SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Amendment No. 3)
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)
May 7, 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
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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
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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 (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 2. Identity and Background.
-----------------------
Neither FAC nor any of the Executive Officers and Directors
has, during the last five years, been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws, except that in 1992 First Albany and Michael Lindburg,
its Chief Compliance Officer, were named as respondents in an administrative
proceeding instituted by the Securities and Exchange Commission (the "SEC"). The
administrative proceeding arose out of allegations that a former employee of
First Albany had engaged in a series of trades that were alleged to be designed
to manipulate the market price of the securities of a publicly traded company,
and that respondents had failed to reasonably supervise such activity so as to
detect and prevent violations of the federal securities laws. Further, the SEC
alleged that First Albany, while acting as a market-maker, published a favorable
research report relating to certain securities, the sale of which was deemed to
be a distribution in violation of Rule 10b-6. Without admitting or denying the
findings, facts or conclusions of law, the respondents consented in the
administrative proceeding to a finding that respondents had failed reasonably to
supervise a registered representative who was subject to their supervision, with
a view to preventing violations of Section 17(a) of the Securities Act of 1933,
as amended, Section 10(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and Rule 10b-5 thereunder, within the meaning of Sections
15(b)(4)(E) and 15(b)(6) of the Exchange Act; and that First Albany willfully
violated Section 7(c) of the Exchange Act and Regulation T thereunder, and Rule
10b-6 under the Exchange Act. In connection with such findings, Mr. Lindburg
consented to a one year supervisory suspension, and First Albany agreed to
retain a consultant to review and report upon the policies, procedures and
practices of First Albany designed to detect and prevent violations of the
federal securities laws.
Item 3. Source and Amount of Funds or Other Consideration
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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 was working capital.
Item 4. Purpose of Transaction.
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The purpose of the acquisition of securities of the Issuer
described herein is to influence the Board of Directors
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and the management of the Issuer, to assist in the revitalization of the Issuer,
and for investment. FAC is seeking representation on the Issuer's Board of
Directors, to be considered and acted upon at the adjourned 1996 Annual
Shareholders Meeting on May 16, 1996.
In connection with seeking such Board representation, on April
26, 1996, FAC (together with George C. McNamee, who is Chairman, a director and
Co-Chief Executive Officer of FAC, and Alan P. Goldberg, who is a director,
President and Co-Chief Executive Officer of FAC) filed a Preliminary Proxy
Statement on Schedule 14A (as amended by Amendment No. 1 thereto filed on May 8,
1996, the "First Albany Committee Proxy Statement") with the Securities and
Exchange Commission. As contemplated by the First Albany Committee Proxy
Statement, FAC (through Messrs. McNamee and Goldberg and certain other
representatives) is soliciting support for (and is, or may be deemed to be,
soliciting proxies to vote in favor of) the election of (i) Messrs. McNamee and
Goldberg and (ii) each of Harry Apkarian, R. Wayne Diesel, Stanley I. Landgraf
and E. Dennis O'Connor (each of whom is a nominee supported by the Issuer's
current Board of Directors and is described in the Issuer's Proxy Statement
dated February 16, 1996)(such Issuer nominees collectively, the "Designated
Issuer Nominees"). The Designated Issuer Nominees constitute the nominees of the
Issuer for Director, other than Albert W.
Lawrence and Lawrence A. Shore.
FAC has engaged in discussions with certain officers and
directors of the Issuer and with certain other significant shareholders relating
to changes in the present Board of Directors and the designation of certain
representatives of FAC to serve as members of the Board of Directors. The First
Albany Committee Proxy Statement has been filed in connection with FAC's
intention to solicit certain additional significant shareholders of the Issuer.
Nevertheless, FAC reserves the right to solicit all shareholders, as
contemplated by the First Albany Committee Proxy Statement.
The Issuer's by-laws provide that the Board of Directors shall
consist of not less than five nor more than fifteen directors, as determined by
the Board of Directors from time to time. The Issuer's by-laws further provide
that if the office of any director or directors becomes vacant for any reason,
the directors in office may choose a successor or successors who shall hold
office for the unexpired term in respect to which such vacancy occurred or until
the next election of directors, or any vacancy may be filled by shareholders at
any meeting thereof.
If elected, Messrs. McNamee and Goldberg currently intend to
seek to increase the size of the Board from six to seven or more directors,
pursuant to the foregoing provisions, and to cause Beno Sternlicht, a founder of
the Issuer who is currently not an officer or director of the Issuer or
otherwise
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affiliated therewith, to be appointed to one of such resulting vacancies. Any
decision by such nominees to take such action would be dependent upon the
composition of the Board, actions taken by management and the current Board and
other circumstances then existing. Mr. Sternlicht has not agreed to accept any
such appointment; accordingly, there is no assurance that he would serve if so
appointed.
In connection with its then ongoing negotiations with the
Liquidator (as defined below) with respect to the possible purchase of
approximately 25% of the outstanding Shares, on March 26, 1996, FAC obtained 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 obtained 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 purchased on May 7, 1996
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 (the New York anti-takeover statute), FAC has delivered
letters to the Board of Directors of the Issuer and to a board member (attached
as 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 then current economic condition of the Issuer) to assist
in the revitalization of the Issuer by enhancing the Issuer's balance sheet
through a private placement of approximately $2,000,000 in new equity and
through the restructuring or refinancing of the Purchased Debt, as described in
Item 6 below. FAC anticipates that in the case of any private placement by the
Issuer to raise new equity, FAC would seek to be designated as placement agent,
on terms no less favorable to the Issuer than those that the Issuer could obtain
from a third party on an arm's length basis. 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 stated that it 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
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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.
No assurance can be given that FAC or its nominees will be
able to implement any of the foregoing plans or produce favorable financial
results. FAC could, and expressly reserves the right to, modify its plans with
respect to FAC.
The Board Correspondence contains certain representations
regarding FAC's intentions with respect to the Issuer. Nevertheless, FAC notes
that such expressions of intent were stated based solely on then current
conditions and circumstances and were not intended to, and do not constitute,
binding obligations of FAC. FAC expressly reserves the right to take actions
inconsistent with the intentions expressed in such Board Correspondence,
although FAC has no current plans to do so.
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.
From time to time, FAC may buy or sell additional Shares, on
the open market, in private negotiated transactions, from the Issuer or
otherwise.
Notwithstanding the foregoing, as a significant shareholder of
the Issuer and through any of its representatives that may be members of 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 certificate of incorporation
and by-laws 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 authorized in an
inter-dealer quotation system of a registered national securities association,
(vii) causing a
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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 currently the direct beneficial owner of 1,036,698
shares of Common Stock, 909,091 Shares of which were acquired upon consummation
of the transactions contemplated by the Purchase Agreement described in Item 6
below. 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 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. 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). FAC's ability
to vote 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.
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") , pursuant to which it purchased on May 7,
1996 (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 which,
as of March 30, 1996, is
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an amount equal to approximately $946,148)) of indebtedness, in respect of which
the Issuer is an obligor, for consideration of $1.00 (the "Purchased Debt"). The
respective purchase prices for the Shares and the Purchased Debt resulted from
negotiations between FAC and the Liquidator, and are reflected in allocations
set forth in the Purchase Agreement.
The Purchased Debt relates to a $5,000,000 loan (the "Term
Loan") made on December 21, 1993 by UCIC to First Commercial Credit Corporation
("FCCC"), secured by an interest in all of FCCC's unencumbered assets, including
the proceeds of any contract acquired with the proceeds of the loan. FCCC used
$3,000,000 of such proceeds to enter into a Claim Participation Agreement with
the Issuer's UTE subsidiary, to be secured by a guarantee of the Issuer (as
amended, the "Guaranteed Claim Participation Agreement"). As a result of
amendments to the Guaranteed Claim Participation Agreement, the Issuer is
currently the sole obligor thereon. Pursuant to the Purchase Agreement, FAC
agreed to purchase either (i) if the Liquidator obtains FCCC's and the Issuer's
consent, an assignment of the Guaranteed Claim Participation Agreement directly
from FCCC to FAC or (ii) a pro rata participation in the Term Loan. On May 7,
1996, FAC, lacking the required consent, purchased a pro rata participation in
the Term Loan pursuant to a Participation Agreement with the Liquidator (the
"Participation Agreement"). The Participation Agreement contemplates that FAC
may (i) negotiate directly with the Issuer or FCCC to restructure the terms and
conditions of the Purchased Debt or (ii) participate pro rata with the
Liquidator in its efforts to collect on the Term Loan. In any event, FAC may act
as limited agent for the Liquidator in enforcing any of its rights under the
Term Loan for a period not to exceed six months. According to information in the
Issuer's Proxy Statement, certain officers and directors of the Issuer had been
officers or directors of UCIC.
As described below, FAC intends to negotiate a restructuring
of the Purchased Debt, and in negotiating and discussing any such restructuring,
FAC is considering 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.
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.
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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 were 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.
The Liquidator's obligations to consummate the transactions
contemplated under the Purchase Agreement were 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 (and pursuant to) the Purchase Agreement,
on May 7, 1996, FAC received an irrevocable written proxy to vote the Shares
(attached as Exhibit J hereto) at any shareholders meeting, including but not
limited to the Issuer's 1996 Annual Stockholder's meeting, and any adjournments
thereof. Such proxy expires 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 (the
New York anti-takeover statute), 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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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, FAC 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,
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should FAC be represented on the Board of Directors, any vote of the directors,
on such an issue.
The Board Correspondence contains certain representations
regarding FAC's intentions with respect to the Issuer. Nevertheless, FAC notes
that such expressions of intent were stated based solely on then current
conditions and circumstances and were not intended to, and do not constitute,
binding obligations of FAC. FAC expressly reserves the right to take actions
inconsistent with the intentions expressed in such Board Correspondence,
although FAC has no current plans to do so.
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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
(Incorporated by reference to Amendment No.
1 to the Schedule 13D, as filed April 12,
1996 ("Amendment No. 1").
Exhibit G - Agreement for the Purchase of Stock and Debt
by and between FAC and the Liquidator, dated
as of April 12, 1996.
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
(Incorporated by reference to Amendment No.
1).
Exhibit I - Participation Agreement dated May 7, 1996
between FAC and the Liquidator
Exhibit J - Proxy of the Liquidator
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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: May 8, 1996 FIRST ALBANY COMPANIES INC.
By: /s/ MICHAEL R. LINDBURG
Name: Michael R. Lindburg
Title: Secretary
<PAGE>
EXHIBITS
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
(Incorporated by reference to Amendment No.
1 to the Schedule 13D, as filed April 12,
1996 ("Amendment No. 1").
Exhibit G - Agreement for the Purchase of Stock and Debt
by and between FAC and the Liquidator, dated
as of April 12, 1996.
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
(Incorporated by reference to Amendment No.
1).
Exhibit I - Participation Agreement dated May 7, 1996
between FAC and the Liquidator
Exhibit J - Proxy of the Liquidator
<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
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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
<PAGE>
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Note and the 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.
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
<PAGE>
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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 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").
Purchaser proposes to purchase: (a) the UCIC Shares; and (b)
either (i) a direct assignment of the Guaranteed Claim Participation Agreement,
from Liquidator, as modified by the Modification Agreement and the Settlement
Agreement, and all rights, title, claims, proceeds, security, guarantees or
<PAGE>
-4-
collateral in connection therewith (the "Purchased Claim Participation
Agreement") or (ii) a Three Million and 00/000 Dollar ($3,000,000), plus accrued
and unpaid interest, participation interest in and to the rights of Liquidator,
in the Term Loan and Term Note, the terms of which shall include, but not be
limited to, Purchaser's right to act as agent for the Liquidator with respect to
the Collateral, including, but not limited to the sole and absolute right to
exercise all of Liquidator's rights by and on behalf of UCIC with respect to the
Collateral, to the extent of Purchaser's interest therein, the terms of which
are set forth more fully in the Participation Agreement, for a period to expire
on the first to occur of (x) notice by the Purchaser to the Liquidator that the
Purchased Term Loan and Note (as defined below) has been restructured with the
Corporation, to Purchaser's satisfaction, (y) if the Superintendent of Insurance
of the State of New York, as regulator of Insurance in the State of New York (or
any local, state or federal regulator or governmental authority) takes any
action against or with respect to LIG (or an Affiliate or Subsidiary thereof),
which the Liquidator deems, in his sole discretion, to affect, directly or
indirectly, the Term Loan, the $1.75 million loan from FCCC to A.W. Lawrence and
Company, Inc., or the transactions related thereto, then upon notice by the
Liquidator of such occurrence to the Purchaser, or (z) November 1, 1996;
provided, however, that Liquidator agrees that it shall at all times, cooperate
fully with Purchaser in any attempts by
<PAGE>
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Purchaser to enforce, restructure or otherwise collect upon the MTI Collateral
(as defined below). Thereafter all such rights of Purchaser as agent for
Liquidator, shall be extinguished and Liquidator shall act as agent for
Purchaser with respect to Purchaser's participation rights in the Term Loan,
Term Note and Collateral, on terms more fully set forth in the Participation
Agreement (all such interests are, collectively, the "Term Loan and Note
Participation"). The Purchased Claim Participation Agreement or the Term Loan
and Note Participation, are referred to as the "Purchased Obligations"
irrespective of which item is ultimately conveyed. In addition, in consideration
of Purchaser's agreement to purchase the UCIC Shares and the Purchased
Obligations, Liquidator shall hereby agree to refrain from taking any action
against Purchaser or the Corporation which may adversely affect Purchaser's
ability to exercise any rights in connection with the Corporation's guarantee
and obligations pursuant to the Guaranteed Claim Participation Agreement (the
"MTI Collateral").
The Seller has agreed to sell the UCIC Shares to the Purchaser
under the terms and conditions set forth in this Agreement.
The Seller has agreed to either assign the Purchased Claim
Participation Agreement or sell the Term Loan and Note
<PAGE>
-6-
Participation to the Purchaser under the terms and conditions set forth in this
Agreement.
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.
<PAGE>
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1.5 "Corporation" means Mechanical Technology Incorporated, a New
York Corporation.
1.6 "FCCC" means First Commercial Credit Corp.
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 "MTI Collateral" has the meaning given in paragraph 3 of the
recitals to this Agreement.
1.11 "Participation Agreement" means the agreement, in a form
satisfactory to Liquidator's and Purchaser's counsel, whereby the parties'
rights with respect to the Purchased Collateral are set forth.
1.12 "Person" means an individual, corporation, partnership, trust,
organization, association, governmental body or agency, or other entity.
<PAGE>
-8-
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.
1.15 "Purchased Claim Participation Agreement" has the meaning given
in paragraph 3 of the recitals to this Agreement.
1.16 "Purchased Obligations" has the meaning given in paragraph 3 of
the recitals to this Agreement.
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
<PAGE>
-9-
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 "Term Loan and Note Participation" has the meaning given in
paragraph 3 of the recitals to this Agreement.
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.
<PAGE>
-10-
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 either a) the Purchased Claim
Participation Agreement or b) the Term Loan and Note Participation, from the
Liquidator, 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 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) if the Liquidator is unable to deliver the Purchased Claim Participation
<PAGE>
-11-
Agreement, deliver an executed copy of the Participation Agreement, 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) a duly executed assignment of the Purchased Claim
Participation Agreement, together with any consents to assignment required
thereunder or in connection therewith, and any and all agreements, records,
filings, assignments, UCC-1s, UCC-3s and any other documents necessary to convey
good and valid title in and to the Purchased Claim Participation Agreement or
(ii) a duly executed copy of the Participation Agreement and any all agreements,
records, filings, assignments, UCC-1s, UCC-3s and any other documents necessary
to convey good and valid title in and to the Term Loan and Note Participation,
free and clear of all liens, pledges, mortgages, claims, counterclaims, disputes
as to title or encumbrances of any kind whatsoever. 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 either
(a) the assignment of the Purchased Claim Participation Agreement, or (b) the
sale of the Term Loan and Note Participation, and the allocation thereto of
payments on the Term Loan and Term Note and the proceeds of the Collateral as
contemplated by the Participation Agreement. Liquidator shall be responsible for
payment of any and all taxes or fees payable in conjunction with the transaction
contemplated by this Agreement.
<PAGE>
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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 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.
(a) Liquidator shall: (i) Use its best efforts to cause FCCC to
assign all of its interest in and to the Guaranteed Claim Participation
Agreement, as modified by the Modification Agreement and the Settlement
Agreement, to Liquidator, free and clear of all liens, encumbrances, defenses,
claims, counterclaims or disputes as to title, by any party to the Term Loan,
the Term Note, the Guaranteed Claim Participation Agreement, the Modification
Agreement or the Settlement Agreement, or any other person; (ii) Use its best
efforts to cause FCCC to execute and deliver any and all agreements, records,
filings, assignments, UCC-1s, UCC-3s and any other documents necessary to convey
good
<PAGE>
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and valid title in and to the Purchased Claim Participation Agreement; and (iii)
assign all of its interests in and to the Purchased Claim Participation
Agreement to Purchaser.
(b) If the Liquidator is unable to cause FCCC to assign the
Guaranteed Claim Participation Agreement to Liquidator, as set forth above, the
Liquidator shall convey the Term Loan and Note Participation to Purchaser and
the Liquidator shall enter into and be bound by the Participation Agreement,
pursuant to the terms set forth in this Agreement.
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
<PAGE>
-14-
"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).
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
<PAGE>
-15-
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 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
<PAGE>
-16-
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.
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 and the Participation Agreement (if
<PAGE>
-17-
executed), 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
either assign the Purchased Claim Participation Agreement, or sell the Term Loan
and Note Participation; and grant the Proxy; and the person signing this
Agreement, the Proxy and the Participation Agreement (if any) 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.
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 and the Participation Agreement (if any), sale of the UCIC Shares, the
assignment and delivery of the Purchased Claim Participation Agreement, the sale
and delivery of the Term Loan and Note Participation, 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.
<PAGE>
-18-
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 Conveyance of UCIC Shares, Purchased Claim Participation
Agreement, Term Loan and Note Participation.
(a) The Liquidator has previously delivered to the Buyer a
true and complete copy of the Guaranteed Claim Participation Agreement, the Term
Note and Security Agreement and all related documents;
(b) If Liquidator assigns the Guaranteed Claim Participation
Agreement to Purchaser, the assignment of the Guaranteed Claim Participation
Agreement from FCCC to Liquidator and from Liquidator to Purchaser, has been
duly authorized, executed and delivered by the respective parties thereto, and
constitute the legal, valid and binding obligation of such
<PAGE>
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parties thereto, enforceable against such parties in accordance with its terms;
and
(c) If Liquidator sells the Term Loan and Note Participation
to Purchaser, the Participation Agreement has been duly authorized, executed and
delivered by the Liquidator, and constitutes the legal, valid and binding
obligation of the Liquidator, enforceable against the Liquidator in accordance
with its terms;
(d) 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
Purchased Claim Participation Agreement, the Term Loan and Note Participation
and the MTI Collateral.
4.7 The Liquidator's Power and Authority. The Liquidator has full
power and authority, pursuant to the Order of Liquidation, by and on behalf of
UCIC, to sell the UCIC Shares, and the Term Loan and Note Participation, and to
assign the Purchased Claim Participation Agreement, 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,
<PAGE>
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the Proxy and the Participation Agreement (if executed), 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 and the Participation Agreement (if executed).
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 and either the
Purchased Claim Participation Agreement or the Term Loan and Note Participation;
and the person signing this
<PAGE>
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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. Certain Agreements by the Liquidator.
------------------------------------
(a) Liquidator agrees not to bring any claim, suit, or
proceeding, or take any action against Purchaser or the Corporation, that may
adversely affect or delay Purchaser's ability to exercise any rights in
connection with the MTI Collateral, and either the Purchased Claim Participation
Agreement or the Term Loan and Note Participation;
(b) If Liquidator commences any action, suit or proceeding,
Liquidator agrees not to interfere with, or otherwise adversely affect,
Purchaser's ability to exercise any rights it may have with respect to the MTI
Collateral, the Purchased Claim Participation Agreement or the Term Loan and
Note Participation;
(c) If the Liquidator receives any payment as the result of
any action, suit or proceeding, in connection with or related to the Collateral,
the Guaranteed Claim Participation Agreement, the Term Loan or the Term Note and
Purchaser has been unable to restructure, collect upon or enforce its rights
with
<PAGE>
-22-
respect to the MTI Collateral, the Purchased Claim Participation Agreement or
the Term Loan and Note Participation because (i) the UCIC Shares were not duly
and validly issued, and conveyed to Purchaser free and clear of all liens,
pledges, mortgages, claims, counterclaims, disputes as to title or encumbrances,
of any kind or nature whatsoever; (ii) the Purchased Claim Participation
Agreement or the Term Loan and Note Participation has not been assigned, sold or
conveyed, to Purchaser free and clear of all liens, pledges, mortgages, claims,
counterclaims, disputes as to title, or encumbrances, of any kind or nature
whatsoever; (iii) the Liquidator's security interest in the Collateral is not
fully perfected; (iv) the Term Loan and Note and related documents fail to
create the security interest they purport to create; or (v) the Liquidator's
action, suit or proceeding, as set forth above, has diminished the value of the
MTI Collateral or adversely affected, or delayed, Purchaser's ability to
exercise any rights in connection with the MTI Collateral, the Purchased Claim
Participation Agreement or the Term Loan and Note Participation, and Liquidator
ultimately receives payment in connection with any such action, then Purchaser
shall be entitled to receive all amounts collected by Liquidator, in excess of
two million dollars ($2,000,000), up to a maximum of Purchaser's interest in the
MTI Collateral and the Purchased Claim Participation Agreement, or the Term Loan
and Note Participation.
<PAGE>
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(f) Notwithstanding the foregoing, nothing contained in this
Agreement shall prohibit Liquidator from commencing any action, suit or
proceeding, against any entity other than the Corporation and Purchaser,
provided, however, that any such action, suit or proceeding shall not adversely
affect Purchaser's ability to restructure or exercise any rights with respect to
the MTI Collateral, the Purchased Claim Participation Agreement or the Term Loan
and Note Participation.
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, the purchase of the Purchased Claim Participation Agreement, or the
Term Loan and Note Participation by the Purchaser, 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
<PAGE>
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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 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
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
<PAGE>
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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 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.
<PAGE>
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10. Confidentiality. Both parties agree that this Agreement shall
remain confidential until the earlier to occur of the restructuring of the
Purchased Claim Participation Agreement or the Term Loan and Note Participation
or 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 A
PRESENT:
HON. FRANK B. WILLIAMS
Justice
STATE OF NEW YORK
SUPREME COURT COUNTY OF SCHENECTADY
- - - - - - - - - - - - - - - - - - - - - x
In the matter of the Application of
:
SALVATORE R. CURIALE, as
Superintendent of Insurance of the : ORDER OF LIQUIDATION
State of New York, for an order to
take possession of and liquidate the :
business and affairs and dissolve
: Index No. 94-1270
UNITED COMMUNITY INSURANCE COMPANY
:
- - - - - - - - - - - - - - - - - - - - - x
Upon reading and filing the petition heretofore served by
Salvatore R. Curiale, made in his capacity as Superintendent of Insurance of the
State of New York, duly verified the 3rd day of August, 1994, for an order
directing the Superintendent of Insurance to take possession of the property of
UNITED COMMUNITY INSURANCE COMPANY (hereinafter referred to as "UNITED") and to
liquidate the business and affairs and dissolve the corporate charter of UNITED
pursuant to Article 74 of the Insurance Law of the State of New York, and upon
the annexed unanimous consent of United's shareholder, dated the 9th day of
November, 1995, and it appearing to my satisfaction that UNITED was incorporated
on February 28, 1967 under the laws of the State of New York and began business
as a stock property/casualty insurer known as URBAN COMMUNITY INSURANCE COMPANY,
that the name was changed to
<PAGE>
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UNITED COMMUNITY INSURANCE COMPANY on February 12, 1982; that, the principal
place of business of UNITED is located in Schenectady County, New York; that it
is amenable to the Insurance Laws of the State of New York and particularly to
Article 74 thereof; that it is not prudent to reinsure in whole or in part the
existing policy obligations of UNITED pursuant to ss. 7405(c) of the Insurance
Law; that it should be dissolved and its corporate charter annulled and
forfeited; that UNITED is insolvent; that on the 9th day of November, 1995,
UNITED consented to the entry of an Order of Liquidation, with notice to it;
that it is in the best interests of policyholders and other creditors of UNITED
that this application be granted and UNITED be liquidated under and pursuant to
Article 74 ss. 7402(a), (c) and (l) of the Insurance Law; and petitioner having
appeared by Hon. DENNIS VACCO, Attorney General of the State of New York,
NOW on motion of Hon. DENNIS VACCO, Attorney General of the
State of New York, it is
ORDERED, that the petition of the Superintendent of Insurance
of the State of New York is granted, and it is further
ORDERED, that EDWARD J. MUHL, the Superintendent of Insurance
of the State of New York or any successor in office as Superintendent
(hereinafter referred to as "Superintendent") is hereby appointed Liquidator of
UNITED, and is hereby authorized and directed forthwith to take possession of
the property and liquidate the business and affairs of UNITED pursuant to
Article
<PAGE>
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74 of the Insurance Law and to deal with the property and business affairs of
UNITED in his name as Superintendent, and is vested with title to all of the
property, contracts and rights of action of UNITED pursuant to ss. 7405 of the
Insurance Law, and it is further
ORDERED, that the Superintendent pursuant to ss. 7433(b)(2) of
the Insurance Law shall make a list of all persons whose names appear on the
books and records of UNITED as policyholders or claimants and said listed
persons shall be deemed to have duly filed a proof of claim prior to the last
date set for filing claims and the Superintendent is relieved of notifying,
pursuant to ss. 7432(b), those persons whose names appear on said list, and it
is further
ORDERED, that all persons who may have claims against UNITED
and whose names do not appear on the books and records of UNITED as
policyholders or claimants, shall present proof of claim to the Superintendent,
as Liquidator, within four months from the date of the entry of this Order, and
it is further
ORDERED, that the notice of liquidation be given by
publication in the Daily Gazette published in Schenectady, New York, and
circulated in Albany, New York, and by publication in the Journal of Commerce,
commencing three weeks from the date of entry of this order once a week for two
successive weeks, and it is further
<PAGE>
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ORDERED, that notice of liquidation be given by publication in
one newspaper in the capital cities of each state in the United States wherein
UNITED is licensed to do business, once a week for two successive weeks within
the period allowed for the filing of claims, the newspaper to be selected by the
Liquidator in his discretion, and it is further
ORDERED, that the notice prescribed is sufficient notice to
all persons interested in the assets of UNITED; and it is further
ORDERED, that in the event one or more Insurance Departments
and/or Guaranty Funds or Associations of foreign States that have adopted the
Uniform Insurers Liquidation Act in which UNITED was licensed to do business,
desire to give formal notice to policyholders and creditors in their respective
State Insurance Departments or Guaranty Fund or Association, the Superintendent,
as Liquidator, may permit the giving of such notice as he in his discretion may
find desirable, and it is further
ORDERED, that all outstanding policy and other insurance
obligations, if any, as well as surety bonds and obligations thereunder of
UNITED terminate and all liability thereunder cease and be fixed as of 12:01
A.M., 30 days after the entry of this Order, or prior thereto upon the
procurement by policyholders of new insurance covering the risks insured
thereby, as well as procurement by principals of new surety bonds
<PAGE>
-5-
covering the obligations thereunder and notice thereof shall be given above as
herein above set forth, and it is further
ORDERED, that all other subsisting contracts, individual labor
or employment contracts, and other obligations of UNITED and all liability
thereunder cease and be fixed as of the date of the entry of this Order, and it
is further
ORDERED, that all leases and tax-sharing agreements of UNITED
and all liability thereunder shall cease and be fixed in the discretion of the
Superintendent, as Liquidator, upon the date of delivery of written notice of
cancellation thereof, or upon the effective date of cancellation contained
therein, by delivery of such notice to any party affected thereby, and it is
further
ORDERED, that the Superintendent, as Liquidator, is relieved
of the provisions set forth in ss. 7405(c) of the Insurance Law, to wit: to
reinsure in whole or in part the policy obligations of UNITED, and it is further
ORDERED, that EDWARD J. MUHL, the Superintendent or any
successor in office as Superintendent, is hereby authorized, permitted and
allowed to sell, assign and transfer any and all real and personal property,
stocks, bonds and securities in his possession or which may hereafter come into
his possession belonging to UNITED, in liquidation, at market price or better,
or when there is no market price, at the best price obtainable, at private sale
and at such times and upon such terms and
<PAGE>
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conditions as in his discretion he deems for the best interests of the creditors
of UNITED, and that he be authorized, permitted and allowed to take such steps
and to make and execute such agreements and other papers as may be necessary to
effect and carry out such sales, transfers and assignments, and it is further
ORDERED, that UNITED, its officers, directors, depositories,
trustees, policyholders, agents and employees and all other persons having any
property or records belonging to UNITED, are hereby directed to assign, transfer
and deliver to the Superintendent, as Liquidator, all of such property in
whomsoever the same may be, and that any persons, firms or corporations having
any books, papers or records relating to the business of said corporation shall
preserve the same and submit them to the Superintendent, as Liquidator, for
examination at all reasonable times, and it is further
ORDERED, that the officers, directors, trustees, depositories,
policyholders, agents and employees of UNITED and all other persons are enjoined
and restrained from the further transaction of business or from dealing with or
disposing of the property or assets of said corporation, or doing or permitting
to be done any act or thing which might waste its property or assets or allow or
suffer the obtaining of preferences, judgments, attachments or other liens, or
the making of any levy against
<PAGE>
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said corporation, or its estate while in the possession and control of the
Superintendent, as Liquidator, and it is further
ORDERED, that the officers, directors, trustees, depositories,
policyholders, agents and employees of UNITED and all other persons, including
but not limited to claimants, plaintiffs and petitioners who have claims against
UNITED, are permanently enjoined and restrained from bringing or further
prosecuting any action at law, suit in equity, special or other proceeding
against the said corporation or its estate, or the Superintendent and his
successors in office, as Liquidator thereof, or from making or executing any
levy upon the property or estate of said corporation, or from in any way
interfering with the Superintendent, or any successor in office, in his
possession or in the discharge of his duties as Liquidator thereof, or in the
liquidation of the business of said corporation as well as the Superintendent of
Insurance as Administrator of the Article 76 of the Insurance Law
Property/Casualty Security Funds, and ss. 107 of the Workers' Compensation
Security Fund insofar as they apply to policyholders and claimants of UNITED,
and it is further
ORDERED, that all parties to law suits in this State and all
other states and territories of the United States, are hereby enjoined and
restrained from proceeding with any trial, application for judgment or
proceeding on judgments or settlements in such actions at law, suits in equity,
special or
<PAGE>
-8-
other proceedings in which UNITED is obligated to defend a party insured or any
other person it is legally obligated to defend by virtue of its insurance
contract and any and all actions being defended by a primary or other underlying
insurer where such primary or underlying insurer has tendered or offered its
full policy limits or where said policy limits have been exhausted by payment of
the underlying insurer's aggregate and UNITED is the next excess of umbrella
layer of insurance for a period of 120 days from the date hereof, and it is
further
ORDERED, that those persons who may have first party or New
York Comprehensive Automobile Insurance Reparations Act (No-Fault) policyholder
loss claims against UNITED coming within the purview of Article 76 of the
Insurance Law, are enjoined for 30 days from the date hereof from presenting and
filing such formal claims in this proceeding pursuant to ss. 7432 of the
Insurance Law, and it is further
ORDERED, that the corporate charter of said UNITED be and the
same hereby is delivered, forfeited and surrendered to the Superintendent as
Liquidator and the same corporate charter shall be annulled and the said UNITED
dissolved upon submission by the Superintendent as Liquidator to the Court
without notice of an order providing for such dissolution, and it is further
ORDERED, that all further papers in this proceeding shall bear
the caption and be entitled:
"SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF SCHENECTADY
<PAGE>
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In the Matter of the Liquidation of
UNITED COMMUNITY INSURANCE COMPANY"
in place and stead of the caption as heretofore used, and it is
further
ORDERED, that the Superintendent, as Liquidator, may at any
time make further application for such further and different relief as he sees
fit.
E N T E R
/s/ Frank B. Williams
JUSTICE OF THE SUPREME COURT
Signed at Saratoga Springs
Nov. 9 1995
<PAGE>
CERTIFICATE OF UNANIMOUS CONSENT OF SHAREHOLDERS
------------------------------------------------
The undersigned, upon resolution made November 9, 1995, of the
Board of Directors of Lawrence Insurance Group, Inc., the sole shareholder of
United Community Insurance Company ("UCIC"), does hereby certify the unanimous
consent of the shareholder of UCIC to the liquidation of the business and
affairs and dissolution of UCIC and to the entry of an order to that effect.
November 9, 1995
/s/
By: _____________, an Officer
<PAGE>
LAWRENCE INSURANCE GROUP, INC.
------------------------------
RESOLUTION
Upon motion duly made by Miles Knorr and seconded by Kevin D.
Harkness, after discussion, it was
Resolved that the Board of Directors of Lawrence Insurance
Group, Inc. does hereby consent to the order of liquidation of United Community
Insurance Company dated the 9th day of November, 1995, and authorize this
consent to be affixed to such order, and it further authorizes Albert W.
Lawrence to execute such other documents as are necessary to implement such
consent.
CERTIFICATION
-------------
I, Barbara C. Lawrence, the Secretary of Lawrence Insurance
Group, Inc., do hereby certify that the above resolution was adopted by a
majority of the members of the Board of Directors of Lawrence Insurance Group,
Inc., at a meeting thereof held on the 9th day of November, 1995 at which a
quorum was present, and that it has not been amended or rescinded.
/s/ Barbara C. Lawrence
BARBARA C. LAWRENCE
Secretary
<PAGE>
Index No. 94-1270
SCHENECTADY COUNTY
[N.Y. STATE SEAL]
STATE OF NEW YORK
INSURANCE DEPARTMENT
160 WEST BROADWAY
GEORGE E. PATAKI NEW YORK, NEW YORK 10013 EDWARD J. MUHL
Governor Superintendent
of Insurance
I, EDWARD J. MUHL, Superintendent of Insurance of the State of
New York, pursuant to law and an order of the Supreme Court made in the matter
of an application by the Superintendent of Insurance to take possession of the
property and liquidate the business of
UNITED COMMUNITY INSURANCE COMPANY
said order bearing date the 9th day of November, 1995 and having been entered
the 10th day of November, 1995 do hereby appoint
ANDREW A. ALBERTI
as my Agent to take possession of the property and liquidate the business of the
said
UNITED COMMUNITY INSURANCE COMPANY
<PAGE>
Exhibit B
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 or 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>
Exhibit I
EXECUTION COPY
The Superintendent of Insurance of the State of New York
as Liquidator of
United Community Insurance Company
431 New Karner Road
P.O. Box 15093
Albany, New York 12212-5098
May 7, 1996
First Albany Companies, Inc.
30 South Pearl Street
Albany, NY 12207
Gentlemen:
This letter agreement ("Participation Agreement") sets forth the
understanding and agreement between The Superintendent of Insurance of the State
of New York, as Liquidator of United Community Insurance Company (the
"Liquidator"), First Albany Companies, Inc. (the "Participant") and First Albany
Companies, Inc., as limited agent for the express purpose of this Participation
Agreement, as provided herein (the "Limited Agent") with respect to the purchase
by the Participant, on the terms and subject to the conditions contained herein,
of a participation interest in and to the Term Loan (as hereinafter defined). As
used herein, the term Security Agreement shall mean that certain Term Loan and
Security Agreement entered into on December 21, 1993 between First Commercial
Credit Corp., a New York corporation ("FCCC"), and United Community Insurance
Company ("UCIC"), whereby UCIC extended a loan to FCCC in the original principal
amount of Five Million and 00/100 Dollars ($5,000,000.00) (the "Term Loan")
evidenced by a Term Note (the "Term Note"), having an outstanding principal
balance as of the date hereof of Five Million and 00/100 Dollars
($5,000,000.00). FCCC's obligations under the Term Note are secured or
guaranteed, as the case may be, 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 as well as the Guaranteed Claim
Participation Agreement, the Modification Agreement, the Settlement Agreement
and the MTI Collateral, in each case as hereinafter defined) (all of the
foregoing, collectively, the "Collateral"). The rights of Liquidator in the
Security Agreement were granted pursuant to an Order of Liquidation of UCIC (the
"Order") entered in the Supreme Court of the State of New York, Schenectady
County. Terms which are
<PAGE>
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capitalized and not otherwise defined in the text herein shall have the meanings
ascribed to such terms in Section 1 below.
In consideration of the mutual promises contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Liquidator hereby sells to the Participant, and the
Participant hereby purchases from the Liquidator, either (1) all Liquidator's
right, title and interest in and to that portion of the Term Loan secured by the
MTI Collateral (the "MTI Participation"), or (2) if Purchaser notifies
Liquidator that it is unable to enforce or restructure the MTI Collateral to its
satisfaction, then an undivided fractional interest in the Term Loan to the
extent of the ratio that Three Million and 00/100 Dollars ($3,000,000) bears to
the unpaid principal amount of the outstanding Term Loan (the "Aggregate
Participation"; the MTI Participation and the Aggregate Participation are,
collectively, the "Participation"). If the Purchaser elects the MTI
Participation, Purchaser shall be entitled to receive from Liquidator any
payments or proceeds received by Liquidator of installment of principal,
participation payments, accrued interest, or other payments or proceeds directly
related to payments made by MTI to FCCC, UCIC or Liquidator, or the MTI
Collateral solely in connection with MTI's obligations under the Guaranteed
Claim Participation Agreement; Purchaser shall not be entitled to any other
payments or proceeds. If Purchaser elects the Aggregate Participation, the total
aggregate dollar amount of the Participation shall be reduced from time to time
through application of payments of installments of principal on the Term Loan
received by the Liquidator or from proceeds of Collateral, as more particularly
set forth herein.
The sale and purchase of said Participation shall be upon the following
express terms and conditions:
1. Definitions.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with such Person.
"Aggregate Participation" shall have the meaning set forth in
the second introductory paragraph of this Agreement.
"Collateral" shall have the meaning set forth in the
introductory paragraph of this Agreement.
"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.
<PAGE>
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"Corporation" means Mechanical Technology Incorporated, a New
York corporation.
"FCCC" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Guaranteed Claim Participation Agreement" means the Claim
Participation Agreement dated December 21, 1993 among FCCC, UTE and the
Corporation, whereby FCCC used Three Million Dollars and 00/100 ($3,000,000.00)
from 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 Fifty-One Dollars and 00/100 ($7,971,351.00), and in exchange UTE agreed
to repay FCCC Three Million Dollars and 00/100 ($3,000,000.00), plus certain
participation payments, to be secured by the corporate guarantee of the
Corporation (as parent of UTE) as amended by the Settlement Agreement, and as
otherwise amended from time to time.
"LIG" means the Lawrence Insurance Group, Inc., a New York
corporation.
"Limited Agent" shall have the meaning set forth in the
introductory paragraph of this Agreement.
"Liquidator" shall have the meaning set forth in the
introductory paragraph of this Agreement.
"Modification Agreement" means the modification of the
Guaranteed Claim Participation Agreement, dated December 14, 1994, whereby the
calculation of certain amounts due FCCC were reduced in exchange for the
Corporation's agreement to make certain payments to FCCC.
"MTI Collateral" means the Corporation's guarantee and
obligations pursuant to the Guaranteed Claim Participation Agreement.
"Order" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Participant" shall have the meaning set forth in the
introductory paragraph of this Agreement.
"Participation" shall have the meaning set forth in the second
paragraph of this Agreement.
<PAGE>
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"Participation Agreement" means this Participation Agreement,
as the same may be amended, modified, supplemented or restated from time to
time.
"Person" means an individual, partnership, corporation, trust,
organization, association, governmental body or agency, or other entity.
"Purchase Agreement" means the Stock and Debt Purchase
Agreement dated as of April 12, 1996 between the Liquidator, as seller and the
Participant, as purchaser.
"Security Agreement" shall have the meaning set forth in the
introductory paragraph of this Agreement.
"Settlement Agreement" means the settlement, approved by the
Bankruptcy Court on August 18, 1995, among FCCC, UTE and the Corporation whereby
UTE paid FCCC certain amounts in settlement of all of 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 to extend the repayment date.
"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.
"Term Loan" shall have the meaning set forth in the
introductory paragraph of this Agreement.
"Term Note" shall have the meaning set forth in the
introductory paragraph of this Agreement.
"UCIC" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"UTE" shall mean United Telecontrol Electronics, Inc., a New
Jersey corporation.
2. The Participation. Upon the closing of the transaction
contemplated under the Purchase Agreement, this Participation Agreement, as
executed, shall become effective and as so executed, amended and supplemented
from time to time, shall evidence the consummation
<PAGE>
-5-
of the Participation, and no other form of evidence thereof, including any
participation certificate, shall be necessary.
3. Settlements and Accountings. Upon Participant's request for
same, Liquidator shall render to Participant, after the end of any month during
which such request shall have been made, a summary statement of the Term Loan
for such month (such month being hereinafter referred to as a "Settlement
Period"). Unless either party hereto gives the other party at least five (5)
business days prior written notice to the contrary, all funds remitted by
Liquidator to Participant hereunder, and all funds remitted by Participant to
Liquidator hereunder, shall be sent by wire transfer to each party's respective
account as set forth in Section 12 hereof. Liquidator agrees to mark its books
and records each Settlement Period to show at all times the dollar amount of the
Participation in the outstanding Term Loan. Participant agrees that it shall
have no right to transfer all or any part of the Participation to others without
Liquidator's prior written consent, which consent shall not be unreasonably
withheld.
4. Participation in all Benefits, Payments and Security. Except
as otherwise provided in Section 5 hereof, as a participant in the Term Loan,
Participant shall also participate (in the same ratio as provided above) in any
and all benefits from and payments and recoveries received by Liquidator or the
Limited Agent from FCCC or others, whether pursuant to the Security Agreement,
the Guaranteed Claim Participation Agreement or otherwise, and all proceeds
thereof, and Participant shall also share in and have the benefit of the MTI
Collateral, guarantees and other claims which Liquidator may now have, or from
time to time may receive in connection with the Security Agreement, or the
Guaranteed Claim Participation Agreement, and all proceeds thereof, in the same
elected interest, percentage or ratio. It is agreed that Participant shall look
only to FCCC and to the collection of accounts receivable and other collateral
guarantees and claims for the payment of indebtedness owing in respect of the
Term Loan.
5. Participation in Recoveries. All monies and other recoveries
received on and after the date hereof by the Liquidator or the Limited Agent in
respect of the Term Loan or the Collateral shall be applied in the following
order:
(a) In the event the Limited Agent restructures the MTI Collateral as
provided herein (assuming Participant has elected the MTI Participation), any
amounts paid by MTI shall be paid to Participant;
(b) If the Participant elects the Aggregate Participation, to the
unpaid principal amount of the Term Loan and to accrued interest payable on
account of the Term Loan, divided between Liquidator and Participant in the
proportion of their respective interests in the Term Loan, as the same is
determined in accordance with the second introductory paragraph hereof, until
Liquidator's and Participant's interests therein are repaid in full;
<PAGE>
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(c) Any surplus, to the extent that Liquidator and Participant are not
legally or equitably obligated to refund the same to FCCC or to make any other
disposition thereof, shall be applied to any other indebtedness which may be
owing from FCCC to either Liquidator or Participant, and in the event that FCCC
shall have such other indebtedness to both Liquidator and Participant, then such
surplus shall be divided between Liquidator and Participant in the ratio of
their respective interests.
6. Enforcement. (A) Except as otherwise provided in Paragraph (B)
below, Liquidator shall have the exclusive right in its name alone to carry out
the provisions of the Security Agreement, to enforce and collect the Term Loan
made thereunder, and to exercise and enforce all rights and privileges accruing
to it by reason of said Security Agreement and any other agreements, Collateral,
guarantees or claims given to it in connection therewith, all in its sole
discretion and in the exercise of its business judgment. Liquidator shall handle
all transactions relating to the Security Agreement in accordance with its usual
practices in the ordinary course of business and shall adhere to the same
standards of conduct as would be the case if all payments on the Term Loan were
to be made exclusively to Liquidator. Liquidator has not made and does not make
any warranties, express or implied, nor does it assume any liability to
Participant with respect to: (a) the present or future solvency or financial
worth of FCCC or obligors under any instruments of guarantee; (b) the
enforcement, validity, value or collectibility of: the Term Loan or any
Collateral or guarantee which may have been granted to UCIC in connection with
the Security Agreement; or (c) FCCC's title or right to transfer, assign or
pledge Collateral to the Liquidator. Liquidator shall not be liable to
Participant for any action or failure to act or any error of judgment,
negligence, or mistake, or oversight whatsoever on the part of Liquidator or any
of its agents, officers, employees, attorneys, successors or assigns with
respect to any transactions relating to the Security Agreement or Collateral or
guarantees therefor, provided Liquidator has acted in good faith and has not
been adjudged liable of any gross negligence or willful misconduct.
(B) The Liquidator hereby appoints Limited Agent to act as
agent on behalf of Liquidator in accordance with the terms provided herein.
Limited Agent shall have the sole and absolute right to exercise all of
Liquidator's rights by and on behalf of UCIC with respect to FCCC, the Term
Loan, any guaranty thereof and the Collateral, to the extent of Liquidator's
interest therein, for a period to commence upon the effectiveness of this
Participation Agreement and to expire on the first to occur of (x) notice by
Participant to Liquidator that Participant has enforced, restructured or
otherwise collected upon the MTI Collateral, to Participant's satisfaction, (y)
if the Superintendent of Insurance of the State of New York, as Regulator of
Insurance in the State of New York (or any local, state or federal regulator or
governmental authority) takes any action against or with respect to LIG (or any
Affiliate or Subsidiary thereof), which the Liquidator deems, in his sole
discretion, to affect, directly or indirectly, the Term Loan, the $1.75 million
loan from FCCC to A.W. Lawrence and Company, Inc., or the transactions related
thereto, then upon notice by the Liquidator of such occurrence to the
Participant, or (z) November 1, 1996; provided, however, that Liquidator agrees
that it shall at
<PAGE>
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all times cooperate fully with Participant in any attempts by Participant to
enforce, restructure or otherwise collect upon the MTI Collateral. Thereafter,
all such rights of Limited Agent shall be extinguished, and Liquidator shall
have the rights of enforcement as provided in Paragraph (A) above.
7. Events of Default; Restrictions on Changes in Fundamental
Terms of Security Agreement. The parties acknowledge that an event of default
currently exists under the Security Agreement, that the outstanding principal
balance of the Term Loan equals $5,000,000.00 and that no payments of principal
of or interest on the Term Loan have been made or are being made currently
thereon. In addition, and notwithstanding the provisions of Paragraph 6 above
and except as required by court order or operation of law, Liquidator agrees
that it will promptly notify Participant in writing upon Liquidator's receipt of
actual knowledge of any event of default under the Security Agreement (in the
event the existing default has been cured and a subsequent default occurs), and
Liquidator further agrees that it will not, without the written consent of
Participant, which consent shall not be unreasonably withheld or delayed: (i)
reduce the amount owing by FCCC under the Security Agreement by a forgiveness of
debt, (ii) decrease the per annum interest rate payable by FCCC as set forth in
the Security Agreement, (iii) execute any release of Liquidator's security
interest in any Collateral, except for releases relating to dispositions of
Collateral permitted by the Security Agreement, or in the ordinary course of
FCCC's business, (iv) amend the Security Agreement so as to alter the terms of
repayment of the Term Loan or (v) release any guarantor of the Term Loan or the
Collateral. Notwithstanding anything to the contrary contained in the previous
sentence, during any period in which any proceeding (whether voluntary or
involuntary) under any bankruptcy, insolvency, reorganization, or other similar
law is in effect regarding FCCC, or any person or entity controlling or under
common control with FCCC. Participant hereby acknowledges that Liquidator shall
have the ability, without obtaining the consent of Participant, to follow and
perform any orders of a bankruptcy court or other court before which such
proceeding is pending and/or do what Liquidator deems necessary, solely in the
exercise of its commercially reasonable judgment, to deal with FCCC, to
administer the Term Loan, or to protect and preserve (or if need be, to
liquidate) the Collateral, for the benefit of the Liquidator and its
participants; provided, that Liquidator shall consult with Participant prior to
taking or omitting to take any action with respect to the MTI Collateral, and in
any event, shall give Participant notice thereof and keep Participant informed
of all such developments.
8. Collection and Legal Expenses. All out-of-pocket costs and
expenses incurred by (a) Liquidator in connection with the Term Loan and in the
collection of Collateral shall be borne exclusively by Liquidator, and (b)
Limited Agent in connection with the Term Loan and in the collection of the
Collateral shall be borne exclusively by Limited Agent. In the event that either
party hereto shall be sued or threatened with suit by any receiver or trustee in
bankruptcy on account of any alleged preference or voidable transfer alleged to
have been received by either party hereto as the result of any transaction in
respect of which Participant shall have participated with Liquidator hereunder,
or in the event that any action, claim or demand of any
<PAGE>
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kind shall be asserted against either party hereto directly or indirectly
relating to such transaction, then in such event any moneys paid in
satisfaction, or compromise of such suit, claim, action or demand and any
expenses, costs and attorney's fees paid or incurred in connection therewith,
shall be shared by Liquidator and Participant on a pro rata basis in accordance
with the percentage of the Participation, provided that no such settlement or
compromise shall be made without Participant's prior written consent, which
shall not be unreasonably withheld or delayed. The provisions of this paragraph
shall not apply to any suits, actions, proceedings or claims of the nature
referred to herein or otherwise which are based upon or related to the repayment
of, or the taking of security for, any loans or advances made by either party
hereto to FCCC or other transactions with FCCC prior to the effective date of
this Participation Agreement or under transactions that are not participated in;
and the party making such loans or advances shall be exclusively responsible for
the defense of such suits, actions, proceedings or claims and the payment of all
such expenses or settlements connected therewith.
9. Termination. Neither Liquidator nor Participant shall have any
right to terminate this Participation Agreement. In the event that (a) the
Security Agreement with FCCC is at any time terminated by Liquidator or FCCC,
Liquidator shall promptly notify Participant thereof or (b) the MTI Collateral
is restructured in a manner acceptable to the Participant, Participant shall
promptly notify Liquidator thereof, and upon the occurrence of any such event,
this Participation Agreement shall automatically terminate as of the date on
which the termination of the Security Agreement with FCCC or the restructuring
of the MTI Collateral becomes operative or effective. Termination of this
Participation Agreement as herein provided shall not affect each party's
respective rights or obligations hereunder incurred prior to the effective date
of such termination. Subject to the terms of Section 13 hereof, this
Participation Agreement may not be assigned by either party without the consent
of the other party, which consent shall not be unreasonably withheld.
10. Independent Investigation. Participant acknowledges that it
has received and reviewed all of the financial and other information that
Participant believes to be necessary to enable Participant to reach an informed
judgment with respect to the credit-worthiness of FCCC, the value and extent of
the Collateral, and the desirability of purchasing the Participation. Liquidator
acknowledges that, so long as this Participation Agreement remains in effect,
Participant shall be entitled to review and copy, at reasonable times during
Liquidator's normal business hours, all financial and other information relating
to FCCC which Liquidator may have, other than information which constitutes
privileged and/or confidential communications between Liquidator and its
counsel, or between Liquidator and FCCC, or other provider of such information.
Participant specifically acknowledges that, independently and without reliance
upon any representations of Liquidator, and based on the financial information
of FCCC previously delivered to Participant and such other documents and
information as Participant deemed appropriate, Participant has made and relied
upon its own credit analysis and judgment to execute this Participation
Agreement and purchase the Participation. Participant also
<PAGE>
-9-
acknowledges that, independently and without reliance upon Liquidator, and based
on such documents and information as Participant deems appropriate at the time,
Participant will continue to make and rely upon it own credit decisions in
taking or not taking action pursuant to this Participation Agreement, including
the purchase of the Participation.
11. Documents; Copies of Notices to FCCC. Participant acknowledges
that it has received and reviewed a copy of the Security Agreement as executed.
Liquidator shall hold copies of the Security Agreement and related documents at
its offices at 431 New Karner Road, P.O. Box 15093, Albany, New York 12212-5098.
Upon written notice from Participant, Liquidator will permit Participant's
limited agents, at reasonable times during business hours, to examine such
copies of the Security Agreement and related documents and Liquidator's books
and records relating to the Term Loan. Upon Participant's request, Liquidator
will furnish to Participant copies of such documents and agreements relating to
the Term Loan as Liquidator may have in its possession. In addition, Liquidator
shall furnish promptly to Participant copies of all amendments, consents,
waivers of default and notices of default which Liquidator sends to FCCC, and
any and all notices, financial reports and any material documents received by
Liquidator from FCCC, and, upon request of Participant, any other documents
received by Liquidator from FCCC.
12. Notices; Payment and Wiring Instructions. All notices
hereunder shall be sent by registered mail, telecopy, or facsimile transmission,
at the respective addresses of the Lender and the Participant set forth below,
or to such other address as either party hereto from time to time may designate
by written notice to the other party. If any notice is sent by mail such notice
shall be deemed to have been given three (3) business days after posting. All
payments and settlements hereunder shall be made without setoff, reduction or
counterclaim, and shall be sent by wire transfer as set forth below (or
otherwise in accordance with written instructions as designated by either party
from time to time):
(a) Notices sent to Liquidator:
Superintendent of Insurance of the State of New York, as
Liquidator of United Community Insurance Company
Dino Venuto, Esq.
Attorney for the Liquidator
State of New York Insurance Department Liquidation Bureau
123 William Street
New York, NY 10038
Tel. No. (212) 341-6720
Fax. No. (212) 608-3398
with a copy to:
<PAGE>
-10-
Lowenthal, Landau, Fischer & Bring, P.C.
250 Park Avenue
10th Floor
New York, NY 10177
Attn: Jeffrey A. Moerdler, Esq.
Tel. No. (212) 986-1116
Fax. No. (212) 986-0604
(b) Notices sent to Participant:
First Albany Companies, Inc.
30 South Pearl Street
Albany, NY 12207
Tel. No.
Fax. No. (518) 447-8068
with a copy to:
Whiteman Osterman and Hanna
One Commerce Plaza
Albany, NY 12260
Attn: Michael Whiteman, Esq.
Tel. No. (518) 487-7600
Fax. No. (518) 487-7777
(c) Wires sent to Liquidator:
Wire to: Chemical Bank, New York, New York
ABA #: 021 000 128
To Benefit: United Community Insurance Company
For A/C #: 573 020 795
(d) Wires sent to Participant:
Wire to: Chemical Bank, New York, New York
ABA#: 021 000 128
To Benefit: First Albany Corporation
For A/C #: 066 002 044
For the Account of: First Albany Companies, Inc.
13. Miscellaneous. Liquidator warrants and represents that
Liquidator is the sole owner of the Term Loan, and has duly authorized the sale
of the Participation to the Participant.
<PAGE>
-11-
Participant warrants and represents that it has duly authorized the purchase of
the Participation from Liquidator. This Participation Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
contained herein, can be changed only by a writing signed by the parties hereto,
and shall bind and benefit such parties and their respective successors and
assigns. Liquidator's failure or delay to exercise any right hereunder shall not
constitute a waiver thereof nor bar it from exercising any of its rights at any
time. The validity, interpretation and enforcement of this Participation
Agreement shall be governed by the laws of the State of New York, without
reference to its choice of law principles. It is the express intent of the
parties hereto that the Participation shall be construed as a commercial
transaction between them and shall not be construed in any manner as an
investment or "security", as defined under applicable federal or state
securities law, and that Liquidator shall in no event be deemed to be
Participant's agent, or owe any fiduciary duty whatsoever to Participant.
<PAGE>
-12-
If the foregoing is acceptable to you, please sign in the
space provided below, whereupon this shall become a binding Participation
Agreement, and return a copy of same to us for our files.
SUPERINTENDENT OF INSURANCE
OF THE STATE OF NEW YORK,
AS LIQUIDATOR OF
UNITED COMMUNITY INSURANCE COMPANY
By: /s/ ANDREW A. ALBERTI
Name: Andrew A. Alberti
Title: As Agent for the Superintendent
ACCEPTED AND AGREED TO AS OF
THIS 7TH DAY OF MAY, 1996
FIRST ALBANY COMPANIES, INC.
By:/s/ George C. McNamee
Name:
Title:
FIRST ALBANY COMPANIES, INC., as Limited Agent
By:/s/ George C. McNamee
Name:
Title:
<PAGE>
Exhibit J
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 or
otherwise act with respect to, all shares of capital stock (the "Stock") of
Mechanical Technology Incorporated (the "Corporation") now owned by the
undersigned, fully and 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 to
closing the transactions contemplated under that certain Agreement for the
Purchase of Stock and Debt, dated as of April 12, 1996 ("Purchase Agreement"),
between the Superintendent of Insurance of the State of New York as Liquidator
of United Community Insurance Company, 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
preceding 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 7th day of May, 1996
SUPERINTENDENT OF INSURANCE OF
THE STATE OF NEW YORK AS
LIQUIDATOR OF UNITED COMMUNITY
INSURANCE COMPANY
By: /s/ Andrew A. Alberti
Name: Andrew A. Alberti
Title: Agent for the Superintendent
<PAGE>
