December 30, 2008 

James K. Prueitt
3 Chandler Drive

Ballston Lake, NY 12019 

Re:     Amendment to Employment Agreement, Vice President of Engineering
and Operations, MTI MicroFuel Cells Inc.


Dear Jim: 

This letter amends and restates our
agreement with respect to the terms of your employment with MTI MicroFuel Cells
Inc. (“MTI Micro” or the “Company”), a subsidiary of Mechanical Technology,
Incorporated (“MTI”). You shall continue to serve as Vice President of
Engineering and Operations of MTI Micro. This letter supersedes our letter to
you dated April 3, 2006, and any other letters or addendums thereto (excluding
the Proprietary Information, Developments, Non-Competition and Non-Solicitation
Agreement ), and this letter is intended to comply with the applicable
provisions of Section 409A of the Internal Revenue Code of 1986, as amended, and
the final Treasury regulations and guidance issued thereunder (“Section 409A”).
The terms of your employment agreement, as amended and restated, effective
December 30, 2008 are as set forth below: 

1. Base
Salary. Your salary will be $188,300 per
year, less all applicable taxes and withholdings. 

2. Bonus. You will be eligible to receive
a retention bonus for the achievement of certain milestones related to the
Company’s business. There shall be two such milestones, the attainment of each
milestone shall result in a cash payment equal to 5% of your base salary, of
which 75% of the applicable bonus will be paid to you in January 2009 after the
applicable milestone is achieved and the remaining 25% will be paid in April
2009. These milestones shall be: 

	
  Milestone 1: The delivery of a minimum of two prototypes to the
  Original Equipment Manufacturers (OEMs) by December 31, 2008.


	
  Milestone 2: The completion of $1.153 million of revenue in 2008 under
  the Department of Energy (DOE) contract (which expires in April 2009) by
  December 31, 2008. 



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3. Stock
Options. In the event the Company obtains a
Series A preferred stock financing, the Company’s Board of Directors will
recommend that you are eligible to receive options in MTI Micro representing
approximately 2.34% of the total equity in MTI Micro stock; with one-half of the
shares vesting immediately and one-half of the shares vesting quarterly over a
period of three years. This is only a recommendation and shall not be binding on
the Company. 

The Compensation Committee of MTI may
grant you options at their discretion in the future. 

4. Other
Benefits. You will be eligible for all
benefits generally available to employees and officers of the Company, including
the Company’s 401(k) plan and health insurance plan. Benefits are subject to
change at any time in the Company’s sole discretion. You will be eligible for 23
days of paid time off annually, which shall accrue based upon MTI Micro regular
PTO procedures. 

5. At-Will Employment. This letter shall
not be construed as an agreement, either express or implied, to employ you for
any stated term, and shall in no way alter MTI Micro’s policy of employment
at-will, under which both MTI Micro and you remain free to end the employment
relationship for any reason, at any time, with or without notice. Similarly,
nothing in this letter shall be construed as an agreement, either express or
implied, to pay you any compensation or grant you any benefit beyond the end of
your employment with MTI Micro, except as otherwise provided herein.

6. Termination of Employment. If the
Company terminates your employment without “cause” (as defined below), the
Company shall, for four months following your date of termination: (i) continue
to pay to you your base salary at the rate in effect at the time of your
termination, in accordance with the Company’s regularly established payroll
procedure; and (ii) provided you elect to continue receiving group medical
insurance pursuant to the federal “COBRA” law, 29 U.S.C. § 1161 et. seq., continue to pay
the share of the premium for health coverage that is paid by the Company for
active and similarly situated employees who receive the same type of coverage.
It is intended that these COBRA payments are exempt from Section 409A. For
purposes of this agreement, “cause” shall mean (i) a finding by the Board of
Directors that you have engaged in gross misconduct, negligence, theft,
dishonesty, fraud, or gross dereliction of duties; or (ii) your indictment on
any felony charge or a misdemeanor charge involving theft, moral turpitude or a
violation of the federal securities laws (whether or not related to your conduct
at work). 

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In the event you are terminated in
anticipation of, in connection with, or during the six months following a Change
of Control of the Company or MTI, if the Company is a subsidiary of MTI at the
time, you shall (i) continue to receive your regular base salary in effect at
the time of your termination for a period of six months effective from the date
of your termination, subject to applicable payroll deductions, and (ii) provided
you elect to continue receiving group medical insurance pursuant to the federal
“COBRA” law, 29 U.S.C. § 1161 et.
seq., continue to pay the share of the
premium for health coverage that is paid by the Company for active and similarly
situated employees who receive the same type of coverage. It is intended that
these COBRA payments are exempt from Section 409A. 

For purposes of this letter agreement,
“Change of Control” means one of the following events: (i) the merger,
consolidation or other reorganization of the Company in which the outstanding
Common Stock is converted into or exchanged for a different class of securities
of the Company, a class of securities of any other issuer (except a subsidiary
or parent corporation), cash or other property other than (a) a merger,
consolidation or reorganization of the Company which would result in the voting
stock of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the ownership of any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, at least sixty percent (60%) of the combined voting power of the
voting stock of the Company or such surviving entity outstanding immediately
after such merger, consolidation or reorganization of the Company, or (b)
merger, consolidation or reorganization of the Company effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than forty-nine percent (49%) of the combined voting power of the
Company’s then outstanding stock; (ii) the sale, lease or exchange of all or
substantially all of the assets of the Company to any other corporation or
entity (except a subsidiary or parent corporation); (iii) the adoption by the
stockholders of the Company of a plan of liquidation and dissolution; (iv) the
acquisition (other than acquisition pursuant to any other clause of this
definition) by any person or entity, including without limitation a “group” as
contemplated by Section 13(d)(3) of the Exchange Act, of beneficial ownership,
as contemplated by such Section, of more than twenty-five percent (25%) (based
on voting power) of the Company’s outstanding capital stock or acquisition by a
person or entity who currently has beneficial ownership which increases such
person’s or entity’s beneficial ownership to fifty percent (50%) or more (based
on voting power) of the Company’s outstanding capital stock; or (v) as a result
of or in connection with a contested election of directors, the persons who were
directors of the Company before such election shall cease to constitute a
majority of the MTI Board. Notwithstanding the provisions of clause (iv) above,
a Change of Control shall not be considered to have occurred upon the
acquisition (other than acquisition pursuant to any other clause of the
preceding sentence) by any person or entity, including without limitation a
“group” as contemplated by Section 13(d)(3) of the Exchange Act, of beneficial
ownership, as contemplated by such Section, of more than twenty-five percent
(25%) (based on voting power) of the Company’s outstanding capital stock or the
requisite percentage to increase their ownership to fifty percent (50%)
resulting from a public offering of securities of the Company under the Securities Act of 1933,
as amended. 

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As a condition to your receipt of these
severance benefits, you must execute, return to the Company and not revoke a
severance agreement and release in a form acceptable to the Company within 60
days of your termination (the “Release Deadline”). Such payments shall be paid
in equal installments on each regular pay cycle commencing on the first regular
pay cycle in the calendar month following the Release Deadline, with the first
such payment including the amount due from the date of termination. For purposes
of this agreement, your termination of employment shall mean your “separation
from service” (within the meaning of Section 409A). 

7. Section 409A Delay: Each payment
hereunder subject to Section 409A will be considered a separate payment for
purposes of Section 409A. To the extent that it is determined by the Company in
good faith that all or a portion of any payments hereunder subject to Section
409A made in connection with your separation from service are not exempt from
Section 409A and that you are a “specified employee” (within the meaning of
Section 409A) at the time of your separation from service, then payment of such
non-exempt payments shall not be made until the date that is six (6) months and
one day after your separation from service (or, if earlier, your death), with
any payments that are required to be delayed being accumulated during the six
(6) month period and paid in a lump sum on the date that is six (6) months and
one day following your separation from service and any subsequent payments, if
any, being paid in accordance with the dates and terms set forth herein.


8. Proprietary Information, Developments, Non-Competition and
Non-Solicitation Agreement. During the course of your
continued employment you will be exposed to, and be responsible for developing,
trade secrets and confidential information of the Company. Therefore, as a
condition of your employment, you are required to continue to comply with the
Proprietary Information, Developments, Non-Competition and Non-Solicitation
Agreement (the “Non-Competition/Proprietary Information Agreement”), dated and
executed by you on April 17, 2006, which is incorporated by reference in its
entirety. 

9. Representations. You represent that
you are not bound by any employment contract, restrictive covenant or other
restriction preventing you from continuing employment with or carrying out your
responsibilities for MTI Micro, or that is in any way inconsistent with the
terms of this letter agreement. 

10. Amendments. Any amendment to this
letter agreement shall be made in writing and signed by the parties hereto.


11. Applicable Law. This letter agreement
shall be governed by and construed in accordance with the laws of the State of
New York (without reference to the conflict of laws provisions thereof). Any
action, suit or other legal proceeding arising under or relating to any
provision of this Agreement shall be commenced only in a court of the State of
New York (or, if appropriate, a federal court located within the State of New
York), and MTI Micro and you each consents
to the jurisdiction of such a court. MTI Micro and you each hereby irrevocably
waives any right to a trial by jury in any action, suit or other legal
proceeding arising under or relating to any provision of this letter agreement.



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12. Miscellaneous. You agree to devote
your full energy and attention to the Company. The provisions of any agreement
(other than your original, any subsequent offer letters and the agreement
amended and restated by this agreement) between you and the Company or any of
their affiliates, including, but not limited to, any non-competition and
non-solicitation agreement, shall continue to be effective, in accordance with
the terms of any such agreement. 

13. Section 409A. This letter is intended
to comply with the provisions of Section 409A and the letter shall, to the
extent practicable, be construed in accordance therewith. Terms defined in the
letter shall have the meanings given such terms under Section 409A if and to the
extent required in order to comply with Section 409A. Notwithstanding the
foregoing, to the extent that the letter or any payment or benefit hereunder
shall be deemed not to comply with Section 409A, then neither the Company or the
Board of Directors, nor its or their designees or agents, shall be liable to you
or any other person for any actions, decisions or determinations made in good
faith. 

[Signature Page Follows]


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     If the
foregoing is acceptable, please countersign this letter in the space provided
below and return it to me. 

Sincerely, 

MTI MICROFUEL CELLS INC.


	/s/
      Peng K. Lim 	
	
      Peng K. Lim
President and Chief
      Executive Officer
	



	Agreed and
      Accepted by:  	/s/ James K. Prueitt 	 on  	12/31/08 
	  	James K.
      Prueitt 	  	(Date)
    



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