=============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A /X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended September 30, 1997 or / / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period from __________ to __________ Commission file number 0-6890 MECHANICAL TECHNOLOGY INCORPORATED ------------------------------------------------------ (Exact name of registrant as specified in its charter) New York 14-1462255 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 968 Albany-Shaker Rd, Latham, New York 12110 - ---------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (518)785-2211 Securities Registered Pursuant to Section 12(b) of the Act: NONE Securities Registered Pursuant to Section 12(g) of the Act $1.00 Par Value Common Stock ---------------------------- (Title of Class) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K. [ ] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The aggregate market value of the registrant's Common Stock held by nonaffiliates of the registrant on December 12, 1997 (based on the last sale price of $5.125 per share for such stock reported by OTC Bulletin Board for that date) was approximately $16,154,195. As of January 22, 1998, the registrant had 5,905,861 shares of Common Stock outstanding. =============================================================================== PART III ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------------------------------ The information set forth under the caption "Executive Officers" in Item 1 of the Form 10-K Report filed by the registrant with the Commission on December 22, 1997 is incorporated herein by reference. DIRECTORS At the Annual Meeting of Shareholders, eight Directors are to be elected to fill the nine available positions, each to hold office until the next Annual Meeting of Shareholders and until a successor shall be elected and shall qualify. Management's nominees for Directors, together with certain information concerning them, are on the following pages. Year First Principal Occupation Became a Name Age or Employment Director - ------------------------ --- ---------------------------- ---------- Dale W. Church 58 Lawyer, private practice 1997 Edward A. Dohring 64 President, SVG Lithography 1997 Systems, Inc. Alan P. Goldberg 52 President & Co-Chief 1996 Executive Officer, First Albany Companies, Inc. George C. McNamee 51 Chairman of the Board of the 1996 Company and Chairman & Co-Chief Executive Officer, First Albany Companies, Inc. Dr. Martin J. Mastroianni 53 President and Chief Operating 1997 Officer of the Company E. Dennis O'Connor 58 Director-New Products and 1993 Technology, Masco Corporation and Registered Patent Attorney Dr. Walter L. Robb 69 President, Vantage 1997 Management, Inc. Dr. Beno Sternlicht 69 President, Benjosh Management 1996 Corporation CERTAIN INFORMATION REGARDING NOMINEES Mr. Church 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 currently serves as General Counsel to the American Electronic Association, as a Trustee of the National Security Industrial Association, and as a director on various private corporations. 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 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 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, Chairman of the Company's Board of Directors, is the Chairman & 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, The Meta Group, Inc., and Internet Shopping Network, Inc. He also serves on the Board of Directors of the New York State Science and Technology Foundation, and is Chairman of the Regional Firms Advisory Committee to the Board of the New York Stock Exchange. Dr. Mastroianni 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 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. The Company understands that 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 by 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. Dr. Robb, 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 Electronics, Cree Research, Celgene, Neopath and X-Ray Optical, Inc. He also serves on the Advisory Council of the Critical Technology Institute and on the Council of the National Academy of Engineering. Dr. Sternlicht, one of the founders of the Company, has been President of Benjosh Management Corporation, a management firm in New York, New York, since 1976. 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, he served as Vice Chairman of the Board of Directors and Technical Director. 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. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Number Number of Name of Forms Transactions ---- -------- ------------ Dale Church, Director (1) 1 1 Martin Mastroianni; President, Chief Operating Officer, Director (1) 1 1 Beno Sternlicht, Director (1) 1 2 (1) Note, such forms were electronically filed with the SEC on a timely basis, however, the filings were rejected. The filings were then made by hard copy. ITEM 11: EXECUTIVE COMPENSATION - -------------------------------- EXECUTIVE COMPENSATION The following table sets forth information with respect to the compensation for services to the Company and its subsidiaries during the Company's fiscal year ended September 30, 1997 (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 during such year whose total annual compensation exceeded $100,000. - ------------------------------------------------------------------------------------------------------------------ SUMMARY COMPENSATION TABLE - ------------------------------------------------------------------------------------------------------------------ ANNUAL COMPENSATION LONG-TERM COMPENSATION - ------------------------------------------------------------------------------------------------------------------ NAME AND POSITION OF FISCAL SALARY BONUS OTHER RESTRICT- SECURITIES ALL PRINCIPAL YEAR ANNUAL ED UNDER- OTHER COMP STOCK LYING COMP AWARDS OPTIONS (1) (#) - ------------------------------------------------------------------------------------------------------------------ R. Wayne Diesel 1997 $200,000 $15,000 - 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 President 1997 $121,154 None - None 150,100 $- & COO (3) - ------------------------------------------------------------------------------------------------------------------ Stephen Sullivan, President, 1997 $62,828 None - None None $16,615 Ling Electronics, Inc. (2)(4) - ------------------------------------------------------------------------------------------------------------------ 1996 $130,310 None - None None $4,840 (2) - ------------------------------------------------------------------------------------------------------------------ 1995 $139,617 None - None None $5,306 (2) - ------------------------------------------------------------------------------------------------------------------ James Clemens, President, Ling 1997 $57,501 None - None 30,000 $32,123 Electronics, Inc. (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, 1997 $120,673 $37,000 - None 25,100 $4,233 LAB and Advanced Products Div (2) - ------------------------------------------------------------------------------------------------------------------ 1996 $99,167 $37,000 - None None $3,966 (2) - ------------------------------------------------------------------------------------------------------------------ 1995 $95,000 $10,000 - 625 None $3,800 (2) - ------------------------------------------------------------------------------------------------------------------ (1) This column shows the market value on the date of grant of shares of the Company's Common Stock awarded under the Company's Restricted Stock Incentive Plan. The Plan expired 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) 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. (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 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 $100,000. OPTION GRANTS IN FISCAL 1997 Potential Realizable Value At Assumed Annual Rates of Number of Percentage Stock Price Shares of Total Exercise Appreciation for Underlying Options Price Option Term Name Options Granted to (per share) Expiration 5% ($) 10%($) - ---- Granted Employees ----------- Date ------- ------- ------- --------- ---- R. Wayne Diesel 35,000(1) 9.14% $3.44 6/30/00 $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 $389 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 $389 (1) Options may be exercised until June 30, 2000. (2) Options may be exercised after December 20, 1997 and before December 20, 2007, except in the case of the death, disability or termination of an employee, in which case options must be exercised sooner. (3) Dr. Mastroianni was originally granted qualified options for 150,000 shares; 30,000 of which vested 6,000 per year for each of five years and 120,000 of which vested upon the attainment of certain defined profit targets. As of July 15, 1997, Dr. Mastroianni's option agreement was amended to provide that Dr. Mastroianni will receive a total of 150,000 qualified stock options that will vest as follows: a) 30,000 will vest 20% per year commencing as of December 20, 1996; b) 30,000 will vest at the rate of 33% per year beginning as of July 15, 1997; c) 90,000 will vest, if certain profit targets are attained, at the rate of 20,000 per year, for each of three years, commencing as of July 15, 1997, and 30,000 as of September 30, 2000. (4) 25% or 3,750 shares, are exercisable each year beginning on August 27,1998. (5) Options will vest and may be exercised based upon the attainment of certain defined annual profit targets. (6) Options may be exercised after December 20, 1997 and prior to December 20, 1999. (7) 25% or 6,250 shares are exercisable each year beginning on August 27, 1998. AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Options at Fiscal Options at Year Fiscal Year End (#) End ($) ------------------- ------------------- Shares Acquired Value on Realized Exercis- Unexercis Exercis- Unexercis Name Exercise (#) ($) able -able able -able - ---- ------------ -------- -------- --------- -------- --------- R. Wayne Diesel 0 0 35,000 100 $1,050 $103 Martin J. Mastroianni 0 0 16,000 134,100 $15,880 $131,523 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 $403 Denis P. Chaves 0 0 0 25,100 0 $853 COMPENSATION COMMITTEE REPORT COMPENSATION POLICIES FOR OFFICERS. The Company's compensation program for executive officers and employee Directors currently consists of an annual salary and bonus payments that are primarily designed to reward performance. For the fiscal year 1997, 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 as Chief Executive Officer and became special assistant to the chairman of the Board of Directors. The Company does not currently have a Chief Executive Officer. Mr. Diesel was Chief Executive Officer from February 1994 to July 1997 and President from February 1994 to December 1996. He was recruited from outside the Company and had previously held senior management positions in the insurance and banking industries, and with the State of New York. The compensation package offered Mr. Diesel took into consideration his experience and expertise; the size, diversity and needs of the business; and compensation levels at companies of comparable size and industry. The compensation package included: (1) a base salary, effective February 4, 1994; (2) the potential for cash incentive bonuses based on performance; and (3) stock grants under the Company's Restricted Stock Incentive Plan. For the period October 1, 1994 through September 30, 1997 there were no changes to his annual compensation. In fiscal 1997, Mr. Diesel was awarded a bonus of $15,000. The Committee also took action in November 1996 to accelerate the vesting of 23,000 shares held by Mr. Diesel that were still subject to restrictions under the Restricted Stock Incentive Plan; as a result, all restrictions under the Plan have lapsed as to all shares held by Mr. Diesel. In addition, on August 27, 1997, the Committee awarded Mr. Diesel 35,000 non-qualified options for the Company's common stock. This award was based upon 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 and held previous management positions in the energy and the test and measurement industries, including positions with the Electric Power Research Institute, Vacuum Components, Inc., Tenney Engineering, Inland Vacuum Industries and Allied Signal. The compensation package offered to Dr. Mastroianni includes (1) an annual base salary; (2) the potential for cash incentive bonuses based on performance; and (3) 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 and a cash incentive bonus of $50,000 was accrued but not paid as of September 30, 1997. 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. 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 thereafter 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" 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. 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 at the discretion of the Compensation Committee. 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. The agreement also stated that if Mr. Diesel was removed from the position of President and CEO 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 plus insurance benefits. Effective December 20, 1996, Mr. Diesel resigned as President of the Company. Effective July 1, 1997, Mr. Diesel resigned as Chief Executive Officer of the Company and became a special assistant to the Chairman of the Board 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 $4,615.38; 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. 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 "Executive Compensation - Option Grants in Fiscal Year 1997", 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. ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - ------------------------------------------------------------------------ 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 Amended Annual Report on Form 10-K/A captioned "Executive Compensation", (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 January 22, 1998. 5,905,861 SHARES OUTSTANDING Name of Amount and Nature of Percent of Beneficial Owner Beneficial Ownership(1)(2) Class ------------------- --------------------------- ---------- Denis P. Chaves 27,700(3) * Dale W. Church 50,000(4) * James R. Clemens 30,000(5) * R. Wayne Diesel 70,200(6) 1.2% Edward A. Dohring 15,000(4) * Alan P. Goldberg 2,165,773(7) 36.7% Douglas McCauley 15,100(8) * George C. McNamee 2,245,698(9)(7) 38.0% Martin J. Mastroianni 170,100(10) 2.9% E. Dennis O'Connor 40,000 * Dr. Walter L. Robb 24,500(4) * Dr. Beno Sternlicht 273,050(4)(11) 4.6% Stephen Sullivan 1,000(2) * Stephen T. Wilson 10,100(12) * All present Directors and Officers as a group (12 persons) 3,091,423 52.3% - ------------------------------------- * 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", below) 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% of the Company's outstanding Common Stock. (2) Includes 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) The individual has the right to acquire 25,000 shares pursuant to an option granted on August 27, 1997 and 100 shares pursuant to an option granted on December 20, 1996. (4) The individual has the right to acquire 10,000 shares pursuant to an option granted on April 16, 1997. (5) The individual has the right to acquire 15,000 shares pursuant to an option granted on August 27, 1997 and 15,000 shares pursuant to an option granted March 24, 1997. (6) Includes 100 shares held by Mr. Diesel's wife as custodian for their minor child; Mr. Diesel disclaims beneficial ownership of such shares. The individual has the right to acquire 35,000 shares pursuant to an option granted August 27, 1997 and 100 shares pursuant to an option granted December 20, 1996. (7) Includes 2,035,698 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) The individual has the right to acquire 15,000 shares pursuant to options granted on August 27, 1997 and 100 shares pursuant to options granted on December 20, 1996. (9) Includes 10,000 shares owned by Mr. McNamee's wife. Mr. McNamee disclaims beneficial ownership of those shares. (10) The individual has the right to acquire up to 150,000 shares pursuant to stock options granted on December 20, 1996 as amended on July 15, 1997, and 100 shares pursuant to options granted on December 20, 1996. (11) Includes 26,650 shares owned by Dr. Sternlicht's wife and 10,150 shares held by Dr. Sternlicht's wife as custodian for their children; Dr. Sternlicht disclaims beneficial ownership of such shares. (12) This individual has the right to acquire 10,000 shares pursuant to options granted on August 27, 1997 and 100 shares pursuant to an option granted on December 20, 1996. 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. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following table sets forth information as of January 22, 1998 in respect of each person known by the Company to be the beneficial owner of more than 5% of its outstanding Common Stock. Amount of Beneficial Percent Name Address Ownership of Class - --------------- ------------------ ------------ -------- First Albany 30 South Pearl St. 2,035,698(A) 34.5% Companies, Inc. Albany, N.Y. 12207 (A) Messrs. McNamee and Goldberg may be deemed the beneficial owners of at least a portion of the shares owned by First Albany Companies, Inc. ("FAC"). However, Messrs. McNamee and Goldberg disclaim such beneficial ownership. As discussed more fully under "Certain Relationships and Related Transactions", below, FAC acquired certain rights to a term loan due from FCCC (the finance company to whom the Company was obligated under a note payable), and 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. ITEM 13: 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. PART IV ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - -------------------------------------------------------------------------- (a) The financial statements filed herewith are set forth on the Index to Consolidated Financial Statements on page F-1 of the separate financial section which accompanies this Report, which is incorporated herein by reference. The following exhibits are filed as part of this Report: Exhibit Number Description ------- ----------- 2.1 Purchase Agreement, dated as of November 23, 			1994, among the Registrant, ProQuip Inc. and 		 			Phase Metrics.(7) 3.1 Certificate of Incorporation of the registrant, 			as amended.(1) 3.2 By-Laws of the registrant, as amended. 4.1 Certificate of Amendment of the Certificate 			of Incorporation of the registrant, filed 		 			on March 6, 1986 (setting forth the provisions 	 			of the Certificate of Incorporation, as amended, 	 			relating to the authorized shares of the 		 			registrant's Common Stock) - included in the copy 	 			of the registrant's Certificate of Incorporation, 	 			as amended, filed as Exhibit 3.1 hereto. 4.20 Loan Agreement, dated as of June 1, 1987, between 			the registrant and Chase Lincoln First Bank, N.A. 	 			("Chase Lincoln"),relating to a $20,000,000 term 	 			loan to finance the registrant's acquisition of 	 			United Telecontrol Electronics, Inc. (the "UTE Loan 			Agreement").(1) 4.21 First Amendment to Loan Agreement, dated as of 			September 30, 1988, amending certain provisions of 	 			the UTE Loan Agreement.(1) 4.22 Second Amendment to Loan Agreement, dated as of 			February 21, 1990, amending certain provisions of 	 			the UTE Loan Agreement.(1) 4.24 Third Amendment to Loan Agreement, dated as of January 1, 1991, amending certain provisions of the UTE Loan Agreement.(2) 4.25 Form of Note, in the amount of $9,181,700, executed 			by the registrant on January 1, 1991 to evidence 	 			its indebtedness under the UTE Loan Agreement.(2) 4.26 Form of Note, in the amount of $2,000,000, executed by the registrant on January 1, 1991 to evidence its indebtedness under the UTE Loan Agreement.(2) 4.27 Form of Note, in the amount of $1,000,000, 			executed by the registrant on January 1, 1991 to	 			evidence its indebtedness under the UTE Loan 		 			Agreement.(2) 4.28 Mortgage, dated January 31, 1991, executed by the 			registrant in favor of Chase Lincoln and securing 	 			the registrant's obligation to Chase Lincoln,		 			including those under the UTE and ProQuip Loan 	 			Agreements.(2) 4.30 Loan Agreement, dated as of September 30, 1988, 			between the registrant and Chase Lincoln relating 	 			to an $8,000,000 term loan to finance the 		 			registrant's acquisition of ProQuip, Inc. (the 	 			"ProQuip Loan Agreement").(1) 4.31 Negative Pledge Agreement, dated as of September 			30, 1988, executed by the registrant in favor of 	 			Chase Lincoln in connection with the ProQuip Loan 	 			Agreement.(1) 4.32 Security Agreement, dated as of September 30, 1988, executed by the registrant in favor of Chase Lincoln and securing the registrant's obligation to Chase Lincoln, including those under the UTE and ProQuip Loan Agreements (the "Chase Lincoln Security Agreement").(1) 4.33 First Amendment to Loan Agreement, dated as of 			February 21, 1990, amending certain provisions of 	 			the ProQuip Loan Agreement.(1) 4.34 Form of Note, in the amount of $3,375,817.80, 			executed by the registrant on February 21, 1990	 			to evidence its indebtedness under the ProQuip	 			Loan Agreement.(1) 4.35 Amendment Number One to Security Agreement, executed by the registrant on February 21, 1990, amending the Chase Lincoln Security Agreement.(1) 4.36 Mortgage, dated February 21, 1990, executed by the 			registrant in favor of Chase Lincoln and securing 	 			the registrant's obligations to Chase Lincoln, 	 			including those under the UTE and ProQuip Loan 	 			Agreements.(1) 4.37 Second Amendment to Loan Agreement, dated as of 			January 1, 1991, amending certain provisions of the	 			ProQuip Loan Agreement.(2) 4.38 Mortgage Modification and Allocation Agreement, 			dated January 1, 1991, executed by the registrant 	 			and Chase Lincoln.(2) 4.40 Form of Payment Guaranty, dated as of September 1, 			1988 [as of September 30, 1988, in the case of 	 			ProQuip, Inc.], executed by the subsidiaries of the	 			registrant in favor of Chase Lincoln and 			guaranteeing payment of the registrant's 		 			obligations to Chase Lincoln, including those under	 			the UTE and ProQuip Loan Agreements.(1) 4.41 Form of Negative Pledge Agreement, dated as of 			September 30, 1988, executed by the subsidiaries of	 			the registrant in favor of Chase Lincoln in 		 			connection with the ProQuip Loan Agreement.(1) 4.42 Form of Security Agreement, dated as of September 30, 1988, executed by the subsidiaries of the registrant in favor of Chase Lincoln and securing the registrant's obligations to Chase Lincoln, including those under the UTE and ProQuip Loan Agreements.(1) 4.43 Acknowledgment, Confirmation and Further Agreement, 			made as of February 21, 1990, executed by the 	 			subsidiaries of the registrant in favor of Chase	 			Lincoln with respect to the registrants obligations	 			under the UTE and ProQuip Loan Agreements.(1) 4.50 Debt Restructure Agreement, made as of 			February 21, 1990, between the registrant, Chase 	 			Lincoln, and Manufacturers Hanover Trust Company 	 			("Manufacturers Hanover"), providing for a 		 			restructuring of the registrant's indebtedness to 	 			Chase Lincoln under the UTE and ProQuip Loan 		 			Agreements and of the registrant's outstanding 	 			indebtedness to Manufacturers Hanover (the "MHTCo. 	 			Existing Debt"), among other things.(1) 4.55 Second Amendment to Debt Restructure Agreement, 			made as of January 1, 1991, between the registrant,	 			Chase Lincoln, and Manufacturers Hanover, amending 	 			certain provisions of the Debt Restructure 		 			Agreement.(2) 4.56 Second Debt Restructure Agreement, as of July 22, 			1992, between the registrant, Chase Lincoln First 	 			Bank, N. A. ("CLFB"), and Chemical Bank 			 			("Chemical"), as successor in interest to 		 			Manufacturers Hanover Trust Company, providing for 	 			a restructuring of the registrant's indebtedness to	 			CLFB under the UTE and ProQuip Loan Agreements and 	 			of the registrant's outstanding indebtedness to 	 			Chemical, among other things.(3) 4.63 Promissory Note, in the amount of $4,000,000 and 			dated July 22, 1992, executed by the registrant to 	 			evidence its indebtedness to Chemical from time to 	 			time with respect to a line of credit in such 	 			amount (The Chemical Line of Credit).(3) 4.64 Form of Payment Guaranty, dated as of July 24, 1992 executed by Masco Corporation in favor of Chemical and guaranteeing payment of the registrant's obligations to Chemical under the Chemical Line of Credit.(3) 4.65 Promissory Note, in the amount of $4,000,000 and 			dated October 31, 1994, extending the maturity date	 			of the Promissory note dated July 22, 1992, 		 			executed by the registrant to evidence its 		 			indebtedness to Chemical under the Chemical 		 			Line of Credit.(8) 4.66 Promissory Note, in the amount of $4,000,000 and dated October 31, 1995, extending the maturity date of the Promissory note dated October 31, 1994, executed by the registrant to evidence its indebtedness to Chemical under the Chemical Line of Credit.(9) 4.67 Form of Payment Guaranty, dated October 31, 1995 executed by Masco Corporation in favor of Chemical and guaranteeing payment of the registrant's obligations to Chemical under the Chemical Line of Credit.(9) 4.80 Amended and Restated Loan Agreement, dated as of July 22, 1992, between the registrant and Chase Lincoln First Bank, N.A., which amends, restates, combines, and supersedes in full the UTE and the ProQuip loan agreements.(3) 4.81 Form of Note, in the amount of $5,000,000, executed by the registrant on July 24, 1992, the July 22, 1992 Loan Agreement.(3) 4.82 Form of Note, in the amount of $7,984,770, executed by the registrant on July 24, 1992 to evidence its indebtedness to CLFB under the July 22, 1992 Loan Agreement.(3) 4.83 Additional Mortgage Note, dated July 24, 1992, executed by the registrant in favor of CLFB and securing the registrant's obligation to CLFB under the Loan Agreement.(3) 4.84 Additional Mortgage and Security Agreement, dated as of July 22, 1992, executed by the registrant in favor of CLFB and securing the registrant's obligations to CLFB.(3) 4.85 Mortgage Consolidation, Spreader, Modification Extension and Security Agreement, dated July 			22, 1992, executed by the registrant and CLFB.(3) 4.86 Confirmation of Guaranties and Security Agreements, dated July 22, 1992, executed by subsidiaries of the registrant in favor of CLFB with respect to the registrant's obligations to CLFB.(3) 4.87 Consent and waiver, dated December 21, 1993, from CLFB to the registrant with respect to the Amended and Restated Loan Agreement.(5) 4.88 Amendment One to Amended and Restated Loan Agreement, dated as of August 1, 1994, between the registrant and Chase Manhattan Bank, N. A. which amends the Amended and Restated Loan Agreement to defer the payment due on June 30, 1994.(6) 4.89 Amendment Two to Amended and Restated Loan Agreement with waiver, dated as of November 22, 1994, between the registrant and Chase Manhattan Bank, N. A. which amends the Amended and Restated Loan Agreement and waives any existing defaults.(8) 4.90 Additional Mortgage and Security Consolidation Agreement, dated as of October 6, 1995 executed by the registrant in favor of Chase Manhattan Bank, N.A. and securing the registrant's obligations to Chase Manhattan Bank, N.A.(9) 4.91 Form of Note, in the amount of $340,000, executed by the registrant on October 6, 1995 to evidence its indebtedness to Chase Manhattan Bank, N.A. under the July 22, 1992 Loan Agreement.(9) 4.92 Amendment Three to Amended and Restated Loan Agreement with waiver, dated as of November 30, 1995, between the registrant and Chase Manhattan Bank, N. A. which amends the Amended and Restated Loan Agreement and waives any existing defaults.(9) 10.1 Mechanical Technology Incorporated Restricted Stock Incentive Plan-filed as Exhibit 28.1 to the registrant's Form S-8 Registration Statement No. 33-26326 and incorporated herein by reference. 10.3 MTI Employee 1982 Stock Option Plan.(1) 10.4 Agreement, dated December 21, 1993, between UTE, 			First Commercial Credit Corporation ("FCCC") and the registrant, relating to an advance against certain receivables.(5) 10.6 Agreement, dated June 2, 1993, between the 			registrant and Mr. Harry Apkarian, Director, regarding his employment.(5) 10.7 Agreement, dated February 22, 1994, between the registrant and Mr. R. Wayne Diesel, President and Chief Executive Officer, regarding his employment.(8) 10.8 Agreement, dated December 14, 1994, between FCCC and the registrant, modifying the Agreement dated December 21, 1993 relating to an advance against certain receivables.(8) 10.9 Agreement, dated May 30, 1995, between FCCC and the registrant, extending the maturity of the Agreement dated December 14, 1994 relating to an advance against certain receivables.(9) 10.10 Agreement, dated June 28, 1995, between FCCC and the registrant, extending the maturity of the Agreement dated December 14, 1994 relating to an advance against certain receivables.(9) 10.11 Agreement, dated September 21, 1995, between FCCC and the registrant, extending the maturity of the Agreement dated December 14,1994 relating to an advance against certain receivables.(9) 10.12 Agreement, dated October 25, 1995, between FCCC and the registrant, extending the maturity of the Agreement dated December 14, 1994 relating to an advance against certain receivables.(9) 10.13 Agreement, dated December 27, 1995, between FCCC and the registrant, extending the maturity of the Agreement dated December 14, 1994 relating to an advance against certain receivables.(9) 10.14 Mechanical Technology Incorporated Stock Incentive Plan - included as Appendix A to the registrant's Proxy Statement, filed pursuant to Regulation 14A, for its December 20, 1996 Special Meeting of Shareholders and incorporated herein by reference. (10) 10.15 Agreement, dated December 6, 1996, between the 			registrant and Mr. Martin J. Mastroianni, President 			and Chief Operating Officer, regarding his 			employment. (10) 10.16 Settlement Agreement and Release, dated as of 			December 27, 1996, between First Albany Companies	 			Inc. and the registrant, with respect to the		 			registrant's indebtedness and obligations under the	 			Agreement dated December 14, 1994 between FCCC and	 			the registrant relating to an advance against		 			certain receivables. (10) 10.17 Agreement, dated March 14, 1997, between the Registrant and Mr. James Clemens, Vice President and General Manager of Ling Electronic, Inc., regarding his employment. (11) 10.18 Limited Liability Company Agreement of Plug Power, L.L.C., dated June 27, 1997, between Edison Development Corporation and Mechanical Technology, Incorporated. (12) (13) 10.19 Contribution Agreement, dated June 27, 1997, between Mechanical Technology, Incorporated and Plug Power, L.L.C. (12) (13) 10.20 Asset Purchase Agreement, dated as of September 22, 1997, between Mechanical Technology, Incorporated and Noonan Machine Company. (12) 21 Subsidiaries of the registrant. 27 Financial Data Schedule ______________________ Certain exhibits were previously filed (as indicated below) and are incorporated herein by reference. All other exhibits for which no other filing information is given are filed herewith: (1) Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 10-K Report, as amended, for its fiscal year ended September 30, 1989. (2) Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 10-Q Report for its fiscal quarter ended December 29, 1990. (3) Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 10-Q Report for its fiscal quarter ended June 27, 1992. (4) Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 10-K Report for its fiscal year ended September 30, 1991. (5) Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 10-K Report for its fiscal year ended September 30, 1993. (6) Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 10-Q Report for its fiscal quarter ended July 2, 1994. (7) Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 8-K Report dated November 23, 1994. (8) Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 10-K Report for its fiscal year ended September 30, 1994. (9) Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 10-K Report for its fiscal year ended September 30, 1995. (10) Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 10-K Report for its fiscal year ended September 30, 1996. (11) Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 8-K Report dated May 12, 1997. (12) Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 10-K Report for the fiscal year ended September 30, 1997. (13) Confidential treatment requested with respect to certain schedules and exhibits. (b) One report on Form 8-K was filed during the quarter ending September 30, 1997. The Company filed a Form 8-K Report, dated September 23, 1997, reporting under item 5 thereof the Company's execution of a definitive agreement for the sale of the assets and certain liabilities of its L.A.B. Division to Noonan Machine Company. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MECHANICAL TECHNOLOGY INCORPORATED Date: January 23, 1998 By: /s/ M. Mastroianni ------------------ --------------------------------------- Martin J. Mastroianni President and Chief Operating Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE - --------- ----- ---- /s/ George C. McNamee Chairman of the Board of Directors 01/23/98 - ------------------------- George C. McNamee /s/ Martin J. Mastroianni Chief Operating Officer - ------------------------- (Principal Executive Officer) Dr. Martin J. Mastroianni and a Director " /s/ Cynthia A. Scheuer Chief Financial Officer - ------------------------- (Principal Financial and Accounting Cynthia A. Scheuer Officer) " /s/ Dale W. Church Director " - ------------------------- Dale W. Church /s/ R. Wayne Diesel Director " - ------------------------- R. Wayne Diesel /s/ Edward A. Dohring Director " - ------------------------- Edward A. Dohring /s/ Alan P. Goldberg Director " - ------------------------- Alan P. Goldberg /s/ E. Dennis O'Connor Director " - ------------------------- E. Dennis. O'Connor /s/ Walter L. Robb Director " - ------------------------- Dr. Walter L. Robb /s/ Beno Sternlicht Director " - ------------------------- Dr. Beno Sternlicht