Approximate date of proposed sale to the public: As soon as possible after
effective date.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________
MECHANICAL TECHNOLOGY 14-1462255
INCORPORATED (I.R.S. Employer
(Exact name of registrant as Identification Number)
specified in its charter)
968 Albany-Shaker Road
New York Latham, NY 12110
(State or other jurisdiction (518) 785-2211
of incorporation or (Address, including zip code,
organization) and telephone number,
including area code, of
Cynthia A. Scheuer registrant's principal
Mechanical Technology executive offices)
Incorporated
968 Albany-Shaker Road Copies of all communications
Latham, NY 12110 to:
(518) 785-2211
(Name, address, including zip Catherine S. Hill, Esq.
code, and telephone number, Whiteman Osterman & Hanna
including area code, of agent One Commerce Plaza
for service) Albany, NY 12260
If any of the securities being registered on this Form are to
be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, as amended ("Securities Act"),
other than securities offered only in connection with dividend or
reinvestment plans, check the following box. [ ]
If the registrant elects to deliver its latest annual report
to security holders, or a complete and legible facsimile thereof,
pursuant to Item 11(a)(1) of this Form, check the following box. [X]
<PAGE>
If this Form is filed to register additional securities or an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, please check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. [ ]
===============================================================================
CALCULATION OF REGISTRATION FEE
===============================================================================
Proposed Proposed
Maximum Maximum
Title of Each Class of Offering Aggregate Amount of
Securities to be Amount to Price per Offering Registration
Registered be registered Share(1) Price Fee
- -------------------------------------------------------------------------------
Common Stock $6,000,000 $1,770
===============================================================================
Total $6,000,000 $1,770
===============================================================================
(1) Common Stock price per share calculated in accordance with
Rule 457(c) of the Securities Act using the proposed maximum
aggregate Offering Price.
The registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective date
until the registrant shall file a further amendment that
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration
Statement shall become effective on such date as the Commission
acting pursuant to said Section 8(a), may determine.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 22, 1998
PROSPECTUS
MECHANICAL TECHNOLOGY INCORPORATED
RIGHTS TO PURCHASE __________ SHARES OF COMMON STOCK
Mechanical Technology Incorporated ("MTI" or the "Company"),
at no charge to its stockholders, is distributing to holders of
record of shares of its common stock, $1.00 par value per share
(the "Common Stock"), as of the close of business on August 12, 1998
(the "Record Date"), non-transferable subscription rights (the
"Rights") to purchase additional shares of Common Stock (the "Basic
Subscription Privilege") at an exercise price of $_________ per
share (the "Exercise Price"). Stockholders will receive one Right
for each ____ shares of Common Stock held on the Record Date. Each
Right will entitle its holder (a "Holder") to purchase one share of
Common Stock (collectively the "Underlying Shares"). No fractional
shares of Common Stock will be sold, and fractional interests will
be rounded up. Upon exercise of the Basic Subscription Privilege,
a Holder will also be entitled to purchase at the Exercise Price a
pro-rata portion of any Underlying Shares that are not otherwise
subscribed for pursuant to the exercise of the Basic Subscription
Privilege (the "Oversubscription Privilege"; collectively, with the
Basic Subscription Privilege, and the sale of shares of Common
Stock in connection therewith, the "Offering").
THE RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
SEPTEMBER 24, 1998, unless extended by the Company (such date, as
it may be extended on one or more occasions, is referred to herein
as the "Expiration Date"). In no event will the Expiration Date be
extended beyond November 30, 1998. If the Company elects to extend
the term of the Rights, it will issue a press release to such
effect not later than the first day The Nasdaq National Market is
open for trading following the most recently announced Expiration
Date. Funds provided in payment of the Exercise Price will be held
by the American Stock Transfer & Trust Company, as the Subscription
Agent, until the closing, which will occur promptly following the
Expiration Date. The exercise of Rights is irrevocable once made,
and no interest will be paid on funds held for Holders exercising
their Rights.
Since August 1994, the Company's Common Stock has been traded
on the over-the-counter market and is listed under the symbol MKTY
on the OTC Bulletin Board. MTI has filed a registration statement
with the Securities and Exchange Commission ("SEC") covering the
shares of Common Stock to be issued upon exercise of the Rights.
On July 17, 1998, the closing bid price of the Common Stock as
reported on the OTC Bulletin Board was $7.25 per share.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY, AND IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY
OTHER PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES TO
ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION MAY NOT LAWFULLY BE MADE.
YOU SHOULD CAREFULLY CONSIDER THE INFORMATION REGARDING THE RISKS
ASSOCIATED WITH AN INVESTMENT IN THE COMMON STOCK OF MECHANICAL
TECHNOLOGY INCORPORATED THAT ARE DISCUSSED UNDER THE CAPTION "RISK
FACTORS" BEGINNING ON PAGE 12.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR
TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR
SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER
THE SECURITIES LAWS OF ANY STATE.
- ----------------------------------------------------------------------
| | EXERCISE AND OFFER | PROCEEDS TO THE |
| | PRICE | COMPANY(1) |
- ----------------------------------------------------------------------
|Per Share | $_________ | Max. $__________ |
- ----------------------------------------------------------------------
|Total | $6,000,000 | Max. $ __________ |
- ----------------------------------------------------------------------
(1) Includes deduction of an estimated ($155,770) in
expenses, including legal, accounting, investment advisor
and distribution expenses.
<PAGE>
THE DATE OF THIS PROSPECTUS IS JULY 22, 1998.
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and
is qualified in its entirety by, the more detailed information and
consolidated financial statements, including the related notes,
appearing elsewhere and incorporated by reference herein.
THE COMPANY
During the last two and a half years, MTI has undergone
significant change. In May 1996, First Albany Companies, Inc.
("FAC") acquired a substantial interest in MTI and led a series of
financial and strategic transactions that have significantly
changed MTI's operations and fiscal well-being. In July 1996, MTI
received an infusion of capital through a private placement of its
Common Stock. In December 1996, MTI and FAC succeeded in
restructuring a significant outstanding debt of the Company by
swapping the debt for Common Stock. This allowed the Company to
receive an unqualified opinion in 1996 from its Independent
Auditors, Coopers & Lybrand, L.L.P., for the first time since 1992.
On June 27, 1997, the Company transferred a portion of the
Technology Division to Plug Power, L.L.C. ("Plug Power") to form a
joint venture between the Company and Edison Development Corp.
("EDC"). Plug Power has focused exclusively on the research and
development of an economically viable Proton Exchange Membrane
("PEM") fuel cell. On September 30, 1997, the Company sold all of
the assets of its L.A.B. Division to Noonan Machine Company of
Franklin Park, Illinois. The proceeds from this sale were used to
pay down outstanding debt and build working capital. On March 31,
1998, the Company sold the remainder of its Technology Division to
a subsidiary of Foster-Miller, Inc., a Waltham, Massachusetts-based
technology company. These divestitures have enabled the Company to
better focus on its profitable test and measurement business.
Today, MTI is a very different Company, substantially
streamlined in focus, but with many challenges remaining. MTI is
a manufacturer of advanced test and measurements products that
combine precision sensing capabilities with proprietary software
and systems to serve a variety of applications for commercial and
military customers. The Company has two principal business units:
the Advanced Products Division ("Advanced Products"), which
produces sensing instruments and computer-based balancing systems,
and Ling Electronics, Inc. ("Ling"), a developer and manufacturer
of vibration test systems and power conversion products. MTI is
<PAGE>
also a member of Plug Power, which hopes to be the first commercial
manufacturer of PEM fuel cells for residential and other
applications.
Advanced Products has two general product families: non-
contact sensing instrumentation and computer-based balancing
systems. The non-contact sensing instrumentation products utilize
fiber optic, laser and capacitance technology to perform high
precision position measurements for product design and quality
control inspection requirements, primarily in the semiconductor and
computer disk drive industries. Some of these products bear the
trademarks FOTONIC and ACCUMEASURE, which are recognized in the
industry worldwide. Advanced Products's computer-based aircraft
engine balancing systems include an on-wing jet engine balancing
system used by both commercial and military aircraft fleet
maintenance personnel. This product provides trim balancing and
vibration analysis in the field or in test cells.
Ling, of Anaheim, California, designs, manufactures, and
markets electro-dynamic vibration test systems, high-intensity-
sound transducers, power conversion equipment and power amplifiers
used to perform reliability testing and stress screening during
product development and quality control. This mode of testing is
used by industry and the military to reveal design and
manufacturing flaws in a broad range of precision products, from
satellite parts to computer components. Recent Ling products for
power and frequency conversion and "clean power" applications
include systems capable of output up to 432 kVA.
The Company believes that the test and measurement industry
will undergo substantial consolidation in the near future. The
challenges facing MTI today are similar to those facing other
smaller companies in industries where consolidation is a part of
the landscape. The Company believes that consolidation may become
a competitive necessity and that Advanced Products and Ling are
well-positioned to combine with complementary, synergistic
businesses to enhance and expand product offerings and increase
profitability and market position. Accordingly, the Company is
actively exploring strategic acquisitions and alliances for these
business units.
Mechanical Technology Incorporated was incorporated in New
York in 1961. Unless the context otherwise requires, registrant",
"Company" and "MTI" refer to Mechanical Technology Incorporated and
its subsidiaries. The Company's principal executive offices are
located at 968 Albany-Shaker Road, Latham, New York 12110 and its
telephone number is (518) 785-2211.
<PAGE>
RECENT DEVELOPMENTS
On July 15, 1998, the Company received a commitment from
KeyBank National Association ("KeyBank") to lend the Company $4
million in a working capital line of credit at an interest rate of
LIBOR plus 250 basis points, and $1 million in an equipment
loan/lease line of credit at an interest rate of LIBOR plus 275
basis points, both of which expire January 31, 2000. Additionally,
KeyBank has agreed to issue a $6 million direct pay letter of
credit to enhance the $6 million Industrial Development Revenue
Bonds ("IDR Bonds") to be issued on the Company's behalf on or
about August 30, 1998. The loan commitment requires the Company to
meet certain covenants, including a fixed charge coverage and
leverage ratio. Further, if certain performance standards are
achieved, the interest rates on the debt may be reduced. The
commitment letter also requires the Company to grant a first lien
on all consolidated assets of the Company exclusive of Plug Power,
a first mortgage on all land and buildings owned by the Company and
a first lien on any equipment purchased by the Company. See "Risk
Factors--Need for Immediate Financing."
The Industrial Development Agency for the Town of Colonie("IDA")
has agreed to issue $6 million in IDR Bonds on behalf of the
Company to assist in the construction of a new building for
Advanced Products and MTI's corporate staff and renovation of
existing buildings to be leased to Plug Power (the "Project"). The
Project is due to be completed as of December 1998. The IDA will
issue Industrial Development Revenue Notes to FAC, which will
underwrite the sale of the IDR Bonds to the public. The bond
proceeds will be deposited with a trustee for the bondholders. MTI
may draw down on the bond proceeds to cover qualified Project
costs. The bond closing is expected to be completed on or about
August 30, 1998. FAC will receive no fees for underwriting the IDR Bonds,
but will be reimbursed for its out of pocket costs. See "Risk Factors--
Immediate Need for Financing" and "Risk Factors--Conflict of Interest."
On April 15, 1998, EDC contributed an additional $2.25
million in cash to Plug Power. MTI contributed a below-market
lease for office and manufacturing facilities in Latham, New York,
valued at $2 million and purchased a one year option to match EDC's
remaining $250,000 contribution. In May 1998, EDC contributed an
additional $2 million to Plug Power and MTI purchased a one year
option to match the contribution. MTI's options mature in April
1999 ($250,000) and May 1999 ($2 million). See "Risk Factors--Plug
Power-Investment in Plug Power" and "Risk Factors--Plug Power-
Recognition of Plug Power Losses."
Plug Power anticipates that it will need at least $4 million
in additional capital to cover expenditures through December 31,
<PAGE>
1998, and significant additional capital thereafter. EDC and MTI
are currently considering additional cash contributions and/or
loans to Plug Power to cover this anticipated need. In addition,
Plug Power continues to pursue strategic partners and additional
sources of capital. Plug Power is negotiating currently with
several strategic partners. There is no assurance, however, that
Plug Power will successfully conclude any transactions with
strategic partners or find other sources of capital. If other
sources of funding cannot be found, MTI will be faced with
contributing and/or lending additional capital to Plug Power or
dilution of its interest in Plug Power. If EDC and the Company
stop funding Plug Power and no additional sources of capital are
found, Plug Power will not be able to continue as a going concern.
See "Risk Factors--Inability to Raise Sufficient Proceeds"; "Risk
Factors--Plug Power-Investment in Plug Power" and "Risk Factors--
Plug Power-Recognition of Plug Power Losses."
<PAGE>
THE OFFERING
Description of the If you hold MTI Common
Offering Stock on August 12, 1998,
you will receive one
non-transferable right
to purchase MTI Common
Stock for every ____
shares of MTI Common
Stock you own.
Fractional Rights will
be rounded up to the
next whole number in
determining the number
of Rights to be issued
to stockholders. Each
right entitles you to
purchase one share of
MTI's Common Stock at a
purchase price of
$_________ ("Exercise
Price"). MTI is
offering _________
shares of Common Stock
for purchase through the
exercise of Rights
("Underlying Shares").
See "Offering--The
Rights."
Basic Subscription Holders are entitled to
Privilege purchase, at the
Exercise Price, one
share of Common Stock
for each Right held.
See "Offering--The
Rights", "Offering--
Subscription Privileges-
-Basic Subscription
Privilege" and
"Offering--No
Revocation."
Oversubscription Each Holder who elects to exercise
Privilege his or her Basic Subscription
Privilege may also subscribe at the
Exercise Price for Underlying Shares,
if any, remaining unissued after
satisfaction of all subscriptions
pursuant to the Basic Subscription
Privilege. If an insufficient number of
Underlying Shares is available to
satisfy fully all elections to exercise
the Oversubscription Privilege, the
available Underlying Shares will be
allocated on a pro-rata basis among
Holders who exercise their
Oversubscription Privilege based on the
respective numbers of
<PAGE>
Underlying shares subscribed for by
such Holders pursuant to the Basic
Subscription Privilege. See "Offering
--The Rights", "Offering--Subscription
Privileges--Oversubscripton Privilege"
and "Offering--No Revocation".
Exercise Price If you wish to exercise your Rights to
purchase Common Stock, the Exercise
Price will be $_______ per share of
Common Stock. See "Risk Factors--
Determination of Exercise Price" and
"Determination of Exercise Price."
When You Can Exercise The Rights will only be exercisable
Your Rights from the period beginning on
______________, 1998, and ending on
September 24, 1998 at 5:00 p.m.,
New York City time, unless extended by
the Company from time to time. See
"Offering--Expiration Date."
Number of Shares of __________ shares.
Common Stock Offered in
the Offering
Record Date August 12, 1998.
Expiration Date September 24, 1998,
unless extended by the
Company from time to
time, provided that the
Expiration Date shall
not be later than
November 30, 1998,
unless the Board of
Directors determines
that a material event
has occurred that
necessitates one or more
further extensions of
the Rights to permit
adequate disclosure of
information concerning
such event to Holders.
If the Company elects to
extend the term of the
Rights, it will issue a
press release to such
effect not later than
the first day
<PAGE>
on which The Nasdaq National Market is open
for trading following the most recently
announced Expiration Date. In the event the
Company elects to extend the term of the
Offering by more than 14 calendar days, it
will, in addition, cause written notice of
such extension to be sent promptly to all
Holders of record on the Record Date. See
"Offering--Expiration Date."
Procedure for Exercising Rights may be exercised by properly completing
Rights the certificate evidencing such Rights
(the "Subscription Certificate") and
forwarding such Subscription Certificate
(or following the Guaranteed Delivery
Procedures, as defined below) to the
Subscription Agent on or prior to the Expiration
Date, together with payment in full of the
Exercise Price for each Underlying Share
subscribed for pursuant to the Subscription
Privileges. If the mail is used to forward
Subscription Certificates and/or payment,
insured, registered mail should be used. The
exercise of a Right may not be revoked or
amended. If time does not permit a Holder of
a Right to deliver its Subscription Certificate
to the Subscription Agent on or before the
Expiration Date, such Holder should make use of
the Guaranteed Delivery Procedures described
under "Offering--Exercise of Rights." Please
note that funds paid by uncertified personal
check may take at least five business days to
clear. Accordingly, Holders who wish to pay
the Exercise Price by means of uncertified
personal check
<PAGE>
should make payment sufficiently in advance
of the Expiration Date to ensure that such
payment is received and clears by such date.
Holders should consider payment by means of
certified or cashier's check, money order or
wire transfer of funds. See "Offering--Exercise
of Rights" and "Offering--Over/Underpayment of
Exercise Price."
Persons Holding Shares, Persons holding shares of Common Stock and
or Wishing to Exercise receiving the Rights distributable with
Rights Through Others respect to such shares through a broker, dealer,
commercial bank, dealer, commercial bank,
trust company or other nominee, as well as
persons holding certificates of Common
Stock personally who would prefer to have
such institutions effect transactions relating
to the Rights on their behalf, should give
timely instructions to their broker, dealer,
commercial bank, trust company or other nominee
and request it to effect the transactions for
them. See "Offering--Exercise of Rights" and
"Offering--Exercise of Rights Through Third
Parties."
Closing and Issuance of The closing will occur and certificates
Common Stock representing Underlying Shares will be delivered
to subscribers as soon as practicable after the
Expiration Date and after all prorations
have been effected. See "Offering--Subscription
Privileges" and "Offering--Delivery of
Subscription Certificates." No Underlying
Shares will be issued until the closing. Funds
delivered to the Subscription Agent for the
exercise of Subscription Privileges will be held
in escrow by the Subscription Agent until the
<PAGE>
closing. No interest will be paid to Holders
on funds held by the Subscription Agent. In
the case of Holders exercising Oversubscription
Privileges, any excess funds will be returned
to the Holders as soon as practical following
the closing.
Common Stock to be After this Offering, assuming all Rights are
Outstanding After the subscribed for, _________ shares of
Offering Common Stock will be outstanding (not
including 249,965 shares issuable upon the
exercise of outstanding stock options at a
weighted average exercise price of $3.42
per share, of which options to purchase
99,465 shares of Common Stock were exercisable
as of June 26, 1998).
How We Intend to Use the It is anticipated that the net proceeds to the
Proceeds Company will be approximately $6 million
if all of the Underlying Shares are purchased in
the Offering. If less than all of the
Underlying Shares are purchased, the proceeds
will be correspondingly reduced. See "Risk
Factors-- Inability to Raise Sufficient
Proceeds." The specific uses of the net proceeds
from this Offering has not been determined.
The Company currently intends to use at least
a portion of the proceeds from the
Offering for further investment into or loans
to Plug Power. The Company may also use the
proceeds of the Offering for acquisitions,
efforts to increase market share, working
capital, general corporate purposes and
other capital expenditures. See "Risk
Factors--Discretion in Application of Proceeds"
and "Use of Proceeds.
Subscription Agent American Stock Transfer & Trust Company. See
"Offering--Subscription Agent.
<PAGE>
STATEMENT CONCERNING FORWARD LOOKING STATEMENTS
Statements in this Prospectus or in documents incorporated herein by
reference that are not statements of historical fact constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995, including statements regarding future revenues, expenses
and profits. These forward looking statements are subject to known and unknown
risks, uncertainties or other factors that may cause the actual results of the
Company to be materially different from the historical results or from any
results expressed or implied by the forward looking statements. Such risks and
factors include, but are not limited to, those discussed below under "Risk
Factors" and "Management's Discussion and Analysis of Results of Operations and
Financial Condition" in MTI's Form 10-Q for the quarter ended March 27, 1998,
attached hereto as Exhibit 13.1. All cautionary statements made in this
Prospectus should be read as being applicable to all related forward-looking
statements wherever they appear.
RISK FACTORS
An investment in the Common Stock being offered by this Prospectus
involves a high degree of risk. In addition to the other information contained
in this Prospectus or incorporated herein by reference, prospective investors
should carefully consider the following risk factors before purchasing the
Common Stock offered by this Prospectus.
Discretion in Application of Proceeds
The Company has not determined the specific uses of the net proceeds of
this Offering. The Company currently intends to use at least a portion of the
proceeds of the Offering for further investments into or loans to Plug Power.
The Company may also use the proceeds of the Offering for acquisitions, efforts
to increase market share, working capital, general corporate purposes and other
capital expenditures. The specific uses of the proceeds will be at the complete
discretion of the Company and may be allocated from time to time based on a
variety of circumstances. There can be no assurance that the Company will
deploy the proceeds in a manner that will enhance the financial condition of
the Company.
Inability to Raise Sufficient Proceeds
There is no assurance that the Company will raise the full amount of funds
sought through this Offering. Failure to raise sufficient funds through this
Offering will severely limit the Company's ability to make further investments
into or loans to Plug Power or to make acquisitions or otherwise increase the
market share of its core businesses.
<PAGE>
Plug Power
Investment in Plug Power
Plug Power currently needs and will continue to need substantial
additional capital. To date, EDC and MTI have contributed approximately $16
million worth of cash and other assets to Plug Power. See "Recent
Developments." Plug Power estimates that it will need an investment of at
least $4 million prior to December 31, 1998 to fulfill its current commitments.
MTI does not believe it can fund its share of Plug Power's capital needs unless
Plug Power attracts other investors. If EDC and MTI stop funding Plug Power
and no additional sources of capital are found, Plug Power will not be able to
continue as a going concern. If EDC and/or other investors fund Plug Power,
MTI's interest in Plug Power will suffer substantial dilution unless MTI is
able and willing to match such contributions.
Recognition of Plug Power Losses
MTI has recorded its proportionate share of Plug Power's losses only to
the extent of MTI's recorded investment in Plug Power, which has been written
down to zero as of March 28, 1998. Future investments into or loans to Plug
Power may result in the Company's recognition of losses to the full extent of
such investment or loans. Recording of its proportionate share of Plug Power
losses will likely result in the Company reporting significant losses in the
future, which is likely to have a substantial adverse impact on the market
price for the Company's Common Stock.
Plug Power Research and Development
Plug Power is engaged in the research and development of an economically
viable PEM fuel cell. Plug Power faces intense competition from a number of
companies, including at least one competitor that is significantly larger with
significantly greater resources. Substantial research and development on the
PEM fuel cell remains to be completed. There is no assurance that Plug Power
will ever successfully complete such research and development and if they do,
that their competitors will not do so more quickly or more effectively.
Further, there can be no assurance that any product that Plug Power may
ultimately produce will find a market.
History of Plug Power Losses
Since its inception on June 27, 1997, Plug Power has incurred substantial
losses as follows:
(000's)
For the period June 27, 1997 (inception) to September 30, 1997 $ 630
For the nine months ended June 26, 1998 $6,019
Plug Power will continue to sustain significant losses until it can
produce sufficient revenues to cover its costs. MTI expects that such revenues
will not be generated until it cost-effectively produces and sells PEM fuel
cells to the public. There can be no assurance as to when, or if Plug Power
may ever sell PEM fuel cells to the public on a profitable basis.
<PAGE>
Immediate Need for Financing
On July 15, 1998, the Company received a letter of commitment from KeyBank
whereby KeyBank agreed to provide a $4 million working capital line of credit
and a $1 million equipment loan/lease line, both of which will expire January
31, 2000. Additionally, KeyBank has agreed to issue a $6 million direct pay
letter of credit to enhance the $6 million IDR Bonds to be issued on the
Company's behalf on or about August 30, 1998. There can be no assurance that
the Company and KeyBank will come to terms on the final agreements contemplated
by the commitment letter, or that the terms of such financing will be favorable
to the Company. There is also no assurance that the Company will be able to
sell the $6 million in IDR Bonds to the public. If the Company cannot obtain
the financing described above, the failure to do so will have a material
adverse effect on the Company's business and operating results.
Conflict of Interest
George McNamee is Chairman of the Board of Directors of each of FAC, MTI
and Plug Power, and is also Chief Executive Officer of MTI and Co-Chief
Executive Officer of FAC. Beno Sternlicht and Walter Robb are members of the
Board of Directors of MTI and Plug Power. Alan Goldberg is a member of the
Board of Directors of FAC and MTI and Co-Chief Executive Officer of FAC. FAC
owns 34% of the outstanding Common Stock of MTI. These interrelationships
create the potential for conflicts of interest to arise in connection with the
exercise by MTI's directors of their respective fiduciary duties.
Discontinued Operations; Change in Strategy
Since 1996, MTI has shifted its focus from research and development to
product development, marketing and sales. With the sale of the remainder of
the Technology Division to a subsidiary of Foster-Miller, Inc. in March 1998
(see Note 4, "Discontinued Operations" in MTI's Form 10-Q for the quarter ended
March 27, 1998, attached hereto as Exhibit 13.1), MTI has completed its planned
sale of non-core businesses and is now prepared to explore strategic
acquisitions and alliances for its two core businesses, Advanced Products and
Ling. There can be no assurance that any acquisitions or strategic alliances
will be made, or if such acquisitions or alliances are made that they will have
a positive impact on the Company's business and results of operations in the
short or long term.
Dilution; Discount from Market Price
Holders who do not exercise their Subscription Privileges in full will
realize a dilution in their percentage voting interest and ownership interest
in future net earnings, if any, of the Company to the extent that Rights are
exercised by other Holders. The Exercise Price represents a _________%
discount from the market price and could result in a reduction in the market
price for the Common Stock.
<PAGE>
Substantial Immediate Dilution
Assuming all Underlying Shares are subscribed for in connection with this
Offering, a purchaser of Common Stock in this Offering will experience
immediate and substantial dilution of approximately $_________ in net tangible
book value per share because the Exercise Price of the Common Stock ($_______)
exceeds the $_________ pro-forma net tangible book value per share at March 27,
1998 of the Company's Common Stock after giving effect to the Offering.
Determination of Exercise Price
The Exercise Price of the Common Stock was determined by the independent
Consulting and Investment Banking firm of Schwartz Heslin Group, Inc. The
Exercise Price does not necessarily bear any relationship to the prices at
which shares of Common Stock have traded in the market or in private
transactions, or to the Company's earnings, assets, book value, financial
condition or any other recognized criterion of value. There can be no assurance
that the value of the Common Stock will not decline below the Exercise Price.
Attraction and Retention of Technical Employees
The Company believes that its future success will depend in large part
upon its ability to attract, retain and motivate highly skilled employees,
particularly technical employees. These employees are likely to remain in
limited supply for the foreseeable future. There can be no assurance that the
Company will be able to attract and retain sufficient numbers of highly skilled
technical employees. The loss of a significant number of the Company's
technical employees could have a material adverse effect on the Company.
Competition
The Company faces intense competition from at least several companies,
many of which are larger than MTI and have greater financial resources. While
Advanced Products and Ling each have a major share of their respective markets,
the Company does not consider either of them to be dominant within its
industry. The primary competitive considerations in the Company's businesses
are: product quality and performance; price; and timely delivery. These
competitive pressures have restrained, and can be expected in the future to
restrain the growth and profitability of the Company's businesses, which could
have a material adverse effect on the value of the Common Stock.
Economic Events in Asia
The Company's operations may be affected by unfavorable financial and
economic conditions in Asia, which are outside of the control of the Company.
Recent economic events in Asia have had a material adverse effect on currency
fluctuations and spending in such areas. The Company's operating results may
be adversely affected by such crises due to the potential for significant
decreases in demand for the Company's products and services, the potential for
foreign governments to implement prohibitions and limitations on U.S.
companies, and the potential for foreign currency losses. Such events could
have an adverse effect on the market value of the Common Stock.
<PAGE>
Additional Capital Requirements
Management expects that the future growth and development of the Company's
business will require additional capital. There can be no assurance that the
Company will be able to obtain additional capital when necessary, or that the
terms on which any capital investment can be obtained will be favorable to the
Company. If the Company cannot obtain capital on satisfactory terms, the
failure to obtain such financing will have a material adverse effect on the
Company's business and operating results.
Control by Existing Holders of Common Stock
The members of the Company's present Board of Directors directly or
indirectly own more than 48% of the Company's outstanding Common Stock. As a
result, it is unlikely that investors who purchase the shares of Common Stock
offered hereby will be able to obtain representation on the Company's Board of
Directors (unless they first obtain the support of the shareholders on the
existing Board), or otherwise exercise any control or influence over the
Company's management. Furthermore, the substantial shareholdings by members of
the present Board of Directors make it unlikely that an independent third party
could effect a change in control of the Company without the consent of the
Board, thereby effectively insulating the Company's Board of Directors and
management from objections and challenges by shareholders to actions taken by
the Board and management in the conduct of the Company's business and the
formulation of its business objectives, strategies and policies. This could
have an adverse effect on the market value of the Common Stock.
No Assurance of Public Market for Common Stock
In August 1994, the Company was removed from The Nasdaq National Market
System and commenced trading on the OTC Bulletin Board. The Company intends to
apply for re-listing on The Nasdaq National Market System shortly after the end
of its fiscal year. There can be no assurance that MTI's Common Stock will be
re-listed or that there will be an active trading market for the Company's
Common Stock. In addition, the trading price of the Common Stock has been, and
in the future could be, subject to significant fluctuations in response to
variations in quarterly operating results, the gain or loss of significant
contracts, changes in management, new products or services by the Company or
its competitors, general trends in the industry, announcements by Plug Power
and other events or factors. In addition, the stock market has experienced
extreme price and volume fluctuations that have particularly affected the
market price for many companies in similar industries and that have often been
unrelated to the operating performance of these companies. These broad market
fluctuations may adversely affect the market price of the Common Stock.
Rapid Technological Change; Dependence on New Product Introduction, Product
Enhancements and Product Developments
The market for many of the Company's products and services is
characterized by rapidly changing technology and evolving industry standards.
There is no assurance that the Company's current technology base will continue
to address current and evolving customer needs. The Company believes that its
future success will depend on its ability to develop and manufacture new
products and product enhancements and to introduce them successfully into the
<PAGE>
market. Failure to do so in a timely fashion could harm the Company's
competitive position. The announcements or introductions of new products by
the Company or its competitors may adversely affect the Company's operating
results, because these announcements or introductions may cause customers to
defer or forego ordering products from the Company's existing product lines.
Moreover, there is no assurance the Company will have sufficient funds to
finance product introductions, enhancements or developments.
Issuance of Additional Common Stock
The Company has 15 million authorized shares of Common Stock, $1.00 par
value, of which _________ shares will be issued in connection with this
Offering, resulting in a maximum of__________ shares outstanding after
completion of this Offering. The Company's Board of Directors generally has
authority, without action or vote of the stockholders, to issue all or part of
the authorized but unissued shares. Any such issuance could further dilute the
percentage ownership interest of shareholders and may further dilute the book
value of the Common Stock.
Year 2000 Compliance
Currently, there is significant uncertainty regarding the impact of the
year 2000 on software installed in certain products by the Company. Current
versions of the Company's products are designed to be "Year 2000" compliant.
The Company is in the process of determining the impact of any non-compliance
of previously installed products or purchased software and related products on
the Company and its customers and suppliers. The Company does not currently
believe that the effects of any potential Year 2000 non-compliance in the
Company's products will result in any material adverse impact on the Company's
business or financial condition. There can be no assurance, however, that the
Company will not be exposed to potential claims resulting from system problems
associated with the arrival of the Year 2000.
No Cash Dividends
Since its inception, the Company has not paid any cash dividends on its
Common Stock. The Company anticipates that its future earnings, if any, will
be retained for use in the business or for other corporate purposes, and it is
not anticipated that any cash dividends on the Common Stock will be paid in the
foreseeable future.
In addition to the matters discussed above, prospective investors should
consult their own attorneys, accountants and other professional advisors as to
legal, tax and related matters concerning their prospective investment in the
Company's Common Stock.
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
Set forth below is summary consolidated financial information (restated for
the discontinuance of the Technology Division as of December 26, 1997) and
certain adjusted financial information of the Company. The consolidated
financial information as of and for the five years ended September 30, 1997 set
forth below has been derived from consolidated financial statements audited by
PricewaterhouseCoopers LLP, independent public accountants. The consolidated
financial data as of and for the six months ended March 27, 1998 and March 28,
1997 has been derived from unaudited consolidated financial statements which,
in the opinion of management, reflect all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of the financial
data for such periods. The following information should be read in conjunction
with "Management's Discussion and Analysis of Results of Operations and
Financial Condition" and the Company's consolidated financial statements and
the accompanying notes set forth in the Company's Form 10-Q for the quarter
ended March 27, 1998, attached hereto as Exhibit 13.1.
<PAGE>
<TABLE>
Six Months
Ended March 27 and 28 Years Ended September 30, (Restated)
--------------------- --------------------------------------------------------
(unaudited) (audited)
<S> <C> <C> <C> <C> <C> <C> <C>
(Restated)
1998 1997 1997 1996 1995 1994 1993
------ ------ ------ ------ ------ ------ ------
Statement of Earnings Data: (in thousands, except per share data)
Net Sales.................. $10,249 $12,594 $24,102 $22,755 $18,140 $29,721 $28,395
Gross Profit............... 4,249 4,848 9,628 8,830 6,145 11,800 11,321
Operating Income (Loss).... 996 1,319 1,593 1,069 (2,167) 2,157 3,021
Gain on sale of
subsidiary/division or
building................... - - 2,012 750 6,779 1,856 -
Income from Continuing
Operations Before
Extraordinary Item and
Income Taxes............... 865 1,129 2,701 673 3,352 816 1,840
Income from Continuing
Operations before
Extraordinary Item......... 865 994 2,558 598 3,256 201 1,492
Extraordinary Item - Gain on
Extinguishment of Debt, net
of taxes ($106)............ - 2,507 2,507 - - - -
Income from Continuing
Operations................. 865 3,501 5,065 598 3,256 201 1,492
Income (Loss) from
Discontinued Operations,
Net of Taxes............... (2,285)(2) (469) (545) 3,150 (334) (24,579)(1) (436)
Net (Loss) Income.......... (1,420) 3,032 4,520 3,748 2,922 (24,378) 1,056
Diluted Earnings Per Share:(3)
Income from Continuing
Operations before
Extraordinary Item......... 0.14 0.18 0.45 0.15 0.91 0.05 0.42
Extraordinary Item......... - 0.46 0.44 - - - -
(Loss) Income from
Discontinued Operations.... (0.37) (0.08) (0.09) 0.81 (0.09) (6.96) (0.12)
Net (Loss) Income.......... (0.23) 0.56 0.80 0.96 0.82 (6.91) 0.30
Weighted Average Shares
Outstanding and
Equivalents................ 6,083,073 5,413,167 5,670,364 3,911,952 3,559,789 3,529,881 3,527,835
Other Information:
Capital Expenditures....... 115 244 377 264 409 426 188
Depreciation and
Amortization............... 143 122 243 233 358 460 706
Balance Sheet Data:
Working Capital (Deficit).. 5,450 6,993 7,696 7,086 2,712 (6,219) 17,326
Total Assets............... 12,594 13,425 14,003 13,481 13,444 23,971 41,680
Total Long Term Debt....... 0 1,007 0 5,508 6,960 11,182 13,082
Total Shareholders' Equity
(Deficit).................. 6,799 6,720 8,213 2,164 (3,490) (6,418) 17,969
</TABLE>
(1) Includes a net charge of $15,415,000 related to the discontinuance of the
Company's United Telecontrol Electronics, Inc. subsidiary.
(2) Includes a net charge of $1,769,000 related to the discontinuance of the
Company's Technology Division.
(3) Earnings per share have been restated to comply with SFAS No. 128,
"Earnings Per Share."
<PAGE>
USE OF PROCEEDS
The net proceeds from the Offering are estimated to be approximately $6
million after the payment of expenses associated with the Offering, assuming the
Offering is fully subscribed. See "Risk Factors--Inability to Raise Sufficient
Proceeds." The Company has not determined the specific uses of the net proceeds
of the Offering. The Company currently intends to use at least a portion of the
proceeds of the Offering for further investments into or loans to Plug Power.The
Company may also use the proceeds of the Offering for acquisitions, efforts to
increase market share, working capital, general corporate purposes and other
capital expenditures. See "Risk Factors--Discretion in Application of Proceeds."
Although the Company intends to pursue acquisitions actively, it has no current
contract or commitment with respect to any particular acquisition.
DETERMINATION OF EXERCISE PRICE
The Exercise Price was determined by the independent Consulting and
Investment Banking firm of Schwartz Heslin Group, Inc., which has issued a
fairness opinion supporting the fairness of the Exercise Price. See "Risk
Factors--Determination of Exercise Price."
OFFERING
The Rights
The Company is distributing, at no cost to the record holders of its
outstanding Common Stock as of August 12, 1998 non-transferable Rights to
purchase additional shares of Common Stock at a price of $________ per share.
The Company will distribute one non-transferable Right for each ___________
shares of Common Stock held on the Record Date. Each Right will entitle its
Holder to purchase one share of Common Stock. The Rights will be evidenced by
non-transferable subscription certificates. An aggregate of _______ shares of
Common Stock will be sold if all Rights are exercised.
No fractional Rights, or cash in lieu thereof, will be issued or paid. The
number of Rights distributed to each Holder will be rounded up to the nearest
whole share in connection with the exercise of Subscription Privileges.
Subscription Privileges
Basic Subscription Privilege. Each Right will entitle the Holder thereof to
receive, upon payment of the Exercise Price, one share of Common Stock.
Certificates representing shares of Common Stock purchased pursuant to the
Subscription Privilege will be delivered to subscribers as soon as practical
after the Expiration Date, irrespective of whether the Subscription Privilege is
exercised immediately prior to the Expiration Date or earlier.Holders exercising
their Subscription Privilege will not be shareholders of record with respect to
the shares issuable pursuant to such Subscription Privilege until the closing,
which it is anticipated will occur four business days after the Expiration Date.
Oversubscription Privilege. Subject to the allocation described below, each
Right also carries the right to subscribe, at the Exercise Price, for any
Underlying Shares not subscribed for through the exercise of Basic Subscription
Privileges by other Holders (the "Excess Shares"). If the Excess Shares are not
sufficient to satisfy all subscriptions made pursuant to the Oversubscription
Privilege, such Excess Shares will be allocated pro-rata (subject to the
elimination of fractional shares) among those Holders exercising the
<PAGE>
Oversubscription Privilege, in proportion, not to the number of shares requested
pursuant to the Oversubscription Privilege, but to the number of shares each
Holder exercising the Oversubscription Privilege subscribed for pursuant to the
Basic Subscription Privilege;provided, however, that if such pro-rata allocation
results in any Holder being allocated a greater number of Excess Shares than
such Holder subscribed for pursuant to the exercise of such Holder's
Oversubscription Privilege, then such Holder will be allocated only the number
of Excess Shares for which such Holder subscribed. The remaining Excess Shares
will be allocated among all other Holders exercising the Oversubscription
Privilege. Only beneficial Holders who exercise the Basic Subscription
privilege in full will be entitled to exercise the Oversubscription Privilege.
Notification of the number of shares allocated pursuant to the Oversubscription
Privilege will be delivered to subscribers as soon as practical after the
Expiration Date and after all prorations have been effected.
Expiration Date
The Rights will expire at 5:00 p.m., New York City time, on September 24,
1998 (the "Expiration Date"),unless extended by the Company from time to time.
Notwithstanding the foregoing, the Expiration Date a no event shall be later
than November 30, 1998, except that the Company reserves the right to extend the
exercise period on one or more occasions if the Board of Directors determines
that the occurrence of a material event necessitates an amendment of the
Registration Statement or recirculation of the Prospectus that forms a part
thereof in order to permit time for the distribution of such information. After
the Expiration Date, unexercised Rights will be null and void. The Company will
not be obligated to honor any purported exercise of Rights received by the
Subscription Agent after the Expiration Date, regardless of when the documents
relating to such exercise were sent, except pursuant to the Guaranteed Delivery
Procedures described below.
Exercise of Rights
Rights may be exercised by delivering to the Subscription Agent, on or
prior to 5:00 p.m., New York City time, on the Expiration Date, the properly
completed and executed Subscription Certificate evidencing such Rights with
any required signatures, together with payment in full of the Exercise Price
for each Underlying Share subscribed for pursuant to the Subscription
Privileges (except as permitted pursuant to clause (iii) of the next sentence).
Such payment in full must be by: (i) check or bank draft drawn upon a U.S.
bank or postal money order, payable to American Stock Transfer & Trust Company,
as Subscription Agent; (ii) wire transfer of funds to the account maintained
by the Subscription Agent for such purpose; or (iii) in such other manner as
the Company may approve in writing in the case of persons acquiring Underlying
Shares at an aggregate Exercise Price of $500,000 or more (the payment method
under (iii) being an "Approved Payment Method"), provided in each case that
the full amount of such Exercise Price is received by the Subscription Agent
in currently available funds within three Nasdaq National Market trading days
following the Expiration Date. Payment of the Exercise Price will be deemed
to have been received by the Subscription Agent only upon (a) clearance of any
uncertified check, (b) receipt by the Subscription Agent of any certified check
or bank draft drawn upon a United States bank or of any postal money order,
(c) receipt of good funds in the Subscription Agent's account designated above,
or (d) receipt of good funds by the Subscription Agent through an Approved
Payment Method.
<PAGE>
If paying by uncertified personal check, please note that the funds paid
thereby may take at least five business days to clear. Accordingly, Holders who
wish to pay the Exercise Price by means of an uncertified personal check are
urged to make payment sufficiently in advance of the Expiration Date to ensure
that such payment is received and clears by such date and are urged to consider
payment by means of certified or bank cashier's check, money order or wire
transfer of funds.
The address to which the Subscription Certificates and payment of the
Exercise Price should be delivered is:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
If a Holder wishes to exercise Rights, but time will not permit such Holder
to cause the Subscription Certificate or Subscription Certificates evidencing
such Rights to reach the Subscription Agent on or prior to the Expiration Date,
such Rights may nevertheless be exercised if all of the following conditions
(the "Guaranteed Delivery Procedures") are met:
(i) such Holder has caused payment in full of the Exercise Price for each
Underlying Share being subscribed for pursuant to the Subscription
Privileges to be received (in the manner set forth above) by the
Subscription Agent on or prior to the Expiration Date;
(ii) the Subscription Agent receives, on or prior to the Expiration Date, a
guaranteed notice (a "Notice of Guaranteed Delivery"), substantially
in the form provided with the Instructions for Subscription
Certificate (the "Instructions") distributed with the Subscription
Certificates, from an "Eligible Institution" (as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934), stating the number
of Rights represented by the Subscription Certificate(s) held by such
exercising Holder, the number of Underlying Shares being subscribed
for pursuant to the Subscription Privileges and guaranteeing the
delivery to the Subscription Agent of any Subscription Certificate(s)
evidencing such Rights within three Nasdaq National Market trading
days following the date of the Notice of Guaranteed Delivery; and
(iii) the properly completed Subscription Certificate(s), with any required
signatures, is received by the Subscription Agent within three Nasdaq
National Market trading days following the date of the Notice of
Guaranteed Delivery relating thereto.The Notice of Guaranteed Delivery
may be delivered to the Subscription Agent in the same manner as
Subscription Certificate(s) at the address set forth above, or may be
transmitted to the Subscription Agent by facsimile transmission
(telecopy number (718) 234-5001). Additional copies of the form of
Notice of Guaranteed Delivery are available upon request from the
Subscription Agent, whose address and telephone number are set forth
under "Subscription Agent" below.
Funds received in payment of the Exercise Price for Excess Shares
subscribed for pursuant to the Oversubscription Privilege will be held in a
segregated account pending issuance of such Excess Shares. If a Holder
exercising the Oversubscription Privilege is allocated less than all of the
Excess Shares that such Holder wished to subscribe for pursuant to the
<PAGE>
Oversubscription Privilege, the excess funds paid by such Holder in respect of
the Exercise Price for shares not issued shall be returned by mail without
interest or deduction as soon as practical after the Expiration Date.
Exercise of Rights Through Third Parties
A Holder who holds shares of Common Stock for the account of others,such as
a broker, a trustee or a depositary for securities, should notify the respective
beneficial owners of such shares as soon as possible to ascertain such
beneficial owners' intentions and to obtain timely instructions with respect
to the Rights. If the beneficial owner so instructs, the record Holder of such
Rights shall complete the Subscription Certificate and submit it to the
Subscription Agent with the proper payment. In addition, the beneficial owner
of Common Stock or Rights held through such a Holder of record should contact
the Holder and make a timely request that the Holder effect transactions in
accordance with the beneficial owner's instructions.
Over/Underpayment of Exercise Price
If either the number of Underlying Shares being subscribed for pursuant to
the Basic Subscription Privilege is not specified on the Subscription
Certificate, or the amount of funds delivered is not enough to pay the Exercise
Price for all Underlying Shares stated to be subscribed for, the number of
Underlying Shares subscribed for will be assumed to be the maximum amount that
could be subscribed for upon payment of such amount. If the number of Underlying
Shares being subscribed for is not specified, or payment of the Exercise Price
for the indicated number of Rights that are being exercised exceeds the required
Exercise Price, the payment will be applied, until depleted, to subscribe for
Underlying Shares in the following order: (i) to subscribe for the number of
Underlying Shares indicated, if any, pursuant to the Basic Subscription
Privilege; (ii) to subscribe for Underlying Shares until the Basic Subscription
Privilege has been fully exercised with respect to all of the Rights represented
by the Subscription Certificate; and (iii) to subscribe for additional
Underlying Shares pursuant to the Oversubscription Privilege (subject to any
applicable proration).
Delivery of Subscription Certificates
The Instructions accompanying the Subscription Certificates should be read
carefully and followed in detail. PLEASE SEND ALL SUBSCRIPTION CERTIFICATES TO
THE SUBSCRIPTION AGENT. DO NOT SEND SUBSCRIPTION CERTIFICATES TO THE COMPANY.
The method of delivery of subscription certificates and payment of the
Exercise Price to the Subscription Agent will be at the election and risk of the
Rights Holder, but if sent by mail it is recommended that such certificates and
payments be sent by registered mail, properly insured, with return receipt
requested, and that a sufficient number of days be allowed to ensure delivery to
the Subscription Agent and clearance of payment prior to 5:00 p.m.,New York City
time, on the Expiration Date. Because uncertified personal checks may take at
least five business days to clear, the Rights Holder is strongly urged to pay,or
arrange for payment, by means of certified or bank cashier's check, money order
or wire transfer of funds.
Any questions or requests for assistance concerning the method of exercising
Rights or requests for additional copies of this Prospectus, or the Notice of
<PAGE>
Guaranteed Delivery should be directed to the Subscription Agent at telephone
number (718) 921-8200, or the Company at telephone number (518) 785-2211.
No Revocation
Once a Rights Holder has exercised the Basic Subscription Privilege or the
Oversubscription Privilege, such exercise may not be revoked.
Subscription Agent
The Company has appointed American Stock Transfer & Trust Company as
Subscription Agent for the Offering. The Subscription Agent's address, which is
the address to which the Subscription Certificates and payment of the Exercise
Price should be delivered, as well as the address to which Notice of Guaranteed
Delivery must be delivered, and the Subscription Agent's telephone number and
facsimile number, are:
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
Telephone No. (718) 921-8200
Telecopier No. (718) 234-5001
The Company will pay the fees and expenses of the Subscription Agent, and
has also agreed to indemnify it from any liability that it may incur in
connection with the Offering.
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
Because of the complexity of the provisions of the Internal Revenue Code of
1986, as amended (the "Code") and because tax consequences may vary depending
upon the particular facts relating to each holder of MTI Common Stock, such
holders should consult their own tax advisors concerning their individual tax
situations and the tax consequences of this Offering under the Code and under
any applicable state, local or foreign tax laws.
PLAN OF DISTRIBUTION
The Common Stock offered hereby is being offered by the Company pursuant to
the issuance of Rights directly to holders of shares of Common Stock on the
Record Date. Certain employees, officers or directors of the Company may
solicit responses from Holders to the Offering, but such individuals will not
receive any commissions or compensation for such services other than their
normal employment compensation.
The Company intends to distribute Rights and copies of this Prospectus to
stockholders of record on the Record Date promptly following the Effective Date
of the Registration Statement of which this Prospectus forms a part.
Holders who desire to subscribe for the purchase of shares of Common Stock
in the Offering are urged to complete, date and sign the Subscription
Certificate and return it to the Subscription Agent on or before the Expiration
Date, together with payment in full for the share purchase. See "Offering--
Exercise of Rights" and "Offering--Exercise of Rights Through Third Parties."
DESCRIPTION OF SECURITIES TO BE REGISTERED
The authorized capital stock of the Company includes 15 million shares of
Common Stock, par value $1.00 per share. ___________ shares of Common Stock are
being registered in connection with the Offering. The outstanding shares of
Common Stock are fully paid and non-assessable. Holders of Common Stock are
entitled to dividends when, as and if declared by the Board of Directors of the
Company out of any funds legally available to the Company for that purpose.
The Company has not paid dividends on the Common Stock and does not
anticipate doing so in the foreseeable future.
Holders of Common Stock are entitled to one vote per share held of record
with respect to all matters submitted to a vote of the stockholders. There is
no cumulative voting for the election of directors, who are elected as follows:
three directors for a three-year term; two directors for a two-year term; and
three directors for a one-year term.
At July 17, 1998, the approximate number of Holders of record of the Common
Stock was 1,460.
<PAGE>
INCORPORATION BY REFERENCE
The following documents filed by the Company with the SEC are hereby
incorporated by reference and are an integral part hereof: the Company's Annual
Report on Form 10-K for its fiscal year ended September 30, 1997; the Company's
Amended Annual Report on Form 10-K/A for its fiscal year ended September 30,
1997, as filed on January 23, 1998; the Company's Amended Annual Report on
Form 10-K/A for its fiscal year ended September 30, 1997, as filed on March 2,
1998; the Company's Quarterly Report on Form 10-Q for its quarter ended March
27, 1998; and the Company's Current Report on Form 8-K dated April 8, 1998.
Copies of the Company's Form 10-K and 10-K/A reports for the year ended
September 30, 1997 and Form 10-Q report for quarter ended March 27, 1998
accompany this Prospectus. All documents filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, subsequent to the date
of this prospectus and prior to the termination of the Offering, shall be deemed
to be incorporated by reference in this prospectus and to be a part hereof
from the respective dates of the filing thereof. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this prospectus. All other documents may be obtained from MTI at no charge
by any person, including any beneficial owner,to whom a prospectus is delivered,
who makes a written or oral request for such documents. Please address all
such requests to Cynthia A. Scheuer, Chief Financial Officer, Mechanical
Technology, Inc., 968 Albany-Shaker Road, Latham, New York 12110 ((518)
785-2211).
AVAILABLE INFORMATION
MTI is subject to the informational requirements of the Securities Exchange
Act of 1934 (the "Exchange Act") and in accordance therewith files reports and
other information with the SEC. Forms 10-K, 10-K/A, 10-Q, S-8, 8-K, the Proxy
Statement and other information filed by the Company, can be read and copied at
the Public Reference Room of the SEC in Washington, D.C. at the address given
below, and at certain of its Regional Offices at 1 World Trade Center, Suite
1300, New York, New York 10048 and 500 W. Madison Street, Suite 1400, Chicago,
Illinois 60661. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. Copies of such material
can be obtained from the Public Reference Section of the SEC, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. The SEC also maintains an
Internet site that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the SEC at
http://www.sec.gov.
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the validity of the Rights and the
Underlying Shares have been passed upon for the Company by Whiteman Osterman &
Hanna, Albany, New York.
EXPERTS
The consolidated balance sheets as of September 30, 1997 and 1996 and the
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended September 30, 1997, incorporated by
reference in this registration statement, have been incorporated herein in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The Exercise Price was determined by the independent Consulting and
Investment Banking firm of Schwartz Heslin Group, Inc. Schwartz Heslin Group,
Inc. has also issued a fairness opinion attesting to the fairness of the
Exercise Price. The Company will pay fees and expenses of Schwartz Heslin
Group, Inc., and has also agreed to indemnify it from certain liabilities it
may incur in connection with the Offering.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED
Cross-Reference Sheet to Prospectus on Form S-2
Furnished Pursuant to Item 501(b) of Regulation S-K
Item Form S-2 Caption Location in Prospectus Page
- ---- ---------------- ---------------------- ----
1. Forepart of the Registration Outside Front Cover Page
Statement and Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page
Cover Pages of Prospectus Outside Back Cover Pages
3. Summary Information and Prospectus Summary; Risk Factors
Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Exercise Determination of Exercise Price
Price
6. Dilution Risk Factors--Dilution; Risk Factors--
Substantial Immediate Dilution
7. Selling Securityholders Not Applicable
8. Plan of Distribution Plan of Distribution
9. Description of Securities Description of Securities to be
to be registered Registered: Risk Factors--Issuance
of Additional Capital Stock; Offering
10. Interests of Named Experts Legal Matters; Experts
and Counsel
11. Information with Respect to Form 10-K for the fiscal year ended
Registrant September 30, 1997, Form 10-K/A, filed
as of January 23,1998, Form 10K/A,filed
as of March 2, 1998, and Form 10-Q for
the quarter ended March 27, 1998,
appended hereto
12. Incorporation of Certain Incorporation of Certain
Information by Reference Documents by Reference; Available
Information
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Registration Fee $ 1,770
Printing 4,000*
Legal fees and Expenses 65,000*
Accounting Fees and Expenses 20,000*
Pricing and Fairness Opinion and Expenses 30,000*
Stock Transfer Fees 35,000*
--------
Total $155,770*
========
*Estimated
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS --
DISCLOSURE OF COMMISSION'S POSITION ON INDEMNIFICATION
Under provisions of the Company's Amended and Restated Certificate of
Incorporation, the Company shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, proceeding or suit (including one by or in the right of the Company to
procure a judgment in its favor), whether civil or criminal, by reason of the
fact that he, his testator or intestate is or was a director or officer of the
Company, or is or was serving any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise in any capacity at
the request of the Company, against judgments, fines, amounts paid in
settlement and expenses, including attorneys' fees, actually incurred as a
result of or in connection with any such action, proceeding or suit, or any
appeal therefrom, if such director or officer acted in good faith for a purpose
which he reasonably believed to be in or not opposed to the best interests of
the Company, and, in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful; provided, however,
that no indemnification shall be made to or on behalf of any director or
officer if a judgment or other final adjudication adverse to the director or
officer establishes that his acts were committed in bad faith or were the
result of active and deliberate dishonesty and were material to the cause of
action so adjudicated, or that he personally gained a financial profit or other
advantage to which he was not legally entitled.
Insofar as the indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act of 1933 and is therefore unenforceable.
<PAGE>
Item 16. EXHIBIT INDEX
See the Exhibit Index included immediately preceding the exhibits to this
Registration Statement.
Item 17. UNDERTAKINGS
The undersigned Company hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to, and meeting the
requirements of, Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-2 and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Albany, State of
New York on July 22, 1998.
MECHANICAL TECHNOLOGY, INC.
By: /s/ George C. McNamee
---------------------------------
George C. McNamee
Chief Executive Officer
KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Cynthia A. Scheuer and George C.
McNamee his true and lawful attorneys-in-fact and agents, each acting
alone, with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities, to sign any or
all amendments to this Registration Statement, including post-effective
amendments, and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person,
and hereby ratifies and confirms all that said attorneys-in-fact and
agents, each acting alone, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE DATE
/s/ George C. McNamee 07/22/98
- ------------------------------------
George C. McNamee
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Cynthia A. Scheuer "
- ------------------------------------
Cynthia A. Scheuer
Chief Financial Officer (Principal
Financial and Accounting Officer)
/s/ Dale W. Church "
- ------------------------------------
Dale W. Church
Director
/s/ Edward A. Dohring "
- ------------------------------------
Edward A. Dohring
Director
/s/ Alan P. Goldberg "
- -----------------------------------
Alan P. Goldberg
Director
/s/ E. Dennis O'Connor "
- -----------------------------------
E. Dennis O'Connor
Director
/s/ Walter L. Robb "
- -----------------------------------
Dr. Walter L. Robb
Director
/s/ Beno Sternlicht "
- ----------------------------------
Dr. Beno Sternlicht
Director
<PAGE>
Exhibit Table
-------------
5.1 Form of Opinion re legality
10.21 Asset Purchase Agreement between MTI and NYFM, Incorporated,
dated as of March 31,1998
10.22 Option Agreement-Contribution Match between Plug Power, L.L.C.
and MTI, dated as of April 24, 1998
10.23 Option Agreement-Contribution Match between Plug Power, L.L.C.
and MTI, dated as of June 15, 1998
10.24 Contribution Agreement between Edison Development Corporation
and MTI, dated as of June 10, 1998
10.25 Form of Notice of Guaranteed Delivery for Subscription
Certificate
10.26 Form of American Stock Transfer & Trust Co. Agency Agreement
10.27 Form of Instructions for Subscription Certificate
13.1 Form 10-Q Quarterly Report to Security Holders for the Quarter
Ended March 27, 1998(1)
23.1 Form of Consent of PricewaterhouseCoopers LLP
23.2 Form of Consent of Whiteman Osterman & Hanna (included in Form
of Opinion in Exhibit 5.1)
24 Power of Attorney (included on signature page)
___________________
Certain Exhibits were previously filed (as indicated below) and are
incorporated by reference herein.
(1) Filed with the Securities and Exchange Commission as of May 8,
1998.
Exhibit No. 5.1
Form of Opinion As to Legality of Shares
_____, 1998
Mechanical Technology, Incorporated
968 Albany-Shaker Road
Latham, New York 12110
RE: Rights Offering Pursuant to Form S-2
Ladies and Gentlemen:
We have acted as counsel to Mechanical Technology Incorporated (the
"Company"), a New York corporation, pursuant to a Registration Statement on
Form S-2, as filed with the Securities and Exchange Commission on July 21, 1998
(the "Registration Statement"), covering ________ shares of the Company's
$1.00 par value Common Stock (the "Securities").
In acting as counsel for the Company and arriving at the opinions as
expressed below, we have examined and relied upon originals or copies,
certified or otherwise identified to our satisfaction, of such records of the
Company, resolutions of the Board of Directors of the Company, agreements and
other instruments, certificates of officers, and representatives of the
Company, certificates of public officials and other documents as we have deemed
necessary or appropriate as a basis for the opinions expressed herein.
In connection with our examination we have assumed the genuineness of
all signatures, the authenticity of all documents tendered to us as originals,
the legal capacity of natural persons and the conformity to original documents
of all documents submitted to us as certified or photostatic copies.
Based on the foregoing, and subject to the qualifications and
limitations set forth herein, it is our opinion that:
1. The Company has the authority to issue the Securities in the manner
and under the terms set forth in the Registration Statement.
2. The Securities have been duly authorized by the Company and when
issued, delivered and paid for in accordance with their respective
terms, will be validly issued, fully paid and non-assessable.
We express no opinion with respect to the laws other than those of the
state of New York and Federal Laws of the United States of America, and we
assume no responsibility as to the applicability thereto, the effect thereon,
of the laws of any other jurisdiction.
<PAGE>
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and its use as part of the Registration Statement.
We are furnishing this opinion to the Company solely for its benefit in
connection with the Registration Statement. It is not to be used, circulated,
quoted or otherwise relied upon for any other purpose.
Very truly yours,
Whiteman, Osterman & Hanna
Exhibit No. 10.21
ASSET PURCHASE AGREEMENT
BETWEEN
MECHANICAL TECHNOLOGY, INCORPORATED
(A New York Corporation)
AND
NYFM, INCORPORATED
(A New York Corporation)
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into between
NYFM, Incorporated, a New York corporation ("NYFM") and Mechanical Technology,
Incorporated, a New York corporation ("Seller"). This Agreement is entered
into as of this 31st day of March, 1998. The Bill of Sale, the Assignment of
Intellectual Property, the Management Services Agreement, the Proprietary
Information Non-Disclosure Agreement, the FMI Guaranty, and the Amended CCF
Agreement are all dated as of the 31st day of March, 1998 (the "Transactional
Documents"). NYFM and Seller are sometimes referred to herein as the
"Parties."
In consideration of the foregoing and the mutual representations,
warranties, covenants, and agreements contained in this Agreement, NYFM and
Seller hereby agree as follows:
1. Sale of Assets.
1.1 Sale of Assets.
(a) Subject to the terms and conditions of this Agreement,
on the Closing Date, Seller will endeavor to sell, assign, transfer and deliver
to NYFM all of the assets and properties set forth on Schedule 1.1(a) attached
hereto and made a part hereof, as the same shall exist on the Closing Date (and
not disposed of in the ordinary course of business) and all assets and property
thereafter acquired by Seller in respect of or necessary for the conduct of the
Business immediately prior to the Closing Date (collectively, the "Conveyed
Assets"). NYFM agrees that prior to May 31, 1998 it will determine what
portion of the Conveyed Assets will be conveyed back to Seller (collectively,
the "Reconveyed Assets"; the Conveyed Assets minus the Reconveyed Assets are,
the "Assets"). The Assets will be conveyed free and clear of all Liens, except
Permitted Liens. NYFM acknowledges that MTI make no representations or
warranties as to its title to or ability to transfer any software set forth on
Schedule 1.1(a).
(b) Seller further agrees that if any Conveyed Assets are
not delivered to NYFM as of the Closing Date, Seller shall, prior to June 30,
1998, promptly deliver such asset to NYFM, so long as such asset is in the
possession of Seller or Plug Power, L.L.C.
<PAGE>
(c) If NYFM resells any of the Assets or transfers any of
such Assets to Foster-Miller, Inc. or any affiliates or subsidiaries thereof,
other than in the ordinary course of its business, within three (3) years of the
Closing Date, NYFM shall remit to Seller all sums paid for any such Assets
(less cost directly related to the sale) in excess of Seventy-Five Thousand
Dollars ($75,000), in the aggregate. Seller may request, not more frequently
than annually, an accounting of any such sales or transfers.
(d) Seller shall also convey government property, contract-
required property and third party owned property as set forth on Schedule
1.1(d) to NYFM, to the extent such conveyance does not violate existing agree-
ments of Seller with the government or such third parties. Seller and NYFM
agree to take all reasonable and necessary action to convey any assets not
conveyed as of the Closing Date to NYFM on or before April 30, 1998.
1.2 Purchase of Assets. In exchange for the Assets, NYFM shall do
the following:
(a) Subject to the terms and conditions of this Agreement,
NYFM hereby agrees (i) to execute and deliver to Seller the Transactional
Documents on the Closing Date, (ii) to assume Seller's accrued liability for
vacation pay to the persons listed on Schedule 1.12 in the total amount of
$40,216.74, and (iii) to establish a credit for $34,783.26 for any warranty work
performed by NYFM at the request of MTI pursuant to the terms of the Management
Services Agreement.
(b) NYFM further agrees to pay to Seller in cash, check or
by wire transfer of immediately available funds, Twenty-five thousand dollars
($25,000), as NYFM's first payment on the Leased Premises, pursuant to the
terms of the Management Services Agreement; and
(c) An amount equal to the following: (A) if Combined Gross
Sales exceed $2.5 million NYFM agrees to pay Seller compensation equal to the
following: (1) for the period commencing as of the Closing Date, through the
first anniversary of the Closing Date, NYFM shall pay Seller compensation equal
to (x) Combined Gross Sales, minus (y) $2.5 million, multiplied by (z) 0.13;
(2) for the period commencing as of the first anniversary of the Closing Date,
through the second anniversary of the Closing Date, NYFM shall pay Seller
compensation equal to (x) Combined Gross Sales, minus (y) $2.5 million,
multiplied by (z) 0.053; (4) for the period commencing as of the third
anniversary of the Closing Date, through the fifth anniversary of the Closing
Date, NYFM shall pay Seller compensation equal to (x) Combined Gross Sales,
minus (y) $2.5 million, multiplied by (z) 0.027, plus, (B) if NYFM or its
parent, Foster-Miller, Inc., a Massachusetts corporation ("FMI") sell all or a
portion of the assets of TEI or Fast Steering Mirror technologies during the
period commencing as of the Closing Date and ending as of the third anniversary
of the Closing Date, Seller shall receive fifty percent of the total purchase
price in cash, regardless of how the purchase price is actually paid, less
expenses directly related to the sale incurred in preparation of sales
proposals and reasonable attorneys' fees necessary to conclude an agreement of
sale. Such payments shall be due and payable 60 days after the anniversary of
the Closing Date, or the first business day thereafter. FMI, for itself, its
successors and assigns, shall execute a guaranty (the "FMI Guaranty") in the
<PAGE>
form attached hereto as Exhibit A, by which FMI agrees to guarantee the prompt
payment when due of all funds payable to Seller pursuant to this Section
1.2(c).
1.3 Assumed Liabilities. Subject to the terms and conditions of
this Agreement, NYFM assumes and agrees to pay, discharge, or fulfill any and
all liabilities and obligations of Seller (including but not limited to
contingent liabilities) set forth on Schedule 1.3, attached hereto and made a
part hereof (the "Assumed Liabilities"), and as may be reconciled by the parties
within thirty (30) days of the Closing date.
1.4 [Intentionally left blank]
1.5 Assignment of Contracts.
(a) Seller shall assign to NYFM all of Seller's rights,
title and interest in and to the contracts set forth on Schedule 1.5(a) attached
hereto (the "Assumed Contracts").
(b) Unless otherwise provided in 1.5(d), Seller shall use
its best efforts to invoice customers for all work performed on any of the
Assumed Contracts prior to the Closing Date. If Seller is unable to invoice
customers for any fully-authorized work performed on Assumed Contracts prior to
the Closing Date because it has not attained the necessary milestones, or for
whatever other reason except default, Seller shall, within sixty (60) days of
the Closing Date, invoice NYFM for such amounts. NYFM shall pay Seller with
respect to such invoices within fifteen (15) days of receipt of payment from
the payor with respect to such Assumed Contract. Seller shall have the sole
and absolute right to receive all payments related to such work. Except as set
forth below, NYFM shall have the sole and absolute right to receive all
payments related to work performed on or after the Closing Date with respect to
Assumed Contracts. Any retainage received by NYFM with respect to the Assumed
Contracts shall be divided pro rata based on the respective billing amounts of
the Parties, and NYFM shall remit to Seller its share thereof within fifteen
(15) days of NYFM's receipt thereof. At Seller's reasonable request, NYFM
shall provide Seller a monthly accounting of its Assumed Contract receipts
until all amounts Seller billed to NYFM have been paid in full. Seller shall
not bill any amounts for adjustments due to billing errors or an increase in
direct or indirect rates.
(c) NYFM hereby agrees to perform the Assumed Contracts in
accordance with the terms and conditions of the Assumed Contracts and
applicable novations and subcontracts.
(d) 1. Notwithstanding Section 1.5(b) above the parties agree that
NYFM shall assume any cost overrun risk with regard to Assumed Contract
F-41650-95-D-0001 and Seller shall assume any cost overrun risk with regard to
the subcontracting (the "DOE Subcontract") of Seller's prime contract DE-AR21-
<PAGE>
95MC32093. Seller shall reimburse NYFM for all invoices submitted to Seller
for NYFM's performance of the DOE Subcontract regardless of Sellers
reimbursement by DOE.
2. The cost to complete several of the NYFM
Electric Boat contracts exceeds the funds currently authorized. It is not
certain that Electric Boat will authorize additional funds to complete the work-
scope of the contracts. The Seller agrees that if the customer(s) does not
authorize sufficient funds to complete the workscopes, that NYFM and the Seller
will share the final amount that the customer pays above the authorized amount
in direct portion to the amount of work each party has invoiced above the
authorized amount.
1.6 [Intentionally left blank]
1.7 Warranty Work Procedure. NYFM will, at Seller's request,
perform all work with respect to any warranty claim on products produced by the
Business with respect to which Seller, or its subsidiary TEI, has warranty
liability. Seller must consent to NYFM's work plan for work and estimate of
costs on warranty claims, prior to the commencement of any such work. Except as
provided in Section 1.2(a) of this Agreement, NYFM will bill Seller for the
direct costs of labor, fringe benefits, materials, equipment, travel and other
direct costs related to such warranty work.
1.8 Assignment of Intellectual Property. On the Closing Date,
Seller shall sell, assign and transfer all of Seller's right, title, and
interest in and to the Intellectual Property, as set forth on Schedule 1.8
attached hereto, by execution and delivery to NYFM of the Assignment of Intel-
lectual Property.
1.9 Licensed Technology. Seller shall retain a non-exclusive,
fully paid-up license in all Intellectual Property, including but not limited
to Patent rights, Copyrights and Trade Secrets, transferred to NYFM and
necessary for the conduct of Seller's business (exclusive of the Business),
provided Seller's use of such Intellectual Property does not compete directly
with NYFM's business or commercialization of such technology. Seller hereby
grants to NYFM an irrevocable, paid-up, non-exclusive, non-transferable, royalty
free license to Seller's software for NYFM's use only in connection with NYFM's
business and only to the extent permitted by Section 7 of this Agreement.
Seller hereby also grants to NYFM an irrevocable, paid-up, non-exclusive, non-
transferable, royalty-free copyright license for NYFM's internal use only of
certain Technology Division documents that are non-public, and for NYFM's
external use of such non-public documents to the extent permitted by Sections
1.15 and 7 of this Agreement. Seller hereby also grants to NYFM an
irrevocable, paid-up, non-exclusive, non-transferable, royalty-free license to
U.S. Patent Nos. 4,773,019 and 4,751,381. All rights not expressly granted to
NYFM hereby with respect to the subject matter of this Section, are reserved to
Seller.
1.10 Consent of Third Parties. Notwithstanding anything to the
contrary in this Agreement, this Agreement shall not constitute an agreement
to assign or transfer any Governmental Approval, instrument, contract, lease,
<PAGE>
permit or other agreement or arrangement or any claim, right or benefit arising
thereunder or resulting therefrom if an assignment or transfer without the
consent of a third party would constitute a breach or violation thereof or
affect adversely the rights of NYFM or Seller thereunder. Any transfer or
assignment to NYFM or Seller of any interest under any such instrument,
contract, lease, permit or other agreement or arrangement which requires the
consent of a third party shall be made subject to such consent or approval
being obtained. In the event any such consent or approval is not obtained on
or prior to the Closing Date, Seller shall continue to use all efforts to
obtain any such approval or consent after the Closing Date until such time as
such consent or approval has been obtained, and Seller will cooperate with NYFM
in any lawful and economically feasible arrangement to provide that NYFM shall
receive the interest of Seller in the benefits under any such instrument,
contract, lease or permit or other agreement or arrangement.
1.11 Liability for Transfer Taxes and Fees. NYFM shall be responsible
for the timely payment of, and shall indemnify and hold harmless Seller
against, all sales, use, value added, documentary, stamp, gross receipts,
registration, transfer, conveyance, excise, recording, license and other similar
Taxes and fees, including any and all fees related to the transfer of Patents
and other Intellectual Property ("Transfer Taxes") arising out of, in connection
with, or attributable to, the transactions effected pursuant to this Agreement.
NYFM shall prepare and timely file all tax returns required to be filed in
respect of Transfer Taxes, provided that the Seller shall be permitted to
prepare any such tax returns that are the primary responsibility of the Seller
under applicable law.
1.12 Employees. NYFM shall offer to hire those employees set forth
on Schedule 1.12 attached hereto and made a part hereof. All such employees
are currently, and shall be hired by NYFM as, employees at will. NYFM shall
make available to such employees benefits that approximate those provided to
existing employees of NYFM, however, NYFM shall not assume any liability for
continuation of any employee benefit plan instituted or carried out by Seller.
1.13 [Intentionally left blank]
1.14 Employee Severance. If NYFM terminates any employee set forth
on Schedule 1.12 for lack of work during the period commencing as of the Closing
Date and terminating as of the Third anniversary of the Closing Date, NYFM
shall pay such employee a separation payment equal to the payment set forth on
Schedule 1.14 attached hereto and made a part hereof ("Separation Payment").
Seller shall reimburse NYFM for such Separation Payment as follows: (1) if the
termination occurs after the Closing Date, but before the first anniversary of
the Closing Date, Seller shall reimburse NYFM for 2/3 of the Separation
Payment; (2) if the termination occurs as of the first anniversary of the
Closing Date, but before the second anniversary of the Closing Date, Seller
shall reimburse NYFM for 1/2 of the Separation Payment; (3) if the termination
occurs as of the second anniversary of the Closing Date, but before the third
anniversary of the Closing Date, Seller shall reimburse NYFM for 1/4 of the
Separation Payment.
<PAGE>
1.15 Confidentiality.
(a) The Parties acknowledge that each of them owns inform-
ation of a confidential and/or proprietary nature ("Information") that may be
located or utilized from time to time at the premises shared by the Parties at
968 Albany-Shaker Road, Latham, New York.
(b) Each of the Parties agrees for itself that it will use
its best efforts to ensure that it, its officers, directors, members, managers
and employees, and any contractors, agents, licensees, and invitees of such
Party do not obtain access to Information of the other Parties through acts or
omissions of such Party and will use its best efforts to protect its own
Information from disclosure to the other Parties or such other persons. In the
event that a Party discovers Information belonging to another Party, or
otherwise receives such Information, other than pursuant to an express written
agreement between such Parties requiring or permitting such disclosure, the
Party discovering or receiving such Information shall (i) use the same
reasonable efforts to protect such Information as are used to protect its own
Information, (ii) promptly give notice of such discovery or disclosure to the
Party whose Information was compromised, as required below, and (iii) except as
provided in paragraph (c) of this Section 1.15, shall not make any
reproductions, disclosures or use of such Information in any manner or for any
use or purpose.
(c) Limitations on reproduction, disclosure or use of
Information shall not apply to, and neither Party shall be liable for, reproduc-
tion, disclosure or use of Information with respect to which any of the follow-
ing conditions exist:
(i) If, prior to the receipt thereof, the Inform-
ation had been developed independently by the Party receiving it, or was
lawfully known to the Party receiving it, or had been lawfully received from
other sources, including another Party, provided such other source did not
receive it due to a breach of this Agreement;
(ii) If, subsequent to the receipt thereof, (i) the
Information is published by the Party furnishing it, or is disclosed by the
Party furnishing it to others, including another Party, without restriction,
(ii) the Information has been lawfully obtained by the Party receiving it from
other sources, including another Party, provided such other source did not
receive it due to a breach of this Agreement, (iii) if such Information other-
wise comes within the public knowledge or becomes generally known to the public,
or (iv) it is established as a matter of law that such Information is developed
by employees or consultants of the receiving Party who have not had access to
Information received hereunder; or
<PAGE>
(iii) If any part of the Information has been or hereafter
shall be disclosed in a United States patent issued to the Party owning the
Information hereunder, then, after the issuance of such patent, the limitations
on such Information as disclosed in the patent shall be only that afforded by
the United States patent laws.
The Parties shall execute, deliver and abide by the terms of the
Proprietary Information Non-Disclosure Agreement of even date, executed in
connection with this transaction.
2. Events Occurring on the Closing Date
2.1 Closing. The closing shall take place on March 31, 1998 (the
"Closing Date") at the offices of Whiteman Osterman & Hanna, One Commerce
Plaza, Albany, New York 12260, or at such other location as the parties shall
mutually agree.
2.2 Deliveries by Seller. As of the Closing Date, Seller shall
deliver to NYFM the following:
(a) The Bill of Sale and the Assignment of Intellectual
Property (the "Conveyance Instruments");
(b) Duly executed copies of every other Transactional
Document to which Seller is a party;
(c) A copy of the resolutions of Seller's directors, certi-
fied by its Secretary or other authorized party, authorizing or ratifying the
execution and delivery of this Agreement, the Conveyance Instruments, and the
other Transactional Documents, and the consummation of the transactions contem-
plated hereby and thereby;
(d) A certificate from the Secretary of State of the State
of New York as to Seller's good standing in such state certified as of a date
within thirty (30) days of the Closing Date;
(e) An opinion from Seller's counsel, in form and substance
satisfactory to NYFM and NYFM's counsel;
(f) All other previously undelivered items required to be
delivered by Seller at or prior to the Closing Date pursuant to the terms of
this Agreement, the Conveyance Instruments or the Transactional Documents.
<PAGE>
2.3 Deliveries by NYFM. As of the Closing Date, NYFM shall deliver
or cause to be delivered to Seller the following:
(a) Duly executed copies of the FMI Guaranty;
(b) Duly executed copies of every Transactional Document to
which NYFM is a party;
(c) A copy of the resolutions of NYFM's directors, certified
by its Secretary or other authorized party, authorizing or ratifying the
execution and delivery of this Agreement and the other Transactional Documents,
and the consummation of the transactions contemplated hereby and thereby;
(d) A copy of the resolutions of FMI's directors, certifie
by its Secretary or other authorized party, authorizing or ratifying the execu-
tion and delivery of the FMI Guaranty;
(e) A certificate from the Secretary of State of the State
of New York as to NYFM's good standing in such state certified as of a date
within thirty (30) days of the Closing Date;
(f) A certificate from the Secretary of State of the Common-
wealth of Massachusetts as to FMI's good standing in such state certified as of
a date within thirty (30) days of the Closing Date;
(g) An opinion, from NYFM's counsel, in form and substance
satisfactory to Seller and Seller's counsel;
(h) All other previously undelivered items required to be
delivered by NYFM or FMI at or prior to the Closing Date pursuant to the terms
of this Agreement, the FMI Guaranty or the Transactional Documents.
3. Representations and Warranties.
3.1 Representations and Warranties of Seller. Seller represents and
warrants to NYFM as follows:
(a) Authorization, etc. Seller has the corporate power and
authority to execute and deliver this Agreement and each of the Conveyance
Instruments and Transactional Documents to which it is a party and to fully
perform its obligations and consummate the transactions contemplated thereby.
The execution and delivery by Seller of this Agreement, the Conveyance
Instruments and the Transactional Documents and the consummation of the
transactions contemplated thereby, have been duly authorized by all requisite
corporate action. This Agreement, together with all other obligations of
<PAGE>
Seller hereunder, constitutes the valid and legally binding obligation of
Seller, enforceable in accordance with its terms.
(b) Corporate Status. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York with full corporate power and authority to carry on the Business in the
places where such Business is conducted.
(c) No Conflicts. The execution, delivery and performance
by Seller of this Agreement, the Transactional Documents, and the consummation
of the transactions contemplated thereby, do not conflict with, or result in a
violation of, or a default under, (i) any Applicable Law applicable to the
Business or any of the Assets, (ii) the certificate of incorporation and bylaws
of Seller or (iii) except as set forth in Schedule 3.1(c), any Contract or
other contract, agreement or other instrument to which Seller is a party and by
which Seller or any properties or assets of the Business are bound. Except as
specified in Schedule 3.1(c), no Governmental Approval or other Consent is
required to be obtained or made by Seller in connection with the execution and
delivery of this Agreement, the Conveyance Instruments or the Transactional
Documents or the consummation of the transactions contemplated thereby.
(d) Absence of Liens. Seller hereby warrants title to the
Assets to NYFM, free and clear of any Lien, except Permitted Liens. Except as
set forth on Schedule 3.1(d), all Assets transferred to NYFM are free from any
Liens, except Permitted Liens.
(e) Legal Proceedings. Except as set forth on Schedule
3.1(e), to the best of Seller's actual knowledge after due inquiry, there are no
outstanding or threatened claims or suits against Seller or the Assets, that
would cloud Seller's title to the Assets or Intellectual Property or prevent
Seller from transferring the Assets or Intellectual Property to NYFM.
(f) Taxes. Seller has duly and timely filed all tax returns
with respect to taxes required to be filed on or before the Closing Date.
Except for taxes set forth on Schedule 3.1(f), which are being contested in
good faith and by appropriate proceedings, all taxes have been duly and timely
paid. All taxes required to be withheld by or on behalf of Seller in connection
with amounts paid or owing to any employee, independent contractor, creditor or
other party with respect to the Business have been withheld, and such withheld
taxes have been duly and timely paid to the proper Governmental Authorities or
set aside in accounts for such purpose. Seller shall be responsible for
payment of all such contested taxes in the event such contest is determined
adverse to Seller.
(g) Intellectual Property. To the best of its knowledge,
Seller is not aware of any third party trade secret, patent, trademark or copy-
right that would be subject to a claim of infringement by such third party
should NYFM practice the Intellectual Property or Trade Secrets to be trans-
ferred. Seller has no outstanding claims against any third party for infringe-
ment of any of the Intellectual Property, and to the best of its actual knowl-
<PAGE>
edge, Seller is not aware of any Intellectual Property that is currently being
infringed by any third party.
(h) Due Diligence Materials. Except as set forth on
Schedule 3.1(h), each of the documents, contracts, financial statements, corres-
pondence, purchase orders, patent applications, records of title, bills of
sale, employee records or business forecasts, identified as material by mutual
agreement of the Parties and as set forth on Schedule 3.1(h), are materially
complete and accurate and no other documents exist that are material to the
Business or material to an analysis of whether to purchase the Business.
(i) Environmental. There are no known outstanding or
pending environmental claims regarding the Assets or the premises to be leased
by NYFM from Seller and there have been no reportable releases to the ground or
air at the premises to be leased by NYFM, except as set forth in the Phase I
Environmental Reports for the Latham and Malta sites, previously delivered to
NYFM. Seller shall indemnify and hold harmless NYFM, its agents, officers,
directors, employees, consultants and contractors, and each of their respective
heirs, successors and assigns, from all claims, injunctions, damages, response
costs, reasonable attorneys' fees, fines, fees, taxes and penalties, including,
without limitation, past, present and future claims under the common law or any
local, state or federal ordinances, statutes or regulations administered or
enforced by any government or governmental agency, arising out of, or relating
to, acts or omissions of Seller with respect to any environmental condition
arising out of Seller's use of such Latham and Malta sites.
(j) Further Environmental Assurances. None of the Assets or
premises are subject to any RCRA, Federal or State Superfund or any third party
environmental claims or suits, and except as disclosed on Schedule 3.1(j),
Seller and employees of the Business as of the Closing Date are not involved in
any claims or suits regarding any environmental matter related to Seller or the
Business.
(k) Employees. Seller is in compliance with regard to any
affirmative action plan and is not in violation of any EEOC, wage, OSHA or
other employment plan or regulation that would give rise to claims by the
current employees of the Business, which claims would have a material adverse
effect on the ability of NYFM to hire such current employees without
restriction or conduct the Business without undue burden or costs.
(l) Leased Space. Except as set forth on Schedule 3.1(l),
to the best of Seller's knowledge, there are no building or electrical or other
code violations or primary lease conditions or breaches regarding the premises
to be leased by NYFM which would cause any unanticipated expense or an inabil-
ity of NYFM to lease the premises for their intended purpose. In the event of a
breach of this provision, upon notice thereof by NYFM to Seller, Seller
promptly shall undertake the repair or correction of any such violation, lease
condition or breach at Seller's own expense.
<PAGE>
(m) To the best of its knowledge, Seller has not withheld
any material facts from NYFM which would cause NYFM, as a reasonably prudent
business entity, not to proceed with the Transactional Documents.
(n) Employees. Seller is an employer at will and has no
employment contracts with any employee of the Business. Seller is a non-union
shop and has no union contracts or agreement. Except as set forth on Schedule
3.1(n) attached hereto, there have been no material changes in the compensation
of the employees of the Business since February 28, 1998.
(o) Seller represents that it has product liability and
completed operations insurance coverage in the amount of $1,000,000 per occur-
rence and $2,000,000 in the aggregate and that it will maintain such coverage
for two years from the Closing.
(p) Intellectual Property. In addition to Schedule 1.8 and
Section 1.9, Seller has transferred to NYFM all the Intellectual Property Seller
owns necessary for NYFM to conduct the Assumed Contracts, and Seller shall not
assert any Patents it owns against NYFM with respect to NYFM's conduct of the
Business.
3.2 Representations and Warranties of Purchaser. NYFM represents
and warrants to Seller as follows:
(a) Authorization, etc. NYFM has the corporate power and
authority to execute and deliver this Agreement and each of the Transactional
Documents to which it is a party and to fully perform its obligations and
consummate the transactions contemplated thereby. The execution and delivery
by NYFM of this Agreement and the Transactional Documents and the consummation
of the transactions contemplated thereby, have been duly authorized by all
requisite corporate action. This Agreement, together with all other obligations
of NYFM hereunder, constitute the valid and legally binding obligation of NYFM,
enforceable in accordance with its terms.
(b) Corporate Status. NYFM is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York,
with full corporate power and authority to carry on its business in the places
where it is to be conducted.
(c) No Conflicts. The execution, delivery and performance
by NYFM of this Agreement and the Transactional Documents, and the consummation
of the transactions contemplated thereby, do not conflict with or result in a
violation of or a default under (i) any Applicable Law applicable to NYFM or
any of its assets, (ii) the certificate of incorporation and bylaws of NYFM or
(iii) except as set forth in Schedule 3.2(c), any contract, agreement or other
instrument to which NYFM is a party and by which NYFM or any properties or
assets are bound. Except as specified in Schedule 3.2(c) or Schedule 3.1(c),
no Governmental Approval or other Consent is required to be obtained or made by
NYFM in connection with the execution and delivery of this Agreement, or the
Transactional Documents or the consummation of the transactions contemplated
thereby.
<PAGE>
(d) Litigation. To the best of NYFM's knowledge, after due inquiry,
there is no action, claim, demand, suit, proceeding, arbitration, grievance,
citation, summons, subpoena, inquiry or investigation of any nature, civil,
criminal, regulatory or otherwise, in law or in equity pending or threatened
against NYFM, their assets or businesses or the transactions contemplated by
this Agreement.
4. Indemnification.
4.1 By Seller. Seller agrees to indemnify against all losses,
actions, suits, claims or proceedings (including attorneys' fees) that may be
incurred by NYFM arising out of any breach by Seller of any of Seller's
representations warranties, covenants or agreements made in this Agreement, the
Schedules attached hereto or any document or instrument delivered in connec-
tion with the transactions contemplated hereby.
4.2 Seller shall also be liable for and indemnify, defend, and hold
harmless NYFM for all costs, including reasonable expenses and attorneys' fees,
of any claims, suits or actions that arise:
(a) out of any contract work, warranty work or products for
any and all Seller contract work, operations or products sold or delivered to
third parties prior to the Closing Date; and
(b) for any and all contract work, warranty work or products
whether or not completed or sold or delivered but only to the extent such claim,
suit or action arises out of Seller's negligent design, fabrication, manu-
facture, sales, installation, repair, replacement parts or warranty work
performed by Seller prior to, or after, the Closing Date.
4.3 By NYFM. NYFM agrees to indemnify against all losses, actions,
suits, claims or proceedings (including attorneys fees) that may be incurred by
Seller arising out of any breach by NYFM of any of NYFM's representations
warranties, covenants or agreements made in this Agreement, the Schedules
attached hereto or any document or instrument delivered in connection with the
transactions contemplated hereby.
4.4 NYFM shall be liable for and indemnify, defend and hold harmless
Seller for all costs, including reasonable expenses and attorneys' fees, that
arise:
(a) out of all Assumed Contract work performed by NYFM after the
Closing Date (except as otherwise provided in Section 4.4(c) hereof), provided,
however, that NYFM shall not be liable for any such Assumed Contract work if
the act or omission or cause of the claim arises out of work previously
performed by Seller;
(b) out of warranty work performed by NYFM at the request of Seller
or upon the contractual obligation of NYFM, provided, however, that NYFM shall
not be liable for any failures of warranty work performed or re-performed that
arise out of the original design of Seller, the design or supply of spare parts
by Seller, or the instruction or operations manuals or procedures supplied by
<PAGE>
Seller, unless such manuals or procedures are not followed by NYFM or unless
NYFM performs redesign and such redesign is the cause of any failure; and
(c) out of work done by Seller for Electric Boat Corporation after
the Closing Date if Seller transfers revenues from such work to NYFM pursuant
to the Management Services Agreement.
4.5 Notice and Defense of Claims. A Party claiming indemnification
under this Section 4 (the "Asserting Party") must promptly notify in writing
the Party from which indemnification is sought (the "Defending Party") of the
nature and basis of such claim for indemnification. If such claim relates to a
claim, litigation or other action by a third party against the Asserting Party,
or any fixed or contingent liability to a third party (a "Third Party Claim"),
the Defending Party may elect to assume the defense of the Third Party Claim at
its own expense with counsel selected by the Defending Party. The Defending
Party may not assume the defense if the named parties to the Third Party Claim
(including any impleaded parties) include both the Defending Party and the
Asserting Party and the Asserting Party determines that representation of both
Parties by the same counsel would be inappropriate due to actual or potential
differing interests between them, in which case the Asserting Party shall have
the obligation to employ its own counsel, at its own cost. If such a
determination is made by counsel to the Asserting Party in an opinion letter
addressed and reasonably satisfactory to the Defending Party, the Defending
Party shall retain liability for the cost of the Asserting Party's independent
counsel. If the Defending Party assumes the defense of the Third Party Claim,
the Defending Party shall be liable for any fees and expenses of counsel for
the Defending Party incurred thereafter in connection with the Third Party
Claim (except in the case of actual or potential differing interests, as
provided in the preceding sentence). The Defending Party shall have the right
to assume the defense of and settle the Third Party Claim (at the Defending
Party's expense), unless the Asserting Party shall notify the Defending Party
in writing within five (5) days after receipt of such notice of intention to
settle, of the Asserting Party's election to assume (at its expense) the
defense of the Third Party Claim and promptly thereafter takes appropriate
action to implement such defense. The Asserting Party and the Defending Party
shall use all reasonable efforts to cooperate fully with respect to the defense
of any claim, action or proceeding covered by this Section 4.
4.6 Remedies. Except as otherwise provided herein, none of the
remedies provided in this Agreement for either party, including specific per-
formance, are the exclusive remedy of either party for a breach of this Agree-
ment. Except as otherwise provided herein, the parties shall have the right to
seek any other remedy in law or equity in lieu of or in addition to any remedies
provided in this Agreement, including an action for damages for breach of
contract.
<PAGE>
5. Brokers.
5.1 For Seller. Seller represents and warrants that except as set
forth on Schedule 5.1 hereof, it has not engaged any broker or finder or
incurred any liability for brokerage fees, commissions or finder's fees in
connection with the transactions contemplated by this Agreement. Seller agrees
to indemnify and hold harmless NYFM against any claims or liabilities asserted
against it by any person acting or claiming to act as a broker or finder on
behalf of Seller.
5.2 For NYFM. NYFM represents and warrants that it has not engaged
any broker or finder or incurred any liability for brokerage fees, commissions
or finder's fees in connection with the transactions contemplated by this
Agreement. NYFM agrees to indemnify and hold harmless Seller against any
claims or liabilities asserted against it by any person acting or claiming to
act as a broker or finder on behalf of NYFM.
5.3 Public Announcements. Any and all press releases and other
public announcements or communications concerning this Agreement and the trans-
actions hereunder to be made by either Party may be made only with the prior
written approval of the other Party or as otherwise required by law.
6. Definition of Certain Terms.
The terms defined in this Section 6, whenever used in this Agreement
(including in the Schedules), shall have the respective meanings indicated
below for all purposes of this Agreement. All references herein to a Section
are to a Section or Schedule of or to this Agreement, unless otherwise
indicated.
"Agreement" means this Asset Purchase Agreement, including the Schedules
hereto.
"Applicable Law" means all applicable provisions of all (i) constitu-
tions, treaties, statutes, laws (including the common law), rules, regulations,
ordinances, codes or orders of any Governmental Authority, (ii) Governmental
Approvals, and (iii) orders, decisions, injunctions, judgments, awards and
decrees of, or agreements with, any Governmental Authority.
"Assets" is defined in Section 1.1.
"Assumed Contracts" is defined in Section 1.5(a).
"Assumed Liabilities" is defined in Section 1.3.
"Business" shall mean the Technology Division of Mechanical Technology
Incorporated.
<PAGE>
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in New York are authorized or required to close.
"Closing Date" is defined in Section 2.1.
"Combined Gross Sales" means Gross Sales of NYFM, plus Gross Sales of
FMI derived from Intellectual Property transferred to NYFM, but shall not
include any sales revenue from the sale by NYFM of all or a portion of the
assets of TEI or Fast Steering Mirror technologies.
"Confidential Information" means any information concerning the business
and affairs of the Business that is not already generally available to the
public.
"Consent" means any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice to,
any Person, including, but not limited to, any Governmental Authority.
"Conveyance Instruments" is defined in Section 2.2(a).
"Copyrights." The term Copyrights shall mean all copyrights, including,
without imitation, all copyrights registered with the U.S. Copyright Office,
(the "Works") and any derivative works of the Works and any "Moral Rights"
Seller may have in the Works to the extent consistent with Sections 1.9 and 7
of this Agreement, excluding those copyrights underlying for which NYFM is only
granted a license.
"$ or dollars" means lawful money of the United States.
"Excluded Liabilities" is defined in Section 1.4.
"Gross Sales" means sales revenue minus any applicable taxes, freight,
insurance, rebates or other costs incurred or paid by NYFM which is added to
the sales price but not reimbursed by the purchaser of the goods or services or
assets.
"Governmental Approval" means any Consent of, with, from, or to, any
Governmental Authority.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including, without limitation, any government authority, agency,
department, board, commission or instrumentality of the United States, any
State of the United States or any political subdivision thereof, and any
tribunal or arbitrator(s) of competent jurisdiction, and any self-regulatory
organization.
<PAGE>
"Intellectual Property" means collectively and singularly Patent
rights, Copyrights, Trademark rights, Trade Secrets and know how used solely
in connection with the Business except to the extent the transfer of any such
Intellectual Property would be inconsistent with Sections 1.9 and 7 of this
Agreement.
"Knowledge" means actual knowledge after due inquiry and investigation.
"Lien" means any encumbrance, lien, insurance claim, suit, and secured
or unsecured financing.
"Patent" The term Patent shall mean certain patent applications (the
"Patent Applications"), together with all U.S. and foreign Letters Patent,
foreign or domestic patent applications set out on Schedule 1.8 attached hereto
and made a part hereof; patentable rights, whether or not such rights are
registered, or applications for registration have been filed, with any foreign
or domestic governmental agency; all proprietary drawings, plans, designs,
quality control, machine and mechanical specifications, engineering data,
production data, production techniques, installation data, application data,
flow charts, logic diagrams relating to the Patent Applications, and any other
foreign or domestic patentable rights that may be obtained in respect thereof;
any foreign or domestic re-issues, reexaminations certificates, extensions,
substitutions, confirmations, divisions, and continuations or continuations-in-
part of any of the foregoing, whether or not such rights or inventions become
patented, to the extent consistent with Sections 1.9 and 7 of this Agreement.
"Permitted Liens" means 1) Liens for taxes not yet due and payable or
which are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on Seller's books in
accordance with GAAP; and 2) those Liens set forth on Schedule 6, attached
hereto and made a part hereof.
"Person" means any natural person, firm, partnership, association,
corporation, company, trust, business trust, Governmental Authority or other
entity.
"Subcontracts" is defined in Section 1.5.
"Trademark" means the foreign or domestically registered trademarks and
common law trademarks described on Schedule 1.8, to the extent consistent with
Sections 1.9 and 7 of this Agreement.
"Trade Secrets" means methods, processes, know how and all other
proprietary data and information relating to the Intellectual Property,
including customer lists and business methods.
7. Covenant Not to Compete. For a period of five (5) years from and after
the Closing Date, NYFM and FMI shall not (1) manufacture for use or sale of any
aircraft engine balancing systems; (2) manufacture for use or sale any non-
contact displacement sensors using fiber optic, capacitance, or laser
technology; (3) manufacture for use or sale any PBS or equivalent engine
<PAGE>
balancing systems or component products; (4) contact any current Advanced
Products Division vendors, unless as of the Closing Date, the Technology
Division, NYFM or FMI had a relationship with such vendors; (5) sell, license
or convey to a third party any of the technology underlying the items 7(1)
through 7(3) above, unless such conveyance is approved by MTI and related to
the purchase of a piece of machinery from MTI by FMI or NYFM for any such third
party. This covenant not to compete does not prohibit NYFM or FMI from making,
using or selling the Fast Steering Mirror Technology or from using structured
light technology for surface profiling in such applications as topographical
mapping and EndSpector or from continuing any work in fiberoptic capacitance or
laser systems that FMI has completed, proposed (as evidenced by written records
or has underway as of the Closing Date. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this Section 7 is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with
one that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
8. Miscellaneous.
8.1 Expenses. Except as otherwise expressly provided herein, NYFM,
FMI and Seller shall each pay their own expenses in connection with this Agree-
ment and the transactions contemplated hereby.
8.2 Severability. If any provision of this Agreement, including any
phrase, sentence, clause, Section or subsection is inoperative or unenforceable
for any reason, such circumstances shall not have the effect of rendering the
provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatsoever.
8.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, (c) sent by next-day or overnight mail or
delivery, or (d) sent by facsimile transmission, with receipt thereof confirmed
by telephone:
<PAGE>
(i) if to NYFM:
Steven K. Ruggieri
Senior Vice President
Foster-Miller, Inc.
350 Second Avenue
Waltham, MA 02154-1196
Fax: (781) 890-3489
with a copy to:
Richard A. Covel, Esq.
General Counsel
Foster-Miller, Inc.
350 Second Avenue
Waltham, MA 02154-1196
Fax: (781) 890-3489
(ii) if to Seller:
President
Mechanical Technology Incorporated
968 Albany-Shaker Road
Latham, New York 12110
Fax: (518) 785-2297
with a copy to:
Catherine S. Hill, Esq.
Whiteman Osterman & Hanna
One Commerce Plaza
Albany, New York 12260
Fax: (518) 487-7777
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
Such notices or other communications shall be deemed received (a) on the
date delivered, if delivered personally, (b) three business days after being
deposited with the U.S. Postal Service, if sent by registered or certified
mail, (c) on the next business day, if sent by Federal Express or similar
<PAGE>
overnight courier, or (d) on the date sent, if receipt is confirmed by
telephone in accordance with this provision.
8.4 Entire Agreement. This Agreement, including the Schedules and
the Transactional Documents (when executed and delivered), constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof.
8.5 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
8.6 Governing Law, etc. This Agreement shall be governed in all
respects, including as to validity, interpretation and effect, by the internal
laws of the State of New York without giving effect to the conflict of laws
rules thereof. NYFM and Seller hereby irrevocably submit to the jurisdiction
of the courts of the State of New York and the Federal courts of the United
States of America located in the State of New York in respect of the
interpretation and enforcement of the provisions of this Agreement and of the
documents referred to in this Agreement, and hereby waive, and agree not to
assert, as a defense in any action, suit or proceeding that such action, suit
or proceeding may not be brought or is not maintainable in said courts or that
the venue thereof may not be appropriate or that this Agreement or any of such
document may not be enforced in or by said courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such a New York or Federal court. NYFM,
Seller hereby consent to and grant any such court jurisdiction over the person
of such parties and over the subject matter of any such dispute and agree that
mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 8.3 or in such other manner as may
be permitted by law, shall be valid and sufficient service thereof.
8.7 Binding Effect. This Agreement shall be binding upon an inure
to the benefit of the parties hereto and their respective heirs, successors and
permitted assigns.
8.8 No Third Party Beneficiaries. Nothing in this Agreement shall
confer any rights upon any person or entity other than the parties and their
respective successors and permitted assigns.
8.9 Amendment; Waivers, etc. No amendment, modification or dis-
charge of this Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by the party against whom enforce-
ment of the amendment, modification, discharge or waiver is sought. Any such
waiver shall constitute a waiver only with respect to the specific matter des-
cribed in such writing and shall in no way impair the rights of the party
granting such waiver in any other respect or at any other time. Neither the
waiver by any of the parties hereto of a breach of or a default under any of the
provisions of this Agreement, nor the failure by any of the parties, on one or
more occasions, to enforce any of the provisions of this Agreement or to exer-
cise any right or privilege hereunder, shall be construed as a waiver of any
<PAGE>
other breach or default of a similar nature, or as a waiver of any of such
provisions, rights or privileges hereunder. The rights or remedies that any
party may otherwise have at law or in equity.
8.10 Further Assurances. Seller and NYFM agree to execute such
documents and other papers and perform such further acts as may be reasonably
required or desirable to carry out the provisions hereof and the transaction
contemplated hereby.
8.11 Continued Cooperation. Seller NYFM agree that following the
Closing Date, each of them shall cooperate in furnishing such information,
documentation, and assistance as the other Party may reasonably request to
carry out the provisions hereof, the transactions contemplated hereby and by
the Transactional Documents, and to permit the continued operation of the
businesses contemplated by the Transactional Documents to be operated at the
building shared by the Parties.
8.12 Survival. None of the representations and warranties or
covenants of the Parties contained in this Agreement shall survive beyond the
Closing Date, except that the and the covenants contained in Sections 1.1, 1.2,
1.3, 1.5(b), 1.7, 1.9, 1.10 through 1.15, 3.1(f), 3.1(i) 3.1(l), 3.1.0, 4.1
through 4.4, 4.5, 5.1 through 5.3, 7, 8.3, 8.6 through 8.11 shall survive until
the expiration of the applicable statute of limitations period for any claims
made in respect of the matters referred to in such Sections.
IN WITNESS WHEREOF, the parties have executed the foregoing documents as
of the date and year first above written.
MECHANICAL TECHNOLOGY INCORPORATED
(a New York corporation)
/s/ Denis Chaves
___________________________________
By: Denis Chaves
Its: Vice-President
NYFM, INCORPORATED
(a New York corporation)
/s/ William A. Ribich
___________________________________
By: William A. Ribich, Sc. D.
Its: President
Exhibit 10.22
OPTION AGREEMENT - CONTRIBUTION MATCH
PLUG POWER, L.L.C.
A Delaware Limited Liability Company
This Option Agreement - Contribution Match ("Option Agreement" or
"Agreement") is made this 24th day of April, 1998, by and between Plug Power,
L.L.C., a Delaware limited liability company (the "Company") and Mechanical
Technology, Inc., a New York corporation ("MTI") (hereinafter collectively
referred to as the "Parties").
WHEREAS, on or about June 27, 1997, MTI and Edison Development
Corporation, a Michigan corporation ("EDC") formed the Company by filing a
Certificate of Formation with the office of the Secretary of State of the State
of Delaware and entered into that certain Limited Liability Company Agreement
of Plug Power, L.L.C., dated June 27, 1997 (the "Operating Agreement"); and
WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meaning given it in the Operating Agreement unless otherwise provided;
and
WHEREAS, Section 4.2(b) of the Operating Agreement provides that the
Company may, from time to time and as required, call upon EDC for additional
cash contributions in amounts not to exceed, in the aggregate, $4,250,000 and
that for each $1.00 of such additional cash contributions EDC shall receive one
(1) Share of Class A Membership Interest; and
WHEREAS, Section 4.2(c) of the Operating Agreement provides that, upon
the Company's receipt of each additional cash contribution from EDC, the Company
shall notify MTI in writing of such contribution, and that MTI shall have five
(5) days after receipt of such notice to request an option to purchase
additional Shares of Class A Membership Interest (the "Option") in an amount
not to exceed the number of Shares issues to EDC, and upon such request, the
Company shall execute and deliver to MTI an Option Agreement granting to MTI an
option to purchase such Shares; and
WHEREAS, as of April 15, 1998, EDC made such additional cash contribu-
tion to the Company in the amount of $2.25 million, and the Company has duly
notified MTI, and MTI and EDC have agreed that $2 million of MTI's match of
such contribution will be through the contribution by MTI of a below-market
lease to the Company; and
WHEREAS, MTI has requested an option to purchase 250,000 additional
Shares of Class A Membership Interest in the Company in accordance with Section
4.2(c) of the Operating Agreement.
<PAGE>
In consideration of the mutual promises and conditions made herein, the
Parties agree as follows:
1. Grant of Option: Term.
(a) The Company grants to MTI an option to purchase 250,000 Shares
of Class A Membership Interest in the Company upon the terms and conditions set
forth herein.
(b) The term of this Option shall expire at 5:00 p.m. E.S.T. on the
date twelve (12) months after the date of this Agreement, or the date MTI ceases
to be a Member of the Company for any reason, whichever occurs first ("Expira-
tion Date").
2. Option Price. In consideration of the grant of the Option, MTI shall
pay to the Company, upon execution of this Option Agreement $21,250.00, being
the amount equal to interest on the Purchase Price (defined below) at an annual
rate of 8.5% ("Interest Rate"), being the prime rate as reported by the Wall
Street Journal on the date of this Agreement, accruing from the date of this
Agreement to the Expiration Date ("Option Price"). The Option Price shall not
be applied in reduction of the Purchase Price and MTI's Capital Account shall
not be increased as a result of the payment of the Option Price. If MTI fails
to exercise the Option, the Option Price shall not be returned to MTI. If MTI
exercises the Option and pays the Purchase Price prior to the Expiration Date,
the Company shall return to MTI a portion of the Option Price equal to the
amount of interest that would have accrued on the Purchase Price at the
Interest Rate from the date of payment of the Purchase Price to the Expiration
Date.
3. Exercise of Option. MTI may exercise this Option at any time prior to
5:00 p.m. EST on the Expiration Date by written notice to the Company. If MTI
fails to exercise this Option in the manner and by the time set forth above,
this Option shall automatically terminate and MTI shall have no further rights
to purchase Shares of Class A Membership Interest pursuant to this Option
Agreement.
4. Purchase Price. The price for the Shares of Class A Membership Interest
purchased under this Option ("Purchase Price") shall be One Dollar ($1.00) per
Share. The Purchase Price shall be paid either in cash at the time MTI
exercises the Option or, if MTI has any credit available pursuant to Section
4.2(d) of the Operating Agreement, any such credits may be applied in payment
of the Purchase Price (but not in payment of the Option Price.) Upon payment
of the Purchase Price, MTI's Capital Account shall be increased by an amount
equal to the Purchase Price paid to the Company.
5. Delivery of Shares. Within ten (10) days after the Company's receipt of
the exercise of this Option by MTI, the Company shall issue and deliver to MTI
<PAGE>
a certificate or certificates for the Shares of Class A Membership Interest
purchased by MTI pursuant to this Option Agreement.
6. Voting Rights Applicable to Option. At all times prior to the earlier
of (a) the Expiration Date of (b) MTI's exercise of this Option and payment of
the Purchase Price, MTI shall have voting rights with respect to the Shares of
Class A Membership Interest in the Company for which MTI has an option to
purchase under this Option Agreement. Should MTI fail to exercise this Option
prior to the Expiration Date or fail to pay the Option Price or Purchase Price
within the time required hereunder for payment thereof, such voting rights
shall automatically terminate.
7. Non-Transferability. This Option shall not be assigned, pledged,
hypothecated, sold, or otherwise transferred or encumbered by MTI, except that
MTI may, without the consent of the Company or EDC, transfer its rights
hereunder to an Affiliate of MTI.
8. Notices. Any notice or other communication to the Company or to MTI
shall be in writing and shall either be delivered in person or mailed by first
class mail, postage prepaid, or sent by telex, telecopy or telegram, addressed
to the Party intended to be the recipient as follows:
If to the Company:
Plug Power, L.L.C.
968 Albany-Shaker Road
Latham, New York 12110
Attn: Gary Mittleman
with a copy to:
Wise & Marsac
11th Floor, Buhl Building
Detroit, Michigan 48226
Attn: Jim Kamp
or at such other address as the Company may designate by notice to MTI.
If to MTI:
Mechanical Technology, Inc.
968 Albany-Shaker Road
Latham, New York 12110
Attn: Cynthia Scheuer
or at such other address as MTI may designate by notice to the Company.
<PAGE>
Any notice, request, consent, offer or demand shall be deemed received,
given or served, if mailed by first class mail, on the 3rd day after the day of
mailing, and, if sent, by telex, telecopy or telegram, 24 hours after the time
of dispatch.
9. Entire Agreement. This Option Agreement supersedes all agreements
previously made between the Parties relating to its subject matter. There are
no other understandings or agreements between the Parties.
10. Governing Law. This Option Agreement shall be construed in accordance
with and governed by the law of the State of Michigan.
11. MTI's Acceptance of the Terms of This Option Agreement. MTI's written
request for this Option Agreement pursuant to Section 4.2(c) of the Operating
Agreement constitutes MTI's acceptance of all the terms and conditions of this
Option Agreement.
Plug Power, L.L.C. has executed this Option Agreement as of the date set
forth above.
WITNESS: PLUG POWER, L.L.C.
(a Delaware limited liability agreement)
/s/ Ana Maria Galeano By: /s/ Gary Mittleman
__________________________ ____________________________
Its: President and CEO
Exhibit 10.23
OPTION AGREEMENT - CONTRIBUTION MATCH
PLUG POWER, LLC
A Delaware Limited Liability Company
This Option Agreement - Contribution Match ("Option Agreement" or
"Agreement") is made this 15th day of June, 1998, by and between Plug Power,
LLC, a Delaware limited liability company (the "Company") and Mechanical
Technology Inc., a New York corporation ("MTI") (hereinafter collectively
referred to as the "Parties").
WHEREAS, on or about June 27, 1997, MTI and Edison Development
Corporation, a Michigan corporation ("EDC") formed the Company by filing a
Certificate of Formation with the office of the Secretary of State of the State
of Delaware and entered into that certain Limited Liability Company Agreement
of Plug Power, LLC, dated June 27, 1997 (the "Operating Agreement"); and
WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meaning given it in the Operating Agreement unless otherwise proved;
and
WHEREAS, Section 4.2(b) of the Operating Agreement provides that the
Company may, from time to time and as required , call upon EDC for additional
cash contributions in amounts not to exceed, in the aggregate, $4,250,000 and
that for each $1.00 of such additional cash contributions EDC shall receive one
(1) Share of Class A Membership Interest; and
WHEREAS, Section 4.2(c) of the Operating Agreement provides that, upon the
Company's receipt of each additional cash contribution from EDC, the Company
shall notify MTI in writing of such contribution, and that MTI shall have five
(5) days after receipt of such notice to request an option to purchase
additional Shares of Class A Membership Interest (the "Option") in an amount
not to exceed the number of Shares issued to EDC, and upon such request, the
Company shall execute and deliver to MTI an Option Agreement granting to MTI an
option to purchase such Shares; and
WHEREAS, as of June 11, 1998, EDC made such additional cash contribution
in the amount of $2 million, and the Company has duly notified MTI, and MTI has
requested an option to purchase additional Shares of Class A Membership
interest in the Company in accordance with Section 4.2(c) of the Operating
Agreement.
In consideration of the mutual promises and conditions made herein, the
Parties agree as follows:
1. Grant of Option; Term.
(a) The Company grants to MTI an option to purchase 2,000,000 Shares of
Class A Membership Interest in the Company ("Option Shares") upon the terms
and conditions set forth herein.
<PAGE>
(b) The term of this Option shall expire at 5:00 p.m. E.S.T. on the date
twelve (12) months after the date of this Agreement, or the date MTI ceases to
be a Member of the Company for any reason, whichever occurs first ("Expiration
Date").
2. Exercise of Option. MTI may exercise this Option, as to all of the
Option Shares, or as to portions of the Option Shares from time to time, at
anytime prior to 5:00 p.m. EST on the Expiration Date by written notice to the
Company. If MTI fails to exercise this Option in the manner and by the time
set forth above, this Option shall automatically terminate and MTI shall have
no further rights to purchase Shares of Class A Membership Interest pursuant
to this Option Agreement. If as of the date of this Agreement MTI has any
credits available pursuant to Section 4.2(d) of the Operating Agreement
("Credits"), or if thereafter and prior to the Expiration Date any such
Credits become available to MTI, MTI shall be deemed to have exercised this
Option to purchase one Option Share for each $1.00 of Credit available to MTI,
such exercise to be effective as of the date of this Agreement or such later
date prior to the Expiration Date that such Credits become available to MTI.
3. Option Price. In consideration of the grant of the Option, MTI
shall pay to the Company, upon execution of this Option Agreement, $170,000,
being the amount equal to interest on the Purchase Price (defined below) at an
annual rate of 8.5 % ("Interest Rate"), being the prime rate as reported by the
Wall Street Journal on the date of this Agreement, accruing from the date of
this Agreement to the Expiration Date ("Option Price"). The Option Price shall
not be applied in reduction of the Purchase Price, and MTI's Capital Account
shall not be increased as a result of the payment of the Option Price. If MTI
fails to exercise the Option, the Option Price shall not be returned to MTI.
If MTI exercises the Option and pays the Purchase Price prior to the Expiration
Date, the Company shall return to MTI a portion of the Option Price equal to the
amount of interest that would have accrued on the Purchase Price at the Interest
Rate from the date of payment of the Purchase Price to the Expiration Date.
Notwithstanding anything contained in this Agreement to the contrary, if any
of the Option Shares are purchased or deemed to be purchased, with Credits, the
Company will waive a portion of the Option Price, or reimburse a portion of the
Option Price if it has been paid by MTI, such portion to be determined by
multiplying the Option Price by a fraction, the numerator of which is the
amount of Credits applied to the Purchase Price, and the denominator of which
is the Purchase Price.
4. Purchase Price. The price for the Option Shares ("Purchase Price")
shall be One Dollar ($1.00) per Share. The Purchase Price shall be paid either
in cash at the time MTI exercises the Option or, if MTI has any Credit
available pursuant to Section 4.2(d) of the Operating Agreement, any such
Credits shall be applied in payment of the Purchase Price (but not in payment
of the Option Price.) Upon payment of the Purchase Price, MTI's Capital
Account shall be increased by an amount equal to the Purchase Price paid to the
Company.
5. Delivery of Shares. Within ten (10) days after the Company's
receipt of an exercise of this Option by MTI, the Company shall issue and
deliver to MTI a certificate or certificates for the Shares of Class A
Membership Interest purchased by MTI pursuant to this Option Agreement.
6. Voting Rights Applicable to Option. At all times prior to the
earlier of (a) the Expiration Date or (b) MTI's exercise of this Option and
payment of the Purchase Price, MTI shall have voting rights with respect to the
Option Shares. Should MTI fail to exercise this Option prior to the expiration
<PAGE>
Date or fail to pay the Option Price or Purchase Price within the time required
hereunder for payment thereof, such voting rights shall automatically terminate.
7. Non-Transferability. This Option shall not be assigned, pledged,
hypothecated, sold, or otherwise transferred or encumbered by MTI, except that
MTI may, without the consent of the Company or EDC, transfer its rights
hereunder to an Affiliate of MTI.
8. Notices. Any notice or other communication to the Company or to MTI
shall be in writing and shall either be delivered in person or mailed by first
class mail, postage prepaid, or sent by telex, telecopy or telegram, addressed
to the Party intended to be the receipt as follows:
If to the Company:
Plug Power, LLC
968 Albany - Shaker Road
Latham, New York 12110
Attn: Gary Mittleman
with a copy to:
Wise & Marsac
11th Floor, Buhl Building
Detroit, Michigan 48226
Attn: Jim Kamp
or at such other address as the Company may designate by notice to MTI.
If to MTI:
Mechanical Technology Inc.
968 Albany - Shaker Road
Latham, New York 12110
Attn: Cynthia Scheuer
or at such other addresses as MTI may designate by notice to the Company.
Any notice, request, consent, offer or demand shall be deemed received,
given or served, if mailed by first class mail, on the 3rd day after the day of
mailing, and, if sent by telex, telecopy or telegram, 24 hours after the time of
dispatch.
9. Entire Agreement. This Option Agreement supersedes all agreements
previously made between the Parties relating to its subject matter. There are
no other understandings or agreements between the Parties.
10. Governing Law. This Option Agreement shall be construed in
accordance with and governed by the law of the State of Michigan.
<PAGE>
11. MTI's Acceptance of the Terms of This Option Agreement. MTI's
written request for this Option Agreement pursuant to Section 4.2(c) of the
Operating Agreement constitutes MTI's acceptance of all the terms and
conditions of this Option Agreement.
Plug Power has executed this Option Agreement as of the date set forth
above.
WITNESS: PLUG POWER, LLC
(a Delaware limited liability agreement)
/s/Ana Maria Galeano By: /s/ Gary Mittleman
____________________ ____________________
Its: President and CEO
____________________
Exhibit 10.24
CONTRIBUTION AGREEMENT
BETWEEN
EDISON DEVELOPMENT CORPORATION
(a Michigan Corporation),
MECHANICAL TECHNOLOGY, INCORPORATED
AND
PLUG POWER, L.L.C.
(a Delaware limited liability company)
THIS CONTRIBUTION AGREEMENT (the "Agreement") is made as of the 10th day
of June, 1998, between Edison Development Corporation, a Michigan corporation,
with its principal office at 2000 Second Avenue, Detroit, Michigan 48226
("EDC"), Mechanical Technology, Incorporated, a New York Corporation with its
principal office at 968 Albany-Shaker Road, Latham, New York 12110 ("MTI") and
Plug Power, L.L.C., a Delaware limited liability company, with its principal
office at 968 Albany-Shaker Road, Latham, New York 12110 (the "Company").
The following facts underlie this Agreement:
WHEREAS, Edison Development Corporation ("EDC") and Mechanical
Technology, Incorporated ("MTI") are the sole members of the Company.
WHEREAS, on or about April 15, 1998, EDC made a capital contribution of
$2.25 million to the Company.
WHEREAS, MTI and EDC have agreed that MTI will fund $2 million of its
capital contribution through contribution of a below market lease, pursuant to
the terms and conditions set forth below.
WHEREAS, MTI will purchase an option to match the remaining $250,000
capital contribution by EDC, pursuant to the terms of the Option Agreement -
Contribution Match, attached hereto as Exhibit A ("Option Agreement").
WHEREAS, in order to accomplish the foregoing, EDC and MTI, individually
and as the sole members of the Company, have agreed to undertake the following:
* Amend the Operating Agreement of the Company;
<PAGE>
* Enter into certain leases with respect to the Company's use and
occupancy of certain property owned by MTI; and
* Enter into a certain Option Agreement as provided herein.
In consideration of the mutual promises set forth in this Agreement and
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties agree as follows:
1. Definitions. Unless the context otherwise requires, for purposes of
this Agreement the following terms shall have the meanings set forth in this
Section 1 (all other defined terms shall have the meaning set forth in the
Section defining such terms):
"Capital Account" shall have the meaning given to such term in the
Operating Agreement.
"Capital Contribution" shall have the meaning given to such term in the
Operating Agreement.
"MTI" shall mean Mechanical Technology, Inc., a New York corporation and
developer of the Technology (as defined in the Operating Agreement).
"Membership Interest" shall mean a Class A Membership Interest (as
defined in the Operating Agreement) in the Company.
"Operating Agreement" shall mean the Limited Liability Company Agreement
of Plug Power, L.L.C., a Delaware limited liability company, as amended from
time to time.
"Person" shall mean an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity.
"Sharing Ratios" shall mean Sharing Ratios as defined under the
Operating Agreement.
2. Basic Contribution Transaction.
2.1 MTI Contribution. MTI and Company acknowledge that on
or about April 15, 1998, EDC made a cash capital contribution of $2,250,000 to
the Company in exchange for 2,250,000 shares of Class A Membership Interests in
the Company. Pursuant to the Operating Agreement, MTI is permitted to maintain
its relative Sharing Ratio and ownership interest in the Company by making a
matching cash contribution or taking an option, or a combination thereof. EDC,
<PAGE>
MTI and Company agree that, in lieu of a cash contribution of $2,250,000 by MTI
to the Company and in order to allow MTI to maintain its relative Sharing Ratio
in the Company:
(a) MTI will lease to the Company, the property
commonly known as Building 3, 968 Albany-Shaker Road, Latham,
New York pursuant to a lease in the form attached as Exhibit A
(the "Building Three Lease"). The parties acknowledge that the
Building Three Lease is at a preferable below market rate and that
the fair market value of such below market lease to Company is
$2,000,000. In exchange for the Building Three Lease, the Company
shall issue 2,000,000 Class A Membership Interests to MTI (the
"New Shares"). The parties further acknowledge that such Building
Three Lease is being entered into by MTI in lieu of a matching
cash capital contribution or option by MTI in the amount of
$2,000,000; and
(b) MTI will enter into a "Option Agreement - Contribution
Match" in the form of Exhibit B whereby MTI will have the right
to match $250,000 of EDC's capital contribution pursuant to the
terms of the Option Agreement in exchange for 250,000 Class A
Membership Interests (the "Option Shares"); and
(c) MTI and the Company will enter into leases for
Building 3 until September 30, 1998; Building 2; and the test
house substantially in the form as the Building Three Lease.
2.2 Capital Account Reduction. The parties acknowledge
that the value of MTI's contribution of a below market lease will be realized
over a period of years and that the benefit to the Company of such an in-kind
contribution in lieu of cash will be reduced if Company dissolves or undergoes
a bankruptcy or similar event in the near term. Accordingly, the parties agree
that in the event that on or before the earlier of (a) May 29, 2000 or (b) an
initial public offering of the Company's shares, the Company shall file a
petition in voluntary bankruptcy under the Federal Bankruptcy Code or any
similar law, state or Federal, or a trustee or receiver shall be appointed for
the Company or any court shall have taken jurisdiction of the Company's
property in any involuntary proceeding for the reorganization, dissolution,
liquidation or winding up of the Company, than in such event:
(i) MTI's Capital Account in the Company shall be
immediately reduced by the sum of $1,000,000 and the number of
shares of Class A Membership Interests held by MTI shall be
immediately reduced by 1,000,000; and
<PAGE>
(ii) The Company's Lease with MTI shall terminate.
The parties further acknowledge that MTI is required to pay or reimburse
the Company for improvements pursuant to Section 3 of the Building 3 Lease.
With respect to such improvements, the parties agree as follows;
(a) If MTI fails to reimburse Tenant for improvements
required under Section 3(b) of the Building 3 Lease within the time
period set forth therein, MTI's Capital Account in the Company and
Class A Membership Interests shall be immediately reduced by the amount
of such unreimbursed improvements.
(b) MTI shall use all reasonable efforts to secure IDA
financing for payment and or reimbursement of the Tenant Improvements
Allowance (as defined in Section 3(a) of the Building 3 Lease). If
MTI is unable to secure such IDA financing on or before September 1,
1998, and has found no alternative source for financing of the Tenant
Improvements Allowance, then MTI shall, on or before September 1, 1998,
pay to Company the sum of $179,900, plus interest on such amount from
April 15, 1998 of $5,860 (the "Option Price"). In exchange for such
payment, MTI shall have the right to retain the remaining New Shares
not previously paid for or forfeited, pursuant to subsection (a) above,
and pursuant to the terms of the Option Agreement - Contribution Match
through April 15, 1999 (the "Remaining Option Shares"). Furthermore,
the rental under the Building 3 Lease shall be adjusted to the fair
market rental value for similar space as determined by a licensed real
estate professional agreed to by MTI, EDC and the Company (the
"parties"). If the parties cannot agree on a licensed real estate
professional, each shall select a real estate professional and the
average of the rents recommended by such individuals shall prevail.
Such real estate appraisal shall value the fair market rental of
Building 3 without regard to any improvements made by the Company
(i.e., based on the Building 3 Lease) and such rental rate shall not
exceed $8.00 per square foot.
(c) In the event that MTI fails to pay the Option Price
pursuant to subsection (b), MTI's Capital Account and Shares of Class A
Membership Interest in the Company shall be reduced by the Option Price
plus the value and number of the Remaining Option Shares.
<PAGE>
(d) In the event that MTI pays the Option Price pursuant to
subsection (b), but fails to pay for the Remaining Option Shares on
or before April 15, 1999, then MTI's Capital Account and Shares of
Class A Membership Interest in the Company shall be reduced by the
value and number of the Remaining Option Shares.
In addition to the foregoing, in the event that MTI fails to make
certain tenant improvements as required by the Building Three Lease (or fails to
reimburse the Company for improvements previously made which are the
responsibility of MTI under the Building Three Lease) on or before March 31,
1999. MTI's capital account shall be reduced dollar for dollar by the cost of
the improvements not made by the required deadline and the number of shares of
Class A Membership Interests held by MTI shall be reduced by a like amount.
2.3 Financing Options. The Company agrees that it will not
request EDC to finance improvements to Building 3 before it has used its best
efforts to obtain such financing from MTI.
2.4 Effect of Agreement. Nothing herein shall be deemed a
waiver of strict compliance with the terms of the Operating Agreement or an
amendment to any of the Agreements of the parties except to the extent expressly
provided herein.
3. Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if (a) delivered in person, (b) sent by
Federal Express or similar overnight courier, or (c) by registered or certified
mail, postage prepaid, to the respective party at the address that follows or
to such other address any party shall have given notice in accordance with this
Section 3:
To EDC:
Edison Development Corporation
2000 Second Avenue, 644 WCB
Detroit, Michigan 48226
Attn: A. Ananthasubramaniam
With a copy to:
DTE Energy, Inc.
2000 Second Avenue, 644 WCB
Detroit, Michigan 48226
Attn: Christopher C. Nern
<PAGE>
To the Company:
Plug Power, L.L.C.
968 Albany-Shaker Road
Latham, New York 12110
Attn: Gary Mittleman
With a copy to:
Wise & Marsac
11th Floor, Buhl Building
Detroit, Michigan 48226
Attn: Jim Kamp
To MTI:
Mechanical Technology, Incorporated
968 Albany-Shaker Road
Latham, New York 12110
Attn: Cynthia Scheuer
Such notices or other communications shall be deemed received (a) on the
date delivered, if delivered personally, (b) three business days after being
deposited with the U.S. Post Office, if sent by registered or certified mail,
or (c) on the next business day, if sent by Federal Express or similar
overnight carrier.
4. Assignment. MTI shall not assign this Agreement, or any interest in
this Agreement, without the prior written consent of the Company, which consent
Company is expressly authorized to withhold.
5. Parties in Interest. This Agreement shall inure to the benefit of, and
be binding on, the named parties and their respective successors and permitted
assigns, but not any other person.
6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
on the date first above written.
EDISON DEVELOPMENT CORPORATION
(a Michigan corporation)
/s/ Larry Garberding
_____________________________________
By: Larry G. Garberding
Its: Executive Vice President and
Chief Financial Officer
"EDC"
MECHANICAL TECHNOLOGY, INCORPORATED
(a New York corporation)
/s/ Cynthia A. Scheuer
_____________________________________
By: Cynthia A. Scheuer
Its: Vice President and
Chief Financial Officer
"MTI"
PLUG POWER, L.L.C.
(a Delaware limited liability company)
/s/ Gary Mittleman
_____________________________________
By: Gary Mittleman
Its: President and
Chief Executive Officer
"Company"
Exhibit No. 10.25
NOTICE OF GUARANTEED DELIVERY
FOR
SUBSCRIPTION CERTIFICATES
ISSUED BY
MECHANICAL TECHNOLOGY INCORPORATED
This form, or one substantially equivalent hereto, must be used to
exercise Rights pursuant to the Rights Offering described in the Prospectus
dated ________________ , 1998 (the "Prospectus"), of Mechanical Technology
Incorporated, a New York corporation (the "Company"), if a holder of Rights
cannot deliver the subscription certificate(s) evidencing the Rights (the
"Subscription Certificate(s)") to the Subscription Agent listed below (the
"Subscription Agent"), at or prior to 5:00 p.m. New York City time, on
September 24, 1998 (such date, subject to extension as provided in the
Prospectus, is referred to as the "Expiration Date"). Such form must be
delivered by hand or sent by facsimile transmission or mail to the
Subscription Agent, and must be received by the Subscription Agent on or
prior to the Expiration Date. See "Offering--Exercise of Rights" in the
Prospectus. Payment of the Subscription Price of $ _____ per share for each
share of the Company's Common Stock subscribed for upon exercise of such
Rights must be received by the Subscription Agent in the manner specified in
the Prospectus at or prior to 5:00 p.m. New York City time, on the Expiration
Date, even if the Subscription Certificate evidencing such Rights is being
delivered pursuant to the procedure for guaranteed delivery thereof.
The Subscription Agent is:
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
Telecopier No. (718) 234-5001
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby represents that he, she or it is the holder of
subscription certificate(s) representing __________ Rights and that such
subscription certificate(s) cannot be delivered to the Subscription Agent at
<PAGE>
or before 5:00 p.m., New York City time on the Expiration Date. Upon the
terms and subject to the conditions set forth in the Prospectus, receipt of
which is hereby acknowledged, the undersigned hereby elects to irrevocably
exercise one or more Rights evidenced by the Subscription Certificate to
subscribe for shares of Common Stock as indicated below.
(a) Number of shares subscribed for pursuant to
the Basic Subscription Privilege. (Number of Rights _____ x $ _____
per share = $ _____ (Basic Exercise Price) = _____ shares
(b) Number of shares subscribed for pursuant to the Oversubscription
Privilege. (Number of remaining Underlying Shares subscribed for _____
x _____ $ per share = $ _____ (Oversubscription Exercise Price) =
_____ shares (maximum number of shares subscribed for)
(c) Total Exercise Price: $ __________ .
The undersigned understands that payment in full of the Exercise Price,
as computed above, of $ _____ per share for each share of Common Stock
subscribed for pursuant to the Subscription Privileges must be received by
the Subscription Agent at or before 5:00 p.m., New York City time on the
Expiration Date and represents that such payment either (check the
appropriate box):
[ ] is being delivered to the Subscription Agent herewith
or
[ ] has been delivered separately to the Subscription Agent, and is or
was delivered in the manner set forth below (check appropriate box and
complete information relating thereto):
[ ] wire transfer of funds
name of transferor institution ____________________________________________
date of transfer __________________________________________________________
confirmation number (if available) ________________________________________
<PAGE>
[ ] uncertified check (Payment of uncertified check will not be deemed
to have been received by the Subscription Agent until such check has
cleared. Holders paying by such means are urged to make payment
sufficiently in advance of the Expiration Date to ensure that such
payment clears by such date)
[ ] certified check
[ ] bank draft (cashier's check)
[ ] money order
name of maker _____________________________________________________________
date of check, draft or money order _______________________________________
check, draft or money order number ________________________________________
bank on which check is drawn or issuer of money order _____________________
Signature(s) ______________________ Address ____________________________
___________________________________ ____________________________________
Name(s) ___________________________ ____________________________________
___________________________________ Area Code and Tel. Nos. ____________
Please type or print ____________________________________
Subscription Certificate
No(s). (if available) _____________________________________________________
GUARANTEE OF DELIVERY
The undersigned, an "Eligible Institution" within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934, guarantees that the
undersigned will deliver to the Subscription Agent the certificates
representing the Rights being exercised hereby, with any required signatures
<PAGE>
and any other required documents, all within three (3) Nasdaq National
Market trading days after the date hereof.
__________________________________________ Dated: ______________ , 1998
__________________________________________ ____________________________
(Name of Firm)
__________________________________________
(Address)
__________________________________________ ____________________________
(Area Code and Telephone Number) (Authorized Signature)
The institution that completes this form must communicate the guarantee
to the Subscription Agent and must deliver the Subscription Certificate(s) to
the Subscription Agent within the time period shown herein. Failure to do so
could result in a financial loss to such institution.
Exhibit No. 10.26
MECHANICAL TECHNOLOGY INCORPORATED
AND AMERICAN STOCK TRANSFER & TRUST COMPANY
SUBSCRIPTION AGENCY AGREEMENT
DATED AS OF JULY ___, 1998
THIS SUBSCRIPTION AGENCY AGREEMENT is dated as of July ___, 1998 by and
between Mechanical Technology Incorporated, a New York corporation (the
"Company") and American Stock Transfer & Trust Company, a ______________
corporation, as Subscription Agent (the "Subscription Agent").
WHEREAS, the Company has caused a Registration Statement on Form S-2
(Registration No. ______________ ) under the Securities Act of 1933, as
amended (the "Act") to be filed with the Securities and Exchange Commission
(the "Commission") relating to a proposed distribution by the Company to
holders of record of shares of its Common Stock, $1.00 par value (the "Common
Stock"), as of the close of business on August 12, 1998 (the "Record Date"),
of non-transferable subscription rights (the "Rights") to purchase additional
shares of its Common Stock (the "Basic Subscription Privilege") at a price of
$ _____ per share (the "Exercise Price"). The Rights will be distributed to
holders of record (other than the Company) of shares of Common Stock as of
the Record Date at a rate of one Right for every _____ shares of Common Stock
held on the Record Date. Each Right will entitle its holder (a "Holder") to
purchase one share of Common Stock;
WHEREAS, the Company has reserved for issuance, and has authorized the
issuance of, an aggregate of _____________ authorized and unissued shares of
Common Stock (the "Underlying Shares") to be distributed pursuant to the
exercise of the Subscription Privileges in the Offering;
WHEREAS, upon exercise of the Subscription Privilege, a Holder will also
be entitled to purchase at the Exercise Price a pro-rata portion of
Underlying Shares, if any, remaining unissued after satisfaction of all
subscriptions pursuant to the Subscription Privilege (the "Oversubscription
Privilege"; collectively with the "Basic Subscription Privilege", the
"Subscription Privileges"). Such Registration Statement, in the form in
which it first becomes effective under the Act, and as thereafter amended
from time to time, is referred to herein as the "Registration Statement" and
the offering of shares of Common Stock upon exercise of the Rights is
referred to herein as the "Offering;" and
WHEREAS, the Company desires the Subscription Agent to act on its behalf
in connection with the Offering as set forth herein, and the Subscription
Agent is willing so to act.
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
<PAGE>
SECTION 1. APPOINTMENT OF SUBSCRIPTION AGENT. The Company hereby
appoints the Subscription Agent to act as agent for the Company in accordance
with the instructions set forth in this Agreement, and the Subscription Agent
hereby accepts such appointment. The duties of the Subscription Agent shall
include those contemplated by the Subscription Certificate (as defined below)
and those enumerated in Exhibit B attached hereto and made a part hereof.
SECTION 2. ISSUE OF SECURITIES.
The Company has authorized the issuance of the Rights. Following
the effectiveness of the Registration Statement and the Record Date, the
Company will issue such Rights to holders of record of shares of Common Stock
as of the close of business on the Record Date as contemplated by the
Registration Statement. The Company will promptly notify the Subscription
Agent upon the effectiveness of the Registration Statement. As transfer
agent and registrar for the shares of Common Stock, the Subscription Agent
shall provide such assistance as the Company may require to effect the
distribution of the Rights to holders of record of shares of Common Stock as
of the close of business on the Record Date, including assistance in
determining the number of Rights to be distributed to each record holder and
assistance in distributing the Subscription Certificates (as defined in
Section 3(b) hereof) evidencing the Rights. The Company has authorized the
issuance of and will hold in reserve the Underlying Shares, and upon the
valid exercise of Rights, the Company will issue Underlying Shares to validly
exercising Holders as set forth in the Prospectus.
SECTION 3. SUBSCRIPTION PRIVILEGES: FORM OF SUBSCRIPTION CERTIFICATE.
(a) Each Right carries with it a Basic Subscription Privilege and
an Oversubscription Privilege. The Basic Subscription Privilege entitles the
Holder to purchase one share of Common Stock at the Exercise Price for each
Right held. The Oversubscription Privilege entitles each Holder that has
exercised his or her Basic Subscription Privilege, the right to subscribe, at
the Exercise Price, for any Underlying Shares remaining unissued after
satisfaction of all subscriptions pursuant to the Basic Subscription
Privilege ("Excess Shares").
(b) The Rights shall be evidenced by subscription certificates
(the "Subscription Certificates"). Subscription Certificates (and the form
of election to exercise Rights to be printed on the reverse thereof) shall be
substantially in the form attached hereto as Exhibit A. The Subscription
Certificates shall be non-transferable.
<PAGE>
SECTION 4. SIGNATURE AND REGISTRATION.
(a) The Subscription Certificates shall be executed on behalf of
the Company by its Chief Financial Officer and its Secretary, whose
signatures may be affixed by facsimile signature. Any Subscription
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Subscription Certificate, shall be a
proper officer of the Company to sign such Subscription Certificate, even if
at the date of the execution of this Agreement or the date of the actual
issuance of such certificate, any person is not such an officer.
(b) The Subscription Agent will keep or cause to be kept, at its
principal offices in the State of New York, books for registration and
transfer of the Rights issued hereunder.
SECTION 5. MUTILATED, DESTROYED, LOST OR STOLEN SUBSCRIPTION.
Upon receipt by the Company and the Subscription Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Subscription Certificate, and, in case of loss, theft or destruction, of
indemnity and/or security satisfactory to them, which may be in the form of
an open penalty bond, and reimbursement to the Company and the Subscription
Agent of all reasonable expenses incidental thereto, and upon surrender and
cancellation of the mutilated Subscription Certificate, the Company will
authorize the Subscription Agent to deliver a Subscription Certificate of
like tenor to the registered owner in lieu of the Subscription Certificate so
lost, stolen, destroyed or mutilated. If required by the Company or
Subscription Agent, an indemnity bond must be sufficient in the judgment of
both to protect the Company, the Subscription Agent or any agent thereof from
any loss that any of them may suffer if a Subscription Certificate is
replaced. Subsequent to their original issuance, no Subscription
Certificates shall be issued except Subscription Certificates issued in
replacement of mutilated, destroyed, lost or stolen Subscription
Certificates.
SECTION 6. EXERCISE OF RIGHTS; EXERCISE PRICE; EXPIRATION DATE.
(a) In General. The Holder of any subscription Certificate may exercise
some or all of the Rights by delivering to the Subscription Agent, on or
prior to 5:00 p.m., New York City time, on September 24, 1998 (the
"Expiration Date"), the properly completed and executed Subscription
Certificate evidencing such Rights with any required signatures, together
with payment in full of the Exercise Price for each Underlying Share
subscribed for pursuant to the Subscription Privilege (except as permitted
pursuant to clause (iii) of the next sentence).
(b) Exercise Price - Payment. Payment of the Exercise Price must be in
full and must be by: (i) check or bank draft drawn upon a U.S. bank or postal
money order, payable to American Stock Transfer & Trust Company, as
Subscription Agent; (ii) wire transfer of funds to the account maintained by
the Subscription Agent for such purpose; or (iii) in such other manner as the
<PAGE>
Company may approve in writing in the case of persons acquiring Underlying
Shares at an aggregate Exercise Price of $500,000 or more (the payment method
under (iii) being an "Approved Payment Method"), provided in each case that
the full amount of such Exercise Price is received by the Subscription Agent
in currently available funds within three Nasdaq National Market trading days
following the Expiration Date.
(c) Exercise Price - Receipt. Payment of the Exercise Price will be
deemed to have been received by the Subscription Agent only upon (i)
clearance of any uncertified check, (ii) receipt by the Subscription Agent of
any certified check or bank draft drawn upon a United States bank or of any
postal money order, (iii) receipt of good funds in the Subscription Agent's
account designated above, or (iv) receipt of good funds by the Subscription
Agent through an Approved Payment Method.
(d) Guaranteed Delivery Procedures. If a Holder wishes to exercise
Rights, but time will not permit such Holder to cause the Subscription
Certificate or Subscription Certificates evidencing such Rights to reach the
Subscription Agent on or prior to the Expiration Date, such Rights may
nevertheless be exercised if all of the following conditions (the "Guaranteed
Delivery Procedures") are met:
(i) such Holder has caused payment in full of the Exercise Price for
each Underlying Share being subscribed for pursuant to the
Subscription Privileges to be received (in the manner set forth
above) by the Subscription Agent on or prior to the Expiration
Date;
(ii) the Subscription Agent receives, on or prior to the Expiration
Date, a guaranteed notice (a "Notice of Guaranteed Delivery"),
substantially in the form provided with the Instructions for
Subscription Certificate (the "Instructions") distributed with
the Subscription Certificates, from an "Eligible Institution"
(as defined in Rule 17Ad-15 under the Securities Exchange Act of
1934), stating the number of Rights represented by the
Subscription Certificate(s) held by such exercising Holder, the
number of Underlying Shares being subscribed for pursuant to the
Subscription Privileges and guaranteeing the delivery to the
Subscription Agent of any Subscription Certificate(s) evidencing
such Rights within three Nasdaq National Market trading days
following the date of the Notice of Guaranteed Delivery; and
(iii) the properly completed Subscription Certificate(s), with any
required signatures, is received by the Subscription Agent within
three Nasdaq National Market trading days following the date of
the Notice of Guaranteed Delivery relating thereto. The Notice
of Guaranteed Delivery may be delivered to the Subscription Agent
in the same manner as Subscription Certificate(s) at the address
set forth in Section 16 hereof, or may be transmitted to the
Subscription Agent by facsimile transmission (telecopy number
<PAGE>
(718) 234-5001). The Subscription Agent shall make additional
copies of the form of Notice of Guaranteed Delivery available
to any Holder upon request made to the Subscription Agent at the
address set forth under such Section 16, or by telephone to (718)
921-8200.
(e) Oversubscription Privilege. The Subscription Agent shall hold
funds received in payment of the Exercise Price for Excess Shares subscribed
for pursuant to the Oversubscription Privilege in a segregated account
pending issuance of such Excess Shares. If a Holder exercising the
Oversubscription Privilege is allocated less than all of the Excess Shares
that such Holder wished to subscribe for pursuant to the Oversubscription
Privilege, the Subscription Agent shall return the excess funds paid by such
Holder in respect of the Exercise Price for shares not issued by mail without
interest or deduction as soon as practicable after the Expiration Date.
(f) Exercise of Rights Through Third Parties. The Subscription Agent
shall require a Holder who holds shares of Common Stock for the account of
others, such as a broker, a trustee or a depository for securities, to
complete the Subscription Certificate and a Nominee Holder Certification, in
the form of Exhibit C attached hereto and made a part hereof, and submit both
documents to the Subscription Agent with the proper payment.
(g) Exercise Price - Application. If either the number of Underlying
Shares being subscribed for pursuant to the Basic Subscription Privilege is
not specified on the Subscription Certificate, or the amount of funds
delivered is not enough to pay the Exercise Price for all Underlying Shares
stated to be subscribed for, the Subscription Agent shall assume that the
number of Underlying Shares subscribed for are the maximum amount that could
be subscribed for upon payment of such amount. If the number of Underlying
Shares being subscribed for is not specified, or payment of the Exercise
Price for the indicated number of Rights that are being exercised exceeds the
required Exercise Price, the Subscription Agent shall apply the payment,
until depleted, to subscribe for Underlying Shares in the following order:
(i) to subscribe for the number of Underlying Shares indicated, if any,
pursuant to the Basic Subscription Privilege; (ii) to subscribe for
Underlying Shares until the Basic Subscription Privilege has been fully-
exercised with respect to all of the Rights represented by the Subscription
Certificate; and (iii) to subscribe for additional Underlying Shares pursuant
to the Oversubscription Privilege (subject to any applicable proration).
(h) Non-revocable. The Subscription Agent shall not permit a Holder
of Rights who has exercised the Basic Subscription Privilege or the
Oversubscription Privilege to revoke such exercise.
(i) Expiration of Rights. The Rights shall expire at 5:00 p.m. New
York City time on the Expiration Date and the Subscription Agent shall not
honor Subscription Certificates received subsequent to that time.
<PAGE>
SECTION 7. DELIVERY OF STOCK CERTIFICATES.
As soon as practical after the Expiration Date, the Subscription Agent
shall mail to each Holder who validly exercised the Subscription Privileges,
certificates representing Underlying Shares purchased pursuant to the
Exercise Price.
SECTION 8. FRACTIONAL RIGHTS.
The Subscription Agent shall not issue fractional Rights, or pay cash in
lieu thereof, to any Holder who has exercised Rights. Fractional Rights
distributed to each Holder shall be rounded up to the next whole number in
determining the number of Rights to be issued to Holders.
SECTION 9. TRANSFER OF RIGHTS.
The Rights are not freely transferable and may not be traded. Rights
will be issued to all Holders of common stock as of August 12, 1998. The
Holders of such Rights may exercise such Rights or permit such Rights to
expire.
SECTION 10. REPORTS.
The Subscription Agent shall notify both the Company and its designated
representative by telephone as requested during the period ending three (3)
business after the Expiration Date, which notice shall thereafter be
confirmed in writing, of: (a) the number of Rights exercised on the day of
such request; (b) the number of Underlying Shares subscribed for pursuant to
the Exercise Price and the number of such Rights for which payment has been
received; (c) the number of Rights subject to guaranteed delivery pursuant to
Section 6 on such day; (d) the number of Rights for which defective exercises
have been received on such day; and (e) cumulative totals derived from the
information set forth in clauses (a) through (d) above. At or before 5:00
p.m. New York City time, on the first Nasdaq National Market trading day
following the Expiration Date, the Subscription Agent shall certify in
writing to the Company the cumulative totals through the Expiration Date
derived from the information set forth in clauses (a) through (d) above. The
Subscription Agent shall also maintain lists, certified to the Company, of
Holders who have exercised their Rights, and Holders who have not exercised
their Rights. The Subscription Agent shall provide the Company or its
designated representatives with the information compiled pursuant to this
Section 10 as any of them shall request.
SECTION 11. FUTURE INSTRUCTION AND INTERPRETATION.
(a) All questions as to the timeliness, validity, form, and
eligibility of any exercise of Rights will be determined by the Company, the
determinations of which shall be final and binding. The Company in its sole
discretion may waive any defect or irregularity or permit a defect or
<PAGE>
irregularity to be corrected within such time as it may determine or reject
the purported exercise of any Right. Subscriptions will not be deemed to
have been received or accepted until all irregularities have been waived or
cured within such time as the Company determines in its sole discretion.
Neither the Company nor the Subscription Agent shall be under any duty to
give notification of any defect or irregularity in connection with the
submission of Subscription Certificates or incur any liability for failure to
give such notification to any Holder.
(b) The Subscription Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder
from an authorized officer of the Company, and to apply to such officers for
advice or instructions in connection with its duties. The Subscription Agent
shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer.
SECTION 12. PAYMENT OF TAXES.
The Company covenants and agrees that it will pay when due and payable
all documentary, stamp and other taxes, if any, that may be payable in
respect of the issuance or delivery of any Subscription Certificate or of the
Underlying Shares; provided however, that the Company shall not be liable for
any tax liability arising out of any transaction that results in, or is
deemed to be, an exchange of Rights or shares.
SECTION 13. CANCELLATION AND DESTRUCTION OF SUBSCRIPTION.
All Subscription Certificates surrendered for the purpose of exercise or
exchange shall be canceled by the Subscription Agent, and no Subscription
Certificates shall be issued in lieu thereof except as expressly permitted by
provisions of this Agreement. The Subscription Agent shall deliver all
canceled Subscription Certificates to the Company or shall, at the written
request of the Company, destroy such canceled Subscription Certificates, and
in such case shall deliver a certificate of destruction thereof to the
Company.
SECTION 14. RIGHT OF ACTION.
All rights of action in respect of this Agreement are vested in the
Company and the respective registered Holders of the Subscription
Certificates. Any registered Holder of any Subscription Certificate, without
the consent of the Subscription Agent or of the Holder of any other
Subscription Certificate, may, on his own behalf and for his own benefit,
enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Subscription Certificate in the manner
provided in such Subscription Certificate and in the Agreement.
<PAGE>
SECTION 15. DUTIES OF SUBSCRIPTION AGENT.
The Subscription Agent undertakes the duties and obligations imposed by
this Agreement including, but not limited to, the duties enumerated on
Exhibit B attached hereto, upon the following terms and conditions. The
Company and the Holders of Subscription Certificates, by their acceptance
thereof, shall be bound by such terms and conditions.
(a) The Subscription Agent may consult with legal counsel (who may
be, but is not required to be, legal counsel for the Company), and the
opinion of such counsel shall be full and complete authorization and
protection to the Subscription Agent as to any action taken or omitted by it
in good faith and in accordance with such opinions.
(b) Whenever, in the performance of its duties under this
Agreement, the Subscription Agent shall deem it necessary or desirable that
any fact or matter be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by either the
Company's Chief Executive Officer, or jointly by a Vice President and the
Secretary of the Company, and delivered to the Subscription Agent. Such
certificate shall be full authorization to the Subscription Agent for any
action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Subscription Agent shall be liable hereunder only for its
own negligence or wilful misconduct.
(d) The Subscription Agent shall not be liable for, or by reason
of, any of the statements of fact or recitals contained in this Agreement or
in the Subscription Certificates or be required to verify the same. All such
statements and recitals are and shall be deemed to have been made by the
Company only.
(e) The Subscription Agent shall not be under any responsibility
in respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Subscription Agent) or in
respect of the validity or execution of any Subscription Certificate, nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Subscription Certificate; nor
shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common
Stock to be issued in connection with the exercised Rights or pursuant to any
Subscription Certificate or as to whether any shares of Common Stock will,
when issued, be validly authorized and issued, fully paid and nonassessable.
<PAGE>
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered
all such further and other acts, instruments and assurances as may reasonably
be required by the Subscription Agent for the carrying out or performing by
the Subscription Agent of the provisions of this Agreement.
(g) Nothing herein shall preclude the Subscription Agent from
acting in any other capacity for the Company.
SECTION 16. NOTICES TO THE COMPANY, HOLDERS AND SUBSCRIPTION AGENT.
All notices and other communications provided for or permitted hereunder
shall be made by hand delivery, prepaid first class mail, or telecopier:
(a) if to the Company to:
Mechanical Technology Incorporated
968 Albany-Shaker Road
Latham, New York 12110
Attn: Cynthia A. Scheuer
FAX: (518) 785-2181
with a copy to:
Whiteman Osterman & Hanna
One Commerce Plaza
Albany, New York 12260
Attn: Catherine Hill, Esq.
FAX: (518) 487-7777
if to the Subscription Agent, to:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
FAX: (718) 234-5001
(b) if to a registered Holder, at the address shown for such Holder on
the registry books of the Company.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered, two (2) business
days after being deposited in the mail, postage prepaid, if mailed as
aforesaid; and when receipt is acknowledged, if telecopied.
<PAGE>
SECTION 17. SUPPLEMENTS AND AMENDMENTS.
The Company and the Subscription Agent may from time to time supplement
or amend this Agreement without the approval of any Holders of Subscription
Certificates in order to cure any ambiguity or to correct or supplement any
provision contained herein, or to make any other provisions in regard to
matters or questions arising hereunder that the Company and the Subscription
Agent may deem necessary or desirable and that shall not adversely affect the
interest of the Holders of the Subscription Certificates.
SECTION 18. SUCCESSORS.
All the covenants and provisions of this Agreement by or for the benefit
of the Company or the Subscription Agent shall bind and inure to the benefit
to their respective successors and assigns hereunder.
SECTION 19. TERMINATION.
This Agreement shall terminate at 5:00 p.m. New York City time, on the
fourteenth day following the Expiration Date. Upon termination of this
Agreement, and provided that the Underlying Shares for Rights accepted for
exercise prior to such termination are issued and delivered by the Company,
the Company shall be discharged from all obligations under this Agreement
except for its obligation to the Subscription Agent under Sections 12 and 15
hereof and except with respect to the obligation of the Company to provide
instruction and direction to the Subscription Agent as may be required by
this Agreement.
SECTION 20. GOVERNING LAW.
This Agreement and each Subscription Certificate shall be deemed to be
a contract made under the laws of the State of New York and for all purposes
shall be construed in accordance with the internal laws of said State without
regard to any conflict of law rules that would defeat the application of New
York law.
SECTION 21. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give any persons or
corporation other than the Company, the Subscription Agent and the Holders of
the Subscription Certificates any legal or equitable right, remedy or claim
under this Agreement. This Agreement shall be for the sole and exclusive
benefit of the Company, the Subscription Agent and the Holders of the
Subscription Certificates, and their respective successors or heirs.
<PAGE>
SECTION 22. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall for all purposes be deemed to be an original, and all of which
shall together constitute one and the same instrument.
SECTION 23. DESCRIPTIVE HEADINGS.
Descriptive headings of the several Sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
IN WITNESS WHEREOF, each of the parties hereto caused this Agreement to
be duly executed as of the date first above written.
MECHANICAL TECHNOLOGY, INC.
By: /s/ Cynthia A. Scheuer
___________________________
Cynthia A. Scheuer
Chief Financial Officer
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: /s/ Herbert Lemmer
___________________________
Title: General Counsel
________________________
<PAGE>
EXHIBIT A
FORM OF SUBSCRIPTION CERTIFICATE
(paper copy submitted)
<PAGE>
EXHIBIT B
SUBSCRIPTION AGENT DUTIES AND FEES
Subscription Agent Duties and Services
1. Calculate and verify number of Rights to be issued to each shareholder.
2. Issue and mail notice of exercise form to each claimant along with the
appropriate Rights offering material.
3. Split-up, issue and mail notice of exercise forms as requested by Holders.
4. Receive and time stamp surrendered Subscription Certificates and checks.
5. Examine Subscription Certificates forms and checks for acceptance.
6. Write regarding deficient time.
7. Calculate and verify exercise prices received and number of shares to be
issued.
8. Deposit checks into a fiduciary account.
9. Wire funds to Company's account on the third business day following
Expiration Date.
10. Handle all letters of inquiry regarding lost, destroyed or stolen
Subscription Certificates.
11. Adjust Rights on disputed claims as per Company's instructions and
refund to the Holder any excess Exercise Price resulting from a
reduction of disputed claim.
12. If applicable, reflect restrictive legend on certain stock
certificates to be issued in connection with the Offering. Please
provide us with the name(s) of the affected shareholders and the
exact legend to be shown on the new certificates.
13. Keep accurate controls of all Subscription Certificates exercised
and cancellation of such certificates.
14. Issue and mail stock certificates to subscribers.
15. Furnish periodic reports of exercised rights.
Subscription Agent Fees: $35,000,
plus out-of-pocket expenses incurred such as postage, telephone,
shipping costs, insurance, stationery, overtime and counsel fees.
<PAGE>
EXHIBIT C
FORM OF NOMINEE HOLDER CERTIFICATION
MECHANICAL TECHNOLOGY INCORPORATED
NOMINEE HOLDER CERTIFICATION
The undersigned, a bank, broker, or other nominee holder of rights
("Rights"), in order to purchase shares of common stock, $1 par value per
share ("Common Stock") of Mechanical Technology Incorporated (the "Company")
pursuant to the rights offering described and provided for in the Company's
prospectus dated _______________ , 1998 (the "Prospectus"), hereby certifies
to the Company and to American Stock Transfer and Trust Corporation, as
Subscription Agent for such rights offering, that the undersigned has
subscribed for, on behalf of the beneficial owners thereof (which may include
the undersigned), the number of shares specified below for each of the
Subscription Privileges (as defined in the Prospectus).
1. Number of shares subscribed
for pursuant to the
Basic Subscription Privilege _________
2. Number of shares subscribed
for pursuant to the
Oversubscription
Privilege _________
______________________
Name of Nominee Holder
By: __________________
Name:
Title:
Dated: _______________ , 1998
Exhibit 10.27
INSTRUCTIONS AS TO USE OF MECHANICAL TECHNOLOGY INCORPORATED
SUBSCRIPTION CERTIFICATES
CONSULT MECHANICAL TECHNOLOGY INCORPORATED,
THE SUBSCRIPTION AGENT, YOUR BANK OR BROKER AS TO ANY QUESTIONS
The following instructions relate to a rights offering (the "Rights
Offering") by Mechanical Technology Incorporated, a New York corporation
(the "Company"), to the holders of its common stock, $1.00 par value per
share (the "Common Stock"), as described in the Company's prospectus
dated _______________, 1998, as such prospectus may be amended and/or
updated prior to the Expiration Date (as defined below; such prospectus, as
so amended and/or updated, being the "Prospectus"). Holders of record of
Common Stock at the close of business on August 12, 1998 (the "Record
Date"), are receiving one non-transferable subscription right
(individually, a "Right" and collectively, the "Rights") for each ____
shares of Common Stock held by them of record on the Record Date. An
aggregate of approximately __________ Rights exercisable to purchase an
aggregate of __________ shares of Common Stock (the "Underlying Shares")
are being distributed in connection with the Rights Offering. Each Right
entitles its holder (a "Holder") to purchase one share of Common Stock
(the "Basic Subscription Privilege") at $__________ per share (the
"Exercise Price").
In addition, subject to the allocation described below, each Right
entitles its Holder to subscribe at the Exercise Price for Underlying
Shares after satisfaction of all subscriptions made pursuant to the Basic
Subscription Privilege (the "Oversubscription Privilege"; collectively,
with the Basic Subscription Privilege, the "Subscription Privileges"),
provided that all of the Rights of such Holder have been fully exercised
with respect to such Holder's Basic Subscription Privilege. The Company and
American Stock Transfer & Trust Company, as subscription agent (the
"Subscription Agent"), will endeavor to ensure that Holders fully
exercise their Basic Subscription Privileges before subscribing for and
acquiring Underlying Shares pursuant to their Oversubscription Privileges,
but such compliance cannot be guaranteed. Underlying Shares will be
available for purchase pursuant to the Oversubscription Privilege only to
the extent that all the Underlying Shares are not subscribed for through
the exercise of the Basic Subscription Privilege by the Expiration Date
(the "Excess Shares"). If the Excess Shares so available are not
sufficient to satisfy all subscriptions pursuant to the Oversubscription
Privilege, the Excess Shares will be allocated pro-rata among the Holders
who exercise the Oversubscription Privilege in proportion, not to the
number of shares requested pursuant to the Oversubscription Privilege, but
to the number of shares they have subscribed for pursuant to the Basic
Subscription Privilege; provided, however, that if such pro-rata allocation
results in any Holder being allocated a greater number of Excess Shares
than such Holder subscribed for pursuant to the exercise of such Holder's
Oversubscription Privilege, then such Holder will be allocated only such
number of Excess Shares as such Holder subscribed for and the remaining
Excess Shares will be allocated among all other Holders exercising their
Oversubscription Privileges. See "The Offering" and "Offering" in the
Prospectus.
<PAGE>
The Rights will expire at 5:00 p.m., New York time, on September 24,
1998, subject to extension as described in the Prospectus (the "Expiration
Date").
The number of Rights to which you are entitled is printed on the face
of your subscription certificate (the "Subscription Certificate"). You
should indicate your wishes with regard to the exercise or sale of your
Rights by completing the appropriate form or forms on your Subscription
Certificate and returning the certificate to the Subscription Agent in the
envelope provided.
YOUR SUBSCRIPTION CERTIFICATE MUST BE RECEIVED BY THE SUBSCRIPTION
AGENT, OR GUARANTEED DELIVERY REQUIREMENTS WITH RESPECT TO YOUR
SUBSCRIPTION CERTIFICATES MUST BE COMPLIED WITH, AND PAYMENT OF THE
EXERCISE PRICE INCLUDING FINAL CLEARANCE OF ANY CHECKS, MUST BE RECEIVED BY
THE SUBSCRIPTION AGENT, ON OR BEFORE 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE (EXCEPT IN THE CASE OF AN APPROVED PAYMENT METHOD). YOU MAY
NOT REVOKE ANY EXERCISE OF A RIGHT.
1. SUBSCRIPTION PRIVILEGES; EXERCISE.
To exercise Rights, complete Section 1, Section 2, if applicable, and
the Substitute Form W-9 on the reverse side of your Subscription
Certificate and send your properly completed and executed Subscription
Certificate, together with payment in full of the Exercise Price for all
Underlying Shares subscribed for pursuant to the Subscription Privileges,
to the Subscription Agent. Payment of the Exercise Price must be made (a)
in U.S. dollars for the full number of Underlying Shares being subscribed
for by check or bank draft drawn upon a U.S. bank or postal money order
payable to American Stock Transfer and Trust Company, as Subscription
Agent; (b) by wire transfer of same day funds to the account maintained by
the Subscription Agent for such purpose at The Chase Manhattan Bank,
Account (No. 323213251; ABA No. 021000021); or (c) in such other manner
as the Company may approve in writing in the case of persons acquiring
Underlying Shares at an aggregate Exercise Price of $500,000 or more;
provided that, in the case of clause (c), in any event, the full amount of
such Exercise Price is received by the Subscription Agent in currently
available funds by no later than the third (3rd) Nasdaq National Market
trading day following the Expiration Date (the payment method under (c)
being an "Approved Payment Method"). Payment of the Exercise Price will
be deemed to have been received by the Subscription Agent only upon the
clearance of any uncertified check, the receipt by the Subscription Agent
of any certified check or bank draft drawn upon a U.S. bank or any postal
money order, the receipt of good funds in the Subscription Agent's account
designated above or receipt of funds by the Subscription Agent through an
Approved Payment Method. If paying by uncertified personal check, please
note that the funds paid thereby may take at least five (5) business days
to clear. Accordingly, Holders who wish to pay the Exercise Price by means
of uncertified personal check are urged to make payment sufficiently in
advance of the Expiration Date to ensure that such payment is received and
cleared by such date and are urged to consider payment by means of
certified or cashier's check, money order or wire transfer of funds. You
<PAGE>
may make arrangements for the delivery of funds on your behalf and request
a bank or broker to exercise the Subscription Certificate on your behalf.
Alternatively, you may cause a written guarantee substantially in the form
attached to these instructions (the "Notice of Guaranteed Delivery") from
an "Eligible Institution" within the meaning of Rule 17Ad-15 under the
Securities Act of 1934, to be received by the Subscription Agent at or
prior to the Expiration Date together with payment in full of the
applicable Exercise Price. Such Notice of Guaranteed Delivery must state
your name, the number of Rights represented by your Subscription
Certificate, the number of Underlying Shares being subscribed for pursuant
to the Basic Subscription Privilege, the number of Underlying Shares, if
any, being subscribed for pursuant to the Oversubscription Privilege and
will guarantee the delivery to the Subscription Agent of your properly
completed and executed Subscription Certificates within three (3) Nasdaq
National Market trading days following the date of the Notice of Guaranteed
Delivery. If this procedure is followed, your Subscription Certificates
must be received by the Subscription Agent within three (3) Nasdaq National
Market trading days of the Notice of Guaranteed Delivery. Additional copies
of the Notice of Guaranteed Delivery may be obtained upon request from the
Subscription Agent at the address, or by calling the telephone number,
indicated below.
Banks, brokers and other nominee holders of Rights who exercise Rights
on behalf of beneficial owners of Rights will be required to certify to the
Subscription Agent and the Company, as a condition of their exercise of
such Rights on behalf of such beneficial owners, as to: (1) the names of
the beneficial owners on whose behalf they are acting; (2) the nominee
holder's authority to so act; (3) the aggregate number of Rights to be
exercised on behalf of each beneficial owner; and (4) the number of
Underlying Shares that are being subscribed for pursuant to the
Subscription Privileges of each beneficial owner of Rights on whose behalf
such nominee holder is acting.
If more Underlying Shares are subscribed for pursuant to the
Oversubscription Privileges than are available for sale, Underlying Shares
will be allocated, as described above, among persons exercising the
Oversubscription Privilege in proportion to such persons' exercise of
Rights pursuant to the Basic Subscription Privilege.
The address, telephone and telecopier numbers of the Subscription
Agent are as follows:
American Stock Transfer
& Trust Company
40 Wall Street
New York, N.Y. 10005
Telephone: (718) 921-8200
Telecopier: (718) 234-5001
If you exercise less than all of the Rights evidenced by your
Subscription Certificate by so indicating in Section 1 of your Subscription
Certificate, the Subscription Agent will issue to you a new Subscription
Certificate evidencing the unexercised Rights. If you choose to have a new
<PAGE>
Subscription Certificate sent to you, however, you may not receive any such
new Subscription Certificate in sufficient time to permit you to exercise
the Rights evidenced thereby.
If the number of Underlying Shares being subscribed for pursuant to
the Basic Subscription Privilege is not specified, you will be deemed to
have exercised such Basic Subscription Privilege with respect to the
maximum whole number of Shares that may be acquired for the Exercise Price
payment delivered after allowances for the Exercise Price of any specified
Underlying Shares. If the number of Underlying Shares being subscribed for
is not specified, or full payment of the Exercise Price for the indicated
number of Rights that are being exercised is not forwarded or if the
payment delivered exceeds the required Exercise Price, the payment will be
applied, until depleted, to subscribe for Underlying Shares in the
following order: (1) to subscribe for the number of Underlying Shares
indicated, if any, pursuant to the Basic Subscription Privilege; (2) to
subscribe for Underlying Shares until the Basic Subscription Privilege has
been fully exercised with respect to all of the Rights represented by your
Subscription Certificate; and (3) to subscribe for additional Underlying
Shares pursuant to the Oversubscription Privilege (subject to any
applicable proration).
2. DELIVERY OF STOCK CERTIFICATES, ETC.
The following deliveries and payments will be made to the address
shown on the face of your Subscription Certificate.
(A) BASIC SUBSCRIPTION PRIVILEGE. As soon as practical after the
Expiration Date, the Subscription Agent will mail to each Holder
who validly exercises the Basic Subscription Privilege
certificates representing shares of Common Stock purchased
pursuant to the Basic Subscription Privilege.
(B) OVERSUBSCRIPTION PRIVILEGE. As soon as practical after the
Expiration Date, the Subscription Agent will mail to each Holder
who validly exercises the Oversubscription Privilege a
certificate representing the number of shares of Common Stock
allocated to such Holder pursuant to the Oversubscription
Privilege.
(C) CASH PAYMENTS. As soon as practical after the Expiration Date,
the Subscription Agent will mail to each Holder who exercises the
Oversubscription Privilege, without interest, any excess funds
received in payment of the Exercise Price for Underlying Shares
that are subscribed for by such Holder but not allocated to such
Holder pursuant to the Oversubscription Privilege.
3. EXECUTION.
(A) EXECUTION BY REGISTERED HOLDER. The signature on the Subscription
Certificate must correspond with the name of the registered Holder exactly
<PAGE>
as it appears on the face of the subscription certificate without any
alteration or change whatsoever. Persons who sign the subscription
certificate in a representative or other fiduciary capacity must indicate
their capacity when signing and, unless waived by the Subscription Agent in
its sole and absolute discretion, must certify to the Subscription Agent
and the Company as to their authority to so act.
(B) EXECUTION BY PERSON OTHER THAN REGISTERED HOLDER. If the
Subscription Certificate is executed by a person other than the Holder
named on the face of the Subscription Certificate, proper evidence of
authority of the person executing the subscription certificate must
accompany the same unless, for good cause, the Subscription Agent dispenses
with proof of authority.
4. METHOD OF DELIVERY.
The method of delivery of Subscription Certificates and payment of the
Exercise Price to the Subscription Agent will be at the election and risk
of the Holder, but, if sent by mail, it is recommended that they be sent by
registered mail, properly insured, with return receipt requested, and that
a sufficient number of days be allowed to ensure delivery to the
Subscription Agent and the clearance of any checks sent in payment of the
Exercise Price prior to 5:00 p.m., New York City time, on the Expiration
Date.
Exhibit No. 23.1
FORM OF
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Mechanical Technology Incorporated and Subsidiaries on Form S-2 (File No.
__________) of our report dated November 14, 1997, on our audits of the
consolidated financial statements of Mechanical Technology Incorporated and
Subsidiaries as of September 30, 1997 and 1996, and for the years ended
September 30, 1997, 1996 and 1995. We also consent to the references to our
firm under the captions "Experts" and "Selected Financial Data."
Albany, New York
July 20, 1998
