8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

May 3, 2006

Date of Report (Date of earliest event reported)

MECHANICAL TECHNOLOGY INCORPORATED

(Exact name of registrant as specified in its chapter)

NEW YORK	0-6890	14-1462255
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
431 NEW KARNER ROAD, ALBANY, NEW YORK 12205 (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:

(518) 533-2200

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))

1

Item 1.01. Entry into a Material Definitive Agreement

Effective May 3, 2006, Dr. Shimshon Gottesfeld, 65, Vice President and Chief Technology Officer (CTO) of MTI MicroFuel Cells Inc. ("MTI Micro" or the "Company"), a majority-owned subsidiary of Mechanical Technology Incorporated (MTI), will transition from Vice President and CTO to Senior Technical Advisor to MTI Micro in preparation for retirement. Dr. Gottesfeld will serve as Senior Technical Advisor to MTI Micro for a period of 18 months until November 2, 2007, after which he will retire and his employment with the Company will terminate.

Dr. Gottesfeld had an employment agreement with MTI Micro effective March 4, 2004, for a 3 year term expiring on March 4, 2007, that provided 1) a base annual salary of $250,000; 2) he would receive 100% of his base salary for 6 months if he was terminated without cause or if he left employment for certain reasons as defined in the agreement.

Effective May 3, 2006, Dr. Gottesfeld entered into a new employment agreement with MTI Micro that replaces the agreement dated March 4, 2004 and provides 1) a base annual salary of $125,000 during his 18-month term as Senior Technical Advisor; 2) a bonus equal to $20,000 to be paid in MTI Common Stock if a qualified deal as defined in the agreement is closed on, or before 6 months after, the commencement date of the new employment agreement; 3) that MTI stock options will continue to vest and any remaining unvested MTI stock options will automatically vest upon the termination of his employment at the end of his role as Senior Technical Advisor; and 4) certain other benefits.

The foregoing description of the new employment agreement does not purport to be complete and is qualified in its entirety by reference to the new employment agreement, which is filed as Exhibit 10.138 to this Current Report on Form 8-K and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

On May 4, 2006, MTI MicroFuel Cells Inc. ("MTI Micro"), a majority-owned subsidiary of Mechanical Technology Incorporated, issued a press release announcing Shimshon Gottesfeld's transition to Senior Technical Advisor. The full text of MTI Micro's press release is furnished as Exhibit 99.1 hereto.

(c) Exhibits.

Exhibit No.	Description
10.138	Employment Agreement dated May 3, 2006 between Shimshon Gottesfeld and MTI MicroFuel Cells Inc.
99.1	Press release of MTI MicroFuel Cells Inc. issued on May 4, 2006.

SIGNATURES

Pursuant to the requirements 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: May 4, 2006	By: /S/ CYNTHIA A. SCHEUER Name: Cynthia A. Scheuer
	Title: Vice President, Chief Financial Officer and Secretary

EX-10

Exhibit 10.138

May 3, 2006

Shimshon Gottesfeld

3404 Rosendale Road

Niskayuna, New York 12309

Re: Employment Agreement dated May 2, 2006

Dear Shimshon:

This letter sets forth our agreement to replace your employment agreement dated March 4, 2004, and is being made to address changes to your employment as Chief Technology Officer (CTO) of MTI MicroFuel Cells Inc. ("MFC") or ("the Company"), as your role changes from that of CTO to that of Senior Technical Advisor or ("Advisor") upon the date of this agreement.

Positions and Responsibilities. In preparation of your contemplated retirement from MTI, you will serve in a reduced role as Senior Technical Advisor to the Company on the terms described below for a period of 18 months after which you have agreed to retire and your employment with the Company will terminate.

It is understood the majority of work will involve advising the Company in the area of DMFC core technology and related intellectual property and will be performed at your home office, with commitments for reporting to the corporate office not to exceed four days per month.

Salary and Compensation. Your base salary as Senior Technical Advisor will be $10,416.67 per month which annualizes to $125,000 per year, paid in accordance with the Company's regular payroll procedures.

Other than the payments set forth in this Agreement, no severance payments shall be made at the conclusion of the 18 month Advisor period.

All payments under this Agreement shall be subject to withholdings and deductions made by the Company as required by applicable federal, state, and local law.

Stock Options. All MTI stock options will continue to vest, in accordance with their vesting schedules, during your employment as Senior Technical Advisor and any remaining unvested stock options shall automatically vest upon the termination of your employment at the end of your 18 month role as Advisor.

In the event your employment is terminated for cause, you will be ineligible for the automatic vesting of unvested options as set forth above. If your employment is terminated for cause, your options will be vested in accordance with the Company's Employee Stock Option Plan.

In the event your employment is involuntarily terminated without cause, you shall be fully eligible for the automatic vesting of unvested stock options as set forth above at the date of termination regardless of the intended duration of the Agreement.

For purposes of this Agreement, "cause" shall mean (i) gross misconduct, gross negligence, theft, dishonesty, fraud, or gross dereliction of duties by you; (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); or (iii) your death or permanent disability (consistent with the requirements of state and federal law).

Success Fee. In addition to the compensation outlined above, MTI will pay you a Bonus if a transaction involving a Qualified Deal between MTI Micro or MTI, and any company set forth on Schedule "A" attached is entered into by the Company.

The Bonus shall equal $20,000 if a Qualified Deal is closed on or before six (6) months of the commencement date of this Agreement. The Success Fee amount will be paid in MTI Common Stock within 14 days of the Qualified Deal. There will be no bonus paid if the Qualified deal is closed after six (6) months of the commencement date of this Agreement.

A "Qualified Deal" shall mean a transaction with a Company set forth in Schedule "A" which furthers the Company's product development.

Other Benefits. As Senior Technical Advisor you will be eligible to participate in the 401(k) retirement program and receive the employer matching contribution and all insurance benefits available to employees and qualified dependents of the Company, subject to the terms and conditions of the applicable plans, but you will not be entitled to vacation.

Vacation benefits that were accrued while employed as CTO will be paid in your final paycheck as CTO or as soon as practicable thereafter

In addition, the Company will pay for or reimburse you for reasonable out of pocket expenses up to a maximum of $10,000 annually, prorated monthly, to attend industry related conferences and seminars. You agree to provide written updates and summaries of materials presented or information acquired at these programs to the CFO of MTI or her designate, prior to your request for expense reimbursement. In order to be eligible to receive such payments and/or reimbursements, you must incur the expenses and submit a written request for payment and/or reimbursement, along with receipts, invoices and other supporting documentation as requested by the Company.

The reasonable out of pocket expenses identified above exclude expenses for attending prescheduled and approved conferences through May 19, 2006. Expenses incurred before May 20, 2006 are not subject to the $10,000 annual maximum reimbursement.

The Company will also provide a monthly reimbursement of up to $125.00 for home office related expenses, payable in accordance with the Company's customary reimbursement procedures, until the conclusion of this Agreement.

Termination of Employment. Each of you and the Company shall have the right to terminate your employment for any reason and for no stated reason. In the event of your termination, the Company shall pay you (or in the event of your death, your beneficiary), in addition to any other amounts payable to you hereunder: (i) the full amount of the accrued but unpaid salary and bonus you have earned through the date of termination; and (ii) any unpaid reimbursement for business expenses that you are entitled to receive. The amounts contemplated above shall be paid to you as follows: a cash lump sum payment not later than thirty (30) days following your termination, in the case of accrued but unpaid salary, and not later than thirty (30) days following receipt by the Company from you of appropriate documentation supporting any reimbursable expenses, in the case of reimbursable expenses.

In addition to the amounts contemplated in the preceding paragraph, in the event the Company terminates your employment with or without cause, the Company shall continue to pay your Advisor payments for the balance of your 18 month advisor period.

Dispute Resolution. This Agreement shall be governed by the Laws of New York State. Except for violations of the Non-Competition and Proprietary Information Agreements, any dispute arising under, or alleged violation of, this Agreement, and any claim, charge, or cause of action by Employee relating to his employment, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the New York Human Rights Law, and any other statute prohibiting employment discrimination or dealing with employment rights, and any contract or tort claim including any claims pursuant to this Agreement, shall be submitted exclusively to arbitration under the Employment Dispute Arbitration rules of the American Arbitration Association. The Arbitration shall be held in the County of Albany, State of New York. The arbitrator shall be chosen by the Employment Dispute Arbitration rules of the American Arbitration Association . The decision of the arbitrator shall be final and binding. In construing or applying this Agreement, the arbitrator's jurisdiction shall be limited to interpretation or application of this Agreement; the arbitrator shall not have the power to add to, to delete, or modify any provision of this Agreement. Each party shall bear her or its own expenses in arbitration, except that the parties shall share the costs of the arbitrator equally. The arbitrator is hereby authorized to award attorneys' fees to the prevailing party to the same extent the prevailing party would be entitled to an award of attorneys' fees pursuant to the above enumerated statutes and/or any enforcement provisions contained in those statutes.

Complete Agreement. This Agreement and the Proprietary Information Agreement ("PIA") (attached hereto as Exhibit A) and Non-Competition Agreement (attached hereto as Exhibit B) previously signed by you on May 25, 2001 which shall remain in full force and effect, constitute the complete agreement between you and the Company and supersede any and all prior discussions and agreements not referred to above between yourself and MFC or MTI. It is further agreed that Section 1, Non-Competition, of the Non-Competition Agreement shall be amended and will cease upon the termination of your employment as Advisor if your employment terminates at the end of the 18 months stated in this Agreement, or if your employment as Advisor is terminated earlier than the 18 months stated in this Agreement it will run until 18 months after the commencement of your employment as Advisor.

This Agreement cannot be amended except in a writing signed by both parties and is binding on our respective successors.

If the foregoing is acceptable, please counter-sign this letter in the space provided below. As always, if you have any questions, please feel free to contact me.

Sincerely,

/S/ William P. Acker

William P. Acker

Chief Executive Officer

Accepted: /S/ Shimshon Gottesfeld

Shimshon Gottesfeld

Date: May 3, 2006

EX-99

Confidential & Proprietary

Exhibit 99.1

FOR:

Mechanical Technology

CONTACT:

George Relan

Director, Corporate Relations

Telephone (518) 533-2220

MTI MICRO'S GOTTESFELD ANNOUNCES RETIREMENT PLAN

ALBANY, New York, May 4, 2006 -MTI MicroFuel Cells Inc. (MTI Micro or the Company), developer of the award-winning Mobion^® micro fuel cell technology and a subsidiary of Mechanical Technology Incorporated (MTI) (NASDAQ:MKTY), today announced that Shimshon Gottesfeld, Ph.D., has agreed to transition from Vice President and Chief Technology Officer to Senior Technical Advisor in preparation for retirement from the Company. Gottesfeld, 65, has agreed to serve as Senior Technical Advisor to MTI Micro for an 18 month period.

"At MTI Micro, we have assembled a world class technical team, developed important ground-breaking intellectual property, and positioned the Company as a leader in the development of direct methanol fuel cells for portable electronic applications," said Steven N. Fischer, Chief Executive Officer of MTI. "We thank Shimshon for all his contributions in making MTI Micro a leader in its field, and congratulate him on his well deserved retirement plans."

"I am very proud of the accomplishments that we have made over the last five years in the development of a novel DMFC platform, and I look forward to my advisory role to the Company on technical matters," said Gottesfeld. "We have become a world leader in developing micro fuel cell components and systems necessary to translate the technology from the laboratory into the market place. I look forward to transitioning my role which will permit me to spend more time abroad with my family. "

About MTI MicroFuel Cells

MTI MicroFuel Cells Inc., a subsidiary of Mechanical Technology Incorporated, (NASDAQ: MKTY), is the developer of the award winning Mobion^® direct methanol micro fuel cell technology. The Company has a world-class team of entrepreneurial business executives, researchers and scientists; a number of system prototypes demonstrating size reductions and performance improvements; significant related intellectual property; and has received government awards and developed strategic partnerships to facilitate efforts to achieve commercialization. More information is available at www.mtimicrofuelcells.com.