-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E941b7IcUGYFuko+cG/4RfyAgOa7stWs/OqKDZJ2/r/sXZWqU+I2ZHdkKJaDueSr b7iwbpQOQ36Zh5RqNEiWkA== 0000064463-98-000017.txt : 19980807 0000064463-98-000017.hdr.sgml : 19980807 ACCESSION NUMBER: 0000064463-98-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980626 FILED AS OF DATE: 19980806 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MECHANICAL TECHNOLOGY INC CENTRAL INDEX KEY: 0000064463 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] IRS NUMBER: 141462255 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-06890 FILM NUMBER: 98678223 BUSINESS ADDRESS: STREET 1: 968 ALBANY-SHAKER RD CITY: LATHAM STATE: NY ZIP: 12110 BUSINESS PHONE: 5187852211 MAIL ADDRESS: STREET 2: 968 ALBANY SHAKER RD CITY: LATHAM STATE: NY ZIP: 12110 10-Q 1 QTRLY REPORT : MECHANICAL TECHNOLOGY INC - 3RD QTR DRAFT 8/05/98 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q /X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 26, 1998 / / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period from _______________ to ______________ ----------------------------- Commission File Number 0-6890 ----------------------------- MECHANICAL TECHNOLOGY INCORPORATED (Exact name of registrant as specified in its charter) New York 14-1462255 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 968 Albany-Shaker Rd., Latham, New York 12110 - --------------------------------------- ------------------ (Address of principal executive offices) (Zip Code) (518) 785-2211 -------------- Registrant's telephone number, including area code Not Applicable -------------- (Former name,former address and former fiscal year,if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 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 X No --- --- Class Outstanding at June 26, 1998 - ----------------------------- ---------------------------- Common Stock, $1.00 Par Value 5,981,896 Shares ================================================================================ MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES INDEX Page No. ------------ Part I Financial Information - ---------------------------- Consolidated Balance Sheets - June 26, 1998 and September 30, 1997 (Restated) 3 - 4 Consolidated Statements of Income - Three months and nine months ended June 26, 1998 and June 27, 1997 (Restated) 5 Consolidated Statements of Cash Flows - Nine months ended June 26, 1998 and June 27, 1997 (Restated) 6 - 7 Notes to Consolidated Financial Statements 8 - 12 Management's Discussion and Analysis of Financial Condition and Results of Operations 13 - 17 Part II Other Information - ------------------------- Item 1 18 Item 4 18 Item 6 19 Signature 20 PART I FINANCIAL INFORMATION MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of June 26, 1998 (Unaudited) and September 30, 1997 (Derived from audited financial statements, as restated) (Dollars in thousands) Sept 30, June 26, 1997 1998 (Restated) Assets --------- --------- Current Assets: Cash and cash equivalents $ 307 $ 1,421 Trade accounts 5,737 4,576 Allowance for doubtful accounts (149) (94) ------- ------- Net receivables 5,588 4,482 Inventories: Raw materials and components 2,658 2,214 Work in process 1,074 967 Finished goods 186 205 ------- ------- Total inventories 3,918 3,386 Note receivable - current 325 315 Prepaid expenses and other current assets 217 102 Taxes receivable 211 - Net assets of a discontinued operation 649 3,186 ------- ------- Total Current Assets 11,215 12,892 Property, Plant and Equipment, net 1,611 749 Note receivable - noncurrent 282 335 Other assets - 27 ------- ------- Total Assets $ 13,108 $ 14,003 ======= ======= The accompanying notes are an integral part of the consolidated financial statements. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of June 26, 1998 (Unaudited) and September 30, 1997 (Derived from audited financial statements, as restated) (Dollars in thousands) Sept 30, June 26, 1997 1998 (Restated) --------- ---------- Liabilities and Shareholders' Equity Current Liabilities: Accounts payable $ 1,387 $ 1,389 Accrued liabilities 2,838 3,276 Income taxes payable - 73 Payroll liabilities 473 458 ------- ------- Total Current Liabilities 4,698 5,196 Deferred income taxes and other credits 524 594 ------- ------- Total Liabilities 5,222 5,790 Commitments Shareholders' Equity: Common stock 5,985 5,909 Paid-in-capital 14,067 13,923 Deficit (12,120) (11,569) Foreign currency translation adjustment (17) (19) Treasury stock (29) (29) Restricted stock grants - (2) ------- ------- Total Shareholders' Equity 7,886 8,213 ------- ------- Total Liabilities and Shareholders' Equity $ 13,108 $ 14,003 ======= ======= The accompanying notes are an integral part of the consolidated financial statements. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share) Three months ended Nine months ended June 27, June 27, June 26, 1997 June 26, 1997 1998 (Restated) 1998 (Restated) -------- -------- -------- -------- Revenue $ 5,767 $ 5,621 $ 16,016 $ 18,215 Cost of sales 3,003 3,224 9,003 10,970 Selling, general and administrative expenses 1,676 2,094 4,607 5,140 Product development and research costs 247 272 592 770 ------- ------- ------- ------- Operating income 841 31 1,814 1,335 Interest expense (8) (60) (18) (285) Equity in joint venture losses - - (27) - Other (expense) income, net 36 61 (35) 111 ------- ------- ------- ------- Income from continuing operations before extraordinary item and income taxes 869 32 1,734 1,161 Income tax (benefit) expense - (39) - 96 Income from continuing operations ------- ------- ------- ------- before extraordinary item 869 71 1,734 1,065 Extraordinary item - gain on extinguishment of debt, net of taxes ($106) - - - 2,507 ------- ------- ------- ------- Income from continuing operations 869 71 1,734 3,572 Discontinued Operations (Note 4) Income/(loss) from operations of discontinued Technology Division, net of tax benefit - 271 (516) (198) Loss on disposal of Technology Division, net of tax benefit - - (1,769) - ------- ------- ------- ------- Income/(loss) from discontinued operations - 271 (2,285) (198) ------- ------- ------- ------- Net income (loss) $ 869 $ 342 $ (551) $ 3,374 ======= ======= ======= ======= Earnings per Share: Income before extraordinary item $ .15 $ .01 $ .29 $ .19 Extraordinary item - - - .45 Income(loss)on discontinued operations - .05 (.38) (.03) ------- ------- ------- ------- Net income (loss) $ .15 $ .06 $ (.09) $ .61 ======= ======= ======= ======= Earnings per Share-assuming dilution: Income before extraordinary item $ .14 $ .01 $ .28 $ .19 Extraordinary item - - - .45 Income (loss) on discontinued operations - .05 (.37) (.03) ------- ------- ------- ------- Net income (loss) $ .14 $ .06 $ (.09) $ .61 ======= ======= ======= ======= The accompanying notes are an integral part of the consolidated financial statements. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Nine months ended June 27, June 26, 1997 1998 (Restated) Operating Activities ------- ------- Net income from continuing operations $ 1,734 $ 3,572 Adjustments to reconcile net income to net cash provided (used) by continuing operations: Gain on extinguishment of debt - (2,507) Depreciation and amortization 224 181 Equity in joint venture loss 27 - Reserve for bad debts 55 (13) Other - 19 Deferred taxes and other credits (70) - Changes in operating assets and liabilities: Accounts receivable (1,161) 710 Inventories (532) 156 Prepaid expenses and other current assets (119) 18 Accounts payable (2) (847) Income taxes (284) (247) Payroll Liabilities 15 (148) Accrued liabilities (438) (929) ------- ------- Net cash used by continuing operations (551) (35) ------- ------- Discontinued operations: Net loss from discontinued operations (2,285) (198) Change in net assets/liabilities of discontinued operations 2,537 (599) Net assets transferred from discontinued operations (878) - ------- ------- Net cash used by discontinued operations (626) (797) ------- ------- Net cash used by operating activities (1,177) (832) Investing Activities ------- ------- Purchases of property, plant & equipment (202) (322) Principal payments from note receivable 43 - ------- ------- Net cash used by investing activities (159) (322) Financing Activities ------- ------- Net borrowings under line-of-credit - 1,649 Principal payments of long-term debt - (454) Other - 7 Proceeds from options exercised 220 - ------- ------- Net cash provided by financing activities 220 1,202 ------- ------- Effect of exchange rate on cash 2 4 ------- ------- (Decrease) increase in cash and cash equivalents (1,114) 52 Cash and cash equivalents - beginning of period 1,421 62 ------- ------- Cash and cash equivalents - end of period $ 307 $ 114 ======= ======= The accompanying notes are an integral part of the consolidated financial statements. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Nine months ended June 27, June 26, 1997 Supplemental Disclosure 1998 (Restated) - ----------------------- ------- ------- NonCash Investing Activities Contribution of net assets to joint venture Inventories $ - $ 1 Property, plant & equipment, net - 444 Accounts Payable - (46) Accrued Liabilities - (50) ------- ------- Net noncash used in investing activities $ - $ 349 ======= ======= NonCash Financing Activities Conversion of Note Payable to common stock Note payable extinguishment $ - $ (3,000) Common stock issued - 1,500 Accrued interest- Note Payable - (1,213) ------- ------- Net noncash used in financing activities $ - $ (2,713) ======= ======= Net noncash used in investing/financing activities $ - $ (2,364) ======= ======= The accompanying notes are an integral part of the consolidated financial statements. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of management the accompanying unaudited consolidated financial statements contain all adjustments, consisting of only normal, recurring adjustments, necessary for a fair presentation of results for such periods. The results for any interim period are not necessarily indicative of results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto for the fiscal year ended September 30, 1997. 2. Income Taxes The Company's effective tax rate for the nine months ended June 26,1998 and June 27, 1997 was 0% and 5.4%, respectively. The June 26, 1998 rate reflects the use of net operating losses and a full valuation allowance against the deferred tax assets generated by the losses on discontinued operations. 3. Earnings per Share The reconciliation of the numerators and denominators of Earnings per Share and Earnings per Share-assuming dilution are as follows: For the three month period For the three month period ended June 26, 1998 ended June 27, 1997 ----------------------------------- ----------------------------------- Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Income before --------- ----------- --------- --------- ----------- --------- extraordinary item $ 869,000 $ 71,000 Earnings per Share: - ------------------ Income available to common stockholders $ 869,000 5,937,434 $ .15 $ 71,000 5,900,408 $ .01 Effect of Dilutive ======= ======= Securities: - ---------- Stock Options - 202,164 - 7,089 Earnings per Share- --------- --------- --------- --------- assuming dilution: - ----------------- Income available to common stockholders plus assumed conversion $ 869,000 6,139,598 $ .14 $ 71,000 5,907,497 $ .01 ========= ========= ======= ========= ========= =======
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the nine month period For the nine month period ended June 26, 1998 ended June 27, 1997 ----------------------------------- ----------------------------------- Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Income before --------- ----------- --------- --------- ----------- --------- extraordinary item $1,734,000 $1,065,000 Earnings per Share: - ------------------ Income available to common stockholders $1,734,000 5,941,997 $ .29 $1,065,000 5,577,386 $ .19 Effect of Dilutive ======= ======= Securities: - ---------- Stock Options - 191,273 - - Earnings per Share- --------- --------- --------- --------- assuming dilution: - ----------------- Income available to common stockholders plus assumed conversion $1,734,000 6,133,270 $ .28 $1,065,000 5,577,386 $ .19 ========== ========= ======= ========= ========= =======
During the first three quarters of fiscal 1998,options to purchase 20,000 shares of common stock at prices ranging from $5.70 to $6per share were outstanding but were not included in the computation of Earnings per Share-assuming dilution because the options' exercise price was greater than the average market price of the common shares. The options, which expire between October 20, 2007 and April 27, 2008, were still outstanding at June 26, 1998. During the first three quarters of fiscal 1997, options to purchase 188,100 shares of common stock at a price of $2.44 per share were outstanding but were not included in the computation of Earnings per Share-assuming dilution because the exercise price was greater than the average market price of the common shares. Therefore, no potential common shares are included in the computation. The options, which expire between December 20, 2006 and March 14, 2007, were still outstanding at June 27, 1997. 4. Discontinued Operations - Restatement All remaining assets of the Company's Technology Division, the sole component of the Technology segment, were sold to NYFM, Incorporated (a wholly-owned subsidiary of Foster Miller, Inc., a Waltham, Massachusetts-based technology company) on March 31, 1998. In exchange for the Technology Division's assets, NYFM, Incorporated a) agreed to pay the Company a percentage of gross sales in excess of $2.5 million for a period of five years; b) assumed approximately $40,000 of liabilities; and c) established a credit for warranty work of approximately $35,000. Accordingly, the Company no longer includes Technology among its reportable business segments and now operates in only one segment,Test & Measurement. The Technology Division is reported as a discontinued operation as of December 26, 1997, and the consolidated financial statements have been reclassified to report separately the net assets and operating results of the business. The Company's prior year financial statements have been restated to conform to this treatment. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Discontinued operations consist of the following: Three months ended Nine months ended ------------------ ------------------ June 26, June 27, June 26, June 27, (Dollars in thousands) 1998 1997 1998 1997 -------- -------- -------- -------- Sales $ - $ 2,444 $ 532 $ 6,486 ======= ======= ======= ======= Income (loss) from operations Before income tax $ - $ 286 $ (516) $ (208) Income tax (benefit) - 15 - (10) ------- ------- ------- ------- Net income (loss) from discontinued operations $ - $ 271 $ (516) $ (198) ======= ======= ======= ======= Loss on disposal of Division $ - $ (1,769) Income tax (benefit) - - ------- ------- Loss on disposal of Division $ - $ (1,769) ======= ======= The assets and liabilities of the Company's discontinued operations are as follows: June 26, Sept 30, 1998 1997 -------- -------- Assets held for sale $ 1,806 $ 3,968 Liabilities $ 1,157 $ 782 ------- ------- Net Assets $ 649 $ 3,186 ======= ======= Assets with a net book value of $878,000 consisting primarily of land, building and management information systems were transferred to continuing operations on October 1, 1997. 5. Reclassification Certain fiscal 1997 amounts have been reclassified to conform with the fiscal 1998 presentation. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. Comprehensive Income Total comprehensive income for the three and nine months ended June 26, 1998 and June 27, 1997 consists of: Three months ended Nine months ended ------------------ ----------------- Restated Restated June 26, June 27, June 26, June 27, (Dollars in thousands) 1998 1997 1998 1997 - --------------------------------- -------- -------- -------- -------- Net income(loss) $ 869 $ 342 $ (551)$ 3,374 Other comprehensive income(loss), before tax: Foreign currency translation adjustments (1) 1 2 4 Income tax related to items of other comprehensive income(loss) - - - - ------- ------- ------- ------- Total comprehensive income(loss) $ 868 $ 343 $ (549)$ 3,378 ======= ======= ======= ======= 7. Investment in Plug Power, L.L.C. On April 15, 1998, Edison Development Corporation ("EDC") contributed $2.25 million in cash to Plug Power, L.L.C. ("Plug Power"). The Company contributed a below-market lease for office and manufacturing facilities in Latham, New York, valued at $2 million and purchased a one year option to match the remaining $250,000 of EDC's contribution. In May 1998, EDC contributed an additional $2 million to Plug Power and the Company purchased a one year option to match the contribution. The Company paid approximately $191,000 for the options, which mature in April 1999 ($250,000) and May 1999 ($2 million). On July 31, 1998, Plug Power asked the Company and EDC to each commit to contribute an additional $5 million dollars (in cash and research credits) between August 5, 1998 and March 31, 1999. Such contributions, if made, will increase the Company's total contributions to Plug Power(including contributions of cash, assets, research credits, and a below market lease) to $11.75 million over the period commencing on June 27, 1997, and ending on March 31, 1999. In addition, unless the Company exercises its options to match EDC's previous contributions of $250,000 in April 1999, and $2 million in May 1999,such options will lapse. The Company, EDC and Plug Power are currently negotiating whether, when and how, such additional contributions will be made. If EDC and/or the Company do not contribute or lend additional funds to Plug Power, and no additional sources of funding can be found,Plug Power will be unable to continue as a going concern. The Company, EDC and Plug Power intend to determine the form, timing and pricing of additional contributions or loans to Plug Power,if any, for the period August 1, 1998 through March 31, 1999, not later than September 15, 1998. On August 5, 1998, EDC and the Company made short term loans to Plug Power of $500,000 each. If the Company, EDC and Plug Power have not agreed upon the terms and timing of additional contributions to Plug Power, if any, as of September 15, 1998, such loans will be payable upon demand. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company has recorded its proportionate share of Plug Power's losses only to the extent of its recorded investment in Plug Power, such investment is zero as of June 26, 1998. To the extent the Company makes investments in Plug Power,it will also recognize its proportionate share of losses to the extent of these investments. 8. Commitments The Industrial Development Agency for the Town of Colonie has agreed to issue $6 million in Industrial Development Revenue ("IDR") Bonds on behalf of the Company to assist in the construction of a new building for Advanced Products and the Company's corporate staff and renovation of existing buildings to be leased to Plug Power, L.L.C. The construction project is due to be completed in December 1998. First Albany Companies, Inc. ("FAC"), the Company's controlling shareholder, will underwrite the sale of the IDR Bonds. Proceeds of the IDR Bonds will be deposited with a trustee for the bondholders. The Company may draw the bond proceeds to cover qualified project costs. The bond closing is expected to be completed on or about August 30, 1998. FAC will receive no fees for underwriting the IDR Bonds but will be reimbursed for its out-of-pocket costs. 9. Subsequent Events Debt - ---- On July 15, 1998, the Company received a commitment from KeyBank National Association ("KeyBank") to lend the Company $4 million in a working capital line of credit at an interest rate of LIBOR plus 250 basis points, and a $1 million equipment loan/lease line of credit at an interest rate of LIBOR plus 275 basis points, both of which expire January 31, 2000. Additionally, KeyBank has agreed to issue a $6 million direct pay letter of credit to enhance the $6 million IDR Bonds to be issued on the Company's behalf on or about August 30, 1998. The loan commitment requires the Company to meet certain covenants, including a fixed charge coverage and leverage ratio. Further, if certain performance standards are achieved, the interest rates on the debt may be reduced. The commitment letter also require the Company to grant a first lien on all consolidated assets of the Company exclusive of Plug Power, L.L.C., a first mortgage on all land and buildings owned by the Company and a first lien on any equipment purchased bythe Company. Rights Offering - --------------- On July 22, 1998, the Company filed a Registration Statement for the sale of additional common stock to current shareholders through the issuance of non- transferable rights. The offering will raise up to approximately $6 million. The Company will use some or all of the proceeds of the offering for investment in and/or loans to Plug Power. In addition, some proceeds may be used for acquisitions for the Company's core businesses,efforts to increase market share, working capital, general corporate purposes and other capital expenditures. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors, which have affected the Company's earnings during the periods included in the accompanying consolidated statements of income. The sale of the Company's Technology Division, the sole component of the Technology segment, to NYFM, Incorporated (a wholly owned subsidiary of Foster- Miller, Inc., a Waltham, Massachusetts-based technology company) on March 31, 1998 completed management's planned sale of non-core businesses. Accordingly,the Company no longer includes Technology among its reportable business segments and now operates in only one segment, Test & Measurement. The Technology Division is reported as a discontinued operation as of December 26, 1997, and the consolidated financial statements have been restated to report separately thenet assets and operating results of the business. Net assets of the discontinued operation were $649 thousand and $3,186 thousand at June 26, 1998 and September 30, 1997, respectively and the loss on discontinued operations included a loss from operations of $516 thousand and a loss on disposal of $1,769 thousand for the nine month period ended June 26, 1998. The loss on disposal includes a provision for estimated operating results prior to disposal. The Company's prior year financial statements have been restated to conform to this treatment. Continuing Operations - --------------------- Sales increased $146 thousand to $5,767 thousand for the three months ended June 26, 1998 as compared to $5,621 thousand for the three months ended June 27, 1997, a 2.6% increase. This change is the result of an approximate $1 million increase in sales for Advanced Products, which more than offset the sales reduction resulting from the September 30, 1997 sale of the L.A.B. Division. The L.A.B. Division reported sales of $889 thousand and operating income of $106 thousand for the three months ended June 27, 1997. Operating income increased $810 thousand to $841 thousand for the three months ended June 26, 1998 as compared to $31 thousand for the three months ended June 27, 1997, a 2,612.9% increase. The increase is the result of increased sales levels for Advanced Products and improved margins as a result of cost control measures. Sales for the first three quarters of fiscal year 1998 versus the same period in fiscal year 1997 have decreased $2.2million to $16million in 1998 from $18.2 million in 1997, a 12% decrease. This decrease is attributable to the reduction of sales resulting from the sale of the L.A.B. Division on September 30, 1997, which reported sales of $2,617 thousand and operating income of $309thousand for the first three quarters of fiscal 1997. The first three quarters of fiscal 1998 operating income of $1,814 thousand represented a $479 thousand increase or a 35.9% increase from the $1,335thousand operating income recorded during the same period last year. The increase is the result of increased sales levels for Advanced Products and improved margins as a result of cost control measures. Other - ----- In addition to the matters noted above, during the first three quarters of fiscal 1997, the Company recorded a $2.5 million extraordinary gain, net of taxes, on the extinguishment of debt. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results during the first three quarters of fiscal 1998 and fiscal 1997 were enhanced by lower interest expense, principally resulting from reduced indebtedness. Moreover, the Company benefited from reduced income tax expense due to the use of net operating loss carryforwards. However, as a result of ownership changes, the availability of further net operating loss carryforwards to offset future taxable income will be significantly limited pursuant to the Internal Revenue Code. The tax rate for the nine months ended June 26, 1998 and June 27, 1997 was 0% and 5.4%, respectively. The June 26, 1998 rate reflects the use of net operating losses and a full valuation allowance against the deferred tax assets generated by the losses on discontinued operations. Financial Condition - ------------------- The Company's working capital of $6.52 million at June 26, 1998 reflects a $1.18 million decline from September 30, 1997. At June 26, 1998, cash and cash equivalents were $307 thousand versus $1.42 million at September 30, 1997. Net cash used by operating activities for the first nine months of fiscal 1998 amounted to $1.18 million, as compared to cash used of $828 thousand in the prior year. The capital used during the first three quarters of fiscal 1998 was applied principally to fund short term operating cash flow requirements and pay estimated taxes. Additionally, accounts receivable increased to $5.59 million or 24.7% as of June 26, 1998 as compared to $4.48 million as of September 30, 1997. Capital spending during the first nine months of fiscal 1998 was $202 thousand, a decrease from the comparable period in 1997 during which capital spending totaled $322 thousand. Capital spending during the fourth quarter of fiscal 1998 and the first quarter of fiscal 1999 will reflect the construction of a new building for Advanced Products and Corporate staff and renovations to an existing building to be leased to Plug Power, L.L.C. Total capital spending for this project is expected to be approximately $6 million. The reduction in net assets of discontinued operations of $2,537 thousand includes the transfer of $878 thousand of assets to continuing operations (principally land, building and management information systems) as well as the accrual for the loss on disposal of the Technology Division. Such accrual included a provision for estimated operating results prior to disposal and an estimate of the loss on disposal and winddown of the Technology Division, which totaled $1,769 thousand. The sale of the Technology Division was completed as of March 31, 1998. During fiscal 1996, First Albany Companies, Inc. ("FAC") purchased 909,091 shares of the Company's common stock from the New York State Superintendent of Insurance as the court-ordered liquidator of United Community Insurance Company ("UCIC"). In connection with this purchase, FAC had also acquired certain rights to an obligation ("Term Loan") due from the same finance company ("FCCC")to whom the Company was obligated under the Note Payable.FCCC was in default of its Term Loan to UCIC. FAC, as the owner of the rights to the Term Loan, filed suit- seeking payment. Collateral for the FCCC Term Loan included the Company's Note Payable to FCCC. FAC exercised its rights to the collateral securing the Term Loan,including the right to obtain payment on the Note Payable directly from the Company. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On December 27, 1996, the Company and FAC entered into an agreement under which the Company issued to FAC 1.0 million shares of common stock in full satisfaction of the Note Payable of $3.0 million and accrued interest of $1.2 million. Accordingly, the Company realized a gain on the extinguishment of debt totaling $2.5 million, net of approximately $100 thousand of transaction related expenses and net of taxes of $106 thousand. The Company anticipates that it will be able to meet the liquidity needs of its continuing operations during fiscal year 1998 from cash flow generated by operations, borrowing under its existing line of credit and, if consummated, the newly committed line of credit from KeyBank N.A. Debt - ---- On July 15, 1998, the Company received a commitment from KeyBank National Association ("KeyBank") to lend the Company $4 million in a working capital line of credit at an interest rate of LIBOR plus 250 basis points, and a $1 million equipment loan/lease line of credit at an interest rate of LIBOR plus 275 basis points, both of which expire January 31, 2000. Additionally, KeyBank has agreed to issue a $6 million direct pay letter of credit to enhance the $6 million IDR Bonds to be issued on the Company's behalf on or about August 30, 1998. The loan commitment requires the Company to meet certain covenants, including a fixed charge coverage and leverage ratio. Further, if certain performance standards are achieved, the interest rates on the debt may be reduced. The commitment letter also requires the Company to grant a first lien onall consolidated assets of the Company exclusive of Plug Power, L.L.C., a first mortgage on all land and buildings owned by the Company and a first lien on any equipment purchased bythe Company. The Industrial Development Agency for the Town of Colonie has agreed to issue $6 million in Industrial Development Revenue Bonds ("IDR") on behalf of the Company to assist in the construction of a new building for Advanced Productsand the Company's corporate staff and renovation of existing buildings to be leased to Plug Power, L.L.C. The construction project is due to be completed as of December 1998. First Albany Companies, Inc. ("FAC"), which owns 34% of the Company's stock, will underwrite the sale of the IDR Bonds. Proceeds of the IDR Bonds will be deposited with a trustee for the bondholders. The Company may draw the bond proceeds to cover qualified project costs. The bond closing is expected to be completed on or about August 30, 1998. FAC will receive no fees for underwriting the IDR Bonds but will be reimbursed for its out of pocket costs. Equity - ------ On July 22, 1998, the Company filed a Registration Statement for the sale of additional common stock to current shareholders through the issuance of non- transferable rights.The anticipated proceeds of up to approximately $6 million will be used for investment in and/or loans to Plug Power, L.L.C., acquisitions for the Company's core businesses and other general corporate business purposes. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Joint Venture - ------------- On July 31, 1998, Plug Power, L.L.C. asked the Company to commit to contribute $5 million (in cash and research credits) to Plug Power, L.L.C. to fund continuing operations for the period August 1, 1998 through March 31, 1999. The Company, EDC and Plug Power, L.L.C. are currently negotiating whether, when and how, such additional contributions will be made. On August 5, 1998, EDC and the Company each made short-term loans of $500,000 to Plug Power, L.L.C. If the Company, EDC and Plug Power, L.L.C. have not agreed upon the terms and timing of additional contributions to Plug Power, L.L.C. as of September 15, 1998, these loans will be payable on demand. In addition, Plug Power, L.L.C. will continue to need substantial investment for the foreseeable future. Plug Power, L.L.C. continues to pursue strategic partners and additional sources of capital. Plug Power, L.L.C. is currently negotiating with several strategic partners and has signed a preliminary Memorandum of Understanding with one strategic partner. There is no assurance, however, that Plug Power, L.L.C. will successfully conclude any transactions with strategic partners or find other sources of capital. If other sources of funding cannot be found, the Company will be faced with contributing and/or lending additional capital to Plug Power, L.L.C. or dilution of its interest in Plug Power, L.L.C. If EDC and the Company stop funding Plug Power, L.L.C. and no additional sources of capital are found, Plug Power, L.L.C. will not be able to continue as a going concern. Year 2000 - --------- The Company relies on both internal systems and systems of other parties in regard to its business, accounting and operational software. As the millennium approaches, the Company is working toward becoming year 2000 compliant. Many of the Company's internal systems and products that have integrated software are already year 2000 compliant. The Company currently has plans that if successful will have all internal systems and all of our products year2000 complaint during fiscal 1999. The Company has contacted its outside software providers regarding their products compliance with year 2000 issues and has developed specific plans to address any non-compliant products. These providers are in the process of implementing these plans with an expected completion date of 1999. If any provider is not successful, the Company will evaluate selecting alternative providers at that time. The incremental costs of assuring that the Company's products and purchased software and products are year 2000 complaint are estimated to be approximately $120,000. Most of these costs are attributable to software/hardware upgrades. The Company presently believes that with modifications to existing software or conversion to new software, year 2000 problems can be effectively mitigated. However, if such modifications and conversions are not made,or are not completed timely, or if other issues that have not been anticipated arise, year 2000 problems could have a material impact on the operations of the Company. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Statement Concerning Forward Looking Statements - ----------------------------------------------- Statements in this Form 10-Q or in documents incorporated herein by reference that are not statements of historical fact constitute "forward-looking statements"within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding future revenues, expenses and profits. These forward looking statements are subject to known and unknown risks, uncertainties or other factors that may cause the actual results of the Company to be materially different from the historical results or from any results expressed or implied by the forward looking statements. Such risks and factors include, but are not limited to, those discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations". PART II OTHER INFORMATION Item 1. Legal Proceedings - -------------------------- On January 30, 1998, Stephen Sullivan, former President of Ling Electronics, Inc., a wholly-owned subsidiary of the Company, filed suit in Superior Court of the State of California against Ling Electronics, Inc., alleging age discrimination and wrongful termination claims against the Company arising from the termination of Mr.Sullivan's employment by Ling, seeking unspecified relief. The Company is currently in settlement negotiations with Mr. Sullivan. In May 1998,the Company paid $138,580.30 in satisfaction of all of the Company's obligations for past or future EPA response costs and any costs incurred by the PRP's with respect to the site as its share of the Settlement of the Environmental Protection Agency's executed consent decree with the Company and other named potentially responsible parties in connection with a alleged release of hazardous materials into the environment at a site in Malta, New York. In February, 1997, an unaffiliated entity, Ling Holdings Group, Inc. ("Plaintiff"), brought suit against the Company. The Plaintiff's claims arise out of the Company's decision not to sell Plaintiff the stock of the Company's wholly owned subsidiary, Ling Electronics, Inc. ("LING"), after expiration of the closing date specified in the stock purchase agreement and side letters executed in connection with the transaction (collectively, the "Agreements"). Plaintiff claims that the Agreements provided an "open-ended" closing that permitted Plaintiff to purchase LING when Plaintiff raised sufficient funds to do so. Plaintiff further claims breach of express and implied contractual obligations, fraud, misrepresentation, and other torts in connection with the Company's refusal to consummate the sale after the agreed upon closing date. Plaintiff further alleged that the Company wrongfully confiscated $50,000 of Plaintiff's escrowed funds in breach of the escrow agreement between Plaintiff, the Company, and the Adirondack Trust Company ("Escrow Agent"). Escrow Agent commenced an interpleader action regarding the escrowed funds in September, 1997. The Company believes that its determination not to sell LING to Plaintiff was in compliance with the terms of the Agreements. The Company further believes that it became the rightful owner of funds escrowed with the Escrow Agent, when Plaintiff failed to have sufficient funds available to close the purchase of LING on the closing date specified in the Agreements. The Company has filed claims against Plaintiff for negligent misrepresentation, asserting that Plaintiff misled the Company concerning its ability to raise the funds required to purchase LING. The Ling Holdings Group, Inc. lawsuit trial date has been postponed until September 21, 1998. Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ On April 15, 1998, the Company held its Annual Meeting of Shareholders of the Company. The following members were elected to the Company's Board of Directors for the terms of office noted: Nominee Term In Favor Withheld - ------- ---- -------- -------- Dale W. Church 2 year 4,417,446 3,581 Edward A. Dohring 2 year 4,418,621 2,406 Alan P. Goldberg 3 year 4,419,071 1,956 George C. McNamee 1 year 4,418,971 2,056 E. Dennis O'Connor 1 year 4,418,971 2,056 Dr. Walter L. Robb 3 year 4,418,871 2,156 Dr. Beno Sternlicht 3 year 4,418,850 2,177 The results of the voting on the proposal to approve the reappointment of Coopers & Lybrand, L.L.P. as the Company's Auditors were as follows: In Favor Opposed Abstained -------- ------- --------- 4,417,627 1,300 2,100 The results of the voting on the approval of the Amendment and Restatement of the Company's Certificate of Incorporation and the Restatement of the Company's By-Laws were as follows: In Favor Opposed Abstained --------- ------- --------- Amendment and Restatement of the Company's Certificate of Incorporation 3,739,428 25,403 6,215 Restatement of the Company's By-Laws 3,739,189 25,493 6,364 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits Exhibit No. Description ----------- ----------- 10.28 Agreement between Mechanical Technology, Inc. and Malone & Tate Builders, Inc. for Building One Construction 10.29 Mechanical Technology, Incorporated/Plug Power, L.L.C. Lease for Building III 27 Financial Data Schedule (b) One report on Form 8-K was filed during the quarter ended June 26, 1998. The Company filed a Form 8-K Report, dated April 8, 1998, reporting under Item 5 thereof the resignation of Martin J. Mastroianni as an officer and director of the Company, Ling Electronics, Inc. and Plug Power, L.L.C. and subsidiaries thereof. SIGNATURE Pursuant to the requirements 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. Mechanical Technology Incorporated 08-06-98 /s/ G.C. McNamee - ---------- ---------------------------------- (Date) George C. McNamee Chief Executive Officer 08-06-98 /s/ C.A. Scheuer - ---------- ---------------------------------- (Date) Cynthia A. Scheuer Vice President/Chief Financial Officer EX-10 2 EXHIBIT 10.28 1997 EDITION AIA DOCUMENT I A111-1997 STANDARD FORM OF AGREEMENT BETWEEN OWNER AND CONTRACTOR where the basis for payment is the COST OF THE WORK PLUS A FEE with a negotiated Guaranteed Maximum Price. A G R E E M E N T made as of the Nineteenth day of June in the year NINETY-EIGHT (In words, indicate day, month and year) B E T W E E N the Owner: MECHANICAL TECHNOLOGY INC. (Name, address and other information) 968 ALBANY-SHAKER ROAD LATHAM, NY 12304 and the Contractor: MALONE & TATE BUILDERS, INC. (Name, address and other information) 2217 CENTRAL AVENUE SCHENECTADY, NY 12304 The Project is: MECHANICAL TECHNOLOGY INC. (Name and address) BUILDING ONE - CONSTRUCTION 968 ALBANY-SHAKER ROAD LATHAM, NY 12110 The Architect is: STRACHER ROTH GILMORE, (Name, address and other information) ARCHITECTS 143 JAY STREET SCHENECTADY, NY 12305 The Owner and Contractor agree as follows. ARTICLE 1 THE CONTRACT DOCUMENTS The Contract Documents consist of this Agreement, Conditions of the Contract (General, Supplementary and other Conditions), Drawings, Specifications, Addenda issued prior to execution of this Agreement, other documents listed in this Agreement and Modifications written and executed by both parties issued after execution of this Agreement; these form the Contract, and are as fully a part of the Contract as if attached to this Agreement or repeated herein. The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. An enumeration of the Contract Documents, other than Modifications, appears in Article 15. If anything in the other Contract Documents is inconsistent with this Agreement, this Agreement shall govern. ARTICLE 2 THE WORK OF THIS CONTRACT The Contractor shall fully execute the Work described in the Contract Documents, except to the extent specifically indicated in the Contract Documents to be the responsibility of others. ARTICLE 3 RELATIONSHIP OF THE PARTIES The Contractor accepts the relationship of trust and confidence established by this Agreement and covenants with the Owner to cooperate with the Architect and exercise the Contractor's skill and judgment in furthering the interests of the Owner; to furnish efficient business administration and supervision; to furnish at all times an adequate supply of workers and materials; and to perform the Work in an expeditious and economical manner consistent with the Owner's interests. The Owner agrees to furnish and approve, in a timely manner, information required by the Contractor and to make payments to the Contractor in accordance with the requirements of the Contract Documents. ARTICLE 4 DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION 4.1 The date of commencement of the Work shall be the date of this Agreement unless a different date is stated below or provision is made for the date to be fixed in a notice to proceed issued by the Owner. (Insert the date of commencement, if it differs from the date of this Agreement or, if applicable, state that the date will be fixed in a notice to proceed.) JUNE 25, 1998 If, prior to commencement of the Work, the Owner requires time to file mortgages, mechanic's liens and other security interests, the Owner's time requirement shall be as follows: 4.2 The Contract Time shall be measured from the date of commencement. 4.3 The Contractor shall achieve Substantial Completion of the entire Work not later than 124 days from the date of commencement or as follows: (Insert number of calendar days. Alternatively, a calendar date may be used when coordinated with the date of commencement. Unless stated elsewhere in the Contract Documents. insert any requirements for earlier Substantial Completion of certain portions of the Work.) SUBSTANTIAL COMPLETION IS DEFINED AS THE POINT WHEN THE CONSTRUCTION WORK HAS PROGRESSED TO THE POINT WHERE THE BUILDING MAY BE LEGALLY OCCUPIED FOR ITS INTENDED USE. OCTOBER 25, 1998 subject to adjustments of this Contract Time as provided in the Contract Documents. (Insert provisions, if any for liquidated damages relating to failure to complete on time, or for bonus payments for early completion of the Work.) $500.00/CALENDAR DAY FOR EARLY OR LATE COMPLETION EARLY COMPLETION BEGINS AFTER OCTOBER 1, 1998 BUT PRIOR TO OCTOBER 25, 1998. ARTICLE 5 BASIS FOR PAYMENT 5.1 CONTRACT SUM 5.1.1 The Owner shall pay the Contractor the Contract Sum in current funds for the Contractor's performance of the Contract . The Contract Sum is the Cost OF the Work as defined in Article 7, plus the Contractor's Fee. 5.1.2 The Contractor's Fee is: $308,527.00 FIXED FEE (State a lump sum, percentage of Cost of the Work or other provision for determining the Contractor's Fee, and describe the method of adjustment of the Contractor's Fee for changes in the Work. ) FOR ADDITIONAL WORK THE CONTRACTOR WILL RECEIVE THE COST OF THE WORK AS DEFINED IN ARTICLE 7, IN ADDITION TO A 15% MARK-UP FOR OVERHEAD AND PROFIT. 5.2 GUARANTEED MAXIMUM PRICE 5.2.1 The sum of the Cost of the Work and the Contractor's Fee is guaranteed by the Contractor not to exceed TWO MILLION SIX HUNDRED SIXTY THREE THOUSAND ONE HUNDRED TWENTY-ONE AND 00/100 DOLLARS--($2,663,121) subject to additions and deductions by Change Order as provided in the Contract Documents. Such maximum sum is referred to in the Contract Documents as the Guaranteed Maximum Price. Costs which would cause the Guaranteed Maximum Price to be exceeded shall be paid by the Contractor without reimbursement by the Owner. (Insert specific provisions if the Contractor is to participate in any savings.) AT THE COMPLETION OF THE JOB ALL SAVINGS REALIZED BY THE CONCERTED TEAM EFFORT OF THE OWNER, ARCHITECT AND THE CONTRACTOR WILL BE DISTRIBUTED AS FOLLOWS: 90% TO THE OWNER 10% TO THE CONTRACTOR 5.2.2 The Guaranteed Maximum Price is based on the following alternates, if any. which are described in the Contract Documents and are hereby accepted by the Owner: (State the numbers or other identification or accepted alternates. If decisions on other alternates are to be made by the Owner subsequent to the execution of this Agreement. attach a schedule of such other alternates showing the amount for each and the date when the amount expires). 1. ADD MAINTENANCE /EQUIPMENT ROOM 900 SF 2. ADD ELECTRICAL ROOM/ STORAGE AREA 360 SF 5.2.3 Unit prices, if any, are as follows: AS STATED IN PRELIMINARY PROPOSED BUDGET DATED, JUNE 19, 1998 (SEE ATTACHMENT) 5.2.4 Allowances, if any, are as follows: (Identify and state the amounts of any allowances,and state whether they include labor materials, or both. ) $20,000.00 LANDSCAPING $26,580.00 FRONT PLANTER $10,000.00 FINISH CARPENTRY $18,500.00 RECEPTION DESK $47,500.00 ORNAMENTAL TRELLIS INTERIOR ALLOWANCES AS STATED IN PRELIMINARY PROPOSED BUDGET DATED, JUNE 19, 1998. 5.2.5 Assumptions, if any, on which the Guaranteed Maximum Price is based are as follows: 1. GROSS BUILDING AREA 32,005 SF 2. BRICK EXTERIOR @ $350.00/1000 BRICKS 3. REVISED HVAC PROPOSAL DATED, JUNE 15, 1998 WITH CEILING PLENUM RETURN (SEE ATTACHMENT) 4. REVISED ELECTRICAL PROPOSAL DATED, JUNE 16, 1998 (SEE ATTACHMENT) 5. STRUCTURAL STEEL PRICING NOT TO EXCEED $7.00/SF 6. EXCLUSIONS LISTED IN PRELIMINARY PROPOSED BUDGET DATED, JUNE 19, 1998. 7. ASPHALT PAVING AND PREPARATION IS EXCLUDED 8. NO STORM WATER MANAGEMENT 9. THIS IS A TAX EXEMPT JOB 5.2.6 To the extent that the Drawings and Specifications are anticipated to require further development by the Architect, the Contractor has provided in the Guaranteed Maximum Price for such further development consistent with the Contract Documents and reasonably inferable therefrom. Such further development does not include such things as changes in scope, systems, kinds and quality of materials, finishes or equipment, all of which, if required, shall be incorporated by Change Order. ARTICLE 6 CHANGES IN THE WORK 6.1 Adjustments to the Guaranteed Maximum Price on account of changes in the Work may be determined by any of the methods listed in Subparagraph 7.3.3 of AIA Document A201-1997. 6.2 In calculating adjustments to subcontracts (except those awarded with the Owner's prior consent on the basis of cost plus a fee), the terms "cost" and "fee" as used in Clause 7.3.3.3 of AIA Document A201-1997 and the terms "costs" and "a reasonable allowance for overhead and profit" as used in Subparagraph 7.3.6 of AIA Document A201-l997 shall have the meanings assigned to them in AIA Document A201-1997 and shall not be modified by Articles 5, 7 and 8 of this Agreement. Adjustments to subcontracts awarded with the Owner's prior consent on the basis of cost plus a fee shall be calculated in accordance with the terms of those subcontracts. 6.3 In calculating adjustments to the Guaranteed Maximum Price, the terms "cost" and "costs" as used in the above-referenced provisions of AIA Document A201-1997 shall mean the Cost of the Work as defined in Article 7 of this Agreement and the terms "fee" and "a reasonable allowance for overhead and profit" shall mean the Contractor's Fee as defined in Subparagraph 5.1.2 of this Agreement. 6.4 If no specific provision is made in Paragraph 5.1 for adjustment of the Contractor's Fee in the case of changes in the Work, or if the extent of such changes is such, in the aggregate, that application of the adjustment provisions of Paragraph 5.1 will cause substantial inequity to the Owner or Contractor, the Contractor's Fee shall be equitably adjusted on the basis of the Fee established for the original Work, and the Guaranteed Maximum Price shall be adjusted accordingly. ARTICLE 7 COSTS TO BE REIMBURSED 7.1 COST OF THE WORK The term Cost of the Work shall mean costs necessarily incurred by the Contractor in the proper performance of the Work. Such costs shall be at rates not higher than the standard paid at the place of the Project except with prior consent of the Owner. The Cost of the Work shall include only the items set forth in this Article 7. 7.2 LABOR COSTS 7.2.1 Wages of construction workers directly employed by, the Contractor to perform the construction of the Work at the site or, with the Owner's approval, at off-site workshops. 7.2.2 Wages or salaries of the Contractor's supervisory and administrative personnel when stationed at the site with the 0wner's approval. (If it is intended that the wages or salaries of certain personnel stationed at the Contractor's principal or other offices shall be included in the Cost of the Work, identify, in Article 14 the personnel to be included and whether for all or only part of their time, and the rates at which their time will be charged to the Work.) 7.2.3 Wages and salaries of the Contractor's supervisory or administrative personnel engaged, at factories, workshops or on the road, in expediting the production or transportation of materials or equipment required for the Work, but only for that portion of their time required for the Work. 7.2.4 Costs paid or incurred by the Contractor for taxes, insurance, contributions, assessments and benefits required by law or collective bargaining agreements and, for personnel not covered by such agreements, customary benefits such as sick leave, medical and health benefits, holidays, vacations and pensions, provided such costs are based on wages and salaries included in the Cost of the Work under Subparagraphs 7.2.1 through 7.2.3. 7.3 SUBCONTRACT COSTS 7.3.1 Payments made by the Contractor to Subcontractors in accordance with the requirements of the subcontracts. 7.4 COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETED CONSTRUCTION 7.4.1 Costs, including transportation and storage, of materials and equipment incorporated or to be incorporated in the completed construction. 7.4.2 Costs of materials described in the preceding Subparagraph 7.4.1 in excess of those actually installed to allow for reasonable waste and spoilage. Unused excess materials, if any, shall become the Owner's property at the completion of the Work or, at the Owner's option, shall be sold by the Contractor. Any amounts realized from such sales shall be credited to the Owner as a deduction from the Cost of the Work. 7.5 COSTS OF OTHER MATERIALS AND EQUIPMENT. TEMPORARY FACILITIES AND RELATED ITEMS 7.5.1 Costs including transportation and storage, installation, maintenance, dismantling and removal of materials, supplies, temporary facilities, machinery, equipment, and hand tools not customarily owned by construction workers, that are provided by the Contractor at the site and fully consumed in the performance of the Work; and cost (less salvage value) of such items if not fully consumed, whether sold to others or retained by the Contractor. Cost for items previously used by the Contractor shall mean fair market value. 7.5.2 Rental charges for temporary facilities, machinery, equipment, and hand tools not customarily owned by construction workers that are provided by the Contractor at the site, whether rented from the Contractor or others, and costs of transportation, installation, minor repairs and replacements, dismantling and removal thereof. Rates and quantities of equipment rented shall be subject to the Owner's prior approval. 7.5.3 Costs of removal of debris from the site. 7.5.4 Costs of document reproductions, facsimile transmissions and long- distance telephone calls, postage and parcel delivery charges, telephone service at the site and reasonable petty cash expenses of the site office. 7.5.5 That portion of the reasonable expenses of the Contractor's personnel incurred while traveling in discharge of duties connected with the Work. 7.5.6 Costs of materials and equipment suitably stored off the site at a mutually acceptable location, if approved in advance by the Owner. 7.6 MISCELLANEOUS COSTS 7.6.1 That portion of insurance and bond premiums that can be directly attributed to this Contract. 7.6.2 Sales, use or similar taxes imposed by a governmental authority that are related to the Work. 7.6.3 Fees and assessments for the building permit and for other permits, licenses and inspections for which the Contractor is required by the Contract Documents to pay. 7.6.4 Fees of laboratories for tests required by the Contract Documents, except those related to defective or nonconforming Work for which reimbursement is excluded by Subparagraph 13.5.3 of AIA Document A201-1997 or other provisions of the Contract Documents, and which do not fall within the scope of Subparagraph 7.7.3. 7.6.5 Royalties and license fees paid for the use of a particular design, process or product required by the Contract Documents; the cost of defending suits or claims for infringement of patent rights arising from such requirement of the Contract Documents; and payments made in accordance with legal judgments against the Contractor resulting from such suits or claims and payments of settlements made with the Owner's consent. However, such costs of legal defenses, judgments and settlements shall not be included in the calculation of the Contractor's Fee or subject to the Guaranteed Maximum Price. If such royalties, fees and costs are excluded by the last sentence of Subparagraph 3.17.1 of AIA Document A201-1997 or other provisions of the Contract Documents, then they shall not be included in the Cost of the Work. 7.6.6 Data processing costs related to the Work. 7.6.7 Deposits lost for causes other than the Contractor's negligence or failure to fulfill a specific responsibility to the Owner as set forth in the Contract Documents. 7.6.8 Legal, mediation and arbitration costs, including attorneys' fees, other than those arising from disputes between the 0wner and Contractor, reasonably incurred by the Contractor in the performance of the Work and with the Owner's prior written approval; which approval shall not be unreasonably withheld. 7.6.9 Expenses incurred in accordance with the Contractor's standard personnel policy for relocation and temporary living allowances of personnel required for the Work, if approved by the Owner. 7.7 OTHER COSTS AND EMERGENCIES 7.7.1 Other costs incurred in the performance of the Work if and to the extent approved in advance in writing by the Owner. 7.7.2 Costs due to emergencies incurred in taking action to prevent threatened damage, in jury or loss in case of an emergency affecting the safety of persons and property, as provided in Paragraph 10.6 of ALA Document A201-1997. 7.7.3 Costs of repairing or correcting damaged or nonconforming Work executed by the Contractor, Subcontractors or suppliers, provided that such damaged or nonconforming Work was not caused by negligence or failure to fulfill a specific responsibility of the Contractor and only to the extent that the cost of repair or correction is not recoverable by the Contractor from insurance, sureties, Subcontractors or suppliers. ARTICLE 8 COSTS NOT TO BE REIMBURSED 8.1 The Cost of the work shall not include: 8.1.1 Salaries and other compensation of the Contractor's personnel stationed at the Contractor's principal office or offices other than the site office, except as specifically provided in Subparagraphs 7.2.2 and 7.2.3 or as may be provided in Article 14. 8.1.2 Expenses of the Contractor's principal office and offices other than the site office. 8.1.3 Overhead and general expenses, except as may be expressly included in Article 7. 8.1.4 The Contractor's capital expenses, including interest on the Contractor's capital employed for the Work. 8.1.5 Rental costs of machinery and equipment, except as specifically provided in Subparagraph 7.5.2. 8.1.6 Except as provided in Subparagraph 7.7.3 of this Agreement, costs due to the negligence or failure to fulfill a specific responsibility of the Contractor, Subcontractors and suppliers or anyone directly or indirectly employed by any of them or for whose acts any of them may be liable. 8.1.7 Any cost not specifically and expressly described in Article 7. 8.1.8 Costs, other than costs included in Change Orders approved by the Owner, that would cause the Guaranteed Maximum Price to be exceeded. ARTICLE 9 DISCOUNTS, REBATES AND REFUNDS 9.l Cash discounts obtained on payments made by the Contractor shall accrue to the Opener if (1) before making the payment, the Contractor included them in an Application for Payment and received payment therefor from the Owner, or (2) the Owner has deposited funds with the Contractor with which to make payments; otherwise, cash discounts shall accrue to the Contractor. Trade discounts, rebates, refunds and amounts received from sales of surplus materials and equipment shall accrue to the Owner, and the Contractor shall make provisions so that then can be secured. 9.2 Amounts that accrue to the Owner in accordance with the provisions of Paragraph 9.1 shall be credited to the Owner as a deduction from the Cost of the Work. ARTICLE 10 SUBCONTRACTS AND OTHER AGREEMENTS 10.1 Those portions of the Work that the Contractor does not customarily perform with the Contractor's own personnel shall be performed under subcontracts or by other appropriate agreements with the Contractor. The Owner may designate specific persons or entities from whom the Contractor shall obtain bids. The Contractor shall obtain bids from Subcontractors and from suppliers of materials or equipment fabricated especially for the Work and shall deliver such bids to the Architect. The Owner shall then determine, with the advice of the Contractor and the Architect, which bids will be accepted. The Contractor shall not be required to contract with anyone to whom the Contractor has reasonable objection. 10.2 If a specific bidder among those whose bids are delivered by the Contractor to the Architect (1) is recommended to the Owner by the Contractor; (2) is qualified to perform that portion of the Work; and (3) has submitted a bid that conforms to the requirements of the Contract Documents without reservations or exceptions, but the Owner requires that another bid be accepted, then the Contractor may require that a Change Order be issued to adjust the Guaranteed Maximum Price by the difference between the bid of the person or entity recommended to the Owner by the Contractor and the amount of the subcontract or other agreement actually signed with the person or entity designated by the Owner. 10.3 Subcontracts or other agreements shall conform to the applicable payment provisions of this Agreement, and shall not be awarded on the basis of cost plus a fee without the prior consent of the Owner. ARTICLE 11 ACCOUNTING RECORDS The Contractor shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Contract, and the accounting and control systems shall be satisfactory to the Owner. The Owner and the Owner's accountants shall be afforded access to, and shall be permitted to audit and copy, the Contractor's records, books, correspondence, instructions, drawings, receipts, subcontracts, purchase orders, vouchers, memoranda and other data relating to this Contract, and the Contractor shall preserve these for a period of three years after final payment, or for such longer period as may be required by law. ARTICLE 12 PAYMENTS 12.1 PROGRESS PAYMENTS 12.1.1 Based upon Applications for Payment submitted to the Architect by the Contractor and Certificates for Payment issued by the Architect, the Owner shall make progress payments on account of the Contract Sum to the Contractor as provided below and elsewhere in the Contract Documents. 12.1.2 The period covered by each Application for Payment shall be one calendar month ending on the last day of the month, or as follows: 12.1.3 Provided that an Application for payment is received by the Architect not later than the LAST day of a month. The Owner* shall make payment to the Contractor not later than the TWENTY-FIRST day of the FOLLOWING month. If an Application for Payment is received by the Architect after the application date fixed above, payment shall be made by the Owner not later than THIRTY days after the Architect receives the Application for Payment. *UPON APPROVAL OF THEIR BANK 12.1.4 With each Application for Payment, the Contractor shall submit payrolls, petty cash accounts, receipted invoices or invoices with check vouchers attached, and any other evidence required by the Owner or Architect to demonstrate that cash disbursements already made by the Contractor on account of the Cost of the Work equal or exceed (1) progress payments already received by the Contractor; less (2 ) that portion of those payments attributable to the Contractor's Fee; plus (3) payrolls for the period covered by the present Application for Payment. 12.1.5 Each Application for Payment shall be based on the most recent schedule of values submitted by the Contractor in accordance with the Contract Documents. The schedule of values shall allocate the entire Guaranteed Maximum Price among the various portions of the Work, except that the Contractor's Fee shall be shown as a single separate item. The schedule of values shall be prepared in such form and supported be such data to substantiate its accuracy as the Architect may require. This schedule, unless objected to by the Architect, shall be used as a basis for reviewing the Contractor's Applications for Payment. 12.1.6 Applications for Payment shall show the percentage of completion of each portion of the Work as of the end of the period covered by the Application for Payment. The percentage of completion shall be the lesser of (1) the percentage of that portion of the Work which has actually been completed; or (2) the percentage obtained by dividing (a) the expense that has actually been incurred by the Contractor on account of that portion of the Work for which the Contractor has made or intends to make actual payment prior to the next Application for Payment by (b) the share of the Guaranteed Maximum Price allocated to that portion of the Work in the schedule of values. 12.1.7 Subject to other provisions of the Contract Documents, the amount of each progress payment shall be computed as follows: .1 take that portion of the Guaranteed Maximum Price properly allocable to completed work as determined by multiplying the percentage of completion of each portion of the Work by the share of the Guaranteed Maximum Price allocated to that portion of the Work in the schedule of values. Pending final determination of cost to the Owner of changes in the Work, amounts not in dispute shall be included as provided in Subparagraph 7.3.8 of AIA Document A201- 1997; .2 add that portion of the Guaranteed Maximum Price properly allocable to materials and equipment delivered and suitably, stored at the site for subsequent incorporation in the Work, or if approved in advamce by the Owner, suitably stored off the site at a location agreed upon in writing; .3 add the Contractor's Fee, less retainage of TEN - percent (10% ). The Contractor's Fee shall be computed upon the Cost of the Work described in the two preceding Clauses at the rate stated in Subparagraph 5.1.2 or, if the Contractor's Fee is stated as a fixed sum in that Subparagraph, shall be an amount that bears the same ratio to that fixed-sum fee as the Cost of the Work in the two preceding Clauses bears to a reasonable estimate of the probable Cost of the Work upon its completion; .4 subtract the aggregate of previous payments made by the Owner; .5 subtract the shortfall, if any, indicated by the Contractor in the documentation required by Paragraph 12.1.4 to substantiate prior Applications for Payment, or resulting from errors subsequently discovered by the Owner's accountants in such documentation; and .6 subtract amounts, if any, for which the Architect has withheld or nullified a Certificate for Payment as provided in Paragraph 9.5 of AIA Document A201-1997. 12.1.8 Except with the Owner's prior approval, payments to Subcontractors shall be subject to retainage of not less than FIVE percent ( 5 %). The Owner and the Contractor shall agree upon a mutually acceptable procedure for review and approval of payments and retention for Subcontractors. 12.1.9 In taking action on the Contractor's Applications for Payment, the Architect shall be entitled to rely on the accuracy and completeness of the information furnished by the Contractor and shall not be deemed to represent that the Architect has made a detailed examination, audit or arithmetic verification of the documentation submitted in accordance with Subparagraph 12.1.4 or other supporting data; that the Architect has made exhaustive or continuous on-site inspections or that the Architect has made examinations to ascertain how or for what purposes the Contractor has used amounts previously paid on account of the Contract. Such examinations, audits and verifications, if required by the Owner, will be performed by the Owner's accountants acting in the sole interest of the Owner. 12.2 FINAL PAYMENT 12.2.1 Final payment, constituting the entire unpaid balance of the Contract Sum, shall be made by the Owner to the Contractor when: .1 the Contractor has fully performed the Contract except for the Contractor's responsibility to correct Work as provided in Subparagraph 12.2.2 of AIA Document A201-1997, and to satisfy other requirements, if any, which extend beyond final payment; and .2 a final Certificate for Payment has been issued by the Architect. 12.2.2 The Owner's final payment to the Contractor shall be made no later than 30 days after the issuance of the Architect's final Certificate for Payment, or as follows: 12.2.3 The Owner's accountants will review and report in writing on the Contractor's final accounting within 30 days after delivery of the final accounting to the Architect by the Contractor. Based upon such Cost of the Work as the Owner's accountants report to be substantiated by the Contractor's final accounting, and provided the other conditions of Subparagraph 12.2.1 have been met, the Architect will, within seven days after receipt of the written report of the Owner's accountants, either issue to the Owner a final Certificate for Payment with a copy to the Contractor, or notify the Contractor and Owner in writing of the Architect's reasons for withholding a certificate as provided in Subparagraph 9.5.1 of the AIA Document A201-1997. The time periods stated in this Subparagraph 12.2.3 supersede those stated in Subparagraph 9.4.1 of the AIA Document A201-1997. 12.2.4 If the Owner's accountants report the Cost of the Work as substantiated by the Contractor's final accounting to be less than claimed by the Contractor, the Contractor shall be entitled to demand arbitration of the disputed amount without a further decision of the Architect. Such demand for arbitration shall be made by the Contractor within 30 days after the Contractor's receipt of a copy of the Architect's final Certificate for Payment; failure to demand arbitration within this 30-day period shall result in the substantiated amount reported by the Owner's accountants becoming binding on the Contractor. Pending a final resolution by arbitration, the Owner shall pay the Contractor the amount certified in the Architect's final Certificate for Payment. 12.2.5 If, subsequent to final payment and at the Owner's request, the Contractor incurs costs described in Article 7 and not excluded by Article 8 to correct defective or nonconforming Work, the Owner shall reimburse the Contractor such costs and the Contractor's Fee applicable thereto on the same basis as if such costs had been incurred prior to final payment, but not in excess of the Guaranteed Maximum Price. If the Contractor has participated in savings as provided in Paragraph 5.2, the amount of such savings shall be recalculated and appropriate credit given to the Owner in determining the net amount to be paid by the Owner to the Contractor. ARTICLE 13 TERMINATION OR SUSPENSION 13.1 The Contract may be terminated by the Contractor, or by the Owner for convenience, as provided in Article 14 of AIA Document A201-1997. However, the amount to be paid to the Contractor under Subparagraph 14.1.3 of A1A Document A201-1997 shall not exceed the amount the Contractor would be entitled to receive under Paragraph 13.2 below, except that the Contractor's Fee shall be calculated as if the Work had been fully completed by the Contractor, including a reasonable estimate of the Cost of the Work for Work not actually completed. 13.2 The Contract may be terminated by the Owner for cause as provided in Article 14 of AIA Document A201-1997. The amount, if any, to be paid to the Contractor under Subparagraph 14.2.4 of AIA Document A201-1997 shall not cause the Guaranteed Maximum Price to be exceeded, nor shall it exceed an amount calculated as follows: 13.2.1 Take the Cost of the Work incurred by the Contractor to the date of termination; 13.2.2 Add the Contractor's Fee computed upon the Cost of the Work to the date of termination at the rate stated in Subparagraph 5.1.2 or, if the Contractor's Fee is stated as a fixed sum in that Subparagraph, an amount that bears the same ratio to that fixed-sum Fee as the Cost of the Work at the time of termination bears to a reasonable estimate of the probable Cost of the Work upon its completion; and 13.2.3 Subtract the aggregate of previous payments made b\ the Owner. 13.3 The Owner shall also pay the Contractor fair compensation, either by purchase or rental at the election of the Owner, for any equipment owned by the Contractor that the Owner elects to retain and that is not otherwise included in the Cost of the Work under Subparagraph 13.2.1. To the extent that the Owner elects to take legal assignment of subcontracts and purchase orders (including rental agreements), the Contractor shall, as a condition of receiving the payments referred to in this Article 13, execute and deliver all such papers and take all such steps, including the legal assignment of such subcontracts and other contractual rights of the Contractor, as the Owner may require for the purpose of fully vesting in the Owner the rights and benefits of the Contractor under such subcontracts or purchase orders. 13.4 The Work may be suspended by the Owner as provided in Article 14 of AIA Document A201-1997; in such case, the Guaranteed Maximum Price and Contract Time shall be increased as provided in Subparagraph 14.3.2 of AIA Document A201-1997 except that the term "profit" shall be understood to mean the Contractor's Fee as described in Subparagraphs 5.1.2 and Paragraph 6.4 of this Agreement. ARTICLE 14 MISCELLANEOUS PROVISIONS 14.1 Where reference is made in this Agreement to a provision A1A Document A201-1997 or another Contract Document, the reference refers to that provision as amended or supplemented by other provisions of the Contract Documents. 14.2 Payments due and unpaid under the Contract shall bear interest from the date payment is due at the rate stated below, or in the absence thereof, at the legal rate prevailing from time to time at the place where the Project is located. (Insert rate of interest agreed upon, if any.) (Usury laws and requirements under the Federal Truth in Lending Act, similar state and local consumer credit laws and other regulations at the Owners and Contractor's principal places of business, the location of the Project and elsewhere may affect the validity of this provision. Legal advice should be obtained with respect to deletions or modifications, and also regarding requirements such as written disclosures or waivers.) 14.3 The Owner's representative is: MR. GARY SMITH (Name, address and other information) 968 ALBANY-SHAKER ROAD LATHAM, NY 12110 (518) 785-2247 14.4 The Contractor's representative is: MR. ROBERT ROMANO (Name, address and other information) 2217 CENTRAL AVENUE SCHENECTADY, NY 12304 (518) 370-0044 14.5 Neither the Owner's nor the Contractor's representative shall be changed without ten days' written notice to the other party. 14.6 Other provisions: A) THE CONTRACTOR WILL ENDEAVOR TO SECURE AT LEAST THREE (3) BIDS ON ALL MAJOR COMPONENTS OF WORK. DUE TO THE TIME CONSTRAINTS IMPOSED ON THIS PROJECT THIS MAY NOT ALWAYS BE POSSIBLE. HOWEVER, A MINIMUM OF TWO (2) BIDS WILL BE REQUIRED ON ALL MAJOR COMPONENTS OF WORK PRIOR TO THE EXECUTION OF ANY SUB-CONTRACTS FOR THIS PROJECT. B) MALONE & TATE BUILDERS, INC., WILL INDEMNIFY M.T.I. TO THE GREATEST EXTENT POSSIBLE FOR ANY ERRORS IN CONSTRUCTION. C) IF M.T.I. CHOOSES TO COMPLETELY DELETE A SPECIFIED SECTION OF PROPOSED WORK AS DESCRIBED IN THE 6/19/98 PRELIMINARY PROPOSED BUDGET, THEN M.T.I. WILL RECEIVE 100% OF THE SAVINGS FOR THAT ITEM AND NO SHARED SAVINGS WILL BE DISTRIBUTED. ARTICLE 15 ENUMERATION OF CONTRACT DOCUMENTS 15.1 The Contract Documents, except for Modifications issued after execution of this Agreement, are enumerated as follows: (SEE 15.1.4 AND 15.1.5) 15.1.1 The Agreement is this executed 1997 edition of the Standard Form of Agreement Between Owner and Contractor. AIA Document A201-1997. 15.1.2 The General Conditions are the 1997 edition of the General Conditions of the Contract for Construction, AIA Document A201-1997. 15.1.3 The Supplementary and other Conditions of the Contract are those contained in the Project Manual dated , and are as follows: Document Title Pages "NONE" 15.1.4 The Specifications are those contained in the Project Manual dated as in Subparagraph 15.1.3., and are as follows: (Either list the Specifications here or refer to an exhibit attached to this Agreement) Section Title Pages 1. GEOTECHNICAL REPORT JUNE 2, 1998 BY VERNON HOFFMAN P.E. 2. 03300S CAST-IN-PL&CE CONCRETE 1-19 3. 03320 CONCRETE SLAB ON GRADE 1-9 4. 03325 CONCRETE STAR ON METAL DECK 1-8 15.1.5 The Drawings are as follows, and are dated , unless a different date is shown below: (Either list the Drawings here or refer to an exhibit attached to this Agreement) Number Title Date 1 PERSPECTIVE/ELEVATION 5/19/98 A-1 FIRST FLOOR PLAN 6/05/98 A-2 SECOND FLOOR PLAN 5/29/98 S-1 FOUNDATION PLAN 6/19/98 S-2 SECOND FLOOR FRAMING PLAN 5/29/98 S-3 ROOF FRAMING PLAN 5/29/98 S-4 FOUNDATION DETAILS 6/16/98 15.1.6 The Addenda, if any, are as follows: Number Date Pages "NONE" Portions of Addenda relating to bidding requirements are not part of the Contract Documents unless the bidding requirements are also enumerated in this Article 15. 15.1.7 Other Documents, if any, forming part of the Contract Documents are as follows: (List here any additional documents, such as a list of alternates that are intended to form part of the Contract Documents. AIA Document A201-1997 provides that bidding requirements such as advertisement or invitation to bid, instructions to Bidders, sample forms and the Contractor's bid are not part of the Contract Documents unless enumerated in this Agreement. They should be listed here only if intended to be part of the Contract Documents.) 1) LIST OF EXCLUSIONS - 1 PAGE (SEE ENCLOSED) 2) PRELIMINARY PROPOSED BUDGET DATED JUNE 19, 1998 - 3 PAGES (SEE ENCLOSED) 3) A.E. ROSEN ELECTRICAL CO., INC., PROPOSAL DATED JUNE 16, 1998 - 3 PAGES (SEE ENCLOSED) 4) ROLAND.J - DOWN PROPOSAL DATED JUNE 15, 1998 - 2 PAGES (SEE ENCLOSED) 5) GENERAL CONDITIONS DATED MAY 29, 1998 - 1 PAGE (SEE ENCLOSED) MTI BUILDING ONE - CONSTRUCTION Exclusions 1. SECURITY AND ALARM SYSTEMS 2. PHONE SYSTEMS 3. DATA/COMPUTER SYSTEMS 4. HVAC AND ELECTRICAL REQUIREMENTS FOR SPECIAL EQUIPMENT 5. TAXES 6. PERFORMANCE 7. A & E FEES 8. PLANNING AND ZONING FEES 9. FURNISHINGS 10. POWER USAGE CHARGES 11. MITIGATION FEES 12. SIGNAGE 13. REMOVAL OF HAZARDOUS MATERIAL OR UNDERGROUND OBSTRUCTIONS 14. BUILDER RISK INSURANCE MTI BUILDING 1 PRELIMINARY PROPOSED BUDGET DESCRIPTION BUDGET 6/19/98 32005sf DIVISION 1-G.C. 1 General Conditions 109,910 See Breakdown 2 Temp. Enclosure 6,750 9000sf @ $ .75/sf 3 Building Permits 12,775 DIVISION 1 Totals 129,435 DIVISION 2 SITEWORK 1 Earthwork/Site Utilities 54,200 Keller Construction Co. 2 Site Grading 7,400 800 cy fill @ $9.25/cy 3 Site Concrete 21,927 4 Planter Allowance 26,580 5 Landscaping Allowance 20,000 DIVISION 2 Totals 130,107 DIVISION 3 - CONCRETE 1 Concrete Work 95,400 424cy @ 225/cy avg. 2 Slabs 67,500 30,000sf @ $ 2.25/sf 3 Insulation 2,400 3,000 sf @ $ .80/sf 4 Base Plate Grouting 1,485 27 Base Plates@ $55 each 5 Stair Nosings 4,400 44 Nosings @ 100/Nosing DIVISION 3 Totals 171,185 DIVISION 4 - MASONRY 1 Masonry 51,328 2 Brick (Exterior) 102,878 62,350 brick @$1.65/brick ($11.96/sf) 3 Brick (Interior Lobby) 11,963 7,250 brick @ $1.65/brick ($11.96/sf) DIVISION 4 Totals 166,169 DIVISION 5 - STEEL 1 Structural/Misc. Steel 210,000 30,000 sf @ $ 7/sf 2 Main Entry Stair Structure 0 DIVISION 5 Totals 210,000 DIVISION 6 - CARPENTRY 1 Finish Carpentry Allowance 10,000 2 Millwork 9,735 21lf of Cabinets@$215/lf/ 435lf Sills @ $12/lf 3 Chair Rail 3,868 455lf @ $ 8.50/lf 4 Reception Desk Allowance 18,500 5 Install Doors & Hardware 9,700 97 doors @ $100/door DIVISION 6 Totals 51,803 DIVISION 7 PROTECTION 1 Waterproofing 2,979 1120sf @ 2.66/sf 2 Joint Sealers 27,450 DMD Interiors 3 Roof Blocking 6,200 Weatherguard Roofing 4 Single Ply Roofing 57,099 Weatherguard Roofing 5 Skylights(3 @ 5'-0" x 5'-0") 5,280 Weatherguard Roofing DIVISION 7 Totals 99,008 DIVISION 8 DOORS Doors, Frames & Hardware 1 Special Doors(3'-0" x 8'-0") 14,670 15 Doors @ $978/door 2 Standard Doors(3'-0" x 7'-0") 40,053 79 Doors @ $507/door 3 Bi-fold Doors 873 3 Doors @ $291/door 4 Insulated O.H. Coiling Doors 8,700 Albany O.H. Door Co.(4 Doors @ $2,175/door) 5 Access Doors 1,470 10 Doors @ $147/door 6 Alum. Systems 208,165 Precision Glass 7 Aluminum Window Upgrade 0 C S Architectural 8 Aluminum Panels 0 C S Architectural 9 Ornamental Trellis Allowance 47,500 Precision Glass 10 Interior Aluminum Framing 25,866 1080sf @ $23.95/sf DIVISION 8 Totals 347,297 DIVISION 9 FINISHES 1 Exterior Metal Framing 71,525 C S Architectural 2 Gypsum Sheathing in Lobby 3,696 DMD Interiors 3 Exterior Gypsum Sheathing 9,460 DMD Interiors 4 Gypsum Systems 165,525 DMD Interiors 5 Acoustical Ceilings 69,710 DMD Interiors 6 Shaftwall 2,710 DMD Interiors 7 Ceramic Tile 27,678 Dibarnardo Tile(Bathroom Walls Full Height) 8 Granite Flooring (Lobby) 22,800 1140sf @ 20/sf 9 Granite Stair Treads 5,000 20 Treads @ $250/tread 10 V.C.T. & Sheet Vinyl 11,956 9,565sf @ $1.25/sf 11 Carpet (Executive Suite) 12,000 400sy @ $30/sy 12 Carpet 22,225 1,270sy @ $17.50/sy 13 Entrance Mat 1,770 Main Vestibule 14 Rubber Base 5,350 5,350lf @ $1.00/lf 15 Vinyl Wallcovering 6,450 Quality Painters 16 Painting 32,250 Quality Painters DIVISION 9 Totals 470,105 DIVISION 10 SPECIALTIES 1 Toilet & Bath Accessories F & I 4,300 Colonie Construction Products 2 Toilet Partitions 1,425 Colonie Construction Products 3 Louvers and Vents 1,000 Colonie Construction Products DIVISION 10 Totals 6,725 DIVISION 14 ELEVATOR 1 Hydraulic Elevator (2 Stop) 35,000 Baystate Elevator 2 Dock Leveler Shelter 4,495 MHP Corp. DIVISION 14 Totals 39,495 DIVISION 15 & 16 Mech/Elec 1 Sprinkler 37,900 Albany Fire Protection 2 HVAC 202,859 Roland J Downs 3 Plumbing 53,108 Dehmel Plumbing 4 Electrical 146,700 Mend Electric DIVISION 15 & 16 Totals 440,567 CONSTRUCTION COSTS 2,261,896 S.F. Increase 1260sf @ $73.57/sf 92,698 OVERHEAD & PROFIT FIXED FEE 308,527 TOTAL PRELIMINARY BUDGET 2,663,121 A. E. ROSEN ELECTRICAL CO., INC. 883 BROADWAY ALBANY, NEW YORK 12207 (518) 463-4600 (518) 463-4628 FAX June 16, 1998 PROPOSAL Malone & Tate Builders 2217 Central Avenue Schenectady, New York 12304 Project: MTI Latham, New York Supply and install electrical on a Design-Built basis. SERVICE: A. 800 amp feeder from existing transformer. B. Metering device. C. (2) 800 amp, 3 phase, 4 wire, 277/480 volt panelboards. D. (1) 225 amp, 3 phase, 4 wire, 277/480 volt panelboard with 150 amp head breaker amp head breaker. E. (1) 600 amp, 3 phase, 4 wire, 120/208 volt panelboard. F. (2) 400 amp, 3 phase, 4 wire, 120/208 volt panelboard. G. (6) 225 amp, 3 phase, 4 wire, 120/208 volt panelboard. H. (1) 150 KVA transformer, 480-120/208 volt. I. (1) 225 KVA transformer, 480-120/208 volt. See 1 line diagram of electrical service: A. (2) 3 1/2" conduit with (4) 500 MCM and 1 #2 eq. ground. B. (1) 2" conduit with (4) #1/0 and 1 #6 eq. ground. C. (1) 2 1/2" conduit with (3) 350 MCM and 1 #4 eq. ground. D. (2) 3" conduit with (4) 350 MCM and 1 #4 eq. ground. E. (1) 2" conduit with (4) 4/0 and 1 #4 eq. ground. F. (1) 2" conduit with (3) 3/0 and 1 #4 eq. ground. DEVICES: (317) 15 amp outlets ( 19) 20 amp outlets ( 6) 15 amp GFIC outlets ( 7) 15 amp GFIC weatherproof outlets ( 1) 120V outlet floorbox ( 1) telephone outlet floorbox ( 83) single pole wall switches ( 26) 3 way wall switches ( 1) 4 way wall switch ( 10) 6 ft. plug strips ( 13) J boxes with final connection to furniture modules (105) 20 amp circuits for the above LIGHTING: ( 2) 2x2 lay-in prismatic lens, 2 lamp fixture ( 38) 2x4 lay-in prismatic lens, 4 lamp fixture ( 39) 2x2 lay-in parabolic lens, 2 lamp fixture (186) 2x4 lay-in parabolic lens, 4 lamp fixture ( 14) 36" wall mount, 2 lamp fluorescent fixture ( 3) 4 ft., 2 lamp recessed open style fixture ( 90) 8 ft., 4 lamp recessed open style fixture ( 7) 100 watt incandescent hi-hat ( 19) 26 watt twin fluorescent hi-hat ( 3) 26 watt twin fluorescent wall wash ( 5) 100 watt metal halide hi-hat ( 1) 200 watt incandescent explosion proof fixture ( 4) 100 watt metal halide wall packs ( 14) exit lights LED with battery backup ( 19) exit and emergency LED with battery backup ( 30) emergency lights HVAC & VENTILATION: ( 1) oven hood fan ( 2) roof exhaust fans ( 1) Sanyo single phase, 208 volt, 20 amp ( 1) gas unit heater ( 20) heating control transformers ( 1) 20 ton HVAC ( 3) 12.5 ton HVAC ( 1) 10 ton HVAC ( 1) 7.5 ton HVAC EQUIPMENT: ( 2) 50 amp single phase, 208 volt outlets, (oven) ( 2) 20 amp, 120 volt outlet, (oven) ( 10) units as per shop equipment sheet FIRE ALARM: ( 1) FCI-7200 Analog Panel with Initial Capacity of 197 Points ( 1) Battery Compliment ( 36) Addressable Smoke Detector and Base ( 7) Addressable Smoke Detector with Relays ( 4) Addressable Heat Detectors ( 9) Addressable Pull Stations ( 18) Horn/Strobe ( 1) Auxiliary Power Supply with Batteries ( 3) Strobe Only ( 3) Addressable Modules ( 1) Remote LCD Display ( 3) Addressable Heat with Relay ( 1) Explosion Proof Heat Detector ( 6) Duct Detector (address with tubes & remote) ( 3) Fan Shutdown Relays Price for the above project: $169,220.00 Deduct for Fire Alarm System: $ 22,520.00 Price Includes: Filing and inspection fees Shop Drawings Use Tax Price Excludes: Utility Co. Charges Incoming telephone conduit Telephone/computer cabling Site lighting Excavation and backfill _______________________________________________ June 15, 1998 MTI Albany Shaker Road Latham, NY HVAC SCOPE OF WORK FOR BUILDING #1 GENERAL: Gas heat-electric cooling rooftop units with zoning capabilities. ROOFTOP EQUIPMENT: 6 Carrier rooftop units on factory curbs with fresh air economizers and high efficiency 2" filters, total cooling capacity of 75-tons. ZONING: 36 zones consisting of Carrier VVT system. Each zone has individual controls with setback and override capabilities. COMPUTER ROOM: Individual split system with air conditioning, dehumidifying and reheat capabilities, NORTEC steam generator with flushing cycle. High efficiency filters. Air conditioner will be equipped with low ambient controls for winter operation. 2 SMOKER'S LOUNGES: Electronic air cleaners and air-to-air heat exchangers. SHIPPING AND RECEIVING: Supplemental Reznor gas fired unit heater. REGISTERS AND GRILLES: All supply diffusers will be 24 x 24 lay-in, louvered, white finished, 4-way blow ceiling diffusers. Return grilles will be 24 x 24 lay-in, white perforated return grilles. Two-story are will receive a linear diffuser along glass area in ceiling. BATHROOMS: Complete exhaust system to roof mounted ventilator. OVEN ROOM: Exhaust hood & roof ventilator. CLEAN ROOM: Supply register installed in ceiling. ENTIRE INSTALLATION INCLUDES: - - 1-year parts and labor warranty - - Manufacturer's 5-years parts only on compressors - - Manufacturer's 20-years parts only on heat exchanger Installation does not including: Line voltage wiring, roof supports or flashing, gas piping, taxes, fire dampers. TOTAL INVESTMENT - $202,859.00 The above installation includes 30 main returns or returns in every room if the ceiling is used as a plenum. For a ducted return system ADD - $23,829.00 Gordon S. Dinger Commercial Sales Representative GSD:gk NOTE: 1. LINE VOLTAGE WIRING IS SUPPLIED BY THE ELECTRICIAN 2. ROOF SUPPORTS SUPPLIED BY THE STEEL FABRICATOR 3. ROOF FLASHINGS SUPPLIED BY THE ROOFING CONTRACTOR 4. GAS PIPING WILL BE SUPPLIED BY THE HVAC CONTRACTOR General Conditions Quantity Unit Unit Cost Total Bond 2,400,000 $ See Breakdown $ 0 Insurance 2,400,000 $ $ 0.006 $ 14,400 Superintendent 20 Weeks $1,200 $ 24,000 Misc. Labor 20 Weeks $ 400 $ 8,000 Misc. Materials 1 LS $2,500 $ 2,500 Trailers 4 Months $ 450 $ 1,800 Phone 4 Months $ 300 $ 1,200 Toilet 4 Unit Months $ 140 $ 560 Temporary Heat 0 Months $5,000 $ 0 Dumpster 35 Dumpsters $ 600 $ 21,000 Site Fencing 700 LF $ 5.50 $ 3,850 Testing 1 LS $9,000 $ 9,200 Survey 1 LS $8,000 $ 8,400 Trailor Equipment 1 LS $2,000 $ 2,000 Drinking Water 1 LS $1,000 $ 1,000 Final Cleaning 30,000 SF $ 0.25 $ 7,500 Permit 0 LS $1,500 $ 0 Blueprints 20 Sets $ 50 $ 1,000 Progress Photo's 1 LS $1,000 $ 1,000 Temp. Railings & Barricades 1 LS $2,000 $ 2,000 Fire Extinguishers 1 LS $ 500 $ 500 TOTAL $109,910 ARTICLE 16 INSURANCE AND BONDS (List required limits of liability for insurance and bonds. AIA Document A201-1997 gives other specific requirements for insurance and bonds.) 1. PERFORMANCE BOND (IF REQUIRED WILL BE SUPPLIED AT M.T.B. ACTUAL COST WITH NO MARK-UP) 2. LABOR AND MATERIAL BOND (IF REQUIRED WILL BE SUPPLIED AT M.T.B. ACTUAL COST WITH NO MARK-UP 3. GENERAL LIABILITY INSURANCE LIMITS: A. $1,000,000.00 EACH OCCURRENCE B. $2,000,000.00 GENERAL AND COMPLETED OPERATIONS AND PRODUCTS AGGREGATES C. ADDITIONAL INSURED/PRIMARY (THE PRIMARY WORDING INDICATES THAT THE ADDITIONAL INSURED PROVISION IS THE PRIMARY POLICY TO RESPOND) D. DESIGNATED PROJECT LIMITS & AGGREGATE ENDORSEMENT (IDENTIFIES THE LIMITS PROVIDED ARE FOR THIS SPECIFIC CONTRACT ONLY) 4. AUTOMOBILE A. $1,000,000.00 COMBINED SINGLE LIMIT 5. WORKER'S COMPENSATION AND EMPLOYER'S LIABILITY A. $100,000.00 EACH ACCIDENT B. $500,000.00 DISEASE POLICY LIMIT C. $100,000.00 EACH EMPLOYEE 6. EXCESS LIABILITY UMBRELLA A. $2,000,000.00 EACH OCCURRENCE B. $2,000,000.00 AGGREGATE This Agreement is entered into as of the day and year first written above and is executed in at least three original copies, of which one is to be delivered to the Contractor, one to the Architect for use in the administration of the Contract, and the remainder to the Owner. /s/ Cynthia A. Scheuer Vice President and Chief Financial Officer - ------------------------------------------------------------------------------- OWNER (Signature) CONTRACT (Signature) MALONE & TATE BUILDERS, INC. /s/ Michael J. Malone MICHAEL J. MALONE, C.E.O. - ------------------------------------------------------------------------------- (Printed name and title) (Printed name and title) Caution: You should sign an original AIA document or a licensed reproduction. Originals contain the AIA logo printed in red; licensed reproductions are those produced in accordance with the Instructions to this document. EX-10 3 EXHIBIT 10.29 MECHANICAL TECHNOLOGY INCORPORATED/PLUG POWER, L.L.C. LEASE FOR BUILDING 3 THIS AGREEMENT made this 10th day of June, 1998, between Mechanical Technology, Incorporated, a New York corporation, as Landlord, and Plug Power, L.L.C., a Delaware Limited Liability company, as Tenant. WITNESSETH: The Landlord hereby leases to Tenant and Tenant hereby hires from Landlord the building (the "Building") known as Building 3, 968 Albany-Shaker Road, Latham, New York (the "Premises") and more fully described on the floor plan designated as Exhibit "A" attached hereto, for the term of ten (10) years, to commence on the first day of October, 1998, and to end on the 30th day of September, 2008, unless terminated earlier, as provided below ("Term") with an option for Tenant to extend the lease for an additional five (5) years, to commence on the first day of October, 2008, and to end on the 30th day of September, 2013 ("Option Term"). 1. RENT. Tenant shall pay the annual rent equal to $4.00 per square foot ("Rent") commencing October 1, 1998 for each year during the Term. Such annual rent shall be made in equal monthly installments of $17,690 in advance on or before the first day of each and every month during the Term. Tenant shall have the option to extend the lease for an additional five years at the end of the Term. Tenant shall pay an annual rent equal to seventy percent (70%) of the Then-Current Fair Market Rent (as defined below) for similar properties commencing October 1, 2008 for each year during the Option Term. Such annual rent shall be made in equal monthly installments in advance on or before the first day of each and every month during the Option Term. The Then-Current Fair Market Rent shall be determined by a qualified real estate professional ("Agent") agreed to by Landlord and Tenant. If Landlord and Tenant cannot agree upon an Agent, then each of Landlord and Tenant shall select an Agent, each Agent shall prepare a report justifying their proposed rental rate, and the Then-Current Fair Market Rent shall become the average of the two fair market rental rates proposed. All rent shall be on a triple net basis such that this Lease shall yield to Landlord the full amount of the installments thereof throughout the Term and the Option Term, if applicable, without deduction. Tenant shall be responsible for payment of (1) the total number of square feet in Building 3, divided by the total number of square feet of all MTI buildings ("Occupancy Ratio") multiplied by the total property, school and other taxes payable with respect to the buildings (less any taxes or assessment only related to the value of the land owned by Landlord) provided, however, that if Building 3 is reassessed (either individually or as a part of the property), such that the total tax burden increases then, Landlord, at its option, may have the building appraised, at its expense, and then Tenant shall be responsible for payment of the appraisal value of Building 3 divided by the appraisal value of all MTI buildings multiplied by the then-current assessed value of the buildings; (2) the property, school and other taxes allocated to four acres of land; (3) the Occupancy Ratio multiplied by the sewer and water charges due or payable in connection with the land and buildings on the MTI property; (4) all costs for liability insurance, fire insurance, heat, air-conditioning, gas, electricity, oil, maintenance and interior repair, janitorial services, garbage collection, fire extinguishers, sprinkler system, building security and window cleaning of the Premises (excluding structural defects to the roof and exterior structure of the Building). All rent shall be paid to Landlord without notice, demand, counterclaim, setoff, deduction or defense, and nothing shall suspend, defer, diminish, abate or reduce any rent, except as otherwise specifically provided in this Lease. 2. LANDLORD DUTIES. Landlord at its sole cost and expense shall be responsible for the following: cleaning and maintenance of common areas, snow removal, cleaning and maintenance of roadway, walks, and parking areas and the care and maintenance of landscaping and grounds. As used in this Lease, the term "common areas" means driveways, walkways, trash facilities, and all other areas and facilities that are provided and designated from time to time by Landlord for the general nonexclusive use and convenience of Tenant with Landlord and other Tenants and their respective employees, invitees, licensees, or other visitors. Landlord grants Tenant, its employees, invitees, licensees and other visitors a nonexclusive license for the Term to use the common areas in common with others entitled to use the common areas, subject to the terms and conditions of this Lease. Without advance written notice to Tenant, and without any liability to Tenant in any respect, provided Landlord will take no action permitted under this paragraph in such a manner as to materially impair or adversely affect Tenant's substantial benefit and enjoyment of the Premises, Landlord will have the right to: 1) Temporarily close any of the common areas for maintenance, alteration or improvement purposes; and 2) Change the size, use, shape or nature of any such common areas, so long as it does not materially interfere or adversely impact Tenant's business. Landlord, at its sole cost and expense, shall be responsible for the care and maintenance of 1) the exterior of the building and 2) the roof, plumbing and electricity on the non-laboratory side of the fire wall. Provided, however, that Landlord shall not be responsible for any maintenance that is due to the negligence or neglect of Tenant. 3. OBLIGATION OF LANDLORD REGARDING IMPROVEMENTS. Landlord shall have the following obligations with respect to alterations and improvements of the Premises that are necessary to the operation of Tenant's business. (a) Landlord shall provide to Tenant the amount of $2,000,000 as a "Tenant Improvement Allowance" which shall be drawn down by Landlord from an IDA facility, as needed to reimburse Tenant for alterations and improvements to the Premises in a manner as more fully set forth below. (b) Landlord acknowledges that Tenant has heretofore made certain alterations and improvements to the Premises that are necessary to the operation of Tenant's business, and that Tenant has paid the amount of approximately $800,000 to make such alterations and improvements and Tenant shall continue to make alterations and improvements to the property. Landlord agrees to reimburse or advance such funds to Tenant out of the Tenant Improvements Allowance for such alterations and improvements on or before the first to occur of i) funding of Landlord's IDA financing ("Lender") for the project; ii) cash flow need by Tenant as determined by Tenant in its sole discretion, after July 15, 1998, or iii) August 15, 1998. (c) Landlord further agrees to reimburse or advance such funds to Tenant out of the Tenant Improvements Allowance for additional alterations and improvements to the Premises that are necessary to the operation of Tenant's business and acceptable to Tenant on or before March 31, 1999 or such later date as may be approved by Tenant. Tenant shall be solely responsible for determining what alterations and improvements it deems necessary to the operation of its business and shall be solely responsible for arranging such alterations and improvements, including the hiring of appropriate contractors to perform the work. With respect to of any aspect of such work, Tenant shall have its architect or builder prepare a requisition in the form required by the AIA form ("Requisition") and such other documentation as required by Landlord's Lender to Landlord, and Landlord shall reimburse Tenant upon funding to Landlord by its Lender for the work. All reimbursements shall be made within 10 business days of approval of the Requisition by Lender. The parties acknowledge and agree that Landlord's total financial responsibility for all alterations and improvements relating specifically to Tenant's business shall not exceed the amount of $2,000,000, which amount includes the reimbursement amount of $800,000 or such larger amount provided for in subsection (a) above. (d) Tenant shall be entitled to offset any unreimbursed amount against the rent due under this Lease if any invoiced amount is funded by Lender and not paid by Landlord to Tenant within 10 business days of such invoice. Offset is not Tenant's exclusive remedy. (e) Landlord shall assist Tenant in obtain any permits, authorizations, certificates of occupancy, or related documentation necessary for the completion and/or final approval of any alterations and improvements made by Tenant to the Premises as provided herein. 4. OCCUPANCY. Tenant shall use and occupy the Premises for no purpose other than the conduct of Tenant's business. 5. PARKING. Landlord and Tenant shall cooperate to assure that sufficient parking is available to Tenant, at Landlord's cost. Tenant will be entitled to use the parking spaces around the Building in common with other Tenants during the Term subject to the rules and regulations set forth herein, and any amendments or additions to them. The Tenant uses the parking spaces at its own risk, and the Landlord will not be liable for loss or damage to any vehicle or any contents of such vehicle or accessories to any such vehicle, or any property left in any of the parking areas. 6. REQUIREMENTS OF LAW. Tenant shall promptly execute and comply with all statutes, ordinances, rules, orders, regulations and requirements of the Federal, State and City Government and of any and all their departments and bureaus applicable to Tenant's particular use of the Premises, for the correction, prevention, and abatement of nuisances or other grievances, in, upon, or connected with the Premises during the Term and the Option Term. 7. TENANT ALTERATIONS AND IMPROVEMENTS: TRADE FIXTURES; TENANT REPAIRS: In addition to those alterations and improvements provided for in Section 3 above, Tenant shall have the right to adapt from time to time the Premises to its use and, in that connection, shall have the right to install manufacturing facilities, laboratory facilities, test centers, showcases, counters, electrical, telephone and other communications connections and other trade fixtures necessary to accommodate Tenant's business operation. Tenant shall obtain prior consent from Landlord for any major Tenant alterations and improvements and any alterations, improvements or work of any kind with respect to the roof, which consent shall not be unreasonably withheld. All Tenant alterations and improvements must be done in good, workmanlike and orderly fashion, and shall be of such nature that as not to affect the safety or structural soundness of the Building. Tenant shall not make any alterations or improvements to the roof that are inconsistent with or void Landlord's warranty for the roof. Landlord's warranty shall permit the use of multiple contractors. Any and all alterations, improvements, additions and partitions, including the installation of trade fixtures, which may be made by Landlord or by Tenant upon the Premises, shall be the sole and absolute property of Landlord and shall remain upon and be surrendered with the Premises, as a part thereof, at the termination of this Lease (whether by default or otherwise), without disturbance, molestation or injury, with the exception that any such alterations, improvements, additions, partitions, or trade fixtures which relate specifically to Tenant's business may be removed from the Premises by Tenant upon termination of the Lease, provided that Tenant can accomplish such removal without damage to the Premises. Subject to all other terms of this Lease, Tenant shall take good care of the Premises and fixtures, make good any injury or breakage done by Tenant or Tenant's agents, employees or visitors, and shall quit and surrender the Premises, at the end of the Term, or the Option Term (as applicable) in as good condition as the reasonable use thereof will permit. 8. ASSIGNMENT. Tenant, successors, heirs, executors or administrators shall not assign this agreement, or underlet or underlease the Premises, or any part thereof, without Landlord's prior consent in writing. Notwithstanding any such permitted sublease, Tenant shall remain fully and primarily liable for the payment of all rent and additional rent, and the performance of all the terms, covenants and conditions contained in this Lease Agreement, jointly and severally with such assignee or sublessee. Tenant shall not occupy, or permit or suffer the Premises to be occupied for any business or purpose deemed disreputable or extra-hazardous, under the penalty of damages and forfeiture, and in the event of a breach thereof, the Term herein shall immediately cease and determine at the option of Landlord as if it were the expiration of the original Term. 9. SIGNS. No sign, advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by Tenant on any part of the Premises or Building without the prior written approval and consent of Landlord, which shall not be unreasonably withheld. Should Landlord deem it necessary to remove the same in order to paint, alter, or remodel any part of the Building, subject to Tenant's prior approval, Landlord may remove and replace same at Landlord's expense. Landlord shall supply the exterior monument sign for the Building to which Tenant may affix its name. All costs associated with affixing Tenant's name to the exterior monument sign or Tenant's entry door shall be borne by Tenant. Tenant must have its name placed on its entry door within one month of its occupancy date. Any temporary signage may be displayed only on prior written approval by Landlord, which approval shall not be unreasonably withheld. All signage must conform to applicable Town of Colonie Sign Law. 10. DEFAULT OF TENANT. Each of the following shall be an "Event of Default" under this Lease: (a) any failure of Tenant to pay any rent when due and such failure continues uncured for fifteen (15) days after Landlord gives Tenant notice of such failure; (b) any failure of Tenant to perform any other of the terms, conditions or covenants of this Lease to be performed by Tenant and such failure continues uncured for thirty (30) days after written notice from Landlord specifying such failure, except that in cases where Tenant cannot reasonably cure within said thirty (30) day period, only if Tenant fails to commence to cure within such thirty (30) day period and thereafter to diligently continue to cure the same until fully corrected; and (c) if both (i) Tenant's estate created by this Lease shall be taken upon execution, attachment or other process of law, and any such execution, attachment or other process be not vacated or set aside within thirty (30) days thereafter, or if Tenant shall be adjudged as bankrupt, or if Tenant shall file a voluntary petition in bankruptcy, or if an involuntary petition in bankruptcy be filed and not vacated or set aside within ninety (90) days thereafter, and (ii) there otherwise occurs an Event of Default as specified in subparagraphs "(a)" and "(b)" above. 11. REMEDIES. Upon an event of Default, Landlord may immediately, or at any time thereafter, re-enter the Premises and remove all persons and all or any property therefrom, either by summary dispossess proceedings, or by any suitable action or proceeding at law, and repossess and enjoy the Premises together with all additions, alterations and improvements. In any such case, Landlord may either relet the Premises or any part or parts thereof for Landlord's own account, or may at Landlord's option, relet the Premises or any part or parts thereof, as the agent of Tenant, and receive the Rents therefor, applying the same first to the payment of such expenses as Landlord may have incurred, and then to the fulfillment of the covenants of Tenant herein, and the balance, if any, at the expiration of the Term, shall be paid to Tenant. In the event that the Term shall terminate by summary proceedings or otherwise, and if Landlord shall not relet the Premises for Landlord's own account, then, whether or not the Premises be relet, Tenant shall remain liable for, and Tenant hereby agrees to pay to Landlord, until the time when this Lease would have expired but for such termination or expiration, the equivalent of the amount of all of the Rent and "additional Rent" reserved herein, less the avails of reletting, if any, and the same shall be due and payable by Tenant to Landlord on the several Rent days above specified; that is, upon each of such Rent days Tenant shall pay to Landlord the amount of deficiency then existing. Tenant hereby expressly waives any and all right of redemption in case Tenant shall be dispossessed by judgment or warrant of any court or judge, and Tenant waives and will waive all right to trial by jury in any summary proceedings hereafter instituted by Landlord against Tenant in respect to the Premises or any action to recover Rent or damages hereunder. 12. ACCESS TO PREMISES. Tenant agrees that Landlord and Landlord's agents and other representatives shall have the right to enter into and upon the Premises, or any part thereof, at all reasonable hours and upon twenty-four (24) hours reasonable notice (except in the case of emergencies) for the purpose of examining the same, or for making such repairs, alterations, additions, or improvements therein as may be necessary or deemed advisable by Landlord. 13. ADDITIONAL BUILDINGS. Landlord acknowledges that Tenant may desire to construct a manufacturing facility on the land upon which the Premises is located. Landlord agrees to enter into good faith negotiations with Tenant with respect to Landlord's construction of such building or Landlord's land for use and occupancy by Tenant as a manufacturing facility, or, alternatively, a long-term ground lease permitting Tenant's construction of such a facility, provided, that Landlord's obligation to enter such negotiation shall be contingent upon Tenant providing evidence of the availability of financing such a project. 14. TENANT'S RIGHT OF FIRST REFUSAL. If (i) Landlord receives a bona fide offer for the lease of all or any portion of the first floor of Building 2 not then leased by Tenant or Foster-Miller Technologies, Inc. (the "Space"), or (ii) Landlord desires to offer the space for lease, Landlord shall give Tenant the right of first refusal to lease the space, at the rent and on the terms and conditions of the offer, in accordance with the following: (a) The right of first refusal will be extended by Landlord giving Tenant written notice of the particular offer received or made by Landlord, together with a detailed summary of the offer, requiring Tenant to sign an appropriate amendment to this Lease subjecting the space to this Lease at the rent and for the term set forth in the offer, within 30 days after the mailing of such notice. (b) In a case arising under clause (i) above of this paragraph, if Tenant does not sign an amendment to this Lease for the space within the 30-day period, Landlord will have the right to accept the offer received free of the rights of Tenant under this paragraph, except as stated in subparagraph (d) of this paragraph. (c) In a case arising under clause (ii) above of this paragraph, if Tenant fails to accept or rejects the offer within the 30-day period, Landlord will be entitled for a period of 180 days to lease the space on the same terms stated in the notice to Tenant. If Landlord does lease the space during the 180-day period, the right granted Tenant under this paragraph will automatically terminate, except as stated in subparagraph (d) of this paragraph. (d) If Landlord does not lease the space pursuant to subparagraph (b) above strictly in accordance with the offer presented to, and rejected by, Tenant, or does not lease the space during the 180-day period referred to in subparagraph (c) above, or if upon leasing the space to a third party, such lease terminates or the space becomes vacant while this Lease is still in force, Landlord may not subsequently lease the space without Landlord's compliance with this paragraph. Tenant's right of first refusal to lease the space will continue throughout the term of this Lease with respect to any space available for lease from time to time. (e) Any space leased by Tenant will be added to the Premises as of the date provided in the offer, and the Rent will be adjusted to reflect the rent provided to be paid in accordance with the offer. Tenant shall execute amendments to this Lease to reflect additions to the Premises resulting from the exercise of this right of first refusal to lease. Tenant's lease of any space pursuant to this right of first refusal will be on all the terms and conditions set forth in this Lease except as to rent, which will be that set forth in the offer. Except as stated in this Section, Landlord is under no obligation to offer for lease all or any portion of the space to Tenant or any other person. 15. INABILITY TO PERFORM. Except as set forth herein, this Lease and the obligation of Tenant to pay Rent hereunder and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in no way be affected, impaired or excused because Landlord is unable to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make, or is delayed in making any repairs, additions, alterations or decorations or is unable to supply or is delayed in supplying any equipment or fixtures or Landlord is prevented or delayed from so doing, by reason of governmental preemption in connection with any National Emergency declared by the President of the United States or in connection with any rule, order or regulation of any department or subdivision thereof of any governmental agency or by reason of the condition of supply and demand which have been or are affected by war or other emergency. 16. DESTRUCTION. In the case of damage, by fire or other action of the elements, to the Building, without the fault of Tenant or of Tenant's agents or employees, if the damage is so extensive as to amount practically to the total destruction of the Premises or of the Building, or if Landlord shall within a reasonable time decide not to rebuild, this Lease shall cease and come to an end, and the Rent shall be apportioned to the time of the damage. In all other cases where the Premises are damaged by fire without the fault of Tenant or of Tenant's agents or employees, Landlord promptly shall repair the damage after notice of damage, and if the damage has rendered the Premises untenantable, in whole or in part, there shall be an apportionment of the Rent until the damage has been repaired. Consideration shall be given to delays caused by strikes, adjustment of insurance and other causes beyond Landlord's control. Landlord is not required to repair or replace any equipment, fixtures, furnishings or decorations, unless originally installed by Landlord. If the fire or other casualty is caused by an act or negligence of Tenant, Tenant's employees or invitees, then all repairs will be made at Tenant's expense and Tenant must pay the full rent with no adjustment. The cost of the repairs will be added rent. Landlord has the right to demolish or rebuild the Building if there is substantial damage by fire or other casualty. Landlord or Tenant may cancel this Lease within 30 days after the substantial fire or casualty by giving Landlord/Tenant notice of Landlord's/Tenant's intention to demolish or rebuild. The Lease will end 30 days after Landlord's/Tenant's cancellation notice to Landlord/Tenant. Tenant must deliver the Premises to Landlord on or before the cancellation date in the notice and pay all Rent due to the date of the fire or casualty. If the Lease is canceled, Landlord is not required to repair the Premises or Building. The cancellation does not release the Tenant or Landlord of liability in connection with the fire or casualty. This section is intended to replace the terms of New York Real Property Law Section 227. 17. CONDEMNATION. Should the land whereon all or part of the Building stands be condemned for public use, then in that event, upon the taking of the same for such public use, this Lease shall become null and void, and the Term shall cease and come to an end upon the date when the same shall be taken and the Rent and all other charges shall be apportioned as of said date. Tenant shall have no claim against Landlord for the value of any unexpired Term of this Lease. No part of any award, however, shall belong to Tenant, except as permitted by law. 18. LIABILITY. Landlord is exempt from any and all liability for any damage or injury to person or property caused by or resulting from steam, electricity, gas, water, rain, ice or snow, or any leak or flow from or into any part of said Building or from any damage or injury resulting or arising from any other cause or happening whatsoever unless said damage or injury be caused by or be due to the negligence of Landlord. 19. INDEMNIFICATION. Except for any injury or damage to persons or property on the Premises that is caused by or results from the negligence or deliberate act of Landlord, its employees or agents, and subject to the provisions of paragraph 19, Tenant will not hold Landlord, its employees or agents liable for, and Tenant will indemnify and hold harmless Landlord, its employees and agents from and against any and all demands, claims, causes of action, fines, penalties, damages (including consequential damages), liabilities, judgments and expenses (including without limitation reasonable attorneys' fees) incurred in connection with or arising from: 1) the use or occupancy or manner of use or occupancy of the Premises by Tenant or any person claiming under Tenant; 2) any activity, work or thing done or permitted by Tenant in or about the Premises, the Building or the Project; 3) any breach by Tenant or its employees, agents, contractors or invitees of this Lease; and 4) any injury or damage to the person, property or business of Tenant, its employees, agents, contractors or invitees entering upon the Premises under the express or implied invitation of Tenant. If any action or proceeding is brought against Landlord, its employees or agents by reason of any such claim for which Tenant has indemnified Landlord, Tenant, upon written notice from Landlord, will defend the same at Tenant's expense, with counsel reasonably satisfactory to Landlord. 20. TENANT'S INSURANCE. At all times during the Term, Tenant will carry and maintain, at Tenant's expense, the following insurance, in the amounts specified below or such other amounts as Landlord may from time to time reasonably request, with insurance companies and on forms satisfactory to Landlord: 1) Bodily injury and property damage liability insurance, with a combined single occurrence limit of not less than $3,000,000 or the appraised value of the Premises, whichever is greater. All such insurance will be equivalent to coverage offered by a commercial general liability form, including without limitation personal injury and contractual liability coverage for the performance by Tenant of the indemnity agreements set forth in this Lease; 2) Workers' compensation insurance satisfying Tenant's obligations and liabilities under the workers' compensation laws of the State of New York, including employer's liability insurance in the limits required by the laws of the State of New York; and 3) If Tenant operates owned, hired or non-owned vehicles on the project, comprehensive automobile liability at a limit of liability not less than $500,000 combined bodily injury and property damage. Certificate of insurance, naming the Landlord as additional insured, will be delivered to the Landlord prior to the Tenant's occupancy of the Premises. All commercial general liability or comparable policies maintained by Tenant will name Landlord as additional insured. All commercial general liability and property policies maintained by Tenant will be written as primary policies, not contributing with and supplemental to the coverage that the Landlord may carry. 21. LIABILITY INSURANCE. Tenant shall carry public liability insurance in the amount of One Million Dollars ($ 1,000,000) per person -- Two Million Dollars ($2,000,000) per occurrence covering the Premises and shall name Landlord as an additional insured therein and shall furnish to Landlord a certificate of said insurance. 22. WAIVER OF CLAIMS AND SUBROGATION. Landlord shall be exempt from, and the Tenant agrees to accept the risk of loss by fire or other casualty covered by insurance as to the contents, leasehold improvements or fixtures of the Premises ensuing by reason of fire or other casualty covered by insurance. Tenant shall be exempt from, and Landlord agrees to accept the risk of loss by fire or other casualty covered by insurance as to the building, equipment, fixtures and appurtenances of the Premises during the Term or any renewal thereof. Landlord and Tenant shall each cause each insurance policy carried by each respectively, insuring the Building or the Premises, its contents, Leasehold improvements or fixtures, to be written in a manner so as to provide that the insurance companies waive all right or recovery by way of subrogation against the other party in connection with any loss or damage covered by any such policies. 23. NO WAIVER. The failure of Landlord or Tenant to insist upon a strict performance of any of the Terms, conditions and covenants herein, shall not be deemed a waiver of any rights or remedies that Landlord or Tenant may have, and shall not be deemed a waiver of any subsequent breach or default in the Terms, conditions and covenants herein contained. This instrument may not be changed, modified or discharged orally. 24. SUBORDINATION. This instrument shall not be a lien against the Premises in respect to any bank, insurance company or other lending institution mortgages that are now on or that hereafter may be placed against the Premises, and that the recording of such mortgage or mortgages shall have preference and precedence and be superior and prior in lien of this Lease, irrespective of the date of recording and Tenant agrees to execute any such instrument without cost, that maybe reasonably necessary or desirable to further effect the subordination of this Lease to any such mortgage or mortgages, provided any such mortgagee shall first execute and deliver to Tenant a nondisturbance agreement in a form reasonably satisfactory to Tenant, by which the mortgagee agrees not to cut off this Lease in foreclosure. Tenant's refusal to execute such instrument shall entitle Landlord, or Landlord's assigns and legal representatives, to cancel this Lease without incurring any expense or damage and the Term hereby granted is expressly limited accordingly. 25. ESTOPPEL CERTIFICATE. Tenant shall from time to time, upon Landlord's reasonable request, deliver a written instrument ("Estoppel Certificate") to Landlord or to any other person or firm specified by Landlord, duly executed and acknowledged, certifying to the best of its knowledge, information or belief that this Lease is unmodified and in full force and effect or, if there has been any modification, that the Lease is in full force and effect as modified, and stating any and all such modifications; specifying the dates to which Rent and additional rent provided for herein have been paid, and whether there exists any default in the performance of any covenant agreement, term, provision or condition contained in this Lease. 26. QUIET ENJOYMENT. Tenant, upon payment of the rent, additional rent and other required charges, and the performance by Tenant under this Lease, shall have the peaceful and quiet enjoyment of the Premises without hindrance or disturbance by Landlord or those claiming by, through or under Landlord, or any other person or entity whatsoever. 27. LATE CHARGES. A late charge of five (5%) percent shall be assessed to any rental payment not made within fifteen (15) days of the due date and shall be considered additional rent. 28. NOTICES. Any notice given Tenant shall be in writing and sent by registered or certified mail to Tenant at: Plug Power, L.L.C. 968 Albany-Shaker Road Latham, New York 12110 Tenant may change the address at which notices shall be given at any time by like notice to Landlord. Any notices to be given Landlord shall be given in writing and sent by certified mail to Landlord at: Mechanical Technology, Incorporated 968 Albany-Shaker Road Latham, New York 12110 Landlord may change the address at which notices shall be given any time by like notice to Tenant. 29. ATTACHMENTS TO LEASE. The covenants and agreements in the Lease, addendums, exhibits and attachments shall be binding upon the parties hereto and upon their respective successors, heirs, executors and administrators. 30. MISCELLANEOUS. Notwithstanding anything to the contrary contained in this Lease, any monies due Landlord under this Lease in addition to the rent shall be deemed to be additional rent. Any default on the payment of such additional rent shall give Landlord the same rights and remedies as are provided herein with respect to a default in the payment of rent. Tenant's obligations to pay rent and additional rent shall survive the expiration of the Term, or the Optional Term, or earlier termination of this Lease. The failure of Landlord or Tenant to insist upon a strict performance of any term, covenant or condition herein shall not be deemed a waiver of any rights or remedies that Landlord or Tenant may have or a waiver of any subsequent breach or default. If any provision of this Lease shall be unenforceable or invalid, such unenforceability or invalidity shall not affect any other provision of this Lease. IN WITNESS WHEREOF, Landlord and Tenant respectively have signed and sealed this Lease as of the day and year first above written. MECHANICAL TECHNOLOGY, INCORPORATED By: /s/ Cynthia Scheuer Its: Vice President and Chief Financial Officer PLUG POWER, L.L.C. By: /s/ Gary Mittleman Name: Gary Mittleman Title: President & CEO STATE OF NEW YORK ) ) ss.: COUNTY OF ALBANY ) On this 9th day of June in the year 1998 before me, the undersigned, a Notary Public in and for said State, personally appeared Cynthia A. Scheuer, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name 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. /s/ M. Sheila Lamb ______________________________ NOTARY PUBLIC STATE OF NEW YORK ) ) ss.: COUNTY OF ALBANY ) On this 10th day of June in the year 1998 before me, the undersigned, a Notary Public in and for said State, personally appeared Gary Mittleman, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name 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. /s/ Ana Maria Galeano ______________________________ NOTARY PUBLIC EX-27 4 FINANCIAL DATA SCHEDULE - 3RD QTR
5 1,000 9-MOS SEP-30-1998 JUN-26-1998 307 0 5,737 149 3,918 11,215 9,022 7,411 13,108 4,698 0 0 0 5,985 1,901 13,108 16,016 16,016 9,003 14,202 62 0 18 1,734 0 1,734 (2,285) 0 0 (551) (.09) (.09)
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