UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

___________________

 

FORM 8-K

 

___________________

 

CURRENT REPORT

Pursuant to Section   13 OR 15(d) of The

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):   

October 17, 2016

 

___________________

 

MECHANICAL TECHNOLOGY, INCORPORATED

(Exact name of registrant as specified in charter)

 

 

New York

  

000-06890

  

14-1462255

(State or other jurisdiction

of incorporation)

  

(Commission File Number)

  

(IRS Employer

Identification No.)

 

325 Washington Avenue Extension, Albany, New York 12205

(Address of principal executive offices) (Zip Code)

 

(518) 218-2550

(Registrant’s telephone number, including area code)

 

___________________

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 


 

 

Section 1 – Registrant’s Business and Operations

Item  1.01 Entry into a Material Definitive Agreement.

On October 21, 2016, Mechanical Technology, Incorporated (the “Company”) entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with Brookstone Partners Acquisition XXIV, LLC (“Brookstone”), pursuant to which on such date the Company issued and sold 3,750,000 shares (the “Shares”) of its common stock, par value $0.01 per share (“Common Stock”), to Brookstone for an aggregate of $2,737,500.  The Company also agreed to (i) appoint three persons designated by Brookstone to its board of directors (the “Board), (ii) appoint two director designees to the Board committees as set forth in Item 5.02 below, (iii) maintain such committee appointments, (iv) appoint one of such designated directors (or a successor named by Brookstone) to each Board committee created after October 21, 2016 and maintain such appointments, and (v) include certain numbers of such designated directors (or successor named by Brookstone) as nominees recommended by the Board for election as directors, as long as Brookstone and its affiliates beneficially own outstanding shares of Common Stock.  At any time Brookstone and its affiliates beneficially own at least 25% of the outstanding shares of Common Stock, the Company must include three such Brookstone-designated directors on its Board and as Board-recommended director nominees.  At any time Brookstone and its affiliates beneficially own at least 10% but less than 25% of the outstanding shares of Common Stock, the Company must include two such Brookstone-designated directors on its Board and as Board-recommended director nominees.  At any time Brookstone and its affiliates beneficially own any shares of Common Stock but less than 10% of the outstanding shares of Common Stock, the Company must include one such Brookstone-designated director on its Board and as a Board-recommended director nominee.

The Company further agreed pursuant to the Securities Purchase Agreement that it would not effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisesable for its equity securities, other than pursuant to a Demand Registration (as defined below) during the 90-day period beginning on the effective date of any registration statement in connection with a Demand Registration, except pursuant to a registration statement covering (i) sales or distributions of the Company’s equity securities or any securities convertible into or exchangeable or exercisable for its equity securities pursuant to a registration statement on Form S-4 or Form S-8 or any successor form, (ii) the issuance of shares of Common Stock upon the conversion, exercise or exchange, by the holder thereof, of options, warrants or other securities convertible into or exercisable or exchangeable for shares of Common Stock pursuant to their terms, or (iii) the issuance of shares of Common Stock in connection with transfers to dividend reinvestment plans or to employee benefit plans in order to enable any such employee benefit plan to fulfill its funding obligations in the ordinary course.

A copy of the Securities Purchase Agreement is filed as Exhibit 10.22 hereto and is incorporated herein by reference.  The representations, warranties and covenants contained in the Securities Purchase Agreement were made solely for the purposes of such agreement and as of specific dates, and were qualified and subject to certain limitations and exceptions agreed to the Company and Brookstone in connection with negotiating the terms of the Securities Purchase Agreement.  In particular, in your review of the representations and warranties contained in the Securities Purchase Agreement, it is important to bear in mind that the representations and warranties were made solely for the benefit of the parties to the Securities Purchase Agreement and were negotiated for the purpose of allocating contractual risk among them rather than to establish matters as facts.  The representations and warranties may also be subject to a contractual standard of materiality or material adverse effect different from those generally applicable to stockholders and reports and documents filed with the Securities and Exchange Commission, and, in some cases, they may be qualified by disclosures made by one party to the other, which are not necessarily reflected in the Securities Purchase Agreement or other public disclosures made the Company. 

Also on October 21, 2016, the Company and Brookstone entered into a Registration Rights Agreement, pursuant to which the Company agreed to, at any time after December 20, 2016 and upon the request of holders of at least 25% of the outstanding Shares, to file a registration statement under the Securities Act to register the resale of the Shares (a “Demand Registration”).  The Company also agreed, subject to certain conditions and exclusions, to include the resale of the Shares in any registration statement that the Company files under the Securities Act (other than a registration statement on Form S-4 or Form S-8) upon the request of any holder of Shares.  The Registration Rights Agreement terminates on the earlier of October 21, 2021 or the date that Brookstone or any permitted assignee or successor of Brookstone owns less than 10% of the outstanding shares of Common Stock.

 

 

 


 

 

A copy of the Registration Rights Agreement is filed as Exhibit 10.23 hereto and is incorporated herein by reference.

Section 3 – Securities and Trading Markets

Item 3.02 Unregistered Sales of Equity Securities.

As discussed under Item 1.01 above, the Company sold 3,750,000 shares of its Common Stock to Brookstone on October 21, 2016, for an aggregate of $2,737,500.

The offer and sale of the Common Stock was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of, and Rule 506 of Regulation D under, the Securities Act.  Brookstone represented to the Company that it was an “accredited investor” as defined in Rule 501 of Regulation D under the Securities Act.

Item  3.03     Material Modification to Rights of Security Holders

On October 20, 2016, the Company and American Stock Transfer & Trust Company, LLC, as Rights Agent (the “Rights Agent”) entered into an amendment (the “Amendment”) to the Rights Agreement, dated as of October 6, 2016, between the Company and the Rights Agent, as described in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 6, 2016.  The Rights Agreement is intended to act as a deterrent to any person (together with all affiliates and associates of such person) acquiring “beneficial ownership” (as defined in the Rights Agreement) of 4.99% or more of the outstanding shares of Common Stock without the approval of the Board (an “Acquiring Person”), in an effort to protect against a possible limitation on the Company’s ability to use its net operating loss carryforwards, which totaled over $51 million as of June 30, 2016.  The Amendment exempts Brookstone and its affiliates and associates from the definition of an Acquiring Person.

Section 5 – Corporate Governance and Management

Item 5.01 Changes in Control of Registrant.

The information provided in Item 1.01 above and Item 5.02 below is hereby incorporated herein by reference.  Subsequent to the issuance of the Shares, Brookstone owns 41.7% of the outstanding shares of Common Stock.  Brookstone’s source of funds for its purchase of the Shares was funds raised from the investors in Brookstone.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Pursuant to the Securities Purchase Agreement, effective October 21, 2016, E. Dennis O’Connor and Dr. Walter Robb resigned from the Board and the Board appointed Matthew E. Lipman, Michael Toporek and Edward R. Hirshfield to the Board.  On October 21, 2016, Thomas J. Marusak also resigned from his position as a member of the Audit Committee of the Board.  At the time of his resignation, Mr. O’Connor was a member of the Compensation and Governance and Nominating Committees of the Board.  Mr. Hirshfield was appointed to the Compensation Committee of the Board and Matthew E. Lipman was appointed to the Audit Committee and Governance and Nominating Committee of the Board.  Messrs. Lipman, Toporek and Hirshfield will receive the same compensation as currently paid to the Company’s other non-employee Board members, who receive cash compensation of $10,000 per year and are eligible to receive grants of options to purchase common stock as the Compensation Committee of the Board may approve. 

Also, in connection with the sale of the Shares, the Company entered into an Option Exercise and Stock Transfer Restriction Agreement (collectively, the “Option and Transfer Agreements”) with its Chief Executive Officer, its Chief Financial Officer and each of its non-employee directors as of immediately before the issuance of the Shares (collectively, the “Insiders”).  The Option and Transfer Agreements amend the stock option grant agreements between the Company and each Insider with respect to an option granted under, and modify the terms of any option to purchase Common Stock held by each such Insider (collectively, “Options”) granted under, (i) the Mechanical Technology, Incorporated Amended and Restated 2006 Equity Incentive Plan, (ii) the Mechanical Technology, Incorporated Amended and Restated 2012 Equity Incentive Plan and (iii) Mechanical Technology, Incorporated 2014 Equity Incentive Plan (collectively, the “Plans”).  The Option and Transfer Agreements restrict the aggregate amount of shares of Common Stock for which the Insiders may exercise Options during calendar years 2016, 2017, 2018 and 2019, and provide for a modified procedure for exercising Options in order to ensure the limit on the aggregate amount of Options that may be exercised in any such year is not exceeded.  Such amendments and modifications also operate to, except with respect to the termination of Options in connection with an Insider’s termination of employment or service in connection with misconduct as described in the Option and Transfer Agreements, (i) remove all references to an expiration of the exercisability of such Options within a special, delineated time period following the termination of service to or employment by the Company, and (ii) provide that all vested Options are exercisable by the Insider until default expiration under the applicable Plan (i.e., ten years from the date of grant). 

 


 

If an Option and Transfer Agreement is terminated, the limitations on Option exercises described above will terminate, but the exercisability of the Insider’s vested Options until default expiration under the applicable Plan and stock option agreement (i.e., ten years from the date of grant) will survive indefinitely. 

The Option and Transfer Agreements also require the Insiders to obtain the written consent of the Company prior to purchasing any equity securities of the Company outside of the exercise of Options and provides a procedure for requesting such consent.

A form of the Option and Transfer Agreement is filed as Exhibit 10.24 hereto and is incorporated herein by reference.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

On October 17, 2016, the Company filed five certificates of correction pursuant to Section 105 of the New York Business Corporation Law with the Department of State of the State of New York (the “Certificates of Correction”).  The Certificates of Correction were filed in order to correct the Company’s (i) Restated Certificate of Incorporation filed October 13, 1999; (ii) two Certificates of Amendment of its Certificate of Incorporation, each filed August 13, 2001; (iii) Certificate of Amendment of its Certificate of Incorporation filed July 11, 2005; and (iv) Certificate of Amendment of its Certificate of Incorporation filed May 19, 2008 (collectively, the “Prior Filings”).  The Certificates of Correction correct a number of errors within the Prior Filings and set forth provisions that were included in the Company’s Certificate of Incorporation, both as originally filed and later amended prior to October 13, 1999, but inadvertently omitted from the Prior Filings (the “Preexisting Provisions”).  In accordance with the New York Business Corporation Law and corresponding practice of applicable New York governmental authorities, the Prior Filings had not removed the Preexisting Provisions from the Company’s Certificate of Incorporation despite the Preexisting Provisions not being included in the Prior Filings.  Therefore, the Certificates of Correction correct the Prior Filings to include currently existing provisions of the Company’s Certificate of Incorporation, as opposed to amending the same.  The Certificates of Correction make the following material corrections to the Prior Filings:

  • Restated Certificate of Incorporation filed October 13, 1999 (“Restated Certificate”):

    • Correct certain typographical errors and update paragraph references to conform with the corrected version of the Restated Certificate and the Company’s original Certificate of Incorporation filed October 4, 1961.

    • Set forth a preexisting statement that the duration of the Company shall be perpetual, as contained in the Company’s original Certificate of Incorporation filed October 4, 1961.

    • Set forth a preexisting statement that the Company may be entitled to issue Company stock without par value, as contained in the Company’s Certificate of Amendment of Certificate of Incorporation filed July 16, 1963.

    • Set forth a preexisting statement with regard to waiver of shareholder pre-emptive rights, as contained in the Company’s Certificate of Amendment of Certificate of Incorporation filed December 27, 1966.

  • Certificates of Amendment of its Certificate of Incorporation, filed August 13, 2001, July 11, 2005 and May 19, 2008:

    • Correct certain paragraph references to conform with the corrected version of the Restated Certificate and the Company’s original Certificate of Incorporation filed October 4, 1961.

 

 


 

A copy of the Company’s current Certificate of Incorporation, as restated and corrected, is filed as Exhibit 3.1 hereto.

Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(d) 

Exhibits

 

 

 

Exhibit Number

     

Description

 

3.1

 

Certificate of Correction of Restated Certificate of Incorporation of Mechanical Technology, Incorporated as of October 17, 2016 and Certificate of Correction of Certificate of Amendment of the Certificate of Incorporation of Mechanical Technology Incorporated, as of October 17, 2016.

 

4.2

 

Amendment No. 1 dated as of October 20, 2016, to the Rights Agreement, dated as of October 6, 2016, between Mechanical Technology, Incorporated and American Stock Transfer & Trust Company, LLC, as Rights Agent.

 

10.22

 

Securities Purchase Agreement dated as of October 21, 2016, by and between Mechanical Technology, Incorporated and Brookstone Partners Acquisition XXIV, LLC.

 

10.23

 

Registration Rights Agreement dated as of October 21, 2016, by and between Mechanical Technology, Incorporated and Brookstone Partners Acquisition XXIV, LLC.

 

10.24

 

Form of Option Exercise and Stock Transfer Restriction Agreement between the Company and its Chief Executive Officer, Chief Financial Officer and Non-Employee Directors.

 

 

 

 


 

 

SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

MECHANICAL TECHNOLOGY, INCORPORATED

 


Date: October 21, 2016

By:  

 


/s/ KEVIN G. LYNCH

 

Name:

Kevin G. Lynch

 

Title:

Chairman and Chief Executive Officer

 

 

 

 

 

 

 

 

 


 

 

 

Exhibit 3.1

CERTIFICATE OF CORRECTION

OF

RESTATED CERTIFICATE OF INCORPORATION

OF

MECHANICAL TECHNOLOGY, INCORPORATED

Under Section 105 of the Business Corporation Law of the State of New York

 

FIRST :           The name of the corporation is: Mechanical Technology, Incorporated (the “ Corporation ”).

 

SECOND :      The date the document to be corrected was filed by the Department of State is: 

 

October 13, 1999.

 

THIRD :          The nature of the informality, error, incorrect statement or defect to be corrected is the Restated Certificate of Incorporation of the Corporation filed by the Department of State on October 13, 1999 (the “ Restated Certificate of Incorporation ”) does not in all instances identify which paragraphs of the then-existing Certificate of Incorporation of the Corporation are to be amended or changed and where certain text is to be added to, deleted from or renumbered with respect to the then-existing Certificate of Incorporation of the Corporation.  The Restated Certificate of Incorporation additionally contains certain typographical errors in Paragraphs 3, 4 and 5 in need of correction.  Furthermore, the Restated Certificate of Incorporation, as set forth in Paragraph 5 of the Restated Certificate of Incorporation, does not include or properly determine the location of all existing text within the Certificate of Incorporation of the Corporation, as originally filed on October 4, 1961 or later amended prior to October 13, 1999.   

 

FOURTH :      Paragraph 3 of the Restated Certificate of Incorporation is corrected to read as follows:

 

                        3.         The certificate of incorporation of the corporation, as amended heretofore, is further amended to effect the following amendments authorized by the Business Corporation Law:

 

                                    (a)  Paragraph FIRST of the certificate of incorporation of the corporation setting forth the corporate name is deleted in its entirety and a new paragraph FIRST is added to read as follows:

 

The name of the corporation is Mechanical Technology, Incorporated .

 

                                    (b) Paragraph SECOND of the certificate of incorporation of the corporation pertaining to the purposes of the corporation is deleted in its entirety and a new paragraph SECOND is added to read as follows:

 

 

 

 


 

 

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.  The corporation is not formed to engage in any act or activity requiring the consent or approval of any state official, department, board, agency or other body.

 

(c)  Paragraph THIRD of the certificate of incorporation pertaining to the number and class of shares of the corporation is amended to add the text set forth in Paragraph 4 of that certain Certificate of Amendment of Certificate of Incorporation of the Corporation filed by the Department of State on March 6, 1986 and to read as follows:

 

The aggregate number of shares which the corporation shall have authority to issue shall be Fifteen Million (15,000,000) shares, par value $1.00 per share.

 

(d) Paragraph FOURTH of the certificate of incorporation of the corporation pertaining to the office of the corporation is deleted in its entirety and a new paragraph FOURTH is added to read as follows:

 

The office of the corporation shall be located at a place within Albany County.

 

                                    (e)  Paragraph SIXTH of the certificate of incorporation of the corporation pertaining to the number of directors serving on the board of directors of the corporation is deleted in its entirety and a new paragraph SIXTH is added to read as follows:

 

The number of directors constituting the entire board of directors 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 of directors, 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 of directors shall be eight until otherwise fixed by a majority of the entire board of directors.  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 of directors 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 shareholders 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.

 

 

2

 


 

 

 

Notwithstanding any other provision of this certificate of incorporation or the bylaws of the corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this certificate of incorporation or the bylaws 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 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 of directors.

 

                                    (f)  Paragraphs SEVENTH, EIGHTH and TENTH of the certificate of incorporation of the corporation pertaining to the names and addresses of the initial directors, the names and addresses of the subscribers of the certificate of incorporation and the age, citizenship and residency of subscribers and an initial director are omitted from the restatement of the text of the certificate of incorporation of the corporation.

 

                                    (g)  A new paragraph SEVENTH regarding indemnification of officers and directors of the corporation is added to the certificate of incorporation of the corporation to read as follows:

 

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 judgements, 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.

 

 

3

 


 

 

                                 

(h)  A new paragraph EIGHTH regarding personal liability of the directors of the corporation is added to the certificate of incorporation of the corporation to read as follows:

 

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 Paragraph became effective.

 

(i)  Paragraph NINTH of the certificate of incorporation of the corporation pertaining to the designation of the Secretary of State as agent for service of process is deleted in its entirety and a new paragraph NINTH is added to read as follows:

 

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.

 

(j) Paragraph ELEVENTH of the certificate of incorporation of the corporation is renumbered as paragraph TENTH.

 

(k)  Paragraph TWELFTH of the certificate of incorporation of the corporation is renumbered as paragraph ELEVENTH.

 

FIFTH :            Paragraph 4 of the Restated Certificate of Incorporation is corrected to read as

follows:

 

            The amendments effected by Paragraph 3 of this Restated Certificate of Incorporation and the restatement of the corporation’s certificate of incorporation set forth in paragraph 5 of this Restated Certificate of Incorporation were authorized by the affirmative vote of a majority 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.

 

 

 

4

 


 

 

SIXTH :           Paragraph 5 of the Restated Certificate of Incorporation is corrected to read as

follows:

 

            The text of the certificate of incorporation of the corporation 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.  The corporation is not formed to engage in any act or activity requiring the consent or approval of any state official, department, board, agency or other body.

 

THIRD : The aggregate number of shares which the corporation shall have authority to issue shall be Fifteen Million (15,000,000) shares, par value $1.00 per share.

 

FOURTH : The office of the corporation shall be located at a place within Albany County.

 

FIFTH : The duration of said corporation shall be perpetual.

 

SIXTH : The number of directors constituting the entire board of directors 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 of directors, 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 of directors shall be eight until otherwise fixed by a majority of the entire board of directors.  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 of directors 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 then in office 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.

5

 


 

 

 

Notwithstanding any other provision of this certificate of incorporation or the bylaws of the corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this certificate of incorporation or the bylaws 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 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 of directors.

 

SEVENTH : 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 judgements, 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.

 

EIGHTH :  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 Paragraph became effective.

 

NINTH :  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.

 

6

 


 

 

TENTH : The corporation may issue and sell its shares without par value for such consideration as, from time to time, may be fixed by the board of directors.

 

ELEVENTH : No shareholder of this corporation shall have a pre-emptive right because of his stock holdings to have first offered to him any part of any stock of this corporation hereafter issued, optioned or sold.  This provision shall operate to defeat pre-emptive rights in all stock and classes of stock now authorized or which this corporation may be hereafter authorized to issue by any amended certificate duly filed.  Thus, any and all of the stock of this corporation presently authorized and any and all of the stock of this corporation which may hereafter be authorized may at any time be issued, optioned and contracted for sale and/or sold and disposed of by direction of the board of directors of this corporation to such persons and upon such terms and conditions as may to the directors seem proper and advisable without first offering the said stock or any part thereof to existing shareholders.

 

 

[ signature page follows ]

 

 

 

 

 

 

7

 


 

 

IN WITNESS WHEREOF , the undersigned has executed this Certificate of Correction of Restated Certificate of Incorporation of Mechanical Technology, Incorporated pursuant to Section 105 of the New York Business Corporation Law as of the 17th day of October, 2016.

 

 

 

By: ____________________________

Name:  Kevin G. Lynch

Title:     Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[ Signature Page to Certificate of Correction – 10-13-99 Filing ]


 

 

CERTIFICATE OF CORRECTION

OF

RESTATED CERTIFICATE OF INCORPORATION

OF

MECHANICAL TECHNOLOGY, INCORPORATED

Under Section 105 of the Business Corporation Law of the State of New York

 

 

Filed by:

Couch White, LLP

 

540 Broadway, PO Box 22222

 

Albany, New York 12201-2222

 

CUST REF #17933

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[ Signature Page to Certificate of Correction – 10-13-99 Filing ]


 

 

 

CERTIFICATE OF CORRECTION

OF

CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION

OF

MECHANICAL TECHNOLOGY, INCORPORATED

Under Section 105 of the Business Corporation Law of the State of New York

 

FIRST :           The name of the corporation is: Mechanical Technology, Incorporated (the “ Corporation ”).

 

SECOND :      The date the document to be corrected was filed by the Department of State is: 

 

May 19, 2008.

 

THIRD :          The nature of the informality, error, incorrect statement or defect to be corrected is the Certificate of Amendment of the Certificate of Incorporation filed by the Department of State on May 19, 2008 (the “ Certificate of Amendment ”) makes an incorrect reference to the paragraph number of the Certificate of Incorporation of the Corporation being amended pursuant to such Certificate of Amendment.  Paragraph number references within the Certificate of Incorporation of the Corporation were previously corrected by the filing by the Department of State of a separate Certificate of Correction of Restated Certificate of Incorporation of Mechanical Technology, Incorporated.  The paragraph references to the Certificate of Incorporation of the Corporation within this Certificate of Correction correspond to the correct paragraph number as set forth in such previously filed Certificate of Correction of Restated Certificate of Incorporation of Mechanical Technology, Incorporated

                       

FOURTH :       Paragraph FOURTH of the Certificate of Amendment is corrected to read as follows:

 

                        FOURTH: To accomplish the foregoing amendment, Paragraph THIRD of the Certificate of Incorporation of the Corporation, relating to the authorized capital stock of the Corporation, is amended in its entirety and replaced as follows:

 

THIRD : The aggregate number of shares which the corporation shall have the authority to issue is Seventy-Five Million (75,000,000) shares, par value $0.01 per share.

 

 

[ signature page follows ]

 

10

 


 

 

IN WITNESS WHEREOF , the undersigned has executed this Certificate of Correction of Certificate of Amendment of the Certificate of Incorporation of Mechanical Technology, Incorporated pursuant to Section 105 of the New York Business Corporation Law as of the 17th day of October, 2016.

 

 

 

By: ____________________________

Name:  Kevin G. Lynch

Title:     Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

[ Signature Page to Certificate of Correction – 05-19-08 Filing ]


 

 

CERTIFICATE OF CORRECTION

OF

CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION

OF

MECHANICAL TECHNOLOGY, INCORPORATED

Under Section 105 of the Business Corporation Law of the State of New York

 

 

Filed by:

Couch White, LLP

 

540 Broadway, PO Box 22222

 

Albany, New York 12201-2222

 

CUST REF #17933

 

 

 

 

Exhibit 4.2

 

 

Mechanical Technology, Incorporated



and

American Stock Transfer & Trust Company, LLC


Rights Agent






______

Amendment No. 1 to Rights Agreement

Dated as of October 20, 2016

 

 

 

 

 

 

 

 


 

 

AMENDMENT No. 1 TO RIGHTS AGREEMENT

AMENDMENT No. 1 (this “ Amendment ”), dated as of October 20, 2016, to the Rights Agreement (the “ Rights Agreement ”), dated as of October 6, 2016, by and between Mechanical Technology, Incorporated, a New York corporation (the “ Company ”), and American Stock Transfer & Trust Company, LLC (the “ Rights Agent ”).

WHEREAS , the Company and the Rights Agent have heretofore executed and entered into the Rights Agreement;

WHEREAS , pursuant to Section 27 of the Rights Agreement, the Company may from time to time supplement or amend the Rights Agreement in accordance with the provisions thereof;

WHEREAS , the Board of Directors of the Company has determined that it is in the best interests of the Company and its shareholders to amend the Rights Agreement pursuant to this Amendment.

NOW, THEREFORE , the Company and the Rights Agent hereby amend the Rights Agreement as follows:

Section 1.                 Amendment to the Rights Agreement.

(a)                 Amendment to Section 1(a) .  Section 1(a) of the Rights Agreement is hereby amended by deleting, in its entirety, clause (iii) of the second sentence of the definition of “Acquiring Person” in Section 1(a) and replacing it with the following:

“(iii) any Person deemed to be an “exempt person” in accordance with Section 28 or Section 29 or Brookstone Partners Acquisition XXIV, LLC, a Delaware limited liability company, or any of its Affiliates and Associates, or”

Section 2.                 Miscellaneous.

(a)                 Except as otherwise expressly provided, or unless the context otherwise requires, all capitalized terms used herein have the meanings ascribed to them in the Rights Agreement.

(b)                This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute but one and the same document.

(c)                 Except as expressly set forth herein, this Amendment shall not by implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Rights Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect.

[The remainder of this page is intentionally left blank.]

 

 


 

 

IN WITNESS WHEREOF , the parties hereto have caused this Amendment to be duly executed effective as of the day and year first above written.

Mechanical Technology, Incorporated

 

By:

 

Name:

Kevin G. Lynch

Title:

President and Chief Executive Officer

 

 

American Stock Transfer & Trust Company, LLC

 

By:

 

Name:

Jennifer Donovan

Title:

Senior Vice President, Relationship Management - Regional Manager

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to Amendment No. 1 to Rights Agreement

 

Exhibit 10.22

SECURITIES PURCHASE AGREEMENT

SECURITIES PURCHASE AGREEMENT (this “ Agreement ”), dated as of October 21, 2016, by and between Mechanical Technology, Incorporated, a New York corporation located at 325 Washington Avenue Extension, Albany, New York 12205 (the “ Company ”), and Brookstone Partners Acquisition XXIV, LLC, a Delaware limited liability company located at 122 East 42 nd Street, Suite 4305, New York, New York 10168 (the “ Buyer ”).

WHEREAS:

A.        The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “ 1933 Act ”), and Rule 506 of Regulation D (“ Regulation D ”) as promulgated by the United States Securities and Exchange Commission (the “ SEC ”) under the 1933 Act.

B.        The Buyer wishes to purchase, and the Company wishes to sell, upon the terms and subject to the conditions stated in this Agreement, an aggregate of 3,750,000 shares (the “ Common Shares ”) of the Company’s common stock, par value $0.01 per share (the “ Common Stock ”).

C.        Contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement, substantially in the form attached hereto as Exhibit A (the “ Registration Rights Agreement ”), pursuant to which the Company has agreed to provide certain registration rights with respect to the Registrable Securities (as defined in the Registration Rights Agreement) under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.

NOW, THEREFORE , the Company and the Buyer hereby agree as follows:

1.                   PURCHASE AND SALE OF COMMON SHARES .

(a)                 Purchase and Sale of Common Shares .

(i)                  Purchase of Common Shares . Subject to the satisfaction (or waiver, to the extent legally permissible) of the conditions set forth in Sections 6 and 7 , the Company shall issue and sell to the Buyer, and the Buyer agrees to purchase from the Company on the Closing Date (as defined below), the Common Shares (the “ Closing ”).

(ii)                Closing . The date and time of the Closing (the “ Closing Date ”) shall be 10:00 a.m., New York City time, on the date hereof (or such other date and time as is mutually agreed to by the Company and the Buyer) after the satisfaction (or waiver, to the extent legally permissible) of the conditions to the Closing set forth in Sections 6 and 7 , at the offices of Olshan Frome Wolosky LLP, 1325 Avenue of the Americas, New York, New York 10019.

 

 


 

 

(iii)              Purchase Price . The aggregate purchase price for the Common Shares to be purchased by the Buyer at the Closing shall be $2,737,500 (the “ Purchase Price ”) which equates to approximately $0.73 per Common Share.

(iv)              Form of Payment . On the Closing Date, after all closing conditions set forth in Sections 6 and 7 have been satisfied (or waived, to the extent legally permissible), the Buyer shall pay the Purchase Price to the Company for the Common Shares at the Closing (less the amounts withheld pursuant to Section 4(g) ), by wire transfer of immediately available funds pursuant to the Company’s wire instructions as provided to the Buyer in writing prior to the date hereof. On the Closing Date, the Company shall deliver to the Buyer a stock certificate evidencing the Common Shares duly executed on behalf of the Company and registered in the name of the Buyer or its designee.

2.                   REPRESENTATIONS AND WARRANTIES OF THE BUYER .

The Buyer represents and warrants that:

(a)                 No Public Sale or Distribution . The Buyer is acquiring the Common Shares for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the 1933 Act; provided , however , that by making the representations herein, the Buyer does not agree to hold any of the Common Shares for any minimum or other specific term and, subject thereto, reserves the right to dispose of the Common Shares at any time in accordance with or pursuant to a registration statement or an applicable exemption under the 1933 Act. The Buyer is acquiring the Common Shares hereunder in the ordinary course of its business. The Buyer does not presently have any agreement or understanding, directly or indirectly, written or otherwise, with any Person (as defined below) to act together for the purpose of acquiring, holding, voting or disposing of the Common Shares. As used herein, “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

(b)                Accredited Investor Status . The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D promulgated under the 1933 Act by reason of being an entity of which all of the equity owners are “accredited investors.” 

(c)                 Reliance on Exemptions . The Buyer understands and acknowledges that the Common Shares are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Common Shares.  The Buyer understands that no federal or state agency or any government or governmental agency has passed upon or made any recommendation or endorsement of the Common Shares.

(d)                Information; Experience . The Buyer acknowledges that it (including through its advisors, if any) has had access to adequate information, has made its own due

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diligence investigation, and has been afforded the opportunity to ask questions and receive answers from the Company and obtain additional information from the Company regarding (i) the offer and sale of the Common Shares, and (ii) the business, operations, prospects and financial condition of the Company. The Company has answered or responded to all such questions and requests for information to the full satisfaction of the Buyer. Neither such inquiries nor any other due diligence investigations conducted by the Buyer or its advisors, if any, or its representatives shall modify, amend or affect the Buyer’s right to rely on the Company’s representations and warranties contained herein. The Buyer has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Common Shares. The Buyer understands that its investment in the Common Shares involves a high degree of risk, including but not limited to those set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 (the “ Form 10-K ”), as filed with the SEC on March 30, 2016, and the Buyer represents that the Buyer and its Affiliates have the financial net worth and wherewithal to endure a complete loss of their investment. The Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Common Shares.  The Buyer acknowledges and agrees that the Company does not make and has not made any representations or warranties with respect to the transactions contemplated by any of the Transaction Documents other than those specifically set forth in this Agreement.  The Buyer also acknowledges that it has been represented by counsel different from the Company’s counsel and has not relied on the Company or its counsel in the preparation, negotiation, execution and delivery of this Agreement, the Registration Rights Agreement and any other agreements and documents contemplated hereby and the consummation of the transactions contemplated hereby and thereby.

(e)                 No Governmental Review . The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Common Shares or the fairness or suitability of the investment in the Common Shares nor have such authorities passed upon or endorsed the merits of the offering of the Common Shares.

(f)                 Transfer or Resale . The Buyer understands that, except as provided in the Registration Rights Agreement: (i) the Common Shares have not been and are not being registered under the 1933 Act or any state securities laws and are therefore “restricted” securities, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) the Buyer shall have delivered to the Company an opinion of counsel, in a form generally acceptable to the Company, to the effect that such Common Shares to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) the Buyer provides the Company with reasonable assurance, including, if requested by the Company, an opinion of counsel in a form generally acceptable to the Company, that such Common Shares can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or a successor rule thereto) (collectively, “ Rule 144 ”), (ii) any sale of the Common Shares made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Common Shares under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the

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SEC thereunder, and (iii) neither the Company nor any other Person is under any obligation to register the Common Shares under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. Notwithstanding the foregoing, the Common Shares may be pledged in connection with a bona fide margin account or other loan or financing arrangement secured by the Common Shares and such pledge of Common Shares shall not be deemed to be a transfer, sale or assignment of the Common Shares hereunder, and to the extent the Buyer effects a pledge of Common Shares, it shall not be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document (as defined below), including, without limitation, this Section 2(f) .

(g)                Legends . The Buyer understands that, until such time as the resale of the Common Shares has been registered under the 1933 Act as contemplated by the Registration Rights Agreement, the certificates or other instruments representing the Common Shares, except as set forth below, shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ALL APPLICABLE REGISTRATIONS THAT MAY BE REQUIRED BY APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL, IN A FORM GENERALLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT AND ANY OTHER APPLICABLE STATE SECURITIES LAWS.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Common Shares upon which it is stamped or issue to such holder by electronic delivery at the applicable balance account at The Depository Trust Company (“ DTC ”), if, unless otherwise required by state securities laws, (i) such Common Shares are registered for resale under the 1933 Act, (ii) in connection with a sale, assignment or other transfer, such holder provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that such sale, assignment or transfer of the Common Shares may be made without registration under the applicable requirements of the 1933 Act; provided , however , that if an opinion is required by Company counsel in order to effect the issuance of a certificate without such legend, counsel to the Company agrees, in its reasonable discretion, with the conclusion set forth in such opinion of counsel provided to the Company, or (iii) the Common Shares can be sold, assigned or transferred pursuant to Rule 144 (upon receipt of a representation letter from the holder(s) of the Common Shares confirming such holder(s) will sell any Common Shares only in compliance with the requirements of Rule 144, in a form reasonably acceptable to counsel to the Company) or Rule 144A.  The Company shall be responsible for the fees of its transfer agent and all DTC fees associated with such issuance. If a legend is no longer required pursuant to the foregoing, the Company shall, within three (3) Business Days (as defined below) following the delivery by the Buyer to the Company’s transfer agent (with notice to the Company) of a legended certificate or instrument representing such Common Shares and, if deemed necessary in the opinion of the Company’s counsel, a representation letter in form reasonably acceptable to such counsel, issue to the holder of the Common Shares a certificate representing such Common Shares without such legend or issue such Common Shares to such holder by electronic delivery at the applicable balance account at DTC.

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(h)                Organization; Authorization; Validity; Enforcement .  The Buyer is a member-managed limited liability company organized, validly existing and in good standing under the laws of its jurisdiction of formation with full power and authority to own and hold its properties and to carry on its business as now conducted, and is duly registered and qualified to conduct its business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except as has not had or would not reasonably be expected to have a material adverse effect upon the Buyer’s ability to conduct its business or consummate the transactions contemplated hereby.  The Buyer has full power and authority to enter into this Agreement and the Registration Rights Agreement and to perform its obligations thereunder.  This Agreement and the Registration Rights Agreement have been duly and validly authorized, executed and delivered on behalf of the Buyer and constitute the legal, valid and binding obligations of the Buyer enforceable against the Buyer in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.  The execution and delivery of the Transaction Documents by the Buyer and the consummation by the Buyer of the transactions contemplated hereby and thereby, including, without limitation, the purchase of the Common Shares, have been duly authorized by the Buyer and no further filing, consent, or authorization is required by the Buyer or its Affiliates.

(i)                  No Conflicts . The execution, delivery and performance by the Buyer of this Agreement and the Registration Rights Agreement and the consummation by the Buyer of the transactions contemplated hereby and thereby does not and will not (i) result in a violation of the organizational documents of the Buyer, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Buyer is a party or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to the Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Buyer to perform its obligations hereunder and consummate the transactions contemplated hereby.

 

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(j)                  Limited Public Market .  The Buyer understands that there is and may, at a future date, be a limited public market for the Common Shares, and that the Company makes no assurances as to the nature or liquidity of the public market for the Common Shares.

(k)                No Broker .  The Buyer represents that neither the Buyer nor any of its Affiliates has engaged any placement agent, broker or other agent in connection with the sale of the Common Shares.

(l)                  Acknowledgement Regarding Buyer .  The Buyer represents and warrants, as of immediately prior to the Closing, that it is not (i) an officer or director of the Company, (ii) an “affiliate” of the Company (as defined in Rule 144) or (iii) to the knowledge of the Buyer, a “beneficial owner” of more than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “ 1934 Act ”)).  The Buyer represents that it is a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of the United States.  The Buyer’s principal place of business is as identified in the preamble of this Agreement.  The Buyer represents and warrants that neither it, nor any of its Affiliates, have been or are subject to any proceedings or event that constitutes a “bad actor” disqualification as set forth in Rule 506(d)(1) of Regulation D promulgated under the Securities Act.

(m)              Director Designees .  The Buyer represents and warrants that each of the Director Designees identified in Section 3(mm) (i) is not and has not been subject to any proceeding or event that constitutes a “bad actor” disqualification as set forth in Rule 506(d)(1) promulgated under Regulation D of the Securities Act and (ii) maintains reasonably sufficient professional experience and sophistication to serve on the board of directors of a publicly-held corporation of like kind and type as the Company.

(n)                Principal Place of Business . The Buyer’s principal place of business is located in the State of New York.

(o)                Investment Company Status .  The Buyer is not, and immediately following the Closing will not be, an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the Buyer is not a company controlled by an “investment company” or a “promoter” or “principal underwriter” for an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.

(p)                No General Solicitation . The Buyer acknowledges that the Common Shares were not offered to it by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media, or broadcast over television or radio or (ii) any seminar or meeting to which the Buyer or any Person associated with the Buyer was invited by any of the foregoing means of communications.

 

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3.                   REPRESENTATIONS AND WARRANTIES OF THE COMPANY .

The Company represents and warrants to the Buyer that:

(a)                 Organization and Qualification . Each of the Company and its “ Subsidiaries ” (which defined term, for purposes of this Agreement, means any entity in which the Company, directly or indirectly, owns at least a majority of the capital stock, equity or similar interest) are entities duly organized and validly existing, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted.  The Company, MTI Instruments (as defined below) and Turbonetics (as defined below) are in good standing under the laws of the jurisdiction in which they are formed.  Each of the Company and its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not reasonably be expected to have a Material Adverse Effect.  As used in this Agreement, “ Material Adverse Effect ” means any material adverse effect on the business, properties, assets, operations, results of operations, financial condition or prospects of the Company and its Subsidiaries, taken as a whole, or their ability to satisfy their obligations with respect to the transactions contemplated hereby. The Company has no Subsidiaries, except for (i) MTI Instruments, Inc., a New York corporation (“ MTI Instruments ”) wholly-owned by the Company, and (ii) Turbonetics Energy, Inc., a New York corporation (“ Turbonetics ”) wholly-owned by the Company that currently does not conduct business.  The Company also owns a forty-seven and one-half percent (47.5%) equity interest in MeOH Power, Inc., a Delaware corporation (“ MeOH Power ”).

(b)                Authorization; Enforcement; Validity . The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement, the Registration Rights Agreement and each of the other agreements and other instruments to be entered into by any of the parties hereto in connection with any of the transactions contemplated by this Agreement (collectively, the “ Transaction Documents ”) and to issue the Common Shares in accordance with the terms hereof and thereof. The execution and delivery of the Transaction Documents by the Company, the performance of its obligations thereunder and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Common Shares, have been duly authorized by the Company’s Board of Directors (the “ Board ”) and (other than (i) the filing with the SEC of one or more Registration Statements (as defined in the Registration Rights Agreement) in accordance with the requirements of the Registration Rights Agreement, (ii) the filing of a Notice of Exempt Offering of Securities on Form D with the SEC under Regulation D promulgated under the 1933 Act, (iii) the filing of an Interim OTCQB Certification with the OTC Markets and (iv) other filings as may be required by state securities agencies) no further filing, consent, or authorization is required by the Company or its Board.  This Agreement and the other Transaction Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity, applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies, or limits on indemnification under applicable federal securities laws.

 

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(c)                 Issuance of Common Shares . The issuance of the Common Shares is duly authorized and, upon issuance in accordance with the terms hereof, shall be validly issued and free from all preemptive or similar rights and taxes, liens and charges with respect to the issue thereof and the Common Shares shall be fully paid and nonassessable with the holders being entitled to all rights accorded to a holder of Common Stock. As of immediately prior to the Closing, there are 69,751,518 shares of Common Stock that are authorized and unissued. Assuming the accuracy of each of the representations and warranties of the Buyer set forth in Section 2 , the offer and issuance by the Company of the Common Shares to the Buyer pursuant to and in accordance with the terms of this Agreement are and will be exempt from the registration requirements of the 1933 Act.

(d)                No Conflicts .  Except as set forth in Schedule 3(d) , the execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Common Shares) will not (i) result in a violation of any certificate of incorporation, certificate or articles of formation or organization, memorandum of association, certificate of designations, bylaws, articles of association, operating agreements or other constituent or organizational documents of the Company or any of its Subsidiaries, or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) in any respect under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the Financial Industry Regulatory Authority (“ FINRA ”) and applicable laws of the State of New York and any other state laws) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected, all except to the extent that any such violation would not reasonably be expected to have a Material Adverse Effect.

(e)                 Consents .  Except as contemplated by the parenthetical within the second sentence of Section 3(b) , neither the Company nor any of its Subsidiaries is required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its obligations under or contemplated by any of the Transaction Documents, in each case in accordance with the terms hereof or thereof.  All consents, authorizations, orders, filings and registrations which the Company or each of its Subsidiaries is required to obtain to enter into this Agreement will have been obtained or effected on or prior to the Closing Date, and the Company is unaware of any facts or circumstances that might prevent the Company from obtaining or effecting any of the registrations, applications or filings pursuant to the preceding sentence.  The Company is not in material violation of any of the rules or regulations of FINRA or the OTC Markets Group quotation system and has no knowledge of any facts that would reasonably lead to the Common Stock to be removed from trading on, or be suspended from trading on, the OTC Markets Group quotation system in the foreseeable future. The issuance by the Company of any of the Common Shares shall not have the effect of causing the Common Stock to be removed from trading, or be suspended from trading on, the OTC Markets Group quotation system; provided , however , that such representation is limited to the act of issuing the Common Shares.

 

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(f)                 Acknowledgment Regarding Buyer’s Purchase of Common Shares . The Company acknowledges and agrees that the Buyer is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby and that the Buyer is not, as of immediately prior to the Closing, (i) an officer or director of the Company or any of its Subsidiaries, (ii) an “affiliate” of the Company or any of its Subsidiaries (as defined in Rule 144) or (iii) to the knowledge of the Company, a “beneficial owner” of more than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the 1934 Act). The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company or any of its Subsidiaries (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby, and any advice given by the Buyer or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby, for which a separate engagement was not consummated, is merely incidental to the Buyer’s purchase of the Common Shares. The Company further represents to the Buyer that the Company’s decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives.

(g)                No General Solicitation; Fees . Neither the Company nor any of its Subsidiaries or Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Common Shares. The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for Persons engaged by or providing services to the Buyer or its Affiliates (a “ Buyer Provider ”)) relating to or arising out of the transactions contemplated hereby. The Company shall pay, and hold the Buyer harmless against, any liability, loss or expense (including, without limitation, attorneys’ fees and out-of-pocket expenses) in connection with any claim relating to any such payment to a Person that is not a Buyer Provider. The Company represents that neither it nor any of its Subsidiaries has engaged any placement agent or other agent in connection with the sale of the Common Shares.

(h)                No Integrated Offering . Except as disclosed on Schedule 3(h) , none of the Company, its Subsidiaries, any of their respective Affiliates, and any Person acting on any of their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security in the prior six (6) months under circumstances that would eliminate the availability of the exemption from registration under the 1933 Act in connection with the offer and sale by the Company of the Common Shares as contemplated hereby, whether through integration with prior offerings or otherwise, or cause the offer and sale of the Common Shares contemplated hereby to require approval of shareholders of the Company for purposes of New York law or any applicable shareholder approval requirements, including, without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or quoted. Following the Closing, none of the Company, its Subsidiaries and any Person acting on any of their behalf will take any action or steps referred to in the preceding sentence that would require registration of any of the Common Shares under the 1933 Act or cause the offering of the Common Shares to be integrated with other offerings for purposes of any such applicable shareholder approval provisions; provided , however , that the foregoing shall not apply to any offering or issuance initiated by, participated in or consented to by the Buyer or its Affiliates or the Director Designees.  For purposes of this Agreement, “ Affiliate ” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person.

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(i)                  Application of Takeover Protections; Rights Agreement; Corporate Opportunity Doctrine . The Company and its Board have taken all possible action in order to render inapplicable (i) all restrictions on the Buyer as an “interested shareholder” under Section 912 of the New York Business Corporation Law and (ii) all restrictions on the Buyer under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Certificate of Incorporation (as defined below) or the laws of the jurisdiction of its formation, which are or could become applicable to the Buyer as a result of any of the transactions contemplated by this Agreement or any of the other Transaction Documents, including, without limitation, the Company’s issuance of the Common Shares and the Buyer’s ownership of the Common Shares.

(j)                  SEC Documents; Financial Statements . Except as set forth on Schedule 3(j) , during the two (2) years prior to the date hereof, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof or prior to the Closing Date, and all exhibits included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “ SEC Documents ”).  The Company has delivered to the Buyer or its representatives true, correct and complete copies of the SEC Documents not available on the EDGAR system.  As of their respective filing dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of their respective filing dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved (“ GAAP ”) (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).  To the knowledge of the Company, no other information provided by or on behalf of the Company to the Buyer which is not included in the SEC Documents, including, without limitation, information referred to in Section 2(d) or in the disclosure schedules to this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading.

(k)                Absence of Certain Changes .  Since December 31, 2015, except as disclosed in the SEC Documents filed subsequent to the Form 10-K filed with respect to such

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date and prior to the date hereof, there has been no Material Adverse Effect with respect to  the business, assets, properties, operations, financial condition, results of operations or prospects of the Company and any of its Subsidiaries, taken as a whole.  Since December 31, 2015, neither the Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets outside of the ordinary course of business, individually or in the aggregate, in excess of $100,000 or (iii) had capital expenditures outside of the ordinary course of business, individually or in the aggregate, in excess of $150,000. Neither the Company nor any of its Subsidiaries has taken any steps to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact that would reasonably lead a creditor to do so. The Company and its Subsidiaries, on a consolidated basis, are not as of the date hereof, and after giving effect to the transactions contemplated hereby to occur at the Closing, will not be Insolvent (as defined below). For purposes of this Agreement, “ Insolvent ” means, with respect to any Person, (i) the present fair market value of such Person’s assets is less than the amount required to pay such Person’s total Indebtedness (as defined below), (ii) such Person is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, (iii) such Person intends to incur or believes that it will incur debts that would be beyond its ability to pay as such debts mature or (iv) such Person has unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted.

(l)                  [Reserved] .

(m)              Conduct of Business; Regulatory Permits . Neither the Company nor any of its Subsidiaries is in violation of any term of or in default under any certificate of designations of any outstanding series of preferred stock of the Company (if any), its Certificate of Incorporation or Bylaws (as defined below) or any of their other organizational or governing documents. Neither the Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries presently conducts its business in violation of any of the foregoing, except as disclosed on Schedule 3(m) and for possible violations which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. During the two (2) years prior to the date hereof, the Common Stock has been quoted on the OTC Markets Group quotation system. During the two (2) years prior to the date hereof, (i) trading in the Common Stock has not been suspended by the SEC, FINRA or the OTC Markets Group and (ii) the Company has received no communication, written or oral, from the SEC, FINRA or the OTC Markets Group regarding the suspension or removal of the trading of the Common Stock on the OTC Markets Group quotation system.  Except as disclosed on Schedule 3(m) , the Company and its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.

 

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(n)                Foreign Corrupt Practices . Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other Person acting on behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the Company or any of its Subsidiaries (i) used any corporate funds for any unlawful contribution, unlawful gift, unlawful entertainment or other unlawful expenses relating to political activity, (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds, (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

(o)                Sarbanes-Oxley Act . The Company is in compliance in all material respects with any and all requirements of the Sarbanes-Oxley Act of 2002 that are effective and applicable with respect to the Company as of the date hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder that are effective and applicable with respect to the Company as of the date hereof.

(p)                Transactions With Affiliates . Except as a product of the ordinary course of business of the Company and as otherwise disclosed in the SEC Documents or on Schedule 3(p) , none of the officers, directors or employees of the Company or any of its Subsidiaries is presently a party to any transaction with the Company or any of its Subsidiaries (other than for ordinary course services as employees, officers or directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such officer, director or employee or, to the knowledge of the Company or any of its Subsidiaries, any corporation, partnership, trust or other entity in which any such officer, director, or employee has a substantial interest or is an officer, director, trustee or partner.

(q)                Equity Capitalization . As of the date hereof, the authorized capital stock of the Company consists of 75,000,000 shares of Common Stock, of which as of the date hereof, 5,248,482 shares are issued and outstanding and up to an additional 1,799,775 shares may be reserved for issuance pursuant to the Company’s stock option plans. No preferred stock is authorized, issued or outstanding as of the date hereof.  All of such outstanding shares have been validly issued and are fully paid and nonassessable and all of such shares reserved for issuance will be, upon issuance, validly issued, fully paid and nonassessable. Except as disclosed in Schedule 3(q) or, for purposes of clause (ii) below, as set forth in that certain list of Company option holders, dated October 12, 2016 and delivered to the Buyer prior to the date hereof: (i) none of the Company’s capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company, (ii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company or any of its Subsidiaries,

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(iii) there are no outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing Indebtedness of the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound, (iv) there are no financing statements securing obligations in any material amounts, either singly or in the aggregate, filed in connection with the Company or any of its Subsidiaries, (v) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except pursuant to the Registration Rights Agreement), (vi) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries, (vii) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of any of the Common Shares, (viii) the Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement, and (ix) the Company and its Subsidiaries have no liabilities or obligations required to be disclosed in the SEC Documents but not so disclosed in the SEC Documents, other than those incurred in the ordinary course of the Company’s or any of its Subsidiaries’ respective businesses and which, individually or in the aggregate, do not or would not reasonably be expected to have a Material Adverse Effect. The Company has furnished or made available to the Buyer true, correct and complete copies of the Company’s Certificate of Incorporation, as amended and corrected and as in effect on the date hereof (the “ Certificate of Incorporation ”), and the Company’s Bylaws, as amended and as in effect on the date hereof (the “ Bylaws ”), and the terms of all securities convertible into, or exercisable or exchangeable for, shares of Common Stock and the material rights of the holders thereof in respect thereto.  Between October 12, 2016 and the Closing, the Company has not issued any options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company or any of its Subsidiaries.

(r)                  Indebtedness and Other Contracts . Except as disclosed in Schedule 3(r) , neither the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness, (ii) is a party to any contract, agreement or instrument, the violation of which, or default under which, by the other party(ies) to such contract, agreement or instrument could reasonably be expected to result in a Material Adverse Effect, (iii) is in violation of any term of or in default under any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in a Material Adverse Effect, or (iv) is a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect. Schedule 3(r) provides a detailed description of the material terms of any such outstanding Indebtedness. For purposes of this Agreement: (x) “ Indebtedness ” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services, including, without limitation, “capital leases” in accordance with GAAP (other than trade payables entered into in the ordinary course of business consistent with past practice), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all

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indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with GAAP, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations (as defined below) in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above; and (y) “ Contingent Obligation ” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any Indebtedness of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

(s)                 Absence of Litigation . There is no action, suit, proceeding, inquiry or investigation before or by FINRA, any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries, the Common Stock or any of the Company’s or its Subsidiaries’ officers or directors, whether of a civil or criminal nature or otherwise, in their capacities as such, except as set forth in Schedule 3(s) . The matters set forth in Schedule 3(s) would not reasonably be expected to have a Material Adverse Effect.

(t)                  Insurance . The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any insurance coverage sought or applied for and neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.

(u)                Employee Relations .

(i)                  Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement and does not employ any member of a union. To the Company’s knowledge, there is no pending or threatened labor dispute, strike or work stoppage affecting the Company’s or its Subsidiaries’ business. No executive officer of the Company or any of its Subsidiaries (as defined in Rule 501(f) of the 1933 Act) has notified the Company that such officer intends to leave the Company or otherwise terminate such officer’s employment with the Company or any of its Subsidiaries. No executive officer of the Company or any of its Subsidiaries, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and, to the knowledge of the Company, the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters.

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(ii)                The Company and its Subsidiaries are in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

(v)                Title . The Company and its Subsidiaries have good and marketable title in fee simple to all material real property and good and marketable title to all material personal property owned by them, in each case as material to the business of the Company and its Subsidiaries and free and clear of all liens, encumbrances and defects except as either (i) set forth on Schedule 3(v) or (ii) as do not materially affect the value of such property and do not interfere with the current use and proposed use of such property by the Company or its Subsidiaries. Any real property and facilities held under lease by the Company or its Subsidiaries are held under valid, subsisting and enforceable leases.

(w)              Intellectual Property Rights . The Company or its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, domain names, original works of authorship, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights and all applications and registrations therefor (“ Intellectual Property Rights ”) necessary to conduct their respective businesses as now conducted, except where failure to so own or possess would not reasonably be expected to result in a Material Adverse Effect. Except as set forth in Schedule 3(w) , none of the Company’s or its Subsidiaries’ Intellectual Property Rights have expired or terminated or have been abandoned or are expected to expire or terminate or are expected to be abandoned, within two (2) years after the date of this Agreement. The Company does not have any knowledge of any infringement by the Company or any of its Subsidiaries of Intellectual Property Rights of others. There is no claim, action or proceeding brought, or to the knowledge of the Company or any of its Subsidiaries, being threatened, against the Company or any of its Subsidiaries regarding their Intellectual Property Rights. Neither the Company nor any of its Subsidiaries is aware of any facts or circumstances which might give rise to any of the foregoing infringements or claims, actions or proceedings. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their Intellectual Property Rights.

(x)                Environmental Laws . The Company and its Subsidiaries (i) are in compliance with any and all Environmental Laws (as defined below), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. The term “ Environmental Laws ” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “ Hazardous Materials ”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

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(y)                Subsidiary Rights . The Company has the unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive dividends and distributions on, all capital securities of its Subsidiaries, as owned by the Company.

(z)                 Investment Company Status .  The Company is not required to be registered as, and immediately following the Closing will not be required to register as, an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the Company is not a company controlled by an “investment company” or a “promoter” or “principal underwriter” for an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.

(aa)             Tax Status . Except as disclosed on Schedule 3(aa) , the Company and each of its Subsidiaries (i) has made or filed all U.S. federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount and due and owing on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes actually due and owing for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

(bb)            Internal Accounting and Disclosure Controls . The Company and each of its Subsidiaries maintain a system of internal accounting controls customary for the respective businesses of similar type and size as the Company and its Subsidiaries sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference. The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15 under the 1934 Act) that are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, including, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure. During the twelve (12) months prior to the date hereof, neither the Company nor any of its Subsidiaries has received any notice or correspondence from any accountant relating to any material weakness in any part of the system of internal accounting controls of the Company or any of its Subsidiaries.

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(cc)             Off Balance Sheet Arrangements . There is no transaction, arrangement, or other relationship between the Company and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its 1934 Act filings and is not so disclosed or that otherwise would be reasonably likely to have a Material Adverse Effect.

(dd)           Transfer Taxes . The Company agrees that it shall pay all stock transfer or other taxes (other than income or similar taxes) which are required to be paid in connection with the sale and transfer of the Common Shares to be sold to the Buyer.

(ee)             Manipulation of Price . Within the last twenty-four (24) months, the Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result, or that could reasonably be expected to cause or result, in the stabilization or manipulation of the price of any security of the Company with the purpose of facilitating the sale of any of the Common Shares, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Common Shares, or (iii) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company.

(ff)              Acknowledgement Regarding Buyer’s Trading Activity . The Company acknowledges and agrees, subject to the final sentence of this clause (ff), that (i) the Buyer has not been asked to agree, nor has the Buyer agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Common Shares for any specified term (unless otherwise specified in the Registration Rights Agreement), (ii) the Buyer, and counter-parties in “derivative” transactions to which the Buyer is a party, directly or indirectly, may in the future have a “short” position in the Common Stock, and (iii) the Buyer shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction. The Company further understands and acknowledges that the Buyer may engage in hedging and/or trading activities at various times during the period that the Common Shares are outstanding, and such hedging and/or trading activities, if any, can reduce the value of the existing shareholders’ equity interest in the Company both at and after the time the hedging and/or trading activities are being conducted.  The Company acknowledges that, subject to the final sentence of this clause (ff), such aforementioned hedging and/or trading activities after the Closing do not constitute a breach of this Agreement or any of the documents executed in connection herewith.  As of the date hereof, neither the Buyer nor its Affiliates maintain a “short” position in the Common Stock with respect to any such hedging and/or trading activity.  Notwithstanding anything else herein to the contrary, (x) the foregoing is not a recognition of or acknowledgement with respect to and does not permit the Buyer’s or its Affiliates’ violation of (i) the insider trading rules and regulations of the applicable United States federal and state securities laws, including, without limitation Section 10(b) and Rules 10b5-1 and 10b5-2 of the

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1934 Act, or (ii) internal Company policies with respect to the purchase or sale of Company securities as in effect on the date hereof or as may be adopted hereafter (“ Company Insider Trading Policies ”), and (y) Buyer, its Affiliates and the Director Designees shall at all times abide by all laws and the rules, regulations, orders, judgments and decrees of any court, public board, agency, self-regulatory organization or body (including federal and state securities laws and regulations and the rules and regulations of FINRA) and the Company Insider Trading Policies with respect to such Person purchasing or selling “short” of any securities of the Company or engaging in a “derivative transaction” to which such Person has a “short” position with respect to the Company and/or Common Stock.

(gg)            U.S. Real Property Holding Corporation . The Company is not, has never been and has no present intention of becoming a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon the Buyer’s request.

(hh)            No Additional Agreements .  The Company does not have any agreement or understanding with the Buyer with respect to the transactions contemplated by the Transaction Documents other than as specified in the Transaction Documents.

(ii)                Disclosure . The Company confirms that neither it nor any other Person acting on its behalf has provided the Buyer or its agents or counsel with any information that constitutes or could reasonably be expected to constitute material, nonpublic information. The Company understands and confirms that the Buyer will rely on the foregoing representations in effecting transactions in securities of the Company.  To the knowledge of the Company, no event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed. The Company acknowledges and agrees that the Buyer does not make and has not made any representations or warranties with respect to the transactions contemplated by any of the Transaction Documents other than those specifically set forth in Section 2 .

(jj)                Shell Company Status . The Company is not, and has never been, an issuer identified in Rule 144(i)(1) promulgated under the 1933 Act.

(kk)            Stock Option Plans . Each stock option granted by the Company was granted (i) in accordance with the terms of the applicable stock option plan of the Company and (ii) with an exercise price at least equal to the fair market value of the Common Stock issuable with respect to such option, based on the applicable listing price of the Company’s Common Stock, on the date such stock option would be considered granted under GAAP and applicable law.  No stock option granted under the Company’s stock option plan has been backdated. The Company has not knowingly granted, and there is no and has been no policy or practice of the Company to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information regarding the Company or its financial results or prospects.

 

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(ll)                No Disagreements with Accountants and Lawyers . To the knowledge of the Company, there are no material disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently engaged by the Company and the Company is current with respect to any fees owed to its accountants and lawyers which could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents. In addition, on or prior to the date hereof, the Company had discussions with its accountants about its financial statements previously filed with the SEC. Based on those discussions, the Company has no reason to believe that it will need to restate any such financial statements or any part thereof.

(mm)        Composition of Board .  Each of E. Dennis O’Connor and Walter L. Robb (the “ Resigning Directors ”) has resigned as a director of the Company, effective concurrently with the Closing.  The Board has taken all action necessary to appoint Matthew E. Lipman, Michael Toporek and Edward R. Hirshfield (the “ Director Designees ”) as directors of the Company, effective concurrently with the Closing, to fill the vacancies on the Board created by the resignation of the Resigning Directors and the other vacancy on the Board such that the Director Designees will comprise three (3) directors of a seven (7) member Board.  Specifically, (i) Michael Toporek has been appointed to a director class with a term expiring at the 2017 annual meeting of shareholders, (ii) Edward R. Hirshfield has been appointed to a director class with a term expiring at the 2018 annual meeting of shareholders, and (iii) Matthew E. Lipman has been appointed to a director class with a term expiring at the 2019 annual meeting of shareholders.  The Board has also taken all action necessary to appoint Edward R. Hirshfield to serve on the Compensation Committee of the Board and Matthew E. Lipman to serve on the Audit Committee and Governance and Nominating Committee of the Board, effective concurrently with the Closing.  Notwithstanding anything in this Section 3(mm) or the Certificate of Incorporation to the contrary, the term of any Director Designee, the appointment of any Director Designee as contemplated by this Agreement and the Company’s and Board’s obligations with regard to the promotion of the re-election of any Director Designee is subject to the limitations and qualifications set forth in Section 4(l) .  All Director Designees shall, notwithstanding any appointment to a particular class of directors with a specified term and any terms or provisions of the Certificate of Incorporation, stand for election to the Board by the shareholders of the Company at the 2017 annual meeting of shareholders as required by Section 705(c) of the New York Business Corporation Law.

4.                   COVENANTS .

(a)                 Best Efforts . Each party shall use its best efforts timely to satisfy each of the covenants and the conditions to be satisfied by it as provided in Sections 6 and 7 .

(b)                Form D and Blue Sky . The Company agrees to file a Form D with respect to the Common Shares as required under Regulation D and to provide a copy thereof to the Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Common Shares for sale to the Buyer at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the State of New York (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyer on or prior to the Closing Date.

 

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(c)                 Reporting Status . Until the earlier of (i) the date on which the Holders (as defined in the Registration Rights Agreement) “beneficially own” (as set forth in Rule 13d-3 and Rule 13d-5(b)(l) of the 1934 Act) an aggregate of ten percent (10%) or less of the shares of Common Stock then outstanding (the “ Reporting Period ”), (ii) the termination of the Registration Rights Agreement, (iii) the date when the Holders may sell all of the Common Shares under Rule 144 without volume limitations and/or without the requirement for current public information, and (iv) the date the Buyer or its Affiliates waive this Section 4(c) , the Company (A) shall timely file all reports required to be filed with the SEC on Form 8-K, Form 10-K and Form 10-Q, provided, that any filing made pursuant to an extension in compliance with Rule 12b-25 promulgated under the Exchange Act shall not be considered untimely, (B) shall not voluntarily terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would no longer require or otherwise permit such termination, and (C) shall take all actions necessary to maintain its eligibility to register the Common Shares for resale by the Holders on Form S-1.

(d)                Use of Proceeds . The Company will use the proceeds from the sale of the Common Shares solely for general corporate purposes and to satisfy all fees and expenses related to this Agreement, the other Transaction Documents and the consummation of the transactions contemplated thereunder, including reimbursement to the Buyer or its designee(s) for its reasonable out-of-pocket costs and expenses solely as set forth in Section 4(g)

(e)                 Financial Information . The Company agrees to send the following to each Director Designee during the Reporting Period (i) unless the following are filed with the SEC through the EDGAR system and are available to the public through the EDGAR system, within three (3) Business Days (as defined below) after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, any Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K (or any analogous reports under the 1934 Act) and any registration statements (other than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) within one (1) Business Day of the release thereof, e-mailed copies of all press releases issued by the Company, and (iii) copies of any notices and other information made available or given to the shareholders of the Company generally, contemporaneously with the making available or giving thereof to the shareholders. For purposes of this Agreement, “ Business Day ” means any day other than a Saturday, a Sunday or a day on which banks in the State of New York generally are closed for regular banking business.

(f)                 Listing . The Company shall promptly secure the listing or quotation of all of the Registrable Securities upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed (subject to official notice of issuance) or quoted and shall maintain such listing or quotation of all Registrable Securities from time to time issuable under the terms of the Transaction Documents (unless otherwise waived by the Buyer or its Affiliates).  During the Reporting Period (unless otherwise waived by the Buyer or its Affiliates), the Company shall maintain the authorization for quotation or the listing of the Common Stock, as applicable, on the OTC Markets Group quotation system, the OTC Bulletin Board or any national securities exchange or other automated quotation system.  Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the Common Stock ceasing to be quoted on, or being suspended from, the OTC Markets Group quotation system.  The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 4(f) .

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(g)                Fees . The Company shall reimburse the Buyer or its designee(s) for one hundred twenty-five thousand dollars ($125,000) of reasonable out-of-pocket costs and expenses incurred by the Buyer and its Affiliates in connection with the transactions contemplated by the Transaction Documents (including, without limitation, legal fees and disbursements in connection with the documentation, negotiation and implementation of the transactions contemplated by the Transaction Documents and due diligence in connection therewith), which amount may be withheld by the Buyer from the Purchase Price at the Closing to the extent not previously reimbursed by the Company. The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or broker’s commissions (other than for a Buyer Provider) relating to or arising out of the transactions contemplated hereby. The Company shall pay, and hold the Buyer harmless against, any liability, loss or expense (including, without limitation, reasonable attorneys’ fees and out-of-pocket expenses) in connection with any claim relating to any such payment contemplated by the foregoing sentence. Except as otherwise set forth in the Transaction Documents, each party to this Agreement shall bear its own expenses in connection with the sale of the Common Shares to the Buyer. 

(h)                Pledge of Common Shares . The Company acknowledges and agrees that the Common Shares may be pledged by a Holder in connection with a bona fide margin agreement or other loan or financing arrangement secured by the Common Shares. Such pledge of Common Shares shall not be deemed to be a transfer, sale or assignment of the Common Shares hereunder, and no Holder effecting a pledge of Common Shares shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document, including, without limitation, Section 2(f) hereof; provided that a Holder and its pledgee shall be required to comply with the provisions of Section 2(f) hereof in order to effect a sale, transfer or assignment of Common Shares to such pledgee. The Company hereby agrees to execute and deliver such documentation as a pledgee of the Common Shares may reasonably request in connection with a pledge of the Common Shares to such pledgee by a Holder.

(i)                  Disclosure of Transactions and Other Material Information . On or before 8:30 a.m., New York City time, on the first (1 st ) Business Day after this Agreement has been executed, the Company shall issue a press release and file a Current Report on Form 8-K describing the terms of the transactions contemplated by the Transaction Documents in the form required by the 1934 Act and attaching the material Transaction Documents (including, without limitation, this Agreement and the Registration Rights Agreement as exhibits to such filing (the “ 8‑K Filing ”)).  Neither the Company nor the Buyer shall issue any press releases or make any other public statements with respect to the transactions contemplated hereby without the prior written consent of the other applicable party; provided , however , that the Company shall be entitled, without the prior approval of the Buyer, to issue any press release or make other public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith and (ii) as is required by applicable law and regulations (provided that in the case of clauses (i) and (ii) the Buyer shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release).

 

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(j)                  Additional Issuances of Securities .

(i)                  The Company shall not effect any public sale or distribution of its equity securities or any securities convertible into or exchangeable or exercisable for its equity securities, except in each case pursuant to a Demand Registration, during the ninety (90) day period beginning on the effective date of any registration statement in connection with a Demand Registration, except pursuant to a registration statement covering (x) sales or distributions of the Company’s equity securities or any securities convertible into or exchangeable or exercisable for its equity securities pursuant to a registration statement on Form S-4 or Form S-8 or any successor form, (y) the issuance of shares of Common Stock upon the conversion, exercise or exchange, by the holder thereof, of options, warrants or other securities convertible into or exercisable or exchangeable for shares of Common Stock pursuant to the terms of such options, warrants or other securities, or (z) the issuance of shares of Common Stock in connection with transfers to dividend reinvestment plans or to employee benefit plans in order to enable any such employee benefit plan to fulfill its funding obligations in the ordinary course.

(ii)                From the date hereof until nine (9) months after the Closing Date, the Company will not, unless approved by the Buyer, its Affiliates or a majority of the Director Designees on the Board, (i) directly or indirectly, offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of) any of its or its Subsidiaries’ equity or equity equivalent securities, including without limitation any debt, preferred stock or other instrument or security that is, at any time during its life and under any circumstances, convertible into or exchangeable or exercisable for Common Stock or Common Stock Equivalents (as defined below), except for any rights, warrants or options issued to employees, consultants, officers or directors of the Company, in connection with their services to the Company, as approved by the Board (any such offer, sale, grant, disposition or announcement being referred to as a “ Subsequent Placement ”), or (ii) be party to any solicitations, negotiations or discussions with regard to the foregoing. For the avoidance of doubt, the foregoing shall not apply to debt that is not convertible into or exchangeable or exercisable for Common Stock or Common Stock Equivalents. For purposes of this Agreement, (x) “ Common Stock Equivalents ” means, collectively, Options and Convertible Securities; (y) “ Options ” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities; provided , that the defined term “Options” shall not include any rights, warrants or options issued to employees, consultants, officers or directors of the Company, in connection with their services to the Company, as approved by the Board; and (z) “ Convertible Securities ” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock.

(iii)              From and after the Closing Date, as long as the Buyer, together with its Affiliates, “beneficially own” (as set forth in Rule 13d-3 and Rule 13d-5(b)(l) of the 1934 Act) shares of Common Stock, the Company will not, directly or indirectly, effect any Subsequent Placement unless the Company shall have first complied with this Section 4(j)(iii) .

(1)                The Company shall deliver to the Buyer an irrevocable written notice (the “ Offer Notice ”) of any proposed or intended issuance or sale or exchange (the “ Offer ”) of the securities being offered (the “ Offered Securities ”) in a Subsequent Placement, which Offer Notice shall (w) reasonably identify and describe the Offered Securities, (x) describe the price and other material terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or exchanged, (y) identify the persons or entities (if known) to which or with which the Offered Securities are to be offered, issued, sold or exchanged and (z) offer to issue and sell to or exchange with the Buyer up to the proportion of the Offered Securities equal to the Buyer’s (including its Affiliates’) pro rata interest in equity securities of the Company on a fully-diluted basis.

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(2)                To accept an Offer, in whole or in part, the Buyer must deliver a written notice to the Company prior to the end of the fifth (5 th ) Business Day after the Buyer’s receipt of the Offer Notice (the “ Offer Period ”), setting forth the number or amount of the Offered Securities that the Buyer elects to purchase (the “ Notice of Acceptance ”). Notwithstanding anything to the contrary contained herein, if the Company desires to modify or amend the terms and conditions of the Offer prior to the expiration of the Offer Period, the Company may deliver to the Buyer a new Offer Notice and the Offer Period shall expire on the fifth (5 th ) Business Day after the Buyer’s receipt of such new Offer Notice.

(3)                The Company shall have sixty (60) days from the expiration of the Offer Period above (i) to offer, issue, sell or exchange all or any part of such Offered Securities as to which a Notice of Acceptance has not been given by the Buyer (the “ Refused Securities ”) pursuant to a definitive agreement (the “ Subsequent Placement Agreement ”), but only to the offerees described in the Offer Notice (if so described therein) and only upon terms and conditions (including, without limitation, unit prices and interest rates) that are not more favorable to the acquiring Person or Persons or less favorable to the Company than those set forth in the Offer Notice and (ii) to publicly announce (a) the execution of such Subsequent Placement Agreement, and (b) either (x) the consummation of the transactions contemplated by such Subsequent Placement Agreement or (y) the termination of such Subsequent Placement Agreement, all as applicable and which shall be filed with the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement and any documents contemplated therein filed as exhibits thereto.

(4)                In the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the terms specified in Section 4(j)(iii)(3) ), then the Buyer may, at its sole option and in its sole discretion, reduce the number or amount of the Offered Securities specified in its Notice of Acceptance to an amount that shall be not less than the number or amount of the Offered Securities that the Buyer elected to purchase pursuant to Section 4(j)(iii)(2) multiplied by a fraction, (i) the numerator of which shall be the number or amount of Offered Securities the Company actually proposes to issue, sell or exchange (including Offered Securities to be issued or sold to the Buyer pursuant to Section 4(j)(iii)(2) prior to such reduction) and (ii) the denominator of which shall be the original amount of the Offered Securities. In the event that the Buyer so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced number or amount of the Offered Securities unless and until such securities have again been offered to the Buyer in accordance with Section 4(j)(iii)(1) .

(5)                Upon the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, the Buyer shall acquire from the Company, and the Company shall issue to the Buyer, the number or amount of Offered Securities specified in the Notice of Acceptance, as reduced pursuant to Section 4(j)(iii)(4) if the Buyer has so elected, upon the terms and conditions specified in the Offer.

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(6)                After completion of the procedures and steps contemplated by this Section 4(j)(iii) , any Offered Securities not acquired by the Buyer or other persons in accordance with Section 4(j)(iii) may not be issued, sold or exchanged until they are again offered to the Buyer under the procedures specified in this Agreement.

(7)                The Company and the Buyer agree that if the Buyer elects to participate in the Offer, (i) neither the Subsequent Placement Agreement with respect to such Offer nor any other transaction documents related thereto (collectively, the “ Subsequent Placement Documents ”) shall expressly include, without the prior written consent of the Buyer, any term or provisions whereby the Buyer shall be required to agree to any restrictions in trading as to any securities of the Company owned by the Buyer prior to such Subsequent Placement, except as required by any applicable Company procedures or policies then in effect regarding the purchase and sale of Company securities while in possession of material, non-public information concerning the Company, and (ii) any registration rights set forth in such Subsequent Placement Documents shall, unless previously consented to in writing by the Buyer or the Majority Holders (as defined in the Registration Rights Agreement), not materially infringe the registration rights contained in the Registration Rights Agreement.

(8)                Notwithstanding anything to the contrary in this Section 4(j) and unless otherwise agreed to by the Buyer, the Company shall either confirm in writing to the Buyer that the transaction with respect to the Subsequent Placement has been abandoned or shall publicly disclose its intention to issue the Offered Securities, in either case in such a manner such that the Buyer will not be in possession of material non-public information and the Board’s fiduciary duties shall be fulfilled, by the ninetieth (90 th ) day following delivery of the Offer Notice. If by the ninetieth (90 th ) day following delivery of the Offer Notice no public disclosure regarding a transaction with respect to the Offered Securities has been made, and no notice regarding the abandonment of such transaction has been received by the Buyer, such transaction shall be deemed to have been abandoned and the Buyer shall not be deemed to be in possession of any material, non-public information with respect to the Company. Should the Company decide to pursue such transaction with respect to the Offered Securities, the Company shall provide the Buyer with another Offer Notice and the Buyer will again have the right of participation set forth in this Section 4(j)(iii) . The Company shall not be permitted to deliver more than one such Offer Notice to the Buyer in any sixty (60) day period.

(k)                Public Information . At any time during the period commencing from the six (6) month anniversary of the Closing Date and ending at such time that all of the Common Shares, if a registration statement is not available for the resale of all of the Common Shares, may be sold without restriction or limitation pursuant to Rule 144 and without the requirement for the Company to be in compliance with Rule 144(c), if the Company shall (i) fail for any reason to satisfy the current public information requirements of Rule 144(c) or (ii) have ever been an issuer described in Rule 144(i)(1)(i) or becomes such an issuer, and shall fail to satisfy any condition set forth in Rule 144(i)(2) (each, a “ Public Information Failure ”), then the Company shall be deemed in breach of this Section 4(k) .

 

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(l)                  Board Matters .

(i)                  As long as the Buyer, together with its Affiliates, “beneficially own” (as set forth in Rule 13d-3 and Rule 13d-5(b)(l) of the 1934 Act) shares of Common Stock, if any Director Designee ceases to be a member of the Board for any reason then the Buyer will be entitled to recommend, subject to the limitations set forth in Section 4(l)(iv) , for consideration by the Board, another individual (a “ Successor Designee ”) to serve as a director in place of such Director Designee.  Any Successor Designee must (A) satisfy the Board membership criteria then established and maintained by the Board and the Company consistent with past practice and (B) be reasonably acceptable to the Board in its good faith business judgment after exercising its fiduciary duties and (C) not be subject to any of the “bad actor” disqualifications set forth in Rule 506(d)(1) of Regulation D promulgated under the Securities Act.  Subject to the limitations set forth in Section 4(l)(iv) , the Board will appoint the Successor Designee as a director promptly after he has been recommended by the Buyer and approved by the Board in accordance herewith and such Successor Designee will be appointed to the same class of directors on which the Director Designee that he is replacing then serves.  In the event the Board declines to accept a candidate recommended by the Buyer due to a failure to meet the standards established by this Section 4(l)(i) , the Buyer may propose a replacement, subject to the above and below criteria.  Upon becoming a member of the Board, the Successor Designee will be deemed a “Director Designee” for all purposes under this Agreement and will succeed to all of the rights and privileges of, and will be bound by the terms and conditions applicable to, a Director Designee under this Agreement.

(ii)                As long as the Buyer, together with its Affiliates, “beneficially own” (as set forth in Rule 13d-3 and Rule 13d-5(b)(l) of the 1934 Act) shares of Common Stock, the Company will, provided that each such Director Designee is not then subject to a “bad actor” disqualification as set forth in Rule 506(d)(1) of Regulation D promulgated under the Securities Act and subject to the limitations set forth in Section 4(l)(iv) , include the Director Designee(s) on the slate of nominees recommended for election by the Board in the Company’s proxy statement and on its proxy card relating to each annual meeting of shareholders and each special meeting of shareholders at which the class of directors on which such Director Designee then serves is up for election.  In connection with such meetings (and any adjournments or postponements thereof), the Company will publicly recommend that the Company’s shareholders vote in favor of the election of each Director Designee, solicit proxies for the election of each Director Designee (in materially the same manner as it does for all other director nominees at such meeting devoting materially the same resources to such solicitation consistent with prior practice), and cause all Common Stock represented by proxies granted to it (or any of its officers or representatives) to be voted in favor of each Director Designee.

(iii)              As long as the Buyer, together with its Affiliates, “beneficially own” (as set forth in Rule 13d-3 and Rule 13d-5(b)(l) of the 1934 Act) shares of Common Stock and subject to the limitations set forth in Section 4(l)(iv) , (A) the Board will appoint at least one (1) Director Designee to serve on each committee of the Board created after the date hereof and (B) the Company will not cause any Director Designee to be removed or disqualified from any committee of the Board to which such individual was appointed pursuant to the terms of this Agreement unless he is legally prohibited to serve on such committee or no longer serves as a director of the Company as a consequence of a reduction in Director Designees/Successor Designees pursuant to Section 4(l)(iv) or otherwise.

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(iv)              Notwithstanding anything else herein to the contrary, the Buyer’s and its Affiliates’ right to recommend a Successor Designee to the Board of the Company, and the Company’s obligations pursuant to Section 4(l)(i) , (ii) and (iii) (including any obligation to appoint such Successor Designee to the Board, take action to recommend such Successor Designee or any Director Designee for election and inclusion on a slate of nominees and appoint a Director Designee to Board committees), shall be based on the amount of shares of Common Stock of the Company beneficially owned by the Buyer and its Affiliates at any applicable time.  Pursuant to the foregoing, the following shall apply:

(1)                In the event the Buyer, together with its Affiliates, “beneficially own” (as set forth in Rule 13d-3 and Rule 13d-5(b)(l) of the 1934 Act) twenty-five percent (25%) or more of the shares of Common Stock then outstanding, the Buyer shall be entitled to exercise its rights pursuant to Section 4(l)(i ) and the Company shall be bound by the agreements and covenants set forth in Section 4(l)(i) , (ii) and (iii) such that the Company Board contains a total of three (3) Director Designees and/or Successor Designees;

(2)                In the event the Buyer, together with its Affiliates, “beneficially own” (as set forth in Rule 13d-3 and Rule 13d-5(b)(l) of the 1934 Act) less than twenty-five percent (25%), but ten percent (10%) or more of the shares of Common Stock then outstanding, the Buyer shall be entitled to exercise its rights pursuant to Section 4(l)(i ) and the Company shall be bound by the agreements and covenants set forth in Section 4(l)(i) , (ii) and (iii) such that the Company Board contains a total of two (2) Director Designees and/or Successor Designees; and

(3)                In the event the Buyer, together with its Affiliates, “beneficially own” (as set forth in Rule 13d-3 and Rule 13d-5(b)(l) of the 1934 Act) less than ten percent (10%) of the shares of Common Stock then outstanding, the Buyer shall be entitled to exercise its rights pursuant to Section 4(l)(i ) and the Company shall be bound by the agreements and covenants set forth in Section 4(l)(i) , (ii) and (iii) such that the Company Board contains a total of one (1) Director Designee or Successor Designee.

(v)                As long as at least one (1) Director Designee is a member of the Board, the size of the Board shall be fixed at seven (7) directors.

(vi)              Each Director Designee will be (A) compensated for his service as a director and will be reimbursed for his expenses on the same basis as all other non-employee directors of the Company, (B) granted equity-based compensation and other benefits on the same basis as all other non-employee directors of the Company, and (iii) entitled to the same rights of indemnification and directors’ and officers’ liability insurance coverage as the other non-employee directors of the Company as such rights may exist from time to time.

(m)              Closing Documents . Promptly following the Closing Date, the Company agrees to deliver, or cause to be delivered, to the Buyer and Olshan Frome Wolosky LLP a complete closing set of the executed Transaction Documents and the closing deliverables pursuant to Section 7 .

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5.                   TRANSFER AGENT INSTRUCTIONS .

(a)                 Transfer Agent Instructions . If the Buyer effects a sale, assignment or transfer of any Common Shares in accordance with Section 2(f) , the Company shall, upon receipt of a representation letter in form reasonably acceptable to the Company and such other documentation of such sale as the Company shall reasonably require, permit the transfer and shall promptly instruct its transfer agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such denominations as specified by the Buyer to effect such sale, transfer or assignment. In the event that such sale, assignment or transfer involves Common Shares sold, assigned or transferred pursuant to an effective registration statement or pursuant to Rule 144 to a Person other than an Affiliate of the Company and the Common Shares are to be certificated, the transfer agent shall issue such Common Shares to the Buyer, assignee or transferee, as the case may be, without any restrictive legend.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5(a) will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 5(a) , that the Buyer shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any such breach or threatened breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required.

6.                   CONDITIONS TO THE COMPANY’S OBLIGATION TO CONSUMMATE THE CLOSING .

The obligation of the Company hereunder to effect the transactions to be consummated at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived (to the extent legally permissible) by the Company at any time in its sole discretion by providing the Buyer with prior written notice thereof:

(a)                 The Buyer shall have duly executed each of the Transaction Documents to which it is a party and delivered the same to the Company.

(b)                The Buyer shall have delivered to the Company the Purchase Price (less the amounts withheld pursuant to Section 4(g) ) for the Common Shares at the Closing by wire transfer of immediately available funds pursuant to the wire instructions provided to the Buyer pursuant to Section 1(a)(iv) .

(c)                 The Buyer shall have delivered to the Company a certificate evidencing the formation and good standing of the Buyer in such entity’s jurisdiction of formation issued by the Secretary of State (or comparable office) of such jurisdiction, as of a date within fifteen (15) days of the Closing Date.

 

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(d)                The Buyer shall have delivered to the Company a certificate, in a form reasonably acceptable to the Company, executed by an officer or the managing member of the Buyer and dated as of the Closing Date, as to (i) the resolutions consistent with Section 2(h) as adopted by the managing member of the Buyer, and (ii) the certificate of formation of the Buyer, each as in effect at the Closing.

(e)                 The Buyer shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for its purchase of the Common Shares.

(f)                 The Company shall have received a certification from each Director Designee, in the form set forth in Exhibit C and dated as of the Closing Date, to the effect that the Director Designee is not and has not been subject to any proceeding or event that constitutes a “bad actor” disqualification as set forth in Rule 506(d)(1) promulgated under Regulation D of the Securities Act.

(g)                The representations and warranties of the Buyer shall be true and correct as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date which shall be true and correct as of such specified date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.

7.                   CONDITIONS TO THE BUYER’S OBLIGATION TO CONSUMMATE THE CLOSING .

The obligation of the Buyer hereunder to effect the transactions to be consummated at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived (to the extent legally permissible) by the Buyer at any time in its sole discretion by providing the Company with prior written notice thereof:

(a)                 The Company shall have duly executed the stock certificate representing the Common Shares and each of the Transaction Documents to which it is a party and delivered the same to the Buyer.

(b)                The Buyer shall have received the opinions of Couch White, LLP and Ober, Kaler, Grimes & Shriver, P.C., the Company’s outside counsel, dated as of the Closing Date, addressed to the Buyer, in form and substance reasonably acceptable to the Buyer as to certain legal matters with respect to this Agreement.

(c)                 The Company shall have delivered to the Buyer a certificate evidencing the formation and good standing of the Company and MTI Instruments in such entity’s jurisdiction of formation issued by the Secretary of State (or comparable office) of such jurisdiction, as of a date within fifteen (15) days of the Closing Date.

(d)                The Company shall have delivered to the Buyer (i) a certificate, as of a date within fifteen (15) days of the Closing Date, evidencing the Company’s and its Subsidiaries good standing with the Franchise Tax Board of the State of California, and (ii) a certificate evidencing MTI Instruments’ qualification as a foreign corporation and good standing within the State of Pennsylvania issued by the Secretary of State (or comparable office) of such state.

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(e)                 The Company shall have delivered to the Buyer a certified copy of the Certificate of Incorporation as certified by the Secretary of State (or comparable office) of the State of New York within fifteen (15) days of the Closing Date.

(f)                 The Company shall have delivered to the Buyer a certificate, in a form reasonably acceptable to the Buyer, executed by the Secretary of the Company and dated as of the Closing Date, as to (i) the resolutions consistent with Section 3(b) , Section 3(i) , and Section 7(l) as adopted by the Board, (ii) the Certificate of Incorporation and (iii) the Bylaws, each as in effect at the Closing.

(g)                The representations and warranties of the Company shall be true and correct as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date which shall be true and correct as of such specified date) and the Company shall have performed, satisfied and complied in all respects with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Closing Date. 

(h)                The Company shall have delivered to the Buyer a letter from the Company’s transfer agent certifying the number of shares of Common Stock issued and outstanding as of the Closing Date.

(i)                  The Common Stock (i) shall be quoted on the OTC Markets Group quotation system and (ii) shall not have been suspended, as of the Closing Date, by the SEC, FINRA or the OTC Markets Group from trading on the OTC Markets Group quotation system nor shall suspension by the SEC, FINRA or the OTC Markets Group have been known by the Company to be threatened, as of the Closing Date, in writing by the SEC, FINRA or the OTC Markets Group.

(j)                  The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Common Shares.

(k)                Each of the Resigning Directors shall have resigned as directors of the Company, effective concurrently with the Closing, in accordance with Section 3(mm) .  The Buyer shall have received conditional resignation letters executed by the Resigning Directors evidencing such resignations in a form reasonably acceptable to the Buyer. 

(l)                  The Board shall have acted by written consent or otherwise approved at a Board meeting the appointment of the Director Designees as directors of the Company and to each committee of the Board, effective concurrently with the Closing, in accordance with Section 3(mm) .   

(m)              The Company shall have delivered to the Buyer an Option Exercise and Stock Transfer Restriction Agreement, substantially in the form attached hereto as Exhibit B , executed by the Company and each of the individuals listed on Annex I .  

 

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(n)                The Company shall have delivered to the Buyer such other documents relating to the transactions contemplated by this Agreement or any of the other Transaction Documents as the Buyer or its counsel may reasonably request.

8.                   MISCELLANEOUS .

(a)                 Governing Law; Jurisdiction; Jury Trial . All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

(b)                Counterparts . This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile, electronic or .pdf signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile, electronic or .pdf signature.

(c)                 Headings . The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

(d)                Severability . If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

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(e)                 Entire Agreement; Amendments . This Agreement and the other Transaction Documents supersede all other prior oral or written agreements among the Buyer, the Company, their Affiliates and Persons acting on their behalf with respect to the matters discussed herein, and this Agreement, the other Transaction Documents and the instruments referenced herein and therein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Buyer, and any amendment to this Agreement made in conformity with the provisions of this Section 8(e) shall be binding on the Buyer and holders of Common Shares and the Company. No provisions hereto may be waived other than by an instrument in writing signed by the party against whom enforcement is sought. The Company has not made any agreements with the Buyer relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. Without limiting the foregoing, the Company confirms that, except as set forth in this Agreement, the Buyer has not made any commitment or promise or has any other obligation to provide any financing to the Company or otherwise.

(f)                 Notices . Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by e-mail (provided confirmation of transmission is electronically generated); or (iii) one (1) Business Day after deposit with an overnight courier service, in each case properly addressed to the party to receive the same. The addresses and e-mail addresses for such communications shall be:

If to the Company:

Mechanical Technology, Incorporated
325 Washington Avenue Extension
Albany, New York 12205
Telephone:  518-218-2588
Attention:   Kevin G. Lynch, President & CEO
E-mail:        klynch@mtiinstruments.com

With a copy to:

Couch White, LLP
540 Broadway, 7 th Floor
Albany, New York 12207
Telephone:  518-426-4600
Attention:   Brian P. Murphy, Esq.

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E-mail: 
 

John R. Vero, Esq.
bmurphy@couchwhite.com 
jvero@couchwhite.com
 

 

 

If to the Buyer:

Brookstone Partners
122 East 42 nd Street, Suite 4305
New York, New York 10168
Telephone:  212-302-0699
Attention:   Matthew Lipman
E-mail:        lipmanm@brookstonepartners.com

With a copy to:

Olshan Frome Wolosky LLP
1325 Avenue of the Americas
New York, New York 10019
Telephone:  (212) 451-2307
Attention:   Jeffrey Spindler, Esq.
E-mail:        jspindler@olshanlaw.com

or to such other address and/or e-mail address and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) electronically generated by the sender’s e-mail or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by e-mail or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.

(g)                Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. Neither party shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other party.

(h)                No Third Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except that each Buyer Indemnitee and Company Indemnitee (as defined below) shall have the right to enforce the obligations of the Company with respect to Section 8(k) .

(i)                  Survival . The representations and warranties of the Buyer and the Company contained in Sections 2 and 3 shall survive the Closing and will remain in full force and effect until the date that is eighteen (18) months following the Closing Date, at which time they will terminate, except that the representations and warranties contained in (i) Section 3(x) (Environmental Laws) shall survive the Closing and remain in full force and effect until the date that is three (3) years following the Closing Date, (ii) Section 3(aa) (Tax Status) shall survive the Closing and remain in full force and effect until the date that is thirty (30) days following the expiration of the applicable statute of limitations, and (iii) Sections 3(b) (Authorization; Enforcement; Validity) and 3(c) (Issuance of Common Shares) shall survive the Closing and remain in full force and effect until the date that is five (5) years after the Closing Date.  All covenants and other agreements in this Agreement to the extent that by their terms are to be performed at or prior to the Closing shall survive the Closing and remain in full force and effect until the date that is sixty (60) days following the Closing Date, at which time they shall terminate and all other covenants and agreements in this Agreement shall survive the Closing indefinitely (unless such covenant or agreement by its terms terminates as of an earlier date).

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(j)                  Further Assurances . Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

(k)                Indemnification

(i)                  In consideration of the Buyer’s execution and delivery of the Transaction Documents and acquiring the Common Shares thereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless the Buyer and all of its partners, managers, members, officers, directors and employees and any of the foregoing Persons’ agents and other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “ Buyer Indemnitees ”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Buyer Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (collectively, the “ Buyer Indemnified Liabilities ”), incurred by any Buyer Indemnitee as a result of, or arising out of, or relating to (A) any misrepresentation or breach of any representation or warranty made by the Company in any of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (B) any breach of any covenant, agreement or obligation of the Company contained in any of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby or (C) any cause of action, suit or claim brought or made against such Buyer Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company) and arising out of, resulting from or related to (I) the execution, delivery, performance or enforcement of any of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby in violation of the same, or (II) any disclosure made by the Company in violation of Section 4(i) ; provided , that, indemnity for a Buyer Indemnitee pursuant to Section 4(k)(i)(C)(I) shall not be available to such Buyer Indemnitee to the extent the Buyer Indemnified Liability is the product of Buyer’s breach of the Transaction Documents.  Except as otherwise set forth herein, the mechanics and procedures with respect to the rights and obligations under this Section 8(k) shall be the same as those set forth in Section 7(c) of the Registration Rights Agreement.

 

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(ii)                In consideration of the Company’s execution and delivery of the Transaction Documents and issuing the Common Shares thereunder and in addition to all of the Buyer’s other obligations under the Transaction Documents, the Buyer shall defend, protect, indemnify and hold harmless the Company and all of its officers, directors and employees and any of the foregoing Persons’ agents and other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “ Company Indemnitees ”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Company Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (collectively, the “ Company Indemnified Liabilities ”), incurred by any Company Indemnitee as a result of, or arising out of, or relating to (A) any misrepresentation or breach of any representation or warranty made by the Buyer in any of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (B) any breach of any covenant, agreement or obligation of the Buyer contained in any of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby or (C) any cause of action, suit or claim brought or made against such Company Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company) and arising out of, resulting from or related to (I) the execution, delivery, performance or enforcement of any of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby in violation of the same or (II) any disclosure made by the Buyer in violation of Section 4(i) ; provided , that, indemnity for a Company Indemnitee pursuant to Section 4(k)(ii)(C)(I) shall not be available to such Company Indemnitee to the extent the Company Indemnified Liability is the product of the Company’s breach of the Transaction Documents.  Except as otherwise set forth herein, the mechanics and procedures with respect to the rights and obligations under this Section 8(k) shall be the same as those set forth in Section 7(c) of the Registration Rights Agreement.

(iii)              Notwithstanding anything else herein to the contrary, the indemnification provided for in this Section 7(k) is subject to the following limitations:

(1)                The Company shall have no obligation to indemnify a Buyer Indemnitee pursuant to Section 7(k)(i) with respect to Buyer Indemnified Liabilities, unless the aggregate amount of all such Buyer Indemnified Liabilities for which the Company would, but for this Section 7(k)(iii)(1) , be liable thereunder exceeds on an aggregate basis Seventy-Five Thousand United States Dollars ($75,000) (the “ Deductible ”), in which event the Buyer Indemnitees shall be entitled to claim indemnity only to the extent of such excess. 

(2)                The Buyer shall have no obligation to indemnify a Company Indemnitee pursuant to Section 7(k)(ii) with respect to Company Indemnified Liabilities, unless the aggregate amount of all such Company Indemnified Liabilities for which the Buyer would, but for this Section 7(k)(iii)(2) , be liable thereunder exceeds on an aggregate basis the Deductible, in which event the Company Indemnitees shall be entitled to claim indemnity only to the extent of such excess. 

(3)                Except for cases of fraud or willful misconduct, notwithstanding anything else herein to the contrary, in no event shall the total aggregate liability of either of the Company or the Buyer, calculated individually, exceed the Purchase Price.

 

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(l)                  No Strict Construction . The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

(m)              Remedies . Each party shall have all rights and remedies set forth in the Transaction Documents and all rights and remedies which such Persons have been granted at any time under any other agreement or contract and all of the rights which such Persons have under any law. Any Person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. Furthermore, each party recognizes that in the event that it fails to perform, observe, or discharge, or threatens to breach, any or all of its obligations under the Transaction Documents, any remedy at law may prove to be inadequate relief to the other applicable party. Each party therefore agrees that the other party shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages and without posting a bond or other security.

(n)                Rescission and Withdrawal Right . Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever the Buyer exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then the Buyer may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.

(o)                Payment Set Aside . To the extent that the Company makes a payment or payments to the Buyer hereunder or pursuant to any of the other Transaction Documents or the Buyer enforces or exercises its rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

[Signature Page Follows]

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IN WITNESS WHEREOF , the Buyer and the Company have caused this Securities Purchase Agreement to be duly executed as of the date first written above.

 

COMPANY:

 

 

 

MECHANICAL TECHNOLOGY, INCORPORATED

 

 

 

 

 

By:

 

 

 

Name:

Kevin G. Lynch

 

 

Title:

President & CEO

 

 

 

BUYER:

 

 

 

BROOKSTONE PARTNERS ACQUISITION XXIV, LLC

 

 

 

By:

BP XXIV Flow, LLC

its Managing Member

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

[Signature Page to Securities Purchase Agreement]

 

 

 

 


 

 

Annex I

Signatories to Option Exercise and Stock Transfer Restriction Agreement

Frederick W. Jones,
Chief Financial Officer and Secretary

Kevin G. Lynch,
Director and Chief Executive Officer

Thomas J. Marusak,
Director

David C. Michaels,
Director

William P. Phelan,
Director

Walter L. Robb,
Director

E. Dennis O’Connor,
Director

 


 

 

Exhibit A

Registration Rights Agreement

 

 

 

 

 

 

 

 


 

 

Exhibit B

Option Exercise and Stock Transfer Restriction Agreement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                                                                                                  

 


 

 

Exhibit C

Form of “Bad Actor” Certification

 

 

 

 

Exhibit 10.23

REGISTRATION RIGHTS AGREEMENT

Registration Rights Agreement (this “ Agreement ”), dated as of October 21, 2016, by and between Mechanical Technology, Incorporated, a New York corporation located at 325 Washington Avenue Extension, Albany, New York 12205 (the “ Company ”), and Brookstone Partners Acquisition XXIV, LLC, a Delaware limited liability company located at 122 East 42 nd Street, Suite 4305, New York, New York 10168 (the “ Investor ”).

The parties hereto agree as follows:

1.                   Definitions .  Capitalized terms used but not defined herein shall have the respective meanings given to such terms in the Securities Purchase Agreement, dated as of the date hereof (the “ Securities Purchase Agreement ”), by and between the Company and the Investor.  As used in this Agreement, the following capitalized terms shall have the following meanings:

Commission ” means the Securities and Exchange Commission.

Common Stock ” means the common stock, par value $0.01 per share, of the Company.

Company Indemnitee(s) ” shall have the meaning assigned to such term in Section 7(b).

Demand Registration ” shall have the meaning assigned to such term in Section 2(a).

Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

Holder ” means the Investor, or any permitted assignee or successor of the Investor owning Registrable Securities. The terms “ hold, ” “ held ” and “ holding ,” when used with respect to Registrable Securities shall mean owning Registrable Securities.

Majority Holders ” means one or more Holders holding in the aggregate at least 50% of the Registrable Securities.

“Participants” means those Holders participating as selling securityholders pursuant to a Registration Statement as contemplated by Section 2 or 3.

Participant Indemnitee(s) ” shall have the meaning assigned to such term in Section 7(a).

Person ” means an individual, partnership, corporation, limited liability company, business trust, unincorporated organization, joint venture, a government authority or other entity of whatever nature.

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Prospectus ” means the prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement, and all other amendments and supplements to the prospectus, including any “free writing” prospectus and all material incorporated by reference in such prospectus.

Register ,” “ registered ,” and “ registration ” refers to a registration effected by preparing and filing a Registration Statement or similar document in compliance with the Securities Act, and the declaration or ordering of effectiveness of such Registration Statement or document.

Registrable Securities ” means (a) any Common Shares held by a Holder and (b) any Common Stock issued with respect to, or in exchange for or in replacement of, any Common Shares referred to in clause (a) above as a result of any stock split, stock dividend, recapitalization, reclassification, exchange or similar event or otherwise; provided , however , that any Registrable Securities sold by a Person in a transaction in which such Person’s rights under this Agreement are not assigned shall cease to be Registrable Securities from and after the time of such sale and the transferee with respect to such securities shall cease to be a Holder pursuant hereto.  The number of Registrable Securities that are held by a Person or are outstanding shall be determined by the number of shares of Common Stock that are Registrable Securities and either are held by such Person or outstanding (as applicable).

Registration Statement ” means any registration statement of the Company which covers any of the Registrable Securities pursuant to any of the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all material incorporated by reference in such registration statement.

Required Holders ” shall have the meaning assigned to such term in Section 2(a).

Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

2.                   Demand Registration .

(a)                 Request for Registration .  Subject to the provisions of Section 2(b), at any time from and after sixty (60) days from the date hereof, one or more Holders holding in the aggregate at least 25% of the outstanding Registrable Securities (the “ Required Holders ”) may make a written request to the Company for registration under and in accordance with the provisions of the Securities Act of the resale of Registrable Securities held by such Holder or Holders (a “ Demand Registration ”).  The Company shall, within five (5) Business Days after receipt of such request, give written notice (the “ Notice ”) of such request to all other Holders known to the Company and will include in such registration all Registrable Securities with respect to which the Company receives written requests for inclusion therein within twenty (20) Business Days after it gives the Notice to the applicable Holder.  Unless the Holder or Holders demanding the Demand Registration shall agree in writing, no other party, including the

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Company (but excluding another Holder of Registrable Securities that requests inclusion in accordance with the preceding sentence) shall be permitted to offer securities under any such Demand Registration.  Notwithstanding the foregoing, if the Company shall furnish to the Holder or Holders requesting a registration pursuant to this Section 2 a certificate signed by the Chief Executive Officer of the Company stating that, in the good faith judgment of the Board of Directors of the Company, it would be materially detrimental to the Company and its shareholders for such registration statement to either become effective or remain effective for as long as such registration statement would otherwise be required to remain effective, because (i) a material acquisition or disposition by the Company, a Company reorganization or similar transaction is being negotiated, or (ii) such action would require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential, the Company shall have the right to defer such filing for a period of not more than ninety (90) days; provided , however , that, without the prior written consent of Investor, the Company may not utilize this right more than once in any twelve (12) month period.

(b)                Number of Registrations . Notwithstanding any other provision of this Section 2, the Company shall not be required to effect more than one (1) Demand Registration regardless of the Person or Persons making the demand.  The Company shall not be deemed to have effected a Demand Registration unless and until such Demand Registration is declared effective by the Commission.  For purposes of this Section 2, a Registration Statement shall not be counted as a Demand Registration if, as a result of an exercise of the underwriters’ cut-back provisions, less than 75% of the total number of Registrable Securities that the Holders have requested to be included in such Registration Statement are so included.

(c)                 Priority on Demand Registration .  If the Demand Registration is an underwritten offering and the managing underwriter or underwriters advise the Company in writing that in its or their opinion the number of Registrable Securities proposed to be sold in such Demand Registration exceeds the number of securities which can be sold in such offering without a material adverse effect on such offering, the Company will include in such registration only the number of securities which, in the opinion of such underwriter or underwriters, can be sold, selected pro rata (based on the number of shares requested to be included) among the Holders which have requested shares to be included in such Demand Registration pursuant to this Section 2; provided , that any securities that the Required Holders have agreed may be included in such Demand Registration by the Company or any security holder other than a Holder shall be cut back first.

(d)                Selection of Underwriters and Counsel .  If any Demand Registration is an underwritten offering, the Required Holders will select the investment banker or bankers and manager or managers to administer the offering and one counsel to the sellers of such Registrable Securities in such offering and the right of any Holder to registration shall be conditioned upon such Holder’s participation in such underwriting; provided, however , that such investment bankers and managers be of nationally recognized standing and reasonably acceptable to the Company.  Subject to the provisions of Section 6, the Company shall pay the reasonable fees and expenses of one such counsel to the sellers of such Registrable Securities incurred in connection with reviewing and otherwise acting in connection with the Registration Statement relating to such underwritten public offering.  If any Holder who has requested inclusion of its Registrable Securities in such Registration Statement as provided above

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disapproves of the terms of the underwriting or otherwise elects not to participate in such underwriting, such Holder shall provide written notice to the Company that the Holder is not participating in such underwriting and that its Registrable Securities shall not be included in such Registration Statement; provided , that an election by such Holder shall not affect the status of such Registration Statement as a Demand Registration.

(e)                 Underwriting Agreement .  In connection with any Demand Registration under this Section 2, if so requested by the Required Holders, the Company shall enter into an underwriting agreement with one or more underwriters selected by the Required Holders having terms and conditions customary for such agreements.

3.                   Piggyback Registration Rights .

(a)                 If the Company at any time or from time to time subsequent to the date hereof proposes to register the offer and sale of any equity securities under the Securities Act either for its own account or the account of any selling security holders that are not Holders (other than (i) a registration statement on Forms S-4 or S-8 or any successor or similar forms or (ii) a registration on any form that does not permit secondary sales), it will give written notice to each of the Holders of its intention at least ten (10) days in advance of the filing of any registration statement with respect thereto. Upon the written request of a Holder given within fifteen (15) days after receipt of such notice, the Company, subject to Section 3(b), will use commercially reasonable efforts to include in such registration, and in any underwriting involved therein, all the Registrable Securities included in such request (“ Piggyback Securities ”).  Notwithstanding the foregoing, (x) the obligation of the Company to include Piggyback Securities in any registration contemplated by this Section 3(a) shall cease and be terminated in the event the Company discontinues the applicable registration at any time prior to the relevant effective date of registration in connection therewith, and (y) if the Company shall furnish to the Holder or Holders requesting a registration pursuant to this Section 3(a) a certificate signed by the Chief Executive Officer of the Company stating that, in the good faith judgment of the Board of Directors of the Company, it would be materially detrimental to the Company and its shareholders for such registration statement to either become effective or remain effective for as long as such registration statement would otherwise be required to remain effective because (i) a material acquisition or disposition by the Company, a Company reorganization or similar transaction is being negotiated, (ii) such action would require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential or (iii) such action would render the Company unable to comply with the requirements under the Securities Act or Exchange Act, the Company shall have the right to both defer such filing for a period of not more than ninety (90) days and terminate or withdraw registration in its entirety.

(b)                Underwritten Offerings .

(i)                  The right of any Holder to registration pursuant to this Section 3 shall be conditioned upon the participation by such Holder in the underwriting arrangements specified by the Company in connection with such registration and the inclusion of the Registrable Securities of such Holder in such underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall (together with the Company) enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting by the Company and take all other actions, and deliver such opinions and certifications, as may be reasonably requested by such managing underwriter or underwriters.

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(ii)                Notwithstanding any other provision of this Section 3, if the managing underwriter or underwriters with respect to such underwritten offering advise the Company in writing that marketing factors require a limitation of the number of shares of Common Stock to be underwritten, the Company may limit the number of Registrable Securities to be included in such registration in accordance with the opinion of such underwriter(s).  The Company shall so advise all Holders distributing Registrable Securities through such underwriting, and there shall be excluded from such registration and underwriting, to the extent necessary to satisfy such limitation, first shares held by the Holders and, thereafter, to the extent necessary, shares that the Company wishes to register for its own account.  As among the Holders as a group, the number of Registrable Securities that may be included in the registration and underwriting shall be allocated in proportion, as nearly as practicable, to the respective amounts of applicable Registrable Securities (determined without regard to any requirement of a request to be included in such registration) held by all Holders at the time of filing the Registration Statement. To facilitate the allocation of shares in accordance with the above provisions, the Company may round the number of shares allocated to any Holder to the nearest 100 shares. 

4.                   Company Obligations .  If and whenever the Company is required by the provisions of this Agreement to effect a registration of Registrable Securities under the Securities Act, the Company shall promptly:

(a)                 Prepare and file with the Commission a Registration Statement on any form that may be utilized by the Company and that shall permit the disposition of the Registrable Securities in accordance with the intended method or methods of disposition thereof, and shall use its commercially reasonable efforts to cause such Registration Statement to become and remain continually effective (subject to the delivery of a certificate of the Chief Executive Officer of the Company pursuant to Sections 2(a) and 3(a) hereof) until the earlier of (i) such time as all of the Registrable Securities covered by such Registration Statement have been sold pursuant to such Registration Statement or Rule 144 under the Securities Act, (ii) such time as all the Registrable Securities covered by such Registration Statement are eligible to be resold pursuant to Rule 144 under the Securities Act without compliance with the volume or manner of sale requirements thereof, and (iii) the termination of this Agreement pursuant to Section 9 ;

(b)                Prepare and file with the Commission such amendments and supplements to such Registration Statement and the Prospectus contained therein as may be necessary to keep such Registration Statement effective for the time periods contemplated by Section 4(a) and such Registration Statement and Prospectus accurate and complete in all material respects during such period (including as may be necessary to correct any statements or omissions in such Registration Statement, Prospectus or any other Prospectus then in effect if any relevant event has occurred);

 

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(c)                 Furnish to each Participant copies of the Registration Statement and Prospectus therein, or amendments or supplements thereto, in such quantities as they may reasonably request;

(d)                Use commercially reasonable efforts to register or qualify the Registrable Securities to be included in a Registration Statement under the state securities or blue sky laws of such jurisdictions within the United States of America as such Participants may reasonably request; provided , that the Company shall not be required to qualify to do business, subject itself to taxation or consent to general service of process in any such state or jurisdiction;

(e)                 Notify the Participants in such registration, promptly after it shall receive notice thereof, of the date and time when such Registration Statement and each post-effective amendment thereto has become effective or a supplement to any Prospectus forming a part of such Registration Statement has been filed;

(f)                 To the extent permitted by law, notify the Participants in such registration promptly of any request by the Commission for the amending or supplementing of such Registration Statement or Prospectus or for additional information;

(g)                To the extent permitted by law, promptly notify the Participants in such registration of the filing of such amendments or supplements to a Registration Statement or Prospectus as may be necessary to correct any statements or omissions if any event has occurred as the result of which any such Registration Statement, Prospectus or any other Prospectus then in effect includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances then existing, not misleading;

(h)                To the extent permitted by law, advise the Participants in such registration, promptly after it shall receive notice or obtain knowledge thereof, of (i) the issuance of any stop order by the Commission suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for that purpose and promptly use its commercially reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued, or (ii) any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose;

(i)                  Otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission;

(j)                  Use its commercially reasonable efforts to obtain from its independent certified public accountants “cold comfort” letters in customary form and at customary times and covering matters of the type customarily covered by cold comfort letters, as may be requested by any managing underwriter of a registration;

(k)                Use its commercially reasonable efforts to obtain from its counsel an opinion or opinions in customary form, as may be requested by any managing underwriter of a registration;

 

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(l)                  Provide a transfer agent and registrar (which may be the same entity) for such Registrable Securities not later than the effective date of such Registration Statement; 

(m)              In the event of any underwritten public offering, perform its obligations under any underwriting agreement that it has entered into with the managing underwriter;

(n)                Cause all such Registrable Securities to be listed or accepted for quotation on any national securities exchange or automated quotation system on which shares of the Common Stock are then listed or quoted; and

(o)                Notify all Participants to such effect in the event that, in the judgment of the Company, it is advisable to suspend use of a Prospectus included in a Registration Statement due to (i) pending material developments or other events that have not yet been publicly disclosed and as to which the Company believes public disclosure would be materially detrimental to the Company, or (ii) the Prospectus containing an untrue statement of a material fact or omitting to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading.  Upon receipt of such notice, each such Participant shall immediately discontinue any sales of Registrable Securities pursuant to such Registration Statement until such Participant has received copies of a supplemented or amended Prospectus or until such Participant is advised in writing by the Company that the then current Prospectus may be used and has received copies of any amended Prospectus or supplements to the Prospectus.

5.                   Holder Obligations .  Each Holder agrees as follows:

(a)                 Upon making a request pursuant to Section 2 or 3 hereof, to specify the number of Registrable Securities to be included in a Registration Statement on its behalf and the intended method of distribution thereof.

(b)                To the extent its Registrable Securities are to be included in any registration pursuant to this Agreement, to furnish to the Company, in writing, such information regarding such Holder and the distribution of Registrable Securities proposed by such Holder as the Company may from time to time reasonably request in writing and as shall be required in connection with such registration or qualification of such Registrable Securities under any applicable securities law.  Each Holder agrees to notify the Company as promptly as practicable of any inaccuracy or change in information such Holder has previously furnished to the Company.

(c)                 Upon receipt of any notice from the Company of the happening of any event of a kind described in Section 4(g), (h) or (o), to immediately discontinue the disposition of Registrable Securities pursuant to any Registration Statement covering such Registrable Securities until such Holder’s receipt of copies of any necessary amendment or supplement to such Registration Statement or the Prospectus contained therein or its receipt of notice from the Company that no such amendment or supplement is required.

(d)                To cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any Registration Statements in which Registrable Securities held by such Holder will be included.

 

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(e)                 To comply with all applicable laws related to a registration, the filing of a Registration Statement and the offering and sale of Registrable Securities and all applicable rules and regulations of governmental authorities in connection therewith (including without limitation the Securities Act, the Exchange Act, applicable state securities laws and the rules and regulations promulgated by applicable state authorities).

6.                   Expenses of Registration

(a)                 Subject to Section 6(b), the following expenses of the Company and the Holders in complying with their obligations pursuant to this Agreement and in connection with each registration of Registrable Securities shall be borne by the Company:

(i)                  all registration, filing, qualification and listing fees of the Company;

(ii)                fees and expenses of the Company’s compliance with all securities or blue sky laws (including fees and disbursements of counsel for the Company in connection with blue sky qualifications of the Registrable Securities);

(iii)              printing, messenger, telephone and delivery expenses for documents created by or to be delivered by the Company pursuant to this Agreement;

(iv)              fees and disbursements of counsel for the Company and its independent auditors; and

(v)                fees and disbursements of one counsel to the selling Holders up to a maximum of $30,000.

(b)                All underwriting discounts, selling and brokerage commissions or other compensation paid to underwriters or other agents or brokers to effect the sale of Registrable Securities and other expenses in connection with a registration hereunder not required to be paid by the Company pursuant to Section 6(a) shall be borne by the Holders on whose behalf such Registrable Securities are included in a Registration Statement in proportion to the number of Registrable Securities included in such Registration Statement on behalf of each such Holder.

(c)                 If the Required Holders request a Demand Registration and thereafter voluntarily withdraw such request, the Required Holders shall bear the expenses of the Company referred to in Section 6(a) in connection with such request (and such request and any actions by the Company pursuant thereto shall not be counted as the Demand Registration to which the Holders are entitled under this Agreement if the request to withdraw is received by the Company within ten (10) Business Days of the initial request, unless, by notice to the Company, the Required Holders elect to have such request count as the Demand Registration to which the Holders are entitled hereunder, in which case all of the Company’s expenses in connection with such request shall be borne by the Company).

 

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7.                   Indemnification and Contribution .

(a)                 Indemnification by the Company . Whenever a Registration Statement is filed hereunder, the Company will (except as to matters covered by Section 7(b)) indemnify and hold harmless each Participant in the registration, each of their respective officers, directors, members, managers, partners and employees, and each Person, if any, who controls any such Participant within the meaning of the Securities Act or the Exchange Act (collectively, the “ Participant Indemnitees ” and, individually, a “ Participant Indemnitee ”), against any and all losses, claims, damages, liabilities, costs and expenses (including reasonable attorneys’ fees), joint or several, to which such Participant Indemnitees, or any of them, may become subject under the Securities Act, the Exchange Act, state securities or blue sky laws or otherwise, insofar as such losses, claims, damages, liabilities, cost or expenses (or actions in respect thereof) arise out of or are based upon (i) any untrue statement of any material fact contained in such Registration Statement, or Prospectus contained therein, or any amendment or supplement thereto, or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus, in light of the circumstances under which they were made) not misleading, except insofar as such losses, claims, damages, liabilities, costs or expenses are caused by an untrue statement or omission or alleged untrue statement or omission that is made in reliance upon and in conformity with information relating to any of the Holders furnished in writing to the Company by any of the Holders, or (ii) any violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of any of its obligations under this Agreement or with the Registration Statement or the offering contemplated thereby.

(b)                Indemnification by Participants .  Each Participant in such registration will, jointly and severally, indemnify and hold harmless the Company, each of its directors, each of its officers (collectively, the “ Company Indemnitees ” and, individually, a “ Company Indemnitee ”), each Person, if any, who controls any such Participant within the meaning of the Securities Act or the Exchange Act and each other Participant Indemnitee against any and all losses, claims, damage, liabilities, costs and expenses (including reasonable attorneys’ fees), joint or several, to which any of the Company Indemnitees or the other Participant Indemnitees may become subject under the Securities Act, the Exchange Act, state securities or Blue Sky laws or otherwise, insofar as such losses, claims, damages, liabilities, costs or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement of any material fact contained in such Registration Statement, or Prospectus contained therein, or any amendment or supplement thereto, or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus, in light of the circumstances under which they were made) not misleading, but only if, and to the extent that, such statement or omission is made in reliance on and in conformity with written information furnished to the Company by such Participant for inclusion in such Registration Statement or Prospectus.

(c)                 Indemnification Procedures .  Reasonably promptly, and in each instance within thirty (30) days after receipt by a Participant Indemnitee or a Company Indemnitee (collectively, “ Indemnitees ” and, individually, an “ Indemnitee ”) of notice of the commencement of any action or commencement of a claim which may result in indemnity pursuant to Section 7(a) or (b), such Indemnitee will, if a claim in respect thereof is to be made

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against the indemnifying party under Section 7(a) or (b), notify the indemnifying party in writing of the commencement thereof, but any failure or delay in notifying the indemnifying party will not relieve the indemnifying party from any liability which it may have to any Indemnitee hereunder unless the indemnifying party is materially prejudiced by such delay.  The indemnifying party shall be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnitee, after notice from the indemnifying party to such Indemnitee of its election to assume the defense thereof.  Following any such assumption of the defense, the indemnifying party shall not be liable to such Indemnitee for any legal or other expenses subsequently incurred by such Indemnitee in connection with the defense thereof. The Indemnitee shall have the right to employ one counsel per jurisdiction to represent such Indemnitee in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Indemnitee unless, in the reasonable judgment of such Indemnitee, it is advisable for such party to be represented by separate counsel because, in the reasonable discretion of separate counsel, separate defenses are available, or because a conflict of interest exists between such Indemnitee and indemnifying party in respect of such claim, or because the indemnifying party shall have failed promptly to assume the defense of such action and to reasonably defend such action, and in any such limited event the reasonable fees and expenses of such separate counsel shall be paid by the indemnifying party.  Notwithstanding the foregoing, if the Company is an Indemnitee, the Company shall designate the one counsel, and in all other circumstances, the one counsel shall be designated by a majority in interest based upon the Registrable Securities of the Indemnitees.  No indemnifying party may settle or compromise, or consent to the entry of any judgment with respect to, any claim without the prior written consent of the Indemnitee (not unreasonably withheld, delayed or conditioned), unless such settlement, compromise or judgment includes a full and unconditional release of such Indemnitee from any and all liability in respect of such claim and involves solely the payment of monetary damages.  No Indemnitee may settle or compromise, or consent to the entry of any judgment with respect to, any claim without the prior written consent of the indemnifying party, not to be unreasonably withheld, conditioned or delayed.

(d)                Contribution .  If for any reason the foregoing indemnity is held by a court of competent jurisdiction to be unavailable, then the indemnifying party shall contribute to the amount paid or payable by the Indemnitee as a result of such losses, claims, damages, liabilities, costs or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party on the one hand and the Indemnitee on the other from the registration or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits received by the indemnifying party on the one hand and the Indemnitee on the other but also the relative fault of the indemnifying party and the Indemnitee as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by or on behalf of the indemnifying party or the Indemnitee and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission.  The Company and the Participants agree that it would not be just and equitable if contribution pursuant to this Section 7(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations described above.  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.  Notwithstanding anything to the contrary contained herein, no Participant shall be required to contribute any amount in excess of the net proceeds actually received by such Participant from its sale of Registrable Securities under the applicable Registration Statement and the Company shall be required to contribute any amount in excess of such proceeds. 

 

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(e)                 The provisions of this Section 7 shall survive the completion of any offering of Registrable Securities and the termination of this Agreement.  The indemnity and contribution agreements contained in this Section 7 are in addition to any liability that an indemnifying party may have to an Indemnitee; provided , that in no event shall an Indemnitee be entitled to recover from an indemnifying party more than once with respect to any specific loss, claim, damage, liability, cost or expense (including reasonable attorneys’ fees) imposed on, sustained, incurred or suffered by, or asserted against the Indemnitee.

8.                   Reports Under the Exchange Act .  With a view to making available to the Holders the benefits of Rule 144 under the Securities Act and any other rule or regulation of the Commission that may at any time permit a Holder to sell the Registrable Securities to the public without registration, the Company agrees to:

(i)                  make and keep current public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the date hereof;

(ii)                file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

(iii)              furnish to the Holders, so long as the Holder owns any Registrable Securities, forthwith upon request by the Majority Holders, (i) a written statement as to its compliance with the reporting requirements of Rule 144 under the Securities Act and of the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information in the possession of or reasonably obtainable by the Company as a Holder may reasonably request in availing itself of any rule or regulation of the Commission which permits the Holder to sell Registrable Securities without registration or pursuant to such form.

9.                   Termination .  This Agreement shall terminate and shall be of no further force or effect on the earlier of (a) the fifth (5th) anniversary of the date hereof, or (b) that day upon which a single Holder, together with its Affiliates, fails to “beneficially own” (as set forth in Rule 13d-3 and Rule 13d-5(b)(l) of the 1934 Act) ten percent (10%) or more of the shares of Common Stock then outstanding.

10.               Assignment

(a)                 The rights to cause the Company to register Registrable Securities pursuant to this Agreement may be assigned, in whole or in part, by the Investor (at Investor’s sole discretion and without the consent of the Company) to one or more transferees (a “ Subsequent Transferee ”); provided , that to preserve and maintain such rights to cause the Company to register Registrable Securities, any such Subsequent Transferee must (i) deliver to the Company a written instrument by which such Subsequent Transferee agrees to be bound by the obligations imposed on Holders under this Agreement to the same extent as if such Subsequent Transferee was a party hereto and (ii) deliver to the Company a written instrument setting forth full notice and contact information for such Subsequent Transferee, including mailing address, email address, facsimile number and telephone number (“ Contact Information ”); provided , further , that any further assignment of this Agreement or the registration rights contained herein by such Subsequent Transferee to another transferee shall require the prior written consent of the Company.

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(b)                In the event a Subsequent Transferee fails to provide the Company with the Contact Information contemplated by Section 10(a), the Company shall have no obligation to provide such Subsequent Transferee with any notice, information, document or deliverable to be mailed or delivered to Holders pursuant to this Agreement unless the Company otherwise has actual knowledge of the Subsequent Transferee’s notice or contact information.

11.               Delay of Registration .  No Holder shall have any right to take any action to restrain, enjoin or otherwise delay any registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Agreement.

12.               Amendment and Modification; Waiver .  This Agreement may be amended, modified or supplemented, and any provision herein may be waived, in any respect only by written agreement by the Company and the Majority Holders; provided , however , that no amendment or waiver that adversely affects a Holder in its capacity as a holder of Registrable Securities without similarly affecting all Holders of Registrable Securities shall be effective without such adversely affected Holder’s approval.  Any amendment to this Agreement adopted in accordance with the provisions of this Section shall be binding on all of the parties to this Agreement.

13.               Governing Law; Jurisdiction; Jury Trial .  All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

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14.               Invalidity of Provision .  If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

15.               Notices .  All notices, requests, demands, instructions or other documents or communications to be given under this Agreement shall be given in accordance with the Securities Purchase Agreement.  With respect to any Holder that is not a party to the Securities Purchase Agreement, notice shall be given to such Holder in accordance with Section 8(f) of the Securities Purchase Agreement at such Holder’s address as delivered to the Company pursuant to Section 10(a).  The Company shall have no obligation to give notice to any address of a Holder other than as set forth in the Securities Purchase Agreement (in the case of Investor) or the notice delivered to the Company pursuant to Section 10(a).

16.               Counterparts .  This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile, electronic or .pdf signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile, electronic or .pdf signature.

17.               Headings .  The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

18.               Entire Agreement .  This Agreement, including any exhibits and schedules hereto and the documents and instruments referred to herein and therein, embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein.  There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein.  This Agreement supersedes all prior agreements and understandings among the parties with respect to such subject matter.

 

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19.               Limitation on Subsequent Registration Rights .  After the date of this Agreement, the Company shall not, without the prior written consent of the Majority Holders, enter into any agreement with any holder or prospective holder of any securities of the Company that would grant such holder registration rights senior to or pari passu with the registration rights of the Holders as provided in this Agreement.

20.               Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. The Investor may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Company, except as contemplated by Section 10.  The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Holder.

[Signatures begin on the following page.]

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF , this Agreement has been signed by each of the parties hereto as of the date first above written.

 

 

 

MECHANICAL TECHNOLOGY, INCORPORATED

 

 

 

 

 

By:

 

 

 

Name:

Kevin G. Lynch

 

 

Title:

Chief Executive Officer

 

 

 

BROOKSTONE PARTNERS ACQUISITION XXIV, LLC

 

 

 

By:

BP XXIV Flow, LLC

its Managing Member

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

[ Signature Page to Registration Rights Agreement ]

Exhibit 10.24

OPTION EXERCISE AND STOCK TRANSFER RESTRICTION AGREEMENT

This OPTION EXERCISE AND STOCK TRANSFER RESTRICTION AGREEMENT (this “ Agreement ”), dated as of October 21, 2016 (“ Effective Date ”), is entered into by and between Mechanical Technology, Incorporated (the “ Company ”) and [________________], an individual residing at [_______________] who currently serves as a [director][executive officer] of the Company (the “ Insider ”).  The Company and the Insider are sometimes referred to herein, individually, as a “ Party ” and, collectively, as the “ Parties ”.

WHEREAS

A.        Pursuant to that certain Securities Purchase Agreement by and between the Company and Brookstone Partners Acquisition XXIV, LLC (the “ Buyer ”), dated even date herewith (the “ Securities Purchase Agreement ”), the Company has agreed, upon the terms and subject to the conditions of the Securities Purchase Agreement, to issue and sell to the Buyer at the Closing shares (the “ Common Shares ”) of the Company’s common stock, par value $0.01 per share (the “ Common Stock ”), pursuant to the terms of the Securities Purchase Agreement.  Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Securities Purchase Agreement.

B.        The Insider currently owns vested and unvested options to purchase Common Stock, in the amount set forth opposite his name on Schedule A (collectively, with the other options owned by the Other Insiders (as defined below), the “ Options ”), pursuant to one or more of the (i) Mechanical Technology, Incorporated Amended and Restated 2006 Equity Incentive Plan, effective June 30, 2011 (the “ 2006 Plan ”), (ii) Mechanical Technology, Incorporated Amended and Restated 2012 Equity Incentive Plan, effective June 14, 2012 (the “ 2012 Plan ”) and (iii) Mechanical Technology, Incorporated 2014 Equity Incentive Plan (the “ 2014 Plan ” and, together with the 2006 Plan and 2012 Plan, the “ Plans ”).

C.        The other individuals identified on Schedule A hereto are entering into agreements substantially similar to this Agreement simultaneously herewith and shall collectively, for such period of time as such substantially similar agreement is binding on and not terminated with respect to such individual, be referred to as the “ Other Insiders ”.

D.        The issuance of the Common Shares to the Buyer pursuant to the terms of the Securities Purchase Agreement will cause the acceleration of the vesting of certain Options pursuant to change in control provisions contained in certain of the Company’s Plans or other agreements or arrangements with the Insiders.

E.         Either of the exercise of Options or the purchase or sale of equity securities of the Company by one or more of the Insider or the Other Insiders could cause the Company to experience an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986, as amended, or any successor statute (the “ Code ”), which could jeopardize the Company’s ability to utilize its existing net operating loss carryovers, capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers, foreign tax credit carryovers, and any net unrealized “built-in loss” within the meaning of Sections 382 and 383 of the Code, or any successor or replacement provisions and the Treasury Regulation promulgated thereunder or any other tax attribute the benefit of which is subject to possible limitation under Section 382 of the Code (collectively, “ NOLs ”). 

 


 

 

F.         In furtherance of preserving the Company’s ability to utilize its NOLs, the Insider believes it would be in the best interests of the Company for the Insider to agree to limitations on his ability to exercise his Options and/or purchase equity securities of the Company as set forth herein.

  NOW, THEREFORE , the Company and the Insider hereby agree as follows:

1.                   Restrictions on Option Exercise .  Subject to Section 3(c) (Special Procedure for Exercising Options After Termination of Service) and Section 4(f) (Termination), the Insider hereby agrees to comply with the following limitations on his ability to exercise all Options he owns:

(a)                 Limitation on Option Exercise for 2016 .  During 2016, Options representing no more than 125,000 shares of Common Stock (the “ 2016 Maximum ”) will be exercised collectively by the Insider and the Other Insiders.  With respect to the Insider, individually, the Insider will be permitted to exercise during 2016 that number of Options that is the product of (i) the 2016 Maximum, multiplied by (ii) that number which is the quotient of (A) the number of vested, but unexercised, Options held by the Insider as of October 21, 2016, divided by (B) the number of vested, but unexercised, Options held by the Insider and all Other Insiders as of October 21, 2016 (the “ 2016 Insider Option Allocation ”); provided , that, during 2016, the Insider will be entitled to exercise his Options in excess of the 2016 Insider Option Allocation to the extent of Option Headroom and in compliance with Section 3(a) hereof.  Any Options exercised during 2016 will be exercised by the Insider solely in compliance with the procedures and authorizations contemplated by Sections 3(a) and 3(c) , as applicable.  The number of shares of Common Stock representing the difference between the 2016 Maximum and the number of shares of Common Stock actually issued to the Insider and the Other Insiders upon the exercise of Options in 2016 is referred to herein as the “ 2016 Balance ”. 

(b)                Limitation on Option Exercise for 2017 .  During 2017, Options representing no more than the sum of (i) 500,000 shares of Common Stock, plus (ii) the 2016 Balance (the “ 2017 Maximum ”) will be exercised collectively by the Insider and the Other Insiders.  With respect to the Insider, individually, the Insider will be permitted to exercise during 2017 that number of Options that is the product of (i) the 2017 Maximum, multiplied by (ii) that number which is the quotient of (A) the number of vested, but unexercised, Options held by the Insider as of January 1, 2017, divided by (B) the number of vested, but unexercised, Options held by the Insider and all Other Insiders as of January 1, 2017 (the “ 2017 Insider Option Allocation ”); provided , that, during 2017, the Insider will be entitled to exercise his Options in excess of the 2017 Insider Option Allocation to the extent of Option Headroom and in compliance with Section 3(a) hereof.  Any Options exercised during 2017 will be exercised by the Insider solely in compliance with the procedures and authorizations contemplated by Sections 3(a) and 3(c) , as applicable.  The number of shares of Common Stock representing the difference between the 2017 Maximum and the number of shares of Common Stock actually issued to the Insider and the Other Insiders upon the exercise of Options in 2017 is referred to herein as the “ 2017 Balance ”. 

 

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(c)                 Limitation on Option Exercise for 2018 .  During 2018, Options representing no more than the sum of (i) 500,000 shares of Common Stock, plus (ii) the 2017 Balance (the “ 2018 Maximum ”) will be exercised collectively by the Insider and the Other Insiders.  With respect to the Insider, individually, the Insider will be permitted to exercise during 2018 that number of Options that is the product of (i) the 2018 Maximum, multiplied by (ii) that number which is the quotient of (A) the number of vested, but unexercised, Options held by the Insider as of January 1, 2018, divided by (B) the number of vested, but unexercised, Options held by the Insider and all Other Insiders as of January 1, 2018 (the “ 2018 Insider Option Allocation ”); provided , that, during 2018, the Insider will be entitled to exercise his Options in excess of the 2018 Insider Option Allocation to the extent of Option Headroom and in compliance with Section 3(a) hereof.  Any Options exercised during 2018 will be exercised by the Insider solely in compliance with the procedures and authorizations contemplated by Sections 3(a) and 3(c) , as applicable.  The number of shares of Common Stock representing the difference between the 2018 Maximum and the number of shares of Common Stock actually issued to the Insider and the Other Insiders upon the exercise of Options in 2018 is referred to herein as the “ 2018 Balance ”. 

(d)                Limitation on Option Exercise for 2019 .  During 2019, Options representing no more than the sum of (i) 500,000 shares of Common Stock, plus (ii) the 2018 Balance (the “ 2019 Maximum ”) will be exercised collectively by the Insider and all Other Insiders.  With respect to the Insider, individually, the Insider will be permitted to exercise during 2019 that number of Options that is the product of (i) the 2019 Maximum, multiplied by (ii) that number which is the quotient of (A) the number of vested, but unexercised, Options held by the Insider as of January 1, 2019, divided by (B) the number of vested, but unexercised, Options held by the Insider and all Other Insiders as of January 1, 2019 (the “ 2019 Insider Option Allocation ”); provided , that, during 2019, the Insider will be entitled to exercise his Options in excess of the 2019 Insider Option Allocation to the extent of Option Headroom and in compliance with Section 3(a) hereof.  Any Options exercised during 2019 will be exercised by the Insider solely in compliance with the procedures and authorizations contemplated by Sections 3(a) and 3(c) , as applicable.

(e)                 Adjustment to Limitations .  The Insider acknowledges that the specified limitations set forth in subparagraphs (a) through (d) above are intended to ensure the exercise of Options will not jeopardize the Company’s ability to utilize its NOLs based on calculations determined as of the date hereof.  Accordingly, notwithstanding anything to the contrary contained herein, the 2016 Maximum, 2016 Balance, 2017 Maximum, 2017 Balance, 2018 Maximum, 2018 Balance and 2019 Maximum may be adjusted internally by the Company, at its sole, good faith discretion, both (x) on a continuous, ongoing basis and (y) following the exercise of Options or purchase/sale of Company equity by the Insider or an Other Insider, solely in order to ensure the exercise of Options by the Insider or Other Insiders will not jeopardize the Company’s ability to utilize its NOLs at the time of any given exercise of Options.  Any such adjustment may take into consideration, among other things, future issuances of securities of the Company, changes to the Company’s capital structure, adjustments, modifications or refinements to the Company’s calculation of NOLs under Section 382 of the Code and changes to applicable provisions of the Code. 

 

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2.                   Restrictions on Stock Purchases .  Prior to purchasing any equity securities of the Company, the Insider covenants and agrees to obtain the written consent of the Company prior to any such purchase pursuant to the procedures and authorizations contemplated by Section 3(b) .  No transfer of equity of the Company in violation of this Section 2 shall be made or recorded on the books of the Company and any such transfer shall be void ab initio and of no force or effect and the purported transferee shall not be deemed to be a shareholder or other equityholder of the Company and shall not be entitled to receive a new stock certificate or any dividends or other distributions on or with respect to applicable shares of stock or other equity of the Company.

3.                   Procedures for Exercise of Options & Purchase of Stock .

(a)                 Procedure for Exercising Options

(i)                  Commencing on January 1 st and terminating at 11:59pm on September 30 th of the fiscal year of exercise, the Insider will be permitted to (A) promptly exercise Options or (B) reserve Options for exercise at a later time during the applicable fiscal year, up to an aggregate amount of his individual 2016 Insider Option Allocation, 2017 Insider Option Allocation, 2018 Insider Option Allocation or 2019 Insider Option Allocation, as applicable, by providing written notice (“ Insider Option Initial Exercise Notice ”) to the Company.  All Insider Option Initial Exercise Notices must specify the number and type of Options the Insider wishes to exercise and desired date for exercise and must be delivered to the Chief Financial Officer of the Company (the “ CFO ”).  The CFO shall promptly consult with the audit committee of the board of directors to obtain the audit committee’s authorization to permit such exercise based on the limitations set forth in Section 1 .  Following receipt of the audit committee’s authorization, the CFO shall promptly, and in all instances within fifteen (15) business days of receipt of the Insider Option Initial Exercise Notice, advise the Insider in writing as to the maximum number of shares of Common Stock into which his Options may be exercised pursuant to such notice under the limitations set forth in Section 1 and the exercise of such Options will be effected either (x) concurrently therewith, in the case of an immediate exercise of Options pursuant to clause (A) of this Section 3(a)(i) , or (y) upon the designated date of exercise, in the case of exercise of Options at a later date pursuant to clause (B) of this Section 3(a)(i) .

(ii)                By close of business on October 15 th of the applicable fiscal year of the Company, the Company shall provide notice (“ Option Headroom Notice ”) to the Insider of (A) that number of Options that is the currently binding 2016 Maximum, 2017 Maximum, 2018 Maximum or 2019 Maximum, as applicable, (B) the aggregate number of Options both exercised pursuant to Section 3(a)(i) and to be exercised pursuant to clause (B) of Section 3(a)(i) by the Insider and all Other Insiders during the applicable Company fiscal year and (C) the difference between the numbers referred to in clauses (A) and (B) of this sentence (such difference, the “ Option Headroom ”).  Following receipt of the Option Headroom Notice and until December 20 th of the applicable fiscal year, the Insider may provide notice to the Company (“ Insider Option Headroom Exercise Notice ”) specifying (x) the number and type of Options the Insider wishes to exercise up to the total Option Headroom as calculated by the Company and (y) the desired date for exercise within the applicable fiscal year.  All Insider Option Headroom Exercise Notices must be delivered to the CFO.  The CFO shall collect Insider Option Headroom Exercise Notices in the order the Company receives properly completed and executed notices

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from the Insider and Other Insiders; provided , that, in the event it is known by the Company that the Insider or an Other Insider has died or suffered a disability (as defined within the applicable underlying Plan or stock option grant agreement), the Company, the Insider and all Other Insiders shall make reasonable provision to allow such dead or disabled Insider/Other Insider (including through an executor/representative) an opportunity to exercise with respect to the Option Headroom prior to all living, non-disabled Insider/Other Insiders.  Upon receipt of properly completed and executed notices, the CFO shall immediately consult with the audit committee of the board of directors to obtain the audit committee’s authorization to permit such exercise based on the limitations set forth in Section 1 and the restrictions on Option Headroom exercise in this Section 3(a)(ii) .  Following receipt of the audit committee’s authorization, the CFO shall promptly, and in all instances within fifteen (15) business days of receipt of the Insider Option Headroom Exercise Notice Requests by the CFO, advise the Insider in writing as to the maximum number of shares of Common Stock into which his Options may be exercised pursuant to the Insider Option Headroom Exercise Notice under the limitations on collective exercise by the Insider and all Other Insiders in Section 1 and restrictions on Option Headroom exercise in this Section 3(a)(ii) , and the exercise of such Options will be effected either (xx) concurrently therewith, in the case of an immediate exercise of Options pursuant to this Section 3(a)(ii) , or (yy) upon the designated date of exercise, in the case of exercise of Options at a later date pursuant to this Section 3(a)(ii) .

(b)                Procedure for Purchasing Stock .  Prior to purchasing any equity securities of the Company, the Insider shall send a notice of such purchase and request for consent (“ Purchase Notice ”) to the Company specifying (i) the number of shares of stock, convertible securities or other equity of the Company proposed to be purchased, (ii) the proposed purchase price for the same and (iii) the proposed closing date for the purchase of the equity securities at issue (which closing date shall be no later than sixty (60) days from the date of the Purchase Notice).  Purchase Notices must be delivered to the CFO.  The CFO shall promptly consult with the audit committee of the board of directors to obtain the audit committee’s authorization to permit such purchase based solely on preserving the Company’s ability to utilize its NOLs.  Following receipt of the audit committee’s authorization, the CFO shall promptly, and in all instances within fifteen (15) business days of receipt of the Purchase Notice, advise the Insider in writing as to the maximum number of equity securities of the Company which the Insider may purchase pursuant to the subject transaction so as to not jeopardize the Company’s ability to utilize its NOLs at the time of such purchase, which such notice shall constitute Company consent to the transfer (“ Company Stock Consent ”).  The Insider shall have sixty (60) days from receipt of the Company Stock Consent to purchase the applicable Company securities; provided , that, if the applicable Company securities are not purchased in such sixty (60) day time period, the subject Company securities may not be purchased by the Insider at a subsequent date until a new, additional Company Stock Consent is received by the Insider with respect thereto.

(c)                 Special Procedure for Exercising Options After Termination of Service .  Notwithstanding anything to the contrary contained in this Agreement and the Plans (including, without limitation, the Company’s standard stock option grant agreement and any reference to a delineated time period during which Options must be exercised post-termination from the Company), following the termination of the Insider’s service to the Company in his capacity as a director and/or executive officer of the Company, whether due to death, disability or cessation of employment/service, the Insider’s vested Options at the time of such termination will be exercisable until default expiration under the applicable Plan ( i.e. , ten (10) years from the date of grant), subject, for so long as this Agreement remains in effect pursuant to Section 4(f) , to the following limitations on exercise:

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(i)                  2016 Termination .  In the event of the termination of the Insider’s employment and/or service at any time between the Effective Date and the end of fiscal year 2016, the terms, conditions and mechanics with respect to the Insider’s exercise of his Options set forth in Exhibit A shall apply.

(ii)                2017 Termination .  In the event of the termination of the Insider’s employment and/or service at any time between January 1, 2017 and the end of fiscal year 2017, the terms, conditions and mechanics with respect to the Insider’s exercise of his Options set forth in Exhibit B shall apply.

(iii)              2018 Termination .  In the event of the termination of the Insider’s employment and/or service at any time between January 1, 2018 and the end of fiscal year 2018, the terms, conditions and mechanics with respect to the Insider’s exercise of his Options set forth in Exhibit C shall apply.

(iv)              2019 Termination .  In the event of the termination of the Insider’s employment and/or service at any time between January 1, 2019 and the end of fiscal year 2019, the terms, conditions and mechanics with respect to the Insider’s exercise of his Options set forth in Exhibit D shall apply.

(v)                Termination for Misconduct .  Notwithstanding anything else herein to the contrary, the Insider’s Options shall terminate in their entirety, regardless of whether such Options are vested, immediately upon:

(1)                If with respect to Options issued pursuant to the 2014 Plan,  the Insider’s discharge of employment or other service relationship for Cause (as defined in the 2014 Plan) or upon the Insider’s commission of any of the following acts during any period following the cessation of the Insider’s employment or other service relationship during which his Options otherwise would be exercisable: (A) fraud on or misappropriation or embezzlement of any funds or property of the Company or any affiliate or (B) breach by the Insider of any provision of any employment, non-disclosure, non-competition, non-solicitation, assignment of inventions or other similar agreement executed by the Insider for the benefit of the Company or any affiliate, as determined by the Administrator (as defined in the Insider’s option grant or applicable Plan), which determination will be conclusive; and

(2)                If with respect to Options issued pursuant to the 2006 Plan and 2012 Plan, upon the Company’s or any affiliates’ termination of the Insider’s service-providing relationship as a result of the Insider’s Gross Misconduct (as defined in the 2006 Plan or 2012 Plan, as applicable).

(d)                Acknowledgement Regarding Amendment of Plans and Stock Option Grant Agreement .  The Company and the Insider hereby acknowledge and agree that the Insider’s stock option grant agreements are being amended by this Agreement, and the terms of any Option granted under a Plan, as held by the Insider, are being modified by this Agreement to, subject to Section 3(c) , (x) remove all references to an expiration of the exercisability of Options within a special, delineated time period following the termination of service to or employment by the Company, and (y) provide that all vested Options are exercisable by the Insider until default expiration under the applicable Plan ( i.e. , ten (10) years from the date of grant).  In the event this Agreement is terminated pursuant to Section 4(f) , the limitations on exercise contemplated by clauses (i) through (v) of Section 3(c) shall terminate, but the exercisability of the Insider’s vested Options until default expiration under the applicable Plan and stock option agreement ( i.e. , ten (10) years from the date of grant) shall survive indefinitely.

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4.                   Miscellaneous .

(a)                 Representation of Insider .  The Insider hereby represents that the number of Options set forth opposite his name on Schedule A hereto represents all Options owned by him as of the date hereof.

(b)                Governing Law; Jurisdiction . All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.  Each Party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the County of Albany, State of New York, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.

(c)                 Counterparts . This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each Party and delivered to the other Party; provided that a facsimile, electronic or .pdf signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile, electronic or .pdf signature.

(d)                Severability . If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the Parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the Parties or the practical realization of the benefits that would otherwise be conferred upon the Parties. The Parties will endeavor, in good faith negotiations, to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

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(e)                 Entire Agreement; Amendments . This Agreement supersedes all other prior oral or written agreements between the Company and the Insider with respect to the matters discussed herein, and this Agreement, together with the Plans and any related stock option grant materials, contains the entire understanding of the Parties with respect to the matters covered herein.  No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Insider. No provisions hereto may be waived other than by an instrument in writing signed by the Party against whom enforcement is sought.

(f)                 Termination; Survival .  This Agreement, including the limitations and restrictions contained herein, shall terminate upon the earlier of (i) a unanimous, good faith determination by the Board of Directors of the Company that the exercise of all Options owned by the Insider and the Other Insiders would not adversely impact in a material respect the time period in which the Company could use the NOLs or limit or impair the availability to the Company of the NOLs and (ii) 12:01am on January 1, 2022; provided , that, notwithstanding any such termination, the terms and conditions of and amendment to the Insider’s stock option agreements and/or modification of the terms of any Option granted under the underlying Plans contemplated by Section 3(d) shall survive indefinitely.  Following the termination of this Agreement by reason of this Section 4(f) , the Insider may both freely exercise his Options during any exercise period contemplated by the Plans or any grant documentation with respect to Options granted to the Insider (including, without limitation, Section 4 of the Company’s standard stock option grant agreement) and freely purchase and sell Company equity.

(g)                Insider Release .  If the Insider exercises Options or purchases equity securities of the Company in compliance with the terms and conditions of this Agreement, the Company hereby releases and discharges the Insider from any and all claims, demands, damages, debts, liabilities, unpaid fees, amounts due, losses, costs, causes of action, expenses (including attorneys’ fees and costs) and obligations of any kind or nature whatsoever, whether known or unknown, suspected or unsuspected, asserted or unasserted, contingent or liquidated, past, present or future, which the Company then holds or could thereafter have, arising out of such Option exercise or such purchase or sale of Company securities causing the Company to experience an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986, or otherwise jeopardizing or adversely affecting the NOLs.

(h)                Assignment .  This Agreement and the rights and obligations hereunder may not be assigned or transferred by either Party without the prior written consent of the other Party and any attempt to do so will be void, except that the Insider may assign any and all of its rights, interests and obligations hereunder to any person or entity (including any executor of an estate) who succeeds to the Insider’s estate or property as a result of such Insider’s death, disability, legal incompetence or other similar reason.

(i)                  Option Grant Amendment; Continuity of Plans .  The terms and conditions of Sections 3(c) and (d) , and the applicable Exhibits referenced therein, shall be deemed to supersede and be an amendment to the terms and conditions of the Plans and the Insider’s applicable stock option grant agreements with respect to his Options, including, without

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limitation, the terms and conditions of such Plans and stock option grant agreements making reference to a delineated time period during which the Insider’s Options must be exercised post-termination from the Company.  In the event of a conflict or ambiguity between the amendment contemplated by this Agreement and the stock option grant agreements or underlying Plans of an Insider, the terms and conditions of this Agreement shall control.  Except as specifically provided for in this Agreement, no other changes, amendments or modifications are being made to or conditions or restrictions being placed upon the Insider with respect to any of the Plans or the Insider’s stock option grant materials or the exercise or vesting of any Options pursuant thereto.  Subject to the terms and conditions of this Agreement, the terms of the Plans and the rights and obligations of the parties thereunder shall remain in full force and all of such terms are hereby ratified and confirmed.

[Signature Pages Follow]

 

 

 

 

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IN WITNESS WHEREOF , the Insider and the Company have caused this Option Exercise and Stock Transfer Restriction Agreement to be duly executed as of the date first written above.

 

COMPANY:

 

 

 

MECHANICAL TECHNOLOGY, INCORPORATED

 

 

 

 

 

By:

 

 

 

Name:

Kevin G. Lynch

 

 

Title:

Chief Executive Officer

       
       
  INSIDER:    
 

_____________________________________

Name of Insider: ______________________

 

 

                                                                            

 

 

                                                                             

 

 

 

 

[ Signature Page to Option Exercise and Stock Transfer Restriction Agreement ]


 

 

Schedule A

Directors and Executive Officers

Name and Title

Number of Options

Frederick W. Jones,
Chief Financial Officer and Secretary

9,500 under 2006 Plan

75,000 under 2012 Plan

51,000 under 2014 Plan

Kevin G. Lynch,
Director and Chief Executive Officer

175,000 under 2012 Plan

103,000 under 2014 Plan

Thomas J. Marusak,
Director

15,000 under 2006 Plan

38,000 under 2012 Plan

42,000 under 2014 Plan

David C. Michaels,
Director

25,500 under 2012 Plan

33,000 under 2014 Plan

William P. Phelan,
Director

15,000 under 2006 Plan

38,000 under 2012 Plan

33,000 under 2014 Plan

Walter L. Robb,
Director

15,000 under 2006 Plan

38,000 under 2012 Plan

18,000 under 2014 Plan

E. Dennis O’Connor,
Director

15,000 under 2006 Plan

38,000 under 2012 Plan

18,000 under 2014 Plan

 

Schedule A - 1


 

 

EXHIBIT A

Special Procedure for Exercising Options After Termination of Service During FY 2016

In the event of the termination of the Insider’s employment and/or service at any time between the Effective Date and the end of fiscal year 2016, the following terms, conditions and mechanics with respect to the Insider’s exercise of his Options shall apply:

(a)                 The CFO will, within ten (10) business days of the Insider’s termination and after consulting with and receiving authorization from the audit committee of the board of directors, advise the Insider in writing as to the maximum number of his total vested Options that may be exercised during fiscal year 2016 based on and subject to the applicable 2016 Insider Option Allocation (as it may have been adjusted pursuant to Section 2(e) ) (the “ 2016 Termination Maximum Amount ”).  The Insider may freely exercise during fiscal year 2016 up to the 2016 Termination Maximum Amount and shall in no event exercise Options during fiscal year 2016 in excess of the 2016 Termination Maximum Amount.  In the event the Insider exercises only a portion of the 2016 Termination Maximum Amount during fiscal year 2016, the unexercised portion of the 2016 Termination Maximum Amount (the “ 2016 Unexercised Amount ”) shall terminate.  In the event Options constituting the 2016 Unexercised Amount terminate, the Company shall be expressly permitted to adjust the 2017 Maximum, 2018 Maximum and 2019 Maximum to account for such termination. 

(b)                The CFO will, within five (5) business days of the beginning of fiscal year 2017, advise the Insider in writing as to the maximum number of his total vested Options that may be exercised during fiscal year 2017 based on and subject to the applicable 2017 Insider Option Allocation (as it may have been adjusted pursuant to Section 2(e) ) (the “ 2017 Termination Maximum Amount ”).  The Insider may freely exercise during the first ninety (90) days of fiscal year 2017 up to the 2017 Termination Maximum Amount and shall in no event exercise Options during fiscal year 2017 in excess of the 2017 Termination Maximum Amount.  In the event the Insider exercises only a portion of the 2017 Termination Maximum Amount during fiscal year 2017, the unexercised portion of the 2017 Termination Maximum Amount (the “ 2017 Unexercised Amount ”) shall terminate.  In the event Options constituting the 2017 Unexercised Amount terminate, the Company shall be expressly permitted to adjust the 2018 Maximum and 2019 Maximum to account for such termination.

(c)                 The CFO will, within five (5) business days of the beginning of fiscal year 2018, advise the Insider in writing as to the maximum number of his total vested Options that may be exercised during fiscal year 2018 based on and subject to the applicable 2018 Insider Option Allocation (as it may have been adjusted pursuant to Section 2(e) ) (the “ 2018 Termination Maximum Amount ”).  The Insider may freely exercise during fiscal year 2018 up to the 2018 Termination Maximum Amount and shall in no event exercise Options during fiscal year 2018 in excess of the 2018 Termination Maximum Amount.  In the event the Insider exercises only a portion of the 2018 Termination Maximum Amount during fiscal year 2018, the unexercised portion of the 2018 Termination Maximum Amount (the “ 2018 Unexercised Amount ”) shall terminate.  In the event the Options constituting the 2018 Unexercised Amount terminate, the Company shall be expressly permitted to adjust the 2019 Maximum to account for such termination.

 

Exhibit A - 1

 


 

 

(d)                The CFO will, within five (5) business days of the beginning of fiscal year 2019, advise the Insider in writing as to the maximum number of his total vested Options that may be exercised during fiscal year 2019 based on and subject to the applicable 2019 Insider Option Allocation (as it may have been adjusted pursuant to Section 2(e) ) (the “ 2019 Termination Maximum Amount ”).  The Insider may freely exercise during fiscal year 2019 up to the 2019 Termination Maximum Amount and shall in no event exercise Options during fiscal year 2019 in excess of the 2019 Termination Maximum Amount.  In the event the Insider exercises only a portion of the 2019 Termination Maximum Amount during fiscal year 2019, the unexercised portion of the 2019 Termination Maximum Amount shall terminate.

(e)                 If, as of January 1, 2020, the Insider owns any remaining vested, but unexercised, Options, the Insider must exercise all such Options within the first ninety (90) days of fiscal year 2020.  In the event the Insider exercises only a portion of such remaining Options, the unexercised portion of such Options shall terminate.

Exhibit A - 2

 


 

 

EXHIBIT B

Special Procedure for Exercising Options After Termination of Service During FY 2017

In the event of the termination of the Insider’s employment and/or service at any time between January 1, 2017 and the end of fiscal year 2017, the following terms, conditions and mechanics with respect to the Insider’s exercise of his Options shall apply:

(a)                 The CFO will, within ten (10) business days of the Insider’s termination and after consulting with and receiving authorization from the audit committee of the board of directors, advise the Insider in writing as to the maximum number of his total vested Options that may be exercised during fiscal year 2017 based on and subject to the applicable 2017 Insider Option Allocation (as it may have been adjusted pursuant to Section 2(e) ) (the “ 2017 Termination Maximum Amount ”).  The Insider may freely exercise during fiscal year 2017 up to the 2017 Termination Maximum Amount and shall in no event exercise Options during fiscal year 2017 in excess of the 2017 Termination Maximum Amount.  In the event the Insider exercises only a portion of the 2017 Termination Maximum Amount during fiscal year 2017, the unexercised portion of the 2017 Termination Maximum Amount (the “ 2017 Unexercised Amount ”) shall terminate.  In the event Options constituting the 2017 Unexercised Amount terminate, the Company shall be expressly permitted to adjust the 2018 Maximum and 2019 Maximum to account for such termination.

(b)                The CFO will, within five (5) business days of the beginning of fiscal year 2018, advise the Insider in writing as to the maximum number of his total vested Options that may be exercised during fiscal year 2018 based on and subject to the applicable 2018 Insider Option Allocation (as it may have been adjusted pursuant to Section 2(e) ) (the “ 2018 Termination Maximum Amount ”).  The Insider may freely exercise during fiscal year 2018 up to the 2018 Termination Maximum Amount and shall in no event exercise Options during fiscal year 2018 in excess of the 2018 Termination Maximum Amount.  In the event the Insider exercises only a portion of the 2018 Termination Maximum Amount during fiscal year 2018, the unexercised portion of the 2018 Termination Maximum Amount (the “ 2018 Unexercised Amount ”) shall terminate.  In the event Options constituting the 2018 Unexercised Amount terminate, the Company shall be expressly permitted to adjust the 2019 Maximum to account for such termination.

(c)                 The CFO will, within five (5) business days of the beginning of fiscal year 2019, advise the Insider in writing as to the maximum number of his total vested Options that may be exercised during fiscal year 2019 based on and subject to the applicable 2019 Insider Option Allocation (as it may have been adjusted pursuant to Section 2(e) ) (the “ 2019 Termination Maximum Amount ”).  The Insider may freely exercise during fiscal year 2019 up to the 2019 Termination Maximum Amount and shall in no event exercise Options during fiscal year 2019 in excess of the 2019 Termination Maximum Amount.  In the event the Insider exercises only a portion of the 2019 Termination Maximum Amount during fiscal year 2019, the unexercised portion of the 2019 Termination Maximum Amount shall terminate.

 

Exhibit B - 1


 

 

(d)                If, as of January 1, 2020, the Insider owns any remaining vested, but unexercised, Options, the Insider must exercise all such Options within the first ninety (90) days of fiscal year 2020.  In the event the Insider exercises only a portion of such remaining Options, the unexercised portion of such Options shall terminate.

 

 

 

 

 

 

 

 

 

Exhibit B - 1


 

 

EXHIBIT C

Special Procedure for Exercising Options After Termination of Service During FY 2018

In the event of the termination of the Insider’s employment and/or service at any time between January 1, 2018 and the end of fiscal year 2018, the following terms, conditions and mechanics with respect to the Insider’s exercise of his Options shall apply:

(a)                 The CFO will, within ten (10) business days of the Insider’s termination and after consulting with and receiving authorization from the audit committee of the board of directors, advise the Insider in writing as to the maximum number of his total vested Options that may be exercised during fiscal year 2018 based on and subject to the applicable 2018 Insider Option Allocation (as it may have been adjusted pursuant to Section 2(e) ) (the “ 2018 Termination Maximum Amount ”).  The Insider may freely exercise during fiscal year 2018 up to the 2018 Termination Maximum Amount and shall in no event exercise Options during fiscal year 2018 in excess of the 2018 Termination Maximum Amount.  In the event the Insider exercises only a portion of the 2018 Termination Maximum Amount during fiscal year 2018, the unexercised portion of the 2018 Termination Maximum Amount (the “ 2018 Unexercised Amount ”) shall terminate.  In the event the Options constituting the 2018 Unexercised Amount terminate, the Company shall be expressly permitted to adjust the 2019 Maximum to account for such termination.

(b)                The CFO will, within five (5) business days of the beginning of fiscal year 2019, advise the Insider in writing as to the maximum number of his total vested Options that may be exercised during fiscal year 2019 based on and subject to the applicable 2019 Insider Option Allocation (as it may have been adjusted pursuant to Section 2(e) ) (the “ 2019 Termination Maximum Amount ”).  The Insider may freely exercise during fiscal year 2019 up to the 2019 Termination Maximum Amount and shall in no event exercise Options during fiscal year 2019 in excess of the 2019 Termination Maximum Amount.  In the event the Insider exercises only a portion of the 2019 Termination Maximum Amount during fiscal year 2019, the unexercised portion of the 2019 Termination Maximum Amount shall terminate.

(c)                 If, as of January 1, 2020, the Insider owns any remaining vested, but unexercised, Options, the Insider must exercise all such Options within the first ninety (90) days of fiscal year 2020.  In the event the Insider exercises only a portion of such remaining Options, the unexercised portion of such Options shall terminate.

 

 

 

 

Exhibit C - 1


 

 

EXHIBIT D

Special Procedure for Exercising Options After Termination of Service During FY 2019

In the event of the termination of the Insider’s employment and/or service at any time between January 1, 2019 and the end of fiscal year 2019, the following terms, conditions and mechanics with respect to the Insider’s exercise of his Options shall apply:

(a)                 The CFO will, within ten (10) business days of the Insider’s termination and after consulting with and receiving authorization from the audit committee of the board of directors, advise the Insider in writing as to the maximum number of his total vested Options that may be exercised during fiscal year 2019 based on and subject to the applicable 2019 Insider Option Allocation (as it may have been adjusted pursuant to Section 2(e) ) (the “ 2019 Termination Maximum Amount ”).  The Insider may freely exercise during fiscal year 2019 up to the 2019 Termination Maximum Amount and shall in no event exercise Options during fiscal year 2019 in excess of the 2019 Termination Maximum Amount. 

(b)                If, as of January 1, 2020, the Insider owns any remaining vested, but unexercised, Options, the Insider must exercise all such Options within the first ninety (90) days of fiscal year 2020; provided , that the period for exercise of such Options shall be reasonably extended by the Company in the event the Insider’s termination (i) occurred during the last two (2) months of fiscal year 2019 or (ii) was due to death, disability or incapacitation.  In the event the Insider exercises only a portion of such remaining Options, the unexercised portion of such Options shall terminate.

 

 

 

 

 

Exhibit D - 1