December 31, 2008
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 and restates
our agreement 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 ”). This letter supersedes the letter to you
dated May 4, 2006 (the “ Prior Letter ”).
The terms of your employment agreement, as amended and restated,
effective as of December 31, 2008 are as follows:
1. 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, you will also be
paid on April 30, 2009 either (A) $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 financing, if the
next MTI Micro preferred financing closes on or before March 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 March 31, 2009; or (B) an MTI Micro secured demand note in
the amount of $50,000, if the next preferred financing does not
close on or before March 31, 2009 and the parties cannot agree on a
valuation for MTI Micro common stock, or a change in control of MTI
Micro occurs before April 30, 2009. Your base salary will be paid
in accordance with the Company’s regular payroll
procedures.
2. Bonus : You will be
eligible to receive a retention bonus for the achievement of
certain milestones related to the MTI Micro business. There shall
be two such milestones, the attainment of each milestone shall
result in a cash payment of $87,500 (which is equal to 25% of your
base salary effective January 1, 2009) (or up to $175,000 if both
milestones are met), 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, provided
that you are employed by the Company on such dates. These
milestones shall be:
§ Milestone 1: The delivery of a minimum of two (2
)prototypes to the Original Equipment Manufacturers (OEMs) by
December 31, 2008.
§ Milestone 2: The completion $1.153 million of
revenue in 2008 under the Department of Energy (DOE) contract
(which expires in April 2009) by December 31, 2008.
In addition, you will be eligible
for future bonus arrangements with a targeted annual payout of 50%
of base salary payable based on years (“ Anniversary
Years ”) between anniversaries (“
Anniversary Dates ”) of your May 8, 2006
commencement date, the first such bonus payable for the May 2009 to
May 2010 period. Nothing in this section is intended to prevent a
greater discretionary bonus in the MTI Board’s discretion.
Except as provided below with respect to termination of employment,
you must remain employed through your Anniversary Date to receive a
bonus for the first and any applicable subsequent Anniversary Year
then ending. For any following Anniversary Years after your first
Anniversary Year during which you remain employed hereunder, bonus
components will be set each year by the MTI Board in its sole
discretion, and the MTI Board will evaluate your performance at the
end of each such year. The bonuses described in this paragraph, if
any, shall be payable within 60 calendar days following the end of
the applicable Anniversary Date.
3. Stock Options . The
Company’s Board of Directors will grant you options for
70,000 shares of MTI stock, with one-half of the shares vesting
immediately and one-half of the shares vesting quarterly over three
years. In the event that MTI Micro receives private financing, the
MTI Board will recommend that you are eligible to receive options
in MTI Micro representing approximately 7% of the total equity in
MTI Micro post Series-A stock; with one-half of the shares vesting
immediately and one-half of the shares vesting quarterly over a
period of three years. Any options will be exercisable for a period
of up to the earlier of (i) five years after your termination of
employment or (ii) the maximum exercise period permitted under the
respective option plan. These are only recommendations and shall
not be binding on the Company or MTI Micro. All stock options will
be granted with a per share exercise price equal to the fair market
value of a share of the stock subject to the option, determined in
accordance with the requirements of Section 409A of the Internal
Revenue Code of 1986, as amended, and the final Treasury
regulations and guidance issued thereunder (“ Section
409A ”).
4. Other Benefits : You
will be eligible for 28 days, or 224 hours, of paid time off
(“ PTO ”) per calendar year, prorated
based on your date of hire and to be taken at such times as may be
approved by the Company, in its sole discretion. The PTO for which
you are eligible shall accrue in accordance with the
Company’s regular vacation benefits procedures. The Company
currently offers its employees paid holiday time. You will also be
eligible to participate in the standard employee benefits programs
that the Company offers to its employees from time to time, which
currently include medical and dental insurance, a flexible medical
and dependent care spending plan, long-term disability insurance,
life insurance and a 401(k) savings and retirement plan. The
Company will pay the full premium, at standard insurable rates, for
$300,000 of Term Life Insurance, while you are employed and
assuming that you are insurable at customary rates. The benefits
made available by the Company, and the rules, terms and conditions
for participation in the benefit plans may be changed by the
Company at any time and from time to time without advance
notice.
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5. Proprietary Information,
Developments, Non-Competition and Non-Solicitation Agreement :
During the course of your 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
continued 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 May 4, 2006, which is
incorporated by reference in its entirety.
6. No Conflicts : You
represent that you are not bound by any employment contract,
restrictive covenant or other restriction preventing you from
carrying out your responsibilities for the Company, or that is in
any way inconsistent with the terms of this letter. The Company has
agreed to your continued service on a specific advisory board and a
specific board of directors, subject to your spending on such
service the limited amount of time agreed between the parties and
subject to your compliance with the terms of this letter agreement
and with the Non-Competition/Proprietary Information
Agreement.
7. Effective Date : The
terms and conditions of your employment with the Company and MTI
Micro shall be governed by this letter until your employment is
terminated as described below.
8. Termination of
Employment : Both you and the Company shall have the right to
terminate your employment for any reason and for no stated reason.
If your employment ends for any reason, the Company shall pay you
(or in the event of your death, your beneficiary or estate), in
addition to any other amounts payable hereunder: (i) the full
amount of the accrued but unpaid salary you earned through the date
of termination; accrued, unused PTO; and any accrued but unpaid
bonus for a completed prior Anniversary Year; and (ii) any unpaid
reimbursement for business expenses that you are entitled to
receive (the “ Accrued Entitlements ”).
The amounts contemplated above shall be paid as follows: a cash
lump sum payment not later than 30 days following termination, in
the case of accrued but unpaid salary, PTO, and unpaid bonus (or
such earlier date as the law may require), and not later than 30
days following receipt by the Company from you of appropriate
documentation supporting any reimbursable expenses, in the case of
reimbursable expenses, which documentation must be provided by you
to the Company within 30 days after the date your employment
terminates. Notwithstanding the foregoing, (i) the expenses
eligible for reimbursement during any of your taxable years may not
affect the expenses eligible for reimbursement in any other taxable
year, (ii) such reimbursement must be made on or before the last
day of your taxable year following the taxable year in which the
expenses were incurred, and (iii) the right to reimbursement shall
not be subject to liquidation or exchange for another
benefit.
9. Termination for Cause :
If you are terminated for Cause, the Company will only be obligated
to pay you the Accrued Entitlements other than any accrued but
unpaid bonuses, payable pursuant to the terms described in
paragraph 8, above. For purposes of this letter agreement, “
Cause ” means (i) gross misconduct, gross
negligence, theft, dishonesty, fraud, or gross dereliction of
duties by you; or (ii) 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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10. Termination Due to Death
or Permanent Disability : If you are terminated because of your
Disability or your death, you, your beneficiary, or your estate
will receive:
(i) the
Accrued Entitlements, payable pursuant to the terms described in
paragraph 8, above;
(ii) a
pro-rata bonus for the year of your separation from service (within
the meaning of Section 409A), based on your target bonus for that
year, assuming that your separation occurs at least six months into
the Anniversary Year, with the payment to be made on the sixtieth (
60 th ) day after your separation from
service;
(iii)
unvested Time-Based Stock Options (as described in the Prior
Letter) shall continue to vest for an additional
quarter;
(iv)
unvested Performance-Based Stock Options (as described in the Prior
Letter) shall vest as of the date of termination; and
(v) all
vested options described shall remain exercisable for a period of
up to the earlier of (i) five years after your termination of
employment, (ii) the maximum exercise period permitted under the
respective option plan, except as the applicable option plan
otherwise provides for options generally (such as in connection
with a sale of the Company) or (iii) the expiration of the term of
the respective option agreement.
Nothing in this section prevents
the MTI Board (or other applicable person or entity) from providing
additional vesting or exercisability on death or Disability. For
purposes of this Agreement, “ Disability
” means (i) that you are unable to eng
