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February 24, 2009
  

Mr. Peng K. Lim 
P.O. Box 16005

Albany, NY 12212 

	Re:     	Amendment to Employment Agreement,
      Chief Executive Officer of Mechanical Technology, Incorporated
  



Dear Mr. Lim: 

This letter amends our recent letter
agreement dated December 31, 2008 (the “Prior Letter”) with respect to the
terms of your employment with Mechanical Technology, Incorporated (“MTI” or the “Company”) as Chairman and Chief
Executive Officer of MTI and President and Chief Executive Officer of MTI
MicroFuel Cells Inc. (“MTI
Micro”). The terms of your employment
agreement as set forth in the Prior Letter are hereby amended effective as of
February 20, 2009 as follows: 

1. Base
Salary Deferral. Effective March 1, 2009, and
continuing through the earlier to occur of May 31, 2009 or the initial closing
of a Series A Preferred Stock financing of MTI Micro (the “Deferral Period”),
$8,333 per month of your base salary shall be temporarily deferred (hereinafter,
the “Deferred Salary”). In consideration of this salary deferral, at the end of
the Deferral Period, you will be either (A) paid an amount equal to your total
Deferred Salary since March 1, 2009, less applicable tax withholding, paid in
equity interests in (i) MTI Micro Series A Preferred Stock based on the per
share valuation paid by the investors in the Series A Preferred Stock financing,
if the next MTI Micro preferred financing closes on or before May 31, 2009, or
(ii) MTI Micro common stock based on a per share valuation agreed upon by MTI
Micro and the majority of the MTI Micro bridge note holders, if the next
preferred financing does not close on or before May 31, 2009; or (B) in the
event (i) the next preferred financing does not close on or before May 31, 2009
and the parties cannot agree on a valuation for MTI Micro common stock, or (ii)
a change in control of MTI Micro occurs before June 30, 2009, or (iii) upon the
insolvency of, or commission of any act of bankruptcy by, MTI Micro, or
assignment for the benefit of creditors by MTI Micro, or filing by or against
MTI Micro of a petition in bankruptcy or any petition for relief under the
federal bankruptcy act, then you will be issued a secured convertible promissory
note in the same form as issued to those certain noteholders participating in
the MTI Micro September 2008 bridge financing, as extended to date (the
“MTI Micro Bridge
Financing”), in the amount of your
Deferred Salary since March 1, 2009, less applicable tax withholding, and you
shall be included as a “Holder” in the MTI Micro Bridge Financing and entitled
to the same warrant coverage and security interest with respect to your
participation therein as all other participants in the MTI Micro Bridge
Financing, subject to your execution of the applicable documentation.




2. Amendment and Restatement of Prior Letter Base Salary. Section 1 of the Prior Letter (“Base Salary”) shall be amended and restated in its entirety as follows:


“Base Salary: Effective
January 1, 2009, your base salary is increased to $350,000 per year; provided
that for the months of January 2009 and February 2009, your base salary will be
temporarily reduced by $8,333 per month. In consideration of your past services,
the postponement of your last annual salary increase from your May anniversary
date and the salary reduction in January and February 2009, on June 30, 2009 you
will also either: (A) be paid $50,000 of equity interests in (i) MTI Micro
Series A Preferred Stock based on the per share valuation paid by the investors
in the Series A Preferred Stock financing, if the next MTI Micro preferred
financing closes on or before May 31, 2009, or (ii) MTI Micro common stock based
on a per share valuation agreed upon by MTI Micro and the majority of the MTI
Micro bridge note holders, if the next preferred financing does not close on or
before May 31, 2009; or (B) in the event (i) the next preferred financing does
not close on or before May 31, 2009 and the parties cannot agree on a valuation
for MTI Micro common stock, or (ii) a change in control of MTI Micro occurs
before June 30, 2009, or (iii) upon the insolvency of, or commission of any act
of bankruptcy by, MTI Micro, or assignment for the benefit of creditors by MTI
Micro, or filing by or against MTI Micro of a petition in bankruptcy or any
petition for relief under the federal bankruptcy act, then you will be issued a
secured convertible promissory note in the same form as issued to those certain
noteholders participating in the MTI Micro September 2008 bridge financing, as
extended to date (the “MTI Micro Bridge
Financing”), in the amount of $50,000,
less applicable tax withholding, and you shall be included as a “Holder” in the
MTI Micro Bridge Financing and entitled to the same warrant coverage and
security interest with respect to your participation therein as all other
participants in the MTI Micro Bridge Financing, subject to your execution of the
applicable documentation. Your base salary will be paid in accordance with the
Company’s regular payroll procedures.” 

3. Entire Agreement; Amendment. You
acknowledge that the Prior Letter, as amended by this letter agreement,
represents the entire understanding between you and the Company and any and all
prior written or oral discussions and agreements between you and the Company
relating to the subject matter of the Prior Letter, as amended by this letter
agreement, or your employment with the Company. Neither the Prior Letter nor
this letter agreement can be amended except in a writing signed by both you and
an authorized representative of the Company. The Prior Letter and this letter
agreement is binding on our respective successors and assigns; provided,
however, that your obligations are personal and shall not be assigned by you.


If the foregoing is acceptable, please
countersign this letter in the space provided below. 

2 




Sincerely, 
 

	 	/s/ E. Dennis O’Connor  	 
	E.
      Dennis O’Connor  
	Chairman of the Governance, Compensation and Nominating
      Committee  
	Mechanical Technology, Incorporated 


 

Accepted: 
 

	 	/s/ Peng K. Lim  	 
	Peng
      K. Lim  
	Date:
      February 24, 2009  



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