SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A2
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
- -------- Exchange Act of 1934 [Fee Required]
For the fiscal year ended September 30, 1994
or
- -------- Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the Transition 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)
Registrant's telephone number, including area code: (518) 785-2211
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act:
$1.00 Par Value Common Stock
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained , to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934
during the preceding 12 months (or for suchshorter 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
----- -----
The aggregate market value of the registrant's Common Stock held by
nonaffiliates of the registrant on December 30, 1994 (based on the last sale
price of $.38 per share for such stock reported by NASDAQ for that date) was
approximately $1,340,000.
As of December 30, 1994, the registrant had 3,568,868 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Document Where Incorporated into Form 10-K Report
Proxy Statement for Annual Part III
Meeting of Shareholders to be held on
May 9, 1995
<PAGE>
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the caption "Executive Officers" in Item 1 of
this Form 10-K Report, and the information set forth in the section entitled
"Election of Directors", and under the captions "Security Ownership of
Certain Beneficial Owners" and "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" in the section entitled "Additional
Information", in the definitive Proxy Statement dated April 10, 1995 filed by
the registrant, pursuant to Regulation 14A, for its Annual Meeting of
Shareholders to be held on May 9, 1995 (the "1995 Proxy Statement", a copy of
which is included as Exhibit 99.1 hereto), is incorporated herein by
reference.
ITEM 11: EXECUTIVE COMPENSATION
The information set forth under the captions "Executive Compensation",
"Compensation Committee Report", "Compensation Committee Interlocks and
Insider Participation", "Employment Agreements", and "Directors
Compensation", in the section entitled "Additional Information" in the
definitive Proxy Statement dated April 10, 1995 filed by the registrant,
pursuant to Regulation 14A, for its Annual Meeting of Shareholders to be held
on May 9, 1995 (the "1995 Proxy Statement", a copy of which is included as
Exhibit 99.1 hereto), is incorporated herein by reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information which will be set forth under the captions "Security
Ownership of Certain Beneficial Owners" and "Security Ownership of
Management" in the section entitled "Additional Information" in the
definitive Proxy Statement dated April 10, 1995 filed by the registrant,
pursuant to Regulation 14A, for its Annual Meeting of Shareholders to be held
on May 9, 1995 (the "1995 Proxy Statement", a copy of which is included as
Exhibit 99.1 hereto), is incorporated herein by reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information which will be set forth under the caption "Certain
Information Regarding Nominees" in the section entitled "Election of
Directors", and under the captions "Directors Compensation", "Security
Ownership of Certain Beneficial Owners", and "Certain Relationships and
Related Transactions", in the section entitled "Additional Information", in
the definitive Proxy Statement dated April 10, 1995 to be filed by the
registrant, pursuant to Regulation 14A, for its Annual Meeting of
Shareholders to be held on May 9, 1995 (the "1995 Proxy Statement", a copy of
which is included as Exhibit 99.1 hereto), is incorporated herein by
reference.
14
<PAGE>
dated July 22, 1992, executed by subsidiaries of the
registrant in favor of CLFB with respect to the
registrant's obligations to CLFB(3)
4.87 Consent and waiver, dated December 21, 1993, from
CLFB to the registrant with respect to the Amended and
Restated Loan Agreement(5)
4.88 Amendment One to Amended and Restated Loan
Agreement, dated as of August 1, 1994, between the
registrant and Chase Manhattan Bank, N.A., which
amends the Amended and Restated Loan Agreement to
defer the payment due on June 30, 1994(6)
4.89 Amendment Two to Amended and Restated Loan
Agreement with waiver, dated as of November 22, 1994,
between the registrant and Chase Manhattan Bank, N.A.,
which amends the Amended and Restated Loan Agreement
and waives any existing defaults
10.1 Mechanical Technology Incorporated Restricted Stock
Incentive Plan - filed as Exhibit 28.1 to the
registrant's Form S-8 Registration Statement No. 33-
26326 and incorporated herein by reference
10.3 MTI Employee 1982 Stock Option Plan(1)
10.4 Agreement, dated December 21, 1993, between UTE,
First Commercial Credit Corporation ("FCCC") and the
registrant, relating to an advance against certain
receivables.(5)
10.6 Agreement, dated June 2, 1993, between the
registrant and Mr. Harry Apkarian, Director, regarding
his employment.(5)
10.7 Agreement, dated February 22, 1994, between the
registrant and Mr. R. Wayne Diesel, President and
Chief Executive Officer, regarding his employment.
10.8 Agreement, dated December 14, 1994, between the
First Commercial Credit Corporation ("FCCC") and the
registrant, modifying the Agreement dated December 21,
1993 relating to an advance against certain
receivables.
22.1 Subsidiaries of the registrant
24.1 Consent of Coopers & Lybrand
99.2 Definitive Proxy Statement, dated April 10, 1995,
filed by the registrant, pursuant to Regulation 14A,
for its Annual Meeting of Shareholders scheduled to be
held on May 9, 1995.
- ----------------------------------------
Certain exhibits were previously filed (as indicated below) and
are incorporated herein by reference. All other exhibits for
which no other filing information is given are filed herewith:
(1) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-K Report, as amended, for its fiscal year
ended September 30, 1989.
20
<PAGE>
(2) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-Q Report for its fiscal quarter ended
December 29, 1990.
(3) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-Q Report for its fiscal quarter ended June
27, 1992.
(4) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-K Report for its fiscal year ended Sep-
tember 30, 1991.
(5) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-K Report for its fiscal year ended Sep-
tember 30, 1993.
(6) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-Q Report for its fiscal quarter ended July
2, 1994.
(7) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 8-K Report dated November 23, 1994.
(b) No reports on Form 8-K were filed by the registrant during the
last quarter of the period covered by this Form 10-K Report.
21
Exhibit 99.2
MECHANICAL TECHNOLOGY INCORPORATED
968 ALBANY-SHAKER ROAD
LATHAM, NEW YORK 12110
PROXY STATEMENT
April 10, 1995
This Proxy Statement, first being mailed to shareholders on approximately
April 10, 1995, is furnished in connection with the solicitation by the Board
of Directors of proxies to be voted at the Annual Meeting of Shareholders to
be held on May 9, 1995, and at any adjournment thereof.
A proxy is enclosed for use at the meeting. The proxy may be revoked at any
time before it is exercised. If a shareholder specifies in this proxy how it
is to be voted on a matter as to which a choice is indicated, the proxy will
be voted in accordance with such specification. If no specification is made,
the proxy will be voted for the election of the nominees listed therein and
for approval of the auditors.
OUTSTANDING SHARES AND VOTING RIGHTS
All holders of Common Stock of record at the close of business on April 7,
1995, are entitled to notice of and to vote at the Annual Meeting of
Shareholders to be held on May 9, 1995, at Rensselaer Polytechnic Institute,
110 8th Street, Troy, New York 12180. At the close of business on April 7,
1995, the Company had outstanding 3,568,868 shares of Common Stock, which is
the only class of securities entitled to vote at the meeting. Each share of
Common Stock entitles the holder thereof to one vote on the matters to be
voted upon by such shareholders.
ELECTION OF DIRECTORS
At the Annual Meeting of Shareholders, six Directors are to be elected, each
to hold office until the next Annual Meeting of Shareholders and until a
successor shall be elected and shall qualify. The Board of Directors voted
to reduce the number of Directors to six following the resignation of Bruce
S. Goldwater from the Board in July 1994.
Management's nominees for Director, together with certain information
concerning them, are on the following pages. All directors were elected at
the Annual Meeting of Shareholders held in 1994. In the event that any of
such nominees shall become unavailable for any reason, it is intended that
proxies will be voted for substitute nominees designated by management.
The number of shares voted "for" the election of each person nominated for
election as a Director, as well as the number of shares as to which authority
is withheld from the proxies to vote for any individual nominee or for all of
management's nominees as a group and the number of shares held for customers
by brokers (or their nominees) and represented at the meeting but not voted
with respect to the election of Directors, will be tabulated by inspectors of
election appointed in accordance with the applicable provisions of the New
York Business Corporation Law. The nominees for election as Director
receiving a plurality of the votes which are cast at the meeting with respect
to the election of Directors will be elected. Thus, except that such action
may reduce the number of shares which are voted "for" the election of any
person nominated for election as a Director and may reduce the number of
votes which are cast at the meeting with respect to the election of
Directors, neither a shareholder's withholding of authority from the proxies
to vote his shares for any individual nominee or for all of management's
nominees as a group, nor the failure of brokers to vote, with respect to the
election of Directors, shares held by them (or their nominees) for customers,
will otherwise affect the vote required for the election of Directors; the
six nominees for election receiving the greatest number of votes will be
elected, without regard to the actual number of shares voted (or not voted)
for each or the total number of votes cast for all nominees.
<TABLE>
<CAPTION>
YEAR FIRST
PRINCIPAL OCCUPATION BECAME A
NAME AGE OR EMPLOYMENT DIRECTOR
- ------------------------ --- ------------------------------ ---------
<S> <C> <C> <C>
Harry Apkarian(1),(2) 72 Director and Former Chairman 1961
of the Board of Directors of
the Company
R. Wayne Diesel(2) 49 President and Chief Executive 1994
Officer of the Company
Stanley I. Landgraf(1) 69 Retired 1993
Albert W. Lawrence(2),(3) 66 Chairman of the Board of 1992
Directors and Chief Executive
Officer of Lawrence Group, Inc.
E. Dennis O'Connor(3) 55 Director-New Products and 1993
Technology, Masco Corporation
Lawrence A. Shore(1),(2),(3) 66 Chairman of the Board of 1992
Directors of the Company
</TABLE>
- --------------
(1)Member of the Compensation Committee of the Board of Directors
(2)Member of the Executive Committee of the Board of Directors
(3)Member of the Audit Committee of the Board of Directors
CERTAIN INFORMATION REGARDING NOMINEES
Mr. Apkarian, one of the founders of the Company, served as President from
the time it was organized in 1961 until 1984 and as Chief Executive Officer
from 1961 to 1991. He was Chairman of the Board of the Company from 1984
until August 1993; he continues as an employee of the Company.
Mr. Diesel was elected President and Chief Executive Officer of the Company
in February 1994. Prior to February 1994, he had been Chief Financial
Officer since 1991 and President since March 1993 of Lawrence Management
Group, and Treasurer of the Lawrence Insurance Group, Inc. from March 1993 to
December 1994. He remains a Director of Lawrence Insurance Group, Inc. and
its principal subsidiaries (see "Security Ownership of Certain Beneficial
Owners" in the section entitled "Additional Information", below). Lawrence
Group, Inc. owns and operates subsidiaries engaged principally in insurance
agency and brokerage operations and in insuring and reinsuring primarily
property, casualty, accident and health risks. From 1988 until his
association with Lawrence Group, Inc., Mr. Diesel was Administrative Vice
President responsible for corporate administration, human resources and
strategic planning at KeyCorp. Previously, he held various executive
positions with the State of New York.
Following his election as President and Chief Executive Officer of the
Company in February 1994, Mr. Diesel was also elected Chairman of the Board
and Chief Executive Officer of the Corporation's United Telecontrol
Electronics, Inc. subsidiary ("UTE"). A few weeks later, UTE's request for
a $7.8 million equitable adjustment ("REA Claim") of the contract price on
its Advanced Medium Range Air-To-Air Missile ("AMRAAM") launcher contract was
denied; as a result, UTE was forced to seek protection from creditors under
Chapter 11 of the Federal Bankruptcy Code in April 1994. While Mr. Diesel
was Chairman of the Board and Chief Executive Officer of UTE at the time of
the UTE bankruptcy filing, the bankruptcy had its genesis in events that
occurred prior to Mr. Diesel's relationship with the Company or with UTE.
Mr. Landgraf is a Trustee of Rensselaer Polytechnic Institute ("RPI") in
Troy, New York; a Director of Albany International, Inc. in Albany, New York;
a Director of Elenel Industries, Inc. in Milford Massachusetts; and a member
of the Trustees of the Victory Funds (mutual funds). Mr. Landgraf was
Chairman and Chief Executive Officer of Mohasco Corporation, in Amsterdam,
New York, a manufacturer of textile products, before retiring in 1985. Mr.
Landgraf also served as Acting President of RPI from March 1987 to March
1988.
Mr. Lawrence is the founder of Lawrence Group, Inc. and its subsidiaries. He
is Chairman of the Board and Chief Executive Officer of Lawrence Group, Inc.
and has held various offices in the subsidiaries of Lawrence Group, Inc.
since prior to 1986; he is Chairman of the Board of Lawrence Insurance Group,
Inc. (see "Security Ownership of Certain Beneficial Owners" in the section
entitled "Additional Information", below).
Mr. O'Connor has been the Director of New Products and Technology for Masco
Corporation, Taylor, Michigan, a diversified manufacturer of building and
home improvement, home furnishings, and other specialty products for the home
and family, since April 1984. He is a member of the Board of Directors of
the Metropolitan Center for High Technology and the Inventor's Council of
Michigan, both Michigan non-profit corporations. The Company understands
that Mr. O'Connor has been selected by Masco Corporation as its designee on
the Company's Board of Directors pursuant to agreements with the Lawrence
Insurance Group, Inc. subsidiaries that own 49% of the Company's outstanding
stock (see "Security Ownership of Certain Beneficial Owners" in the section
entitled "Additional Information", below). Under those agreements (entered
into in connection with the transaction by which Masco sold such shares to
the Lawrence Insurance Group, Inc. subsidiaries), the Lawrence Insurance
Group, Inc. subsidiaries agreed to vote their shares to elect a designee of
Masco to the Company's Board of Directors so long as Masco remains liable
under a guarantee it had executed in connection with the Company's
obligations under a line of credit.
Mr. Shore was President and Chief Executive Officer of the Company from July
1992 until he resigned from those positions in February 1993. He was
President of Lawrence Management Group from July 1990 and Treasurer of
Lawrence Insurance Group, Inc. from July 1991, until he resigned from those
positions in March, 1993. He retired from Lawrence Management Group in May
1993. He remains a Director of Lawrence Insurance Group, Inc. and its
principal subsidiaries (see "Security Ownership of Certain Beneficial Owners"
in the section entitled "Additional Information", below). Prior to July
1990, he served as President and Chief Executive Officer of Lawrence
Insurance Group, Inc. and President of United Community Insurance Company (a
subsidiary of Lawrence Insurance Group, Inc.), offices which he had held
since September 1986 and September 1985, respectively.
Management recommends that you vote FOR election of the six nominees listed
above as Directors of the Company.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has the responsibility for establishing broad
corporate policies and for the overall performance of the Company, although
it is not involved in day-to-day operating details. Members of the Board are
kept informed of the Company's business by various reports sent to them, as
well as by operating and financial reports made at Board and Committee
meetings by the officers of the Company. The Board of Directors held seven
meetings during fiscal 1994. All Directors attended at least 75% of all
meetings of the Board, and of all Board committees on which they serve, held
during fiscal 1994.
In addition to an Executive Committee and other committees it establishes
from time to time, the Company's Board of Directors has established Audit and
Compensation Committees, but not a nominating committee. The Audit Committee
reviews with the independent auditors the plan and results of the auditing
engagement including the auditors' assessment of internal accounting
controls; it also recommends the appointment of the public auditors to the
Board of Directors. One Audit Committee meeting was held during fiscal
1994. The Compensation Committee determines compensation for officers and
employee Directors, the number of shares to be awarded under the Restricted
Stock Incentive Plan, and the aggregate amount to be disbursed as incentive
compensation to Director and non-Director officer employees. Two
Compensation Committee meetings were held during fiscal 1994.
APPROVAL OF AUDITORS
At the Annual Meeting, the shareholders will consider a proposal to ratify
the reappointment of Coopers & Lybrand as the auditors of the Company,
subject to the receipt of a satisfactory letter of engagement from such firm.
Coopers & Lybrand have been the Company's auditors since 1978. While
approval of auditors by the shareholders is not required by the By-Laws of
the Company, management believes that it is an appropriate matter for
shareholder consideration. Should the Board's appointment of the auditors
not be ratified, other auditors will be appointed by the Board of Directors.
Representatives of Coopers & Lybrand are expected to be present at the Annual
Meeting with the opportunity to make a statement if they desire to do so and
to be available to respond to appropriate questions.
The Board of Directors recommends that shareholders vote FOR the ratification
of the appointment of Coopers & Lybrand as independent public accountants for
1995.
ADDITIONAL INFORMATION
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the compensation
for services to the Company and its subsidiaries, during the Company's fiscal
year ended September 30, 1994, of each person who served as Chief Executive
Officer during such year, and of all other persons who served as executive
officers of the Company during such year whose total annual compensation
exceeded $100,000.
<TABLE>
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------
<CAPTION>
Annual Long-Term
Compensation Compen-
sation
- ------------------------------------------------------------------------------
Name & Principal Fiscal Salary Bonus Other Restricted All
Position Year Annual Stock Other
Compen- Awards(1) Compen-
sation sation
($)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
R. Wayne Diesel 1994 $129,744 - - $ 12,500 -
President & CEO 1993 - - - - -
1992 - - - - -
- -------------------------------------------------------------------------------
Mark L. Hyland(2) 1994 $ 89,110 - $ 2,140(3) - $ 6,929(4)
Former President & 1993 $179,808 - $68,545(3) - $ 9,720(4)
CEO of the Company 1992 $150,000 $30,000 $24,314(3) - $ 9,720(4)
- -------------------------------------------------------------------------------
Stephen Sullivan 1994 $118,927 - - - $ 4,838(5)
President, Ling 1993 $121,828 - - - $ 5,384(5)
Electronics, Inc. 1992 $110,799 - - - $ 4,432(5)
- -------------------------------------------------------------------------------
Ronald Y. Miyahara 1994 $104,789 $27,500 - - $ 2,096(6)
General Manager, 1993 $ 95,923 $30,000 - - $ 1,919(6)
ProQuip, Inc. 1992 $ 90,000 $44,435 - - $ 1,523(6)
- -------------------------------------------------------------------------------
Douglas McCauley 1994 $105,000 - - $ 6,250 $ 4,200(5)
Vice-President, 1993 - - - - -
Technology Group 1992 - - - - -
- -------------------------------------------------------------------------------
</TABLE>
(1) This column shows the market value on the date of grant of shares of the
Company's Common Stock awarded under the Company's Restricted Stock Incentive
Plan. The Plan expired on December 31, 1994. The restrictions on these
shares lapse on a scheduled basis of 10% per year for 10 years or upon death.
The recipient has voting and dividend rights to the shares from the date of
award. The aggregate holdings/value of shares of Restricted Stock, as to
which the restrictions have not lapsed, on September 30, 1994, (based on a
price on that date of 1/16 per share) by the individuals listed in this
table, including the awards shown in this column, are: Mr. Diesel, 10,000
shares/$625.00; Mr. Sullivan, 1,500 shares/$93.75; and Mr. McCauley, 5,000
shares/$312.50.
(2) Mr. Hyland was elected President and CEO of the Company during February
1993 and was replaced in this position by the Company's Board of Directors in
February 1994. He was also President of United Telecontrol Electronics, Inc.
("UTE"), a wholly owned subsidiary of the Company, from 1989 until February
1994.
(3) Includes payments to Mr. Hyland, as moving and relocation expense
allowances, of $64,300, 1993; and $24,314, 1992. Also includes an automobile
allowance of $4,245, 1993 and $2,318, 1994.
(4) Includes Company contributions to the UTE Profit Sharing Plan.
(5) Represents Company matching contributions of $1.00 for each $1.00
contributed by the named individual to the 401(k) Savings Plan up to a
maximum of 4% of base pay.
(6) Represents Company matching contributions to the ProQuip 401(k) Savings
Plan.
The Company has outstanding stock options which were granted under a 1982
Stock Option Plan. The Plan expired in 1992 and no further options may be
granted. At September 30, 1994, the following options were outstanding:
<TABLE>
-------------------------------------------------
<CAPTION>
NAME # OF SHARES UNDERLYING
UNEXERCISED OPTIONS AT
SEPTEMBER 30, 1994
-------------------------------------------------
<S> <C>
R. Wayne Diesel -
-------------------------------------------------
Mark L. Hyland -
-------------------------------------------------
Harry Apkarian -
-------------------------------------------------
Stephen Sullivan 5,000
-------------------------------------------------
Ronald Y. Miyahara -
-------------------------------------------------
Douglas McCauley -
-------------------------------------------------
</TABLE>
All options listed in the above table are presently exercisable, but the
exercise price of the options exceeded the market price of the Company's
Common Stock on September 30, 1994. No options were exercised by any of the
named persons during the fiscal year ended September 30, 1994.
COMPENSATION COMMITTEE REPORT
COMPENSATION POLICIES FOR OFFICERS. The Company's compensation program for
executive officers and employee directors currently consists of annual
payments of salary and bonuses and issuance of stock grants. Salary and
bonus payments are primarily designed to reward performance. Stock grants
are mainly designed to provide incentives for superior long term performance.
Any shares not vested are forfeited if the officer leaves the Company before
retirement. All stock grants are made under the shareholder-approved
Restricted Stock Incentive Plan, adopted in 1988 and amended in 1991. The
Plan expired on December 31, 1994.
For the year 1994, the Committee used the following criteria in making
compensation decisions for executive officers:
# Company and individual affiliate financial performance.
# Transition from the Company's heavy reliance on defense-
oriented contracts to commercial products.
# Implementation of programs to improve working capital and
cash flow, and to diversify the Company's product
offerings and strengthen its technology resources.
# Resolution of major outstanding issues with the U.S.
Government.
CHIEF EXECUTIVE OFFICER COMPENSATION. Mr. Diesel was appointed President and
CEO effective February 4, 1994. He was recruited from outside the Company
and had previously held senior management positions in the insurance and
banking industries, and with New York State. The compensation package
offered Mr. Diesel took into consideration his experience and expertise; the
size, diversity and needs of the business; and compensation levels at
companies of comparable size and industry. The compensation package
included: (1) a base salary, effective February 4, 1994; (2) the potential
for cash incentive bonuses based on performance; and (3) stock grants under
the Company's Restricted Stock Incentive Plan. For the period February 4,
1994 through September 30, 1994 no cash incentive bonuses were paid. The
Committee did, however, issue a stock grant to Mr. Diesel effective April 29,
1994.
Compensation Committee
Stanley I. Landgraf, Chairman
Harry Apkarian
Lawrence A. Shore
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors ("Committee") approves
all of the policies under which compensation is paid or awarded to the
Company's officers and employee directors. The Committee consists of two
non-employee Directors (Mr. Landgraf and Mr. Shore) and one employee Director
(Mr. Apkarian). Mr. Shore and Mr. Apkarian are both former Chief Executive
Officers of the Company. Mr. Shore serves as the Chairman of the Board of
Directors and had served as the Company's Chief Executive Officer from July
1992 until February 1993. Mr. Apkarian was Chief Executive Officer of the
Company from 1961 until 1991 and was Chairman of the Board of Directors from
1984 until his resignation from this position in August 1993. Mr. Apkarian
does not vote on matters pertaining to his own compensation. During the
Company's last fiscal year, Mr. R. Wayne Diesel, President, Chief Executive
Officer and a Director of the Company, was a member of the Board of Directors
of Lawrence Insurance Group, Inc., and served on the Compensation Committee
of the Lawrence Insurance Group, Inc. Board; Mr. Albert W. Lawrence, Chairman
of the Board of Lawrence Insurance Group, Inc., is a Director of the Company.
See "Security Ownership of Certain Beneficial Owners" and "Certain
Relationships and Related Transactions", below, for information regarding the
relationship between the Company, Mr. Lawrence, and Lawrence Insurance Group,
Inc.
EMPLOYMENT AGREEMENTS
The Company has an agreement with Mr. Diesel which provides that Mr. Diesel
will receive an annual base salary of $200,000 and is eligible to receive
incentive compensation at the discretion of the Compensation Committee. Per
this agreement, Mr. Diesel was awarded an initial grant under the Company's
Restricted Stock Incentive Plan ("the Plan") of 10,000 shares and is eligible
for future grants at the discretion of the Committee. (In December 1994, the
Committee awarded Mr. Diesel an additional 25,000 shares under the Plan).
The agreement also states that if Mr. Diesel is removed from the position of
President and CEO for reasons other than cause during his first three years
of employment, the Company will pay him severance payments equivalent to a
maximum of one year's base salary plus insurance benefits.
The Company also has an agreement with Mr. Apkarian terminating on September
30, 1997 or upon Mr. Apkarian's retirement, whichever occurs first. This
agreement provides that Mr. Apkarian will continue as an employee and a
Director of the Company at an annual salary of $130,000. The agreement also
provides an annual bonus of $10,000 which he will use to purchase $250,000 of
term life insurance. Upon his retirement, an annual pension supplement of
$50,000 will be paid until September 30, 1997, and if Mr. Apkarian dies
during this period, a survivor's benefit payment of $25,000 per year will be
paid to his spouse, if then living, for the remainder of the payment period.
In addition, the agreement provides for the payment of club dues and the use
of a Company automobile for which Mr. Apkarian pays 50% of the lease
payments.
DIRECTORS COMPENSATION
Directors who are not officers or employees receive Director's fees of $750
for each Board meeting attended. Directors also are reimbursed for travel
expenses incurred in attending meetings.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN AMONG MECHANICAL TECHNOLOGY
INCORPORATED (MTIX), S&P 500 INDEX, AND S&P HIGH TECH COMPOSITE INDEX
<TABLE>
<CAPTION>
S&P
Measurement Period S&P High Tech
(Fiscal Year Covered) MTIX 500 Index Index
- --------------------- ------ --------- ---------
<S> <C> <C> <C>
Measurement Pt-9/30/89 $ 100 $ 100 $ 100
FYE 9/30/90 $ 65 $ 91 $ 85
FYE 9/30/91 $ 50 $ 119 $ 105
FYE 9/30/92 $ 50 $ 132 $ 107
FYE 9/30/93 $ 35 $ 149 $ 130
FYE 9/30/94 $ 1 $ 155 $ 151
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of December 30, 1994 in respect
of each person known by the Company to be the beneficial owner of more than
5% of its outstanding Common Stock.
<TABLE>
<CAPTION>
Amount of
Beneficial Percent
Name Address Ownership of Class
- ------------------ -------------------- ------------ --------
<S> <C> <C> <C>
Lawrence Insurance 500 Fifth Avenue 1,730,000(A) 48.5%
Group, Inc. New York, N.Y. 10110
Harry Apkarian 968 Albany-Shaker Road 288,001(B) 8.1%
Latham, N.Y. 12110
</TABLE>
(A)These shares are owned by the following companies owned directly or
indirectly by Lawrence Insurance Group, Inc.: United Community Insurance
Company - 909,091 shares; United Republic Insurance Company - 363,636 shares;
Global Insurance Company - 349,068 shares; and Senate Insurance Company -
108,205 shares. According to the Form 10-K Report of Lawrence Insurance
Group, Inc. for its fiscal year ended December 31, 1993, Lawrence Group,
Inc. is the beneficial owner of approximately 93% of the outstanding shares
of the common stock of Lawrence Insurance Group, Inc. Albert W. Lawrence (a
Director of the Company) is, along with Barbara C. Lawrence, his wife, the
owner of 100% of the common stock of Lawrence Group, Inc.; as a result, Mr.
and Mrs. Lawrence may be deemed to be the beneficial owners of the shares of
the Company's Common Stock referred to above in this paragraph. Mrs.
Lawrence also owns beneficially and of record an additional 100 shares of the
Company's Common Stock; Mr. Lawrence disclaims beneficial ownership of such
shares.
In July 1994, upon application of the Superintendent of Insurance of the
State of New York ("Superintendent"), and with the consent of UCIC, an Order
of Rehabilitation was entered in the Supreme Court of the State of New York,
Schenectady County, with respect to United Community Insurance Company
("UCIC"). The Petition under which the Superintendent sought the Order
alleges that UCIC was insolvent due to inadequate reserves. The Order, among
other things, authorizes the Superintendent to take control of all of UCIC's
assets and to conduct its business and affairs. At the time the Order was
entered, and for several years prior to that time, Albert Lawrence, a
Director of the Company, was Chairman of the Board of UCIC, and Messrs. R.
Wayne Diesel, President, Chief Executive Officer and a Director of the
Company, and Lawrence Shore, Chairman of the Board of Directors of the
Company, were members of the UCIC Board of Directors. Mr. Diesel was also
Treasurer of UCIC. Subsequent to entry of the Order, the Superintendent
filed a motion requesting that the Court order that UCIC be liquidated. UCIC
is challenging that motion, claiming, among other things, that there is no
justification for an order of liquidation; UCIC has filed its own motion
seeking to instead have the Order dissolved and the proceedings dismissed.
No decision has been made by the Court on the cross-motions filed by the
parties; the matter is still pending, and the Order is still in effect. By
reason of the Order and the powers granted to the Superintendent thereunder,
Lawrence Insurance Group, Inc. may no longer have the power to vote or
dispose of the 909,091 shares of the Company's Common Stock owned by UCIC,
and thus may no longer be deemed the beneficial owner of such shares (which
represents about 25% of the Company's outstanding Common Stock); pursuant to
the authority granted to him by the Order, the Superintendent (in his
capacity as Rehabilitator under the Order, acting for the benefit of the
policyholders and other creditors of UCIC) may be deemed to be the beneficial
owner of the shares of the Company's Common Stock owned by UCIC.
(B)Includes 4,500 shares issued under the Company's Restricted Stock
Incentive Plan which are still subject to forfeiture.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1993, the Company sold an approximately 51,000 sq. ft. building
it owned, located on a 6-acre parcel in Colonie, New York, to Barbara C.
Lawrence for $1,975,000. Mrs. Lawrence is the wife of Albert W. Lawrence, a
Director of the Company and Chairman of the Board of Lawrence Insurance
Group, Inc. (see "Security Ownership of Certain Beneficial Owners" above).
The Company's Board of Directors considered the price it received for the
property to be satisfactory, and voted to accept the offer, because the price
matched an offer for the property the Company had received from an unrelated
third party and approximated the appraised value of the property set forth in
an independent market value appraisal the Company had obtained. Moreover,
the Company was able to sell the property to Mrs. Lawrence without paying
brokerage commissions that would have been incurred in a sale to a third
party.
In December 1993, the Company obtained an advance of $3 million from a
finance company pursuant to an agreement relating to a receivable of the
Company's UTE subsidiary. The funds advanced to the Company by the finance
company were provided to the finance company by UCIC, and the finance
company's obligation to repay such funds to UCIC is secured by (and is
dependent on payment of) the Company's obligation to the finance company
under the agreement. UCIC (a wholly owned subsidiary of Lawrence Insurance
Group, Inc.), owns about 25% of the Company's outstanding Common Stock, and
Lawrence Insurance Group, Inc. (through UCIC and its other direct and
indirect subsidiaries) is the beneficial owner of about 48.5% of the
Company's outstanding Common Stock; Mr. Albert W. Lawrence, a Director of the
Company, and his wife may be deemed to be the beneficial owners of the shares
of the Company's Common Stock owned by Lawrence Insurance Group, Inc. and its
subsidiaries. See "Security Ownership of Certain Beneficial Owners", above.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of shares of the Company's Common Stock by (i) each
Director and nominee for Director of the Company (ii) each named executive
officer described in the section of this Proxy Statement captioned "Executive
Compensation", and (iii) all present Directors and Officers of the Company as
a group, as of December 30, 1994.
<TABLE>
<CAPTION>
Amount
Name of and Nature of
Beneficial Beneficial Percent of
Owner Ownership(1) Class
------------------- ------------- ----------
<S> <C> <C>
Harry Apkarian 288,001(2) 8.1%
R. Wayne Diesel 35,000(2),(5),(6) *
Douglas McCauley 8,000(2) *
Stanley I. Landgraf 1,000 *
Albert W. Lawrence 1,730,000(4) 48.5%
E. Dennis O'Connor -0- *
Lawrence A. Shore -0-(5) *
Stephen Sullivan 10,000(2),(3) *
All present Directors and 2,080,101(2),(3),(4),(5),(6)
Officers as a group (10 persons)
- -------------------------------------
</TABLE>
* Percentage is less than 1.0% of the outstanding Common Stock.
(1)To the best of the Company's knowledge, based on information reported by
such Directors and officers or contained in the Company's shareholder
records. Except as otherwise indicated, each of the named persons is
presumed to have sole voting and investment power with respect to all shares
shown. None of the Company's present Directors or officers other than Mr.
Apkarian and Mr. Lawrence (see "Security Ownership of Certain Beneficial
Owners," above) beneficially own more than 1% of the Company's outstanding
Common Stock; all present Directors and officers as a group beneficially own,
in the aggregate, approximately 58.3% of the Company's outstanding Common
Stock.
(2)Includes shares granted under the Company's Restricted Stock Incentive
Plan which are still subject to forfeiture as follows: Mr. Apkarian, 4,500
shares; Mr. Diesel, 35,000; Mr. McCauley, 7,500 shares; and Mr. Sullivan,
1,500 shares. All present Directors and officers as a group, 54,000 shares.
(3)Includes the right to purchase 5,000 shares pursuant to exercisable
options granted under the Company's stock option plan.
(4)Includes 1,730,000 shares owned by subsidiaries of Lawrence Insurance
Group, Inc. Albert W. Lawrence and his wife, Barbara, may be deemed to be
the beneficial owners of the Lawrence Insurance Group, Inc. shares. (See
"Security Ownership of Certain Beneficial Owners", above.) Excludes 100
shares owned by Barbara C. Lawrence, wife of Albert W. Lawrence. Mr.
Lawrence disclaims beneficial ownership of such shares.
(5)Excludes shares owned by subsidiaries of Lawrence Insurance Group, Inc.;
Mr. Shore and Mr. Diesel, as Directors, share the power to vote and dispose
of such shares. Mr. Shore and Mr. Diesel disclaim beneficial ownership of
such shares.
(6)Does not include 100 shares held by Mr. Diesel's wife as custodian for
their minor child; Mr. Diesel disclaims beneficial ownership of such shares.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission ("SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities
of the Company. Officers, directors and greater than ten percent sharehold-
ers are required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file.
Based on Company records and other information, the Company believes that all
SEC filing requirements applicable to its directors and officers with respect
to the Company's fiscal year ended September 30, 1994 were complied with.
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders accompanies this Proxy Statement.
The Company's Annual Report on Form 10-K for the year ended September 30,
1994, as filed with the Securities and Exchange Commission, may be obtained
by addressing a written request to the Investor Relations Department at the
Company's corporate headquarters (968 Albany-Shaker Road, Latham, NY 12110).
PROPOSALS OF SECURITY HOLDERS
Proposals by security holders intended to be presented at the Company's
Annual Meeting of Shareholders held in 1996 must be received by the Company
before December 12, 1995, in order to qualify for inclusion in the Company's
Proxy Statement relating to that meeting.
OTHER MATTERS
Management does not know of any matters which will be brought before the
meeting other than those specifically set forth in the notice thereof. If
any other matter properly comes before the meeting, however, it is intended
that the shares represented by proxies will be voted with respect thereto in
accordance with the best judgment of the persons voting them.
All expenses incurred in connection with this solicitation of proxies will
be borne by the Company.
By Order of the Board of Directors
John Recupero
Secretary
Latham, New York
April 10, 1995
