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:
[ X ] Preliminary proxy statement           [   ] Confidential, for Use
                                                  of the Commission Only
                                                  (as permitted by Rule
                                                  14a-6(e)(2))
[   ] 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 pursuant to Exchange Act Rule 0-11:
                                                                   
	________________________________________________________________________
      (4)	Proposed maximum aggregate value of transaction:
                                                                   
	________________________________________________________________________
      (5)	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       
                            968 ALBANY-SHAKER ROAD
                            LATHAM, NEW YORK 12110

                   NOTICE OF ANNUAL MEETING OF SHAREHOLDERS         


TO THE SHAREHOLDERS:		


The Annual Meeting of Shareholders of Mechanical Technology Incorporated 
will be held at the offices of First Albany Companies, Inc., 30 South Pearl
Street, Albany,Mechanical Technology Incorporated, 968 Albany-
Shaker Road, Latham, New York 1220712110 (directions enclosed), on April 15, 1998,March 18, 
1999, at 10:00 A.M. local time (refreshments will be served at 9:15 A.M.) 
for the following purposes:		

1. Election of Directors;

2. Ratification of the appointment of Coopers & Lybrand L.L.P.PricewaterhouseCoopers LLP as the 
auditors of the Company.

3.  Approval of the amendmentAdoption and restatementapproval of the Company's Certificate of 
Incorporation.1999 Employee Stock Incentive 
Plan.

4. Approval of the restatement of the Company's By-Laws.

5. Such other business as may properly come before the meeting or any 
adjournment thereof.

Shareholders of record at the close of business on February 25, 1998January 29, 1999 are 
entitled to notice of and to vote at the meeting or any adjournment.meeting.  The Proxy Statement and 
Annual Report of the Company for the fiscal year ended September 30, 1997,1998, 
are enclosed.

By Order of the Board of Directors

John Recupero                                               Latham, New York
Secretary                                                  March 9, 1998February 12, 1999

                           YOUR VOTE IS IMPORTANT

              YOU ARE URGED TO MARK, DATE, SIGN, AND PROMPTLY
                 RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE



















                      MECHANICAL TECHNOLOGY INCORPORATED
                            968 ALBANY-SHAKER ROAD
                            LATHAM, NEW YORK  12110
	
                              PROXY STATEMENT

	

This Proxy Statement, first being mailed to shareholders on approximately 
March 9, 1998,February 12, 1999, 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 April 15, 1998,March 18, 
1999, and any adjournment thereof, at the offices of First Albany Companies, Inc., 30 South 
Pearl Street, Albany,Mechanical Technology 
Incorporated, 968 Albany-Shaker Road, Latham, New York.

The shares represented by properly completed proxies received prior to the 
vote will be voted FOR 1) the election of directors; and 2) ratifying 
appointment of auditors; 3) amendment and restatement of the Certificate of 
Incorporation; and 4) restatement of the By-Laws,auditors, unless specific instructions to the contrary are 
given or an abstention from voting is indicated by the stockholder.shareholder. The 
proxy may be revoked any time before it is exercised.

At the close of business on February 25, 1998January 29, 1999 the Company had outstanding 
5,905,7617,178,270 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.  A majority of the outstanding shares, present in person or by 
proxy, will constitute a quorum at the meeting.  Abstentions and broker non-votesnon-
votes are counted for purposes of determining whether a quorum is present.present 
but do not affect the outcome of the election.  A plurality vote is required 
for the election of Directors.  Accordingly, abstentions and
broker non-votes will not affect the outcome of the election of Directors. Votes will be tabulated by inspectors of 
election appointed in accordance with the applicable provisions of the New 
York Business Corporation Law.

                            ELECTION OF DIRECTORS

At the Annual Meeting of Shareholders, eighttwo 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.  ThreeThe Directors shall serve a three year term,
two Directors shallstaggered terms. 

George McNamee and Dennis O'Connor are nominated to serve a two year term and three Directors shall serve a
one year term.three-year terms. 
Alan Goldberg, Walter Robb and Beno Sternlicht are nominated to serve threein the second year of 
three-year terms; Dale Church and Edward Dohring are nominated to serve twoin the second year terms; and George McNamee, Dennis O'Connor and Martin Mastroianni are nominated
to serve one yearof 
two-year terms. Management's nominees for Directors, together with certain 
information concerning them, are on 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.

All eightBoth nominees are presently serving as Directors of the Company.			
						
							 					  










R. 
Wayne Diesel, who has resigned as an officer of the Company, will not stand 
for re-election to the Board of Directors.






                   CERTAIN INFORMATION REGARDING NOMINEES

Mr. Church, 58, 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 is currently the CEO of Ventures &
Solutions LLC, a Trustee of the National Security Industrial Association and
is a director of various private corporations. He has served as general
Counsel to the American Electronics Association. 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.

Mr. Dohring, 64, a Director since 1997, has been Vice President of Silicon 
Valley Group, Inc. ("SVG") since July 1992 and President of its SVG 
Lithography Systems, Inc. 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 has also held management positions with General 
Signal, CVC Products, Bendix, Bell & Howell and Veeco Instruments.

Mr. Goldberg,McNamee, 52, a Director since 1996, is the President & Co-Chief 
Executive Officer and a Director of First Albany Companies, Inc. ("FAC", see 
"Securities Ownership of Certain Beneficial Owners" in the section entitled 
"Additional Information", below). He is Chairman of the Board of Trustees of 
the Albany Institute of History and Art, and a Director of the Center for 
Economic Growth and the Albany Symphony Orchestra.

Mr. McNamee, 51, a Director since 1996, Chairman of the Company's Board of 
Directors from 1996 through April 1998, and Chief Executive Officer since 
April 1998, is the Chairman &of the Board and Co-Chief Executive Officer and a Director of 
FAC (see "Securities Ownership of Certain Beneficial Owners" in the section 
entitled "Additional Information", below). Mr. McNamee is a member of the 
Board of Directors of MapInfo Corporation and The Meta Group, Inc. and is 
Chairman of the Company's joint venture with Edison Development Corp., and Internet
Shopping Network, Inc.a 
subsidiary of DTE Energy, Corp., Plug Power, L.L.C. He also serves on the 
Board of Directors of the New York State Science and Technology Foundation, 
and is Chairmana member of the Regional Firms Advisory Committee to the Board of the 
New York Stock Exchange.

Dr. Mastroianni, 53, a Director since 1997, was elected President and Chief 
Operating Officer of the Company in December 1996. Prior to joining the Company,
he served most recently as a Director of Transmission Power Delivery for the
Electric Power Research Institute, where he was employed since 1992. Previously,
from 1973 to 1992, he held senior management positions in the technology driven
test and measurement industries with Vacuum Components, Inc., Tenney
Engineering, Inland Vacuum Industries, Halocarbon Products, Inc., and Allied
Signal Corporation.

Mr. O'Connor, 58,59, a Director since 1993, is a registered patent attorney and 
has, since April 1984, been the Director of New Products and Technology for 
Masco Corporation, Taylor, Michigan, a diversified manufacturer of building 
and home improvement, and other specialty products for the home and family. 
He is a director of various private corporations.  Mr. O'Connor originally 
became a Director of the Company when he was selected by Masco Corporation 
as its designee on the Company's Board of Directors pursuant to agreements 
entered into in connection with the 1992 transaction in which Masco sold 
1,730,000 shares of the Company's Common Stock to subsidiaries of the 
Lawrence Insurance Group, Inc., a former majority shareholder of the 
Company. The Lawrence Insurance Group, Inc. subsidiaries agreed to vote 
their shares to elect a designee of Masco to the Company's Board of 
Directors so long as Masco remained liable under a guarantee it had executed 
in connection with the Company's obligations under a line of credit. This 
Agreement with Masco terminated when Mr. Lawrence lost control of his shares 
in 1996.  Furthermore, the guarantee was released on October 15, 1998 after 
the Company replaced its existing line of credit with a line of credit from 
KeyBank, N.A. 

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

             CERTAIN INFORMATION REGARDING INCUMBENT DIRECTORS

Mr. Church, 59, 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 is currently the 
CEO of Ventures & Solutions LLC, a Trustee of the National Defense 
Industrial Association and is a director of various private corporations.  
He has served as General Counsel to the American Electronics Association. 
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.

Mr. Dohring, 65, a Director since 1997, has been Vice President of Silicon 
Valley Group, Inc. ("SVG") since July 1992 and President of its SVG 
Lithography Systems, Inc. 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 has also held management positions with General 
Signal, CVC Products, Bendix, Bell & Howell and Veeco Instruments.





Mr. Goldberg, 53, a Director since 1996, is the President & Co-Chief
Executive Officer and a Director of First Albany Companies, Inc. ("FAC", see 
"Securities Ownership of Certain Beneficial Owners" in the section entitled 
"Additional Information", below). He is Chairman of the Board of Trustees of 
the Albany Institute of History and Art, and a Director of the Center for 
Economic Growth and the Albany Symphony Orchestra.

Dr. Robb, 69,70, a Director since 1997, now a management consultant and 
President of Vantage Management, Inc., was until December 31, 1992, General 
Electric Company's("GE") Senior Vice President for corporate research and 
development. He directed the GE Research and Development Center, one of the 
world's largest and most diversified industrial laboratories, and served on 
GE's Corporate Executive Council. He serves on the Board of Directors of 
Marquette Medical Systems, Cree Research, Celgene and Neopath.  He also 
serves on the Advisory Council of the Critical Technology Institute and on 
the Council of the National Academy of Engineering.

Dr. Sternlicht, 69,70, a Director since 1996, one of the foundersco-founder of the Company, has 
been President of Benjosh Management Corporation, a management firm in New 
York, New York, since 1976.1976 and has been President of Arben International 
since 1994, with offices in Moscow and New York City. He previously served 
as a Director of the Company from 1961 to 1992. Prior to 1985, he held a 
number of positions with the Company. At the time of his departure from the 
Company in 1985, he served as Vice Chairman of the Board of Directors and 
Technical Director.

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


COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS

The Board of Directors held nine (9)seven (7) meetings during fiscal 1997.1998.  All 
Directors attended at least 75% of all meetings of the Board, and of all 
Board committees on which they serve, held during fiscal 1997.1998. 

The Company's Board of Directors has established Audit Compensation and NominatingCompensation 
Committees. The Audit Committee (consisting of Messrs.  O'Connor, Church and 
Goldberg) reviews with the independent auditors the plan and results of the 
auditing engagement, the auditors' assessment of internal accounting  
controls; and it also recommends the appointment of the public auditors to the Board 
of Directors. One Audit Committee meeting was held during fiscal 1997.1998.  The 
Compensation Committee (consisting of Messrs. Apkarian, Landgraf and
Goldberg until April 16, 1997, and thereafter consisting of Mr. Goldberg and Dr. Sternlicht) 
determines compensation and bonuses for officers and employee Directors.  
OneTwo Compensation Committee meeting wasmeetings were held during fiscal 1997.1998. 

     PROPOSAL TO ADOPT AND APPROVED THE MECHANICAL TECHNOLOGY INCORPORATED 
                      1999 EMPLOYEE STOCK INCENTIVE PLAN

The NominatingBoard of Directors expects to approve, subject to approval by the 
stockholders, a new employee stock incentive plan ("the 1999 Plan") 
intended to attract or encourage officers and other key employees of the 
Company and its subsidiaries to remain in the employ of the Company and to 
reward other individuals or entities who make significant contributions to 
the Company's success.  A copy of the 1999 Plan is attached to this Proxy 
Statement as Exhibit A.  The following description of the 1999 Plan is in 
all respects qualified by reference to Exhibit A:

ADMINISTRATION:  The 1999 Plan will be administered by the Compensation 
Committee (consisting of Messrs. Goldberg, McNameethe Board of Directors.



SHARES SUBJECT TO PLAN:  The 1999 Plan authorizes the grant of options to 
purchase a number of shares of Common Stock equal to 1,000,000.  If options 
granted under the 1999 Plan expire or are terminated or surrendered without 
having been exercised, the shares of Common Stock subject thereto may again 
be optioned.

PARTICIPATION:  Options may be granted by the Committee to officers, 
directors and Diesel) seeks
outother key employees of the Company and interviews qualified candidatesits subsidiaries.  
Approximately 115 persons would be potentially eligible to receive options 
under the 1999 Plan.

TERM OF OPTIONS:  The Committee will determine the term of each option, 
which may not exceed 10 years.  The Committee also has the power to shorten 
the term of an option and to determine the effect on any option of the 
holder's termination of employment or of any conduct or activity of the 
holder.

EXERCISE PRICE:  The per share exercise price of an option will be 
determined by the Committee at the time of granting the option but may not 
be less than 100% of the fair market value (determined by the Committee) of 
a share of Common Stock on the date of grant.  The exercise price shall be 
paid in cash.  The proceeds received by the Company on the exercise of 
options will be used for considerationgeneral corporate purposes.

EXERCISE OF OPTIONS:  The times at which an option granted under the 1999 
Plan will become exercisable will be determined by the Committee at the 
time of grant.  In the past options granted under the Company's option 
plans have become exercisable as potentialto either 25% of the shares covered 
thereby on each of the first four anniversaries of the date of grant, or 
immediately vested.  The Committee has indicated its intention to continue 
this practice, but will not be obligated to do so.

RECAPITALIZATION, ETC.:  In the event of a stock dividend, 
recapitalization, merger, consolidation, combination or exchange of shares, 
or the like, the Committee will be empowered, but not obligated, to make 
appropriate adjustments in the number and class of shares subject to the 
1999 Plan, in the number of shares subject to options granted thereunder 
and in the exercise prices of such options.

TRANSFERABILITY:  The options granted under the 1999 Plan shall not be 
transferable other than by will or the laws of descent and distribution.

AMENDMENT AND TERMINATION:  The Board of Directors may at any time 
terminate or amend the 1999 Plan in any respect, except that, without the 
approval of the stockholders, no amendment may (1) increase the number of 
shares for which options may be granted under the 1999 Plan; (2) change the 
minimum option exercise price;  (3) change eligibility for awards; (4) 
extend the award period; or (5) materially modify eligibility for 
participation.  Unless the 1999 Plan is previously terminated, options may 
be granted under the 1999 Plan through March 18, 2009.

TAX AND ACCOUNTING CONSEQUENCES:  The 1999 Plan permits grants of incentive 
stock options, intended to meet the requirements of Section 422 of the 
Internal Revenue Code, as well as of non-qualified options.






Incentive Stock Options
The Company has been advised that the federal income tax consequences to 
the Company and the optionee of the grant and exercise of incentive stock 
options under the 1999 Plan, under the current provisions of the Internal 
Revenue Code, are substantially as follows:  Generally a person who is 
granted an incentive stock option is not required to recognize taxable 
income at the time of the grant or at the time of exercise and the Company 
is not entitled to a deduction at the time of grant or at the time of 
exercise.  Under certain circumstances, however, an optionee may be subject 
to alternative minimum tax with respect to the exercise of his or her 
incentive stock options.  Generally, the gain realized, but not recognized, 
upon the exercise of an incentive stock option (equal to the difference 
between the fair market value of the shares received upon exercise of the 
incentive stock option and the purchase price paid for such shares) is 
included in the optionee's alternative minimum tax income and, depending 
upon the optionee's overall tax situation, he or she may be required to pay 
alternative minimum tax on such gain.

If an optionee does not dispose of the shares acquired pursuant to the 
exercise of an incentive stock option before the later of two years from 
the date of grant and one year from the date of exercise, any gain or loss 
realized on a subsequent disposition of the shares will be treated as 
capital gain or loss.  Under such circumstances, the Company will not be 
entitled to any deduction for federal income tax purposes.  An optionee 
must also own the shares of stock acquired upon exercise of an incentive 
stock option for more than eighteen months for the gain or loss realized on 
the sale to qualify as long-term capital gain or loss.

If an optionee disposes of the shares received upon the exercise of an 
incentive stock option either (1) within one year of the exercise date or 
(2) within two years after the grant date, the optionee will generally 
recognize ordinary income equal to the lesser of (a) the excess of the fair 
market value of the shares on the date of exercise over the purchase price 
paid for the shares upon exercise and (b) the amount of gain realized on 
the sale.  Any gain realized in excess of the ordinary income recognized, 
and any loss realized, will be long-term or short-term capital gain or 
loss, depending upon the length of the period the optionee held the shares. 
 If an optionee is required to recognize ordinary income as a result of the 
disposition of shares acquired on the exercise of an incentive stock 
option, the Company, subject to general rules under Section 162(m) of the 
Internal Revenue Code, will be entitled to a deduction for an equivalent 
amount.

Non-Qualified Stock Options
The Company has been advised that the federal income tax consequences to 
the Company and the optionee of the grant and exercise of non-qualified 
options under the 1999 Plan, under the current provisions of the Internal 
Revenue Code, are substantially as follows:  An optionee is not deemed to 
receive any income at the time the option is granted.  If the option is 
exercised, the optionee is deemed to have received ordinary income, on the 
exercise date, in an amount equal to the difference, on the exercise date, 
between the exercise price and the fair market value of the acquired 
shares.  The Company is generally entitled, in the year in which the option 
is exercised, to a corresponding deduction, subject to general rules 
relating to the reasonableness of the optionee's compensation and the 
limitation under Rule 162(m) of the Code.




Section 162(m) of the Code generally limits to $1 million the amount of 
compensation paid to certain "covered employees" of a publicly held 
corporation (generally, the corporation's chief executive officer and four 

most highly compensated executive officers other than the chief executive 
officer) that may be deducted by the corporation as an expense.  Certain 
performance-based compensation, the material terms of which are disclosed 
to the corporation's stockholders and approved by a majority stockholder 
vote, is exempt from the $1 million limitation.  Based on regulations of 
the Internal Revenue Service promulgated under Section 162(m), grants of 
stock options under the 1999 Plan approved by a Committee consisting solely 
of "outside directors" (as defined in such regulations) would appear to 
constitute performance-based compensation that would be exempt under 
Section 162(m).

Under current accounting rules, there is no earnings charge to the Company 
for financial accounting purposes in connection with the grant, existence 
or exercise of any stock option granted to employees under the 1999 Plan, 
however, there will be an earnings charge for options granted to members of 
the Board of Directors.  The Company is required to disclose, and does 
disclose, in a footnote to its annual consolidated financial statements, 
the impact of such employee grants on consolidated net income and earnings 
per share.

The board expects to approve the 1999 plan and recommends candidates for election and to fill interim vacancies.
Atthat stockholders 
vote "for" the present time, the Nominating Committee has not established any procedures
for consideration of director-candidates submitted by shareholders.  One
Nominating Committee meeting was held during fiscal 1997.1999 plan.

	
                            APPROVAL OF AUDITORS

The Board of Directors has recommended that the appointment of
Coopers & 
Lybrand L.L.P.PricewaterhouseCoopers LLP as independent auditors for the year ending 
September 30, 19981999 be ratified by the stockholders. PricewaterhouseCoopers 
LLP (and its predecessor, Coopers & Lybrand, L.L.P.LLP) have been the Company's 
auditors since 1978. Representatives of Coopers & Lybrand L.L.P.PricewaterhouseCoopers LLP are 
expected to be present at the Annual Meeting with the opportunity to make a 
statement if they desire to do so and to be available to respond to 
appropriate questions.

The Board of Directors recommends that shareholders vote FOR the ratificationratifica-
tion of the appointment of auditors.
                  APPROVAL OF AMENDMENT AND RESTATEMENT OF THE
                    COMPANY'S CERTIFICATE OF INCORPORATION

In 1997, the New York State legislature revised the New York Business 
Corporation Law.  The Board of Directors has therefore approved, subject to 
shareholder approval, amendment of the Company's Certificate of Incorporation
to include certain standard provisions that are now required by the New York
Business Corporation Law, provide for a classified board and staggered election
of Directors, provide for indemnification of the Company's Directors and
officers, and limit the personal liability of the Company's Directors, to the
fullest extent permitted by the New York Business Corporation Law.  For purposes
of clarity and cohesiveness, the Board of Directors has approved, subject to
shareholder approval, the restatement of the Company's Certificate of
Incorporation, which restatement shall include, the foregoing amendments.  As
so amended and restated, the Company's Certificate of Incorporation would read
as set forth on Exhibit A hereto.

Certain provisions of the Amended and Restated Certificate of Incorporation and
the Amended and Restated By-Laws of the Company could, together or separately,
discourage potential acquisition proposals or delay or prevent a change in
control of the Company.  These provisions include a classified Board of
Directors, staggered election of Directors and super majority approval for the
removal of a Director.

Amendments to the Company's By-Laws creating a classified board, requiring
staggered election of Directors, and requiring super majority voting for the
removal of a Director became effective as of February 23, 1998.  The
amendment and restatement of the Company's Certificate of Incorporation, if
approved by shareholders, will become effective when filed with the Secretary of
State of the State of New York.  Accordingly, at the Annual Meeting of
Shareholders on April 15, 1998, three directors will be elected to serve a
three year term, two directors will be elected to serve a two year term and
three directors will be elected to serve a one year term.  Directors will serve
until the expiration of his or her term and until their successors shall be
elected and shall qualify.

The Board of Directors recommends that shareholders vote FOR the amendment 
and restatement of the Company's Certificate of Incorporation.


                         APPROVAL OF RESTATEMENT OF
                          OF THE COMPANY'S BY-LAWS

The Board of Directors amended of the By-Laws of the Company to incorporate the
most recent amendments to the New York Business Corporation Law, and update the
By-Laws such that they are consistent with the By-Laws of companies in like-
industries, effective February 23, 1998.  For purposes of clarity and
cohesiveness, the Board of Directors has approved, subject to Shareholder
approval, the restatement of the Company's By-Laws, which restatement shall
include, the foregoing amendments.  As so amended and restated, the Company's
By-Laws would read as set forth on Exhibit B hereto.

The Board of Directors recommends that shareholders vote FOR the restatement
of the Company's By-Laws.







	
                            ADDITIONAL INFORMATION

EXECUTIVE COMPENSATION

The following table setstables set forth information with respect to the compensation 
and stock option grants for services to the Company and its subsidiaries during the Company's fiscal year ended September 30, 19971998 (and 
during the Company's two prior fiscal years), of each person who served as 
Chief Executive Officer during such year, and of all other persons who 
served as executive officers of the Company and its subsidiaries during such 
year whose total annual compensation exceeded $100,000.







========================================================================================================
                                        SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------

                                  ANNUAL COMPENSATION          LONG-TERM COMPENSATION
- --------------------------------------------------------------------------------------------------------
                                                               
NAME AND POSITION OF
PRINCIPAL                   FISCAL      SALARY      BONUS      OTHER    RESTRICT-   SECURITIES       ALL  
                             PRINCIPAL                        YEAR                         ANNUAL      ED                                 UNDER-       OTHER 
                                                                  COMP      STOCK       LYING         COMP
                                                                 AWARDS      OPTIONS
                                                                   (#)
                                                               
George C. McNamee,
Chief Executive
Officer (1)                  (#)
- --------------------------------------------------------------------------------------------------------
R. Wayne Diesel                  1997   $200,000    $15,000       -1998           $-         $-            None           35,100      $6,605
CEO                                                                                                 (2)
- --------------------------------------------------------------------------------------------------------
                                 1996   $200,000       None       -       None         None      $8,000
                                                                                                    (2)
- --------------------------------------------------------------------------------------------------------
                                 1995   $190,764       None       -     12,500         None      $4,452
                                                                                                    (2)
- --------------------------------------------------------------------------------------------------------$-

Martin J. Mastroianni,       1998     $101,168    $50,000            None     $170,322
President & COO(2)                                                             (3),(4)

                             1997     $121,154       None         -       None      150,100           $-

James Clemens, President     1998     $122,961    $20,340          50,000       $4,896      
& COO (3)
- --------------------------------------------------------------------------------------------------------
Stephen Sullivan, President,     1997    $62,828       None       -       None         None     $16,615CEO, Ling Electronics,                                                           (3)
Inc.                                                                           (2)(4)
- --------------------------------------------------------------------------------------------------------
                                 1996   $130,310       None       -       None         None      $4,840
                                                                                                    (2)
- --------------------------------------------------------------------------------------------------------
                                 1995   $139,617       None       -       None         None      $5,306
                                                                                                    (2)
- --------------------------------------------------------------------------------------------------------
James Clemens, Vice President,
                             1997      $57,501       None          -       None       30,000      $32,123
                                                                               Ling Electronics, Inc. (3),(5)                                                                       (2)(6)
- --------------------------------------------------------------------------------------------------------
Douglas McCauley, Vice           1997   $115,000     $7,000       -       None       15,100      $4,158
President, Technology Group                                                                         (2)
- --------------------------------------------------------------------------------------------------------
                                 1996   $110,807     $7,500       -       None         None        None
- --------------------------------------------------------------------------------------------------------
                                 1995   $100,152     $5,000       -        625         None      $1,669
                                                                                                    (2)
- --------------------------------------------------------------------------------------------------------
Stephen T. Wilson, Chief         1997   $110,000    $10,000       -       None       10,100      $3,594
Financial Officer                                                                                   (2)
- --------------------------------------------------------------------------------------------------------
                                 1996   $107,903    $10,000       -       None         None      $2,620
                                                                                                    (2)
- --------------------------------------------------------------------------------------------------------
                                 1995    $60,846       None       -       None         None          $-
- --------------------------------------------------------------------------------------------------------
                                                                              
Denis P. Chaves, Vice        President,1998     $133,481    $33,500          45,100       $5,793
                                                                                   (3)

                             1997     $120,673    $37,000          -       None       25,100       $4,233
                                                                                   LAB and Advanced Products                                                                           (2)
- --------------------------------------------------------------------------------------------------------(3)

                             1996      $99,167    $37,000            -       None         None       $3,966
                                                                                   (2)
- --------------------------------------------------------------------------------------------------------

                                 1995    $95,000    $10,000       -        625         None      $3,800
                                                                                                    (2)
- --------------------------------------------------------------------------------------------------------(3)
(1) This column shows the market valueMr. McNamee was appointed Chief Executive Officer on the date of grant of shares of the Company's Common Stock awarded under the Company's Restricted Stock Incentive Plan. The Plan expiredApril 15, 1998. (2) Dr. Mastroianni resigned his position as President and Chief Operating Officer on December 31, 1994. The restrictions on these shares lapse on a scheduled basis as determined by the Board of Directors at the time of grant or upon death. The recipient has voting and dividend rights to the shares from the date of award. The aggregate holdings/value of shares of Restricted Stock, as to which the restrictions have not lapsed, on September 30, 1997 (based on a price on that date of $3.47 per share) by the individuals listed in this table, including the awards shown in this column, are: Mr. Sullivan, 500 shares/$1,735; Mr. McCauley, 3,500 shares/$12,145. In November 1996, the Board of Directors took action to accelerate the vesting of shares held by Messrs. Diesel (23,000 shares), McCauley (1,500 shares), and Chaves (1,500 shares) that were still subject to restrictions under the Plan; as a result, all restrictions under the Plan have lapsed as to all shares held by Messrs. Diesel and Chaves, while 4,000 shares held by Mr. McCauley and 500 shares held by Mr. Sullivan remain subject to restrictions under the Plan. (2)April 7, 1998. (3) 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. (3) Dr. Mastroianni replaced Mr. Diesel as President and became Chief Operating Officer of the Company on December 20, 1996. (4) Represents payout of vacation pay in lieu of time off.off and total salary payments of $150,000 payable monthly at a rate of $10,000 per month for a period of 15 months pursuant to an agreement dated April 7, 1998. See "Employment Agreements." (5) Mr. Clemens replaced Mr. Sullivan as president of Ling Electronics, Inc. on March 24, 1997. (6) Includes a $30,000 loan by the Company to Mr. Clemens. The loan is repayable in three equal annual installments of $10,000 plus interest at the rate of 6.5%. The Company has agreed to pay Mr. Clemens an annual bonus equal to the principal plus interest due on the promissory note, if Mr. Clemens continues to be employed by the Company on March 24 of 1998, 1999 and 2000, respectively. The March 24, 1998 installment was bonused to Mr. Clemens. The Company also agreed to repay the note in full if Mr. Clemens dies or becomes permanently disabled prior to the due date of the final payment on the note. The following table sets forth information concerning the grant of stock options during the Company's fiscal year ended September 30, 1997 to each person who served as Chief Executive Officer during such year, and all other persons who served as executive officers of the Company during such year whose total annual compensation exceeded $100,000. OPTION GRANTS IN FISCAL 19971998 Potential Realizable Value at Assumed Number of Percentage Annual Rates of Shares of Total Stock Price Underlying Options Exercise Appreciation for Options Granted to Price Expiration Option Term Name Granted Employees (per share) Date 5%($) 10%($) - ---- ------- --------- ----------- ---- ----- ------ R. Wayne Diesel 35,000(1) 9.14% $3.44 06/30/00 $17,305 $36,180 100(2) 0.03% $2.44 12/20/06 $153 $389 Martin J. Mastroianni 30,000(3) 7.83% $2.44 12/20/06 $46,035 $116,662 100(2) 0.03% $2.44 12/20/06 $153 $389 120,000(3) 31.32% $2.50 07/15/07 $188,668 $478,123 James Clemens 15,000(4) 3.92% $3.44 08/27/07 $32,451 $82,237 15,000(5) 3.92% $2.44 03/24/07 $23,018 $58,331 Douglas McCauley 15,000(4) 3.92% $3.44 08/27/07 $32,451 $82,237 100(2) 0.03% $2.44 12/20/06 $153 $389 Stephen T. Wilson 10,000(6) 2.61% $3.44 12/20/99 $3,947 $8,148 100(2) 0.03% $2.44 12/20/06 $153 $38920,000(1) 14.44% $6.00 06/16/08 $75,467 $191,249 Denis P. Chaves 25,000(7) 6.53% $3.44 08/27/07 $54,085 $137,062 100(2) 0.03% $2.44 12/20/06 $153 $38920,000(1) 14.44% $6.00 06/16/08 $75,467 $191,249
- ----------------------- (1) Options may be exercised until June 30, 2000. (2) Options may be exercised after December 20, 1997 and prior to December 20, 1999. (3) Dr. Mastroianni was originally granted qualified options for 150,000 shares; 30,000 of which vested 6,000 per year for each of five years and 120,000 of which vested upon attainment of certain defined profit targets. As of July 15, 1997, Dr. Mastroianni's option agreement was amended to provide that Dr. Mastroianni will receive a total of 150,000 qualified stock options that will vest as follows: a) 30,000 will vest 20% per year commencing as of December 20, 1996; (b) 30,000 will vest at the rate of 33-1/3% per year beginning as of July 15, 1997; c) 90,000 will vest, if certain profit targets are attained, at the rate of 20,000 per year, for each of three years, commencing as of July 15, 1997, and 30,000 as of September 30, 2000. (4) 25% or 3,7505,000 shares are exercisable each year beginning on August 27, 1998. (5) Options will vest and may be exercised based upon the attainment of certain defined annual profit targets. (6) Options may be exercised after December 20, 1997 and prior to December 20, 1999. (7) 25% or 6,250 shares are exercisable each year beginning on August 27, 1998. AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES Number of Securities Underlying Unexercised Value of Unexercised Number of Securities In-the-Money Underlying Unexercised Options at Options at Fiscal Year End(#) Options at Fiscal Year End (#) End ($End($) ------------- ----------- Shares Value Acquired Value on Realized Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable - ---- ------------ ----- ----------- ------------- ----------- ------------- R. Wayne Diesel 0 0 35,000 100 $1,050 $103 Martin J. Mastroianni 42,100 206 0 0 36,000 114,100 $25,580 $121,8230 0 James Clemens 0 0 0 30,000 0 $15,900 Douglas McCauley 0 0 0 15,100 0 $553 Stephen T. Wilson 0 0 0 10,100 0 $4033,750 46,250 $13,819 $134,231 Denis P. Chaves 0 0 0 25,100 0 $8536,350 38,750 $23,500 $91,594
COMPENSATION COMMITTEE REPORT COMPENSATION POLICIES FOR OFFICERS.OFFICERS The Company's compensation program for executive officers, and employee Directors currentlyother than the Chief Executive Officer, consists of an annual salary and bonus payments that are primarily designed to reward performance. For the fiscal year 1997,1998, the Committee used the following criteria in making compensation decisions for executive officers: * Company and individual affiliate financial performance. * Identification and implementation of strategies and programs that result in increased revenue, decreased cost or improved share value. * Implementation of programs to improve working capital and cash flow, and to focus the Company's product offerings such that they compliment the Company's technology resources. CHIEF EXECUTIVE OFFICER COMPENSATION. Effective July 1, 1997, Mr. Diesel resigned asGeorge C. McNamee became Chief Executive Officer and became special assistant to the chairman of the Board of Directors. Effective June 30,Company on April 15, 1998 Mr. Diesel will resign from his positionafter Dr. Mastroianni resigned as special assistant. The office ofPresident and Chief ExecutiveOperating Officer was eliminated as of February 23,on April 7, 1998. Mr. DieselMcNamee receives no salary, bonus or other compensation from the Company. Effective April 7, 1998, Dr. Mastroianni resigned as President and Chief Operating Officer. Dr. Mastroianni was President and Chief ExecutiveOperating Officer from February 1994December 20, 1996 to July 1997 and President from February 1994 to December 1996. Mr. Diesel's compensation package reflected his experience and expertise; the size, diversity and needs of the business; and compensation levels at companies of comparable size and industry.April 7, 1998. For the period October 1, 1994 through September 30, 1997, Mr. Diesel'sDecember 20, 1996 to April 7, 1998, Dr. Mastroianni's base salary of $200,000$150,000 did not change. In fiscal 1997, Mr. DieselDr. Mastroianni was awarded a bonus of $15,000. In November 1996 restrictions on 23,000 shares of restricted stock held by Mr. Diesel were removed. In addition, on August 27, 1997, Mr. Diesel$50,000 which was awarded 35,000 non-qualified options for the Company's common stock. The stock award and bonus were based on Mr. Diesel's service to the Company and the Company's improved financial condition. (see "Employment Agreements" in the section entitled "Certain Relationships and Related Transactions", below). Effective December 20, 1996, Dr. Martin Mastroianni replaced Mr. Diesel as President and became Chief Operating Officer of the Company. Dr. Mastroianni was recruited from outside the Company. His compensation package includes an annual base salary of $150,000; the potential for cash incentive bonuses based on performance; and option grants under the Company's Incentive Stock Option Plan. For the period December 20, 1996 through September 30, 1997, there were no changes to Dr. Mastroianni's annual compensation of $150,000. A cash incentive bonus of $50,000 was accrued but not paid as of September 30, 1997.1997 and paid in fiscal 1998. Dr. Mastroianni was however, awarded qualified options for 30,000 shares, plus an additional 120,000 shares if certain performance targets were met, at an exercise price of $2.44 per share. The award was amended on July 15, 1997, to (1) redefine the profit targets; (2) reprice the exercise price for the 120,000 shares at $2.50 per share; and (3) permit vesting of 30,000 of the 120,000 shares based on the Company's performance in fiscal 1997. Upon his resignation, Dr. Mastroianni was vested in 42,000 qualified options. Compensation Committee Mr. Alan P. Goldberg Dr. Beno Sternlicht COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee ("Committee") approves all of the policies under which compensation is paid or awarded to the Company's officers and employee Directors. The Committee, in fiscal 1997, consisted of Messrs. Goldberg, Landgraf and Apkarian, until April 16, 1997, and thereafter1998, consisted of Mr. Goldberg and Dr. Sternlicht. Mr. Goldberg is Co-Chief Executive Officer of First Albany Companies, Inc. ("FAC"). (See "Security Ownership of Certain Beneficial Owners" in the section entitled "Additional Information" and "Certain Relationship and Related Transactions", below). Mr. Apkarian is a former Chief Executive Officer of the Company. Mr. Apkarian was Chief Executive Officer of the Company from 1961 until 1991 and was Chairman of the Board of Directors from 1984 until his resignation from his position in August 1993. Mr. Apkarian has not served on the Board or the Compensation Committee since April 1997. Mr. Apkarian did not vote on matters pertaining to his own compensation. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS At September 30, 1997, First Albany Companies, Inc. ("FAC") owned approximately 32.3% of the Company's Common Stock. During fiscal 1997, First Albany Corporation, a wholly owned subsidiary of FAC, provided financial advisory services in connection with the sale of the L.A.B. Division, for which First Albany Corporation was paid a $75,000 fee. During fiscal 1997, the Company and FAC entered into an agreement dated as of December 27, 1996, under which the Company issued to FAC 1.0 million shares of Common Stock in full satisfaction of the note payable to FAC by First Commercial Credit Corporation ("FCCC"), thereby extinguishing the Company's indebtedness to FCCC under that certain Note Payable, due December 31, 1996 ("Note Payable"); at December 27, 1996, the Note Payable to FCCC had an outstanding principal balance of $3.0 million and accrued interest of $1.1 million. On December 27, 1996, the last sale price of the Company's Common Stock, as quoted on the OTC Bulletin Board, was $2.00 per share. EMPLOYMENT AGREEMENTS The Company had an employment agreement with Mr. Diesel which provided that Mr. Diesel would receive an annual base salary of $200,000 and was eligible to receive incentive compensation. This agreement expired in February 1997. Per this agreement, Mr. Diesel was awarded an initial grant under the Company's Restricted Stock Incentive Plan of 10,000 shares; in December 1994, the Committee awarded Mr. Diesel an additional 25,000 shares under such Plan. In addition, on August 27, 1997 the Company awarded Mr. Diesel 35,000 options for shares, pursuant to the Company's Incentive Stock Option Plan. Effective December 20, 1996, Mr. Diesel resigned as President of the Company. On December 19, 1997, the Company entered into an agreement with Mr. Diesel regarding termination of his employment. The agreement provides that Mr. Diesel will receive: a) total salary payments from the Company of $42,308, b) 401k matching payments of $4,615; c) insurance benefits through December 31, 1997; d) a lump sum severance payment of $95,615; and e) vesting of the 35,000 non-qualified stock options awarded to Mr. Diesel on August 27, 1997. The Company has an agreement with Dr. Mastroianni which provides that Dr. Mastroianni will receive an annual base salary of $150,000 and be eligible for incentive compensation and incentive stock options. The agreement also states that if Dr. Mastroianni is removed from the position of President for reasons other than cause during his first three years of employment, the Company will pay him severance payments equivalent to a maximum of one year's base salary. Per this agreement, Dr. Mastroianni was awarded initial stock options under the Company's Incentive Stock Option Plan for 30,000 shares plus up to 120,000 additional shares, based upon achievement of certain defined profit targets for fiscal 1997. In July 1997, Dr. Mastroianni's Option Agreement was amended to vest Dr. Mastroianni in an additional 30,000 shares, change the defined profit targets for the remaining 90,000 shares, and change the exercise price for the full 120,000 shares. (See "Option Grants in Fiscal Year 1997" in the section entitled "Executive Compensation", above). The Company also entered into an agreement with Mr. James Clemens, President of Ling Electronics, Inc. ("Ling"). The agreement provides that Mr. Clemens' annual base salary will be $115,000, subject to adjustment by the Committee, from time to time. In addition, Mr. Clemens is eligible to receive incentive compensation of 3% of annual pre-tax income of Ling up to $1,000,000, and 2% of annual pre-tax income of Ling in excess of $1,000,000. The agreement also grants Mr. Clemens non-qualified stock options for 15,000 shares of the Company's common stock. (See "Option Grants in Fiscal Year 1997" in the section entitled "Executive Compensation, above). In addition, the Company agreed to advance Mr. Clemens $30,000 pursuant to a promissory note, payable in three annual installments of $10,000 plus interest at the rate of 6.5%. The Company agreed to award Mr. Clemens an annual bonus equivalent to the payments due on the note if Mr. Clemens is still employed by the Company on March 24, 1998, 1999 and 2000, respectively. If Mr. Clemens dies or is disabled prior to the due date of the note, the full amount due on the note will be bonused to Mr. Clemens. The Company also had an agreement with Mr. Apkarian. This agreement provided that Mr. Apkarian would continue as an employee and a Director of the Company at an annual salary of $130,000. The agreement also provided an annual bonus of $10,000 which he would use to purchase $250,000 of term life insurance. In addition, the agreement provided for the payment of club dues and the use of a Company automobile for which Mr. Apkarian paid 50% of the lease payments. As the result of Mr. Apkarian's retirement on September 30, 1997, all obligations pursuant to this agreement have terminated, however, the Company is required to continue to pay 50% of Mr. Apkarian's lease payments on his automobile until June 1998, at which time the Company will purchase the automobile and give it to Mr. Apkarian. DIRECTORS COMPENSATION Directors who are not officers or employees receive Director's fees of $750 for each Board meeting attended. Directors also are reimbursed for travel expenses incurred in attending meetings. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG MECHANICAL TECHNOLOGY INCORPORATED, THE S&P 500 INDEX EMPLOYMENT AGREEMENTS The Company entered into an employment agreement with Mr. James Clemens, President of Ling Electronics, Inc. ("Ling"). The agreement provides for an annual base salary of $115,000, subject to adjustment by the Compensation Committee. Effective July 1, 1998, Mr. Clemens' salary was increased to $150,000. In addition, Mr. Clemens is entitled to receive incentive compensation equal to 3% of annual pre-tax income of Ling up to $1,000,000, and 2% of annual pre-tax income of Ling in excess of $1,000,000. Mr. Clemens also received non-qualified stock options for 15,000 shares of the Company's common stock and an advance of $30,000. The advance must be repaid at the rate of $10,000 per year plus 6.5% interest. The Company agreed to pay Mr. Clemens an annual bonus equivalent to the payments due on the advance if Mr. Clemens is still employed by the Company prior to March 24, 1998, 1999 and 2000, respectively. If Mr. Clemens dies or is disabled prior to March 24, 2000, the amount then due on the advance will be forgiven. The Company had an employment agreement with Dr. Mastroianni which provided that Dr. Mastroianni would receive an annual base salary of $150,000 and be eligible for incentive compensation and incentive stock options. The agreement also stated that if Dr. Mastroianni was removed from the position of President for reasons other than cause during his first three years of employment, the Company would pay him severance payments equivalent to a maximum of one year's base salary. Effective April 7, 1998, Dr. Mastroianni resigned as President and Chief Operating Officer of the Company. On April 7, 1998, the Company entered into an agreement with Dr. Mastroianni regarding his employment. The agreement provides that Dr. Mastroianni will receive: a) total salary payments from the Company of $150,000 payable monthly over 15 months; b) 401(k) matching payments; c) insurance benefits through June 1, 2000; and d) vesting of 42,000 qualified stock options previously awarded to Dr. Mastroianni. CERTAIN RELATIONSHIPS AND THE S&P TECHNOLOGY SECTOR INDEX (1) S&P Measurement Period S&P Technology (Fiscal Year Covered) MKTY 500 Index Sector Index - ---------------------- ---- --------- ------------ Measurement Pt-9/30/92 100 100 100 FYE 9/30/93 70 113 121 FYE 9/30/94 3 117 140 FYE 9/30/95 45 152 222 FYE 9/30/96 70 183 272 FYE 9/30/97 140 257 442 (1) Assumes that $100 was invested onRELATED TRANSACTIONS At September 30, 19921998, First Albany Companies, Inc. ("FAC") owned approximately 34% of the Company's Common Stock. George McNamee, a Director and Chief Executive Officer of the Company, is Chairman of the Board of Directors, Co-Chief Executive Officer and a shareholder of FAC. Alan Goldberg, a Director of the Company, is a Director, President and Co-Chief Executive Officer and a shareholder of FAC. During fiscal 1998, First Albany Corporation, a wholly owned subsidiary of FAC, provided financial advisory services in Mechanicalconnection with the sale of the Technology Incorporated Common Stock,Division for which FAC was paid fees of $10,000. On December 17, 1998, the S&P 500,Industrial Development Agency for the Town of Colonie issued $6 million in Industrial Development Revenue ("IDR") Bonds on behalf of the Company to assist in the construction of a new building for Advanced Products and the S&P Technology Sector Index,Company's corporate headquarters and that all dividends were reinvested.renovation of existing buildings leased to Plug Power. The construction project is due to be completed in April 1999. FAC underwrote the sale of the IDR Bonds. FAC received no fees for underwriting the IDR Bonds but was reimbursed for its out-of-pocket expenses. ADDITIONAL INFORMATION SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS First Albany Companies, Inc. ("FAC"), 30 South Pearl Street,street, Albany, New York, 12207, are the beneficial owners of 2,035,6982,444,038 shares, or 34.5%34%, of the outstanding common stock of the Company. Messrs. McNamee and Goldberg may be deemed the beneficial owners of at least a portion of the shares owned by FAC. Messrs. McNamee and Goldberg disclaim such beneficial ownership. As discussed more fully under "Certain Relationships and Related Transactions", above, FAC acquired certain rights to a term loan due from FCCC (the finance company to whom the Company was obligated under the Note Payable). Pursuant to an agreement between FAC and the Company, dated December 27, 1996, the Company issued 1.0 million shares of common stock of the Company to FAC, in full satisfaction of the Note Payable. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires the Company's Directors and Executive Officers, and persons who own more than ten percent of a registered class of the Company's equity securities, to file with the Securities and Exchange Commission ("SEC") initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, Directors and greater than ten percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based on Company records and other information, the Company does not believe that all SEC filing requirements applicable to its Directors and Officers with respect to the Company's fiscal year ended September 30, 1997 were complied with. The Company believes that Dale Church and Beno Sternlicht, each a Director of the Company, and Martin Mastroianni, a Director, President and Chief Operating Officer of the Company, each failed to file one Section 16(a) form in a timely manner. Each late filing set forth above was filed electronically in a timely manner, however the electronic filings were rejected and the hard copy filings, when made, were late. Mr. Church's and Dr. Mastroianni's form reported one transaction. Dr. Sternlicht's form reported two transactions. The Company further believes that the Lawrence Insurance Group, Inc. failed to file at least one Section 16(a) form, reporting at least one transaction. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information with respect to the beneficial ownership of shares of the Company's Common Stock by (i) each Director and nominee for Director of the Company, (ii) each named executive officer described in the section of this Proxy Statement captioned "Executive Compensation", and (iii) all present Directors and Officers of the Company as a group, and (iv) each person who is known to the registrant to be the beneficial owner of more than 5% of any class of the registrant securities as of February 12, 1998. group. Name of Amount and Nature of Percent of Beneneficial Owner Beneficial Ownership(1)(2) Class ------------------ -------------------------- ----------Ownership Class(1) Denis P. Chaves 27,700(3)47,700(2) * Dale W. Church 50,000(4)68,000(3) * James R. Clemens 30,000(5)50,000(4) * R. Wayne Diesel 70,200(6) 1.2% Edward A. Dohring 15,000(4)26,000(5) * Alan P. Goldberg 2,165,773(7) 36.7% Douglas McCauley 15,100(8) *2,644,229(6) 36.8% George C. McNamee 2,245,698(7)(9) 38.0%2,741,341(6)(7) 38.2% Martin J. Mastroianni 170,100(10) 2.9%24,000(8) * E. Dennis O'Connor 40,00058,000(9) * Dr. Walter L. Robb 24,500(4)37,400(5) * Dr. Beno Sternlicht 273,050(4)(11) 4.6% Stephen Sullivan 1,000(2) * Stephen T. Wilson 10,100(12) *273,902(5)(10) 3.8% All present Directors and Officers as a group (12(10 persons) 3,091,423 52.3% - ---------------------------- * Percentage3,517,534 48.99% *Percentage is less than 1.0% of the outstanding Common Stock. (1) To the best of the Company's knowledge, based on information reported by such Directors and Officers or contained in the Company's shareholder records, except as otherwise indicated, each of the named persons is presumed to have sole voting and investment power with respect to all shares shown. None of the Company's present Directors or Officers other than Messrs. Goldberg and, McNamee, Dr. Mastroianni, Mr. Church and Dr. Sternlicht (see "Security Ownership of Certain Beneficial Owners", above) beneficially own more than 1% of the Company's outstanding Common Stock; all present Directors and Officers as a group beneficially own, in the aggregate, approximately 52.3%48.99% of the Company's outstanding Common Stock. (2) Includes options for 20,000 shares granted under the Company's Restricted Stock Incentive Plan which are still subject to forfeiture as follows: Mr. McCauley, 3,500 shares; and Mr. Sullivan, 500 shares. All present Directors and Officers as a group, 3,500 shares. (3) Includes an option foron June 16, 1998, 25,000 shares granted on August 27, 1997 and an option for 100 shares granted on December 20, 1996. (4)(3) Includes an optionoptions for 10,000 shares granted on August 31, 1998, 10,000 shares granted on April 16, 1997. (5)1997 and 8,000 shares owned by Mr. Church's wife. Mr. Church disclaims beneficial ownership of such shares. (4) Includes an optionoptions for 20,000 shares granted on June 16, 1998, 15,000 shares granted on August 27, 1997 and an option for 15,000 shares granted on March 24, 1997. (6)(5) Includes 100 shares held by Mr. Diesel's wife as custodianoptions for their minor child; Mr. Diesel disclaims beneficial ownership of such shares. Includes an option for 35,00010,000 shares granted on August 27, 199731, 1998 and an option for 10010,000 shares granted on December 20, 1996. (7)April 16, 1997. (6) Includes 2,035,6982,444,038 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. (8)(7) Includes an option for 15,000 shares granted on August 27, 1997 and an option for 100 shares granted on December 20, 1996. (9) Includes 10,00012,000 shares owned by Mr. McNamee's wife. Mr. McNamee disclaims beneficial ownership of such shares. (10)(8) Dr. Mastroianni resigned as President and Chief Operating Officer of the Company in April 1998, accordingly his shares are not included within the total shares of all present Directors and Officers as a group. (9) Includes an optionoptions for up to 150,00010,000 shares granted on December 20, 1996 as amended on July 15, 1997, and an option for 100 shares granted on December 20, 1996. (11)August 31, 1998. (10) Includes 26,65031,980 shares owned by Dr. Sternlicht's wife and 10,15012,180 shares held by Dr. Sternlicht's wife as custodian for their children; Dr. Sternlicht disclaims beneficial ownership of such shares. (12) Includes an option for 10,000 shares granted on August 27, 1997 and an option for 100 shares granted on December 20, 1996. 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, 1997,1998, 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, 968 Albany-Shaker Road, Latham, NY 12110. PROPOSALS OF SECURITY HOLDERS Proposals by security holders intended to be presented at the Company's Annual Meeting of Shareholders to be held in 19992000 must be received by the Company before October 6, 19984, 1999 in order to qualify for inclusion in the Company's Proxy Statement relating to that meeting. 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 John Recupero Secretary Latham, New York March 9, 1998February 12, 1999 Appendix A - Proxy Card MECHANICAL TECHNOLOGY INCORPORATED 968 Albany-Shaker Road Latham, New York 12110 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 ITEMS 2 AND 3, or 4, THE PROXY WILL BE VOTED FOR THOSE PROPOSALS.THAT PROPOSAL. The undersigned hereby appoints George C. McNamee and Alan Goldberg, 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 offices of First Albany Companies Inc., 30 South Pearl Street, Albany,Mechanical Technology Incorporated, 968 Albany-Shaker Road, Latham, New York, at 10:00 a.m. on April 15, 1998,March 18, 1999, or any adjournment thereof, as follows: 1.ELECTION OF DIRECTORS: FOR ALLBOTH NOMINEES LISTED BELOW _______ WITHHOLD AUTHORITY _______ (except as marked to the contrary below) to vote for allboth 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. One Year Term Two Year Term Three Year Term _____________ _____________ _______________ Dr. Martin Mastroianni Dale W. Church Alan P. Goldberg George C. McNamee Edward A. Dohring Dr. Walter L. Robb E. Dennis O'Connor Dr. Beno Sternlicht 2.PROPOSAL TO APPROVE THE REAPPOINTMENT OF COOPERS & LYBRAND L.L.P.PRICEWATERHOUSECOOPERS L.L.P AS AUDITORS. FOR _____ AGAINST _____ ABSTAIN _____ 3.PROPOSAL TO APPROVE AND ADOPT THE AMENDMENT AND RESTATEMENT OF THE CERTIFICATE OF INCORPORATION.COMPANY'S 1999 EMPLOYEE STOCK INCENTIVE PLAN FOR _____ AGAINST _____ ABSTAIN ___ 4.PROPOSAL TO APPROVE THE RESTATEMENT OF THE BY-LAWS. FOR ___ AGAINST ___ ABSTAIN _____ IN THEIR DISCRETION, UPON ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING. Date,______________ 1998 _______________________________________________________________1999 ___________________________________________ 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. __________________________________________________________________________________________ Please provide Social Security Number or Tax Identification Number Attendance at Meeting: NO _____ YES _____ NUMBER ATTENDING _____ EXHIBIT A Mechanical Technology Incorporated 1999 Employee Stock Incentive Plan SECTION 1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF MECHANICAL TECHNOLOGY INCORPORATED UNDERPURPOSE The purpose of the Mechanical Technology Incorporated 1999 Employee Stock Incentive Plan is to provide a means whereby Mechanical Technology Incorporated, a New York corporation (the "Corporation"), may attract able persons to remain in or to enter the employ of the Corporation, a Parent Corporation or a Subsidiary and to provide a means whereby those employees, directors, officers, and other individuals or entities upon whom the responsibilities of the successful administration, management, planning, and/or organization of the Corporation may rest, and whose present and potential contributions to the welfare of the Corporation, a Parent Corporation or a Subsidiary are of importance, can acquire and maintain stock ownership, thereby strengthening their concern for the long-term welfare of the Corporation. A further purpose of the Plan is to provide such employees and individuals or entities with additional incentive and reward opportunities designed to enhance the profitable growth of the Corporation over the long term. Accordingly, the Plan provides for granting Common Stock, Incentive Stock Options, options which do not constitute Incentive Stock Options, or any combination of the foregoing, as is best suited to the circumstances of the particular employees and individuals or entities as provided herein. SECTION 807 OF THE BUSINESS CORPORATION LAW2 DEFINITIONS The undersigned, beingfollowing definitions shall be applicable during the President andterm of the Secretary of MECHANICAL TECHNOLOGY INCORPORATED,Plan unless specifically modified by any paragraph: (a) Award means, individually or collectively, any Option granted pursuant to Section 807the Plan. (b) Board means the board of directors of the Business Corporation lawCorporation. (c) Change of Control Value means the amount determined in Clause (i), (ii) or (iii), whichever is applicable, as follows: (i) the per share price offered to stockholders of the State of New York, do hereby restate, certify and set forth: 1. The nameCorporation in any merger, consolidation, sale or assets or dissolution transaction, (ii) the price per share offered to stockholders of the corporation is MECHANICAL TECHNOLOGY INCORPORATED. 2. The certificate of incorporation of the corporation was filed by the Department of State on the 4th day of October, 1961. 3. The certificate of incorporation of the corporation, as amended heretofore, is hereby further amended to effect the following amendment authorized by the Business Corporation Law: a. To amend the certificate of incorporation to add the following provision regarding the location of the principal office of the corporation as follows: The principal office of the corporation shall be at such place within the state of New York, county of Albany, or such other place within the State of New York as the Board of Directors shall determine from time to time. b. To further amend the certificate of incorporation to add the following provision regarding designation of an agent of the corporation for purposes of service of process: The Secretary of State is designated as agent of the corporation upon whom process against it may be served. The post office address to which the Secretary of State shall mail a copy of any process against the corporation served upon him is: 968 Albany-Shaker Road, Latham, New York 12110. c. To further amend the certificate of incorporation to restate the purpose of the corporation as follows: The purposes for which it is formed are: To engage in any lawful acttender offer or activity for which corporations may be organized underexchange offer whereby a Corporate Change takes place or (iii) if a Corporate Change occurs other than as described in Clause (i) or Clause (ii), the New York Business Corporation Law. d. To further amend the certificate of incorporation to add the following provision to provide for a classified board and staggered election of directors: The number of directors constituting the entire Board shall be not less than three nor more than nine as fixed from time to time by vote of a majority of the entire Board, provided, however, that the number of directors shall not be reduced so as to shorten the term of any director at the time in office, and provided further, that the number of directors constituting the entire Board shall be eight until otherwise fixed by a majority of the entire Board. The Board of Directors shall be divided into three classes, as nearly equal in numbers as the then total number of directors constituting the entire Board permits with the term of office of one class expiring each year. At the annual meeting of stockholders in April 1998, three directors of the first class shall be elected to hold office for a term expiring at the next succeeding annual meeting, two directors of the second class shall be elected to hold office for a term expiring at the second succeeding annual meeting and three directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting. Any vacancies in the Board of Directors for any reason, and any directorships resulting from any increase in the number of directors, may be filledfair market value per share determined by the Board of Directors, acting by a majorityas of the directors thendate determined by the Board to be the date of cancellation and surrender of an Option. If the consideration offered to stockholders of the Corporation in office, although lessany transaction described in this Paragraph or Paragraphs (d) and (e) of Section 8 consists of anything other than a quorum,cash, the Board shall determine the fair cash equivalent of the portion of the consideration offered which is other than cash. (d) Code means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any Section of the Code shall be deemed to include any amendments or successor provisions to such Section and any directors so chosen shall hold office untilregulations under such Section. (e) Common Stock means the next electioncommon stock of the class for which such directors shall have been chosen and until their successors shall be elected and qualified. Subject to the foregoing, at each annual meeting of stockholders the successors to the class of directors whose term shall then expire shall be elected to hold office forCorporation. (f) Compensation Committee means a term expiring at the third succeeding annual meeting. Notwithstanding any other provision of this Certificate of Incorporation or the By-Laws of the corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Certificate of Incorporation or the By-Laws of the corporation), any director or the entire Board of Directors of the corporation may be removed at any time, but only for cause or after the affirmative vote of the holders of 75% or more of the outstanding shares of stock entitled to vote for the election of directors at a meeting called for that purpose or after the affirmative vote of 75% of the entire Board. e. To further amend the certificate of incorporation to add the following provision regarding indemnification of the officers and directors of the corporation: The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, proceeding or suit (including one by or in the right of the corporation to procure a judgment in its favor), whether civil or criminal, by reason of the fact that he, his testator or intestate is or was a director or officer of the corporation, or is or was serving any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity at the request of the corporation, against judgments, fines, amounts paid in settlement and expenses, including attorneys' fees, actually incurred as a result of or in connection with any such action, proceeding or suit, or any appeal therefrom, if such director or officer acted in good faith for a purpose which he reasonably believed to be in or not opposed to the best interests of the corporation and, in criminal actions or proceedings, in addition, had no reasonable cause to believe that his conduct was unlawful; provided, however, that no indemnification shall be made to or on behalf of any director or officer if a judgment or other final adjudication adverse to the director or officer establishes that his acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that he personally gained a financial profit or other advantage to which he was not legally entitled. f. To further amend the certificate of incorporation to add the following provision regarding personal liability of the directors of the corporation: Directors of the corporation shall not be personally liable to the corporation or its shareholders for any breach of duty in such capacity; provided, however, that this provision shall not operate so as to eliminate or limit (i) the liability of any director if a judgment or other final adjudication adverse to him establishes that his acts or omissions were in bad faith or involved intentional misconduct or a knowing violation of law or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled or that his acts violated Section 719 of the New York Business Corporation Law, or (ii) the liability of any director for any act or omission prior to the date on which this Article became effective. 4. The amendment effected by Paragraph 3 of this Restated Certificate of Incorporation and the restatement of the corporation's certificate of incorporation set forth in Paragraph 4 of this Restated Certificate of Incorporation were authorized by the affirmative vote of a majoritycommittee of the Board of Directors of the corporation, followed by the affirmative vote of the holders of a majority of all outstanding shares of the corporation's common stock entitled to vote at a meeting of shareholders. 5. The text of the certificate of incorporation of the corporationCorporation, who is hereby restated, as amended hereby, to read as herein set forth in full: FIRST: The name of the corporation is MECHANICAL TECHNOLOGY INCORPORATED. SECOND: The purposes for which it is formed are: To engage in any lawful act or activity for which corporations may be organized under the New York Business Corporation Law. THIRD: The principal office of the corporation shall be at such place within the state of New York, county of Albany, or such other place as the Board of Directors shall determine from time to time. FOURTH: The aggregate number of shares which the corporation shall havegiven authority to issue shall be Fifteen Million (15,000,000) shares, par value $1.00 per share. FIFTH: The number of directors constituting the entire Board shall be not less than three nor more than nine as fixed from time to time by vote of a majority of the entire Board, provided, however, that the number of directors shall not be reduced so as to shorten the term of any director at the time in office, and provided further, that the number of directors constituting the entire Board shall be eight until otherwise fixed by a majority of the entire Board. The Board of Directors shall be divided into three classes, as nearly equal in numbers as the then total number of directors constituting the entire Board permits with the term of office of one class expiring each year. At the annual meeting of stockholders in 1998, three directors of the first class shall be elected to hold office for a term expiring at the next succeeding annual meeting, two directors of the second class shall be elected to hold office for a term expiring at the second succeeding annual meeting and three directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting. Any vacancies in the Board of Directors for any reason, and any directorships resulting from any increase in the number of directors, may be filled by the Board of Directors, acting by a majorityto grant options or make stock grants under the Plan. (g) Corporation means Mechanical Technology Incorporated. (h) Corporate Change means one of the directors then in office, although less than a quorum, and any directors so chosen shall hold office untilfollowing events: (i) the next electionmerger, consolidation or other reorganization of the classCorporation in which the outstanding Common Stock is converted into or exchanged for which such directors shall have been chosen and until their successors shall be elected and qualified. Subject to the foregoing, at each annual meeting of stockholders the successors to thea different class of directors whose term shall then expire shall be elected to hold office forsecurities of the Corporation, a term expiring at the third succeeding annual meeting. Notwithstandingclass of securities of any other provision of this Certificate of Incorporationissuer (except a Subsidiary or the By-LawsParent Corporation), cash or other property other than (a) a merger, consolidation or reorganization of the corporation (and notwithstandingCorporation which would result in the fact that some lesser percentage may be specified by law, this Certificate of Incorporation or the By-Lawsvoting stock of the corporation), any directorCorporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or the entire Board of Directorsby being converted into voting securities of the corporation may be removed at any time, but only for cause or aftersurviving entity), in combination with the affirmative vote of the holders of 75% or more of the outstanding shares of stock entitled to vote for the election of directors at a meeting called for that purpose or after the affirmative vote of 75% of the entire Board. SIXTH: The Secretary of State is designated as agent of the corporation upon whom process against it may be served. The post office address to which the Secretary of State shall mail a copyownership of any process against the corporation served upon him is: 968 Albany-Shaker Road, Latham, New York 12110. SEVENTH: The corporation shall indemnify any person who wastrustee or is a party or is threatened to be made a party to any threatened, pending or completed action, proceeding or suit (including one by or in the right of the corporation to procure a judgment in its favor), whether civil or criminal, by reason of the fact that he, his testator or intestate is or was a director or officer of the corporation, or is or was serving any other corporation, partnership, joint venture, trust,fiduciary holding securities under an employee benefit plan or other enterprise in any capacity at the request of the corporation, against judgments, fines, amounts paid in settlement and expenses, including attorneys' fees, actually incurred as a result of or in connection with any such action, proceeding or suit, or any appeal therefrom, if such director or officer acted in good faith for a purpose which he reasonably believed to be in or not opposed to the best interestsCorporation, at least sixty percent (60%) of the corporation and, in criminal actions or proceedings, in addition, had no reasonable cause to believe that his conduct was unlawful; provided, however, that no indemnification shall be made to or on behalf of any director or officer if a judgment or other final adjudication adverse to the director or officer establishes that his acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that he personally gained a financial profit or other advantage to which he was not legally entitled. EIGHTH: Directorscombined voting power of the corporation shall not be personally liable to the corporation or its shareholders for any breach of duty in such capacity; provided, however, that this provision shall not operate so as to eliminate or limit (i) the liability of any director if a judgment or other final adjudication adverse to him establishes that his acts or omissions were in bad faith or involved intentional misconduct or a knowing violation of law or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled or that his acts violated Section 719 of the New York Business Corporation Law, or (ii) the liability of any director for any act or omission prior to the date on which this Article became effective. IN WITNESS WHEREOF, we have signed this certificate as of the _____ day of April, 1998, and we affirm the statements contained herein as true under penalties of perjury. ______________________________ Martin J. Mastroianni President ______________________________ John Recupero Secretary EXHIBIT 2 AMENDED AND RESTATED BY-LAWS OF MECHANICAL TECHNOLOGY INCORPORATED ARTICLE I OFFICES SECTION 1. PRINCIPAL OFFICE. The principal office of the corporation shall be at such place within the State of New York as the Board of Directors shall determine from time to time. SECTION 2. OTHER OFFICES. The corporation may have other offices, either within or without the State of New York, at such place or places as the Board of Directors may from time to time appoint or the business of the corporation may require. ARTICLE II MEETING OF STOCKHOLDERS SECTION 1. ANNUAL MEETINGS. Annual meetings of stockholders for the election of directors and for such other business as may be stated in the notice of the meeting, shall be held at such place, either within or without the State of New York, and at such time and date as the Board of Directors, by resolution, shall determine and as set forth in the notice of the meeting. If the date of the annual meeting shall fall upon a legal holiday, the meeting shall be held on the next business day. At each annual meeting, the stockholders entitled to vote shall elect a Board of Directors and they may transact such other corporate business as shall be stated in the notice of the meeting. SECTION 2. OTHER MEETINGS. Meetings of stockholders for any purpose other than the election of directors may be held at such time and place, within or without the State of New York, as shall be stated in the notice of meeting. SECTION 3. VOTING. Each stockholder entitled to vote in accordance with the terms of the Certificate of Incorporation and in accordance with the provisions of these By-Laws shall be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholder, but no proxy shall be voted after eleven months from its date unless such proxy provides for a longer period. Upon the demand of any stockholder, the vote for directors and the vote upon any question before the meeting, shall be by ballot. All elections for directors shall be decided by plurality vote; all other questions shall be decided by majority vote of those stockholders present in person or by proxy except as otherwise provided by the Certificate of Incorporation or the laws of the State of New York. A complete list of the stockholders entitled to vote at the ensuing election, arranged in alphabetical order, with the address of each, and the number of shares held by each, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the meeting and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 4. QUORUM. Except as otherwise required by law, by the Certificate of Incorporation or by these By-Laws, the presence, in person or by proxy, of stockholders holding a majority of thevoting stock of the corporation entitled to vote shall constitute a quorum at all meetingsCorporation or such surviving entity outstanding immediately after such merger, consolidation or reorganization of the stockholders. In case a quorum shall not be present at any meeting, a majority in interestCorporation, or (b) merger, consolidation or reorganization of the stockholders entitledCorporation effected to vote thereat, present in person or by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of stock entitled to vote shall be present. At any such adjourned meeting at which the requisite amount of stock entitled to vote shall be represented, any business may be transacted which might have been transacted at the meeting as originally noticed; but only those stockholders entitled to vote at the meeting as originally noticed shall be entitled to vote at any adjournment or adjournments thereof. SECTION 5. SPECIAL MEETINGS. Special meetingsimplement a recapitalization of the stockholders for any purpose or purposes may be called by the President or Secretary, or by resolutionCorporation (or similar transaction) in which no person acquires more than forty-nine percent (49%) of the directors. SECTION 6. NOTICE OF MEETINGS. Written notice, stating the place, date and timecombined voting power of the meeting, and the general nature of the business to be considered, shall be given to each stockholder entitled to vote thereat at his address as it appears on the records of the corporation, not less than ten nor more than sixty days before the date of the meeting. No business other than that stated in the notice shall be transacted at any meeting without the unanimous consent of all the stockholders entitled to vote thereat. SECTION 7. ACTION WITHOUT MEETING. Unless otherwise provided by the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders ofCorporation's then outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS SECTION 1. NUMBER AND TERM. The number of directors constituting the entire Board shall be not less than three nor more than nine as fixed from time to time by vote of a majority of the entire Board, provided, however, that the number of directors shall not be reduced so as to shorten the term of any director at the time in office, and provided further, that the number of directors constituting the entire Board shall be eight until otherwise fixed by a majority of the entire Board. The Board of Directors shall be divided into three classes, as nearly equal in numbers as the then total number of directors constituting the entire Board permits with the term of office of one class expiring each year. At the annual meeting of stockholders in 1998, three directors of the first class shall be elected to hold office for a term expiring at the next succeeding annual meeting, two directors of the second class shall be elected to hold office for a term expiring at the second succeeding annual meeting and three directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting. Any vacancies in the Board of Directors for any reason, and any directorships resulting from any increase in the number of directors, may be filled by the Board of Directors, acting by a majority of the directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next election of the class for which such directors shall have been chosen and until their successors shall be elected and qualified. Subject to the foregoing, at each annual meeting of stockholders the successors to the class of directors whose term shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting. Notwithstanding any other provision of this Certificate of Incorporation or the By-Laws of the corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Certificate of Incorporation or the By-Laws of the corporation), any director or the entire Board of Directors of the corporation may be removed at any time, but only for cause or after the affirmative vote of the holders of 75% or more of the outstanding shares of stock entitled to vote for the election of directors at a meeting called for that purpose or after the affirmative vote of 75% of the entire Board. SECTION 2. RESIGNATIONS. Any director, member of a committee or other officer may resign at any time. Such resignation shall be made in writing, and shall take effect at the time specified therein, and if no time is specified, at the time of its receipt by the President or Secretary. The acceptance of a resignation shall not be necessary to make it effective. SECTION 3. VACANCIES. If the office of any director, member of a committee or other office becomes vacant, the remaining directors in office, though less than a quorum, by a majority vote, may appoint any qualified person to fill such vacancy, who shall hold office for the unexpired term and until his successor shall be duly chosen. SECTION 4. REMOVAL. Except as hereinafter provided, any director or directors may be removed either for or without cause at any time by the affirmative vote of the holders of a majority of all the shares of stock outstanding and entitled to vote, at a special meeting of the stockholders called for the purpose and the vacancies thus created may be filled, at the meeting held for the purpose of removal, by the affirmative vote of a majority in interest of the stockholders entitled to vote. SECTION 5. INCREASE OF NUMBER. The number of directors may be fixed by a majority of the entire Board of Directors. The maximum number of directors may be increased by amendment of these By-laws by the affirmative vote of a majority of the directors, though less than a quorum, or, by the affirmative vote of a majority of the stockholders, at the annual meeting or at a special meeting called for that purpose. By like vote any additional directors may be chosen to hold office for the unexpired term of such class of directors and until their successors are elected and qualify. SECTION 6. POWERS. The Board of Directors shall exercise all of the powers of the corporation except such as are by law, or by the Certificate of Incorporation of the corporation or by these By-Laws conferred upon or reserved to the stockholders. SECTION 7. COMMITTEES. The Board of Directors may, by resolution or resolutions passed by a majority of the whole board, designate one or more committees, each committee to consist of two or more directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, or in these By-Laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholdersstock; (ii) the sale, lease or exchange of all or substantially all of the corporation's propertyassets of the Corporation to any other corporation or entity (except a Subsidiary or Parent Corporation); (iii) the adoption by the stockholders of the Corporation of a plan of liquidation and assets, recommendingdissolution; (iv) the acquisition (other than acquisition pursuant to any other clause of this definition) by any person or entity, including without limitation a "group" as contemplated by Section 13(d)(3) of the Exchange Act, of beneficial ownership, as contemplated by such Section, of more than twenty- five percent (25%) (based on voting power) of the Corporation's outstanding capital stock or acquisition by a person or entity who currently has beneficial ownership which increases such person's or entity's beneficial ownership to fifty percent (50%) or more (based on voting power) of the Corporation's outstanding capital stock; or (v) as a result of or in connection with a contested election of directors, the persons who were directors of the Corporation before such election shall cease to constitute a majority of the Board. Notwithstanding the provisions of clause (iv) above, a Corporate Change shall not be considered to have occurred upon the acquisition (other than acquisition pursuant to any other clause of the preceding sentence) by any person or entity, including without limitation a "group" as contemplated by Section 13(d)(3) of the Exchange Act, of beneficial ownership, as contemplated by such Section, of more than twenty- five percent (25%) (based on voting power) of the Corporation's outstanding capital stock or the requisite percentage to increase their ownership to fifty percent (50%) resulting from a public offering of securities of the Corporation under the Securities Act of 1933, as amended. (i) Exchange Act means the Securities Exchange Act of 1934, as amended. (j) Fair Market Value means, as of any specified date, the closing price of the Common Stock on the NASDAQ (or, if the Common Stock is not listed on such exchange, such other national securities exchange on which the Common Stock is then listed) on that date, or if no prices are reported on that date, on the last preceding date on which such prices of the Common Stock are so reported. If the Common Stock is not then listed on any national securities exchange but is traded over the counter at the time determination of its Fair Market Value is required to be made hereunder, its Fair Market Value shall be deemed to be equal to the stockholdersaverage between the reported high and low sales prices of Common Stock on the most recent date on which Common Stock was publicly traded. If the Common Stock is not publicly traded at the time a dissolutiondetermination of its value is required to be made hereunder, the determination of its Fair Market Value shall be made by the Board in such manner as it deems appropriate (such determination will be made in good-faith as required by Section 422(c)(1) of the corporationCode and may be based on the advice of an independent investment banker or a revocation of a dissolution, or amendingappraiser recognized to be expert in making such valuations). Fair Market Value also shall satisfy the By-Lawsrequirements under Section 260.140 of the corporation;California Code of Regulations, as necessary to qualify for an exemption from the provisions of Section 25110 of the California Corporations Code. (k) Grant means individually or collectively, any Common Stock granted pursuant to the Plan. (l) Grantee means an employee, director, officer, other individual or entity who has been granted Common Stock pursuant to the Plan. (m) Holder means an individual or entity who has been granted an Award. (n) Incentive Stock Option means an Option within the meaning of Section 422 of the Code. (o) Option means an Award granted under Section 7 of the Plan and unlessincludes both Incentive Stock Options to purchase Common Stock and Options which do not constitute Incentive Stock Options to purchase Common Stock. (p) Option Agreement means a written agreement between the resolution, these By-Laws,Corporation and an employee with respect to an Option. (q) Optionee means an employee, director, officer, entity or the Certificate of Incorporation expressly so provide, no such committeeindividual who has been granted an Option. (r) Parent Corporation shall have the powermeaning set forth in Section 424(e) of the Code. (s) Plan means the Mechanical Technology Incorporated 1999 Employee Stock Incentive Plan. (t) Rule 16b-3 means Rule 16b-3 of the General Rules and Regulations of the Securities and Exchange Commission under the Exchange Act, as such rule is currently in effect or authorityas hereafter modified or amended. (u) Subsidiary means a company (whether a corporation, partnership, joint venture or other form of entity) in which the Corporation, or a corporation in which the Corporation owns a majority of the shares of capital stock, directly or indirectly, owns an equity interest of fifty percent (50%) or more, except solely with respect to declare a dividend or to authorize the issuance of stock. SECTION 8. MEETINGS. Regular meetingsIncentive Stock Options the term "Subsidiary" shall have the same meaning as the term "subsidiary corporation" as defined in Section 424(f) of the directorsCode. SECTION 3 EFFECTIVE DATE AND DURATION OF THE PLAN The Plan shall be effective as of March 29, 1999, the date of its adoption by the Board, provided that the Plan is approved by the stockholders of the Corporation within twelve (12) months before or thereafter and on or prior to the date of the first annual meeting of stockholders of the Corporation held subsequent to the acquisition of an equity security by a Holder hereunder for which exemption is claimed under Rule 16b-3. Notwithstanding any provision of the Plan or of any Option Agreement, no Option shall be exercisable and no Common Stock may be held without notice atgranted prior to such placesstockholder approval. The Plan shall be terminated and no further Awards or Common Stock may be granted under the Plan after ten (10) years from the date the Plan is adopted by the Board or the date the Plan is approved by the Corporation's shareholders, whichever is earlier. Subject to the provisions of Section 9, the Plan shall remain in effect until all Options granted under the Plan have been exercised or have expired by reason of lapse of time and all restrictions imposed upon restricted stock awards have lapsed. Any option exercised before shareholder approval is obtained must be rescinded if shareholder approval is not obtained within twelve (12) months before or after the Plan is adopted. Such shares shall not be counted in determining whether such approval is granted. SECTION 4 ADMINISTRATION (a) Administration of Plan by Board. The Plan shall be administered by the Board in compliance with Rule 16b-3. Members of the Board shall abstain from participating in and deciding matters which directly affect their individual ownership interests under the Plan. (b) Powers. Subject to the terms of the Plan, the Board shall elect one or several members to the Compensation Committee who shall have sole authority, in their discretion, to determine which employees, officers, directors, individuals or entities shall receive an Award or Grant, the time or times when such Award or Grant shall be made, whether Common Stock, an Incentive Stock Option or non-qualified Option shall be granted and the number of shares of Common Stock which may be issued under each Option. In making such determinations, the Designated Officer may take into account the nature of the services rendered by these individuals, their present and potential contribution to the success of the Corporation, a Parent Corporation or a Subsidiary, and such other factors as the Board in its discretion shall deem relevant. (c) Additional Powers. The Board shall have such additional powers as are delegated to it by the other provisions of the Plan. Subject to the express provisions of the Plan, the Board is authorized in its sole discretion, exercised in a nondiscriminatory manner, to construe and interpret the Plan and the respective agreements executed thereunder, to prescribe such rules and regulations relating to the Plan as it may deem advisable to carry out the Plan, and to determine the terms, restrictions and provisions of each Award or Grant, including such terms, restrictions and provisions as shall be determinedrequisite in the judgment of the Board to cause designated Options to qualify as Incentive Stock Options, and to make all other determinations necessary or advisable for administering the Plan. The Board may correct any defect or supply any omission or reconcile any inconsistency in any agreement relating to an Award or Grant in the manner and to the extent it shall deem expedient to carry it into effect. The determination of the Board on the matters referred to in this Section 4 shall be conclusive. (d) Compliance With Code 162(m). In the event the Corporation, a Parent Corporation or a Subsidiary becomes a "publicly-held corporation" as defined in Section 162(m)(2) of the Code, the Corporation may establish a committee of outside directors meeting the requirements of Code 162(m) to (i) approve the grant of Options which might reasonably be anticipated to result in the payment of employee remuneration that would otherwise exceed the limit on employee remuneration deductible for income tax purposes by the Corporation pursuant to Code 162(m) and (ii) administer the Plan. In such event, the powers reserved to the Board in the Plan shall be exercised by such compensation committee. In addition, Options under the Plan shall be granted upon satisfaction of the conditions to such grants provided pursuant to Code 162(m) and any Treasury Regulations promulgated thereunder. SECTION 5 GRANT OF OPTIONS AND STOCK SUBJECT TO THE PLAN (a) Award Limits. The Compensation Committee may from time to time grant Awards and/or make Grants to one or more employees, directors, officers, individuals or entities determined by resolutionhim or her to be eligible for participation in the Plan in accordance with the provisions of Section 6 of the directors. Special meetingsPlan. The aggregate number of shares of Common Stock that may be issued under the Plan shall not exceed 1,000,000 shares. The aggregate number of shares of Common Stock that may be issued to any Holder and/or granted to any Grantee under the Plan shall not exceed thirty percent (30%)] of the boardaggregate number of shares referred to in the preceding sentence. The total number of shares issuable upon exercise of all outstanding Options shall not exceed a number of shares which is equal to thirty percent (30%) of the then outstanding shares of the Corporation. Any of such shares which remain unissued and which are not subject to outstanding Options and/or Grants at the termination of the Plan shall cease to be subject to the Plan but, until termination of the Plan, the Corporation shall at all times reserve a sufficient number of shares to meet the requirements of the Plan. Shares shall be deemed to have been issued under the Plan only to the extent actually issued and delivered pursuant to an Award or Grant. To the extent that an Award or Grant lapses or the rights of its Holder or Grantee terminate, any shares of Common Stock subject to such Award or Grant shall again be available for the grant of an Award or making of a Grant. The aggregate number of shares which may be calledissued under the Plan shall be subject to adjustment in the same manner as provided in Section 8 of the Plan with respect to shares of Common Stock subject to Options then outstanding. Separate stock certificates shall be issued by the ChairmanCorporation for those shares acquired pursuant to a Grant, the exercise of an Incentive Stock Option and for those shares acquired pursuant to the exercise of any Option which does not constitute an Incentive Stock Option. (b) Stock Offered. The stock to be offered pursuant to an Award or Grant may be authorized but unissued Common Stock or Common Stock previously issued and outstanding and reacquired by the Corporation. SECTION 6 ELIGIBILITY An Incentive Stock Option Award made pursuant to the Plan may be granted only to an individual who, at the time of grant, is an employee of the Board, if elected, PresidentCorporation, a Parent Corporation or a Subsidiary. An Award of an Option which is not an Incentive Stock Option or a Grant of Common Stock may be made to an individual who, at the time of Award or Grant, is an employee of the Corporation, a Parent Corporation or a Subsidiary, or to an individual who has been identified by the Secretary onBoard or Designated Officer to receive an Award or Grant due to their contribution or service to the written request of any two directors on at least two days notice to each director and shall be held at such place or places as may be determined by the directors, or shall be stated in the call of the meeting. Unless otherwise restricted by the Certificate of Incorporation or by these By-Laws,Corporation, including members of the Board of Directors of the Corporation, a Parent Corporation or a Subsidiary. An Award or Grant made pursuant to the Plan may be made on more than one occasion to the same person, and such Award or Grant may include a Common Stock Grant, an Incentive Stock Option, an Option which is not an Incentive Stock Option, or any committee designatedcombination thereof. Each Award or Grant shall be evidenced by a written instrument duly executed by or on behalf of the Corporation. SECTION 7 STOCK OPTIONS/GRANTS (a) Stock Option Agreement. Each Option shall be evidenced by an Option Agreement between the Corporation and the Optionee which shall contain such terms and conditions as may be approved by the Board of Directors, may participate in a meetingand agreed upon by the Holder. The terms and conditions of the Boardrespective Option Agreements need not be identical. Each Option Agreement shall specify the effect of Directors,termination of employment, total and permanent disability, retirement or death on the exercisability of the Option. Under each Option Agreement, a Holder shall have the right to appoint any committee, by means of conference telephoneindividual or similar communications equipment by means of which all persons participatinglegal entity in writing as his or her beneficiary under the Plan in the meeting can hearevent of his death. Such designation may be revoked in writing by the Holder at any time and a new beneficiary may be appointed in writing on the form provided by the Board for such purpose. In the absence of such appointment, the beneficiary shall be the legal representative of the Holder's estate. (b) Option Period. The term of each other, and such participation in a meetingOption shall constitute presence in personbe as specified by the Board at the meeting. SECTION 9. QUORUM. A majoritydate of grant and shall be stated in the Option Agreement; provided, however, that an option may not be exercised more than one hundred twenty (120) months from the date it is granted. (c) Limitations on Exercise of Option. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Board and as shall be permissible under the terms of the directorsPlan, which shall constitute a quorumbe specified in the Option Agreement evidencing the Option; provided, however, that an option shall be exercised at the rate of at least twenty percent (20%) per year over five (5) years from the date it is granted. An Option may not be exercised for fractional shares. (d) Special Limitations on Incentive Stock Options. To the extent that the aggregate Fair Market Value (determined at the time the respective Incentive Stock Option is granted) of Common Stock with respect to which Incentive Stock Options are exercisable for the transaction of business. If atfirst time by an individual during any meetingcalendar year under all incentive stock option plans of the board thereCorporation (and any Parent Corporation or Subsidiary) exceeds One Hundred Thousand Dollars ($100,000) (within the meaning of Section 422 of the Code), such excess Incentive Stock Options shall be treated as Options which do not constitute Incentive Stock Options. The Board shall determine, in accordance with applicable provisions of the Code, Treasury Regulations and other administrative pronouncements, which of an Optionee's Incentive Stock Options will not constitute Incentive Stock Options because of such limitation and shall notify the Optionee of such determination as soon as practicable after such determination. No Incentive Stock Option shall be granted to an individual if, at the time the Option is granted, such individual owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation or of its Parent Corporation or a Subsidiary, within the meaning of Section 422(b)(6) of the Code, unless (i) at the time such Option is granted the Option price is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock subject to the Option and (ii) such Option by its terms is not exercisable after the expiration of five years from the date of grant. (e) Option Price. The purchase price of Common Stock issued under each Option shall be determined by the Board and shall be stated in the Option Agreement, but such purchase price shall, in the case of Incentive Stock Options, not be less than a quorum present, a majoritythe Fair Market Value of those presentCommon Stock subject to the Option on the date the Option is granted, and, in the case of Options which do not constitute Incentive Stock Options, not be less than eighty-five percent (85%) of the fair value of the stock at the time the option is granted, except that the price shall be one hundred ten percent (110%) of the fair value in the case of any person or entity who owns stock comprising more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation or its Parent Corporation or Subsidiary. Fair value in the case of options that do not constitute Incentive Stock Options shall have the same meaning as set forth in Section 260.140.50 of the California Code of Regulations. (f) Options and Rights in Substitution for Stock Options Made by Other Corporations. Options may adjournbe granted under the meetingPlan from time to time untilin substitution for stock options held by employees of corporations who become, or who became prior to the effective date of the Plan, employees of the Corporation, of any Parent Corporation or of any Subsidiary as a quorum is obtained, and no further notice thereof need be given other thanresult of a merger or consolidation of the employing corporation with the Corporation, such Parent Corporation or such Subsidiary, or the acquisition by announcementthe Corporation, a Parent Corporation or a Subsidiary of all or a portion of the assets of the employing corporation, or the acquisition by the Corporation, a Parent Corporation or a Subsidiary of stock of the employing corporation with the result that such employing corporation becomes a Subsidiary. (g) Restricted Stock Option Purchase Agreement. Notwithstanding the foregoing, at the meetingelection of the Holder, the Option can be exercised provided that the Holder shall, as a condition of such exercise, execute and deliver the Restricted Stock Option Purchase Agreement (the "Purchase Agreement"), pursuant to which the Corporation shall be adjourned.granted a "Repurchase Option" and "Right of First Refusal" as to all "Shares" (as such terms are defined in the Purchase Agreement). (h) Restricted Stock Grant Agreement. Each Grant shall be evidenced by the execution and delivery of a Restricted Stock Grant Agreement (the "Grant Agreement"), pursuant to which the Corporation shall be granted a "Repurchase Option" and "Right of First Refusal" as to all "Shares" (as such terms are defined in the Grant Agreement). SECTION 10. COMPENSATION. Directors8 RECAPITALIZATION OR REORGANIZATION (a) Except as hereinafter otherwise provided, Awards or Grants shall be subject to adjustment by the Board at its discretion as to the number and price of shares of Common Stock in the event of changes in the outstanding Common Stock by reason of stock dividends, stock splits, reverse stock splits, reclassifications, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges or other relevant changes in capitalization occurring after the date of the grant of any such Options or Common Stock. (b) The existence of the Plan and the Awards and/or Grants made hereunder shall not receive any stated salary for their services as directors or as members of committees, but by resolution of the board a fixed fee and expenses of attendance may be allowed for attendance at each meeting. Nothing herein contained shall be construed to preclude any director from serving the corporationaffect in any other capacity as an officer, agentway the right or otherwise, and receiving compensation therefor. SECTION 11. ACTION WITHOUT MEETING. Any action required or permitted to be taken at any meetingpower of the Board or the stockholders of Directors,the Corporation to make or authorize any adjustment, recapitalization, reorganization or other change in the capital structure of the Corporation, a Parent Corporation or a Subsidiary or their business, any committeemerger or consolidation of the Corporation, a Parent Corporation or a Subsidiary, any issue of debt or equity securities having any priority or preference with respect to or affecting Common Stock or the rights thereof, the dissolution or liquidation of the Corporation, a Parent Corporation or a Subsidiary, or any sale, lease, exchange or other disposition of all or any part of their assets or business or any other corporate act or proceeding. (c) The shares with respect to which Options may be taken without a meeting,granted are shares of Common Stock as presently constituted but if and whenever, prior to such actionthe expiration of an Option theretofore granted, the Corporation shall effect a written consent thereto is signed by all memberssubdivision or consolidation of shares of Common Stock or the board, orpayment of such committee as the case may be, and such written consent is filed with the minutesa stock dividend on Common Stock without receipt of proceedings of the board or committee. ARTICLE IV OFFICERS SECTION 1. OFFICERS. The officers of the corporation shall be a a President, a Chief Financial Officer, and a Secretary, all of whom shall be electedconsideration by the Board of Directors and who shall hold office until their successors are elected and qualified. In addition, the Board of Directors may elect one or more Vice Presidents and such Assistant Secretaries and Assistant Treasurers as they may deem proper. None of the officers of the corporation need be directors. The officers shall be elected by the Board of Directors from time to time. More than two offices may be held by the same person. SECTION 2. OTHER OFFICERS AND AGENTS. The Board of Directors may appoint such other officers and agents as it may deem advisable, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. SECTION 3. PRESIDENT. The President shall have the general powers and duties of supervision and management normally vested in the office of President. He shall have general supervision, direction and control of the business of the corporation. He shall preside at all meetings of the stockholders if present thereat, and in the absence or non-election of the Chairman of the Board of Directors, at all meetings of the Board of Directors, and shall have general supervision, direction and control of the business of the corporation. Except as the Board of Directors shall authorize the execution thereof in some other manner, he shall execute bonds, mortgages and other contracts in behalf of the corporation, and shall cause the seal to be affixed to any instrument requiring it and when so affixed the seal shall be attested by the signature of the Secretary or the Chief Financial Officer or an Assistant Secretary or an Assistant Treasurer. SECTION 4. VICE-PRESIDENT. Each vice-president shall have such powers and shall perform such duties as shall be assigned to him by the directors. SECTION 5. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to the corporation. He shall deposit all moneys and other valuables in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. The Chief Financial Officer shall disburse the funds of the corporation as may be ordered by the Board of Directors, or the President, taking proper vouchers for such disbursements. He shall render to the President and Board of Directors at the regular meetings of the Board of Directors, or whenever they may request it, an account of all his transactions as Chief Financial Officer and of the financial condition of the corporation. If required by the Board of Directors, he shall give the corporation a bond for the faithful discharge of his duties in such amount and with such surety as the board shall prescribe. SECTION 6. SECRETARY. The Secretary shall give, or cause to be given, notice of all meetings of stockholders and directors, and all other notices required by law or by these By-Laws, and in case of his absence or refusal or neglect so to do, any such notice may be given by and person thereunto directed by the President, or by the directors, or stockholders, upon whose requisition the meeting is called as provided in these By-Laws. He shall record all the proceedings of the meetings of the corporation and of the directors in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him by the directors or the President. He shall have the custody of the seal of the corporation and shall affix the same to all instruments requiring it, when authorized by the directors or the President, and attest the same. SECTION 7. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. Assistant Treasurers and Assistant Secretaries, if any, shall be elected and shall have such powers and shall perform such duties as shall be assigned to them, respectively, by the directors. ARTICLE V MISCELLANEOUS SECTION 1. CERTIFICATES OF STOCK. Certificate of stock, signed by the Chairman of the Board of Directors, if he be elected, President or Vice- President, and the Chief Financial Officer or an Assistant Treasurer, or Secretary or an Assistant Secretary, shall be issued to each stockholder certifyingCorporation, the number of shares owned by himof Common Stock with respect to which such Option may thereafter be exercised (i) in the corporation. Anyevent of or all the signatures may be facsimiles. SECTION 2. LOST CERTIFICATES. A new certificate of stock may be issuedan increase in the placenumber of any certificate theretofore issued by the corporation, alleged to have been lost or destroyed,outstanding shares shall be proportionately increased, and the directors may,purchase price per share shall be proportionately reduced, and (ii) in their discretion, require the ownerevent of a reduction in the number of outstanding shares shall be proportionately reduced, and the purchase price per share shall be proportionately increased. (d) If the Corporation recapitalizes or otherwise changes its capital structure, thereafter upon any exercise of an Option theretofore granted, the Optionee shall be entitled to purchase under such Option, in lieu of the lost or destroyed certificate, or his legal representatives,number of shares of Common Stock as to givewhich such Option shall then be exercisable, the corporation a bond, in such sum as they may direct, not exceeding double the valuenumber and class of the stock, to indemnify the corporation against any claim that may be made against it on account of the alleged loss of any such certificate, or the issuance of any such new certificate. SECTION 3. TRANSFER OF SHARES. The shares of stock and securities, and the cash and other property to which the Optionee would have been entitled pursuant to the terms of the corporation shallrecapitalization if, immediately prior to such recapitalization, the Optionee had been the holder of such record of the number of shares of Common Stock then covered by such Option. (e) In the event of a Corporate Change, unless otherwise deemed to be transferable only upon its booksimpractical by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificates shall be surrendered to the corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers, or to such other person as the directors may designate, by whom they shall be canceled, and new certificates shall thereupon be issued. A record shall be made of each transfer and whenever a transfer shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer. SECTION 4. STOCKHOLDERS RECORD DATE. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board, of Directors may fix, in advance, a record date, which shall not be morethen no later than sixty nor less than ten days before the date of such meeting, nor more than sixty(i) two business days prior to any other action. A determination of stockholders of record entitled to notice ofCorporate Change referenced in Clause (i), (ii), (iii), (v) or to vote at a meeting of stockholders shall apply to any adjournment(vi) of the meeting; provided, however, thatdefinition thereof or (ii) ten business days after any Corporate Change referenced in Clause (iv) of the definition thereof, the Board, acting in its sole discretion without the consent or approval of Directorsany Optionee or Grantee, shall act to effect the following alternatives with respect to outstanding Options which acts may fix a new record date for the adjourned meeting. SECTION 5. SEAL. The corporate seal shallvary among individual Optionees and, with respect to acts taken pursuant to Clause (i) above, may be circular in form and shall contain the namecontingent upon effectuation of the corporation,Corporate Change: (A) in the yearevent of its creationa Corporate Change referenced in Clauses (i), (ii) and the words "CORPORATE SEAL NEW YORK." Said seal(vi) acceleration of exercise for all Options then outstanding so that such Options may be usedexercised in full for a limited period of time on or before a specified date (before or after such Corporate Change) fixed by causing itthe Board, after which specified date all unexercised Options and all rights of Optionees thereunder shall terminate; (B) in the event of a Corporate Change referenced in Clauses (iii), (iv) and (v) require the mandatory surrender to the Corporation by selected Optionees of some or a facsimile thereof to be impressed or affixed or reproduced or otherwise. SECTION 6. FISCAL YEAR. The fiscal yearall of the corporation shall be October 1 through September 30. SECTION 7. CHECKS. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signedoutstanding Options held by such officer or officers, agent or agentsOptionees (irrespective of the corporation, and inwhether such manner as shall be determined from time to time by resolutions of the Board of Directors. SECTION 8. NOTICE AND WAIVER OF NOTICE. Whenever any notice is required by these By-laws to be given, personal notice is not meant unless expressly so stated, and any notice so required shall be deemed to be sufficient if given by depositing the same in the United States mail, postage prepaid, addressed to the person entitled thereto at his address as it appears on the records of the corporation, and such notice shall be deemed to have been given on the day of such mailing. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by Statute. Notice to Directors shall be deemed to be sufficient if given by facsimile to a number provided by the Director to the corporation, delivery to an overnight delivery service or depositing the same in the United States mail, postage prepaid, addressed to the person entitled thereto at his address as it appears on the records of the corporation, and such notice shall be deemed to have been given on the day such facsimile is sent or the day of such mailing. Whenever any notice whatever is required to be givenOptions are then exercisable under the provisions of the law,Plan) as of a date (before or after such Corporate Change) specified by the Board, in which event the Board shall thereupon cancel such Options and pay to each Optionee an amount of cash per share equal to the excess, if any, of the Change of Control Value of the shares subject to such Option over the exercise price(s) under such Options for such shares; (C) in the event of a Corporate Change referenced in Clauses (iii), (iv) and (v), make such adjustments to Options then outstanding as the Board deems appropriate to reflect such Corporate Change (provided, however, that the Board may determine in its sole discretion that no adjustment is necessary to Options then outstanding); (D) in the event of a Corporate Change referenced in Clauses (iii), (iv) and (v), provide that thereafter upon any exercise of an Option theretofore granted the Optionee shall be entitled to purchase under such Option, in lieu of the number of shares of Common Stock as to which such Option shall then be exercisable, the number and class of shares of stock or other securities or property (including, without limitation, cash) to which the Optionee would have been entitled pursuant to the terms of the agreement of merger, consolidation or sale of assets or plan of liquidation and dissolution if, immediately prior to such merger, consolidation or sale of assets or any distribution in liquidation and dissolution of the Corporation, the Optionee had been the holder of record of the number of shares of Common Stock then covered by such Option; or (E) in the event of a Corporate Change referenced in Clauses (iii), (iv) and (v), cancel the Options granted if the Fair Market Value of the Common Stock underlying the Options is below the Option exercise price. (f) Except as hereinbefore expressly provided, issuance by the Corporation of shares of stock of any class or securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warranty to subscribe therefore, or upon conversion of shares or obligations of the Corporation convertible into such shares or other securities, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Common Stock subject to Options theretofore granted, or the purchase price per share of Common Stock subject to Options. SECTION 9 AMENDMENT OR TERMINATION OF THE PLAN The Board in its discretion may terminate the Plan or any Option or Grant or alter or amend the Plan or any part thereof or any Option from time to time; provided that no change in any Award or Grant previously made may be made which would impair the rights of the Holder or Grantee without the consent of the Holder or Grantee, and provided further, that the Board may not, without approval of the stockholders, amend the Plan: (a) to increase the aggregate number of shares which may be issued pursuant to the provisions of the CertificatePlan on exercise or surrender of IncorporationOptions or upon Grants; (b) to change the minimum Option exercise price; (c) to change the class of employees eligible to receive Awards and/or Grants or increase materially the benefits accruing to employees under the Plan; (d) to extend the maximum period during which Awards may be granted or Grants may be made under the Plan; (e) to modify materially the requirements as to eligibility for participation in the Plan; or (f) to decrease any authority granted to the Board hereunder in contravention of Rule 16b-3. SECTION 10 OTHER (a) No Right to an Award or Grant. Neither the adoption of the corporationPlan nor any action of the Board or these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein,Designated Officer shall be deemed equivalent thereto. ARTICLE VI AMENDMENTS These By-Lawsto give an employee any right to be granted an Option to purchase Common Stock, to receive a Grant or to any other rights hereunder except as may be altered or repealed and By-Laws may be made at any annual meetingevidenced by an Option Agreement duly executed on behalf of the stockholders or atCorporation, and then only to the extent of and on the terms and conditions expressly set forth therein. The Plan shall be unfunded. The Corporation shall not be required to establish any special meeting thereof if noticeor separate fund or to make any other segregation of funds or assets to assure the proposed alterationpayment of any Award or repeal or By-Law or By- Laws to be made beGrant. Shares issued under this Plan shall have the same voting rights as all other shares of common stock issued by the Corporation. (b) No Employment Rights Conferred. Nothing contained in the noticePlan or in any Award or Grant made hereunder shall (i) confer upon any employee any right with respect to continuation of employment with the Corporation or any Parent Corporation or Subsidiary, or (ii) interfere in any way with the right of the Corporation or any Parent Corporation or Subsidiary to terminate his or her employment at any time. (c) Other Laws; Withholding. The Corporation shall not be obligated to issue any Common Stock pursuant to any Award granted or any Grant made under the Plan at any time when the offering of the shares covered by such Award has not been registered (or exempted) under the Securities Act of 1933 and such other state and federal laws, rules or regulations as the Corporation or the Board deems applicable and, in the opinion of legal counsel for the Corporation, there is no exemption from the registration requirements of such special meeting,laws, rules or regulations available for the issuance and sale of such shares. No fractional shares of Common Stock shall be delivered, nor shall any cash in lieu of fractional shares be paid. The Corporation shall have the right to deduct in connection with all Awards or Grants any taxes required by law to be withheld and to require any payments necessary to enable it to satisfy its withholding obligations. The Board may permit the affirmative voteHolder of a majorityan Award or Grant to elect to surrender, or authorize the Corporation to withhold shares of Common Stock (valued at their Fair Market Value on the date of surrender or withholding of such shares) in satisfaction of the stock issued and outstanding and entitledCorporation's withholding obligation, subject to vote thereat, or by the affirmative vote of a majority ofsuch restrictions as the Board deems necessary to satisfy the requirements of Directors, at any regular meetingRule 16b-3. (d) No Restriction of the Board of Directors, or at any special meeting of the Board of Directors, if notice of the proposed alteration or repeal, or By-Law or By-Laws to be made, beCorporate Action. Nothing contained in the noticePlan shall be construed to prevent the Corporation or any Parent Corporation or Subsidiary from taking any corporate action which is deemed by the Corporation or such Parent Corporation or Subsidiary to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan or any Award made under the Plan. No employee, beneficiary or other person shall have any claim against the Corporation or any Parent Corporation or Subsidiary as a result of such special meeting.action. (e) Restrictions on Transfer. An Award shall not be transferable otherwise than by will or the laws of descent and distribution and shall be exercisable during the lifetime of the Holder only by such Holder or the Holder's guardian or legal representative. (f) Effect of Death, Disability or Termination of Employment. The Option Agreement or other written instrument evidencing an Award shall specify the effect of the death, disability or termination of employment of the Holder on the Award; provided, however that an Optionee shall be entitled to exercise (i) at least six (6) months from the date of termination of employment with the Corporation if such termination is caused by death or disability or (ii) at least thirty (30) days from the date of termination of employment with the Corporation if such termination is caused by reasons other than death or disability. The Corporation has no right to repurchase securities issued under the Plan upon termination of employment of the Holder. All outstanding Incentive Stock Options will automatically be converted to a non-qualified stock option if the Optionee does not exercise the Incentive Stock Option (i) within three (3) months of the date of termination caused by reasons other than death or disability; or (ii) within twelve (12) months of the date of termination caused by disability. (g) Information to Employees. Optionees and Grantees under the Plan shall receive financial statements annually regarding the Corporation during the period the options are outstanding. The financial statements provided need not comply with Section 260.613 of the California Code of Regulations. (h) Rule 16b-3. It is intended that the Plan and any grant of an Award made to a person subject to Section 16 of the Exchange Act meet all of the requirements of Rule 16b-3. If any provisions of the Plan or any such Award would disqualify the Plan or such Award hereunder, or would otherwise not comply with Rule 16b-3, such provision or Award shall be construed or deemed amended to conform to Rule 16b-3. (i) Governing Law. The Plan shall by construed in accordance with the laws of the State of New York and all applicable federal law. The securities issued hereunder shall be governed by and in accordance with the Corporate Securities Laws of the State of New York. ADOPTED BY MECHANICAL TECHNOLOGY INCORPORATED's BOARD OF DIRECTORS AS OF _________ __, 199_. APPROVED BY THE SHAREHOLDERS AS OF ___________ __, 199__.