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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended September 30, 1997
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period from __________ to __________
Commission file number 0-6890
MECHANICAL TECHNOLOGY INCORPORATED
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(Exact name of registrant as specified in its charter)
New York 14-1462255
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
968 Albany-Shaker Rd, Latham, New York 12110
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518)785-2211
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act
$1.00 Par Value Common Stock
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(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. [ ]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
The aggregate market value of the registrant's Common Stock held by
nonaffiliates of the registrant on December 12, 1997 (based on the last
sale price of $5.125 per share for such stock reported by OTC Bulletin
Board for that date) was approximately $16,154,195.
As of August 7,1998, the registrant had 5,989,896 shares of Common
Stock outstanding.
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<PAGE>
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
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(a) The financial statements filed herewith are set forth on the Index to
Consolidated Financial Statements on page F-1 of the separate financial
section that accompanies this Report, which is incorporated herein by
reference.
The following exhibits are filed as part of this Report:
Exhibit
Number Description
------- -----------
2.1 Purchase Agreement, dated as of November 23,
1994, among the Registrant, ProQuip Inc. and
Phase Metrics.(7)
3.1 Certificate of Incorporation of the registrant,
as amended.(1)
3.2 By-Laws of the registrant, as amended.
4.1 Certificate of Amendment of the Certificate
of Incorporation of the registrant, filed
on March 6, 1986 (setting forth the provisions
of the Certificate of Incorporation, as amended,
relating to the authorized shares of the
registrant's Common Stock) - included in the copy
of the registrant's Certificate of Incorporation,
as amended, filed as Exhibit 3.1 hereto.
4.20 Loan Agreement, dated as of June 1, 1987, between
the registrant and Chase Lincoln First Bank, N.A.
("Chase Lincoln"),relating to a $20,000,000 term
loan to finance the registrant's acquisition of
United Telecontrol Electronics, Inc. (the "UTE Loan
Agreement").(1)
4.21 First Amendment to Loan Agreement, dated as of
September 30, 1988, amending certain provisions of
the UTE Loan Agreement.(1)
4.22 Second Amendment to Loan Agreement, dated as of
February 21, 1990, amending certain provisions of
the UTE Loan Agreement.(1)
4.24 Third Amendment to Loan Agreement, dated as of
January 1, 1991, amending certain provisions of the
UTE Loan Agreement.(2)
4.25 Form of Note, in the amount of $9,181,700, executed
by the registrant on January 1, 1991 to evidence
its indebtedness under the UTE Loan Agreement.(2)
<PAGE>
4.26 Form of Note, in the amount of $2,000,000, executed
by the registrant on January 1, 1991 to evidence
its indebtedness under the UTE Loan Agreement.(2)
4.27 Form of Note, in the amount of $1,000,000,
executed by the registrant on January 1, 1991 to
evidence its indebtedness under the UTE Loan
Agreement.(2)
4.28 Mortgage, dated January 31, 1991, executed by the
registrant in favor of Chase Lincoln and securing
the registrant's obligation to Chase Lincoln,
including those under the UTE and ProQuip Loan
Agreements.(2)
4.30 Loan Agreement, dated as of September 30, 1988,
between the registrant and Chase Lincoln relating
to an $8,000,000 term loan to finance the
registrant's acquisition of ProQuip, Inc. (the
"ProQuip Loan Agreement").(1)
4.31 Negative Pledge Agreement, dated as of September
30, 1988, executed by the registrant in favor of
Chase Lincoln in connection with the ProQuip Loan
Agreement.(1)
4.32 Security Agreement, dated as of September 30, 1988,
executed by the registrant in favor of Chase
Lincoln and securing the registrant's obligation
to Chase Lincoln, including those under the UTE and
ProQuip Loan Agreements (the "Chase Lincoln
Security Agreement").(1)
4.33 First Amendment to Loan Agreement, dated as of
February 21, 1990, amending certain provisions of
the ProQuip Loan Agreement.(1)
4.34 Form of Note, in the amount of $3,375,817.80,
executed by the registrant on February 21, 1990
to evidence its indebtedness under the ProQuip
Loan Agreement.(1)
4.35 Amendment Number One to Security Agreement, executed
by the registrant on February 21, 1990, amending
the Chase Lincoln Security Agreement.(1)
4.36 Mortgage, dated February 21, 1990, executed by the
registrant in favor of Chase Lincoln and securing
the registrant's obligations to Chase Lincoln,
including those under the UTE and ProQuip Loan
Agreements.(1)
4.37 Second Amendment to Loan Agreement, dated as of
January 1, 1991, amending certain provisions of the
ProQuip Loan Agreement.(2)
4.38 Mortgage Modification and Allocation Agreement,
dated January 1, 1991, executed by the registrant
and Chase Lincoln.(2)
<PAGE>
4.40 Form of Payment Guaranty, dated as of September 1,
1988 [as of September 30, 1988, in the case of
ProQuip, Inc.], executed by the subsidiaries of the
registrant in favor of Chase Lincoln and
guaranteeing payment of the registrant's
obligations to Chase Lincoln, including those under
the UTE and ProQuip Loan Agreements.(1)
4.41 Form of Negative Pledge Agreement, dated as of
September 30, 1988, executed by the subsidiaries of
the registrant in favor of Chase Lincoln in
connection with the ProQuip Loan Agreement.(1)
4.42 Form of Security Agreement, dated as of September
30, 1988, executed by the subsidiaries of the
registrant in favor of Chase Lincoln and securing
the registrant's obligations to Chase Lincoln,
including those under the UTE and ProQuip Loan
Agreements.(1)
4.43 Acknowledgment, Confirmation and Further Agreement,
made as of February 21, 1990, executed by the
subsidiaries of the registrant in favor of Chase
Lincoln with respect to the registrants obligations
under the UTE and ProQuip Loan Agreements.(1)
4.50 Debt Restructure Agreement, made as of
February 21, 1990, between the registrant, Chase
Lincoln, and Manufacturers Hanover Trust Company
("Manufacturers Hanover"), providing for a
restructuring of the registrant's indebtedness to
Chase Lincoln under the UTE and ProQuip Loan
Agreements and of the registrant's outstanding
indebtedness to Manufacturers Hanover (the "MHTCo.
Existing Debt"), among other things.(1)
4.55 Second Amendment to Debt Restructure Agreement,
made as of January 1, 1991, between the registrant,
Chase Lincoln, and Manufacturers Hanover, amending
certain provisions of the Debt Restructure
Agreement.(2)
4.56 Second Debt Restructure Agreement, as of July 22,
1992, between the registrant, Chase Lincoln First
Bank, N. A. ("CLFB"), and Chemical Bank
("Chemical"), as successor in interest to
Manufacturers Hanover Trust Company, providing for
a restructuring of the registrant's indebtedness to
CLFB under the UTE and ProQuip Loan Agreements and
of the registrant's outstanding indebtedness to
Chemical, among other things.(3)
4.63 Promissory Note, in the amount of $4,000,000 and
dated July 22, 1992, executed by the registrant to
evidence its indebtedness to Chemical from time to
time with respect to a line of credit in such
amount (The Chemical Line of Credit).(3)
<PAGE>
4.64 Form of Payment Guaranty, dated as of July 24, 1992
executed by Masco Corporation in favor of Chemical and
guaranteeing payment of the registrant's obligations to
Chemical under the Chemical Line of Credit.(3)
4.65 Promissory Note, in the amount of $4,000,000 and
dated October 31, 1994, extending the maturity date
of the Promissory note dated July 22, 1992,
executed by the registrant to evidence its
indebtedness to Chemical under the Chemical
Line of Credit.(8)
4.66 Promissory Note, in the amount of $4,000,000 and
dated October 31, 1995, extending the maturity date
of the Promissory note dated October 31, 1994,
executed by the registrant to evidence its
indebtedness to Chemical under the Chemical Line of
Credit.(9)
4.67 Form of Payment Guaranty, dated October 31, 1995
executed by Masco Corporation in favor of Chemical
and guaranteeing payment of the registrant's
obligations to Chemical under the Chemical Line of
Credit.(9)
4.80 Amended and Restated Loan Agreement, dated as of
July 22, 1992, between the registrant and Chase
Lincoln First Bank, N.A., which amends, restates,
combines, and supersedes in full the UTE and the
ProQuip loan agreements.(3)
4.81 Form of Note, in the amount of $5,000,000, executed
by the registrant on July 24, 1992, the July 22,
1992 Loan Agreement.(3)
4.82 Form of Note, in the amount of $7,984,770,
executed by the registrant on July 24, 1992
to evidence its indebtedness to CLFB under
the July 22, 1992 Loan Agreement.(3)
4.83 Additional Mortgage Note, dated July 24, 1992,
executed by the registrant in favor of CLFB and
securing the registrant's obligation to CLFB under
the Loan Agreement.(3)
4.84 Additional Mortgage and Security Agreement, dated
as of July 22, 1992, executed by the registrant in
favor of CLFB and securing the registrant's
obligations to CLFB.(3)
4.85 Mortgage Consolidation, Spreader, Modification
Extension and Security Agreement, dated July
22, 1992, executed by the registrant and CLFB.(3)
4.86 Confirmation of Guaranties and Security
Agreements, dated July 22, 1992, executed
by subsidiaries of the registrant in favor
of CLFB with respect to the registrant's
obligations to CLFB.(3)
<PAGE>
4.87 Consent and waiver, dated December 21, 1993,
from CLFB to the registrant with respect to the
Amended and Restated Loan Agreement.(5)
4.88 Amendment One to Amended and Restated Loan
Agreement, dated as of August 1, 1994, between the
registrant and Chase Manhattan Bank, N. A. which
amends the Amended and Restated Loan Agreement to
defer the payment due on June 30, 1994.(6)
4.89 Amendment Two to Amended and Restated Loan
Agreement with waiver, dated as of November
22, 1994, between the registrant and Chase Manhattan
Bank, N. A. which amends the Amended and Restated
Loan Agreement and waives any existing defaults.(8)
4.90 Additional Mortgage and Security Consolidation
Agreement, dated as of October 6, 1995 executed
by the registrant in favor of Chase Manhattan
Bank, N.A. and securing the registrant's
obligations to Chase Manhattan Bank, N.A.(9)
4.91 Form of Note, in the amount of $340,000, executed by
the registrant on October 6, 1995 to evidence its
indebtedness to Chase Manhattan Bank, N.A. under
the July 22, 1992 Loan Agreement.(9)
4.92 Amendment Three to Amended and Restated Loan
Agreement with waiver, dated as of November 30,
1995, between the registrant and Chase Manhattan
Bank, N. A. which amends the Amended and Restated
Loan Agreement and waives any existing defaults.(9)
10.1 Mechanical Technology Incorporated Restricted Stock
Incentive Plan-filed as Exhibit 28.1 to the
registrant's Form S-8 Registration Statement No.
33-26326 and incorporated herein by reference.
10.3 MTI Employee 1982 Stock Option Plan.(1)
10.4 Agreement, dated December 21, 1993, between UTE,
First Commercial Credit Corporation ("FCCC") and
the registrant, relating to an advance against
certain receivables.(5)
10.6 Agreement, dated June 2, 1993, between the
registrant and Mr. Harry Apkarian, Director,
regarding his employment.(5)
10.7 Agreement, dated February 22, 1994, between the
registrant and Mr. R. Wayne Diesel, President and
Chief Executive Officer, regarding his
employment.(8)
10.8 Agreement, dated December 14, 1994, between FCCC
and the registrant, modifying the Agreement dated
December 21, 1993 relating to an advance against
certain receivables.(8)
<PAGE>
10.9 Agreement, dated May 30, 1995, between FCCC
and the registrant, extending the maturity of
the Agreement dated December 14, 1994 relating
to an advance against certain receivables.(9)
10.10 Agreement, dated June 28, 1995, between FCCC and
the registrant, extending the maturity of the
Agreement dated December 14, 1994 relating to an
advance against certain receivables.(9)
10.11 Agreement, dated September 21, 1995, between FCCC
and the registrant, extending the maturity of the
Agreement dated December 14,1994 relating to an
advance against certain receivables.(9)
10.12 Agreement, dated October 25, 1995, between FCCC
and the registrant, extending the maturity of
the Agreement dated December 14, 1994 relating
to an advance against certain receivables.(9)
10.13 Agreement, dated December 27, 1995, between FCCC
and the registrant, extending the maturity of the
Agreement dated December 14, 1994 relating to an
advance against certain receivables.(9)
10.14 Mechanical Technology Incorporated Stock Incentive
Plan - included as Appendix A to the registrant's
Proxy Statement, filed pursuant to Regulation 14A,
for its December 20, 1996 Special Meeting of
Shareholders and incorporated herein by reference. (10)
10.15 Agreement, dated December 6, 1996, between the
registrant and Mr. Martin J. Mastroianni, President
and Chief Operating Officer, regarding his
employment. (10)
10.16 Settlement Agreement and Release, dated as of
December 27, 1996, between First Albany Companies
Inc. and the registrant, with respect to the
registrant's indebtedness and obligations under the
Agreement dated December 14, 1994 between FCCC and
the registrant relating to an advance against
certain receivables. (10)
10.17 Agreement, dated March 14, 1997, between the
Registrant and Mr. James Clemens, Vice President
and General Manager of Ling Electronic, Inc.,
regarding his employment. (11)
10.18 Limited Liability Company Agreement of Plug Power,
L.L.C., dated June 27, 1997, between Edison
Development Corporation and Mechanical Technology,
Incorporated. (12) (13)
10.19 Contribution Agreement, dated June 27, 1997,
between Mechanical Technology, Incorporated and
Plug Power, L.L.C. (12) (13)
<PAGE>
10.20 Asset Purchase Agreement, dated as of September 22,
1997, between Mechanical Technology, Incorporated
and Noonan Machine Company. (12)
21 Subsidiaries of the registrant. (12)
27 Financial Data Schedule (12)
______________________
Certain exhibits were previously filed (as indicated below) and are
incorporated herein by reference. All other exhibits for which no other
filing information is given are filed herewith:
(1) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-K Report, as amended, for its fiscal year ended
September 30, 1989.
(2) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-Q Report for its fiscal quarter ended December 29,
1990.
(3) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-Q Report for its fiscal quarter ended June 27,
1992.
(4) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-K Report for its fiscal year ended September 30,
1991.
(5) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-K Report for its fiscal year ended September 30,
1993.
(6) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-Q Report for its fiscal quarter ended July 2, 1994.
(7) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 8-K Report dated November 23, 1994.
(8) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-K Report for its fiscal year ended September 30,
1994.
(9) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-K Report for its fiscal year ended September 30,
1995.
(10) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-K Report for its fiscal year ended September 30,
1996.
(11) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 8-K Report dated May 12, 1997.
(12) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-K Report for the fiscal year ended September 30,
1997.
<PAGE>
(13) Refiled herewith after confidential treatment request with respect to
certain schedules and exhibits was denied by the Commission. Confidential
treatment with respect to certain schedules and exhibits was granted.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MECHANICAL TECHNOLOGY INCORPORATED
Date: August 13, 1998 By: /s/ George C. McNamee
------------------ ---------------------------------------
George C. McNamee
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ George C. McNamee Chairman of the Board of Directors 08/13/98
- -------------------------
George C. McNamee
/s/ Cynthia A. Scheuer Chief Financial Officer
- ------------------------- (Principal Financial and Accounting
Cynthia A. Scheuer Officer) "
/s/ Dale W. Church Director "
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Dale W. Church
/s/ Edward A. Dohring Director "
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Edward A. Dohring
/s/ Alan P. Goldberg Director "
- -------------------------
Alan P. Goldberg
/s/ E. Dennis O'Connor Director "
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E. Dennis O'Connor
/s/ Walter L. Robb Director "
- -------------------------
Dr. Walter L. Robb
/s/ Beno Sternlicht Director "
- -------------------------
Dr. Beno Sternlicht
<PAGE>
EXHIBIT A Exhibit 10.18
LIMITED LIABILITY COMPANY AGREEMENT
OF
PLUG POWER, LLC
A DELAWARE LIMITED LIABILITY COMPANY
THIS LIMITED LIABILITY COMPANY AGREEMENT is made as of this 27th day of
June, 1997, by those parties signing this Agreement on the signature page and
all other persons who become members of Plug Power, LLC ("Company") pursuant
to the terms of this Limited Liability Company Agreement.
RECITALS
WHEREAS, Edison Development Corporation, a Michigan corporation ("EDC"),
as the sole Member, formed Plug Power, LLC, a limited liability company, by
filing a certificate of formation ("Certificate") pursuant to the Delaware
Limited Liability Company Act (the "Act") with the Office of the Secretary of
State of the State of Delaware in accordance with the Act on June 11, 1997.
WHEREAS, the purpose of the Company is to develop, manufacture, market and
distribute fuel cell systems capable of delivering electricity or waste heat and
engage in related activities.
WHEREAS, EDC wishes to admit Mechanical Technology Inc., a New York
corporation ("MTI") as a Member of the Company.
WHEREAS, EDC and MTI have agreed to enter into this Limited Liability
Company Agreement to govern the operations and procedures of the Company.
NOW, THEREFORE, in consideration of the mutual covenants, conditions and
agreements set forth in this Limited Liability Company Agreement each Member
agrees as follows:
<PAGE>
ARTICLE I
DEFINITIONS
1. Definitions. For purposes of this Agreement, unless the language or
context clearly indicates that a different meaning is intended, the words,
terms and phrases defined in this section have the following meanings:
1.1 "Act" means the Delaware Limited Liability Company Act, 6 Del. C.
18-101, et seq., as amended from time to time.
1.2 "Adjusted Basis" means the basis of the Company's Property as determined
for federal income tax purposes pursuant to Code Section 1011.
1.3 "Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant Taxable Year after giving effect to the following adjustments:
(a) Credit the Capital Account with any amounts such Member is
obligated to restore pursuant to any provisions of this Agreement or is
deemed obligated to restore pursuant to the penultimate sentences of
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) Debit the Capital Account with the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4)-(6).
This definition of Adjusted Capital Account Deficit is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
1.4 "Affiliate" means, with respect to any Member, (i) any Person directly
or indirectly controlling, controlled by, or under common control with the
Member, (ii) any Person owning or controlling ten percent (10%) or more of the
outstanding voting interests of the Member, (iii) any officer, director, member
or general partner of the Member, or (iv) any Person who is an officer,director,
member, general partner, trustee, or holder of ten percent (10%) or more of the
voting interests of any Person described in clauses (i) through (iii) of this
sentence. For purposes of this definition, the term "controls," "is controlled
by," or "is under common control with" shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a person or entity, whether through the ownership or voting
securities by contract or otherwise.
1.5 "Agreement" means this Limited Liability Company Agreement, as it may
be amended from time to time under Article XVI.
<PAGE>
1.6 "Applicable Federal Rate" means the applicable federal rate as defined
in Code Section 1274.
1.7 "Awarded Contracts" means the Contract Proposals for which the Company
has received written confirmation from the other party to the Contract Proposal
by not later than April 1, 1999 that the Contract Proposal has been awarded to
the Company.
1.8 "Awarded Funds" means the funds received by the Company under the
Awarded Contracts as of April 1, 2001.
1.9 "Capital Account" means the account maintained for each Member in
accordance with Section 4.6.
1.10 "Capital Contributions" means, with respect to any Member, the amount
of money and the initial Gross Asset Value of any Property (other than money)
contributed to the Company under Section 4.1, 4.2, or 4.3, with respect to the
Membership Interest in the Company held by such Member.
1.11 "Certificate" means the Certificate of Formation of the Company to be
filed with the Office of the Secretary of State of the State of Delaware in
accordance with the Act.
1.12 "Class A Member" means any Person listed in Exhibit A, as it may be
amended from time to time.
1.13 "Class A Membership Interest" means all of the interest of a Class A
Member in the Company, including a Class A Member's: (a) right to a share of the
Profits and Losses of, and to receive distributions from, the Company; (b) right
to inspect the Company's books and records; and (c) Voting Rights and right to
participate in the management and affairs of the Company.
1.14 "Class B Member" means any Key Employee to whom the Management
Committee has issued a Class B Membership Interest and is listed in Exhibit B,
as it may be amended from time to time.
1.15 "Class B Membership Interest" means all of the interest of a Class B
Member in the Company, including a Class B Member's right to a share of the
Profits and Losses, and to receive distributions from, the Company, subject to
any vesting schedule which the Management Committee may establish in connection
with the issuance of a Class B Membership Interest to a Key Employee. No Class
B Member shall have any Voting Rights or right to participate in the management
or affairs of the Company. Class B Members shall have only such rights as
prescribed by the Act or this Agreement to inspect the Required Records. All
<PAGE>
Class B Membership Interests will be converted to Class A Membership Interests
on the earlier of the date on which the Company (or its successor) files a
registration statement for the public sale of interests in the Company (or
shares of a successor), under the Securities Act of 1933, upon approval by a
majority of the Class A Shares Issued of (a) a sale, lease, assignment,
transfer, or other conveyance of all or substantially all of the assets of the
Company, or (b) a merger, combination, or dissolution of the Company. The
conversion shall be reflected by amending Exhibit A to reflect the admission of
the Class B Members as Class A Members of the Company and holding the same
number of Class A Shares as the number of Class B Shares previously held by
such Class B. Members.
1.16 "Code" means the Internal Revenue Code of 1986, as amended.
1.17 "Contract Proposals" means the contract proposals set forth on Exhibit
D and which Contract Proposals are subject to the approval of the Management
Committee pursuant to Section 7.3(g). Contract Proposals shall not include
the contracts or contract proposals set forth in Exhibit E.
1.18 "Contribution Agreements" means the EDC Contribution Agreement and the
MTI Contribution Agreement.
1.19 "Company" means Plug Power, LLC, a Delaware limited liability company.
1.20 "Company Liability" means any enforceable debt or obligation for which
the Company is liable or which is secured by any Company Property.
1.21 "Company Minimum Gain" has the meaning set forth in Regulations Sections
1.704-2(b)(2) and 1.704-2(d) for "partnership minimum gain".
1.22 "Company Property" means any Property owned by the Company.
1.23 "Default Rule" means a rule stated in the Act:
(a) which structures, defines, or regulates the finances, governance,
operations, or other aspects of a limited liability company organized under
the Act; and
(b) which applies except to the extent it is modified or overridden
through the provisions of a limited liability company's certificate of
formation or limited liability company.
<PAGE>
1.24 "Depreciation" means (a) an amount equal to the depreciation,
amortization, or other cost recovery deduction allowable with respect to an
item of Company Property for each Taxable Year, or (b), if the Gross Asset
Value of an item of Company Property differs from its Adjusted Basis at the
beginning of a Taxable Year, Depreciation shall equal the amount of the
depreciation, amortization, or other cost recovery deduction for such Taxable
Year determined as if such Property's Adjusted Basis equalled its Gross Asset
Value.
1.25 "Disassociation" means the occurrence of any event which causes a Key
Employee Member to become a Disqualified Person.
1.26 "Disqualified Person" means a Key Employee Member who:
(a) terminates his/her employment with the Company for any reason
prior to age sixty (60);
(b) whose employment is terminated by the Company for any or no
reason at any time; or
(c) who makes an assignment for the benefit of creditors, files a
voluntary petition of bankruptcy, is adjudicated bankrupt or insolvent, or
an order for relief in any bankruptcy or insolvency proceeding is entered
against the Key Employee Member; files a petition seeking any reorganization,
arrangement, composition, readjustment, liquidation, or similar relief under
any statute, law or regulation; seeks, consents to, or acquiesces in the
appointment of a trustee for the Key Employee Member or all or any
substantial part of the Key Employee Member's properties; files an answer
or other pleading admitting or failing to contest the material allegations of
a petition filed against the Key Employee Member in any proceeding described
above; any proceeding filed against the Key Employee Member seeking
reorganization, arrangement, composition, a readjustment, liquidation,
dissolution, or similar relief under any statute, law, or regulation,
continues for one hundred twenty (120) days after the commencement thereof;
or the appointment of a trustee for the Key Employee Member or all or any
substantial part of the Member's properties without the Member's agreement
or acquiescence, which appointment is not vacated or stayed within one
hundred twenty (120) days or, if the appointment is stayed, continues for
one hundred twenty (120) days after the expiration of the stay during which
period the appointment is not vacated.
1.27 "EDC" means Edison Development Corporation, a Michigan corporation.
<PAGE>
1.28 "EDC Contribution Agreement" means the Contribution Agreement dated as
of the date of this Agreement between the Company and EDC.
1.29 "Gross Asset Value" means, with respect to any Property, the Property's
Adjusted Basis, except as follows:
(a) The initial Gross Asset Value of any Property contributed by a
Member shall be the gross fair market value of such Property, as determined
by the contributing Member and the Management Committee;
(b) The Gross Asset Value of all Company Property shall be adjusted to
equal its gross fair market value, as determined by the Management Committee,
at the following times: (i) the acquisition of an additional Membership
Interest by any new or existing Member in exchange for more than a de minimis
Capital Contribution; (ii) the distribution by the Company to a Member of
more than a de minimis amount of the Company Property as consideration for a
Membership Interest in the Company; and (iii) the liquidation of the Company
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); provided,that
adjustments under clauses (i) and (ii) above shall be made at the sole
election of the Management Committee;
(c) The Gross Asset Value of Company Property distributed to a Member
shall be adjusted to equal its gross fair market value on the date of
distribution; and
(d) The Gross Asset Value of Company Property shall be adjusted to
reflect any adjustments pursuant to Code Section 734(b) or Code Section 743
(b), but only as required under Regulation Section 1.704-1(b)(2)(iv)(m) and
Section 5.2(g) of this Agreement.
If the Gross Asset Value of any Company Property has been determined or adjusted
pursuant to subsections (a), (b) or (d) of this definition, such Gross Asset
Value shall thereafter be adjusted by the Depreciation computed as provided in
Section 1.24(b).
1.30 "Involuntary Withdrawal" means, with respect to any Class A Member, the
occurrence of any of the following events:
(a) The Member: makes an assignment for the benefit of creditors,
files a voluntary petition of bankruptcy, is adjudicated bankrupt or
insolvent, or an order for relief in any bankruptcy or insolvency proceeding
is entered against the Member; files a petition seeking for the Member any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any statute, law or regulation; seeks,
consents to, or acquiesces in the appointment of a trustee for, receiver for,
or liquidation of the Member, or of all or any substantial part of the
<PAGE>
Member's properties; or the Member files an answer or other pleading
admitting or failing to contest the material allegations of a petition filed
against the Member in any proceeding described above;
(b) Any proceeding against the Member seeking reorganization,
arrangement, composition, a readjustment, liquidation, dissolution, or
similar relief under any statute, law, or regulation, continues for one
hundred twenty (120) days after the commencement thereof, or the appointment
of a trustee, receiver, or liquidator for the Member or all or any
substantial part of the Member's properties without the Member's agreement or
acquiescence, which appointment is not vacated or stayed within one hundred
twenty (120) days or, if the appointment is stayed, continues for one hundred
twenty (120) days after the expiration of the stay during which period the
appointment is not vacated;
(c) If the Member is acting as a Member by virtue of being a trustee
of a trust, the termination of the trust;
(d) If the Member is a partnership or limited liability company, the
dissolution and commencement of winding up of the partnership or limited
liability company;
(e) If the Member is a corporation, the dissolution of the corporation
or the revocation of its charter; or
(f) If the Member is an estate, the distribution by the fiduciary of
the estate's entire interest in the Company.
1.31 "Key Employee" means any person designated by the Management Committee
as a Key Employee and as eligible to become a Class B Member.
1.32 "Management Committee" means the committee appointed under Section 7.1.
1.33 "Manager" means any Person appointed to the Management Committee by
a Class A Member. A Manager may sit on the board of directors or management
committee of another Person, even if the business of such Person, or that of any
Affiliate of such Person, is in direct or indirect competition with the fuel
cell business of the Company, provided such Manager refrains from taking any
action that would be in violation of the Manager's duties and obligations to
the Company and Members set forth in the Act or this Agreement, including,
without limitation, the duties and obligations set forth in Section 7.5.
<PAGE>
1.34 "Member" means any Person that is a Class A Member or a Class B
Member.
1.35 "Member Nonrecourse Deductions" has the meaning set forth in
Regulations Sections 1.704-2(i)(1) and (2).
1.36 "Member Nonrecourse Liability" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
1.37 "Member Nonrecourse Liability Minimum Gain" means an amount, with
respect to each Member Nonrecourse Liability, equal to the Company Minimum Gain
that would result if such Member Nonrecourse Liability were treated as a
Nonrecourse Liability, determined in accordance with Regulations Section
1.704-2(i)(3).
1.38 "Membership Interest" means a Class A Membership Interest or a Class B
Membership Interest.
1.39 "MTI" means Mechanical Technology Incorporated, a New York corporation.
1.40 "MTI Contribution Agreement" means the Contribution Agreement dated as
of the date of this Agreement between the Company and MTI.
1.41 "Net Awarded Funds" means the Awarded Funds less any amounts the
Company is required under the terms of the Awarded Contracts to expend under
subcontracts with third parties for the performance of the Company's obligations
under the Awarded Contracts.
1.42 "Net Income" means the net income (or loss) of the Company, for any
applicable period of determination, determined in accordance with generally
accepted accounting principals, but excluding therefrom any gains or losses on
the sale or other disposition, not in the ordinary course of business, of
investments or fixed or capital asset.
1.43 "Net Operating Income" means the Net Income of the Company, for any
applicable period of determination, less the amount used to pay or establish
reserves for all Company expenses, debts, payments, capital improvements,
reinvestments, replacements and contingencies, all as determined by the
Management Committee.
1.45 "Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(b)(1).
1.46 "Nonrecourse Liabilities" has the meaning set forth in Regulations
Section 1.704-2(b)(3).
<PAGE>
1.47 "Person" includes a natural person, limited liability company,
corporation, partnership, limited partnership, joint venture, association,
business trust, estate, trust, enterprise, and any other legal entity.
1.48 "Profits and Losses" means an amount equal to the Company's taxable
income or loss for each Taxable Year, determined in accordance with Code Section
703(a) (for this purpose, all items of income, gain, loss, or deduction required
to be stated separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss) adjusted as follows:
(a) Income exempt from federal income tax shall be added to such
taxable income or loss;
(b) Expenditures described in or treated as Code Section 705(a)(2)(B)
expenditures (pursuant to Regulations Section 1.704-1(b)(2)(iv)(i)) shall be
subtracted from such taxable income or loss;
(c) Adjustments to the Gross Asset Value of any Company Property
pursuant to subsection (b) or (c) of the "Gross Asset Value" definition shall
be taken into account as gain or loss from the disposition of such Property
for purposes of computing Profits and Losses;
(d) Gain or loss which is recognized for federal income tax purposes as
a result of any disposition of Property shall be computed by reference to the
Gross Asset Value of such Property, notwithstanding that its Adjusted Basis
differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation computed in accordance with the
provisions of Section 1.24; and
(f) Notwithstanding any other provision of this definition, any items
which are specially allocated pursuant to Section 5.2 or Section 5.3 shall
not be taken into account in computing Profits or Losses.
1.49 "Projected Net Awarded Funds" has the meaning set forth in Section 4.7.
1.50 "Property" means all property whether real or personal, tangible or
intangible (including goodwill), but excluding services and promises to
perform services in the future.
<PAGE>
1.51 "Regulations" means the permanent, temporary, proposed, or proposed and
temporary regulations promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
1.52 "Required Records" means those records that the Company is required to
maintain under Section 10.1 and under the Act.
1.53 "Share" means a single unit of either a Class A Membership Interest or
Class B Membership Interest.
1.54 "Shares Authorized" means the total number of Shares which may be issued
by the Management Committee or as otherwise provided in this Agreement with the
total number of authorized Shares for a Class A Membership Interest to equal
18,000,000 and the total number of Shares for a Class B Membership Interest to
equal 3,000,000.
1.55 "Shares Issued" means the number of Shares of Class A Membership
Interest issued to a Member as reflected on Exhibit A under the column "Shares"
or the number of Shares of Class B Membership Interest issued to a Member as
reflected on Exhibit B under the column "Shares".
1.56 "Taxable Year" means the taxable year of the Company as determined
pursuant to Code Section 706.
1.57 "Transfer" means, when used as a noun, any voluntary sale,hypothecation,
pledge, assignment, or other transfer, and, when used as a verb, means
voluntarily to sell, hypothecate, pledge, assign or otherwise transfer.
1.58 "Voluntary Withdrawal" means a Class A Member's disassociation with the
Company by means other than by ceasing to be a Member as a result of an
Involuntary Withdrawal.
1.59 "Voting Rights" means each Class A Member's right under the Act, the
Certificate, or this Agreement to cast the number of votes on any matter subject
to a vote or to the consent of Class A Members equal to the number of Shares
owned by the Class A Member.
1.60 "Withdrawn Member" means any Class A Member that is the subject of a
Voluntary or Involuntary Withdrawal.
<PAGE>
ARTICLE II
ORGANIZATION OF LIMITED LIABILITY COMPANY
2.1 Formation. The parties hereby organize a limited liability company
pursuant to the Act and the terms of this Agreement and, for that purpose, will
cause a Certificate of Formation to be filed with the Office of the Secretary
of State of Delaware.
2.2 Name. The name of the Company is Plug Power, LLC The Company may
also conduct its business under one or more assumed names duly approved by a
resolution of the Management Committee.
2.3 Term. The term of the Company will begin upon the acceptance of the
Certificate by the Office of the Secretary of State of Delaware and shall
continue in existence in perpetuity or until the Company shall be sooner
dissolved and its affairs wound up in accordance with the Act or this Agreement.
2.4 Purpose. The purpose of the Company is to plan, develop, finance,
patent, manufacture, market and distribute fuel cell systems capable of
delivering electricity or waste heat and related and ancillary services. The
Company shall have all the powers necessary or convenient to effect any such
purpose, including all powers given to a limited liability company under the
Act.
2.5 Initial Date. This Agreement is made on this 27th day of June, 1997.
2.6 Registered Office and Resident Agent. The registered office and
resident agent of the Company shall be as designated in the Certificate, as it
may be amended from time to time.
2.7 Principal Office. The principal office of the Company shall be located
at 968 Albany - Shaker Road, Latham, New York 12110 or such other location as
determined by the Management Committee.
2.8 Representations, Warranties, and Covenants of Members.
(a) Each non-individual Member represents, warrants and covenants that:
(i) It is validly organized and existing and in good standing
according to the laws of the state of its incorporation or organization,
and it is qualified to do business in every jurisdiction where the
failure to be so qualified would have a material adverse effect on its
ability to perform its obligations under this Agreement;
<PAGE>
(ii) This Agreement is duly authorized, executed and delivered on
behalf of such Member and constitutes the valid and binding obligations
of such Member enforceable in accordance with the terms of such
Agreement;
(iii) Neither the formation of the Company, the execution and delivery
of this Agreement (including all contracts or other agreements necessary
to carry out the purposes of this Agreement), nor the performance of the
obligations undertaken pursuant to this Agreement will contravene any
provision of, or constitute a default under, any indenture, mortgage,
debenture, or other agreement of such Member, any order of any court,
commission, or governmental agency having jurisdiction, or violate any
law or regulation affecting or governing the Member or the business
conducted by the Member; and
(iv) It will not willfully or knowingly violate any law or regulation
regarding the Company or its business.
(b) Each individual member represents , warrants and covenants that:
(i) This Agreement is the valid and binding obligation of such
Member;
(ii) Neither the entering into nor the performance of this Agreement
will violate the terms or conditions of any agreement or order binding
on the Member; and
(iii) He or she will not violate any law or regulation regarding the
Company or its business.
ARTICLE III
BACKGROUND OF THIS AGREEMENT
3.1 Intent of this Agreement. The parties to this Agreement have reached an
understanding concerning: (i) their business relationship with each other in
connection with the purpose of the Company; and (ii) the organization and
operation of the Company and its business. The parties intend this Agreement
to control the business and affairs of the Company, including the Company's
governance structure, the Company's dissolution, winding up, liquidation and
termination, and the relations between the Company's Members.
<PAGE>
3.2 Relationship of Agreement to Default Rules. Whether or not this
Agreement specifically refers to a Default Rule, if any provision of this
Agreement conflicts with a Default Rule, the provision of this Agreement shall
control and the Default Rule shall be modified or overridden accordingly.
3.3 Advice of Counsel. Each person signing this Agreement understands
that this Agreement contains legally binding provisions, has had the opportunity
to and has either consulted a lawyer or purposefully chosen not to consult a
lawyer.
ARTICLE IV
CONTRIBUTIONS AND CAPITAL ACCOUNTS
4.1 Initial Contributions.
(a) The initial Members, EDC and MTI, have entered into their
respective Contribution Agreements and made such Capital Contributions to
the Company as required thereunder each in exchange for the number of Shares
of Class A Membership Interest as set forth on Exhibit A; provided, however,
MTI's Membership Interest is subject to reduction as set forth in Section
4.7. The fair market value of EDC's and MTI's Capital Contributions and the
Adjusted Basis of each Capital Contribution are as set forth on Exhibit A.
(b) Admission of Class A Members. In the event that the Management
Committee decides to admit additional Class A Members, each new Class A
Member shall make as its Capital Contribution the contribution required by
the Management Committee in its written offer to such Person (as required
under Section 11.1) in exchange for the issuance of the number of Shares of
Class A Membership Interest set forth in such offer.
(c) Admission of Class B Members. In the event that the Management
Committee decides to admit Class B Members, each new Class B Member shall
make as its Capital Contribution the contribution required by the Management
Committee in its written offer to such Person (as required under Section
11.2) in exchange for the issuance of the number of Shares of Class B
Membership set forth in such offer.
4.2 Additional Capital Contributions.
(a) Except as provided in this Section 4.2, the Company has no right to
require any Member to make additional capital contributions. This section
<PAGE>
does not release any Member from any obligation or promise of future
performance that the Company has accepted as a Capital Contribution.
(b) EDC agrees that, subject to subsection 4.2(f), the Company may
call upon EDC, from time to time and as required, for additional cash
contributions from EDC in an amount not to exceed, in the aggregate,
$4,250,000.00 (each additional EDC capital contribution is an "EDC
Contribution"); provided, however, EDC shall not be required to make
additional capital contributions under this subsection during the twelve
(12) month period after the date of this Agreement. For each $1.00 of
additional capital contributions made by EDC, EDC shall receive one (1)
Share of Class A Membership Interest.
(c) Upon receipt of each EDC Contribution, the Company shall notify
MTI in writing of such contribution. Such notice shall include the amount
of the EDC Contribution, the date of the EDC Contribution, and the number
of Shares of Class A Membership interest issued to EDC in exchange for the
EDC Contribution. MTI shall have five (5) days after receipt of such notice
to request in writing an option to purchase ("Option") additional Shares of
Class A Membership Interest in an amount not to exceed the number of Shares
of Class A Membership Interest issued to EDC as set forth in the notice for
the option price set forth in the notice. Within five (5) days after receipt
of such request, the Company shall execute and deliver to MTI an option to
purchase Shares of Class A Membership Interest in the form attached as
Exhibit F ("Option Agreement - Contribution Match"). MTI's written request
for the Option shall constitute MTI's agreement to terms and conditions of
the Option Agreement - Contribution Match.
(d) If the Net Awarded Funds exceed $8,000,000.00, MTI shall receive
a credit equal to 18.75% of the amount of Net Awarded Funds in excess of
$8,000,000.00. Such credit shall be applied toward the purchase price
payable for any additional Shares purchased by MTI under any of the Option
Agreements - Contribution Match delivered to MTI under subsection 4.2(c).
If such credit is earned prior to expiration of the term of any such Option
Agreement, MTI may request the return of any cash payments made by MTI under
any such Option Agreement and prior to such expiration date up to the amount
of the credit in accordance with and subject to the terms and conditions of
any such Option Agreement.
(e) In the event MTI's Membership Interest is reduced pursuant to
subsection 4.7(b), MTI shall have until October 6, 1999 to request an option
to repurchase the Returned MTI Shares. Within five (5) days after receipt of
such written request, the Company shall issue to MTI an Option Agreement in
the form attached as Exhibit G ("Option Agreement - Returned Shares"). MTI's
<PAGE>
request for such option shall constitute MTI's agreement to the terms and
conditions of the Option Agreement - Returned Shares.
(f) The obligations of EDC to make additional capital contributions
under this Section 4.2 shall at all times be conditioned upon the Company
achieving the Milestones by the Milestone Dates, as such terms are defined
in and in accordance with the schedule set forth in Exhibit C.
4.3 Additional Capital Financing.
(a) In the event the Management Committee determines that the Company
needs additional financing to meet its working capital or capital investment
requirements, the Management Committee shall determine the structure and the
pricing of the debt and/or equity offering necessary to raise such additional
financing. If the Management Committee cannot agree on the structure and
pricing of such financing, such determination shall be made by a reputable,
nationally recognized investment banking firm, experienced in structuring
and pricing debt and/or equity offerings in similar industries, selected by
the Management Committee.
(b) If equity and/or debt financing is determined to be necessary
pursuant to (a) above and the nature of such transaction is predominantly to
raise capital in the form of cash, such equity and/or debt financing shall
be offered first to the Class A Members as voluntary additional Capital
Contributions. All such calls on the Class A Members for additional Capital
Contributions made pursuant to this Section 4.3 shall be in writing and
shall contain the following information:
(1) The total amount of the additional financing to be raised by the
Company and a description of the debt and/or equity structure and
pricing of such financing, including, but not limited to, the number of
Shares of Class A Membership Interest offered and the price for each
Share so offered;
(2) The amount of such additional financing that the Company
requests each Class A Member provide to the Company, including the
amount requested from the Class A Member to whom the request is
addressed, which amounts shall be in proportion to each Class A Members'
ownership of Shares of Class A Membership Interest;
(3) The purpose for which the funds are to be applied set forth in
reasonable detail; and
<PAGE>
(4) The date, not less than thirty (30) days after the written call,
on which funding of the additional financing shall be made by the Class
A Member, if such Class A Member elects to participate in the additional
financing.
All calls for additional financing made pursuant to this Section 4.3 shall
be voluntary and none of the Class A Members shall be obligated to
participate in any additional financing under this Section 4.3. In the event
a Class A Member elects not to participate in additional financing pursuant
to this Section 4.3, the Management Committee shall notify the remaining
Class A Members within fifteen (15) days after the expiration of the 30-day
period provided in Section 4.3(b)(4), and the remaining Class A Members shall
have the option to provide such non-participating Class A Member's additional
financing, pro rata in proportion to their ownership of Shares of Class A
Membership Interest, within thirty (30) days after receipt of notice from the
Management Committee.
(c) Any such equity and/or debt financing not raised through additional
financing from the Class A Members pursuant to Section 4.3(b) may be offered
to Class B Members or non-Members in accordance with the structure and
pricing determined pursuant to Section 4.3(a).
(d) The preemptive rights of the Class A Members pursuant to Section
4.3(b) shall not prohibit the Management Committee from issuing Shares of
Class A Membership Interest to non-Class A Members (i) in exchange for
services rendered in connection with any debt and/or equity financing
pursuant to this Section 4.3, or (ii) in connection with any transaction
the predominate purpose of which is to acquire all or any part of a Person
or any of its business or assets, whether structured as an asset purchase
or a purchase of stock or other equity.
4.4 No Right to Return of Capital Contributions. Except as otherwise
provided in this Agreement, no Member shall demand or receive a return of its
Capital Contributions or withdraw from the Company without the consent of all
Members. No Member shall be entitled to receive interest on its Capital
Contributions. Under any circumstance that requires a return of all or part
of any Capital Contribution, no Member shall have the right to receive any
Property other than money, except as otherwise provided in this Agreement.
4.5 Loans and Advances by Members.
(a) Interest Bearing Loans. If at any time or times the Company needs
additional funds which, for any reason, the Company does not raise through
an increase in the Company capital or through advances, the funds may be
borrowed from any one or more of the Members, at a rate of interest equal
<PAGE>
to the Applicable Federal Rate and on such payment terms as may be agreed
upon by the lending Member(s) and the Management Committee. These loans
shall be evidenced by promissory notes signed on behalf of the Company.
(b) Non-Interest Bearing Advances. Any Member may advance money
to the Company in excess of the Member's Capital Contribution. The amount
of the advance shall not increase the Member's Membership Interest, Capital
Account, or Shares, but rather the amount of the advance will be a demand
obligation of the Company to that Member and will be fully repaid, without
interest, before distributions, or any withdrawals of capital, are made with
respect to any Member.
4.6 Capital Accounts. The Company shall establish and maintain for each
Member, a Capital Account in accordance with the following provisions:
(a) To each Member's Capital Account there shall be credited such
Member's Capital Contributions, such Member's distributive share of Profits
and any items in the nature of gain which are specially allocated pursuant
to Section 5.2 or Section 5.3, and the amount of any Company Liabilities
assumed by such Member or which are secured by any Property distributed to
such Member;
(b) To each Member's Capital Account there shall be debited the amount
of cash and the Gross Asset Value of any Property distributed to such Member
pursuant to any provision of this Agreement, such Member's distributive
share of Losses and any items in the nature of expenses or losses which are
specifically allocated pursuant to Section 5.2 of Section 5.3, and the amount
of any liabilities of such Member assumed by the Company or which are secured
by any Property contributed by such Member to the Company; and
(c) In the event all or a portion of a Member's Shares are transferred
in accordance with the terms of this Agreement, the assignee shall succeed to
the Capital Account of the transferor to the extent it relates to the
transferred Shares.
The Capital Accounts shall be maintained in accordance with Section 1.704-1b
of the Regulations, and shall be interpreted and applied in a manner consistent
with such Regulations, notwithstanding any provision of this Agreement to the
contrary. In the event the Management Committee shall determine that it is
prudent to modify the manner in which the Capital Accounts, or any debits or
credits thereto are computed in order to comply with such Regulations, the
Management Committee may make such modification, provided that it is not likely
to have a material effect on the amounts distributed to any Member pursuant to
Article XIII hereof upon the dissolution of the Company.
<PAGE>
4.7 Reduction in MTI's Capital Contribution. It is anticipated that the Net
Awarded Funds from the Contract Proposals will be Eight Million Dollars
($8,000,000.00) ("Projected Net Awarded Funds"). If the Net Awarded Funds from
the Contract Proposals are less than the Projected Net Awarded Funds, MTI's
Capital Account shall be reduced by an amount equal to $1,750,000 multiplied by
the percentage determined by dividing the difference between the Projected Net
Awarded Funds and the Net Awarded Funds by the Projected Net Awarded Funds
("Research Debit"). The number of Shares of Class A Membership Interest held
by MTI shall be reduced by one Share for each $1.00 of the Research Debit
("Returned MTI Shares"). Adjustments will be made to MTI's Capital Account and
Shares at the close of business on October 1, 1999 to reflect the Net Awarded
Funds. If greater than one hundred percent (100%) of the Projected Net Awarded
Funds are received by the Company, no adjustments will be made to MTI's Capital
Account or Shares except as provided in subsection 4.2(d).
4.8 Requested Registration. At any time following five (5) years after the
date of this Agreement, upon the request of Class A Members holding not less
than twenty-five (25%) of the Shares of Class A Membership Interest entitled to
vote ("Initiating Members"), the Company shall retain an independent reputable
and nationally recognized investment banking firm ("Advisor") experienced in
advising on the registration of Shares of businesses similar to the Company and
acceptable to the Company and the Initiating Member, to propose to the Company
the optimal time to effect registration of the Shares held by the Company and
the offering price for such Company Shares. The Advisor shall make such proposal
in a writing ("Proposal") delivered to the Company within sixty (60) days after
the Advisor is retained by the Company. The Company shall provide the Class A
Members with copies of the Advisor's Proposal within thirty (30) days after
receipt of the Proposal. If the Advisor's Proposal recommends pursuing
registration at that time, the Initiating Members may require the Company to
effect registration of the Company Shares in accordance with the Advisor's
Proposal. If necessary in order to effect registration of the Company Shares
in accordance with the Advisor's Proposal, the Members authorize the Company to
increase the number of Shares Authorized to an amount sufficient to effect the
registration, and authorize the Company to merge the Company into a Delaware
corporation and exchange their Shares in the Company for an equal number of
Shares in the surviving Delaware corporation.
In the event the advisor's proposal recommends against effecting registration
at that time, the Company shall not be obligated to pursue such registration,
and the Member shall not be entitled request the Company to retain an advisor
again for the purpose set forth above for a period of twelve (12) months after
the date of the advisor's proposal recommending against effecting a registration
at that time.
<PAGE>
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 Allocations of Profits and Losses from Operations.
(a) Profits. After giving effect to the special allocations in Sections
5.2 and 5.3, Profits shall be allocated among the Members in proportion to
the number of Shares owned by each Member and the number of Shares Issued.
(b) Losses. After giving effect to the special allocations in Sections
5.2 and 5.3, Losses shall be allocated among the Members in proportion to the
number of Shares owned by each Member and the number of Shares Issued.
5.2 Special Allocations. The following special allocations shall be made in
the following order:
(a) Minimum Gain Chargeback. To the extent and in the manner provided
in Section 1.704-2(f) of the Regulations, if there is a net decrease in
Company Minimum Gain during any Taxable Year, each Member shall be specially
allocated items of Company income and gain for such fiscal year (and, if
necessary, subsequent fiscal years) in an amount equal to such Member's share
of the net decrease in Company Minimum Gain, determined in accordance with
Section 1.704-2(g) of the Regulations. Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. This Section 5.2(a) is intended
to comply with the minimum gain chargeback requirement in Section 1.704-2(f)
of the Regulations and shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. To the extent and in the manner
provided in Section 1.704-2(i)(4) of the Regulations, if there is a net
decrease in Member Minimum Gain attributable to a Member Nonrecourse
Liability during any fiscal year, each Member who has a share of the Member
Minimum Gain attributable to such Member Nonrecourse Liability shall be
specially allocated items of Company income and gain for such fiscal year
(and, if necessary, subsequent fiscal years) in an amount equal to such
Member's share of the net decrease in Member Minimum Gain attributable to
such Member Nonrecourse Liability, determined in accordance with Regulations
Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall
be made in proportion to the respective amounts required to be allocated to
each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) an 1.704-2(j)(2) of the
Regulations. This Section 5.2(b) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall
be interpreted consistently therewith.
<PAGE>
(c) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Treasury
Regulation Sections 1.704(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-
1(b)(2)(ii)(d)(6), items of Company income and gain shall be specifically
allocated to each such Member in an amount and manner sufficient to
eliminate, to the extent required by the Treasury Regulations, the Adjusted
Capital Account Deficit of such Member as quickly as possible, provided that
an allocation pursuant to this Section 5.2(c) shall be made only if and to
the extent that such Member would have an Adjusted Capital Account Deficit
after all other allocations provided for in this Section 5 have been
tentatively made as if this Section 5.2(c) were not in this Agreement.
(d) Gross Income Allocation. In the event any Member has an Adjusted
Capital Account Deficit at the end of any fiscal year, each such Member shall
be specially allocated items of Company income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 5.2(d) shall be made only if and to the extent that such Member would
have Adjusted Capital Account Deficit after all other allocations provided
for in this Section 5 have been made as if Section 5.2(c) and this Section
5.2(d) were not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions shall be allocated
among the Members in proportion to the number of Shares owned by each Member
to the number of Shares Issued.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions
for any fiscal year shall be specially allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Liability to
which such Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i)(1).
(g) Section 754 Adjustments. If an adjustment to the Adjusted Basis of
any Company Property pursuant to Code Section 734(b) or Code Section 743(b)
is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as the result of a distribution to a Member in
complete liquidation of his or her Membership Interest in the Company, the
amount of such adjustment shall be treated as an item of gain or loss and
shall be specially allocated to the Members in proportion to the number of
Shares owned by each Member and the number of Shares Interest in the event
that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member
to whom such distribution was made in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
5.3 Curative Allocations. The allocations set forth in Sections 5.2(a)-5.2
(g) hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Regulations. It is the intent of the Members that, to the
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extent possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of Profits or
Losses pursuant to this Section 5.3. Therefore, notwithstanding any other
provision of this Section 5 (other than the Regulatory Allocations), the
Management Committee shall make such offsetting special allocations of items of
Profit or Loss in whatever manner it determine(s) appropriate so that, after
such offsetting allocations are made, each Member's Capital Account balances,
to the extent possible, are equal to the Capital Account balance such Member
would have had if the Regulatory Allocations were not part of the Agreement
and all items of Profit and Loss were allocated pursuant to Section 5.1.
5.4 Tax Allocations: Code Section 704(c). In accordance with Code Section
704(c) and the Regulations thereunder, Profits and Losses which relate to any
Property contributed by a Member to the Company shall, solely for tax purposes,
be allocated among Members so as to take account of any variation between the
Property's Adjusted Basis and its initial Gross Asset Value.
ARTICLE VI
DISTRIBUTIONS
6.1 Distributions of Net Operating Income. Subject to the limitations of
Section 6.3 and the Act, the Management Committee shall distribute (within
seventy-five (75) days after the end of each fiscal year of the Company) to the
Members in proportion to the number of Shares owned by each Member and the
number of Shares Issued, the lesser of (a) Net Operating Income for the
preceding fiscal year of the Company, or (b) an amount equal to the total
expected federal and Michigan income tax liability (determined at the highest
individual federal and Michigan marginal income tax rates) of all Members on
account of their Membership Interest in the Company during the preceding fiscal
year. If the Net Operating Income for the preceding fiscal year of the Company
exceeds the required distribution amount under this Section 6.1, then, in the
sole discretion of the Management Committee and subject to the limitations of
Section 6.3 and the Act,the Management Committee may make additional
distributions of Net Operating Income to the Members in proportion to the number
of Shares owned by each Member to the number of Shares Issued.
6.2 Amounts Withheld. All amounts required to be withheld pursuant to the
Code or any provision of any state or local tax law with respect to any payment,
distribution, or allocation to the Members, shall be treated as amounts
distributed to the Members pursuant to this Article VI. The Management
Committee is authorized to withhold from distributions, or with respect to
allocations, to the Members and to pay over to any federal, state or local
government any amounts required to be so withheld pursuant to the Code or any
provision of any other federal, state, or local law.
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6.3 Limitation on Distributions. No Member shall be entitled to a
distribution pursuant to this Article VI, if, after giving effect to the
distribution, the Company would not be able to pay its debts as they become
due in the usual course of business, or if the Company's total assets would be
less than the sum of its total liabilities. A determination that a
distribution is not prohibited under this subsection or the Act may be based
either on financial statements prepared on the basis of accounting practices
and principles that are reasonable under the circumstances or on a fair
valuation or other method that is reasonable under the circumstances. Unless
otherwise agreed by the Members, a Member shall only be entitled to the
distributions provided in this Agreement.
ARTICLE VII
POWERS, DUTIES, LIABILITIES, REIMBURSEMENT
AND DECISIONS OF MANAGEMENT COMMITTEE
7.1 Management of Business.
(a) The Company shall be managed by a Management Committee. Except
as provided in subsection 7.1(b), the Management Committee shall be comprised
of six Managers, three (3) Managers appointed by EDC and three (3) Managers
appointed by MTI.
(b) In the event the number of Shares of Class A Membership Interest
held by EDC is greater than (i) the number of Shares of Class A Membership
Interest held by MTI and the MTI Affiliates, in the aggregate, plus (ii) the
number of Shares of Class A Membership Interest for which MTI and the MTI
Affiliates, in the aggregate, hold unexpired options to purchase pursuant to
Section 4.2(c) or (e) ("Option Shares"), EDC shall be entitled to appoint two
(2) additional Managers to the Management Committee. Thereafter, the
Management Committee shall be comprised of eight (8) Managers, five (5)
Managers appointed by EDC and three (3) Managers appointed by MTI. If the
number of Shares and Option Shares of Class A Membership Interest held by
MTI and the MTI Affiliates, in the aggregate, subsequently become equal to
the number of Shares of Class A Membership Interest held by EDC, EDC shall
cause two (2) of the Managers appointed by EDC to resign or be removed, and
thereafter the Management Committee shall be comprised of six (6) Managers,
three (3) appointed by EDC and three (3) appointed by MTI.
(c) The Managers shall serve for a term of three (3) years, unless a
Manager is sooner removed or resigns pursuant to either this Section 7.1 or
Section 7.9. The duties, compensation and benefits, if any, of the Managers
shall be determined by reference to the provisions of this Agreement, the
Act, and, if applicable, resolutions adopted by the Management Committee.
7.2 Authority of Management Committee.
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(a) Subject to the limitations imposed by the Act and this Agreement,
the Management Committee shall have full and exclusive authority to conduct,
manage and control all of the business affairs of the Company and to make
all decisions regarding the business of the Company. In furtherance of such
authority, the Management Committee shall have all of the rights and powers
provided in this Section 7.2, as amended from time to time, and, except as
otherwise provided by law or this Agreement, any action taken by the
Management Committee shall constitute the act of and serve to bind the
Company.
(b) The Management Committee is hereby granted the exclusive right,
power and authority to:
(1) Manage, operate, maintain and develop the business of the
Company;
(2) Approve any loan agreements or instruments evidencing debt
incurred by the Company; the selection of a bank in which Company funds
shall be deposited; the selection of legal counsel; the approval of
Company tax returns; and any other matters which the Management
Committee shall deem to be of fundamental importance to the Company;
(3) Execute any and all agreements, contracts, documents,
certifications, instruments, notes, mortgages, assignments and security
agreements necessary or convenient in connection with the operation of
the business of the Company;
(4) Borrow money and issue evidences of indebtedness in furtherance
of any or all of the purposes of the Company, and to secure the same by
mortgage, pledge or other lien on any Company Property;
(5) Protect and preserve the title and interest of the Company with
respect to the assets at any time owned or acquired by the Company;
(6) Collect all amounts due to the Company, and otherwise to
enforce all rights of the Company, including all of such rights inuring
to the benefit of the Company under any agreement for the management of
its assets, and, in that connection, to retain counsel and institute
such suits or proceedings, in the name and on behalf of the Company, or,
if the Management Committee shall so determine, in the name of the
Members; provided, however, that the Members reserve the right to retain
separate counsel to defend against any lawsuits which name the Members
as separate parties to such proceedings;
(7) Enter into contracts with and pay fees or cause others to pay
fees to any person or entity;
<PAGE>
(8) Enter into agreements for the performance of legal, accounting,
bookkeeping, tax, administrative reporting, receiving and paying of
funds and other management services necessary or appropriate for the
administration of the Company with any Person;
(9) Defend and hold harmless any Members against any claim in
connection with the Company business other than a claim by another
Member for breach of an obligation under this Agreement;
(10) Designate and appoint one or more employees of or agents for
the Company who shall have such authority as may be conferred upon
them by the Management Committee, and who may perform any of the duties
and exercise any of the powers and authority conferred upon the
Management Committee hereunder, including, without being limited to,
the designation of an agent for service of process on the Company and
one or more agents as authorized signatories on any bank accounts
maintained by the Company;
(11) Invest and reinvest Company funds to the extent not currently
required, in its sole discretion, for Company operating capital;
(12) To the extent that funds of the Company are available and the
Management Committee deems it appropriate, make distribution to the
Members in accordance with the provisions of this Agreement;
(13) Perform all normal business functions, and otherwise operate
and manage the business and affairs of the Company, in accordance with
this Agreement;
(14) Engage in any kind of activity and perform and carry out
contracts of any kind necessary to, or in connection with or convenient
or incidental to, the accomplishment of the purposes of the Company, so
long as said activities and contracts may be lawfully carried on or
performed by a limited liability company under the laws of the State of
Delaware;
(15) Offer Shares that are Shares Authorized but unissued for sale
for not less than fair market value to Persons that are identified by
the Management Committee as prospective Members or as Key Employees, to
enter into capital contribution agreements with such Persons in the
name of and on behalf of the Company, to admit such Persons as Members
upon receipt of the agreed upon capital contribution and to amend
Exhibit A or B as applicable, to reflect the admission of such Persons
as Members and the issuance of Shares to such Persons; and
(16) Request additional capital contributions consistent with Section
4.2.
<PAGE>
7.3 Limitations on Management Committee and Managers. Notwithstanding the
foregoing and any other provision contained in this Limited Liability Company
Agreement to the contrary, no act shall be taken, sum expended, decision made,
obligation incurred or power exercised by the Management Committee or any
Manager on behalf of the Company, unless approved by the Class A Members holding
at least seventy percent (70%) of the Shares of Class A Membership Interest
entitled to vote with respect to those decisions set forth below:
(a) Any sale, lease, assignment, transfer, or other conveyance of all or
substantially all of the assets of the Company or any merger,consolidation,
dissolution, divestiture or winding-up of the Company;
(b) Any amendment or restatement of the Certificate or this Limited
Liability Company Agreement;
(c) Any material change in the character of the business and affairs of
the Company;
(d) Any change in the number of Shares Authorized for a Class A
Membership Interest;
(e) The commission of any act which would make it impossible for the
Company to carry on its ordinary business and affairs;
(f) The commission of any act that would contravene any provision of the
Certificate or this Limited Liability Company Agreement or the Act; or
(g) The approval of any Contract Proposal.
7.4 Compensation; Expenses.
(a) Except as otherwise provided in this Section 7.4, no Manager shall
receive any salary, fee, or draw for services rendered to or on behalf of the
Company, nor shall any Manager be reimbursed for any expenses incurred by
such Manager on behalf of the Company.
(b) Each Manager may charge the Company, and shall be reimbursed,
for any reasonable direct expenses incurred in connection with the Company's
business and in compliance with any procedures and requirements of the
Company relating to such reimbursement.
7.5 Manager Duties.
(a) Except as provided in subsection 7.5(b) and Section 7.6, each
Manager shall devote such time to the Company business as may be necessary
<PAGE>
to adequately and properly manage and supervise the Company business and
affairs in an efficient and workmanlike manner and discharge his or her
duties as a Manager in good faith, with the care an ordinarily prudent
person would exercise in similar circumstances, and in a manner he or she
believes to be in the best interest of the Company. Notwithstanding the
foregoing, the failure of any Manager appointed by EDC to approve a Contract
Proposal pursuant to Section 7.3(g) shall not constitute a breach of any duty
imposed upon such Manager under this Agreement or the Act, and MTI and its
affiliates are forever barred from bringing, and hereby waive any right to
bring, any action or suit against such Manager for failure to approve a
Contract Proposal.
(b) Nothing in this Agreement shall be deemed to restrict in any way the
rights of a Manager, or of any Affiliate of a Manager, to conduct any other
business or activity whatsoever, and no Manager shall be accountable to the
Company or to any Member with respect to that business or activity even if
the business or activity competes with the Company's business. The
organization of the Company shall be without prejudice to their respective
rights (or the rights of their respective Affiliates) to maintain, expand,
or diversify such other interests and activities and to receive and enjoy
profits or compensation therefrom.
(c) (1) Each Manager shall deal in confidence with all matters
involving the Company until such time as there has been a general public
disclosure. Subject to subsection 7.5(c)(2), no Manager shall disclose or
use any Confidential Information, Inventions or Confidential Documents of
the Company (as such terms are defined below) except for the direct or
indirect benefit of the Company.
(2) In the event a Manager receives a discovery request (including,
without limitation, document requests, subpoenas, notices of deposition,
orders to produce documents, information or individuals) in a judicial action
or an arbitration (referred to hereinafter as "Discovery Requests"), each
Manager agrees that:
(A) The Manager will notify the Company of the Manager's
receipt of the Discovery Request within a reasonable time following
such receipt to allow the Company to seek an order preventing or
limiting the disclosure by the Manager of the Confidential
Information from a tribunal having jurisdiction over the Discovery
Request.
(B) The Manager will not take any action, including responding
to the Discovery Requests before the response time, that would
interfere with any efforts by the Company to pursue such legal
remedies preventing or limiting disclosure of the Confidential
Information.
(i) In the event of a Discovery Request other than a
deposition request, this means that the Manager will not
<PAGE>
respond until the date set forth in the Discovery Request,
thus giving the Company full opportunity to obtain an order
modifying the Manager's obligation to respond or to obtain
an agreement from the party making the Discovery Request that
the Manager is not obligated to respond at that time.
(ii) In the event of a deposition in which a question
is posed requiring the disclosure of Confidential Information,
this means that the Manager will not disclose the Confidential
Information as long as the Company immediately requests an
adjournment of the deposition in order to obtain direction
from a tribunal having jurisdiction over the Discovery Request
as to whether and under what circumstances the Manager can
disclose the Confidential Information. If the parties to the
action in which the deposition is taken do not permit the
Company to attend the deposition of the Manager, and a
question requiring the disclosure of Confidential Information
is asked, the Manager agrees that prior to disclosing the
Confidential Information it will request an adjournment of the
deposition in order to inform the Company of the question and
to give the Company an opportunity to seek direction from
such a tribunal.
(C) To the extent the Company fails to request or is unable
to obtain an order from a tribunal having jurisdiction over the
Discovery Request, nothing shall prevent the Manager from
responding to a Discovery Request in the manner it considers
appropriate.
(3) Each Manager acknowledges the disclosure of Confidential
Information by the Managers or a breach of the provisions contained in this
subsection 7.5(c) will give rise to irreparable injury to the Company or to
the Company's clients and customers, which injury could not be adequately
compensated for in damages. Accordingly, the Company or such other party
may seek and obtain injunctive relief against the breach or threatened breach
of the Manager's agreements and undertakings contained in this subsection
7.5(c), in addition to any other legal remedies which may be available to the
Company or such other party.
(4) For purposes of this subsection 7.5(c),the terms defined below
shall have the following meanings:
(A) "Confidential Documents" shall mean any papers,
blueprints, records, notebooks, computer disks, computer tapes, or
other similar repositories containing Confidential Information,
<PAGE>
including copies thereof which have been prepared for the benefit
of the Company or its employees or independent contractors, whether
prepared by, its employees, independent contractors, or outside
parties.
(B) "Confidential Information" shall mean information or
knowledge not readily ascertainable by the general public or the
industry in which the Company is or may become engaged regarding
the Company's products, systems, processes, Inventions, designs,
research, development, manufacture, purchasing, accounting,
engineering, marketing, client or customer lists and information,
merchandising and selling, and Confidential Documents.
(C) "Inventions" shall mean discoveries, concepts, and ideas,
whether patentable or not, including but not limited to the design,
specification and technology of systems, processes, methods,
formulas, and techniques, as well as improvements or modifications
of processes, systems, methods, formulas and techniques which are
not readily ascertainable by the general public or the industry in
which the Company is or may become engaged.
(d) When a Manager, directly or indirectly, has a financial or personal
interest in a contract or transaction to which the Company is to be a party,
the Manager is considered to be "interested" in the matter. An interested
Manager shall disclose that interest and describe to the Management Committee
all material facts concerning the matter with complete accuracy and
inclusiveness. Provided such full and accurate disclosure is made, the
interested Manager shall be allowed to discuss and vote on the matter and any
such contract or transaction authorized by the Management Committee shall not
be later subject to revocation on the basis that the terms of such contract
or transactions were not fair and commercially reasonable.
7.6 Additional Duties and Obligations of Management Committee
(a) The Management Committee shall take all actions which may be
necessary or appropriate for the continuation of the Company's valid
existence as a limited liability company under the laws of the State of
Delaware.
(b) The Management Committee shall use its best efforts to meet all
current and future federal income tax requirements to assure that the
Company will not fail to be classified for federal income tax purposes as a
partnership rather than as an association taxable as a corporation.
(c) The Management Committee shall direct the affairs of the Company
in the best interest of the Company, including the safekeeping and use of
all Company funds and assets and the use thereof for the benefit of the
Company.
<PAGE>
(d) The Management Committee shall, from time to time, prepare and file
any amendment to the Company's Certificate and any other similar documents
which are required by law to be filed and recorded for any reason in such
office or offices as are required under the laws of the State of Delaware.
7.7 Management Committee Meetings and Decisions.
(a) A meeting of the Management Committee shall be held every month,
on the 15th day of each month or on such other day of the month as
determined by the Management Committee.
(b) All decisions made by the Management Committee shall require a vote
of not less than fifty-one percent (51%) of all of the Managers. All actions
shall be taken only at a meeting called at least five (5) days in advance of
the meeting attended by not less than fifty-one percent (51%) of all of the
Managers.
(c) Actions of the Management Committee may also be taken by written
consent of all of the Managers.
(d) A Manager may participate in a meeting with the same effect as being
present in person by a conference telephone or by other similar
communications equipment through which all persons participating in the
meeting may communicate with the other participants.
7.8 Removal or Resignation of Manager.
(a) The Class A Members, by a vote of at least seventy percent (70%),
may remove a Manager for cause. For purposes of this Agreement, "cause"
shall mean the Manager's gross negligence, willful misconduct, or bad faith
in the performance of the material duties and obligations of the Manager
under this Agreement, or the knowing violation of statutory obligations or
fraud by the Manager.
(b) A Manager may be removed only at a meeting called by the Class A
Members in accordance with the procedures required under Article VIII.
Notice of the meeting shall be given to all Class A Members and the Manager.
Further, the notice shall include notice of the specific allegations against
the Manager which form the basis for the proposed removal. At the meeting
called for the removal of the Manager, the Manager shall be given a full
opportunity to be heard and to address the specific allegations against the
Manager.
(c) A Manager may be removed at any time, with or without cause, by
the Class A Member that appointed the Manager under Section 7.1. The Class
A Member taking such action shall provide prompt written notice of such
action to all other Class A Members.
<PAGE>
(d) Except as provided under Section 7.9(a) or 7.9(c), a Manager may not
be removed.
(e) A Manager may resign by providing written notice to all Class A
Members not less than forty-five (45) days prior to the effective date of
such resignation. The resignation shall take effect forty-five (45) days
after the date the Manager gives notice to all Class A Members, or at such
later date stated in the notice of resignation.
7.9 Replacement Manager. A replacement Manager for any Manager that has
been removed or has resigned shall be appointed by the Class A Member that had
appointed the removed or resigning Manager within ten (10) business days of the
date of removal or the effective date of resignation. The Class A Member
appointing the replacement Manager shall provide prompt written notice to all
other Class A Members of the name and address of the replacement Manager.
Once appointed, the replacement Manager will serve the unexpired term of and
will have all of the powers and duties of the Manager that resigned or was
removed.
7.10 Officers of the Company.
(a) Power to Elect Officers. The Management Committee shall select a
president, treasurer, and a secretary, and may select a chairman, one or more
vice presidents, one or more assistant treasurers, and one or more assistant
secretaries, and any other officers that the Management Committee deems in
the best interest of the Company which may be appointed and their duties
prescribed by resolution of the Management Committee.
(b) Removal of Officers and Agents. Any officer or agent may be
removed by the Management Committee whenever, in the judgment of the
Management Committee, the business interests of the Company will be served
thereby.
(c) Delegation of Powers. For any reason deemed sufficient by the
Management Committee, whether occasioned by absence or otherwise, the
Management Committee may delegate all or any of the powers and duties of any
officer to any other officer or Manager.
(d) Powers and Duties of Officers.
(1) Chairman. The Chairman shall be selected by and from the
membership of the Management Committee. He or she shall conduct all
meetings of the Management Committee and shall perform all duties
incident thereto.
<PAGE>
(2) President. The President shall have general and active
management of the business of the Company and shall see that all orders
and resolutions of the Management Committee are carried into effect. He
or she shall be ex-officio, a member of all standing committees, and
shall have the general powers and duties of supervision and management
usually vested in the office of president of a corporation. During the
prolonged absence or disability of the President, or the vacancy of his
or her office, the below listed individuals shall perform the duties and
exercise the power of President, until a successor is appointed, as
follows: Vice President, and if he or she be not available, then
whosoever shall be appointed by the Management Committee.
(3) Vice President. The duties which the Vice Presidents are to
perform shall be designated by the Management Committee.
(4) Secretary. The Secretary shall attend all meetings of the
Members and shall preserve in the books of the Company true minutes of
the proceedings of all such meetings. He or shall safely keep in his or
her custody the seal of the Corporation, and shall have authority to
affix the same to all instruments where its use is required. He or she
shall give all notices required by statute, by-law or resolution. He or
she shall perform such other duties as may be delegated to him or her
by the Management Committee.
(5) Treasurer. The Treasurer shall have custody of all Company
funds and securities, and shall keep in books belonging to the Company
full and accurate accounts of all receipts and disbursements; he or she
shall deposit all monies, securities and other valuable effects in the
name of the Company in such depositories as may be designated for that
purpose by the Management Committee. He or she shall disburse the funds
of the Company as may be ordered by the Management Committee, taking
proper vouchers for such disbursements and shall render to the President
and directors at regular meetings of the Management Committee, and
whenever requested by them, an account of all his or her transactions as
Treasurer, and of the financial condition of the Management Committee.
If required by the Management Committee, he or she shall deliver to the
President of the Company, an shall keep in force, a bond in form,
amount, and with a surety or sureties satisfactory to the Management
Committee, conditioned for faithful performance of the duties of his or
her office, and for restoration to the Company in case of his or her
death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and property of whatever kind in his or her
possession or under his or her control belonging to the Company.
<PAGE>
(6) Assistant Secretary and Assistant Treasurer. The Assistant
Secretary, in the absence or disability of the Secretary, shall perform
the duties and exercise the powers of the Secretary. The Assistant
Treasurer, in the absence or disability of the Treasurer, shall perform
the duties and exercise the powers of the Treasurer.
(e) Each officer of the Company shall discharge his or her duties as an
officer in good faith, with the care an ordinarily prudent person in a like
position would exercise in similar circumstances and in a manner he or she
reasonably believes to be in the best interests of the Company. In
discharging his or her duties, an officer is entitled to rely in good faith
upon the records of the Company and such information, opinions, reports or
statements provided to any such officer by any other person as to matters
the officer reasonably believes are within such other person's professional
or expert competence and who has been selected with reasonable care by or
on behalf of the Company.
7.11 No Authority of Members. No Member is an agent of the Company or has
the authority to make any contracts, enter into any transactions, or make any
commitments on behalf of the Company, except that, prior to the first meeting
of the Management Committee, either Member may execute any agreement, document
or instrument required to be executed by the Company under this Agreement, the
EDC Contribution Agreement or the MTI Contribution Agreement.
7.12 Actions Against Members for Breach of Contract. In the event that
any Manager or Officer of the Company brings to the attention of the Management
Committee any allegation of a breach of a contract between a Member and the
Company, the Management Committee shall evaluate the validity of the allegations
and vote on whether or not to take action against the subject Member. No
Manager appointed by the subject Member shall be entitled to vote on any
resolution to pursue any claim or take any action against the subject Member.
The vote taken at the meeting shall be preliminary and subject to the obligation
of the Management Committee to provide the Company's independent public
accountants with a written report of their evaluation and assessment of the
allegation of a breach by the subject Member of a contract with the Company.
Such report shall be delivered by the Management Committee to such accountants
within five (5) business days of such meeting. The Company's independent public
accountants shall provide the Management Committee with a written report
expressing their views and opinions with respect to the Management Committee's
evaluation and assessment. Such report shall be provided to the Management
Committee within ten (10) business days following such accountants' receipt of
the Management Committee's written report and for the purpose of reviewing the
Company's independent public accountant's written report. The Management
Committee shall then convene a meeting for the specific purpose of determining
what action to take with regard to the alleged breach of contract between the
subject Member and the Company. At such meeting, no Manager appointed by the
subject Member shall be entitled to vote on any resolution regarding whether or
not to pursue a claim or other action against the subject Member.
<PAGE>
ARTICLE VIII
ACTION OF MEMBERS AND MEMBER MEETINGS
8.1 Action of Members. Except to the extent that the Act, the Certificate,
or this Agreement require otherwise, all actions of the Class A Members shall
be taken either (a) by a majority vote of the votes entitled to be cast by all
of the Class A Members at a properly called meeting of the Class A Members,
when a quorum is present; or (b) by written action without a meeting, complying
with Section 8.8.
8.2 Tri-Annual and Special Meetings.
(a) A tri-annual meeting of the Class A Members shall be held every
third year, on the third Tuesday of January of such year, for the appointment
of Managers to the Management Committee.
(b) A special meeting of the Class A Members may be called for any
purpose or purposes at any time by the Management Committee or by one or more
Class A Members having at least fifty-one percent (51%) of all of the votes
entitled to be cast by Class A Members.
(c) For any special meeting not called by the Management Committee, the
Class A Member or Class A Members who are calling the special meeting must
give written notice to the Management Committee specifying the purpose of the
meeting. Within thirty (30) days after the Management Committee receives a
demand under this paragraph, the Management Committee shall call a special
meeting of the Class A Members. If the Management Committee fails to call
the special meeting, the Class A Member or Class A Members calling the
meeting may, at the expense of the Company, call the meeting by giving the
notice described in Section 8.3.
8.3 Notice of Meetings. Written notice of each meeting of the Class A
Members, stating the date, time, place, and the purposes or purposes, must be
given to every Class A Member at least ten (10) days and not more than sixty
(60) days prior to the meeting. The business transacted at any meeting of
Class A Members is limited to the purposes stated in the notice of the meeting.
8.4 Location and Conduct of the Meetings; Adjournments.
(a) The location of each of the meetings of the Class A Members will
alternate each meeting between 2000 Second Avenue, 644 WCB, Detroit, Michigan
and 968 Albany - Shaker Road, Latham, New York, with the first meeting being
held at the Detroit, Michigan location, or at some other suitable location
within the same city, as designated by the Management Committee or the Class
A Member or Class A Members calling the meeting, as applicable.
<PAGE>
(b) A Manager designated by the Management Committee shall preside
at each meeting of the Class A Members.
(c) At each tri-annual and special meeting of the Members, the
Management Committee shall designate a Manager to act as secretary at the
meeting, who shall record the discussions had and actions taken at such
meeting and prepare minutes summarizing such discussions and actions. A
copy of such minutes, certified by the secretary, shall be maintained at
the Company's principal place of business with the records of the Company,
and a copy shall be sent to each of the Members within thirty (30) days
after the date of such meeting.
(d) The Management Committee shall have the power and authority to
establish the rules of order to be followed at the tri-annual and special
meetings of the Members.
(e) Any meeting of the Class A Members may be adjourned from time to
time to another date and time and, subject to Section 8.4(a), to another
place. If at the time of adjournment, the person presiding over the meeting
announces the date, time, and place at which the meeting will be reconvened,
no further notice of the reconvened meeting shall be required.
8.5 Waiver of Notice.
(a) A Class A Member may waive notice of the date, time, place, and
purpose or purposes of a meeting of Class A Members. A waiver may be made
before, at, or after the meeting, in writing, orally, or by attendance.
(b) Attendance by a Class A Member at a meeting is a waiver of notice
of that meeting, unless the Class A Member objects at the beginning of the
meeting to the meeting or the transaction of business at the meeting because
the meeting is not properly called or convened, or objects before a vote on
an item of business because the item may not properly be considered at that
meeting and does not participate in the consideration of the item at that
meeting.
8.6 Proxies.
(a) A Class A Member may cast or authorize the casting of a vote by
filing a written appointment of a revocable proxy given to any other Class
A Member with the Management Committee at or before the meeting at which the
appointment is to be effective. The Class A Member may sign or authorize the
written appointment by telegram, telecopy, cablegram, or other means of
electronic transmission stating, or submitted with information sufficient to
determine, that the Class A Member authorized the transmission. Any copy,
facsimile, telecommunication, or other reproduction of the original of either
<PAGE>
the writing or the transmission may be used in lieu of the original, if it is
a complete and legible reproduction of the entire original.
(b) A Class A Member may not grant or appoint an irrevocable proxy.
8.7 Quorum. For any meeting of the Class A Members, a quorum consists of
Class A Members holding a majority of all of the votes entitled to be cast at
a meeting of the Class A Members. If a quorum is present when a properly
called meeting is convened, the Class A Members present may continue to
transact business until adjournment, even though the departure of Class A
Members originally present leaves less than the number of Class A Members
otherwise required for a quorum.
8.8 Action Without a Meeting. Any action required or permitted to be taken
at a meeting of the Class A Members may be taken without a meeting by written
consent signed by all of the Class A Members who are entitled to vote at a
meeting of the Class A Members. The action taken by unanimous written consent
shall be effective when signed by all Class A Members entitled to vote, unless
a different effective date is provided in the written consent.
8.9 Attendance by Conference Telephone. A Class A Member may participate
in a meeting with the same effect as being present in person by a conference
telephone or by other similar communications equipment through which all persons
participating in the meeting may communicate with the other participants.
ARTICLE IX
MEMBERSHIP OBLIGATIONS AND CONDUCT
9.1 Compliance with Policies. It shall be the duty of each Member to act
at all times consistently with and in compliance with all and each of the
provisions of this Agreement and with all policies, rules, and decisions of the
Company adopted in accordance with any of the provisions of this Agreement.
9.2 Authority to Bind. Only the Manager and agents of the Company authorized
by the Management Committee shall have the authority to bind the Company. No
Member who is not authorized as an agent of the Company by the Management
Committee shall take any action to bind the Company, and each Member shall
indemnify the Company for any costs or damages incurred by the Company as a
result of any such unauthorized action by such Member. Provided, however, that,
prior to the first meeting of the Management Committee, either Member may
execute any agreement, document or instrument required to be executed by the
Company under this Agreement, the EDC Contribution Agreement or the MTI
Contribution Agreement.
9.3 Confidentiality.
<PAGE>
(a) (1) Each Member shall deal in confidence with all matters involving
the Company until such time as there has been a general public disclosure.
Subject to subsection 9.3(a)(2), no Member shall disclose or use any
Confidential Information, Inventions or Confidential Documents of the Company
(as such terms are defined below) except for the direct or indirect benefit
of the Company.
(2) In the event a Member receives a discovery request (including,
without limitation, document requests, subpoenas, notices of deposition,
orders to produce documents, information or individuals) in a judicial action
or an arbitration (referred to hereinafter as "Discovery Requests"), each
Member agrees that:
(A) The Member will notify the Company of the Member's
receipt of the Discovery Request within a reasonable time following
such receipt to allow the Company to seek an order preventing or
limiting the disclosure by the Member of the Confidential
Information from a tribunal having jurisdiction over the Discovery
Request.
(B) The Member will not take any action, including
responding to the Discovery Requests before the response time, that
would interfere with any efforts by the Company to pursue such legal
remedies preventing or limiting disclosure of the Confidential
Information.
(i) In the event of a Discovery Request other than a
deposition request, this means that the Member will not
respond until the date set forth in the Discovery Request, thus
giving the Company full opportunity to obtain an order
modifying the Member's obligation to respond or to obtain an
agreement from the party making the Discovery Request that
the Member is not obligated to respond at that time.
(ii) In the event of a deposition in which a question
is posed requiring the disclosure of Confidential Information,
this means that the Member will not disclose the Confidential
Information as long as the Company immediately requests an
adjournment of the deposition in order to obtain direction from
a tribunal having jurisdiction over the Discovery Request as to
whether and under what circumstances the Member can
disclose the Confidential Information. If the parties to the
action in which the deposition is taken do not permit the
Company to attend the deposition of the Member, and a question
requiring the disclosure of Confidential Information is asked,
the Member agrees that prior to disclosing the Confidential
Information it will request an adjournment of the deposition
in order to inform the Company of the question and to give the
<PAGE>
Company an opportunity to seek direction from such a tribunal.
9.4 Business Opportunities
(a) Except as otherwise expressly provided in Section 9.4(b), nothing
in this Agreement shall be deemed to restrict in any way the rights of any
Member, or of any Affiliate of any Member, to conduct any other business or
activity whatsoever, and no Member shall be accountable to the Company or to
any other Member with respect to that business or activity even if the
business or activity competes with the Company's business. The organization
of the Company shall be without prejudice to their respective rights (or to
the rights of their respective Affiliates) to maintain, expand, or diversify
such other interests and activities and to receive and enjoy profits or
compensation therefrom. Each Member waives any rights the Member might
otherwise have to share or participate in such other interests or activities
of any other Member or the Member's Affiliates.
(b) Each Member understands and acknowledges that the conduct of the
Company's business may involve business dealings and undertakings with
Members and their Affiliates. In any of those cases, those dealings and
undertakings shall be at arm's length and on commercially reasonable terms
as determined by the Management Committee.
ARTICLE X
REQUIRED RECORDS; ACCOUNTING
10.1 Contents and Location of Required Records. The Company will maintain at
its principal place of business the following records:
(a) A current list of the full name and last known address of each
Member and Manager;
(b) A copy of the Certificate, together with any amendments to the
Certificate;
(c) A copy of this Agreement as executed by the Members, together with
all amendments to this Agreement;
(d) Copies of the Company's federal, state, and local income tax returns
and reports, if any, for the three (3) most recent calendar years;
(e) Copies of any financial statements of the Company for the three (3)
most recent calendar years;
<PAGE>
(f) Records (including minutes and written consents) evidencing
authorization of Company action;
(g) Copies of records that would enable a Member to determine the
Member's relative Membership Interest, Voting Rights, and Shares, and, in
the case of Class B Members, any vesting schedule to which their Class B
Membership Interest is subject; and
(h) Such other records as the Company is required to maintain pursuant
to the Act.
10.2 Access to Required Records.
(a) After giving reasonable advance notice to the Company, any Member
may inspect and review the Required Records and may, at the Member's sole
cost and expense, have the Company make copies of any portion or all of the
records.
(b) Unless the Company agrees otherwise, all Member access to the
Required Records must take place during the Company's regular business hours.
The Company may impose additional reasonable conditions and restrictions on
Members' access to the Required Records, including specifying the amount of
advance notice a Member must give and the charges imposed for copying.
10.3 Tax Characterization and Returns.
(a) The Members acknowledge the intention that the Company be treated
as a "partnership" for federal and state tax purposes. All provisions of this
Agreement and the Certificate are to be construed so as to preserve that
tax status.
(b) Within ninety (90) days after the end of each Taxable Year, the
Management Committee will cause to be delivered to each person who was a
Member at any time during such Taxable Year a Form K-1 and such other
information, if any, with respect to the Company as may be necessary for
the preparation of each Member's federal, state or local income tax (or
information) returns.
10.4 Accounting Decisions.
(a) The Management Committee will make all decisions as to accounting
matters; and
(b) The Management Committee may cause the Company to make
whatever elections the Company may make under the Code or the tax laws of
the State of Michigan or any other jurisdiction having taxing authority over
the Company.
<PAGE>
10.5 "Tax Matters Member". EDC is designated to act on behalf of the Company
as the initial "tax matters partner" within the meaning of Section 6231(a)(7)
of the Code. Any subsequent tax matters partner will be designated by EDC.
ARTICLE XI
ADMISSION OF ADDITIONAL MEMBERS
11.1 Admission of Additional Class A Members. Subject to any preemptive
rights of the Class A Members pursuant to Section 4.3 (b), Additional Persons
may be admitted as Class A Members pursuant to a written offer made to a Person
by the Management Committee in connection with an offering of Shares in
accordance with Section 4.3. The offer will establish all of the conditions
for admission of a Person as an additional Class A Member, including the amount
required as a Capital Contribution for such additional Class A Member.
11.2 Admission of Class B Members. The Management Committee may, from
time to time, offer in writing Shares of Class B Membership Interests to Key
Employees under such terms and conditions as the Management Committee shall
determine in its sole discretion. The Management Committee may establish vesting
schedules for individual Key Employees that defer such Key Employee's rights
to full ownership of their respective Shares of Class B Membership Interests.
Exhibit B shall be amended from time to time to reflect the admission of Key
Employees as Class B Members, to reflect the granting of unvested and vested
rights to Key Employees to become or as Class B Members, the vested number of
Shares of Class B Membership of each Class B Member, and the unvested interest
granted to each Key Employee, whether or not admitted as a Class B Member.
11.3 Admission of Substitute Class B Members. Upon the Disassociation of a
Class B Member, the legal successor in interested of the Disassociated Class B
Member shall be admitted as a Substitute Class B Member (as defined below).
The Substitute Class B Member shall have all the rights and powers and shall be
subject to all the restrictions and liabilities of the Disassociated Class B
Member. The admission of a Substitute Class B Member will not release the
Disassociated Class B Member from any liability of the Company that may have
existed prior to the admission of the Substitute Class B Member. For purposes
of this Article XI, "Substitute Class B Member" means the transferee of a Class
B Membership Interest who has been admitted to all rights of Class B Membership
pursuant to this Agreement.
11.4 Conditions to Admission. Notwithstanding the other provisions of this
Agreement, a proposed additional Member or Substitute Class B Member will not be
admitted as a Member until the proposed additional Member or Substitute Class
B Member agrees in writing to be bound by the terms and provisions of the
Certificate and this Agreement.
<PAGE>
ARTICLE XII
TRANSFERS; WITHDRAWAL; DISASSOCIATION
12.1 Restrictions on Transfers.
(a) Except as provided in subsection 12.1(b) and Section 12.6, no
Member shall Transfer all or any portion of his/her/its Membership Interest
or any rights therein without the written consent of all Class A Members
during the first three (3) years after the date of this Agreement and without
the written consent of the Class A Members holding a majority of the
outstanding Shares of Class A Membership Interest which consents may be in
each case withheld by any Class A Member for any or no reason. Any Transfer
or attempted Transfer by any Member in violation of the preceding sentences
shall be null and void ab initio. Each Member acknowledges the reasonableness
of the restrictions on Transfer imposed by this Agreement in view of the
Company's purposes and the relationship of the Members. Accordingly, these
restrictions on Transfer shall be specifically enforceable. Each Member
further agrees to hold the Company wholly and completely harmless from any
cost, liability, or damage (including, without limitation, liabilities for
income taxes and costs of enforcing this indemnity) incurred by the Company
as a result of a Transfer or an attempted Transfer in violation of this
Agreement.
(b) Subject to compliance with all of the provisions of subsection
12.1(d) a Disassociated Class B Member's financial rights under his or her
Class B Membership Interest will transfer to his or her legal successor in
interest as provided under Section 12.5 and such legal successor in interest
shall be admitted as a Substitute Class B Member upon compliance and in
accordance with Sections 11.3 and 11.4.
(c) Any transferee of all or part of a Class B Membership Interest
derives its rights exclusively through the Class B Member/transferor. Any
such transferee takes the transferred Class B Membership Interest subject
to any claims or offsets the Company has or may in the future have against
the Class B Member/transferor.
(d) Notwithstanding anything else contained in this Article XI or
Article XII to the contrary, Class B Membership Interests may not be
transferred, in whole or in part:
(i) If the transfer, alone or taken together with other
transactions, would result in a termination of the Company within the
meaning of Code Section 708;
(ii) If the transferee is a Disqualified Person;
<PAGE>
(iii) Without an opinion of counsel satisfactory to the Company that
the transfer is subject to an effective registration under, or exempt
from the registration requirements of, applicable state and federal
securities laws; and
(iv) Unless and until the Company receives from the assignee the
information and agreements that the Company may reasonably require,
e.g., any taxpayer identification number, the transferee's initial tax
basis in the transferred rights or interest, instruments of transfer,
assignment, and assumption.
12.2 Voluntary Withdrawal. No Class A Member shall have the right to
voluntarily withdraw from the Company. A Voluntary Withdrawal is a violation
of this Agreement, and upon a Voluntary Withdrawal a Class A Member shall cease
to be a Class A Member with no further right to participate in the Company's
business, Profits and Losses, or distributions, and will not be entitled to
receive any distribution pursuant to Section 18-604 of the Act. If the Company
is continued as provided in Section 13.1(c), the Withdrawn Member shall have
the right to receive the distribution provided for under Section 12.4, but
shall not be entitled to receive in liquidation of the Withdrawn Member's
Membership Interest the fair market value of the Withdrawn Member's Membership
Interest, or any other amount on withdrawal pursuant to Section 18-604 of the
Act.
12.3 Involuntary Withdrawal. Immediately upon the occurrence of an
Involuntary Withdrawal, the successor of the Withdrawn Member (if any) shall
become an assignee of the Withdrawn Member that holds all of its Membership
Interest subject to all of the restrictions and limitations that would be
applicable to that Membership Interest if it were still held by the Withdrawn
Member, but shall not become a Member and/or shall cease to be a Member with
no further right to participate in the Company's business, Profits and Losses,
or distributions, and will not be entitled to receive any distribution pursuant
to Section 18-604 of the Act. If the Company is continued as provided in
Section 13.1(c), the Withdrawn Member or the assignee shall have the right to
receive the distribution provided for under Section 12.4, but shall not be
entitled to receive in liquidation of the Withdrawn Member's Membership
Interest the fair market value of the Withdrawn Member's Membership Interest
as of the date of the Involuntary Withdrawal or the date the assignee's
interest is terminated, or any other amount on withdrawal pursuant to Section
18-604 of the Act.
12.4 Distribution on Withdrawal or Attempted Transfer. Upon any attempted
Transfer by a Member of all or part of a Membership Interest or Voluntary
Withdrawal of a Member, the Company may recover by offset or otherwise from
such Member damages for such Member's breach of this Agreement.
Subject to the Act, Section 6.3, and the Company's right of offset under the
preceding paragraph, upon a Member's attempted Transfer of all or part of his/
her/its Membership Interest, a Member's Voluntary Withdrawal, or a Member's
Involuntary Withdrawal, the Company shall, in complete liquidation of such
Member's Membership Interest, make as a liquidating distribution for such
<PAGE>
Membership Interest a Company note in an amount equal to fifty percent (50%) of
the "Net Book Value" (as defined in Section 12.7) of such Member's Membership
Interest calling for payment of the principal amount of the note in ten (10)
equal annual installments, without interest, with the first annual installment
being due on the later of one (1) year after the date of such note or five
years after the date of this Agreement.
12.5 Disassociation. Upon the Disassociation of a Class B Member, the Company
will continue without dissolution, and the Disassociated Class B Member shall
be deemed to have transferred all of the financial rights associated with his/
her/its financial rights to such Class B Member's legal successor in interest
as set forth in Section 10.2(b).
12.6 Redemption of Class B Membership Interest. A Class B Member may at any
time offer his/her vested Shares of Class B Membership Interest for sale to the
Company and the Company shall be obligated to purchase such Shares upon the
following terms:
(a) The price ("Purchase Price") to be paid for such interest shall be
an amount equal to the "Net Book Value" (as defined in Section 12.7) of such
Class B Member's Membership Interest;
(b) The closing shall occur at the Company's registered office on the
thirtieth (30th) day following the date of the offer to sell; and
(c) At the closing, the selling Class B Member shall assign its Shares
of Class B Membership Interest to the Company and the Company shall deliver
to the selling Class B Member a Company note in an amount equal to the
Purchase Price calling for payment of the principal amount of the note in
five (5) equal annual installments, together with quarterly payments of
interest accruing on the unpaid principal amount of the note at the
Applicable Federal Rate and permitting the Company to prepay such note at
any time without penalty or premium.
12.7 "Net Book Value". For purposes of this Section 12.7 the "Net Book Value"
of a Member's Membership Interest shall be determined as of the last day of the
calendar month immediately preceding the occurrence of the Member's attempted
Transfer, Voluntary or Involuntary Withdrawal, or Disassociation and shall
equal the amount that would be distributed to such Member in liquidation of
the Company pursuant to Article XIII, if (a) the Gross Asset Values of the
Company Property were adjusted as set forth in Section 1.29(b) hereof, (b) all
of the Company's assets were sold for their Gross Asset Values, as so adjusted,
(c) the Company paid its accrued, but unpaid, liabilities and established
reserves pursuant to Article XIII for the payment of reasonably anticipated
contingent or unknown liabilities, and (d) the Company distributed the
remaining proceeds to the Members in liquidation, as of such day.
The Net Book Value of a Member's Membership Interest shall be determined,
without audit or certification, from the books and records of the Company by the
<PAGE>
accounting firm regularly employed by the Company, and the amount of such Net
Book Value shall be disclosed to the Company and each of the Members by written
notice. The Net Book Value determination of such accountants shall be final
and binding in the absence of a showing of gross negligence or willful
misconduct.
ARTICLE XIII
DISSOLUTION, WINDING UP, LIQUIDATING DISTRIBUTIONS
AND TERMINATION
13.1 Events Causing Dissolution. The Company shall dissolve and its business
be wound up upon the occurrence of the first of any of the following events:
(a) By the unanimous written consent of all the Class A Members; or
(b) Disposition of all of or substantially all of the assets of the
Company; or
(c) Upon the occurrence of a Voluntary or Involuntary Withdrawal of a
Class A Member unless within ninety (90) days after the date of such
occurrence, the remaining Class A Members by a majority vote of the Class A
Shares held by the remaining Class A Members consent in writing to continue
the business of the Company.
13.2 Certificate of Dissolution. As soon as practicable following the
occurrence of any of the events specified in Section 13.1 that cause the
dissolution of the Company, the Company shall execute and file a Certificate
of Dissolution, as prescribed by the Act.
13.3 Dissolution Procedure. The Company shall be terminated after the
dissolution described in Section 13.1, in which event the Management Committee
shall promptly wind up the affairs of the Company, liquidate and discharge all
debts and liabilities of the Company and distribute all assets in accordance
with this Agreement and the Act.
13.4 Tax Obligations. Before the assets of the Company are distributed
pursuant to Section 13.5 below, the Company shall file tax returns and pay
tax obligations as required by applicable state tax laws.
13.5 Distributions at Liquidation. Subject to Section 13.10 and subject to
the right of the Management Committee to establish cash reserves as may be
deemed reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Company, the proceeds of the liquidation and any other funds
of the Company shall be distributed as follows:
<PAGE>
(a) First, to the payment and discharge of all Company Liabilities to
creditors other than the Managers or Members;
(b) Second, to the payment and discharge of all Company Liabilities to
the Managers and Members;
(c) Third, to the Members in accordance with their Capital Accounts,
after giving effect to all contributions, distributions, and allocations for
all periods; and
(d) The balance, if any, to the Members in proportion to the number of
Shares held by each Member to the number of Shares Issued.
If any Member has a deficit balance in his/her/its Capital Account
(after giving effect to all contributions, distributions, and allocations
for all Taxable Years, including the Taxable Year during which such
liquidation occurs), such Member shall have no obligation to make any
contribution to the capital of the Company with respect to such deficit,
and such deficit shall not be considered a debt owed to the Company or
to any other Person for any purpose whatsoever.
13.6 Final Report. Within a reasonable time following the completion of the
liquidation of the Company, the Management Committee shall supply to each Member
a statement that states the assets and liabilities of the Company as of the date
of complete liquidation and each Member's portion of payments and distributions
pursuant to Section 13.5.
13.7 Rights of Members. Each Member shall look solely to the Company Property
for all distributions with respect to the Company, to its Capital Contribution,
and to its share of Profits and Losses, and no Member shall have recourse (upon
dissolution or otherwise) against any other Member. No Member shall be entitled
to receive Company Property other than cash upon the dissolution and termination
of the Company.
13.8 Termination. Upon the completion of the liquidation of the Company
and the distribution of all Company Property, the Company shall terminate. The
Management Committee shall have the authority to execute and record a
Certificate of Dissolution as well as any and all other documents required to
effect the dissolution and termination of the Company.
13.9 Deemed Distribution and Recontribution. Notwithstanding any other
provisions of this Article XIII, in the event the Company is liquidated within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), but the Class A Members
holding a majority of the Class A Shares entitled to vote have elected to
continue the business of the Company under Section 13.1, the Company Property
shall not be liquidated, the Company's Liabilities shall not be paid or
discharged, and the Company's affairs shall not be wound up.
<PAGE>
13.10 Hire Company Employees. At any time following the dissolution of the
Company, any Member, any Affiliate of any Member, any Manager or any Affiliate
of any Manager shall have the right to solicit for hire, and hire, any Person
who as an employee of the Company at any time.
ARTICLE XIV
INDEMNIFICATION; INSURANCE AND LIABILITY OF MEMBERS
14.1 Indemnity. The Company shall defend, indemnify and hold harmless each
Manager from and against any cost, expense, damage or injury suffered or
sustained by it by reason of any acts, omissions or alleged acts or omissions
arising out of any of its activities on behalf of the Company or in furtherance
of the interests of the Company, including without being limited to any
judgment, award, settlement, reasonable attorneys' fees and other costs or
expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim, if the acts, omissions or alleged acts or
omission upon which such actual or threatened actions, proceedings or claims
are based did not involve gross negligence, willful misconduct, bad faith, the
knowing violation of statutory obligations or fraud by such Manager. Any such
indemnifications shall only be made from Company Property.
14.2 Disclosure. The amount of any indemnification or advance paid pursuant
to this Article XIV and to whom and on whose behalf it was paid will be
included in the Required Records.
14.3 Discretionary Indemnification. Nothing in this Article XIV limits the
ability of the Management Committee to cause the Company to indemnify any Person
that is not a Manager pursuant to, and to the extent described in, an
agreement authorized by the Management Committee.
14.4 Insurance. The Company may purchase and maintain insurance on behalf
of a Person in that Person's official capacity against any liability asserted
against and incurred by the Person in or arising from that capacity, whether
or not the Company would have been required to indemnify the Person against
the liability under the provisions of this Article XIV.
14.5 Other Insurance. The Management Committee shall use its best efforts
to obtain and maintain in force such insurance as it deems necessary to protect
the Company Property and to protect the Company against liability for claims
of third persons. The Company shall be a named insured on the policies
obtained. Each Member shall be provided with a certificate disclosing the
issuance of the policy and its basic terms. No such policy shall be canceled
by the Management Committee except after it shall have given at least thirty
(30) days prior written notice to the Members to that effect. Except as
<PAGE>
assumed by the Company, each Member shall be responsible for insuring itself
against damages, losses and liabilities relative to its Membership Interest
in the Company.
14.6 Limited Liability of Members. Pursuant to the Act, the Members shall
have no personal liability whatsoever, whether to the Company, to any of the
Members, or to the creditors of the Company, for the debts of the Company or
any of its losses beyond the amounts contributed or committed to be contributed
by that Member to the capital of the Company pursuant to this Agreement; nor
shall the Members have any other obligations or liabilities under this
Agreement other than those specifically set forth in this Agreement.
ARTICLE XV
REMEDIES FOR BREACH
15.1 Specific Enforcement. All breaches of this Agreement are subject to
specific enforcement, without prejudice to the right to seek damages or other
remedies.
15.2 Attorney Fees and Other Litigation Expenses. If the Company resorts to
litigation to remedy a breach of this Agreement by a Member or former Member
and the Company prevails in the litigation, in addition to any other remedies
available to the Company under this Agreement or by law the Company may
collect its actual attorney fees and other costs and expenses of litigation.
ARTICLE XVI
AMENDMENTS
16.1 Amendment of Agreement. This Agreement may only be amended at a
special meeting of Members called for the purpose of amending this Agreement
or by the written consent of Members to a proposed written amendment to this
Agreement.
16.2 Required Vote. Any proposed amendment to this Agreement shall only
become effective upon the vote or written consent of more than fifty (50%) of
all the votes entitled to be cast by the Class A Members; provided, however,
that without the unanimous consent of all Class A Members, this Agreement
shall not be amended to:
(a) Cause the Company to effect any registration of the Shares, except
as provided in Section 4.8;
(b) Except as otherwise provided in Section 4.8, cause the Company to
lose its status as a limited liability company, taxable as a partnership for
federal income tax purposes;
<PAGE>
(c) Amend this Section 16.2 or Sections 4.2, 4.3(b), 4.8, 5.1(a), 5.1(b),
7.1, 7.2, 7.2(b)(15), 7.3, 7.5, 7.6, 7.8, 7.9, 12.1 or 13.1 of this
Agreement; or
(d) Affect any rights of the Class B Members in their Class B Membership
Interests, including, but not limited to, amending any part of the definition
in Section 1.13.
ARTICLE XVII
MISCELLANEOUS
17.1 Governing Law. All questions pertaining to this Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware.
It is further agreed that any and all litigation relating to this Agreement or
the Company shall be brought in a state or federal court located within the
State of Michigan; and each party, for the purpose of all such litigation,
hereby submits to the exclusive jurisdiction and venue of such courts.
17.2 Notices.
(a) Any notice, request, consent, offer or demand required or permitted
to be given under this Agreement 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 as the
recipient as follows:
If to the Company: With a copy to:
Plug Power, LLC DTE Energy, Inc.
968 Albany - Shaker Road 2000 Second Avenue, 644 WCB
Latham, New York 12110 Detroit, Michigan 48226
Attn: Gary Mittleman Attn: Chris C. Nern
Fax No.:(518) 785-2127 Fax No.:(313) 235-8500
If to any Member: at the address shown on Exhibit A and B, unless a
Member shall have requested the Company in writing at least thirty (30) days
before the date of a notice to use a different address.
(b) 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.
<PAGE>
17.3 Agreement for Further Execution. As soon as practicable after being
requested by the Management Committee to do so, the Members agree to sign,
swear to or acknowledge the Certificate required by the Act; to sign, swear to,
or acknowledge any amendment or cancellation as required by law; to sign,
swear to or acknowledge similar certificates or affidavits or certificates of
assumed firm name, trade name or the like (and any amendments or cancellations
thereof) required by the laws of Delaware; and to cause the filing of any of
the same for record wherever such filing shall be required by law.
17.4 Entire Agreement. This Agreement contains the entire understanding
between the Members and the Company and supersedes any prior understanding and
agreements between them respecting the subject matter herein. There are no
representations, agreements, arrangements or understandings, oral or written,
between the parties hereto relating to the subject matter of this Agreement
which are not fully expressed or described herein.
17.5 Severability. This Agreement is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations of the jurisdictions in which the Company does business.
If any provision of this Agreement or the application thereto to any person or
circumstance shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to any other Person or circumstances shall not be affected thereby,
but rather shall be enforced to the greatest extent permitted by law.
17.6 Captions. All Section titles and captions contained in this Agreement
are for convenience only and shall not be deemed part of the context of this
Agreement.
17.7 Number and Gender. All the terms and words used in this Agreement,
regardless of the number and gender in which they are used, shall be deemed
and construed to include any other number, singular or plural, and any other
gender, masculine, feminine or neuter, as the context or sense of this
Agreement or any Section, paragraph or clause herein may require, the same as
if such word had been fully and properly written in such number and gender.
17.8 Binding Effect. Subject to the provisions of this Agreement relating
to transferability, this Agreement will be binding upon and shall inure to the
benefit of the parties, and their respective distributees, heirs, successors
and assigns.
<PAGE>
17.9 Counterparts. This Agreement may be executed in several counterparts,
each of which will be deemed an original but all of which will constitute one
and the same.
EDISON DEVELOPMENT CORPORATION
(a Michigan corporation)
By: /s/ Larry Garberding
______________________________________
Its: Executive Vice-President
_____________________________________
MECHANICAL TECHNOLOGY INCORPORATED
(a New York corporation)
By: /s/ Martin Mastroianni
______________________________________
Its: President
_____________________________________
<PAGE>
EXHIBIT A
CLASS A MEMBERS, CAPITAL CONTRIBUTIONS, AND SHARES
Class A FMV of Capital Adjusted
Members Contributions Basis Shares
- ------- ------------- -------- ------
Edison Development $4,750,000 $4,750,000 4,750,000
Corporation
Mechanical Technology $4,750,000 $ 300,000 4,750,000
Incorporated
<PAGE>
EXHIBIT B
CLASS B MEMBERS, CAPITAL CONTRIBUTIONS, AND SHARES
Class B FMV of Capital Adjusted
Members Contribution Basis Shares
- ------- ------------ -------- ------
<PAGE>
EXHIBIT C
MILESTONES
CONFIDENTIAL TREATMENT REQUIRED
<PAGE>
EXHIBIT D
CONTRACT PROPOSALS
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT E
EXCLUDED CONTRACTS AND PROPOSALS
None
<PAGE>
EXHIBIT F
OPTION AGREEMENT - CONTRIBUTION MATCH
<PAGE>
EXHIBIT G
OPTION AGREEMENT - RETURNED SHARES
<PAGE>
Exhibit 10.19
CONTRIBUTION AGREEMENT
BETWEEN
MECHANICAL TECHNOLOGY INCORPORATED,
(a New York corporation)
AND
PLUG POWER, L.L.C.,
(a Delaware limited liability company)
THIS CONTRIBUTION AGREEMENT (this "Agreement") is entered into between
Mechanical Technology Incorporated, a New York corporation, and Plug Power,
L.L.C., a Delaware limited liability company (the "Company"). This Agreement,
the Limited Liability Company Agreement of Plug Power, L.L.C., a Delaware
limited liability company (the "Operating Agreement"), and the Contribution
Agreement between Edison Development Corporation, a Michigan corporation, and
the Company (the "Management Agreement") are entered as of and shall be
effective simultaneously with each other as of the close of business on the
27th day of June, 1997 (the "Contribution Date").
RECITALS
1. MTI conducts a business which is engaged in the research and
development of technology for fuel cells, primarily as a contractor or
subcontractor under government contracts, grants and cooperative agreements
( the "Fuel Cell Business").
2. For the purpose set forth in Section 2.4 of the Operating Agreement,
and as its initial Capital Contribution (as defined in Section 4.1 of the
Operating Agreement), MTI wishes to contribute the Fuel Cell Business (except
the "Excluded Assets", as defined in Section 1.2 of this Agreement) to the
Company and in exchange for MTI's initial Capital Contribution MTI shall
become a Class A Member (as defined in Section 1.12 of the Operating Agreement)
in the Company and shall receive the number of Shares of Class A Membership
Interest in the Company (as set forth on Exhibit A to the Operating Agreement)
(the "MTI Shares").
3. In order to accomplish the foregoing, simultaneously with the
execution of this Agreement and the Operating Agreement, MTI and the Company
shall enter into the agreements identified in Section 4 below (collectively,
the "Other Agreements").
4. The foregoing contribution of assets by MTI and assumption of
liabilities by Company are all subject to the terms and conditions of this
Agreement, the Operating Agreement and the Other Agreements.
<PAGE>
In consideration of the foregoing and the mutual representations,
warranties covenants, and agreements contained in this Agreement, MTI and the
Company agree as follows:
1. Contribution of Assets by MTI.
1.1 Contribution of Assets. Subject to the terms and conditions of
this Agreement, on the Contribution Date, MTI hereby assigns, transfers,
and delivers to the Company, as a contribution to the capital of the
Company, free and clear of all Liens, except Permitted Liens, all of the
assets, properties, and business, (excepting the Excluded Assets) of every
kind and description, wherever located, real, personal, or mixed, tangible
or intangible, owned, leased or held by MTI, which are necessary for the
conduct of the Fuel Cell Business by MTI as the same shall exist on the
Contribution Date including all assets and property shown on the
Contributed FCB Balance Sheet (and not disposed of in the ordinary course
of business) and all assets and property thereafter acquired by MTI in
respect of or necessary for the conduct of and used in the Fuel Cell
Business immediately prior to the Contribution Date (collectively, the
"Assets"), and including, without limitation, all right, title, and
interest of MTI in, to, and under:
(a) The machinery, equipment, furniture, vehicles, and other
tangible property (including, without limitation, maintenance and
operating supplies, fuel, and spare parts for such machinery and
equipment) listed and described in Schedule 1.1(a) (the "Equipment");
(b) The raw materials, finished goods, work-in-process, supplies,
and inventories described in Schedule 1.1(b) (the "Inventory");
(c) All rights of MTI (including, but not limited to, any and all
Intellectual Property Rights) in and to the products sold or leased
and in and to any products or other Intellectual Property Rights under
research or development prior to or on the Contribution Date;
(d) All of the rights of MTI under all contracts, arrangements,
leases and other agreements identified on Schedule 1.1(d), including,
without limitation, any right to receive goods and services, pursuant
to such agreements and to assert claims and take other rightful
actions in respect of breaches, defaults and other violations of
such contracts, arrangements, licenses, leases and other agreements
and otherwise;
(e) All credits, prepaid expenses, deferred charges, advance
payments, security deposits and pre-paid items, listed in Schedule
1.1(e);
(f) [Intentionally Omitted]
<PAGE>
(g) All Intellectual Property Rights and all rights thereunder
or in respect thereof primarily relating to or used or held for use
in connection with the Fuel Cell Business all of which are listed
on Schedule 1.1(g), including, but not limited to, rights to sue
for an injunction, damages, and/or other remedies against past,
present and future infringements thereof and to collect and retain
any damages resulting therefrom for its own use and enjoyment, and
rights of priority and protection of interests therein under the
laws of any jurisdiction worldwide and all tangible embodiments
thereof (together with all Intellectual Property rights included
in the other clauses of this Section 1.1, the "Intellectual Property
Assets");
(h) All of MTI's right, title, and interest in, to, and under
each of the Government Contracts and commercial contracts for research
and development of fuel cells listed in Schedule 1.1(h);
(i) All books, records, manuals and other materials (in any form
or medium), including, without limitation, all records and materials
maintained by MTI regarding any of the Assets and, with respect to the
Assets and Fuel Cell Business, all price lists, correspondence,
mailing lists, lists of customers, photographs, production data,
sales and promotional materials and records, purchasing materials
and records, manufacturing and quality control records and
procedures, blueprints, research and development files, records,
data and laboratory books, Intellectual Property disclosures, media
materials and plates, accounting records, all files regarding any
of the Government Contracts transferred hereunder, and litigation
files;
(j) To the extent their transfer is permitted by law, all
Governmental Approvals, including all applications therefor,
required for the conduct of the Fuel Cell Business or the occupancy
or use of the Licensed Premises;
(k) All rights to causes of action, lawsuits, judgments, claims
and demands of any nature available to or being pursued by MTI with
respect to the Fuel Cell Business or the ownership, use, function or
value of any Asset, whether arising by way of counterclaim or
otherwise;
(l) All rights, title, and interest of MTI under any agreement
with past or present employees or independent contractors of MTI
regarding: (i) confidentiality or non-disclosure with respect to
the Assets or Fuel Cell Business; (ii) the obligation of such
employees or contractors to join in the filing of any patent
application as an inventor and/or the obligation to assign to MTI
any patent application on which such employee or contractor is named
as an inventor; (iii) the obligation to assign and transfer any
interest of such employee or contractor in any of the Intellectual
Property Rights; and (iv) any restriction on the right of such
employee or contractor to use any Intellectual Property Rights or
<PAGE>
to compete with the Fuel Cell Business. Each such agreement is
listed on Schedule 1.1(l); and
(m) All guarantees, warranties, indemnities and similar rights
in favor of MTI with respect to any Asset.
1.2 Excluded Assets. The Company expressly understands and agrees
that there shall be excluded from the Assets those assets and properties
of MTI which are necessary for and used in the conduct of the Fuel Cell
business as listed on Schedule 1.2.
In addition, the Company expressly understand and agrees that there
shall be excluded from the Assets any assets, properties and businesses
of every kind and description; wherever located; real, personal, or mixed;
tangible or intangible; owned, leased or held; or used in the conduct of
any business of MTI (including, but not limited to, assets, properties and
businesses of MTI's Technology Division) other than the Fuel Cell Business,
as the same shall exist on the Contribution Date; any and all intellectual
property owned, held or primarily used by MTI in any business other than
the Fuel Cell Business (including, but not limited to, use of the name
Mechanical Technology Incorporated and all derivatives thereof); any and
all cash, including petty cash, or receivables of MTI as of the close of
business June 27, 1997, including any reflected on the Contributed FCB
Balance Sheet.
1.3 Conveyance Instruments. In order to consummate MTI's contribution
of the Assets, MTI has, or will hereafter, execute and deliver, or cause to
be executed and delivered, all such documents or instruments of assignment,
transfer, or conveyance, in each case dated the Contribution Date
(collectively, the "Conveyance Instruments"), as EDC and MTI and their
respective counsel shall reasonably deem necessary or appropriate to vest
in, confirm title to and/or record the transfer of (in such form as may be
required by any Governmental Authority) the Assets to the Company.
1.4 Assumed Liabilities. Subject to the terms and conditions of this
Agreement and the Operating Agreement, in reliance on the representations,
warranties, covenants, and agreements of the parties contained herein, the
Company assumes and agrees to pay, discharge, or fulfill the liabilities
and obligations relating to the Fuel Cell Business and listed on Schedule
1.4 (the "Assumed Liabilities").
1.5 Excluded Liabilities.The Company shall not assume any liabilities,
obligations or commitments of MTI relating to or arising out of the
operation of the Fuel Cell Business or the ownership of the Assets prior
to the Contribution Date other than the Assumed Liabilities (the "Excluded
Liabilities").
<PAGE>
1.6 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, permit or other agreement or arrangement or any claim,
right or benefit arising thereunder or resulting therefrom if an
assignment or transfer or an attempt to make such an assignment or
transfer without the consent of a third party would constitute a breach
or violation thereof or affect adversely the rights of the Company or
MTI thereunder; and any transfer or assignment to the Company by MTI 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
Contribution Date, MTI shall continue to use all best efforts to obtain
any such approval or consent after the Contribution Date until such time
as such consent or approval has been obtained, and MTI will cooperate
with the Company in any lawful and economically feasible arrangement to
provide that the Company shall receive the interest of MTI in the benefits
under any such instrument, contract, lease or permit or other agreement or
arrangement, including performance by MTI, as agent, if economically
feasible, provided that the Company shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent
such liabilities are described as Assumed Liabilities in Schedule 1.4 and
which the Company would have assumed if such consent or approval had been
obtained. MTI shall cooperate with the Company and shall pay and
discharge, and shall indemnify and hold the Company harmless from and
against, any and all out-of-pocket costs incurred by MTI in seeking to
obtain or obtaining any such consent or approval whether before or after
the Contribution Date. Nothing in this Section 1.6 shall be deemed a
waiver by the Company of its right to have received on or before the
Contribution Date an effective assignment of all of the Assets nor shall
this Section 1.6 be deemed to constitute an agreement to exclude from
the Assets any assets described under Section 1.1.
2. Events Occurring on the Contribution Date.
2.1 Deliveries by MTI. Simultaneously with the execution of this
Agreement, MTI shall execute and agree to be bound by all of the terms and
conditions of the Operating Agreement and shall deliver to the Company the
following:
(a) The Conveyance Instruments to effect the contribution of the
Assets to the Company, such Conveyance Instruments to be those
reasonably deemed necessary by, and to be in form and substance
reasonably satisfactory to counsel for EDC and MTI;
(b) A copy of the resolutions of MTI's Board of Directors,
certified by its Secretary, authorizing or ratifying its execution and
<PAGE>
delivery of this Agreement, the Operating Agreement, and the Other
Agreements, and the consummation of the transactions contemplated
hereby and thereby;
(c) All of the Other Agreements to which MTI is a party, duly
executed by it.
(d) A copy of MTI's certificate of incorporation, a certified
copy of its bylaws and other organizational documents;
(e) A certificate from the Secretary of State of New York as to
MTI's good standing in such state certified as of a date within
thirty (30) days of the Contribution Date;
(f) An employment agreement with Wayne Huang, and an
employment agreement executed by Manmohian Dhar each of which will be
agreements to be entered into with the Company and in the form and
substance of the agreements attached in Schedule 2.1(f);
(g) The executed counterpart copies of all Consents and Govern-
mental Approvals set forth in Schedule 3.1(c);
(h) The opinion of counsel for MTI, dated the Contribution Date,
in form and substance reasonably satisfactory to EDC's counsel;
(i) All other previously undelivered items required to be
delivered by MTI at or prior to the Contribution Date pursuant to the
terms of this Agreement, the Operating Agreement, and the Other
Agreements.
2.2 Deliveries by the Company.
(a) Copy of filed Certificate of Formation of the Company;
(b) Execution copies of the Limited Liability Company Agreement
of Plug Power, LLC, a Delaware limited liability company, dated the
Contribution Date;
(c) Executed copy of the Contribution Agreement between the
Company and EDC;
(d) Execution copies of the Distribution Agreement between EDC
and the Company; and
(e) A transition services agreement between MTI and the
Company.
<PAGE>
2.3 Effect of Contributions. In exchange for its initial Capital
Contribution, as defined in Section 4.1 of the Operating Agreement, (i)
MTI shall become a Class A Member (as defined in Section 1.12 of the
Operating Agreement) in the Company pursuant to the terms of the
Operating Agreement; (ii) MTI will receive the Shares; and (iii) the
Capital Account of MTI will be credited with such amount set forth
beside its name on Exhibit A to the Operating Agreement. Such Class A
Membership Interest and Capital Account shall be subject to adjustment
as provided under Section 4.7 of the Operating Agreement.
3. Representations and Warranties.
3.1 Representations and Warranties of MTI. MTI represents and
warrants to the Company as follows:
(a) Authorization, etc. MTI has the corporate power and
authority to execute and deliver this Agreement and each of the Other
Agreements to which it is a party and to fully perform its obligations
and consummate the transactions contemplated thereby. The execution
and delivery by MTI of this Agreement and the Other Agreements, and
the consummation of the transactions contemplated by this Agreement,
have been duly authorized by all requisite corporate action. This
Agreement, together with all other obligations of MTI hereunder,
constitutes the valid and legally binding obligation of MTI,
enforceable in accordance with its terms.
(b) Corporate Status.
(i) MTI 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 Fuel Cell
Business and to own or lease and operate the properties as and
in the places where such business is conducted and such
properties are owned, leased or operated.
(ii) MTI is duly qualified or licensed to do business and
is in good standing in each of the jurisdictions specified in
Schedule 3.1(b)(ii), which are the only jurisdictions in which
the operation of the Fuel Cell business or the character of the
properties owned, leased or operated by MTI in connection with
the Fuel Cell Business makes such qualification or licensing
necessary.
(iii)MTI has delivered to the Company complete and correct
copies of its certificate of incorporation and by-laws or other
organizational documents, in each case, as amended and in effect
on the date hereof. MTI is not in violation of any of the
<PAGE>
provisions of its certificate of incorporation or by-laws or
other organizational documents.
(c) No Conflicts. The execution, delivery and performance by
MTI of this Agreement and the consummation of the transactions
contemplated hereby, do not and will not conflict with or result in
a violation of or a default under (with or without the giving of
notice of the lapse of time or both) (i) any Applicable Law applicable
to MTI or any of the Assets, (ii) the certificate of incorporation
or by-laws or other organizational documents of MTI or (iii) except
as specifically set forth in Schedule 3.1(c) and except for any
conflict which would cause no material adverse affect on the
Company (any conflict which would affect the transfer of the Assets
shall be deemed material), any Contract or other contract, agreement
or other instrument to which MTI or any of its Affiliates is a party
or by which MTI or any of its properties or assets, including, but
not limited to the Assets, may be bound or affected. Except as
specified in Schedule 3.1(c), no Governmental Approval or other
Consent is required to be obtained or made by MTI in connection with
the execution and delivery of this Agreement or the Other Agreements
or the consummation of the transactions contemplated thereby.
(d) Financial Statements. MTI has delivered to the Company a
pro forma balance sheet for the Fuel Cell Business as of May 23, 1997
(the "Preliminary Contributed FCB Balance Sheet"), a copy of which
is attached as Schedule 3.1(d). Within ten (10) days after the
Contribution Date, MTI will deliver to the Company a pro forma
balance sheet for the Fuel Cell Business (excluding the Excluded
Assets and Excluded Liabilities) as of the Contribution Date (the
"Contributed FCB Balance Sheet"); (the Preliminary Contributed FCB
Balance Sheet and the Contributed FCB Balance Sheet are the
"Financial Statements"). The Financial Statements fairly present
the financial condition and results of operations of the Fuel Cell
Business for the period and as of the dates stated therein. The
Total Liabilities reflected on the Contributed FCB Balance Sheet
shall not exceed by more than $25,000 the total amount of the
Assumed Liabilities shown on Schedule 1.4.
(e) Absence of Undisclosed Liabilities. MTI has no Knowledge
of any liabilities or obligations of any nature, absolute, accrued,
contingent or otherwise and whether due or to become due, arising
out of or relating to the Fuel Cell Business, except (a) as set
forth in Schedule 3.1(e), (b) as and to the extent disclosed or
reserved against in the Contributed FCB Balance Sheet and (c) for
liabilities and obligations that (i) individually and in the
aggregate are not material to the Fuel Cell Business and have not
had or resulted in, and will not have or result in, a material
adverse effect on the Fuel Cell Business or Assets.
<PAGE>
(f) Taxes.
(i) MTI has duly and timely filed all Tax Returns
affecting the Fuel Cell Business with respect to Taxes
required to be filed on or before the Contribution Date
("Covered Returns"). Except for Taxes set forth on
Schedule 3.1(f)(i), which are being contested in good
faith and by appropriate proceedings, the following Taxes
have been duly and timely paid: (1) all Taxes shown to be
due on the Tax Returns, (2) all deficiencies and assessments
of Taxes of which notice has been received by MTI that are
or may become payable by the Company or chargeable as a
lien upon the Fuel Cell Business, and (3) all other Taxes
due and payable as of the Contribution Date for which
neither filing of Tax Returns nor notice of deficiency or
assessment is required, of which MTI has Knowledge that
may become payable by the Company or chargeable as a lien
upon the Fuel Cell Business. All Taxes required to be
withheld by or on behalf of MTI in connection with amounts
paid or owing to any employee, independent contractor,
creditor or other party with respect to the Fuel Cell
Business ("Withholding Taxes") have been withheld, and
such withheld taxes have either been duly and timely paid
to the proper Governmental Authorities or set aside in
accounts for such purpose.
(ii) Except as set forth on Schedule 3.1(f)(ii), no
agreement or other document extending, or having the effect
of extending, the period of assessment or collection of any
Taxes or Withholding Taxes, and no power of attorney with
respect to any such Taxes, has been filed with the IRS or
any other Governmental Authority.
(iii)Except as set forth on Schedule 3.1(f)(iii), (1)
there are no Taxes or Withholding Taxes asserted in writing
by any Governmental Authority to be due and (2) no issue has
been raised in writing by any Governmental Authority during
the course of any audit with respect to Taxes or Withholding
Taxes. Except as set forth on Schedule 3.1(f)(iii), no Taxes
and no Withholding Taxes are currently under audit by any
Governmental Authority. Except as set forth on Schedule
3.1(f)(iii), neither the IRS nor any other Governmental
Authority is now asserting or, to the best knowledge of MTI,
threatening to assert against MTI any deficiency or claim for
additional Taxes or any adjustment of Taxes that would, if
<PAGE>
paid by the Company, have an adverse effect on the Fuel Cell
Business or the Assets, and there is no reasonable basis for
any such assertion of which MTI is or reasonably should be
aware.
(iv) Except as set forth on Schedule 3.1(f)(iv), there
is no litigation or administrative appeal pending or, to the
best knowledge of MTI, threatened against or relating to MTI
in connection with Covered Taxes.
(g) Absence of Changes. Except as set forth in Schedule
3.1(g), since May 23, 1997, MTI has conducted the Fuel Cell
Business only in the ordinary course consistent with prior
practice and has not, on behalf of, in connection with or relating
to the Fuel Cell Business or the Assets:
(i) suffered any adverse effect;
(ii) to MTI's Knowledge incurred any obligation or
liability, absolute, accrued, contingent or otherwise,
whether due or to become due, except current liabilities
for trade or business obligations incurred in connection
with the purchase of goods or services in the ordinary
course of business consistent with prior practice;
(iii)discharged or satisfied any Lien other than those
then required to be discharged or satisfied, or paid any
obligation or liability, absolute, accrued, contingent or
otherwise, whether due or to become due, other than current
liabilities incurred since the date thereof in the ordinary
course of business consistent with prior practice;
(iv) mortgaged, pledged or subjected to Lien, any
property, business or assets, tangible or intangible, held
in connection with the Fuel Cell Business;
(v) sold, transferred, leased to others or otherwise
disposed of any of the Assets (except in the ordinary course
of business), or cancelled or compromised any debt or claim,
or waived or released any right of substantial value;
(vi) received any notice of termination of any
contract, lease or other agreement or suffered any damage,
destruction or loss (whether or not covered by insurance);
<PAGE>
(vii)transferred or granted any rights under, or
entered into any settlement regarding the breach or
infringement of, any Intellectual Property, or modified
any existing rights with respect thereto, other than as
set forth in this Agreement;
(viii)made any change in the rate of compensation,
commission, bonus or other direct or indirect remuneration
payable, or paid or agreed or orally promised to pay,
conditionally or otherwise, any bonus, incentive, retention
or other compensation, retirement, welfare, fringe or
severance benefit or vacation pay, to or in respect of any
shareholder, director, officer, employee, salesman,
distributor or agent of MTI relating to the Fuel Cell
Business;
(ix) encountered any labor union organizing activity,
had any actual or threatened employee strikes, work
stoppages, slowdowns or lockouts, or had any material
change in its relations with its employees, agents,
customers or suppliers;
(x) made any purchase commitment in excess of the
normal, ordinary and usual requirements of the Fuel Cell
Business or at any price in excess of the then current
market price or upon terms and conditions more onerous
than those usual and customary in the industry, or made
any change in its selling, pricing, advertising or
personnel practices inconsistent with its prior practice
and prudent business practices prevailing in the industry;
(xi) made any capital expenditures or capital additions
or improvements in excess of an aggregate of $10,000;
(xii)instituted, settled or agreed to settle any litiga-
tion, action or proceeding before any court or governmental
body which may affect the Fuel Cell Business or the Assets
other than in the ordinary course of business consistent with
past practices but not in any case involving amounts in
excess of $10,000;
(xiii)entered into any transaction, contract or
commitment in the ordinary course of business or paid or
agreed to pay any legal, accounting, brokerage, finder's
fee, Taxes or other expenses in connection with, or
incurred any severance pay obligations by reason of this
<PAGE>
Agreement or the transactions contemplated hereby, except
as otherwise provided in this Agreement; or
(ix) to MTI's Knowledge, taken any action or omitted
to take any action that would result in the occurrence of
any of the foregoing.
(h) Litigation. Except as set forth on Schedule 3.1(h),
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 or relating to the
Assets or the Fuel Cell Business or against or relating to the
transactions contemplated by this Agreement, and MTI does not
have Knowledge of any basis for the same. Except as set forth in
such Schedule 3.1(h), no citations, fines or penalties have been
asserted against MTI with respect to the Division under any
Environmental Law or any federal, state or local law relating
to occupational health or safety.
(i) Compliance with Laws; Governmental Approvals and
Consents; Governmental Contracts.
(i) Except as disclosed in Schedule 3.1(i)(i), MTI
has complied in all material respects with all Applicable
Laws applicable to the Fuel Cell Business or the Assets,
and MTI has not received any notice alleging any such
conflict, violation, breach or default.
(ii) Schedule 3.1(i)(ii) sets forth all Governmental
Approvals and other Consents necessary for, or otherwise
material to, the conduct of the Fuel Cell Business. Except
as set forth in Schedule 3.1(i)(ii), all such Governmental
Approvals and Consents have been duly obtained and are in
full force and effect, and MTI is in compliance with each
of such Governmental Approvals and Consents held by it with
respect to the Assets and the Fuel Cell Business.
(iii)Schedule 3.1(i)(iii) sets forth all Government
Contracts.
(iv) Except as set forth in Schedule 3.1(iv)(iv), to
MTI's Knowledge as of the Contribution Date, there are no
proposed laws, rules, regulations, ordinances, orders, judg-
ments, decrees, governmental takings, condemnations or other
<PAGE>
proceedings which would be applicable to the business,
operations or properties of the Fuel Cell Business and
which might adversely affect the properties, assets,
liabilities, operations or prospects of the Fuel Cell
Business, either before or after the Contribution Date.
(j) Operation of the Fuel Cell Business. Except as set
forth in Schedule 3.1(j), (i) MTI has conducted the Fuel Cell
Business only through MTI and not through any direct or indirect
subsidiary or affiliate of MTI and (ii) no part of the Fuel Cell
Business is operated by MTI through any entity other than MTI.
(k) Assets. Except as disclosed in Schedule 3.1(k), MTI
has good title to all the Assets free and clear of any and all
Liens other than Permitted Liens. The Assets, together with the
services and arrangements described in Section 4, comprise all
assets and services necessary for the continued conduct of the
Fuel Cell Business by the Company as now being conducted. The
Assets, taken as a whole, constitute all the properties and
assets relating to or used or held for use in connection with
the Fuel Cell Business during the past twelve months (except
cash disposed of, accounts receivable collected, prepaid expenses
realized, Contracts fully performed, properties or assets
replaced by equivalent or superior properties or assets, in
each case in the ordinary course of business, employees not
hired by the Company, the Excluded Assets, and those services
which the Company has the right to receive from MTI under the
Services Agreement). Except for Excluded Assets, there are no
assets or properties used in the operation of the Fuel Cell
Business and owned by any Person other than MTI that will not
be leased or licensed to the Company under valid, current
leases or license arrangements. The Assets are in all material
respects adequate for the purposes for which such assets are
currently used or are held for use, and are in reasonably good
repair and operating condition (subject to normal wear and tear)
and, to the Knowledge of MTI, there are no facts or conditions
affecting the Fuel Cell Business or the Assets which could,
individually or in the aggregate, interfere in any material
respect with the conduct of the Fuel Cell Business.
(l) Contracts.
(i) Schedule 3.1(l)(i) contains a complete and correct
list of all agreements, contracts, commitments and other
instruments and arrangements (whether written or oral) of the
types described below (1) by which any of the Assets are
<PAGE>
bound or affected or (2) to which MTI is a party or by
which it is bound that affects the Fuel Cell Business or
the Assets (the "Contracts"):
(1) licenses, permits, Governmental Approvals,
and other contracts concerning or relating to
the Licensed Premises;
(2) employment, consulting, agency, collective
bargaining or other similar contracts, agreements,
and other instruments and arrangements relating to or
for the benefit of current, future or former employees
or inventors, officers, directors, sales
representatives, distributors, dealers, agents,
independent contractors or consultants;
(3) loan agreements, indentures, letters of
credit, mortgages, security agreements, pledge
agreements, deeds of trust and instruments relating to
the borrowing of money or obtaining of or extension of
credit;
(4) licenses, licensing arrangements and other
contracts providing in whole or in part for the use of,
or limiting the use of, any of the Intellectual Property
Rights;
(5) notifications, requests for bid, proposals,
awards, contracts, and grants under which MTI has or
may have rights to obligations;
(6) joint venture, partnership and similar
contracts involving a sharing of profits or expenses
(including, but not limited to, joint research and de-
velopment and joint marketing contracts);
(7) asset purchase agreements and other
acquisition or divestiture agreements, including, but
not limited to, any agreements relating to the sale,
lease or disposal of any Assets (other than sale of
inventory in the ordinary course of business) or
involving continuing indemnity or other obligations;
<PAGE>
(8) orders and other contracts for the purchase
or sale of materials, supplies, products or services,
each of which involves aggregate payments in excess of
$10,000 in the case of purchases or $10,000 in the case
of sales;
(9) contracts with respect to which the
aggregate amount that could reasonably expected to be
paid or received thereunder in the future exceeds
$10,000 per annum or $30,000 in the aggregate;
(10)sales agency, manufacturer's representa-
tive, marketing or distributorship agreements;
(11)contracts, agreements or arrangements
with respect to the representation of the Fuel Cell
Business in foreign countries; and
(12)master lease agreements providing for the
leasing of personal property primarily used in, or held
for use primarily in connection with, the Fuel Cell
Business.
(ii) MTI has delivered to the Company complete and
correct copies of all written Contracts, together with all
amendments thereto, and accurate descriptions of all material
terms of all oral Contracts, set forth or required to be set
forth in Schedule 3.1(l)(i).
(iii)All Contracts are in full force and effect and
enforceable against each party thereto. There does not exist
under any Contract any event of default or event or condition
that, after notice or lapse of time or both, would constitute
a violation, breach or event of default thereunder on the
part of MTI or, to the Knowledge of MTI, any other party
thereto except as set forth in Schedule 3.1(l)(iii).
Except as set forth in Schedule 3.1(l)(iii), no consent of
any third party is required under any Contract as a result
of or in connection with, and the enforceability of any
Contract will not be affected in any manner by, the
execution, delivery and performance of this Agreement or
any of the Other Agreements or the consummation of the
transactions contemplated thereby.
<PAGE>
(iv) MTI has no outstanding power of attorney
relating to the Fuel Cell Business.
(m) Territorial Restrictions. Except as set forth in
Schedule 1.1(m), MTI is not restricted by any written agreement
or understanding with any other Person from carrying on the Fuel
Cell Business anywhere in the world. The Company, solely as a
result of its receipt of MTI's contribution of the Fuel Cell
Business pursuant to this Agreement or by its assumption of the
Assumed Liabilities, will not become restricted in carrying on
any business anywhere in the world.
(n) Inventories. All Inventories are of good, usable and
merchantable quality.
(o) Suppliers; Raw Materials. Schedule 3.1(o) sets forth
(i) the names and addresses of all suppliers from which the Fuel
Cell Business ordered raw materials, supplies, merchandise and
other goods and services with an aggregate purchase price for
each such supplier of $100 or more during the twelve month period
ended May 31, 1997 and (ii) the amount for which each such
supplier invoiced the Fuel Cell Business during such period. MTI
has not received any notice or has any reason to believe that
there has been any material adverse change in the price of such
raw materials, supplies, merchandise or other goods or services,
or that any such supplier will not sell raw materials, supplies,
merchandise and other goods to the Company at any time after the
Contribution Date on the terms and conditions similar to those
used in its current sales to the Fuel Cell Business, subject to
general and customary price increases. To the best knowledge of
MTI, no supplier of the Fuel Cell Business described in clause
(i) of the first sentence of this Section 3.1(o) has otherwise
threatened to take any action described in the preceding sentence
as a result of the consummation of the transactions contemplated
by this Agreement or the Other Agreements.
(p) Government Contracts.
(i) Government Contracts. Schedule 3.1(i)(iii)
identifies all contracts, grants, cooperative agreements,
awards, proposals, requests to bid, notification of
opportunity to bid, or other arrangements in which MTI is
either a prime contractor, subcontractor, grantee, awardee,
bidder, or prospective bidder or any such arrangement
between MTI and its subcontractors for any Government
Contract relating to the Fuel Cell Business ("Government
<PAGE>
Contracts"). Except for explicit references to
sections of the applicable agency acquisition regulations, or
Federal Acquisition Regulations, none of the Government
Contracts is subject to any "implied" clauses or other
understandings which modify, extend or limit the contract
in any way.
(ii) Patent Rights. MTI has or will, upon the receipt
of the Consents, have the authority and ability to assign to
the Company all patent rights accrued as a result of its
performance under the Government Contracts ("MTI Patent
Rights").
(iii)Exceptions to Patent Rights. Except as noted on
Schedule 3.1(p)(ii), MTI has complied with all applicable
agency policies and contract procedures necessary to secure
in itself the right to file patent applications for the MTI
Patent Rights. MTI shall, within sixty (60) days of the
date of this Agreement, secure in itself the right to file
patent applications for MTI Patent Rights which it has not
yet secured in itself. MTI shall assign such patent rights
solely to the Company within ten (10) days of securing such
rights.
(iv) Third Party and Government Rights. Except in
the case of the Government Contracts set out on Schedule
3.1(p)(iv), no other party has a license, whether express or
implied, to use the MTI Patent Rights. In the case of the
Government Contracts set out on Schedule 3.1(p)(iv), the
parties to each such contract, including the United States
government, have only a non-exclusive, perpetual, non-
assignable, license to use the MTI Patent Rights, as of the
date of this Agreement.
(v) March In Rights. MTI has complied with its
obligations set out in the Government Contracts and otherwise
required by 35 U.S.C. 203, to prevent the relevant Federal
agency from requiring the assignment of the MTI Patent Rights
to any other party, including a signatory to the applicable
Government Contract.
(q) Absence of Certain Fuel Cell Business Practices. To
MTI's Knowledge, neither MTI, nor any officer, employee or agent
of MTI, or any other person acting on MTI's behalf, has, directly
or indirectly, within the past five years given or agreed to give
any gift or similar benefit to any customer, supplier,
<PAGE>
governmental employee
or other person who is or may be in a position to help or hinder
the Fuel Cell Business (or assist MTI in connection with any
actual or proposed transaction relating to the Fuel Cell Business)
(i) which subjected or might have subjected MTI to any damage or
penalty in any civil, criminal or governmental litigation or
proceeding, (ii) which if not given in the past, might have had
an adverse effect on the Fuel Cell Business or MTI, (iii) which
if not continued in the future, might have an adverse effect on
the Fuel Cell Business or the Assets or subject the Fuel Cell
Business or the Company to suit or penalty in any private or
governmental litigation or proceeding, (iv) for any of the
purposes described in Section 162(c) of the Code or (v) for the
purpose of establishing or maintaining any concealed fund or
concealed bank account.
(r) Intellectual Property Rights.
(i) MTI owns, or is licensed or otherwise possesses
legally enforceable and sufficient rights to use the
Intellectual Property Rights. Schedule 3.1(r)(i) lists all
current and past (lapsed, expired, abandoned or cancelled)
patents, registered and material unregistered copyrights,
trade marks, service marks, trade names and any applications
therefor that are necessary for the conduct of the Fuel Cell
Business and specifies the jurisdictions in which each such
Intellectual Property Right has been issued or registered or
in which an application for such issuance and registration
has been filed, including the respective registration or
application numbers and the names of all registered owners.
Schedule 3.1(r)(i) lists (1) any requests MTI has received
to make any registration of the type referred to in the
immediately preceding sentence, including the identity of the
requestor and the item requested to be so registered, and the
jurisdiction for which such request has been made; (2) all
licenses, sublicenses and other agreements (written or oral)
as to which MTI is a party and pursuant to which any person
is authorized to use any Intellectual Property Right, or any
trade secret material of the Fuel Cell Business, and includes
the identity of all parties thereof, a description of the
nature and subject matter thereof, the applicable royalty and
the term thereof; and (3) all licenses, sublicenses, and
other agreements (written or oral) as to which MTI is a party
and pursuant to which MTI is authorized to use any
intellectual property rights in MTI's conduct of the Fuel
Cell Business ("Third Party Intellectual Property Rights"),or
<PAGE>
other trade secret of a third party in or as to any product,
and includes the identity of all parties thereto, a
description of the nature and subject matter thereof, the
applicable royalty and the term thereof. MTI is not party
to any oral license, sublicense or agreement which, if
reduced to written form, would be required to be listed in
Schedule 3.1(r)(i).
(ii) Except as otherwise provided in this Agreement
or as set forth in Schedule 3.1(r)(ii), MTI is not, nor will
it be as a result of the execution and delivery of this
Agreement or the performance of its obligations hereunder,
in violation of any license, sublicense, or agreement
described in Schedule 3.1(r)(i). No claims with respect
to the Intellectual Property Rights, or Third Party
Intellectual Property Rights, to the extent arising out of
any use, reproduction or distribution of such Third Party
Intellectual Property Rights by or through MTI, are
currently pending or, to the Knowledge of MTI are
threatened by any Person, nor does MTI have Knowledge of
any valid grounds for any such claims that are bona fide
(1) to the effect that the manufacture, sale, licensing or
use of any product as now used, sold or licensed or proposed
for use, sale or license by MTI infringes on any copyright,
patent, trademark, service mark or trade secret; (2) against
the use by MTI of any of the Intellectual Property Rights;
(3) challenging the ownership, validity or effectiveness of
any of the Intellectual Property Rights or other trade
secret material to the Fuel Cell Business; or (4) challenging
the license or legally enforceable right to use any of the
Third Party Intellectual Property Rights. To the Knowledge
of MTI, all patents, registered trademarks, trade names
and copyrights held by MTI are valid and subsisting.
Except as set forth in Schedule 3.1(r)(ii), to the
Knowledge of MTI, there is no material unauthorized use,
infringement or misappropriation of any of the Intellectual
Property Rights by any third party, including any employee
or former employee of MTI.
(iii)Except as set forth in Schedule 3.1(r)(iii), MTI
(1) has not been sued, charged in writing, or otherwise
notified of any claim that any of the Intellectual Property
Rights infringe any other Person's trade secrets, patents,
trademarks, service marks, trade names or copyrights and
which has not been finally terminated prior to the date
hereof, nor has MTI been informed or notified by any third
party that MTI's use of any of the Intellectual Property
Rights and/or operation of the Fuel Cell business may
<PAGE>
constitute such an infringement and (2) has no Knowledge
of any infringement liability with respect to, or
infringement by MTI in its conduct of the Fuel Cell Business
of any trade secret, patent, trademark, service mark, trade
names or copyright of another.
(iv) Employee Restrictions. To MTI's Knowledge
none of MTI's employees (past or present, full or part-time)
involved in MTI's conduct of the Fuel Cell Business is
obligated under any contract or contracts ((including
licenses, agreements, covenants and other commitments of any
nature), or is subject to any order, writ, judgment,
injunction, decree, determination or award of any court,
administrative agency or other tribunal, that restricts
the employee's activities on behalf of MTI's conduct of
the Fuel Cell Business or interferes with the use of such
employee's best efforts to promote the interests of MTI
in the conduct of the Fuel Cell Business.
(v) Confidential Information. MTI has not disclosed
any information of a proprietary or confidential nature
relating to its business, products, technology or financial
condition to any person or entity, except as described in
Schedule 3.1(r)(v).
(s) Insurance. Schedule 3.1(s) contains a complete and
correct list and summary description of all insurance policies
maintained by MTI for the benefit of or in connection with the
Assets or the Fuel Cell Business. MTI has delivered to the
Company complete and correct copies of all such policies together
with all riders and amendments thereto. Such policies are in
full force and effect, and all premiums due thereon have been
paid. MTI has complied in all material respects with the terms
and provisions of such policies. The insurance overage provided
by such policies is adequate and customary for the Fuel Cell
Business. Schedule 3.1(s) sets out all claims made by MTI under
any policy of insurance during the past two years with respect
to the Fuel Cell Business and in the opinion of MTI reasonably
formed and held, there is no basis on which a claim should or
could be made under any such policy with respect to it.
(t) Licensed Premises. MTI is the owner of the real
property in which the Licensed Premises are located (the
"Property"). MTI's license under the Services Agreement to the
Company of the Licensed Premises does not violate or conflict
with any instrument of record or agreement affecting the
Property. MTI has no Knowledge of any eminent domain or
<PAGE>
similar proceedings against the Property which could adversely
affect the Company's use or occupancy of the Licensed Premises
during the term of the license. There are no defaults by MTI
under any mortgage on the Property which could give rise to the
mortgagee's foreclosure on the Property or give rights to any
mortgagee to disturb the Company's use or occupancy of the
Licensed Premises during the term of the license.
(u) Environmental Matters.
(i) Permits. All Environmental Permits necessary
for the conduct of the Fuel Cell Business are identified
Schedule 3.1(u)(i), and MTI currently holds all such En-
vironmental Permits, and all such Environmental Permits to
the extent permitted by law shall be validly transferred to
the Company on the Contribution Date. MTI has not been
notified by any relevant Governmental Authority that any
such Environmental Permit will be modified, suspended,
cancelled or revoked, or cannot be renewed in the ordinary
course of business.
(ii) No Violations. MTI has complied in all material
respects with all Environmental Permits and all applicable
Environmental Laws pertaining to the Licensed Premises and
MTI's conduct of the Fuel Cell Business. No Person has
alleged any violation by MTI of any such Environmental
Permits or any applicable Environmental Law relating to MTI's
conduct of the Fuel Cell Business.
(iii)No Actions. Except as set forth in Schedule
3.1(u)(iii), MTI has not caused or taken any action that has
resulted or may result in any liability or obligation
relating to (1) the environmental conditions on, under, or
about the Licensed Premises, the Assets or other properties
or assets owned, leased or used by MTI in connection with
and necessary for the conduct of the Fuel Cell Business, or
(2) the past or present use, management, handling, transport,
treatment, generation, storage or Release of any Hazardous
Substances, except for any such liabilities and obligations
that, individually and in the aggregate, are not material to
the Fuel Cell Business and have not had or resulted in, and
will not have or result in, any material adverse effect on
the Fuel Cell Business.
<PAGE>
(iv) Other. Except as set forth in Schedule 3.1(u)(iv):
(1) MTI has not transported or arranged for transportation
(directly or indirectly) of any Hazardous Substances relating
to the Fuel Cell Business to any location that is, listed or
proposed for listing under CERCLA, or on any similar state
list, or the subject of federal, state or local enforcement
actions or investigations or Remedial Action; and (2) no
work, repair, construction or capital expenditure is
required or planned in respect of the Assets or the Licensed
Premises pursuant to or to comply with any Environmental Law,
nor has MTI received any notice of any such requirement,
except for such work, repair, construction or capital
expenditure as is not material to the Fuel Cell Business and
is in the ordinary course of business.
(v) Full Disclosure. MTI has disclosed and made
available to the Company, all information, including, without
limitation, all studies, analyses and test results, in the
possession, custody or control of MTI relating to Hazardous
Substances used, managed, handled, transported, treated,
generated, stored or Released by MTI or any other Person at
any time on the Licensed Premises, or otherwise in connection
with the use or operation of the properties or assets used in
or held for use in connection with the Fuel Cell Business.
(v) Employees, Labor Matters, etc. MTI is not a party to
or bound by any collective bargaining agreement and there are no
labor unions or other organizations representing, purporting to
represent or attempting to represent any employees employed in the
operation of the Fuel Cell Business. Schedule 3.1(v) contains a
list of all employees of MTI that work for or in the Fuel Cell
Business, along with the position and the annual rate of
compensation of each such person. Each such employee, as well as
any other person who was involved in the development or creation
of MTI's Intellectual property Rights, has entered into a
confidentiality and assignment of inventions agreement with MTI,
a copy of which has previously been delivered to the Company.
Except as set forth in Schedule 3.1(v), to the Knowledge of MTI,
no key employee or group of employees employed by MTI in the Fuel
Cell Business has any plans to terminate employment with MTI.
MTI has complied in all material respects with all provisions of
Applicable Law pertaining to the employment of the employees of
the Fuel Cell Business, including, without limitation, all such
Laws relating to labor relations, equal employment, fair
employment practices, entitlements, prohibited discrimination or
<PAGE>
other similar employment practices or acts, except for
any failure or failures to comply that, individually or together
with all such other failures, has not and will not result in a
material liability or obligation on the part of the Fuel Cell
Business, and has not had or resulted in, and will not have or
result in, an adverse effect on the Fuel Cell Business.
(w) Employee Benefit Plans. Schedule 3.1(w) lists each
pension, retirement , profit sharing, deferred compensation, bonus
or other incentive plan, or other employee benefit program,
arrangement, agreement or understanding, or medical, vision,
dental or other health plan, or life insurance or disability plan,
or any other employee benefit plan, including, without limitation,
any "employee benefit plan" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), to which MTI contributes or is a party or is bound or
under which it may have liability and under which employees or
former employees of the Fuel Cell Business (or their
beneficiaries) are eligible to participate or derive a benefit
("Employee Benefit Plans'). MTI has delivered to the Company
true, correct and complete copies of all Employee Benefit Plans.
(x) Confidentiality. Except as set forth on Schedule 3.1(x),
MTI has taken all steps necessary to preserve the confidential
nature of all material confidential information (including,
without limitation, any proprietary information) with respect to
the Fuel Cell Business, including, but not limited to, the
manufacturing or marketing of any of the Fuel Cell Business
products or services.
(y) No Guarantees. Except as set forth on Schedule 3.1(y),
none of the obligations or liabilities of the Fuel Cell Business
or of MTI incurred in connection with the operation of the Fuel
Cell Business is guaranteed by or subject to a similar contingent
obligation of any other Person. MTI has not guaranteed or become
subject to a similar contingent obligation in respect of the
obligations or liabilities of any other Person. There are no
outstanding letters of credit, surety bonds or similar
instruments of MTI or any of its Affiliates in connection with
the Fuel Cell Business or the Assets.
(z) Disclosure. No representation or warranty made by
MTI in this Agreement nor any statement or certificate furnished
or to be furnished by MTI to the Company or its representatives
in connection with or pursuant to this Agreement contains or will
contain any untrue statement of a material fact, or omits or will
omit to state any material fact required to make the statements
<PAGE>
not misleading. There is no fact (other than matters of a
general economic or political nature which do not affect the
Fuel Cell Business uniquely) known to MTI that has not been
disclosed by MTI to the Company that might reasonably be
expected to have or result in a material adverse effect
on the Fuel Cell Business.
(aa) Contract Payments. MTI has not received any prepay-
ments or advances under any Contract or Government Contract.
4. Related Transactions.
4.1 Other Agreements. Contemporaneously with the execution of this
Agreement and the Operating Agreement, MTI and the Company shall enter
into the following agreements:
(a) A Distribution Agreement in the form attached as Schedule
4.1(a).
(b) A Services Agreement in the form attached as Schedule 4.1(b).
5. Covenants of MTI.
5.1 Information Retention. Other than the books and records of MTI
and the Fuel Cell Business contributed to the Company hereunder, MTI will
retain all books and records relating to the Fuel Cell Business in
accordance with MTI's record retention policies as presently in effect.
During the three (3) year period beginning on the Contribution Date, MTI
shall not dispose of or permit the disposal of any such books and records
not required to be retained under such policies without first giving 60
days' prior written notice to the Company offering to surrender the same
to the Company at the Company's expense.
5.2 [Intentionally Omitted.]
5.3 Liability for Transfer Taxes. MTI shall be responsible for the
timely payment of, and shall indemnify and hold harmless the Company
against, all sales, use, value added, documentary, stamp, gross receipts,
registration, transfer, conveyance, excise, recording, license and other
similar Taxes and fees ("Transfer Taxes"), arising out of or in connection
with or attributable to the transactions effected pursuant to this
Agreement. MTI shall prepare and timely file all Tax Returns required to
be filed in respect of Transfer Taxes, provided that the Company shall be
permitted to prepare any such Tax Returns that are the primary
responsibility of the Company under applicable law. The Company's
<PAGE>
preparation of any such Tax Returns shall be subject to MTI's approval,
which approval shall not be withheld unreasonably.
5.4 Certificates of Tax Authorities. MTI shall provide to the
Company copies of certificate from the appropriate taxing authority for
which the Company could have liability to withhold or pay Taxes with
respect to the transfer of the Assets or the Fuel Cell Business within
_______ days following the Contribution Date.
5.5 Confidentiality. MTI will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver
promptly to the Company or destroy, at the request and option of the
Company, all tangible embodiments (and all copies) of the Confidential
Information which are in its possession. In the event that MTI is
requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, MTI will notify the Company promptly of the request or
requirement so that the Company may seek an appropriate protective order
or waive compliance with the provisions of this Section 5.5. If in the
absence of a protective order or the receipt of a waiver hereunder, MTI
is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal, MTI may disclose the Confidential
Information to the tribunal.
5.6 Covenant Not to Compete. For a period of three (3) years from
and after the Contribution Date, MTI will not engage directly or indirectly
in any business previously or presently (as of the Contribution Date)
conducted by the Fuel Cell Business in the United States; provided,
however, that no owner of less than 5% of the outstanding stock of any
publicly traded corporation shall be deemed to engage solely by reason
thereof in any of such publicly trade company's businesses. If the final
judgment of a court of competent jurisdiction declares that any term or
provision of this Section 5.6 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 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. This covenant shall not prevent MTI from
performance under the Distribution Agreement described in Section 2.2(d)
or conduct of any further research and development under the NYSERDA
contract regarding the hybrid electrical vehicle, an Excluded Asset.
<PAGE>
6. Indemnification.
6.1 By MTI.
(a) MTI - Indemnity for Breach of Representations, Warranties,
Covenants and Agreements. MTI agrees to indemnify, defend and hold
harmless the Company from and against all Losses which may be
incurred by the Company arising out of any breach by MTI of any of
MTI'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. The maximum liability of MTI to the Company under this
Section 6.1 for breaches of MTI's representations and warranties in
Section 3 shall be limited to the total amount of Capital
Contributions made by EDC to the Company under Article 4 of the
Operating Agreement.
(b) MTI - Indemnity for Excluded Liabilities. MTI agrees to
indemnify, defend and hold harmless the Company from and against all
Losses which may be incurred by the Company with respect to or arising
out of any of the Excluded Liabilities. There shall be no limitation
of either time or amount on MTI's obligation to indemnify, defend and
hold harmless the Company under this Section 6.1(b).
6.2 By Company. The Company agrees to indemnify MTI with respect
to any and all claims, losses, liabilities, costs and expenses (including
attorneys' fees and reimbursable expenses) which may be reasonably incurred
by MTI arising out of any breach by the Company of any of its
representations, warranties, covenants or agreements made in this
Agreement, the Schedules hereto or any document or instrument delivered
in connection with the transactions contemplated hereby or arising out
of any of the Assumed Liabilities.
6.3 Notice and Defense of Claims. A party claiming indemnification
under this Section 6 (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 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
right to defend the Third Party Claim and to employ counsel approved by the
<PAGE>
Defending Party at the expense of the Defending Party. 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 Asserting
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). If the Defending Party does not assume the
defense of the Third Party Claim, the Asserting Party shall have the right
to assume the defense of and settle the Third Party Claim (at the Defending
Party's expense), if such Asserting Party shall notify the Defending Party
of the Asserting Party's intention to settle the Third Party Claim (at the
Defending Party's expense), unless the Defending Party shall notify
Asserting Party in writing within five (5) days after receipt of such
notice of intention to settle of the Defending 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 shall use all reasonable efforts to
cooperate fully with respect to the defense of any claim, action or
proceeding covered by this Section 6.
6.4 Remedies. Except as otherwise provided herein, none of the
remedies provided in this Agreement for either party, including specific
performance, are the exclusive remedy of either party for a breach of
this Agreement. 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.
7. Public Announcements. Any and all press releases and other public
announcements or communications concerning this Agreement and the transactions
hereunder shall be made only with the Company's prior written approval or as
otherwise required by law.
8. Brokers.
8.1 For MTI. MTI 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. MTI agrees to indemnify and hold harmless the Company against
any claims or liabilities asserted against it by any person acting or
claiming to act as a broker or finder on behalf of MTI.
8.2 For the Company. The Company 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. The Company agrees to indemnify and hold
harmless MTI against any claims or liabilities asserted against it by any
person acting or claiming to act as a broker or finder on behalf of the
Company.
<PAGE>
9. Definition of Certain Terms.
The terms defined in this Section 9, 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
or Schedule are to a Section or Schedule of or to this Agreement, unless
otherwise indicated.
"Affiliate" of a Person means a Person that directly or indirectly
through one or more intermediaries, controls, is controlled by, or is
under common control with, the first Person. "Control" (including the
terms "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the
ownership of voting securities, by contract or credit arrangement, as
trustee or executor, or otherwise.
"Agreement" means this Contribution Agreement, including the Schedules
hereto.
"Applicable Law" means all applicable provisions of all (i)
constitutions, 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 Liabilities" is defined in Section 1.4.
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in Detroit or New York are authorized or
required to close.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the
businesses and affairs of the Fuel Cell 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.
"Contracts" is defined in Section 3.1(l)(i).
<PAGE>
"Contributed FCB Balance Sheet" is defined in Section 3.1(d).
"Contribution Date" is defined in the introductory paragraph of this
Agreement.
"Copyrights" shall mean the copyrights registered with the U.S.
Copyright Office, as further described on Schedule 9 - Copyrights,
attached, which lists all federally registered copyrights now held or at
anytime held by MTI and used in the Fuel Cell Business, together with all
other copyrighted or copyrightable works used in the Fuel Cell Business
(as described on Schedule 9 - Copyrights, the "Works") and any derivative
works of the Works and any "Moral Rights" MTI may have in the Works,
including the Works described in any registered copyrights listed on
Schedule 9 - Copyrights.
"Covered Returns" is defined in Section 3.1(f)(i).
"$ or dollars" means lawful money of the United States.
"EDC" means Edison Development Corporation, a Michigan corporation,
whose address is 2000 Second Avenue, Detroit, Michigan 48226-1279.
"Environmental Laws" means all Applicable Laws relating to the
protection of the environment, to human health and safety, or to any
emission, discharge, generation, processing, storage, holding, abatement,
existence, Release, threatened Release or transportation of any Hazardous
Substances, including, without limitation, (i) CERCLA, the Resource
Conservation and Recovery Act, and the Occupational Safety and Health Act,
(ii) all other requirements pertaining to reporting, licensing, permitting,
investigation or remediation of emissions, discharges, releases or
threatened releases of Hazardous Materials into the air, surface water,
groundwater or land, or relating to the manufacture, processing,
distribution, use, sale, treatment, receipt, storage, disposal, transport
or handling of Hazardous Substances, and (iii) all other requirements
pertaining to the protection of the health and safety of employees or the
public.
"Environmental Liabilities and Costs" means all Losses, whether direct
or indirect, known or unknown, current or potential, past, present or
future, imposed by, under or pursuant to Environmental Laws, including,
without limitation, all Losses related to Remedial Actions, and all fees,
disbursements and expenses of counsel, experts, personnel and consultants
based on, arising out of or otherwise in respect of: (i) the ownership or
operation of the Fuel Cell Business or the Assets; and (ii) expenditures
necessary to cause the Licensed Premises or any aspect of the Fuel Cell
Business to be in compliance with any and all requirements of Environmental
Laws as of the Contribution Date.
<PAGE>
"Environmental Permits" means any federal, state and local permit,
license, registration, consent, order, administrative consent order,
certificate, approval or other authorization with respect to MTI
necessary for the conduct of the Fuel Cell Business as currently
conducted or previously conducted under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Excluded Assets" is defined in Section 1.2.
"Excluded Liabilities" is defined in Section 1.5.
"Financial Statements" means each of the financial statements required
to be provided by MTI under Section 3.1(d).
"Fuel Cell Business" means the business acquired or to be acquired
by the Company pursuant to this Agreement, consisting of the Assets and
the Assumed Liabilities, but not including the Excluded Assets or
Excluded Liabilities.
"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.
"Hazardous Substances" means any substance that: (i) is or contains
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum or petroleum derived substances or wastes, radon gas or related
materials; (ii) requires investigation, removal or remediation under any
Environmental Law, or is defined, listed or identified as a "hazardous
waste" or "hazardous substance" thereunder; or (iii) is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic,
or otherwise hazardous and is regulated by any Governmental Authority
or Environmental Law.
"Intellectual Property Assets" is defined in Section 1.1(h).
"Intellectual Property Rights" shall refer collectively and singularly
to Patent Rights, Copyrights, Trademark Rights, Trade Secrets and Know
<PAGE>
How, except to the extent that MTI expressly indicates on the attached
schedules that it has transferred such Intellectual Property Rights.
"Inventories" is defined in Section 3.1(n).
"IRS" means the Internal Revenue Service.
"Know How" shall mean all drawings, prototypes, computer files (in
object and source code) and other such tangible materials.
"Knowledge" means actual knowledge after due inquiry and
investigation.
"Licensed Premises" is [to be provided by MTI].
"Lien" means any mortgage, pledge, hypothecation, right of others,
claim, security interest, encumbrance, lease, sublease, license,
occupancy agreement, adverse claim or interest, easement, covenant,
encroachment, burden, title defect, title retention agreement, voting
trust agreement, interest, equity option, lien, right of first refusal,
charge or other restrictions or limitations of any nature whatsoever,
including, but not limited to, such as may arise under any Contracts.
"Losses" is defined as any and all claims, liabilities, obligations,
losses, fines, costs, royalties, proceedings, deficiencies or damages
(whether absolute, accrued, conditional or otherwise and whether or not
resulting from third party claims), including out-of-pocket expenses and
reasonable attorneys' and accountants' fees incurred in the investigation
or defense of any of the same or in asserting any of their respective
rights.
"MTI" means Mechanical Technology Corporation, a New York corporation.
"Moral Rights" shall mean all rights of paternity or integrity
relating to each Work including, without limitation, all rights to be
identified as the author of the Work(s), to object to the modification
of any of the Work, and any similar rights existing under the judicial
or statutory laws of any country in the world or any treaty, regardless
of whether such right is denominated or generally referred to as
moral rights.
"Other Agreements" means the agreements and other documents and
instruments described in Section 4.
"Patent Rights" shall mean all Letters Patent, together with all
foreign Letters Patent corresponding thereto listed on Schedule 9 - Patent
Rights, further together with, foreign or domestic patent applications
corresponding thereto, excluding those listed on Schedule 9 - Patent Rights
and related thereto; patentable rights, excluding those listed on
<PAGE>
Schedule 9 - Patent Rights and related thereto, whether or not such
rights are registered, or applications for registration have been filed
with any Governmental Authority, and all proprietary: drawings, plans;
designs; quality control; machine and mechanical specifications;
engineering data; production techniques; installation data; application
data; flow charts; logic diagrams relating to the Patent, and any other
foreign or domestic patentable rights that may be obtained in respect
thereof; and any foreign or domestic reissues, reexaminations certificates,
extensions, substitutions, confirmations, divisions, and continuations or
continuations-in-part of any of the foregoing.
"Permitted Liens" means (i) 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 MTI's books in
accordance with GAAP; or (ii) Liens that, individually and in the
aggregate, do not and would not materially detract from the value of any
of the Assets or interfere with the conduct of the Fuel Cell Business by
MTI or the Company or as listed in Schedule 9 - Permitted Liens.
"Person" means any natural person, firm, partnership, association,
corporation, company, trust, business trust, Governmental Authority or
other entity.
"Release" means any releasing, disposing, discharging, injecting,
spilling, leaking, leaching, pumping, dumping, emitting, escaping,
emptying, seeping, dispersal, migration, transporting, placing and the
like, including without limitation, the moving of any materials through,
into or upon, any land, soil, surface water, ground water or air, or
otherwise entering into the environment.
"Remedial Action" means all actions required to (i) clean up, remove,
treat or in any other way remediate any Hazardous Substances; (ii) prevent
the release of Hazardous Substances so that they do not migrate or
endanger or threaten to endanger public health or welfare or the
environment; or (iii) perform studies, investigations and care related to
any such Hazardous Substances.
"Tax" means any federal, state, provincial, local, foreign or other
income, alternative, minimum, accumulated earnings, personal holding
company, franchise, capital stock, net worth, capital, profits, windfall
profits, gross receipts, value added, sales, use, goods and serves, excise,
customs duties, transfer, conveyance, mortgage, registration, stamp,
documentary, recording, premium, severance, environmental (including taxes
under Section 59A of the Code), real property, personal property, ad
valorem, intangibles, rent, occupancy, license, occupational, employment,
unemployment insurance, social security, disability, workers' compensation,
payroll, health care, withholding, estimated or assessment or deficiencies
thereof (including all interest and penalties thereon and additions thereto
whether dispute or not).
<PAGE>
"Tax Return" means any return, report, declarations, form, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Trade Secrets" shall mean methods, processes, know how and all other
proprietary data and information relating to MTI's conduct of the Fuel Cell
Business, products and/or services, including customer lists and business
methods.
"Trademark Rights" shall mean the foreign or domestically registered
trademarks described on Schedule 9 - Trademark Rights, which is attached
hereto and made a part hereof and constitutes all of the foreign or
domestically registered trademarks now held or at any time held by MTI and
used in the Fuel Cell Business, any trademark applications (state of
federal), common law trademark rights, and all other trademarks or service
marks now owned or ever owned by MTI and used at any time in connection
with its Fuel Cell Business, including the sale and promotion of its goods
and services, together with the goodwill of the business relating to such
trademarks or service marks.
"Transfer Taxes" is defined in Section 5.3.
"Treasury Regulations" means the regulations prescribed pursuant to
the Code.
"Withholding Taxes" is defined in Section 3.1(f)(i).
10. Miscellaneous.
10.1 Survival of Representations and Warranties, etc. The
representations and warranties contained in this Agreement shall survive
the execution and delivery of this Agreement, any examination by or on
behalf of the parties hereto and the completion of the transactions
contemplated herein, but only to the extent of the time periods specified
below:
(a) Except as set forth in clause (b) below, the representations
and warranties contained in Section 3.1 shall survive until the
earlier of (i) an initial public offering of equity interests in the
Company and in accordance with the requirements of the Securities Act
of 1933 or (ii) for a period of five (5) years following the
Contribution Date.
(b) The representations and warranties of MTI contained in
Section 3.1(f) shall survive as to any Tax covered by such
representations and warranties for so long as any statute of
limitations for such Tax remains open, in whole or in part, including
without limitation by reason of waiver of such statute of
limitations.
<PAGE>
All other agreements, covenants and obligations of the parties hereunder
shall survive the execution and delivery of this Agreement and the
completion of the transactions hereunder.
10.2 Expenses. Except as otherwise expressly provided herein, the
Company and MTI shall each pay their own expenses in connection with this
Agreement and the transactions contemplated hereby.
10.3 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.
10.4 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, or (c) sent by next-day or overnight
mail or delivery:
(i) if to the Company to,
Gary Mittleman
968 Albany-Shaker Road
Latham, New York 12110
with a copy to:
Chris Nern
2000 Second Avenue
Detroit, Michigan 48226
Ananth G. Ananthasubramaniam
2000 Second Avenue
Detroit, Michigan 48226
Cathy Hill
Whiteman Osterman & Hanna
One Commerce Plaza
Albany, New York 12260
<PAGE>
(ii) if to MTI,
Marty Mastriani
Mechanical Technology Inc.
968 Albany-Shaker Road
Latham, New York 12110
with a copy to:
Cathy Hill
Whiteman Osterman & Hanna
One Commerce Plaza
Albany, New York 12260
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. Post Office, if sent by registered or
certified mail, or (c) on the next business day, if sent by Federal
Express or similar overnight courier.
10.5 Entire Agreement. This Agreement (including the Schedules) and
the Other Agreements (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.
10.6 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.
10.7 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 Michigan, without giving effect to the
conflict of laws rules thereof. The Company and MTI hereby irrevocably
submit to the jurisdiction of the courts of the State of Michigan and the
Federal courts of the United States of America located in the State of
Michigan 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 for the interpretation or enforcement hereof or of any such
document, that it is not subject thereto or that such action, suite or
proceeding may not be brought or is not maintainable in said courts or that
the venue thereof or 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
<PAGE>
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 Michigan or Federal court. The Company and MTI
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 8.4 or in such other manner
as may be permitted by law, shall be valid and sufficient service thereof.
10.8 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respect heirs, successors
and permitted assigns.
10.9 No Third Party Beneficiaries. Nothing in this Agreement shall
confer any rights upon any person or entity other than the parties hereto
and their respective heirs, successors and permitted assigns.
10.10 Amendment; Waivers, etc. No amendment, modification or discharge
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
enforcement of the amendment, modification, discharge or waiver is sought.
Any such waiver shall constitute a waiver only with respect to the specific
matter described 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 exercise any right or privilege hereunder, shall be
construed as a waiver of any other breach or default of a similar nature,
or as a waiver of any of such provisions, rights or privileges hereunder.
The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies that any party may otherwise have at
law or in equity.
10.11 Further Assurances. In addition to MTI's obligations under
Section 1.3, each of the parties shall execute such documents and other
papers and perform such further acts as may be reasonably required or
desireable to carry out the provisions hereof and the transactions
contemplated hereby.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed the foregoing documents
as of the date and year first above written.
MECHANICAL TECHNOLOGY INCORPORATED
(a New York corporation)
By: /s/ Martin Mastroianni
__________________________________
Its: President
_________________________________
"MTI"
PLUG POWER, L.L.C.
(a Delaware limited liability company)
By: /s/ Larry Garberding
__________________________________
Its: Executive Vice-President
_________________________________
"Company"
<PAGE>
SCHEDULE 1.1(a) -- Assets
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 1.1(b) -- Inventory
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 1.1(d) -- Rights of MTI
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 1.1(e) - Credits, Prepaid Expenses, Deferred Charges, Advance
Payments, Security Deposits and Pre-Paid Items
None
<PAGE>
SCHEDULE 1.1(g) -- Intellectual Property
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 1.1(h) -- Interests in Government Contracts
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 1.1(l) -- Employee and Independent
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 1.2 -- Excluded Assets
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 1.4 - Assumed Liabilities
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 2.1(f) -- Employment Agreements
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 3.1(b)(ii) -- States in Which MTI is Qualified to do Business
Maryland
New York
<PAGE>
SCHEDULE 3.1(c) -- Required Consents and Government Approvals
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 3.1(d) -- Contributed Business Balance Sheet
Attached is a Contributed Business Balance Sheet as of 6/25/97
<PAGE>
Mechanical Technology Inc.
Fuel Cell Activity
Proforma Statement of New Assets at 5/23/97
Total To Plug Power
Assets -------- -------------
Cash $ 0 $ 0
(1) - Accounts Receivable 348,794 0
Inventory 77 77
Property, Plant & Equipment
at Acquisition Cost 463,532 463,532
Accumulated Depreciation (82,600) (82,600)
------- -------
Net Property, Plant, and Equipment 380,932 380,932
------- -------
Total Assets 729,803 381,009
Liabilities
(2) - Accounts Payable 52,191 10,585
Notes Payable 18,384 18,384
Accrued Vacation
Base Vacation 49,141 24,571
Purchased Vacation 2,150 2,150
(3) - Accrued FSA 2,662 2,662
------- -------
Total Liabilities 124,528 58,352
------- -------
Net Assets $ 605,275 $ 322,658
======= =======
(1) - Retained by MTI
(2) - Will transfer payables associated with transferred assets, materials,
and supplies.
For example, per the attached list, laboratory expenditures of $430.7
thousand had been authorized and $389 thousand recorded, as of 5/23/97.
Payables associated with the $389 thousand expenditure will be
transferred. Additional payables, including but not limited to
authorized but unexpended Plan Appropriations, will also transfer.
(3) - Subject to IRS regulations that may inhibit transfer of this liability.
Backlog $ 657,000 $ 657,000
======= =======
<PAGE>
SCHEDULE 3.1(e) -- Liabilities Relating to Business
See Schedule 1.4
See Schedule 3.1(g)
<PAGE>
SCHEDULE 3.1(f)(i) -- Taxes Contested in Good Faith
MTI pays a variety (sales, use franchise, property, and income, etc.) of
taxes at various and numerous levels of government including, but not
limited to, school, town, county, state, and federal.
In the ordinary course of business MTI is subject to audit by the various
taxing authorities.
MTI is currently involved in settling, in good faith, both New York State
corporation franchise tax and sales and use tax for several open years.
MTI also has contested Property taxes (Town of Colonie) for 1995/96 and
1996/97.
<PAGE>
SCHEDULE 3.1(f)(ii) -- Extension of Assessment on Taxes
In connection with both New York State corporation franchise tax and sales
and use tax audits, MTI has consented to extending the period of limitation.
<PAGE>
SCHEDULE 3.1(f)(iii) -- Disclosures Regarding Taxes and Withholding Taxes
See Schedule 3.1(f)(i) and Schedule 3.1 (f)(ii)
<PAGE>
SCHEDULE 3.1(f)(iv) -- Litigation or Administrative Appeals Pending In
Connection with Covered Taxes
See Schedule 3.1(f)(i) and Schedule 3.1(f)(ii)
<PAGE>
SCHEDULE 3.1(g) -- Changes in Conduct of Business Since Audited Balance
Sheet
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 3.1(h) -- Litigation, Citations, Fines or Penalties
None
<PAGE>
SCHEDULE 3.1(i)(i) -- Violations of Applicable Laws
None
<PAGE>
SCHEDULE 3.1(i)(ii) -- Governmental Approval and Consents Required for
Conduct of the Business
1. See Schedule 1.1(h)
2. See Schedule 3.1(c)
3. See Schedule 3.1(u)(i)
4. Received Approvals only form the Chase Manhattan Bank, NYSERDA and
LANL.
<PAGE>
SCHEDULE 3.1(i)(iii) -- Contracts with Governmental Authority
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 3.1(i)(iv) -- Disclosures Regarding Business
1. The Committee on Appropriations, Subcommittee on Interior and Related
Agencies, has completed a "mark-up" of the budget that includes the DOE
Office of Advanced Automobile Technologies Programs, and has moved $10
Million form the fuel cell area to the heavy duty diesel area. This
action would reduce the fuel cell effort form $29.6 Million to $19.6
Million. It is the understanding of many that this action is counter
to DOE plans and results form the interests of the diesel engine
technology community. it is difficult to understand the wisdom of
moving money to the giant diesel engine industry with its mature
technology while depriving the embryonic fuel cell industry with its
potential for break-through commercial technology that can rival the
emergence of the PC industry form the mainframe computer.
2. Phase II of the Ford contract will not be completed within the current
limits of the contract. -- Please the Addendum to Schedule 3.1(g)
<PAGE>
SCHEDULE 3.1(j) -- Operation of the Business
MTI has conducted the Business only through MTI. There are no exceptions.
<PAGE>
SCHEDULE 3.1(k) -- Permitted Liens
1. All government property as set forth on Schedule 1.1(a), items in
Government owned property room, Ford Phase I material, and Ford Phase
II material is owned exclusively by the Department of Energy and used
by MTI in connection with research and development activities.
2 Air Compressor Engineering lien, as assigned to LCA.
3. Limitations on Intellectual Property Rights, as set forth in Schedules
3.1(p)(iii)-(iv)
<PAGE>
SCHEDULE 3.1(l)(i) -- Contracts
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 3.1(l)(iii) -- Existing Default Under Contracts
None
<PAGE>
SCHEDULE 3.1(m) -- Territorial Restrictions
See Schedule 1.1(h)
<PAGE>
SCHEDULE 3.1(o) -- Suppliers to Fuel Cell Business
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 3.1(p)(i) -- Government Contracts
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 3.1(p)(iii) -- Exceptions to Patent Rights
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 3.1(p)(iv) -- Third Party and Government Rights
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 3.1(r)(i) -- Intellectual Property Owned by MTI
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 3.1(r)(ii) -- Infringement by Third Party of MTI Intellectual
Property Rights
None
<PAGE>
SCHEDULE 3.1(r)(ii) -- Infringement of Third Party Intellectual Property
Rights
None
<PAGE>
SCHEDULE 3.1(r)(v) -- Confidential Information
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 3.1(s) -- Insurance
This Schedule contains a complete list of all insurance policies maintained
by MTI. A summary description of each policy is attached. No claims have
been made by MTI's Fuel Cell Business during the past two years.
Coverage Claims (Past 2 Years)
-------- ---------------------
Directors & Officers Liability None
Excess Directors & Officers Liability None
Property & General Liability None
Air Craft Products Liability None
Workers Compensation None
Commercial Umbrella None
ERISA Bond None
Commercial Crime Policy None
Commercial Auto None
California Tax Bond None
Open Cargo Policy None
<PAGE>
SCHEDULE 3.1(u)(iii) -- Disclosure of Information Regarding Environmental
Conditions Relating to the Business, Assets or leased Property
See Attached Phase I (Hard Copy Previously Provided)
<PAGE>
SCHEDULE 3.1 (u)(iv) -- Other
None
<PAGE>
SCHEDULE 3.1(v) -- Employees of MTI
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
SCHEDULE 3.1(w) -- Employee Benefit Plans
Existing MTI Employee Benefit Plans are listed as follows:
1. 401(k) Savings Plan (Administered by Mass Mutual)
2. Medical Insurance (Four carriers are currently available at the
employees option)
- Capital District Physician's Health Plan (CDPHP)
- Blue Shield of Northeastern New York
- Mohawk Valley Physicians (MVP)
- Community Health Plan (CHP)
3. Dental Insurance (Offered through Phoenix Home Life. Employees with
CHP medical coverage may select CHP Dental)
4. Long Term Disability Insurance (Policy with UNUM)
5. Short Term Disability Insurance (Policy with Phoenix Home Life)
6. Flexible Spending Account (Administered by Lawrence Healthcare)
7. Life Insurance (Policy with Mass Mutual)
8. Vacation
- Earned Vacation
- Vacation Purchase
9. Short Term Personal Illness
10. Extended Personal Illness
11. Personal Business Time
12. Voluntary Furlough Program
13. Technology Division Profit Sharing Plan
14. Stock Incentive Plan
Profit Sharing Plan
Technology Division
1996 Fiscal Year
Effective: Fiscal Year 1995
Eligibility:
* All full time employees and scheduled employees who work more than
1000 hours. Distributions made on basis of individual salary as a
percentage of total salary.
* New hires may participate on a pro rata share basis at the
discretion of management at the time of hiring.
* Must be on the payroll on 9/30/96 to receive distribution.
<PAGE>
* Non-discretionary.
* Based upon earnings before taxes, but after corporate assessment.
Formula:
Earnings < Budget No Distribution
Earnings = Budget 10% Payment to Pool
Earnings > Budget 10% of amount = budget, +
15% of any additional earnings
Impact:
Budget = $200,000 income pre-tax
Earnings Distribution
-------- ------------
$ 200,000 $ 20,000
300,000 35,000
500,000 65,000
Comments:
* Plan is identical to 1995 approved plan
<PAGE>
SCHEDULE 3.1(x) -- Confidentiality
None
<PAGE>
SCHEDULE 3.1(y) -- Guarantees By Third Parties
Guaranty dated as of October 31, 1995, by MASCO Corporation, a Delaware
corporation, located at 21001 Van Born Road, Taylor, Michigan 48180, in
favor of Chemical Bank, to secure payment of a $4,000,000 Promissory Note
dated October 31, 1995 by Mechanical Technology Incorporated in favor of
Chemical Bank.
<PAGE>
SCHEDULE 9 -- COPYRIGHT, PATENT AND TRADEMARK RIGHTS
See Schedule 1.1(g)
<PAGE>
