices that are favorable to us. Our business could be seriously harmed if we are unable to sell our products at favorable prices, or if our products are not accepted by the markets in which we operate.

We have made investments in our proprietary technologies. If third parties violate our proprietary rights, or accuse us of infringing upon their proprietary rights, such events could result in a loss of value of some of our intellectual property or costly litigation.

Our success is dependent in part on our technolog ies and our other proprietary rights. We believe that while patents can be useful and may be utilized by us in the future, they are not always necessary or feasible to protect our intellectual property. The process of seeking patent protection is lengthy and expensive, and we cannot be certain that applications will actually result in issued patents or that issued patents will be of sufficient scope or strength to provide meaningful protection or commercial advantage to us. In addition to patent protection, we have also historically protected our proprietary information and intellectual property such as design specifications, blueprints, technical processes and employee know-how, by limiting access to this confidential information and trade secrets and through the use of non-disclosure agreements. Other companies and individuals, including our larger competitors, may develop technologies that are similar or superior to our technology, or design around the intellectual property that we own or license. Our failure to adequately protect our intellectual property, could result in the reduction or extinguishment of our rights to such intellectual property. We also assert rights to certain trademarks relating to certain of our products and product lines. We have not filed trademark applications to protect such marks with any governmental agency, including, but not limited to the U.S. Patent and Trademark Office. We claim copyright protection for certain proprietary software and documentation, but we have not filed any copyright applications with the U.S. Copyright Office in connection with those works. As a result, we can give no assurance that our trademarks and copyrights will be upheld or successfully deter infringement by third parties.

While patent, copyright and trademark protection for our intellectual property may be important, we believe our future success in highly dynamic markets is most dependent upon the technical competence and creative skills of our personnel. We attempt to protect our trade secrets and other proprietary information through confidentiality agreements with our customers, suppliers, employees and consultants, and through other internal security measures. However, these employees, consultants and third parties may breach these agreements, and we may not have adequate remedies for wrongdoing. In addition, the laws of certain territories in which we sell our products may not protect our intellectual property rights to the same extent as do the laws of the United States.

Occasionally, we may receive communications from other parties asserting the existence of patent rights or other intellectual property rights that they believe cover certain of our products, processes, technologies or information. If such cases arise, we will evaluate our position and consider the available alternatives, which may include seeking licenses to use the technology in question on commercially reasonable terms, or defending our position. Nevertheless, we cannot ensure that we will be able to obtain licenses, or, if we are able to obtain licenses, that related terms will be acceptable, or that litigation or other administrative proceedings will not occur. Defending our intellectual property rights through litigation could be very costly. If we are not able to negotiate the necessary licenses on commercially reasonable terms or successfully defend our position, our financial position and results of operations could be materially and adversely affected.

Our reputation and operating performance may be negatively affected if our products are not timely delivered.

We provide complex products that often require substantial lead-time for design, ordering parts and materials, and for assembly and installation. The time required to design, order parts and materials and to manufacture, assemble and install our products, may in turn lead to delays or shortages in the availability of some products. If a product is delayed or is the subject of shortage because of problems with our ability to design, manufacture or assemble the product on a timely basis, or if a product or software otherwise fails to meet performance criteria, we may lose revenue opportunities entirely, or experience delays in revenue recognition associated with a product or service. In addition, we may incur higher operating expenses during the period required to correct the problem.

Our lengthy and variable sales cycle may make it difficult to predict our financial results.

The marketing, sale and manufacture of our products, often requires a lengthy sales cycle ranging from several months to over one year before we can complete production and delivery. The lengthy sales cycle makes forecasting the volume and timing of sales difficult, and raises additional risks that customers may cancel or decide not to enter into contracts. The length of the sales cycle depends on the size and complexity of the project, the customer ’s in-depth evaluation of our products, and, in some cases, the protracted nature of a bidding process. Because a significant portion of our operating expenses are fixed, we may incur substantial expense before we earn associated revenue. If customer cancellations occur, they could result in the loss of anticipated sales without allowing us sufficient time to reduce our operating expenses.

We need to manage our growth effectively or we may experience difficulty in filling customer orders, declining product quality, increased costs or other operating challenges.

W e anticipate that continued growth of our operations will be required to satisfy our projected increase in demand for our products and to avail ourselves of new market opportunities. The expanding scope of our business and the growth in the number of our employees, customers and products have placed and will continue to place a significant strain on our management, information technology systems, manufacturing facilities and other resources. To properly manage our growth, we may need to hire additional employees, upgrade our existing financial and reporting systems and improve our business processes and controls. We may also be required to expand our manufacturing facilities or add new manufacturing facilities. Failure to effectively manage our growth could make it difficult to manufacture our products and fill orders, as well as lead to declines in product quality or increased costs; any of these would adversely impact our business and results of operations.

Historically, we have only manufactured in unit or small batch quantities. If we receive orders for a large number of our systems, we may not have the internal manufacturing capacity to fill these orders on a timely basis, if at all, and may be forced to subcontract or outsource some of the fabrication of these systems to third parties. We cannot assure you that we will be able to successfully subcontract or outsource the fabrication of our systems at a reasonable cost to us, or that such third parties will adhere to our quality control standards.

Our business might be adversely affected by our dependence on foreign business.

During the year ended December 31, 201 7, approximately $3.0 million or 9.6% of our revenues were generated by sales to customers outside the U.S. compared to approximately $2.4 million or 11.9% for the year ended December 31, 2016.

Because a portion of our revenues are derived from international customers, our operating results could be negatively affected by a decline in the economies of any of the countries or regions in which we do business. Each region can exhibit unique characteristics, which can cause capital equipment investment patterns to vary significantly from period to period. Periodic local or international economic downturns, trade balance issues and political instability, as well as fluctuations in interest and currency exchange rates, could negatively affect our business and results of operations.

All of our sales to date have been primarily priced in U.S. dollars. While our business has not been materially affected in the past by currency fluctuations, there is a risk that it may be materially adversely affected in the future. Such risks include possible losses due to both currency exchange rate fluctuations and from possible social and political instability.

Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.

We are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. We have agreements with third parties and make sales in countries known to experience corruption, extortion, bribery, pay-offs, theft and other fraudulent practices. We can make no assurance, however, that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

If our critical suppliers fail to deliver sufficient quantities of quality materials and components in a timely and cost-effective manner, it could negatively affect our business.

We do not manufacture many components used in the production of our products, and consequently, we use numerous unrelated suppliers of materials and components. We generally do not have guaranteed supply arrangements with our suppliers. Because of the variability and uniqueness of our customer’s orders, we try to avoid maintaining an extensive inventory of materials and components for manufacturing. While we are not dependent on any principal or major supplier for most of our material and component needs, switching over to an alternative supplier may take significant amounts of time and added expense, which could result in a disruption of our operations and adversely affect our business.

It is not always practical or even possible to ensure that component parts are available from multiple suppliers; accordingly, we procure some key parts from a single supplier or a limited group of suppliers. At certain times, increases in demand for capital equipment can result in longer lead-times for many important system components, which may cause delays in meeting shipments to our customers. The delay in the shipment of even a few systems could cause significant variations in our quarterly revenue, operating results and the market value of our common stock.

We cannot assure you that our financial position and results of operations will not be materially and adversely affected if, in the future, we do not receive in a timely and cost-effective manner a sufficient quantity of quality component parts and materials to meet our production requirements.

We might require additional financing to expand our operations.

Although we recently purchased additional space , we may require additional financing to further implement our growth plans. We cannot assure you any additional financing will be available if and when required on commercially reasonable terms, if at all, or, even if available, that it would not materially dilute the ownership interests of the then existing shareholders.

We may be required to take additional impairment charges on assets.

We are required to assess goodwill and indefinite-lived intangible assets annually for impairment, or on an interim basis, whenever certain events occur or circumstances change, such as an adverse change in business climate or a decline in the overall industry, that would more likely than not reduce the fair value below its carrying amount. We are also required to test our long-lived assets, including acquired intangible assets and property, plant and equipment, for recoverability and impairment whenever there are indicators or impairment, such as an adverse change in business climate.

As part of our long-term strategy, we have pursued acquisitions of other companies or assets, such as our recent acquisitions of assets owned by Tantaline ApS and Mesoscribe Technologies, Inc. and may pursue future acquisitions of other companies or assets which could potentially increase our assets. Adverse changes in business conditions could materially impact our estimates of future operations and result in impairment charges to these assets. If our assets were impaired, our financial condition and results of operations could be materially and adversely affected.

The price of our common shares is volatile and could decline significantly.

The stock market in general and the market for technology stocks in particular has experienced volatility. If those industry-based market fluctuations continue, the trading price of our common shares could decline significantly independent of the overall market, and shareholders could lose all or a substantial part of their investment. The market price of our common shares could fluctuate significantly in response to several factors, including, among others:

●

difficult macroeconomic conditions, unfavorable geopolitical events, and general stock market uncertainties, such as those occasioned by a global liquidity crises and a failure of large financial institutions;

●

receipt of large orders or cancellations of orders for our products;

●

issues associated with the performance and reliability of our products;

●

actual or anticipated variations in our results of operations;

●

announcements of financial developments or technological innovations;

●

changes in recommendations and/or financial estimates by investment research analysis;

●

strategic transactions, such as acquisitions, divestitures, or spin-offs; and

●

the occurrence of major catastrophic events

●

Significant price and value fluctuations have occurred with respect to our publicly traded securities and technology companies generally. The price of our common shares is likely to be volatile in the future. In the past, securities class action litigation often has been brought against a company following periods of volatility in the market price of its securities. If similar litigation were pursued against us, it could result in substantial costs and a diversion of management ’s attention and resources, which could materially and adversely affect our financial condition, results of operations, and liquidity.

We face the risk of product liability claims.

The manufacture and sale of our products, which in operation may involve the use of toxic materials and extreme temperatures, involve the risk of product liability claims. For example, our rapid thermal processing systems are used to heat semiconductor materials to temperatures in excess of 1000º Celsius. In addition, a failure of one of our products at a customer site could interrupt the business operations of our customer. Our existing insurance coverage limits may not be adequate to protect us from all liabilities that we might incur in connection with the manufacture and sale of our products if a successful product liability claim or series of product liability claims were brought against us.

We are subject to environmental regulations, and our inability or failure to comply with these regulations could adversely affect our business.

We are subject to environmental regulations in connection with our business operations, including regulations related to the development and manufacture of our products and our customers ’ use of our products. Our failure or inability to comply with existing or future environmental regulations could result in significant remediation liabilities, the imposition of fines or the suspension or termination of development, manufacturing or use of certain of our products, or affect the operation of our facilities, use or value of our real property, each of which could damage our financial position and results of operations.

If we are subject to cyber-attacks we could incur substantial costs and, if such attacks are successful, we could incur significant liabilities, reputational harm, and disruption to our operations.

We manage, store and transmit proprietary information and sensitive data re lating to our operations. We may be subject to breaches of the information technology systems we use for these purposes. Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate and/or compromise our confidential information (and or third party confidential information), create system disruptions, or cause shutdowns. Computer programmers and hackers also may be able to develop and deploy viruses, worms, and other malicious software programs that attack our systems or our products, or that otherwise exploit any security vulnerabilities.

The costs to address the foregoing security problems and security vulnerabilities before or after a cyber-incident could be significant. Our remediation efforts may not be successful and could result in interruptions, delays, or cessation of service, and loss of existing or potential customers, impeding our sales, manufacturing, distribution, or other critical functions. In addition, breaches of our security measures and the unapproved dissemination of proprietary information or sensitive data about us, our customer, or other third parties, could expose us, our customers, or other third parties to a risk of loss or misuse of this information, result in litigation and potential liability for us, damage our reputation, or otherwise harm our business.

Regulations related to conflict minerals will force us to incur additional expenses, may make our supply chains more complex, and may result in damage to our relationships with customers.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, the SEC adopted requirements for companies that manufacture products that contain certain minerals and metals known as “conflict minerals”. These rules require public companies to perform diligence and to report annually to the SEC whether such minerals originate from the Democratic Republic of Congo and adjoining countries. The implementation of these requirements could adversely affect the sourcing, availability, and pricing of minerals we use in the manufacture of our products. In addition, we have incurred and will continue to incur additional costs to comply with the disclosure requirements, including costs related to determining the source of any of the relevant minerals used in our products. Given the complexity of our supply chain, we may not be able to ascertain the origins of these minerals used in our products through the due diligence procedures that we implement, which may harm our reputation. We may also face difficulties in satisfying customers who may require that our products be certified as conflict mineral free, which could harm our relationships with these customers and lead to a loss of revenue. These requirements could limit the pool of suppliers that can provide conflict-free minerals, and we may be unable to obtain conflict-free minerals at competitive prices, which could increase our costs and adversely affect our manufacturing operations and our profitability.

Item 1B. Unresolved Staff Comments

None.

Item 2. Description of Property.

Owned Location s	Size (sf)	Entity	Mortgage/Loan	Principal use
Central Islip, NY	130,000	CVD Equipment	Yes	Corporate: R&D; M anufacturing
Central Islip, NY	179,000	CVD Materials	Yes	M anufacturing and R&D

Saugerties, NY	22,000	SDC	No	Admin; M anufacturing


Leased Locations	Size (sf)	Entity	Lease term	Principal use
Nordborgvej, Denmark	7,793	Tantaline AsP	4 years	Process coatings, Admin

Huntington Beach Ca.	22,142	CVD Mesoscribe	1.5 years	M anufacturing

Item 3. Legal Proceedings .

None

Item 4. Mine Safety Disclosures .

Not applicable .

PART II

Item 5. Market for Registrant ’ s Common Equity , Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is listed on the NASDAQ Capital Market under the symbol “CVV .” The following table sets forth, for the periods indicated, the high and low closing prices of our common stock on the NASDAQ Capital Market.

	High		Low
Year Ended December 31, 201 7:
1 ^st Quarter	$	10.75	$	8.55
2 ^nd Quarter		12.16		10.09
3 ^rd Quarter		11.87		10.00
4 ^th Quarter		13.00		10.71

	High		Low
Year Ended December 31, 20 16:
1 ^st Quarter	$	9.95	$	7.79
2 ^nd Quarter		8.74		6.27
3 ^rd Quarter		9.27		8.33
4 ^th Quarter		8.83		7.70

As of March 22, 2018 there were approximately 93 holders of record and approximately 1,226 beneficial owners of our common stock, and the closing sales price of our common stock as reported on the NASDAQ Capital Market was $9.27.

Dividend Policy

We have never paid dividend s on our common stock and we do not anticipate paying dividends on common stock at the present time. We currently intend to retain earnings, if any, for use in our business. There can be no assurance that we will ever pay dividends on our common stock. Our dividend policy with respect to our common stock is within the discretion of the Board of Directors and its policy with respect to dividends in the future will depend on numerous factors, including earnings, financial requirements and general business conditions. We are also prohibited from paying dividends under the terms of our Revolving Line of Credit Agreement with HSBC Bank, USA, N.A.

Equity Compensation Plan Information Table

The following table provides information about shares of our common stock that may be issued upon the exercise of options under all of our existing compensation plans as of December 31, 20 17.

	Number of securities to be issued upon exercise of outstanding options, warrants and rights (1)		Weighted-average exercise price of outstanding options, warrants and rights (2)		Number of securities remaining available for future issuance
Plan Category

Equity compensation plans approved by security holders		387,930	$	11.93		744,067

Equity compensation p lans not approved by security holders		--		N/A		--

Total		387,930	$	11.93		744,067

(1) Reflects aggregate options and restricted stock awards outstanding under our 1989 Key Employee Stock Option Plan, 2001 Stock Option Plan and 2007 Share Incentive Plan.

(2) Calculation is exclusive of the value of any unvested restricted stock awards.

Recent Sales o f Unregistered Securities

None .

Issuer Purchases o f Equity Securities

None .

Item 6. Selected Financial Data.

Not applicable.

Item 7 .

Management’s Discussion and Analysis of Financial Condition and Results of Operations .

Except for historical information contained herein, this “Management ’s Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, as amended. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Important assumptions and other factors that could cause actual results to differ materially from those in the forward-looking statements, include but are not limited to: competition in the Company’s existing and potential future product lines of business; the Company’s ability to obtain financing on acceptable terms if and when needed; uncertainty as to the Company’s future profitability, uncertainty as to the future profitability of acquired businesses or product lines, uncertainty as to any future expansion of the Company. Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements and the failure of such assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. The Company assumes no obligation to update these forward looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements. Past results are no guaranty future performance. You should not place undue reliance on any forward-looking statements, which speak only as of the dates they are made. When used with this Report, the words “believes,” “anticipates,” ”expects,” “estimates,” “plans,” “intends,” “will” and similar expressions are intended to identify forward-looking statements.

We design and manufacture state-of-the-art equipment and process solutions used to develop and manufacture materials and coatings for research and industrial applications with the focus on enabling tomorrow’s technologies ^TM . These coatings are used in numerous fields including but not limited to aerospace, medical, solar, nano and advanced electronic components. We offer a broad range of chemical vapor deposition, gas control and other equipment that is used by our customers to research, design and manufacture these materials or coatings for turbine blades, implants, semiconductors, solar cells, smart glass, carbon nanotubes, nanowires, LEDs, MEMS and other applications. Through our Application Laboratory, we provide process development support, startup assistance and focus on developing higher efficiency material manufacturing for a wide variety of growth markets. We look to accelerate the introduction of nano materials into a range of products and applications to help create a demand for our equipment or which we can market through our wholly owned subsidiary, CVD Materials Corporation. Our proprietary technology products are generally customized to meet the particular specifications of individual customers and to accelerate the commercialization of their proprietary intellectual property. We also offer standard products that are based on the expertise and know-how we have developed in designing and manufacturing our customized products.

Based on more than 35 years of experience, we use our engineering, manufacturing and process development to transform new applications into leading-edge manufacturing solutions. This enables university, research and industrial scientists at the cutting edge of technology to develop next generation chemical vapor deposited products for use in solar, nano materials, LEDs, semiconductors and other applications. We also develop and manufacture research and production equipment based on our proprietary designs. We have built a significant library of design expertise, know-how and innovative solutions to assist our customers in developing these intricate processes and to accelerate their commercialization of chemically deposited materials. This library of solutions, along with our vertically integrated manufacturing facilities, allows us to provide superior design, process and manufacturing solutions to our customers on a cost effective basis.

Results of Operations

Twelve Months Ended December 31, 201 7 vs Twelve Months Ended December 31, 201 6

	Twelve Months Ended
	December 31
	2017			2016			Change			% Change
Revenue
CVD (net of eliminations)	$	35,551		$	18,560		$	16,991			91.5
SDC (net of eliminations)		5,578			2,395			3,183			132.9
Total Revenue		41,129			20,955			20,174			96.3

Cost of Goods Sold		23,528			13,851			9,677			69.9

Gross Profit		17,601			7,104			10,497			147.8
Gross Margin		42.8	%		33.9	%					8.9

Research & Development		437			434			3			0.0
Selling and Shipping		1,405			1,098			307			28.0
General & Administrative		8,539			6,926			1,613			23.3
		10,381			8,458			1,923			22.7
Gain on settlement		-			(629	)		629
Total Operating expenses		10,381			7,829			2,552			32.6

Operating income/(loss)		7,220			(724	)		7,944			1,097.2

Other (expense)/income		(24	)		71			(95	)		(133.8	)

Income/(loss) before taxes		7,196			(653	)		7,849			1,202.0

Income tax expense/(benefit)		1,934			(504	)		2,438			483.7

Net income/(loss)		5,262			(149	)		5,411

Net income/(loss) per share
Basic		0.83			(0.02	)
Diluted		0.82			(0.02	)

Revenue

Our revenue for the year ended December 31, 2017 was $41.1 million compared to $21 million for the year ended December 31, 2016, resulting in an increase of 96.3%. This increase was primarily attributable to the work performed on the increased orders received over the past 18 months, in particular those orders received from our largest customer. Our largest customer, in the aerospace industry, from which we have secured multiple orders, represented $27.2 million or approximately 66.2% of our revenue for the twelve months ended December 31, 2017 compared to $9.5 million or approximately 45.3% of our revenue for the year ended December 31, 2016. We continue to receive additional orders and opportunities with new and current customers. The revenue contributed for the year ended December 31, 2017, by the CVD/First Nano division, of $35.7 million, which totaled 86.6% of our overall revenue, was 91.9% or $17.1 million more than the division’s $18.6 million contribution made in the prior year, which totaled 88.6% of our overall revenue.

Annual revenue for the SD C division increased to $5.6 million in 2017 compared to $2.4 million in 2016, an increase of 132.9%. The increase is primarily attributable to a general increase in activity for the year as well as having received a significant order from one customer that comprised approximately $1.4 million or 25% of the total. The SDC division represented 13.5% and 11.4% of our total revenue during the years ended December 31, 2017 and December 31, 2016 respectively. We have not received any appreciable revenue from Tantaline of Mesoscribe in 2017.

Gross Profit

Gross profit for the year ended December 31, 201 7 amounted to $17.6 million, with a gross profit margin of 42.8%, compared to a gross profit of $7.1 million and a gross profit margin of 33.9% for the year ended December 31, 2016. The increased gross profit and gross margin was the result of both greater overall revenue and the product mix of orders being worked on.

Research and Development, Selling and General and Administrative Expenses

Due to the technical development required on our custom orders, our research and development team and their expenses are charged to costs of goods sold when they are working directly on a customer project. When they are not working on a customer project they work in our Application Laboratory and their costs are charged to research and development. In 201 7 and 2016, we incurred $0.4 million of internal research and development costs.

Selling and shipping expenses were $1.4 million or 3.4% of the revenue for the year ended December 31, 2017 compared to $1.1 million or 5.2% for the year ended December 31, 2016. The increase in actual expenses was a result of additional personnel in the current period primarily related to CVD Materials, including its recently established subsidiaries CVD Tantaline ApS and CVE Mesoscribe Technologies.

General and administrative expenses for the year ended December 31, 2017 were $8.5 million compared to $6.9 million during the year ended December 31, 2016, an increase of $1.6 million. This increase was also primarily a result of additional personnel and occupancy costs related to CVD Materials, including its recently established subsidiaries CVD Tantaline ApS and CVD Mesoscribe Technologies, during the current year which totaled approximately $1.2 million.

Gain on Settlement

The Company has included the results of a negotiated reduc tion to legal fees and expenses in connection with the settlement of the previously disclosed Taiwan Glass litigation. The final negotiated sum was $1.1 million, resulting in a reduction of the amount that was previously billed and accrued and a gain on the statement of operations of $629,000 during the year ended December 31, 2016.

Operating Income/(Loss)

As a result of the increased revenues and gross margins, we recorded income from operations of approximately $7.2 million for the year ended December 31, 2017 compared to an operating loss of $653,000 for the year ended December 31, 2016.

Other (Expenses)/Income

Interest expense for the year ended December 31, 2017 increased as a result of the interest on the mortgage for the new building for one month. Other income of $71,000 for the year ended December 31, 2016 was primarily the result of a payment from our insurance company on a property damage claim that exceeded the repair costs by $119,000

Income Taxes

For the twelve months ended December 31, 2017, we recorded income tax expense of approximately $1.9 million. We incurred a current income tax expense of approximately $1.1 million as a result of applying federal, state and local income tax rates less available net operating loss carryforwards and research and development tax credits. We incurred an additional $0.8 million of deferred tax expense as a result of both the new tax law and temporary differences between financial statements and tax bases of assets and liabilities. The new Tax Act that was adopted into law on December 22, 2017 makes broad and complex changes to the Internal Revenue Code of 1986, including, but not limited to, (i) reducing the U.S. federal corporate tax rate from 35% to 21%; (ii) eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits are realized; (iii) creating a new limitation on deductible interest expense and (iv) changing rules related to uses and limitation of net operating loss carryforwards created in tax years beginning after December 31, 2017. The change in the tax law resulted in an additional $689,000 of deferred income tax expense. For the twelve months ended December 31, 2016 we recorded an income tax benefit of $0.5 million.

Net Income/ (Loss)

As a result of the foregoing factors, for the year ended December 31, 201 7, we earned net income of $5.3 million or $0.82 per diluted share compared to a net loss of $149,000 or $(0.02) per diluted share for the year ended December 31, 2016.

Inflation

Inflation has not materially impacted our operations.

Liquidity and Capital Resources

As of December 31, 2017, we had aggregate working capital of $22.4 million compared to aggregate working capital of $20.5 million at December 31, 2016 and had available cash and cash equivalents of $14.2 million, compared to $21.7 million, in cash and cash equivalents at December 31, 2016. The increase in working capital of $1.9 million is primarily attributable to increases in, costs and estimated earnings in excess of billings on contracts in progress and accounts receivable that was partially offset by a reduction in cash. Net cash decreased by $7.5 million as a result of cash used in investing activities primarily related to the acquisition of the land and building located at 555 North Research Place and the acquisition of Mesoscribe Technologies Inc. This was partially offset by cash provided by financing activities, specifically the mortgage obtained from HSBC on the property at 555 North Research Place and operating activities of $1.9 million which was primarily attributed to an increase in billings in excess of costs and estimated earnings on contracts in progress.

Accounts receivable, net of allowance for doubtful accounts , increased by $1.5 million or 238.9% at December 31, 2017 to $2.1 million compared to $0.6 million at December 31, 2016. This increase is principally due to the timing of shipments and customer payments.

Inventories as of December 31, 2017 were approximately $3.0 million representing a decrease of approximately $300,000 or 9.8% compared to the balance of approximately $3.3 million as of December 31, 2016.

We maintain a revolving credit facility with HSBC Bank, USA, N.A. (“HSBC”) providing up to $7 million, although we have never utilized this facility. This credit facility remains available until September 1, 2018. The credit facility also contains certain financial covenants, all of which we were in compliance with at December 31, 2017.

On August 1, 2016 we made the final payment on a $2.1 million term loan that was initially entered into in August 2011.

The Company has a loan agreement with HSBC which is secured by a mortgage against our Central Islip facility at 355 South Technology Drive. The loan is payable in 120 consecutive equal monthly installments of $25,000 in principal plus interest and a final balloon payment upon maturity in March 2022. The balances as of December 31, 2017 and December 31, 2016 were approximately $3.0 million and $3.3 million respectively. Interest accrues on the Loan, at our option, at the variable rate of LIBOR plus 1.75% which was 3.3118% and 2.5618% at December 31, 2017 and 2016 respectively.

On December 16, 2016, we purchased certain assets formerly owned by Tantaline A/S of Nordborg, Denmark through our wholly owned subsidiary, CVD Materials Corporation. Formed in 2007, as a spin off from The Danfoss Group, Tantaline A/S established itself as a leader in the commercialization of tantalum treated parts for corrosion resistance. We have now established in Nordborg a new and wholly owned CVD subsidiary operating under the name Tantaline CVD ApS (“Tantaline”).

On October 31, 2017, through our newly formed and wholly-owned subsidiary, CVD Mesoscribe Technologies Corporation (“Mesoscribe Technologies”), we acquired substantially all of the operating assets and business of Mesoscribe Technologies, Inc. (“MTI”). Formed in 2002, by a group out of Stony Brook University, MTI established itself as a pioneer and leader in the direct deposition of thermal sensors, heaters, and instrumentation for harsh environments.

On November 30, 2017, we closed on the purchase of the premises located at 555 North Research Place, Central Islip, NY 11722. The purchase price of the land and the building was $13,850,000 exclusive of closing costs.

As part of the acquisition, the Company’s newly formed wholly-owned subsidiary, 555 N Research Corporation (the” Assignee”) and the Islip IDA, entered into a Fee and Leasehold Mortgage and Security Agreement (the ”Loan”) with HSBC USA, N.A. (the ”Bank”) in the amount of $10,387500, which was used to finance a portion of the purchase price to acquire the premises located at 555 North Research Place, Central Islip, New York 11722 (the ”Premises”). The Loan was evidenced by the certain Note, dated November 30, 2017 (the ”Note”), by and between Assignee and the Bank, and secured by a certain Fee and Leasehold Mortgage and Security Agreement, dated November 30, 2017 (the “Mortgage”), as well as a collateral Assignment of Leases and Rents (“Assignment of Leases”).

The Loan is payable in 60 consecutive equal monthly installments of $62,777.60 including interest. The Loan shall bear interest for each Interest Period (as defined in the Note), at the fixed rate of 3.9148%. The maturity date for the Note is December 1, 2022.

We believe that our cash and cash equivalent positions and cash flow from operations will be sufficient to meet our working capital and capital expenditure requirements for the next twelve months.

We may also raise additional funds in the event we determine in the future to effect one or more acquisitions of businesses, technologies or products. In addition, we may elect to raise additional funds even before we need them if the conditions for raising capital are favorable. Any equity or equity-linked financing could be dilutive to existing shareholders.

Critical Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our significant estimates include accounting for certain items such as revenues on long-term contracts recognized on the percentage-of-completion method; valuation of inventories at the lower of cost or market; allowance for doubtful accounts receivable; recognition of stock-based compensation; estimated lives and recoverable value of our long-lived assets; costs associated with product warranties; and certain components of the current and deferred income tax provisions which ae based on estimates of future taxable events.

Revenue R e cognition

Revenue Recognition . We earn revenue from the sale of custom equipment to customers around the world. A large portion of our revenue is derived from contracts relating to the design, development or manufacture of complex equipment to a buyer’s specification and is recognized in accordance with FASB ASC 605-35. For these contracts, we primarily apply the percentage-of-completion accounting method and generally recognize revenue based on the relationship of total costs incurred to total projected costs. Profits expected to be realized on such contracts are based on total estimated sales for the contract compared to total estimated costs, including warranty costs, at completion of the contract.

Direct costs which include materials, labor and overhead are charged to work-in-progress (including our contracts-in-progress) inventory or cost of sales. Indirect costs relating to long-term contracts, which include expenses such as general and administrative, are charged to expense as incurred and are not included in our work-in-process (including our contracts-in-progress) inventory or cost of sales. Total estimates are reviewed and revised periodically throughout the lives of the contracts, and adjustments to profits resulting from such revisions are made cumulative to the date of the change. Estimated losses on long-term contracts are recorded in the period in which the losses become evident.

We have been engaged in the production and delivery of goods on a continual basis under contractual arrangements for many years. Historically, we have demonstrated an ability to accurately estimate total revenues and total expenses relating to our long-term contracts. However, there exist many inherent risks and uncertainties in estimating revenues, expenses and progress toward completion, particularly on larger or longer-term contracts. If we do not estimate the total sales, related costs and progress toward completion on such contracts, the estimated gross margins may be significantly impacted or losses may need to be recognized in future periods. Any such resulting changes in margins or contract losses could be material to our results of operations and financial condition.

Adoption of New Revenue Standard

In May 2014, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” (Topic 606), which changes the criteria for recognizing revenue. The standard requires an entity which recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard requires a five-step process for recognizing revenues including identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction prices, allocating the transaction price to the performance obligations in the contract, and recognizing revenue when (or as) the entity satisfies a performance obligation. Publicly-traded companies were initially required to adopt the ASU for reporting periods beginning after December 15, 2016; however, the FASB, in August 2015, then issued Accounting Standards Update (“ASU”) No. 2015-14 to defer the effective date of ASU 2014-09 for all entities by one year. The Company has completed its assessment of the impact that the standard will have on revenue recognition. The Company has reviewed contracts for all material revenue streams and assessed potential impacts on the Company’s consolidated financial statements, results of operations, disclosures, and internal controls over financial reporting. The Company currently recognizes a significant majority of its revenue over time. Management has determined that this will remain materially consistent upon adoption of the new standard and no adjustment to beginning retained earnings will be necessary upon adoption. Additionally, the Company will make additional disclosures related to the revenues arising from contracts with customers as required by the new standard. The Company has adopted this guidance in the first quarter of fiscal 2018 using the modified retrospective approach.

Product and service sales, including those based on time and materials type contracts, are recognized when persuasive evidence of an arrangement exists, product delivery has occurred or services have been rendered, pricing is fixed or determinable, and collection is reasonably assured. Service sales, principally representing repair, maintenance and engineering activities are recognized over the contractual period or as services are rendered.

Stock-Based Compensation

We record stock-based compensation in accordance with the provisions set forth in the Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) 718, “Stock Compensation,” using the modified prospective method. ASC 718 requires companies to recognize the cost of employee services received in exchange for awards of equity instruments based upon the grant date fair value of those awards.

Long-Lived Assets and Intangibles

Long-lived assets consist primarily of property, plant and equipment. Intangibles consist of patents, copyrights, intellectual property, licensing agreements and certifications. Long-lived assets are reviewed for impairment whenever events or circumstances indicate their carrying value may not be recoverable. When such events or circumstances arise, an estimate of the future undiscounted cash flows produced by the asset, or the appropriate grouping of assets, is compared to the asset’s carrying value to determine if impairment exists pursuant to the requirements of ASC 360-10-35, “Impairment or Disposal of Long-Lived Assets.” If the asset is determined to be impaired, the impairment loss is measured on the excess of its carrying value over its fair value. Assets to be disposed of are reported at the lower of their carrying value or net realizable value. We had no recorded long-lived asset impairment charges in the statement of operations during each of the years ended December 31, 2017 and 2016.

Off-Balance Sheet Arrangements

None.

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 8 .

Financial Statements and Supplementary Data.

The consolidated financial statements and supplementary data required by this item are included in this annual report beginning on page F-1.

Item 9 .

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None .

Item 9 A.

Controls and Procedures.

Disclosure Controls and Procedures . We maintain a system of disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). As required by Rule 13a-15(b) under the Exchange Act, management of the Company, under the direction of our Chief Executive Officer and Chief Financial Officer, reviewed and performed an evaluation of the effectiveness of design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2017. Based on that review and evaluation, the Chief Executive Officer and Chief Financial Officer, along with the management of the Company, have determined that as of December 31, 2017, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and were effective to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

Management ’s Annual Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining effective internal control over financial reporting (as defined in Rule 13a – 15(f) of the Exchange Act). There are inherent limitations to the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time. We have assessed the effectiveness of our internal controls over financial reporting (as defined in Rule 13a -15(f) of the Exchange Act) as of December 31, 2017. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control – Integrated Framework (2013)”. Management concluded that, as of December 31, 2017, our internal control over financial reporting was effective based on the criteria established by the COSO Internal Control Framework.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting, identified in connection with the evaluation of such internal control that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9 B. Other Information .

None .

PART III

Item 10 .

Directors, Executive Officers, and Corporate Governance .

B ackground and Experience of Directors

When considering whether directors and nominees have the experience, qualifications, attributes or skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of our business and structure, the Nominating, Governance and Compliance Committee focused primarily on each person ’s background and experience as reflected in the information discussed in each of the directors’ individual biographies set forth immediately below. We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business. As more specifically described in such person’s individual biographies set forth below, our directors possess relevant and industry-specific experience and knowledge in the engineering financial and business fields, as the case may be, which we believe enhances the Board’s ability to oversee, evaluate and direct our overall corporate strategy. The Nominating, Governance and Compliance Committee annually reviews and makes recommendations to the Board regarding the composition and size of the Board so that the Board consists of members with the proper expertise, skills, attributes, and personal and professional backgrounds needed by the Board, consistent with applicable regulatory requirements.

The Nominating, Governance and Compliance Committee believes that all directors, including nominees, should possess the highest personal and professional ethics, integrity, and values, and be committed to representing the long-term interests of our shareholders. The Nominating, Governance and Compliance Committee will consider criteria including the nominee ’s current or recent experience as a senior executive officer, whether the nominee is independent, as that term is defined in existing independence requirements of the NASDAQ Capital Market and the Securities and Exchange Commission, the business, scientific or engineering experience currently desired on the Board, geography, the nominee’s industry experience, and the nominee’s general ability to enhance the overall composition of the Board.

The Nominating, Governance and Compliance Committee does not have a formal policy on diversity; however, in recommending directors, the Board and the Committee consider the specific background and experience of the Board members and other personal attributes in an effort to provide a diverse mix of capabilities, contributions and viewpoints which the Board believes enables it to function effectively as the Board of Directors of a company with our size and the nature of our business.

D irector Service on other Boards

Lawrence J. Waldman has served as a director of Bovie Medical Corporation (“Bovie”) since 2011 and is currently the Chair of the Audit Committee and Lead Independent Director of Bovie ’s Board. Mr. Waldman serves as a member of the Board of Directors of Northstar/RXR Metro Income Fund, a non-traded Real Estate Investment Trust, and has served as a member of its Audit Committee since 2014. Mr. Waldman also serves as a member of the Board of Directors of Comtech Telecommunications, Corp. since August of 2014, and has served as the Chairman of the Audit Committee since December 2015.

R aymond A. Nielsen has been a member of the Board of Directors of Bridgehampton National Bank and Bridge Bancorp Inc., its parent holding company since 2013. He currently serves on the Compensation Committee, Corporate Governance and Nominating Committee as well as on the ALCO and Loan Committees and the Compliance BSA & CRA Committee.

L egal Proceedings Involving Directors

None .

B oard Leadership

The Board has no formal policy with respect to separation of the positions of Chairman and CEO or with respect to whether the Chairman should be a member of management or an independent director, and believes that these are matters that should be discussed and determined by the Board from time to time. Currently, Leonard A. Rosenbaum serves as our Chairman, President and CEO. Given the fact that Mr. Rosenbaum, in his capacity as our President and CEO is tasked with the responsibility of implementing our corporate strategy, we believe he is best suited for leading discussions, at the Board level, regarding performance relative to our corporate strategy, and th ese discussions account for a significant portion of the time devoted at our Board meetings.

Our Certificate of Incorporation and Bylaws provide for our Company to be managed by or under the direction of the Board of Directors. Under our Certificate of Incorporation and Bylaws, the number of directors is fixed from time to time by the Board of Directors. The Board of Directors currently consists of five members. Directors are elected for a period of one year and thereafter serve, subject to the Bylaws, until the next annual meeting at which their successors are duly elected by the shareholders.

The following table sets for the names, ages and positions with the Company of each of our directors and executive officers, as of March 22, 2018.

Name	Age	Position(s) with the Company
Leonard A. Rosenbaum	7 2	Chairman of the Board of Directors , Chief Executive Officer, President

Martin J. Teitelbaum	6 7	Director, General Counsel and Assistant Secretary
Conrad J. Gunther	7 1	Director, Chair person-Audit Committee
Lawrence J. Waldman	7 1	Director, Chairperson-Compensation Committee
Raymond A. Nielsen	6 7	Director, Chairperson-Nominating, Governance and
		Compliance Committee
Glen R. Charles	6 4	Chief Financial Officer, Secretary
Steven Aragon	5 6	Chief Operating Officer
Karlheinz Strobl	5 8	Vice President of Business Development
William S. Linss	60	Vice President of Operations-CVD/First Nano Division
Kevin R. Collins	5 2	Vice President and General Manager-SDC Division
Emmanuel Lakios	5 6	Vice President of Sales and Marketing

Leonard A. R osenbaum

Leonard A. R osenbaum founded the Company in 1982 and has been our President, Chief Executive Officer and has served as Chairman of the Board of Directors since that time. From 1971 until 1982, Mr. Rosenbaum was president, director and a principal stockholder of Nav-Tec Industries, a manufacturer of semiconductor processing equipment similar to the type of equipment we manufacture. From 1966 to 1971, Mr. Rosenbaum was employed by a division of General Instrument, a manufacturer of semiconductor materials and equipment.

Martin J. Teitelbaum , Esq.

Martin J. Teitelbaum has served as a member of our Board of Directors and General Counsel since 1985 and as our in-house General Counsel since May 16, 2011. Mr. Teitelbaum is an attorney, who prior to May 16, 2011, conducted his own private practice, the Law Offices of Martin J. Teitelbaum. Prior to establishing his own firm in 1988, Mr. Teitelbaum was a partner at Guberman and Teitelbaum from 1977 to 1987. In addition, Mr. Teitelbaum currently acts as our Assistant Secretary. Mr. Teitelbaum earned a B.A. in Political Science from the State University of New York at Buffalo and a Juris Doctor from Brooklyn Law School. Mr. Teitelbaum has served as our outside General Counsel for many years and his legal expertise makes him an asset to the Company’s board of directors.

Conrad J. Gunther

Conrad J. Gunther has served as a member of our Board of Directors since 2000. Mr. Gunther has extensive experience in mergers and acquisitions and in raising capital through both public and private means. He has been an executive officer and director of several banks, both public and private, and has served on the boards of two other public companies. He most recently served on the board of GVC Venture Corp., a public company from June 2004 until it merged with the Halo Companies in September 2009. Since January 2008, Mr. Gunther has served as an Executive Vice President and Senior Loan Officer for Community National Bank, a Long Island, New York based commercial bank, where he is responsible for all commercial lending. Mr. Gunther qualifies to serve on our board of directors as a result of his experience and expertise in the financial community.

Lawrence J. Waldman

Lawrence J. Waldman was appointed a member of the Board of Directors on October 5, 2016. Mr. Waldman has over forty years of experience in public accounting. He joined First Long Island Investors LLC, an investment and wealth management firm, as a Senior Advisor in May 2016. Prior to that Mr. Waldman served as an advisor to the accounting firm of EisnerAmper LLP, where he was previously the Partner-in-Charge of Commercial Audit Practice Development for Long Island since September 2011. Prior to joining EisnerAmper LLP, Mr. Waldman was the Partner-in-Charge of Commercial Audit Practice Development for Holtz Rubenstein Reminick, LLP from July 2006 to August 2011. Mr. Waldman was the Managing Partner of the Long Island office of KPMG LLP from 1994 through 2006, the accounting firm where he began his career in 1972. Mr. Waldman has served as a director of Bovie Medical since 2011 and he is currently the Chair of the audit committee and Lead Independent Director of the Board. Mr. Waldman serves as a member of the Board of Directors of Northstar/RXR Metro Income Fund, a non-traded Real Estate Investment Trust, and has served as a member of its audit committee since 2014. Mr. Waldman was elected to the Board of Directors of Comtech Telecommunications Corp. in August of 2015, and since December 2015, serves as Chair of its Audit Committee. Mr. Waldman is also a member of Supervisory Committee of Bethpage Federal Credit Union. Mr. Waldman previously served as a member of the State University of New York's Board of Trustees and as chair of its audit committee. He also previously served as the Chairman of the Board of Trustees of the Long Island Power Authority and as Chair and a member of the finance and audit committee of its Board of Trustees. Mr. Waldman is a Certified Public Accountant.

Raymond Nielsen

Raymond Nielsen was appointed a member of the Board of Directors on October 5, 2016. Mr. Nielsen is currently the Director of Finance for The Beechwood Organization and has been responsible for Project and Corporate Finance including Strategic Planning Initiatives since 2014. He has been a member of the Board of Directors of Bridgehampton National Bank and Bridge Bancorp Inc., its Parent holding company since 2013, serving on the Compensation Committee, Corporate Governance & Nominating Committee, ALCO, Loan, and the Compliance, BSA & CRA Committees. Mr. Nielsen is the former CEO of Reliance Federal Savings Bank and Herald National Bank, and a 45 year veteran of the banking industry. Mr. Nielsen also served as a Director of North Fork Bancorporation and its subsidiary North Fork Bank for 6 years where he chaired both the Compensation Committee and Audit Committee as well as having served as Lead Independent Director. Mr. Nielsen ’s extensive public company, banking and real estate development experience will provide a valuable resource to the Board of Directors and Executive Management.

Glen R. Charles

Glen R. Charles has been the Chief Financial Officer and Secretary of the Company since January, 2004. From 2002 until he joined the Company, he was the Director of Financial Reporting for Jennifer Convertibles, Inc., the owner and licensor of the largest group of sofabed specialty retail stores in the United States. From 1994 to 2002, he was the Chief Financial Officer of Trans Global Services, Inc., a public company providing temporary technical services to the aerospace, aircraft, electronics and telecommunications markets. Mr. Charles has also had his own business in the private practice of accounting. Mr. Charles earned his B.S. in Accounting from the State University of New York at Buffalo.

Steven Aragon

Dr. Steven Aragon was appointed Chief Operating Officer by the Board of Directors on October 20, 2014. Dr. Aragon has over 25 years of thin-film process, materials, and system expertise applied to photovoltaic, optical, electronic, and magnetic device fabrication. He received his Ph.D. in Physical Chemistry from the University of California, Santa Cruz, in 1990 and his MBA from Santa Clara University in 1996. He is the holder of five process equipment design patents. Dr. Aragon was a co-founder of Optimus Energy Systems International Inc. and served as its Chief Technical Officer and Senior Vice-President – Engineering from November 2011 to October 2014. From June 2008 to October 2011, He has also served as Vice-President – Engineering at Stion Corp of San Jose, California, a maker of nanostructure-based CIGS (copper indium gallium sulphur-diselenide) thin-film photovoltaic panels and as the Vice President – Engineering at Day Star Technologies Inc. from June 2001 to June 2008.

Karlheinz Strobl

Dr. Karlheinz Strobl has been the Vice President of Business Development since October 2007. From 1997 to 2007, he was the founder and President of eele Laboratories, LLC, a technology and manufacturing solutions development company for a novel Light Engine for the video and data projection display market. Dr. Strobl holds over 14 patents and earned an MBA from Boston University, a P hD from the University of Innsbruck and an MS from both the University of Innsbruck and the University of Padova. He has also worked at the Max Plank Institute and at Los Alamos National Laboratory.

William S. Linss

William S. Linss is the Vice President, Operations for the CVD/First Nano Division of CVD. In addition to managing daily engineering and production operations, Bill is instrumental in expanding the company ’s technology capabilities, developing new products and positioning CVD for growth. Prior to his promotion in 2013, Bill was the Division Manager for the CVD/First Nano Division since 2005. Bill has worked in semiconductor manufacturing and chemical vapor deposition for 25 years. From 1980 through 1988 Bill worked at Standard Microsystems Corp. in Hauppauge, NY, advancing to Equipment Engineering Manager with all capital equipment responsibilities for SMC’s MOS/VLSIC manufacturing. Bill was employed by CVD from 1988 through 1994, advancing through various positions as Electrical Systems Designer, Field Service Engineer and Production Manager. From 1994 through 2001 Bill served as a Software Quality Assurance (SQA) Manager with Otari Corporation, at their Long Island pro-audio R&D office; and later with AP Engines in Sacramento, CA, a Cable TV billing solutions start-up. In 2001, Bill re-joined CVD to head the newly acquired Research International Division for SMT reflow oven manufacturing, which then resulted in CVD’s acquisition of the Conceptronic product line.

Kevin R. Collins

Prior to his appointment as Vice President and General Manager-SDC Division, Mr. Collins served as the General Manager of CVD ’s SDC Division since 1999. From 1990 to 1999 he was employed by Stainless Design Corp. as Manager of Field Operations and Product Development Advisor. Mr. Collins attended Columbia University School of Engineering and Applied Science.

Emmanuel Lakios

Mr. Lakios has over thirty (30) years of experience serving the semiconductor, data storage and optical device industries and is the holder of several patents in the field of process equipment and device structure. From 2015 until earlier this year, Mr. Lakios was the President and Chief Executive Officer at Sensor Electronic Technology, Inc., overseeing that company ’s transition from R&D to a leading global commercial UV LED supplier. From 2003 to 2011 he was the Executive Vice President of Field Operations and President and Chief Operating Officer at Imago Scientific, bringing it from pre-revenue to a commercial leadership position in the 3D atomic scale tomography field. Mr. Lakios was previously employed at Veeco Instruments Inc. from 1984 until 2003, where he held several positions, including President of the Process Equipment Group and Executive Vice President of Field Operations. He has been involved in several acquisitions and numerous product line launches. He received his BE in Mechanical Engineering with focus in Material Science from SUNY Stony Brook in 1984.

Code Of Ethics

We have adopted a Corporate Code of Conduct and Ethics that applies to our employees, senior management and Board of Directors, including the Chief Executive Officer and Chief Financial Officer. The Corporate Code of Conduct and Ethics is available on our website, http://www.cvdequipment.com , by clicking on “About Us” and then clicking on “Corporate Overview.”

Audit Committee

Our Board of Directors has an Audit Committee that currently consists of Conrad J. Gunther, Lawrence J. Waldman and Raymond A. Nielsen. During the fiscal year ended December 31, 2017, the Audit Committee held four meetings. Pursuant to the Audit Committee Charter, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of any independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us, and each such independent auditor shall report directly to the Committee. The Audit Committee also reviews with management and the independent auditors, our annual audited financial statements (including the disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”), the scope and results of annual audits and the audit and non-audit fees of the independent registered public accounting firm. Messrs. Gunther, Waldman and Nielsen are “independent” under the requirements of the NASDAQ Stock Market.

The Board of Directors has determined that each of Messrs. Gunther and Waldman is an “audit committee financial expert” as that term is defined in the rules and regulations of the Securities and Exchange Commission.

Section 16(a) Beneficial Ownership Reporting Compliance

The rules of the Securities and Exchange Commission require us to disclose late filings of reports of stock ownership and changes in stock ownership by our directors, officers and ten percent shareholders. To our knowledge, based solely on our review of (a) the copies of such reports and amendments thereto furnished to us and (b) written representations that no other reports were required, during our fiscal year ended December 31, 2017, all of the filings for our officers, directors and ten percent shareholders were made on a timely basis, except for Conrad J. Gunther, who inadvertently filed one Form 4 one day late.

Item 1 1 . Executive Compensation .

Summary Compensation Table

The following table sets forth the compensation of our chief executive officer and chief financial officer, and our “named executive officers,” for the years ended December 31, 2017 and 2016.

Name and principal position	Year	Salary ($)		Bonus ($)		Option Awards ($)		Stock Awards ($)		All Other Compensation		Total ($)
						(1)		(1)

Leonard A. Rosenbaum	20 17		500,690		22,500		-		21,936		-		545,126
President and Chief	2016		302,742		20,000		-		37,949		-		360,691
Executive Officer

Glen R. Charles	20 17		157,981		20,000		-		21,936-				199,917
Secretary and Chief	20 16		163,942		15,000		-		28,469				192,411
Financial Officer

Steven Aragon	201 7		181,731		20,000		-		46,936				248,667
Chief Operating Officer	201 6		193,462		15,000		-		53,469				250,199

Martin J. Teitelbaum	201 7		265,074		20,000		-		21,936				307,010
General Counsel and	2016		266,126		15,000		-		28,469				309,595
Assistant Secretary

(1)

Amounts shown do not reflect compensation actually received by the named executive officer. Instead, the amounts shown reflect the total remaining compensation on restricted stock and option awards granted, that have not previously been shown, as determined pursuant to ASC 718. The assumptions used to calculate the value of stock and option awards are set forth under Note 11 of the Notes to Consolidated Financial Statements. This column represents the grant date fair value of the awards as calculated in accordance with FASB ASC 718 (Stock Compensation). Pursuant to SEC rule changes effective February 28, 2010, we are required to reflect the total grant date fair values of the option grants in the year of grant, rather than the portion of this amount that was recognized for financial statement reporting purposes in a given fiscal year which was required under the prior SEC rules, resulting in a change to the amounts reported in prior Annual Reports, which was valued utilizing the grant date fair value in the year granted.

Employment Agreements and Potential Payments Upon Termination or Change in Control

There are no arrangements for compensation of directors and there are no employment contracts between the company and its direc tors or any change in control arrangements.

Outstanding Equity Awards at December 31, 201 7

The following table sets forth the outstanding equity awards held by our named executive officers as of December 31, 2017.

							OPTION AWARDS		STOCK AWARDS

																Equity Incentive :
																Plan Awards
											Market		Equity Incentive			Market or payout
	Number of								Number of		Value of		Plan Awards:			value of
	Securities		Number of						shares or		shares or		Number of			unearned shares
	Underlying		Securities						units of stock		units of stock		unearned shares			or units
	Options		Options		Exercise		Option		that have not		that have not		or units that have			that have
	Exercisable		Unexercisable		Price		Expiration		Vested		Vested		not vested			not vested
Name	(#)		(#)		($)		Date		(#)		($)		(#)			($)

Leonard A		-		-		-		-		-		-		2,898	(1)		33,675
Rosenbaum

Steven Aragon		100,000		100,000		11.17	Various (4)							2,174	(2)		25,262

Glen R. Charles		-		-		-		-		-		-		3,606	(3)		41,902
														2,174	(2)		25,262

Martin J.		5,310		-		4.25	1/15/2020			-		-		2,174	(2)		25,262
Teitelbaum		1,400		-		7.90	1 /15/2021			-		-		-			-

(1)

Restricted stock units vest as to 1,449 shares respectively on July 1, 2018 and 2019.

(2)

Re stricted stock units vest as to 1,087 shares respectively on July 1, 2018 and 2019.

(3)

Restricted stock units vest on November 15, 2018.

(4)

Options vest as to 20,000 shares on October 20 each year consecutively through 2019 and expire 10 years from date of issuance.

20 1 7 Director Compensation

The following table sets forth a summary of the compensation we paid to our non -employee directors in 2017.

Name	Fees Earned or Paid in Cash		Option Awards (1)		Restricted Stock Awards (1)		Total
Conrad J. Gunther		23,000		-		30,070		53,070
Lawrence J. Waldman		20,000		-		30,070		50,070
Raymond A. Nielsen		20,000		-		30,070		50,070

(1)

Amounts shown do not necessarily reflect compensation actually received by the named director. Instead, the amounts shown are the compensation costs recognized by CVD in fiscal 2017 for awards as determined pursuant to ASC 718. The assumptions used to calculate the value of option awards are set forth under Note 12 of the Notes to Consolidated Financial Statements.

On May 9, 2016, the Board of Directors adopted a Director Compensation Plan for all non-employee directors, which retroactively from January 1, 2016, provided for annual compensation of approximately fifty thousand dollars ($50,000) to each non-employee director in a combination of 40% cash and 60% stock grant.

Item 12 .

Security Ownership of Certain Beneficial Owners and Management and Related Stock h older Matters .

The following table sets forth, as of March 22, 2018, information regarding the beneficial ownership of our common stock by (a) each person who is known to us to be the owner of more than five percent (5%) of our common stock, (b) each of our directors, (c) each of the named executive officers, and (d) all directors and executive officers and executive employees as a group. For purposes of the table, a person or group of persons is deemed to have beneficial ownership of any shares that such person has the right to acquire within 60 days of March 22, 2018.

Name and Address of Beneficial Owner(1)	Amounts and Nature of Beneficial Ownership (2)			Percent of Class (%)

Leonard A. Rosenbaum		818,319	(3)		12.7
Martin J. Teitelbaum		75,133	(4)		1.2
Conrad J. Gunther		57,988	(5)		*
Lawrence J. Waldman		4,700	(6)		*
Raymond A . Nielsen		4,700	(6)		*
Glen R. Charles		17,072	(7)		*
Steven Aragon		64,312	(8)		1.0
Karlheinz Strobl		120,979	(9)		1.9
William S. Linss		8,805	(10)		*
Kevin R. Collins		77,537	(11)		1.2
Emmanuel Lakios		22,660	(12)		*
All directors and executive officers and executive employees as a group ( ten (10) persons)		1,272,205			18.0

* Less than 1% of the outstanding common stock or less than 1% of the voting power

(1)	T he address of Messrs. Rosenbaum, Teitelbaum, Gunther, Waldman, Nielsen, Charles, Strobl, Linss, Aragon and Lakios is c/o CVD Equipment Corporation, 355 South Technology Drive, Central Islip, New York 11722.

(2)	The address of Mr. Collins is c/o Stainless Design Concepts, 1117 Old Kings Highway, Saugerties, NY 12477.

(3)	All of such shares are owned directly with sole voting and investment power, unless otherwise noted below. Does not include 2,898 shares of unvested restricted stock units.

(4)	Includes 2,000 shares held by Mr. Teitelbaum’s wife as to which beneficial ownership thereof is disclaimed by Mr. Teitelbaum. Also includes options to purchase 6,710 shares of our common stock. Does not include 2,174 shares of unvested restricted common stock units.

(5)	Includes options to purchase 8,110 shares of our common stock. Does not include 2,100 shares of unvested restricted common stock.

(6)	Does not include 2,100 shares of unvested restricted common stock.

(7)	Does not include 5,780 shares of unvested restricted common stock units.

(8)	Does not include unvested options to purchase 40,000 shares of our common stock. Does not include 2,174 shares of unvested restricted common stock units.

(9)	Does not include 5,089 shares of unvested restricted common stock units.

(10)	Does not include 9,164 shares of unvested restricted common stock units.

(11)	Does not include 6,214 shares of unvested restricted common stock units.

(12)	Does not include unvested options to purchase 80,000 shares of our common stock.

See Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities under the heading “Equity Compensation Plan Information” for information regarding our securities authorized for issuance under equity compensation plans.

Item 1 3 . Certain Relationships and Related Transactions , and Director Independence .

Transactions with related persons, promoters and certain control persons.

None.

Director Independence

The current members of our Board of Directors are Leonard A. Rosenbaum, Martin J. Teitelbaum, Conrad J. Gunther, Lawrence J. Waldman and Raymond A. Nielsen. Messrs. Gunther, Waldman and Nielsen have been determined to be “independent” as defined under Rule 4200 of the Nasdaq Stock Market.

Item 14. Principal Accountant Fees and Services .

The following presents fees for professional audit services rendered by MSPC , Certified Public Accountants and Advisors, A Professional Corporation (“MSPC”), for the audit of our financial statements for the years ended December 31, 2017 and December 31, 2016.

	Year Ended		Year Ended
	December 31, 201 7		December 31, 201 6
Audit Fees	$	138,000	$	132,000
Audit-Related Fees (1)		10,000		10,000
Tax Fees		--		--
All Other Fees		9,000		--
Total Fees	$	157,000	$	142,000

Audit-Related Fees

Audit-related fees consisted of the audit of the Company ’s Defined Contribution Plan 401(k) for the years 2017 and 2016 by MSPC.

Tax Fees

Tax fees consisted of the preparation of the tax returns by Baker, Tilley, Virchow Krause, LLP. The aggregate fees billed in 2017 were $18,500. The aggregate fees billed in 2016 were $20,000.

All Other Fees

In 2017, the firm of Baker, Tilley, Virchow and Krause, LLP was retained to prepare a comprehensive appraisal report to determine the fair value of certain stock options granted to an officer of the corporation for a fee of $9,000. We did not incur any other fees in 2016.

Audit Committee Approval

The engagement of the Company ’s independent registered public accounting firm is pre-approved by the Company’s Audit Committee. The Audit Committee pre-approves all fees billed and all services rendered by the Company’s independent registered public accounting firm.

PART IV

Item 15. Exhibits, Financial Statement Schedules

3.1	Certificate of Incorporation dated October 12, 1982 of Certificate of Corporation incorporated herein by reference to Exhibit 3.1 to our Form S-1 filed on July 3, 2007.

3.2	Certificate of Amendment dated April 25, 1985 of Certificate of Corporation incorporated herein by reference to Exhibit 3.1 to our Form S-1 filed on July 3, 2007.

3.3	Certificate of Amendment dated August 12, 1985 of Certificate of Corporation incorporated herein by reference to Exhibit 3.1 to our Form S-1 filed on July 3, 2007.

3.4	Certificate of Amendment of the Certificate of Incorporation, dated December 9, 2016 incorporated herein by reference to Exhibit 3.1 on our Current Report on Form 8-K filed on December 14, 2016.

3. 5	Bylaws of CVD Equipment Corporation, incorporated herein by reference to Exhibit 3.2 to our Form S-1 filed on July 3, 2007.

3.6	Amended and restated By-laws of CVD Equipment Corporation, dated as of October 5, 2016, incorporated herein by reference to Exhibit 3.5 to our Current Report on Form 8-K filed on October 11, 2016.

10.1	Form of Non-Qualified Stock Option Agreement with certain directors, officers and employees of CVD Equipment Corporation incorporated herein by reference to our Registration Statement on Form S-8 No. 33-30501, filed August 15, 1989.*

10.2	Purchase Agreement relating to a 22,000 square foot facility from Kidco Realty incorporated herein by reference to our Form 8-K filed on March 2, 1999.

10.3	CVD Equipment Corporation 2001 Stock Option Plan incorporated herein by reference to Exhibit 3.1 to our Form S-1 filed on July 3, 2007.*

10.4	Form of Non-Qualified Stock Option Agreement incorporated herein by reference to Exhibit 3.1 to our Form 10-KSB filed on March 26, 2007.*

10.5	1989 Key Employee Stock Option Plan incorporated herein by reference to Amendment No. 1 to our Form S-1 filed on August 7, 2007.

10.6	CVD Equipment Corporation 2007 Share Incentive Plan incorporated herein by reference to our Schedule 14A filed November 5, 2007.

10.7	Lease Agreement, dated February 9, 2012, by and between FAE Holdings 411519R, LLC and the Company incorporated by reference from the Company’s Report on Form 10-Q filed with the Commission on May 15, 2012.

10.8	Assignment Agreement, dated February 9, 2012, by and between FAE Holdings 411519R, LLC and the Company incorporated by reference from the Company’s Report on Form 10-Q filed with the Commission on May 15, 2012.

10.9	Qualified Exchange Accommodation Agreement, dated February 9, 2012, by and between FAE Holdings 411519R, LLC and the Company incorporated by reference from the Company’s Report on Form 10-Q filed with the Commission on May 15, 2012.

10.10

Joint and Several Hazardous Material Guaranty and Indemnification Agreement, dated March 15, 2012, by and between FAE Holdings 411519R, LLC and the Company incorporated by reference from the Company’s Report on Form 10-Q filed with the Commission on May 15, 2012.

10.11

Assignment of Leases and Rents, dated March 15, 2012, by and among FAE Holdings 411519R, LLC, the Town of Islip Industrial Development Agency and HSBC Bank USA, National Association incorporated by reference from the Company’s Report on Form 10-Q filed with the Commission on May 15, 2012.

10.12

Amended and Restated Fee and Leasehold Mortgage, dated March 15, 2012, by and among FAE Holdings 411519R, LLC, the Town of Islip Industrial Development Agency and HSBC Bank USA, National Association incorporated by reference from the Company’s Report on Form 10-Q filed with the Commission on May 15, 2012.

10.13

Amended and Restated Note, dated March 15, 2012, by and among FAE Holdings 411519R, LLC, the Town of Islip Industrial Development Agency and HSBC Bank USA, National Association incorporated by reference from the Company’s Report on Form 10-Q filed with the Commission on May 15, 2012.

10.14

Note and Mortgage Assumption Agreement, dated March 15, 2012, by and among FAE Holdings 411519R, LLC, the Town of Islip Industrial Development Agency and HSBC Bank USA, National Association incorporated by reference from the Company’s Report on Form 10-Q filed with the Commission on May 15, 2012.

10.15

Guaranty of Payment, dated March 15, 2012, by the Company incorporated by reference from the Company’s Report on Form 10-Q filed with the Commission on May 15, 2012.

10.16

Credit Agreement dated August 5, 2011, by and between CVD Equipment Corporation and HSBC Bank, USA, National Association incorporated by reference to our Report on form 10-Q filed on November 14, 2011.

10.17

Contract of Sale, dated May 31, 2012, between CVD Equipment Corporation and Glomel LLC incorporated by reference to our Report on Form 10-Q filed on August 14, 2012.

10.18

Amendment No. 3 and waiver to Credit Agreement dated September 4, 2015 incorporated by reference to the Company ’s Current Report on Form 8-K filed with the Commission on September 10, 2015.

10.19**

Agreement of Purchase and sale dated October 24, 2017, by and between the Company and Creative Bath Products, Inc.

10.20

Asset Purchase Agreement, dated October 31, 2017, by and between Mesoscribe Technologies, Inc. and CVD Mesoscribe Technologies Corporation, incorporated by reference from the Company ’s Current Report on Form 8-K filed on November 6, 2017.

10.21**	ADA and Environmental Indemnity Agreement by 555 N Research Corporation and CVD Equipment Corporation dated November 30, 2017.

10.22**	Assignment of Leases and Rents dated November 30, 2017 by and between 555 N Research Corporation and HSBC Bank USA, National Association

10.23**	Unlimited Guaranty between CVD Equipment Corporation and HSBC Bank USA, National Association dated November 30, 2017.

10.24**	Town of Islip Industrial Development Agency and CVD Equipment Corporation Agency Compliance Agreement dated as of November 1, 2017.

10.25**	Town of Islip Industrial Development Agency and CVD Equipment Corporation Amended and Restated Agency Compliance Agreement dated November 1, 2017

10.26**	Fee and Leasehold Mortgage and Security Agreement from Town of Islip Industrial Development Agency and 555 N Research Corporation to HSBC Bank USA, National Association

10.27**	Town of Islip Industrial Development Agency and FAE Holdings 411519R,LLC Amended and Restated Lease and Project Agreement dated as of November 1, 2017.

10.28**	Amended and Restated Note by and between 555 N Research Corporation and HSBC Bank USA, National Association

21.1 **	List of Subsidiaries.

23.1**

Consent of MSPC, Certified Public Accountants and Advisors, A Professional Corporation (S-1) .

23.2**

Consent of MSPC, Certified Public Accountants and Advisors, A Professional Corporation (S-8) .

23.3**

Consent of MSPC, Certified Public Accountants and Advisors, A Professional Corporation (S-8) .

23.4**

Consent of MSPC, Certified Public Accountants and Advisors, A Professional Corporation (S-3).

23.5**

Consent of MSPC, Certified Public Accountants and Advisors, A Profession Corporation (S-8)

31.1**

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

31.2**

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

32.1**

Section 1350 Certification of Principal Executive Officer.

32.2**

Section 1350 Certification of Principal Financial Officer.

101.INS** * XBRL Instance

101.SCH** * XBRL Taxonomy Extension Schema

101.CAL** * XBRL Taxonomy Extension Calculation

101.DEF** * XBRL Taxonomy Extension Definition

101.LAB** * XBRL Taxonomy Extension Labels

101.PRE** * XBRL Taxonomy Extension Presentation

* Management contract or compensatory plan or arrangement required

** Filed herewith

** * XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934 , as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DATE: April 2, 2018

CVD EQUIPMENT CORPORATION

By :	/s/ Leonard A. Rosenbaum
Name:	Leonard A. Rosenbaum
Title:	President and Chief Executive Officer

By:	/s/ Glen R. Charles
Name:	Glen R. Charles
Title:	Chief Financial Officer and Secretary
	Principal Financial and Accounting Officer

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated below.

NAME	POSITION	DATE

/s/ Leonard A Rosenbaum	President, Chief Executive Officer and Director	April 2, 2018
Leonard A. Rosenbaum	(Principal Executive Officer)

/s/ Martin J. Teitelbaum	Director , General Counsel and Assistant Secretary	April 2, 2018
Martin J. Teitelbaum

/s/ Conrad J. Gunther	Director	April 2, 2018
Conrad J. Gunther

/s/ Lawrence J. Waldman	Director	April 2, 2018
Lawrence J. Waldman

/s/ Raymond A. Nielsen	Director	April 2, 2018
Raymond A. Nielsen

CVD EQUIPMENT CORPORATION AND SUBS IDIARies

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page No .

Report of Independent Registered Public Accounting Firm	F-1

Financial Statements:

Consolidated Balance Sheets as of December 31, 2017 and 2016	F-2

Consolidated Statements of Operations for the years ended December 31, 2017 and 2016	F-3

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2017 and 2016	F-4

Consolidated Statements of Cash Flows for the years ended December 31, 2017 and 2016	F-5

Notes to Consolidated Financial Statements	F-6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

CVD Equipment Corporation and Subsidiaries

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of CVD Equipment Corporation and Subsidiaries (the "Company") as of December 31, 2017 and 2016, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for each of the two years in the two-year period ended December 31, 2017, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CVD Equipment Corporation and Subsidiaries as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company ’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinions.

/s/ MSPC

Certified Public Accountants and Advisors,

A Professional Corporation

We have served as the Company ’s auditor since 2004.

New York, New York

April 2, 2018

The accompanying notes are an integral part of the consolidated financial statements

F-1

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

Consolidated Balance Sheets

As of December 31,

	20 17		20 16
ASSETS
Current Assets
Cash and cash equivalents	$	14,210,909	$	21,677,186
Accounts receivable, net		2,058,617		607,522
Cost s and estimated earnings in excess of billings on contracts in progress		8,397,024		2,596,518
Inventories , net		2,965,623		3,286,539
Other current assets		167,425		235,537
Total Current Assets		27,799,598		28,403,302


Property, plant and equipment, net		28,839,457		14,344,924
Construction in progress				94,058

Deferred income taxes		1,609,186		2,440,334
Other assets		67,847		68,450
Intangible assets, net		662,162		253,624
Total Assets	$	58,978,250	$	45,604,692


LIABILITIES AND STOCKHOLDERS ’ EQUITY
Current Liabilities
Accounts payable	$	1,174,968	$	743,132
Accrued expenses		2,738,373		1,942,818
Current maturities of long-term debt		647,324		300,000
Current portion acquisition related contingent payments		100,000		---
Billings in excess of costs and estimated earnings on contracts in progress		466,313		5,262,339
Deferred revenu e		291,953		77,633
Total Current Liabilities		5,418,931		8,325,922

Long-term acquisition related contingent payments		200,000		---
Long-term debt, net of current portion		12,705,683		2,965,508
Total Long-Term Liabilities		12,905,683		2,965,508

Total Liabilities		18,324,614		11,291,430

Commitments and Contingencies (Note 16)		-		-

Stockholders ’ Equity:
Common stock - $0.01 par value – 20,000,000 shares authorized; issued and outstanding 6,458,714 at December 31, 2017 and 6,346,590 shares at December 31, 2016		64,587		63,466
Additional paid-in capital		25,209,316		24,131,474
Retained earnings		15,379,733		10,118,322
Total Stockholders ’ Equity		40,653,636		34,313,262

Total Liabilities and Stockholders ’ Equity	$	58,978,250	$	45,604,692

The accompanying notes are an integral part of the consolidated financial statements

F-2

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

Consolidated Statements of Operations

Years ended December 31,

	2017			2016

Revenue	$	41,128,639		$	20,955,347

Cost of revenue		23,528,427			13,850,824

Gross profit		17,600,212			7,104,523

Operating expenses
Research and development		437,157			433,844
Selling and shipping		1,404,938			1,097,661
General and administrative		8,539,244			6,926,487
Gain on settlement		-			(628,905	)

Total operating expenses		10,381,339			7,829,087

Operating income/(loss)		7,218,873			(724,564	)

Other income (expense) :
Interest income		80,518			28,233
Interest expense		(106,280	)		(79,861	)
Other income/(expense)		2,244			123,006
Total other (expense)/income net		(23,518	)		71,378

I ncome/(loss) before income tax e xpense/(benefit)		7,195,355			(653,186	)
Income tax expense/(benefit)		1,933,944			(504,061	)

Net income/(loss)	$	5,261,411		$	(149,124	)


Basic income/(loss) per common share	$	0.83		$	(0.02	)
Diluted income/(loss) per common share	$	0.82		$	(0.02	)

Weighted average common shares Outstanding -basic		6,375,848			6,285,815

Weighted average common shares Outstanding-diluted		6,387,464			6,285,815

The accompanying notes are an integral part of the consolidated financial statements

F-3

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

Consolidated Statements of Changes in Stockholders’ Equity

Additional

Total

Common Stock

Paid-In

Retained

Stockholders ’

Amount

Capital

Earnings

Equity

Balance – January 1, 2016

6,198,135

61,981

22,895,202

10,267,446

33,224,629

Exercise of stock options

100,000

1,000

461,000

462,000

Stock-based compensati on

48,455

485

775,272

775,757

Net (loss)

(149,124

)

(149,124

)

Balance – December 31, 2016

6,346,590

63,466

24,131,474

10,118,322

34,313,262

Exercise of stock options

36,800

368

145,852

146,220

Stock-based compensation

75,324

753

931,990

932,743

Net income

5,261,411

Balance – December 31, 2017

6,458,714

64,587

25,209,316

15,379,733

40,653,636

The accompanying notes are an integral part of the consolidated financial statements

F-4

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

Consolidated Statements of Cash Flows

Years ended December 31,

	2017			2016
Cash flows from operating activities:
Net income/(loss)	$	5,261,411		$	(149,124	)
Adjustments to reconcile net income/(loss) to net cash used in operating activities
Stock-based compensation		932,743			775,757
Depreciation and amortization		867,277			813,657
Deferred income tax benefit		831,148			(435,495	)
Deferred revenue		(80,187	)		---
Provision for doubtful accounts		1,413			(16,395	)
Increase/(decrease) in operating assets
Accounts receivable		(1,452,507	)		2,500,124
Cost in excess of billings on contracts in progress		(5,800,506	)		2,038,500
Inventories, net		345,916			(290,109	)
Other current assets		68,112			(68,473	)
Increase/(decrease) in operating liabilities
Accounts payable		431,836			435,129
Accrued expenses		795,552			(1,503,062	)
Current maturities of long-term debt		---			(280,000	)
Billings in excess of costs and estimated earnings on contracts in progress		(4,796,025	)		5,262,339
Deferred revenue		214,320			(230,050	)
Total adjustments		(7,640,908	)		9,001,922
Net cash (used in)/provided by operating activities		(2,379,497	)		8,852,798

Cash flows from investing activities:
Restricted cash		---			200,000
Capital expenditures		(889,298	)		(112,493	)
Purchase of building		(14,000,886	)
Purchase of Mesoscribe Technologies		(419,813	)
Purchase of assets Tantaline A /S		---			(500,000	)
Deposits		(10,503	)		1,550
Net cash (used in) investing activities		(15,320,500	)		(410,943	)

Cash flows from financing activities
Net proceeds from stock options exercised		146,220			462,000
Proceeds from mortgage payable		10,387,500
Payments of long-term debt		(300,000	)		(300,000	)
Net cash provided by financing activities		10,233,720			162,000

Net (decrease)/increase in cash and cash equivalents		(7,466,277	)		8,603,855

Cash and cash equivalents at beginning of year		21,677,186			13,073,331

Cash and cash equivalents at end of year	$	14,210,909		$	21,677,186

Supplemental disclosure of cash flow information:
Income taxes paid	$	601,800		$	101,352
Interest paid	$	71,263		$	79,861

The accompanying notes are an integral part of the consolidated financial statements

F-5

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 20 17 and 2016

Note 1 – Business Description

CVD Equipment Corporation and its subsidiaries (the “Company”), a New York corporation, was organized and commenced operations in October 1982. Its principal business activities include the manufacturing of chemical vapor deposition equipment, customized gas control systems, the manufacturing of process equipment suitable for the synthesis of a variety of one -dimensional nanostructures and nanomaterials and a line of furnaces, all of which are used primarily to produce semiconductors and other electronic components. The Company engages in business throughout the United States and internationally.

Note 2 - Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of CVD Equipment Corporation and its wholly owned subsidiar ies. In December 1998, a subsidiary, Stainless Design Concepts, Ltd., was formed as a New York Corporation. In April 1999, this subsidiary was merged into CVD Equipment Corporation. The Company has five wholly owned subsidiaries: CVD Materials Corporation, which provides material coatings, process development support and process startup assistance through Tantaline ApS and CVD Mesoscribe Technologies Corporation, FAE Holdings 411519R, LLC, a real estate holding company whose sole asset is its interest in the real estate and building housing our corporate headquarters and 555 N Research Corporation whose sole asset is its interest in the real estate and building located at 555 North Research Place, Central Islip, NY. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The Company ’s significant estimates are the accounting for certain items such as revenues on long-term contracts recognized on the percentage-of-completion method, depreciation and amortization, valuation of inventories at the lower of cost or market; allowance for doubtful accounts receivable; valuation allowances for deferred tax assets, impairment considerations of long-lived assets and stock-based compensation and costs associated with product warranties.

Revenue Recognition. We earn revenue from the sale of custom equipment to customers around the world. A large portion of our revenue is derived from contracts relating to the design, development or manufacture of complex equipment to a buyer’s specification and is recognized in accordance with FASB ASC 605 - 35. For these contracts, we primarily apply the percentage-

F-6

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017 and 2016

Note 2 - Summary of Significant Accounting Policies (continued)

of-completion accounting method and generally recognize revenue based on the relationship of total costs incurred to total projected costs. Profits expected to be realized on such contracts are based on total estimated sales for the contract compared to total estimated costs, including warranty costs, at completion of the contract.

Direct costs which include materials, labor and overhead are charged to work-in-progress (including our contracts-in-progress) inventory or cost of sales. Indirect costs relating to long-term contracts, which include expenses such as general and administrative, are charged to expense as incurred and are not included in our work-in-process (including our contracts-in-progress) inventory or cost of sales. Total estimates are reviewed and revised periodically throughout the lives of the contracts, and adjustments to profits resulting from such revisions are made cumulative to the date of the change. Estimated losses on long-term contracts are recorded in the period in which the losses become evident.

We have been engaged in the production and delivery of goods on a continual basis under contractual arrangements for many years. Historically, we have demonstrated an ability to accurately estimate total revenues and total expenses relating to our long-term contracts. However, there exist many inherent risks and uncertainties in estimating revenues, expenses and progress toward completion, particularly on larger or longer-term contracts. If we do not estimate the total sales, related costs and progress toward completion on such contracts, the estimated gross margins may be significantly impacted or losses may need to be recognized in future periods. Any such resulting changes in margins or contract losses could be material to our results of operations and financial condition.

Adoption of New Revenue Standard

F-7

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017 and 2016

Note 2 - Summary of Significant Accounting Policies (continued)

assessed potential impacts on the Company ’s consolidated financial statements, results of operations, disclosures, and internal controls over financial reporting. The Company currently recognizes a significant majority of its revenue over time. Management has determined that this will remain materially consistent upon adoption of the new standard and no adjustment to beginning retained earnings will be necessary upon adoption. Additionally, the Company will make additional disclosures related to the revenues arising from contracts with customers as required by the new standard. The Company has adopted this guidance in the first quarter of fiscal 2018 using the modified retrospective approach.

Inventories

Inventories are valued at the lower of cost (determined on the first -in, first -out method) or net realizable value.

Income Taxes

On December 22, 2017, the Tax Act was adopted into law. The tax Act makes broad and complex changes to the Internal Revenue Code of 1986, including, but not limited to, (i) reducing the U.S. federal corporate tax rate from 35% to 21%; (ii) eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits are realized; (iii) creating a new limitation on deductible interest expense and (iv) changing rules related to uses and limitation of net operating loss carryforwards created in tax years beginning after December 31, 2017.

Deferred tax assets and liabilities are determined based on the estimated future tax effects of temporary differences between the financial statements and tax bases of assets and liabilities, as measured by using the future enacted tax rates. Deferred tax expense (benefit) is the result of changes in the deferred tax assets and liabilities. The Company records a valuation allowance against deferred tax assets when it is more likely than not that future tax benefits will not be utilized based on a lack of sufficient positive evidence.

Investment tax credits are accounted for by the flow-through method , reducing income taxes currently payable and the provision for income taxes in the period the assets giving rise to such credits are placed in service. To the extent such credits are not currently utilized on the Company’s tax return, deferred tax assets, subject to considerations about the need for a valuation allowance, are recognized for the carryforward amount.

F-8

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017 and 2016

Note 2 - Summary of Significant Accounting Policies (continued)

The Company recognizes the tax benefit from an uncertain tax position only if it is more-likely-than- not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The accounting guidance on accounting for uncertainty in income taxes also addresses derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. The Company does not believe it has any uncertain tax positions through the year ending December 31, 2017 which would have a material impact on the Company’s consolidated financial statements.

The Company and its subsidiar ies file combined income tax returns in the U.S. Federal and New York State jurisdiction. In addition, the parent company files standalone tax returns in California, Delaware, Michigan, Minnesota, New Hampshire and Wisconsin. The Company is no longer subject to U.S. federal and state income tax examinations for tax periods before 2014.

Long Lived Assets and Intangibles

Long-lived assets consist primarily of property, plant, and equipment. Intangibles consist of patents, copyrights and intellectual property, licensing agreements and certifications. Long-lived assets are reviewed for impairment whenever events or circumstances indicate their carrying value may not be recoverable. When such events or circumstances arise, an estimate of the future undiscounted cash flows produced by the asset, or the appropriate grouping of assets, is compared to the asset’s carrying value to determine if impairment exists pursuant to the requirements of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360 - 10 - 35, “Impairment or Disposal of Long-Lived Assets.” If the asset is determined to be impaired, the impairment loss is measured on the excess of its carrying value over its fair value. Assets to be disposed of are reported at the lower of their carrying value or net realizable value. The Company had no recorded impairment charges in the consolidated statement of operations during each of the years ended December 31, 2017 and 2016.

F-9

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 201 7 and 2016

Note 2 - Summary of Significant Accounting Policies (continued)

Computer Software

The Company follows ASC 350 - 40, “Internal Use Software.” This standard requires certain direct development costs associated with internal-use software to be capitalized including external direct costs of material and services and payroll costs for employees devoting time to the software projects. These costs totaled $427,000 and $2,000 for the years ended December 31, 2017 and 2016, respectively, and are included in Fixed Assets. All computer software is amortized using the straight-line method over its estimated useful life of three to five years. Amortization expense related to computer software totaled $36,000 and $18,000 for the years ended December 31, 2017 and 2016, respectively.

Intangible Assets

The cost of intangible assets is being amortized on a straight-line basis over their estimated initial useful lives which ranged from 5 to 20 years. Amortization expense recorded by the Company in 2017 and 2016 totaled $46,000 and $31,000, respectively.

Research & Development

Research and development costs are expensed as incurred. In 2012 we expanded our laboratory staff and began conducting research and development independent of customer orders. In 2017, we incurred approximately $2,220,000 of research and development expenses of which $437,000 were independent of external customer orders compared to 2016, when we incurred approximately $2,448,000 of research and development expenses of which approximately $434,000 were independent of external customer orders.

Accounts Receivable

Accounts receivable is presented net of an allowance for doubtful accounts of $4,000 and $2,000 as of December 31, 2017 and 2016, respectively. The allowance is based on historical experience and management’s evaluation of the collectability of accounts receivable. Management believes the allowance is adequate. However, future estimates may fluctuate based on changes in economic and customer conditions. The Company doesn’t require collateral from its customers.

Product Warranty

The Company records warranty costs as incurred and does not provide for possible future costs. Management estimates such costs are immaterial , based on historical experience. However, it is reasonably possible that this estimate may differ in future periods.

F-10

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 201 7 and 2016

Note 2 - Summary of Significant Accounting Policies (continued )

Earnings Per Share

Basic earnings per common share is computed by dividing the net income by the weighted average number of shares of common stock outstanding during each period. When applicable, diluted earnings per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be adjusted upon exercise of common stock options and warrants.

Potential common shares issued are calculated using the treasury stock method, which recognizes the use of proceeds that could be obtained upon the exercise of options and warrants in computing diluted earnings per share. It assumes that any proceeds would be used to purchase common stock at the average market price of the common stock during the period.

Cash and Cash Equivalents

The Company had cash and cash equivalents of $ 14.2 million and $21.7 million respectively at December 31, 2017 and 2016.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable. The Company places its cash equivalents with high credit-quality financial institutions and invests its excess cash primarily in money market instruments. The Company has established guidelines relative to credit ratings and maturities that seek to maintain stability and liquidity. The Company sells products and services to various companies across several industries in the ordinary course of business. The Company routinely assesses the financial strength of its customers and maintains al lowances for anticipated losses based upon historical experience.

Fair value of Financial Instruments

The carrying amounts of financial instruments including cash and cash equivalents, accounts receivable, net, accounts payable and accrued expenses, deferred revenue and customer deposits approximate fair value due to the relatively short-term maturity of these instruments. The carrying value of long-term debt approximates fair value based on prevailing borrowing rates currently available for loans with similar terms and maturities.

F-11

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 201 7 and 2016

Note 2 - Summary of Significant Accounting Policies (continued)

Business Combination

The Company has accounted for its acquisitions of the assets of both Tantaline A/S and Mesoscribe Technologies, Inc. using the acquisition method. The Company has allocated the purchase price to the assets acquired based on their estimated fair values at the acquisition dates.

Acquisition-Related Contingent Consideration

Acquisition-related contingent consideration represents an obligation of the Company to transfer additional assets or equity interests if specified future events occur or conditions are met. This contingency is accounted for at fair value either as a liability or equity depending on the terms of the acquisition agreement. The Company determines the estimated fair value of contingent consideration as of the acquisition date, and subsequently at the end of each reporting period. In doing so, the Company makes significant estimates and assumptions regarding future events or conditions being achieved under the subject contingent agreement as well as the appropriate discount rate to apply.

Stock-Based Compensation

The Company records stock-based compensation in accordance with the provisions set forth in ASC 718, “Stock Compensation” using the modified prospective method. ASC 718 requires companies to recognize the cost of employee services received in exchange for awards of equity instruments based upon the grant date fair value of those awards.

Shipping and Handling

It is the Company ’s policy to include freight charges billed to customers in total revenue. The amount included in revenue was $42,000 and $28,000 for the years ended December 31, 2017 and 2016, respectively.

Recently Adopt ed A ccounting Pronouncement

In May 2014, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014 - 09, “Revenue from Contracts with Customers” (Topic 606 ), which changes the criteria for recognizing revenue. The standard requires an entity which recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard requires a five -step process for recognizing revenues including identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction prices, allocating the transaction price to the performance obligations in the contract, and recognizing revenue when (or as) the entity satisfies a performance obligation. Publicly-traded companies were initially required to adopt the ASU for reporting periods beginning after December 15, 2016; however, the FASB, in August 2015, then issued Accounting Standards Update (“ASU”) No. 2015 - 14 to defer the effective date of ASU 2014 - 09 for all entities by one year. The Company has completed its assessment of the impact that the standard will have on revenue recognition. The Company has reviewed contracts for all material revenue streams and assessed potential impacts on the Company ’s consolidated financial statements, results of operations, disclosures, and internal controls over financial reporting. The Company currently recognizes a significant majority of its revenue over time. Management has determined that this will remain materially consistent upon adoption of the new standard and no adjustment to beginning retained earnings will be necessary upon adoption. Additionally, the Company will make additional disclosures related to the revenues arising from contracts with customers as required by the new standard. The Company has adopted this guidance in the first quarter of fiscal 2018 using the modified retrospective approach.

F-12

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 201 7 and 2016

Note 2 - Summary of Significant Accounting Policies (continued)

In February 2016 the FASB issued ASU No. 2016 - 02, "Leases (Topic 842 )" (ASU 2016 - 02 ). The primary difference between previous GAAP and ASU 2016 - 02 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The guidance requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Similarly, optional payments to purchase the underlying asset should be included in the measurement of lease assets and lease liabilities only if the lessee is reasonably certain to exercise that purchase option. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. ASU 2016 - 02 is effective for fiscal years beginning after December 15, 2018. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. In addition, FASB has amended Topic 842 prior to it becoming effective. The effective date and transition requirements for these amendments to Topic 842 are the same as ASU 2016 - 02. The Company is in the initial stages of evaluating the impact the adoption of this guidance will have on its consolidated financial statements, results of operations, and disclosures which will include recognizing a lease liability and a right-of-use asset representing its right to use the underlying asset for the lease term.

We believe there is no additional new accounting guidance adopted, but not yet effective that is relevant to the readers of our financial statements. However, there are numerous new proposals

F-13

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 201 7 and 2016

Note 2 - Summary of Significant Accounting Policies (continued)

under development which, if and when enacted, may have a significant impact on our financial reporting.

Note 3 – Contracts in Progress

Costs and estimated earnings in excess of billings on percentage of completion type contracts in progress are summarized as follows:

	2017			2016
Costs incurred on contracts in progress	$	22,079,680		$	4,678,192
Estimated earnings		16,499,697			10,733,826
		38,579,377			15,412,018
Billings to date		(30,648,666	)		(18,077,839	)
	$	7,930,711		$	(2,665,821	)

	2017			2016
Included in accompanying balance sheets
Under the following captions:
Costs and estimated earnings in excess of billings on contracts in progress	$	8,397,024		$	2,596,518

Billings in excess of costs and estimated earnings on contracts in progress	$	(466,313	)	$	(5,262,339	)

Note 4 - Inventories

Inventories consist of:

	2017		20 16

Raw materials	$	2,549,016	$	3,062,830
Work-in-process		389,630		159,482
Finished goods		26,977		64,227
Totals	$	2,965,623	$	3,286,539

F-14

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 201 7 and 2016

Note 5 – Property, Plant and Equipment

Major classes of property, plant and equipment consist of the following :

	2017			2016
Land	$	6,929,000		$	2,220,000
Buildings		15,917,925			6,631,039
Building improvements		5,805,045			5,615,823
Machinery and equipment		3,246,877			2,671,333
Furniture and fixtures		563,959			547,144
Computer equipment		587,147			479,534
Software		427,441			---
Transportation equipment		65,994			65,994
Lab equipment		1,979,181			1,975,533
Totals at cost		35,522,568			20,206,400
Less: Accumulated depreciation and amortization		(6,683,111	)		(5,861,476	)
Property, plant and equipment, net	$	28,839,457		$	14,344,924

Deprec iation and amortization expense (1)	$	867,277		$	813,657

( 1 )

Includes amortization expense of $ 45,645 and $31,356 for the years ending December 31, 2017 and 2016, respectively. Such amortization expense relates to other capitalized and intangible assets.

Note 6 – Intangible Assets

2017

Weighted Average

Accumulated

Carrying

Intangible Assets

Amortization Period

Cost

Amortization

Amount

Patents , Copyrights and

Intellectual Property

839,831

177,669

662,162

Licensing Agreement

10,000

Certifications

58,722

Other

21,492

Totals

930,045

267,883

662,162

F-15

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 201 7 and 2016

2016

Weighted Average

Accumulated

Carrying

Intangible Assets

Amortization Period

Cost

Amortization

Amount

Patents , Copyrights and

Intellectual property

396,757

143,133

253,624

Licensing agreement

10,000

Certifications

58,722

Other

21,492

Totals

486,971

233,347

253,624

The estimated amortization expense related to intangible assets for each of the five succeeding fiscal years and therea fter as of December 31, 2016 is as follows:

Year Ended
2018	$	56,533
2019		56,533
2020		56,533
2021		56,533
2022		56,533
Thereafter		379,497
Total	$	662,162

Note 7 – Financing Arrangements

The Company has a revolving credit facility with HSBC Bank, USA, N.A. (“HSBC”) providing up to $7 million, although the Company has never utilized this facility. This credit facility remains available until September 1, 2018. The credit agreement also contains certain financial covenants, all of which the Company was in compliance with at December 31, 2017.

The Company has a loan agreement with HSBC which is secured by a mortgage against our Central Islip facility. The loan is payable in 120 consecutive equal monthly installments of $25,000 in principal plus interest and a final balloon payment upon maturity in March 2022. The balances as of December 31, 2017 and December 31, 2016 were approximately $3.0 million and $3.3 million respectively. Interest accrues on the Loan, at our option, at the variable rate of LIBOR plus 1.75% which was 3.3118% and 2.5610% at December 31, 2017 and 2016 respectively.

F-16

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 201 7 and 2016

Note 7 – Financing Arrangements (continued)

On October 31, 2017 The Company through its newly formed and wholly-owned indirect subsidiary (CVD MesoScribe Technologies Corporation, a New York corporation) purchased substantially all of the operating assets and business (excluding cash, accounts receivable and other specified excluded assets) of MesoScribe Technologies, Inc., a Delaware corporation.

Pursuant to the Asset Purchase Agreement, the purchase price for the assets acquired in the Acquisition was $800,000.00, of which $500,000 was paid on the Closing Date an d $300,000 may be paid to Mesoscribe Technologies Inc. as additional consideration based upon the achievement of certain revenue thresholds and other criteria set forth in the Asset Purchase Agreement with respect to each of the two ( 2 ) consecutive twelve ( 12 ) month measurement periods following the Closing Date. The additional consideration is classified as Acquisition related contingent payments, of which $100,000 is the current portion.

On November 30, 2017, we closed on the purchase of the premises located at 555 North Research Place, Central Islip, NY 11722. The purchase price of the building was $13,850,000 exclusive of closing costs. The Company ’s newly formed wholly-owned subsidiary, 555 N Research Corporation (the “Assignee”) and the Islip IDA, entered into a Fee and Leasehold Mortgage and Security Agreement (the ”Loan”) with HSBC in the amount of $10,387,500, which was used to finance a portion of the purchase price to acquire the premises located at 555 North Research Place, Central Islip, New York 11722 . The Loan was evidenced by the certain Note, dated November 30, 2017 ( the “Note”), by and between Assignee and the Bank, and secured by a certain Fee and Leasehold Mortgage and Security Agreement, dated November 30, 2017, as well as a collateral Assignment of Leases and Rents.

The Loan is payable in 60 consecutive equal monthly installments of $62,777.60 including interest. The Loan shall bear interest for each Interest Period (as defined in the Note), at the fixed rate of 3.9148%. The maturity date for the Note is December 1, 2022.

As a condition of the Bank making the Loan, the Company was required to guaranty Assignee ’s obligations under the Loan pursuant that certain Unlimited Guaranty, dated November 30, 2017 ( the “Guaranty”).

F-17

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 201 7 and 2016

Note 8 – Long-term Debt

Long-term debt as of December 31 consists of the following:

	201 7		20 16
HSBC $10,387,500 Mortgage payable secured by real
Property, buildings and improvements at 555 N Research
Place, Central Islip, NY payable in monthly principle
Installments of $62,777.60 including interest at a rate of 3.9148%, maturing on December 1, 2022	$	10,387,500	$	---

Mesoscribe Technologies, Inc. $300,000 acquisition related contingent payment

	$	300,000		---

HSBC $6,000,000 Mortgage payable secured by real Property, b uildings and improvements at 355 South Technology Drive, Central Islip, NY payable in monthly principle installments of $25,000 plus interest. Interest presently accrues at our option, at the variable rate of LIBOR plus 1.75% or HSBC’s prime rate minus 0.50% The loan matures on March 1, 2022.		2,965,508		3,265,508
Total long-term debt		13,653,008		3,265,508
Less: Current maturities		747,325		300,000
Long-term debt	$	12,905,683	$	2,965,508

Note 8 – Long-term Debt (continued)

Future maturities of long-t erm debt as of December 31, 2017 are as follows:

2018	$	747,324
2019		861,364
2020		674,893
2021		691,125
2022		10,678,302
Thereafter		--
Total long-term debt	$	13,653,008

F-18

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 201 7 and 2016

Note 9 – Earnings per Share

The calculation of basic and diluted weighted average common shares outstanding is as follows:

	2017		2016
Weighted average common shares outstanding basic earnings per share		6,375,848		6,285,815

Effect of potential common share issuance:
Stock options		11,616		---

Weighted average common shares outstanding
Diluted earnings per share		6,387,464		6,285,815

Stock options to purchase 387,930 shares of common stock were outstanding and 207,930 were exercisable at December 31, 2017. At December 31, 2017, options to purchase 22,930 shares were included in the diluted earnings per share calculation because their average market price was higher than the exercise price. Stock options to purchase 284,730 shares of common stock were outstanding and 124,730 were exercisable at December 31, 2016. At December 31, 2016 none of the outstanding options were included in the diluted earnings per share calculation as their effect would have been anti-dilutive.

Note 1 0 – Income Taxes

The Tax Cuts and Jobs Act was enacted on December 22, 2017. The Act provides for numerous significant tax law changes and modifications including the reduction of the U.S. federal corporate income tax rate from 35% to 21.

In accordance with the accounting standard ASC 740 “Income Taxes”, companies are required to recognize the tax law changes in the period of enactment.

As a result of the reduction of the corporate income tax rate to 21%, U.S. GAAP requires companies to remeasure their deferred tax assets and liabilities as of the date of enactment, with resulting tax effects accounted for in the period of enactment. The Company remeasured deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future. The provisional amount recorded for the remeasurement and resulting write-down of the deferred tax balance was $689,000. At December 31, 2017, the Company had approximately $427,000 of federal research and development tax credits. If not utilized, the research and development tax credits expire from 2032 - 2037. Based on the available objective evidence, including the Company ’s history of taxable income and the character of that income, management believes it is more likely than not that these components of the Company’s deferred tax assets will be fully utilized.

F-19

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 201 7 and 2016

Note 1 0 – Income Taxes (continued)

The expense/(benefit) for income taxes includes the following:

	201 7		2016
Current:
Federal	$	1,091,216	$	(71,070	)
State		11,580		2,504
Total current tax provision		1,102,796		(68,566	)
Deferred:
Federal		831,148		(435,495	)
State		-		---
Total deferred tax provision		831,148		(435,495	)
Income tax (benefit)/expense	$	1,933,944	$	(504,061	)

In March 2014, New York State eliminated the state income tax for qualified manufacturing companies such as CVD.

The tax effects of temporary differences giving rise to significant portions of the net deferred taxes are as follows:

	201 7		201 6

Allowance for doubtful accounts	$	773	$	771
Inventory capitalization		6,813		19,071
Depreciation and amortization		70,272		(211,014	)
Investment tax credits		----		475,000
Research & development tax credits		496,930		1,278,690
Compensation costs		838,643		1,000,073
Vacation accrual		179,309		333,396
Net operating loss carryforward		---		(7,280	)
Capital loss carryforward		16,446		26,627
Net long-term deferred tax asset		1,609,186		2,915,334
Less valuation allowance		---		(475,000	)
Net long-term deferred tax asset	$	1,609,186	$	2,440,334

F-20

CVD EQUIPMENT CORPORATION AND SUBSIDIAR IES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 201 7 and 2016

Note 1 0 – Income Taxes (continued)

The reconciliation of the federal statutory income tax rate to our effective tax rate is as follows:

	2017			2016

Expected provision at federal statutory tax rate (34%)	$	2,740,010		$	(222,083	)
State taxes, net of federal benefit		11,580			2,504
Stock-based compensation expense		(161,429	)		(269,163	)
Net operating loss carryforward		7,280			(21,412	)
Federal research & development credit		(781,760	)		(144,522	)
Other permanent differences		118,263			150,615
Income tax expense/(benefit)	$	1,933,944		$	(504,061	)

The Company ’s foreign entity CVD Tantaline ApS incurred a loss of approximately $865,000, which would provide a $190,000 deferred tax asset as of December 31, 2017, based on the standard corporate tax rate of 22% in Denmark. However, sufficient uncertainty exists as to the realizability of these assets such that a full valuation allowance is necessary. There was no significant loss for the year ended December 31, 2016.

NOTE 1 1 – Stockholders’ e quity

2001 Non-Qualified Stock Option Plan

In November 2006, the Company registered a non-qualified stock option plan that the shareholders had approved in July 2001, covering key employees, officers, directors and other persons that may be considered as service providers to the Company. Options were awarded by the Board of Directors or by a committee appointed by the Board. Under the plan, an aggregate of 300,000 shares of Company common stock, $.01 par value, were reserved for issuance or transfer upon the exercise of options which were granted. Unless otherwise provided in the option agreement, options granted under the plan would vest over a four year period commencing one year from the anniversary date of the grant. The stock option plan expired on July 22, 2011.

2007 Share Incentive Plan

On December 12, 2007, shareholders approved the Company ’s 2007 Share Incentive Plan (“Incentive Plan”), in connection therewith, 750,000 shares of the Company’s common stock are reserved for issuance pursuant to options or restricted stock that may be granted under the Share Incentive Plan through December 12, 2017. In 2017, 75,324 shares of stock were granted and issued to directors and key employees, additionally, options were granted to three key employees for 140,000 shares of the Company ’s common stock. In 2016, 42,320 shares of stock were granted and issued to directors and key employees. The Plan expired in December, 2017.

2016 Share Incentive Plan

On December 9, 2016, shareholders approved the Company ’s 2016 Share Incentive Plan ( “2016 Incentive Plan”), in connection therewith 750,000 shares of the Company’s common stock are

F-21

CVD EQUI PMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 201 7 and 2016

NOTE 1 1 – Stockholders’ equity (continued)

reserved for issuance pursuant to options or restricted stock that may be granted under the 2016 Incentive Plan through December 9, 2026. No shares have been issued yet from this Plan.

The purchase price of the common stock under each option plan shall be determined by the Committee, provided, however, that such purchase price shall not be less than the fair market value of the shares on the date such option is granted. The stock options generally expire seven to ten years after the date of grant. The Company recorded stock-based compensation of $933,000 and $776,000 for the years ended December 31, 2017 and 2016, respectively.

A summary of the stock option activity related to the 2001 Stock Option Plans and the 2007 Share Incentive Plan for the period from January 1, 201 6 through December 31, 2017 is as follows:

2001 Non-Qualified Stock Option Plan

Beginning

Granted

Exercised

Canceled

Ending

Balance

During

Balance

Outstanding

Period

Outstanding

Exercisable

Year ended December 31, 201 6

Number of shares

124,480

-0-

64,750

-0-

59,730

Weighted average exercise price Per share

4.57

-0-

4.62

-0-

4.51

Year ended December 31, 201 7

Number of shares

59,730

-0-

36,800

-0-

22,930

Weighted average exercise price Per share

4.51

-0-

3.97

-0-

5.36

2007 Share Incentive Plan

Beginning

Granted

Exercised

Canceled

Ending

Balance

During

Balance

Outstanding

Period

Outstanding

Exercisable

Year ended December 31, 201 6

Number of shares

100,000

125,000

-0-

225,000

65,000

Weighted average exercise price Per share

11.17

8.04

-0-

9.43

9.97

Year ended December 31, 201 7

Number of shares

225,000

140,000

-0-

365,000

185,000

Weighted average exercise price Per share

9.43

10.82

-0-

12.35

13.76

The Company has 387,930 of outstanding stock options under the two plans at December 31, 2017.

F-22

CVD EQUI PMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 201 7 and 2016

NOTE 1 1 – Stockholders’ equity (continued)

The following table summarizes information about the outstanding and exercisable options at December 31, 201 7.

Options Outstanding

Options Exercisable

Weighted

Average

Exercis e

Number

Remaining

Exercise

Intrinsic

Number

Exercise

Intrinsic

Price Range

Outstanding

Contractual

Price

Value

Exercisable

Price

Value

$4.00

7.00

15,930

2.00

4.25

117,404

15,930

4.25

117,404

$7.00

10.00

7,000

3.00

7.90

26,040

9,800

7.90

26,040

$10.01

12.00

240,000

8.3

10.96

158,400

65,000

11.17

27,000

$12.01

15.00

125,000

4.5

15.00

125,000

15.00

The intrinsic value of the 34,000 options exercised during the year ended December 31, 2017 was $256,000. The intrinsic value of the 100,000 options exercised during the year ended December 31, 2016 was $203,000.

Restricted Stock Awards

The following table summarizes restricted stock awards for the year s ended December 31, 2017 and 2016:

				Weighted
	Shares of			Average Grant
	Restricted			Date Fair
	Stock			Value
Unvested outstanding at January 1, 2016		4,000		$	10.97

Granted		17,524		$	8.45
Vested		(21,524	)	$	12.84
Forfeited/Cancelled		-

Unvested outstanding at December 31, 201 6		0		$	0

Granted		9,300		$	9.70
Vested		(9,300	)	$	9.70
Forfeited/Cancelled		-

Unvested outstanding at December 31, 201 7		-0-		$

The total fair value of shares of restricted stock awards vested for the years ended December 31, 201 7 and 2016 was approximately $90,000 and $276,000 respectively.

F-23

CVD EQUI PMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 201 7 and 2016

NOTE 1 1 – Stockholders’ equity (continued)

The fair value of the outstanding restricted stock awards will be recorded as stock compensation expense over the vesting period.

Restricted Stock Units

The following table summarizes restricted stock units for the year s ended December 31, 2017 and December 31, 2016:

				Weighted
	Shares of			Average Grant
	Restricted			Date Fair
	Stock Units			Value
Unvested outstanding at January 1, 201 6		94,580		$	12.55

Granted		60,400		$	8.56
Vested		(33,890	)	$	12.43
Forfeited/Cancelled		(7,000	)	$	11.68

Unvested outstanding at December 31, 201 6		114,090		$	10.47

Granted		39,720		$	10.88
Vested		(58,776	)	$	10.83
Forfeited/Cancelled		(125	)	$	14.61

Unvested outstanding at December 31, 201 7		94,909		$	10.43

The total fair value of vested restricted stock units was $ 637,000 and $421,000 respectively for the years ended December 31, 2017 and 2016.

The fair value of the outstanding restricted stock units will be recorded as stock compensation expense over the vesting period. As of December 31, 201 7, there was $990,000 of total unrecognized compensation costs related to restricted stock units, which is expected to be recognized over a weighted-average period of 1.58 years.

During the years ended December 31, 2017 and 2016, the Company recorded into selling and general administrative expense approximately $933,000 and $776,000 for the cost of employee and director services received in exchange for equity instruments based on the grant-date fair value of those instruments in accordance with the provisions of ASC 718.

F-24

CVD EQUI PMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 201 7 and 2016

NOTE 1 2 – Defined Contribution Plan

On August 1, 1998, the Company adopted a 401 (k) Plan for the benefit of all eligible employees. All employees as of the effective date of the 401 (k) Plan became eligible. An employee is eligible to become a participant after three months of continuous service.

Participants may elect to contribute from their compensation any amount up to the maximum deferral allowed by the Internal Revenue Code. Employer contributions are optional. During the years ended December 31, 201 7 and 2016, the Company incurred administrative and audit fees totaling $13,325 and $14,636, respectively. No discretionary employer contribution has been made for 2017 and 2016.

Note 1 3 – Significant Risks and U ncertainties

Cash and Cash Equivalents

The Company places most of its temporary cash investments with financial institutions, which from time to time may exceed the Federal Deposit Insurance Corporation limit. The amount at risk at December 31, 20 17 and at December 31, 2016 was $12,198,000 and $20,157,000 respectively.

Sales Concentration s

Revenue to a single customer in any one year can exceed 10.0% of our total sales. One customer represented 66.1% and 45.3% respectively, of our annual revenues in fiscal years 2017 and 2016. Previously, we have not been generally dependent on any single customer, and the loss of any customer would be replaced by others, however, the dynamic has changed and although, we believe that our relationship with our current largest customer will provide us with ongoing continuous sustainability for years to come, the loss of our largest customer would have to be replaced by others, and our inability to do so may have a material adverse effect on our business and financial condition.

Export sales to unaffiliated customers represented approximately 9.6% and 11.9% of sales for the years ended December 31, 2017 and 2016, respectively. Export sales in both 2017 and 2016 were primarily to customers in Europe and Asia. All contracts except those entered into by CVD Tantaline ApS are denominated in U.S. dollars. The Company does not enter into any foreign exchange contracts.

F-25

CVD EQUI PMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 201 7 and 2016

Note 1 4 – Segment Reporting

The Company adopted ASC 280, “Segment Reporting.” The Company operates through ( 2 ) segments, CVD and SDC. The CVD division is utilized for silicon, silicon germanium, silicon carbide and gallium arsenide processes. SDC is the Company’s ultra-high purity manufacturing division in Saugerties, New York. The accounting policies of CVD and SDC are the same as those described in the summary of significant accounting policies (see Note 2 ). The Company evaluates performance based on several factors, of which the primary financial measure is earnings before taxes. Included in the CVD division are our wholly owned subsidiaries, CVD Tantaline Aps and CVD Mesoscribe Technologies Corporation. There was no significant revenue from either entity, although we incurred approximately $1.2 million in start-up costs.

The following table presents certain information regarding the Company ’s segments as of December 31, 2017 and for the year then ended:

CVD

SDC

Eliminations

Consolidated

Assets

54,387,955

4,902,027

(311,732

)

58,978,250

Revenue

35,697,372

7,426,890

(1,995,623

)

41,128,639

Interest Expense

106,280

Depreciation and Amortization

804,900

62,377

867,277

Capital expenditures

14,888,801

1,383

14,890,184

Pretax earnings/(loss)

5,227,131

1,968,224

7,195,355

The following table presents certain information regarding the Company ’s segments as of December 31, 2016 and for the year then ended:

CVD

SDC

Eliminations

Consolidated

Assets

43,300,131

4,558,111

(2,253,550

)

45,604,692

Revenue

18,568,132

2,934,831

(547,616

)

20,955,347

Interest Expense

78,322

1,539

79,861

Depreciation and Amortization

750,680

62,978

813,658

Capital expenditures

606,643

5,850

612,493

Pretax (loss)/earnings

(211,576

)

(441,610

)

(653,186

)

F-26

CVD EQUI PMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 201 7 and 2016

Note 15 – Business acquisition

On December 16, 2016, we purchased certain assets formerly owned by Tantaline A/S of Nordborg, Denmark through our wholly owned subsidiary, CVD Materials Corporation. Formed in 2007, as a spin off from The Danfoss Group, Tantaline A/S established itself as a leader in the commercialization of tantalum treated parts for corrosion resistance. We have now established in Nordborg a new and wholly owned CVD subsidiary operating under the name Tantaline CVD Aps (“Tantaline”).

Pursuant to the asset Purchase Agreement, the purchase price for the assets acquired in the Acquisition was $500,000, which was paid out on Closing Date.

The Company accounted for this acquisition using the acquisition method. The Company allocated the purchase price to the acquired assets based on their estimated fair values at the acquisition date as summarized in the following table.

Inventory	$	10,000
Machinery and equipment		286,900
Intellectual property		203,100
Net tangible assets acquired	$	500,000

On October 31, CVD Mesoscribe Technologies Corporation, a New York corporation and newly formed and wholly-owned indirect subsidiary of CVD Equipment Corporation (the “Company”) and MesoScribe Technologies, Inc., a Delaware corporation (“Seller”) entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”). Pursuant to the Asset Purchase Agreement, among other things, Buyer acquired (the “Acquisition”) substantially all of the operating assets and business of the Seller (excluding cash, accounts receivable and other specified excluded assets), as more particularly described in the Asset Purchase Agreement.

Pursuant to the Asset Purchase Agreement, the purchase price for the assets acquired in the Acquisition was $800,000.00, of which $500,000 was paid on the Closing Date and $300,000 may be paid to Seller as additional acquisition related contingent consideration based upon the achievement of certain revenue thresholds and other criteria set forth in the Asset Purchase Agreement with respect to each of the two ( 2 ) consecutive twelve ( 12 ) month measurement periods following the Closing Date.

Inventory	$	25,000
Machinery and equipment		350,000
Intellectual property		425,000
Net tangible assets acquired	$	800,000

F- 27

Exhibit 10.19

AGREEMENT OF PURCHASE AND SALE

between

CREATIVE BATH PRODUCTS, INC.,

Seller

and

CVD EQUIPMENT CORPORATION,

Purchaser

Premises:

555 North Research Place, Central Islip, New York 11722 (Section: 164; Block 4; Lots 5, 6, 7 and Right of Way over Lot 4)

As of October 24, 2017

AGREEMENT OF PURCHASE AND SALE

THIS AGREEMENT OF PURCHASE AND SALE (“Agreement” or “Contract”), made as of October, 2017, by and among CREATIVE BATH PRODUCTS, INC., a New York corporation, having an address of 250 CREATIVE DRIVE, CENTRAL ISLIP, NEW YORK, 11722 (“Seller”), and CVD EQUIPMENT CORPORATION a New York corporation, having an address of 355 SOUTH TECHNOLOGY DRIVE CENTRAL ISLIP, NEW YORK, 11722 (“Purchaser”).

W I T N E S S E T H :

1. Agreement to Sell and Purchase; Description of Property.

Seller agrees to sell and convey to Purchaser, and Purchaser agrees to purchase from Seller, upon the terms and conditions hereinafter contained, all right, title and interest of Seller in and to (a) th at certain lot, piece or parcel of land located at 555 North Research Place, Central Islip, New York 11722 (Section: 164; Block 4; Lots 5, 6, 7 and Right of Way over Lot 4) , such land as bounded and more particularly described in Exhibit A -1 attached hereto and hereby made a part hereof (collectively the “ Land ”), together with (i) the building(s) erected thereon (collectively the “ Building ”) and any and all other fixtures and improvements erected thereon (the Building and such other fixtures and improvements being hereinafter collectively referred to as the “ Improvements ”), (ii) the land lying in the bed of any street, highway, road or avenue, opened or proposed, public or private, in front of or adjoining the Land, to the center line thereof, (iii) any rights of way, appendages, appurtenances, easements, sidewalks, alleys, gores or strips of land adjoining or appurtenant to the Land or any portion thereof and used in conjunction therewith, (iv) any development rights appurtenant to the Land or any portion thereof and (v) any award or payment made or to be made in lieu of any of the foregoing or any portion thereof and any unpaid award for damage to the Land or any of the Improvements by reason of change of grade or closing of any street, road or avenue, it being understood and agreed that Seller will execute and deliver to Purchaser on the Closing Date (as hereinafter defined) or thereafter (which obligation shall survive the Closing (as hereinafter defined)), upon reasonable written request, all proper instruments for the conveyance of such right, title and interest and for the assignment and collection of any such awards or payments, without representation or warranty by or recourse to Seller and without extension of any survival periods relating thereto, (b) all fixtures, machinery, tangible personal property and equipment used exclusively in connection with or attached or appurtenant to or at or upon all or any portion of the Land and the Improvements at the date hereof, including, without limitation, such fire protection, heating, plumbing, electrical and air conditioning systems as now exist thereat, (c) the interest of the landlord in and to all Leases (as hereinafter defined) of all or any portion of the Land and the Improvements, and all security deposits held by Seller thereunder on the Closing Date, and (d) permits and licenses, if any, held solely for use in connection with all or any portion of the Land and the Improvements.

All of the above enumerated property, rights and interests to be sold to Purchaser pursuant to this Agreement (including, without limitation, the Building and Improvements erected on the Land or any part thereof) are hereinafter sometimes collectively referred to as the “ Property ”.

2. Exceptions to Title; Title Matters

2.1 The Property is sold and shall be conveyed subject to the following (collectively, the “ Permitted Exceptions ”):

2.1.1 All presently existing and future liens for unpaid real estate taxes and water and sewer charges not due and payable as of the date of the Closing Date, subject to adjustment as herein below provided.

2.1.2 All present and future zoning, building, environmental and other laws, ordinances, codes, restrictions and regulations of all governmental authorities having jurisdiction with respect to the Property, including, without limitation, Section 421-a of the New York Real Property Tax Law, landmark designations and all zoning variances and special exceptions, if any (collectively, “ Laws and Regulations ”).

2.1.3 All covenants, restrictions and rights and all customary easements and agreements, including, without limitation those for the erection and/or maintenance of water, gas, steam, electric, telephone, sewer or other utility pipelines, poles, wires, conduits or other like facilities, and appurtenances thereto, over, across and under the Property (collectively, “ Rights ”), provided that they do not interfere with or prohibit the maintenance or industrial use of the premises as it presently exists, nor prohibit the paving of the landbanked parking area.

2.1.4 Any state of facts an accurate survey may show provided the same does not render the title unmarketable.

2.1.5 Any state of facts attributable directly or indirectly to acts or omissions of Purchaser or by any Affiliate of Purchaser. For Purposes of this Agreement, an “Affiliate” means any “Person”, that is, a natural person or entity that, directly or indirectly, controls the other Person, any Person that the other Person controls, or any Person or entity that is under common control with the other Person. For purposes of the preceding sentence, the term “control” means the power, direct or indirect, to direct or cause the direction of the management and policies of a Person through voting securities, by contract or otherwise.

2.1.6 INTENTIONALLY OMITTED .

2.1.7 Consents by Seller or any former owner of the Property for the erection of any structure or structures on, under or above any street or streets on which the Property may abut.

2.1.8 E ncroachments and/or projections of stoop areas, roof cornices, window trims, vent pipes, cellar doors, steps, columns and column bases, flue pipes, signs, piers, lintels, window sills, fire escapes, satellite dishes, protective netting, sidewalk sheds, ledges, fences, coping walls (including retaining walls and yard walls), air conditioners and the like, if any, on, under or above any street or highway, the Property or any adjoining property.

2.1.9 V ariations between tax lot lines and lines of record title.

2.1.10 Standard conditions and exceptions to title contained in the form of title policy or “marked -up” title commitment employed by the Title Company (as hereinafter defined).

2.1.11 Any financing statements, chattel mortgages, encumbrances or mechanics ’ or other liens entered into by, or arising from, any financing statements filed on a day more than five (5) years prior to the Closing and any financing statements, chattel mortgages, encumbrances or mechanics’ or other liens filed against property no longer on the Property, the foregoing – provided that the title insurer designated by the Purchaser shall be willing, without special premium, to omit all such exceptions to title insurance coverage and further provided that same shall be acceptable to the Institutional Lender designated by Purchaser.

2.1.12 INTENTIONALLY OMITTED .

2.1.13 Any other matter which the Title Company may raise as an exception to title, provided the Title Company designated by Purchaser will without special premium, omit all exceptions to title insurance or insure against collection or enforcement of same out of the Property and title is not rendered unmarketable, and further provided that same shall be acceptable to the Institutional Lender (as defined below) designated by Purchaser.

2.2 Purchaser agrees to cause title to the Property to be examined by any reputable title or abstract company licensed to transact business in the State of New York (the “ Title Company ”) and shall direct the Title Company to deliver copies of such title report, including any modifications or continuation reports (collectively the “ Title Report ”) to Seller’s attorney simultaneously with the delivery of same to Purchaser. Purchaser shall order an examination of title in respect of the Property from a title company licensed or authorized to issue title insurance by the New York State Insurance Department or any agent for such title company within five (5) business days after the Purchaser receives a fully executed original of this Contract.

2.3 If, on the Closing Date, Seller is unable to convey to Purchaser title to the Property subject to and in accordance with the provisions of this Agreement, Seller shall be entitled, upon written notice delivered to Purchaser at least five business days prior to the scheduled Closing Date, to reasonable adjournments of the Closing one or more times for a period not to exceed thirty (30) days in the aggregate (or such additional time as Purchaser may consent to) to enable Seller to convey such title to the Property. If at the adjourned date Seller fails or is unable to convey title subject to and in accordance with the provisions of this Agreement, Purchaser may terminate this Agreement by written notice to Seller and Escrow Agent (as hereinafter defined) delivered on or promptly after the date scheduled for the Closing, in which event Escrow Agent shall repay to Purchaser the Downpayment (as hereinafter defined), subject to Section 2.4 hereof. This Agreement shall thereupon be deemed canceled and become void and of no further effect, and neither party hereto shall have any obligations of any nature to the other hereunder or by reason hereof, except that the provisions of Sections 13, 24 and 27 hereof shall survive such termination. If Seller elects to adjourn the Closing as provided above, this Agreement shall remain in effect for the period or periods of adjournment, in accordance with its terms. Seller shall not be required to take or bring any action or proceeding or any other steps to remove any defect in or objection to title or to fulfill any condition precedent to Purchaser’s obligations under this Agreement or to expend any moneys therefor, nor shall Purchaser have any right of action against Seller therefor, at law or in equity, except that Seller shall, on or prior to the Closing, pay, discharge or remove of record or cause to be paid, discharged or removed of record at Seller’s sole cost and expense all of the following items: (a) Voluntary Liens, as defined below, (including all sums due or which by virtue of this transaction will become due from the Seller to the Town of Islip IDA & their counsel) judgments and federal, state and municipal tax liens) (as hereinafter defined) and (b) other liens encumbering the Property (other than open real estate taxes, water and sewer charges that are subject to adjustment in accordance with Section 7 hereof other than Permitted Exceptions) which (i) are in liquidated amounts and which may be satisfied solely by the payment of money (including the preparation or filing of appropriate satisfaction instruments in connection therewith). The term “ Voluntary Liens ” as used herein shall mean liens and other encumbrances (other than Permitted Exceptions) which Seller has knowingly and intentionally placed or allowed to be placed on the Property, inclusive of mortgages. There shall be no monetary limitation on Seller’s obligation to cure Voluntary Liens, other liens, or mortgages. Notwithstanding anything to the contrary contained herein, Seller shall resolve or remit payment for all monetary fines and/or penalties associated with any Violations (as defined below) which were issued prior to the date of Closing by any governmental department, agency or bureau having jurisdiction as to the conditions affecting the Premises, and all such violations shall be removed or complied with by the Seller. If such removal or compliance has not been completed prior to Closing, Seller shall pay to Purchaser at Closing the reasonably estimated unpaid cost to effect or complete such removal or compliance. However, Seller in their sole discretion shall have the option to place an amount of money approved by Purchasers title company in escrow for a defined period of time in order to remove any Violations issued prior to Closing.

2.4 Notwithstanding anything in Section 2.3 above to the contrary, Purchaser may at any time accept such title as Seller can convey, without reduction of the Purchase Price (as hereinafter defined) or any credit or allowance on account thereof or any claim against Seller. The acceptance of the Deed (as hereinafter defined) by Purchaser shall be deemed to be full performance of, and discharge of, every agreement and obligation on Seller’s part to be performed under this Agreement, except for such matters which are expressly stated in this Agreement (or any subsequent agreement signed by the parties) to survive the Closing, to the limit of such survival.

2.5 The amount of any unpaid taxes, assessments and water and sewer charges which Seller is obligated to pay and discharge, with interest and penalties, may at the option of Seller be paid by Purchaser out of the balance of the Purchase Price, if bills therefor with interest and penalties thereon figured to said date are furnished to or obtained by the Title Company at the Closing for payment thereof.

2.6 If the Property shall, at the time of the Closing, be subject to any liens such as for judgments or transfer, inheritance, estate, franchise, license or other similar taxes or any encumbrances or other title exceptions which would be grounds for Purchaser to reject title hereunder, the same shall not be deemed an objection to title provided that, at the time of the Closing, either (a) Seller delivers certified or official bank teller’s checks at the Closing in the amount required to satisfy the same and delivers to Purchaser and/or the Title Company at the Closing instruments in recordable form (and otherwise in form reasonably satisfactory to the Title Company in order to omit the same as an exception to its title policy) sufficient to satisfy and discharge of record such liens and encumbrances together with the cost of recording or filing such instruments or (b) the Title Company will otherwise issue or bind itself to issue a policy which will without special premium, omit an exceptions to title insurance or insure Purchaser against collection thereof from or enforcement thereof against the Property and title is not rendered unmarketable, and further provided that same shall be acceptable to the Institutional Lender designated by Purchaser.

2.7 INTENTIONALLY OMITTED .

3. Purchase Price and Payment.

3.1 The purchase price payable to Seller for the Property is Thirteen Million Eight Hundred Fifty Thousand and 00/100 DOLLARS ($13,850,000.00) (the “ Purchase Price ”), subject to such apportionments, adjustments and credits as are provided in Sections 7, 10, and12 hereof.

3.2 The Purchase Price shall be payable as follows:

(a) Five Hundred Thousand and 00/100 DOLLARS ($500,000.00) (such principal amount being the “ Downpayment ”) upon the signing of this Agreement, by bank check drawn on a member bank of the New York Clearinghouse Association, payable to Campolo, Middleton & McCormick, LLP AS ATTORNEY (“ Escrow Agent ”), subject to collection. The Downpayment shall be held by Escrow Agent and disbursed in accordance with the terms and conditions of this Agreement. The Downpayment shall be held by Escrow Agent in a NON-INTEREST bearing account and disbursed in accordance with the terms and conditions of this Agreement.

(b) The balance of the Purchase Price shall be paid to Seller on the Closing Date , in accordance with Section 3.2 hereof, subject to the apportionments, adjustments and credits referenced in Section 3.2 above , simultaneously with the delivery of the Deed by one or more of the following methods: certified check(s), official bank tellers check(s), federal funds wire transfer of immediately available funds to an account at such bank or banks as shall be designated by Seller, except that uncertified checks of Purchaser payable to the order of Seller up to the amount of ten thousand ($10,000.00) dollars in the aggregate shall be acceptable for sums payable at Closing .

3.3 Subject to Section 24, whenever in this Agreement Purchaser is entitled to a return of the Downpayment, Purchaser shall be entitled to the return of the Downpayment actually being held by Escrow Agent pursuant to this Agreement. Subject to Section 24, whenever in this Agreement Seller is entitled to retain the Downpayment, Seller shall be entitled to the Downpayment actually being held by Escrow Agent pursuant to this Agreement.

4. Mortgage Commitment Contingency

(A) The obligation of Purchaser to purchase under this Contract is conditioned upon issuance on or before the date (the “Commitment Date”) which is forty-five (45) days after the date hereof, of a written commitment from an Institutional Lender pursuant to which such Institutional Lender agrees to make a first mortgage loan to Purchaser, at Purchaser’s sole cost and expense, of $10,387,500.00 for a term of ten (10) years with an amortization schedule of not less than 20 years (or such lesser sum, shorter term or different amortization schedule as Purchaser shall be willing to accept) at the prevailing fixed or adjustable rate of interest and on other customary commitment terms (the “Commitment”). A commitment conditioned on the Institutional Lender’s approval of an appraisal and/or environmental inspection shall not be deemed a “Commitment” hereunder until an appraisal and environmental inspection are approved (and if that does not occur before the Commitment Date, Purchaser may cancel under subparagraph (D) hereof unless the Commitment Date is extended).

(B)

Purchaser shall (i) make prompt application to one or, at Purchaser ’s election, more than one Institutional Lender for such mortgage loan, (ii) furnish accurate and complete information regarding Purchaser and Purchaser’s principals, as required, (iii) pay all fees, and charges required in connection with such application and loan, (iv) pursue such application with diligence (including the securing of such environmental reports required by such Institutional Lender), and (v) cooperate in good faith with such Institutional Lender(s) to obtain a Commitment. Purchaser shall accept a Commitment meeting the terms set forth in subparagraph (A) and shall comply with all requirements of such Commitment (or any other commitment accepted by Purchaser).

(C)

If all Institutional Lenders to whom applications were made deny such applications in writing prior to the Commitment Date, Purchaser may cancel this Contract by giving Notice thereof to Seller, within 5 business days after the Commitment Date with a copy of such denials and all application materials (except to the extent that they contain material non-public information), provided that Purchaser has complied with all its obligations under this section.

(D)

If no Commitment is issued by an Institutional Lender on or before the Commitment Date, then, unless Purchaser has accepted a written commitment from an Institutional Lender that does not conform to the terms set forth in subparagraph (A) hereof, Purchaser may cancel this Contract by giving Notice to Seller, within 5 business days after the Commitment Date , provided that such Notice includes the name and address of the Institutional Lender(s) to whom application was made and that Purchaser has complied with all its obligations under this section.

(E)

If this Contract is canceled by Purchaser pursuant to subparagraphs (C) or (D) hereof, neither party shall thereafter have any further rights against, or obligations or liabilities to, the other by reason of this Contract, except that (i) the Downpayment shall be promptly refunded to Purchaser and (ii) those provisions which, by the express terms of this Contract survive cancellation, shall survive.

(F)

For purposes of this Contract, the term “Institutional Lender” shall mean any (i) bank, savings bank, trust company, savings and loan association, credit union whether organized under the laws of the State of New York, the United States or any other state, foreign banking corporation licensed by the Superintendent of Banks of New York or regulated by the Comptroller of the Currency to transact business in New York State; or (ii) mortgage banker licensed pursuant to Article 12-D of the Banking Law;

5. Closing.

5.1 The closing of the transaction contemplated hereby (the “ Closing ”) shall occur on or about NINETY (90) days immediately following the date that Purchaser receives a fully executed duplicate original of this Agreement being herein referred to as the “ Closing Date ”). However, notwithstanding the foregoing, at the sole election of the Purchaser (or its Assigns), after a title report/commitment has been issued and received by Seller, upon not less than three (3) days written Notice (which may be served by email directed to Seller’s attorney) excluding November 23, 24 or December 22, 25, 26, 27, 28, 29 Closing shall take place on the date so designated by Purchaser (or its Assigns), TIME BEING OF THE ESSENCE with respect to Seller’s obligations pursuant to this Section “5.”

5.2 The Closing will occur at the offices of Campolo, Middleton & McCormick, LLP at 4175 Veterans Memorial Highway, Suite 400, Ronkonkoma, NY 11779 or such location as designated by Purchaser’s mortgage lender.

6. As Is.

6.1 Seller represents and warrants that the Premises shall be delivered at Closing (i) vacant, (ii) free of tenancies and occupancies, (iii) broom clean, (iv) with the existing plumbing, electrical, heating, ventilation and air conditioning systems and equipment and loading dock doors in working order and (v) with the roof free of leaks. Except as expressly set forth in this Contract to the contrary, Purchaser is expressly purchasing the Property in its existing condition “AS IS, WHERE IS, AND WITH ALL FAULTS” with respect to all facts, circumstances, conditions and defects, and, except as is expressly set forth in this Agreement to the contrary, Seller has no obligation to determine or correct any such facts, circumstances, conditions or defects or to compensate Purchaser for same. Seller has specifically bargained for the assumption by Purchaser of all responsibility to investigate the Property, Laws and Regulations, Rights, Facts, and of all risk of adverse conditions and has structured the Purchase Price and other terms of this Agreement in consideration thereof. Purchaser has undertaken all such investigations of the property, laws and regulations, rights, facts, and Violations as Purchaser deems necessary or appropriate under the circumstances as to the status of the Property and based upon same, except as is expressly set forth in this Agreement to the contrary, Purchaser is and will be relying strictly and solely upon such inspections and examinations and the advice and counsel of its own consultants, agents, legal counsel and officers and Purchaser is and will be fully satisfied that the Purchase Price is fair and adequate consideration for the Property and, by reason of all the foregoing, Purchaser assumes the full risk after Closing of any loss or damage (subject to Section 12 below) occasioned by any fact, circumstance, condition or defect pertaining to the Property.

6.2 Except as expressly set forth in this Contract to the contrary, Seller hereby disclaims all warranties of any kind or nature whatsoever (including, without limitation, warranties of habitability and fitness for particular purposes), whether expressed or implied, including, without limitation, warranties with respect to the Property. Purchaser acknowledges that it is not relying upon any representation of any kind or nature made by Seller, or Broker (as hereinafter defined), or any of their respective direct or indirect members, partners, shareholders, officers, directors, employees or agents (collectively, the “ Seller Related Parties ”) with respect to the Property, and that, in fact, no such representations were made except as expressly set forth in this Agreement. To the extent required to be operative, the disclaimers and warranties contained herein are “conspicuous” disclaimers for purposes of any applicable Laws and Regulations. Except to the extent expressly set forth in this Contract to the contrary, Purchaser, for itself and its agents, affiliates, successors and assigns (collectively, the “Purchaser Related Parties”), hereby releases and forever discharges Seller Related Parties from any and all rights, claims and demands at law or in equity, whether known or unknown at the time of this Agreement, which Purchaser Related Parties have or may have in the future, arising out of the physical and/or environmental condition of the Property, including, without limitation, any claim for indemnification or contribution arising under the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. §§ 9601 et seq.) or any similar Federal, State or local statute, rule or ordinance relating to liability of property owners for environmental matters. The provisions of this Section 6.2 shall survive the Closing or termination of this Agreement.

6.3 Seller represents and warra nts that, to the best of Seller’s knowledge: (i) there are no adverse Environmental Conditions (as defined below) affecting the Premises; (ii) Seller does not have in its possession any environmental documents pertaining to Environmental Conditions at the Premises, whether prepared for or by Seller or some other party; (iii) no third party or governmental claims, actions, or demands are pending or have been threatened against the Seller or any other party in connection with Environmental Conditions at the Premises; (iv) No lien or other restriction on the ownership, occupancy, use or transferability of the Premises, has been imposed by any governmental agency in connection with presence of any Hazardous Substances or any release or threatened release of Hazardous Substances; and (v) neither the Seller nor any other party has entered into or been subject to any consent decree, compliance order, or administrative order issued pursuant to applicable laws with respect to Environmental Conditions at the Premises, or received notice under the citizen suit provision of any applicable law in connection with Environmental Conditions at the Premises or any facilities or operation thereon. Except for the foregoing, Seller makes no warranty with respect to the presence of Hazardous Materials on, above or beneath the Land (or any parcel in proximity thereto) or in any water on or under the Property. Except with regards to joinder made within five (5) years from the date of Closing, Purchaser’s closing hereunder shall be deemed to constitute an express waiver of Purchaser’s right to cause Seller to be joined in any action brought under any Environmental Laws (as hereinafter defined). The term “ Hazardous Materials ” shall mean (a) those substances included within the definitions of any one or more of the terms “hazardous materials”, “hazardous wastes”, “hazardous substances”, “industrial wastes”, and “toxic pollutants”, as such terms are defined under the Environmental Laws, or any of them, (b) petroleum and petroleum products, including, without limitation, crude oil and any fractions thereof, (c) natural gas, synthetic gas and any mixtures thereof, (d) asbestos and or any material which contains any hydrated mineral silicate, including, without limitation, chrysotile, amosite, crocidolite, tremolite, anthophylite and/or actinolite, whether friable or non-friable, (e) polychlorinated biphenyl (“ PCBs ”) or PCB-containing materials or fluids, (f) radon, (g) any other hazardous or radioactive substance, material, pollutant, contaminant or waste, and (h) any other substance with respect to which any Environmental Law or governmental authority requires environmental investigation, monitoring or remediation. The term “ Environmental Laws ” shall mean all federal, state and local laws, statutes, ordinances and regulations, now or hereafter in effect, in each case as amended or supplemented from time to time, including, without limitation, all applicable judicial or administrative orders, applicable consent decrees and binding judgments relating to the regulation and protection of human health, safety, the environment and natural resources (including, without limitation, ambient air, surface, water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation), including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. §§ 9601 et seq.), the Hazardous Material Transportation Act, as amended (49 U.S.C. §§ 1801 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. §§ 136 et seq.), the Resource Conservation and Recovery Act, as amended (42 U.S. §§ 6901 et seq.), the Toxic Substances Control Act, as amended (15 U.S.C. §§ 2601 et seq.), the Clean Air Act, as amended (42 U.S.C. §§ 7401 et seq.), the Federal Water Pollution Control Act, as amended (33 U.S.C. §§ 1251 et seq.), the Occupational Safety and Health Act, as amended (29 U.S.C. §§ 651 et seq.), the Safe Drinking Water Act, as amended (42 U.S.C. §§ 300f et seq.), any state or local counterpart or equivalent of any of the foregoing, and any federal, state or local transfer of ownership notification or approval statutes.

6.4 Except for the foregoing representations by Seller, Purchaser shall rely solely upon Purchaser’s own knowledge of the Property based on its investigation of the Property and its own inspection of the Property in determining the Property’s physical condition. Except for the foregoing representation by Seller, Purchaser releases Seller, the Seller Related Parties and their respective successors and assigns from and against any and all claims which Purchaser Related Party has or may have arising from or related to any matter or thing related to or in connection with the Property, except as expressly set forth in this Agreement to the contrary, any construction defects, errors or omissions in the design or construction and any environmental conditions, and neither Purchaser nor any Purchaser Related Party shall look to Seller, the Seller Related Parties or their respective successors and assigns in connection with the foregoing for any redress or relief. This release shall be given full force and effect according to each of its express terms and provisions, including those relating to unknown and unsuspected claims, damages and causes of action. The provisions of this Section 6.4 shall survive the termination of this Agreement or the Closing Date and shall not be deemed to have merged into any of the documents executed or delivered at the Closing. To the extent required to be operative, the disclaimers and warranties contained herein are “conspicuous” disclaimers for purposes of any applicable Law or Regulation.

6.5 The provisions of this Section 6 shall survive the Closing or earlier termination of this Agreement or the Closing Date and shall not be deemed to have merged into any of the documents executed or delivered at the Closing.

7. Apportionments.

7.1 At the Closing, the following items shall be apportioned between the parties as of 11:59 PM EST on the day preceding the Closing Date. Any errors in the apportionments pursuant to this Section 7 shall be corrected by appropriate re-adjustment between Seller and Purchaser post-closing, provided that notice of any such error, with supporting calculations, shall be given by Purchaser to Seller or by Seller to Purchaser, as the case may be, no later than ninety (90) days after the Closing, if ascertainable within such period, it being understood and agreed that if any such items or errors are not ascertainable at the Closing or within ninety (90) days thereafter, the apportionment shall be made subsequent to the Closing when the charge or error is determined. Except as otherwise specifically provided for herein, all apportionments shall be made in the manner recommended by the Customs in Respect to Title Closings of the Real Estate Board of New York, Inc., and there shall be no other apportionments. The items to be apportioned are:

7.1.1 INTENTIONALLY OMITTED

7.1.2 Real estate taxes and PILOT, unmetered water and sewer charges and vault charges, if any, and any and all other municipal or governmental assessments of any and every nature levied or imposed upon the Property in respect of the current lien year of the applicable taxing authority in which the Closing Date occurs (the “Current Tax Year”), on a per diem basis based upon the number of days in the Current Tax Year prior to the Closing Date (which shall be allocated to Seller) and the number of days in the Current Tax Year on and after the Closing Date (which shall be allocated to Purchaser). If the Closing shall occur before the tax rate for the Current Tax Year is fixed, the apportionment of real estate taxes or PILOT shall be upon the basis of the tax rate for the next preceding fiscal period applied to the latest assessed valuation. Promptly after the new tax rate is fixed for the fiscal period in which the Closing takes place, the apportionment of real estate taxes shall be recomputed. Upon the Closing Date and subject to the adjustment provided above, Purchaser shall be responsible for real estate taxes and assessments levied or imposed upon the Property payable in respect of the Current Tax Year In no event shall Seller be charged with or be responsible for any increase in the real estate taxes or assessments levied or imposed upon the Property resulting from the transfer of the Property herein contemplated or from any improvements made or any lease entered into at any time or for any reason. If any assessments levied or imposed upon the Property are payable in installments, the installment for the Current Tax Year shall be prorated in the manner set forth above and Purchaser hereby assumes the obligation to pay any such installments due on and after the Closing Date.

7.1.3 Any charges or fees for transferable licenses and permits for the Property, if any.

7.1.4 All other items customarily apportioned in connection with sale of buildings substantially similar to the Building in the State of New York and County of Suffolk.

7.2 If the Property is not on frontage and there a re water meters on the Property, Seller shall endeavor to furnish actual readings at the Closing, and the unfixed meter charges and the unfixed sewer rents, if any, based thereon for the intervening time shall be apportioned on the basis of such last final or actual readings. If Seller fails or is unable to obtain such readings, the Closing shall nevertheless proceed and the parties shall place in escrow an amount reasonably agreeable to the parties and apportion the meter charges and sewer rents on the basis of the last readings and bills received by Seller and the same shall be appropriately readjusted after the Closing from said escrow on the basis of a final water meter reading.

7.3 Seller shall not be required or entitled to assign any policies of insurance in respect of the Property to Purchaser, and Purchaser shall be responsible for obtaining its own insurance as of the Closing Date, and no adjustment shall be made for any insurance premiums. Purchaser shall take all necessary actions required to transfer all utility accounts to Purchaser as of the Closing Date and Seller shall cooperate (at no cost to Seller) in connection with any such transfer. Seller shall be entitled to a refund from any such utility of any deposits made by Seller in connection therewith.

7.4 INTENTIONALLY OMITTED.

7.5 The provisions of this Section 7 shall survive the Closing; provided, however, that any re-prorations or re-apportionments shall be made as and when required under Section 7.1 above.

8. Representations and Warranties of the Parties; Certain Covenants.

8.1 Seller warrants, represents and covenants to and with Purchaser that the following are true and correct on the date hereof and shall be true and correct at Closing:

8.1.1 Seller has the requisite power and authority to enter into and to perform the terms of this Agreement. Seller is not subject to any law, order, decree, restriction or agreement which prohibits or would be violated by this Agreement or the consummation of the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all requisite action of Seller. This Agreement constitutes, and each document and instrument contemplated hereby to be executed and delivered by Seller, when executed and delivered, shall constitute the legal, valid and binding obligation of Seller enforceable against Seller in accordance with its respective terms (subject to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors ’ rights generally).

8.1.2 Seller is not a “foreign person” within the meaning of Section 1445 of the Internal Revenue Code 1986, as amended, or any regulations promulgated thereunder (collectively, the “Code”).

8.1.3 Neither the execution, delivery and performance of this Agreement nor the consummation of the transactions contemplated hereby is prohibited by, or requires Seller to obtain any consent, authorization, approval or registration under any law, statute, rule, regulation, judgment, order, writ, injunction or decree which is binding upon Seller.

8.1.4 Seller has not entered into any written service contracts relating to the Property (“Service Contracts”) which will be binding upon Purchaser after the Closing.

8.1.5 Seller has not received written notice of any pending or threatened condemnation or eminent domain proceedings that would affect the Property.

8.1.6 Seller is not, and will not become, a person or entity with whom United States persons or entities are restricted or prohibited from doing business under regulations of the Office of Foreign Asset Control ( “ OFAC ” ) of the Department of the Treasury (including those named on OFAC’s specially designated and blocked persons list) or under any statute, executive order (including the November 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and will not engage in any dealings or transactions or be otherwise associated with such persons or entities.

8.1.7 Intentionally Omitted.

8.1.8 To the best of Seller ’s knowledge, Seller has not received any written notice that the Property is subject to any material violation or material failure to comply with any law or municipal ordinance which will materially and adversely affect the value of the Property.

8.1.9 Seller has not received written notice of and has no knowledge of any action, suit, arbitration, unsatisfied order or judgment, government investigation or proceeding pending against Seller with respect to the Premises, including with respect to environmental violations, which if adversely determined could individually or in the aggregate materially interfere with the consummation of the transaction contemplated by this contract.

8.1.10 T here are no underground fuel storage tanks at the Premises.

8.1.11 There is no union agreement governing the employee s at the Property.

8.1.12 Neither Seller, nor any person controlling or controlled by Seller, is a country, territory, individual or entity named on a Government List, and the monies used in connection with this Agreement and amounts committed with respect thereto, were not and are not derived from any activities that contravene any applicable anti-money laundering or anti-bribery laws and regulations (including funds being derived from any person, entity, country or territory on a Government List or engaged in any unlawful activity defined under Title 18 of the United States Code, Section 1956(c)(7)). For purposes of this paragraph “ Government List ” means any of (a) the two lists maintained by the United States Department of Commerce (Denied Persons and Entities), (b) the list maintained by the United States Department of Treasury (Specially Designated Nationals and Blocked Persons), and (c) the two lists maintained by the United States Department of State (Terrorist Organizations and Debarred Parties).

For the purposes of this Agreement, the terms “to the actual knowledge of Seller,” “to the best of Seller ’s knowledge” and phrases of similar import shall mean the actual knowledge of Robert Weiss (Seller’s Chief Operating Officer), without independent inquiry or investigation (other than the review of Seller’s records relating to the Property), or the actual knowledge of any of Seller’s officers or directors without any special investigation, and shall not mean that Seller or such individual is charged with knowledge of the acts, omissions and/or knowledge of Seller’s property manager (or any employee thereof) or of Seller’s other agents or employees or of Seller’s predecessors-in-title to the Property. Subject to Purchaser's compliance with the requirements of this Agreement, Seller’s representations and warranties contained in this Section 8.1 shall survive the Closing for a period of ninety (90) days after the Closing (the “ Survival Period ”).

8.2 Purchaser warrants, represents and covenants to and with Seller that to the best of its knowledge, the following are true and correct on the date hereof and shall be true and correct at Closing:

8.2.1 Purchaser is not subject to any law, order, decree, restriction, or agreement which prohibits or would be violated by this Agreement or the consummation of the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all requisite action of Purchaser. This Agreement constitutes, and each document and instrument contemplated hereby to be executed and delivered by Purchaser, when executed and delivered, shall constitute the legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its respective terms (subject to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditor ’s rights generally).

8.2.2 Neither the execution, delivery and performance of this Agreement nor the consummation of the transactions contemplated hereby is prohibited by, or requires Purchaser to obtain any consent, authorization, approval or registration under any law, statute, rule, regulation, judgment, order, writ, injunction or decree which is binding upon Purchaser.

8.2.3 There are no judgments, orders, or decrees of any kind against Purchaser unpaid or unsatisfied of record, nor any actions, suits or other legal or administrative proceedings pending or, to the best of Purchaser ’s actual knowledge, threatened against Purchaser, which would have any material adverse effect on the business or assets or the condition, financial or otherwise, of Purchaser or the ability of Purchaser to consummate the transactions contemplated by this Agreement.

8.2.4 Purchaser is not, and will not become, a person or entity with whom United States persons or entities are restricted or prohibited from doing business under regulations of the OFAC (including those named on OFAC’s specially designated and blocked persons list) or under any statute, executive order (including the November 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and will not engage in any dealings or transactions or be otherwise associated with such persons or entities.

8.2.5 Purchaser has sufficient financial resources to pay the Purchase Price and perform its obligations hereunder.

8.3 Purchaser agrees and acknowledges that, except as specifically set forth in this Agreement, neither Seller nor any of the Seller Related Parties nor Broker nor any agent nor any representative nor any purported agent or representative of Seller or any of the Seller Related Parties or Broker have made, and neither Seller nor any of the Seller Related Parties nor Broker are liable for or bound in any manner by, any express or implied warranties, guaranties, promises, statements, inducements, representations or information pertaining to the Property or any part thereof. Without limiting the generality of the foregoing, Purchaser has not relied on any representations or warranties, and Seller, the Seller Related Parties and Broker have not made any representations or warranties other than as expressly set forth herein, in either case express or implied, as to (a) the current or future real estate tax liabilities, assessments or valuations of the Property, (b) the potential qualification of the Property for any and all benefits conferred by Federal, state or municipal laws, whether for subsidies, special real estate tax treatment, insurance, mortgages, or any other benefits, whether similar or dissimilar to those enumerated, (c) the compliance of the Property, in its current or any future state, with applicable zoning ordinances and the ability to obtain a change in the zoning or a variance with respect to the Property ’s’ non-compliance, if any, with said zoning ordinances, (d) the availability of any financing for the alteration, rehabilitation or operation of the Property from any source, including, without limitation, any state, city or Federal government or any institutional lender, (e) the current or future use of the Property, including, without limitation, to the Property’s use for residential (including hotel, cooperative or condominium use) or commercial purposes, (f) the present and future condition and operating state of any and all machinery or equipment on the Property and the present or future structural and physical condition of any building or its suitability for rehabilitation or renovation, (g) the ownership or state of title of any personal property on the Property, (h) the presence or absence of any Laws and Regulations or any Violations, (i) the compliance of the Property or the Leases (or the rents thereunder) with any rent control or similar law or regulation, and (j) the ability to relocate any Tenant or to terminate any Lease, and (k) the layout, leases, potential leases, rents, income, expenses, operation, agreements, licenses, easements, instruments, documents or Service Contracts of or in any way affecting the Property. Further, Purchaser acknowledges and agrees that neither Seller nor any of the Seller Related Parties nor Broker are liable for or bound by (and Purchaser has not relied upon) any verbal or written statements, representations or any other information respecting the Property furnished by Seller, any of the Seller Related Parties or Broker or any broker, employee, agent, consultant or other person representing or purportedly representing Seller, any of the Seller Related Parties or Broker. The provisions of this Section 8.3 shall survive the Closing or the earlier termination of this Agreement.

8.4 For the purposes of this Agreement, the terms “to the actual knowledge of Purchaser,” “to the best of Purchaser knowledge” and phrases of similar import shall mean the actual knowledge of its President and CEO, Leonard A. Rosenbaum, without independent inquiry or investigation, and shall not mean that Purchaser or such individual is charged with knowledge of the acts, omissions and/or knowledge of any of Purchaser other agents or employees. Subject to Seller’s compliance with the requirements of this agreement, Purchaser’s representations and warranties contained in Sections 8.2 and 8.3 shall survive the Closing for a period of ninety (90) days after the Closing (the “Survival Period”).

9. Closing Deliveries.

9.1 Seller shall deliver to Purchaser at the Closing the following:

9.1.1 A bargain and sale deed with covenants against grantor ’s acts, in the form attached hereto as Exhibit B and made a part hereof (the “ Deed ”), duly executed and acknowledged by Seller for each Property.

9.1.2 A bill of sale, conveying and transferring to Purchaser all right, title and interest of Seller, in and to all personal property at the Property (the “ Personal Property ”), including, without limitation, all assignable (without any third-party consent) licenses, permits, warranties and guarantees and plans and specifications held by Seller in connection with the Property, in the form attached hereto as Exhibit C and made a part hereof, duly executed by Seller, it being expressly understood that no portion of the Purchase Price shall be attributable to such Personal Property.

9.1.3 Intentionally Omitted.

9.1.4 Intentionally Omitted.

9.1.5 Intentionally Omitted.

9.1.6 Keys to each portion of the Property,

9.1.7 A certificate of non-foreign status in accordance with Section 1445 of the Code, executed by Seller.

9.1.8 Corporate resolutions of Seller authorizing the transaction contemplated herein and the execution and delivery of the documents required to be executed and delivered hereunder.

9.1.9 A New York State Combined Real Estate Transfer Tax Return and Credit Line Mortgage Certificate, Form TP -584 for the conveyance of the Property (the “ State Transfer Tax Return ”), duly executed by Seller.

9.1.10 Intentionally Omitted.

9.1.11 A New York State Real Estate Real Property Transfer Report, Form RP-5217 NYC (the “ Transfer Report ”), duly executed and acknowledged by Seller.

9.1.12 Seller shall deliver to Purchaser and the Title Company evidence of the authority of Seller to enter into the transaction contemplated by this Agreement and to execute and deliver the documents required to be executed and delivered hereunder.

9.1.13 Seller shall deliver to Purchaser , if required a certificate of Seller, dated as of the Closing, certifying to the fulfillment of the conditions set forth in Section 10.2.2 hereof.

9.1.14 To the extent in Seller ’s possession or control, the following: original (or copies if originals are unavailable) books and records, tenant files, plans and specifications and other materials related to the operation of the Property.

9.1.15 Seller shall deliver a title affidavit in the form as required by Purchaser ’s Title Company.

9.1.16 (a) If Seller is a corporation, copies of Seller’s (i) certificate of incorporation, (ii) by laws, (iii) resolutions of its board of directors authorizing the transaction contemplated by this Agreement and (iv) a good standing certificate dated not more than thirty (30) days prior to the Closing Date, (b) if Seller is a limited partnership, (i) copies of Seller’s certificate of limited partnership, (ii) resolutions of the general partner of Seller authorizing the transaction contemplated by this Agreement, (iii) consents of Seller’s partners, if required under Seller’s agreement of limited partnership and (iv) a good standing certificate dated not more than thirty (30) days prior to the Closing Date, (c) if Seller is a limited liability company, Seller’s (i) certificate of formation, (ii) operating agreement, (iii) good standing certificate dated not more than thirty (30) days prior to the Closing Date, (iv) any consents of Seller’s members required under the operating agreement to the transaction contemplated herein and (v) resolutions authorizing the transaction contemplated herein, which documents shall be accompanied by a certification signed by a secretary, assistant secretary, managing member, or general partner, as the case may be, certifying that such copies are true, complete and correct.

9.2 Purchaser shall deliver to Seller at Closing the following:

9.2.1 The balance of the Purchase Price.

9.2.2 (a) If Purchaser is a corporation, copies of Purchaser ’s (i) certificate of incorporation, (ii) by-laws, (iii) resolutions of its board of directors authorizing the transaction contemplated by this Agreement and (iv) a good standing certificate dated not more than thirty (30) days prior to the Closing Date, (b) if Purchaser is a limited partnership, (i) copies of Purchaser’s certificate of limited partnership, (ii) resolutions of the general partner of Purchaser authorizing the transaction contemplated by this Agreement, (iii) consents of Purchaser’s partners, if required under Purchaser’s agreement of limited partnership and (iv) a good standing certificate dated not more than thirty (30) days prior to the Closing Date, (c) if Purchaser is a limited liability company, Purchaser’s (i) certificate of formation, (ii) operating agreement, (iii) good standing certificate dated not more than thirty (30) days prior to the Closing Date, (iv) any consents of Purchaser’s members required under the operating agreement to the transaction contemplated herein and (v) resolutions authorizing the transaction contemplated herein, which documents shall be accompanied by a certification signed by a secretary, assistant secretary, managing member, or general partner, as the case may be, certifying that such copies are true, complete and correct.

9.2.3 Intentionally Omitted.

9.2.4 The State Transfer Tax Return, executed and acknowledged by Purchaser.

9.2.5 Intentionally Omitted.

9.2.6 The Transfer Report, executed and acknowledged by Purchaser.

9.2.7 Such evidence as the Title Company may reasonably require as to the authority of the person or persons executing d ocuments on behalf of Purchaser.

9.2.8 Such other instruments, agreements or other documents as may be necessary or convenient to effectuate the provisions of this Agreement, including, without limitation, a Property Owner ’s Registration Form (Department of Finance) and Customer Registration Form (Department of Environmental Protection).

9.2.9 Any and all required approvals, inducements , resolutions or any other such necessary government approvals from the Town of Islip Industrial Development Agency authorizing the transfer of the Property.

10. Conditions to the Closing Obligations.

10.1 Notwithstanding anything to the contrary contained herein, the obligation of Seller to close title in accordance with this Agreement is expressly conditioned upon the fulfillment by and as of the Closing Date of each of the conditions listed below, provided that Seller, at its election, evidenced by notice delivered to Purchaser at or prior to the Closing, may waive any of such conditions:

10.1.1 Purchaser shall have executed and delivered to Seller all of the documents, shall have paid all sums of money and shall have taken or caused to be taken all of the other action required of Purchaser in this Agreement.

10.1.2 All representations and warranties made by Purchaser in this Agreement shall be true and correct in all material respects as of the Closing Date.

10.2 Notwithstanding anything to the contrary contained herein, the obligation of Purchaser to close title and pay the Purchase Price in accordance with this Agreement is expressly conditioned upon the fulfillment by and as of the Closing Date of each of the conditions listed below, provided that Purchaser, at its election, evidenced by notice delivered to Seller at or prior to the Closing, may waive all or any of such conditions:

10.2.1 Seller shall have executed and delivered to Purchaser all of the documents required to be delivered by Seller at the Closing, and shall have taken or caused to be taken all of the other action required of Seller at the Closing.

10.2.2 All representations and warranties made by Seller in this Agreement shall be true and correct in all material respects as of the Closing Date. To the extent that Purchaser knows at or prior to Closing that any of Seller’s representations or warranties are inaccurate, untrue, incorrect or misleading in any material way (whether matters contradicting any representation or warranty are contained in any Exhibit or Schedule to this Agreement, or are contained in any materials delivered or available to Purchaser by or on behalf of Seller or whether such matters are contained in any study, test, analysis or report prepared by or for the benefit of Purchaser), and Purchaser consummates the Closing, the representations and warranties will be deemed modified to reflect Purchaser’s knowledge and will not form the basis for any action against Seller (except to the extent that prior to Closing the Parties enter into a written agreement in connection with same). Notwithstanding the foregoing, if on the Closing Date any such representations and warranties are not true and correct in all material respects, Purchaser shall in any event be required to close hereunder and pay the Purchase Price (less any adjustment) to Seller and Seller shall be required at Closing to pay to Purchaser (or the sales price shall be adjusted by credit to Purchaser) such amount on account of such breach(es), misrepresentations, warranty claims and casualty losses to remedy all such breach(es), warranty claims and casualty losses. If such misrepresentations, warranty claim, and casualty losses shall in the aggregate exceed the sum of Seventy-Five ($75,000.00) Dollars, then either Purchaser or Seller may cancel the Contract and in such event the Purchaser shall be entitled to a refund of all moneys paid by or on behalf of Purchaser on account of this Contract. For purposes hereof, a representation or warranty shall not be deemed to have been breached if the representation or warranty is not true and correct in all material respects as of the Closing Date by reason of changed facts or circumstances which pursuant to the terms of this Agreement are permitted to have occurred and are not within the control of Seller.

10.2.3 The Title Company shall be willing to insure title to the Property pursuant to an ALTA 2006 Owner ’s Policy of Title Insurance in the amount of the Purchase Price at regular rates and without additional premium (which shall not be deemed to include the cost of any endorsements to title requested by Purchaser), subject only to the Permitted Exceptions and as otherwise provided in this Agreement (the “ Title Policy ”).

11. Limitation on Liability of Parties.

11.1 If Purchaser shall default in the performance of Purchaser ’s obligations under this Agreement and the Closing does not occur as a result thereof (a “ Purchaser Default ”), Seller’s sole and exclusive remedy shall be, and Seller shall be entitled, to retain the Downpayment as and for full and complete liquidated and agreed damages for Purchaser’s default, and the parties hereto shall be released from any further liability to each other hereunder, except for those obligations and liabilities that are expressly stated to survive termination of this Agreement. SELLER AND PURCHASER AGREE THAT IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE DAMAGES WHICH SELLER MAY SUFFER UPON A PURCHASER DEFAULT AND THAT THE DOWNPAYMENT AND ANY INTEREST EARNED THEREFROM, AS THE CASE MAY BE, REPRESENTS A REASONABLE ESTIMATE OF THE TOTAL NET DETRIMENT THAT SELLER WOULD SUFFER UPON A PURCHASER DEFAULT. SUCH LIQUIDATED AND AGREED DAMAGES ARE NOT INTENDED AS A FORFEITURE OR A PENALTY WITHIN THE MEANING OF APPLICABLE LAW.

11.2 If Seller shall default in the performance of Seller ’s obligations under this Agreement and the Closing does not occur as a result thereof, In addition to the refund of its Downpayment, Purchaser shall be entitled to assert all equitable and legal remedies available to it.

11.3 Subject to the provisions of Section 2.3 and 11.2 hereof, in the event that Seller shall default in the performance of Seller’s obligations under this Agreement and the Closing does not occur as a result thereof, Purchaser shall be entitled to (a) terminate this Agreement, and thereupon receive a return of the Downpayment, together with the interest earned thereon, if any,(b) seek specific performance of Seller’s obligations as required in this Agreement, provided that any such action for specific performance must be commenced within sixty (60) days after such default (as to which date time shall be of the essence), and (c) avail itself of any other remedy at law or in equity to which it is entitled. In the event Purchaser shall seek specific performance of this Agreement or institute a plenary action, the successful party shall be entitled to a judgment for any costs, expenses or damages incurred by it in connection therewith.

11.4 Any claim by Purchaser, whether made prior to or after the Closing, of a breach of one or more of Seller ’s representations and warranties pursuant to Section 8.1 or a claim for indemnity under this Agreement or any document delivered by Seller at the Closing (individually or collectively, as applicable, a “Breach”) shall be made by Purchaser delivering to Seller’s attorney written notice (a “Claim Notice”) promptly after Purchaser has learned of such Breach and, in all events, prior to expiration of the Survival Period, which Claim Notice shall set forth (a) a description in reasonable detail of the claimed Breach, (b) the Section and subsection of this Agreement under which the claimed Breach is asserted, and (c) Purchaser's good-faith calculation of the diminution in the total value of the Property affected by such Breach resulting therefrom (the “Claimed Damage”). Purchaser's and Seller’s rights and remedies in respect of any alleged Breach shall, without limiting the foregoing, be as hereinbelow provided.

11.5 Notwithstanding anything to the contrary herein contained, from and after the Closing Date, with respect to any asserted Breach of Seller ’s representations and warranties set forth in Section 8.1, (a) Seller shall have no liability to Purchaser (i) if Purchaser has not delivered a Claim Notice with respect thereto as required pursuant to Section11.4 above (the Breaches described in this clause (i) being herein referred to as “Nonqualifying Breaches”) and (ii) unless and until there shall be found to have existed pursuant to a final, nonappealable order of a court of competent jurisdiction one or more Breaches other than Nonqualifying Breaches that constitute individually or in the aggregate a Material Adverse Effect, (b) Purchaser shall in no event whatsoever be entitled to recover consequential damages against Seller with respect to any such asserted Breach, (c) Purchaser shall in no event whatsoever be entitled to recover for any Breach of which Purchaser was aware at or before the Closing. If, prior to the Closing, there occurs or exists a Breach which does not have a Material Adverse Effect, then Purchaser shall have no remedy therefore and must proceed to the Closing except that there shall be an equitable adjustment of the Purchase Price.

11.6 The terms and provisions of this Section 11 shall survive the Closing.

12. Fire or Other Casualty; Condemnation.

12 .1 Seller agrees (a) to maintain its present property insurance policy including fire and extended coverage and (b) to give Purchaser reasonably prompt notice of any fire or other casualty occurring at the Property of which Seller obtains knowledge, between the date hereof and the date of the Closing, or of any actual or threatened condemnation of all or any part of the Property of which Seller obtains knowledge.

12 .2 If prior to the Closing there shall occur (a) damage to the Property caused by fire or other casualty which would cost an amount equal to 25% of the Purchase Price or more to repair, as reasonably determined by an engineer selected by Seller which is reasonably satisfactory to Purchaser or (b) a taking by condemnation of any material portion of the Property, then, and in either such event, Purchaser may elect to terminate this Agreement by written notice given to Seller within ten (10) business days after Seller has given Purchaser the notice referred to in Section 12.1 hereof, or at the Closing, whichever is earlier, in which event Seller shall promptly instruct Escrow Agent, to make a Downpayment Return, this Agreement shall thereupon be null and void and neither party hereto shall thereupon have any further obligation to the other, except that the provisions of Sections 6.4, 13, 24 and 27 hereof shall survive such termination. If neither Purchaser nor Seller elects to terminate this Agreement, then the Closing shall take place as herein provided, without abatement of the Purchase Price (unless otherwise agreed to in writing by the Parties), and Seller shall assign to Purchaser at the Closing, by written instrument in form reasonably satisfactory to Purchaser, all of Seller’s interest in and to any insurance proceeds or condemnation awards which may be payable to Seller on account of any such fire, casualty or condemnation, shall deliver to Purchaser any such proceeds or awards actually theretofore paid, less any amounts (the " Reimbursable Amounts ") (i) actually and reasonably expended or incurred by Seller in adjusting any insurance claim or negotiating and/or obtaining any condemnation award (including, without limitation, reasonable attorneys’ fees and expenses) and/or (ii) theretofore actually and reasonably incurred or expended by or for the account of Seller for the cost of any compliance with laws, protective restoration or emergency repairs made by or on behalf of Seller (to the extent Seller has not theretofore been reimbursed by its insurance carriers for such expenditures), and Seller shall pay to Purchaser the amount of the deductible, if any, under Seller’s property insurance policy(ies), less all Reimbursable Amounts not received by Seller from any insurance proceeds or condemnation awards paid to Seller prior to the Closing. The proceeds of rent interruption insurance, if any, shall on the Closing Date be appropriately apportioned between Purchaser and Seller.

1 2.3 If, prior to the Closing, there shall occur (a) damage to the Property caused by fire or other casualty which would cost less than 25% of the Purchase Price to repair, as reasonably determined by an engineer selected by Seller which is reasonably satisfactory to Purchaser or (b) a taking by condemnation of any part of the Property which is not material, then, and in either such event, neither party shall have the right to terminate its obligations under this Agreement by reason thereof, but Seller shall assign to Purchaser at the Closing, by written instrument in form and substance reasonably satisfactory to Purchaser, all of Seller’s interest in any insurance proceeds or condemnation awards which may be payable to Seller on account of any such fire, casualty or condemnation, or shall deliver to Purchaser any such proceeds or awards actually theretofore paid, in each case less any Reimbursable Amounts. The proceeds of rent interruption insurance, if any, shall on the Closing Date be appropriately apportioned between Purchaser and Seller.

12.4 Nothing contained in this Section 12 shall be construed to impose upon Seller any obligation to repair any damage or destruction caused by fire or other casualty or condemnation.

12.5 In the event neither Purchaser nor Seller elects to terminate this Agreement in accordance with Section 12.2 above, or upon the occurrence of the events set forth in Section 12.3 (a) or (b) above, Seller shall have the exclusive right to negotiate, compromise or contest the obtaining of any insurance proceeds and/or any condemnation awards.

13. Brokerage.

Each Party represents and warrants to the other Party that it has not dealt with any broker, consultant, finder or like agent who might be entitled to a commission or compensation on account of introducing the parties hereto, the negotiation or execution of this Agreement or the closing of the transactions contemplated hereby other than Greiner Maltz of Long Island, LLC (“ Broker ”). Seller shall pay the commission due to Broker pursuant to a separate agreement. Purchaser represents and warrants to Seller that it has not engaged any broker, consultant, finder or like agent who might be entitled to a commission or compensation with respect to any of the transactions described in this Agreement or otherwise relating to the purchase of the Property; nor, except for Broker, has any broker, consultant, finder or like agent brought about such transactions, brought the Property to the attention of Purchaser or otherwise communicated with Purchaser with respect to any such transactions or the Property. Each party agrees to indemnify, defend and hold harmless the other party from and against all claims, losses, liabilities and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) caused by or arising out of: (a) a breach of any of the aforesaid representations and warranties of the indemnifying party; and (b) any claims for any brokerage or sales commissions, consultant’s fees, finder’s fees or any other similar fees or compensation of any person or entity (other than Broker) claiming to have dealt with, on behalf of, through or under such indemnifying party. The provisions of this Section 13 shall survive the Closing or the earlier termination of this Agreement.

14. Closings Costs; Fees and Disbursements of Counsel, etc.

At the Closing, Seller shall pay the New York State Real Estate Transfer Tax imposed pursuant to Article 31 and Section 1402 of the New York Tax Law (the “ State Transfer Tax ”) and the New York City Real Property Transfer Tax imposed pursuant to Title 11, Chapter 21 of the New York City Administrative Code (the “ City Transfer Tax ”), upon or payable in connection with the transfer of title to the Property and the recordation of the Deed which State Transfer Tax and City Transfer Tax shall, at Seller’s election, be allowed for out of the Purchase Price and paid by Purchaser on behalf of Seller. At the Closing, Seller and Purchaser shall each execute, acknowledge (if appropriate) and deliver the State Transfer Tax Return, the City Transfer Tax Return and the Transfer Report to the Title Company or to the appropriate governmental offices. All such tax payments shall be made payable directly to the order of the appropriate governmental officer or the Title Company. Except as otherwise expressly provided to the contrary in this Agreement, Seller shall pay all charges for recording any required Satisfaction of mortgages, judgments or liens to which it is a party, and Purchaser shall pay (a) all charges for recording and/or filing the Deed and (b) all title charges and survey costs, including the premium on Purchaser’s Title Policy. Each of the parties hereto shall bear and pay the fees and disbursements of its own counsel, accountants and other advisors in connection with the negotiation and preparation of this Agreement and the Closing. The provisions of this Section 14 shall survive the Closing.

15. Notices.

Except as otherwise provided in this Agreement, all notices, demands, requests, consents, approvals or other communications (for the purposes of this Section collectively referred to as “ Notices ”) required or permitted to be given hereunder or which are given with respect to this Agreement, in order to constitute effective notice to the other party, shall be in writing and shall be deemed to have been given when (a) personally delivered with signed delivery receipt obtained, (b) when transmitted by facsimile machine, if followed by delivery of, pursuant to one of the other means set forth in this Section 15 before the end of the first Business Day thereafter, printed confirmation of the successful transmission to the appropriate facsimile number listed below as obtained by the sender from the sender’s facsimile machine, (c) upon receipt, when sent by prepaid reputable overnight courier or (d) the earlier of the date of actual delivery to the recipient or five (5) days after the date so mailed if sent postage prepaid by registered or certified mail, return receipt requested, in each case addressed as follows:

If to Seller, to:

Creative Bath Products, Inc.

250 Creative Drive

Central Islip, New York, 11722

E-mail:

with copies to:

Campolo, Middleton & McCormick, LLP

4175 Veterans Memorial Highway

Suite 400

Ronkonkoma, New York 11779

Attn: Joseph Vozza, Esq.

E-mail: jvozza@cmmllp.com

If to Purchaser, to:

CVD Equipment Corporation

355 South Technology Drive

Central Islip, New York 11722

Email : legal@cvdequipment.com

with a copy to:

Martin J. Teitelbaum, Esq.

General Counsel

355 South Technology Drive

Central Islip, New York 11722

Email: mjteitelbaum@cvdequipment.com

If to Escrow Agent, to:

Campolo, Middleton & McCormick, LLP

4175 Veterans Memorial Highway

Suite 400

Ronkonkoma, New York 11779

Attn: Joseph Vozza, Esq.

E-mail: jvozza@cmmllp.com

Personal delivery to a party or to any officer, director, partner, member, agent or manager of such party at the foregoing addresses shall constitute receipt. Rejection or other refusal to accept or inability to deliver because of changed address of which no notice has been received shall also constitute receipt. Notices may be sent by the attorneys for the respective parties and each such notice so served shall have the same force and effect as if sent by such party. Notices shall be valid only if served in the manner provided in this Article 15. Seller hereby designates and empowers Seller’s counsel Campolo, Middleton & McCormick, LLP, as Seller’s agent, to give any notice to Purchaser under this Agreement (including, without limitation, a notice of default) in Seller’s name, which notice so given shall have the same force and effect as if given by the Seller itself.

16. Survival; Governing Law.

(a) Except as otherwise expressly set forth in this Agreement, the terms, covenants, conditions, representations and warranties set forth in this Agreement shall not survive the Closing and delivery of the Deed, all of which shall be merged therein, or the earlier termination of this Agreement.

(b) This Agreement shall be governed by, interpreted under, and construed and enforced in accordance with, the laws of the State of New York.

(c) Each party hereby consents to the jurisdiction of any local or federal court located within the State of New York , County of Suffolk, waives personal service of any and all process upon it, consents to the service of process by registered or certified mail direct to each party at the address for notices herein and acknowledges that service so made shall be deemed to be completed upon actual delivery thereof (whether accepted or refused).

17. Counterparts; Captions.

This Agreement may be executed in counterparts, each of which shall be deemed an original. The captions are for convenience of reference only and shall not affect the construction to be given any of the provisions hereof. PDF, electronic and facsimile signatures shall have the same force and effect as original signatures.

18. Entire Agreement.

This Agreement (including all exhibits annexed hereto), contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior understandings, if any, with respect thereto. This Agreement may not be modified, changed, supplemented or terminated, nor may any obligations hereunder be waived, except by written instrument signed by the party to be charged or by its agent duly authorized in writing or as otherwise expressly permitted herein. The provisions of this Section shall survive the Closing.

19. Waivers; Extensions.

No waiver of any breach of any agreement or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof or of any other agreement or provision herein contained. No extension of time for performance of any obligations or acts shall be deemed an extension of the time for performance of any other obligations or acts. In the event that the date specified herein for the performance of an obligation or act shall fall on a day which is not a business day, the time for performance of such obligation or act shall be deemed to be extended automatically to the first business day thereafter. As used in this Agreement, “business day” shall mean any day other than Saturdays, Sundays and holidays, on which banks in the State of New York are required or permitted to be closed.

20. No Recording.

The parties hereto agree that neither this Agreement nor any memorandum or notice hereof shall be recorded. Any recordation or attempted recordation by Purchaser shall constitute a Purchaser ’s Default.

21. Assignment .

21.1 Purchaser shall, at any time prior to closing provided that Purchaser is not then otherwise in default of this Agreement, have the right to assign this Agreement all of its rights and delegate its obligations hereunder to a corporation or LLC (either presently existing or one to be formed) provided that the Assignee shall be a subsidiary of the Purchaser.

21.2 Except as provided in Section 21.1 above, Purchaser shall neither assign its rights nor delegate its obligations hereunder without obtaining Seller’s prior written consent, which consent may be granted or withheld in Seller’s sole discretion. Any purported or attempted assignment or delegation without obtaining Seller’s prior written consent or not otherwise permitted hereunder shall be void and of no effect. For purposes of this Section 21, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the entity in question, whether through the ownership of voting stock, by contract or otherwise. No consent given by Seller to any transfer or assignment of Purchaser’s rights or obligations hereunder shall be construed as a consent to any other transfer or assignment of Purchaser’s rights or obligations hereunder. Purchaser shall not resell the Property or any part thereof through a “double escrowed” or other similar procedure without Seller’s prior written consent, which consent may be granted or withheld in Seller’s sole discretion. No transfer or assignment in violation of the provisions hereof shall be valid or enforceable. Purchaser shall give Seller notice of such assignment not less than five (5) Business Days prior to the Closing Date which notice shall contain the name, address, and federal employee identification of the assignee.

22. Pronouns; Joint and Several Liability.

All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the parties may require. If Purchaser consists of two or more parties, the liability of such parties shall be joint and several.

23. Successors and Assigns.

This Agreement shall bind and inure to the benefit of Seller, Purchaser and their respective permitted successors and assigns.

24. Escrow.

24.1 Escrow Agent shall hold and disburse the Downpayment in accordance with the following provisions:

24.1.1 Escrow Seller’s attorney (“Escrowee”) shall hold the Downpayment for Seller’s account in escrow in a IOLA bank account at Capital One Bank N.A. until Closing or sooner termination of this contract and shall pay over or apply the Downpayment in accordance with the terms of this paragraph. Escrowee shall hold the Downpayment in an NON interest-bearing account for the benefit of the parties. If the Closing occurs, then Escrow Agent shall deliver the Downpayment to Seller.

24.1.2 If for any reason the Closing does not occur, Escrow Agent shall, at its sole option, either (i) deliver to a court of competent jurisdiction the Downpayment; or (ii) retain the Downpayment until one of the following events shall have occurred: (a) (b) there shall have been served upon Escrow Agent an order or judgment duly entered in a court of competent jurisdiction setting forth the manner in which the Downpayment is to be paid out and delivered, in which event Escrow Agent shall deliver the Downpayment as set forth in such order or judgment; or (b) Seller and Purchaser shall have delivered to Escrow Agent a joint statement executed by both Seller and Purchaser setting forth the manner in which the Downpayment is to be paid out and delivered, in which event Escrow Agent shall deliver the Downpayment as set forth in such statement. Escrow Agent shall not be or become liable in any way or to any person for its refusal to comply with any such requests or demands by Seller and Purchaser until and unless it has received a direction of the nature described above.

24.2 Any notice to Escrow Agent shall be sufficient only if received by Escrow Agent within the applicable time period set forth herein. All mailings and notices from Escrow Agent to Seller and/or Purchaser, or from Seller and/or Purchaser to Escrow Agent, provided for in this Section 24 shall be addressed to the party to receive such notice at its notice address set forth in Section 15 above (with copies to be similarly sent to the additional persons therein indicated).

24.3 Notwithstanding the foregoing, if Escrow Agent shall have received a notice from either Seller or Purchaser (or the attorney representing either of the parties) disputing entitlement to the Downpayment or shall otherwise believe in good faith at any time that a disagreement or dispute has arisen between the parties hereto over entitlement to the Downpayment (whether or not litigation has been instituted), Escrow Agent shall have the right, upon notice to both Seller and Purchaser, (a) to deposit the Downpayment with the Clerk of the Court in which any litigation is pending and/or (b) to take such reasonable affirmative steps as it may, at its option, elect in order to terminate its duties as Escrow Agent, including, without limitation, the depositing of the Downpayment with a court of competent jurisdiction and the commencement of an action for interpleader, the costs thereof to be borne by whichever of Seller or Purchaser is the losing party, and thereupon Escrow Agent shall be released of and from all liability hereunder except for any previous gross negligence or willful misconduct.

24.4 Escrow Agent is acting hereunder solely as a stakeholder without charge as an accommodation to Purchaser and Seller, it being understood and agreed that Escrow Agent shall not be liable for any error in judgment or any act done or omitted by it in good faith or pursuant to court order, or for any mistake of fact or law. Escrow Agent shall not incur any liability in acting upon any document or instrument believed thereby to be genuine. Escrow Agent is hereby released and exculpated from all liability hereunder, except only for willful misconduct or gross negligence. Escrow Agent may assume that any person purporting to give it any notice on behalf of any party has been authorized to do so. Escrow Agent shall not be liable for, and Purchaser and Seller hereby jointly and severally agree to indemnify Escrow Agent against, any loss, liability or expense, including reasonable attorney's fees (either paid to retained attorneys or, representing the fair value of legal services rendered by Escrow Agent to itself), arising out of any dispute under this Agreement, including the cost and expense of successfully defending itself against any claim arising hereunder. Notwithstanding anything to the contrary herein contained, Purchaser agrees that Escrow Agent Campolo, Middleton & McCormick, LLP, may represent Seller as Seller’s counsel in any action, suit or other proceeding between Seller and Purchaser or in which Seller and Purchaser may be involved. As between the Parties, Seller shall be liable for any loss or misappropriation of the Downpayment.

24.5 Escrow Agent has executed this Agreement to confirm its agreement to be bound by the terms and conditions set forth in this Agreement with respect to the Downpayment.

24.6 The provisions of this Section 2 4 shall survive the Closing or earlier termination of this Agreement.

25. TOWN OF ISLIP INDUSTIAL DEVELOPMENT AGENCY .

The Parties acknowledge that Seller does not currently own fee title to the Premises, but is the Lessee pursuant to a certain IDA Agreement between Seller and the Town of Islip Industrial Development Agency (the “IDA”) which allows the Seller and the Premises to be eligible to receive certain real estate tax benefits under a certain Payment in Lieu of Tax Agreement.

This Agreement shall be subject to and conditioned upon Purchaser entering into a Lease and PILOT agreement with the IDA, satisfactory to Purchaser which shall be effective as of the date of Closing. Purchaser shall make prompt application to the IDA for such benefits and provide all requested documents and information customarily required in connection therewith. In the event that such application has not been approved by the IDA within forty-five (45) days from the date of this Agreement, Purchaser shall have the right to cancel this agreement upon written notice to the Seller. If Purchaser cancels this Agreement pursuant to this Section 25, Purchaser will provide Seller with a copy of all application materials, provided to the IDA.

In lieu of receiving the Deed at Closing, Purchaser may request that the current Lease Agreement and Pilot Agreement be terminated and a new Lease Agreement and new Pilot Agreement be executed by the IDA and Purchaser at Closing (a “New IDA Transaction”). If Purchaser so elects, Seller and Purchaser shall cooperate with each other and with the IDA in good faith to cause the IDA Assignment or New IDA Transaction to occur at Closing and both parties shall execute and deliver all documents reasonably required by the IDA and Purchaser ’s lender in connection therewith, provided that in connection with such assignment Seller shall incur no additional liability, cost or obligation with respect thereto and shall at Closing be released from all liability under its existing Lease Agreement, Pilot Agreement and related documents. Each party shall pay the fees of its own attorneys in connection with any IDA Assignment or New IDA Transaction.

26. NYS Empire State Development . Seller represents that it has filed an application for assistance from NYS Empire State Development (“ESD). This Agreement shall be subject to and conditioned upon Purchaser receiving an incentive package from ESD in the amount of Two Million Seven Hundred Fifty Thousand ($2,750,000.00) Dollars or greater.

27. Confidentiality.

Seller and Purchaser covenant and agree not to communicate (i) the terms or any aspect of this Agreement and the transactions contemplated hereby and (ii) the content of any and all information in respect of the Property which is supplied by Seller to Purchaser (collectively, the “ Confidential Information ” ) to any person or entity, without the express written consent of the other party; provided, however, that either party may, without consent, disclose the Confidential Information (a) to its respective advisors, consultants, attorneys, accountants, partners, investors, and lenders (the “ Transaction Parties ” ) without the express written consent of the other party, so long as any such Transaction Parties to whom disclosure is made shall also agree to keep all such information confidential in accordance with the terms hereof and (b) if disclosure is required by law or by regulatory or judicial process or pursuant to any regulations promulgated by the New York Stock Exchange or other public exchange for the sale and purchase of securities, provided that in such event Seller or Purchaser, as applicable, shall (except with regards to filings required by the Securities and Exchange Commission, NASDAQ, or any other public exchange) notify the other party in writing of such required disclosure, shall exercise all commercially reasonable efforts to preserve the confidentiality of the Confidential Information, including, without limitation, reasonably cooperating with the other party to obtain an appropriate order or other reliable assurance that confidential treatment will be accorded such Confidential Information by such tribunal and shall disclose only that portion of the Confidential Information which it is legally required to disclose. If this Agreement is terminated, such confidentiality shall be maintained by each of the Parties and each Party and its Transaction Parties will destroy or deliver to the other Party, upon request, all documents and other materials, and all copies thereof, obtained thereby in connection with this Agreement that are subject to such confidence, with any such destruction confirmed by such Party, and its Transaction Parties in writing. The foregoing confidentiality obligations shall not apply to the extent that any such information is a matter of public record or is provided in other sources readily available to the real estate industry other than as a result of disclosure by a Party or their respective Transaction Parties in violation of this Agreement. Each Party hereby agrees to indemnify the other Party against, and hold the other Party harmless from, any and all claims, losses, damages, liabilities and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) arising in connection with its obligations under this Section 2 7 and/or the prohibited disclosure of any Confidential Information by it and/or by its Transaction Parties in violation of this Section 2 7 . The provisions of this Section 2 7 shall survive the Closing or the earlier termination of this Agreement. Notwithstanding anything to the contrary contained in this Agreement, each Party shall be allowed to retain one copy of all such documents and other returned or destroyed materials for legal archiving purposes.

28. Further Assurances.

The parties each agree to do such other and further acts and things, and to execute and deliver such instruments and documents (not creating any obligations additional to those otherwise imposed by this Agreement) as either may reasonably request from time to time, whether at or after the Closing, in furtherance of the purposes of this Agreement. The provisions of this Section 2 8 shall survive the Closing or the earlier termination of this Agreement.

29. Tax Free Exchange

2 9.1 Seller may consummate the sale of the Property as part of a so-called like-kind exchange (the “ Seller Exchange ”) pursuant to Section 1031 of the Code, provided that: (i) Seller shall effect the Seller Exchange through an assignment of this Agreement, or its rights under this Agreement, to a qualified intermediary (as defined in Treas. Reg. 1.1031(k)-1(g)(4)(iii)) and Purchaser shall not be required to acquire or hold title to any real property for purposes of consummating the Seller Exchange; (ii) Seller shall pay all additional costs that would not otherwise have been incurred by Seller or Purchaser had Seller not consummated the sale through the Seller Exchange, (iii) Seller shall, and hereby does, indemnify and hold Purchaser harmless from, any loss, cost, damage, liability or expense (including, Purchaser's reasonable legal fees) which may arise or which Purchaser may suffer in connection with a Seller Exchange; (iv) the Seller Exchange does not delay the Closing; and (v) Purchaser shall not be obligated to make any representation or warranty in favor of Seller or any other person in connection with the Seller Exchange.

2 9.2 Purchaser may consummate the sale of the Property as part of a so-called like-kind exchange (the “ Purchaser Exchange ”) pursuant to Section 1031 of the Code, provided that: (i) Purchaser shall effect the Purchaser Exchange through an assignment of this Agreement, or its rights under this Agreement, to a qualified intermediary and Seller shall not be required to acquire or hold title to any real property for purposes of consummating the Purchaser Exchange; (ii) Purchaser shall pay any additional costs that would not otherwise have been incurred by Seller or Purchaser had Purchaser not consummated the sale through the Purchaser Exchange, (iii) Purchaser shall, and hereby does, indemnify and hold Seller harmless from, any loss, cost, damage, liability or expense (including, Seller’s reasonable legal fees) which may arise or which Seller may suffer in connection with a Purchaser Exchange; (iv) the Purchaser Exchange does not delay the Closing; and (v) Seller shall not be obligated to make any representation or warranty in favor of Purchaser or any other person in connection with the Purchaser Exchange.

30. Miscellaneous.

30.1 All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the parties may require.

30.2 For purposes of this Agreement, the term “ Business Day ” means shall mean any day other than Saturdays, Sundays and holidays, on which banks in the State of New York are required or permitted to be closed.

30.3 This Agreement shall bind and inure to the benefit of Seller, Purchaser and their respective permitted successors and assigns.

30.4 This Agreement may be executed and delivered electronically (by email pdf, etc.) and such transmission of the Agreement shall be treated as an original.

30.5 Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction will, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision will be interpreted to be only so broad as is enforceable.

30.6 If any action is brought by either party against the other in connection with or arising out of this Agreement or any of the documents and instruments delivered in connection herewith or in connection with the transactions contemplated hereby, the prevailing party shall be entitled to recover from the other party reasonable attorneys ’ fees and expenses incurred in connection with the prosecution or defense of such action.

30.7 (a) Any legal action or proceeding with respect to this Agreement sh all be brought in a Federal or State court of Suffolk County, State of New York and by execution and delivery of this Agreement, each party to this Agreement hereby accepts, generally and unconditionally, the jurisdiction of the New York Courts. Each party to this Agreement hereby expressly and irrevocably submits the person of such party to this Agreement to the in personal jurisdiction of the New York Courts in any suit, action or proceeding arising, directly or indirectly, out of or relating to this Agreement. To the extent permitted under applicable law, this consent to personal jurisdiction shall be self-operative and no further instrument or action, other than service of process in one of the manners specified in this Agreement or as otherwise permitted by law, shall be necessary in order to confer jurisdiction upon the person of such party to this Agreement in any such New York Court.

(b) To the fullest extent permitted under applicable law, each party to this Agreement irrevocably waives and agrees not to assert, by way of motion, as a defense or otherwise, any objection which may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in a New York Court and any claim that any such suit, action or proceeding has been brought in an inconvenient forum, any claim that it is not personally subject to the jurisdiction of any such New York Court or that this Agreement or the subject matter hereof may not be enforced in or by such New York Court.

30.8 SELLER AND PURCHASER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER ARISING IN TORT OR CONTRACT) BROUGHT BY SUCH PARTY AGAINST THE OTHER ON ANY MATTER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.

30.9 Purchaser shall, in its capacity as Contract Vendee, have the right prior to Closing at its own cost and expense to file an application(s) with the Town of Islip for site plan approval and for the issuance of building permits. In the event that the Town requires separate written authorization to so file, Seller’s shall promptly (and without charge) execute such consents and hereby authorize their attorneys, Campolo, Middleton & McCormick, LLP, to execute such consents on Seller’s behalf and to promptly deliver same to Purchaser, without cost to the Purchaser or its Assigns. However, in the event that Purchaser requests Seller’s attorneys to perform any other work (other than executing such consents) in connection with Purchaser’s application(s) for site plan approval or for the issuance of building permits, then in such evcnt Purchaser shall be required to reimburse Seller for any reasonable costs and expenses including reasonable attorney’s fees.

30.10 To the extent applicable, all of the foregoing provisions of this Section 30 shall survive the Closing or the earlier termination of this Agreement.

31. Limitation of Liability . Notwithstanding anything to the contrary contained in this Agreement, except as otherwise expressly provided in this Agreement, it is understood and agreed that none of the employees, directors, officers, members, partners, managers, principals, consultants, shareholders, advisors, attorneys or agents of Seller, Purchaser, or any other person, shall have any personal liability or obligation whatsoever for any obligations under this Agreement or under any documents delivered at Closing, and the individual assets of such parties shall not be subject to any claims of any person relating to such obligations. However, the foregoing shall not in any way limit the parties’ obligations and liabilities under this Agreement. The provisions of this Section 31 shall survive the Closing or any early termination of this Agreement.

32. No Offer . This Agreement shall not be deemed an offer or binding upon Seller or Purchaser until this Agreement is fully executed and delivered by Seller and Purchaser.

33. No Third - Party Beneficiaries . The parties do not intend to confer any benefit hereunder on any person or entity other than the parties hereto..

34. Due Diligence Period .

3 4.1 Due Diligence Testing. Purchaser Shall be entitled to perform a Phase I Environmental Site Assessment on the property during the Due Diligence Period. All Due Diligence Testing and Reports are subject to Section 27 of this Agreement. Purchaser is aware that all testing and results shall remain confidential and this provision shall survive closing or the termination of this agreement. Purchaser and Seller, shall keep the results of the Phase I and all other testing performed during the Due Diligence Period, strictly confidential and shall not disclose, or permit or assist another to disclose, all or any portion of the results thereof to any person or entity (other than its legal counsel or other parties necessary to fund or otherwise facilitate Seller’ sale and/or Purchaser’s purchase of the Property) except as required by law or court order, without the advance written consent of Seller, or as otherwise provided in Section 27 of this Agreement.

3 4.2 Due Diligence Period . Subject to the further terms and conditions of this Section Purchaser shall in good faith during the Due Diligence Period (as hereinafter defined) diligently perform and complete, at Purchaser’s sole cost and expense , its due diligence review, examination and inspection of all matters relating to Purchaser’s acquisition of the Property, including without limitation, the review of the Title Report, surveys, building plans and specifications, the Leases, the Service Contracts and other documents evidencing or relating to or otherwise constituting a part of the Property, and all financial and title information in respect of the operation of the Property (Seller shall, to the extent that it is in possession thereof, deliver a copy of Title Report, surveys, site plans, building plans and specifications to Purchaser, all other such review, except as provided in Section 33.2 below, to be conducted at Seller’s offices or, at Seller’s election, the office of Seller’s managing agent, and the performance of all physical inspections and environmental studies of the Property (all of the foregoing being herein referred to as “Purchaser’s Due Diligence”). Seller makes no representations that it has in its possession and Title Report, surveys, building plans and specifications, the Leases, the Service Contracts and other documents evidencing or relating to or otherwise constituting a part of the Property or any financial and title information in respect of the operation of the Property. Purchaser at its sole cost and expense , is responsible to obtain any and all information in connection with their Due Diligence. Seller is not responsible and makes no representations that they are in possession or shall provide any information for Purchaser to conduct the Due Diligence on the property. The “ Due Diligence Period ” shall mean the period commencing on the date that Purchaser receives a fully executed original of this Agreement and expiring on the Due Diligence Expiration Date. The “ Due Diligence Expiration Date ” shall mean the date which is sixty ( 60 ) calendar days after the commencement of the Due Diligence Period.

3 4.3 Purchaser (a) shall give reasonable prior written notice of Purchaser’s request to enter the Property and at all times conduct Purchaser’s Due Diligence in compliance with applicable law and the terms of the Leases, in a manner so as not to cause damage, loss, cost or expense to Seller, the Property or any tenants, and without interference with or disturbance of the tenants’ use and enjoyment of the Property in accordance with the Leases, (b) shall promptly restore the Property to its condition immediately preceding Purchaser’s inspection and examination, (c) shall keep the Property free and clear of any mechanic’s liens or materialman’s liens in connection with Purchaser’s Due Diligence, (d) shall at all times be accompanied by a representative of Seller when at the Property shall not contact the tenants and shall not contact any governmental authority having jurisdiction over the Property without Seller’s express written consent, (e) shall, promptly after receipt thereof by Purchaser, provide Seller with copies of all engineering and architectural reports, environmental reports and lab analyses, appraisals, construction and renovation estimates, as applicable (collectively, the “ Reports ”) commissioned and received by Purchaser in connection with Purchaser’s Due Diligence, and with any additional Reports which Purchaser may receive prior to the Closing, all at no cost or expense to Seller it being understood that Seller shall, provided that the Closing occurs, keep the Reports confidential, except to the extent that such (i) information (w) is a matter of public record or is provided in other sources readily available to the real estate industry other than as a result of disclosure by Seller, (x) was available to Seller from a source known to Seller not to have a duty of confidentiality with regard to the information or was or is independently developed by Seller from non-confidential sources or (ii) disclosure is compelled by law or regulatory or judicial process; provided, however, that Seller may disclose such information to its agents, advisors, attorneys and accountants so long as such persons are informed by Seller of the confidential nature of such information and are directed by Seller to treat such information confidentially and to use such information only in connection with the transaction contemplated by this Agreement) and (f) shall keep the Reports confidential, in accordance with Section 27 hereof; provided, however, that Seller may, in accordance with Section 27 hereof, disclose such information to its Transaction Parties (as hereinafter defined) and (f) shall, until the Closing, keep the Reports confidential in accordance with Section 27 hereof; provided, however, that Purchaser may, in accordance with Section 27 hereof, disclose such information to its Transaction Parties. The provisions of this Section 33.3 shall survive the termination of this Agreement.

3 4.4 Except as otherwise provided in this Agreement, Seller shall have no obligation to deliver or make available to Purchaser any information, including without limitation, the following: (a) any information contained in Seller’s credit reports, credit authorizations, financial analyses or projections or other internal documents relating to the Property, (b) materials which are, in the reasonable judgment of Seller or its counsel, subject to an attorney-client or work product privilege under applicable law, (c) appraisals of the Property or summary information with respect thereto, (d) financial statements of Seller or any affiliate of Seller or (e) any information that Seller is prohibited by law or by regulatory or judicial process to disclose.

3 4.5 During the Due Diligence Period, upon request by Purchaser, Seller shall deliver or make available to Purchaser copies of the following documents or records evidencing or relating to or otherwise constituting a part of the Property to the extent in Seller’s possession or control and to the extent that same has not been previously delivered or made available to Purchaser: (a) title insurance policies and documents evidencing exceptions set forth in such policies, (b) ad valorem tax bills, notices, assessed valuations, protests, rendering and other similar documents for the period during which Seller has owned the Property, (c) Leases, (d) material notices from or to governmental authorities, (e) all written Service Contracts, (f) all surveys of the Property and (g) all licenses, permits and approvals.

3 4.6 Purchaser shall not, and shall not permit its employees, consultants, engineers and agents to, in connection with Purchaser’s Due Diligence, conduct any soil tests or sampling or any boring, digging, drilling or other physical intrusion of the Property and/or any of the Improvements (collectively, “ Testing ”), except at reasonable times and with the prior written consent of Seller. If Seller consents thereto, Purchaser shall furnish to Seller a Certificate of Insurance evidencing $1 million general liability insurance and an $11 million umbrella coverage prior to commencing any such Testing and shall, upon completion thereof, restore promptly, at Purchaser’s sole cost and expense, the Property to its condition existing prior to such Testing. Purchaser hereby indemnifies and holds harmless Seller from and against any and all claims, damage, liability, loss, cost and expense that may arise in connection with all claims arising out of the acts or omissions of Purchaser, its partners, agents, employees, licensees, invitees, contractors and consultants; In addition, at Seller’s election, Purchaser and/or such alternative indemnitor shall provide, prior to any Testing, a separate indemnity agreement reasonably satisfactory to Seller in Seller’s sole discretion. The provision of this Section 33.6 shall survive termination of this Agreement.

3 4.7 Phase II Environmental Testing. Phase II Environmental Site Assessment Testing or any subsequent environmental testing upon the completion of the Phase I Site Assessment shall require the written consent and approval of Seller, which may be withheld at the sole discretion of the Seller.

3 4.8 The Phase I or any other Due Diligence testing shall initially be provided in draft form to Purchaser’s counsel and its mortgage lender and shall not be provided to Seller or its counsel unless expressly requested by Seller’s counsel in writing. Upon its receipt of the draft reports, Purchaser’s counsel shall review the same and discuss (by telephone) the same with Seller’s counsel and, if requested by Seller’s counsel and not otherwise, provide a copy thereof directly to Seller’s counsel. Purchaser shall then in good faith consider any commercially reasonable written comments to the draft reports that may be provided by Seller’s counsel provided the form and content of the final reports shall be ultimately determined in Purchaser’s sole discretion. The final reports shall be delivered to Seller’ counsel at its written request, but not otherwise.

3 4.9 This Agreement may be terminated by Purchaser if Purchaser’s Due Diligence shall be unsatisfactory in Purchaser’s sole discretion, by written notice to Seller and Escrow Agent on or prior to the expiration of the Due Diligence Period (the “ Due Diligence Termination Notice ”) in which event Escrow Agent shall repay to Purchaser the Initial Deposit (as hereinafter defined) and this Agreement shall be deemed canceled and become void and of no further effect, and neither party shall have any obligations of any nature to the other hereunder or by reason hereof, upon the expiration of the Due Diligence Period (except as to the Sections of this agreement which have been defined and shall survive such termination).

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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

SELLER:

CREATIVE BATH PRODUCTS, INC.

BY : /s/ Helene Bartsch

Name: Helene Bartsch

Title:

BY : /s/ Christa Meinzinger

Name: Christa Meinzinger

Title:

PURCHASER:

CVD EQUIPMENT CORPORATION

BY : /s/ Leonard A. Rosenbaum

Name: Leonard A. Rosenbaum

Title: President and CEO

ESCROW AGENT:

SOLELY FOR THE PURPOSES OF

CONFIRMING THE PROVISIONS OF

ARTICLE 2 4:

Campolo, Middleton & McCormick, LLP

By:______________________________
Joseph C. Vozza

EXHIBIT A -1

Legal Description

SEE ATTACHED

EXHIBIT B

Form of Deed

— Bargain and Sale Deed, with Covenant against Grantor’s Acts — Individual or Corporation (Single Sheet)

Consult your lawyer before signing this instrument —this instrument should be used by lawyers only.

— —————————————————

THIS INDENTURE, made the ____ day of _____, in the year 2017

BETWEEN ______________ with a place of Business at ____________________

party of the first part, and _______________________ with a place of Business at_____________________

party of the second part,

WITNESSETH, that the party of the first part, in consideration of dollars paid by the party of the second part, does hereby grant and release unto the party of the second part, the heirs or successors and assigns of the party of the second part forever,

ALL that certain plot, piece or parcel of land, with the buildings and improvements thereon erected, situate, lying and being in the

TOGETHER with all right, title and interest, if any, of the party of the first part in and to any streets and roads abutting the above described premises to the center lines thereof; TOGETHER with the appurtenances and all the estate and rights of the party of the first part in and to said premises; TO HAVE AND TO HOLD the premises herein granted unto the party of the second part, the heirs or successors and assigns of the party of the second part forever.

AND the party of the first part covenants that the party of the first part has not done or suffered anything whereby the said premises have been encumbered in any way whatever, except as aforesaid.

AND the party of the first part, in compliance with Section 13 of the Lien Law, covenants that the party of the first part will receive the consideration for this conveyance and will hold the right to receive such consideration 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. The word “party” shall be construed as if it read “parties” whenever the sense of this indenture so requires.

IN WITNESS WHEREOF, the party of the first part has duly executed this deed the day and year first above written.

IN PRESENCE OF:

________________________________________

ACKNOWLEDGEMENT TAKEN IN NEW YORK STATE State of New York, County of , ss: On the day of in the year , before me, the undersigned, personally appeared , personally known to me or proved to me on the basis of satisfactory evidence to be the 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. ACKNOWLEDGEMENT BY SUBSCRIBING WITNESS TAKEN IN NEW YORK STATE State of New York, County of , ss: On the day of in the year , before me, the undersigned, a Notary Public in and for said State, personally appeared , the subscribing witness to the foregoing instrument, with whom I am personally acquainted, who, being by me duly sworn, did depose and say that he/she/they reside(s) in (if the place of residence is in a city, include the street and street number if any, thereof); that he/she/they know(s) to be the individual described in and who executed the foregoing instrument; that said subscribing witness was present and saw said execute the same; and that said witness at the same time subscribed his/her/their name(s) as a witness thereto			ACKNOWLEDGEMENT TAKEN IN NEW YORK STATE State of New York, County of , ss: On the day of in the year , before me, the undersigned, personally appeared , personally known to me or proved to me on the basis of satisfactory evidence to be the 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. ACKNOWLEDGEMENT TAKEN OUTSIDE NEW YORK STATE State of , County of , ss: (Or insert District of Columbia, Territory, Possession or Foreign County) On the day of in the year, before me the undersigned personally appeared Personally known to me or proved to me on the basis of satisfactory evidence to be the 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), 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, and that such individual make such appearance before the undersigned in the (add the city or political subdivision and the state or country or other place the acknowledgement was taken).
Bargain and Sale Deed With Covenants Title No. __________ T O ___________________			SECTION: BLOCK: LOT: COUNTY OR TOWN: RETURN BY MAIL TO:

EXHIBIT C

Form of Bill of Sale

KNOW ALL MEN BY THESE PRESENTS, that __________________, having an address at _____________________________ (“ Assignor ”), for and in consideration of TEN DOLLARS ($10.00) and other good and valuable consideration given by ______________, a __________________________, having an address at ______________________ (“ Assignee ”), the receipt and sufficiency of which is hereby acknowledged, hereby assigns, transfers and sets over unto Assignor, its successors and assigns, from and after the date hereof, without representation or warranty by or recourse to Assignor, express or implied, by operation of law or otherwise, except as expressly provided in that certain Agreement of Purchase and Sale, dated as of_____________ ___, 2016, by and between Assignor, as seller and Assignee, as purchaser (the “ Agreement ”), all of Assignor’s right, title and interest in and to the fixtures, equipment, furniture, furnishings, fittings and articles of personal property, if any, owned by Assignor and located at, attached or appurtenant to or used in connection with the Property (as defined in the Agreement), all as more particularly described in Exhibit A attached hereto and made a part hereof, excluding, however, any such fixtures, equipment, furniture, furnishings, fittings and articles of personal property belonging to any Tenants (as defined in the Agreement), any public utility or any other person or entity except Assignor (collectively, the “ Personal Property ”).

TO HAVE AND TO HOLD THE SAME unto Assignee, its successors and assigns, forever.

[NO FURTHER TEXT ON THIS PAGE]

IN WITNESS WHEREOF, Assignor has caused these presents to be duly executed as of ______________________, 2017.

ASSIGNOR :

____________________________

ASSIGNEE:

___________________________________

EXH IBIT A-2

ASSIGNOR:

ASSIGNEE:

All right, title, interest and estate of Assignor in and to all fixtures and personal property now located or used in connection with the use of the Property, including, without limitation, all apparatus, machinery, devices, fixtures, appurtenances, equipment, furniture and furnishings and articles of personal property of every kind and nature whatsoever now located in or at, and used or useful in connection with the operation and maintenance of the Property (or any part thereof) and the Improvements (as defined in the Agreement), including, without limitation, lightpoles, lighting equipment, fixtures and standards, awnings, shades, screens and blinds, asphalt, vinyl, composition and other floors, wall and ceiling coverings, partitions, doors and hardware, beds, bed fittings, bedroom furnishings, elevators, escalators and hoists, refrigeration cases, refrigerators, stoves, ovens and food preparation equipment, heating, plumbing and ventilating apparatus, gas, electric and steam fixtures, chutes, ducts and tanks, oil burners, furnaces, heaters, compactors, incinerators and boilers, air cooling and air conditioning equipment, washroom, toilet and lavatory fixtures and equipment, engines, pumps, dynamos, motors, generators, electrical wiring and equipment, tools, snow removal, landscaping, gardening and groundskeeping equipment, pool, pool machinery, maintenance equipment and furniture, building supplies, office furniture, machines and equipment, computer equipment and machinery, printers, decorations, window washing hoists and equipment, all pylons and signs, vacuums, buffers, polishers, sweepers and all other cleaning equipment and supplies, all alarms, fire protection systems, detectors and other fixtures and equipment used for or in connection with the security of the Property (or any part thereof) and all additions thereto and replacements thereof, save and except and excluding, however, such thereof as may be owned and used by any Space Lessees, together with all Assignor ’s right to all franchises, permits, certificates of occupancy, licenses, approvals and contracts, and rights therein and thereto, respecting the ownership, use, occupation, maintenance and operation of the Property and/or the Improvements or any part thereof concerning, pertaining to, involving or respecting any business or activity conducted on the Property or any part thereof, together with all rents, issues and profits arising from all or any portion of the Property and/or the Improvements, together with all of Assignor’s right to all trade names under which the Property and/or the Improvements is being operated or by which the same is generally known and all unexpired warranties and guaranties affecting the same, together with all of Assignor’s right, title, interest and estate in and to all plans, specifications and other documents, instruments, contracts, agreements, claims and insurance policies of any kind and description whatever concerning, pertaining to, used in connection with or generated from the Property and/or the Improvements or any part thereof, together with all proceeds of the conversion, voluntary or involuntary, or any of the foregoing into cash or liquidated claims, including, without limitation, proceeds of insurance and condemnation awards, if, but only to the extent the same are within Assignor’s possession or control, subject in all cases to the terms and conditions of the Agreement and except as may be otherwise provided therein.

EXHIBIT D

SERVICE CONTRAC T S

NO NE

Exhibit 10.21

ADA AND ENVIRONMENTAL INDEMNITY AGREEMENT

THIS ADA AND ENVIRONMENTAL INDEMNITY AGREEMENT (this “ Agreement ”) made as of the ___ day of November, 2017, by 555 N Research Corporation, a New York corporation, having an address at 555 North Research Place, Central Islip, New York 11722 (“ Borrower ”) and CVD Equipment Corporation, a New York corporation, having an address at 355 South Technology Drive, Central Islip, New York 11722 (the “ Obligor ” and collectively with Borrower, the “ Indemnitor ”) in favor of HSBC Bank USA, National Association, a bank organized under the laws of the United States of America, having an address at 534 Broad Hollow Road, Melville, New York 11747 (“ Indemnitee ”) and other Indemnified Parties (defined herein).

W I T N E S S E T H :

WHEREAS, Indemnitee is prepared to make a loan to Indemnitor in the principal amount of Ten Million Three Hundred Eighty-Seven Thousand Five Hundred and 00/100 Dollars ($10,387,500.00) (the “ Loan ”), pursuant to a Fee and Leasehold Mortgage and Security Agreement, dated as of the date hereof, by and between Indemnitor, and Indemnitee (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the “ Loan Agreement ”), which Loan is secured by, among other things, that certain property more particularly described on Exhibit A attached hereto (the “ Property ”). Capitalized terms not otherwise defined herein shall have the meaning set forth in the Loan Agreement;

WHEREAS, Indemnitee is unwilling to make the Loan unless Indemnitor agrees to provide the indemnification, representations, warranties, covenants and other matters described in this Agreement for the benefit of the Indemnified Parties; and

WHEREAS, Indemnitor is entering into this Agreement to induce Indemnitee to make the Loan.

NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Indemnitor hereby represents, warrants, covenants and agrees for the benefit of the Indemnified Parties as follows:

1. Representations And Warranties.

(a) Except as otherwise disclosed by that certain Phase I environmental report in respect of the Property delivered to Indemnitee (referred to below as the “ Environmental Report ”), a copy of which has been provided to Indemnitor, (i) there are no Hazardous Substances (defined below) or underground storage tanks in, on, or under the Property, except those that are both (A) in compliance with all Environmental Laws (defined below) and with permits issued pursuant thereto and (B) fully disclosed to Indemnitee in writing pursuant to the Environmental Report; (ii) there are no past, present or threatened Releases (defined below) of Hazardous Substances in, on, under or from the Property which have not been fully remediated in accordance with Environmental Law; (iii) there is no threat of any Release of Hazardous Substances migrating to the Property; (iv) there is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with the Property which has not been fully remediated in accordance with Environmental Law; (v) Indemnitor does not know of, and has not received, any written or oral notice or other communication from any Person (including but not limited to a governmental entity) relating to Hazardous Substances or Remediation (defined below) thereof, or possible liability of any Person pursuant to any Environmental Law, other environmental conditions in connection with the Property, or any actual or potential administrative or judicial proceedings in connection with any of the foregoing; and (vi) Indemnitor has truthfully and fully provided to Indemnitee, in writing, any and all information relating to conditions in, on, under or from the Property that is known to Indemnitor and that is contained in files and records of Indemnitor, including but not limited to any reports relating to Hazardous Substances in, on, under or from the Property and/or to the environmental condition of the Property.

-1-

(b) Except as otherwise disclosed by that certain Physical Conditions Report in respect of the Property, a copy of which has been provided to Indemnitor by Indemnitee, the Property complies in all respects with the ADA.

2. Covenants.

(a) Indemnitor covenants and agrees that: (i) all uses and operations on or of the Property, whether by Indemnitor or any other Person, shall be in compliance with all Environmental Laws and permits issued pursuant thereto; (ii) there shall be no Releases of Hazardous Substances in, on, under or from the Property; (iii) there shall be no Hazardous Substances in, on, or under the Property, except those that are both (A) in compliance with all Environmental Laws and with permits issued pursuant thereto and (B) fully disclosed to Indemnitee in writing; (iv) Indemnitor shall keep the Property free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law, whether due to any act or omission of Indemnitor or any other Person (the “ Environmental Liens ”); (v) Indemnitor shall, at its sole cost and expense, fully and expeditiously cooperate in all activities pursuant to Section 3 of this Agreement, including but not limited to providing all relevant information and making knowledgeable Persons available for interviews; (vi) Indemnitor shall, at its sole cost and expense, perform any environmental site assessment or other investigation of environmental conditions in connection with the Property, pursuant to any reasonable written request of Indemnitee (including but not limited to sampling, testing and analysis of soil, water, air, building materials, and other materials and substances whether solid, liquid or gas), and share with Indemnitee the reports and other results thereof, and Indemnitee and the other Indemnified Parties shall be entitled to rely on such reports and other results thereof; (vii) Indemnitor shall, at its sole cost and expense, comply with all reasonable written requests of Indemnitee to (A) effectuate Remediation of any condition (including but not limited to a Release of a Hazardous Substance) in, on, under or from the Property; (B) comply with any Environmental Law; (C) comply with any directive from any governmental authority; and (D) take any other reasonable action necessary or appropriate for protection of human health or the environment; (viii) Indemnitor shall not do or allow any tenant or other user of the Property to do any act that materially increases the dangers to human health or the environment, poses an unreasonable risk of harm to any Person (whether on or off the Property), impairs or may impair the value of the Property, is contrary to any requirement of any insurer, constitutes a public or private nuisance, constitutes waste, or violates any covenant, condition, agreement or easement applicable to the Property; and (ix) Indemnitor shall immediately notify Indemnitee in writing of (A) any presence or Releases or threatened Releases of Hazardous Substances in, on, under, from or migrating towards the Property; (B) any non-compliance with any Environmental Laws related in any way to the Property; (C) any actual or potential Environmental Lien; (D) any required or proposed Remediation of environmental conditions relating to the Property; and (E) any written or oral notice or other communication of which any Indemnitor becomes aware from any source whatsoever (including but not limited to a governmental entity) relating in any way to Hazardous Substances or Remediation thereof, possible liability of any Person pursuant to any Environmental Law, other environmental conditions in connection with the Property, or any actual or potential administrative or judicial proceedings in connection with anything referred to in this Agreement.

-2-

(b) Indemnitor covenants and agrees that (i) the Property shall at all times comply with all requirements of the ADA, (ii) Indemnitor shall, at its sole cost and expense, comply with all reasonable written requests of Indemnitee to (A) effectuate compliance with the ADA and (B) comply with any directive from any governmental authority relating to ADA compliance and (iii) Indemnitor shall immediately notify Indemnitee in writing of (A) any non-compliance with the ADA related in any way to the Property and (B) any written or oral notice or other communication of which Indemnitor becomes aware from any source whatsoever (including but not limited to a governmental entity) relating in any way to the ADA or compliance therewith, possible liability of any Person pursuant to the ADA, or any actual or potential administrative or judicial proceedings in connection with anything referred to in this Agreement.

3. Indemnified Rights/Cooperation and Access.

(a) In the event the Indemnified Parties have reason to believe that an environmental hazard exists on the Property that does not, in the sole discretion of the Indemnified Parties, endanger any Tenants or other occupants of the Property or their guests or the general public or materially and adversely affects the value of the Property, upon reasonable notice from the Indemnitee, Indemnitor shall, at Indemnitor ’s expense, promptly cause an engineer or consultant satisfactory to the Indemnified Parties to conduct any environmental assessment or audit (the scope of which shall be determined in the sole and absolute discretion of the Indemnified Parties) and take any samples of soil, groundwater or other water, air, or building materials or any other invasive testing requested by Indemnitee and promptly deliver the results of any such assessment, audit, sampling or other testing; provided , however , if such results are not delivered to the Indemnified Parties within a reasonable period or if the Indemnified Parties have reason to believe that an environmental hazard exists on the Property that, in the sole judgment of the Indemnified Parties, endangers any tenant or other occupant of the Property or their guests or the general public or may materially and adversely affect the value of the Property, upon reasonable notice to Indemnitor, the Indemnified Parties and any other Person designated by the Indemnified Parties, including but not limited to any receiver, any representative of a governmental entity, and any environmental consultant, shall have the right, but not the obligation, to enter upon the Property at all reasonable times to assess any and all aspects of the environmental condition of the Property and its use, including but not limited to conducting any environmental assessment or audit (the scope of which shall be determined in the sole and absolute discretion of the Indemnified Parties) and taking samples of soil, groundwater or other water, air, or building materials, and reasonably conducting other invasive testing. Indemnitor shall cooperate with and provide the Indemnified Parties and any such Person designated by the Indemnified Parties with access to the Property.

(b) In the event the Indemnified Parties have reason to believe that the Property is not in compliance with the ADA, upon reasonable notice from the Indemnitee, Indemnitor shall, at Indemnitor ’s expense, promptly cause an engineer or consultant satisfactory to the Indemnified Parties to conduct any ADA assessment required by Indemnitee (the scope of which shall be determined in the sole and absolute discretion of the Indemnified Parties) and promptly deliver the results of any such assessment. Indemnitor shall cooperate with and provide the Indemnified Parties and any such Person designated by the Indemnified Parties with access to the Property.

-3-

4. Indemnification.

Indemnitor covenants and agrees, at its sole cost and expense, to protect, defend, indemnify, release and hold Indemnified Parties harmless from and against any and all Losses (defined below) imposed upon or incurred by or asserted against any Indemnified Parties and directly or indirectly arising out of or in any way relating to any one or more of the following: (a) any presence of any Hazardous Substances in, on, above, or under the Property; (b) any past, present or threatened Release of Hazardous Substances in, on, above, under or from the Property; (c) any activity by Indemnitor, any Person affiliated with Indemnitor, and any tenant or other user of the Property in connection with any actual, proposed or threatened use, treatment, storage, holding, existence, disposition or other Release, generation, production, manufacturing, processing, refining, control, management, abatement, removal, handling, transfer or transportation to or from the Property of any Hazardous Substances at any time located in, under, on or above the Property; (d) any activity by Indemnitor, any Person affiliated with Indemnitor, and any tenant or other user of the Property in connection with any actual or proposed Remediation of any Hazardous Substances at any time located in, under, on or above the Property, whether or not such Remediation is voluntary or pursuant to court or administrative order, including but not limited to any removal, remedial or corrective action; (e) any past, present or threatened non-compliance or violations of any Environmental Laws (or permits issued pursuant to any Environmental Law) in connection with the Property or operations thereon, including but not limited to any failure by Indemnitor, any Person affiliated with Indemnitor, and any tenant or other user of the Property to comply with any order of any governmental authority in connection with any Environmental Laws; (f) the imposition, recording or filing or the threatened imposition, recording or filing of any Environmental Lien encumbering the Property; (g) any administrative processes or proceedings or judicial proceedings in any way connected with any matter addressed in this Agreement; (h) any past, present or threatened injury to, destruction of or loss of natural resources in any way connected with the Property, including but not limited to costs to investigate and assess such injury, destruction or loss; (i) any acts of Indemnitor, any Person affiliated with Indemnitor, and any tenant or other user of the Property in arranging for disposal or treatment, or arranging with a transporter for transport for disposal or treatment, of Hazardous Substances at any facility or incineration vessel containing such or similar Hazardous Substances; (j) any acts of Indemnitor, any Person affiliated with any Indemnitor, and any tenant or other user of the Property in accepting any Hazardous Substances for transport to disposal or treatment facilities, incineration vessels or sites from which there is a Release, or a threatened Release of any Hazardous Substance which causes the incurrence of costs for Remediation; (k) any personal injury, wrongful death, or property or other damage arising under any statutory or common law or tort law theory, including but not limited to damages assessed for private or public nuisance or for the conducting of an abnormally dangerous activity on or near the Property; and (l) any past present or future non-compliance with the ADA; and (m) misrepresentation or inaccuracy in any representation or warranty or material breach or failure to perform any covenants or other obligations pursuant to this Agreement, the Loan Agreement or the Mortgage.

5. Duty to Defend and Attorneys and Other Fees and Expenses.

Upon written request by any Indemnified Party, Indemnitor shall defend same (if requested by any Indemnified Party, in the name of the Indemnified Party) by attorneys and other professionals approved by the Indemnified Parties. Notwithstanding the foregoing, any Indemnified Party may, in its sole and absolute discretion, engage its own attorneys and other professionals to defend or assist it, and, at the option of the Indemnified Party, its attorneys shall control the resolution of any claim or proceeding, providing that no compromise or settlement shall be entered without Indemnitor’s consent, which consent shall not be unreasonably withheld. Upon demand, Indemnitor shall pay or, in the sole and absolute discretion of the Indemnified Party, reimburse, the Indemnified Party for the payment of reasonable fees and disbursements of attorneys, engineers, environmental consultants, laboratories and other professionals in connection therewith.

6. Definitions. As used in this Agreement, the following terms shall have the following meanings:

“ ADA ” shall mean the Americans with Disabilities Act of 1990, as amended and supplemented from time to time.

-4-

“ Environmental Law ” means any present and future federal, state and local laws, statutes, ordinances, rules, regulations and the like, as well as common law, relating to protection of human health or the environment, relating to Hazardous Substances, relating to liability for or costs of other actual or threatened danger to human health or the environment. The term “ Environmental Law ” includes, but is not limited to, the following statutes, as amended, any successor thereto, and any regulations promulgated pursuant thereto, and any state or local statutes, ordinances, rules, regulations and the like addressing similar issues: the Comprehensive Environmental Response, Compensation and Liability Act; the Emergency Planning and Community Right-to-Know Act; the Hazardous Substances Transportation Act; the Resource Conservation and Recovery Act (including but not limited to Subtitle I relating to underground storage tanks); the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational Safety and Health Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the National Environmental Policy Act; and the River and Harbors Appropriation Act. The term “ Environmental Law ” also includes, but is not limited to, any present and future federal, state and local laws, statutes ordinances, rules, regulations and the like, as well as common law: conditioning transfer of property upon a negative declaration or other approval of a governmental authority of the environmental condition of the Property; requiring notification or disclosure of Releases of Hazardous Substances or other environmental condition of the Property to any Governmental Authority or other Person, whether or not in connection with transfer of title to or interest in property; imposing conditions or requirements in connection with permits or other authorization for lawful activity; relating to nuisance, trespass or other causes of action related to the Property; and relating to wrongful death, personal injury, or property or other damage in connection with any physical condition or use of the Property.

“ Hazardous Substances ” shall mean but is not limited to any and all substances (whether solid, liquid or gas) defined, listed, or otherwise classified as pollutants, hazardous wastes, hazardous substances, hazardous materials, extremely hazardous wastes, or words of similar meaning or regulatory effect under any present or future Environmental Laws or that may have a negative impact on human health or the environment, including but not limited to petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls, lead, radon, radioactive materials, flammables and explosives, but excluding substances of kinds and in amounts ordinarily and customarily used or stored in similar properties for the purposes of cleaning or other maintenance or operations and otherwise in compliance with all Environmental Laws.

“ Indemnified Parties ” shall mean Indemnitee, any Person who is or will have been involved in the origination of the Loan, any Person who is or will have been involved with the servicing of the Loan, any Person in whose name the encumbrance created by the Mortgage is or will have been recorded, Persons who may hold or acquire or will have held a full or partial interest in the Loan as well as the respective directors, officers, shareholders, partners, employees, agents, servants, representatives, contractors, subcontractors, affiliates, subsidiaries, participants, successors and assigns of any and all of the foregoing (including but not limited to any other Person who holds or acquires or will have held a participation or other full or partial interest in the Loan or the Property, whether during the term of the Loan or as a part of or following a foreclosure of the Loan and including, but not limited to, any successors by merger, consolidation or acquisition of all or a substantial portion of Indemnitee’s assets and business).

“ Legal Action ” shall mean any claim, suit or proceeding, whether administrative or judicial in nature.

-5-

“ Losses ” shall mean any losses, damages, costs, fees, expenses, claims, suits, judgments, awards, liabilities (including but not limited to strict liabilities), obligations, debts, diminutions in value, fines, penalties, charges, costs of Remediation (whether or not performed voluntarily), amounts paid in settlement, foreseeable and unforeseeable consequential damages, litigation costs, attorneys’ fees, engineers’ fees, environmental consultants’ fees, and investigation costs (including but not limited to costs for sampling, testing and analysis of soil, water, air, building materials, and other materials and substances whether solid, liquid or gas), of whatever kind or nature, and whether or not incurred in connection with any judicial or administrative proceedings, actions, claims, suits, judgments or awards.

“ Release ” shall mean with respect to any Hazardous Substance but is not limited to any release, deposit, discharge, emission, leaking, leaching, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Substances.

“ Remediation ” shall mean but is not limited to any response, remedial, removal, or corrective action; any activity to clean up, detoxify, decontaminate, contain or otherwise remediate any Hazardous Substance; any actions to prevent, cure or mitigate any Release of any Hazardous Substance; any action to comply with any Environmental Laws or with any permits issued pursuant thereto; any inspection, investigation, study, monitoring, assessment, audit, sampling and testing, laboratory or other analysis, or evaluation relating to any Hazardous Substances or to anything referred to herein.

7. Unimpaired Liability.

The liability of Indemnitor under this Agreement shall in no way be limited or impaired by, and Indemnitor hereby consents to and agrees to be bound by, any amendment or modification of the provisions of the Note, the Loan Agreement, the Mortgage or any other Loan Document to or with Indemnitee by Indemnitor or any Person who succeeds Indemnitor or any Person as owner of the Property. In addition, the liability of Indemnitor under this Agreement shall in no way be limited or impaired by (a) any extensions of time for performance required by the Note, the Loan Agreement, the Mortgage or any of the other Loan Documents, (b) any sale or transfer of all or part of the Property, (c) any exculpatory provision in the Note, the Loan Agreement, the Mortgage, or any of the other Loan Documents limiting Indemnitee’s recourse to the Property or to any other security for the Note, or limiting Indemnitee’s rights to a deficiency judgment against Indemnitor, (d) the accuracy or inaccuracy of the representations and warranties made by Indemnitor under the Note, the Loan Agreement, the Mortgage or any of the other Loan Documents or herein, (e) the release of Indemnitor or any other Person from performance or observance of any of the agreements, covenants, terms or condition contained in any of the other Loan Documents by operation of law, Indemnitee’s voluntary act, or otherwise, (f) the release or substitution in whole or in part of any security for the Note, or (g) Indemnitee’s failure to record the Mortgage or file any UCC financing statements (or Indemnitee’s improper recording or filing of any thereof) or to otherwise perfect, protect, secure or insure any security interest or lien given as security for the Note; and, in any such case, whether with or without notice to Indemnitor and with or without consideration.

8. E nforcement.

Indemnified Parties may enforce the obligations of Indemnitor without first resorting to or exhausting any security or collateral or without first having recourse to the Note, the Loan Agreement, the Mortgage, or any other Loan Documents or any of the Property, through foreclosure proceedings or otherwise, provided, however, that nothing herein shall inhibit or prevent Indemnitee from suing on the Note, foreclosing, or exercising any power of sale under, the Mortgage, or exercising any other rights and remedies thereunder. It is not necessary for an Event of Default to have occurred pursuant to and as defined in the Mortgage or the Loan Agreement for Indemnified Parties to exercise their rights pursuant to this Agreement. Indemnitor is fully and personally liable for the obligations pursuant to this Agreement and such liability is not limited to the original or amortized principal balance of the Loan or the value of the Property.

-6-

9. Survival.

The obligations and liabilities of Indemnitor under this Agreement shall fully survive indefinitely notwithstanding any termination, satisfaction, assignment, entry of a judgment of foreclosure, exercise of any power of sale, or delivery of a deed in lieu of foreclosure of the Mortgage.

10. Interest.

Any amounts payable to any Indemnified Parties under this Agreement shall become immediately due and payable on demand and, if not paid within five (5) days of such demand therefor, shall bear interest at the Default Rate.

11. Waivers.

(a) Indemnitor hereby waives (i) any right or claim of right to cause a marshaling of Indemnitor’s assets or to cause Indemnitee or other Indemnified Parties to proceed against any of the security for the Loan before proceeding under this Agreement against Indemnitor; (ii) and relinquishes all rights and remedies accorded by applicable law to indemnitors or guarantors, except any rights of subrogation which Indemnitor may have, provided that the indemnity provided for hereunder shall neither be contingent upon the existence of any such rights of subrogation nor subject to any claims or defenses whatsoever which may be asserted in connection with the enforcement or attempted enforcement of such subrogation rights including, without limitation, any claim that such subrogation rights were abrogated by any acts of Indemnitee or other Indemnified Parties; (iii) the right to assert a counterclaim, other than a mandatory or compulsory counterclaim, in any action or proceeding brought against or by Indemnitee or other Indemnified Parties; (iv) notice of acceptance hereof and of any action taken or omitted in reliance hereon; (v) presentment for payment, demand of payment, protest or notice of nonpayment or failure to perform or observe, or other proof, or notice or demand; and (vi) all homestead exemption rights against the obligations hereunder and the benefits of any statutes of limitations or repose. Notwithstanding anything to the contrary contained herein, Indemnitor hereby agrees to postpone the exercise of any rights of subrogation with respect to any collateral securing the Loan until the Loan shall have been paid in full.

(b) INDEMNITOR AND, BY ITS ACCEPTANCE HEREOF, INDEMNITEE, EACH HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE APPLICATION FOR THE LOAN EVIDENCED BY THE NOTE, THE MORTGAGE, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY ACTS OR OMISSIONS OF ANY INDEMNIFIED PARTIES IN CONNECTION THEREWITH.

12. Subrogation.

Indemnitor shall take any and all reasonable actions, including institution of legal action against third parties, necessary or appropriate to obtain reimbursement, payment or compensation from such Persons responsible for the presence of any Hazardous Substances at, in, on, under or near the Property or otherwise obligated by law to bear the cost. Indemnified Parties shall be and hereby are subrogated to all of Indemnitor ’s rights now or hereafter in such claims.

-7-

13. Indemnitor ’s Representations and Warranties . Indemnitor represents and warrants that:

(a) it has the full power and authority to execute and deliver this Agreement and to perform its obligations hereunder; the execution, delivery and performance of this Agreement by Indemnitor has been duly and validly authorized; and all requisite action has been taken by Indemnitor to make this Agreement valid and binding upon Indemnitor, enforceable in accordance with its terms;

(b) its execution of, and compliance with, this Agreement is in the ordinary course of business of Indemnitor and will not result in the breach of any term or provision of the charter, by-laws, partnership or trust agreement, or other governing instrument of Indemnitor or result in the breach of any term or provision of, or conflict with or constitute a default under, or result in the acceleration of any obligation under, any agreement, indenture or loan or credit agreement or other instrument to which Indemnitor or the Property is subject, or result in the violation of any law, rule, regulation, order, judgment or decree to which Indemnitor or the Property is subject;

(c) to the best of Indemnitor ’s knowledge, there is no action, suit, proceeding or investigation pending or threatened against it which, either in any one instance or in the aggregate, may result in any material adverse change in the business, operations, financial condition, properties or assets of Indemnitor, or in any material impairment of the right or ability of Indemnitor to carry on its business substantially as now conducted, or in any material liability on the part of Indemnitor, or which would draw into question the validity of this Agreement or of any action taken or to be taken in connection with the obligations of Indemnitor contemplated herein, or which would be likely to impair materially the ability of Indemnitor to perform under the terms of this Agreement;

(d) it does not believe, nor does it have any reason or cause to believe, that it cannot perform each and every covenant contained in this Agreement;

(e) to the best of Indemnitor ’s knowledge, no approval, authorization, order, license or consent of, or registration or filing with, any governmental authority or other person, and no approval, authorization or consent of any other party is required in connection with this Agreement; and

(f) this Agreement constitutes a valid, legal and binding obligation of Indemnitor, enforceable against it in accordance with the terms hereof.

14. No Waiver.

No delay by any Indemnified Party in exercising any right, power or privilege under this Agreement shall operate as a waiver of any such privilege, power or right.

15. Notice of Legal Actions.

Each party hereto shall, within five (5) business days of receipt thereof, give written notice to the other party hereto of (a) any notice, advice or other communication from any governmental entity or any source whatsoever with respect to Hazardous Substances or the ADA on, from or affecting the Property, and (b) any legal action brought against such party or related to the Property, with respect to which Indemnitor may have liability under this Agreement. Such notice shall comply with the provisions of Section 18 hereof.

-8-

16. Examination of Books and Records.

Indemnified Parties and their accountants shall have the right to examine the records, books, management and other papers of Indemnitor which reflect upon its financial condition, at the Property or at the office regularly maintained by Indemnitor where the books and records are located. Indemnified Parties and their accountants shall have the right to make copies and extracts from the foregoing records and other papers. In addition, at reasonable times and upon reasonable notice, Indemnified Parties and their accountants shall have the right to examine and audit the books and records of Indemnitor pertaining to the income, expenses and operation of the Property during reasonable business hours at the office of Indemnitor where the books and records are located.

17. Taxes.

Indemnitor has filed all federal, state, county, municipal, and city income and other Tax returns required to have been filed by it and has paid all Taxes and related liabilities which have become due pursuant to such returns or pursuant to any assessments received by it. Indemnitor has no knowledge of any basis for any additional assessment in respect of any such Taxes and related liabilities for prior years.

18. Notices.

All notices or other written communications hereunder shall be made in accordance with Section 10.6 of the Loan Agreement.

19. Duplicate Originals; Counterparts.

This Agreement may be executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Agreement may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Agreement. The failure of any party hereto to execute this Agreement, or any counterpart hereof, shall not relieve the other signatories from their obligations hereunder.

20. No Oral Change.

This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Indemnitor or any Indemnified Party, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought.

21. Headings, Etc.

The headings and captions of various paragraphs of this Agreement are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof.

-9-

22. Number and Gender/Successors and Assigns.

All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the Person or Persons referred to may require. Without limiting the effect of specific references in any provision of this Agreement, the term “Indemnitor” shall be deemed to refer to each and every Person comprising Indemnitor from time to time, jointly and severally, and to include the heirs, executors, administrators, legal representatives, successors and assigns of each such Person. Without limiting the generality of the foregoing, the term “Indemnitor” as used herein shall include any new or successor corporation, association, partnership (general or limited), limited liability company joint venture, trust or other individual or organization formed as a result of any merger, reorganization, sale, transfer, devise, gift or bequest of any Person comprising Indemnitor from time to time or any interest in such Person. All such Persons shall be bound by the provisions of this Agreement, provided that no obligation of Indemnitor may be assigned except with the written consent of Indemnitee. Each reference herein to Indemnitee shall be deemed to include its successors and assigns. This Agreement shall inure to the benefit of Indemnified Parties and their respective successors and assigns forever.

23. Release of Liability.

Any one or more parties liable upon or in respect of this Agreement may be released without affecting the liability of any party not so released.

24. Rights Cumulative.

The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies which Indemnitee has under the Note, the Mortgage, the Loan Agreement or the other Loan Documents or would otherwise have at law or in equity.

25. Inapplicable Provisions.

If any term, condition or covenant of this Agreement shall be held to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without such provision.

26. Governing Law .

(a) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK , AND MADE BY INDEMNITOR AND ACCEPTED BY INDEMNITEE IN THE STATE OF NEW YORK , AND THE PROCEEDS OF THE NOTE SECURED HEREBY WERE DISBURSED FROM THE STATE OF NEW YORK , WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. TO THE FULLEST EXTENT PERMITTED BY LAW, INDEMNITOR HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK .

-10-

(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST INDEMNITEE OR INDEMNITOR ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY AT INDEMNITEE ’S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE COUNTIES OF NASSAU OR SUFFOLK , PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW , AND INDEMNITOR WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND INDEMNITOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. INDEMNITOR DOES HEREBY DESIGNATE AND APPOINT:

___________________

___________________
___________________

AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN THE COUNTIES OF NASSAU OR SUFFOLK , PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW , AND AGREES THAT SERVICE OF PROCESS UPON SAID AUTHORIZED AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE MAILED OR DELIVERED TO INDEMNITOR IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON INDEMNITOR IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK . INDEMNITOR (I) SHALL GIVE PROMPT NOTICE TO INDEMNITEE OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN SUFFOLK COUNTY , NEW YORK (WHICH SUBSTITUTE AUTHORIZED AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN SUFFOLK COUNTY , NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.

27. Entire Agreement .

The Note, the Loan Agreement, this Agreement and the other Loan Documents constitute the entire understanding and agreement between Indemnitor and Indemnitee with respect to the transactions arising in connection with the Debt and supersede all prior written or oral understandings and agreements between Indemnitor and Indemnitee with respect thereto. Indemnitor hereby acknowledges that, except as incorporated in writing in the Note, the Loan Agreement, this Agreement and the other Loan Documents, there are not, and were not, and no persons are or were authorized by Indemnitor to make, any representations, understandings, stipulations, agreements or promises, oral or written, with respect to the transaction which is the subject of the Note, the Loan Agreement, this Agreement and the other Loan Documents.

28. Miscellaneous .

(a) Wherever pursuant to this Agreement (i) Indemnitee exercises any right given to it approve or disapprove, (ii) any arrangement or term is to be satisfactory to Indemnitee, or (iii) any other decision or determination is to be made by Indemnitee, the decision of Indemnitee to approve or disapprove, all decisions that arrangements or terms are satisfactory or not satisfactory and all other decisions and determinations made by Indemnitee, shall be in the sole and absolute discretion of Indemnitee and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein.

-11-

(b) Wherever pursuant to this Agreement it is provided that Indemnitor pay any costs and expenses, such costs and expenses shall include, but not be limited to, legal fees and disbursements of Indemnitee, whether retained firms, the reimbursements for the expenses of the in-house staff or otherwise.

(c) In the event of any inconsistencies between the terms and conditions of this Section 28 and the other terms and conditions of this Agreement, the terms and conditions of Section 28 shall control and be binding.

29. Joint and Several Liability . If Indemnitor consists of more than one person, all representations, warranties, covenants, obligations and liabilities of each such person hereunder shall be joint and several. A default hereunder by any such person shall be deemed a default by all such persons and Indemnitor. The representations, warranties and covenants contained herein shall be read to apply to the individual persons comprising Indemnitor when the context so requires, but a breach of any such representation, warranty or covenant or a breach of any obligation under this Agreement shall be deemed a breach by all such persons and Indemnitor, entitling Indemnitee and other Indemnified Parties to exercise all of their rights and remedies under this Agreement and under applicable law.

[ remainder of this page intentionally left blank]

-12-

IN WITNESS WHEREOF, this Agreement has been executed by Indemnitor and is effective as of the day and year first above written.

BORROWER :

555 N Research Corporation

By: /s/ G len C harles

Glen Charles

Chief Financial Officer

OBLIGOR :

CVD EQUIPMENT CORPORATION

By: /s/ G len C harles

Glen Charles

Chief Financial Officer

-13-

EXHIBIT A

DESCRIPTION OF PROPERTY

-14-

Exhibit 10.22

ASSIGNMENT OF LEASES AND RENTS

Dated: November ___, 2017

from

555 N Research Corporation

having an office at:

555 North Research Place

Commack, New York 11722

(the "Mortgagor")

HSBC Bank USA , National Association,

a New York banking corporation

having an office at:

534 Broad Hollow Road

Melville, New York 11747

(the "Mortgagee")

LOCATION OF PREMISES :

	Street Address	: 555 North Research Place, Central Islip, NY
	County of	: Suffolk
	State of	: New York
	Section	: 164.00
	Block	: 04.00
	Lot	: 007.001

After recording, please return to:

HSBC Bank USA, National Association
2929 Walden Avenue, C-111
Depew, New York 14043

Attn: Sheila Finnegan, Danielle LaBarge, Rachel Goldhawk

ASSIGNMENT OF LEASES AND RENTS

ASSIGNMENT OF LEASES AND RENTS, made this ___ day of November, 2017, by 555 N Research Corporation, a New York corporation, having an office at 555 North Research Place, Central Islip, New York 11722 (the "Assignor"), and HSBC Bank USA, National Association, having an address at 534 Broad Hollow Road, Melville, New York 11747 (the "Assignee").

W I T N E S S E T H :

WHEREAS, Assignor is the owner of certain real property with the buildings and improvements thereon, situated in the County of Suffolk and State of New York, covering premises (herein called the "Premises"), as more particularly described in Schedule A annexed hereto and made a part hereof; and

WHEREAS, the Town of Islip Development Agency (the “Agency”) holds leasehold title to the Premises pursuant to a Company Lease Agreement dated November ___, 2017, between the Assignor, as lessor, to the Agency, as lessee; and

WHEREAS, the Agency entered into a Lease Agreement dated November ___, 2017 (the “IDA Sublease”), whereby the Agency subleased the Premises to the Assignor; and

WHEREAS, the Assignor has entered into a sub-sublease, from the Assignor to CVD Equipment Corporation (“CVD”) whereby the Assignor sub-subleased the Premises to CVD; and

WHEREAS, Assignor is about to execute and deliver to Assignee a Fee and Leasehold Mortgage and Security Agreement (the "Mortgage") securing an indebtedness in the principal amount of $10,387,500.00, evidenced by an Note in the amount of $10,387,500.00 of even date herewith (the "Note"); and

WHEREAS, Assignee is unwilling to accept the Mortgage unless Assignor executes this Assignment.

NOW THEREFORE, in consideration of the premises and in consideration of the sum of Ten Dollars ($10.00) and other good and valuable consideration paid by Assignee to Assignor, the receipt and sufficiency of which are hereby acknowledged, and to better secure the payment to Assignee of (i) all monies which may be due and payable to Assignee under the Mortgage and (ii) performance and discharge of each obligation, covenant and agreement of the Assignor contained herein or in the Mortgage and the Note secured thereby.

Assignor hereby grants, transfers, bargains, sells, conveys, sets over and assigns to the Assignee, its successors and assigns all of the right, title and interest of the Assignor in and to (i) all leases, subleases, licenses, concessions and other occupancy agreements which now or may hereafter affect the Premises or any part or parts thereof (other than the IDA Sublease) and all guarantees, modifications, renewals and extensions thereof (the "Leases"), and (ii) all deposits, documents and instruments made or hereafter made in respect of the Leases, together with all of the rents, income, revenues, issues and profits, due and to become due or to which Assignor is now or may hereafter become entitled, arising out of the Leases or the Premises or any part or parts thereof (collectively, the "Profits").

THE ASSIGNEE AGREES THAT:

So long as no Event of Default under the Mortgage or this Assignment has occurred and is continuing, Assignee hereby gives Assignor a license to collect all the Profits, and to retain, use and enjoy the same and Assignee agrees that it shall not exercise any power or authority granted to Assignee hereunder. Assignor agrees to collect and receive said Profits in trust for the benefit of Assignee and to use said Profits in payment of principal and interest becoming due under the Note and Mortgage and in payment of taxes, assessments, water charges, sewer rents and carrying charges becoming due against the Premises. Such license hereby granted to Assignor to collect and receive said Profits may be revoked by Assignee upon the occurrence of an Event of Default under the Mortgage by Assignee giving Assignor not less than five (5) days written notice of such revocation, served personally upon or sent by registered or certified mail or by courier offering next day delivery to the Assignor. This Assignment shall continue in full force and effect until (a) all sums due and payable under the Note and Mortgage shall have been fully paid and satisfied, together with any and all other sums which may become due and owing under this Assignment, and (b) all other obligations of Assignor under the Note and Mortgage, this Assignment and any other document executed in connection therewith, are satisfied. Upon termination of this Assignment as hereinbefore provided, this Assignment and the authority and powers herein granted by Assignor to Assignee shall cease and terminate, and, in that event, Assignee shall (i) execute and deliver to Assignor such instrument or instruments effective to evidence the termination of this Assignment and the reassignment to Assignor of the rights, powers and authorities granted herein, and (ii) deliver to Assignor any monies held by Assignee for the benefit of Assignor. Assignor agrees that upon termination of this Assignment it shall assume payment of all unmatured or unpaid charges, expenses or obligations incurred or undertaken by Assignee in connection with the management of the Premises.

THE ASSIGNOR AGREES, JOINTLY AND SEVERALLY IF THERE ARE MORE THAN ONE ASSIGNOR, WITH RESPECT TO EACH LEASE that:

1. The Assignor will: fulfill or perform each and every condition and covenant of the Lease by Lessor to be fulfilled or performed; give prompt notice to the Assignee of any notice of default by the Assignor under the Lease received by the Assignor together with a complete copy of any such notice; at the sole cost and expense of the Assignor, enforce, short of termination of the Lease, the performance or observance of each and every covenant and condition of the Lease by the Lessee to be performed or observed; not modify nor in any way alter the terms of the Lease except as provided for in the Mortgage; not terminate the term of the Lease nor accept a surrender thereof unless required to do so by the terms of the Lease; not anticipate the rents thereunder for more than 30 days prior to accrual except for security deposits not in excess of an amount equal to two (2) months rent; not to further assign the Leases to which Assignor may now or hereafter become entitled; and not waive nor release the Lessee from any obligations or conditions by the Lessee to be performed to comply with all laws, rules, orders, ordinances and requirements of all Governmental Authorities; and to deliver copies of all Leases to Assignee. This Assignment is made with reference to Section 291-f of the New York Real Property Law.

2. The rights assigned hereunder include all the Assignor's right and power to modify the Leases or to terminate the term or to accept a surrender thereof or to waive, or release the Lessee from the performance or observance by the Lessee of any obligation or condition thereof or to anticipate rents thereunder for more than 30 days prior to accrual.

3. Assignor further gives and grants unto Assignee the power and authority to: (i) enter upon and take possession of and operate the Premises and manage the same; (ii) make, enforce, modify, cancel or accept a surrender of any or all of the Leases; (iii) demand, collect, sue for, attach, levy, recover, receive, compromise and adjust and make, execute, and deliver receipts and releases for Profits which may be or may hereafter become due, owing or payable from any present or future lessees, sub-lessees, licenses, concessionaires or other occupants of the Premises or any part thereof (the "Lessees"); (iv) receive, endorse and deposit for collection in the name of Assignor or Assignee any checks, promissory notes or other evidences of indebtedness, whether made payable to Assignor or Assignee, which are given in payment or on account of rent for the Premises or any part or parts thereof, or by way of compromise or settlement of any indebtedness for such rents; (v) give acquittances for rents received; (vi) institute, prosecute, settle or compromise any summary or other proceedings for the recovery of the Profits or for removing any and all of the Lessees; (vii) institute, prosecute, settle or compromise any proceedings for the protection of the Premises, for the recovery of any damage done to the Premises for the abatement of any nuisance thereon or thereabouts; (viii) defend, settle or compromise any legal proceedings brought, or claims made against, Assignee or its agents, employees or servants which may effect the Premises, and, at the option of Assignee, defend, settle or compromise any claims made or legal proceedings brought against Assignor which may affect the Premises or any part thereof; (ix) lease or rent the Premises or any part thereof for such time and at such rentals as Assignee, in its sole discretion, may deem advisable; (x) make any changes or improvements, structural or otherwise, on, in or to the Premises or any part thereof which Assignee may deem necessary or expedient for the leasing, renting or preservation thereof; (xi) keep and maintain the Premises in tenantable and rentable condition and in a good state of repair; (xii) pay, from and out of the Profits collected by Assignee hereunder, or from or out of any other funds, all taxes, assessments, water charges, sewer rents, and other governmental charges levied, assessed or imposed against the Premises or any part thereof, and any and all other charges, costs and expenses (including, without limitation, brokers' fees) which Assignee may deem necessary or advisable to pay in connection with the management and operation of the Premises; (xiii) contract for and purchase such insurance as Assignee may deem advisable or necessary for the protection of Assignee and the Premises, including, without limitation, fire, general liability, boiler, plate glass, rent, demolition and workmen's compensation insurance; (xiv) execute and comply with all laws, rules, orders, ordinances and requirements of the United States, the state in which the Premises is located and any political subdivision thereof, and any agency, department, bureau, board, commission or instrumentality of any of them (collectively, "Governmental Authorities"), and remove any and all violations which may be filed against the Premises; (xv) enforce, enjoin or restrain the violation of any of the terms, provisions and conditions of the Leases; and (xvi) do anything and everything which Assignor could or would do which might increase the Profits or which might diminish the expense of operating the Premises; after any attempt by the Assignor to exercise any of the rights described in Paragraph 2 or after any default by the Assignor in the payment of said indebtedness or in the performance of any obligation of the Assignor herein or in the Mortgage or any other instrument securing said indebtedness, the Assignee, at its option, without notice and without regard to the adequacy of security for the indebtedness hereby secured, either in person or by agent with or without bringing any action or proceeding, or by a receiver to be appointed by a court, whether herein expressly authorized or not, and in all respects act in the place and stead of Assignor and have all of the powers as owner as possessed by Assignor for the purposes aforesaid.

All of the foregoing powers may be executed by Assignee or by its agents, servants or attorneys, in the name of Assignee or in the name of Assignor, and in such manner as Assignee, its agents, servants, or attorneys, in the name of Assignor, and in such manner as Assignee, its agents, servants, or attorneys consider to be necessary, desirable, expedient, or appropriate; provided, however, that under no circumstances shall Assignee be under any obligation to exercise any of the foregoing rights and shall not, in any manner, be liable to Assignor or any other party for failure to exercise such rights.

4. Assignee shall have the unqualified right to receive, use and apply the Profits collected and received by it under this Assignment (a) for the payment of any and all costs and expenses incurred in connection with (i) enforcing the terms of this Agreement; (ii) upholding and defending the rights of Assignee hereunder, and (iii) collecting rents due under the Leases; and (b) for the operation and maintenance of the Premises and the payment of all costs and expenses in connection therewith including, without limitation, the payment of (i) interest and principal due on any and all mortgages on the Premises, including the Note and Mortgage, (ii) taxes, assessments, water charges and sewer rents and other governmental charges levied, assessed or imposed against the Premises or any part thereof, (iii) insurance premiums, (iv) costs and expenses in prosecuting or defending any litigation referred to herein, and (v) wages and salaries of employees, commissions of agents and attorneys' fees. After the payment of all such costs and expenses and after Assignee shall have set up such reserves as Assignee, in its sole discretion, shall deem necessary for the proper management of the Premises, Assignee shall apply all remaining Profits collected and received by it to the reduction of the indebtedness evidenced by the Note and secured by the Mortgage.

5. At the Assignor's sole cost and expense, the Assignor will appear in and defend any action growing out of or in any manner connected with the Lease or the obligations or liabilities of the Lessor, Lessee or any guarantor thereunder, and the Assignee, if made a party to any such action, may employ counsel and incur and pay necessary costs and expenses and reasonable attorney's fees and all such sums, with interest at the Involuntary Rate, if applicable, (as defined in the Mortgage), shall immediately be due from the Assignor and secured hereby.

6. Should the Assignor fail to make any payment or to do any act as herein provided, then the Assignee, but without obligation so to do and without notice to or demand on the Assignor and without releasing the Assignor from any obligation herein, may make or do the same, including specifically, without limiting its general powers, appearing in and defending any action purporting to affect the security hereof or the rights or powers of the Assignee and performing any obligation of the Lessor in the Lease contained, and, in exercising any such powers paying necessary costs and expenses from and out of Profits, or from and out of other funds, employing counsel and incurring and paying reasonable attorneys' fees; and the Assignor will pay immediately upon demand all sums expended by the Assignee under the authority hereof, together with interest thereon at the Involuntary Rate, if applicable, and the same shall be added to said indebtedness and shall be secured hereby and by the Mortgage.

7. The whole of said indebtedness shall become due (a) upon the election by the Assignee to accelerate the maturity of the indebtedness pursuant to the provisions of the Note and the Mortgage, or any other instrument which may be held by the Assignee as security for the indebtedness, or (b) at the option of the Assignee, after any attempt by the Assignor to exercise any of the rights described in Paragraph 2 or after any default by the Assignor hereunder and the continuance of such default for 10 days after notice and demand.

8. Assignor hereby irrevocably constitutes and appoints Assignee its true and lawful attorney-in-fact, to undertake and execute any or all of the powers described herein either in express terms or generally, with the same force and effect as if undertaken or executed by Assignor, and Assignor hereby ratifies and confirms any and all things done or omitted to be done by Assignee, its agents, servants, employees or attorneys in, to or about the Premises.

9. Assignee shall not in any way be liable to Assignor for any act done or anything omitted to be done by it in good faith in connection with the management of the Premises, except for the consequences of its own gross negligence or willful misconduct, nor shall Assignee be liable for any act or omission of its agents, servants, employees or attorneys, provided that due care is used by Assignee in the selection of such agents, servants, employees and attorneys. Assignee shall be accountable to Assignor only for monies actually received by it pursuant to this Assignment.

10. Intentionally Omitted.

11. Assignor represents and warrants: (a) Assignor has not executed any prior assignment of any of its rights under the Lease except to Assignee; (b) Assignor has not done anything which might prevent the Assignee from or limit the Assignee in operating under any of the provisions hereof; (c) Assignor has not accepted rent under the Lease more than 30 days in advance of its due date or has not accepted a security deposit in excess of an amount equal to two (2) months rent; (d) so far as Assignor knows, there is no present default by any of the Lessees under the Leases; (e) the Leases are in full force and effect and unmodified.

12. It is understood and agreed that nothing contained in this Assignment shall prejudice or be construed to prejudice the right of Assignee, without notice, to institute, prosecute and compromise any action which it would deem advisable to protect its interest in the Premises, including any action to foreclose the Mortgage and in such action, to move for the appointment of a receiver of the Profits, or prejudice any rights which Assignee shall have by virtue of any default under the Mortgage. This Assignment shall survive, however, the commencement of any such action and shall continue in full force and effect in the event of any foreclosure action until a sale of the Premises shall be had thereunder.

13. Assignor hereby indemnifies and holds Assignee harmless from and against any and all liability, loss, damage, cost and expense, including reasonable attorneys' fees which it may or shall incur under any of the Leases, or by reason of this Assignment, or by reason of any action taken by Assignee hereunder, and from and against any and all claims and demands whatsoever which may be asserted against Assignee by reason of any alleged obligation or undertaking on its part to perform or discharge any of the terms, covenants and conditions contained in any of the Leases. Should Assignee incur any such liability, loss, damage, cost of expense, the amount thereof, together with interest thereon from the date such amount was suffered or incurred by Assignee until the same is paid by Assignor to Assignee, at the Involuntary Rate shall be payable by Assignor to Assignee immediately upon demand, or at the option of Assignee, Assignee may reimburse itself therefor out of any Profits collected by Assignee. Assignor agrees that any such charge shall not be deemed to be additional interest or a penalty, but shall be deemed to be liquidated damages because of the difficulty in computing the actual amount of damages in advance; provided, however, that any sums collected by Assignee as liquidated damages, as aforesaid, which are held to be interest in excess of the maximum rate permitted by law, shall be deemed a payment in reduction of the principal sum then outstanding and shall be so applied. Nothing contained herein shall operate or be construed to obligate Assignee to perform any of the terms, covenants or conditions contained in the Leases or otherwise to impose any obligation upon Assignee with respect to any of the Leases.

14. Upon request of Assignee, Assignor shall execute and deliver to Assignee, such further instruments as Assignee may deem necessary to effect this Assignment and the covenants of Assignor contained herein. Assignor, at its sole cost and expense, shall cause such further instruments to be recorded in such manner and in such places as may be required by Assignee.

15. Assignor shall pay all recording and filing fees in respect of this Assignment and any agreements, instruments and documents made pursuant to the terms hereof or ancillary hereto, as well as any and all taxes which may be due and payable on the recording of this Assignment and any taxes hereafter imposed on this Assignment. Should Assignor fail to pay the same, all such recording and filing fees and taxes may be paid by Assignee on behalf of Assignor and the amount thereof, together with interest at the Involuntary Rate, shall be payable by Assignor to Assignee immediately upon demand, or at the option of Assignee, Assignee may reimburse itself therefor out of the Profits collected by Assignee. Assignor agrees that any such charge shall not be deemed to be additional interest or a penalty, but shall be deemed to be liquidated damages because of the difficulty in computing the actual amount of damages in advance; provided, however, that any sums collected by Assignee as liquidated damages, as aforesaid, which are held to be interest in excess of the maximum rate permitted by law, shall be deemed a payment in reduction of the principal sum then outstanding under the Note and shall be so applied.

16. Assignee shall be entitled to the appointment of a receiver for the Premises, without notice to Assignor.

17. Failure of Assignee to avail itself of any of the terms, covenants and conditions of this Assignment shall not be construed or deemed to be a waiver of any of its rights hereunder. The rights and remedies of the Assignee under this instrument are cumulative and are not in lieu of but are in addition to, and shall not be affected by the exercise of, any other rights and remedies which Assignee shall have under or by virtue of law or equity, the Note, the Mortgage, or any other document executed in connection therewith (collectively, the "Other Rights"). The rights and remedies of the Assignee hereunder may be exercised concurrently with any of the Other Rights.

18. This Assignment shall inure to the benefit of the successors and assigns of the Assignee and shall bind the Assignor's legal representatives, successors and assigns.

19. This Assignment may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.

20. This Assignment shall be governed by, construed and enforced in accordance with, the laws of the State of New York.

The parties agree that all notices, demands or documents which are required or permitted to be given or served hereunder shall be in writing and shall be given in the manner set forth in the Mortgage.

21. Assignor and Assignee hereby waive, to the extent permitted by law, the right to trial by jury in any action, proceeding or counterclaim brought by either party against the other, or in any matter whatsoever arising out of or in any manner related to this Assignment.

22. To the extent there is a conflict with the terms of the Mortgage referred to herein and the terms of this Assignment of Leases and Rents, the terms of the document most advantageous to the Assignee, as determined by the Assignee, shall prevail.

IN WITNESS WHEREOF, the Assignor has duly executed this Assignment the day and year first above written.

555 N Research Corporation

By: /s/ Glen Charles

Glen Charles

Chief Financial Officer

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

On the ___ day of November in the year 2017, before me, the undersigned, a Notary Public in and for said State, personally appeared Glen Charles, personally known to be or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed instrument.


	Notary Public

Exhibit 10.23

UNLIMITED GUARANTY

TO:

HSBC Bank USA, National Association, a bank organized under the laws of the United States of America (the "Bank")

534 Broad Hollow Road, Melville, New York 11747

RE:

555 N Research Corporation , a New York corporation (the "Borrower")

To induce the Bank to make or continue to make loans, advances, or grant other financial accommodations to the Borrower, in consideration thereof and for loans, advances or financial accommodations heretofore or hereafter granted by the Bank to or for the account of the Borrower, the undersigned (the "Guarantor") absolutely and unconditionally guarantees the full and punctual payment to the Bank of all sums which may be presently due and owing and of all sums which shall in the future become due and owing to the Bank from the Borrower, whether direct or indirect, whether as a borrower, guarantor, surety or otherwise, including, without limitation, interest, attorneys' fees and other amounts accruing after the filing of a petition in bankruptcy by or against Borrower, notwithstanding the discharge of Borrower from such obligations, together with all costs and expenses incurred by the Bank in connection with such obligations, this Unlimited Guaranty (this "Guaranty") and the enforcement thereof, and also guarantees the due performance by the Borrower of all its obligations under all other present and future contracts and agreements with the Bank, including, without limitation, all rate swap transactions, basis swaps, forward rate transactions, commodity swaps, commodity options, equity or equity index swaps, equity or equity index options, bond options, interest rate options, foreign exchange transactions, cap transactions, floor transactions, collar transactions, forward transactions, currency swap transactions, cross-currency rate swap transactions and currency options. This is a guaranty of payment and not collection.

The Guarantor also agrees:

(1)

to indemnify and hold the Bank and any Bank Affiliate (as hereinafter defined) and their directors, officers, employees, agents and attorneys harmless from and against all claims, obligations, demands and liabilities, by whomsoever asserted, and against all losses in any way suffered, incurred or paid as a result of or in any way arising out of or following or consequential to transactions with the Borrower, except for any claim arising out of the gross negligence or willful misconduct of the Bank;

(2)

that this Guaranty shall not be impaired by any modification, supplement, extension, renewal or amendment of any contract or agreement to which the parties thereto may hereafter agree, nor by any modification, increase, decrease, release or other alteration of any of the obligations hereby guaranteed or of any security therefor, nor by any agreements or arrangements whatsoever with the Borrower or anyone else, all of which may be done without notice to or consent by the Guarantor;

(3)

that the liability of the Guarantor hereunder is direct and unconditional and due immediately upon default of the Borrower without demand or notice and without requiring the Bank first to resort to any other right, remedy or security;

(4)

that Guarantor shall have no right of subrogation, reimbursement or indemnity whatsoever until the Bank is indefeasibly paid in full, nor any right of recourse to security for the debts and obligations of the Borrower to the Bank;

(5)

that the liability of the Guarantor is unlimited and shall be joint and several with the liabilities of any other guarantors;

(6)

that if the Borrower or the Guarantor or any other guarantor should at any time become insolvent or make a general assignment, or if a petition in bankruptcy or any insolvency or reorganization proceedings shall be filed or commenced by, against or in respect of the Borrower or the Guarantor, or any other guarantor of the obligations guaranteed hereby, any and all obligations of the Guarantor shall be immediately due and payable without notice;

(7)

that the Bank’s books and records showing the account between the Bank and the Borrower shall be admissible in any action or proceeding, shall be binding upon the Guarantor for the purpose of establishing the items therein set forth and shall constitute conclusive proof thereof;

(8)

that this Guaranty is, as to the Guarantor, a continuing Guaranty that shall remain effective under successive transactions until expressly terminated as hereinafter provided;

(9)

that this Guaranty may be terminated as to the Guarantor only by giving the Bank prior written notice by registered or certified mail to the address of the Bank listed above, and thereupon this Guaranty shall terminate with respect to Guarantor only after the date of receipt of such notice by the Bank, which shall then be the effective date of termination, and that such termination shall be applicable only to transactions having their inception after the effective date of termination and shall not affect rights and obligations arising out of transactions or indebtedness or extensions or renewals thereof having their inception prior to such date, including renewals, extensions, modifications and refinancings of such prior transactions, or arising out of extensions of credit made pursuant to a commitment previously made by the Bank;

(10)

that the termination or dissolution of Guarantor shall not effect the termination of this Guaranty as to Guarantor;

(11)

that termination, release or limitation of any guaranty of the obligations guaranteed hereby by any other guarantor shall not affect the continuing liability hereunder of the Guarantor;

(12)

that nothing shall discharge or satisfy the liability of the Guarantor hereunder except the full indefeasible payment and performance of all of the Borrower's debts and obligations to the Bank with interest and costs of collection, and the Bank may apply any amounts received in payment from the Borrower or the Guarantor as the Bank so elects;

(13)

that this Guaranty shall not be affected by the illegality, invalidity or unenforceability of the obligations guaranteed, by any fraudulent, illegal or improper act by the Borrower, the legal incapacity or any other defense of the Borrower, the Guarantor or any other person obligated to the Bank consequential to transactions with the Borrower nor by the invalidation, by operation of law or otherwise, of all or any part of the obligations guaranteed hereby, including but not limited to any interest accruable on the obligations guaranteed hereby during the pendency of any bankruptcy or receivership proceeding of the Borrower;

(14)

that any and all present and future debts and obligations of the Borrower to Guarantor are hereby waived and postponed in favor of and subordinated to the full indefeasible payment and performance of all present and future debts and obligations of the Borrower to the Bank;

(16)

that if at any time payment of all or any part of the obligations guaranteed hereunder is rescinded or otherwise must be restored by the Bank to the Borrower or to the creditors of the Borrower or any representative of the Borrower or representative of the Borrower's creditors as a voidable preference or fraudulent transfer or conveyance upon the insolvency, bankruptcy or reorganization of the Borrower or the Guarantor, or to the creditors of the Guarantor or any representative of the Guarantor or representative of the creditors of Guarantor upon the insolvency, bankruptcy or reorganization of the Guarantor or otherwise, this Guaranty shall continue to be effective or be reinstated, as the case may be, as though such payments had not been made, and shall survive as an obligation of the Guarantor, and shall not be discharged or satisfied by said payment or payments, notwithstanding the return of the original of this Guaranty to the Guarantor or to the Borrower, or any other apparent termination of Guarantor’s obligations hereunder;

(17)

that any rights and remedies available to the Bank under this Guaranty or any other guaranty, instrument or agreement are cumulative, and not exclusive of any rights and remedies otherwise available to the Bank at law or in equity;

(18)

that the Bank’s delay or omission in exercising any of the Bank’s rights and remedies shall not constitute a waiver of these rights and remedies, nor shall the Bank’s waiver of any right or remedy operate as a waiver of any other right or remedy available to the Bank. The Bank’s waiver of any right or remedy on any one occasion shall not be considered a waiver of same on any subsequent occasion, nor shall this be considered to be a continuing waiver;

(20)

Guarantor agrees to pay any and all expenses incurred by the Bank in enforcing any rights under this Guaranty or in defending any of its rights or any amounts received hereunder. Without limiting the foregoing, Guarantor agrees that whenever any attorney is used by the Bank to obtain payment hereunder, to advise it as to its rights, to adjudicate the rights of the parties hereunder or for the defense of any of its rights or amounts received hereunder, the Bank shall be entitled to recover all attorneys' fees, court costs, and expenses attributable thereto;

(21)

Guarantor acknowledges and agree that any acknowledgement, new promise, payment of principal or interest or other act by the Borrower or others with respect to any claim, obligation, demand or liability of the Borrower shall be deemed to be made as agent for the Guarantor;

(22)

that this Guaranty incorporates all discussions and negotiations between the Bank and the Guarantor concerning the guaranty and indemnification provided by the undersigned hereby, and that no such discussions or negotiations shall limit, modify, or otherwise affect the provisions hereof, there are no preconditions to the effectiveness of this Guaranty and that no provision hereof may be altered, amended, waived, canceled or modified, except by a written instrument executed and acknowledged by the Bank’s duly authorized officer;

(24)

that the Guarantor will deliver the financial statements and financial information required under Section 1.11 of the Fee and Leasehold Mortgage and Security Agreement Agreement made by the Borrower in favor of the Bank in the original principal amount of $10,387,500 of even date herewith, and the Guarantor represents and warrants the accuracy of any information contained therein and hereby agree not to encumber or transfer any assets listed on any financial statements without the Bank’s prior consent.

Guarantor waives: notice of acceptance hereof, presentment and protest of any instrument and notice thereof, notice of default and all other notices to which the Guarantor might otherwise be entitled; and any and all defenses, including without limitation, any and all defenses which the Borrower or any other party may have to the fullest extent permitted by law, any defense to this Guaranty based on impairment of collateral or on suretyship defenses of every type; any right to exoneration or marshaling. To the maximum extent permitted by law, Guarantor waives and terminates any homestead rights and/or exemptions respecting any premises under the provisions of any applicable homestead law, including without limitation, Section 5206 of the Civil Practice Law and Rules of New York. To the extent that it lawfully may, Guarantor hereby further agrees not to invoke any law relating to the marshaling of collateral which might cause delay in or impede the enforcement of the Bank’s rights under this Guaranty or otherwise respecting the guaranteed obligations, and to the extent that it lawfully may do so, the Guarantor hereby irrevocably waives the benefits of all such laws. Except as otherwise provided by applicable law, the Bank shall have no duty as to the collection or protection of any collateral, if any, securing the guaranteed obligations beyond the safe custody thereof.

Guarantor will from time to time execute and deliver to the Bank, and take or cause to be taken, all such other further action as the Bank may request in order to effect and confirm or vest more securely in the Bank all the rights contemplated in this Guaranty (including, without limitation, to correct clerical errors) or respecting any of the obligations guaranteed hereby or to comply with applicable statute or law.

The term "Bank Affiliate" as used in this Guaranty shall mean any "Affiliate" of the Bank or any lender acting as a participant under any loan arrangement between the Bank and the Borrower(s). The term "Affiliate" shall mean with respect to any person, (a) any person which, directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such person, or (b) any person who is a director or officer (i) of such person, (ii) of any subsidiary of such person, or (iii) any person described in clause (a) above. For purposes of this definition, control of a person shall mean the power, direct or indirect, (x) to vote 5% or more of the Capital Stock having ordinary voting power for the election of directors (or comparable equivalent) of such person, or (y) to direct or cause the direction of the management and policies of such person whether by contract or otherwise. Control may be by ownership, contract, or otherwise.

This Guaranty shall be governed by the laws of the State of New York without giving effect to the conflicts of laws principles thereof, shall be binding upon the heirs, executors, administrators, successors and assigns of the Guarantor and shall inure to the benefit of the Bank’s successors and assigns.

If any provision of this Guaranty is found to be invalid, illegal or unenforceable, the validity of the remainder of the Guaranty shall not be affected.

GUARANTOR HEREBY WAIVES THE RIGHT TO INTERPOSE ANY DEFENSE, SET-OFF, COUNTERCLAIM OR CROSS-CLAIM OF ANY NATURE OR DESCRIPTION, AND OBJECTION BASED ON FORUM NON CONVENIENS OR VENUE, AND ANY CLAIM FOR CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES.

The Bank is authorized to fill in any blank spaces and to otherwise complete this Guaranty and correct any patent errors herein.

Guarantor irrevocably submits to the nonexclusive jurisdiction of any Federal or state court sitting in New York, over any suit, action or proceeding arising out of or relating to this Guaranty. Guarantor irrevocably waives, to the fullest extent it may effectively do so under applicable law, any objection they may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that the same has been brought in an inconvenient forum. Guarantor hereby consents to any and all process which may be served in any such suit, action or proceeding, (i) by mailing a copy thereof by registered and certified mail, postage prepaid, return receipt requested, to the Guarantor’s address shown below or as notified to the Bank and (ii) by serving the same upon the Guarantor in any other manner otherwise permitted by law, and agrees that such service shall in every respect be deemed effective service upon the Guarantor.

GUARANTOR AND BANK EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, AND AFTER AN OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL, (A) WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING IN CONNECTION WITH THIS GUARANTY, THE OBLIGATIONS GUARANTEED HEREBY, ALL MATTERS CONTEMPLATED HEREBY AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH AND (B) AGREE NOT TO SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CAN NOT BE, OR HAS NOT BEEN WAIVED. GUARANTOR CERTIFIES THAT NEITHER THE BANK NOR ANY OF ITS REPRESENTATIVES, AGENTS OR COUNSEL HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT IN THE EVENT OF ANY SUCH PROCEEDING SEEK TO ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY JURY.

PARTIES AGREE THAT ANY ACTION, DISPUTE, PROCEEDING, CLAIM OR CONTROVERSY BETWEEN OR AMONG THE PARTIES WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE ("DISPUTE" OR "DISPUTES") SHALL, AT BANK'S ELECTION, WHICH ELECTION MAY BE MADE AT ANY TIME PRIOR TO THE COMMENCEMENT OF A JUDICIAL PROCEEDING BY BANK, OR IN THE EVENT OF A JUDICIAL PROCEEDING INSTITUTED BY A PARTY OTHER THAN THE BANK, AT ANY TIME PRIOR TO THE LAST DAY TO ANSWER AND/OR RESPOND TO A SUMMONS AND/OR COMPLAINT MADE BY PARTY OTHER THAN THE BANK, BE RESOLVED BY ARBITRATION IN NEW YORK, NEW YORK IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION AND SHALL, AT THE ELECTION OF BANK, INCLUDE ALL DISPUTES ARISING OUT OF OR IN CONNECTION WITH (I) THIS AGREEMENT OR ANY RELATED AGREEMENTS OR INSTRUMENTS, (II) ALL PAST, PRESENT AND FUTURE AGREEMENTS INVOLVING THE PARTIES, (III) ANY TRANSACTION CONTEMPLATED HEREBY AND ALL PAST, PRESENT AND FUTURE TRANSACTIONS INVOLVING THE PARTIES AND (IV) ANY ASPECT OF THE PAST, PRESENT OR FUTURE RELATIONSHIP OF THE PARTIES. Bank may elect to require arbitration of any Dispute with the other party without thereby being required to arbitrate all Disputes between Bank and the other party. Any such Dispute shall be resolved by binding arbitration in accordance with Article 75 of the New York Civil Practice Law and Rules and the Commercial Arbitration Rules of the American Arbitration Association ("AAA"). In the event of any inconsistency between such Rules and this arbitration provision, this provision shall supersede such Rules. All statutes of limitations which would otherwise be applicable shall apply to any arbitration proceeding under this provision. In any arbitration proceeding subject to this provision, the arbitration panel (the "arbitrator") is specifically empowered to decide (by documents only, or with a hearing, at the arbitrator's sole discretion) pre-hearing motions which are substantially similar to pre-hearing motions to dismiss and motions for summary adjudication. In any such arbitration proceeding, the arbitrator shall not have the power or authority to award punitive damages to any party. Judgment upon the award rendered may be entered in any court having jurisdiction. Whenever an arbitration is required, the parties shall select an arbitrator in the manner provided in this section. No provision of, nor the exercise of any rights under this provision shall limit the right of any party (i) to foreclose against any real or personal property collateral through judicial foreclosure, by the exercise of a power of sale under a deed of trust, mortgage or other security agreement or instrument, pursuant to applicable provisions of the UCC, or otherwise pursuant to applicable law, (ii) to exercise self help remedies including but not limited to setoff and repossession, or (iii) to request and obtain from a court having jurisdiction before, during or after the pendency of any arbitration, provisional or ancillary remedies and relief including but not limited to injunctive or mandatory relief or the appointment of a receiver. The institution and maintenance of an action or judicial proceeding for, or pursuit of, provisional or ancillary remedies or exercise of self help remedies shall not constitute a waiver of the right of Bank, even if Bank is the plaintiff, to submit the Dispute to arbitration if Bank would otherwise have such right. Bank may require arbitration of any Dispute(s) concerning the lawfulness, unconscionableness, propriety, or reasonableness of any exercise by Bank of its right to take or dispose of any Collateral or its exercise of any other right in connection with Collateral including, without limitation, judicial foreclosure, exercising a power of sale under a deed of trust or mortgage, obtaining or executing a writ of attachment, taking or disposing of property with or without judicial process pursuant to Article 9 of the UCC or otherwise as permitted by applicable law, notwithstanding any such exercise by Bank. Whenever an arbitration is required under this section, the arbitrator shall be selected, except as otherwise herein provided, in accordance with the Commercial Arbitration Rules of the AAA. A single arbitrator shall decide any claim of $100,000 or less and he or she shall be an attorney with at least five years' experience. Where the claim of any party exceeds $100,000, the Dispute shall be decided by a majority vote of three arbitrators, at least two of whom shall be attorneys (at least one of whom shall have not less than five years' experience representing commercial banks). In the event of any Dispute governed by this section, each of the parties shall, subject to the award of the arbitrator, pay an equal share of the arbitrator's fees. The arbitrator shall have the power to award recovery of all costs and fees (including attorneys' fees, administrative fees, arbitrator's fees, and court costs) to the prevailing party.

This Unlimited Guaranty is e xecuted and dated as of November ___, 2017.

Guarantor:

CVD EQUIPMENT CORPORATION

By: __________________________________

Glen Charles

Chief Financial Officer

Address of Guarantor:

355 South Technology Drive

Central Islip, New York 11722

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

On the __ day of November in the year 2017, before me, the undersigned, a Notary Public in and for said State, personally appeared Glen Charles, personally known to be or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed instrument.


	Notary Public

Exhibit 10.24

Nixon Peabody LLP

Draft Dated 11/14/17

Transcript Document No. 5

TOWN OF ISLIP INDUSTRIAL DEVELOPMENT AGENCY

( TOWN OF ISLIP, NEW YORK)

and

CVD EQUIPMENT CORPORATION

___ ___________________________________

AGENCY COMPLIANCE AGREEMENT

____________ ___________________________

Dated as of November 1, 2017

Town of Islip Industrial Development Agency

( 555 N Research Corporation/CVD Equipment Corporation 2017 Facility)

THIS AGENCY COMPLIANCE AGREEMENT, dated as of November 1, 2017 (this “ Agency Compliance Agreement ”), is by and between the TOWN OF ISLIP INDUSTRIAL DEVELOPMENT AGENCY, a public benefit corporation of the State of New York, having its office at 40 Nassau Avenue, Islip, New York 11751 (the “ Agency ”), and CVD Equipment Corporation , a business corporation duly organized and validly existing under the laws of the State of New York, having its principal office at 355 South Technology Drive, Central Islip, New York 11722 (the “ Sublessee ”).

R E C I T A L S

WHEREAS, the Agency was created by Chapter 47 of the Laws of 1974 of the State of New York, as amended, pursuant to Title 1 of Article 18-A of the General Municipal Law of the State of New York, as amended (collectively, the “ Act ”);

WHEREAS, the Agency has agreed to assist in (a) the acquisition of an approximately 11.88 acre parcel of land located at 555 North Research Place, Central Islip, New York 11722 (the “ Land ”), the renovation of an approximately 179,000 square foot building located thereon, together with the acquisition, installation and equipping of improvements, structures and other related facilities attached to the Land (the “ Improvements ”) and the acquisition and installation therein of certain equipment not part of the Equipment (as such term is defined herein) (the “ Facility Equipment ”; and, together with the Land and the Improvements, the “ Company Facility ”), which Company Facility is to be leased and subleased by the Agency to 555 N Research Corporation, a New York business corporation (the “ Company ”), and further subleased by the Company to the Sublessee; and (b) the acquisition and installation of certain equipment and personal property (the “ Equipment ”, and together with the Company Facility, the “ Facility ”), which Equipment is to be leased by the Agency to the Sublessee , and which Facility is to be used by the Sublessee for its primary use as a manufacturing facility to process surface treatments or films and coatings on various product lines in its business as a manufacturer of equipment and materials for the semiconductor industry (the “ Project ”) ; and

WHEREAS, the Company has agreed with the Agency, on behalf of the Agency and as the Agency ’s agent, to complete the Project Work; and

WHEREAS, the Company has agreed to lease the Land and the Improvements to the Agency pursuant to the terms of a certain Company Lease Agreement, dated as of November 1, 2017 (the “ Company Lease ”), by and between the Company and the Agency; and

WHEREAS, the Company has agreed to transfer title to the Facility Equipment to the Agency pursuant to a certain Bill of Sale, dated the Closing Date (the “ Bill of Sale ”); and

WHEREAS, the Agency has agreed to sublease and lease the C ompany Facility to the Company pursuant to the terms of a certain Lease and Project Agreement, dated as of November 1, 2017 (the “ Lease Agreement ”), by and between the Agency and the Company; and

WHEREAS, the Company has agreed to sub-sublease the Company Facility pursuant to the terms of a certain Sublease Agreement, dated November [__], 2017 (the “ Sublease Agreement ”), by and between the Company, as sublessor, and the Sublessee, as sublessee;

NOW, THEREFORE, the parties hereto hereby agree as follows:

Article I
REPRESENTATIONS AND COVENANTS OF SUBLESSEE

Section 1.1 Representations and Covenants of Sublessee . The Sublessee makes the following representations and covenants as the basis for the undertakings on its part herein contained:

( a) The Sublessee is a business corporation organized and existing under the laws of the State of New York, is in good standing under the laws of the State of New York and has full legal right, power and authority to execute, deliver and perform this Agency Compliance Agreement. This Agency Compliance Agreement has been duly authorized, executed and delivered by the Sublessee.

( b) Neither the execution and delivery of this Agency Compliance Agreement nor the consummation of the transactions contemplated hereby nor the fulfillment of or compliance with the provisions hereof will conflict with or result in a breach of or constitute a default under any of the terms, conditions or provisions of any law or ordinance of the State or any political subdivision thereof, the Sublessee’s organizational documents, as amended, or any restriction or any agreement or instrument to which the Sublessee is a party or by which it is bound. Under penalty of perjury, the Sublessee certifies that it is in substantial compliance with all local, state, and federal tax, worker protection and environmental laws, rules and regulations.

(c) Any and all leasehold and subleasehold improvements undertaken by the Sublessee with respect to the Company Facility and the design, development, construction, equipping and operation thereof by the Sublessee will conform with all applicable zoning, planning, building and environmental laws, ordinances, rules and regulations of governmental authorities having jurisdiction over the Facility. The Sublessee shall defend, indemnify and hold the Agency harmless from any liability or expenses, including reasonable attorneys’ fees, resulting from any failure by the Sublessee to comply with the provisions of this subsection.

( d) This Agency Compliance Agreement constitutes a legal, valid and binding obligation of the Sublessee enforceable against the Sublessee in accordance with its terms.

(e) The Sublessee will complete the installation and equipping of any and all leasehold improvements undertaken by the Sublessee in accordance with the terms and provisions of the Sublease Agreement and the Lease Agreement. In the event there is a conflict between the Lease Agreement and the Sublease Agreement, the terms of the Lease Agreement shall prevail.

(f) Facilities and property that are primarily used in the making of retail sales of goods and services to customers who personally visit the Facility will not constitute more than one-third (1/3) of the total costs of the Facility except in accordance with New York General Municipal Law (the “ GML ”) Section 862.

(g) There is no action or proceeding pending or, to the best of the Sublessee’s knowledge, after diligent inquiry, threatened, by or against the Sublessee by or before any court or administrative agency that would adversely affect the ability of the Sublessee to perform its obligations under this Agency Compliance Agreement.

Article II
INSURANCE

Section 2.1 Insurance Required . At all times throughout the Lease Term, including, when indicated herein during the Construction Period, the Sublessee shall, at its sole cost and expense, maintain or cause to be maintained insurance against such risks and for such amounts as are customarily insured against by businesses of like size and type and shall pay, as the same become due and payable, all premiums with respect thereto, including, but not necessarily limited to (but without duplications of insurance provided by the Company pursuant to the Lease Agreement covering the same risks and insured(s)):

(a) Insurance against loss or damage by fire, lightning and other casualties customarily insured against, with a uniform standard extended coverage endorsement, such insurance to be in an amount not less than the full replacement value of the completed Improvements, exclusive of footings and foundations, as determined by a recognized appraiser or insurer selected by the Sublessee. During the Construction Period, such policy shall be written in the so-called “Builder’s Risk Completed Value Non-Reporting Form” and shall contain a provision granting the insured permission to complete and/or occupy.

(b) Workers ’ compensation insurance, disability benefits insurance and each other form of insurance that the Sublessee is required by law to provide, covering loss resulting from injury, sickness, disability or death of employees of the Sublessee or any permitted sublessee who are located at or assigned to the Facility. This coverage shall be in effect from and after the Completion Date or on such earlier date as any employees of the Sublessee, any contractor or subcontractor first occupy the Facility.

(c) Insurance protecting the Agency and the Sublessee against loss or losses from liability imposed by law or assumed in any written contract (including the contractual liability assumed by the Sublessee under Section 3.2 hereof) or arising from personal injury, including bodily injury or death, or damage to the property of others, caused by an accident or other occurrence, with a limit of liability of not less than $1,000,000 (combined single limit or equivalent for personal injury, including bodily injury or death, and property damage); comprehensive automobile liability insurance covering all owned, non-owned and hired autos, with a limit of liability of not less than $1,000,000 (combined single limit or equivalent protecting the Agency and the Company against any loss, liability or damage for personal injury, including bodily injury or death, and property damage); and blanket excess liability coverage, in an amount not less than $5,000,000 combined single limit or equivalent, protecting the Agency and the Sublessee against any loss or liability or damage for personal injury, including bodily injury or death, or property damage. This coverage shall also be in effect during the Construction Period.

(d) During the Construction Period (and for at least one year thereafter in the case of Products and Completed Operations as set forth below), the Sublessee shall cause the general contractor or construction manager, as applicable, to carry liability insurance of the type and providing the minimum limits set forth below:

( i) Workers’ compensation and employer’s liability with limits in accordance with applicable law.

( ii) Comprehensive general liability providing coverage for:

Premises and Operations

Products and Completed Operations

Owners Protective

Contractors Protective

Contractual Liability

Personal Injury Liability

Broad Form Property Damage

(including completed operations)

Explosion Hazard

Collapse Hazard

Underground Property Damage Hazard

Such insurance shall have a limit of liability of not less than $1,000,000 (combined single limit for personal injury, including bodily injury or death, and property damage).

( iii) Comprehensive auto liability, including all owned, non-owned and hired autos, with a limit of liability of not less than $1,000,000 (combined single limit for personal injury, including bodily injury or death, and property damage).

( iv) Excess “umbrella” liability providing liability insurance in excess of the coverage in (i), (ii) and (iii) above, with a limit of not less than $5,000,000.

(e) A policy or policies of flood insurance (in full force and effect) in an amount not less than the maximum amount of flood insurance available with respect to the Facility under the Flood Disaster Protection Act of 1973, as amended. This requirement will be waived upon presentation of evidence satisfactory to the Agency that no portion of the Land is located within an area identified by the U.S. Department of Housing and Urban Development as having special flood hazards.

(f) The Agency does not in any way represent that the insurance specified in this Agency Compliance Agreement, whether in scope or coverage or limits of coverage, is adequate or sufficient to protect the Sublessee ’s business or interests.

Section 2.2 Additional Provisions Respecting Insurance .

(a) All insurance required by this Agency Compliance Agreement hereof shall be procured and maintained in financially sound and generally recognized responsible insurance companies authorized to write such insurance in the State and selected by the entity required to procure the same. The insurance companies issuing the policies required by Section 2.1(a) and (e) shall be rated “A” or better by A.M. Best Co., Inc. in Best’s Key Rating Guide. Such insurance may be written with deductible amounts comparable to those on similar policies carried by other companies engaged in businesses similar in size, character and other respects to those in which the procuring entity is engaged. All policies evidencing the insurance required by Section 2.1 hereof shall provide for at least thirty (30) days prior written notice to the Agency of the restriction, cancellation or modification thereof. The policy evidencing the insurance required by Section 2.1(c) hereof shall name the Agency as additional insured. All policies evidencing the insurance required by Section 2.1(d)(ii), (iii) and (iv) shall name the Agency and the Sublessee as additional insureds. The policies under Section 2.1(a) shall contain appropriate waivers of subrogation.

(b) The policies (or certificates or binders) of insurance required by Sections 2.1(a), (c) and (e) hereof shall be deposited with the Agency on or before the Closing Date. A copy of the policies (or certificates or binders) of insurance required by Section 2.1(d)(ii), (iii) and (iv) hereof shall be delivered to the Agency on or before the Closing Date. The Sublessee shall deliver or cause to be delivered to the Agency before the first Business Day of each calendar year thereafter a certificate dated not earlier than the immediately preceding month reciting that there is in full force and effect, with a term covering at least the next succeeding calendar year, insurance of the types and in the amounts required by Section 2.1 hereof and complying with the additional requirements of Section 2.2(a) hereof. Prior to the expiration of each such policy or policies, the Sublessee shall furnish or cause to be furnished to the Agency and any other appropriate Person a new policy or policies of insurance or evidence that such policy or policies have been renewed or replaced or are no longer required by this Agency Compliance Agreement. The Sublessee shall provide such further information with respect to the insurance coverage required by this Agency Compliance Agreement as the Agency may from time to time reasonably require.

Section 2.3 Application of Net Proceeds of Insurance . The Net Proceeds of the insurance carried pursuant to the provisions of Section 2.1 hereof shall be applied as follows: (i) the Net Proceeds of the insurance required by Section 2.1(a) and (e) hereof shall be applied as provided in Section 7.1 of the Lease Agreement, and (ii) the Net Proceeds of the insurance required by Section 2.1(b), (c) and (d) hereof shall be applied toward extinguishment or satisfaction of the liability with respect to which such insurance proceeds may be paid.

Section 2.4 Right of Agency to Pay Taxes, Insurance Premiums and Other Charges . If the Sublessee fails (i) to pay any tax, together with any fine, penalty, interest or cost which may have been added thereto or become due or been imposed by operation of law for nonpayment thereof, or payments in lieu of taxes pursuant to this Agency Compliance Agreement and the Lease Agreement, or assessment or other governmental charge required to be paid, (ii) to maintain any insurance required to be maintained by Section 2.1 hereof, (iii) to pay any amount required to be paid by any law or ordinance relating to the use or occupancy of the Company Facility or by any requirement, order or notice of violation thereof issued by any governmental person, (iv) to pay any mechanic’s lien which is recorded or filed against the Company Facility or any part thereof (unless contested in accordance with the provisions of Section 3.10 hereof), or (v) to pay any other amount or perform any act hereunder required to be paid or performed by the Sublessee hereunder, the Agency may pay or cause to be paid such tax, payments in lieu of taxes pursuant to this Agency Compliance Agreement and the Lease Agreement, assessment or other governmental charge, or the premium for such insurance or any such other payment, or may perform any such act. No such payment shall be made or act performed by the Agency until at least ten (10) days shall have elapsed since written notice shall have been given by the Agency to the Company, with a copy of such notice being given to the Sublessee (or by the Agency to the Sublessee), and in the case of any tax, assessment or governmental charge, or the amounts specified in clauses (iii) and (iv) of this Section, no such payment shall be made in any event if the Sublessee is contesting the same in good faith to the extent and as permitted by this Agency Compliance Agreement, unless an Event of Default under the Lease Agreement shall have occurred and be continuing. No such payment by the Agency shall affect or impair any rights of the Agency hereunder arising in consequence of such failure by the Sublessee. The Sublessee shall, on demand, reimburse the Agency for any amount so paid or for expenses or costs incurred in the performance of any such act by the Agency pursuant to this Section (which shall include all reasonable legal fees and disbursements), together with interest thereon from the date of payment of such amount, expense or cost by the Agency at two percent (2%) in excess of the Prime Rate, and such amount, together with interest shall become additional indebtedness.

Article III

INCORPORATION AND ASSUMPTION OF THE LEASE AGREEMENT

Section 3.1 Incorporation and Assumption of the Lease Agreement.

(a) The Sublessee acknowledges receipt of a true and complete copy of the Lease Agreement and consent to the terms thereof.

(b) The Sublessee hereby agrees to be bound by each and every payment, obligation, term, covenant, condition and agreement of the Company under Sections 5.1 and 5.4 of the Lease Agreement (the “ Obligations ”), and hereby assumes the Obligations, as if the Sublessee was named as the Company under the Lease Agreement. To the extent that the Obligations are set forth as surviving the termination of the Lease Agreement, the Obligations shall similarly survive as obligations of the Sublessee and survive the termination of this Agency Compliance Agreement.

(c) With respect to Sublessee, the term “ Recaptured Benefits ” shall include, in addition to those benefits enumerated in the Lease Agreement, the Sales Tax Exemption savings realized by or for the benefit of the Sublessee, including any savings realized by any Agent pursuant to the Equipment Lease Agreement and each Sales Tax Agent Authorization Letter issued in connection with the Facility (the “ Sublessee Sales Tax Savings ”).

(d) With respect to Sublessee, the term “ Recapture Event ” shall include, in addition to those events enumerated in the Lease Agreement, the following event: the Sublessee receives Sales Tax Savings in connection with the Project Work in excess of the Maximum Sublessee Sales Tax Savings Amount; provided, however, that the foregoing shall constitute a Recapture Event with respect to such excess Sales Tax Savings only. It is further provided that failure to repay the Sales Tax Savings within thirty (30) days shall constitute a Recapture Event with respect to all Recapture Benefits

(e) Without limitation to any other provision of this Section 3.1, the Sublessee shall at all times during the term of the Sublease Agreement occupy, use and operate the Facility in accordance with the provisions of the Act and as a qualified “project” under the Act.

Article IV
SPECIAL COVENANTS

Section 4.1 No Warranty of Condition or Suitability by Agency . THE AGENCY HAS MADE AND MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE MERCHANTABILITY, CONDITION, FITNESS, DESIGN, OPERATION OR WORKMANSHIP OF ANY PART OF THE FACILITY, ITS FITNESS FOR ANY PARTICULAR PURPOSE, THE QUALITY OR CAPACITY OF THE MATERIALS IN THE FACILITY, THE SUITABILITY OF THE FACILITY FOR THE PURPOSES OR NEEDS OF THE SUBLESSEE OR THE EXTENT TO WHICH FUNDS AVAILABLE TO THE SUBLESSEE WILL BE SUFFICIENT TO PAY THE COST OF COMPLETION OF THE FACILITY. THE SUBLESSEE ACKNOWLEDGES THAT THE AGENCY IS NOT THE MANUFACTURER OF THE EQUIPMENT NOR THE MANUFACTURER’S AGENT NOR A DEALER THEREIN. THE SUBLESSEE, ON BEHALF OF ITSELF IS SATISFIED THAT THE FACILITY IS SUITABLE AND FIT FOR PURPOSES OF THE SUBLESSEE. THE AGENCY SHALL NOT BE LIABLE IN ANY MANNER WHATSOEVER TO THE SUBLESSEE OR ANY OTHER PERSON FOR ANY LOSS, DAMAGE OR EXPENSE OF ANY KIND OR NATURE CAUSED, DIRECTLY OR INDIRECTLY, BY THE PROPERTY OF THE FACILITY OR THE USE OR MAINTENANCE THEREOF OR THE FAILURE OF OPERATION THEREOF, OR THE REPAIR, SERVICE OR ADJUSTMENT THEREOF, OR BY ANY DELAY OR FAILURE TO PROVIDE ANY SUCH MAINTENANCE, REPAIRS, SERVICE OR ADJUSTMENT, OR BY ANY INTERRUPTION OF SERVICE OR LOSS OF USE THEREOF OR FOR ANY LOSS OF BUSINESS HOWSOEVER CAUSED.

Section 4.2 Hold Harmless Provisions .

The Sublessee agrees that the Agency, its directors, members, officers, agents (except the Sublessee), and employees (the “ Indemnified Parties ”) shall not be liable for and agrees to protect, defend, indemnify, save, release and hold the Indemnified Parties harmless from and against any and all damages, losses, liabilities, obligations, penalties, claims, litigation, demands, defenses, judgments, suits, actions, proceedings, costs, disbursements or expenses (including, without limitation, reasonable attorneys’ and experts’ fees, expenses and disbursements, incurred whether by reason of third party claims or to enforce the terms, conditions and provisions of this Agency Compliance Agreement) of any kind or nature whatsoever which may at any time be imposed upon, incurred by or asserted or awarded against the Agency relating to, resulting from or arising out of: (i) loss or damage to Property or injury to or death of any and all Persons that may be occasioned by, directly or indirectly, any cause whatsoever pertaining to the Facility or arising by reason of or in connection with the occupation or the use thereof or the presence of any Person or Property on, in or about the Facility or the Land, (ii) the Project Work and the Agency’s acquisition, owning, leasing and subleasing of the Facility, including, without limiting the generality of the foregoing, all claims arising from the breach by the Sublessee of any of their covenants contained herein, and all causes of action and reasonable attorneys’ fees (whether by reason of third party claims or by reason of the enforcement of any provision of this Agency Compliance Agreement (including without limitation this Section) or any of the other documents delivered on the Closing Date by the Agency) and any other expenses incurred in defending any claims, suits or actions which may arise as a result of any of the foregoing, (iii) the conditions of the Environment at, on or in the vicinity of the Facility, (iv) the Project Work or the operation or use of the Facility in violation of any applicable Environmental Law for the storage, treatment, generation, transportation, processing, handling, management, production or Disposal of any Hazardous Substance or as a landfill or other waste disposal site, or for military, manufacturing or industrial purposes or for the commercial storage of petroleum or petroleum based products, except in compliance with all applicable Environmental Laws, (v) the presence of any Hazardous Substance or a Release or Disposal or the threat of a Release or Disposal of any Hazardous Substance or waste on, at or from the Facility, (vi) the failure promptly to undertake and diligently pursue to completion all necessary, appropriate and legally authorized investigative, containment, removal, clean-up and other remedial actions with respect to a Release or the threat of a Release of any Hazardous Substance on, at or from the Facility, required by any Environmental Law, (vii) human exposure to any Hazardous Substance, noises, vibrations or nuisances of whatever kind to the extent the same arise from the Project Work, the condition of the Facility or the ownership, use, sale, operation, conveyance or operation thereof in violation of any Environmental Law, (viii) a violation of any applicable Environmental Law, (ix) non-compliance with any Environmental Permit, (x) a material misrepresentation or inaccuracy in any representation or warranty or a material breach of or failure to perform any covenant made by the Sublessee in this Agency Compliance Agreement, or (xi) the costs of any required or necessary investigation, assessment, testing, repair, cleanup, or detoxification of the Facility and the preparation of any closure or other required plans; provided that any such losses, damages, liabilities or expenses of the Agency are not incurred on account of and do not result from the gross negligence or intentional or willful wrongdoing of the Indemnified Parties. The foregoing indemnities shall apply notwithstanding the fault or negligence in part of any of the Indemnified Parties, and irrespective of the breach of a statutory obligation or the application of any rule of comparative or apportioned liability. The foregoing indemnities are limited only to the extent of any prohibitions imposed by law, and upon the application of any such prohibition by the final judgment or decision of a competent court of law, the remaining provisions of these indemnities shall remain in full force and effect.

( b) Notwithstanding any other provisions of this Agency Compliance Agreement, the obligations of the Sublessee pursuant to this Section 4.2 shall remain in full force and effect after the termination of this Agency Compliance Agreement until the expiration of the period stated in the applicable statute of limitations during which a claim, cause of action or prosecution relating to the matters herein described may be brought, the payment in full or the satisfaction of such claim, cause of action or prosecution relating to the matters herein described and the payment of all expenses and charges incurred by the Indemnified Parties, relating to the enforcement of the provisions herein specified. The liability of the Sublessee to the Agency hereunder shall in no way be limited, abridged, impaired or otherwise affected by (i) any amendment or modification of any of the Transaction Documents by or for the benefit of the Agency, the Sublessee or any subsequent owners or users of the Facility, (ii) any extensions of time for payment or performance required by any of the Transaction Documents, (iii) the release of the Sublessee or any other person from the performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Transaction Documents by operation of law, either by the Agency’s voluntary act or otherwise, (iv) the invalidity or unenforceability of any of the terms or provisions of the Transaction Documents, (v) any exculpatory provision contained in any of the Transaction Documents limiting the Agency’s recourse to any other security or limiting the Agency’s rights to a deficiency judgment against the Sublessee, (vi) any investigation or inquiry conducted by or on the behalf of the Agency or any information which the Agency may have or obtain with respect to the condition of the Environment at, or ecological condition of, the Facility, (vii) the sale, assignment or foreclosure of any mortgage relating to all or any part of the Facility, but only with respect to a Release that has occurred prior to any such event, (viii) the sale, assignment, subleasing, transfer or conveyance of all or part of the Land or the Facility, but only with respect to a Release that has occurred prior to any such event, (ix) the death or legal incapacity of the Sublessee, (x) the release or discharge, in whole or in part, of the Sublessee in any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or similar proceeding, or (xi) any other circumstances which might otherwise constitute a legal or equitable release or discharge, in whole or in part, of the Sublessee under the Agency Compliance Agreement.

( c) In the event of any claim against the Indemnified Parties by any employee or contractor of the Company or anyone directly or indirectly employed by any of them or anyone for whose acts any of them may be liable, the obligations of the Company hereunder shall not be limited in any way by any limitation on the amount or type of damages, compensation, disability benefits or other employee benefit acts.

Section 4.3 Right to Inspect Facility . The Agency and its duly authorized agents shall have the right at all reasonable times to inspect the Facility.

Section 4.4 Sublessee to Maintain Its Existence . The Sublessee agrees that during the Lease Term it will maintain its existence, will not dissolve, liquidate or otherwise dispose of substantially all of its assets, and will not consolidate with or merge into another entity or permit one or more entities to consolidate with or merge into it.

Section 4.5 Qualification in State . The Sublessee throughout the Lease Term shall continue to be duly authorized to do business in the State.

Section 4.6 Qualification as Project .

(a) The Sublessee will not take any action, or fail to take any action, which action or failure to act would cause the Facility not to constitute a “project” as such quoted term is defined in the Act. Without limiting the generality of the foregoing, the Sublessee will in no event use the Facility in such a way as to cause or permit the Facility to be used in violation of Section 862(2)(a) of the Act.

(b) The occupation of the Facility has not and will not result in the removal of a facility or plant of the Sublessee from one area of the State to another area of the State or in the abandonment of one or more plants or facilities of the Sublessee located within the State.

Section 4.7 Agreement to File Annual Statements and Provide Information . The Sublessee shall file with the New York State Department of Taxation and Finance an annual statement of the value of all sales and use tax exemptions claimed in connection with the Facility in compliance with Sections 874(8) of the New York State General Municipal Law (the “ GML ”), if any. The Sublessee shall submit a copy of such annual statement to the Agency at the time of filing with the Department of Taxation and Finance. The Sublessee shall also provide the Agency with the information necessary for the Agency to comply with Section 874(9) of the GML. Annually, the Sublessee shall provide the Agency with a certified statement and documentation (i) enumerating the FTE jobs, by category, retained and/or created at the Facility as a result of the Agency’s financial assistance and (ii) indicating the fringe benefits and salary averages or ranges for such categories of FTE jobs created and/or retained. The Sublessee further agrees to provide and certify or cause to be provided and certified whenever requested by the Agency such information concerning the Sublessee, its finances, its operations, its employment and its affairs necessary to enable the Agency to make any report required by law, governmental regulation, including, without limitation, the Act or the Public Authorities Accountability Act of 2005 and the Public Authorities Reform Act of 2009, each as amended from time to time, or any of the Agency Documents or Sublessee Documents. Such information shall be provided within thirty (30) days following written request from the Agency.

Section 4.8 Books of Record and Account; Financial Statements . The Sublessee agrees to maintain at all times proper accounts, records and books in which full and correct entries shall be made, in accordance with generally accepted accounting principles, of all transactions and events relating to the business and affairs of the Sublessee.

Section 4.9 Compliance with Orders, Ordinances, Etc.

(a) The Sublessee, throughout the Lease Term, agrees that it will promptly comply, and cause any permitted sub-sublessee or occupant of the Facility to comply, with all statutes, codes, laws, acts, ordinances, orders, judgments, decrees, injunctions, rules, regulations, permits, licenses, authorizations, directions and requirements, ordinary or extraordinary, which now or at any time hereafter may be applicable to the Facility or any part thereof, or to the design, development, installation and equipping thereof, or to any use, manner of use or condition of the Facility or any part thereof, of all federal, state, county, municipal and other governments, departments, commissions, boards, courts, authorities, officials and officers having jurisdiction over the Facility or any part thereof, and companies or associations insuring the premises.

( b) The Sublessee shall keep or cause the Facility to be kept free of Hazardous Substances except in compliance with all applicable federal and state laws and local laws and regulations. Without limiting the foregoing, the Sublessee shall not cause or permit the Facility to be used to generate, manufacture, refine, transport, treat, store, handle, dispose, transfer, produce or process Hazardous Substances, except in compliance with all applicable federal, state and local laws or regulations, nor shall the Sublessee cause or permit, as a result of any intentional or unintentional act or omission on the part of the Sublessee or any contractor, subcontractor, tenant or subtenant, a release of Hazardous Substances onto the Facility or onto any other property. The Sublessee shall comply with, and ensure compliance by all contractors, subcontractors, tenants and subtenants with, all applicable federal, state and local laws, ordinances, rules and regulations, whenever and by whomever triggered, and shall obtain and comply with, and ensure that all contractors, subcontractors, tenants and subtenants obtain and comply with, any and all approvals, registrations or permits required thereunder. The Sublessee shall (i) conduct and complete all investigations, studies, sampling and testing and all remedial, removal and other actions necessary to clean up and remove all Hazardous Substances on, from or affecting the Facility (A) in accordance with all applicable federal, state and local laws, ordinances, rules, regulations and policies, (B) to the satisfaction of the Agency, and (C) in accordance with the orders and directives of all federal, state and local governmental authorities; and (ii) defend, indemnify and hold harmless the Agency, its employees, agents (except the Company and the Sublessee), officers, members and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs or expenses of whatever kind or nature, known or unknown, contingent or otherwise, arising out of, or in any way related to (A) the presence, disposal, release or threatened release of any Hazardous Substances which are on, from or affecting the soil, water, vegetation, buildings, personal property, persons, animals or otherwise, (B) any bodily injury, personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Substances, (C) any lawsuit brought or threatened, settlement reached or government order relating to such Hazardous Substances, and/or (D) any violation of laws, orders, regulations, requirements or demands of government authorities, or of any policies or requirements of the Agency, which are based upon or in any way related to such Hazardous Substances, including, without limitation, reasonable attorney and consultant fees, investigation and laboratory fees, court costs and litigation expenses. In the event the Company tenders a termination of lease, the Sublessee shall deliver the Facility free of any and all Hazardous Substances so that the condition of the Facility shall conform with all applicable federal, state and local laws, ordinances, rules or regulations affecting the Facility. The provisions of this Section shall be in addition to any and all other obligations and liabilities the Sublessee may have to the Agency at common law and shall survive the transactions contemplated herein.

( c) Notwithstanding the provisions of subsections (a) and (b) hereof, the Sublessee may in good faith contest the validity or the applicability of any requirement of the nature referred to in such subsections (a) and (b) by appropriate legal proceedings conducted in good faith and with due diligence. In such event, the Sublessee may fail to comply with the requirement or requirements so contested during the period of such contest and any appeal therefrom, unless the Agency shall notify the Sublessee that, by failure to comply with such requirement or requirements, any part of the Facility may be materially endangered or the Facility or any part thereof may be subject to loss, penalty or forfeiture, in which event the Sublessee shall promptly take such action with respect thereto or provide such security as shall be reasonably satisfactory to the Agency. If at any time the then existing use or occupancy of the Facility shall, pursuant to any zoning or other law, ordinance or regulation, be permitted only so long as such use or occupancy shall continue, the Sublessee shall use its best efforts not to cause or permit such use or occupancy to be discontinued without the prior written consent of the Agency.

( d) Notwithstanding the provisions of this Section, if, because of a breach or violation of the provisions of subsection (a) or (b) hereof (without giving effect to subsection (c) hereof), the Agency, or any of its members, directors, officers, agents, or employees shall be threatened with a fine, liability, expense or imprisonment, then, upon notice from the Agency, the Sublessee shall immediately provide legal protection and/or pay amounts necessary in the opinion of the Agency, and of its members, directors, officers, agents and employees, to the extent permitted by applicable law, to remove the threat of such fine, liability, expense or imprisonment.

( e) Notwithstanding any provisions of this Section, the Agency retains the right to defend itself in any action or actions which are based upon or in any way related to such Hazardous Substances. In any such defense of itself, the Agency shall select its own counsel, and any and all costs of such defense, including, without limitation, reasonable attorney and consultant fees, investigation and laboratory fees, court costs and litigation expenses, shall be paid by the Sublessee.

Section 4.10 Discharge of Liens and Encumbrances .

( a) The Sublessee, throughout the Lease Term, shall not permit or create or suffer to be permitted or created any lien, except for Permitted Encumbrances, upon the Facility or any part thereof by reason of any labor, services or materials rendered or supplied or claimed to be rendered or supplied with respect to the Facility or any part thereof.

( b) Notwithstanding the provisions of subsection (a) hereof, the Sublessee may in good faith contest any such lien. In such event, the Sublessee may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom, unless the Agency shall notify the Sublessee that, by nonpayment of any such item or items or the Facility or any part thereof may be subject to loss or forfeiture, in which event the Sublessee shall promptly secure payment of all such unpaid items by filing a bond, in form and substance satisfactory to the Agency, thereby causing such lien to be removed, or by taking such other actions as may be satisfactory to the Agency to protect its interests. Mechanics’ Liens shall be discharged or bonded within thirty (30) days of the filing or perfection thereof.

Section 4.11 Identification of Facility Equipment . All Facility Equipment which is or may become the Property of the Agency pursuant to the provisions of this Agency Compliance Agreement shall be properly identified by the Sublessee by such appropriate records, including computerized records, as may be approved by the Agency. All Facility Equipment and other Property of whatever nature affixed or attached to the Land or used or to be used by the Sublessee in connection with the Land or the Improvements shall be deemed presumptively to be owned by the Agency, rather than the Sublessee, unless the same were utilized for purposes of installation and equipping of the Facility or were installed by the Sublessee and title thereto was retained by the Sublessee in the manner provided in Section 6.2 of the Lease Agreement and such Facility Equipment and other Property were properly identified by such appropriate records as were approved by the Agency.

Section 4.12 Employment Opportunities; Notice of Jobs . The Sublessee covenants and agrees that, in consideration of the participation of the Agency in the transactions contemplated herein, it will, except as otherwise provided by collective bargaining contracts or agreements to which it is a party, cause any new employment opportunities created in connection with the Facility to be listed with the New York State Department of Labor, Community Services Division, and with the administrative entity of the service delivery area created pursuant to the Job Training Partnership Act (PL 97-300, as amended), as superseded by the Workforce Innovation and Opportunity Act (PL. 113-128), in which the Facility is located (collectively, the “ Referral Agencies ”). The Sublessee also agrees that it will, except as otherwise provided by collective bargaining contracts or agreements to which it is a party, first consider for such new employment opportunities persons eligible to participate in federal job training partnership programs who shall be referred by the Referral Agencies.

Section 4.13 Employment at the Facility . The Sublessee covenants at all times to create and maintain at the Facility and at its facility located at 355 South Technology Drive, Central Islip, New York 11722: one-hundred seventy-six (176) full time equivalent employees as of December 31, 20[__], and one-hundred eighty-six (186) full time equivalent employees as of December 31, 20[__] and thereafter throughout the Lease Term, calculated on the basis of 35 hours per week who are employees of the Sublessee or any subsidiary or affiliates of the Sublessee, or any consultants, contractors or subcontractors of the Sublessee, or any subsidiary or affiliates of the Company, whose place of employment or workplace is located at the Facility (including the full time equivalent employees of all tenants at the Facility) (“ FTE ”).

Section 4.14 Compliance with the Act . The Sublessee hereby agrees to comply with GML Section 875. The Sublessee further agrees that the exemption of sales and use tax provided pursuant to the Act and the appointment of the Sublessee as agent of the Agency is subject to termination and recapture of benefits pursuant to Section 875 of the GML, the Lease Agreement and this Agency Compliance Agreement.

Section 4.15 Subleasing . The Sublessee may not assign the Sublease Agreement or sub-sublease the Facility in whole or in part without the express written consent of the Agency. Any assignment or sub-subleasing of the Facility shall conform with the restrictions and requirements set forth in Section 9.3 of the Lease Agreement.

Article V

EVENTS OF DEFAULT AND REMEDIES

Section 5.1 Events of Default Defined .

(a)

The following shall each be “Events of Default” under this Lease Agreement:

(i) the failure by the Sublessee to observe and perform any covenant contained in Sections 1.1(f), 2.1, 2.2, 4.2, 4.5, 4.6, 4.13, 4.15, and Article VI hereof;

(ii ) the failure by the Sublessee to pay or cause to be paid PILOT Payments or the Recapture Benefits, in each case on the dates due;

(i ii) the occurrence and continuation of a Recapture Event;

( iv) any representation or warranty of the Sublessee herein, in any of the Sublessee Documents or in the Project Application Information shall prove to have been false or misleading in any material respect;

( v) the failure by the Sublessee to observe and perform any covenant, condition or agreement hereunder on its part to be observed or performed (except obligations referred to in 5.1(a)(i), (ii) and (vi)) for a period of thirty (30) days after written notice, specifying such failure and requesting that it be remedied, has been given to the Sublessee by the Agency;

(vi ) the dissolution or liquidation of the Sublessee; or the failure by the Sublessee to release, stay, discharge, lift or bond within thirty (30) days any execution, garnishment, judgment or attachment of such consequence as may impair its ability to carry on its operations; or the failure by the Sublessee generally to pay its debts as they become due; or an assignment by the Sublessee for the benefit of creditors; or the commencement by the Sublessee (as the debtor) of a case in bankruptcy or any proceeding under any other insolvency law; or the commencement of a case in bankruptcy or any proceeding under any other insolvency law against the Sublessee (as the debtor), wherein a court having jurisdiction in the premises enters a decree or order for relief against the Sublessee as the debtor, or such case or proceeding is consented to by the Sublessee or remains undismissed for forty (40) days, or the Sublessee consents to or admits the material allegations against it in any such case or proceeding; or a trustee, receiver or agent (however named) is appointed or authorized to take charge of substantially all of the property of the Sublessee for the purpose of enforcing a lien against such Property or for the purpose of general administration of such Property for the benefit of creditors;

(vii) an Event of Default under the Lease Agreement shall have occurred and be continuing.

(b) Notwithstanding the provisions of Section 5.1(a), if by reason of force majeure any party hereto shall be unable in whole or in part to carry out its obligations under Sections 4.13 of this Lease Agreement, and if such party shall give notice and full particulars of such force majeure in writing to the other party, within a reasonable time after the occurrence of the event or cause relied upon, such obligations under this Lease Agreement of the party giving such notice (and only such obligations), so far as they are affected by such force majeure , shall be suspended during continuation of the inability, which shall include a reasonable time for the removal of the effect thereof. The term “ force majeure ” as used herein shall include, without limitation, acts of God, strikes, lockouts or other industrial disturbances, acts of public enemies, acts, priorities or orders of any kind of the government of the United States of America or of the State or any of their departments, agencies, governmental subdivisions or officials or any civil or military authority, insurrections, riots, epidemics, landslides, lightning, earthquakes, fire, hurricanes, storms, floods, washouts, droughts, arrests, restraint of government and people, civil disturbances, explosions, breakage or accident to machinery, transmission pipes or canals, shortages of labor or materials or delays of carriers, partial or entire failure of utilities, shortage of energy or any other cause or event not reasonably within the control of the party claiming such inability and not due to its fault. The party claiming such inability shall remove the cause for the same with all reasonable promptness. It is agreed that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the party having difficulty, and the party having difficulty shall not be required to settle any strike, lockout and other industrial disturbances by acceding to the demands of the opposing party or parties.

Section 5.2 Remedies on Default . Whenever an Event of Default shall have occurred and be continuing, the Agency may take, to the extent permitted by law, any one or more of the remedial steps enumerated in the Lease Agreement. In addition thereto, the Agency may terminate this Agency Compliance Agreement and the Sublessee agrees to be bound by each and every payment, obligation, term, covenant, condition and agreement of the Company under Articles X and XI of the Lease Agreement.

Article VI
ENVIRONMENTAL MATTERS

Section 6.1 Environmental Representations of the Sublessee . Except as otherwise shown on Exhibit A attached hereto, the Sublessee hereby represents and warrants to the Agency that:

(a ) Neither the Facility nor, to the best of Sublessee’s knowledge, any property adjacent to or within the immediate vicinity of the Facility is being or has been used in violation of any applicable Environmental Law for the storage, treatment, generation, transportation, processing, handling, production or disposal of any Hazardous Substance or as a landfill or other waste management or disposal site or for military, manufacturing or industrial purposes or for the storage of petroleum or petroleum based products.

(b) Underground storage tanks are not and have not been located on the Facility.

(c) The soil, subsoil, bedrock, surface water and groundwater of the Facility are free of Hazardous Substances, in violation of Environmental Law, other than any such substances that occur naturally.

(d) There has been no Release or threat of a Release of any Hazardous Substance in violation of any applicable law on, at or from the Facility or any property adjacent to or within the immediate vicinity of the Facility which through soil, subsoil, bedrock, surface water or groundwater migration could come to be located on or at the Facility, and the Company has not received any form of notice or inquiry from any federal, state or local governmental agency or authority, any operator, tenant, subtenant, licensee or occupant of the Facility or any property adjacent to or within the immediate vicinity of the Facility or any other person with regard to a Release or the threat of a Release of any Hazardous Substance on, at or from the Facility or any property adjacent to or within the immediate vicinity of the Facility in violation of any applicable law.

(e) All Environmental Permits necessary for the Project Work and the ownership, use or operation of the Facility have been obtained and are in full force and effect.

(f) No event has occurred with respect to the Facility which, with the passage of time or the giving of notice, or both, would constitute a violation of or non-compliance with any applicable Environmental Law or Environmental Permit.

(g) There are no agreements, consent orders, decrees, judgments, license or permit conditions or other orders or directives of any federal, state or local court, governmental agency or authority relating to the past, present or future construction, renovation, equipping, ownership, use, operation, sale, transfer or conveyance of the Facility which require any change in the present condition of the Facility or any work, repairs, construction, containment, clean up, investigations, studies, removal or remedial action or capital expenditures in order for the Facility to be in compliance with any applicable Environmental Law or Environmental Permit.

(h) There are no actions, suits, claims or proceedings, pending or threatened, which could cause the incurrence of expenses or costs of any name or description or which seek money damages, injunctive relief, remedial action or remedy that arise out of, relate to or result from (i) conditions of the Environment at, on or in the vicinity of the Facility, (ii) a violation or alleged violation of any applicable Environmental Law or non-compliance or alleged non-compliance with any Environmental Permit with respect to the Facility, (iii) the presence of any Hazardous Substance or a Release or the threat of a Release of any Hazardous Substance on, at or from the Facility or any property adjacent to or within the immediate vicinity of the Facility or (iv) human exposure to any Hazardous Substance, noises, vibrations or nuisances of whatever kind to the extent the same arise from the condition of the Facility, the Project Work or the ownership, use, operation, sale, transfer or conveyance of the Facility.

Section 6.2 Environmental Covenants of the Sublessee . The Sublessee hereby covenants and agrees with the Agency as follows:

(a) The Sublessee shall perform the Project Work and use, operate and manage the Facility in accordance with all applicable Environmental Laws and Environmental Permits, and shall cause all operators, tenants, subtenants, licensees and occupants of the Facility to perform the Project Work and to use, operate and manage the Facility in accordance with any applicable Environmental Laws and Environmental Permits, and shall not cause, allow or permit the Facility or any part thereof to be operated or used for the storage, treatment, generation, transportation, processing, handling, production, management or Disposal of any Hazardous Substances other than in accordance with all applicable Environmental Laws and Environmental Permits.

(b) The Sublessee shall obtain and comply with, and shall cause all contractors, subcontractors, operators, tenants, subtenants, licensees and occupants of the Facility to obtain and comply with, all Environmental Permits, if any.

(c) The Sublessee shall not cause or permit any change to be made in the present or intended Project Work or use or operation of the Facility which would (i) involve the storage, treatment, generation, transportation, processing, handling, management, production or disposal of any Hazardous Substance other than in accordance with any applicable Environmental Law, or the Project Work or use or operation of the Facility as a landfill or waste management or disposal site or for manufacturing or industrial purposes or for the storage of petroleum or petroleum based products other than in accordance with any applicable Environmental Law, (ii) violate any applicable Environmental Law, (iii) constitute a violation or non-compliance with any Environmental Permit or (iv) increase the risk of a Release of any Hazardous Substance.

(d) The Sublessee shall promptly provide the Agency with a copy of all notifications which the Sublessee gives or receives with respect to conditions of the Environment at or in the vicinity of the Facility, any past or present Release or the threat of a Release of any Hazardous Substance on, at or from the Facility or any property adjacent to or within the immediate vicinity of the Facility. If the Sublessee receives or becomes aware of any such notification which is not in writing or otherwise capable of being copied, the Sublessee shall promptly advise the Agency of such verbal, telephonic or electronic notification and confirm such notice in writing. Furthermore, upon the Sublessee’s discovery thereof, the Sublessee shall promptly advise the Agency in writing of: (i) the presence of any Hazardous Substance on, under or about the Facility of which the Agency has not previously been advised in writing; (ii) any remedial action taken by, or on behalf of, the Sublessee in response to any Hazardous Substance on, under or about the Facility or to any environmental proceedings of which the Sublessee has not previously been advised in writing; and (iii) the occurrence or condition on any real property adjoining or in the vicinity of the Company Facility that could reasonably be expected to cause the Facility or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use of the Facility under any Environmental Law. The Sublessee shall also provide the Agency with copies of all reports, analyses, notices, licenses, approvals, orders, correspondences or other written materials in its possession or control relating to the condition of the Environment at the Facility or real property or bodies of water adjoining or in the vicinity of the Facility or environmental proceedings promptly upon receipt, completion or delivery of such materials.

(e) The Sublessee shall undertake and complete all investigations, studies, sampling and testing and all removal or remedial actions necessary to contain, remove and clean up all Hazardous Substances that are or may become present at the Facility and are required to be removed and/or remediated in accordance with all applicable Environmental Laws and all Environmental Permits. All remedial work shall be conducted (i) in a diligent and timely fashion by licensed contractors acting under the supervision of a consulting environmental engineer, (ii) pursuant to a detailed written plan for the remedial work approved by any public or private agencies or persons with a legal or contractual right to such approval, (iii) with such insurance coverage pertaining to liabilities arising out of the remedial work as is then customarily maintained with respect to such activities, and (iv) only following receipt of any required permits, licenses or approvals. In addition, the Sublessee shall submit, or cause to be submitted, to the Agency, promptly upon receipt or preparation, copies of any and all reports, studies, analyses, correspondence, governmental comments or approvals, proposed removal or other remedial work contracts and similar information prepared or received by or on behalf of the Sublessee in connection with any remedial work, or Hazardous Substances relating to the Facility. All costs and expenses of such remedial work shall be paid by or on behalf of the Sublessee, including, without limitation, the charges of the remedial work contractors and the consulting environmental engineer, any taxes or penalties assessed in connection with the remedial work and the Agency’s out-of-pocket costs incurred in connection with monitoring or review of such remedial work. The Agency shall have the right but not the obligation to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any environmental proceedings.

(f) If at any time the Agency obtains any notice or information that the Sublessee or the Facility, or the use or operation thereof or the Project Work may be in violation of an Environmental Law or in non-compliance with any Environmental Permit or standard, the Agency may require that a full or supplemental environmental inspection and audit report with respect to the Facility of a scope and level of detail reasonably satisfactory to the Agency be prepared by a professional environmental engineer or other qualified environmental scientist acceptable to the Agency, at the Sublessee’s sole cost and expense. Said audit may, but is not required to or limited to, include a physical inspection of the Facility, a records search, a visual inspection of any property adjacent to or within the immediate vicinity of the Facility, personnel interviews, review of all Environmental Permits and the conducting of scientific testing. If necessary to determine whether a violation of an Environmental Law exists, such inspection shall also include subsurface testing for the presence of Hazardous Substances in the soil, subsoil, bedrock, surface water and/or groundwater. If said audit report indicates the presence of any Hazardous Substance or a Release or Disposal or the threat of a Release or Disposal of any Hazardous Substance on, at or from the Company Facility in violation of any applicable law, the Sublessee shall promptly undertake and diligently pursue to completion all necessary, appropriate investigative, containment, removal, clean-up and other remedial actions required by any Environmental Law, in accordance with subsection (e) above. The Sublessee hereby consents to the Agency notifying any party under such circumstances of the availability of any or all of the environmental reports and the information contained therein. The Sublessee further agrees that the Agency may disclose such environmental reports to any governmental agency or authority if they reasonably believe that they are required to disclose any matter contained therein to such agency or authority; provided that the Agency shall give the Sublessee at least forty-eight (48) hours prior written notice before so doing. The Sublessee acknowledges that the Agency cannot control or otherwise assure the truthfulness or accuracy of the environmental reports, and that the release of the environmental reports, or any information contained therein, to prospective bidders at any foreclosure sale of the Facility may have a material and adverse effect upon the amount which a party may bid at such sale. The Sublessee agrees that the Agency shall not have any liability whatsoever as a result of delivering any or all of the environmental reports or any information contained therein to any third party if done in good faith, and the Sublessee hereby releases and forever discharges the Agency from any and all claims, damages, or causes of action arising out of, connected with or incidental to the delivery of environmental reports.

Section 6.3 Survival Provision . Notwithstanding anything to the contrary contained herein, the representations, warranties, covenants and indemnifications of the Sublessee contained in this Article V shall survive any termination, conveyance, assignment, subleasing or defeasance of any right, title or interest of the Sublessee in and to the Facility or in, to or under the Sublease Agreement.

Article VII
MISCELLANEOUS

Section 7.1 Definitions . All capitalized terms used in this Agency Compliance Agreement and not otherwise defined herein shall have the meanings assigned thereto in the Schedule of Definitions attached to the Lease Agreement as Schedule A .

Section 7.2 Covenants and Conditions of the Sublease Agreement . Notwithstanding anything to the contrary contained in the Sublease Agreement, the Sublessee covenants and agrees that the Agency shall not be held liable for any of the covenants or conditions, express or implied, contained in the Sublease Agreement. The Sublessee further agrees that it will look solely to the Company for the satisfaction of any covenants or conditions contained therein.

Section 7.3 Execution of Counterparts . This Agency Compliance Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

(Remainder of Page Intentionally Left Blank – Signature Page Follows)

IN WITNESS WHEREOF, the Agency and the Sublessee have caused this Agency Compliance Agreement to be executed in their respective names by their duly authorized officers, all as of November 1, 2017.

	TOWN OF ISLIP INDUSTRIAL DEVELOPMENT AGENCY


	By:	/s/ William G. Mannix
	Name:	William G. Mannix
	Title:	Executive Director


	CVD EQUIPMENT CORPORATION


	By:	/s/ Glen R Charles
	Name:	Glen R Charles
	Title:	CFO

EXHIBIT A

Exceptions to Representations and Warranties of SUBLESSEE

[None.]

Exhibit 10.25

Nixon Peabody LLP

Draft Dated 11/15/17

Transcript Document No. 3

TOWN OF ISLIP INDUSTRIAL DEVELOPMENT AGENCY

(TOWN OF ISLIP, NEW YORK)

and

CVD EQUIPMENT CORPORATION

______________________________________

AMENDED AND RESTATED AGENCY COMPLIANCE AGREEMENT

_______________________________________

Dated as of November 1, 2017

Town of Islip Industrial Development Agency

(FAE Holdings 411519R, LLC/CVD Equipment Corporation 2017 Facility)

THIS AGENCY COMPLIANCE AGREEMENT, originally dated as of March 1, 2012 and amended and restated as of November 1, 2017 (this “ Agency Compliance Agreement ”), is by and between the TOWN OF ISLIP INDUSTRIAL DEVELOPMENT AGENCY, a public benefit corporation of the State of New York, having its office at 40 Nassau Avenue, Islip, New York 11751 (the “ Agency ”), and CVD Equipment Corporation , a business corporation duly organized and validly existing under the laws of the State of New York, having its principal office at 355 South Technology Drive, Central Islip, New York 11722 (the “ Sublessee ”).

R E C I T A L S

WHEREAS, the Agency has previously provided assistance to the FAE Holdings 411519R, LLC, a New York business corporation and the Sublessee in the acquisition, construction and equipping of an approximately 120,000 square foot building (the “ Improvements ” and the “ Equipment ”), on approximately 8.0 acres of land located at 355 South Technology Drive, Central Islip, Suffolk County, New York (the “ Land ”; and together with the Improvements and the Equipment, the “ Facility ”), which Facility is used by the Sublessee as a manufacturing facility to process surface treatments or films and coatings on various product lines in its business as a manufacturer of equipment and materials for the semiconductor industry (the “ Project ”) ; and

WHEREAS, the Agency is currently leasing the Facility to the Company pursuant to a certain Lease Agreement, dated as of March 1, 2012 (the “ Original Lease Agreement ”), by and between the Agency and the Company; and

WHEREAS, the Company is currently subleasing the Facility to the Sublessee pursuant to a certain Lease Agreement, dated as of February 9, 2012 (the “ Original Sublease Agreement ”), by and between the Company and the Sublessee; and

WHEREAS, the Agency, the Company and the Sublessee previously entered into a certain Amended and Restated Environmental Compliance and Indemnification Agreement, dated as of March 1, 2012 (the “ Environmental Compliance and Indemnification Agreement ”), by and among the Agency, the Company and the Sublessee; and

WHEREAS, the Agency, the Company and the Sublessee previously entered into a certain Third Amended and Restated Payment-in-Lieu-of-Tax Agreement, originally dated as of December 1, 2000, amended and restated as of April 1, 2009, further amended and restated as of March 1, 2012, and further amended and restated as of April 1, 2012 (collectively, the “ PILOT Agreement ”), by and among the Agency, the Company and the Sublessee; and

WHEREAS, the Sublessee and the Agency previously entered into a certain Agency Compliance Agreement, dated as of March 1, 2012 (the “ Original Agency Compliance Agreement ”), whereby the Sublessee made certain assurances to the Agency with respect to the Facility; and

WHEREAS, the Company and the Sublessee have now requested an extension of the lease term and the property tax abatements granted on the Facility (the “ Extension ”); and

WHEREAS, the Agency has agreed to continue leasing the Facility to the Company pursuant to a certain Amended and Restated Lease and Project Agreement, dated as of November 1, 2017 (the “ Lease Agreement ”), by and between the Agency and the Company; and

WHEREAS, the PILOT Agreement will be amended and restated pursuant to the Lease Agreement; and

WHEREAS, the Environmental Compliance and Indemnification Agreement will be amended and restated pursuant to the Lease Agreement; and

WHEREAS, the Original Sublease Agreement will be amended pursuant to a certain [Amended Lease Agreement], dated November [__], 2017 (the “ Amended Sublease Agreement ”; and together with the Original Sublease Agreement, the “ Sublease Agreement ”), by and between the Company and the Sublessee; and

WHEREAS, the Original Agency Compliance Agreement will be amended and restated pursuant to this Agency Compliance Agreement;

NOW, THEREFORE, the parties hereto hereby agree as follows:

Article I
REPRESENTATIONS AND COVENANTS OF SUBLESSEE

Section 1.1 Representations and Covenants of Sublessee . The Sublessee makes the following representations and covenants as the basis for the undertakings on its part herein contained:

(c) Any and all leasehold and subleasehold improvements undertaken by the Sublessee with respect to the Facility and the design, development, construction, equipping and operation thereof by the Sublessee will conform with all applicable zoning, planning, building and environmental laws, ordinances, rules and regulations of governmental authorities having jurisdiction over the Facility. The Sublessee shall defend, indemnify and hold the Agency harmless from any liability or expenses, including reasonable attorneys’ fees, resulting from any failure by the Sublessee to comply with the provisions of this subsection.

( d) This Agency Compliance Agreement constitutes a legal, valid and binding obligation of the Sublessee enforceable against the Sublessee in accordance with its terms.

Article II
INSURANCE

(a) Insurance against loss or damage by fire, lightning and other casualties customarily insured against, with a uniform standard extended coverage endorsement, such insurance to be in an amount not less than the full replacement value of the completed Improvements, exclusive of footings and foundations, as determined by a recognized appraiser or insurer selected by the Sublessee. During the Construction Period, such policy shall be written in the so-called “Builder ’s Risk Completed Value Non-Reporting Form” and shall contain a provision granting the insured permission to complete and/or occupy.

( i) Workers’ compensation and employer’s liability with limits in accordance with applicable law.

( ii) Comprehensive general liability providing coverage for:

Premises and Operations

Products and Completed Operations

Owners Protective

Contractors Protective

Contractual Liability

Personal Injury Liability

Broad Form Property Damage

(including completed operations)

Explosion Hazard

Collapse Hazard

Underground Property Damage Hazard

Such insurance shall have a limit of liability of not less than $1,000,000 (combined single limit for personal injury, including bodily injury or death, and property damage).

( iv) Excess “umbrella” liability providing liability insurance in excess of the coverage in (i), (ii) and (iii) above, with a limit of not less than $5,000,000.

Section 2.2 Additional Provisions Respecting Insurance .

Article III

INCORPORATION AND ASSUMPTION OF THE LEASE AGREEMENT

Section 3.1 Incorporation and Assumption of the Lease Agreement.

(a) The Sublessee acknowledges receipt of a true and complete copy of the Lease Agreement and consent to the terms thereof.

(b) The Sublessee hereby agrees to be bound by each and every payment, obligation, term, covenant, condition and agreement of the Company under Section 5.1 of the Lease Agreement (the “ Obligations ”), and hereby assumes the Obligations, as if the Sublessee was named as the Company under the Lease Agreement. To the extent that the Obligations are set forth as surviving the termination of the Lease Agreement, the Obligations shall similarly survive as obligations of the Sublessee and survive the termination of this Agency Compliance Agreement.

(d) Reserved.

Article IV
SPECIAL COVENANTS

Section 4.2 Hold Harmless Provisions .

The Sublessee agrees that the Agency, its directors, members, officers, agents (except the Sublessee), and employees (the “ Indemnified Parties ”) shall not be liable for and agrees to protect, defend, indemnify, save, release and hold the Indemnified Parties harmless from and against any and all damages, losses, liabilities, obligations, penalties, claims, litigation, demands, defenses, judgments, suits, actions, proceedings, costs, disbursements or expenses (including, without limitation, reasonable attorneys’ and experts’ fees, expenses and disbursements, incurred whether by reason of third party claims or to enforce the terms, conditions and provisions of this Agency Compliance Agreement) of any kind or nature whatsoever which may at any time be imposed upon, incurred by or asserted or awarded against the Agency relating to, resulting from or arising out of: (i) loss or damage to Property or injury to or death of any and all Persons that may be occasioned by, directly or indirectly, any cause whatsoever pertaining to the Facility or arising by reason of or in connection with the occupation or the use thereof or the presence of any Person or Property on, in or about the Facility or the Land, (ii) any Project Work and the Agency’s acquisition, owning, leasing and subleasing of the Facility, including, without limiting the generality of the foregoing, all claims arising from the breach by the Sublessee of any of their covenants contained herein, and all causes of action and reasonable attorneys’ fees (whether by reason of third party claims or by reason of the enforcement of any provision of this Agency Compliance Agreement (including without limitation this Section) or any of the other documents delivered on the Closing Date by the Agency) and any other expenses incurred in defending any claims, suits or actions which may arise as a result of any of the foregoing, (iii) the conditions of the Environment at, on or in the vicinity of the Facility, (iv) any Project Work or the operation or use of the Facility in violation of any applicable Environmental Law for the storage, treatment, generation, transportation, processing, handling, management, production or Disposal of any Hazardous Substance or as a landfill or other waste disposal site, or for military, manufacturing or industrial purposes or for the commercial storage of petroleum or petroleum based products, except in compliance with all applicable Environmental Laws, (v) the presence of any Hazardous Substance or a Release or Disposal or the threat of a Release or Disposal of any Hazardous Substance or waste on, at or from the Facility, (vi) the failure promptly to undertake and diligently pursue to completion all necessary, appropriate and legally authorized investigative, containment, removal, clean-up and other remedial actions with respect to a Release or the threat of a Release of any Hazardous Substance on, at or from the Facility, required by any Environmental Law, (vii) human exposure to any Hazardous Substance, noises, vibrations or nuisances of whatever kind to the extent the same arise from any Project Work, the condition of the Facility or the ownership, use, sale, operation, conveyance or operation thereof in violation of any Environmental Law, (viii) a violation of any applicable Environmental Law, (ix) non-compliance with any Environmental Permit, (x) a material misrepresentation or inaccuracy in any representation or warranty or a material breach of or failure to perform any covenant made by the Sublessee in this Agency Compliance Agreement, or (xi) the costs of any required or necessary investigation, assessment, testing, repair, cleanup, or detoxification of the Facility and the preparation of any closure or other required plans; provided that any such losses, damages, liabilities or expenses of the Agency are not incurred on account of and do not result from the gross negligence or intentional or willful wrongdoing of the Indemnified Parties. The foregoing indemnities shall apply notwithstanding the fault or negligence in part of any of the Indemnified Parties, and irrespective of the breach of a statutory obligation or the application of any rule of comparative or apportioned liability. The foregoing indemnities are limited only to the extent of any prohibitions imposed by law, and upon the application of any such prohibition by the final judgment or decision of a competent court of law, the remaining provisions of these indemnities shall remain in full force and effect.

Section 4.3 Right to Inspect Facility . The Agency and its duly authorized agents shall have the right at all reasonable times to inspect the Facility.

Section 4.5 Qualification in State . The Sublessee throughout the Lease Term shall continue to be duly authorized to do business in the State.

Section 4.6 Qualification as Project .

Section 4.9 Compliance with Orders, Ordinances, Etc.

Section 4.10 Discharge of Liens and Encumbrances .

Section 4.13 Employment at the Facility . The Sublessee covenants at all times to create and maintain at the Facility and at its facility located at 555 North Research Place, Central Islip, New York 11722: one-hundred seventy-six (176) full time equivalent employees as of December 31, 20[__], and one-hundred eighty-six (186) full time equivalent employees as of December 31, 20[__] and thereafter throughout the Lease Term, calculated on the basis of 35 hours per week who are employees of the Sublessee or any subsidiary or affiliates of the Sublessee, or any consultants, contractors or subcontractors of the Sublessee, or any subsidiary or affiliates of the Company, whose place of employment or workplace is located at the Facility (including the full time equivalent employees of all tenants at the Facility) (“ FTE ”).

Article V

EVENTS OF DEFAULT AND REMEDIES

Section 5.1 Events of Default Defined .

(a)

The following shall each be “Events of Default” under this Lease Agreement:

(i) the failure by the Sublessee to observe and perform any covenant contained in Sections 1.1(f), 2.1, 2.2, 4.2, 4.5, 4.6, 4.13, 4.15, and Article VI hereof;

(ii ) the failure by the Sublessee to pay or cause to be paid PILOT Payments or the Recapture Benefits, in each case on the dates due;

(i ii) the occurrence and continuation of a Recapture Event;

(iv ) any representation or warranty of the Sublessee herein, in any of the Sublessee Documents or in the Project Application Information shall prove to have been false or misleading in any material respect;

(vii) an Event of Default under the Lease Agreement shall have occurred and be continuing.

Article VI
ENVIRONMENTAL MATTERS

Section 6.1 Environmental Representations of the Sublessee . Except as otherwise shown on Exhibit A attached hereto, the Sublessee hereby represents and warrants to the Agency that:

(b) Underground storage tanks are not and have not been located on the Facility.

(c) The soil, subsoil, bedrock, surface water and groundwater of the Facility are free of Hazardous Substances, in violation of Environmental Law, other than any such substances that occur naturally.

(e) All Environmental Permits necessary for the ownership, use or operation of the Facility have been obtained and are in full force and effect.

Section 6.2 Environmental Covenants of the Sublessee . The Sublessee hereby covenants and agrees with the Agency as follows:

(a) The Sublessee shall use, operate and manage the Facility in accordance with all applicable Environmental Laws and Environmental Permits, and shall cause all operators, tenants, subtenants, licensees and occupants of the Facility to use, operate and manage the Facility in accordance with any applicable Environmental Laws and Environmental Permits, and shall not cause, allow or permit the Facility or any part thereof to be operated or used for the storage, treatment, generation, transportation, processing, handling, production, management or Disposal of any Hazardous Substances other than in accordance with all applicable Environmental Laws and Environmental Permits.

(c) The Sublessee shall not cause or permit any change to be made in the present or intended use or operation of the Facility which would (i) involve the storage, treatment, generation, transportation, processing, handling, management, production or disposal of any Hazardous Substance other than in accordance with any applicable Environmental Law, or use or operation of the Facility as a landfill or waste management or disposal site or for manufacturing or industrial purposes or for the storage of petroleum or petroleum based products other than in accordance with any applicable Environmental Law, (ii) violate any applicable Environmental Law, (iii) constitute a violation or non-compliance with any Environmental Permit or (iv) increase the risk of a Release of any Hazardous Substance.

Article VII
MISCELLANEOUS

(Remainder of Page Intentionally Left Blank – Signature Page Follows)

IN WITNESS WHEREOF, the Agency and the Sublessee have caused this Agency Compliance Agreement to be executed in their respective names by their duly authorized officers, all as of November 1, 2017.

	TOWN OF ISLIP INDUSTRIAL DEVELOPMENT AGENCY


	By:	/s/ William G. Mannix
	Name:	William G. Mannix
	Title:	Executive Director


	CVD EQUIPMENT CORPORATION



	By:	/s/ Glen R. Charles
	Name:	Glen R. Charles
	Title:	CFO

EXHIBIT A

Exceptions to Representations and Warranties of SUBLESSEE

[None.]

Exhibit 10.26

FEE AND LEASEHOLD MORTGAGE AND SECURITY AGREEMENT

Dated: November 30, 2017

in the amount of

$10,387,500.00

(the "Mortgage Amount")

from

Town of Islip Industrial Development Agency

having an office at:

40 Nassau Avenue

Islip, New York 11751

(the "Agency")

and

555 N Research Corporation

having an office at:

555 North Research Place

Central Islip, New Y ork 11722

(the "Mortgagor")

HSBC Bank USA, National Association

having an office at:

534 Broad Hollow Road

Melville, New York 11747

(the "Mortgagee")

LOCATION OF PREMISES:

	Street Address	: 555 North Research Place, Central Islip, NY
	County of	: Suffolk
	State of	: New York
	Section	: 164.00
	Block	: 04.00
	Lot	: 007.001

After recording, please return to:

HSBC Bank USA, National Association

Attention: Post Closing Team

2929 Walden Avenue, C-111

Depew, New York 14043

FEE AND LEASEHOLD MORTGAGE AND SECURITY AGREEMENT

This Fee and Leasehold Mortgage and Security Agreement (the "Mortgage"), made the 30 th day of November, 2017 from the Town of lslip Industrial Development Agency,, a public benefit corporation organized and existing under the laws of the State of New York, having its principal office at 40 Nassau Avenue, Islip, New York 11751 (the "Agency") and 555 N Research Corporation, a New York corporation, having an office at 555 North Research Place, Central Islip, New York (the "Mortgagor"), to and HSBC Bank USA, National Association, having an address at 534 Broad Hollow Road, Melville, New York 11747 (the "Mortgagee").

WITNESSETH:

WHEREAS, (i) the Mortgagor is the owner of a fee estate in the premises described in Schedule A attached hereto (the "Premises"), (ii) the Agency is the owner of a leasehold estate in the Premises under a certain company lease agreement, dated as of November 1, 2017, made by the Mortgagor, as lessor, to the Agency, as lessee (the "Company Lease"), (iii) the Agency subleased the Premises to Mortgagor pursuant to a certain lease agreement dated as of November 1, 2017, (the "Agency Lease"), and (iv) the Mortgagor sub-subleased the Premises to CVD Materials Corporation pursuant to a sub- sublease agreement dated as of November 30, 2017 (the "Sublease"); and

WHEREAS, concurrently herewith, Mortgagor is borrowing from Mortgagee the principal sum Ten Million Three Hundred Eighty-Seven Thousand Five Hundred and 00/100 ($10,387,500.00) Dollars (the "Mortgage Amount") and in connection therewith, Mortgagor has executed and delivered to Mortgagee that certain Note, dated of even date herewith, made by Mortgagor, as borrower, in favor of Mortgagee, as lender, in the original principal amount of $10,387,500.00 (such Note, as the same may be hereafter amended, modified or extended, being hereinafter called the "Note") evidencing the indebtedness of Mortgagor to Mortgagee; and

WHEREAS, to secure the payment by the Mortgagor of an indebtedness in the principal sum of Ten Million Three Hundred Eighty-Seven Thousand Five Hundred and 00/100 ($10,387,500.00) Dollars, lawful money of the United States of America, to be paid with interest, and all other sums which may or shall become due hereunder according to the Note, dated the date hereof, given by the Mortgagor to the Mortgagee, the Agency and the Mortgagor duly authorize the execution of this Mortgage.

Certain Definitions

The Agency, Mortgagor and the Mortgagee agree that, unless the context otherwise specifies or requires, the following terms shall have the meanings herein specified, such definitions to be applicable equally to the singular and to the plural forms of such terms.

"Accounts" means all moneys which have been, or may hereafter be, deposited or delivered to the Mortgagee by or for the account or credit of the Mortgagor.

"Additional Interest" means any breakage costs that may or shall become due and payable under the Swap Transaction.

"Chattels" means all fixtures, fittings, appliances, apparatus, equipment, machinery and articles of personal property, and replacements thereof owned by Mortgagor, other than those owned by lessees, now or at any time hereafter affixed to, attached to, placed upon or used in any way in connection with the complete and comfortable use, enjoyment, occupancy or operation of the Improvements on the Premises.

"Commodity Exchange Act" means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

"Events of Default" means the events and circumstances described as such in Section 2.01 hereof.

"Excluded Swap Obligations" means any obligation to pay or perform under any Swap Transaction if, and to the extent that, all or a portion of the guarantee of Guarantor of, or the grant by Guarantor of a security interest to secure, such Swap Transaction (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of Guarantor's failure for any reason to constitute an "eligible contract participant" as defined in the Commodity Exchange Act and the regulations thereunder at the time the Guaranty or the grant of such security interest becomes effective with respect to such Swap Transaction. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Transaction that is attributable to swaps for which such Guaranty or security interest is or becomes illegal.

"Guarantor" means CVD Equipment Corporation and any other person or entity that may guaranty repayment of the Note. For the avoidance of doubt, the Agency is not a Guarantor.

"Improvements" means all structures and buildings, and replacements thereof, now or hereafter located upon the Premises by the Mortgagor, including all plant equipment, apparatus, machinery and fixtures of every kind and nature whatsoever forming part of said structures and/or buildings.

"Intangibles" means all "general intangibles" (as such quoted term is defined in the Uniform Commercial Code of the state wherein the premises are located) in any way relating to the Premises and/or the Improvements and which the Mortgagor owns, all licenses, trade names, good will and books and records relating to the business operated or to be operated on the Premises or any part thereof, and all unearned premiums, accrued, accruing or to accrue under all insurance policies now or hereafter obtained by the Mortgagor insuring the Mortgaged Property, as hereinafter defined (excluding any liability policies for the benefit of the Agency), and all rights and interest of Mortgagor thereunder.

"Involuntary Rate" means the Interest Rate provided in the Note plus 5%, but in no event to exceed the maximum rate allowed by law .

"Loan" shall mean the $10,387,500.00 loan to be made pursuant to the Loan Documents.

"Loan Document" shall mean this Mortgage, the Note, the Guaranty, the ADA and Environmental Indemnity, the Assignment of Leases and Rents, all of even date herewith, all Uniform Commercial Code Financing Statements executed and delivered in connection herewith, together with all Uniform Commercial Code continuation statements hereafter filed in respect of any such Financing Statements, together with all other documents, guarantees, instruments, certificates , title policies and the like securing and/or evidencing the Mortgage Amount and other Indebtedness and/or executed and/or delivered by or on behalf of the Mortgagor and Guarantor in connection with the Loan (whether any of the foregoing were

executed in connection with the original closing of the loan evidenced by the Note, or at any time thereafter).

"Premises" means the premises described in Schedule A hereto, including all of the air space, easements, rights, privileges, royalties and appurtenances thereunto belonging or in anywise appertaining, and all of the estate, right, title, interest, claim or demand whatsoever of the Mortgagor therein and in the streets, alleys and ways adjacent thereto, either at law or in equity, in possession or expectancy, now or hereafter acquired.

"Swap Transaction" means any agreement, contract or transaction between the Lessee and Mortgagee, that constitutes a "swap" within the meaning of section 1a(47) of the Commodity Exchange Act., each as amended or supplemented from time to time, which transaction shall be in a form acceptable to Mortgagee in its sole discretion and which shall be related solely to the Note.

"Swap Transaction Documents" means the documentation governing the Swap Transaction.

All terms of this Mortgage which are not defined above have the meaning set forth in this Mortgage.

Granting Clause

NOW, THEREFORE, the Agency, having first been indemnified by Mortgagor against any liability or expense, and the Mortgagor, in consideration of the premises and in order to secure payment by the Mortgagor of both the principal of the Note and the interest (including Additional Interest) and any other sums payable thereon, and/or under this Mortgage or the other Loan Documents as well as, without limitation, all loans, advances, indebtedness, notes, liabilities, owing by the Mortgagor to the Mortgagee under the Note, the Mortgage, the Loan Documents or the Swap Transaction, direct or indirect (that is, whether the same are due directly by the Mortgagor to the Mortgagee; or are due indirectly by the Lessee to the Mortgagee as endorser, guarantor or other surety, or as borrower of obligations due third persons which have been endorsed or assigned to the Mortgagee, or otherwise under or pursuant to the Loan Documents or Swap Transaction), absolute or contingent, due or to become due, now existing or hereafter arising or contracted, including, without limitation, payment when due of all amounts outstanding respecting any of the Loan Documents and the performance and observance of all the provisions hereof and of the Note including the payment of any sums advanced by the Mortgagee pursuant to this Mortgage (collectively, all of such obligations are hereinafter referred to as the "Indebtedness"), hereby give, grant, bargain, sell, warrant, alien, remise, release, convey, assign, transfer, mortgage, hypothecate, deposit, pledge, set over and confirm unto the Mortgagee all their respective estates, rights, titles and interests in, to and under any and all of the following described property (the "Mortgaged Property"), whether now owned or held or hereafter acquired:

(a) the Premises;

(b) the Improvements;

(d) the Intangibles;

(e) the Accounts;

(f) all proceeds of the conversion, voluntary or involuntary, of any of the foregoing into cash or liquidated claims, including , without limitation, proceeds of hazard and title insurance and condemnation awards (excluding any liability policies for the benefit of the Agency); and

(g) all leases and lettings of the Premises now or hereafter entered into and all right, title and interest of the Agency and Mortgagor thereunder, excluding, however, the Agency's Unassigned Rights, as such term is defined in the Agency Lease, and including, without limitation, cash or securities deposited thereunder to secure performance by the 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 of the installments of rent coming due immediately prior to the expiration of such terms, subject to the Mortgagor's right to possess and apply such cash or securities prior to an Event of Default, including, further, the right, upon the happening of an Event of Default, to receive and collect the rents thereunder, excluding the Agency's Unassigned Rights.

TO HAVE AND TO HOLD unto the Mortgagee, its successors and assigns forever together with all the Improvements now or hereafter erected on the Premises to its and their own proper use and behoof. And also the Mortgagor does for itself, its successors and assigns, covenant with the said Mortgagee, its successors and assigns, that at and until the ensealing of these presents it is well seized of the Premises in fee simple, and has good right to bargain and sell the same and that the same are free from all encumbrances whatsoever except such as are listed as exceptions to title in the title policy insuring the lien of this Mortgage (the "Permitted Encumbrances").

And furthermore, the Mortgagor does by these presents bind itself and its successors and assigns forever to warrant and defend the Premises described in Schedule A to the Mortgagee, its successors and assigns , against all claims and demands whatsoever except as mentioned herein.

ARTICLE I

Particular Covenants of the Agency and the Mortgagor

The Agency, having first been indemnified by the Mortgagor against any liability or expense, and the Mortgagor, each covenant and agree (provided that each of the Agency and the Mortgagor covenants and agrees only with respect to the covenants and agreement of itself and not of each other) as follows :

SECTION 1.01. The Mortgagor represents and warrants that it has a good and marketable title to an indefeasible fee estate in the Premises subject to no lien, charge or encumbrance, except the Permitted Encumbrances; that the Mortgagor will own the Chattels free and clear of liens and claims; that this Mortgage is and will remain a valid and enforceable first lien on the Mortgaged Property subject only to the exceptions referred to above; that the execution and delivery of this Mortgage has been duly authorized by the Agency and the Mortgagor , the execution and delivery of the Note has been duly authorized by the Mortgagor and that there is no provision in any document that evidences or establishes the existence of the Agency or Mortgagor requiring further consent for such action by any other entity or person; that it is duly organized, validly existing and is in good standing under the laws of the state of its formation or incorporation, as the case may be; that the Mortgagor has (i) all necessary licenses, authorizations, registrations, permits and/or approvals and (ii) full power and authority to own its properties and carry on its business as presently conducted and the execution and delivery by it of and performance of its respective obligations under, this Mortgage and the Note will not result in the Mortgagor being in default under any provisions of any document which evidences or establishes the existence of the Mortgagor or of any mortgage, credit or other agreement to which the Mortgagor is a party or which affects the Mortgagor or the Premises, or any part thereof; that it will preserve such title,

and will forever warrant and defend the same to the Mortgagee and will forever warrant and defend the validity and priority of the lien hereof against the claims of all persons and parties whomsoever except for the Permitted Encumbrances.

SECTION 1.02. The Agency and Mortgagor, as the case may be, will, at the sole 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 reasonably require, for the better assuring, conveying, assigning, transferring and confirming unto the Mortgagee the property and rights hereby conveyed or assigned or intended now or hereafter so to be, or which the Mortgagor may be or may hereafter become bound to convey or assign to the Mortgagee, or for carrying out the intention or facilitating the performance of the terms of this Mortgage, or for filing, registering or recording this Mortgage (provided that, with respect to the Agency such deeds, conveyance, mortgage, assignments, notices of assignment, transfers and assurances are so authorized by the Act (as such term is defined in the Agency Lease) and by the Agency's board of directors, if so required, and (ii) such deeds, conveyances, mortgages, assignments, notices of assignment, transfers and assurances are in a form reasonably acceptable to the Agency) and, on demand, will execute and deliver and hereby authorizes the Mortgagee to execute and file in the name of the Agency and/or Mortgagor, as the case may be, to the extent it may lawfully do so, one or more financing statements, chattel mortgages or comparable security instruments to evidence more effectively the lien hereof upon the Mortgaged Property or any part thereof.

SECTION 1.03. (a) The Agency and Mortgagor, as the case may be, forthwith upon the execution and delivery of this Mortgage, and thereafter from time to time, upon reasonable prior notice, will at the sole cost and expense of the Mortgagor cause this Mortgage and any security instrument creating a lien or evidencing the lien hereof upon the Chattels and/or the Intangibles and each instrument of further assurance to be filed, registered and/or recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the lien hereof upon, and the interest of the Mortgagee in, the Mortgaged Property, all at the sole cost and expense of the Mortgagor.

(b) The Mortgagor will pay all filing, registration or recording fees, and all expenses incident to or arising in connection with this Mortgage, any mortgage supplemental hereto, any security instrument with respect to the Chattels or the Intangibles, and any instrument of further assurance, and all federal, state, county and municipal stamp taxes and other taxes, duties, impositions, assessments and charges arising out of or in connection with the execution and delivery of the Note, this Mortgage or any mortgage supplemental hereto, any security instrument with respect to the Chattels and/or the Intangibles or any instrument of further assurance. In the event any additional mortgage recording tax or recording fees become due subsequent to the recording of this Mortgage, Mortgagor agrees to pay any such additional mortgage tax and recording fees within seven (7) days of Mortgagee's demand, and upon the failure to make such payment, the Mortgagee has the absolute right to then make such payment for the mortgage tax or recording fees, and such payment shall be deemed a protective advance hereunder and subject to the lien of this Mortgage.

SECTION 1.04. The Mortgagor will punctually pay the principal and interest and all other sums to become due in respect of the Note at the time and place and in the manner specified in the Note, according to the true intent and meaning thereof, all in any coin or currency of the United States of America which at the time of such payment shall be legal tender for the payment of public and private debts.

SECTION 1.05. (a) The Mortgagor, if a corporation, will, so long as it is owner of the Mortgaged Property or any part thereof, do all things necessary to preserve and keep in full force and

effect its existence, franchises, rights and privileges as a business or stock corporation under the laws of the state of its incorporation and will comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental authority or court applicable to the Mortgagor or to the Mortgaged Property or any part thereof.

(b) Nothing in this Section 1.05 shall require the payment or discharge of any obligation imposed upon the Mortgagor by this Section so long as the Mortgagor shall in good faith and at its own expense contest the same or the validity thereof by appropriate legal proceedings which shall operate to prevent the collection thereof or other realization thereon and the sale or forfeiture of the Premises or any part thereof to satisfy the same; provided that during such contest the Mortgagor shall, at the option of the Mortgagee, provide security satisfactory to the Mortgagee, assuring the discharge of the Mortgagor's obligation hereunder and of any additional charge, penalty or expense arising from or incurred as a result of such contest; and provided further that if, at any time, payment of any obligation imposed upon the Mortgagor by subsection (a) of this Section shall become necessary to prevent the delivery of a tax deed, or its equivalent, conveying the Mortgaged Property, or any part thereof, because of nonpayment, then the Mortgagor shall pay the same in sufficient time to prevent the delivery of such tax deed or its equivalent.

SECTION 1.06. All right, title and interest of the Agency and the Mortgagor in and to all extensions, improvements, betterments, renewals, substitutes and replacements of, and all additions and appurtenances to, the Mortgaged Property hereafter acquired by, or released to, the Agency or the Mortgagor, or constructed, assembled or placed by the Mortgagor on the Premises or any part thereof, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further mortgage, conveyance, assignment or other act by the Agency or the Mortgagor, shall become subject to the lien of this Mortgage as fully and completely, and with the same effect, as though now owned by the Agency or the Mortgagor and specifically described in the granting clauses hereof, but at any and all times the Mortgagor and/or the Agency will, as applicable, at the sole expense of the Mortgagor, execute and deliver to the Mortgagee any and all such further assurances, mortgages, conveyances or assignments thereof as the Mortgagee may require for the purpose of expressly and specifically subjecting the same to the lien of this Mortgage, provided that, with respect to the Agency such deeds, conveyance, mortgage, assignments, notices of assignment, transfers and assurances are so authorized by the Act.

SECTION 1.07. (a) The Mortgagor, from time to time when the same shall become due and payable, will pay and discharge all taxes of every kind and nature, all general and special assessments, levies, permits, inspection and license fees, all water and sewer rents and charges, and all other public charges whether of a like or different nature, including any payment-in-lieu of tax payments, imposed upon or assessed against the Mortgaged Property (or upon the revenues, rents, issues, income and profits of the Mortgaged Property, or any part thereof, or arising in respect of the occupancy, use or possession thereof collectively the "Taxes"). The Mortgagor will, upon the request of the Mortgagee, deliver to the Mortgagee receipts evidencing the payment of all such Taxes.

(b) The Mortgagor, upon demand of the Mortgagee after the occurrence of an Event of Default, will be required to pay to Mortgagee on the first day of each calendar month one- twelfth of an amount (the "Escrow Fund") which would be sufficient to pay the Taxes payable, or estimated by Mortgagee to be payable, during the ensuing twelve (12) months. Mortgagee will apply the Escrow Fund to the payment of Taxes which are required to be paid by Mortgagor pursuant to the provisions of this Mortgage. If the amount of the Escrow Fund shall exceed the amount of the Taxes payable by the Mortgagor pursuant to the provisions of this Mortgage as determined by the Mortgagee from time to time, Mortgagee shall return any excess to Mortgagor. If the Escrow Fund is not sufficient

to pay the Taxes, as the same become payable, the Mortgagor shall pay to Mortgagee, upon demand, the amount which Mortgagee shall estimate as sufficient to make up the deficiency. Until expended or applied as above provided, any amounts in the Escrow Fund may be commingled with the general funds of Mortgagee and shall constitute additional security for the Indebtedness and shall not bear interest. Notwithstanding the foregoing, for so long as Taxes are being collected and paid pursuant to a payment- in-lieu of tax arrangement with the Agency, Mortgagor shall not be required to pay Taxes to Mortgagee pursuant to this Section 1.07(b) .

(c) The Mortgagor will pay, from time to time when the same shall become due, all lawful claims and demands of mechanics, materialmen, laborers and others, which claims and demands, if unpaid, might result in, or permit the creation of, a lien on the Mortgaged Property or any part thereof, or on the revenues, rents, issues, income and profits arising therefrom and in general will do or cause to be done everything necessary so that the lien of this Mortgage shall be fully preserved, at the cost of the Mortgagor, without expense to the Mortgagee.

(d) Nothing in this Section shall require the payment or discharge of any obligation imposed upon the Mortgagor by this Section so long as the Mortgagor shall in good faith and at its own expense contest the same or the validity thereof by appropriate legal proceedings which shall operate to prevent the collection thereof or other realization thereon and the sale or forfeiture of the Premises or any part thereof to satisfy the same; provided that during such contest the Mortgagor shall, at the option of the Mortgagee, provide security satisfactory to the Mortgagee, assuring the discharge of the Mortgagor's obligation hereunder and of any additional charge, penalty or expense arising from or incurred as a result of such contest; and provided further that if, at any time, payment of any obligation imposed upon the Mortgagor by subsection (a) of this Section shall become necessary to prevent the delivery of a tax deed, or its equivalent, conveying the Mortgaged Property, or any part thereof, because of non-payment, then the Mortgagor shall pay the same in sufficient time to prevent the delivery of such tax deed or its equivalent.

SECTION 1.08. The Mortgagor will pay any and all taxes, charges, fees and/or levies by reason of the Mortgagee's ownership of the Note or this Mortgage and/or resulting from the exercise by the Mortgagee of any of its rights and/or remedies provided for under this Mortgage, except for income taxes and any gains tax law which may hereafter be enacted. The obligations assumed by the Mortgagor pursuant to this Section shall survive the exercise by the Mortgagee of any of its rights and/or remedies under this Mortgage.

SECTION 1.09. (a) The Mortgagor shall keep the Improvements and Chattels insured against damage by fire and other hazards covered by the standard extended coverage insurance policy, and each policy shall be endorsed to name the Mortgagee as an insured thereunder, as its interest may appear, with loss payable to the Mortgagee, without contribution or assessment, pursuant to a standard first mortgage endorsement substantially equivalent to the New York standard mortgagee endorsement. All insurance policies and endorsements required pursuant to this Section shall be fully paid for, nonassessable and contain such provisions and expiration dates and be in such form and amounts and issued by such insurance companies satisfactory to the Mortgagee. Without limiting the foregoing, each policy shall specifically provide that (i) such policy may not be cancelled except upon thirty (30) days' prior written notice to the Mortgagee and that no act or thing done by the Mortgagor shall invalidate the policy as against the Mortgagee and (ii) any and all insurance proceeds will be paid to the Mortgagee so long as Mortgagee certifies to the insurer that the unpaid Indebtedness exceeds the proceeds of insurance. In addition, the Mortgagee may require the Mortgagor to carry such other insurance on the Improvements and Chattels in such amounts as may from time to time be required by institutional lenders, against insurable casualties (including risks of war and nuclear explosion) which at the time are commonly insured against in the case of Premises similarly situated. The Mortgagor will assign and

deliver the policy or policies of all such insurance to the Mortgagee, which policy or policies shall have endorsed thereon an endorsement substantially equivalent to the New York standard mortgagee endorsement in the name of the Mortgagee, so and in such manner and form that the Mortgagee and its successors and assigns shall at all times have and hold said policy or policies as collateral and further security for the payment of the Indebtedness until the full payment of the Indebtedness. In addition, from time to time, upon occurrence of any change in the use, operation or value of the Premises, or in the availability of insurance in the area in which the Premises are located, the Mortgagor shall, within five (5) days after demand by the Mortgagee, take out such additional amounts and/or such other kinds of insurance as the Mortgagee may reasonably require.

(b) The Mortgagor shall not take out separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section, unless the Mortgagee is included thereon as a named insured with loss payable to the Mortgagee under the standard mortgage endorsement of the character above described. The Mortgagor shall immediately notify the Mortgagee whenever any such separate insurance is taken out and shall promptly deliver to the Mortgagee the policy or policies of such insurance. Notwithstanding any of the foregoing to the contrary, Mortgagee hereby acknowledges that the Mortgagor is required to provide insurance for the benefit of the Agency pursuant to the terms of the Agency Lease.

(c) If the Premises, or any part thereof, are located in an area which has been identified by the Secretary of Housing and Urban Development as a flood hazard area, the Mortgagor will keep, for as long as any Indebtedness remains unpaid, the Improvements covered by flood insurance in an amount at least equal to the full amount of the Note or the maximum limit of coverage available for the Premises under the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, as the same may have been or may hereafter be amended or modified (and any successor act thereto), whichever is less.

(d) The Mortgagor shall give the Mortgagee prompt notice of any loss covered by insurance and the Mortgagee shall have the right to join the Mortgagor in adjusting any loss in excess of $25,000. Notwithstanding anything to the contrary contained herein or in Section 254 of the Real Property Law of the State of New York or any other provision of applicable law, the proceeds of insurance policies coming into the possession of the Mortgagee shall not be deemed trust funds and the Mortgagee shall have the option in its sole discretion to apply any insurance proceeds it may receive pursuant hereto, or otherwise, to the payment of the Indebtedness or to allow all or a portion of such proceeds to be used for the restoration of the Mortgaged Property. In the event any such insurance proceeds shall be used to reduce the Indebtedness, the same shall be applied by the Mortgagee, after the deduction therefrom and repayment to the Mortgagee of any and all costs incurred by the Mortgagee in the recovery thereof , in any manner it shall designate including but not limited to, the application of such proceeds to the then unpaid installments of the principal balance due under the Note in the inverse order of their maturity, such that the regular payments, if any, under the Note shall not be reduced or altered in any manner.

(e) INTENTIONALLY OMITTED.

(f) The Mortgagor shall give the Mortgagee prompt written notice of damage to or destruction of the Improvements and Chattels or any part thereof and, unless the Indebtedness is paid in full to Mortgagee within thirty (30) days of the date of said damage or destruction, and provided that such proceeds are made available to Mortgagor, Mortgagor shall promptly commence and diligently continue to perform the repairs, restoration and rebuilding of the portion of the Improvements and Chattels so damaged or destroyed (hereinafter the "Work") so as to restore the Improvements and Chattels in full compliance with all legal requirements and so that the Mortgaged

Property shall be at least equal in value and general utility as they were prior to such damage or destruction, and if such damage or destruction, in the reasonable judgment of the Mortgagee, shall exceed One Hundred Thousand ($100,000) Dollars (hereinafter, collectively "Major Work"), the Mortgagor shall, prior to the commencement of the work, furnish to the Mortgagee for its approval: ( l) complete plans and specifications for the Work, with satisfactory evidence of the approval thereof (i) by all governmental authorities whose approval is required and (ii) by an architect satisfactory to the Mortgagee (hereinafter, the "Architect") and which shall be accompanied by the Architect's signed estimate, bearing the Architect's seal, of the entire cost of completing the Work; (2) certified or photostatic copies of all permits and approvals required by law in connection with the commencement and conduct of the Work; and (3) a surety bond or guaranty of the payment for and completion of the Work, which bond or guaranty shall be in form satisfactory to Mortgagee and shall be signed by surety or sureties, or guarantor or guarantors, as the case may be, who are acceptable to the Mortgagee, and in an amount not less than the Architect's estimate of the entire cost of completing the Work, less the amount of insurance proceeds and Mortgagor deposits, if any, then held by the Mortgagee for application toward the cost of the Work. The Mortgagor shall not commence any of the Work until the Mortgagor shall have complied with applicable requirements referred to in this subsection (t), and after commencing the Work the Mortgagor shall perform the Work diligently and in good faith in accordance with the plans and specifications referred to in this subsection (t), if applicable.

(g) If the insurance proceeds, less the cost, if any, to the Mortgagee of such recovery and of paying out such proceeds (including reasonable attorneys' fees and costs allocable to inspecting the Work and the plans and specifications therefor) should be paid towards restoration of the Improvements and Chattels or if such insurance proceeds are applied toward such restoration, then such insurance proceeds shall be applied by the Mortgagee as follows:

(i) To the payment of the cost of the Work and shall be paid out from time to time to the Mortgagor and/or, at the Mortgagee's option exercised from time to time, directly to the contractor, subcontractors, materialmen, laborers, engineers, architects and other persons rendering services or materials for the Work, as said Work progresses except as otherwise hereinafter provided, but subject to the following conditions, any of which the Mortgagee may freely waive:

(A) If the Work to be done is Major Work, as determined by the Mortgagee, the Architect shall be in charge of the Work;

(B) Each request for payment shall be made on seven (7) days prior notice to the Mortgagee and shall be accompanied by a certificate of the Architect if one is required under subsection (t) above, otherwise by a certificate of an officer of the Mortgagor, stating (i) that all of the Work completed has been done in compliance with the approved plans and specifications, if any be required under said subsection (t), and in accordance with all provisions of law; (ii) the sum requested is justly required to reimburse the Mortgagor for payments by the Mortgagor to, or is justly due to, the contractor, subcontractor, materialmen, laborers, engineers, architects or other persons rendering services or materials for the Work (giving a brief description of such services and materials), and that when added to all sums, if any, previously paid out by the Mortgagee does not exceed the value of the Work done to date of such certificate, and (iii) that the amount of such proceeds and other deposits remaining in the hands of the Mortgagee will be sufficient on completion of the Work to pay for the same in full (giving in such reasonable detail as the Mortgagee may require an estimate of the cost of such completion);

(C) Each request shall be accompanied by waivers of liens satisfactory to the Mortgagee covering that part of the Work previously paid for, if any, and by a search prepared by the title company which insured the lien of the Mortgage or by other evidence satisfactory to

the Mortgagee, that there has not been filed with respect to the Mortgaged Property or any part thereof any mechanic's lien or other lien or instrument for the retention of title in respect of any part of the Work not discharged of record and that there exist no encumbrances on or affecting the Mortgaged Property or any part thereof other than encumbrances, if any, existing as of the date hereof and which have been approved by the Mortgagee;

(D) The request for any payment after the Work has been completed shall be accompanied by a copy of all certificates, permits, licenses, waivers and/or other documents required by law to render occupancy of the Premises and/or Improvements legal; and

(ii) Upon completion of the Work and payment in full therefor, or upon failure on the part of the Mortgagor to commence, as provided in subsection (t) of this Section, or diligently to continue the Work, or at any time upon request by the Mortgagor, the Mortgagee may apply the amount of any such proceeds then or thereafter in the hands of the Mortgagee to the payment of the Indebtedness, provided, however, that nothing herein contained shall prevent the Mortgagee from applying at any time the whole or any part of such proceeds to the curing of any default under this Mortgage or the Note.

SECTION 1.10. If the Mortgagor shall fail to perform any of the covenants contained in Section 1.01, 1.03, 1.05, 1.07, 1.08, 1.09, 1.12 or 1.21 the Mortgagee may make advances to perform the same in its behalf upon ten (10) days' prior written notice to Mortgagor, and all sums so advanced shall be a lien upon the Mortgaged Property and shall be secured hereby. The Mortgagor will repay on demand all sums so advanced on its behalf with interest at the Involuntary Rate. The provisions of this Section shall not prevent any default in the observance of any covenant contained in said Section 1.01, 1.03, 1.05, 1.07, 1.08, 1.09, 1.12 or 1.21 from constituting an Event of Default.

SECTION 1.11. (a) The Mortgagor will keep adequate records and books of account in accordance with generally accepted accounting principles ("GAAP") and will permit the Mortgagee, by its agents, accountants and attorneys, to visit and inspect the Premises and examine its records and books of account and to discuss its affairs, finances and accounts with the officers of the Mortgagor, at such reasonable times as may be requested by the Mortgagee.

(b) Throughout the term of the Loan, the Mortgagee shall receive the following:

(i) annually, Form 10-K of the Guarantor prepared by an accounting firm acceptable to the Mortgagee, within 120 days of each fiscal year-end;

(ii) quarterly, Form 10-Q of the Guarantor prepared by an accounting firm acceptable to the Mortgagee, within 60 days of each fiscal quarter-end;

(iii) annual tax returns of the Mortgagor to be provided within 30 days of filing; and

(iv) such other information concerning the business operation or financial condition of the Mortgagor and the Guarantor as the Mortgagee may reasonably require.

(c) The Mortgagor, within ten (10) days upon request by mail, will furnish a written statement duly acknowledged of the amount due whether for principal or interest on the Note and whether any offsets, counterclaims or defenses exist against the Mortgagee, or the Indebtedness, or any part thereof.

(d) The Mortgagor shall, upon reasonable notice from the Mortgagee, permit the Mortgagee and its agents, representatives or designees access to the Premises from time to time for the purpose of conducting an appraisal of the fair value of the Premises. The Mortgagor agrees that it shall be solely responsible for the costs and expenses of any such appraisal. No failure or omission on the part of the Mortgagee to request any such appraisals shall relieve the Mortgagor of any of its obligations under this Paragraph.

(e) Mortgagor shall maintain at all times during the term of the Loan a deposit account ("Account") with Mortgagee which shall have a balance in immediately available funds on the dates on which installments of principal and interest are due sufficient to pay the installments due hereunder and Mortgagee is authorized to debit the Account for payment of the installments of principal, interest and escrow amounts due and owing. The Mortgagor and Guarantor shall maintain their primary banking and depository relationship with the Mortgagee, and in the event that the Mortgagor and Guarantor cease to maintain their primary banking and depository relationship with the Mortgagee, reserves the right to increase the interest rate on the Note by one (1 %) percent per annum until such time as the Mortgagor and Guarantor resume the maintenance of their primary banking and depository relationship with the Mortgagee.

(f) CVD Equipment Corporation and its consolidated subsidiaries shall maintain a Fixed Charge Coverage Ratio ("FCCR") of no less than 1.10: I to be measured as of each fiscal quarter end over the term of the Loan. FCCR is defined as ((EBITDA minus (the sum of distributions plus unfunded capital expenditures plus cash taxes) divided by (the sum of interest expense plus current maturities of long term debt - excluding current maturities of long term debt secured by cash)). Unfunded capital expenditures excludes the equity requirement to purchase the Premises (or any other property purchased which is financed by the Mortgagee) (collectively, the "Property") and improvements to the Property.

(g) Throughout the term of the Loan and Refinance Loan (as defined in the Note), as the case may be, the outstanding principal balance due, together with all unpaid interest which shall have accrued thereon, shall not exceed 75% of the fair market value of the Premises at the time of any such determination (the "LTV Requirement"). Fair market value shall be determined by the Mortgagee from time to time by reference to acceptable guides and indices and/or appraisals paid for by the Mortgagor or such other means as Mortgagee, in its discretion, deems appropriate. In the event that Mortgagee shall at any time determine that the loan to value ratio is greater than 75%, the Mortgagor shall within ten (10) days of notice and demand by Mortgagee, either reduce the loan amount or pledge such additional collateral as may be acceptable to Mortgagee in order to maintain the required loan to value ratio. The Mortgagor's failure to either reduce the Loan balance as necessary or satisfy Mortgagee's demand for additional collateral acceptable to it within ten (10) days of notice having been given by Mortgagee shall be considered a default.

SECTION 1.12. The Mortgagor will not commit any waste on the Mortgaged Property, or any part thereof, or make any change in the use of the Mortgaged Property, or any part thereof, which will in any way impair the value of the Mortgaged Property in the judgment of the Mortgagee, or in any way increase any ordinary fire or other hazard arising out of construction or operation. The Mortgagor will, at all times, maintain the Improvements in good operating order and condition and will promptly make, from time to time, all repairs, renewals, replacements, additions and improvements in connection therewith which are needful or desirable to such end. The Improvements shall not be demolished or substantially altered, nor shall any Chattels be removed without the prior written consent of the Mortgagee except where appropriate replacements free of superior title, liens and claims are immediately made having value at least equal to the value of the removed Chattels. Without the prior written consent of the Mortgagee, the Mortgagor shall not (a) initiate or acquiesce in a change in the zoning classification

of and/or restrictive covenants affecting the Premises or seek any variance under existing zoning ordinances, (b) use or permit the use of the Premises in a manner which may result in the use of the Premises becoming a non conforming use under applicable zoning ordinances, (c) subject the Premises to restrictive covenants, or (d) establish any condominium or cooperative regime with respect to the Premises. The Mortgagor will perform and comply promptly with and cause the Mortgaged Property to be maintained, used and operated in accordance with, any and all (i) present and future laws, ordinances, rules, regulations and requirements of ever duly constituted governmental or quasi-governmental authority agency applicable to the Mortgagor or the Mortgaged Property, including permits, licenses and/or certificates that may be, (ii) similarly applicable orders, rules and regulations of any regulatory, licensing, accrediting, insurance underwriting or rating organization or other body exercising similar functions, (iii) similarly applicable duties or obligations of any kind imposed under any Permitted Encumbrance or otherwise by law, covenant, condition, agreement or easement, public or private, and (iv) policies of insurance at any time in force with respect to the Mortgaged Property.

SECTION 1.13. The Mortgagor, immediately upon obtaining knowledge of the institution of any proceedings for the condemnation of the Premises or any part thereof, will notify the Mortgagee of the pendency of such proceedings. The Mortgagee may participate in any such proceedings and the Mortgagor from time to time will deliver to the Mortgagee all instruments requested by it to permit such participation. In the event of such condemnation proceedings, the award or compensation payable is hereby assigned to and shall be paid to the Mortgagee. The Mortgagee shall be under no obligation to question the amount of any such award or compensation and may accept the same in the amount in which the same shall be paid. In any such condemnation proceedings, the Mortgagee may be represented by counsel selected by the Mortgagee. The proceeds of any award or compensation so received shall be applied toward the restoration of the Mortgaged Property pursuant to the same terms, provisions and conditions which are applicable to the use of insurance proceeds as set forth in Sections 1.09 (d), (e), (f) and (g) herein provided that the Mortgagor has met the conditions contained in Sections 1.09 (d), (e), (f) and (g) or, if the Mortgagor has not met the conditions contained in Sections 1.09 (d), (e), (f) and (g), to the payment of the Indebtedness, notwithstanding the fact that the Indebtedness may not then be due and payable, or to the restoration of the Improvements. In the event that any portion of the condemnation awards or compensation shall be used to reduce the Indebtedness, same shall be applied by the Mortgagee in any manner it shall designate, including, but not limited to, the application of such award or compensation to the then unpaid installments of the principal balance due under the Note in the inverse order of their maturity such that the regular payments under the Note shall not be reduced or altered in any manner. The Mortgagor, upon request by the Mortgagee, shall make, execute and deliver any and all instruments requested for the purpose of confirming the assignment of the aforesaid awards and compensation to the Mortgagee free and clear of any liens, charges or encumbrances of any kind or nature whatsoever. The Mortgagee shall not be limited to the interest paid on the proceeds of any award or compensation, but shall be entitled to the payment by the Mortgagor of interest at the applicable rate provided for in the Note.

SECTION 1.14. (a) The Agency or Mortgagor will not execute an assignment of the rents (except the Agency's Unassigned Rights), or any part thereof, from the Premises. In no event shall (i) the Mortgagor, without the prior consent of the Mortgagee, (a) terminate or consent to the cancellation or surrender of any lease (except the Company Lease and Agency Lease), (b) modify any lease or sublease, or (c) accept prepayments of any installments of rents to become due under any lease or sublease, except prepayments in the nature of security for the performance of the lessee thereunder, and (d) enter into any lease of all or a portion of the Premises without the prior consent of the Mortgagee, it being understood however, that the Company Lease, Agency Lease and Sublease are approved by the Mortgagee, and (ii) CVD Equipment Corporation fail to occupy at least fifty-one percent (51%) of the rentable square footage of the Premises for the operation of its business throughout the term of this Mortgage, it being understood and agreed that the Sublease at all times shall (i) be a "triple net" lease

which shall provide for monthly rental payments sufficient to enable Mortgagor to meet the FCCR requirement set forth in Section 1.1 l(t) herein, (ii) contain an expiration date to occur at least five (5) years from the date hereof, and an additional five years from the closing of the Refinance Loan (as defined in the Note) as the case may be, and (iii) provide that throughout the term of the Loan and Refinance Loan, as the case may be, the CVD Materials Corporation as tenant under the Sublease shall occupy a minimum of 51 % of the rentable area of the Premises. At no time during the term of the Loan and Refinance Loan, as the case may be, shall fifty percent (50%) or more of the primary source of payments on the Loan and Refinance Loan be derived from third-party income unaffiliated with the Mortgagor.

(b) The Mortgagor will not execute any lease of all or a substantial portion of the Premises except for actual occupancy by the lessee thereunder (except the Company Lease and Agency Lease) and will at all times promptly and faithfully perform, or cause to be performed promptly, all of the covenants, conditions and agreements contained in all leases and subleases of the Premises, or any part thereof, now or hereafter existing, on the part of the lessor or sublessor thereunder to be kept and performed and will at all times do all things necessary to compel performance by the lessee or sublessee, as the case may be, under each lease of all obligations, covenants and agreements by such lessee to be performed thereunder. If any of such leases provide for the giving by the lessee of certificates with respect to the status of such leases, the Mortgagor shall exercise its right to request such certificates within ten (10) days of any demand therefore by the Mortgagee.

(c) The Mortgagor shall furnish to the Mortgagee, within thirty (30) days after a request by the Mortgagee to do so, a written statement containing the names of all lessees of the Premises, the terms of their respective leases, the space occupied and the rentals payable thereunder not more than once per year.

SECTION 1.15. To the extent not so provided by applicable law each lease of the Premises (except the Company Lease and Agency Lease), or of any part thereof, shall provide that, in the event of the enforcement by the Mortgagee of the remedies provided for by law or by this Mortgage, the lessee thereunder will, upon request of any person succeeding to the interest of the Mortgagor as a result of such enforcement, automatically become the lessee of said successor in interest, without change in the terms or other provisions of such lease, provided, however, that said successor in interest shall not be bound by (i) any payment of rent or additional rent for more than one month in advance, except prepayments in the nature of security for the performance by said lessee of its obligations under said lease, or (ii) any amendment or modification of the lease made without the consent of the Mortgagee or such successor in interest. If the Premises, or any part thereof, are located within the State of New York, then reference is hereby made to Section 291-f of the Real Property Law of the State of New York, for purposes of obtaining for the Mortgagee the benefit of Section 291-f in connection with this Mortgage. Each such lease shall provide that upon request by such successor in interest, such lessee shall execute and deliver an instrument or instruments confirming such attornment.

SECTION 1.16. Intentionally Omitted .

SECTION 1.17. In the event any payment provided for herein or in the Note shall become overdue for a period in excess of ten (10) days, a late charge of five cents (5¢) for each dollar so overdue shall become immediately due to the Mortgagee for the purpose of defraying the expenses incident to handling such delinquent payment, and such charge shall be deemed to be part of the Indebtedness and therefore secured by the lien of this Mortgage. Late charges shall be payable with the next installment of principal and/or interest due under the Note.

SECTION 1.18. The Mortgagor, in compliance with Section 13 of the Lien Law of the State of New York, will receive the advances secured by this Mortgage 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 improvement and will apply the same first to the payment of the cost of improvement before using any part of the total of the same for any other purpose.

SECTION 1.19. The Mortgagor agrees that it shall indemnify and hold the Mortgagee harmless against any loss or liability, cost or expense, including without limitation, any judgments, attorneys' fees, costs of appeal bonds and printing costs, arising out of or relating to any proceedings instituted by any claimant alleging priority over the lien of this Mortgage and/or if the Premises or any part thereof is within the State of New York by any claimant alleging a violation by the Mortgagor or the Mortgagee of any section of Article 3-A of the Lien Law of the State of New York.

SECTION 1 . 20 . The Mortgagor shall execute and deliver to the appropriate governmental authority any affidavit, instrument, document and/or filing required pursuant to any applicable statute, ordinance, rule and/or regulation.

SECTION 1.21. The Mortgagor expressly covenants and agrees to pay in full the fees and expenses of the Mortgagee's counsel, promptly upon the receipt of a statement therefor, which are incurred prior to and after the date hereof and which fees and expenses arise in connection with any matter incidental to the loan which is evidenced by the Note and secured by this Mortgage.

SECTION 1.22. (a) The Mortgagor represents and warrants that except as otherwise disclosed by that certain Phase I Environmental Site Assessment report dated October 30, 2017 prepared by The Vertex Companies, Inc., in respect of the Premises delivered to Mortgagee (referred to below as the "Environmental Report"), a copy of which has been provided to Mortgagor, (i) there are no Hazardous Substances (defined below) or underground storage tanks in, on, or under the Premises, except those that are both (A) in compliance with all Environmental Laws (defined below) and with permits issued pursuant thereto and (B) fully disclosed to Mortgagee in writing pursuant to the Environmental Report; (ii) there are no past, present or threatened Releases (defined below) of Hazardous Substances in, on, under or from the Premises which have not been fully remediated in accordance with Environmental Law; (iii) there is no threat of any Release of Hazardous Substances migrating to the Premises; (iv) there is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with the Premises which has not been fully remediated in accordance with Environmental Law; (v) Mortgagor does not know of, and has not received, any written or oral notice or other communication from any Person (including but not limited to a governmental entity) relating to Hazardous Substances or Remediation (defined below) thereof, or possible liability of any Person pursuant to any Environmental Law, other environmental conditions in connection with the Premises, or any actual or potential administrative or judicial proceedings in connection with any of the foregoing; and (vi) Mortgagor has truthfully and fully provided to Mortgagee, in writing, any and all information relating to conditions in, on, under or from the Premises that is known to Mortgagor and that is contained in files and records of Mortgagor, including but not limited to any reports relating to Hazardous Substances in, on, under or from the Premises and/or to the environmental condition of the Premises.

(b) The Premises complies in all respects with the ADA.

(c) Mortgagor covenants and agrees that: (i) all uses and operations on or of the Premises, whether by Mortgagor or any other Person, shall be in compliance with all Environmental Laws and permits issued pursuant thereto; (ii) there shall be no Releases of Hazardous Substances in, on, under or from the Premises; (iii) there shall be no Hazardous Substances in, on, or under the Premises, except those that are both (A) in compliance with all Environmental Laws and with permits issued

pursuant thereto and (B) fully disclosed to Mortgagee in writing; (iv) Mortgagor shall keep the Premises free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law, whether due to any act or omission of Mortgagor or any other Person (the "Environmental Liens"); (v) Mortgagor shall, at its sole cost and expense, fully and expeditiously cooperate in all activities pursuant to Section 1.22 (d) of this Mortgage, including but not limited to providing all relevant information and making knowledgeable Persons available for interviews; (vi) Mortgagor shall, at its sole cost and expense, perform any environmental site assessment or other investigation of environmental conditions in connection with the Premises, pursuant to any reasonable written request of Mortgagee (including but not limited to sampling, testing and analysis of soil, water, air, building materials, and other materials and substances whether solid, liquid or gas), and share with Mortgagee the reports and other results thereof, and Mortgagee shall be entitled to rely on such reports and other results thereof; (vii) Mortgagor shall, at its sole cost and expense, comply with all reasonable written requests of Mortgagee to (A) effectuate Remediation of any condition (including but not limited to a Release of a Hazardous Substance) in, on, under or from the Premises; (B) comply with any Environmental Law; (C) comply with any directive from any governmental authority; and (D) take any other reasonable action necessary or appropriate for protection of human health or the environment; (viii) Mortgagor shall not do or allow any tenant or other user of the Premises to do any act that materially increases the dangers to human health or the environment, poses an unreasonable risk of harm to any Person (whether on or off the Premises), impairs or may impair the value of the Premises, is contrary to any requirement of any insurer, constitutes a public or private nuisance, constitutes waste, or violates any covenant, condition, agreement or easement applicable to the Premises; and (ix) Mortgagor shall immediately notify Mortgagee in writing of (A) any presence or Releases or threatened Releases of Hazardous Substances in, on, under, from or migrating towards the Premises; (B) any non-compliance with any Environmental Laws related in any way to the Premises; (C) any actual or potential Environmental Lien; (D) any required or proposed Remediation of environmental conditions relating to the Premises; and (E) any written or oral notice or other communication of which any Mortgagor becomes aware from any source whatsoever (including but not limited to a governmental entity) relating in any way to Hazardous Substances or Remediation thereof, possible liability of any Person pursuant to any Environmental Law, other environmental conditions in connection with the Premises, or any actual or potential administrative or judicial proceedings in connection with anything referred to in this Mortgage.

(d) In the event the Mortgagee has reason to believe that an environmental hazard exists on the Premises that does not, in the sole discretion of the Mortgagee, endanger any Tenants or other occupants of the Premises or their guests or the general public or materially and adversely affects the value of the Premises, upon reasonable notice from the Mortgagee, Mortgagor shall, at Mortgagor's expense, promptly cause an engineer or consultant satisfactory to the Mortgagee to conduct any environmental assessment or audit (the scope of which shall be determined in the sole and absolute discretion of the Mortgagee) and take any samples of soil, groundwater or other water, air, or building materials or any other invasive testing requested by Mortgagee and promptly deliver the results of any such assessment, audit, sampling or other testing: provided, however, if such results are not delivered to the Mortgagee within a reasonable period or if the Mortgagee have reason to believe that an environmental hazard exists on the Premises that, in the sole judgment of the Mortgagee, endangers any tenant or other occupant of the Premises or their guests or the general public or may materially and adversely affect the value of the Premises, upon reasonable notice to Mortgagor, the Mortgagee and any other Person designated by the Mortgagee, including but not limited to any receiver, any representative of a governmental entity, and any environmental consultant, shall have the right, but not the obligation, to enter upon the Premises at all reasonable times to assess any and all aspects of the environmental condition of the Premises and its use, including but not limited to conducting any environmental assessment or audit (the scope of which shall be determined in the sole and absolute discretion of the Mortgagee) and taking samples of soil, groundwater or other water, air, or building materials, and

reasonably conducting other invasive testing. Mortgagor shall cooperate with and provide the Mortgagee and any such Person designated by the Mortgagee with access to the Premises.

(e) Mortgagor covenants and agrees, at its sole cost and expense, to protect, defend, indemnify, release and hold Mortgagee harmless from and against any and all Losses (defined below) imposed upon or incurred by or asserted against any Mortgagee and directly or indirectly arising out of or in any way relating to any one or more of the following: (a) any presence of any Hazardous Substances in, on, above, or under the Premises; (b) any past, present or threatened Release of Hazardous Substances in, on, above, under or from the Premises; (c) any activity by Mortgagor, any Person affiliated with Mortgagor, and any tenant or other user of the Premises in connection with any actual, proposed or threatened use, treatment, storage, holding, existence, disposition or other Release, generation, production, manufacturing, processing, refining, control, management, abatement, removal, handling, transfer or transportation to or from the Premises of any Hazardous Substances at any time located in, under, on or above the Premises; (d) any activity by Mortgagor, any Person affiliated with Mortgagor, and any tenant or other user of the Premises in connection with any actual or proposed Remediation of any Hazardous Substances at any time located in, under, on or above the Premises, whether or not such Remediation is voluntary or pursuant to court or administrative order, including but not limited to any removal, remedial or corrective action; (e) any past, present or threatened non-compliance or violations of any Environmental Laws (or permits issued pursuant to any Environmental Law) in connection with the Premises or operations thereon, including but not limited to any failure by Mortgagor, any Person affiliated with Mortgagor, and any tenant or other user of the Premises to comply with any order of any governmental authority in connection with any Environmental Laws; (f) the imposition, recording or filing or the threatened imposition, recording or filing of any Environmental Lien encumbering the Premises; (g) any administrative processes or proceedings or judicial proceedings in any way connected with any matter addressed in this Mortgage; (h) any past, present or threatened injury to, destruction of or loss of natural resources in any way connected with the Premises, including but not limited to costs to investigate and assess such injury, destruction or loss; (i) any acts of Mortgagor, any Person affiliated with Mortgagor, and any tenant or other user of the Premises in arranging for disposal or treatment, or arranging with a transporter for transport for disposal or treatment, of Hazardous Substances at any facility or incineration vessel containing such or similar Hazardous Substances; G) any acts of Mortgagor, any Person affiliated with any Mortgagor, and any tenant or other user of the Premises in accepting any Hazardous Substances for transport to disposal or treatment facilities, incineration vessels or sites from which there is a Release, or a threatened Release of any Hazardous Substance which causes the incurrence of costs for Remediation; (k) any personal injury, wrongful death, or Premises or other damage arising under any statutory or common law or tort law theory, including but not limited to damages assessed for private or public nuisance or for the conducting of an abnormally dangerous activity on or near the Premises; and (l) any past present or future non-compliance with the ADA; and

(m) misrepresentation or inaccuracy in any representation or warranty or material breach or failure to perform any covenants or other obligations pursuant to this Mortgage.

(f) Upon written request by the Mortgagee, Mortgagor shall defend same (if requested by the Mortgagee, in the name of the Mortgagee) by attorneys and other professionals approved by the Mortgagee. Notwithstanding the foregoing, the Mortgagee may, in its sole and absolute discretion, engage its own attorneys and other professionals to defend or assist it, and, at the option of the Mortgagee, its attorneys shall control the resolution of any claim or proceeding, providing that no compromise or settlement shall be entered without Mortgagor's consent, which consent shall not be unreasonably withheld. Upon demand, Mortgagor shall pay or, in the sole and absolute discretion of the Mortgagee, reimburse, the Mortgagee for the payment of reasonable fees and disbursements of attorneys, engineers, environmental consultants, laboratories and other professionals in connection therewith.

(g) Definitions. As used in this Section 1.22, the following terms shall have the following meanings:

"ADA" shall mean the Americans with Disabilities Act of 1990, as amended and supplemented from time to time.

"Environmenta l Law" means any present and future federal, state and local laws, statutes, ordinances, rules, regulations and the like, as well as common law, relating to protection of human health or the environment, relating to Hazardous Substances, relating to liability for or costs of other actual or threatened danger to human health or the environment. The term "Environmental Law" includes, but is not limited to, the following statutes, as amended, any successor thereto, and any regulations promulgated pursuant thereto, and any state or local statutes, ordinances, rules, regulations and the like addressing similar issues: the Comprehensive Environmental Response, Compensation and Liability Act; the Emergency Planning and Community Right-to-Know Act; the Hazardous Substances Transportation Act; the Resource Conservation and Recovery Act (including but not limited to Subtitle I relating to underground storage tanks); the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational Safety and Health Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the National Environmental Policy Act; and the River and Harbors Appropriation Act. The term "Environmental Law" also includes, but is not limited to, any present and future federal, state and local laws, statutes ordinances, rules, regulations and the like, as well as common law: conditioning transfer of Premises upon a negative declaration or other approval of a governmental authority of the environmental condition of the Premises; requiring notification or disclosure of Releases of Hazardous Substances or other environmental condition of the Premises to any Governmental Authority or other Person, whether or not in connection with transfer of title to or interest in property; imposing conditions or requirements in connection with permits or other authorization for lawful activity; relating to nuisance, trespass or other causes of action related to the Premises; and relating to wrongful death, personal injury, or property or other damage in connection with any physical condition or use of the Premises.

"Hazardous Substances" shall mean but is not limited to any and all substances (whether solid, liquid or gas) defined, listed, or otherwise classified as pollutants, hazardous wastes, hazardous substances, hazardous materials, extremely hazardous wastes, or words of similar meaning or regulatory effect under any present or future Environmental Laws or that may have a negative impact on human health or the environment, including but not limited to petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls, lead, radon, radioactive materials, flammables and explosives, but excluding substances of kinds and in amounts ordinarily and customarily used or stored in similar properties for the purposes of cleaning or other maintenance or operations and otherwise in compliance with all Environmental Laws.

"Mortgagee" shall mean Mortgagee, any Person who is or will have been involved in the origination of the Loan, any Person who is or will have been involved with the servicing of the Loan, any Person in whose name the encumbrance created by this Mortgage is or will have been recorded, Persons who may hold or acquire or will have held a full or partial interest in the Loan as well as the respective directors, officers, shareholders, partners, employees, agents, servants, representatives, contractors, subcontractors, affiliates, subsidiaries, participants, successors and assigns of any and all of the foregoing (including but not limited to any other Person who holds or acquires or will have held a participation or other full or partial interest in the Loan or the Premises, whether during the term of the Loan or as a part of or following a foreclosure of the

Loan and including, but not limited to, any successors by merger, consolidation or acquisition of all or a substantial portion of Mortgagee's assets and business).

"Legal Action" shall mean any claim, suit or proceeding, whether administrative or judicial in nature.

"Losses" shall mean any losses, damages, costs, fees, expenses, claims, suits, judgments, awards, liabilities (including but not limited to strict liabilities), obligations, debts, diminutions in value, fines, penalties, charges, costs of Remediation (whether or not performed voluntarily), amounts paid in settlement, foreseeable and unforeseeable consequential damages, litigation costs, attorneys' fees, engineers' fees, environmental consultants' fees, and investigation costs (including but not limited to costs for sampling, testing and analysis of soil, water, air, building materials, and other materials and substances whether solid, liquid or gas), of whatever kind or nature, and whether or not incurred in connection with any judicial or administrative proceedings, actions, claims, suits, judgments or awards.

"Person" shall mean any individual, limited liability company, partnership, corporation, trust or any other form of public, private or governmental entity or authority.

"Release" shall mean with respect to any Hazardous Substance but is not limited to any release, deposit, discharge, emission, leaking, leaching, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Substances.

"Remediation" shall mean but is not limited to any response, remedial, removal, or corrective action; any activity to clean up, detoxify, decontaminate, contain or otherwise remediate any Hazardous Substance; any actions to prevent, cure or mitigate any Release of any Hazardous Substance; any action to comply with any Environmental Laws or with any permits issued pursuant thereto; any inspection, investigation, study, monitoring, assessment, audit, sampling and testing, laboratory or other analysis, or evaluation relating to any Hazardous Substances or to anything referred to herein.

SECTION 1.23. The Mortgagor represents, warrants and covenants as follows:

Neither the Mortgagor, the Guarantor nor CVD Materials Corporation is in violation of any legal requirements relating to terrorism or money laundering, including Executive Order No. 13224 on Terrorist Financing (effective September 24, 2001, (the "Executive Order") and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56, the "Patriot Act").

Neither the Mortgagor, the Guarantor nor CVD Materials Corporation is a "Prohibited Person" which is defined as follows:

a person or entity that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

a person or entity owned or controlled by, or acting for or on behalf of, any person or entity that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

a person or entity with whom the Mortgagor is prohibited from dealing or otherwise engaging in any transaction by any terrorism or money laundering legal requirements, including the Executive Order and the Patriot Act;

a person or entity who commits, threatens or conspires to commit or supports "terrorism" as defined in the Executive Order;

a person or entity that is named as a "specially designated national and blocked person" on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control; and

a person or entity who is affiliated with a person or entity listed above.

Neither the Mortgagor, the Guarantor nor CVD Materials Corporation will (i) conduct any business or engage in any transaction or dealing with any Prohibited Person, including the making or receiving of any contribution of funds, goods or services to or for the benefit of any Prohibited Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order; or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purposes of evading or avoiding, or attempts to violate, any of the prohibitions set forth in the Executive Order or the Patriot Act.

SECTION 1.24. The Mortgagor agrees as follows:

(a) The Mortgagor agrees that the Premises shall at all times comply or cause to be complied to the extent applicable with the requirements of the Americans with Disabilities Act of 1990, as amended from time to time, the Fair Housing Amendments Act of 1988, as amended from time to time, all state and local laws and ordinances related to handicapped access and all rules, regulations, and orders issues pursuant thereto including, without limitation, the American with Disabilities Act Accessibility Guidelines for Buildings and Facilities, as amended from time to time (collectively, "Access Laws").

(b) Notwithstanding any prov1s1ons set forth herein or in any other documents regarding the Mortgagee's approval or alterations of the Premises but at all times subject to the Lease, the Mortgagor shall not alter the Premises in any manner which would increase the Mortgagor's responsibilities for compliance with the applicable Access Laws without the prior written approval of the Mortgagee. The foregoing shall apply to tenant improvements constructed by the Mortgagor or by any of its tenants. The Mortgagee may condition any such approval upon receipt of a certificate of Access Law compliance from an architect, engineer, or other person reasonably acceptable to the Mortgagee.

(c) The Mortgagor agrees to give prompt notice to the Mortgagee of the receipt by the Mortgagor of any complaints related to violations of any Access Laws and of commencement of any proceedings or investigations which related to compliance with applicable Access Laws.

(End of Article I)

ARTICLE II

Events of Default and Remedies

SECTION 2.01. If one or more of the following Events of Default shall happen, that is to say:

(a) if (i) default shall be made in the payment of any interest due under the Note, or in the payment of any installment of principal due under the Note, in either such case, when and as the same shall become due and payable, or (ii) default shall be made in any other payment of the principal of the Note, when and as the same shall become due and payable, whether at maturity or by acceleration or as part of any prepayment or otherwise, in each case, as in the Note and this Mortgage provided or default in the payment of any other Indebtedness due to Mortgagee under this Mortgage, or (iii) default shall be made in the payment of any tax required by Section 1.07 to be paid and said default shall have continued for a period of twenty (20) days; or

(b) if default shall be made in the due observance or performance of any covenant, term or agreement on the part of the Mortgagor contained in Section 1.01, 1.03, or 1.08, and such default shall have continued for a period of twenty (20) days after written notice specifying such default shall have been given to the Mortgagor by the Mortgagee, unless such term, covenant or agreement cannot be complied with or such default be cured in such period and provided further that the Mortgagor shall commence compliance with such term, covenant or agreement or curing such default and shall continue to diligently prosecute such compliance or curing such default; or

(c)

if any representation made in Section 1.01 shall have been false when made; or

(d) if default shall be made in the due observance or performance of any other covenant, term or agreement on the part of the Mortgagor in the Note or in this Mortgage contained, and such default shall have continued for a period of thirty (30) days after written notice specifying such default shall have been given to the Mortgagor by the Mortgagee, unless such term, covenant or agreement cannot be complied with or such default be cured in such period and provided further that the Mortgagor shall commence compliance with such term, covenant or agreement or curing such default and shall continue to diligently prosecute such compliance or curing such default; or

(e) if by the order of a court of competent jurisdiction, a trustee, receiver or liquidator of the Mortgaged Property, or any part thereof, or of the Mortgagor shall be appointed and such order shall not be discharged or dismissed within sixty (60) days after such appointment; or

(t) if the Mortgagor shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case under any such law or to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Mortgagor or of any substantial part of its property, or if the Mortgagor shall make any general assignment for the benefit of creditors, or if the Mortgagor shall fail generally to pay its debts as such debts become due, or if the Mortgagor shall take any action in furtherance of any of the foregoing; or

(g) if any of the creditors of the Mortgagor shall commence against the Mortgagor an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect and if such case shall not be discharged or dismissed within sixty (60) days after the date on which such case was commenced, or

(h) if final judgment for the payment of money in excess of the sum of $10,000 in the aggregate shall be rendered against the Mortgagor and the Mortgagor shall not discharge the same or cause it to be discharged within sixty (60) days from the entry thereof, or shall not appeal therefrom or from the order, decree or process upon which or pursuant to which said judgment was granted, based or entered, and secure a stay of execution pending such appeal; or

(i) if any of the events enumerated in clauses (e) through (h) of this Section 2.01 shall happen to any Guarantor, if any, or any of its property; or

U) if any Guarantor defaults under or attempts to withdraw, cancel or disclaim liability under any guaranty issued to Mortgagee; or

(k) if the Mortgagor sells, transfers, assigns, conveys or encumbers the Premises or any part thereof or any interest therein without the prior written consent of the Mortgagee; or

(I) if a default occurs under any mortgage that is prior or subordinate to the lien of this Mortgage or the mortgagee under any prior or subordinate mortgage commences a foreclosure action in connection with said mortgage; it being further agreed by the Mortgagor that an Event of Default hereunder shall constitute an Event of Default under any such other mortgage or deed of trust held by the Mortgagee; or

(m) if the Mortgagor or any Guarantor shall default under any other written agreement with the Mortgagee following notice and the expiration of any applicable cure period, including without limitation, any default under any Swap Transaction entered into by Lessee and Mortgagee, or if a Termination Event (as defined in the Swap Transaction) occurs and is continuing under the Swap Transaction; or

(n) if any shares of the capital stock of the Mortgagor or any Guarantor, if the Mortgagor or such Guarantor is a corporation, shall be sold, assigned, transferred, conveyed, mortgaged, pledged, hypothecated or alienated without the prior written consent of the Mortgagee; or

(o) if any partnership or limited liability company interest in the Mortgagor or any Guarantor, if the Mortgagor or such Guarantor is a partnership, shall be sold, assigned, transferred, conveyed, mortgaged, pledged, hypothecated or alienated without the prior written consent of the Mortgagee; or

(p) if it shall be illegal for the Mortgagor to pay any tax referred to in Section 1.08 hereof or if the payment of such tax by the Mortgagor would result in the violation of the usury laws of the State of New York; or

(q) if any person or entity having or claiming an interest in the Mortgagor or the Mortgaged Property commences an action or proceeding against the Mortgagor, the Mortgaged Property or any person or entity having or claiming an interest in the Mortgagor or the Mortgaged Property; or

(r) if a default shall occur under the Company Lease, Agency Lease or the Sublease which continues beyond the applicable notice and grace periods; or

(s) if the Mortgagor fails to deliver to the Mortgage by November 30, 2018 satisfactory proof that the following open permits have been removed of record from the Town of Islip Building Department records:

Open Permits

Building Permit issued on 10/13/2009 for interior alterations to cellu-tissue.

Building Permit issued on 11/19/2009 for a fire sprinkler system.

Building Permit issued on 9/13/2017 for interior alterations; then and in every such case:

I. During the continuance of any such Event of Default, the Mortgagee, by written notice given to the Mortgagor, may declare the entire principal of the Note then outstanding (if not then due and payable), and all accrued and unpaid interest thereon, together with all other Indebtedness, to be due and payable immediately, and upon any such declaration the principal of the Note, said accrued and unpaid interest thereon, and all other Indebtedness shall become and be immediately due and payable, anything in the Note or in this Mortgage to the contrary notwithstanding;

II. During the continuance of any such Event of Default, the Mortgagee personally, or by its agents or attorneys, may enter into and upon all or any part of the Premises, and each and every part thereof, and may exclude the Mortgagor, its agents and servants wholly therefrom; and having and holding the same, may use, operate, manage and control the Premises and conduct the business thereof, either personally or by its superintendents, managers, agents, servants, attorneys or receivers; and upon every such entry, the Mortgagee, at the expense of the Mortgaged Property, from time to time, either by purchase, repairs or construction, may maintain and restore the Mortgaged Property, whereof it shall become possessed as aforesaid, may complete the construction of any of the Improvements and in the course of such completion may make such changes in the contemplated Improvements as it may deem desirable and may insure the same; and likewise, from time to time, at the expense of the Mortgaged Property, the Mortgagee may make all necessary or proper repairs, renewals and replacements and such useful alterations, additions, betterments and improvements thereto and thereon as to it may seem advisable; and in every such case the Mortgagee shall have the right to manage and operate the Mortgaged Property and to carry on the business thereof and exercise all rights and powers of the Mortgagor with respect thereto either in the name of the Mortgagor or otherwise as it shall deem best; and the Mortgagee shall be entitled to collect and receive all earnings, revenues, rents, issues profits and income of the Mortgaged Property and every part thereof, excluding the Agency's Unassigned Rights, and in furtherance of such right the Mortgagee may collect the rents payable under all leases of the Premises, excluding the Agency's Unassigned Rights, directly from the lessees thereunder upon notice to each such lessee that an Event of Default exists hereunder accompanied by a demand on such lessee for the payment to the Mortgagee of all rents due and to become due under its lease, and the Mortgagor FOR THE BENEFIT OF MORTGAGEE AND EACH SUCH LESSEE hereby covenants and agrees that the lessee shall be under no duty to question the accuracy of the Mortgagee's statement of default and shall unequivocally be authorized to pay said rents to the Mortgagee without regard to the truth of the Mortgagee's statement of default and notwithstanding notices from the Mortgagor disputing the existence of an Event of Default such that the payment of rent by the lessee to the Mortgagee pursuant to such a demand shall constitute performance in full of the lessee's obligation under the lease for the payment of rents by the lessee to the Mortgagor; and after deducting the expenses of conducting the business thereof and of all maintenance, repairs, renewals, replacements, alterations, additions, betterments and improvements and amounts necessary to pay for taxes, assessments, insurance and prior or other proper charges upon the Mortgaged Property, or any part thereof, as well as just and reasonable compensation for the services of the Mortgagee and for all attorneys, counsel, agents, clerks, servants and other employees by it properly engaged and employed, the Mortgagee shall apply the moneys arising as aforesaid, first to the payment of the principal of the Note and the interest thereon, when and as the same shall become

payable, and second to the payment of any other Indebtedness and sums required to be paid by the Mortgagor under this Mortgage.

III. The Mortgagee, with or without entry, personally or by its agents or attorneys, insofar as applicable, may:

(1) sell the Mortgaged Property or any part thereof pursuant to any procedures provided by applicable law, including, without limitation, the procedures set forth in Article 14 of the New York Real Property Actions and Proceedings Law (and any amendments or substitute statutes in regard thereto), and all estate, right, title, interest, claim and demand therein, and right of redemption thereof, at one or more sales as an entirety or in parcels, and at such time and place upon such terms and after such notice thereof as may be required or permitted by applicable law; or

(2)

institute proceedings for the complete or partial foreclosure of this Mortgage ; or

(3) take such steps to protect and enforce its rights whether by action , suit or proceeding in equity or at law for the specific performance of any covenant, condition or agreement in the Note, or in this Mortgage, or in aid of the execution of any power herein granted, or for any foreclosure hereunder, or for the enforcement of any other appropriate legal or equitable remedy or otherwise as the Mortgagee shall elect; or

(4) the Mortgagee also shall have such other rights and/or remedies provided to a mortgagee and/or a secured party by the Uniform Commercial Code as that model statute is enacted and in effect in the jurisdiction wherein the Premises are situated.

SECTION 2.02. (a) The Mortgagee may adjourn from time to time any sale by it to be made under or by virtue of this Mortgage by announcement at the time and place appointed for such sale or for such adjourned sale or sales; and, except as otherwise provided by any applicable provision of law, the Mortgagee, without further notice or publication, may make such sale at the time and place to which the same shall be so adjourned.

(b) Upon the completion of any sale or sales made by the Mortgagee under or by virtue of this Article II, the Mortgagee, or an officer of any court empowered to do so, shall execute and deliver to the accepted purchaser or purchasers a good and sufficient instrument, or good and sufficient instruments, conveying, assigning and transferring all estate, right, title and interest in and to the property and rights sold and shall execute and deliver to the appropriate governmental authority any affidavit, instrument, document and/or filing required pursuant to any applicable statute, ordinance, rule and/or regulation. As long as the loan secured by this Mortgage remains unpaid the Mortgagee is hereby irrevocably appointed the true and lawful attorney of the Mortgagor, in its name and stead, to make all necessary conveyances, assignments, transfers and deliveries of the Mortgaged Property and rights so sold and for that purpose the Mortgagee may execute all necessary instruments of conveyance , assignment and transfer, including, without limitation, any affidavit, instrument, document or filing required pursuant to any applicable statute, rule or regulation, and may substitute one or more persons with like power, the Mortgagor hereby ratifying and confirming all that its said attorney or such substitute or substitutes shall lawfully do by virtue hereof. Nevertheless the Mortgagor, if so requested by the Mortgagee, shall ratify and confirm any such sale or sales by executing and delivering to the Mortgagee or to such purchaser or purchasers all such instruments as may be advisable, in the reasonable judgment of the Mortgagee, for that purpose, and as may be designated in such request. Any such sale or sales made under or by virtue of this Article II, whether made under or by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale, shall operate to divest all the estate, right, title, interest, claim and demand whatsoever, whether at law or in equity, of the Mortgagor in and to the properties and rights

so sold, and shall be a perpetual bar both at law and in equity against the Mortgagor and against any and all persons claiming or who may claim the same, or any part thereof, from, through or under the Mortgagor.

(c) In the event of any sale made under or by virtue of this Article II (whether made under or by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale), the entire principal of, and interest on, the Note, if not previously due and payable, and all other sums required to be paid by the Mortgagor pursuant to this Mortgage, immediately thereupon, shall, anything in the Note or in this Mortgage to the contrary notwithstanding, become due and payable.

(d) The purchase money proceeds or avails of any sale made under or by virtue of this Article II, together with any other sums which then may be held by the Mortgagee under this Mortgage, whether under the provisions of this Article II or otherwise, shall be applied as follows:

First: To the payment of the costs and expenses of such sale, including, but not limited to, the reasonable compensation to the Mortgagee, its agents and counsel, and any sums that may be due under and/or pursuant to any statute, rule, regulation and/or law which imposes any tax, charge, fee and/or levy in connection with and/or arising from the exercise of any right and/or remedy under this Mortgage or the requirement that any sum be paid in order to record and/or file any deed, instrument of transfer or other such document in connection with any such sale and of any judicial proceedings wherein the same may be made, and of all expenses, liabilities and advances made or incurred by the Mortgagee under this Mortgage, together with interest at the Involuntary Rate on all advances made by the Mortgagee and all taxes or assessments, except any taxes, assessments or other charges subject to which the Mortgaged Property shall have been sold.

Second: To the payment of the whole amount then due, owing or unpaid upon the Note for principal, interest, other indebtedness (on a pari passu basis with all obligations of the Mortgagor under the Swap Transaction), and any other sums required to be paid thereunder with interest on the unpaid principal at the Involuntary Rate from and after the happening of any Event of Default described in clause (a) of Section 2.01 from the due date of any such payment of principal until the same is paid.

Third: To the payment of any other Indebtedness and any other sums required to be paid by the Mortgagor pursuant to any provision of this Mortgage or the Note.

Fourth: To the payment of the surplus, if any, to Mortgagor.

(e) Upon any sale made under or by virtue of this Article II, whether made under or by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale, the Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and in lieu of paying cash therefor may make settlement for the purchase price by crediting upon the indebtedness of the Mortgagor secured by this Mortgage the net sales price after deducting therefrom the expenses of the sale and the costs of the action and any other sums which the Mortgagee is authorized to deduct under this Mortgage.

SECTION 2.03. (a) In case an Event of Default shall have happened and be continuing, then, upon written demand of the Mortgagee, the Mortgagor will pay to the Mortgagee the whole amount which then shall have become due and payable on the Note, for principal or interest or both, as the case may be, and after the happening of said Event of Default will also pay to the Mortgagee interest at the Involuntary Rate on the then unpaid principal of the Note, and the sums required to be paid by the Mortgagor pursuant to any provision of this Mortgage, and in addition thereto such further amount as shall be sufficient to cover the costs and expenses of collection, including reasonable compensation to

the Mortgagee, its agents, and counsel and any expenses incurred by the Mortgagee hereunder. In the event the Mortgagor shall fail forthwith to pay such amounts upon such demand, the Mortgagee shall be entitled and empowered to institute such action or proceedings at law or in equity as may be advised by its counsel for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Mortgagor and collect, out of the property of the Mortgagor wherever situated, as well as out of the Mortgaged Property, in any manner provided by law, moneys adjudged or decreed to be payable.

(b) The Mortgagee shall be entitled to recover judgment as aforesaid either before or after or during the pendency of any proceedings for the enforcement of the provisions of this Mortgage; and the right of the Mortgagee to recover such judgment shall not be affected by any entry or sale hereunder, or by the exercise of any other right, power or remedy for the enforcement of the provisions of this Mortgage, or the foreclosure of the lien hereof; and in the event of a sale of the Mortgaged Property, or any part thereof, and of the application of the proceeds of sale, as in this Mortgage provided, to the payment of the debt hereby secured, the Mortgagee shall be entitled to enforce payment of, and to receive all amounts then remaining due and unpaid upon the Note, and to enforce payment of all other charges, payments and costs due under this Mortgage, and shall be entitled to recover judgment for any portion of the debt remaining unpaid, with interest at the Involuntary Rate. In case of the commencement of any case against the Mortgagor under any applicable bankruptcy, insolvency, or other similar law now or hereafter in effect or any proceedings for its reorganization or involving the liquidation of its assets, then the Mortgagee shall be entitled to prove the whole amount of principal and interest due upon the Note to the full amount thereof, and all other payments, charges and costs due under this Mortgage, without deducting therefrom any proceeds obtained from the sale of the whole or any part of the Mortgaged Property, provided, however, that in no case shall the Mortgagee receive a greater amount than such principal and interest and such other payments, charges and costs from the aggregate amount of the proceeds of the sale of the Mortgaged Property and the distribution from the estate of the Mortgagor.

(c) No recovery of any judgment by the Mortgagee and no levy of an execution under any judgment upon the Mortgaged Property or upon any other property of the Mortgagor shall affect in any manner or to any extent, the lien of this Mortgage upon the Mortgaged Property, or any part thereof, of any liens, rights, powers or remedies of the Mortgagee hereunder, but such liens, rights, powers and remedies of the Mortgagee shall continue unimpaired as before.

(d) Any moneys thus collected by the Mortgagee under this Section 2.03 shall be applied by the Mortgagee in accordance with the provisions of subsection (d) of Section 2.02.

SECTION 2.04. After the happening of any Event of Default and immediately upon the commencement of any action, suit or other legal proceedings by the Mortgagee to obtain judgment for the principal of, or interest on, the Note, and all other Indebtedness and other sums required to be paid by the Mortgagor pursuant to any provision of this Mortgage, or of any other nature in aid of the enforcement of the Note or of this Mortgage, the Mortgagor will (a) consent to the service of process as provided in Section 3.12 and enter its voluntary appearance in such action, suit or proceeding, and (b) if required by the Mortgagee, consent to the appointment of a receiver or receivers of the Mortgaged Property, or any part thereof, and of all the earnings, revenues, rents, issues, profits and income thereof. After the happening of any Event of Default and during its continuance, or upon the commencement of any proceedings to foreclose this Mortgage or to enforce the specific performance hereof or in aid thereof or upon the commencement of any other judicial proceeding to enforce any right of the Mortgagee, the Mortgagee shall be entitled, as a matter of right, if it shall so elect, without the giving of notice to any other party and without regard to the adequacy or inadequacy of any security for the Indebtedness,

forthwith either before or after declaring the unpaid principal of the Note to be due and payable, to the appointment of such a receiver or receivers.

SECTION 2.05. Notwithstanding the appointment of any receiver, liquidator or trustee of the Mortgagor, or of any of its property, or of the Mortgaged Property or any part thereof, the Mortgagee shall be entitled to retain possession and control of all property now or hereafter held under this Mortgage.

SECTION 2.06. No remedy herein conferred upon or reserved to the Mortgagee is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative, and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission of the Mortgagee to exercise any right or power accruing upon any Event of Default shall impair any such right or power, or shall be construed to be a waiver of any such Event of Default or any acquiescence therein; and every power and remedy given by this Mortgage to the Mortgagee may be exercised from time to time as often as may be deemed expedient by the Mortgagee. Nothing in this Mortgage or in the Note shall affect the obligation of the Mortgagor to pay the principal of, and interest on, the Note in the manner and at the time and place therein respectively expressed.

SECTION 2.07. The Mortgagor will not at any time insist upon, or plead, or in any manner whatever claim or take any benefit or advantage of any stay or extension or moratorium law, any exemption from execution or sale of the Mortgaged Property or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance of this Mortgage, nor claim, take or insist upon any benefit or advantage of any law now or hereafter in force providing for the valuation or appraisal of the Mortgaged Property, or any part thereof, prior to any sale or sales thereof which may be made pursuant to any provision herein, or pursuant to the decree, judgment or order of any court of competent jurisdiction; nor, after any such sale or sales, claim or exercise any right under any statute heretofore or hereafter enacted to redeem the property so sold or any part thereof and the Agency and the Mortgagor hereby expressly waive all benefit or advantage of any such law or laws, and covenant not to hinder, delay or impede the execution of any power herein granted or delegated to the Mortgagee, but to suffer and permit the execution of every power as though no such law or laws had been made or enacted. The Agency and the Mortgagor each waive, to the extent that they lawfully may, all right to have the Mortgaged Property, or any part thereof, marshaled upon any foreclosure hereof.

SECTION 2.08. During the continuance of any Event of Default, and pending the exercise by the Mortgagee of its right to exclude the Mortgagor from all or any part of the Premises, the Mortgagor agrees to pay the fair and reasonable rental value for the use and occupancy of the Mortgaged Property, or any part thereof that is in its possession for such period, and upon default of any such payment, will vacate and surrender possession of the Mortgaged Property, or any part thereof, to the Mortgagee or to a receiver, if any, and in default thereof may be evicted by any summary action or proceeding for the recovery of possession of the Premises for non-payment of rent, however designated.

(End of Article II)

ARTICLE III

Miscellaneous

SECTION 3 . 01. In the event any one or more of the prov1s10ns contained in this Mortgage or in the Note shall for any reason be held to be invalid, illegal or unenforceable in any respect,

such invalidity, illegality or unenforceability shall, at the option of the Mortgagee, not affect any other provision of this Mortgage, but this Mortgage shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein or therein.

SECTION 3.02. All notices hereunder or under any applicable law pertaining hereto (including, without limitation, Article 14 of the New York Real Property Actions and Proceedings Law) shall be in writing and shall be deemed sufficiently given or served for all purposes when delivered (i) by personal service or courier service, and shall be deemed given on the date when signed for or, if refused, when refused by the person designated as an agent for receipt of service, (ii) by facsimile transmission, and shall be deemed given when printed confirmation of completion of transmission is generated by the sender's facsimile transmission instrument, or (iii) by United States certified mail, return receipt requested, postage prepaid, and shall be deemed given two (2) days after being sent, to any party hereto at its address above stated or such other address of which a party shall have notified the party giving such notice in writing as aforesaid.

SECTION 3.03. All covenants hereof shall be construed as affording to the Mortgagee rights additional to and not exclusive of the rights conferred under the provisions of Sections 254 and 273 of the Real Property Law of the State of New York, or any other applicable law.

SECTION 3.04. All of the grants, terms, conditions, provisions and covenants of this Mortgage shall run with the land, shall be binding upon the Agency and the Mortgagor and shall inure to the benefit of the Mortgagee, subsequent holders of this Mortgage and their respective successors and assigns. For the purpose of this Mortgage, the term "Agency" shall include and refer to the Agency named herein, any subsequent lessee of the Mortgaged Property, or any part thereof, including the Mortgagor, and their respective heirs, executors, legal representatives, successors and assigns of each. For the avoidance of doubt, the Agency is not a "Mortgagor" hereunder.

SECTION 3.05. The enforcement of this Mortgage shall be governed, construed and interpreted by the laws of the State where the Premises are located. Nothing in this Mortgage, the Note or in any other agreement between the Mortgagor and the Mortgagee shall require the Mortgagor to pay, or the Mortgagee to accept, interest in an amount which would subject the Mortgagee to any penalty or forfeiture under applicable law. In the event that the payment of any charges, fees or other sums due hereunder or under the Note or any such other agreement, which are or could be held to be in the nature of interest and which would subject the Mortgagee to any penalty or forfeiture under applicable law, then, ipso facto, the obligations of the Mortgagor to make such payment shall be reduced to the highest rate authorized under applicable law. Should the Mortgagee receive any payment which is or would be in excess of the highest rate authorized under law, such payment shall have been, and shall be deemed to have been, made in error, and shall automatically be applied to reduce the outstanding balance of the Indebtedness.

SECTION 3.06. This Mortgage and all of the terms, covenants, provisions, conditions and grants contained in this Mortgage cannot be altered, amended, waived, modified or discharged orally, and no executory agreement shall be effective to modify, waive or discharge, in whole or in part, anything contained in this Mortgage unless it is in writing and signed by the party against whom enforcement of the modification, alteration, amendment, waiver or discharge is sought.

SECTION 3.07. The Agency and Mortgagor acknowledge that each has received a true copy of this Mortgage.

SECTION 3.08. This Mortgage may be executed in any number of counterparts, and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts shall together constitute but one and the same mortgage.

SECTION 3.09. All covenants hereof shall be construed as affording to the Mortgagee rights additional to and not exclusive of the rights conferred under the provisions of any applicable law.

SECTION 3.10. The information set forth on the cover hereof is hereby incorporated herein.

SECTION 3.11. The Agency and Mortgagor expressly agree, intending that the Mortgagee rely thereon, that this Mortgage also shall constitute a "security agreement," as such term is defined in the Uniform Commercial Code in the jurisdiction wherein the Premises are situated (the "Code"). The Mortgaged Property includes, and shall be deemed to include, inter alia, the Chattels and the Intangibles, regardless of whether they are held or hereafter acquired, of the Mortgagor in, to and under the Mortgaged Property. By executing and delivering this Mortgage, the Agency and Mortgagor have granted, in the same manner and with the same effect described in the Granting Clause hereof, to the Mortgagee, as additional security, a security interest in the Chattels and the Intangibles which are subject to the Code. If any Event of Default shall occur, the Mortgagee shall have, in addition to any and all other rights and remedies set forth in this Mortgage, and may exercise without demand, any and all rights and remedies granted to a secured party under the Code, including, but not limited to, the right to take possession of the Chattels and the Intangibles, or any part thereof, and the right to advertise and sell the Chattels and the Intangibles, or any part thereof, pursuant to and in accordance with the power of sale provided for in this Mortgage. The Agency and Mortgagor agree that any notice of sale or other action intended by the Mortgagee with respect to the Chattels and the Intangibles, or any part thereof, shall constitute reasonable notice if it is sent to the Mortgagor not less than ten (10) days prior to any such sale or intended action. The proceeds of any such sale of the Chattels and the Intangibles, or any part thereof, shall be applied in the manner set forth in clauses First through Fourth of Section 2.02 (d) of this Mortgage.

SECTION 3.12. The Agency and the Mortgagor agrees to submit to personal jurisdiction in the State of New York in any action or proceeding arising out of this Mortgage.

SECTION 3.13. This mortgage does not cover(s) 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.

SECTION 3.14. Upon the occurrence of an Event of Default in the performance of any of the Mortgagor's covenants or agreements herein, the Mortgagee may, at its option, pay or perform the same and the amount or cost thereof, with interest at the Involuntary Rate, shall immediately be due from the Mortgagor to the Mortgagee. If the Mortgagor shall fail to perform any of its obligations under this Mortgage, then the Mortgagee may make advances to perform the same on its behalf and, to the extent that any such amounts or costs paid by the Mortgagee shall constitute payment of (i) taxes, charges or assessments which may be imposed by law upon the Premises; (ii) premiums on insurance policies covering the Premises; (iii) expenses incurred in upholding the lien of this Mortgage, including, but not limited to the expenses of any litigation to prosecute or defend the rights and lien created by this Mortgage; (iv) any amount, costs or charge to which the Mortgagee becomes subrogated, upon payment, whether under recognized principles of law or equity, or under express statutory authority; or (v) any amount pursuant to the provisions provided for herein that shall become effective after Event of Default

then, and in each such event, such amounts or costs, together with interest thereon at the Involuntary Rate, shall be added to the indebtedness secured hereby and shall be secured by this Mortgage.

SECTION 3.15. Upon reasonable notice to the Mortgagor, the Mortgagee, its officers, employees, agents and contractors, may enter the Premises to inspect it and to conduct, complete and take such tests, samples, analyses and other processes as the Mortgagee shall require to determine the Mortgagor's compliance with the Environmental Laws. The costs, expenses and fees of the Mortgagee of such entry, inspection, tests, samples, analyses and processes shall be paid and reimbursed by the Mortgagor upon demand by the Mortgagee. Any such sum paid by the Mortgagee, with the interest thereon at the rate provided to be paid on the Indebtedness, shall be a lien on the Premises prior to any claim, lien, right, title or interest in, to or on the Premises attaching or accruing subsequent to the lien of this Mortgage, and shall be deemed to be evidenced and secured by this Mortgage.

SECTION 3.16. AGENCY, DEBTOR AND MORTGAGEE HEREBY WAIVE, TO THE EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE OTHER, OR IN ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY MANNER RELATED TO THIS MORTGAGE.

SECTION 3.17. Anything in this Mortgage or the other Loan Documents to the contrary notwithstanding, the Mortgagor shall indemnify and hold the Agency and the Mortgagee harmless and defend the Agency and the Mortgagee at the Mortgagor's sole cost and expense against any loss or liability, cost or expense (including, without limitation, title insurance premiums and charges and reasonable attorneys' fees and disbursements of the Mortgagee's counsel, whether in-house staff, retained firms or otherwise), and all claims, actions, procedures and suits arising out of or in connection with (i) any ongoing matters arising out of the transaction contemplated hereby, the Indebtedness, this Mortgage, the Note or any other Loan Document, the Company Lease, Agency Lease and the Sublease, and/or the Mortgaged Property, including, but not limited to, all costs of reappraisal of the Mortgaged Property or any part thereof, whether required by law, regulation, the Mortgagee or any governmental or quasi- governmental authority, (ii) any amendment to, or restructuring of, the Indebtedness and this Mortgage, the Note or any of the other Loan Documents, (iii) any and all lawful action that may be taken by the Mortgagee in connection with the enforcement of the provisions of this Mortgage or the Note or any of the other Loan Documents, whether or not suit is filed in connection with the same, or in connection with the Mortgagor, any Guarantor and/or any partner, joint venturer or shareholder thereof becoming a party to a voluntary or involuntary federal or state bankruptcy, insolvency or similar proceeding, and (iv) the past, current and/or future sale or offering for sale of interests in the Mortgagor, including, without limitation, liabilities under any applicable securities or blue sky laws. All sums expended by the Mortgagee shall be payable on demand and, until reimbursed by the Mortgagor pursuant hereto, shall be deemed additional principal of the Indebtedness and secured hereby and shall bear interest at the Involuntary Rate. The obligations of the Mortgagor under this paragraph shall, notwithstanding any exculpatory or other provisions of any nature whatsoever set forth in the Loan Documents, constitute the personal recourse undertakings, obligations and liabilities of the Mortgagor.

SECTION 3.18. No Recourse Against Agency . The general credit of the Agency is not obligated or available for the payment of this Mortgage. The Mortgagee will not look to the Agency or any principal, member, director, officer or employee of the Agency with respect to the indebtedness evidenced by this Mortgage or any covenant, stipulation, promise, agreement or obligation contained herein. In enforcing its rights and remedies under this Mortgage, the Mortgagee will look solely to the mortgaged property and/or the Mortgagor for the payment of the indebtedness secured by this Mortgage and for the performance of the provisions hereof. The Mortgagee will not seek a deficiency or other money judgment against the Agency or any principal, member, director, officer or employee of the

Agency and will not institute any separate action against the Agency by reason of any default that may occur in the performance of any of the terms and conditions of this Mortgage or the Loan documentation. This Agreement on the part of the Mortgagee shall not be construed in any way so as to effect or impair the lien of this Mortgage of the Mortgagee's right to foreclose hereunder as provided by law or construed in any way so as to limit or restrict any of the rights or remedies of the Mortgagee in any foreclosure proceedings or other enforcement of payment of the indebtedness secured hereby out of and from the security given therefor. All covenants, stipulations, promises, agreements and obligations are the Agency's and not of any member, director, officer, employee or agent (except the Mortgagor) of the Agency in his or her individual capacity, and no recourse shall be had for the payment of the principal of any debt or interest thereon or for any claim based thereon or hereunder against any member, director, officer, employee or agency (except the Mortgagor) of the Agency or any natural person executing this Mortgage on behalf of the Agency. No covenant contained herein shall be deemed to constitute a debt of the State of New York or the Town oflslip and neither the State of New York nor the Town oflslip shall be liable on any covenant contained herein, nor shall any obligations hereunder be payable out of any funds of the Mortgagor.

SECTION 3.19. The relationship of the Mortgagee to the Mortgagor hereunder is strictly and solely that of lender and borrower and Mortgagor and mortgagee and nothing contained in the Note, this Mortgage or any other document or instrument now or hereafter executed and delivered in connection therewith or otherwise in connection with the loan secured hereby is intended to create, or shall in any event or under any circumstance be construed as creating, a partnership, joint venture, tenancy-in- common, joint tenancy or other relationship of any nature whatsoever between the Mortgagee and the Mortgagor other than as lender and borrower.

SECTION 3.20. Hold Harmless Provisions .

(a) The Mortgagor agrees that the Agency, its directors, members, officers, agents (except the Mortgagor) and employees shall not be liable for and agrees to defend, indemnify, release and hold the Agency, its director, members, officers, agents (except the Mortgagor) and employees harmless from and against any and all (i) liability for loss or damage to property or injury to or death of any and all persons that may be occasioned by, directly or indirectly, any cause whatsoever pertaining to the Facility or arising by reason of or in connection with the use thereof or under this Mortgage, or (ii) liability arising from or expense incurred by the Agency's acquiring, constructing, renovating and equipping, installation, owning and leasing of the Premises, including without limitation the generality of the foregoing, all claims arising from the breach by the Mortgagor of any of its covenants contained herein and all causes of action and reasonable attorneys' fees (whether by reason of third party claims or by reason of the enforcement of any provision of the Lease or this Mortgage (including without limitation this Section) and any other expenses incurred in defending any claims, suits or actions) which may arise as a result of the foregoing, provided that any such losses, damages, liabilities or expenses of the Agency are not incurred or do not result from the gross negligence or intentional or willful wrongdoing of the Agency or any of its directors, members, officers, agents (except the Mortgagor) or employees. The foregoing indemnities shall apply notwithstanding the fault or negligence on the part of the Agency, or any of its members, directors, officers, agents, or employees and irrespective of the breach of a statutory obligation or the application of any rule of comparative or apportioned liability. The foregoing indemnities are limited only to the extent of any prohibitions imposed by law, and upon the application of such prohibition by the final judgment or decision of a competent court of law, the remaining provisions of these indemnities shall remain in full force and effect.

(b) Notwithstanding any other provisions of this Mortgage, the obligations of the Mortgagor pursuant to this Section 3.20 shall remain in full force and effect after the termination of this Mortgage until the expiration of the period stated in the applicable statute of limitations during which a

claim, cause of action or prosecution relating to the matters herein described may be brought and payment in full or the satisfaction of such claim, cause of action or prosecution relating to the matters herein described and the payment of all reasonable expenses and charges incurred by the Agency, or its respective members, directors, officers, agents (except the Mortgagor) and employees, relating to the enforcement of the provisions herein specified.

(c) In the event of any claim against the Agency or its members, directors, officers, agents (except the Mortgagor) or employees by any employee or contractor of the Mortgagor or anyone directly or indirectly employed by any of them or anyone for whose acts any of them may be liable, the obligations of the Mortgagor hereunder shall not be limited in any way by any limitation on the amount or type of damages, compensation, disability benefits or other employee benefit acts.

(d) The Mortgagor directs the Agency to execute and deliver this Mortgage to the Mortgagee, and further agrees to indemnify the Agency (and its members, officer, directors, agents, servants and employees) in connection with the execution, delivery, recording, performing and enforcing of this Mortgage.

SECTION 3.21. The Mortgagee shall not be deemed to have consented to or acquiesced in any particular provision of any of the Company Lease, Agency Lease or the Sublease; and the Agency and the Mortgagor hereby confirm that the Company Lease, Agency Lease or the Sublease are in all respects subordinate to this Mortgage, including, without limitation, matters pertaining to property insurance proceeds and condemnation proceeds. Nothing in the Company Lease, Agency Lease or the Sublease shall vitiate in any way the Mortgagor's obligations under this Mortgage.

SECTION 3.22. Upon termination of the Company Lease for any reason whatsoever and at the sole cost and expense of the Mortgagor, the Mortgagee shall prepare and deliver to the Agency and the Mortgagor, and the Agency and the Mortgagor shall execute, any documents necessary to amend and restate the Mortgage, in order to remove the Agency as a party hereto.

SECTION 3.23. The Agency covenants that it will record or cause this Mortgage to be duly recorded in all offices where the recordation thereof is necessary, including the Suffolk County Clerk's Office.

SECTION 3.24. Notwithstanding anything set forth in this Mortgage to the contrary, the maximum amount of principal indebtedness secured hereby at execution, or which under any contingency may become secured hereby at any time hereafter, is $10,387,500.00, with interest (including interest at the Involuntary Rate to the extent provided in this Mortgage), late charges and such other sums as may (a) be advanced by the Mortgagee pursuant to the Loan Documents for the protection of the Mortgaged Property or the preservation of the lien of this Mortgage (together with attorneys' fees and disbursements) and (b) be secured hereby without resulting in the imposition of mortgage recording tax in addition to the amount of tax due with respect to the principal indebtedness of $10,387,500.00.

SECTION 3.25 The Mortgagor and Agency agree that the Company Lease, Agency Lease or the Sublease are subject and subordinate in all respects to this Mortgage, including any renewals, replacements, extensions, modifications, etc. of the same. This provision shall be self-operative and no further instrument of subordination shall be necessary.

SECTION 3.26. The Agency retains the right to defend itself in any action or actions covered by the indemnities in this Mortgage, which in the reasonable opinion of the Agency its directors, members, officers, agents (except the Mortgagor), or employees independent counsel is necessary to protect the interests of the Agency due to the failure or inability of the Mortgagor to defend the Agency

consistent with contemporary legal standards. In any such defense of itself, the Agency shall select its own counsel, and any and all reasonable out-of-pocket costs of such defense, including, without limitation, attorney and disbursement fees, court costs, and litigation expenses shall be paid by the Mortgagor .

[remainder of this page intentionally left blank]

IN WITNESS WHEREOF, this Mortgage has been duly executed by the Agency and the Mortgagor.

TOWN OF ISLIP INDUSTRIAL

DEVELOPMENT AGENCY

By: /s/ William G. Mannix

William G. Mannix

Executive Director

555 N Research Corporation

By: /s/ Glen Charles

Glen Charles

Chief Financial Officer

S T A T E OF NEW YORK )

) ss.:

COUNTY OF NASSAU )

On the 30 ^th da y of No v ember in the year 2017 , before me, the undersigned , a Notary Public in and for said State, personally appeared Glen Charles , personally known to be or proved to me on the basis of satisfactory evidence to be the individual w hose name is subscribed to the within instrument and acknowledged to me that he executed the same i n his capacity, and that by his signature on the instrument, the individual, or the person upon beh a lf of which the individual acted, executed instrument.

____________________________________

Notary Public

ST ATE OF N E W Y O RK )

) ss.:

C O UN TY O F N A SS AU )

On the 30 ^t ^h day o f No v ember in the y ear 2 017 , before me, the undersigned , a Notary Public in and for said State, personall y appeared William G . Manni x, personally known to be or proved to me on the basis of satisfactory e v iden c e to be the individual w hose name is subscribed to the within instrument and acknowledged to m e that he executed the same in his capacity, and that by his signature on the instrument, the individu a l , or the person upon behalf of which the individual acted, executed instrument.

____________________________________

Notary Public

Page 1

AMENDED

SCHEDULE A DESCRIPTION

ALL that certain plot piece or parcel of land, with the buildings and improvements thereon erected, situate, lying and being at Central Islip, in the Town of Islip , County of Suffolk and State of New York, known and designated as Lots 5, 6 and 7 on a certain map entitled, "Map of Tech Park, filed in the Office of the Clerk of Suffolk County, which said map was filed on October 30, 1992 as Map No. 9282, being more particularly bounded and described as follows:

BEGINNING at the point formed by the intersection of the westerly line of North Champlin Drive with the northerly line of North Research Place:

RUNNING THENCE from said point of beginning the following two (2) courses an d distances:

1). South 81 degrees 30 minutes 37 seconds West, a distance of 834 . 82 feet along the northerly line of North Research Place to a point of curve;

2). Southwesterly along a curve to the left having a radius of 283.00 feet, a distance of 119 . 02 feet (deed), 230.44 feet (actual) to the division line between Lot 7 and Lot 8 on said map;

THENCE along said division line, the following two (2) courses and distances: 1). North 55 degrees 08 minutes 36 seconds West, 129.29 feet;

2). North 11 degrees 47 minutes 48 seconds West, 348.01 feet to a point on the southerly line

of "Map of College Woods Section 2", filed 3/4/91 as Map No. 9071 .

THENCE along said southerly line of "Map of College Woods, Section 2", North 72 degrees 54 minutes 33 seconds East, a distance of 1106.21 feet to a point;

THENCE South 39 degrees 24 minutes 19 seconds East, a distance of 136.64 feet to a point on the westerly line of North Champlin Drive;

THENCE along westerly line of North Champlin Drive, the following four (4) courses and dis tances :

1).

South 13 degrees 29 minutes 54 seconds East, a distance of 137 . 77 feet to a point;

2).

Along the arc of a curve, bearing to the right having a radius of 975 .00 feet, a distance of 85.23 feet to a point;

3).

South 08 degrees 29 minutes 23 seconds East, a distance of 148 . 26 feet to a point;

4).

Along the arc of a curve, bearing to the right, having a radius of 25 .00 feet, a distance of 39.27 feet to the point or place of BEGINNING .

TOGETHER with a non-exclusive ea sement for ingress and egress , in and over the following described parcel:

ALL that certain plot , piece or parcel of land, situate, lying and being in Central Islip in the Town of Islip, County of Suffolk and State of New York, being a portion of Lot 4 on a certain map entitled, "Map of Tech Park" filed in the Office of the Clerk of the County of Suffolk, filed October 30, 1992 as Map No. 9282, being more particularly bounded and described as follows:

BEGINNING at a point on the westerly side of North Ch amplin Drive where the same is intersected by the division line between Lot 4 and Lot 5 on said map;

Page 2

RUNNING THENCE along the westerly side of North Champlin Drive, North 13 degrees 29 minutes 54 seconds West, 126.66 feet to a point;

THENCE through Lot 4 on said map, South 72 degrees 54 minutes 33 seconds West, 59.82 feet to a point on the division line between Lot 4 and Lot 5 on said map;

THENCE along the division line, South 39 degrees 24 minutes 19 seconds East, 136.64 feet to the point or place of BEGINNING .

Exhibit 10.27

Nixon Peabody LLP

Draft Dated 11/15/17

Transcript Document No. 1

TOWN OF ISLIP INDUSTRIAL DEVELOPMENT AGENCY

( TOWN OF ISLIP, NEW YORK)

and

FAE HOLDINGS 411519R, LLC

______________________________________

AMENDED AND RESTATED LEASE AND PROJECT AGREEMENT

______________________________________

Dated as of November 1, 2017

Town of Islip Industrial Development Agency

( FAE Holdings 411519R, LLC/CVD Equipment Corporation 2017 Facility)

Table of Contents

Page

ARTICLE I DEFINITIONS		3

ARTICLE II REPRESENTATIONS AND COVENANTS		3

Section 2.1	Representations and Covenants of Agency	3
Section 2.2	Representations and Covenants of Company	4

ARTICLE III CONVEYANCE OF FACILITY SITE; PROJECT WORK AND COMPLETION		5

Section 3.1	Agreement to Convey to Agency	5
Section 3.2	Title Report and Survey	5
Section 3.3	Public Authorities Law Representations	6
Section 3.4	Project Work	6
Section 3.5	Identification of Equipment	6
Section 3.6	Certificates of Completion	7
Section 3.7	Remedies to Be Pursued Against Contractors, Subcontractors, Materialmen and Their Sureties	7
Section 3.8	Reserved	7

ARTICLE IV LEASE OF FACILITY RENTAL PROVISIONS		7

Section 4.1	Lease of Facility	7
Section 4.2	Duration of Lease Term; Quiet Enjoyment	7
Section 4.3	Rents and Other Amounts Payable	8
Section 4.4	Obligations of Company Hereunder Unconditional	8
Section 4.5	No Warranty of Condition or Suitability by Agency	8

ARTICLE V PILOT PAYMENTS; SALES TAX EXEMPTION; MORTGAGE RECORDING TAX EXEMPTION AND RECAPTURE OF BENEFITS		9

Section 5.1	PILOT Payments	9
Section 5.2	Sales Tax Exemption	12
Section 5.3	Mortgage Recording Tax Exemption	16
Section 5.4	Recapture of Agency Benefits	16

ARTICLE VI MAINTENANCE, MODIFICATIONS, TAXES AND INSURANCE		19

Section 6.1	Maintenance and Modifications of Facility by Company	19
Section 6.2	Installation of Additional Equipment	20
Section 6.3	Taxes, Assessments and Utility Charges	20
Section 6.4	Insurance Required	21
Section 6.5	Additional Provisions Respecting Insurance	23
Section 6.6	Application of Net Proceeds of Insurance	23
Section 6.7	Right of Agency to Pay Taxes, Insurance Premiums and Other Charges	24

ARTICLE VII DAMAGE, DESTRUCTION AND CONDEMNATION		24

Section 7.1	Damage or Destruction of the Facility	24
Section 7.2	Condemnation	26
Section 7.3	Condemnation of Company-Owned Property	27
Section 7.4	Waiver of Real Property Law Section 227	27

Table of Contents (continued)

Page

ARTICLE VIII SPECIAL COVENANTS		27

Section 8.1	Right to Inspect Facility	27
Section 8.2	Hold Harmless Provisions	28
Section 8.3	Company to Maintain Its Existence	29
Section 8.4	Qualification in State	29
Section 8.5	Agreement to File Annual Statements and Provide Information	30
Section 8.6	Books of Record and Account; Financial Statements	30
Section 8.7	Compliance with Orders, Ordinances, Etc	30
Section 8.8	Discharge of Liens and Encumbrances	31
Section 8.9	Depreciation Deductions and Investment Tax Credit	31
Section 8.10	Employment Opportunities; Notice of Jobs	31
Section 8.11	Employment at the Facility	32

ARTICLE IX RELEASE OF CERTAIN LAND; ASSIGNMENTS AND SUBLEASING		32

Section 9.1	Restriction on Sale of Facility; Release of Certain Land	32
Section 9.2	Removal of Equipment	32
Section 9.3	Assignment and Subleasing	33
Section 9.4	Merger of Agency.	34

ARTICLE X EVENTS OF DEFAULT AND REMEDIES		34

Section 10.1	Events of Default Defined	34
Section 10.2	Remedies on Default	36
Section 10.3	Remedies Cumulative	37
Section 10.4	Agreement to Pay Attorneys’ Fees and Expenses	37
Section 10.5	No Additional Waiver Implied by One Waiver	37
Section 10.6	Certificate of No Default	37

ARTICLE XI EARLY TERMINATION OF LEASE AGREEMENT OPTION IN FAVOR OF COMPANY		37

Section 11.1	Early Termination of Lease Agreement	37
Section 11.2	Conditions to Termination of Lease Agreement	38
Section 11.3	Conveyance on Termination	38

ARTICLE XII LENDER PROVISIONS		38

Section 12.1	Subordination of Lease Agreement	38
Section 12.2	Mortgage and Pledge of Agency’s Interests to Lender	39
Section 12.3	Pledge of Company’s Interest to Lender	39
Section 12.4	Making of Loans; Disbursement of Loan Proceeds	39
Section 12.5	References to Lender, Loan or Mortgage	39

ARTICLE XIII ENVIRONMENTAL MATTERS		40

Section 13.1	Environmental Representations of the Company	40
Section 13.2	Environmental Covenants of the Company	41
Section 13.3	Survival Provision	43

Table of Contents (continued)

Page

ARTICLE XIV MISCELLANEOUS		43

Section 14.1	Notices	43
Section 14.2	Binding Effect	44
Section 14.3	Severability	44
Section 14.4	Amendments, Changes and Modifications	44
Section 14.5	Execution of Counterparts	44
Section 14.6	Applicable Law	44
Section 14.7	List of Additional Equipment; Further Assurances	44
Section 14.8	Survival of Obligations	44
Section 14.9	Table of Contents and Section Headings Not Controlling	45
Section 14.10	Waiver of Trial by Jury	45

iii

EXHIBIT A

Legal Description of Real Property

EXHIBIT B

Equipment

EXHIBIT C

PILOT Schedule

EXHIBIT D

Mortgage Requirements

EXHIBIT E

Sales Tax Agent Authorization Letter

EXHIBIT F

Sales Tax Registry

EXHIBIT G

Construction Wage Policy

EXHIBIT H

Exceptions to Representations and Warranties of Company

EXHIBI T I

Form Tenant Agency Compliance Agreement

SCHEDULE A

Schedule of Definitions

THIS AMENDED AND RESTATED LEASE AND PROJECT AGREEMENT, originally dated as of March 1, 2012 and amended and restated as of November 1, 2017 (this “ Lease Agreement ”), is between the TOWN OF ISLIP INDUSTRIAL DEVELOPMENT AGENCY, a public benefit corporation of the State of New York, having its office at 40 Nassau Avenue, Islip, New York 11751 (the “ Agency ”), and FAE HOLDINGS 411519R, LLC, a limited liability company duly organized and validly existing under the laws of the State of New York, having its principal office at 355 South Technology Drive, Central Islip, New York 11722 (the “ Company ”).

R E C I T A L S

WHEREAS, Title 1 of Article 18-A of the General Municipal Law of the State of New York was duly enacted into law as Chapter 1030 of the Laws of 1969 of the State of New York (the “ State ”); and

WHEREAS, the aforesaid act authorizes the creation of industrial development agencies for the Public Purposes of the State; and

WHEREAS, the aforesaid act further authorizes the creation of industrial development agencies for the benefit of the several counties, cities, villages and towns in the State and empowers such agencies, among other things, to acquire, construct, reconstruct, renovate, refurbish, equip, lease, sell and dispose of land and any building or other improvement, and all real and personal property, including but not limited to machinery and equipment deemed necessary in connection therewith, whether now in existence or under construction, which shall be suitable for manufacturing, warehousing, research, commercial, recreation or industrial facilities, in order to advance job opportunities, health, general prosperity and the economic welfare of the people of the State and to improve their standard of living; and

WHEREAS, pursuant to and in accordance with the provisions of the aforesaid act, as amended, and Chapter 47 of the Laws of 1974 of the State, as amended (collectively, the “ Act ”), the Agency was created and is empowered under the act to undertake the Project Work and the leasing of the Facility defined below; and

WHEREAS, the Agency has previously provided assistance to the Company and CVD Equipment Corporation, a New York business corporation (the “ Sublessee ”), in the acquisition, construction and equipping of an approximately 120,000 square foot building (the “ Improvements ” and the “ Equipment ”), on approximately 8.0 acres of land located at 355 South Technology Drive, Central Islip, Suffolk County, New York (the “ Land ”; and together with the Improvements and the Equipment, the “ Facility ”), which Facility is used by the Sublessee as a manufacturing facility to process surface treatments or films and coatings on various product lines in its business as a manufacturer of equipment and materials for the semiconductor industry (the “ Project ”) ; and

WHEREAS, the Company is currently subleasing the Facility to the Sublessee pursuant to a certain Lease Agreement, dated as of February 9, 2012 (the “ Original Sublease Agreement ”), by and between the Company and the Sublessee; and

WHEREAS, the Company and the Sublessee have now requested an extension of the lease term and the property tax abatements granted on the Facility (the “ Extension ”); and

WHEREAS, the Agency has agreed to continue leasing the Facility to the Company, and the Company desires to rent the Facility from the Agency, upon the terms and conditions set forth in this Lease Agreement; and

WHEREAS, the PILOT Agreement will be amended and restated pursuant to this Lease Agreement; and

WHEREAS, the Environmental Compliance and Indemnification Agreement will be amended and restated pursuant to this Lease Agreement; and

WHEREAS, the Original Agency Compliance Agreement will be amended and restated pursuant to a certain Amended and Restated Agency Compliance Agreement , dated as of November 1, 2017 (the “ Amended and Restated Agency Compliance Agreement ”; and together with the Original Agency Compliance Agreement, the “ Agency Compliance Agreement ”), by and between the Agency and the Sublessee.

- 2 -

AGREEMENT

For and in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto do hereby mutually agree as follows:

ARTICLE I
DEFINITIONS

All capitalized terms used in this Lease Agreement and not otherwise defined herein shall have the meanings assigned thereto in the Schedule of Definitions attached hereto as Schedule A .

ARTICLE II
REPRESENTATIONS AND COVENANTS

Section 2.1 Representations and Covenants of Agency . The Agency makes the following representations and covenants as the basis for the undertakings on its part herein contained:

(a) The Agency is duly established and validly existing under the provisions of the Act and has full legal right, power and authority to execute, deliver and perform each of the Agency Documents and the other documents contemplated thereby. Each of the Agency Documents and the other documents contemplated thereby has been duly authorized, executed and delivered by the Agency.

(b) The Agency has acquired a fee title interest in the Land and Improvements, caused the Improvements to be constructed and the Equipment to be acquired and installed and will continue leasing the Facility to the Company pursuant to this Lease Agreement, all for the Public Purposes of the State.

(c) By resolution dated November 29, 2011, the Agency determined that, based upon the review by the Agency of the materials submitted and the representations made by the Company relating to the Facility, the Facility would not have a “significant impact” or “significant effect” on the environment within the meaning of the SEQR Act.

(d) Neither the execution and delivery of any of the Agency Documents and the other documents contemplated thereby or the consummation of the transactions contemplated thereby nor the fulfillment of or compliance with the provisions of any of the Agency Documents and the other documents contemplated thereby will conflict with or result in a breach of or constitute a default under any of the terms, conditions or provisions of the Act, any other law or ordinance of the State or any political subdivision thereof, the Agency ’s Certificate of Establishment or By-Laws, as amended, or any corporate restriction or any agreement or instrument to which the Agency is a party or by which it is bound, or result in the creation or imposition of any Lien of any nature upon any of the Property of the Agency under the terms of the Act or any such law, ordinance, Certificate of Establishment, By-Laws, restriction, agreement or instrument, except for Permitted Encumbrances.

(e) Each of the Agency Documents and the other documents contemplated thereby constitutes a legal, valid and binding obligation of the Agency enforceable against the Agency in accordance with its terms.

(f) The Agency has been induced to enter into this Lease Agreement by the undertaking of the Company to utilize the Facility in the Town of Islip, New York in furtherance of the Public Purposes of the Agency.

- 3 -

(g) The Agency will execute, acknowledge (if appropriate) and deliver from time to time such instruments and documents which are necessary or desirable to carry out the intent and purposes of this Lease Agreement.

Section 2.2 Representations and Covenants of Company . The Company makes the following representations and covenants as the basis for the undertakings on its part herein contained:

(a) The Company is a limited liability company, organized and existing under the laws of the State of New York, is in good standing under the laws of the State of New York, and has full legal right, power and authority to execute, deliver and perform each of the Company Documents and the other documents contemplated thereby. Each of the Company Documents and the other documents contemplated thereby has been duly authorized, executed and delivered by the Company.

(b) Neither the execution and delivery of any of the Company Documents and the other documents contemplated thereby or the consummation of the transactions contemplated thereby nor the fulfillment of or compliance with the provisions of any of the Company Documents and the other documents contemplated thereby will conflict with or result in a breach of or constitute a default under any of the terms, conditions or provisions of any law or ordinance of the State or any political subdivision thereof, the Company’s Organizational Documents, as amended, or any restriction or any agreement or instrument to which the Company is a party or by which it is bound, or result in the creation or imposition of any Lien of any nature upon any of the Property of the Company under the terms of any such law, ordinance, Organizational Documents, as amended, restriction, agreement or instrument, except for Permitted Encumbrances.

(c) The Facility, any future renovations at the Facility and the design, and operation of the Facility will conform with all applicable zoning, planning, building and Environmental Laws, ordinances, rules and regulations of governmental authorities having jurisdiction over the Facility. Under penalty of perjury, the Company certifies that it is in substantial compliance with all local, state, and federal tax, worker protection and environmental laws, rules and regulations.

(d) Each of the Company Documents and the other documents contemplated thereby constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

(e ) The Facility is and will continue to be a “project” as such quoted term is defined in the Act. The Company will not take any action, or fail to take any action, which action or failure to act would cause the Facility not to constitute a “project” as such quoted term is defined in the Act.

(f ) The transactions contemplated by this Lease Agreement shall not result in the removal of any facility or plant of any Facility occupant(s) from one area of the State to another area of the State or in the abandonment of one or more facilities or plants of the Facility occupant(s) located within the State.

- 4 -

(g ) The Company agrees to take any actions reasonably deemed necessary by the Agency, or its Chairman, Vice Chairman, Executive Director, or any member or officer of the Agency, counsel to the Agency or Transaction Counsel, in order to ensure compliance with Sections 2.2(e) and (f) and 9.3 of this Lease Agreement provided that the Company receives duly acknowledged written confirmation from the Agency setting forth the reason(s) for said action(s). Without limiting the generality of the foregoing, the Company will provide the Agency with any and all information and materials describing proposed Facility occupants as necessary.

( h) The Company will cause future tenants of the Facility (other than the Sublessee), if any, to execute and deliver to the Agency a Tenant Agency Compliance Agreement, substantially in the form attached hereto as Exhibit I , prior to the occupancy of the Facility, or a portion thereof, by such tenant, in accordance with the provisions of Section 9.3 hereof.

(i ) The Company hereby represents to the Agency that facilities and property that are primarily used in making retail sales of goods and services to customers who personally visit the Facility will not constitute more than one-third (1/3) of the total costs of the Facility, except in accordance with New York General Municipal Law (the “ GML ”) Section 862.

(j ) There is no action or proceeding pending or, to the best of the Company’s knowledge, after diligent inquiry, threatened, by or against the Company by or before any court or administrative agency that would adversely affect the ability of the Company to perform its obligations under this Lease Agreement or any other Company Document.

( k) The Company has obtained all authorizations, consents and approvals of governmental bodies or agencies required to be obtained by it as of the Closing Date in connection with the execution and delivery of this Lease Agreement and each other Company Document or in connection with the performance of its obligations hereunder and under each Company Document.

( l) The Project Application Information was true, correct and complete as of the date submitted to the Agency, and no event has occurred or failed to occur since such date of submission which could cause any of the Project Application Information to include any untrue statement of a material fact or omit to state any material fact required to be stated therein to make such statements not misleading.

ARTICLE III
CONVEYANCE OF FACILITY SITE; PROJECT WORK AND COMPLETION

Section 3.1 Agreement to Convey to Agency . The Company has conveyed or has caused to be conveyed to the Agency (i) good and marketable fee title in the Land, including any buildings, structures or other improvements thereon, and (ii) lien-free title to the Equipment, and will convey or cause to be conveyed to the Agency lien-free title to or a leasehold interest in the Equipment and Improvements acquired after the date hereof, in each case except for Permitted Encumbrances.

Section 3.2 Title Report and Survey . The Company has obtained (i) a fee title insurance policy for the benefit of the Agency insuring fee title to the Land and the improvements, in an amount equal to the fair market value of the Land and the Improvements existing as of the date hereof, and except for Permitted Encumbrances.

- 5 -

Section 3.3 Public Authorities Law Representations . The parties hereto hereby acknowledge and agree that the Facility and the interest therein to be conveyed by this Lease Agreement are not “Property” as defined in Article 9, Title 5-A of the Public Authorities Law of the State because the Facility and the leasehold interests therein are securing the financial obligations of the Company. The Facility and the leasehold interests therein secure the obligations of the Company to the Agency under this Lease Agreement, including the Company’s obligation to acquire and maintain the Facility and the Company’s obligation to indemnify and hold harmless the Agency.

Section 3.4 Project Work .

(a) The Company agrees that, on behalf of the Agency, it will complete the Project Work has been completed in accordance with the Plans and Specifications.

(b) The Company may revise the Plans and Specifications from time to time without the consent or approval of the Agency; provided that the Facility shall retain its overall configuration and intended purposes and shall remain a “project” as defined in the Act.

(c) Except as set forth in Section 6.2 hereof, fee or leasehold title, as applicable, to all materials, equipment, machinery and other items of Property incorporated or installed in or placed in, upon, or under the Facility shall vest in the Agency immediately upon the Company’s obtaining an interest in or to the materials, equipment, machinery and other items of Property. The Company shall execute, deliver and record or file all instruments necessary or appropriate so to vest such title in the Agency and shall take all action necessary or appropriate to protect such title against claims of any third Persons.

(d) The Agency shall enter into, and accept the assignment of, such contracts as the Company may request in order to effectuate the purposes of this Section 3.4.

(e) The Company, as agent for the Agency, shall comply in all material respects with all provisions of the Labor Law of the State applicable to the completion of any work required at the Facility and shall include in all construction contracts all provisions which may be required to be inserted therein by such provisions. The Company agrees to comply with the Agency’s “ Construction Wage Policy ,” a copy of which is attached hereto as Exhibit G and made a part hereof. Except as provided in the preceding sentence, the provisions of this subsection do not create any obligations or duties not created by applicable law outside of the terms of this Lease Agreement.

Section 3.5 Identification of Equipment . All Equipment which is or may become the Property of the Agency pursuant to the provisions of this Lease Agreement shall be properly identified by the Company by such appropriate records, including computerized records, as may be approved by the Agency. All Property of whatever nature affixed or attached to the Land or used or to be used by the Company in connection with the Land or the Improvements shall be deemed presumptively to be owned by the Agency, rather than the Company, unless the same were installed by the Company and title thereto was retained by the Company as provided in Section 6.2 of this Lease Agreement and such Property was properly identified by such appropriate records as were approved by the Agency.

- 6 -

Section 3.6 Certificates of Completion . The Company agrees that the Project Work was completed prior to the Closing Date.

Section 3.7 Remedies to Be Pursued Against Contractors, Subcontractors, Materialmen and Their Sureties . In the event of a default by any contractor, subcontractor, materialman or other Person under any contract made by it in connection with the Facility or in the event of a breach of warranty or other liability with respect to any materials, workmanship or performance guaranty, the Company at its expense, either separately or in conjunction with others, may pursue any and all remedies available to it and the Agency, as appropriate, against the contractor, subcontractor, materialman or other Person so in default and against any surety for the performance of such contract. The Company, in its own name or in the name of the Agency, may prosecute or defend any action or proceeding or take any other action involving any such contractor, subcontractor, materialman, surety or other Person which the Company deems reasonably necessary, and in such event the Agency, at the Company’s sole cost and expense, hereby agrees to cooperate fully with the Company and to take all action necessary to effect the substitution of the Company for the Agency in any such action or proceeding. The Net Proceeds of any recovery from a contractor or subcontractor or materialman or other person shall be paid to the Company.

Section 3.8 Reserved .

ARTICLE IV
LEASE OF FACILITY RENTAL PROVISIONS

Section 4.1 Lease of Facility . The Agency hereby leases the Facility, consisting of the Land as more particularly described in Exhibit A attached hereto and the Improvements and the Equipment as more particularly described in Exhibit B attached hereto, to the Company and the Company hereby takes the Facility from the Agency upon the terms and conditions of this Lease Agreement.

Section 4.2 Duration of Lease Term; Quiet Enjoyment .

(a) The Agency has delivered to the Company sole and exclusive possession of the Facility (subject to Sections 8.1 and 10.2 hereof), and the leasehold estate created hereby commenced, and the Company accepted possession of the Facility on the closing date with respect to the Original Lease Agreement.

(b) Except as provided in Sections 10.2 and 11.1 hereof, the estate created hereby shall terminate at 11:58 p.m. on November 30, 2031 (the “ Lease Term ”).

(c) Except as provided in Sections 8.1 and 10.2 hereof, the Agency shall neither take nor suffer or permit any action to prevent the Company during the Lease Term from having quiet and peaceable possession and enjoyment of the Facility and will, at the request of the Company and at the Company’s sole cost and expense, cooperate with the Company in order that the Company may have quiet and peaceable possession and enjoyment of the Facility as hereinabove provided.

- 7 -

Section 4.3 Rents and Other Amounts Payable .

(a) The Company shall pay basic rent for the Facility as follows: One Dollar ($1.00) per year commencing on the Closing Date and on each and every January 1 thereafter during the term of this Lease Agreement. In addition, the Company shall pay to the Agency an annual compliance fee of $1,000 on or before January 1 of each year commencing January 1, 2018 and continuing through the Lease Term.

(b) In addition to the payments of basic rent pursuant to Section 4.3(a) hereof, throughout the Lease Term, the Company shall pay to the Agency as additional rent, within ten (10) days of receipt of demand therefor, an amount equal to the sum of the expenses of the Agency and the members thereof incurred (i) by reason of the Agency’s ownership, leasing, subleasing, or financing of the Facility, or (ii) in connection with the carrying out of the Agency’s duties and obligations under the Agency Documents, the payment of which is not otherwise provided for under this Lease Agreement. The foregoing shall be in addition to any annual or continuing administrative or management fee imposed by the Agency now or hereafter.

(c) The Company, under the provisions of this Section 4.3, agrees to make the above-mentioned payments in immediately available funds and without any further notice in lawful money of the United States of America. In the event the Company shall fail to timely make any payment required in Section 4.3(a) or 4.3(b), the Company shall pay the same together with interest on such payment at a rate equal to two percent (2%) plus the Prime Rate, but in no event at a rate higher than the maximum lawful prevailing rate, from the date on which such payment was due until the date on which such payment is made.

Section 4.4 Obligations of Company Hereunder Unconditional . The obligations of the Company to make the payments required in Section 4.3 hereof, and to perform and observe any and all of the other covenants and agreements on its part contained herein, shall be general obligations of the Company, and shall be absolute and unconditional irrespective of any defense or any rights of setoff, recoupment or counterclaim it may otherwise have against the Agency. The Company agrees it will not (i) suspend, discontinue or abate any payment required hereunder, or (ii) fail to observe any of its other covenants or agreements in this Lease Agreement.

Section 4.5 No Warranty of Condition or Suitability by Agency . THE AGENCY HAS MADE AND MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE MERCHANTABILITY, CONDITION, FITNESS, DESIGN, OPERATION OR WORKMANSHIP OF ANY PART OF THE FACILITY, ITS FITNESS FOR ANY PARTICULAR PURPOSE, THE QUALITY OR CAPACITY OF THE MATERIALS IN THE FACILITY, OR THE SUITABILITY OF THE FACILITY FOR THE PURPOSES OR NEEDS OF THE COMPANY OR THE EXTENT TO WHICH FUNDS AVAILABLE TO THE COMPANY WILL BE SUFFICIENT TO PAY THE COST OF COMPLETION OF THE PROJECT WORK. THE COMPANY ACKNOWLEDGES THAT THE AGENCY IS NOT THE MANUFACTURER OF THE EQUIPMENT NOR THE MANUFACTURER’S AGENT NOR A DEALER THEREIN. THE COMPANY, ON BEHALF OF ITSELF, IS SATISFIED THAT THE FACILITY IS SUITABLE AND FIT FOR PURPOSES OF THE COMPANY. THE AGENCY SHALL NOT BE LIABLE IN ANY MANNER WHATSOEVER TO THE COMPANY OR ANY OTHER PERSON FOR ANY LOSS, DAMAGE OR EXPENSE OF ANY KIND OR NATURE CAUSED, DIRECTLY OR INDIRECTLY, BY THE PROPERTY OF THE FACILITY OR THE USE OR MAINTENANCE THEREOF OR THE FAILURE OF OPERATION THEREOF, OR THE REPAIR, SERVICE OR ADJUSTMENT THEREOF, OR BY ANY DELAY OR FAILURE TO PROVIDE ANY SUCH MAINTENANCE, REPAIRS, SERVICE OR ADJUSTMENT, OR BY ANY INTERRUPTION OF SERVICE OR LOSS OF USE THEREOF OR FOR ANY LOSS OF BUSINESS HOWSOEVER CAUSED.

- 8 -

ARTICLE V
PILOT PAYMENTS; SALES TAX EXEMPTION; MORTGAGE RECORDING TAX EXEMPTION AND RECAPTURE OF BENEFITS

Section 5.1 PILOT Payments .

(a) As long as this Lease Agreement is in effect, the Company agrees to make payments in lieu of all real estate taxes and assessments (the “ PILOT Payments ”) (in addition to paying all special ad valorem levies, special assessments or Special District Taxes and service charges against real property located in the Town of Islip, Central Islip Union Free School District, Suffolk County (including any existing incorporated village or any village which may be incorporated after the date hereof, within which the Facility is or may be wholly or partially located) (the “ Taxing Authorities ”) which are or may be imposed for special improvements or special district improvements) which would be levied upon or with respect to the Facility if the Facility were owned by the Company exclusive of the Agency’s leasehold interest (the “ Taxes on the Facility ”). The method of calculation for such PILOT Payments are set forth in Exhibit C attached hereto. PILOT Payments shall be allocated among the Taxing Authorities in proportion to the amount of real property tax and other taxes which would have been received by each Taxing Authority if the Facility was owned by the Company exclusive of the Agency’s leasehold interest.

(b) Reserved.

(c) Commencing with the 2017/2018 Tax Year, the Company shall pay, as PILOT Payments, the amounts set forth on Exhibit C attached hereto and made a part hereof.

(d) The Company shall pay, or cause to be paid, the amounts set forth in subsections (a) and (c) above, as applicable, after receipt of tax bills from the Agency or the Taxing Authorities, as the case may be. Failure to receive a tax bill shall not relieve the Company of its obligation to make all payments provided for hereunder. If, for any reason, the Company does not receive an appropriate tax bill, the Company shall have the responsibility and obligation to make all reasonable inquiries to the Taxing Authorities and to have such a bill issued, and thereafter to make payment of the same no later than the due dates provided therein. PILOT Payments shall be made directly to the Agency. PILOT Payments made after the due date(s) as set forth in the applicable tax bills shall accrue interest (and penalties) at the rates applicable to late payments of taxes for the respective Taxing Authorities and as further provided in the GML, including Section 874(5) thereof, which currently provides for an initial penalty of five percent (5%) of the amount due and an additional penalty of one percent (1%) per month on payments more than one month delinquent. Anything contained in this paragraph (d) to the contrary notwithstanding, the Company shall have the obligation to make all annual payments required by this paragraph (other than payments of penalties, if any) in two equal semi-annual installments on or prior to January 10 and May 31 of each year of the Lease Term or on such other due dates as may be established from time to time during the Lease Term.

- 9 -

(e) During the Lease Term, the Company shall continue to pay all special ad valorem levies, special assessments, and service charges levied against the Facility for special improvements or special district improvements.

(f) In the event that any structural addition shall be made to the building or buildings included in the Facility subsequent to the Closing Date, or any additional building or improvement shall be constructed on the Land (such structural additions, buildings and improvements being referred to hereinafter as “ Additional Facilities ”), the Company agrees to make additional payments in lieu of taxes to the Taxing Authorities in amounts equal to the product of the then current ad valorem tax rates which would be levied upon or with respect to the Additional Facilities by the Taxing Authorities if the Additional Facilities were owned by the Company and not the Agency times the assessment or assessments established for that tax year by the respective Taxing Authorities having appropriate assessing jurisdiction . All other provisions of this Section 5.1 shall apply to this obligation for additional payments.

(g) In the event that title to the Facility or any part thereof is transferred from the Agency to the Company at such time in reference to any taxable status date as to make it impossible to place such Facility or part thereof on the tax rolls of the Taxing Authorities, or appropriate special districts, as the case may be, by such taxable status date, the Company hereby agrees to pay, at the first time taxes or assessments are due following the taxable status date on which such Facility or part thereof is placed on the tax rolls, an amount equal to the taxes or assessments which would have been levied on such Facility or part thereof had it been on the tax rolls from the time the Company took title until the date of the tax rolls following the taxable status date as of which such Facility or part thereof is placed on the tax rolls. There shall be deducted from such amount any amounts previously paid pursuant to this Section 5.1 by the Agency or the Company to the respective Taxing Authorities relating to any period of time after the date of termination of the Agency’s interest. The provisions of this subsection (g) shall survive the termination or expiration of the Lease Agreement. Any rights the Company may have against its respective designees are separate and apart from the terms of this subsection (g), and this subsection (g) shall survive any transfer from the Agency to the Company.

(h) In the event the Facility or any part thereof is declared to be subject to taxation for taxes or assessments by an amendment to the Act or other legislative change or by a final judgment of a court of competent jurisdiction, the obligations of the Company under this Section 5.1 shall, to such extent, be null and void.

- 10 -

(i) In the event the Company shall enter into a subsequent payment-in-lieu-of-tax agreement or agreements with respect to the Taxes on the Facility directly with any or all Taxing Authorities in the jurisdiction of which the Facility is located, the obligations of the Company under this Section 5.1, which are inconsistent with such future agreement or agreements, shall be superseded and shall, to such extent, be null and void.

(j) As long as this Lease Agreement is in effect, the Agency and the Company agree that (i) the Company shall be deemed to be the owner of the Facility and of the Additional Facilities for purposes of instituting, and shall have the right to institute, administrative or judicial review of an assessment of the real estate with respect to the Facility and of the Additional Facilities pursuant to the provisions of Article 7 of the Real Property Tax Law or any other applicable law, as the same may be amended from time to time, and (ii) the Agency, at the request of the Company, shall request the Assessor of the Town of Islip, or any other assessor having jurisdiction to assess the Facility, to take into consideration the value of surrounding properties of like character when assessing the Facility. Notwithstanding the foregoing, in the event that the assessment of the real estate with respect to the Facility and the Additional Facilities is reduced as a result of any such administrative or judicial review so that such complaining party would be entitled to receive a refund or refunds of taxes paid to the respective Taxing Authorities, if such complaining party were the owner of the Facility and the Additional Facilities, such complaining party shall not be entitled to receive a refund or refunds of the PILOT Payments paid pursuant to this Lease Agreement and the PILOT Payments set forth on Exhibit C hereto shall not be reduced. In that event, such complaining party shall be entitled to receive a credit against future PILOT Payments to be paid pursuant to this Lease Agreement, as and when collected by the Agency or the respective Taxing Authorities (as the case may be), in an amount equal to any refund that such complaining party would be entitled to receive if such complaining party were the owner of the Facility and the Additional Facilities; provided, however, that the Agency shall have no obligation to provide a credit against PILOT Payments which it has remitted to any of the respective Taxing Authorities before the date the Agency receives written notice from the complaining party that it seeks a credit. In no event shall the Agency be required to remit to the Company or any Taxing Authority any moneys otherwise due as a result of a reduction in the assessment of the Facility (or any part thereof) due to a certiorari review. If the Company receives a reduction in assessment in the last year of the Lease Agreement after it has made its final payments in lieu of taxes, the Company acknowledges that it shall look solely to the Taxing Authorities for repayment or for a credit against the first payment(s) of Taxes on the Facility which will be due after the Facility is returned to the tax rolls. The Company hereby agrees that it will notify the Agency if the Company shall have requested a reassessment of the Facility or a reduction in the taxes on the Facility or shall have instituted any tax certiorari proceedings with respect to the Facility. The Company shall deliver to the Agency copies of all notices, correspondence, claims, actions and/or proceedings brought by or against the Company in connection with any reassessment of the Facility, reduction of taxes with respect to the Facility or tax certiorari proceedings with respect to the Facility.

(k) The Company, in recognition of the benefits provided under the terms hereof, including, but not limited to, the PILOT Payments set forth in Exhibit C hereto, and for as long as the Lease Agreement is in effect, expressly waives any rights it may have for any exemption under Section 485-b of the Real Property Tax Law or any other exemption under any other law or regulation (except, however, for the exemption provided by Title 1 of Article 18-A of the GML) with respect to the Facility. The Company, however, reserves any such rights with respect to the Additional Facilities as referred to in subsection (f) hereof and with respect to the assessment and/or exemption of the Additional Facilities.

- 11 -

Section 5.2 Sales Tax Exemption .

(a) The Agency hereby appoints the Company its true and lawful agent, and the Company hereby accepts such agency (i) to complete the Project Work, if any, in accordance with the Plans and Specifications, (ii) to make, execute, acknowledge and deliver any contracts, orders, receipts, writings and instructions with any other Persons, and in general to do all things which may be requisite or proper, all for the Project Work with the same powers and with the same validity as the Agency could do if acting on its own behalf, (iii) to pay all fees, costs and expenses incurred in connection with the Project Work, (iv) to ask, demand, sue for, levy, recover and receive all such sums of money, debts, dues and other demands whatsoever which may be due, owing and payable to the Agency under the terms of any contract, order, receipt or writing in connection with the Project Work, and (v) to enforce the provisions of any contract, agreement, obligation, bond or other performance security. This agency appointment expressly excludes the Company from purchasing any motor vehicle, including any cars, trucks, vans or buses which are licensed by the Department of Motor Vehicles for use on public highways or streets.

(b) Agency’s Exempt Status . The Agency constitutes a corporate governmental agency and a public benefit corporation under the laws of the State of New York, and therefore, in the exercise of its governmental functions, is exempt from the imposition of Sales and Use Taxes. As an exempt governmental entity, no exempt organization identification number has been issued to the Agency nor is one required. Notwithstanding the foregoing, the Agency makes no representation to the Company, any Agent or any third party that any Sales Tax Exemption is available under this Lease Agreement.

(c) Scope of Authorization of Sales Tax Exemption . The Agency hereby authorizes the Company, subject to the terms and conditions of this Lease Agreement, to act as its agent in connection with the Facility for the purpose of effecting purchases and leases of Eligible Items so that such purchases and leases are exempt from the imposition of Sales and Use Taxes. The Agency’s authorization with respect to such Sales Tax Exemption provided to the Company and its Agents pursuant to this Lease Agreement and any Sales Tax Agent Authorization Letters issued hereunder shall be subject to the following limitations:

(i) The Sales Tax Exemption shall be effective only for a term commencing on the Closing Date and expiring upon the earliest of (A) the termination of this Lease Agreement, (B) the completion date established for such future Project Work, (C) failure of the Company to file Form ST-340, as described in Section 5.2(g) below, (D) the termination of the Sales Tax Exemption authorization pursuant to Section 10.2 or (E) the date upon which the Company received the Maximum Company Sales Tax Savings Amount.

(ii) The Sales Tax Exemption authorization set forth herein shall automatically be suspended upon written notice to the Company that the Company is in default under this Lease Agreement until such default is cured to the satisfaction of the Agency.

- 12 -

(iii) The Sales Tax Exemption authorization shall be subject to all of the terms, conditions and provisions of this Lease Agreement.

(iv) The Sales Tax Exemption shall only be utilized for Eligible Items which shall be purchased, incorporated, completed or installed for use only by the Company at the Facility (and not with any intention to sell, transfer or otherwise dispose of any such Eligible Item to a Person as shall not constitute the Company), it being the intention of the Agency and the Company that the Sales Tax Exemption shall not be made available with respect to any Eligible Item unless such item is used solely by the Company at the Facility.

(v) The Sales Tax Exemption shall not be used for any Ineligible Item.

(vi) The Sales Tax Exemption shall not be used to benefit any person or entity, including any tenant or subtenant located at the Facility, other than the Company and the Sublessee, without the prior written consent of the Agency.

(vii) By execution by the Company of this Lease Agreement, the Company agrees to accept the terms hereof and represents and warrants to the Agency that the use of the Sales Tax Exemption by the Company or by any Agent is strictly for the purposes stated herein.

(viii) Upon the Termination Date, the Company and each Agent shall cease being agents of the Agency, and the Company shall immediately notify each Agent in writing of such termination and that the Sales Tax Agent Authorization Letter issued to any such Agent is likewise terminated.

(ix) The Company agrees that the aggregate amount of Company Sales Tax Savings realized by the Company and by all Agents of the Company, if any, in connection with the Facility shall not exceed in the aggregate the Maximum Company Sales Tax Savings Amount.

(d) Procedures for Appointing Agents . If the Company desires to seek the appointment of a contractor, a subcontractor or other party to act as the Agency’s agent (an “ Agent ”) for the purpose of effecting purchases which are eligible for the Sales Tax Exemption pursuant to authority of this Lease Agreement, it must complete the following steps:

(i)

For each Agent, the Company must complete and submit Form ST-60 to the Agency. The foregoing is required pursuant to the GML Section 874(9) and Form ST-60 and the regulations relating thereto which require that within thirty (30) days of the date that the Agency appoints a project operator or other person or entity to act as agent of the Agency for purposes of extending a sales or use tax exemption to such person or entity, the Agency must file a completed Form ST-60 with respect to such person or entity.

- 13 -

(ii)

Following receipt by the Agency of the completed Form ST-60, such Agent must be appointed as Agent by the Agency, by execution by the Agency and the Agent of a Sales Tax Agent Authorization Letter in the form attached hereto as Exhibit E . The determination whether to approve the appointment of an Agent shall be made by the Agency, in its sole discretion. If executed, a completed copy of the Sales Tax Agent Authorization Letter shall be sent to the Company. The Company must also provide a copy of an executed Sales Tax Agent Authorization Letter together with a copy of this Lease Agreement to the Agent within five (5) Business Days after receipt thereof by the Company.

(iii)

The Company shall ensure that each Agent shall observe and comply with the terms and conditions of its Sales Tax Agent Authorization Letter and this Lease Agreement.

(e) Form ST-60 Not an Exemption Certificate . The Company acknowledges that the executed Form ST-60 designating the Company or any Agent as an agent of the Agency shall not serve as a sales or use tax exemption certificate or document. Neither the Company nor any other Agent may tender a copy of the executed Form ST-60 to any person required to collect sales tax as a basis to make such purchases exempt from tax. No such person required to collect sales or use taxes may accept the executed Form ST-60 in lieu of collecting any tax required to be collected. THE CIVIL AND CRIMINAL PENALTIES FOR MISUSE OF A COPY OF FORM ST-60 AS AN EXEMPTION CERTIFICATE OR DOCUMENT OR FOR FAILURE TO PAY OR COLLECT TAX SHALL BE AS PROVIDED IN THE TAX LAW. IN ADDITION, THE USE BY AN AGENT, THE COMPANY, OR OTHER PERSON OR ENTITY OF SUCH FORM ST-60 AS AN EXEMPTION CERTIFICATE OR DOCUMENT SHALL BE DEEMED TO BE, UNDER ARTICLES TWENTY EIGHT AND THIRTY SEVEN OF THE TAX LAW, THE ISSUANCE OF A FALSE OR FRAUDULENT EXEMPTION CERTIFICATE OR DOCUMENT WITH THE INTENT TO EVADE TAX.

(f) Form ST-123 Requirement . As an agent of the Agency, the Company agrees that it will, and will cause each Agent to, present to each seller or vendor a completed and signed Form ST-123 for each contract, agreement, invoice, bill or purchase order entered into by the Company or by any Agent, as agent for the Agency, for the Project Work. Form ST-123 requires that each seller or vendor accepting Form ST-123 identify the Facility on each bill or invoice for purchases and indicate on the bill or invoice that the Agency or Agent or Company, as project operator of the Agency, was the purchaser. For the purposes of indicating who the purchaser is, each bill or invoice should state, “I, [Company/Agent], certify that I am duly appointed agent of the Town of Islip Industrial Development Agency and that I am purchasing the tangible personal property or services for use in the [Facility Name] located at [Address], Suffolk County, New York, IDA Project Number [__].” The Company shall retain copies of all such contracts, agreements, invoices, bills and purchase orders for a period of not less than six (6) years from the date thereof. For each Agent the Form ST-123 shall be completed as follows: (i) the “Project information” section of Form ST-123 should be completed using the name and address of the Facility as indicated on the Form ST-60 used to appoint the Agent; (ii) the date that the Agent was appointed as an agent should be completed using the date of the Agent’s Sales Tax Agent Authorization Letter; and (iii) the “Exempt purchases” section of Form ST-123 should be completed by marking “X” in box “A” only.

- 14 -

(g) Form ST-340 Filing Requirement . The Company shall annually (currently, by each February 1st with respect to the prior calendar year) file a Form ST-340 with NYSDTF, and with a copy to the Agency, in a manner consistent with such regulations as is or may be prescribed by the Commissioner of NYSDTF (the “ Commissioner ”), of the value of all Company Sales Tax Savings claimed by the Company and each Agent in connection with the Facility. Should the Company fail to comply with the foregoing requirement, the Company and each Agent shall immediately cease to be agents of the Agency in connection with the Facility without any further action of the Agency and the Company shall immediately and without demand notify each Agent appointed by the Agency in connection with the Facility of such termination.

(h) Sales Tax Registry Filing Requirement. No later than August 1st of each year, the Company shall file with the Agency a completed Sales Tax Registry, in the form attached hereto as Exhibit F , which accounts for all Company Sales Tax Savings realized by the Company and each Agent during the prior annual period ending on the preceding June 30th (or such shorter period beginning on the Closing Date and ending on the preceding June 30th), unless the Termination Date occurred prior to such June 30th. Within ten (10) days after the Termination Date, the Company shall file with the Agency a completed Sales Tax Registry which accounts for all Company Sales Tax Savings realized by the Company and each Agent during the period from the preceding July 1st to the Termination Date.

(i) Special Provisions Relating to State Sales Tax Savings .

(i)

The Company covenants and agrees to comply, and to cause each of its contractors, subcontractors, Agents, persons or entities to comply, with the requirements of GML Sections 875(1) and (3) (the “ Special Provisions ”), as such provisions may be amended from time to time. In the event of a conflict between the other provisions of this Lease Agreement and the Special Provisions, the Special Provisions shall control.

(ii)

The Company acknowledges and agrees that pursuant to GML Section 875(3), the Agency shall have the right to recover, recapture, receive, or otherwise obtain from the Company, State Sales Tax Savings taken or purported to be taken by the Company, any Agent or any other person or entity acting on behalf of the Company to which the Company is not entitled or which are in excess of the Maximum Company Sales Tax Savings Amount or which are for property or services not authorized or taken in cases where the Company, any Agent or any other person or entity acting on behalf of the Company failed to comply with a material term or condition to use property or services in the manner required by this Lease Agreement. The Company shall, and shall require each Agent and any other person or entity acting on behalf of the Company, to cooperate with the Agency in its efforts to recover, recapture, receive, or otherwise obtain such State Sales Tax Savings and shall promptly pay over any such amounts to the Agency that it requests. The failure to pay over such amounts to the Agency shall be grounds for the Commissioner to assess and determine State Sales and Use Taxes due from the Company under Article 28 of the New York State Tax Law, together with any relevant penalties and interest due on such amounts.

- 15 -

(j) Subject to the provisions of subsection (i) above, in the event that the Company or any Agent shall utilize the Sales Tax Exemption in violation of the provisions of this Lease Agreement or any Sales Tax Agent Authorization Letter, the Company shall promptly deliver notice of same to the Agency, and the Company shall, upon demand by the Agency, pay to or at the direction of the Agency a return of sales or use tax exemptions in an amount equal to all such unauthorized sales or use tax exemptions together with interest at the rate of twelve percent (12%) per annum compounded daily from the date and with respect to the dollar amount for which each such unauthorized sales or use tax exemption was availed of by the Company or any Agent (as applicable).

(k) Upon request by the Agency with reasonable notice to the Company, the Company shall make available at reasonable times to the Agency and/or the Independent Accountant all such books, records, contracts, agreements, invoices, bills or purchase orders of the Company and any Agent, and require all appropriate officers and employees of the Company to respond to reasonable inquiries by the Agency and/or the Independent Accountant, as shall be necessary (y) to indicate in reasonable detail those costs for which the Company or any Agent shall have utilized the Sales Tax Exemption and the dates and amounts so utilized, and (z) to permit the Agency to determine any amounts owed by the Company under this Section 5.2.

Section 5.3 Mortgage Recording Tax Exemption . Section 874 of the Act exempts the Agency from paying certain mortgage recording taxes except for the portion of the mortgage recording tax allocated to transportation districts referenced in Section 253(2)(a) of the Tax Law. The Agency hereby grants to the Company exemption from mortgage recording taxes for one or more Mortgages securing an aggregate principal amount not to exceed $0.00, or such greater amount as approved by the Agency in its sole and absolute discretion, in connection with the financing of the Project Work and any future financing, refinancing or permanent financing of the costs of the Project Work for the Facility (the “ Mortgage Recording Tax Exemption ”). The Company represents and warrants (1) that the real property secured by the Mortgage is located within a transportation district referenced in Section 253(2)(a) of the Tax Law, and (2) that upon recording the Mortgage, the Company shall pay the mortgage recording tax allocated to transportation districts referenced in Section 253(a)(2) of the Tax Law.

Section 5.4 Recapture of Agency Benefits .

(a) It is understood and agreed by the parties hereto that the Agency is entering into this Lease Agreement in order to provide financial assistance to the Company for the Facility and to accomplish the public purposes of the Act. In consideration therefor, the Company hereby agrees as follows:

(i) If there shall occur a Recapture Event after the Closing Date, but on or before December 31, 2020, the Company shall pay to the Agency, or to the State of New York, if so directed by the Agency (except as otherwise specified below) as a return of public benefits conferred by the Agency, one hundred percent (100%) of the Recaptured Benefits (as defined below);

- 16 -

(ii) If there shall occur a Recapture Event on or after January 1, 2021 but on or before December 31, 2022, the Company shall pay to the Agency, or to the State of New York, if so directed by the Agency (except as otherwise specified below) as a return of public benefits conferred by the Agency, seventy-five percent (75%) of the Recaptured Benefits;

(iii) If there shall occur a Recapture Event on or after January 1, 2023 but on or before December 31, 2024, the Company shall pay to the Agency, or to the State of New York, if so directed by the Agency (except as otherwise specified below) as a return of public benefits conferred by the Agency, fifty percent (50%) of the Recaptured Benefits;

(iv) If there shall occur a Recapture Event on or after January 1, 2025 but on or before December 31, 2025, the Company shall pay to the Agency, or to the State of New York, if so directed by the Agency (except as otherwise specified below) as a return of public benefits conferred by the Agency, twenty-five percent (25%) of the Recaptured Benefits; and

(v) If there shall occur a Recapture Event on or after January 1, 2026, the Company shall not be obligated to pay to the Agency, or to the State of New York, any of the Recaptured Benefits; and

(b) The term “ Recaptured Benefits ” shall mean all direct monetary benefits, tax exemptions and abatements and other financial assistance, if any, derived solely from the Agency’s participation in the transaction contemplated by the Lease Agreement including, but not limited to, the amount equal to 100% of:

(i) the Mortgage Recording Tax Exemption; and

(ii) Sales Tax Exemption savings realized by or for the benefit of the Company, including any savings realized by any Agent pursuant to the Lease Agreement and each Sales Tax Agent Authorization Letter issued in connection with the Facility (the “ Company Sales Tax Savings ”); and

(iii ) real property tax abatements granted pursuant to Section 5.1 hereof (the “ Real Property Tax Abatements ”);

which Recaptured Benefits from time to time shall upon the occurrence of a Recapture Event in accordance with the provisions of subsection (c) below and the declaration of a Recapture Event by notice from the Agency to the Company be payable directly to the Agency or the State of New York if so directed by the Agency within ten (10) days after such notice.

- 17 -

( i) The occurrence and continuation of an Event of Default under this Lease Agreement (other than as described in clause (iv) below or in subsections (d) or (e) below) which remains uncured beyond any applicable notice and/or grace period, if any, provided hereunder; or

( ii) The Facility shall cease to be a “project” within the meaning of the Act, as in effect on the Closing Date, through the act or omission of the Company; or

( iii) The sale of the Facility or closure of the Facility and/or departure of the Company from the Town of Islip, except as due to casualty, condemnation or force majeure as provided in subsection (e) below or as provided in Section 9.3 hereof; or

( iv) Failure of the Company to create or cause to be maintained the number of FTE jobs at the Facility as provided in Section 8.11 of the Lease Agreement, which failure is not reflective of the business conditions of the Company or the subtenants of the Company, including without limitation loss of major sales, revenues, distribution or other adverse business developments and/or local, national or international economic conditions, trade issues or industry wide conditions; or

( v) Any significant deviations from the Project Application Information which would constitute a significant diminution of the Company’s activities in, or commitment to, the Town of Islip , Suffolk County, New York; or

( vi) The Company receives Sales Tax Savings in connection with the Project Work in excess of the Maximum Company Sales Tax Savings Amount; provided, however, that the foregoing shall constitute a Recapture Event with respect to such excess Sales Tax Savings only. It is further provided that failure to repay the Sales Tax Savings within thirty (30) days shall constitute a Recapture Event with respect to all Recapture Benefits.

(d) Provided, however, if a Recapture Event has occurred due solely to the failure of the Company to create or cause to be maintained the number of FTEs at the Facility as provided in Section 8.11 hereof in any Tax Year but the Company has created or caused to be maintained at least 90% of such required number of FTEs for such Tax Year, then in lieu of recovering the Recaptured Benefits provided above, the Agency may, in its sole discretion, adjust the PILOT Payments due hereunder on a pro rata basis so that the amounts payable will be adjusted upward retroactively for such Tax Year by the same percentage as the percentage of FTEs that are below the required FTE level for such Tax Year. Such adjustments to the PILOT Payments may be made each Tax Year until such time as the Company has complied with the required number of FTEs pursuant to Section 8.11 hereof.

- 18 -

(e) Furthermore, notwithstanding the foregoing, a Recapture Event shall not be deemed to have occurred if the Recapture Event shall have arisen as a result of (i) a “force majeure” event (as more particularly defined in Section 10.1(b) hereof), (ii) a taking or condemnation by governmental authority of all or part of the Facility, or (iii) the inability or failure of the Company after the Facility shall have been destroyed or damaged in whole or in part (such occurrence a “ Loss Event ”) to rebuild, repair, restore or replace the Facility to substantially its condition prior to such Loss Event, which inability or failure shall have arisen in good faith on the part of the Company or any of its affiliates so long as the Company or any of its affiliates have diligently and in good faith using commercially reasonable efforts pursued the rebuilding, repair, restoration or replacement of the Facility or part thereof.

(f) The Company covenants and agrees to furnish the Agency with written notification (i) within sixty (60) days of the end of each Tax Year the number of FTEs located at the Facility for such Tax Year, and (ii) within thirty (30) days of actual notice of any facts or circumstances which would likely lead to a Recapture Event or constitute a Recapture Event hereunder. The Agency shall notify the Company of the occurrence of a Recapture Event hereunder, which notification shall set forth the terms of such Recapture Event.

(g) In the event any payment owing by the Company under this Section shall not be paid on demand by the Agency, such payment shall bear interest from the date of such demand at a rate equal to one percent (1%) plus the Prime Rate, but in no event at a rate higher than the maximum lawful prevailing rate, until the Company shall have made such payment in full, together with such accrued interest to the date of payment, to the Agency (except as otherwise specified above).

(h) The Agency shall be entitled to deduct all reasonable out of pocket expenses of the Agency, including without limitation, reasonable legal fees, incurred with the recovery of all amounts due under this Section 5.4, from amounts received by the Agency pursuant to this Section 5.4.

ARTICLE VI
MAINTENANCE, MODIFICATIONS, TAXES AND INSURANCE

Section 6.1 Maintenance and Modifications of Facility by Company .

(a) The Company shall not abandon the Facility or cause or permit any waste to the Improvements. During the Lease Term, the Company shall not remove any material part of the Facility outside of the jurisdiction of the Agency and shall (i) keep the Facility or cause the Facility to be kept in as reasonably safe condition as its operations shall permit; (ii) make all necessary repairs and replacements to the Facility; and (iii) operate the Facility in a sound and economic manner.

(b) The Company from time to time may make any structural additions, modifications or improvements to the Facility or any part thereof, provided such actions do not adversely affect the structural integrity of the Facility. The Company may not make any changes to the footprint of the Facility, and any additions expanding the square footage of the Facility (including the addition of any stories whether above or below ground) or make any additions, modifications or improvements to the Facility which will materially and/or adversely affect the structural integrity or value of the Facility without the prior written consent of the Agency which consent shall not be unreasonably withheld or delayed. All such additions, modifications or improvements made by the Company after the date hereof shall become a part of the Facility and the Property of the Agency. The Company agrees to deliver to the Agency all documents which may be necessary or appropriate to convey to the Agency title to or an interest in such Property.

- 19 -

Section 6.2 Installation of Additional Equipment . Subject to the provisions of Section 3.5 hereof, the Company or any permitted sublessee of the Company from time to time may install additional machinery, equipment or other personal property in the Facility (which may be attached or affixed to the Facility), and such machinery, equipment or other personal property shall not become, or be deemed to become, a part of the Facility, so long as such additional property is properly identified by such appropriate records, including computerized records, as approved by the Agency. The Company from time to time may create or permit to be created any Lien on such machinery, equipment or other personal property. Further, the Company from time to time may remove or permit the removal of such machinery, equipment and other personal property from the Facility, provided that any such removal of such machinery, equipment or other personal property shall not occur: (i) if any Event of Default has occurred or (ii) if any such removal shall adversely affect the structural integrity of the Facility or impair the overall operating efficiency of the Facility for the purposes for which it is intended, and provided further, that if any damage to the Facility is occasioned by such removal, the Company agrees promptly to repair or cause to be repaired such damage at its own expense.

Section 6.3 Taxes, Assessments and Utility Charges .

(a) Subject to the Sales Tax Exemption and the Real Property Tax Abatements as provided hereunder, the Company agrees to pay, as the same become due and before any fine, penalty, interest (except interest which is payable in connection with legally permissible installment payments) or other cost which may be added thereto or become due or be imposed by operation of law for the non-payment thereof, (i) all taxes, PILOT Payments and governmental charges of any kind whatsoever which may at any time be lawfully assessed or levied against or with respect to the Facility and any machinery, equipment or other Property installed or brought by the Company therein or thereon, including, without limiting the generality of the foregoing, any sales or use taxes imposed with respect to the Facility or any part or component thereof, or the rental or sale of the Facility or any part thereof, and any taxes levied upon or with respect to the income or revenues of the Agency from the Facility; (ii) all utility and other charges, including service charges, incurred or imposed for or with respect to the operation, maintenance, use, occupancy, upkeep and improvement of the Facility; and (iii) all assessments and charges of any kind whatsoever lawfully made by any governmental body for public improvements; provided that, with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the Company shall be obligated under this Lease Agreement to pay only such installments as are required to be paid during the Lease Term.

(b) The Company may in good faith contest any such taxes, assessments and other charges. In the event of any such proceedings, the Company may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such proceedings and any appeal therefrom, provided, however, that (i) neither the Facility nor any part thereof or interest therein would be in any immediate danger of being sold, forfeited or lost by reason of such proceedings and (ii) the Company shall have set aside on its books adequate reserves with respect thereto and shall have furnished such security, if any, as may be required in such proceedings or requested by the Agency.

- 20 -

(c) The Agency agrees that if it or the Company contests any taxes, assessments or other charges provided for in paragraph (b) hereof, all sums returned and received by the Agency, as a result thereof, will be promptly transmitted by the Agency to the Company and that the Company shall be entitled to retain all such amounts; which such obligation shall survive the expiration or termination of this Lease Agreement.

(d) Within thirty (30) days of receipt of written request therefor, the Company shall deliver to the Agency, official receipts of the appropriate taxing authorities or other proof reasonably satisfactory to the Agency evidencing payment of any tax.

Section 6.4 Insurance Required . At all times throughout the Lease Term, including, when indicated herein, during the Construction Period, if any, the Company shall, at its sole cost and expense, maintain or cause to be maintained insurance against such risks and for such amounts as are customarily insured against by facilities of like size and type and shall pay or cause to be paid, as the same become due and payable, all premiums with respect thereto, including, but not necessarily limited to:

(a) Insurance against loss or damage by fire, lightning and other casualties customarily insured against, with a uniform standard extended coverage endorsement, in an amount not less than the full replacement value of the completed Improvements, exclusive of footings and foundations, as determined by a recognized appraiser or insurer selected by the Company, but in no event less than the greater of $1,000,000 or the amount as may be required by any Lender. During the Construction Period, such policy shall be written in the so-called “Builder’s Risk Completed Value Non-Reporting Form” and shall contain a provision granting the insured permission to complete and/or occupy.

(b) Workers’ compensation insurance, disability benefits insurance and each other form of insurance which the Company or any permitted sublessee is required by law to provide, covering loss resulting from injury, sickness, disability or death of employees of the Company or any permitted sublessee who are located at or assigned to the Facility. This coverage shall be in effect from and after the Completion Date or on such earlier date as any employees of the Company, any permitted sublessee, any contractor or subcontractor first occupy the Facility.

(c) Insurance protecting the Agency and the Company against loss or losses from liability imposed by law or assumed in any written contract (including the contractual liability assumed by the Company under Section 8.2 hereof) or arising from personal injury, including bodily injury or death, or damage to the property of others, caused by an accident or other occurrence, with a limit of liability of not less than $1,000,000 (combined single limit or equivalent for personal injury, including bodily injury or death, and property damage); comprehensive automobile liability insurance covering all owned, non-owned and hired autos, with a limit of liability of not less than $1,000,000 (combined single limit or equivalent protecting the Agency and the Company against any loss, liability or damage for personal injury, including bodily injury or death, and property damage); and blanket excess liability coverage, in an amount not less than $5,000,000 combined single limit or equivalent, protecting the Agency and the Company against any loss or liability or damage for personal injury, including bodily injury or death, or property damage. This coverage shall also be in effect during the Construction Period.

- 21 -

(d) During the Construction Period, if any (and for at least one year thereafter in the case of Products and Completed Operations as set forth below), the Company shall cause the general contractor to carry liability insurance of the type and providing the minimum limits set forth below:

( i) Workers’ compensation and employer’s liability with limits in accordance with applicable law.

( ii) Comprehensive general liability providing coverage for:

Premises and Operations

Products and Completed Operations

Owners Protective

Contractors Protective

Contractual Liability

Personal Injury Liability

Broad Form Property Damage

(including completed operations)

Explosion Hazard

Collapse Hazard

Underground Property Damage Hazard

Such insurance shall have a limit of liability of not less than $1,000,000 (combined single limit for personal injury, including bodily injury or death, and property damage).

( iv) Excess “umbrella” liability providing liability insurance in excess of the coverages in (i), (ii) and (iii) above with a limit of not less than $5,000,000.

(e) A policy or policies of flood insurance in an amount not less than the greater of $1,000,000 or the amount that may be required by any Lender or the maximum amount of flood insurance available with respect to the Facility under the Flood Disaster Protection Act of 1973, as amended, whichever is less. This requirement will be waived upon presentation of evidence satisfactory to the Agency that no portion of the Land is located within an area identified by the U.S. Department of Housing and Urban Development as having special flood hazards.

(f) The Agency does not in any way represent that the insurance specified in this Lease Agreement, whether in scope or coverage or limits of coverage, is adequate or sufficient to protect the Company’s business or interests.

- 22 -

Section 6.5 Additional Provisions Respecting Insurance .

(a) All insurance required by Section 6.4 hereof shall be procured and maintained in financially sound and generally recognized responsible insurance companies authorized to write such insurance in the State and selected by the entity required to procure the same. The company issuing the policies required by Section 6.4(a) and (e) shall be rated “A” or better by A.M. Best Co., Inc. in Best’s Key Rating Guide. Such insurance may be written with deductible amounts comparable to those on similar policies carried by other companies engaged in businesses similar in size, character and other respects to those in which the procuring entity is engaged. All policies of insurance required by Section 6.4 hereof shall provide for at least thirty (30) days’ prior written notice to the Agency of the restriction, cancellation or modification thereof. The policy evidencing the insurance required by Section 6.4(c) hereof shall name the Agency as an additional insured. All policies evidencing the insurance required by Section 6.4(d)(ii), (iii) and (iv) shall name the Agency and the Company as additional insureds. The Agency acknowledges that a mortgage and security interest in the policies of insurance required by Section 6.4(a) and the Net Proceeds thereof have been or may be granted by the Company to any Lender pursuant to the Mortgage, and the Agency consents thereto. The Agency hereby acknowledges that upon request of any Lender, the Company will assign and deliver (which assignment shall be deemed to be automatic and to have occurred upon the occurrence of an Event of Default under any Mortgage) to any Lender the policies of insurance required under Section 6.4(a), so and in such manner and form that any Lender shall at all times, upon such request and until the payment in full of any Loan, have and hold said policies and the Net Proceeds thereof as collateral and further security under any Mortgage for the payment of any Loan. The policies required under Section 6.4(a) shall contain appropriate waivers of subrogation.

(b) The certificates of insurance required by Section 6.4(a), (c) and (e) hereof shall be deposited with the Agency on or before the Closing Date. A copy of the certificates of insurance required by Section 6.4(d)(ii), (iii) and (iv) hereof shall be delivered to the Agency on or before the commencement of any Construction Period. The Company shall deliver to the Agency before the first Business Day of each calendar year thereafter a certificate dated not earlier than the immediately preceding month reciting that there is in full force and effect, with a term covering at least the next succeeding calendar year, insurance of the types and in the amounts required by Section 6.4 hereof and complying with the additional requirements of Section 6.5(a) hereof. Prior to the expiration of each such policy or policies, the Company shall furnish to the Agency and any other appropriate Person a new policy or policies of insurance or evidence that such policy or policies have been renewed or replaced or are no longer required by this Lease Agreement. The Company shall provide such further information with respect to the insurance coverage required by this Lease Agreement as the Agency may from time to time reasonably require.

Section 6.6 Application of Net Proceeds of Insurance . The Net Proceeds of the insurance carried pursuant to the provisions of Section 6.4 hereof shall be applied as follows: (i) the Net Proceeds of the insurance required by Section 6.4(a) and (e) hereof shall be applied as provided in Section 7.l hereof, and (ii) the Net Proceeds of the insurance required by Section 6.4(b), (c) and (d) hereof shall be applied toward extinguishment or satisfaction of the liability with respect to which such insurance proceeds may be paid.

- 23 -

Section 6.7 Right of Agency to Pay Taxes, Insurance Premiums and Other Charges . If the Company fails, beyond the expiration of any applicable notice and cure periods, (i) to pay any tax, together with any fine, penalty, interest or cost which may have been added thereto or become due or been imposed by operation of law for nonpayment thereof, PILOT Payment, assessment or other governmental charge required to be paid by Section 6.3 hereof (unless contested in accordance with the provisions of Section 6.3), (ii) to maintain any insurance required to be maintained by Section 6.4 hereof, (iii) to pay any amount required to be paid by any law or ordinance relating to the use or occupancy of the Facility or by any requirement, order or notice of violation thereof issued by any governmental person, (iv) to pay any mechanic’s Lien which is recorded or filed against the Facility or any part thereof (unless contested in accordance with the provisions of Section 8.8(b) hereof), or (v) to pay any other amount or perform any act required to be paid or performed by the Company hereunder, the Agency may pay or cause to be paid such tax, PILOT Payment, assessment or other governmental charge, premium for such insurance or any such other payment, or may perform any such act. No such payment shall be made or act performed by the Agency until at least ten (10) days shall have elapsed since notice shall have been given by the Agency, and in the case of any tax, assessment or governmental charge or the amounts specified in clauses (i) and (iv) hereof, no such payment shall be made in any event if the Company is contesting the same in good faith to the extent and as permitted by this Lease Agreement, unless an Event of Default hereunder shall have occurred and be continuing. No such payment by the Agency shall affect or impair any rights of the Agency hereunder arising in consequence of such failure by the Company. The Company shall, on demand, reimburse the Agency for any amount so paid or for expenses or costs incurred in the performance of any such act by the Agency pursuant to this Section (which shall include all reasonable legal fees and disbursements), together with interest thereon, from the date of payment of such amount, expense or cost by the Agency at a rate equal to two percent (2%) plus the Prime Rate, but in no event higher than the maximum lawful prevailing rate.

ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION

Section 7.1 Damage or Destruction of the Facility .

(a) If the Facility or any part or component thereof shall be damaged or destroyed (in whole or in part) at any time during the Lease Term:

(i) the Agency shall have no obligation to replace, repair, rebuild, restore or relocate the Facility;

(ii) there shall be no abatement or reduction in the amounts payable by the Company under this Lease Agreement, including, without limitation, the PILOT Payments (whether or not the Facility is replaced, repaired, rebuilt, restored or relocated);

(iii) the Company shall promptly give written notice thereof to the Agency;

(iv) upon the occurrence of such damage or destruction, the Net Proceeds derived from the insurance shall be (A) paid to the Company or the Lender, as applicable, for the replacement, repair, rebuilding, restoration or relocation of the Facility as provided in Section 7.1(b) hereof or (B) applied pursuant to Section 7.1(e) hereof; and

- 24 -

(v) if the Facility is not replaced, repaired, rebuilt, restored or relocated, as provided herein and in Section 7.1(b) hereof, this Lease Agreement shall be terminated at the option of the Agency and the provisions of Section 7.1(e) hereof shall apply.

(b) Any replacements, repairs, rebuilding, restorations or relocations of the Facility by the Company after the occurrence of such damage or destruction shall be subject to the following conditions:

(i) the Facility shall be in substantially the same condition and value as an operating entity as existed prior to the damage or destruction;

(ii) the Facility shall continue to constitute a “project” as such term is defined in the Act;

(iii) the Facility will be subject to no Liens, other than Permitted Encumbrances; and

(iv) any other conditions the Agency may reasonably impose.

(c) All such repair, replacement, rebuilding, restoration or relocation of the Facility shall be effected with due diligence in a good and workmanlike manner in compliance with all applicable legal requirements, shall be promptly and fully paid for by the Company in accordance with the terms of the applicable contracts and shall automatically become a part of the Facility as if the same were specifically provided herein.

(d) In the event such Net Proceeds are not sufficient to pay in full the costs of such repair, replacement, rebuilding, restoration or relocation, the Company shall nonetheless complete the work, or cause the work to be completed pursuant to the terms of this Lease Agreement, and pay from its own moneys, or cause to be paid by such other party as may be obligated for payment that portion of the costs thereof in excess of such Net Proceeds. All such repairs, replacements, rebuilding, restoration or relocations made pursuant to this Section, whether or not requiring the expenditure of the Company’s own money or moneys of any other person, shall automatically become a part of the Facility as if the same were specifically described herein.

(e) If the Company shall not repair, replace, rebuild, restore or relocate the Facility, it shall be deemed to have exercised its option to terminate this Lease Agreement pursuant to Section 11.1 hereof. Any Net Proceeds derived from insurance shall be applied to the payment of the amounts required to be paid by Section 11.2 hereof and the balance shall be delivered to the Company. If an Event of Default hereunder shall have occurred and the Agency shall have exercised its remedies under Section 10.2 hereof, such Net Proceeds shall be applied to the payment of the amounts required to be paid by Section 10.2 and Section 10.4 hereof.

- 25 -

Section 7.2 Condemnation .

(a) If title to or use of the Facility shall be taken by Condemnation (in whole or in part) at any time during the Lease Term:

(i) the Agency shall have no obligation to repair, replace, rebuild, restore or relocate the Facility or to acquire, by construction or otherwise, facilities of substantially the same nature as the Facility (“ Substitute Facilities ”);

(ii) there shall be no abatement or reduction in the amounts payable by the Company under this Lease Agreement including, without limitation, the PILOT Payments (whether or not the Facility is repaired, replaced, rebuilt, restored or relocated or Substitute Facilities are acquired);

(iii) the Company shall promptly give written notice thereof to the Agency;

(iv) upon the occurrence of such Condemnation, the Net Proceeds derived therefrom shall be (A) paid to the Company or the Lender, as applicable, for the replacement, repair, rebuilding, restoration or relocation of the Facility or acquisition of Substitute Facilities as provided in Section 7.2(b) hereof or (B) applied pursuant to Section 7.2(e) hereof; and

(v) if the Facility is not repaired, replaced, rebuilt, restored or relocated, as provided herein and in Section 7.2(b) hereof, this Lease Agreement shall be terminated at the option of the Agency and the provisions of Section 7.2(e) hereof shall apply.

(b) Any repairs, replacements, rebuilding, restorations or relocations of the Facility by the Company after the occurrence of such Condemnation or acquisitions by the Company of Substitute Facilities shall be subject to the following conditions:

(i) the Facility or the Substitute Facilities shall be in substantially the same condition and value as an operating entity as existed prior to the Condemnation;

(ii) the Facility or the Substitute Facilities shall continue to constitute a “project” as such term is defined in the Act;

(iii) the Facility or the Substitute Facilities will be subject to no Liens, other than Permitted Encumbrances; and

(iv) any other conditions the Agency may reasonably impose.

- 26 -

(d) In the event such Net Proceeds are not sufficient to pay in full the costs of such repair, replacement, rebuilding, restoration, relocation or acquisition of Substitute Facilities, the Company shall nonetheless complete, or cause to be completed, the work or the acquisition pursuant to the terms of this Lease Agreement and pay from its own moneys, or cause to be paid by such other party as may be obligated for payment, that portion of the costs thereof in excess of such Net Proceeds. All such repairs, replacements, rebuilding, restoration, relocations and such acquisition of Substitute Facilities made pursuant to this Section, whether or not requiring the expenditure of the Company’s own money or moneys of any other person, shall automatically become a part of the Facility as if the same were specifically described herein.

(e) If the Company shall not repair, replace, rebuild or restore the Facility or acquire Substitute Facilities, it shall be deemed to have exercised its option to terminate this Lease Agreement pursuant to Section 11.1 hereof. Any Net Proceeds derived from the Condemnation shall be applied to the payment of the amounts required to be paid by Section 11.2 hereof. If any Event of Default hereunder shall have occurred and the Agency shall have exercised its remedies under Section 10.2 hereof, such Net Proceeds shall be applied to the payment of the amounts required to be paid by Section 10.2 and Section 10.4 hereof and any balance remaining thereafter shall belong to the Company.

Section 7.3 Condemnation of Company-Owned Property . The Company shall be entitled to the Net Proceeds of any casualty, damage or destruction insurance proceeds or any Condemnation award or portion thereof made for damage to or taking of any Property which, at the time of such damage or taking, is not part of the Facility.

Section 7.4 Waiver of Real Property Law Section 227 . The Company hereby waives the provisions of Section 227 of the Real Property Law of the State or any law of like import now or hereafter in effect.

ARTICLE VIII
SPECIAL COVENANTS

Section 8.1 Right to Inspect Facility . The Agency and its duly authorized agents shall have the right at all reasonable times on reasonable notice to inspect the Facility, including, without limitation, for the purpose of ascertaining the condition of the Environment at, on or in the vicinity of the Facility.

- 27 -

Section 8.2 Hold Harmless Provisions .

(a) The Company agrees that the Agency, its directors, members, officers, agents (except the Company), and employees (the “ Indemnified Parties ”) shall not be liable for and agrees to protect, defend, indemnify, save, release and hold the Indemnified Parties harmless from and against any and all damages, losses, liabilities, obligations, penalties, claims, litigation, demands, defenses, judgments, suits, actions, proceedings, costs, disbursements or expenses (including, without limitation, reasonable attorneys’ and experts’ fees, expenses and disbursements, incurred whether by reason of third party claims or to enforce the terms, conditions and provisions of this Lease Agreement) of any kind or nature whatsoever which may at any time be imposed upon, incurred by or asserted or awarded against the Agency relating to, resulting from or arising out of: (i) loss or damage to Property or injury to or death of any and all Persons that may be occasioned by, directly or indirectly, any cause whatsoever pertaining to the Facility or arising by reason of or in connection with the occupation or the use thereof or the presence of any Person or Property on, in or about the Facility or the Land, (ii) any Project Work and the Agency’s acquisition, owning, leasing and subleasing of the Facility, including, without limiting the generality of the foregoing, all claims arising from the breach by the Company of any of its covenants contained herein, the exercise by the Company of the authority conferred upon it pursuant to Section 5.2 of this Lease Agreement, and all causes of action and reasonable attorneys’ fees (whether by reason of third party claims or by reason of the enforcement of any provision of this Lease Agreement (including without limitation this Section) or any of the other documents delivered on the Closing Date by the Agency) and any other expenses incurred in defending any claims, suits or actions which may arise as a result of any of the foregoing, (iii) the conditions of the Environment at, on or in the vicinity of the Facility, (iv) any Project Work or the operation or use of the Facility in violation of any applicable Environmental Law for the storage, treatment, generation, transportation, processing, handling, management, production or Disposal of any Hazardous Substance or as a landfill or other waste disposal site, or for military, manufacturing or industrial purposes or for the commercial storage of petroleum or petroleum based products, except in compliance with all applicable Environmental Laws, (v) the presence of any Hazardous Substance or a Release or Disposal or the threat of a Release or Disposal of any Hazardous Substance or waste on, at or from the Facility, (vi) the failure promptly to undertake and diligently pursue to completion all necessary, appropriate and legally authorized investigative, containment, removal, clean-up and other remedial actions with respect to a Release or the threat of a Release of any Hazardous Substance on, at or from the Facility, required by any Environmental Law, (vii) human exposure to any Hazardous Substance, noises, vibrations or nuisances of whatever kind to the extent the same arise from any Project Work, the condition of the Facility or the ownership, use, sale, operation, conveyance or operation thereof in violation of any Environmental Law, (viii) a violation of any applicable Environmental Law, (ix) non-compliance with any Environmental Permit, (x) a material misrepresentation or inaccuracy in any representation or warranty or a material breach of or failure to perform any covenant made by the Company in this Lease Agreement, or (xi) the costs of any required or necessary investigation, assessment, testing, repair, cleanup, or detoxification of the Facility and the preparation of any closure or other required plans; provided that any such losses, damages, liabilities or expenses of the Agency are not incurred on account of and do not result from the gross negligence or intentional or willful wrongdoing of the Indemnified Parties. The foregoing indemnities shall apply notwithstanding the fault or negligence in part of any of the Indemnified Parties, and irrespective of the breach of a statutory obligation or the application of any rule of comparative or apportioned liability. The foregoing indemnities are limited only to the extent of any prohibitions imposed by law, and upon the application of any such prohibition by the final judgment or decision of a competent court of law, the remaining provisions of these indemnities shall remain in full force and effect.

- 28 -

(b) Notwithstanding any other provisions of this Lease Agreement, the obligations of the Company pursuant to this Section 8.2 shall remain in full force and effect after the termination of this Lease Agreement until the expiration of the period stated in the applicable statute of limitations during which a claim, cause of action or prosecution relating to the matters herein described may be brought, the payment in full or the satisfaction of such claim, cause of action or prosecution relating to the matters herein described and the payment of all expenses and charges incurred by the Indemnified Parties, relating to the enforcement of the provisions herein specified. The liability of the Company to the Agency hereunder shall in no way be limited, abridged, impaired or otherwise affected by (i) any amendment or modification of any of the Transaction Documents by or for the benefit of the Agency, the Company or any subsequent owners or users of the Facility, (ii) any extensions of time for payment or performance required by any of the Transaction Documents, (iii) the release of the Company or any other person from the performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Transaction Documents by operation of law, either by the Agency’s voluntary act or otherwise, (iv) the invalidity or unenforceability of any of the terms or provisions of the Transaction Documents, (v) any exculpatory provision contained in any of the Transaction Documents limiting the Agency’s recourse to any other security or limiting the Agency’s rights to a deficiency judgment against the Company, (vi) any investigation or inquiry conducted by or on the behalf of the Agency or any information which the Agency may have or obtain with respect to the condition of the Environment at, or ecological condition of, the Facility, (vii) the sale, assignment or foreclosure of any mortgage relating to all or any part of the Facility, but only with respect to a Release that has occurred prior to any such event, (viii) the sale, assignment, subleasing, transfer or conveyance of all or part of the Land or the Facility or the Company’s interests and rights in, to, and under the Lease Agreement or the termination of the Lease Agreement, but only with respect to a Release that has occurred prior to any such event, (ix) the death or legal incapacity of the Company, (x) the release or discharge, in whole or in part, of the Company in any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or similar proceeding, or (xi) any other circumstances which might otherwise constitute a legal or equitable release or discharge, in whole or in part, of the Company under the Lease Agreement, or any other Transaction Document.

(c) In the event of any claim against the Indemnified Parties by any employee or contractor of the Company or anyone directly or indirectly employed by any of them or anyone for whose acts any of them may be liable, the obligations of the Company hereunder shall not be limited in any way by any limitation on the amount or type of damages, compensation, disability benefits or other employee benefit acts.

Section 8.3 Company to Maintain Its Existence . The Company covenants and agrees that at all times during the Lease Term, it will (i) maintain its existence, (ii) continue to be an entity subject to service of process in the State and either organized under the laws of the State, or organized under the laws of any other state of the United States and duly qualified to do business as a foreign entity in the State, (iii) not liquidate, wind-up or dissolve or otherwise dispose of all or substantially all of its property, business or assets remaining after the execution and delivery of this Lease Agreement, (iv) not consolidate with or merge into another corporation or permit one or more corporations to consolidate with or merge into it, and (v) not change more than 49% of the ownership and control of the Company or sell or transfer more than 49% of the equity interests in the Company, except with consent of the Agency, which consent shall not be unreasonably withheld or delayed or conditioned.

Section 8.4 Qualification in State . The Company throughout the Lease Term shall continue to be duly authorized to do business in the State.

- 29 -

Section 8.5 Agreement to File Annual Statements and Provide Information . The Company shall file with the NYSDTF an annual statement of the value of all sales and use tax exemptions claimed in connection with the Facility in compliance with Sections 874(8) of the GML as provided in Section 5.2(g) hereof. The Company shall submit a copy of such annual statement to the Agency at the time of filing with NYSDTF. The Company shall also provide the Agency with the information necessary for the Agency to comply with Section 874(9) of the GML. Annually, the Company shall provide the Agency with a certified statement and documentation (i) enumerating the FTE jobs, by category, retained and/or created at the Facility as a result of the Agency’s financial assistance and (ii) indicating the fringe benefits and salary averages or ranges for such categories of FTE jobs created and/or retained. The Company further agrees to provide and certify or cause to be provided and certified such information concerning the Company, its finances, its operations, its employment and its affairs necessary to enable the Agency to make any report required by law, governmental regulation, including, without limitation, any reports required by the Act or the Public Authorities Accountability Act of 2005 and the Public Authorities Reform Act of 2009, each as amended from time to time, or any other reports required by the New York State Authority Budget Office or the Office of the State Comptroller or any of the Agency Documents or Company Documents. Such information shall be provided within thirty (30) days following written request from the Agency. The Company shall cause any and all sublessees at the Facility to comply with the requirements of this Section 8.5 by requiring each such sublessee to enter into a Tenant Agency Compliance Agreement.

Section 8.6 Books of Record and Account; Financial Statements . The Company at all times agrees to maintain proper accounts, records and books in which full and correct entries shall be made, in accordance with generally accepted accounting principles, of all transactions and events relating to the business and financial affairs of the Company.

Section 8.7 Compliance with Orders, Ordinances, Etc .

(a) The Company, throughout the Lease Term, agrees that it will promptly comply, and cause any sublessee, tenant or occupant of the Facility to comply, with all statutes, codes, laws, acts, ordinances, orders, judgments, decrees, injunctions, rules, regulations, permits, licenses, authorizations, directions and requirements, ordinary or extraordinary, which now or at any time hereafter may be applicable to the Facility or any part thereof, or to the Project Work, or to any use, manner of use or condition of the Facility or any part thereof, of all federal, state, county, municipal and other governments, departments, commissions, boards, courts, authorities, officials and officers having jurisdiction over the Facility or any part thereof, or of the Project Work, or of any use, manner of use or condition of the Facility or any part thereof or of any companies or associations insuring the premises.

(b) Notwithstanding the provisions of subsection (a) above, the Company may in good faith contest the validity or the applicability of any requirement of the nature referred to in such subsection (a) by appropriate legal proceedings conducted in good faith and with due diligence. In such event, the Company may fail to comply with the requirement or requirements so contested during the period of such contest and any appeal therefrom, unless the Agency shall notify the Company that by failure to comply with such requirement or requirements, the Facility or any part thereof may be subject to loss, penalty or forfeiture, in which event the Company shall promptly take such action with respect thereto or provide such security as shall be satisfactory to the Agency. If at any time the then existing use or occupancy of the Facility shall, pursuant to any zoning or other law, ordinance or regulation, be permitted only so long as such use or occupancy shall continue, the Company shall use its best efforts not to cause or permit such use or occupancy to be discontinued without the prior written consent of the Agency.

- 30 -

Section 8.8 Discharge of Liens and Encumbrances .

(a) The Company, throughout the Lease Term, shall not permit or create or suffer to be permitted or created any Lien, except for Permitted Encumbrances, upon the Facility or any part thereof by reason of any labor, services or materials rendered or supplied or claimed to be rendered or supplied with respect to the Facility or any part thereof.

(b) Notwithstanding the provisions of subsection (a) above, the Company may in good faith contest any such Lien. In such event, the Company may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom, unless the Agency shall notify the Company in writing that by nonpayment of any such item or items, the Facility or any part thereof may be subject to loss or forfeiture. In the event of such notice the Company shall promptly secure payment of all such unpaid items by filing a bond, in form and substance satisfactory to the Agency, thereby causing such Lien to be removed, or by taking such other actions as may be satisfactory to the Agency to protect its interests. Mechanics’ Liens shall be discharged or bonded within thirty (30) days of the filing or perfection thereof.

Section 8.9 Depreciation Deductions and Investment Tax Credit . The parties agree that, as between them, the Company shall be entitled to all depreciation deductions with respect to any depreciable property comprising a part of the Facility and to any investment credit with respect to any part of the Facility.

Section 8.10 Employment Opportunities; Notice of Jobs . The Company covenants and agrees that, in consideration of the participation of the Agency in the transactions contemplated herein, it will, except as otherwise provided by collective bargaining contracts or agreements to which the Company is a party, cause any new employment opportunities created in connection with the Facility to be listed with the New York State Department of Labor, Community Services Division and with the administrative entity of the service delivery area created pursuant to the Job Training Partnership Act (PL 97-300), as superseded by the Workforce Innovation and Opportunity Act (PL. 113-128), in which the Facility is located (collectively, the “ Referral Agencies ”). The Company also agrees, and shall cause any and all sublessees to agree, that they will, where practicable, first consider for such new employment opportunities persons eligible to participate in federal job training partnership programs who shall be referred by the Referral Agencies.

- 31 -

Section 8.11 Employment at the Facility . The Company hereby agrees to create and maintain or cause to be created and maintained at all times at the Facility and at the facility located at 555 North Research Place, Central Islip, New York 11722: one-hundred seventy-six (176) full time equivalent employees as of December 31, 20[__], and one-hundred eighty-six (186) full time equivalent employees as of December 31, 20[__] and thereafter throughout the Lease Term, calculated on the basis of 35 hours per week who are employees of the Company or any subsidiary or affiliates of the Company, or any consultants, contractors or subcontractors of the Company, or any subsidiary or affiliates of the Company, whose place of employment or workplace is located at the Facility (including the full time equivalent employees of all tenants at the Facility) (“ FTE ”). It is further provided that the Company may not actually provide the FTEs at the Facility, but rather shall sublease the Facility to the Sublessee, and the FTE jobs created and maintained by the Sublessee at the Facility shall satisfy the requirement above. The Company’s obligation with regard to creating or causing to be maintained FTEs includes (a) using all reasonable efforts to lease up the Facility, and (b) including provisions in all subleases requiring any tenant to comply with the provisions of the Lease Agreement applicable to them.

ARTICLE IX
RELEASE OF CERTAIN LAND; ASSIGNMENTS AND SUBLEASING

Section 9.1 Restriction on Sale of Facility ; Release of Certain Land .

(a) Except as otherwise specifically provided in this Article IX and in Article X hereof, the Agency shall not sell, convey, transfer, encumber or otherwise dispose of the Facility or any part thereof, or any of its rights under this Lease Agreement, without the prior written consent of the Company.

(b) The Agency and the Company from time to time may release from the provisions of this Lease Agreement and the leasehold estate created hereby any part of, or interest in, the Land which is not necessary, desirable or useful for the Facility. In such event, the Agency, at the Company’s sole cost and expense, shall execute and deliver any and all instruments necessary or appropriate so to release such part of, or interest in, the Land. As a condition to such release, the Agency shall be provided with a copy of the instrument transferring such title or interest in such Land, an instrument survey of the Land to be conveyed, together with a certificate of an Authorized Representative of the Company stating that there is then no Event of Default under this Lease Agreement and that such part of, or interest in, the Land is not necessary, desirable or useful for the Facility.

(c) No conveyance of any part of, or interest in, the Land effected under the provisions of this Section 9.l shall entitle the Company to any abatement or diminution of the rents payable by it under this Lease Agreement or any abatement or diminution of the PILOT Payments.

Section 9.2 Removal of Equipment .

(a) The Agency shall not be under any obligation to remove, repair or replace any inadequate, obsolete, worn out, unsuitable, undesirable or unnecessary item of Equipment. In any instance where the Company determines that any item of Equipment has become inadequate, obsolete, worn out, unsuitable, undesirable or unnecessary, the Company, may remove such items from the Facility and may sell, trade-in, exchange or otherwise dispose of the same, as a whole or in part, provided that such removal will not materially impair the operation of the Facility for the purpose for which it is intended or change the nature of the Facility so that it does not constitute a “project” under the Act.

- 32 -

(b) Upon the request of the Company, the Agency shall execute and deliver to the Company all instruments necessary or appropriate to enable the Company to sell or otherwise dispose of any such item of Equipment. The Company shall pay any costs (including attorneys’ fees) incurred in transferring title to any item of Equipment removed pursuant to this Section 9.2.

(c) The removal of any item of Equipment pursuant to this Section shall not entitle the Company to any abatement or diminution of the PILOT Payments or any other amounts payable by it under this Lease Agreement.

Section 9.3 Assignment and Subleasing .

(a) Except pursuant to the Sublease Agreement, this Lease Agreement may not be assigned, in whole or in part, and the Facility may not be subleased, in whole or in part, without the prior written consent of the Agency, in each instance, which consent shall not be unreasonably withheld or delayed, but shall be subject to the dates of the Agency’s board meetings, and which consent may be fully and effectively given by the execution and delivery of a Tenant Agency Compliance Agreement by an Authorized Representative of the Agency in substantially the form attached hereto as Exhibit I . Any assignment or sublease shall be on the following conditions, as of the time of such assignment or sublease:

(i) no assignment or sublease shall relieve the Company from primary liability for any of its obligations hereunder unless the Agency consents thereto, which consent shall not be unreasonably withheld or delayed subject to the dates of the Agency’s board meetings and which consent shall be conditioned upon the Agency being indemnified and held harmless to its reasonable satisfaction;

(ii) the assignee or sublessee (except in the case of a true sublessee in the ordinary course of business) shall assume the obligations of the Company hereunder to the extent of the interest assigned or subleased;

(iii) the Company shall, within ten (10) days after the delivery thereof, furnish or cause to be furnished to the Agency a true and complete copy of such assignment or sublease and the instrument of assumption;

(iv) neither the validity nor the enforceability of the Lease Agreement shall be adversely affected thereby;

(v) the Facility shall continue to constitute a “project” as such quoted term is defined in the Act, and, without limiting the generality of the foregoing, no assignment or sublease shall cause the Facility to be used in violation of Section 862(2)(a) of the Act and no assignment or sublease shall cause the Facility to be occupied by a sublessee in violation of Section 862(1) of the Act; and

(vi) any sublessee will execute and deliver a Tenant Agency Compliance Agreement, satisfactory to the Agency in substantially the form attached hereto as Exhibit I ;

- 33 -

(b) If the Agency shall so request, as of the purported effective date of any assignment or sublease pursuant to subsection (a) of this Section 9.3, the Company at its sole cost and expense shall furnish the Agency with opinions, in form and substance satisfactory to the Agency, (i) of Transaction Counsel as to item (v) above, and (ii) of Independent Counsel as to items (i), (ii), and (iv) above.

(c) In accordance with Section 862(1) of the Act, the Facility shall not be occupied by a sublessee whose tenancy would result in the removal of a facility or plant of the proposed sublessee from one area of the State to another area of the State or in the abandonment of one or more plants or facilities of such sublessee located within the State; provided, however, that neither restriction shall apply if the Agency shall determine:

(i)

that such occupation of the Facility is reasonably necessary to discourage the proposed sublessee from removing such other plant or facility to a location outside the State, or

(ii)

that such occupation of the Facility is reasonably necessary to preserve the competitive position of the proposed sublessee in its respective industry.

Section 9.4 Merger of Agency .

(a) Nothing contained in this Lease Agreement shall prevent the consolidation of the Agency with, or merger of the Agency into, or the transfer of the Agency’s interest in the entire Facility to, any other public benefit corporation or political subdivision which has the legal authority to own and lease the Facility and to continue the tax benefits contemplated by the Transaction Documents, provided that upon any such consolidation, merger or transfer, the due and punctual performance and observance of all the agreements and conditions of this Lease Agreement to be kept and performed by the Agency shall be expressly assumed in writing by the public benefit corporation or political subdivision resulting from such consolidation or surviving such merger or to which the Facility shall be transferred.

(b) Within thirty (30) days after the consummation of any such consolidation, merger or transfer of title, the Agency shall give notice thereof in reasonable detail to the Company and shall, upon request, furnish to the Company, at the sole cost and expense of the Company, a favorable opinion of Independent Counsel as to compliance with the provisions of Section 9.4(a) hereof. The Agency promptly shall furnish such additional information with respect to any such transaction as the Company may reasonably request.

ARTICLE X
EVENTS OF DEFAULT AND REMEDIES

Section 10.1 Events of Default Defined .

(a)

The following shall each be “Events of Default” under this Lease Agreement:

(i) the failure by the Company to pay or cause to be paid, on the date due, the amounts specified to be paid pursuant to Section 4.3(a) and (b) hereof;

- 34 -

(ii) the failure by the Company to observe and perform any covenant contained in Sections 2.2(e), (f) or (i), 5.2, 6.3, 6.4, 6.5, 8.2, 8.4, 8.5, 8.11, 9.3, 10.4 and 10.6 and Article XIII hereof;

(iii ) the failure by the Company to pay or cause to be paid PILOT Payments or the Recapture Benefits, in each case on the dates due;

(iv) the occurrence and continuation of a Recapture Event;

(v ) any representation or warranty of the Company herein, in any of the Company Documents or in the Project Application Information shall prove to have been false or misleading in any material respect;

( vi) the failure by the Company to observe and perform any covenant, condition or agreement hereunder on its part to be observed or performed (except obligations referred to in 10.1(a)(i), (ii), (iii) and (vii)) for a period of thirty (30) days after written notice, specifying such failure and requesting that it be remedied, has been given to the Company by the Agency;

(vii ) the dissolution or liquidation of the Company; or the failure by the Company to release, stay, discharge, lift or bond within thirty (30) days any execution, garnishment, judgment or attachment of such consequence as may impair its ability to carry on its operations; or the failure by the Company generally to pay its debts as they become due; or an assignment by the Company for the benefit of creditors; or the commencement by the Company (as the debtor) of a case in bankruptcy or any proceeding under any other insolvency law; or the commencement of a case in bankruptcy or any proceeding under any other insolvency law against the Company (as the debtor), wherein a court having jurisdiction in the premises enters a decree or order for relief against the Company as the debtor, or such case or proceeding is consented to by the Company or remains undismissed for forty (40) days, or the Company consents to or admits the material allegations against it in any such case or proceeding; or a trustee, receiver or agent (however named) is appointed or authorized to take charge of substantially all of the property of the Company for the purpose of enforcing a lien against such Property or for the purpose of general administration of such Property for the benefit of creditors;

(viii) an Event of Default under the Mortgage, if any, shall have occurred and be continuing; or

( ix) a default by any tenant under its respective Tenant Agency Compliance Agreement shall have occurred and be continuing.

- 35 -

(b) Notwithstanding the provisions of Section 10.1(a), if by reason of force majeure any party hereto shall be unable in whole or in part to carry out its obligations under Sections 3.4, 6.1 and 8.11 of this Lease Agreement, and if such party shall give notice and full particulars of such force majeure in writing to the other party, within a reasonable time after the occurrence of the event or cause relied upon, such obligations under this Lease Agreement of the party giving such notice (and only such obligations), so far as they are affected by such force majeure , shall be suspended during continuation of the inability, which shall include a reasonable time for the removal of the effect thereof. The term “ force majeure ” as used herein shall include, without limitation, acts of God, strikes, lockouts or other industrial disturbances, acts of public enemies, acts, priorities or orders of any kind of the government of the United States of America or of the State or any of their departments, agencies, governmental subdivisions or officials or any civil or military authority, insurrections, riots, epidemics, landslides, lightning, earthquakes, fire, hurricanes, storms, floods, washouts, droughts, arrests, restraint of government and people, civil disturbances, explosions, breakage or accident to machinery, transmission pipes or canals, shortages of labor or materials or delays of carriers, partial or entire failure of utilities, shortage of energy or any other cause or event not reasonably within the control of the party claiming such inability and not due to its fault. The party claiming such inability shall remove the cause for the same with all reasonable promptness. It is agreed that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the party having difficulty, and the party having difficulty shall not be required to settle any strike, lockout and other industrial disturbances by acceding to the demands of the opposing party or parties.

Section 10.2 Remedies on Default .

(a) Whenever any Event of Default shall have occurred and be continuing, the Agency may take, to the extent permitted by law, any one or more of the following remedial steps:

(i) declare, by written notice to the Company, to be immediately due and payable, whereupon the same shall become immediately due and payable: (A) all unpaid installments of rent payable pursuant to Section 4.3(a) and (b) hereof, (B) all unpaid and past due PILOT Payments, (C) all due and owing Recapture Benefits, and (D) all other payments due under this Lease Agreement; provided, however, that if an Event of Default specified in Section 10.1(a)(vii) hereof shall have occurred and be continuing, such installments of rent and other payments due under this Lease Agreement shall become immediately due and payable without notice to the Company or the taking of any other action by the Agency;

(ii) terminate this Lease Agreement, reconvey the Facility to the Company and terminate the Sales Tax Exemption authorization. The Agency shall have the right to execute an appropriate deed with respect to the Facility and to place the same on record in the Suffolk County Clerk’s office, at the sole cost and expense of the Company and in such event the Company waives delivery and acceptance of such deed and the Company hereby appoints the Agency its true and lawful agent and attorney-in-fact (which appointment shall be deemed to be an agency coupled with an interest), with full power of substitution to file on its behalf all affidavits, questionnaires and other documentation necessary to accomplish the recording of such deed; or

(iii) take any other action at law or in equity which may appear necessary or desirable to collect the payments then due or thereafter to become due hereunder, and to enforce the obligations, agreements and covenants of the Company under this Lease Agreement.

- 36 -

(b) No action taken pursuant to this Section 10.2 (including termination of the Lease Agreement) shall relieve the Company from its obligation to make all payments required by Section 4.3 hereof or due and owing PILOT Payments or Recapture Benefits.

Section 10.3 Remedies Cumulative . No remedy herein conferred upon or reserved to the Agency is intended to be exclusive of any other available remedy, but each and every such remedy shall be cumulative and in addition to every other remedy given under this Lease Agreement or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall impair any such right and power or shall be construed to be a waiver thereof, but any such right or power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Agency to exercise any remedy reserved to it in this Article X, it shall not be necessary to give any notice, other than such notice as may be herein expressly required in this Lease Agreement.

Section 10.4 Agreement to Pay Attorneys ’ Fees and Expenses . In the event the Company should default under any of the provisions of this Lease Agreement and the Agency should employ attorneys or incur other expenses for the collection of amounts payable hereunder or the enforcement of performance or observance of any obligations or agreements on the part of the Company herein contained, the Company shall, on demand therefor, pay to the Agency the reasonable fees of such attorneys and such other expenses so incurred.

Section 10.5 No Additional Waiver Implied by One Waiver . In the event any agreement contained herein should be breached by any party and thereafter waived by any other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder.

Section 10.6 Certificate of No Default . The Company shall deliver to the Agency each year no later than January 15th, a certificate signed by an Authorized Representative of the Company stating that the Company is not in default under this Lease Agreement and that no Event of Default exists under this Lease Agreement or any other Company Document. Such certificate shall also contain all information required under Section 8.5 hereof.

ARTICLE XI
EARLY TERMINATION OF LEASE AGREEMENTOPTION IN FAVOR OF COMPANY

Section 11.1 Early Termination of Lease Agreement . The Company shall have the option to terminate this Lease Agreement at any time upon filing with the Agency a certificate signed by an Authorized Representative of the Company stating the Company’s intention to do so pursuant to this Section and stating the date upon which such payments required by Section 11.2 hereof shall be made (which date shall not be less than forty five (45) nor more than 90 days from the date such certificate is filed) and upon compliance with the requirements set forth in Section 11.2 hereof.

- 37 -

Section 11.2 Conditions to Termination of Lease Agreement . In the event of the termination or expiration of this Lease Agreement in accordance with the provisions of Sections 4.2, 10.2 or 11.1 hereof, the Company shall make or cause to be made the following payments:

(a) To the Agency or the Taxing Authorities, as appropriate pursuant to Section 5.1 hereof: all PILOT Payments due and payable hereunder as of the date of the termination or expiration of this Lease Agreement;

(b) To the Agency: the purchase price with respect to the Equipment of one dollar ($1.00);

( d) To the Agency: an amount certified by the Agency to be sufficient to pay all unpaid fees and expenses of the Agency incurred under the Agency Documents; and

( e) To the appropriate Person: an amount sufficient to pay all other fees, expenses or charges, if any, due and payable or to become due and payable under the Company Documents.

Section 11.3 Conveyance on Termination . At the closing of any expiration or termination of the Lease Agreement, the Agency shall, upon receipt of the amounts payable pursuant to Section 11.2 hereof, deliver to the Company all necessary documents (i) to terminate this Lease Agreement and to convey the Facility to the Company, subject in each case only to the following: (A) any Liens to which leasehold estate or title to such Property was subject when conveyed to the Agency, (B) any Liens created at the request of the Company, to the creation of which the Company consented or in the creation of which the Company acquiesced, (C) any Permitted Encumbrances, and (D) any Liens resulting from the failure of the Company to perform or observe any of the agreements on its part contained in this Lease Agreement or arising out of an Event of Default hereunder; and (ii) to release and convey to the Company all of the Agency’s rights and interest in and to any rights of action or any Net Proceeds of insurance or Condemnation awards with respect to the Facility (but not including any Unassigned Rights). At the closing of any expiration or termination of the Lease Agreement, and unless otherwise waived by the Agency, as a condition to such termination or expiration, the Company shall request each Lender to release the Agency from any Mortgage and any other Loan Documents to which it is a party in writing and cause such releases to be recorded as applicable.

ARTICLE XII
LENDER PROVISIONS

Section 12.1 Subordination of Lease Agreement . This Lease Agreement and any and all modifications, amendments, renewals and extensions thereof is subject and subordinate to any Mortgage which may be granted by the Agency and the Company on the Facility or any portion thereof and to any and all modifications, amendments, consolidations, extensions, renewals, replacements and increases thereof.

- 38 -

Section 12.2 Mortgage and Pledge of Agency ’s Interests to Lender . The Agency shall at the request of, and at the sole cost and expense of, the Company (i) mortgage its interest in the Facility, and (ii) pledge and assign its rights to and interest in this Lease Agreement (other than Unassigned Rights) to the Lender as security for the payment of the principal of and interest on the Loan, in each case in accordance with the provisions attached hereto as Exhibit D . The Company hereby acknowledges and consents to such mortgage, pledge and assignment by the Agency. Notwithstanding the foregoing, all indemnities herein contained shall, subsequent to such mortgage, pledge and assignment, continue to run to the Agency for its benefit.

Section 12.3 Pledge of Company ’s Interest to Lender . The Company shall have the right to pledge and assign its rights to and interest in this Lease Agreement and the Plans and Specifications to any Lender as security for the payment of the principal of and interest on the Loan. The Agency hereby acknowledges and consents to any such pledge and assignment by the Company.

Section 12.4 Making of Loans; Disbursement of Loan Proceeds . The Agency acknowledges that the Company may request one or more Lenders to make one or more loans to finance and refinance the costs of the acquisition of the Facility and/or the Project Work or to reimburse the Company for the cost of acquiring the Facility and/or the Project Work (the “ Loan ”). Proceeds of such Loan shall be disbursed by such Lender in accordance with the provisions of the Mortgage or other related documentation applicable to such Loan.

Provided that the Agency shall have received the notice of the name and address of a Lender, the Agency agrees that simultaneously with its giving of any notice under this Lease Agreement (each a “ Notice ”) it will send a copy of such Notice to each Lender. Each Notice shall be sent to each Lender in the manner provided herein at the address provided to the Agency by each Lender for such purpose. Each such Lender may change such address from time to time by written notice to the Agency in accordance herewith. The Agency shall reasonably cooperate with the Company in connection with the granting or modification by the Company of any Mortgage. Such cooperation shall include, without limitation, the execution and delivery of such documents and instruments in connection with a Mortgage as the Company or the Lender may reasonably request (the “ Loan Documents ”), provided that such documents and instruments shall contain the language set forth in Exhibit D attached hereto and made a part hereof. The Company shall perform or cause to be performed for and on behalf of the Agency, and at the Company’s sole cost and expense, each and every obligation of the Agency under and pursuant to such instruments.

Section 12.5 References to Lender, Loan or Mortgage . All references herein to Lender, Loan or Mortgage or other similar words, whether in the singular or the plural, may be in anticipation of future Loans to be made by future Lenders. Such references shall only be effective if such Loans have been made and are still outstanding. If such Loans are never made or have been repaid, such references shall not be of any force or effect.

- 39 -

ARTICLE XIII
ENVIRONMENTAL MATTERS

Section 13.1 Environmental Representations of the Company . Except as otherwise shown on Exhibit H attached hereto, the Company hereby represents and warrants to the Agency that:

(a ) Neither the Facility nor, to the best of Company’s knowledge, any property adjacent to or within the immediate vicinity of the Facility is being or has been used in violation of any applicable Environmental Law for the storage, treatment, generation, transportation, processing, handling, production or disposal of any Hazardous Substance or as a landfill or other waste management or disposal site or for military, manufacturing or industrial purposes or for the storage of petroleum or petroleum based products.

(b) Underground storage tanks are not and have not been located on the Facility.

(c) The soil, subsoil, bedrock, surface water and groundwater of the Facility are free of Hazardous Substances, in violation of Environmental Law, other than any such substances that occur naturally.

(e) All Environmental Permits necessary for the ownership, use or operation of the Facility have been obtained and are in full force and effect.

- 40 -

Section 13.2 Environmental Covenants of the Company . The Company hereby covenants and agrees with the Agency as follows:

(a) The Company shall use, operate and manage the Facility in accordance with all applicable Environmental Laws and Environmental Permits, and shall cause all operators, tenants, subtenants, licensees and occupants of the Facility to use, operate and manage the Facility in accordance with any applicable Environmental Laws and Environmental Permits, and shall not cause, allow or permit the Facility or any part thereof to be operated or used for the storage, treatment, generation, transportation, processing, handling, production, management or Disposal of any Hazardous Substances other than in accordance with all applicable Environmental Laws and Environmental Permits.

(b) The Company shall obtain and comply with, and shall cause all contractors, subcontractors, operators, tenants, subtenants, licensees and occupants of the Facility to obtain and comply with, all Environmental Permits, if any.

(c) The Company shall not cause or permit any change to be made in the present or intended use or operation of the Facility which would (i) involve the storage, treatment, generation, transportation, processing, handling, management, production or disposal of any Hazardous Substance other than in accordance with any applicable Environmental Law, or use or operation of the Facility as a landfill or waste management or disposal site or for manufacturing or industrial purposes or for the storage of petroleum or petroleum based products other than in accordance with any applicable Environmental Law, (ii) violate any applicable Environmental Law, (iii) constitute a violation or non-compliance with any Environmental Permit or (iv) increase the risk of a Release of any Hazardous Substance.

(d) The Company shall promptly provide the Agency with a copy of all notifications which the Company gives or receives with respect to conditions of the Environment at or in the vicinity of the Facility, any past or present Release or the threat of a Release of any Hazardous Substance on, at or from the Facility or any property adjacent to or within the immediate vicinity of the Facility. If the Company receives or becomes aware of any such notification which is not in writing or otherwise capable of being copied, the Company shall promptly advise the Agency of such verbal, telephonic or electronic notification and confirm such notice in writing. Furthermore, upon the Company’s discovery thereof, the Company shall promptly advise the Agency in writing of: (i) the presence of any Hazardous Substance on, under or about the Facility of which the Agency has not previously been advised in writing; (ii) any remedial action taken by, or on behalf of, the Company in response to any Hazardous Substance on, under or about the Facility or to any environmental proceedings of which the Company has not previously been advised in writing; and (iii) the occurrence or condition on any real property adjoining or in the vicinity of the Facility that could reasonably be expected to cause the Facility or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use of the Facility under any Environmental Law. The Company shall also provide the Agency with copies of all reports, analyses, notices, licenses, approvals, orders, correspondences or other written materials in its possession or control relating to the condition of the Environment at the Facility or real property or bodies of water adjoining or in the vicinity of the Facility or environmental proceedings promptly upon receipt, completion or delivery of such materials.

- 41 -

(e) The Company shall undertake and complete all investigations, studies, sampling and testing and all removal or remedial actions necessary to contain, remove and clean up all Hazardous Substances that are or may become present at the Facility and are required to be removed and/or remediated in accordance with all applicable Environmental Laws and all Environmental Permits. All remedial work shall be conducted (i) in a diligent and timely fashion by licensed contractors acting under the supervision of a consulting environmental engineer, (ii) pursuant to a detailed written plan for the remedial work approved by any public or private agencies or persons with a legal or contractual right to such approval, (iii) with such insurance coverage pertaining to liabilities arising out of the remedial work as is then customarily maintained with respect to such activities, and (iv) only following receipt of any required permits, licenses or approvals. In addition, the Company shall submit, or cause to be submitted, to the Agency, promptly upon receipt or preparation, copies of any and all reports, studies, analyses, correspondence, governmental comments or approvals, proposed removal or other remedial work contracts and similar information prepared or received by or on behalf of the Company in connection with any remedial work, or Hazardous Substances relating to the Facility. All costs and expenses of such remedial work shall be paid by or on behalf of the Company, including, without limitation, the charges of the remedial work contractors and the consulting environmental engineer, any taxes or penalties assessed in connection with the remedial work and the Agency’s out-of-pocket costs incurred in connection with monitoring or review of such remedial work. The Agency shall have the right but not the obligation to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any environmental proceedings.

(f) If at any time the Agency obtains any notice or information that the Company or the Facility, or the use or operation thereof or the Project Work may be in violation of an Environmental Law or in non-compliance with any Environmental Permit or standard, the Agency may require that a full or supplemental environmental inspection and audit report with respect to the Facility of a scope and level of detail reasonably satisfactory to the Agency be prepared by a professional environmental engineer or other qualified environmental scientist acceptable to the Agency, at the Company’s sole cost and expense. Said audit may, but is not required to or limited to, include a physical inspection of the Facility, a records search, a visual inspection of any property adjacent to or within the immediate vicinity of the Facility, personnel interviews, review of all Environmental Permits and the conducting of scientific testing. If necessary to determine whether a violation of an Environmental Law exists, such inspection shall also include subsurface testing for the presence of Hazardous Substances in the soil, subsoil, bedrock, surface water and/or groundwater. If said audit report indicates the presence of any Hazardous Substance or a Release or Disposal or the threat of a Release or Disposal of any Hazardous Substance on, at or from the Facility in violation of any applicable law, the Company shall promptly undertake and diligently pursue to completion all necessary, appropriate investigative, containment, removal, clean-up and other remedial actions required by any Environmental Law, in accordance with Section 13.2(e) above. The Company hereby consents to the Agency notifying any party under such circumstances of the availability of any or all of the environmental reports and the information contained therein. The Company further agrees that the Agency may disclose such environmental reports to any governmental agency or authority if they reasonably believe that they are required to disclose any matter contained therein to such agency or authority; provided that the Agency shall give the Company at least forty-eight (48) hours prior written notice before so doing. The Company acknowledges that the Agency cannot control or otherwise assure the truthfulness or accuracy of the environmental reports, and that the release of the environmental reports, or any information contained therein, to prospective bidders at any foreclosure sale of the Facility may have a material and adverse effect upon the amount which a party may bid at such sale. The Company agrees that the Agency shall not have any liability whatsoever as a result of delivering any or all of the environmental reports or any information contained therein to any third party if done in good faith, and the Company hereby releases and forever discharges the Agency from any and all claims, damages, or causes of action arising out of, connected with or incidental to the delivery of environmental reports.

- 42 -

Section 13.3 Survival Provision . Notwithstanding anything to the contrary contained herein, the representations, warranties, covenants and indemnifications of the Company contained in this Article XIII shall survive any termination, conveyance, assignment, subleasing or defeasance of any right, title or interest of the Company in and to the Facility or in, to or under the Lease Agreement.

ARTICLE XIV
MISCELLANEOUS

Section 14.1 Notices . All notices, certificates and other communications hereunder shall be in writing and shall be either delivered personally or sent by certified mail, return receipt requested, or delivered by any national overnight express delivery service (in each case, postage or delivery charges paid by the party giving such communication) addressed as follows or to such other address as any party may specify in writing to the other:

To the Agency :

Town of Islip Industrial Development Agency

40 Nassau Avenue

Islip, New York 11751

Attention: Executive Director

With a copy to :

Islip Town Attorney ’s Office

40 Nassau Avenue

Islip, New York 11751

Attention: Michael A. Brandi , Esq.

To the Company:

FAE Holdings 411519R, LLC

355 South Technology Drive

Central Islip, New York 11722

Attention: Glen Charles, CFO

- 43 -

With a copy to :

CVD Equipment Corporation

355 South Technology Drive

Central Islip, New York 11722

Attention: Martin Teitelbaum, Esq.

Notice by mail shall be effective when delivered but if not yet delivered shall be deemed effective at 12:00 p.m. on the third Business Day after mailing with respect to certified mail and one Business Day after mailing with respect to overnight mail.

Copies of all notices given either to the Agency or to the Company shall also be sent to any Lender, if such Lender shall have delivered written instructions to the Agency and the Company with the address of such Lender pursuant to Section 12.4 hereof.

Section 14.2 Binding Effect . This Lease Agreement shall inure to the benefit of and shall be binding upon the parties and their respective successors and assigns.

Section 14.3 Severability . In the event any provision of this Lease Agreement shall be held illegal, invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof.

Section 14.4 Amendments, Changes and Modifications . This Lease Agreement may not be amended, changed, modified, altered or (except pursuant to Section 10.2 hereof) terminated except in a writing executed by the parties hereto.

Section 14.5 Execution of Counterparts . This Lease Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 14.6 Applicable Law . This Lease Agreement shall be governed exclusively by the applicable laws of the State without regard or reference to its conflict of laws principles.

Section 14.7 List of Additional Equipment ; Further Assurances . Upon the Completion Date with respect to the Facility and the installation of all of the Equipment therein, the Company shall prepare and deliver to the Agency, a schedule listing all of the Equipment not previously described in this Lease Agreement. If requested by the Agency, the Company shall thereafter furnish to the Agency, within sixty (60) days after the end of each calendar year, a schedule listing all of the Equipment not theretofore previously described herein or in the aforesaid schedule.

Section 14.8 Survival of Obligations . This Lease Agreement shall survive the performance of the obligations of the Company to make the payments required by Section 4.3, and all indemnities shall survive the foregoing and any termination or expiration of this Lease Agreement.

- 44 -

Section 14.9 Table of Contents and Section Headings Not Controlling . The Table of Contents and the headings of the several Sections in this Lease Agreement have been prepared for convenience of reference only and shall not control or affect the meaning of or be taken as an interpretation of any provision of this Lease Agreement.

Section 14.10 Waiver of Trial by Jury . The parties do hereby expressly waive all rights to trial by jury on any cause of action directly or indirectly involving the terms, covenants or conditions of this Lease Agreement or the Facility or any matters whatsoever arising out of or in any way connected with this Lease Agreement.

(Remainder of Page Intentionally Left Blank - Signature Pages Follow)

- 45 -

IN WITNESS WHEREOF, the Agency and the Company have caused this Lease Agreement to be executed in their respective names by their duly authorized representatives, all as of the day and year first above written.

	TOWN OF ISLIP INDUSTRIAL DEVELOPMENT AGENCY


	By:

	Name:	William G. Mannix
	Title:	Executive Director

STATE OF NEW YORK	)
	: SS.:
COUNTY OF NASSAU	)

On the ___ day of November in the year 2017, before me, the undersigned, personally appeared William G. Mannix , personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument, and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person or entity on behalf of which the individual acted, executed the instrument.


	Notary Public

Signature Page to Lease Agreement

Page 1 of 2

	FAE Holdings 411519R, LLC


	By:

	Name:
	Title:

STATE OF NEW YORK	)
	: SS.:
COUNTY OF NASSAU	)

On the ___ day of November in the year 2017, before me, the undersigned, personally appeared _____________________ , personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument, and acknowledged to me that he/she executed the same in his/her capacity, and that by his/her signature on the instrument, the individual, or the person or entity on behalf of which the individual acted, executed the instrument.


	Notary Public

Signature Page to Lease Agreement

Page 2 of 2

EXHIBIT A

Legal Description of Real Property

EXHIBIT B

Equipment

All Eligible Items acquired, constructed, renovated or installed and/or to be acquired, constructed, renovated or installed by or on behalf of the Company, in connection with the completion of the Town of Islip Industrial Development Agency’s FAE Holdings 411519R, LLC/CVD Equipment Corporation 2017 Facility located at 355 South Technology Drive, Central Islip, New York 11722, and leased to the Company pursuant to the Lease Agreement.

EXHIBIT C

PILOT Schedule

Formula for In-Lieu-of-Taxes Payment: Town of Islip (including any existing incorporated village and any village which may be incorporated after the date thereof, within which the facility is wholly or partially located), Central Islip Union Free School District, Suffolk County and appropriate Special Districts.

Definitions

Normal Tax Due = Those payments for taxes and assessments, and other special ad valorem levies, special assessments and service charges against real property located in the Town of Islip (including any existing incorporated village or any village which may be incorporated after the date hereof, within which the Facility is wholly or partially located) which are or may be imposed for special improvements or special district improvements, that the Company would pay without exemption.

Formula

Year

201 7/2018

100% Normal Tax Due on the Taxable Assessed Value of $280,000

201 8/2019

100% Normal Tax Due on the Taxable Assessed Value of $280,000

20 19/2020

100% Normal Tax Due on the Taxable Assessed Value of $280,000

202 0/2021

100% Normal Tax Due on the Taxable Assessed Value of $280,000

2021 /2022

100% Normal Tax Due on the Taxable Assessed Value of $280,000

202 2/2023

100% Normal Tax Due on the Taxable Assessed Value of $354,260

202 3/2024

100% Normal Tax Due on the Taxable Assessed Value of $428,520

202 4/2025

100% Normal Tax Due on the Taxable Assessed Value of $502,780

202 5/2026

100% Normal Tax Due on the Taxable Assessed Value of $577,040

202 6/2027

100% Normal Tax Due on the Taxable Assessed Value of $651,300

202 7/2028

100% Normal Tax Due on the Taxable Assessed Value of $725,560

202 8/2029

100% Normal Tax Due on the Taxable Assessed Value of $799,820

20 29/2030

100% Normal Tax Due on the Taxable Assessed Value of $874,080

203 0/2031

100% Normal Tax Due on the Taxable Assessed Value of $948,340

And thereafter: 100% Normal Tax Due on the Full Assessed Value

EXHIBIT D

Mortgage Requirements

Any Mortgage or related document which shall be entered into by the Agency and the Company shall contain the following required provisions:

Non-Recourse and Hold Harmless Provisions to be included in the Lender ’s Mortgage

Section ___. No Recourse Against Agency . The general credit of the Agency is not obligated or available for the payment of this Mortgage. The Mortgagee will not look to the Agency or any principal, member, director, officer or employee of the Agency with respect to the indebtedness evidenced by this Mortgage or any covenant, stipulation, promise, agreement or obligation contained herein. In enforcing its rights and remedies under this Mortgage, the Mortgagee will look solely to the mortgaged premises and/or the Company for the payment of the indebtedness secured by this Mortgage and for the performance of the provisions hereof. The Mortgagee will not seek a deficiency or other money judgment against the Agency or any principal, member, director, officer or employee of the Agency and will not institute any separate action against the Agency by reason of any default that may occur in the performance of any of the terms and conditions of this Mortgage or the Loan Documentation. This agreement on the part of the Mortgagee shall not be construed in any way so as to effect or impair the lien of this Mortgage or the Mortgagee’s right to foreclose hereunder as provided by law or construed in any way so as to limit or restrict any of the rights or remedies of the Mortgagee in any foreclosure proceedings or other enforcement of payment of the indebtedness secured hereby out of and from the security given therefor. All covenants, stipulations, promises, agreements and obligations are the Agency’s and not of any member, director, officer, employee or agent (except the Company) of the Agency in his or her individual capacity, and no recourse shall be had for the payment of the principal of any debt or interest thereon or for any claim based thereon or hereunder against any member, director, officer, employee or agent (except the Company) of the Agency or any natural person executing this Mortgage on behalf of the Agency. No covenant contained herein shall be deemed to constitute a debt of the State of New York or the Town of Islip, Suffolk County and neither the State of New York nor the Town of Islip, Suffolk County shall be liable on any covenant contained herein, nor shall any obligations hereunder be payable out of any funds of the Agency.

Section ___. Hold Harmless Provisions . The Company agrees that the Agency, its directors, members, officers, agents (except the Company) and employees shall not be liable for and agrees to defend, indemnify, release and hold the Agency, its director, members, officers, agents (except the Company) and employees harmless from and against any and all (i) liability for loss or damage to property or injury to or death of any and all persons that may be occasioned by, directly or indirectly, any cause whatsoever pertaining to the Facility or arising by reason of or in connection with the use thereof or under this Mortgage, or (ii) liability arising from or expense incurred by the Project Work or the Agency’s acquiring, owning and leasing of the Facility, including without limiting the generality of the foregoing, all claims arising from the breach by the Company of any of its covenants contained herein and all causes of action and reasonable attorneys’ fees (whether by reason of third party claims or by reason of the enforcement of any provision of the Mortgage (including, without limitation, this Section)) and any other expenses incurred in defending any claims, suits or actions which may arise as a result of the foregoing, provided that any such losses, damages, liabilities or expenses of the Agency are not incurred or do not result from the gross negligence or intentional or willful wrongdoing of the Agency or any of its directors, members, officers, agents (except the Company) or employees. The foregoing indemnities shall apply notwithstanding the fault or negligence on the part of the Agency, or any of its members, directors, officers, agents, or employees and irrespective of the breach of a statutory obligation or the application of any rule of comparative or apportioned liability. The foregoing indemnities are limited only to the extent of any prohibitions imposed by law, and upon the application of such prohibition by the final judgment or decision of a competent court of law, the remaining provisions of these indemnities shall remain in full force and effect.

Exhibit D-1

(b) Notwithstanding any other provisions of this Mortgage, the obligations of the Company pursuant to this Section ___ shall remain in full force and effect after the termination of this Mortgage until the expiration of the period stated in the applicable statute of limitations during which a claim, cause of action or prosecution relating to the matters herein described may be brought and payment in full or the satisfaction of such claim, cause of action or prosecution relating to the matters herein described and the payment of all reasonable expenses and charges incurred by the Agency, or its respective members, directors, officers, agents (except the Company) and employees, relating to the enforcement of the provisions herein specified.

(c) In the event of any claim against the Agency or its members, directors, officers, agents (except the Company) or employees by any employee or contractor of the Company or anyone directly or indirectly employed by any of them or anyone for whose acts any of them may be liable, the obligations of the Company hereunder shall not be limited in any way by any limitation on the amount or type of damages, compensation, disability benefits or other employee benefit acts.

Section ___. Recordation of Mortgage. The Agency covenants that it will record or cause this Mortgage to be duly recorded in all offices where recordation thereof is necessary.

Section___. Termination of Lease Agreement . Upon the termination of the Lease Agreement for any reason whatsoever, and at the sole cost and expense of the Company, the Mortgagee shall prepare, execute and deliver to the Agency and the Company, and the Agency and the Company shall execute, any documents necessary to amend the Mortgage to remove the Agency as a party thereto.

Exhibit D-2

EXHIBIT E

FORM OF SALES TAX AGENT AUTHORIZATION LETTER

SALES TAX AGENT AUTHORIZATION LETTER

EXPIRATION DATE: November [__] , 201 7

ELIGIBLE LOCATION:

355 South Technology Drive, Central Islip, New York 11722

___________ __, 201_

TO WHOM IT MAY CONCERN

Re:

Town of Islip Industrial Development Agency

( FAE Holdings 411519R, LLC /CVD Equipment Corporation 20 17 Facility)

Ladies and Gentlemen:

The Town of Islip Industrial Development Agency (the “ Agency ”), by this notice, hereby advises you as follows:

1. Pursuant to a certain Amended and Restated Lease and Project Agreement, dated as of November 1, 2017 (the “ Lease Agreement ”), between the Agency and FAE Holdings 411519R, LLC, a limited liability company duly organized and validly existing under the laws of the State of New York, having its principal office at 355 South Technology Drive, Central Islip, New York (the “ Company ”), the Agency has authorized the Company to act as its agent in connection with the Facility described therein located at the Eligible Location described above. Certain capitalized terms used herein and not defined shall have the respective meanings given to such terms in the Lease Agreement.

2. Upon the Company’s request, the Agency has appointed [insert name of Agent] (the “ Agent ”), pursuant to this Sales Tax Agent Authorization Letter (the “ Sales Tax Agent Authorization Letter ”) to act as the Agency’s agent for the purpose of effecting purchases exempt from sales or use tax in accordance with the terms, provisions of this Sales Tax Agent Authorization Letter and the Lease Agreement. The Agent should review the definitions of Eligible Items and Ineligible Items in Schedule A hereto with respect to the scope of Sales Tax Exemption provided under the Lease Agreement and hereunder.

3. The effectiveness of the appointment of the Agent as an agent of the Agency is expressly conditioned upon the execution by the Agency of New York State Department of Taxation and Finance Form ST-60 “IDA Appointment of Project Operator or Agent” (“ Form ST-60 ”) to evidence that the Agency has appointed the Agent as its agent (the form of which is to be completed by Agent and the Company). Pursuant to the exemptions from sales and use taxes available to the Agent under this Sales Tax Agent Authorization Letter, the Agent shall avail itself of such exemptions when purchasing eligible materials and services in connection with the Facility and shall not include such taxes in its contract price, bid or reimbursable costs, as the case may be.

Exhibit E-1

4. The Agent acknowledges that the executed Form ST-60 shall not serve as a sales or use tax exemption certificate or document. No agent or project operator may tender a copy of the executed Form ST-60 to any person required to collect sales tax as a basis to make such purchases exempt from tax. No such person required to collect sales or use taxes may accept the executed Form ST-60 in lieu of collecting any tax required to be collected. THE CIVIL AND CRIMINAL PENALTIES FOR MISUSE OF A COPY OF FORM ST-60 AS AN EXEMPTION CERTIFICATE OR DOCUMENT OR FOR FAILURE TO PAY OR COLLECT TAX SHALL BE AS PROVIDED IN THE TAX LAW. IN ADDITION, THE USE BY AN AGENT, THE COMPANY, OR OTHER PERSON OR ENTITY OF SUCH FORM ST-60 AS AN EXEMPTION CERTIFICATE OR DOCUMENT SHALL BE DEEMED TO BE, UNDER ARTICLES TWENTY EIGHT AND THIRTY SEVEN OF THE TAX LAW, THE ISSUANCE OF A FALSE OR FRAUDULENT EXEMPTION CERTIFICATE OR DOCUMENT WITH THE INTENT TO EVADE TAX.

5. As agent for the Agency, the Agent agrees that it will present to each seller or vendor a completed and signed NYSDTF Form ST-123 “IDA Agent or Project Operator Exempt Purchase Certificate” or such additional or substitute form as is adopted by NYSDTF for use in completing purchases that are exempt from Sales and Use Taxes (“ Form ST-123 ”) for each contract, agreement, invoice, bill or purchase order entered into by the Agent, as agent for the Agency, for the construction, repair and equipping of the Facility. Form ST-123 requires that each seller or vendor accepting Form ST-123 identify the Facility on each bill and invoice and invoice for purchases and indicate on the bill or invoice that the Agency or Agent or Company, as project operator of the Agency, was the purchaser. For the purposes of indicating who the purchaser is, each bill or invoice should state, “I, [Company/Agent], certify that I am duly appointed agent of the Town of Islip Industrial Development Agency and that I am purchasing the tangible personal property or services for use in the [Facility Name] located at [Address], Suffolk County, New York, IDA Project Number [__].” The Agent shall complete Form ST-123 as follows: (i) the “Project information” section of Form ST-123 should be completed using the name and address of the Facility as indicated on the Form ST-60 used to appoint the Agent; (ii) the date that the Agent was appointed as an agent should be completed using the date of the Agent’s Sales Tax Agent Authorization Letter; and (iii) the “Exempt purchases” section of Form ST-123 should be completed by marking “X” in box “A” only.

6. The Agent agrees to comply with the terms and conditions of the Lease Agreement. The Agent must retain for at least six (6) years from the date of expiration of its contract copies of (a) its contract with the Company to provide services in connection with the Facility, (b) all contracts, agreements, invoices, bills or purchases entered into or made by such Agent using the Letter of Authorization for Sales Tax Exemption, and (c) the executed Form ST-60 appointing the Agent as an agent of the Agency, and shall make such records available to the Agency upon reasonable notice. This provision shall survive the expiration or termination of this Sales Tax Agent Authorization Letter.

7. In order to assist the Company in complying with its obligation to file New York State Department of Taxation and Finance Form ST-340 “Annual Report of Sales and Use Tax Exemptions Claimed by Agent/Project Operator of Industrial Development Agency/Authority” (“ Form ST-340 ”), the Agent covenants and agrees that it shall file semi-annually with the Company and the Agency (no later than January 15th and July 15th of each calendar year in which it has claimed sales and use tax exemptions in connection with the Facility) a written statement of all sales and use tax exemptions claimed by such Agent for the preceding six-month period (ending on June 30th or December 31st, as applicable) in connection with the Facility by completing and submitting to the Company and the Agency the Sales Tax Registry attached hereto as Schedule B . If the Agent fails to comply with the foregoing requirement, the Agent shall immediately cease to be the agent for the Agency in connection with the Facility (such agency relationship being deemed to be immediately revoked) without any further action of the parties, the Agent shall be deemed to have automatically lost its authority to make purchases as agent for the Agency, and shall desist immediately from all such activity.

Exhibit E-2

8. The Agent agrees that if it fails to comply with the requirements for sales and use tax exemptions, as described in this Sales Tax Agent Authorization Letter, it shall pay any and all applicable Company Sales Tax Savings and any interest and penalties thereon. This provision shall survive the expiration or termination of this Sales Tax Agent Authorization Letter.

9. Special Provisions Relating to State Sales Tax Savings .

(a) The Agent covenants and agrees to comply, and to cause each of its contractors, subcontractors, persons or entities to comply, with the requirements of General Municipal Law Sections 875(1) and (3) (the “ Special Provisions ”), as such provisions may be amended from time to time. In the event of a conflict between the other provisions of this Sales Tax Agent Authorization Letter or the Lease Agreement and the Special Provisions, the Special Provisions shall control.

(b) The Agent acknowledges and agrees that pursuant to General Municipal Law Section 875(3) the Agency shall have the right to recover, recapture, receive, or otherwise obtain from the Agent State Sales Tax Savings taken or purported to be taken by the Agent or any other person or entity acting on behalf of the Agent to which Agent or the Company is not entitled or which are in excess of the Maximum Company Sales Tax Savings Amount or which are for property or services not authorized or taken in cases where the Company, any Agent or any other person or entity acting on behalf of the Company or the Agent failed to comply with a material term or condition to use property or services in the manner required by this Sales Tax Agent Authorization Letter or the Lease Agreement. The Company shall, and shall require each Agent and any other person or entity acting on behalf of the Company, to cooperate with the Agency in its efforts to recover, recapture, receive, or otherwise obtain such State Sales Tax Savings and shall promptly pay over any such amounts to the Agency that it requests. The failure to pay over such amounts to the Agency shall be grounds for the Commissioner of the New York State Department of Taxation and Finance (the “ Commissioner ”) to assess and determine State Sales and Use Taxes due from the Company under Article Twenty-Eight of the New York State Tax Law, together with any relevant penalties and interest due on such amounts.

10. Subject to the provisions of Section 9 hereof, in the event that the Agent shall utilize the Sales Tax Exemption in violation of the provisions of the Lease Agreement or this Sales Tax Agent Authorization Letter, the Agent shall promptly deliver notice of same to the Company and the Agency, and the Agent shall, upon demand by the Agency, pay to or at the direction of the Agency a return of sales or use tax exemptions in an amount equal to all such unauthorized sales or use tax exemptions together with interest at the rate of twelve percent (12%) per annum compounded daily from the date and with respect to the dollar amount for which each such unauthorized sales or use tax exemption was availed of by the Agent.

Exhibit E-3

11. Upon request by the Agency with reasonable notice to the Agent, the Agent shall make available at reasonable times to the Agency all such books, records, contracts, agreements, invoices, bills or purchase orders of the Agent, and require all appropriate officers and employees of the Agent to respond to reasonable inquiries by the Agency as shall be necessary (y) to indicate in reasonable detail those costs for which the Agent shall have utilized the Sales Tax Exemption and the dates and amounts so utilized, and (z) to permit the Agency to determine any amounts owed by the Agent under Section 10.

12. By execution of this Sales Tax Agent Authorization Letter, the Agent agrees to accept the terms hereof and represent and warrant to the Agency that the use of this Sales Tax Agent Authorization Letter by the Agent is strictly for the purposes stated herein.

13. The Agent acknowledges that this Sales Tax Agent Authorization Letter will terminate on the date (the “ Termination Date ”) that is the earlier of (i) the Expiration Date referred to above, and (ii) the expiration or termination of the Lease Agreement. Upon the Termination Date, the agency relationship between the Agency and the Agent shall terminate.

(Remainder of Page Intentionally Left Blank -Signature Page Follows)

Exhibit E-4

The signature of a representative of the Agent where indicated below will indicate that the Agent accepted the terms hereof.

	TOWN OF ISLIP INDUSTRIAL DEVELOPMENT AGENCY


	By:
	Name:
	Title:

ACCEPTED AND AGREED TO BY: [ *AGENT* ]


By:
Name:
Title:

Schedule A

SALES TAX AGENT AUTHORIZATION LETTER

Set forth below is a description of items that are eligible for the Sales Tax Exemption

Eligible Items shall mean the following items of personal property and services, but excluding any Ineligible Items, with respect to which the Agent shall be entitled to claim a Sales Tax Exemption in connection with the Facility:

(i)

purchases of materials, goods, personal property and fixtures and supplies that will be incorporated into and made an integral component part of the Facility;

(ii)

purchases or leases of any item of materials, goods, machinery, equipment, furniture, furnishings, trade fixtures and other tangible personal property having a useful life of one year of more;

(iii)

with respect to the eligible items identified in (ii) above: purchases of freight, installation, maintenance and repair services required in connection with the shipping, installation, use, maintenance or repair of such items; provided that maintenance shall mean the replacement of parts or the making of repairs;

(iv)

purchases of materials, goods and supplies that are to be used and substantially consumed in the course of construction or renovation of the Facility (but excluding fuel, materials or substances that are consumed in the course of operating machinery and equipment or parts containing fuel, materials or substances where such parts must be replaced whenever the substance is consumed); and

(v)

leases of machinery and equipment solely for temporary use in connection with the construction or renovation of the Facility.

Ineligible Items shall mean the following items of personal property and services with respect to which the Agent shall not be entitled to claim a Sales Tax Exemption in connection with the Facility:

(i)

vehicles of any sort, including watercraft and rolling stock;

(ii)

personalty having a useful life of one year or less;

(iii)

any cost of utilities, cleaning services or supplies or other ordinary operating costs;

(iv)

ordinary office supplies such as pencils, paper clips and paper;

(v)

any materials or substances that are consumed in the operation of machinery;

(vi)

equipment or parts containing materials or substances where such parts must be replaced whenever the substance is consumed; and

(vii)

maintenance of the type as shall constitute janitorial services.

Schedule B

SALES TAX AGENT AUTHORIZATION LETTER

SALES TAX REGISTRY

Please Complete: REPORTED PERIOD : SEMI-ANNUAL PERIOD FROM [JANUARY 1][JULY 1], 201__ to [JUNE 30][DECEMBER 31], 201__

Description of Item (incl. Serial #,if applicable)	Location of Item	Dollar Amount	Vendor Description	Date of Payment	Purchase order or invoice number	Sales Tax Savings

TOTAL SALES TAX SAVINGS REALIZED DURING THE SEMI-ANNUAL REPORTED PERIOD:

Cer tification: I , the undersigned , an authorized officer or principal owner of the company identified below , hereby certify to the best of my knowledge and belief that all information contained in this report is true and complete . The information reported in this form includes all Company Sales Tax Savings realized by the company identified below and its principals, affiliates, tenants, subtenants, contractors and subcontractors. This form and information provided pursuant hereto may be disclosed to the Town of Islip Industrial Development Agency (“TOIIDA”), and may be disclosed by TOIIDA in connection with the administration of the programs by TOIIDA; and , without limiting the foregoing , such information may be included in reports or disclosure required by law .

Name of Agent: ________________________________________________________

Signature By: __________________________________________________________

Name (print): __________________________________________________________

Title : _________________________________________________________________

Date : _________________________________________________________________

EXHIBIT F

Sales Tax Registry

Please Complete: REPORTED PERIOD : ANNUAL PERIOD FROM JULY 1, 201__ to JUNE 30, 201__

Description of Item (incl. Serial #,if applicable)	Location of Item	Dollar Amount	Vendor Description	Date of Payment	Purchase order or invoice number	Sales Tax Savings
SEMI-ANNUAL PERIOD FROM JULY 1, [____] to DECEMBER 31, [____]





TOTAL SALES TAX SAVINGS REALIZED DURING THE SEMI-ANNUAL PERIOD FROM JULY 1, [____] to DECEMBER 31, [____]:
SEMI-ANNUAL PERIOD FROM JANUARY 1, [____] to JUNE 30, [____]





TOTAL SALES TAX SAVINGS REALIZED DURING THE SEMI-ANNUAL PERIOD FROM JANUARY 1, [____] to JUNE 30, [____]:
TOTAL SALES TAX SAVINGS REALIZED DURING THE ANNUAL REPORTED PERIOD:

Cer tification: I , the undersigned , an authorized officer or principal owner of the Company , hereby certify to the best of my knowledge and belief that all information contained in this report is true and complete . The information reported in this form includes all Company Sales Tax Savings realized by the Company below and its principals, affiliates, tenants, subtenants, contractors, subcontractors and any other person or entity pursuant to the LETTER OF AUTHORIZATION FOR SALES TAX EXEMPTION issued to the Company, and any SALES TAX AGENT AUTHORIZATION LETTER issued to any other person or entity at the direction of the Company, by the Town of Islip Industrial Development Agency (“TOIIDA”). This form and information provided pursuant hereto may be disclosed by TOIIDA in connection with the administration of the programs by TOIIDA; and , without limiting the foregoing , such information may be included in reports or disclosure required by law .

Company Name: ______________________________________________________

Signature By: _________________________________________________________

Name (print): _________________________________________________________

Title : ________________________________________________________________

Date : ________________________________________________________________

EXHIBIT G

Construction Wage Policy

Town of Islip Industrial Development Agency

The purpose of the Town of Islip Industrial Development Agency is to provide benefits that reduce costs and financial barriers to the creation and to the expansion of business and enhance the number of jobs in Islip.

The Agency has consistently sought to ensure that skilled and fair paying construction jobs for local residents are encouraged in projects receiving financial assistance from the Agency and that local vendors be used during the construction process.

It is the intent of the Agency that the economic activity created by Agency assisted projects during the construction process primarily benefits local residents and vendors.

The following shall be the policy of the Town of Islip Industrial Development Agency for all applicants for financial assistance:

II.

(A)

Employ 90% of the construction workers for the project from within Nassau or Suffolk Counties.

(B)

Purchase 90% of the building materials from within the bi-County region.

In the event that any of these conditions cannot be met, the applicant shall submit to the Agency an explanation as to the reasons for its failure or inability to comply with such conditions. Furthermore, this policy may be waived, in the sole and final discretion of the Agency, in the event that the applicant demonstrates to the Agency special circumstances or economic hardship to justify a waiver to be in furtherance of the purposes and goals of the Town of Islip Industrial Development Agency.

EXHIBIT H

Exceptions to Representations and Warranties of Company

[None.]

EXHIBIT I

Form of Tenant Agency Com pliance Agreement

THIS TENANT AGENCY COMPLIANCE AGREEMENT, dated as of ________, 20__, is between the TOWN OF ISLIP INDUSTRIAL DEVELOPMENT AGENCY, a public benefit corporation of the State of New York, having its office at 40 Nassau Avenue, Islip, New York 11751 (the “ Agency ”), and _______________________, a [banking corporation] [business corporation] [general partnership] [limited liability company] [limited liability partnership] [limited partnership] duly organized and validly existing under the laws of the State of ________ having its principal office at _____________________________________ (the “ Tenant ”).

R E C I T A L S

WHEREAS, the Agency has agreed to provide assistance to FAE Holdings 411519R, LLC, a New York limited liability company (the “ Company ”) and CVD Equipment Corporation, a New York business corporation (the “ Sublessee ”), in the acquisition, construction and equipping of an approximately 120,000 square foot building (the “ Improvements ” and the “ Equipment ”), on approximately 8.0 acres of land located at 355 South Technology Drive, Central Islip, Suffolk County, New York (the “ Land ”; and together with the Improvements and the Equipment, the “ Facility ”), which Facility is leased by the Agency to the Company and subleased by the Company to the Sublessee and used by the Sublessee as a manufacturing facility to process surface treatments or films and coatings on various product lines in its business as a manufacturer of equipment and materials for the semiconductor industry (the “ Project ”) ; and

WHEREAS, the Agency leased the Facility to the Company pursuant to the Amended and Restated Lease and Project Agreement, dated as of November 1, 2017 (the “ Lease Agreement ”), by and between the Agency and the Company; and

WHEREAS, the Company intends to sublease a portion of the Facility to be used as ___________ (the “ Demised Premises ”) to the Tenant pursuant to a [Tenant Lease Agreement], dated as of ___________, 20__ (the “ Tenant Lease Agreement ”), by and between the Company and the Tenant, which may be amended from time to time.

NOW, THEREFORE, the parties hereto hereby agree as follows:

ARTICLE I
REPRESENTATIONS AND COVENANTS OF TENANT

Section 2.1 Representations and Covenants of Tenant . The Tenant makes the following representations and covenants as the basis for the undertakings on its part herein contained:

(a) The Tenant is a [banking corporation] [business corporation] [general partnership] [limited liability company] [limited liability partnership] [limited partnership] duly organized and validly existing under the laws of the State of __________ [ and authorized to transact business in the State of New York ], and in good standing under the laws of the State of New York,[and the State of [____]] and has full legal right, power and authority to execute, deliver and perform this Tenant Agency Compliance Agreement. This Tenant Agency Compliance Agreement has been duly authorized, executed and delivered by the Tenant.

(b) To the best of the Tenant’s knowledge, neither the execution and delivery of this Tenant Agency Compliance Agreement nor the consummation of the transactions contemplated hereby nor the fulfillment of or compliance with the provisions hereof will conflict with or result in a breach of or constitute a default under any of the terms, conditions or provisions of any law or ordinance of the State or any political subdivision thereof, the Tenant’s organizational documents, as amended, or any restriction or any agreement or instrument to which the Tenant is a party or by which it is bound.

(c) Any and all leasehold improvements undertaken by the Tenant with respect to the Demised Premises and the design, acquisition, construction, renovation, equipping and operation thereof by the Tenant will conform in all material respects with all applicable zoning, planning, building and environmental laws, ordinances, rules and regulations of governmental authorities having jurisdiction over the Facility. The Tenant shall defend, indemnify and hold harmless the Agency from any liability or expenses, including reasonable attorneys’ fees, resulting from any failure by the Tenant to comply with the provisions of this subsection.

(d ) The Tenant Agency Compliance Agreement constitutes a legal, valid and binding obligation of the Tenant enforceable against the Tenant in accordance with its terms.

(e) Under penalty of perjury, the Tenant certifies that it is in substantial compliance with all local, state, and federal tax, worker protection and environmental laws, rules and regulations.

ARTICLE II
INSURANCE

Section 2.1 Insurance Required . At all times throughout the Lease Term, the Tenant shall, at its sole cost and expense, maintain or cause to be maintained insurance against such risks, and for such amounts, as are customarily insured against by businesses of like size and type and shall pay, as the same become due and payable, all premiums with respect thereto. Such insurance shall include, without limitation, the following (but without duplication of insurance provided by the Company pursuant to the Lease Agreement covering the same risks and insured(s)):

(a) Insurance against loss or damage by fire, lightning and other casualties customarily insured against, with a uniform standard extended coverage endorsement, such insurance to be in an amount not less than the full replacement value of the completed Improvements, exclusive of footings and foundations, as determined by a recognized appraiser or insurer selected by the Tenant, but in no event less than $1,000,000. During the construction of the Facility, such policy shall be written in the so-called “Builder’s Risk Completed Value Non-Reporting Form” and shall contain a provision granting the insured permission to complete and/or occupy.

(b) Workers’ compensation insurance, disability benefits insurance and each other form of insurance that the Tenant is required by law to provide, covering loss resulting from injury, sickness, disability or death of employees of the Tenant or any permitted sublessee who are located at or assigned to the Facility. This coverage shall be in effect from and after the date any such employees first occupy the Facility.

(c) Insurance protecting the Agency and the Tenant against loss or losses from liability imposed by law or assumed in any written contract (including the contractual liability assumed by the Tenant under Section 3.2 hereof) or arising from personal injury, including bodily injury or death, or damage to the property of others, caused by an accident or other occurrence, with a limit of liability of not less than $1,000,000 (combined single limit for personal injury, including bodily injury or death, and property damage), and blanket excess liability coverage, in an amount not less than $5,000,000 combined single limit or equivalent, protecting the Agency and the Tenant against any loss or liability or damage for personal injury, including bodily injury or death, or property damage. This coverage shall also be in effect during any construction or renovation period with respect to the Demised Premises.

(d ) During any construction period with respect to the Demised Premises (and for at least one year thereafter in the case of Products and Completed Operations as set forth below), the Tenant shall cause the general contractor to carry liability insurance of the type and providing the minimum limits set forth below:

(i)

Workers’ compensation and employer’s liability with limits in accordance with applicable law.

(ii)

Comprehensive general liability providing coverage for:

Premises and Operations

Products and Completed Operations

Owners Protective

Contractors Protective

Contractual Liability

Personal Injury Liability

Broad Form Property Damage

(including completed operations)

Explosion Hazard

Collapse Hazard

Underground Property Damage Hazard

Such insurance shall have a limit of liability of not less than $1,000,000 (combined single limit for personal injury, including bodily injury or death, and property damage).

(iii)

Business auto liability, including all owned, non-owned and hired autos, with a limit of liability of not less than $1,000,000 (combined single limit for personal injury, including bodily injury or death, and property damage).

(iv)

Excess “umbrella” liability providing liability Insurance in excess of the coverages in (i), (ii) and (iii) above with a limit of not less than $5,000,000.

Section 2.2

Additional Provisions Respecting Insurance .

(a) All insurance required by this Tenant Agency Compliance Agreement shall be procured and maintained in financially sound and generally recognized responsible insurance companies authorized to write such insurance in the State and selected by the entity required to procure the same. The company issuing the policies required by Section 2.1(a) hereof shall be rated “A” or better by A.M. Best Co., Inc. in Best’s Key Rating Guide. Such insurance may be written with deductible amounts comparable to those on similar policies carried by other companies engaged in businesses similar in size, character and other respects to those in which the procuring entity is engaged. All policies of insurance required by Section 2.1 hereof shall provide for at least thirty (30) days prior written notice to the Agency of the restriction, cancellation or modification thereof. The policy evidencing the insurance required by Section 2.1(c) hereof shall name the Agency as an additional insured. All policies evidencing the insurance required by Section 2.1 (d)(ii) and (iv) shall name the Agency and the Tenant as additional insureds.

(b) The certificate of insurance required by Section 2.1(c) hereof shall be delivered to the Agency on or before the date hereof. A copy of the certificates of insurance required by Section 2.1(d)(ii) and (iv) hereof shall be delivered to the Agency on or before the commencement of any construction or renovation of the Demised Premises. The Tenant shall deliver to the Agency before the first Business Day of each calendar year thereafter a certificate dated not earlier than the immediately preceding month reciting that there is in full force and effect, with a term covering the current year of the Tenant’s insurance policy, insurance of the types and in the amounts required by Section 2.1 hereof and complying with the additional requirements of Section 2.2(a) hereof. Prior to the expiration of each such policy or policies, the Tenant shall furnish to the Agency and any other appropriate Person a new policy or policies of insurance or evidence that such policy or policies have been renewed or replaced or are no longer required by this Tenant Agency Compliance Agreement. The Tenant shall provide such further information with respect to the insurance coverage required by this Tenant Agency Compliance Agreement as the Agency may from time to time reasonably require.

Section 2.3 Application of Net Proceeds of Insurance . The Net Proceeds of the insurance carried pursuant to the provisions of Section 2.1(c) and (d) hereof shall be applied toward extinguishment or satisfaction of the liability with respect to which such insurance proceeds may be paid. The Net Proceeds of the insurance carried pursuant to the provisions of Section 2.1(a) hereof shall be applied in accordance with the provisions of the Tenant Lease Agreement.

Section 2.4 Right of Agency to Pay Insurance Premiums . If the Tenant fails to maintain or cause to be maintained any insurance required to be maintained by Section 2.1 hereof, the Agency may pay or cause to be paid the premium for such insurance. No such payment shall be made by the Agency until at least ten (10) days shall have elapsed since notice shall have been given by the Agency to the Tenant. No such payment by the Agency shall affect or impair any rights of the Agency hereunder arising in consequence of such failure by the Tenant. The Tenant shall, on demand, reimburse the Agency for any amount so paid pursuant to this Section, together with interest thereon from the date of payment of such amount by the Agency.

ARTICLE III
SPECIAL COVENANTS

Section 3.1 No Warranty of Condition or Suitability by Agency . THE AGENCY HAS MADE AND MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE MERCHANTABILITY, CONDITION, FITNESS, DESIGN, OPERATION OR WORKMANSHIP OF ANY PART OF THE FACILITY, ITS FITNESS FOR ANY PARTICULAR PURPOSE, THE QUALITY OR CAPACITY OF THE MATERIALS IN THE FACILITY, OR THE SUITABILITY OF THE DEMISED PREMISES FOR THE PURPOSES OR NEEDS OF THE TENANT OR THE EXTENT TO WHICH FUNDS AVAILABLE TO THE TENANT WILL BE SUFFICIENT TO PAY THE COST OF COMPLETION OF THE DEMISED PREMISES. THE TENANT ACKNOWLEDGES THAT THE AGENCY IS NOT THE MANUFACTURER OF THE EQUIPMENT NOR THE MANUFACTURER’S AGENT NOR A DEALER THEREIN. THE TENANT, ON BEHALF OF ITSELF IS SATISFIED THAT THE DEMISED PREMISES IS SUITABLE AND FIT FOR PURPOSES OF THE TENANT. THE AGENCY SHALL NOT BE LIABLE IN ANY MANNER WHATSOEVER TO THE TENANT OR ANY OTHER PERSON FOR ANY LOSS, DAMAGE OR EXPENSE OF ANY KIND OR NATURE CAUSED, DIRECTLY OR INDIRECTLY, BY THE PROPERTY OF THE FACILITY OR THE USE OR MAINTENANCE THEREOF OR THE FAILURE OF OPERATION THEREOF, OR THE REPAIR, SERVICE OR ADJUSTMENT THEREOF, OR BY ANY DELAY OR FAILURE TO PROVIDE ANY SUCH MAINTENANCE, REPAIRS, SERVICE OR ADJUSTMENT, OR BY ANY INTERRUPTION OF SERVICE OR LOSS OF USE THEREOF OR FOR ANY LOSS OF BUSINESS HOWSOEVER CAUSED.

Section 3.2 Hold Harmless Provisions .

(a) The Tenant agrees that the Agency and its directors, members, officers, agents (except the Company) and employees shall not be liable for, and agrees to defend, indemnify, release and hold the Agency and its directors, members, officers, agents and employees harmless from and against, any and all (i) liability for loss or damage to Property or injury to or death of any and all Persons that may be occasioned by, directly or indirectly, any cause whatsoever pertaining to the Demised Premises or to common areas or other portions of the Facility to which the Tenant has regular access (such areas, together with the Demised Premises, are hereinafter referred to as the “ Tenant Premises ”), or arising by reason of or in connection with the occupation or the use thereof or the presence of any Person or Property on, in or about the Tenant Premises, and (ii) liability arising from or expense incurred in connection with the Agency’s participation in the subleasing of the Demised Premises to the Tenant, including, without limiting the generality of the foregoing, all claims arising from the breach by the Tenant of any of its covenants contained herein, the exercise by the Tenant of any authority conferred upon it pursuant to this Tenant Agency Compliance Agreement and all causes of action and reasonable attorneys’ fees (whether by reason of third party claims or by reason of the enforcement of any provision of this Tenant Agency Compliance Agreement (including without limitation this Section) or any other documents delivered by the Agency in connection with this Tenant Agency Compliance Agreement), and any other expenses incurred in defending any claims, suits or actions which may arise as a result of any of the foregoing, to the extent that any such losses, damages, liabilities or expenses of the Agency are not incurred and do not result from the gross negligence or intentional or willful wrongdoing of the Agency or any of its directors, members, agents or employees. Except as otherwise provided herein, the foregoing indemnities shall apply notwithstanding the fault or negligence in part of the Agency, or any of its members, directors, officers, agents or employees, and irrespective of the breach of a statutory obligation or the application of any rule of comparative or apportioned liability. The foregoing indemnities are limited only to the extent of any prohibitions imposed by law, and upon the application of any such prohibition by the final judgment or decision of a competent court of law, the remaining provisions of these indemnities shall remain in full force and effect.

(b) Notwithstanding any other provisions of this Tenant Agency Compliance Agreement, the obligations of the Tenant pursuant to this Section shall remain in full force and effect after the termination of this Tenant Agency Compliance Agreement until the expiration of the period stated in the applicable statute of limitations during which a claim, cause of action or prosecution relating to the matters herein described may be brought, and payment in full or the satisfaction of such claim, cause of action or prosecution relating to the matters herein described and the payment of all expenses and charges incurred by the Agency or its members, directors, officers, agents and employees relating to the enforcement of the provisions herein specified.

(c) In the event of any claim against the Agency or its members, directors, officers, agents or employees by any employee or contractor of the Tenant or anyone directly or indirectly employed by any of them or anyone for whose acts any of them may be liable, the obligations of the Tenant hereunder shall not be limited in any way by any limitation on the amount or type of damages, compensation, disability benefits or other employee benefit acts.

Section 3.3 Right to Inspect Demised Premises . The Agency and its duly authorized agents shall have the right at all reasonable times and upon reasonable prior written notice to inspect the Demised Premises.

Section 3.4 Qualification as Project .

(a) The Tenant will not take any action, or fail to take any action, which action or failure to act would cause the Facility not to constitute a “project” as such quoted term is defined in the Act. Without limiting the generality of the foregoing, the Tenant will in no event use the Demised Premises in such a way as to cause or permit the Facility to be used in violation of Section 862(2)(a) of the Act.

(b) The occupation of the Demised Premises has not and will not result in the removal of a facility or plant of the Tenant from one area of the State to another area of the State or in the abandonment of one or more plants or facilities of the Tenant located within the State.

Section 3.5 Compliance with Orders, Ordinances, Etc .

(a) The Tenant, throughout the Lease Term, agrees that it will promptly comply, and cause any sublessee of the Tenant or occupant of the Demised Premises which is occupying the Demised Premises by permission of the Tenant to comply, with all statutes, codes, laws, acts, ordinances, orders, judgments, decrees, injunctions, rules, regulations, permits, licenses, authorizations, directions and requirements, ordinary or extraordinary, which now or at any time hereafter may be applicable to the Facility or the Demised Premises, or to the acquisition, construction and equipping of the Demised Premises, or to any use, manner of use or condition of the Facility or any part of the Demised Premises, of all federal, state, county, municipal and other governments, departments, commissions, boards, courts, authorities, officials and officers having jurisdiction of the Facility or any part thereof, and companies or associations insuring the premises.

(b) The Tenant shall keep or cause the Demised Premises to be kept free of Hazardous Substances. Without limiting the foregoing, the Tenant shall not cause or permit the Demised Premises to be used to generate, manufacture, refine, transport, treat, store, handle, dispose, transfer, produce or process Hazardous Substances, except in compliance with all applicable federal, state and local laws or regulations, nor shall the Tenant cause or permit, as a result of any intentional or unintentional act or omission on the part of the Tenant or any of its contractors, subcontractors or tenants, a release of Hazardous Substances onto the Facility or onto any other property. The Tenant shall comply with, and ensure compliance by all of its contractors, subcontractors and subtenants with, all applicable federal, state and local environmental laws, ordinances, rules and regulations, whenever and by whomever triggered, and shall obtain and comply with, and ensure that all of its contractors, subcontractors and subtenants obtain and comply with, any and all approvals, registrations or permits required thereunder. The Tenant shall (i) conduct and complete all investigations, studies, sampling and testing and all remedial, removal and other actions necessary to clean up and remove all Hazardous Substances released, stored, generated or used by it on, from or affecting the Demised Premises (A) in accordance with all applicable federal, state and local laws, ordinances, rules, regulations and policies, (B) to the satisfaction of the Agency, and (C) in accordance with the orders and directives of all federal, state and local governmental authorities; and (ii) defend, indemnify and hold harmless the Agency, its employees, agents, officers, members and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs or expenses of whatever kind or nature, known or unknown, contingent or otherwise, arising out of, or in any way related to (A) the presence, disposal, release or threatened release of any Hazardous Substances which are on, from or affecting the soil, water, vegetation, buildings, personal property, persons, animals or otherwise, (B) any bodily injury, personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Substances, (C) any lawsuit brought or threatened, settlement reached, or government order relating to such Hazardous Substances, or (D) any violation of laws, orders, regulations, requirements or demands of government authorities, or of any policies or requirements of the Agency, which are based upon or in any way related to such Hazardous Substances, and in all cases which result from the intentional or unintentional act or omission of the Tenant or any of its contractors, subcontractors or subtenants, including, without limitation, reasonable attorney and consultant fees, investigation and laboratory fees, court costs and litigation expenses. The provisions of this Section shall be in addition to any and all other obligations and liabilities the Tenant may have to the Agency at common law and shall survive the transactions contemplated herein.

(c) Notwithstanding the provisions of subsections (a) and (b) above, the Tenant may in good faith contest the validity or the applicability of any requirement of the nature referred to in such subsections (a) and (b) by appropriate legal proceedings conducted in good faith and with due diligence. In such event, the Tenant may fail to comply with the requirement or requirements so contested during the period of such contest and any appeal therefrom, unless the Agency shall notify the Tenant that, by failure to comply with such requirement or requirements, the Facility or any part thereof may be subject to loss, penalty or forfeiture, in which event the Tenant shall promptly take such action with respect thereto or provide such security as shall be reasonably satisfactory to the Agency. If at any time the then existing use or occupancy of the Demised Premises shall, pursuant to any zoning or other law, ordinance or regulation, be permitted only so long as such use or occupancy shall continue, the Tenant shall use reasonable efforts not to cause or permit such use or occupancy by the Tenant to be discontinued without the prior written consent of the Agency, which consent shall not be unreasonably withheld.

(d) Notwithstanding the provisions of this Section, if, because of a breach or violation of the provisions of subsection (a) or (b) above (without giving effect to subsection (c)), the Agency or any of its members, directors, officers, agents or employees shall be threatened with a fine, liability, expense or imprisonment, then, upon notice from the Agency, the Tenant shall immediately provide legal protection or pay an amount or post a bond in an amount necessary, in the opinion of the Agency and of its members, directors, officers, agents and employees, to the extent permitted by applicable law, to remove the threat of such fine, liability, expense or imprisonment.

(e) Notwithstanding any provisions of this Section, the Agency retains the right to defend itself in any action or actions which are based upon or in any way related to such Hazardous Substances. In any such defense of itself, the Agency shall select its own counsel, and any and all costs of such defense, including, without limitation, reasonable attorney and consultant fees, investigation and laboratory fees, court costs and litigation expenses, shall be paid by the Tenant.

Section 3.6 Agreement to Provide Information . Annually, the Tenant shall provide the Agency with a certified statement and documentation (i) enumerating the FTE jobs, by category, retained and/or created at the Facility as a result of the Agency’s financial assistance and (ii) indicating the fringe benefits and salary averages or ranges for such categories of FTE jobs created and/or retained. ¹ The Tenant further agrees to provide and certify or cause to be provided and certified whenever requested by the Agency any other information concerning the Tenant, its respective finances, its respective operations, its respective employment and its affairs necessary to enable the Agency to make any report required by law, governmental regulation, including, without limitation, any reports required by the Act, the Public Authorities Accountability Act of 2005, or the Public Authorities Reform Act of 2009, each as amended from time to time, or any other reports required by the New York State Authority Budget Office or the Office of the State Comptroller, or any of the Agency Documents or Tenant Documents. Such information shall be provided within thirty (30) days following written request from the Agency.

Section 3.7 Employment Opportunities; Notice of Jobs . The Tenant covenants and agrees that, in consideration of the participation of the Agency in the transactions contemplated herein, it will, except as otherwise provided by collective bargaining contracts or agreements to which it is a party, cause any new employment opportunities created in connection with the Demised Premises to be listed with the New York State Department of Labor, Community Services Division and with the administrative entity of the service delivery area created pursuant to the Job Training Partnership Act (PL 97-300), as superseded by the Workforce Innovation and Opportunity Act (PL. 113-128), in which the Facility is located (collectively, the “ Referral Agencies ”). The Tenant also agrees that it will, except as otherwise provided by collective bargaining contracts or agreements to which it is a party, first consider for such new employment opportunities persons eligible to participate in federal job training partnership programs who shall be referred by the Referral Agencies.

Section 3.8 Subleasing .

(a) In accordance with Section 862(1) of the Act, the Demised Premises shall not be occupied by a sublessee whose tenancy would result in the removal of a facility or plant of the proposed sublessee from one area of the State to another area of the State or in the abandonment of one or more plants or facilities of such sublessee located within the State; provided, however, that neither restriction shall apply if the Agency shall determine:

(i)

that such occupation of the Demised Premises is reasonably necessary to discourage the proposed sublessee from removing such other plant or facility to a location outside the State, or

(ii)

that such occupation of the Demised Premises is reasonably necessary to preserve the competitive position of the proposed sublessee in its respective industry.

¹ Cannot be removed or modified; required by GML Section 859-a(6)(b).

(b) The Tenant may not assign the Tenant Lease Agreement or sub-sublease the Demised Premises without the prior written consent of the Agency. Any assignment or sub-sublease shall conform with the restrictions and requirements set forth in Section 9.3 of the Lease Agreement.

Section 3.9 Approval of Tenant Lease Agreement . The Agency hereby approves the subleasing of the Facility by the Company to the Tenant pursuant to the terms of the Tenant Lease Agreement.

Section 3.10 Definitions . All capitalized terms used in this Tenant Agency Compliance Agreement and not otherwise defined herein shall have the meanings assigned thereto in the Schedule of Definitions attached to the Lease Agreement as Schedule A .

Section 3.11 Execution of Counterparts . This Tenant Agency Compliance Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

(Remainder of Page Intentionally Left Blank – Signature Page Follows)

IN WITNESS WHEREOF, the Agency and the Tenant have caused this Tenant Agency Compliance Agreement to be executed in their respective names by their duly authorized representatives, all as of _____________, 20__.

	TOWN OF ISLIP INDUSTRIAL DEVELOPMENT AGENCY


	By:
	Name:
	Title:


	[NAME OF ENTITY]


	By:
	Name:
	Title:

SCHEDULE A

SCHEDULE OF DEFINITIONS

“ Act ” means, collectively, Title 1 of Article 18-A of the General Municipal Law of the State, enacted into law as Chapter 1030 of the Laws of 1969 of the State, as amended, together with Chapter 47 of the Laws of 1974 of the State, as amended.

“ Agency ” means (i) the Town of Islip Industrial Development Agency, its successors and assigns, and (ii) any local governmental body resulting from or surviving any consolidation or merger to which the Agency or its successors may be a party.

“ Agency Documents ” means the Lease Agreement and the Agency Compliance Agreement.

“ Agency Compliance Agreement ” means, collectively, the Original Agency Compliance Agreement and the Amended and Restated Agency Compliance Agreement.

“ Agent ” shall have the meaning set forth in Section 5.2(d).

“ Amended Sublease Agreement ” means the [Amended Lease Agreement], dated November [__], 2017, by and between the Company and the Sublessee, as the same may be amended from time to time.

“ Amended and Restated Agency Compliance Agreement ” means the Amended and Restated Agency Compliance Agreement, dated as of November 1, 2017, by and between the Agency and the Sublessee, as the same may be amended from time to time.

“ Approving Resolution ” or “ Authorizing Resolution ” means the resolution adopted by the Agency on September 19, 2017, authorizing the execution and delivery of the Amended and Restated Lease Agreement and related documents, as such resolution may be amended and supplemented from time to time.

“ Authorized Representative ” means, in the case of the Agency, the Chairman, the Vice Chairman, the Secretary, the Assistant Secretary, the Executive Director or any member or officer of the Agency and such additional persons as, at the time, are designated to act on behalf of the Agency; in the case of the Company, the members and such additional persons as, at the time, are designated to act on behalf of the Company; and, in the case of the Sublessee, the President, Vice President, Treasurer, Secretary or any officer and such additional persons as, at the time, are designated to act on behalf of the Sublessee.

“ Bill of Sale ” means the Bill of Sale, dated the closing date with respect to the Original Lease Agreement, given by the Company to the Agency with respect to the Equipment, as the same may be amended from time to time.

“ Business Day ” means any day other than a Saturday, a Sunday, a legal holiday or a day on which banking institutions in New York, New York, or any city in which the principal office of the Lender, if any, is located are authorized by law or executive order to remain closed.

Schedule A-1

“ Closing Date ” means November [__], 2017.

“ Company ” means FAE Holdings 411519R, LLC, a limited liability company organized and validly existing under the laws of the State of New York and its successors and assigns.

“ Company Documents ” means the Bill of Sale, the Lease Agreement and the Sublease Agreement.

“ Company Sales Tax Savings ” means all Sales Tax Exemption savings realized by or for the benefit of the Company, including any savings realized by any Agent on behalf of the Company, pursuant to this Lease Agreement and each Sales Tax Agent Authorization Letter issued in connection with the Facility.

“ Condemnation ” means the taking of title to, or the use of, Property under the exercise of the power of eminent domain by any governmental entity or other Person acting under governmental authority.

“ Construction Period ” means the period beginning on the earlier of (a) Closing Date and (b) the date of commencement of any Project Work of the Facility, and ending on the completion date of such Project Work.

“ Disposal ” has the same meaning as given to that term in the Solid Waste Disposal Act as amended by the Resource Conservation and Recovery Act, (42 U.S.C. Section 6901 et seq .)

“ Eligible Items ” shall mean the following items of personal property and services, but excluding any Ineligible Items, with respect to which the Company, the Sublessee and any Agent shall be entitled to claim a Sales Tax Exemption in connection with the Facility: (i) purchases of materials, goods, personal property and fixtures and supplies that will be incorporated into and made an integral component part of the Facility; (ii) purchases or leases of any item of materials, goods, machinery, equipment, furniture, furnishings, trade fixtures and other tangible personal property having a useful life of one year or more; (iii) with respect to the eligible items identified in (ii) above; purchases of freight, installation, maintenance and repair services required in connection with the shipping, installation, use, maintenance or repair of such items; provided that maintenance shall mean the replacement of parts or the making of repairs; (iv) purchases of materials, goods and supplies that are to be used and substantially consumed in the course of construction or renovation of the Facility (but excluding fuel, materials or substances that are consumed in the course of operating machinery and equipment or parts containing fuel, materials or substances where such parts must be replaced whenever the substance is consumed); and (v) leases of machinery and equipment solely for temporary use in connection with the construction or renovation of the Facility.

“ Environment ” means any water or water vapor, any land, including land surface or subsurface, air, fish, wildlife, flora, fauna, biota and all other natural resources.

“ Environmental Compliance and Indemnification Agreement ” means the Amended and Restated Environmental Compliance and Indemnification Agreement, dated as of March 1, 2012, by and among the Agency, the Company and the Sublessee.

Schedule A-2

“ Environmental Laws ” means all federal, state and local environmental, land use, zoning, health, chemical use, safety and sanitation laws, statutes, ordinances and codes relating to the protection, preservation or remediation of the Environment and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Substances and the rules, regulations, written and published policies, guidelines, decisions, orders and directives of federal, state and local governmental agencies and authorities with respect thereto.

“ Environmental Permits ” means all permits, licenses, approvals, authorizations, consents or registrations required by any applicable Environmental Law in connection with the ownership, construction, renovation, equipping, use and/or operation of the Facility, for the storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Substances or the sale, transfer or conveyance of the Facility.

“ Equipment ” means all machinery, equipment and other personal property used and to be used in connection with the Facility as described in Exhibit B to the Lease Agreement.

“ Event of Default ” means (a) when used with respect to the Lease Agreement, any of the events defined as Events of Default by Section 10.1 of the Lease Agreement, and (b) when used with respect to any Mortgage, any of the events defined as Events of Default in such Mortgage.

“ Facility ” means, collectively, the Land, the Improvements and the Equipment, leased to the Company pursuant to the Lease Agreement.

“ Form ST-60 ” shall mean NYSDTF Form ST-60 “IDA Appointment of Project Operator or Agent” or such additional or substitute form as is adopted by NYSDTF to report the appointment of project operators or agents with respect to industrial development agency transactions.

“ Form ST-123 ” shall mean NYSDTF Form ST-123 “IDA Agent or Project Operator Exempt Purchase Certificate” or such additional or substitute form as is adopted by NYSDTF for use in completing purchases that are exempt for Sales and Use Taxes with respect to industrial development agency transactions.

“ Form ST-340 ” shall mean NYSDTF Form ST-340 “Annual Report of Sales and Use Tax Exemptions Claimed by Agent/Project Operator of Industrial Development Agency/Authority” or such additional or substitute form as is adopted by NYSDTF to report Company Sales Tax Savings with respect to industrial development agency transactions.

“ FTE ” shall have the meaning set forth in Section 8.11 of the Lease Agreement.

“ Hazardous Substance ” means, without limitation, any flammable, explosive, radon, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum, petroleum constituents, petroleum products, methane, hazardous materials, hazardous wastes, hazardous or toxic substances or related materials, pollutants, or toxic pollutants, as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections 9601, et seq .), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901, et seq .), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et seq .), the Toxic Substances Control Act, as amended (15 U.S.C. Sections 2601, et seq .), the Federal Water Pollution Control Act, as amended (33 U.S.C. Sections 1251 et seq .), Articles 17 and 27 of the New York State Environmental Conservation Law, or any other applicable Environmental Law and the regulations promulgated thereunder.

Schedule A-3

“ Improvements ” means all those buildings, improvements, structures and other related facilities (i) affixed or attached to the Land, and (ii) not part of the Equipment, all as they may exist from time to time.

“ Independent Accountant ” shall mean an independent certified public accountant or firm of independent certified public accountants selected by the Company and approved by the Agency (such approval not to be unreasonably withheld or delayed).

“ Independent Counsel ” means an attorney or attorneys or firm or firms of attorneys duly admitted to practice law before the highest court of any state of the United States of America or in the District of Columbia and not a full time employee of the Agency, the Company.

“ Ineligible Items ” shall mean the following items of personal property and services with respect to which the Company and any Agent shall not be entitled to claim a Sales Tax Exemption in connection with the Facility:

(i)

vehicles of any sort, including watercraft and rolling stock;

(ii)

personalty having a useful life of one year or less;

(iii)

any cost of utilities, cleaning services or supplies or other ordinary operating costs;

(iv)

ordinary office supplies such as pencils, paper clips and paper;

(v)

any materials or substances that are consumed in the operation of machinery;

(vi)

equipment or parts containing materials or substances where such parts must be replaced whenever the substance is consumed; and

(vii)

maintenance of the type as shall constitute janitorial services.

“ Land ” means the real property leased by the Agency to the Company pursuant to the Lease Agreement and more particularly described in Exhibit A attached thereto.

“ Lease Agreement ” means the Amended and Restated Lease and Project Agreement, originally dated as of March 1, 2012 and amended and restated as of November 1, 2017 by and between the Agency, as lessor, and the Company, as lessee, with respect to the Facility, as the same may be amended from time to time.

“ Lease Term ” means the duration of the leasehold estate created by the Lease Agreement as specified in Section 4.2 of the Lease Agreement.

Schedule A-4

“ Lender ” means any lender making a Loan to the Company to finance in whole or in part the Project Work, the acquisition and/or development of the Facility or any portion thereof.

“ Lien ” means any interest in Property securing an obligation owed to a Person, whether such interest is based on the common law, statute or contract, and including but not limited to the security interest arising from a mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. The term “Lien” includes reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other similar title exceptions and encumbrances, including but not limited to mechanics’, materialmen’s, warehousemen’s, carriers’ and other similar encumbrances, affecting real property. For the purposes of this definition, a Person shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes.

“ Loan ” has the meaning ascribed to such term in Section 12.4 of the Lease Agreement.

“ Loan Documents ” has the meaning ascribed to such term in Section 12.4 of the Lease Agreement.

“ Loss Event ” has the meaning ascribed to such term in Section 5.4 of the Lease Agreement.

“ Maximum Company Sales Tax Savings Amount ” shall mean the aggregate maximum dollar amount of Company Sales Tax Savings that the Company and all Agents acting on behalf the Company are permitted to receive under this Lease Agreement, which shall equal $0.00, or such maximum dollar amount as may be determined by the Agency pursuant to such additional documents as may be required by the Agency for such increase.

“ Mortgage ” means any mortgage and security agreement granted by the Agency and the Company to a Lender which grants a mortgage lien on and security interest in the Facility in favor of the Lender as security for such Lender’s Loan to the Company.

“ Mortgage Recording Tax Exemption ” has the meaning ascribed to such term in Section 5.3 of the Lease Agreement.

“ Net Proceeds ” means so much of the gross proceeds with respect to which that term is used as remain after payment of all expenses, costs and taxes (including attorneys’ fees) incurred in obtaining such gross proceeds.

“ NYSDTF ” means the New York State Department of Taxation and Finance.

“ Original Agency Compliance Agreement ” means the Agency Compliance Agreement, dated as of March 1, 2012, by and between the Agency and the Sublessee, as the same may be amended from time to time.

“ Original Lease Agreement ” means the Lease Agreement, dated as of March 1, 2012, by and between the Agency and the Company, as the same may be amended from time to time.

Schedule A-5

“ Original Sublease Agreement ” means the Lease Agreement, dated as of February 9, 2012, by and between the Company and the Sublessee, as the same may be amended frm time to time.

“ Organizational Documents ” means (i) in the case of an entity constituting a limited liability company, the articles of organization or certificate of formation, and the operating agreement of such entity, (ii) in the case of an Entity constituting a corporation, the articles of incorporation or certificate of incorporation, and the by-laws of such entity, and (iii) in the case of an entity constituting a general or limited partnership, the partnership agreement of such entity

“ Permitted Encumbrances ” means, with respect to the Facility, (i) exceptions to title set forth in the Title Report, (ii) Lease Agreement, (iii) utility, access and other easements and rights-of-way, restrictions and exceptions that do not materially impair the utility or the value of the Property affected thereby for the purposes for which it is intended, (iv) mechanics', materialmen's, warehousemen's, carriers' and other similar Liens which are approved in writing by the Lender, if any, or its counsel and, if no Lender, then by the Agency or its counsel, (v) Liens for taxes not yet delinquent, (vi) any Mortgage granted to a Lender and (vii) purchase money security interests and blanket liens.

“ Person ” or “ Persons ” means an individual, partnership, limited liability partnership, limited liability company, corporation, trust or unincorporated organization, or a government agency, political subdivision or branch thereof.

“ PILOT Agreement ” means the Payment-in-Lieu-of-Tax Agreement, originally dated as of December 1, 2000, amended and restated as of April 1, 2009, further amended and restated as of March 1, 2012, and further amended and restated as of April 1, 2012, by and among the Agency, the Company and the Sublessee.

“ PILOT Payments ” has the meaning ascribed to such term in Section 5.1 of the Lease Agreement.

“ Plans and Specifications ” means the plans and specifications, if any, for the Improvements, prepared for the Company and approved by the Agency, as revised from time to time in accordance with the Lease Agreement.

“ Project ” means the acquisition, construction and equipping of an approximately 120,000 square foot building, on approximately 8.0 acres of land located at 355 South Technology Drive, Central Islip, Suffolk County, New York, which Facility is used by the Sublessee as a manufacturing facility to process surface treatments or films and coatings on various product lines in its business as a manufacturer of equipment and materials for the semiconductor industry.

“ Project Application Information ” means the application and questionnaire submitted to the Agency on August 3, 2017 by or on behalf of the Company, for approval by the Agency of the Project, together with all other letters, documentation, reports and financial information submitted in connection therewith.

“ Project Work ” means the work, if any, required to complete the Project.

Schedule A-6

“ Prime Rate ” means (i) if no Lender, the rate designated by The Wall Street Journal from time to time as its “prime rate”, or (ii) if a Lender exists, the rate designated by the Lender from time to time as its “prime rate”.

“ Property ” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

“ Public Purposes ” shall mean the State’s objective to create industrial development agencies for the benefit of the several counties, cities, villages and towns in the State and to empower such agencies, among other things, to acquire, construct, reconstruct, lease, improve, maintain, equip and sell land and any building or other improvement, and all real and personal properties, including, but not limited to, machinery and equipment deemed necessary in connection therewith, whether or not now in existence or under construction, which shall be suitable for manufacturing, warehousing, research, commercial, recreation or industrial facilities, including industrial pollution control facilities, in order to advance job opportunities, health, general prosperity and the economic welfare of the people of the State and to improve their standard of living.

“ Real Property Tax Abatements ” has the meaning ascribed to such term in Section 5.4 of the Lease Agreement.

“ Recaptured Benefits ” has the meaning ascribed to such term in Section 5.4 of the Lease Agreement.

“ Recapture Event ” has the meaning ascribed to such term in Section 5.4 of the Lease Agreement.

“ Release ” has the meaning given to that term in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq .), and the regulations promulgated thereunder.

“ Sales Tax Agent Authorization Letter ” shall mean the Sales Tax Agent Authorization Letter, substantially in the form set forth in Exhibit E to the Lease Agreement – “Form of Sales Tax Agent Authorization Letter” and to be delivered in accordance with Section 5.2(d) of the Lease Agreement.

“ Sales Tax Exemption ” shall mean an exemption from Sales and Use Taxes resulting from the Agency’s participation in the Facility.

“ Sales Tax Registry ” shall mean the Sales Tax Registry in the form set forth in Exhibit F .

“ Sales and Use Taxes ” shall mean local and State sales and compensating use taxes and fees imposed pursuant to Article 28 of the New York State Tax Law, as the same may be amended from time to time.

“ Schedule of Definitions ” means the words and terms set forth in this Schedule of Definitions attached to the Lease Agreement, as the same may be amended from time to time.

Schedule A-7

“ SEQR Act ” means the State Environmental Quality Review Act and the regulations thereunder.

“ Special Provisions ” has the meaning ascribed to such term in Section 5.2 of the Lease Agreement.

“ State ” means the State of New York.

“ State Sales and Use Taxes ” shall mean sales and compensating use taxes and fees imposed by Article 28 of the New York State Tax Law but excluding such taxes imposed in a city by Section 1107 or 1108 of such Article 28, as the same may be amended from time to time.

“ State Sales Tax Savings ” shall mean all Sales Tax Exemption savings relating to State Sales and Use Taxes realized by or for the benefit of the Company, including any savings realized by any Agent, pursuant to this Lease Agreement and each Sales Tax Agent Authorization Letter issued in connection with the Facility.

“ Sublease Agreement ” means collectively, the Original Sublease Agreement and the Amended Sublease Agreement.

“ Sublessee ” means CVD Equipment Corporation, a business corporation, organized and existing under the laws of the State of New York, as sublessee under the Sublease Agreement, and its successors and assigns.

“ Sublessee Documents ” means the Agency Compliance Agreement and the Sublease Agreement.

“ Substitute Facilities ” means facilities of substantially the same nature as the proposed Facility.

“ Taxes on the Facility ” has the meaning ascribed to such term in Section 5.1 of the Lease Agreement.

“ Taxing Authorities ” has the meaning ascribed to such term in Section 5.1 of the Lease Agreement.

“ Tenant Agency Compliance Agreement ” means an agreement in the form attached to the Lease Agreement as Exhibit I between the Agency and a sublessee of the Facility.

“ Termination Date ” shall mean such date on which the Sales Tax Exemption authorization may terminate pursuant to the terms and conditions of Section 5.2 of the Lease Agreement.

“ Title Report ” means Certificate of Title No. 42764F issued by Fidelity National Title Insurance Company of Pennsylvania to the Agency on October 5, 2011 and redated and recertified on the Closing Date.

“ Transaction Counsel ” means the law firm of Nixon Peabody LLP.

Schedule A-8

“ Transaction Documents ” means the Agency Documents and the Company Documents.

“ Unassigned Rights ” means the rights of the Agency and moneys payable pursuant to and under Sections 4.3, 4.4, 5.1, 5.2, 5.4, 6.4(c) and (d), 6.7, 8.1, 8.2, 8.5, 8.7, 8.8, 8.10, 8.11, 9.3, 10.2(a), 10.4, 11.2, 11.3 and 14.8 and Article XIII of the Lease Agreement.

Schedule A-9

Exhibit 10.28

AMENDED AND RESTATED NOTE

Date of Note :	As of November 30, 2017

Amount of Note :	$10,387,500.00

Maturity Date :	December 1, 2022

Interest Rate :	3.9148% per annum.

FOR VALUE RECEIVED, each of the undersigned, jointly and severally, (the "Maker"), having an address as indicated under its name, hereby promises to pay on the Maturity Date to the order of HSBC Bank USA, National Association (the "Bank") at its offices at 534 Broad Hollow Road, Melville, New York 11747 or at such other place as the holder hereof may from time to time designate in writing, in immediately available New York funds, the Amount of Note together with interest on the Amount of Note at the Interest Rate (computed on an actual/360 day basis, i.e., interest for each day during which any of the Amount of Note is outstanding shall be computed at the Interest Rate divided by 360) by payment of interest only on the first day of the first month following the date hereof, and thereafter successive equal monthly installments of principal and interest in the amount of $62,777.60 commencing on January 1, 2018 and on the first day of each month thereafter until the Maturity Date, at which time any unpaid balance of the Amount of Note shall be due and payable with all accrued but unpaid interest. Each of said payments shall be applied first to payment of accrued interest on the unpaid balance of the Amount of Note and the balance thereof to the reduction of said Amount of Note. A late payment of 5% of any principal or interest payment made more than 10 days after the due date thereof shall be due with any such late payment. The Bank may charge any account of the Maker for such payments.

This Note is secured by a Fee and Leasehold Mortgage and Security Agreement of even date herewith (the "Mortgage") made by the Maker to the Bank encumbering, among other things, the property located as indicated below and more particularly described in the Mortgage; all of the covenants, conditions and agreements of the Mortgage being made a part hereof by this reference.

It is expressly agreed that, upon the failure of the Maker timely to make any payment due hereunder after any applica ble grace period or upon the happening of any "Event of Default" under the Mortgage, the principal sum hereof, or so much thereof as may be outstanding, together with accrued interest and all other expenses, payable by Maker under the Mortgage, including, but not limited to reasonable attorneys' fees for legal services incurred by the holder hereof in collecting or enforcing payment hereof whether or not suit is brought, and if suit is brought, then through all appellate actions, shall immediately become due and payable at the option of the holder of the Note, notwithstanding the Maturity Date set forth herein. Upon the stated or accelerated maturity of this Note, the Maker agrees that this Note shall bear interest at a per annum rate of 3% in excess of the Interest Rate until the principal is fully paid.

Notwithstanding anything to the contrary contained in this Note, the rate of interest payable on this Note shall never exceed the maximum rate of interest permitted under applicable law. If at any time the rate of interest otherwise prescribed herein shall exceed such maximum rate, and such prescribed rate is thereafter below such maximum rate, the prescribed rate shall be increased to the maximum rate for such period of time as is required so that the total amount of interest received by the Bank is that which would have been received by the Bank, except for the operation of the first sentence hereof.

This Note may be prepaid in whole or in minimum amounts of $ 100,000.00 or integral multiples thereof (or the balance of the Note, if less than $100,000), at any time upon at least ten days' notice, provided however, in the event the Maker prepays all or any portion of the indebtedness evidenced by the Note, whether as a result of acceleration or otherwise, the Maker will pay the Bank, on the same date the prepayment is made, a break funding charge to cover loss, cost and expense attributable to such an event. Such loss, cost or expense to the Bank shall be deemed to include but not be limited to an amount determined by the Bank as follows:

(A) calculate the Bank’s remaining interest cost based on (i) the most current Bank funding rate assigned upon origination, last repricing date, or last prepayment date, times (ii) the principal amount of the prepayment amortized accordingly, times (iii) the remaining period of time until the earlier of this Note’s expiration or next repricing date, dayweighted accordingly.

(B) calculate the Bank’s implied reinvestment rate based on (i) the US LIBOR/SWAP rate as of the date of prepayment for the shorter of this Note’s expiration date or next repricing date, times (ii), the principal amount of the prepayment amortized accordingly, times (iii) the remaining period of time until the earlier of this Note’s expiration or next repricing date, dayweighted accordingly.

(C) if (B) is equal to or greater than (A), the break funding charge is zero ($0). If (A) exceeds (B), the break funding charge will be calculated using the Bank’s discounted cash flow formula to determine the present value (the break funding charge) of the excess of (A) less (B).

Each prepayment shall be made together with interest accrued thereon to and including the date of prepayment and shall be applied to the last maturing monthly installments of principal in inverse order of their respective maturities.

The Maker agrees that it shall be bound by any agreement extending the time or modifying the above terms of payment, made by the Bank and the owner or owners of the property affected by the Mortgage, whether with or without notice to the Maker, and the Maker shall continue to be liable to pay the amount due hereunder, but with interest at a rate no greater than the Interest Rate, according to the terms of any such agreement of extension or modification.

This Note may not be changed orally, but only by an agreement in writing, signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.

Should the indebtedness represented by this Note or any part thereof be collected at law or in equity, or in bankruptcy, receivership or any other court proceedings (whether at the trial or appellate level), or should this Note be placed in the hands of attorneys for collection upon default, the Maker agrees to pay, in addition to the principal, premium and interest due and payable hereon, all costs of collection or attempting to collect this Note, including reasonable attorneys' fees and expenses.

Time is of the essence as to all dates set forth herein, provided, however, that whenever any payment to be made under this Note shall be stated to be due on a Saturday, Sunday or a public holiday or the equivalent for banks generally under the laws of the State of New York (any other day being a "Business Day"), such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computa tion of payment of interest.

All parties to this Note, whether Maker, principal, surety, guarantor, or endorser, hereby waive presentment for payment, demand, protest, notice of protest and notice of disho nor.

Any notice, demand or request relating to any matter set forth herein shall be in writing and shall be deemed effective when mailed, postage prepaid, by registered or certified mail, return receipt requested, to any party hereto at its address stated herein or at such other address of which it shall have notified the party giving such notice in writing as aforesaid.

The Maker hereby waives, to the extent permitted by law, the right to trial by jury in any action, proceeding or counterclaim related to this Note.

This Note is to be construed and enforced in accordance with the laws of the State of New York.

The Maker’s right to request refinancing of this Note and the Bank’s obligation in this regard shall be governed by the terms set forth in Exhibit A attached hereto which is incorporated herein by reference.

This Note amends, restates, replaces and corrects that certain Note in the amount of $ 10,387,500.00 dated November 30, 2017 made by Maker in favor of the Bank (the “Original Note”), and payments made on the Original Note to date shall be retroactively applied to principal and interest as provided herein, with any shortfall to be paid by Maker to the Bank simultaneously herewith. Maker hereby authorizes the Bank to debit its account maintained with the Bank in payment of such shortfall.

555 N Research Corporation

By:________________________________

Glen Charles

Chief Financial Officer

Location of Property :

555 North Research Place,

Central Islip, New York

Address of Maker :

555 North Research Place,

Central Islip, New York

E XHIBIT A

I. Refinance Request .

(i) Conditions Precedent . The Maker shall have the right to request (the “Refinance Request”) a refinance of this Note on the Maturity Date with a loan equal to the principal amount to be outstanding under this Note as of the Maturity Date (the “Refinance Loan”), and the Bank will approve the Refinance Request subject to the following:

(A) The Maker shall have provided the Bank with its irrevocable Refinance Request notice (the “Refinance Request Notice”) not more than one hundred twenty (120) days prior or less than sixty (60) days prior to the Maturity Date.

(B) As of the Maturity Date, the following conditions to the closing of the Refinance Loan shall be satisfied:

(1) Certification . The Maker shall have certified to the Bank that Maker has no claims, causes of action, or demands against the Bank or defenses or offsets to the payment of the Loan or any other amounts due under the Loan Documents (as defined in the Mortgage) as of such date, and that all representations and warranties set forth in the Mortgage remain true and correct as of the making of the Refinancing Loan.

(2) Default . No “Event of Default” then exists under the Loan Documents or will exist under the Loan Documents by reason of the making of the Refinance Loan, or any event, circumstance or action, which with the giving of notice, passage of time or both would give rise to an Event of Default, shall have occurred and be continuing.

(3) Expenses . The Maker shall have paid all reasonable expenses incurred by the Bank in connection with the review and approval of the Refinance Request and Refinance Loan, including all reasonable fees and expenses of counsel for the Bank.

(4) Insurance . The Bank shall have received proof that Maker has obtained all insurance under the Mortgage.

(5) Status . No Material Adverse Effect shall have occurred. The term “Material Adverse Effect” shall mean any event, circumstance, fact, condition, development, or occurrence that has had or could be expected to have any material and adverse effect on (1) the business, condition (financial or otherwise), operations, prospects, liabilities, capitalization, liquidity, or any assets of the Maker or the Guarantor(as defined in the Mortgage), as the case may be, taken as a whole; (2) the ability of the Maker or the Guarantor, as the case may be, to pay the Loan and perform the obligations under the Loan Documents for which such respective party is responsible, in strict accordance with the terms and provisions therefor; (3) the validity, enforceability, or binding effect of any provision of the Loan Documents; or (4) the value of the Premises.

(6) Sublease . The Bank shall have reviewed and approved the Sublease (as defined in the Mortgage).

(7) Covenant Compliance The Maker shall be in full compliance with the covenants set forth in Section 1.11(e) and 1.11(g) of the Mortgage.

(8) Other . Maker shall have delivered to the Bank such other documents and certificates as the Bank may reasonably request in connection with the Refinance Loan, including without limitation, any reaffirmations, resolutions and other corporate documents as may be required of the Maker and Guarantor (as defined in the Mortgage) by the Bank.

(ii) Interest and Amortization on the Refinance Loan . If the Maker timely provides the Refinance Request Notice and has satisfied the conditions set forth in Paragraph I (i) above, the Bank agrees that it will make the Refinance Loan which will be effected through an amended and restated note to be executed by the Maker (the “Refinance Loan Note”) to be secured by the Mortgage. The Refinance Loan Note shall bear interest at a fixed rate calculated to 175 basis points plus the 5 Year LIBOR Swap rate (or if not then available, a rate based on a comparable index as determined by the Bank) in effect on the date of the Refinance Loan, payable monthly in arrears on the first day of each month computed on an actual/360 day basis. The Refinance Loan Note shall mature five (5) years from the date of the closing of the Refinance Loan (the “Refinance Loan Maturity Date”). During the term of the Refinance Loan, the Maker shall pay equal monthly installments of principal and interest payments based on a fifteen (15) year mortgage style amortization schedule, with the entire unpaid principal balance together with interest thereon being due and payable on the Refinance Loan Maturity Date.

(iii) Prepayment . The Refinance Loan Note may be prepaid in whole or in minimum amounts of $100,000.00 or integral multiples thereof (or the balance of the Note, if less than $100,000), at any time upon at least ten days' notice, provided however, in the event the Maker prepays all or any portion of the indebtedness evidenced by the Note, whether as a result of acceleration or otherwise, the Maker will pay the Bank, on the same date the prepayment is made, a break funding charge to cover loss, cost and expense attributable to such an event. Such loss, cost or expense to the Bank shall be deemed to include but not be limited to an amount determined by the Bank as follows:

Exh ibit 21.1

SUBSIDIARIES

CVD Materials Corporation, a New York corporation.

CVD Mesoscribe Technologies Corporation, a New York corporation.

555 N Research Corporation, a New York Corporation.

FAE Holdings 411519R, LLC, a New York limited liability company.

CVD Tantaline ApS, a Danish private limited liability company.

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement (No. 333-144336) on Form S-1, pertaining to the 2007 public offering, of CVD Equipment Corporation and Subsidiaries of our report dated April 2, 2018 relating to our audit of the consolidated financial statements, which appear in the Annual Report on Form 10-K of CVD Equipment Corporation for the year ended December 31, 2017.

/s/ MS PC

Certified Public Accountants and Advisors,

A Professional Corporation

Cranford, New Jersey

April 2 , 2018

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement (No. 333-138903) on Form S-8, pertaining to the 2001 Stock Option Plan of CVD Equipment Corporation and Subsidiaries of our report dated April 2, 2018 relating to our audit of the consolidated financial statements, which appear in the Annual Report on Form 10-K of CVD Equipment Corporation for the year ended December 31, 2017.

/ s / MS PC

Certified Public Accountants and Advisors,

A Professional Corporation

New York, New York

April 2 , 2018

Exhibit 23.3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement (No. 333-153186) on Form S-8, pertaining to the 2007 Share Incentive Plan of CVD Equipment Corporation and Subsidiaries of our report dated April 2, 2018 relating to our audit of the consolidated financial statements, which appear in the Annual Report on Form 10-K of CVD Equipment Corporation for the year ended December 31, 2017.

/ s/ MS PC

Certified Public Accountants and Advisors,

A Professional Corporation

New York, New York

April 2, 2018

Exhibit 23.4

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement (No. 333- 172252) on Form S-3, pertaining to the 2011 public offering of CVD Equipment Corporation and Subsidiaries of our report dated April 2, 2018 relating to our audit of the consolidated financial statements, which appear in the Annual Report on Form 10-K of CVD Equipment Corporation for the year ended December 31, 2017.

/ s/ MS PC

Certified Public Accountants and Advisors,

A Professional Corporation

New York, New York

April 2, 2018

Exhibit 23.5

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement (No. 333-217439) on Form S-8, pertaining to the 2016 Share Incentive Plan of CVD Equipment Corporation and Subsidiaries of our report dated April 2, 2018 relating to our audit of the consolidated financial statements, which appear in the Annual Report on Form 10-K of CVD Equipment Corporation for the year ended December 31, 2017.

/ s/ MS PC

Certified Public Accountants and Advisors,

A Professional Corporation

New York, New York

April 2, 2018

Exhibit 31.1

Certification of Principal Executive Officer

P ursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Leonard A. Rosenbaum, certify that:

1. I have reviewed this annual report on Form 10-K of CVD Equipment Corporation;

2. Based upon my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3 Based upon my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: April 2, 2018	/s/ Leonard A. Rosenbaum
	President, Chief Executive Officer and Director

Exhibit 31.2

Certification of Principal Financial Officer

P ursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Glen R. Charles, certify that:

1. I have reviewed this annual report on Form 10-K of CVD Equipment Corporation;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f) for the registrant and have:

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: April 2, 2018	/s/ Glen R. Charles
	Chief Financial Officer

Exhibit 32.1

Certification of Principal Executive Officer

P ursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

I, Leonard A. Rosenbaum, President and Chief Executive Officer of CVD Equipment Corporation, hereby certif y, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge, the annual report on Form 10-K for the period ending December 31, 2017 of CVD Equipment Corporation (the “Form 10-K”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of CVD Equipment Corporation.

Dated: April 2, 2018	/s/ Leonard A. Rosenbaum
	Leonard A. Rosenbaum
	Chief Executive Officer
	(Principal Executive Officer)

Exhibit 32.2

Certification of Principal Financial Officer

P ursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

I, Glen R. Charles, Chief Financial Officer of CVD Equipment Corporation, hereby certif y, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge, the annual report on Form 10-K for the period ending December 31, 2017 of CVD Equipment Corporation (the “Form 10-K”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of CVD Equipment Corporation.

Dated: April 2, 2018	/s/ Glen R. Charles
	Glen R. Charles
	Chief Financial Officer
	(Principal Financial Officer)