SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Amendment No. 1)
Under the Securities Exchange Act of 1934
Mechanical Technology Incorporated
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(Name of Issuer)
$1.00 Par Value Common Stock
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(Title of Class of Securities)
583538103
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(CUSIP Number)
Howard Kelberg, Esq.
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004
(212) 858-1334
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
April 12, 1996
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(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
Schedule because of Rule 13d- 1(b)(3) or (4), check the following: [ ]
Check the following box if a fee is being paid with this
Statement: [ ]
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SCHEDULE 13D
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CUSIP NO. 583538103
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1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
First Albany Companies Inc.
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
WC
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
First Albany Companies Inc. is organized under the laws
of the State of New York
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NUMBER OF SHARES 7. SOLE VOTING POWER
1,036,698 (including 909,091 which
there is a right to acquire)
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BENEFICIALLY OWNED BY 8. SHARED VOTING POWER
140,000
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EACH PERSON WITH 9. SOLE DISPOSITIVE POWER
1,036,698 (including 909,091 which
there is a right to acquire)
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10. SHARED DISPOSITIVE POWER
0
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,036,698 (including 909,091 which there is a right to
acquire and excluding 140,000 which there is a
right to vote pursuant to a limited purpose proxy)
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [X}
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT ON ROW (11)
29.0%
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14. TYPE OF REPORTING PERSON
CO
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The items identified below, or the particular paragraph of
such items that are identified below, are amended or restated as set forth
below. Capitalized terms not otherwise defined have the meanings ascribed to
them in the original Schedule 13D.
SCHEDULE 13D
Item 3. Source and Amount of Funds or Other Consideration.
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On September 28, 1995, First Albany purchased 101,900 Shares
in the open market for an aggregate price of $95,531 ($.9375 per Share), and on
January 16, 1996, First Albany purchased 25,707 Shares in the open market for an
aggregate price of $16,710 ($.65 per Share). The source of funds for both
purchases was working capital. On April 4, the 127,607 Shares were transferred
to FAC.
On April 12, 1996, FAC entered into an agreement to purchase
909,091 Shares at a purchase price of $1.50 per share (subject to the price
protection provisions set forth in such agreement, as described in Item 6
hereof) and certain indebtedness of the Issuer for consideration of $1.00. The
source of funds to finance this purchase is also expected to be working capital.
Item 4. Purpose of Transaction.
----------------------
The purpose of the acquisition of securities of the Issuer
described herein is to influence the Board of Directors and the management of
the Issuer, to assist in the revitalization of the Issuer, and for investment.
FAC intends to seek representation on the Issuer's Board of Directors.
On March 26, 1996, FAC received a limited purpose proxy
(included as Exhibit A hereto and incorporated herein by reference) from Ford
Motor Company relating to 156,250 Shares beneficially owned by Ford Motor
Company and on March 28, 1996, FAC received a limited purpose proxy (included as
Exhibit B hereto and incorporated herein by reference) from Atlas Copco AB
relating to 140,000 Shares beneficially owned by Atlas Copco AB (collectively,
the "Proxy Shares"). Such proxies authorized FAC to vote such Shares at the
Issuer's 1996 Annual Stockholders Meeting scheduled for March 28, 1996 (and, in
the case of the proxy from Atlas Copco AB, at any adjournment thereof) for an
adjournment of such meeting. Without a formal vote of stockholders (and
therefore, without exercise of such proxies), the Issuer's 1996 Annual
Stockholders Meeting has been adjourned to May 16, 1996.
On April 12, 1996, FAC entered into a Purchase Agreement (as
described in Item 6 below), pursuant to which FAC, subject to the satisfaction
of certain conditions, will purchase 909,091 Shares and the Purchased Debt (as
defined below). In connection with negotiating the foregoing and FAC's request
for approval of such transactions by the Board of Directors of the Issuer
pursuant to Section 912 of the New York Business Corporation Law, FAC has
delivered letters to the Board of Directors of the Issuer and to a board member
(attached as
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<PAGE>
Exhibits C, D, E and F hereto and incorporated by reference herein
(collectively, the "Board Correspondence")), as described in Item 6 below. The
Board Correspondence sets forth, among other things, that FAC plans (based on
the current economic condition of the Issuer) to assist in the revitalization of
the Issuer by enhancing the Issuer's balance sheet through the ultimate infusion
of approximately $2,000,000 in new equity. FAC also plans to maintain the Issuer
as a viable going concern that provides jobs and economic opportunities in the
New York capital region. FAC also intends, through the contemplated stock and
debt purchases, to act in the best interests of the Issuer and does not intend
to strip the assets of the Issuer, do a leveraged buyout, squeeze out minority
shareholders or merge the Issuer with FAC or any of its subsidiaries. Reference
is made to Item 6 hereof and the copies of the Board Correspondence attached
hereto and incorporated by reference herein for additional information regarding
the Board Correspondence.
Prior to entering into the Purchase Agreement, FAC was advised
by the Issuer that the Board of Directors of the Issuer had approved the
purchases contemplated by the Purchase Agreement. A copy of the resolution of
the Issuer approving the purchases is attached as Exhibit H hereto and
incorporated by reference herein.
From time to time, FAC has engaged in discussions with the
Issuer, its officers and directors and other significant shareholders relating
to the Issuer's policies, management, directors, business, operations, financial
condition, strategies and other developments, and FAC intends to engage in such
discussions in the future. FAC intends to discuss with the officers and
directors of the Issuer and certain other significant shareholders changes in
the present Board of Directors and the designation of certain persons to serve
as members of the Board of Directors as representatives of FAC, to be considered
and acted upon at the adjourned 1996 Annual Stockholders Meeting on May 16,
1996.
From time to time, FAC may buy or sell additional Shares, on
the open market, in private negotiated purchases, from the Issuer or otherwise.
Notwithstanding the foregoing, as a significant shareholder of
the Issuer and through any representation that it may have on the Issuer's Board
of Directors, FAC may consider, from time to time, (i) an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Issuer or any of its subsidiaries, (ii) a sale or transfer of a
material amount of assets of the Issuer or any of its subsidiaries, (iii)
material changes in the present capitalization or dividend policy of the Issuer,
(iv) other material changes in the Issuer's business or corporate structure, (v)
changes in the Issuer's charter and bylaws or other actions which may impede the
acquisition of control of the Issuer by any person, (vi) causing a class of
securities of the Issuer to be delisted from a national securities exchange or
to cease to be
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<PAGE>
authorized in an inter-dealer quotation system of a registered national
securities association, (vii) causing a class of equity securities of the Issuer
to become eligible for termination of registration pursuant to Section 12(g)(4)
of the Securities Exchange Act of 1934, as amended or (viii) any action similar
to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
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(a) FAC is the direct beneficial owner of 127,607 Shares. On
March 26, 1996, FAC became the beneficial owner of an additional 156,250 Shares
by acquiring a limited purpose proxy (which, by its terms, is no longer
effective) from Ford Motor Company and on March 28, 1996, became the beneficial
owner of an additional 140,000 Shares by acquiring a limited purpose proxy from
Atlas Copco AB, in each case limited to vote the respective Proxy Shares at the
Issuer's 1996 Annual Stockholders Meeting, scheduled for March 28, 1996 (and, in
the case of the proxy from Atlas Copco AB, at any adjournment thereof) for
adjournment of such meeting. As of April 12, 1996, FAC is deemed to be the
beneficial owner of an additional 909,091 Shares by acquiring the right to
purchase such Shares pursuant to the Purchase Agreement described in Item 6
below. The foregoing Shares in the aggregate (excluding the Proxy Shares)
constitute approximately 29.0% of the outstanding Shares of the Issuer.
(b) FAC has the sole power to direct the vote and disposition
of all Shares directly owned by it as described in paragraph (a), and upon
consummation of the purchases contemplated by the Purchase Agreement, will also
have (and is currently deemed to have) the power to direct the vote of the
909,091 Shares to be purchased thereunder. FAC's ability to direct the vote of
the Proxy Shares is limited to the power to vote the 140,000 Shares owned by
Atlas Copco AB for adjournment of the Issuer's 1996 Annual Stockholders Meeting.
Atlas Copco AB retains sole power to direct the vote (other than with respect to
such adjournment) and the disposition of its Proxy Shares. The limited purpose
proxy delivered by Ford Motor Company to FAC is no longer effective by its terms
and, accordingly, FAC no longer has the ability to direct the vote of the Proxy
Shares owned by Ford Motor Company.
(c) Except as described Items 3, 4, 5 and 6 hereof, neither
FAC nor any Executive Officer and Director has effected any transactions in
Shares during the past 60 days.
(d) No other person is known to have the right to receive or
the power to direct the receipt of dividends from, or the proceeds from the sale
of, such Shares, other than the Proxy Shares, which power is retained by Ford
Motor Company and Atlas Copco AB, respectively.
(e) Not applicable.
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<PAGE>
Item 6. Contracts, Arrangements, Understandings or
Relationships With Respect to Securities of the Issuer.
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FAC received limited purpose proxies from Ford Motor Company
(which is no longer effective by its terms) and Atlas Copco AB to vote for
adjournment of the Issuer's 1996 Stockholders Meeting.
FAC has entered into a Stock and Debt Purchase Agreement (the
"Purchase Agreement," a copy of which is attached hereto as Exhibit G and
incorporated by reference herein) dated as of April 12, 1996 with the New York
Superintendent of Insurance, as Liquidator (the "Liquidator") of United
Community Insurance Company ("UCIC") to purchase (i) 909,091 Shares at a
purchase price of $1.50 per share and (ii) certain rights in $3,000,000
principal amount (plus accrued and unpaid interest) of indebtedness, in respect
of which the Issuer is an obligor, for consideration of $1.00 (the "Purchased
Debt"). Certain officers and directors of the Issuer had been officers or
directors of UCIC.
On April 17, 1996, in connection with its oversight of the
liquidation proceedings of UCIC and at the recommendation of the Liquidator, the
Supreme Court of the State of New York, Fourth Judicial District, issued an
order approving the Purchase Agreement, as required by applicable law.
Pursuant to the Purchase Agreement, FAC has agreed that if it
or any of its affiliates purchases any Shares directly from the Lawrence Group,
Inc. (of which UCIC had been a wholly-owned subsidiary), or any affiliates or
subsidiaries thereof, within six months after the closing date, FAC will pay the
Liquidator the difference between the per share price paid to such entity and
$1.50, multiplied by 909,091 Shares.
FAC's obligations to consummate the transactions contemplated
by the Purchase Agreement are subject to satisfaction of certain conditions,
including (i) satisfactory review of an accurate and current assessment of
environmental issues affecting the Issuer or any real property owned by it,
reflecting no environmental liabilities that will or can exceed $100,000
(excluding amounts already reserved for), (ii) substantial resolution of certain
pending threatened criminal proceedings against the Issuer's UTE subsidiary,
(iii) substantial resolution of the bankruptcy proceedings pending against the
Issuer's UTE subsidiary, (iv) satisfactory completion of FAC's due diligence and
(v) certain other customary conditions specified in the Purchase Agreement.
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<PAGE>
The Liquidator's obligations to consummate the transactions
contemplated under the Purchase Agreement are subject to the accuracy of the
representations and warranties of FAC made in the Purchase Agreement,
performance by FAC of its obligations under the Purchase Agreement and payment
under the Purchase Agreement.
In connection with the Purchase Agreement, on the closing
date, FAC has the right to receive an irrevocable written proxy to vote the
Shares (the form of which is attached as an exhibit to the Purchase Agreement),
at any shareholders meeting, including but not limited to the Issuer's 1996
Annual Stockholder's meeting, and any adjournments thereof. Such proxy shall
expire by its terms on March 28, 1997 unless otherwise extended by the express
written consent of the parties to the Purchase Agreement.
In connection with its negotiations of the Purchase Agreement
and FAC's request for approval of such transactions by the Board of Directors of
the Issuer pursuant to Section 912 of the New York Business Corporation Law, on
March 28, 1996, FAC delivered a letter to the Board of Directors (attached as
Exhibit C hereto and incorporated herein by reference), in which, among other
things, FAC expressed its plans to assist in the revitalization of the Issuer.
On March 28, 1996, FAC also delivered a similar letter to a board member
(attached as Exhibit D hereto and incorporated herein by reference), on April 3,
1996, FAC delivered an additional letter to the Board of Directors (attached as
Exhibit E hereto and incorporated herein by reference) and on April 11, 1996,
FAC delivered an additional letter to the Board of Directors (attached as
Exhibit F hereto and incorporated herein by reference).
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<PAGE>
In the letter dated April 3, 1996, FAC represented, among
other things, that it is its intention to assist in the recapitalization of the
Issuer in order to preserve and enhance the economic benefits it brings to the
New York capital region. FAC indicated that is not its intention to enter into
any transactions with the Issuer other than to negotiate a restructuring or
refinancing of the purchased indebtedness and, specifically, that FAC shall not
(i) merge with the Issuer, (ii) cause the consolidation of the Issuer into FAC
or any of its subsidiaries or (iii) participate as a principal in the sale or
lease of greater than 10% of the assets of the Issuer. FAC also represented that
if the Issuer and the Board of Directors determine that a rights offering is in
the best interests of the Issuer and its shareholders, FAC shall either abstain
or recuse itself from any vote of shareholders or, if it is represented on the
Board of Directors, any vote of the directors, on such an issue.
In the same letter, the Issuer also indicated that, in
negotiating and discussing any restructuring of the indebtedness that it is
negotiating to purchase, FAC will consider certain options, including (i)
restructuring such debt on terms and conditions more favorable than currently
exist and on terms and conditions at least comparable to those existing in the
marketplace at the time of the restructuring, (ii) conversion of the debt to
preferred stock, (iii) conversion of the debt to common stock (at a per share
price of not less than $1.50 per share) and (iv) some combination of the options
that the Issuer or the Board presents. The letter indicates that any
restructuring would be subject to the approval by a majority of disinterested
directors of the Board of Directors. The letter also indicates that FAC will
propose raising approximately $2 million in equity pursuant to a private
placement.
In the letter dated April 11, 1996, FAC reiterated and
represented, among other things, that it is not its intention to enter into any
transactions with the Issuer other than to negotiate a restructuring or
refinancing of the Purchased Debt and shall not (i) merge with the Issuer, or
cause the Issuer to merge or to be merged with any of its subsidiaries or
affiliates, (ii) cause the consolidation of the Issuer into FAC or any of its
subsidiaries or affiliates or (iii) participate as a principal in the sale or
lease of greater than ten percent of the assets of the Issuer.
In the letter of April 11, FAC indicated that should the
Issuer and the Board of Directors determine that a preemptive rights offering is
in the best interests of the Issuer and its shareholders in connection with a
conversion of the Purchased Debt to equity or the offer of additional common
stock of the Issuer in a private placement to accredited investors, FAC shall
either abstain or recuse itself from any vote of shareholders or, should FAC be
represented on the Board of Directors, any vote of the directors, on such an
issue.
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<PAGE>
Item 7. Material to be Filed as Exhibits.
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Exhibit A - Limited purpose proxy of Ford Motor
Company (Incorporated by reference to the
Original Schedule 13D of FAC, as filed April
5, 1996 (the "Original Filing")).
Exhibit B - Limited purpose proxy of Atlas Copco AB
(Incorporated by reference to the Original
Filing).
Exhibit C - Letter from FAC to the Issuer's Board of
Directors, dated March 28, 1996
(Incorporated by reference to the Original
Filing).
Exhibit D - Letter from FAC to Issuer Board Member, dated
March 28, 1996 (Incorporated by reference to
the Original Filing).
Exhibit E - Letter from FAC to Issuer Board Member, dated
April 3, 1996 (Incorporated by reference to
the Original Filing).
Exhibit F - Letter from FAC to the Issuer's Board of
Directors, dated April 11, 1996.
Exhibit G - Agreement for the Purchase of Stock and Debt
by and between FAC and the Liquidator, dated
as of April 12, 1996 (Confidential Treatment
Requested).
Exhibit H - Resolution of the Issuer's Board of Directors,
approving the purchases under the Purchase
Agreement, pursuant to Section 912 of the N.Y.
Business Corporation Law.
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<PAGE>
After reasonable inquiry and to the best knowledge and belief
of the undersigned, the undersigned certifies that the information set forth in
this statement is true, complete and correct.
DATED: April 19, 1996 FIRST ALBANY COMPANIES INC.
By: /s/ MICHAEL R. LINDBURG
Name: Michael R. Lindburg
Title: Secretary
<PAGE>
EXHIBIT INDEX
Exhibit A - Limited purpose proxy of Ford Motor Company
(Incorporated by reference to the Original
Filing).
Exhibit B - Limited purpose proxy of Atlas Copco AB.
(Incorporated by reference to the Original Filing).
Exhibit C - Letter from FAC to the Issuer's Board of
Directors, dated March 28, 1996 (Incorporated by
reference to the Original Filing).
Exhibit D - Letter from FAC to Issuer Board Member, dated
March 28, 1996 (Incorporated by reference to the
Original Filing).
Exhibit E - Letter from FAC to Issuer Board Member, dated
April 3, 1996 (Incorporated by reference to the
Original Filing).
Exhibit F - Letter from FAC to the Issuer's Board of Directors,
dated April 11, 1996.
Exhibit G - Agreement for the Purchase of Stock and Debt by and
between FAC and the Liquidator, dated as of
April 12, 1996 (Confidential Treatment Requested).
Exhibit H - Resolution of the Issuer's Board of Directors,
approving the purchases under the Purchase
Agreement, pursuant to Section 912 of the N.Y.
Business Corporation Law.
<PAGE>
Exhibit F
April 11, 1996
Board of Directors
Mechanical Technology Incorporated ("MTI")
968 Albany-Shaker Road
Latham, New York 12110
Dear Member of the Board:
This letter is intended to be read in context with our letters of March 28,
1996 to the Board of Directors of MTI and Mr. Dennis O'Connor; and is further
intended to clarify First Albany's intentions and plans as presented at the
meeting with the Board of Directors of MTI on March 28, 1996; and to respond to
concerns which have been expressed to us since that time.
Accordingly, First Albany represents and reiterates that:
1. It is our intention to acquire the referenced shares of MTI common stock
and the Claim Participation Agreement for the purposes of investments to be held
in our corporate account. It is further our intention to assist in the
recapitalization of MTI in order to preserve and enhance the economic benefits
it brings to the capital region. Such a recapitalization has been and remains a
publicly stated objective of MTI's management and presumably its Board of
Directors.
It is not our intention to enter into any transactions with the Company
other than to negotiate a restructuring or refinancing of the Claim
Participation Agreement as referenced below. Specifically, First Albany shall
not (a) merge with the Company, or cause the Company to merge or to be merged
with any of its subsidiaries or affiliates; (b) cause the consolidation of the
Company into First Albany or any of its subsidiaries or affiliates; or (c)
participate as a principal in the sale or lease of greater than ten percent of
the assets of the Company.
2. Should the Company and the Board of Directors determine that a rights
offering is in the best interests of the Company and its shareholders in
connection with a conversion of the Claim Participation Agreement to equity or
the offer of additional common stock of the Company in a private placement to
accredited investors, First Albany shall either abstain or recuse itself from
any vote of shareholders or, should we be represented on the Board of Directors,
any vote of the directors, on such an issue.
3. With respect to negotiations and discussions concerning restructuring of
the debt evidenced by the Claim Participation Agreement, First Albany shall
consider certain options, to include, but not limited to: (a) restructuring of
the debt on terms and
<PAGE>
conditions more favorable than currently exist pursuant to the Claim
Participation Agreement as amended and on terms and conditions that are at least
comparable to those existing in the marketplace at the time of the
restructuring; (b) conversion of the debt to preferred stock; (c) conversion of
the debt to common stock provided however, that the per share price of such
stock shall not be less than $1.50 per share; (d) some combination of the
options that the Company or the Board may present for consideration by First
Albany. Any agreement as to the restructuring of the Debt shall be subject to
the approval by a majority of disinterested directors of the Board.
4. First Albany shall propose that approximately $2 million in equity be
raised pursuant to a private placement to not more than thirty accredited
investors. First Albany is aware of a significant level of interest in such a
private placement and is prepared to move ahead to solicit such investors
immediately upon an agreement with the Board of Directors on the terms,
conditions and pricing of such an offering. Such proposal shall be subject to
approval by a majority of disinterested directors of the Board.
We believe the foregoing representations should convince the Board that
approval of First Albany's contemplated stock and debt acquisition, pursuant to
Section 912 of the Business Corporation Law, is in the best interests of the
Company. Furthermore, upon receipt of your approval we are prepared to begin
discussions and serious negotiations immediately with the Board or its
management designees to accomplish the objectives and representations stated.
We look forward to your prompt request and remain available to meet with
you to answer any additional questions.
Sincerely,
/s/ GEORGE C. McNAMEE
George C. McNamee
Chairman
<PAGE>
Exhibit G
AGREEMENT FOR THE PURCHASE OF
STOCK AND DEBT
BY AND BETWEEN
FIRST ALBANY COMPANIES, INC.
AND
SUPERINTENDENT OF INSURANCE OF THE STATE OF NEW YORK
AS LIQUIDATOR
OF UNITED COMMUNITY INSURANCE COMPANY
Dated as of April 12, 1996
<PAGE>
STOCK AND DEBT PURCHASE AGREEMENT
THIS STOCK AND DEBT PURCHASE AGREEMENT (the "Agreement") is made as of the
12th day of April, 1996, by and between First Albany Companies, Inc., a New York
corporation (the "Purchaser"), and the Superintendent of Insurance of the State
of New York as Liquidator of, United Community Insurance Company ("Liquidator").
RECITALS
1. United Community Insurance Company ("UCIC"), a wholly-owned subsidiary
of the Lawrence Insurance Group, Inc., a New York corporation (the "LIG"), is
record owner of 909,091, shares of Common Stock (the "UCIC Shares") of
Mechanical Technology Incorporated, a New York Corporation (the "Corporation"),
which shares constitute approximately twenty-five percent (25%) of the issued
and outstanding stock of the Corporation. On November 10, 1995, with the consent
of LIG (as the sole shareholder of UCIC), an Order of Liquidation of UCIC was
entered in the Supreme Court of the State of New York, Schenectady County (a
copy of which, together with a Certificate of Authority, is attached hereto as
Exhibit A). The Order of Liquidation adjudicated UCIC insolvent, and authorized
the Liquidator to take possession of the property and liquidate its business and
affairs. The Order of Liquidation (which incorporates Article 74 of the New York
Insurance Law) includes the authority of the Liquidator to sell all real and
personal property of UCIC, including the UCIC Shares, the Guaranteed Claim
Participation Agreement, the Term Loan and Term Note and the
<PAGE>
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Collateral (all as defined below), on such terms and conditions as in his
discretion he deems to be in the best interest of the creditors of UCIC.
2. UCIC is a party to a Term Loan and Security Agreement, entered into on
December 21, 1993, between First Commercial Credit Corp., a New York corporation
("FCCC") and UCIC, whereby UCIC loaned FCCC the sum of Five Million and 00/100
Dollars ($5,000,000) (the "Term Loan") evidenced by a Term Note (the "Term
Note"), and secured by a perfected security interest in FCCC's accounts,
inventory, general intangibles, chattel paper, cash equivalents, documents, and
instruments, whether or not specifically assigned, including without limitation,
all notes receivable (which includes the Guaranteed Claim Participation
Agreement, the Modification Agreement and the Settlement Agreement, in each case
as hereinafter defined) (the "Collateral"). On December 21, 1993, FCCC entered
into a Claim Participation Agreement, between United Telecontrol Electronics,
Inc., a New Jersey corporation ("UTE"), the Corporation, and FCCC, whereby FCCC
used Three Million Dollars ($3,000,000) of the proceeds of the Term Loan to
purchase the right to participate in the proceeds of a certified claim held by
UTE against the Department of the Air Force, Aeronautical Systems Division,
under Contract No. F08635-90-C-0196, in the total amount of Seven Million Nine
Hundred Seventy One Thousand Three Hundred and Fifty One Dollars ($7,971,351).
In exchange, UTE agreed to repay FCCC Three Million Dollars ($3,000,000), plus
certain participation payments, to be secured by the corporate guarantee of the
Corporation as parent of UTE (the "Guaranteed Claim Participation
<PAGE>
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Agreement"). On December 14, 1994, after default by UTE, FCCC and the
Corporation entered into a modification of the Guaranteed Claim Participation
Agreement whereby the calculation of certain amounts due FCCC were reduced in
exchange for the Corporation's agreement to make certain payments to FCCC (the
"Modification Agreement"). On April 8, 1994, UTE filed for protection under
chapter 11 of the Bankruptcy Code. Under the aegis of the Bankruptcy Court and
with its approval by order of August 18, 1995, FCCC, UTE and the Corporation
reached a settlement whereby UTE paid FCCC certain amounts in settlement of all
its obligations under the Guaranteed Claim Participation Agreement, as modified,
and, FCCC and the Corporation restructured the remaining obligations under the
Guaranteed Claim Participation Agreement, as modified, to make the Corporation a
direct obligor, reduce the interest rate, provide for the accrual of certain
interest payments and extend the repayment date (the "Settlement Agreement").
3. [CONFIDENTIAL TREATMENT REQUESTED]
4. The Seller has agreed to sell the UCIC Shares to the Purchaser under the
terms and conditions set forth in this Agreement.
5. The Seller has agreed to [CONFIDENTIAL TREATMENT REQUESTED] under the
terms and conditions set forth in this Agreement.
<PAGE>
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NOW THEREFORE, in consideration of the recitals, the premises, the mutual
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. The following terms as used herein have the following
respective meanings:
1.1 "Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person.
1.2 "Closing" and "Closing Date" have the meaning given in Section 2.3
hereof.
1.3 "Collateral" has the meaning given in paragraph 2 of the recitals to
this Agreement.
1.4 "Common Stock" means the Common Stock, $1.00 par value, of the
Corporation as described in the Certificate of Incorporation of the Corporation.
1.5 "Corporation" means Mechanical Technology Incorporated, a New York
Corporation.
1.6 "FCCC" means First Commercial Credit Corp.
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1.7 "Guaranteed Claim Participation Agreement" has the meaning given in
paragraph 2 of the recitals to this Agreement.
1.8 "Liquidator" means the Superintendent of Insurance of the State of New
York as court appointed Liquidator of UCIC.
1.9 "Modification Agreement" has the meaning given in paragraph 3 of the
recitals to this Agreement.
1.10 [CONFIDENTIAL TREATMENT REQUESTED]
1.11 [CONFIDENTIAL TREATMENT REQUESTED].
1.12 "Person" means an individual, corporation, partnership, trust,
organization, association, governmental body or agency, or other entity.
1.13 "Proxy" means the irrevocable written proxy, attached hereto as
Exhibit B, to vote the UCIC Shares, at any shareholders meeting, including but
not limited to, the Annual Meeting of the Shareholders scheduled on March 28,
1996, as adjourned to May 16, 1996, and any adjournments thereof. Such Proxy
shall expire by its own terms on March 28, 1997, unless otherwise extended by
the express written consent of the parties to this Agreement.
1.14 "Purchase Price" has the meaning given in Section 2.2 hereof.
<PAGE>
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1.15 [CONFIDENTIAL TREATMENT REQUESTED].
1.16 [CONFIDENTIAL TREATMENT REQUESTED].
1.17 "Purchaser" means First Albany Companies, Inc.
1.18 "Security Agreement" has the meaning given in paragraph 3 of the
recitals to this Agreement.
1.19 "Subsidiary" means with respect to any corporation, partnership, trust
organization, association, governmental body or agency, or other entity, any
other corporation, partnership, trust organization, association, governmental
body or agency, or other entity, directly or indirectly controlled by such
corporation, partnership, trust organization, association, governmental body or
agency, or other entity. The term "control" means the possession, directly or
indirectly, of the power, whether or not exercised, to direct or cause the
direction of the management and policies of any corporation, partnership, trust
organization, association, governmental body or agency, or other entity, whether
through ownership of voting securities, by contract or otherwise.
1.20 "Term Loan" has the meaning given in paragraph 2 of the recitals to
this Agreement.
1.21 [CONFIDENTIAL TREATMENT REQUESTED].
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1.22 "Term Note" has the meaning given in paragraph 2 of the recitals to
this Agreement.
1.23 "UCIC" means United Community Insurance Company.
1.24 "UCIC Shares" has the meaning given in paragraph 1 of the recitals to
this Agreement.
1.25 "UTE" means United Telecontrol Electronics, Inc.
2. Purchase.
2.1 Proxy. In consideration for entering into this Agreement, Seller agrees
to convey the Proxy to Purchaser as of the Closing Date.
2.2 Purchase. The Purchaser, intending to be legally bound, hereby agrees
to purchase the UCIC Shares, and [CONFIDENTIAL TREATMENT REQUESTED], on and
subject to the terms and conditions stated herein. Purchaser shall acquire a)
the UCIC Shares for $1.50 per share, for each of the 909,091 shares, and b) the
Purchased Obligations for $1.00, for a total purchase price of $1,363,637.50
(the "Purchase Price").
2.3 Closing. The closing of the purchase and sale of the UCIC Shares and
Purchased Obligations (the "Closing") shall occur at the executive offices of
Purchaser on a date and at a time to be agreed
<PAGE>
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upon by the parties, which in no event shall be later than the second
business day after all conditions to Closing set forth in Section 3 hereof have
been met or waived by Purchaser, or on such later date as agreed upon by the
parties (the "Closing Date"). At the Closing, (a) the Purchaser shall (i) pay
the Purchase Price by a wire transfer of immediately available funds to an
account designated by the Liquidator and (ii) [CONFIDENTIAL TREATMENT REQUESTED]
and (b) the Liquidator shall deliver certificates representing the UCIC Shares
duly endorsed in blank with all stock transfer tax stamps, if any, required to
be affixed thereto, and either (i) [CONFIDENTIAL TREATMENT REQUESTED] The
Liquidator will take all such further action and execute and deliver such
further documents as Purchaser may reasonably request to implement fully the
sale of the UCIC shares and [CONFIDENTIAL TREATMENT REQUESTED]. Liquidator shall
be responsible for payment of any and all taxes or fees payable in conjunction
with the transaction contemplated by this Agreement. Both parties shall be
responsible for their own legal and accounting fees in connection with the
transaction contemplated by this Agreement.
2.4 Price Protection. Purchaser agrees that if Purchaser, its successors or
assigns, or any of its Affiliates, purchases any shares of the Corporation
directly from the LIG, or any Affiliates or Subsidiaries thereof (each a
"Lawrence Entity") within six (6) months after the Closing Date, for a purchase
price of greater than $1.50 per share, Purchaser will pay the Liquidator the
difference between the
<PAGE>
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per share price paid to any Lawrence Entity and $1.50, multiplied by
909,091 shares.
2.5 Liquidator's Obligations with respect to the Purchased Obligations.
[CONFIDENTIAL TREATMENT REQUESTED]
3. Conditions to Closing.
3.1 Obligations of the Purchaser. The obligation of the Purchaser on the
Closing Date to accept and pay for the UCIC Shares and the Purchased Obligations
is subject to the contemporaneous or prior satisfaction of the following
conditions in subsections 3.1.1 through 3.1.4, any of which will be deemed
waived by the Purchaser if the Purchaser has not notified the Liquidator, in
writing, on or before May 5, 1996, that such conditions or any of them have not
been met to Purchaser's satisfaction:
3.1.1 Environmental Review. Satisfactory review of an accurate and current
assessment of environmental issues affecting the Corporation or any real
property owned by the Corporation (an "Environmental Assessment") acceptable in
all respects to the Purchaser and which reflects no environmental liabilities
that will or can exceed One Hundred Thousand Dollars ($100,000) (such amounts to
exceed any amounts already reserved for, as reflected in the Corporation's most
recent audited financial statements).
<PAGE>
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3.1.2 Criminal Actions. Substantial resolution, in a manner satisfactory to
the Purchaser, of any and all pending or threatened criminal proceedings against
UTE.
3.1.3 Bankruptcy. Substantial resolution, in a manner satisfactory to the
Purchaser, of the bankruptcy proceedings of UTE currently pending before the
Federal Bankruptcy Court in New Jersey.
3.1.4 Due Diligence. Purchaser shall have satisfactorily completed its
investigation of the business, assets and financial condition of the Corporation
and its Subsidiaries in connection with the transactions contemplated hereby and
shall have been satisfied with such results. Purchaser agrees to complete its
due diligence by May 5, 1996.
3.2 Further Obligations of the Purchaser. The obligation of the Purchaser
on the Closing Date to accept and pay for the UCIC Shares and the Purchased
Obligations is also subject to the contemporaneous or prior satisfaction of the
following conditions, any of which may be waived by the Purchaser in writing at
any time prior to the Closing:
3.2.1 Opinion of Liquidator's Counsel. The Purchaser shall have received
from Lowenthal, Landau, Fischer & Bring, counsel for Liquidator, an opinion
dated as of the Closing, as to the due authorization, validity and
enforceability of this Agreement and the
<PAGE>
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Proxy, which opinion may be given solely in reliance upon the Order of
Liquidation and the Certificate of Authority.
3.2.2 Representations and Warranties are True and Correct. The
representations and warranties of Liquidator contained herein shall be true and
correct in all material respects when made and (unless made as of a specific
date) at and as of the Closing Date, except to the extent of changes caused by
the transaction expressly contemplated herein.
3.2.3 Performance. Liquidator shall have performed and complied in all
material respects with all agreements on its part to be performed or complied
with, at or prior to the Closing.
3.3 Obligation of Liquidator. The obligation of Liquidator on the Closing
Date to sell the UCIC Shares and the Purchased Obligations to the Purchaser
shall be subject to the contemporaneous or prior satisfaction of the following
conditions, any of which may be waived by Liquidator in writing at any time at
or prior to the Closing:
3.3.1 Representations and Warranties. The representations and warranties of
the Purchaser contained herein shall be true and correct in all material
respects when made and (unless made as of a specific date) at and as of the
Closing Date, except to the extent of changes caused by the transaction
expressly contemplated herein.
<PAGE>
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3.3.2 Performance. Purchaser shall have performed and complied in all
material respects with all agreements on its part to be performed or complied
with, at or prior to the Closing.
3.3.3 Delivery of Payment. Purchaser is prepared to deliver the Purchase
Price by a wire transfer of immediately available funds to an account designated
by the Liquidator.
4. Representations and Warranties of Liquidator. Liquidator, by its
execution of this Agreement, represents and warrants to, and agrees with, the
Purchaser as of the date hereof and (unless made as of a specific date) as of
the Closing Date that:
4.1 Due Authorization, Binding Effect. Each of this Agreement, the Proxy
[CONFIDENTIAL TREATMENT REQUESTED], has been duly authorized, executed and
delivered by the Liquidator and constitutes the valid and legally binding
obligation of the Liquidator enforceable against the Liquidator in accordance
with its terms, subject to bankruptcy, insolvency, reorganization and similar
laws of general applicability relating to or affecting creditors' rights and to
general equity principles; the Liquidator is empowered, authorized and qualified
to sell the UCIC Shares; and [CONFIDENTIAL TREATMENT REQUESTED]; and grant the
Proxy; and the person signing this Agreement, the Proxy [CONFIDENTIAL TREATMENT
REQUESTED] on behalf of the Liquidator has been duly authorized by the
Liquidator and to the extent necessary, by the Supreme Court, Schenectady
County, to do so.
<PAGE>
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4.2 Approvals, Consents, Etc. All approvals, consents, orders,
authorizations, designations, registrations, declarations, or filings of or with
any federal, state or local governmental or public agency, authority or court,
required in connection with the execution and delivery of this Agreement, the
Proxy [CONFIDENTIAL TREATMENT REQUESTED], sale of the UCIC Shares, [CONFIDENTIAL
TREATMENT REQUESTED], and any other transactions contemplated by or incidental
to this Agreement, have been obtained by the Liquidator or will have been
obtained at or prior to the Closing.
4.3 Title to and Authority to Transfer Common Stock. The UCIC Shares are
owned of record by UCIC and are fully paid and nonassessable. The Liquidator has
the authority under the Order of Liquidation to sell all real and personal
property of UCIC, including the UCIC Shares. The Liquidator agrees that as of
the Closing Date, it will have released any and all liens, pledges,
encumbrances, claims, or counterclaims, of any kind or nature whatsoever, that
it might have with respect to the UCIC Shares. At the Closing, Liquidator will
convey all of its rights, title and interest in and to the UCIC Shares.
4.5 [CONFIDENTIAL TREATMENT REQUESTED]
4.7 The Liquidator's Power and Authority. The Liquidator has full power and
authority, pursuant to the Order of Liquidation, by and on
<PAGE>
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behalf of UCIC, to sell the UCIC Shares, [CONFIDENTIAL TREATMENT
REQUESTED], and to grant the Proxy to the Purchaser. At the Closing, the
Liquidator has full power and authority, and has all necessary approvals from
any Court, and any other necessary approvals to enter into this Agreement, the
Proxy [CONFIDENTIAL TREATMENT REQUESTED], and to effect the transactions
contemplated by such agreements.
4.8 No Implied Representation. Purchaser agrees that neither Liquidator,
nor any director, officer, employee or agent thereof, is making, or has made,
any representation, express or implied, other than those expressly set forth in
this Agreement [CONFIDENTIAL TREATMENT REQUESTED].
5. Representation, Warranties and Agreements of the Purchaser. By execution
of this Agreement, the Purchaser hereby represents and warrants to, and agrees
with Liquidator as of the date hereof and (unless made as of a specific date) as
of the Closing Date that:
5.1 Due Authorization, Binding Effect. This Agreement has been duly
authorized, executed and delivered by the Purchaser and constitutes the valid
and legally binding obligation of the Purchaser enforceable against the
Purchaser in accordance with its terms, subject to bankruptcy, insolvency,
reorganization and similar laws of general applicability relating to or
affecting creditors rights and to general equity principals; the Purchaser is
empowered, authorized and qualified to purchase the UCIC shares [CONFIDENTIAL
TREATMENT
<PAGE>
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REQUESTED]; and the person signing this Agreement on behalf of the
Purchaser has been duly authorized by the Purchaser to do so.
5.2 Payment. Purchaser, as of the Closing, shall have immediately available
funds for the payment of the purchase price to Liquidator.
6. [CONFIDENTIAL TREATMENT REQUESTED]
7. Survival of Agreements, Etc. All agreements, representations and
warranties contained herein or made in writing by or on behalf of the Liquidator
or the Purchaser in connection with the transactions contemplated hereby shall
survive the execution and delivery of this Agreement and the Closing, and shall
continue to be binding on the party making such agreement, representation or
warranty, notwithstanding any investigation at any time made by the Purchaser,
the Liquidator, the purchase of the UCIC Shares by the Purchaser, [CONFIDENTIAL
TREATMENT REQUESTED], or the completion of the Closing hereunder.
8. Notices, Etc. All notices and other communications hereunder shall be in
writing and shall be deemed given (i) if personally delivered, on the date of
delivery if such day is a business day or on the first business day after the
date of delivery if the delivery date is not a business day; (ii) if given by
regular or certified mail, return receipt requested, postage prepaid, on the
earlier of the date received or the third business day after the date mailed; or
(iii) if given by overnight courier, on the next business day after the date
<PAGE>
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such notice is sent; or (iv) if given by facsimile, on the date receipt of
such notice is confirmed. All notices shall be addressed as follows:
To Purchaser:
First Albany Companies, Inc.
30 South Pearl Street
Albany, New York 12207
Fax No.: (518) 447-8068
With a copy to:
Michael Whiteman, Esq.
Whiteman Osterman & Hanna
One Commerce Plaza
Albany, New York 12260
Fax No.: (518) 487-7777
<PAGE>
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To Liquidator:
The New York State Liquidator of Insurance
as Liquidator of United Community Insurance Company:
Dino Venuto, Esq.
Attorney for the Liquidator
New York State Insurance
Department Liquidation Bureau
123 William Street
New York, NY 10038
With a copy to:
Lowenthal, Landau, Fischer & Bring
250 Park Avenue
New York, New York 10177
Attention: Jeffrey A. Moerdler, Esq.
or to such other address, or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by and against the respective successors and
assigns of the parties hereto, whether so expressed or not. Purchaser may assign
its rights and obligations under this Agreement to one or more of its
Affiliates. This Agreement embodies the entire agreement and understanding among
the parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings relating to the subject matter hereof. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York without giving effect to any conflict or choice of law rules.
The headings in this Agreement are for purposes of reference only and shall not
limit or otherwise affect the meaning
<PAGE>
hereof. This Agreement may be executed in any number of counterparts, each
of which shall be an original, but all of which together shall constitute one
instrument. This Agreement is not transferable or assignable by the Purchaser,
except to its Affiliates and except as may be provided herein.
10. Confidentiality. Both parties agree that this Agreement shall remain
confidential until [CONFIDENTIAL TREATMENT REQUESTED] November 1, 1996.
<PAGE>
IN WITNESS WHEREOF, the Purchaser and the Liquidator have executed this
Stock and Debt Purchase Agreement on this 12th day of April, 1996.
First Albany Companies, Inc.
By:_/s/ Alan Goldberg______
Name: _____________________
Title: ____________________
Superintendent of Insurance
of the State of New York as
Liquidator of United Community
Insurance Company:
By: /s/ Andrew A. Alberti___
Name: ______________________
Title: _____________________
<PAGE>
Exhibit H
MECHANICAL TECHNOLOGY INCORPORATED
Certificate of Assistant Secretary
I, M. Sheila Lamb, Assistant Secretary of Mechanical Technology,
Incorporated, a New York Corporation with offices at 968 Albany-Shaker Road,
Latham, New York, do hereby CERTIFY:
That, at the Board of Directors Special Meeting of said Corporation
held on April 11, 1996 at Company Headquarters, Latham, New York, at which a
100% quorum was present, either in person or by telephone, and acting throughout
with full authority, the following resolution was duly adopted and is now in
full force and effect:
WHEREAS, by letters dated March 28, 1996 and April 3, 1996, First
Albany Corporation ("First Albany") has requested that the Board of Directors of
the Company consent to the purchase of stock and the acquisition of an
obligation evidenced by a Claim Participation Agreement in the amount of
approximately $4,000,000 ("Debt"), as more fully described in such letters, and
WHEREAS, the Board considered this request at its meeting of March 28,
1996, and directed that R. Wayne Diesel, its President and Chief Executive
Officer, and counsel pursue other options and further discussions with First
Albany relative to that consent, and
WHEREAS, the members of the Board have received additional
reports, both orally and in writing, and
WHEREAS, a second meeting of the Board was commenced on
April 3, 1996 to consider the issues, and
WHEREAS, after discussion, the Board established certain parameters
under which it would consider granting the requested approval, based upon and
induced by the covenants and representations contained in the letters to the
Board of First Albany dated March 28, 1996 and April 3, 1996, at a Special
Meeting of the Board of Directors, at which all members were present, in person,
or by telephonic device in accordance with the New York Business Corporation Law
and the By-Laws of the Company, upon motion of Mr. Apkarian, seconded by Mr.
Diesel, it was
RESOLVED, that, based upon and induced by the covenants and
representations made by First Albany in its letters dated March 28, 1996 and
April 3, 1996 and, if and only if the letter dated April 3, 1996 is amended and
delivered to the Board in the form attached hereto as Exhibit "A" within seven
(7) calendar days from the date of this Resolution, the purchase of Stock and
Debt by First Albany is approved.
<PAGE>
IN WITNESS WHEREOF, I have hereunto subscribed my signature and have
affixed the seal of the Corporation this 11th day of April, 1996.
/s/ M. Sheila Lamb
M. Sheila Lamb
Assistant Secretary
Mechanical Technology Incorporated
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<PAGE>
EXHIBIT "A"
DATE ____________________
Dear Member of the Board:
This letter is intended to be read in context with our letters
of March 28, 1996 to the Board of Directors of MTI and Mr. Dennis O'Connor; and
is further intended to clarify First Albany's intentions and plans as presented
at the meeting with the Board of Directors of MTI on March 28, 1996; and to
respond to concerns which have been expressed to us since that time.
Accordingly, First Albany represents and reiterates that:
1. It is our intention to acquire the referenced shares of MTI common
stock and the Claim Participation Agreement for the purposes of investments to
be held in our corporate account. It is further our intention to assist in the
recapitalization of MTI in order to preserve and enhance the economic benefits
it brings to the capital region. Such a recapitalization has been and remains a
publicly stated objective of MTI's management and presumably its Board of
Directors.
It is not our intention to enter into any transations with the Company
other than to negotiate a restructuring or refinancing of the Claim
Participation Agreement as referenced below. Specifically, First Albany shall
not (a) merge with the Company, or cause the Company to merge or to be merged
with any of its subsidiaries or affiliates; (b) cause the consolidation of the
Company into First Albany or any of its subsidiaries or affiliates; or (c)
participate as a principal in the sale or lease of greater than ten percent of
the assets of the Company.
2. Should the Company and the Board of Directors determine that a
pre-emptive rights offering is in the best interests of the Company and its
shareholders in connection with a conversion of the Claim Participation
Agreement to equity or the offer of additional common stock of the Company in a
private placement to accredited investors, First Albany shall either abstain or
recuse itself from any vote of shareholders or, should we be represented on the
Board of Directors, any vote of the directors, on such an issue.
3. With respect to negotiations and discussions concerning
restructuring of the debt evidenced by the Claim Participation Agreement, First
Albany shall consider certain options, to include, but not be limited to: (a)
restructuring of the debt on terms and conditions more favorable than currently
exist pursuant to the Claim Participation Agreement as amended and on terms and
conditions that are at least comparable to those existing in the marketplace at
the time of the restructuring: (b) conversion of
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<PAGE>
the conditions that are at least comparable to those existing in the marketplace
at the time of the restructuring: (b) conversion of the debt to preferred stock;
(c) conversion of the debt to common stock provided, however, that the per share
price of such stock shall not be less than $1.50 per share; (d) some combination
of the options that the Company or the Board may present for consideration by
First Albany. Any agreement as to the restructuring of the Debt shall be subject
to the approval by a majority of disinterested directors of the Board.
4. First Albany shall propose that approximately $2 million in equity
be raised pursuant to a private placement to not more than 30 accredited
investors. First Albany is aware of a significant level of interest in such a
private placement and is prepared to move ahead to solicit such investors
immediately upon an agreement with the Board of Directors on the terms,
conditions and pricing of such an offering. Such proposal shall be subject to
approval by a majority of disinterested directors of the Board.
We believe the foregoing representations should convince the Board that
approval of First Albany's contemplated stock and debt acquisition, pursuant to
Section 912 of the Business Corporation Law, is in the best interests of the
Company. Furthermore, upon receipt of your approval, we are prepared to begin
discussions and serious negotiations immediately with the Board or its
management designees to accomplish the objectives and representations stated.
We look forward to your prompt request [N.B. probably should read
"response"] and remain available to meet with you to answer any additional
questions.
Sincerely,
George C. McNamee
Chairman
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<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED IRREVOCABLE PROXY
The undersigned agrees to, and hereby grants to First Albany Companies,
Inc. ("First Albany"), and any representatives thereof, an irrevocable proxy
pursuant to the provisions of Section 609 of the New York Business Corporation
Law, to vote, or to execute and deliver written consents orble otherwise act
with respect to, all shares of capital stock (the "Stock") of Mechanical
Technology Incorporated (the "Corporation") now owned or hereafter acquired by
the undersigned as fully, to the same extent and with the same effect as the
undersigned might or could do under any applicable laws or regulations governing
the rights and powers of shareholders of a New York corporation in connection
with the election of directors of the Corporation and as to any other matters on
which the undersigned might be able to vote as a shareholder of the Corporation.
The undersigned hereby affirms that this proxy is given as a condition of
entering into that Certain Agreement to Purchase Stock and Debt, dated as of
April 12, 1996 ("Purchase Agreement"), among the New York State Superintendent
of Insurance as Liquidator of United Community Insurance Company ("UCIC"), UCIC
and First Albany and as such is coupled with an interest and is irrevocable. It
is further understood by the undersigned that this proxy may be exercised by
First Albany and any representatives thereof for the period beginning the date
hereof and ending on the day immediately proceeding the Corporation's 1997
annual stockholder's meeting, unless sooner terminated in accordance with the
provisions of said Purchase Agreement. THIS PROXY SHALL REMAIN IN FULL FORCE AND
EFFECT AND BE ENFORCEABLE AGAINST ANY DONEE, TRANSFEREE OR ASSIGNEE OF THE
STOCK.
Dated this _____ day of April, 1996
UNITED COMMUNITY INSURANCE COMPANY
BY:
NEW YORK STATE SUPERINTENDENT OF INSURANCE AS
LIQUIDATOR OF UNITED COMMUNITY INSURANCE COMPANY
BY:
<PAGE>
