SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. )

 

Filed by the registrant [ X ]

Filed by a party other than the registrant [ ]

 

Check the appropriate box:

[ ] Preliminary proxy statement

[ ] Confidential, for Use of the Commission Only (as permitted

by Rule 14a-6(e)(2))

[ X ] Definitive proxy statement

[ ] Definitive additional materials

[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

 

MECHANICAL TECHNOLOGY INCORPORATED

(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 

Payment of filing fee (Check the appropriate box):

[ X ] No fee required.

[ ] Fee computed on table below per Exchange Act rules 14a-6(i)(4)

and 0-11.

    1. Title of each class of securities to which transaction applies:
    2. Aggregate number of securities to which transaction applies:
    3. Per unit price or other underlying value of transaction computed
    4. pursuant to Exchange Act rule 0-11:

    5. Proposed maximum aggregate value of transaction:
    6. Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act

Rule 0-11(a)(2) and identify the filing for which the offsetting

fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

 
    1. Amount previously paid:
    2. Form, schedule or registration statement no.:
    3. Filing party:
    4. Date filed:

 

 

 

MECHANICAL TECHNOLOGY INCORPORATED

431 NEW KARNER ROAD

ALBANY, NEW YORK 12205

 

February 1, 2002May 12, 2003

 

Dear Stockholder:

You are cordially invited to attend the 20022003 Annual Meeting of Stockholders (the Annual Meeting) of Mechanical Technology Inc., a New York corporation (the Company), to be held on Thursday, March 7, 2002June 19, 2003 at 10:00 a.m., local time, at the Albany Marriott, 189 WolfThe Desmond, 660 Albany-Shaker Road, Albany, New York.

The Annual Meeting has been called for the purpose of (i) electing twothree Directors, each for a three-year term, (ii) to ratify the appointment of PricewaterhouseCoopers LLP as independent auditors for the Company for the year ending December 31, 2003, and (ii)(iii) considering and voting upon such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof.

The Board of Directors has fixed the close of business on January 8, 2002April 21, 2003 as the record date for determining stockholders entitled to notice of, and to vote at, the Annual Meeting and any adjournments or postponements thereof.

The Board of Directors of the Company recommends that you vote FOR the election of the twothree nominees as Directors of the Company.

IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.

VOTES WILL BE TABULATED BY INSPECTORS OF ELECTION APPOINTED IN ACCORDANCE WITH THE APPLICABLE PROVISIONS OF THE NEW YORK BUSINESS CORPORATION LAW.

 

Sincerely,

 

 

Dr. William P. AckerDale W. Church

PresidentChairman and CEO

MECHANICAL TECHNOLOGY INCORPORATED

431 NEW KARNER ROAD

ALBANY, NEW YORK 12205

(518) 533-2200

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

NOTICE IS HEREBY GIVEN that the 20022003 Annual Meeting of Stockholders of Mechanical Technology Inc., a New York corporation (the Company), will be held on Thursday, March 7, 2002,June 19, 2003, at 10:00 a.m., local time, at the Albany Marriott, 189 WolfThe Desmond, 660 Albany-Shaker Road, Albany, New York (the Annual Meeting) for the purpose of considering and voting upon:

1.

  1. The election of twothree Directors, each to hold office until the Company's 20052006 annual meeting of stockholders and until such director's successor is duly elected and qualified.

    1. The ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors for the Company for the year ending December 31, 2003.
    2. Such other business as may properly come before the Annual Meeting and any adjournments or postponements thereof.

    The Board of Directors has fixed the close of business on January 8, 2002April 21, 2003 as the record date for determination of stockholders entitled to notice of, and to vote at, the Annual Meeting and any adjournments or postponements thereof. Only holders of common stock of record at the close of business on that date will be entitled to notice of, and to vote at, the Annual Meeting and any adjournments or postponements thereof.

    In the event that there are not sufficient shares to be voted in favor of any of the foregoing proposals at the time of the Annual Meeting, the Annual Meeting may be adjourned in order to permit further solicitation of proxies.

     

    By Order of the Board of Directors

    Catherine S. Hill

    Corporate Secretary

     

     

    Albany, NY

    February 1, 2002May 12, 2003

    WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IN THE UNITED STATES. VOTES WILL BE TABULATED BY INSPECTORS OF ELECTION APPOINTED IN ACCORDANCE WITH THE APPLICABLE PROVISIONS OF THE NEW YORK BUSINESS CORPORATION LAW.

     

     

     

    MECHANICAL TECHNOLOGY INCORPORATED

    431 NEW KARNER ROAD

    ALBANY, NEW YORK 12205

    PROXY STATEMENT

    This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of proxies to be voted at the Annual Meeting of Shareholders of Mechanical Technology Incorporated to be held on March 7, 2002,June 19, 2003, and any adjournment thereof, at The Albany Marriott Hotel, Northway Exit 4, 189 Wolf Road,Desmond, Albany, New York.

    The shares represented by properly completed proxies received prior to the vote will be voted FOR 1) the election of directors, unless specific instructions to the contrary are given or an abstention from voting is indicated by the shareholder.shareholder; and 2) the ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors. The proxy may be revoked any time before it is exercised.

    This Proxy is first being mailed to shareholders on or about February 1, 2002.May 12, 2003. At the close of business on January 8, 2002April 21, 2003 the Company had outstanding 35,484,76027,639,135 shares of Common Stock. Each share of Common Stock entitles the holder thereof to one vote on the matters to be voted upon by such shareholders.shareholder. A majority of the outstanding shares, present in person or by proxy, will constitute a quorum at the meeting. Abstentions and broker non-votes are counted for purposes of determining whether a quorum is present but do not affect the outcome of the election. A plurality vote is required for the election of Directors. An affirmative vote of a majority of the votes cast is necessary to approve all other actions. Votes will be tabulated by inspectors of election appointed in accordance with the applicable provisions of the New York Business Corporation Law.

    Householding of Annual Meeting Materials

    Some banks, brokers and other nominee record holders may be participating in the practice of "householding" proxy statements and annual reports. This means that only one copy of the Corporation's Proxy Statement or Annual Report to Stockholders may have been sent to multiple stockholders who share an address. The Corporation will promptly deliver a separate copy of either document to any stockholder upon written or oral request to the Investor Relations Department of the Company, Mechanical Technology Incorporated, 431 New Karner Road, Albany, New York 12205, telephone: (518) 533-2200. Any stockholder who wants to receive separate copies of the Proxy Statement or Annual Report to Stockholders in the future, or any stockholder who is receiving multiple copies and would like to receive only one copy per household, should contact the stockholder's bank, broker, or other nominee record holder, or the stockholder may contact the Company at the above address and phone number.

    ELECTION OF DIRECTORS

    At the Annual Meeting of Shareholders, twothree Directors are to be elected, each to hold office until the expiration of his or her term and until a successor shall be elected and shall qualify. The Directors serve staggered terms.

    George McNameeDale Church, Edward Dohring and Dennis O'ConnorDavid Eisenhaure are nominated to serve three-year terms, expiring 2005; Dale Church, Edward Dohring2006; Walter Robb and David EisenhaureBeno Sternlicht are in the second year of three-year terms, expiring 2003; Alan Goldberg, Walter Robb and Beno Sternlicht are2004; Dennis O'Connor is in the first year of a three-year terms,term, expiring 2004.2005. Management's nominees for Directors, together with certain information concerning them, are on the

    the following pages. In the event that any of such nominees shall become unavailable for any reason, it is intended that proxies will be voted for substitute nominees designated by management.

    CERTAIN INFORMATION REGARDING NOMINEES

    Mr. McNamee, 55, Church,63,a Director since 1997 became the Chief Executive Officer and Chairman of the Company's Board since 1996, and Chief Executive Officer since April 1998.on October 22, 2002. Mr. McNamee is and has been theChurch also became Chairman of the Board of First Albany CompaniesMTI MicroFuel Cells Inc. ("FAC") since 1985 (see "Securities Ownership of Certain Beneficial Owners", below). Mr. McNamee also serves as Chairmana subsidiary of the Board of Plug Power Inc., a position he has held since Plug Power LLC was formed in 1997. He is a member of the Board of Directors of MapInfo Corporation and The Meta Group, Inc. He isCompany, on the Board of Directors of the New York Stock Exchange, and the New York Conservation Education Fund.

    Mr. O'Connor, 62, a Director since 1993, is a registered patent attorney, and from 1984 until his retirement in June 2000, was the Director of New

    Products and Technology for Masco Corporation, a diversified manufacturer

    of building, home improvement, and other specialty products for the home

    and family.

    Management recommends that you vote FOR election of the two nominees listed above as Directors of the Company.

    CERTAIN INFORMATION REGARDING INCUMBENT DIRECTORS

    October 22, 2002. Mr. Church 62, a Director since 1997, has practiced law in private practice, government, and corporate environments for over 30 years with specialties in U.S. and international government contracting, developing companies, mergers and acquisitions, and joint ventures. He has been the Chief Executive Officer of Ventures & Solutions LLC since 1996, andwas the Chairman and CEO of the Intelligent Inspection Corporation sincefrom 1999 and,

    prior to that time,April 2003, and was a partner in the law firm of McDermott, Will & Emery from 1993 to 1997. He served as General Counsel to the American

    Electronics Association from 1994 to 1998. His previous experience includes

    working for the U.S. Government's Central Intelligence Agency and Department of Defense and as corporate counsel to establish several companies in the Silicon Valley of California. He is a TrusteeDirector of the National SecurityDefense Industrial Association and is a director of various private corporations.

    Mr. Dohring, 68, a Director since 1997, became President69, is currently Chairman of the Board of MTI Instruments, Inc., a majority-owned subsidiary of the Company, onwhere he served as President from April 1,

    2000. 2000 to April 5, 2002, and has been a Director of Mechanical Technology Inc. since 1997. Mr. Dohring retired December 31, 1998 from Silicon Valley Group, Inc. ("SVG") where he had been Vice President since July 1992 and President

    of its SVG Lithography Systems, Inc. ("SVGL") unit since October 1994. From June 1992 to October 1994, he served as President of SVG's Track Systems Division. He joined SVG from Rochester Instrument Systems, Inc., where he served as President from April 1989 to June 1992. He also held management positions with General Signal, CVC Products, Bendix, Bell & Howell and

    Veeco Instruments. He is a member of the Board of Directors of Tegal Corporation, and has served as a director of Semiconductor Equipment & Materials International (SEMI) and International Disc Equipment Manufacturers Association (IDEMA). He currently servesser ves on the State University of New York Maritime College Board of Directors and is a trustee of the College.

    CERTAIN INFORMATION REGARDING INCUMBENT DIRECTORS (Continued)

    Mr. Eisenhaure, 56,57, a Director since 2000, has served as President, Chief Executive Officer and Chairman of the Board of Directors of SatCon Technology Corporation ("SatCon") since 1985. Prior to founding SatCon, Mr. Eisenhaure was associated with the Charles Stark Draper Laboratory, Incorporated, from 1974 to 1985, and with its predecessor, the Massachusetts Institute of Technology's Instrumentation Laboratory, from 1967 to 1974. In addition to his duties at SatCon, Mr. Eisenhaure holds an academic position at the Massachusetts Institute of Technology ("M.I.T."), serving as a lecturer in the

    Department of Mechanical Engineering. He also serves on the Board of Directors of Beacon Power Corporation. Mr. Eisenhaure became a Director of the Company when he was selected by SatCon as its designee on the Company's Board of Directors pursuant to the agreements entered into in connection with the October 1999 transactions between SatCon and the Company whereby the Company sold its subsidiary,

    2

    Ling Electronics, to SatCon and agreed to invest approximately $7 million in SatCon.

    Management recommends that you vote FOR election of the three nominees listed above as Directors of the Company.

    CERTAIN INFORMATION REGARDING INCUMBENT DIRECTORS

    Mr. Goldberg, 56,O'Connor, 63, a Director since 1996, has been1993, is a registered patent attorney, and from 1984 until his retirement in June 2000, was the PresidentDirector of FAC since 1993New

    Products and Technology for Masco Corporation, a Director since 1985 (see "Securities Ownership diversified manufacturer

    of Certain Beneficial Owners," below). Mr. Goldberg currently serves onbuilding, home improvement, and other specialty products for the Board of Directors of SatCon Technology Corporation home

    and Beacon Power Corporation. He is active in industry and civic organizations and serves on the board of several private corporations.family.

    Dr. Robb, 73,75, a Director since 1997, has been a management consultant and President of Vantage Management, Inc., since 1993. Prior to that, Dr. Robb was with General Electric Company ("GE") in a number of executive positions. He was Senior Vice President for Corporate Research and Development from 1986 until his retirement on December 31, 1992, directing the GE Research and Development Center, one of the world's largest and most diversified industrial laboratories, and serving on GE's Corporate Executive Council. He has served on the Board of Directors of Plug Power Inc., since its formation infrom 1997 through October 9, 2002, and is a Director of Celgene Corp. and a number of privately owned companies.

    Dr. Sternlicht, 73,75, a Director since 1996 and a co-founder of the Company, has been President of Benjosh Management Corporation,Assoc., a management firm in New York City, since 1976; President of AMEAST Corporation, a consulting and trading corporation, since 1976; and President of Arben International,LLC, a distribution and manufacturing firm for products for the furniture and home décor industry, with offices in MoscowRussia, China and New York City,the United States, since 1994. He has also served as Chairman of the Board of Comfortex Corp., a window shade designerdeveloper and manufacturer, from 1992 until its sale to Hunter Douglas in 1999, and currently serves as stockholder representative to the Board of Directors. Dr. Sternlicht was a Director of the Company from 1961 to 1992, and prior to 1985 held a numberthe position of positions with the Company. At the time of his departure from the Company in 1985, he served as Technical Director and Vice Chairman of the Board of Directors.Chairman. Dr. Sternlicht was one of the founders of VITA Volunteers in Technical Assistance, , and has served on various advisory committees of NASA, DOE and the Commerce Department under Presidents Carter, Reagan and Bush, and served as an Advisor on Energy to the People's Republic of China, Israel and India.

     

    COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS

    The Board of Directors held 139 meetings during fiscal 2001.2002. All directors attended at least 75% of all of the Board and committees meetings held during fiscal 2001.2002. The Board of Directors has established an Audit Committee and a Compensation Committee. The Company does not have a standing Nominating Committee of the Board of Directors.

    Audit Committee

    The Audit Committee currently consists of Messrs.Mr. O'Connor (Chairman), ChurchMr. Dohring and Goldberg.Dr. Robb. Prior to Mr. Church's appointment as Chairman and CEO

    3

    of the Company on October 22, 2002 and prior to Mr. Goldberg's resignation on December 31, 2002, they served as members of the Audit Committee. The Board has determined that the members of the Audit Committee satisfy all requirements as to independence, financial literacy and experience, except that Mr. Goldberg, as a director of First Albany Companies Inc., an affiliate of the Company, and Mr. Dohring as former President (April 1, 2000 to April 5, 2002) of MTI Instruments, Inc., a subsidiary of the Company, may not behave been deemed independent as defined in Nasdaq Marketplace Rule 4200(a)(14). Based on Mr. Goldberg'sDohring's extensive financial and business experience and his unique knowledge and understanding of the Company and its industry, the Board of Directors determined that Mr. Goldberg'sDohring's membership on the Audit Committee is in the best interests of the Company and its stockholders.shareholders.

    The Audit Committee met six times during 2002. The responsibilities of the Audit Committee are set forth in the Charter of the Audit Committee, which was adopted by the Board of Directors of the Company on March 30, 2000. The Committee, among other matters, is responsible for the annual recommendationappointment of the independent accountants to be appointed by the Board of Directors as the auditors of the Company, and reviews the arrangements for and the results of the auditors' examination of the Company's books and records, auditors' compensation, internal accounting control procedures, and activities. The Audit Committee also reviews the Company's accounting policies, control systems and compliance activities. The Committee also reviews the Charter of the Audit Committee. The

    Audit Committee met four times during fiscal 2001. ThisReport

    Management is responsible for the Company's internal controls and the financial reporting process. The Company's independent auditor's, PricewaterhouseCoopers LLP ("PwC"), are responsible for performing an independent audit of the Company's financial statements in accordance with generally accepted auditing standards and to issue a report on those financial statements.

    The Board of Directors has not yet designated any members as Audit Committee Financial Experts under the Committee's activities relating to Fiscal 2001.

    rules of the SEC adopted in January 2003, which will be effective later in the year. The Board will consider this matter during 2003 as a part of its ongoing governance review.

    Review of Audited Financial Statements with Management

    The Audit Committee reviewed and discussed the Company's audited financial statements for Fiscalthe year ended December 31, 2002 and the three months ended December 31, 2001 ("the Transition Period"), with the management of the Company.

    Review of Financial Statements and Other Matters with Independent Accountants

    The Audit Committee has discussed with the independent auditorsPwC the matters required to be discussed by SAS 61 (Codification of StatementsStatement on Auditing Standards AU Section 380), as may be modified or supplemented. TheNo. 61,"Communication with Audit Committees." In addition, the Audit Committee has received the written disclosures and the letter from the independent accountantsPwC required by Independence Standards Board Standard

    No. 1, (Independence Standards Board Standard No. 1, Independence"Independence Discussions with Audit Committees), as may be modified or supplemented,Committees," and has discussed with the independent accountantsPwC the independent accountants' independence.independence from the Company and its management.

    4

    Recommendation that Financial Statements be Included in Annual Report

    BasedIn reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for Fiscal 2001the year ended

    December 31, 2002 for

    filing with the Securities and Exchange Commission.

    Audit Committee:

    Mr. E. Dennis O'Connor (Chairman)

    Mr. Edward A. Dohring

    Dr. Walter L. Robb

    Fees

    During Fiscal 2001,Aggregate fees for professional services rendered for the Company paidby PwC as of or for the followingyear ended December 31, 2002, for the three months ended December 31, 2001 ("the Transition Period") and the year ended September 30, 20011.

      

    Three Months

     
     

    Year Ended

    Ended

    Year Ended

     

    December 31,

    December 31,

    September 30,

     

    2002

    2001

    2001

    Audit

    $77,900

    $ 45,345

    $72,250

    Audit Related

    4,725

    41,015

    11,899

    Tax

    9,800

    88,170

    26,765

    All Other

    -

    -

    -

    Total

    $92,425

    $174,530

    $110,914

    (1)The aggregate fees included in Audit are fees billedfor the fiscal periods for the audit of the registrant's annual financial statements and review of financial statements and statutory and regulatory filings or engagements. The aggregate fees included in each of the other categories are fees billedin the fiscal periods.

    TheAudit fees for the year ended December 31, 2002, the Transition Period and the year ended September 30, 2001, respectively, were for professional services rendered for the audits of the consolidated financial statements of the Company, reviews of quarterly consolidated financial statements, NIST contract audit, and audit of 401(K) plan and its associated Form 11-K filing.

    TheAudit Relatedfees as of the year ended December 31, 2002, the Transition Period and the year ended September 30, 2001, respectively, were for assurance and related services related to PricewaterhouseCoopers, LLP,consultations concerning financial accounting and reporting standards.

    TheTax fees as of the Company's independent accountants:

    Audityear ended December 31, 2002, the Transition Period and Quarterly Review Fees: $79,279the year ended September 30, 2001, respectively, were for services related to tax compliance, including the preparation of tax returns and claims for refund; and tax planning and tax advice, including assistance with and representation in tax audits and- advice related to proposed transactions.

    All Other Fees: 31,635

    The Audit Committee has considered whether the provision of the non-audit services above is compatible with maintaining the auditors' independence.independence, and has concluded that it is.

    5

    Other MattersAudit Committee Pre-Approval Policies and Procedures

    In accordance withThe Company's Audit Committee has not yet adopted/enacted pre-approval policies and procedures for audit and non-audit services. However, for the rulesyear ended December 31, 2002, the Audit Committee pre-approved audit and tax fees. Therefore, the proxy disclosure does not include pre-approval policies and procedures and related information. The Company is early-adopting components of the Securities and Exchange Commission,proxy fee disclosure requirements; the foregoing information, which is required by paragraphs (a) and (b) of Regulation S-K Item 306, shallrequirement does not be deemed to be soliciting material, or to be filed withbecome effective until periodic annual filings for the Commission or subject to the Commission's Regulation 14A, other than as provided in that Item, or to the liabilities of section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically requests that the information be treated as soliciting material or specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

    Audit Committee:

    E. Dennis O'Connor (Chairman)

    Dale W. Church

    Alan P. Goldberg

    first fiscal year ending after December 15, 2003.

    Compensation Committee

    Drs. Robb and Sternlicht and Mr. Goldberg and Dr. SternlichtO'Connor currently serve as the members of the Company's Compensation Committee. Mr. Goldberg served as a member of the Compensation Committee until his resignation from the Board of Directors on December 31, 2002. The Compensation Committee was established to set and administer the policies that govern annual stock and non-stock compensation for the Company's executives, review general compensation levels for other employees as a group and review and recommend policies regarding the Company's compensation and incentive plans. After review and approval by the Compensation Committee, issues pertaining to executive compensation and compensation policies are reported to the Board of Directors. The Compensation Committee met one timetwo times during fiscal 2001.2002.

     

    REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORSREPORT ON EXECUTIVE COMPENSATION

    The Corporation's executive compensation program is administered by the Compensation Committee. This committee, composed of Drs. Robb and Sternlicht and Mr. O'Connor, is responsible for establishing the policies that govern base salary, as well as short and long-term incentives for the Company's senior management team. Mr. Goldberg served on the Compensation Committee reviews and evaluates individual executive officers and determinesuntil his resignation from the Board on December 31, 2002.

    The Committee believes that the primary objectives of the Company's compensation for each executive officer. In general, compensation is designedpolicies are to attract and retain a management team that can effectively implement and motivate a superior executive team, reward individual performance, relateexecute the Company's strategic business plan. These compensation policies include (i) an overall management compensation program that is competitive with management compensation programs at companies of similar sizes and lines of business; and, (ii) long-term incentive compensation in the form of stock options which will encourage management to Company goals and objectives andcontinue to focus on stockholder return.

    The Committee's goal is to use compensation policies to closely align the interests of management with the executive officers with thoseinterests of stockholders in building long-term value for the Company's stockholders. The Committee reviews its compensation policies from time to time in order to determine the reasonableness of the Company's stockholders.compensation programs and to take into account factors which are unique to the Company.

    Compensation forAs described below, Messrs. Church and Soucy and Drs. Acker and Gottesfeld have signed Employee Agreements with the Named Executive Officers during Fiscal 2001 includedCompany defining the employee's duties, salary, severance arrangements and bonus. Base salary and in certain circumstances cash bonuses were determined by employment arrangement.restrictions on competition with the Company. For more detailed information on employment arrangements, (seesee "Employment Agreements" below).below.

    For fiscal 2001, all bonuses other than guaranteed6

    Base Salary. The Committee's goal is not only to assure a base level sufficient to attract and retain key executives, but also to balance that goal with long-term incentives which assure that a significant portion of annual compensation is dependent upon the performance of the Company.

    Bonus. No bonuses were paid to Messrs. Church, Chaves or Soucy or to Dr. Acker in Fiscal 2002. Dr. Gottesfeld was paid a bonus in Fiscal 2002.

    Stock Options. In examining stock option, equity incentive, phantom stock and other plans typically provided to senior management in publicly held companies, the Compensation Committee determined that the Company should provide equity incentives to its senior management. Stock options have been issued in recognition of the performance of the senior management team to date in improving the Company's financial position, establishing important strategic relationships with distributors, and developing technology and bringing to market innovative new products. The Committee also believes that the granting of stock options is a valuable incentive tool for management to continue to focus on realizing strategic goals and in building value for all stockholders. Most of the stock option grants vest over a multi-year period.

    Compensation of Chief Executive Officer.Dale W. Church became the Company's Chief Executive Officer on October 22, 2002 and received salary compensation of $23,077 for the period October 22 to December 31, 2002. The compensation for Mr. Church was based upon careful analysis of other comparable public companies' chief executive officer's compensation and the performance of the Company, including progress on the specific contributions made duringdevelopment and commercialization of MTI Micro's direct methanol micro fuel cell system, revenue generation at MTI Instruments and Mr. Church's efforts in identifying potential funding sources for the year toward the Company's goals established at the beginningCompany and its subsidiaries.

    Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the yearInternal Revenue Code generally disallows a tax deduction to public companies for compensation over $1 million paid to the Corporation's Chief Executive Officer and the executive's responsibilities. Cashfour other most highly compensated executive officers. Qualifying performance-based compensation will not be subject to the deduction limit if certain requirements are met. The Committee periodically reviews the potential consequences of Section 162(m) and stock bonuses are generally paid a month aftermay structure the executive's anniversary date or a month afterperformance-based portions of its executive compensation to comply with certain exemptions to Section 162(m). However, the executive's review.

    The CompensationCommittee reserves the right to use its judgment to authorize compensation payments that do not comply with the exemptions to Section 162(m) when the Committee believes that with current salary, bonussuch payments are appropriate and stock option grants, which generally vest over a four-year period,in the executive team is properly motivated to achieve best interests of

    the short and long-term goals ofstockholders, after taking into consideration changing business conditions or the Company.officer's performance.

     

    CHIEF EXECUTIVE OFFICER COMPENSATION

    George C. McNamee became Chief Executive Officer of the Company on April 15, 1998. Mr. McNamee receives no salary or bonus from the Company; however, he does receive stock options as a member of the Board of Directors of the Company.

    Dr. William P. Acker, President and Chief Technology Officer, has an employment agreement with us that provides a base salary of $175,000 and a bonus of not less than $25,000 per year. For fiscal 2001, based on the achievement of goals established for the Company, Dr. Acker received a bonus of $75,000 (paid in fiscal 2002) as well as options for 100,000 shares. He will also receive 100% of his base salary and benefits for one year, subject to reduction for any amounts earned in other employment, if we terminate him without cause. This agreement continues unless modified.

     

    Compensation Committee

    Mr. Alan P. GoldbergDr. Walter Robb

    Dr. Beno Sternlicht

    Mr. E. Dennis O'Connor

    7

    COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

    In fiscal 2001,2002, the Compensation Committee, consisted of Drs. Robb and Sternlicht and Mr. Goldberg and Dr. Sternlicht, neitheruntil his resignation from the Board of Directors on December 31, 2002, none of whom are employees of the Company. Mr. Goldberg is the President and a member of the Board of Directors of FAC.First Albany Companies Inc. For information concerning the committee members' relationship to the Company see "Securities Ownership of Certain Beneficial Owners" and "Certain Relationships and Related Transactions."

    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    Management believes transactions among related parties are as fair to the Company as obtainable from unaffiliated third parties.

    On December 20, 2002, the Company and First Albany Companies Inc.

    ("FAC") completed a share exchange transaction in which FAC exchanged 8 million shares of the Company's common stock owned by FAC for 2,721,088 shares of Plug Power common stock owned by the Company. As a condition of the exchange, FAC agreed not to sell its remaining shares of the Company for two years ("lock-up agreement"). MTI waived this lock-up agreement in late December 2002 to permit FAC to gift shares. The Company recorded a non-cash gain on the exchange transaction of $8.006 million and recorded treasury stock at a non-cash cost of $13.606 million. As of December 31, 2002, FAC owns 2,991,040 shares, or approximately 10.83%, of the Company.

    As a result of the transaction, the Company is no longer required to account for its remaining holdings in Plug Power under the equity method of accounting. Under the equity method of accounting, the Company was required to report its proportionate share of Plug Power's financial results.

    During the twelve months ended December 31, 2002, FAC sold 662,705 shares of the Company's common stock in the public markets.

    As of December 31, 2002, Mechanical Technology owns approximately 4.58% of SatCon's outstanding stock. David B. Eisenhaure, a Director of the Company, is President, Chief Executive Officer and Chairman of the Board of Directors of SatCon.

    SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

    Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's directors, executive officers and holders of more than 10% of the Company's Common Stock to file with the SEC initial reports of ownership of the Company's Common Stock and other equity securities on a Form 3 and reports of changes in such ownership on a Form 4 or Form 5. Officers, directors and 10% stockholders are required by SEC regulations to furnish

    the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on a review of the Company's records and written representations by the persons required to file such reports, all filing requirements of Section 16(a) were satisfied with respect to the Company's most recent fiscal year, except for an amended Form 4Calendar year.

    8

    RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

    The Audit Committee annually considers and recommends to the Board the appointment of the Company's independent auditors.

    The persons named in the enclosed Proxy will vote to ratify the appointment of PricewaterhouseCoopers LLP ("PwC") as independent auditors for the monthyear ending December 31, 2003 unless otherwise directed by the stockholders. A representative of April 2000 filedPwC is expected to be present at the Annual Meeting and will have the opportunity to make a statement and answer appropriate questions from stockholders. If the stockholders do not ratify the appointment of PwC as the Company's independent auditors, the appointment of such independent auditors will be reconsidered by Mr. Goldberg on December 20, 2001.the Audit Committee and the Board.

     

    EXECUTIVE COMPENSATION

    Summary Compensation Table

    The following table sets forth information concerning the annual and long-term compensation for services rendered to the Company'sCompany for the years ended December 31, 2002 and 2001, and the year ended September 30, 2001, of those persons who were at December 31, 2002 (i) the Chief Executive Officer of the Company and (ii) the four most highly compensated executive officers or key employees (collectively, the "Named Executive Officers"Employees") for the fiscal years ended September 30, 2001, 2000 and 1999.

     

    SUMMARY COMPENSATION TABLE

     

    ANNUAL COMPENSATION

    LONG-TERM COMPENSATION

    NAME AND POSITION OF PRINCIPAL

    FISCAL

    YEAR

    SALARY

    BONUS

    SECURITIES

    UNDERLYING

    OPTIONS

    (#)

    ALL

    OTHER

    COMP

    George C. McNamee,

    Chief Executive Officer

    2001

    2000

    1999

    $ -

    -

    -

    $ -

    -

    -

    10,000

    30,000

    90,000(1)

    $ -

    -

    -

    Dr. William P. Acker, President & Chief Technology Officer

    2001

    2000(2)

    $175,000

    $ 50,481

    $75,000(3)

    -

    100,000

    175,000

    $ 2,827(4)

    -

    Dr. Judith A. Barnes,

    Vice President & Chief Marketing Officer

    2001

    2000(2)

    $175,000

    100,962

    $125,000

    62,500

    40,000

    140,000

    $ -

    -

    Dr. Shimshon Gottesfeld

    Vice President of R&D and Chief Technology Officer

    MTI MicroFuel Cells Inc.

    2001(2)

    $148,846

    $124,858(5)

    50,000

    $22,708(4)(6)

    Catherine S. Hill,

    Vice President of

    Corporate Development

    2001

    2000(2)

    $150,000

    86,539

    $100,000

    -

    40,000

    140,000

    $ 1,846(4)

    -

    SUMMARY COMPENSATION TABLE

    ANNUAL COMPENSATION LONG-TERMCOMPENSATION

    NAME AND

    TWELVE

    SALARY

    BONUS

    SECURITIES

    RESTRICTED

    ALL

    PRINCIPAL POSITION

    MONTH

    UNDERLYING

    STOCK

    OTHER

    FISCAL

    OPTIONS

    AWARD

    COMPENSATION

    PERIOD ENDED

    (#)

    Dale W. Church,

    12/31/20021

    $ 23,077

    $ -

    120,0002

    $50,0003

    $ -

    Chief Executive Officer

    Dr. William P. Acker,

    12/31/2002

    $193,750

    $ -

    250,0004

    $ -

    $ 6,8275

    President and CEO

    12/31/20016

    $175,000

    $ 75,000

    -

    $ -

    $ 2,8275

    MTI MicroFuel Cells Inc.

    09/30/2001

    $175,000

    $ -

    100,000

    $ -

    $ 2,8275

    09/30/20001

    $ 50,481

    $ -

    175,000

    $ -

    $ -

    Denis P. Chaves

    12/31/2002

    $177,585

    $ -

    -

    $-

    $ 7,1035

    Vice President and

    12/31/20016

    $170,000

    $ 22,500

    -

    $ -

    $ 6,8005

    General Manager

    09/30/2001

    $167,500

    $ 20,000

    25,000

    $ -

    $ 6,7005

    MTI Instruments, Inc.

    09/30/2000

    $160,000

    $ 25,000

    30,000

    $ -

    $ 6,1545

    Dr. Shimshon Gottesfeld

    12/31/2002

    $180,000

    $ 40,000

    50,0007

    $ -

    $ 7,7728

    Vice President of R&D and

    12/31/20016

    $180,000

    $ 79,1149

    -

    $ -

    $35,16411

    Chief Technology Officer

    09/30/20011

    $148,846

    $114,20210

    50,000

    $ -

    $33,36412

    MTI MicroFuel Cells Inc.

    Alan J. Soucy

    12/31/20021

    $121,154

    $ -

    325,00013

    $ -

    $ -

    Chief Operating Officer

    MTI MicroFuel Cells Inc.

     

     

    Summary Compensation Table(Continued)

    1. Reflects awards under the Directors' Stock Option Program for services as a Director.
    2. 9

      1 Represents compensation for a portion of the fiscal year based upon employment dates:

    3. Dr. Acker joined the Company as President and Chief Technology Officer on June 19, 2000.

      Dr. Barnes
      Mr. Church joined the Company as Vice PresidentChairman and Chief MarketingExecutive Officer on March 7, 2000.October 22, 2002.
      Dr. Gottesfeld joined MTI MicroFuel Cells Inc. as Vice President of Research and Development and Chief Technology Officer on December 4, 2000.

      Ms. HillMr. Soucy joined MTI MicroFuel Cells Inc. as Chief Operating Officer on August 5, 2002.

      2 Represents 45,000 options awarded under the Directors' Stock Option Program for services as a Director and 75,000 options to purchase shares of MTI MicroFuel Cells Inc, a subsidiary of the Company.

      3 Represents 50,000 shares of restricted common stock of the Company as Vice Presidentvalued at $1 per share based on the market price on the date of Corporate Development on March 7, 2000.issue.

    4. Bonus includes amount paid in Fiscal 2002 related4 Represents 250,000 options to services performed in Fiscal 2001.
    5. purchase shares of MTI MicroFuel Cells Inc, a subsidiary of the Company.

    6. 5 Represents Company matching contributions of $1.00 for each $1.00 contributed by the named individual to the 401(k) Savings Plan up to a
      maximum of 4% of base pay.

    7. 6 In 2002, the Company changed its fiscal year-end from September 30 to December 31, effective with the calendar year beginning January 1, 2002. The compensation information for the twelve-month fiscal period ended December 31 includes the three-month transition period from October 1, 2001 to December 31, 2001 which preceded the start of fiscal 2002 and excludes the three-month period from October 1, 2000 to December 31, 2000.

    8. Includes7 Represents 50,000 options to purchase shares of MTI MicroFuel Cells Inc, a subsidiary of the Company.

      8 Represents Company matching contribution of $4,846 to the 401(k) Savings Plan and $2,926 in moving expenses reimbursement.

      9Represents bonus for the purchase of 100,000 shares of MTI MicroFuel Cells Inc., a subsidiary of the Company, Class A Preferred Stock totaling $79,114. This bonus is also reflected in Note 10.

      10 Represents commencement bonus of $35,088, bonus for gross up of taxes for relocation expenses of $10,656 and bonus for the purchase of 100,000 shares of MTI MicroFuel Cells Inc. , a subsidiary of the Company, Class A Preferred Stock oftotalling $79,114.

    9. The $79,114 bonus is also reflected in Note 9.

    10. 11 Represents Company matching contributions of $4,292 to the 401(k) Savings Plan, $20,216 in moving expenses paid by the Company and bonus for gross up of taxes for relocation expenses of $10,656.

      12 Represents Company matching contributions of $2,492 to the 401(k) Savings Plan, and $20,216 in moving expenses paid by the Company and bonus for gross up of taxes for relocation expenses of $10,656.

      13 Represents 50,000 options to purchase shares of the Company's common stock and 275,000 options to purchase shares of MTI MicroFuel Cells Inc, a subsidiary of the Company.


    Option Grants Table

    The following table sets forth information concerning individual grants of stock options to purchase the Company's Common Stock made to the Named Executive OfficersEmployees during Fiscal 2001.2002.

    OPTION GRANTS IN FISCAL 20012002

     

    Individual Grants

     

     

     

     

     

     

     

    Name

     

     

     

    Number of

    Shares

    Underlying

    Options

    Granted

     

     

    Percentage

    of Total

    Options

    Granted to

    Employees

     

     

     

     

    Exercise

    Price

    (per share)

     

     

     

     

     

    Expiration

    Date

    Potential Realizable

    Value at Assumed

    Annual Rates of

    Stock Price

    Appreciation for

    Option Term1

    5%($)10%($)

    George C. McNamee

    10,0002

    1.95%

    $4.313

    04/02/2011

    $ 27,124

    $ 68,738

    Dr. William P. Acker

    100,0003

    19.49%

    $2.875

    12/15/2010

    $180,807

    $458,201

    Dr. Judith A. Barnes

    40,0004

    7.80%

    $2.875

    12/15/2010

    $ 72,323

    $183,280

    Dr. Shimshon

    Gottesfeld

    50,0006

    9.75%

    $2.875

    12/15/2010

    $ 90,404

    $229,100

    Catherine S. Hill

    40,0004

    7.80%

    $2.875

    12/15/2010

    $ 72,323

    $183,280

    ________________Individual Grants________________

    Potential Realizable

    Value at Assumed

    Number of

    Percentage

    Annual Rates of

    Shares

    of Total

    Stock Price

    Underlying

    Options

    Exercise

    Appreciation for

    Options

    Granted to

    Price

    Expiration

    Option Term2

    Name

    Granted1

    Employees

    (per share)

    Date

    5%($)

    10%($)

    Dale W. Church

    25,0003

    20.66%

    $3.42

    03/31/2012

    $ 53,770

    $136,265

    20,0003

    16.53%

    $1.00

    10/21/2012

    $ 12,578

    $ 31,875

    Dr. William P. Acker

    -

    -

    -

    -

    $ -

    $ -

    Denis P. Chaves

    -

    -

    -

    -

    $ -

    $ -

    Dr. Shimshon Gottesfeld

    -

    -

    -

    -

    $ -

    $ -

    Alan J. Soucy

    50,0004

    41.32%

    $0.98

    08/04/2012

    $ 30,816

    $ 78,093

    _______________

    1. Potential

      10

      1The following information concerns individual grants of stock options to purchase shares of MTI MicroFuel Cells Inc, a subsidiary of the Company, to the Named Employees during 2002:

      ________________Individual Grants________________

      Potential Realizable

      Value at Assumed

      Number of

      Percentage

      Annual Rates of

      Shares

      of Total

      Stock Price

      Underlying

      Options

      Exercise

      Appreciation for

      Options

      Granted to

      Price

      Expiration

      Option Term2

      Name

      Granted

      Employees

      (per share)

      Date

      5%($)

      10%($)

      Dale W. Church

      75,000

      4.92%

      $1.268

      10/21/2012

      $ 59,808

      $151,565

      Dr. William P. Acker

      250,000

      16.39%

      $1.268

      10/14/1012

      $199,360

      $505,216

      Denis P. Chaves

      -

      -

      -

      -

      -

      -

      Dr. Shimshon Gottesfeld

      50,000

      3.28%

      $1.268

      07/16/2012

      $ 39,872

      $101,043

      Alan J. Soucy

      275,000

      18.03%

      $1.268

      08/04/2012

      $219,296

      $555,738

      2Potential realizable value is based on the assumption that the common stock appreciates at the annual rate shown, compounded annually, from the date of grant until expiration of the 10-year term. These numbers are calculated based upon Securities and Exchange Commission requirements and do not reflect the Company's projection or estimate of future stock price growth. Potential realizable values are computed by multiplying the number of shares of common stock subject to a given option by the fair market value on the date of grant, assuming that the aggregate stock value derived from that calculation compounds at the annual 5% or 10% rate shown in the table for the entire 10-year term of the option and subtracting from that the aggregate option exercise price.


    2. Option Grants Table (Continued)

    3. 3 100% exercisable at grant. Reflects awards under the Directors' Stock Option Program for services as a Director.

    325%450% or 25,000 shares are exercisable each year beginning December 15, 2000.

    4 25% or 10,000 shares are exercisable each year beginning December 15, 2001.

    on first anniversary date (August 5, 25% or 6,250 shares are exercisable each year beginning December 15, 2001.

    62003) and 25% or 12,500 shares are exercisable each year beginning December 15, 2001.

    on second
    FISCAL YEAR-END OPTION VALUES

    Option Exercises and Option Values.The following table sets forth information concerning the number and value of unexercised options to purchase Common Stock of the Company held by the Named Executive Officers of the Company who held such options at September 30, 2001.third anniversary dates.

    AGGREGATEAGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE

    The following table sets forth certain information regarding stock options exercised during 2002 and held as of December 31, 2002 by the Named Employees of the Company.

    AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR

    AND FISCAL YEAR-END OPTION VALUES

      

    Number of Securities

     

      

    Underlying Unexercised

    Value of Unexercised

      

    Options at

    In-the-Money Options

      

    Year End (#)

    at Year End ($)(2)(3)

    Shares

         

    Acquired

    Value

        

      

    Number of Securities

    Underlying Unexercised

    Options atFiscal Year End (#)

    Value of Unexercised

    In-the-Money Optionsat Fiscal Year End ($)(2)

    On Exercise

    Realized

        

    Name

    Shares

    Acquired

    On Exercise

    (#)

    Value

    Realized

    ($)(1)

     

    Exercisable

     

    Unexercisable

     

    Exercisable

     

    Unexercisable

    (#)

    ($)(1)

    Exercisable

    Unexercisable

    Exercisable

    Unexercisable

    George C. McNamee

    -

    -

    130,000

    -

    $ 78,125

    $ -

    Dale W. Church

    -

    -

    220,000

    -

    $ 78,700

    $ -

    Dr. William P. Acker

    -

    -

    112,500

    162,500

    $ 15,625

    $ 46,875

    -

    -

    206,250

    68,750

    $ -

    $ -

    Dr. Judith A. Barnes

    -

    -

    64,167

    115,833

    $ -

    $ 25,000

    Denis P. Chaves

    -

    -

    282,950

    27,500

    $ 98,631

    $ -

    Dr. Shimshon Gottesfeld

    -

    -

    -

    50,000

    $ -

    $ 31,250

    -

    -

    25,000

    25,000

    $ -

    $ -

    Catherine S. Hill

    -

    -

    139,167

    115,833

    $ 77,500

    $ 25,000

    Alan J. Soucy

    -

    -

    -

    50,000

    $ -

    $ 34,500

    11

    1. Represents the difference between the exercise price and the fair value of the common stock on the date of exercise.
    2. BasedValue is based on the last reportedclosing sale price of the common stock on the Nasdaq National Market on September 28, 2001,December 31, 2002, less the option exercise price.
    3. The table does not include options outstanding for MTI MicroFuel Cells Inc., a subsidiary of the Company, since there is no market for MTI MicroFuel Cells Inc.

    EQUITY COMPENSATION PLANS

    The Company has two stock option plans. The following table provides information about the securities authorized for issuance under the Company's equity compensation plans as of December 31, 2002.

     

    Number of Securities To Be

     

    Number of Securities

     

    Issued Upon Exercise of

    Weighted Average Exercise

    Remaining Available for

     

    Outstanding

    Price of Outstanding

    Future Issuance Under

    Plan Category

    Options, Warrants, Rights(1)

    Options, Warrants, Rights

    Equity Compensation Plans

    Equity compensation plans approved by security holders

     

    3,327,525

     

    $7.01

     

    3,379,582

    (1)Under both the 1996 and 1999 Plans, the securities available under the Plans may be adjusted in the event of a change in outstanding stock by reason of stock dividend, stock splits, reverse stock splits, etc.

    The 1996 Plan also provides for increases to securities available by 10% of any increase in shares outstanding, excluding shares issued under option plans.

     

    EMPLOYMENT AGREEMENTS

    Dr. William P. Acker, President andMr. Dale W. Church, Chief TechnologyExecutive Officer, has an employment agreementletter with usthe Company that provides a base salary of $175,000$10,000 per month which was increased to $20,000 per month effective January 1, 2003. The agreement also provided for the grant of 50,000 shares of restricted stock which vests one year from his employment commencement date. He will also receive 100% of his base salary and benefits for six months, if he is terminated without cause. This agreement continues unless modified.

    Dr. William P. Acker, Chief Executive Officer and President of MTI MicroFuel Cells Inc. ("MTI Micro") has an employment agreement with MTI Micro that provides a bonusbase salary of not less than $25,000 per year.$200,000. He will also receive 100% of his base salary and benefits for one year, subject to reduction for any amounts earned in other employment, if we terminate himhe is terminated without cause. This agreement continues unless modified.

    Dr. Judith A. Barnes, Vice President and Chief Marketing Officer has an employment letter with us that provides a base salary of $175,000 and a bonus of not less than $125,000 per year. This bonus is paid quarterly. She will also receive 100% of her base salary for 6 months if we terminate her employment without cause. This agreement continues unless modified.

    EMPLOYMENT AGREEMENTS(Continued)

    Dr. Shimshon Gottesfeld, Vice President of Research and Development and Chief Technology Officer of MTI MicroFuel Cells Inc.Micro has an employment

    agreement for a term expiring on December 1, 2003. The agreement provides for a base salary of $180,000 per year and an annual bonus of not less than $20,000 each year. The agreement also provides for (1) a commencement bonus of $35,088; (2) moving and relocation expenses; and (3)

    the issuance of 100,000 Class A preferred stock in MTI MicroFuel Cells Inc., a Subsidiary of the Company, as well as a cash bonus to cover the purchase price and any tax liability related to the purchase of such shares. He will also

    12

    receive 100% of his base salary for the remainder of his agreement if the

    Company terminates him without cause or he leaves

    employment for defined reasons, subject to reduction for amounts earned in any other employment.

    Ms. Catherine S. Hill, Vice PresidentMr. Alan J. Soucy, Chief Operating Officer of Corporate Development,MTI Micro has an employment letteragreement with usMTI Micro that provides a base salary of $150,000 and a bonus of not less than $100,000 per year. She$295,000. He will also receive 100% of herhis base salary for 6 months, subject to reduction for any amounts earned in other employment, if we terminate her employmenthe is terminated without cause. This agreement continues unless modified.

    DIRECTORS' COMPENSATION

    Directors receive fees of $750 for each Board of Directors meeting attended. Directors are also reimbursed for travel expenses incurred in attending meetings.

    Beginning in Fiscal 2002, Directors will no longer receive fees of $750 for each Board of Directors meeting attended, however the Directors' Stock Option Program will be modified to provide compensation for their services as directors. Directors will also be reimbursed for travel expenses incurred in attending meetings.

    On March 18, 1999, the Company's Board of Directors adopted a Directors' Stock Option Program, whereby options to purchase 10,000 shares of the Company's Common Stock are issued to each non-employee director serving as a director on the date of the Annual Meeting. This annual grant was increased to 20,000 options per year in 2001 in exchange for the Directors agreeing to forgo any cash compensation or their services. These grants will occur on April 1, of each year. Further if a Director serves as a member of the Audit Committee or the Compensation Committee, he or she will receive an additional grant of 5,000 and 3,000 options, respectively. These options are immediately exercisable and have exercise prices equal to the closing price of the Company's Common Stock on the NASDAQ National Market on the date of grant. Prior to 2001, Directors received $750 for each Board of Directors meeting attended.

    During Fiscal 2001,2002, the Company granted stock20,000 options to purchase shares of the Company's Common Stock to each member of the Board of Directors. Each member of the Audit and Compensation Committees received an additional grant of 5,000 and 3,000 options, respectively. The stock option exercise price was $4.313$3.42 per share, and these stock options were immediately exercisable upon grant.

    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    At September 30, 2001, First Albany Companies Inc. ("FAC") owned approximately 33.1% of Further, on October 22, 2002, the Company's common stock. George McNamee, a Director, Chairman of the Board and Chief Executive Officer of the Company, is a director and Chairman of the Board of FAC, a director and

    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)

    Chairman of the Board of First Albany Corporation ("First Albany"), and is currently a director and Chairman of the Board of Directors received an additional grant of Plug Power.

    Alan Goldberg, a Director of the Company, is a Director and President of FAC and a director and President of First Albany. In addition, Dr. Walter L. Robb, a director of the Company, is a director of Plug Power.

    Mechanical Technology owns approximately 7.86% of SatCon's outstanding stock and has the right to appoint two members to SatCon's Board of Directors. Alan Goldberg is the Company's current representative on the SatCon board.

    David B. Eisenhaure, a Director of the Company, is President, Chief

    Executive Officer and Chairman of the Board of Directors of SatCon.

    Mechanical Technology owned approximately 10.3% of Beacon Power common stock as of September 30, 2001, and Alan Goldberg is the Company's representative on the Beacon Power Board of Directors. In addition, SatCon performs funded research and development and sells power electronic boards and components to
    Beacon Power. SatCon also owns approximately 11% of Beacon Power's shares.

    Mr. Dohring serves as Chairman and President of MTI Instruments, Inc., a subsidiary of the Company, and received a salary of $150,000 for such services during fiscal 2001.

    Transactions among related parties are as fair to the Company as obtainable from unaffiliated third parties.

    In April 2000, the Company entered into a management services agreement with First Albany, a wholly owned subsidiary of FAC, to sublet offices in First Albany's facilities and purchase certain services, (i.e. phone, postage, computer network access, etc.) from First Albany. Under this agreement, FAC billed the cost of these services to the Company. Billings under these agreements amounted to approximately $33 thousand for 2001.

    The Company exercised 1,333,333 of Beacon Power warrants on a cash-less basis, on December 20, 2000, and received 985,507 shares of Beacon Power common stock. The Company also received approximately $183 thousand in preferred stock dividends from Beacon Power during fiscal 2001.

    On September 28, 2001, the Company received 544,148 shares of Beacon Power Common Stock as a pro rata distribution by SatCon. The Company recognized a gain of $827 thousand on this dividend distribution.

    On December 27, 2000, the Company entered into a Put and Call with FAC to provide independent credit support for repayment of its $25.2 million indebtedness to Key Bank, N.A.("FAC Credit Enhancement") for20,000 options, which the Company paid a fee of $945 thousand. The FAC Credit Enhancement provided FAC with the option, if thewere immediately exercisable at an exercise price of Plug Power stock fell to $4$1.00 per share, to either purchase 6.3 million Plug Power shares pledged as collateral on the loan or take an assignment of KeyBank N.A.'s rights under the Credit Agreement, as amended. The FAC Credit Enhancement could be triggered in the event of a default and was amended on April 27, 2001, the original expiration date, to extend its expiration date to August 27, 2001. The mutually agreeable terms. If the FAC Credit Enhancement expired, and was

    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS(Continued)

    not replaced, prior to November 3, 2001, the loan would be immediately due and payable. Upon expiration of the FAC Credit Enhancement Agreement, mandatory repayments on any outstanding balance would be required if the

    Plug Power stock price fell below $20 per share. The FAC Credit Enhancement expired on August 27, 2001 and was not replaced because the Company amended and restated its Credit Agreement with KeyBank, N.A. on August 10, 2001.

    The new KeyBank agreement does not require a credit enhancement.

    On December 27, 2000, the Company entered into two bridge loan agreements with FAC. The first loan was for $945 thousand and was used to pay the purchase price for the FAC Credit Enhancement. The Company pledged 200,000

    shares of Plug Power common stock as collateral. The second loan was for $5 million, $3 million of which was used to make a December 27, 2000 principal loan repayment to KeyBank, N.A. and the remaining $2 million was available for working capital. The Company pledged 1 million shares of Plug Power common stock as collateral. Upon mutual agreement of FAC and the Company, the loans may be converted to equity prior to maturity. Both loans bear interest at the Prime Rate and both interest and principal are due on January 3, 2002. On March 30, 2001, the Company made a principal payment to FAC totaling $4 million. On April 30, 2001, the Company made principal and interest payments to FAC totaling $1.445 million and $.117 million, respectively, which reduced the Company's obligations on the FAC Bridge Loans to zero.

     

    SHAREHOLDER RETURN PERFORMANCE GRAPH

    Below is a line graph comparing the percentage change in the cumulative total shareholder return on the Company's common stock, based on the market price of the Company's common stock, with the total return of companies included within the Standard & Poor's (S&P) 500 Composite Index and the companies included within the S&P Technology Sector Composite Index for a five year period commencing October 1, 19961997 and ending September 30, 2001.December 31, 2002. The calculation of total cumulative return assumes a $100 investment in the Company's common stock, the S&P 500 Composite Index and the S&P Technology Sector Composite Index on October 1, 1996,1997, the first day of the Company's fiscal year.

    13

    [GRAPH APPEARS HERE]

    Measurement Period

    MKTY

    S&P 500 Index

    S&P Technology

    (Fiscal Year Covered)

      

    Sector Index

        

    FYE 9/30/96

    100.00

    100.00

    100.00

    FYE 9/30/97

    164.71

    140.45

    162.40

    FYE 9/30/98

    335.29

    153.15

    183.87

    FYE 9/30/99

    2510.29

    195.74

    321.38

    FYE 9/30/00

    2290.04

    221.74

    383.98

    FYE 9/30/01

    741.25

    162.71

    147.71

     

    14

    ADDITIONAL INFORMATION

    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

    FAC, 30 South Pearl Street, Albany, New York, 12207, are beneficial owners of 11,753,744 shares, or approximately 33.1%, of the outstanding common stock of the Company. Messrs. McNamee and Goldberg may be deemed the beneficial owners of the shares owned by FAC. Messrs. McNamee and Goldberg disclaim such beneficial ownership.

    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The following table sets forth information regarding the beneficial

    ownership of our common stock as of DecemberMarch 31, 20012003 for:

    Shares Beneficially Owned(1)

    Shares Beneficially Owned1

     

    Name of Beneficial Owner

    Number(2)

     

    Percent

    Number 2

     

    Percent

    First Albany Companies Inc.

    11,753,744

     

    33.12%

    2,991,040

     

    10.82%

    Alan P. Goldberg

    4,049,658

    3, 4

    14.63

    George C. McNamee

    4,376,989

    3, 5, 6

    15.81

    Dr. William P. Acker

    137,500

    (3)

    *

    256,250

    7

    *

    Dr. Judith A. Barnes

    74,167

    (4)

    *

    Denis P. Chaves

    290,450

    8

    1.04

    Dale W. Church

    338,500

    (5)

    *

    433,500

    9

    1.56

    Edward A. Dohring

    203,689

    (6)

    *

    228,689

    10

    *

    David B. Eisenhaure

    343,000

    (7)

    *

    363,000

    11

    1.30

    Alan P. Goldberg

    12,784,362

    (8),(9)

    36.01

    Dr. Shimshon Gottesfeld

    13,000

    (10)

    45,500

    12

    *

    Catherine S. Hill

    149,167

    (11)

    *

    George C. McNamee

    13,321,860

    (8),(9),(12)

    37.52

    E. Dennis O'Connor

    259,500

    (13)

    *

    296,500

    13

    1.07

    Dr. Walter L. Robb

    223,300

    (13)

    *

    266,300

    14

    *

    Alan J. Soucy

    -

     

    *

    Dr. Beno Sternlicht

    944,018

    (6), (14)

    2.65

    982,018

    15

    3.54

    All present Directors and Officers as a group (13 persons)

    17,175,402

     

    45.99

    All present Directors and Officers as a group (15 persons)

    3,769,290

    16

    12.56

    *Percentage is less than 1.0% of the outstanding common stock.

    1. 1 Unless otherwise indicated, each of the stockholders has sole voting and investment power with respect to the shares of common stock beneficially owned by the Stockholder. The address of George C. McNamee and Alan P. Goldberg is First Albany Companies Inc., Alan P. Goldberg and George C. McNamee is 30 South Pearl Street, Albany, New York 12207. The address of all other listed stockholders is c/o Mechanical Technology Inc., 431 New Karner Road, Albany, New York 12205. This table does not include any beneficially owned shares of MTI MicroFuel Cells Inc., a subsidiary of the Company.
    2. 2 The number of shares beneficially owned by each stockholder is determined under rules promulgated by the Securities and Exchange Commission and includes voting or investment power with respect to securities. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power and includes any shares as to which the individual or entity has the right to acquire beneficial ownership within 60 days after DecemberMarch 31, 2001,2003, through the exercise of any warrant, stock option or other right. The inclusion in this proxy statement of such shares, however, does not constitute an admission that the named stockholder is a direct or indirect beneficial owner of such shares. The number of shares of common stock outstanding used in calculating the percentage for each listed person includes the shares of common stock underlying options held by such person, which are exercisable within 60 days of DecemberMarch 31, 2001,2003, but excludes sharesshar es of c ommoncommon stock underlying options held by any other person. Percentage of beneficial ownership is based on 35,484,98527,639,135 shares of common stock outstanding as of DecemberMarch 31, 2001.

    3. 2003.

      3Includes 2,991,040 shares owned by First Albany Companies Inc.

      4 Includes options for 50,000158,000 shares, granted on December 15, 2000 and 87,500 shares granted on June 19, 2000, which are exercisable as of DecemberMarch 31, 2001.

    4. 2003.

      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (Continued)

    5. 5 Includes options for 10,000150,000, which are exercisable as of March 31, 2003.

      6 Includes 57,375 shares granted on December 15, 2000, 11,667owned by Mr. McNamee's wife. Mr. McNamee disclaims beneficial ownership of such shares.

      7Includes options for 206,250 shares, granted on June 20, 2000 and 52,500 shares granted on March 7, 2000, which are exercisable within 60 days of DecemberMarch 31, 2000.2003.

    1. 8 Includes options for 10,000290,450 shares, granted on April 2, 2001, 30,000which are exercisable within 60 days of March 31, 2003.

      15

      9 Includes options for 220,000 shares, granted on April 1, 2000, 45,000 shares granted on April 1, 1999, 45,000 shares granted on August 31, 1998, 45,000 shares granted on April 16, 1997, which are exercisable as of DecemberMarch 31, 20012003 and 2,250 shares owned by Mr. Church's wife. Mr. Church disclaims beneficialownership of such shares.

    2. 10 Includes options for 10,000200,000 shares, granted on April 2, 2001, 30,000 shares granted on April 1, 2000, 45,000 shares granted on April 1, 1999, 45,000 shares granted on August 31, 1998 and 45,000 shares granted on April 16, 1997, which are exercisable as of DecemberMarch 31, 2001.

    3. 2003.

      11 Includes options for 10,00060,000 shares, granted on April 2, 2001, 30,000 shares granted on April 1, 2000, which are exercisable as of DecemberMarch 31, 20012003 and 300,000 shares of common stock issuable upon the exercise of outstanding warrants held by SatCon Technology Corporation exercisable as of DecemberMarch 31, 2001.2003. Mr. Eisenhaure, a director and officer of SatCon Technology Corporation, may be deemed the beneficial owner of these shares. Mr. Eisenhaure disclaims beneficial ownership of these shares.

    1. Includes 11,753,744 shares owned by First Albany Companies Inc.; see "Security Ownership of Certain Beneficial Owners." However, Messrs. McNamee and Goldberg disclaim beneficial ownership of such shares.
    2. Includes

      12Includes options for 10,00025,000 shares, granted on April 2, 2001, 30,000 shares granted on April 1, 2000, 45,000 shares granted on April 1, 1999 and 45,000 shares granted on November 12, 1998, which are exercisable aswithin 60 days of DecemberMarch 31, 2001.

    3. Includes 12,500 shares granted on December 15, 2000, which are exercisable as of December 31, 20012003 and 500 shares owned by Mr. Gottesfeld's wife. Mr. Gottesfeld disclaims beneficialownership of such shares.
    4. 13 Includes options for 10,000155,000 shares, granted December 15, 2000, 11,667 shares granted on June 20, 2000, 30,000 shares granted on March 30, 2000, 52,500 shares granted on March 7, 2000 and 45,000 shares granted on January 8, 1999, which are exercisable as of DecemberMarch 31, 2001.2003.

    5. Includes 57,375 shares owned by Mr. McNamee's wife. Mr. McNamee disclaims beneficial ownership of such shares.
    6. Includes

      14Includes options for 10,000158,000 shares, granted on April 2, 2001, 30,000 shares granted on April 1, 2000, 45,000 shares granted on April 1, 1999 and 45,000 shares granted on August 31, 1998, which are exercisable as of DecemberMarch 31, 2001.2003.

    7. Includes

      15Includes options for 198,000 shares, which are exercisable as of March 31, 2003 and 200,970 shares held by Dr. Sternlicht's wife as custodian for their children. Dr. Sternlicht disclaims beneficial ownership of such shares.


    16Includes options for 2,356,033 shares, which are exercisable within 60 days of March 31, 2003.

     

     

    ANNUAL REPORT TO SHAREHOLDERS

    The Company's Annual Report to Shareholders accompanies this Proxy Statement. The Company's Annual Report on Form 10-K for the year ended September 30, 2001,December 31, 2002, as filed with the Securities and Exchange Commission, may be obtained by addressing a written request to the Investor Relations Department at the Company's corporate headquarters, 431 New Karner Road, Albany, New York 12205.

     

    PROPOSALSSOLICITATION OF SECURITYHOLDERSPROXIES

    The cost of solicitation of Proxies will be borne by the Company. In addition to the solicitation of Proxies by mail, officers and employees of the Company may solicit Proxies in person or by telephone. The Company may reimburse brokers or persons holding stock in their names, or in the names of their nominees, for their expenses in sending Proxies and proxy material to beneficial owners.

    If

    REVOCATION OF PROXY

    Subject to the terms and conditions set forth herein, all Proxies received by the Company will be effective, notwithstanding any transfer of the shares to which such Proxies relate, unless at or prior to the Annual Meeting the Company receives a shareholder intendswritten notice of revocation signed by the person who, as of the record date, was the registered holder of such shares. The notice of revocation must indicate the certificate number and numbers of shares to present a proposal atwhich such revocation relates and the Company'saggregate number of shares represented by such certificate(s).


    16

    STOCKHOLDER PROPOSALS

    In order to be included in Proxy material for the 2004 Annual Meeting of Shareholders to be held in 2003 and seeks to have the proposal included in the Company's Proxy Statement relating to that meeting, pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as amended, the proposalStockholders, stockholders' proposed resolutions must be received by the Company no later than the close of businessat its offices, 431 New Karner Road, Albany, New York 12205 on October 3, 2002. If a shareholder wishes to present a matter at the Company's Annual Meeting of Shareholders to be held in 2003or before January 13, 2004. The Company suggests that is outside of the processes of Rule 14a-8, the proposal must be receivedproponents submit their proposals by the Company no later than the close of business on October 17, 2002. After that date, the proposal will be considered untimely and the Company's proxies will have discretionary voting authority with respect to such matter. Any proposals, as well as any related questions, should be directedcertified mail, return receipt requested, addressed to the Secretary of the Company.Corporation.

    If a stockholder of the Company wishes to present a proposal before the 2004 Annual Meeting of Stockholders, but does not wish to have the proposal considered for inclusion in the Corporation's proxy statement and proxy card, such stockholder must also give written notice to the Secretary of the Corporation at the address noted above. The Secretary must receive such notice by March 28, 2004.

    If a stockholder fails to provide timely notice of a proposal to be presented at the 2004 Annual Meeting of Stockholders, the proxies designated by the Board will have discretionary authority to vote on any such proposal.

    OTHER MATTERS

    Management does not know of any matters which will be brought before the meeting other than those specifically set forth in the notice thereof. If any other matter properly comes before the meeting, however, it is intended that the shares represented by proxies will be voted with respect thereto in accordance with the best judgment of the persons voting them.

    All expenses incurred in connection with this solicitation of proxies will be borne by the Company.

    By Order of the Board of Directors

     
     

    Catherine S. Hill

    Secretary

     

    Albany, New York

    February 1, 2002

    May 12, 2003

     

    17

     

     

    Appendix A - Proxy Card

    MECHANICAL TECHNOLOGY INCORPORATED

    431 New Karner Road Albany, New York 12205

    PROXY

    THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

    The undersigned hereby revokes any proxy heretofore given to vote such shares, and hereby ratifies and confirms all that said proxies may do by virtue hereof.

    THIS PROXY WILL BE VOTED AS SPECIFIED BY THE SHAREHOLDER. IF AUTHORITY TO VOTE FOR ITEM 1, ELECTION OF DIRECTORS, IS NOT SPECIFICALLY WITHHELD, THE PROXY WILL BE VOTED FOR THE NOMINEES LISTED IN THE PROXY STATEMENT. IF NO CHOICE IS SPECIFIED WITH RESPECT TO ITEM 2, THE PROXY WILL BE VOTED FOR THIS PROPOSAL.

    The undersigned hereby appoints George C. McNameeDale W. Church and Alan Goldberg,Cynthia A. Scheuer, or either of them, as proxies to vote all the stock of the undersigned with all the powers which the undersigned would possess if personally present at the Annual Meeting of the Shareholders of Mechanical Technology Incorporated, to be held at the Albany Marriott Hotel (Northway Exit 4), 189 WolfThe Desmond, 660 Albany-Shaker Road, Albany, New York, at 10:00 a.m. on March 7, 2002,June 19, 2003, or any adjournment thereof, as follows:

    1. ELECTION OF DIRECTORS:

    FOR THE TWO NOMINEES LISTED BELOWÿ WITHHOLD AUTHORITYÿ

    (except as marked to the contrary below)to vote for both nominees listed below

    FOR THE THREE NOMINEES LISTED BELOW

    _____

    WITHHOLD AUTHORITY

    ____

    (except as marked to the contrary below)

    to vote for all nominees listed below

    INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.

    Three Year Term:

    Dale W. Church

    Edward A. Dohring

    David B. Eisenhaure

    2.Three Year Term:George C. McNamee E. Dennis O'ConnorTO RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS FOR MECHANICAL TECHNOLOGY INCORPORATED FOR THE YEAR ENDING DECEMBER 31, 2003.

    FOR

    _____

    AGAINST

    _____

    ABSTAIN

    _____

    IN THEIR DISCRETION, UPON ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.

    Date,20022003

     

    Please sign exactly as name appears on this proxy. When

    shares are held by joint tenants, both should sign. When

    signing as attorney, executor, administrator, trustee, or guardian,

    please give full title as such. If a corporation, please sign in full

    corporate name by President or other authorized officer. If a

    partnership, please sign in partnership name by authorized

    person.

    ATTENDANCE AT MEETING: NO! _____YES! _____

    NUMBER ATTENDING! _____

    Please provide Social Security Number or Tax Identification

    Number

    18