MTI MICROFUEL CELLS INC.

AMENDMENT NO. 1 TO
CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT, SECURITY
AGREEMENT AND SECURED CONVERTIBLE PROMISSORY NOTES AND CONSENT

     This Amendment No. 1 to Convertible Note and Warrant Purchase Agreement,
Security Agreement and Secured Convertible Promissory Notes and Consent (this
“Amendment and Consent”) is made as of FEB 20th, 2009 (the “Effective Date”) by
and among MTI MicroFuel Cells Inc., a Delaware corporation (the “Company”) and
each of the investors listed on Exhibit A attached to this Amendment (each a
“Purchaser” and together the “Purchasers”), and amends (i) that certain
Convertible Note and Warrant Purchase Agreement, dated as of September 18, 2008
(the “Purchase Agreement”) between the Company and the Purchasers, (ii) that
certain Security Agreement, dated as of September 18, 2008 (the “Security
Agreement”) between the Company and the Purchasers, and (iii) those certain
Secured Convertible Promissory Notes, each dated as of September 18, 2008 (the
“Notes”) between the Company and each of the Purchasers.

     WHEREAS, the Company issued Notes in the aggregate principal amount of
$2,200,000, and warrants exercisable for equity securities of the Company (the
“Warrants”), to the Purchasers pursuant to the Purchase Agreement, which Notes
are secured by all of the assets of the Company in accordance with the
provisions of the Security Agreement;

     WHEREAS, the Company and the Purchasers desire to amend the Purchase
Agreement to permit the Company to sell additional Notes and Warrants with an
aggregate principal amount of up to $500,000 to such Purchasers who desire to
acquire additional Notes and Warrants as scheduled on Exhibit A attached hereto;

     WHEREAS, the Company and the Purchasers desire to amend the Notes to extend
the Maturity Date (as defined thereunder) from March 31, 2009 to May 31, 2009;
and

     WHEREAS, the Purchase Agreement and the Notes may be amended by the Company
and holders of at least a majority in interest of the Notes, and the Security
Agreement may be amended by Company and each of the Purchasers;

     NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties to this Amendment and Consent agree as follows:

     1. Amendment of Section 1(b)(iii) of the Purchase Agreement. Section
1(b)(iii) of Purchase Agreement is hereby amended to permit the Company to sell
additional Notes and Warrants with an aggregate principal amount of up to
$500,000 under the Purchase Agreement for a period of thirty (30) days following
the Effective Date hereto to such Purchasers who desire to acquire additional
Notes and Warrants as scheduled on Exhibit A attached hereto.

     2. Amendment of “Maturity Date” of the Notes. The “Maturity Date” set forth
in Section 1 of each of the Notes, and such additional Notes to be issued to the
Purchasers as scheduled on Exhibit A attached hereto, shall be amended to
provide for an amended “Maturity Date” of May 31, 2009.

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      3. Amendment of Security Interest. The Security Agreement is hereby
amended to provide that the indebtedness represented by the additional Notes to
be issued to the Purchasers scheduled on Exhibit A attached hereto shall be
secured by all of the assets of the Company in accordance with the provisions of
the Security Agreement, and Exhibit A to the Security Agreement shall be amended
to include such Purchasers’ additional indebtedness thereunder.

     4. Consent to Amendments and Related Matters. The Company and each of the
Purchasers hereby consent to (i) the amendment of the Purchase Agreement and the
Notes, (ii) the purchase by the Purchaser(s) set forth on Exhibit A attached
hereto of an additional Note(s) and Warrant(s) and the Company’s issuance of a
Note(s) and Warrant(s) to such Purchaser(s), and (iii) the inclusion of the
indebtedness represented by such additional Note(s) under the Security Agreement
and amendment thereof to include such indebtedness as secured thereunder.

     5. Miscellaneous.

          (a) Governing Law. This Amendment and Consent and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of Delaware, without giving effect to principles of conflicts of
law.

          (b) Counterparts. This Amendment and Consent may be executed in two or
more counterparts and by facsimile, each of which shall be deemed an original
and all of which together shall constitute one instrument.

          (c) Entire Agreement. Each of the Purchase Agreement, the Security
Agreement, and the Notes, as amended by this Amendment and Consent, and the
documents referred to herein and therein, constitute the entire agreement
between the parties hereto pertaining to the subject matters hereof and thereof,
respectively, and any and all other written or oral agreements existing between
the parties hereto are expressly canceled.

[Signature Pages Follow]

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      The parties have executed this Amendment No. 1 to Convertible Note and
Warrant Purchase Agreement, Security Agreement and Secured Convertible
Promissory Notes and Consent as of the Effective Date.

COMPANY:

MTI MICROFUEL CELLS INC.

/s/ Peng K. Lim  Peng K. Lim, Chief Executive Officer 

PURCHASERS:

MECHANICAL TECHNOLOGY INCORPORATED

/s/ Peng K. Lim  Peng K. Lim, Chief Executive Officer 

WALTER L. ROBB

/s/ Walter L. Robb  Walter L. Robb 

COUNTER POINT VENTURES FUND II, LP

/s/ Walter L. Robb  Walter L. Robb, General Partner 

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EXHIBIT A

Additional Closing Date: _______________, 2009

Name and Address of Purchaser        Additional Note Principal Amount          
Counter Point Ventures Fund II, LP    $500,000 Dr. Walter L. Robb, General
Partner    c/o Vantage Management, Inc.    3000 Troy Schenectady Road   
Facsimile: (518) 782-0030   

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISPOSITION THEREOF. NO SUCH SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

MTI MICROFUEL CELLS INC.

SECURED CONVERTIBLE PROMISSORY NOTE

FEB 20th (pl) $500,000 XXXXXXXXXXX, 2009 Albany, New York

     For value received, MTI MicroFuel Cells Inc., a Delaware corporation (the
“Company”), promises to pay to Counter Point Ventures Fund II, LP (the
“Holder”), the principal sum of $500,000. Interest shall accrue from the date of
this Note on the unpaid principal amount at a rate equal to 10.0% per annum,
compounded annually. This Note is one of a series of Secured Convertible
Promissory Notes containing substantially identical terms and conditions issued
pursuant to that certain Convertible Note and Warrant Purchase Agreement dated
September 18, 2008, as amended (the “Purchase Agreement”). Such Notes are
referred to herein as the “Notes,” and the holders thereof are referred to
herein as the “Holders.” This Note is subject to the following terms and
conditions.

     1. Maturity. Unless converted as provided in Section 2 below, all unpaid
principal and accrued interest under this Note shall be due and payable upon
demand by the Holder at any time on or after May 31, 2009 (the “Maturity Date”),
except as otherwise provided hereunder. Notwithstanding the foregoing, the
entire unpaid principal sum of this Note, together with accrued and unpaid
interest thereon, shall become immediately due and payable upon the insolvency
of the Company, the commission of any act of bankruptcy by the Company, the
execution by the Company of a general assignment for the benefit of creditors,
the filing by or against the Company of a petition in bankruptcy or any petition
for relief under the federal bankruptcy act or the continuation of such petition
without dismissal for a period of 90 days or more, or the appointment of a
receiver or trustee to take possession of the property or assets of the Company.

     2. Conversion.

          (a) Investment by the Holder.

               (i) The entire principal amount of and (at the Company’s option)
accrued but unpaid interest on this Note will automatically convert into shares
of the Company’s preferred stock (the “Next Equity Preferred”) issued and sold
in the Company’s next equity financing in a single or a series of related
transactions yielding gross proceeds to the Company of at least $3,500,000
(including conversion, in whole or in part, of any Notes) (the “Next Equity
Financing”). The number of shares of Next Equity Preferred to be issued upon
such conversion shall be equal to the quotient obtained by dividing (a) the
entire principal amount of this Note plus (if applicable) accrued but unpaid
interest, by (b) the price per share of the Next Equity Preferred, rounded down
to the nearest whole share, and the issuance of such shares upon such conversion
shall be upon the terms and subject to the conditions applicable to the Next
Equity Financing.

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               (ii) If the Next Equity Financing does not occur on or before the
Maturity Date, all principal and (at the Company’s option) accrued interest
outstanding under all of the Notes shall be converted into equity securities of
the Company (“Equity Securities”) based upon a Company valuation and on such
terms to be agreed upon by the Company and the holders of a majority in interest
of the Notes within thirty (30) days following the Maturity Date, which
valuation and terms shall be negotiated in good faith by the Company and a
majority in interest of the Notes (a “Negotiated Conversion”). If the Company
and holders of a majority in interest of the Notes cannot agree upon the
valuation and terms of a Negotiated Conversion, and fail to consummate such
Negotiated Conversion within thirty (30) days following the Maturity Date, then
all principal and accrued interest outstanding under the Notes shall be due and
payable upon demand by the Holders at any time thereafter.

               (iii) Notwithstanding the above, in the event a Change of Control
(as defined below) is consummated prior to the Next Equity Financing, a
Negotiated Conversion, or the repayment in full of all principal and accrued
interest under the Notes, then the Notes shall become immediately due and
payable in an amount equal to 125% of the principal amount of the Note(s) and
100% of the accrued interest outstanding thereon, payment of which shall be in
full satisfaction of the Note(s) and shall be made within thirty (30) days
following the consummation of such Change of Control.

               (iv) The term “Change of Control” shall mean the sale, conveyance
or other disposition of all or substantially all of the Company’s property or
business or the Company’s merger with or into or consolidation with any other
corporation, limited liability company or other entity (other than a wholly
owned subsidiary of the Company), provided that the term “Change of Control”
shall not include a merger of the Company effected exclusively for the purpose
of changing the domicile of the Company, to an equity financing in which the
Company is the surviving corporation, or to a transaction in which the
stockholders of the Company immediately prior to the transaction own 50% or more
of the voting power of the surviving corporation following the transaction.

          (b) Mechanics and Effect of Conversion. Upon conversion of this Note
pursuant to this Section 2, the Holder shall surrender this Note, duly endorsed,
at the principal offices of the Company or any transfer agent of the Company. At
its expense, the Company will, as soon as practicable thereafter, issue and
deliver to such Holder, at such principal office, a certificate or certificates
for the number of shares to which such Holder is entitled upon such conversion,
together with any other securities and property to which the Holder is entitled
upon such conversion under the terms of this Note, including a check payable to
the Holder for any cash amounts payable as described herein. Upon conversion of
this Note, the Company will be forever released from all of its obligations and
liabilities under this Note with regard to that portion of the principal amount
and accrued interest being converted including without limitation the obligation
to pay such portion of the principal amount and accrued interest.

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          (c) Payment of Interest. Upon conversion of the principal amount of
this Note into the Company’s Next Equity Preferred or Equity Securities, as
applicable, any interest accrued on this Note that is not by reason of Section
2(a) hereof simultaneously converted into Next Equity Preferred or Equity
Securities, as applicable, shall be immediately paid to the Holder.

     3. Payment; Prepayment. All payments shall be made in lawful money of the
United States of America at such place as the Holder hereof may from time to
time designate in writing to the Company. Payment shall be credited first to the
accrued interest then due and payable and the remainder applied to principal.
Prepayment of this Note may be made at any time without penalty.

     4. Transfer; Successors and Assigns. The terms and conditions of this Note
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Notwithstanding the foregoing, the Holder may not
assign, pledge, or otherwise transfer this Note without the prior written
consent of the Company. Subject to the preceding sentence, this Note may be
transferred only upon surrender of the original Note for registration of
transfer, duly endorsed, or accompanied by a duly executed written instrument of
transfer in form satisfactory to the Company. Thereupon, a new note for the
appropriate principal amount and interest will be issued to, and registered in
the name of, the transferee. Interest and principal are payable only to the
registered holder of this Note.

     5. Governing Law. This Note and all acts and transactions pursuant hereto
and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of Delaware,
without giving effect to principles of conflicts of law.

     6. Amendments and Waivers. Any term of this Note may be amended only with
the written consent of the Company and at least a majority in interest of the
Holders. Any amendment or waiver effected in accordance with this Section 6
shall be binding upon the Company, each Holder and each transferee of any Note.

     7. Security Interest. This Note is secured by all of the assets of the
Company in accordance with a separate security agreement (the “Security
Agreement”) of even date herewith between the Company and the Holder. In case of
an Event of Default (as defined in the Security Agreement), the Holder shall
have the rights set forth in the Security Agreement.

     8. Company Covenant. For so long as this Note is outstanding, the Company
shall not, without written consent of at least a majority in interest of the
Holders, sell or transfer any accounts, inventory, equipment, general
intangibles (to include all intellectual property including without limitation:
patents, patent applications, copyrights, trademarks and trade names),
documents, instruments, chattel paper, deposit accounts, and all proceeds of the
foregoing, except for: (i) the payment on accounts payable in the ordinary
course of the Company’s operations; (ii) the sale of finished inventory and the
non-exclusive licenses of intellectual property in the ordinary course of the
Company’s business; (iii) the sale of obsolete or unneeded equipment in the
ordinary course of business; (iv) cash and equipment to the Company’s
subsidiaries necessary for their operations; and (v) the repayment of accrued
interest and/or principal under the Notes.

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     9. Stockholders, Officers and Directors Not Liable. In no event shall any
stockholder, officer or director of the Company be liable for any amounts due or
payable pursuant to this Note.

     10. Counterparts. This Note may be executed in counterparts and by
facsimile, each of which will be deemed to be an original and all of which
together will constitute a single agreement.

 

[Signature Page Follows]

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     This Secured Convertible Promissory Note was executed as of the date first
above written.

COMPANY:    MTI MICROFUEL CELLS INC.      /s/ Peng K. Lim      Peng K. Lim 
Chief Executive Officer    Address:     431 New Karner Road    Albany, NY 12205 

AGREED TO AND ACCEPTED:

HOLDER:

COUNTER POINT VENTURES FUND II, LP

/s/ Walter L. Robb      Signature    Walter L. Robb, General Partner      Print
Name and Title of Signatory (if entity)      Address:     c/o Vantage
Management, Inc.  3000 Troy Schenectady Road  Schenectady, NY 12309 

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

Warrant No. 4  FEB 20th (PL)  Date of Issuance:   XXXXXX, 2009 

MTI MICROFUEL CELLS INC.

Warrant

     MTI MicroFuel Cells Inc. (the “Company”), for value received, hereby
certifies that Counter Point Ventures Fund II, LP, or its registered assigns
(the “Holder”), is entitled, subject to the terms set forth below, to purchase
from the Company, at any time after the date hereof and on or before the
Expiration Date (as defined in Section 6 below) shares of capital stock of the
Company at an exercise price per share as set forth herein. This Warrant is one
of a series of Warrants containing substantially identical terms and conditions
issued pursuant to that certain Convertible Note and Warrant Purchase Agreement
dated September 18, 2008, as amended (the “Purchase Agreement”). This Warrant is
issued pursuant to, and is subject to the terms and conditions of, the Purchase
Agreement.

     The shares purchasable upon exercise of this Warrant are hereinafter
referred to as the “Warrant Stock”.

     1. Number and Type of Shares; Purchase Price. Subject to the terms and
conditions hereinafter set forth, the Holder is entitled, upon surrender of this
Warrant, to purchase from the Company the following: in the event the Company
(i) issues or sells preferred stock (“Next Equity Preferred”) in a Next Equity
Financing (as defined in the Note(s) issued to the Holder pursuant to the
Purchase Agreement), or (ii) issues equity securities (“Equity Securities”) in a
Negotiated Conversion (as defined in the Note(s) issued to the Holder pursuant
to the Purchase Agreement), the Holder is entitled to exercise this Warrant for
a number of shares of such Next Equity Preferred or Equity Securities issued in
the earlier to occur of the Next Equity Financing or a Negotiated Conversion, as
applicable, equal to (x) 10% of the original principal amount of the Note(s)
issued to the Holder pursuant to the Purchase Agreement on the date of issuance
of this Warrant, divided by (y) the purchase or conversion price per share of
the Next Equity Preferred or Equity Securities, as applicable, issuable upon
conversion of the Note(s) (the “Purchase Price”), rounded down to the nearest
whole share, at a per share purchase price equal to the Purchase Price per share
of such Next Equity Preferred or Equity Securities, as applicable, issued
therein.

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     2. Exercise.

          (a) Manner of Exercise. This Warrant may be exercised by the Holder,
in whole or in part, by surrendering this Warrant, with the purchase/exercise
form appended hereto as Exhibit A duly executed by such Holder or by such
Holder’s duly authorized attorney, at the principal office of the Company, or at
such other office or agency as the Company may designate, accompanied by payment
in full of the Purchase Price payable in respect of the number of shares of
Warrant Stock purchased upon such exercise. The Purchase Price may be paid by
cash, check, wire transfer, or by the surrender of promissory notes or other
instruments representing indebtedness of the Company to the Holder.

          (b) Effective Time of Exercise. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
day on which this Warrant shall have been surrendered to the Company as provided
in Section 2(a) above. At such time, the person or persons in whose name or
names any certificates for Warrant Stock shall be issuable upon such exercise as
provided in Section 2(d) below shall be deemed to have become the holder or
holders of record of the Warrant Stock represented by such certificates.

          (c) Net Issue Exercise.

               (i) In lieu of exercising this Warrant in the manner provided
above in Section 2(a), the Holder may elect to receive shares equal to the value
of this Warrant (or the portion thereof being canceled) by surrender of this
Warrant at the principal office of the Company together with notice of such
election on the purchase/exercise form appended hereto as Exhibit A duly
executed by such Holder or such Holder’s duly authorized attorney, in which
event the Company shall issue to such Holder a number of shares of Warrant Stock
computed using the following formula:

                          X =  Y (A - B)   A

Where:       X =  The number of shares of Warrant Stock to be issued to the
Holder.        Y =  The number of shares of Warrant Stock purchasable under this
Warrant (at the date of such calculation).          A =  The fair market value
of one share of Warrant Stock (at the date of such calculation).          B = 
The Purchase Price (as adjusted to the date of such calculation). 

               (ii) For purposes of this Section 2(c), the fair market value of
Warrant Stock on the date of calculation shall mean with respect to each share
of Warrant Stock:

                    (A) if the exercise is in connection with an initial public
offering of the Company’s Common Stock, and if the Company’s Registration
Statement relating to such public offering has been declared effective by the
Securities and Exchange Commission, then the fair market value shall be the
product of (x) the initial “Price to Public” per share specified in the final
prospectus with respect to the offering and (y) the number of shares of Common
Stock into which each share of Warrant Stock is convertible at the date of
calculation;

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                    (B) if (A) is not applicable, the fair market value of
Warrant Stock shall be at the highest price per share which the Company could
obtain on the date of calculation from a willing buyer (not a current employee
or director) for shares of Warrant Stock sold by the Company, from authorized
but unissued shares, as determined in good faith by the Board of Directors,
unless the Company is at such time subject to an acquisition as described in
Section 6 below, in which case the fair market value of Warrant Stock shall be
deemed to be the value received by the holders of such stock pursuant to such
acquisition.

          (d) Delivery to Holder. As soon as practicable after the exercise of
this Warrant in whole or in part, and in any event within ten (10) days
thereafter, the Company at its expense will cause to be issued in the name of,
and delivered to, the Holder, or as such Holder (upon payment by such Holder of
any applicable transfer taxes) may direct:

               (i) a certificate or certificates for the number of shares of
Warrant Stock to which such Holder shall be entitled; and

               (ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of shares of Warrant Stock equal (without
giving effect to any adjustment therein) to the number of such shares called for
on the face of this Warrant minus the number of such shares purchased by the
Holder upon such exercise as provided in Section 2(a) or 2(c) above.

     3. Adjustments.

          (a) Stock Splits and Dividends. If outstanding shares of the Company’s
Common Stock shall be subdivided into a greater number of shares or a dividend
in Common Stock shall be paid in respect of Common Stock, the Purchase Price in
effect immediately prior to such subdivision or at the record date of such
dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of shares of Warrant Stock purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Purchase Price
in effect immediately prior to such adjustment; by (ii) the Purchase Price in
effect immediately after such adjustment.

          (b) Reclassification, Etc. In case there occurs any reclassification
or change of the outstanding securities of the Company or of any reorganization
of the Company (or any other corporation the stock or securities of which are at
the time receivable upon the exercise of this Warrant) or any similar corporate
reorganization on or after the date hereof, then and in each such case the
Holder, upon the exercise hereof at any time after the consummation of such
reclassification, change, or reorganization shall be entitled to receive, in
lieu of the stock or other securities and property receivable upon the exercise
hereof prior to such consummation, the stock or other securities or property to
which such Holder would have been entitled upon such consummation if such Holder
had exercised this Warrant immediately prior thereto, all subject to further
adjustment pursuant to the provisions of this Section 3; provided, however, that
the operation of this Section 3(b) shall not effect the termination of this
Warrant upon a Change of Control (as defined in Section 6 below) pursuant to
Section 6 below.

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          (c) Adjustment Certificate. When any adjustment is required to be made
in the Warrant Stock or the Purchase Price pursuant to this Section 3, the
Company shall promptly mail to the Holder a certificate setting forth (i) a
brief statement of the facts requiring such adjustment; (ii) the Purchase Price
after such adjustment; and (iii) the kind and amount of stock or other
securities or property into which this Warrant shall be exercisable after such
adjustment.

     4. Transfers.

          (a) Unregistered Security. Each holder of this Warrant acknowledges
that this Warrant and the Warrant Stock of the Company have not been registered
under the Securities Act of 1933, as amended (the “Securities Act”), and agrees
not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose
of this Warrant or any Warrant Stock issued upon its exercise in the absence of
(i) an effective registration statement under the Act as to this Warrant or such
Warrant Stock and registration or qualification of this Warrant or such Warrant
Stock under any applicable U.S. federal or state securities law then in effect;
or (ii) an opinion of counsel, satisfactory to the Company, that such
registration and qualification are not required. Each certificate or other
instrument for Warrant Stock issued upon the exercise of this Warrant shall bear
a legend substantially to the foregoing effect.

          (b) Transferability. The Holder may not assign, pledge, or otherwise
transfer this Warrant without the prior written consent of the Company. Subject
to the preceding sentence, this Warrant may be transferred only upon surrender
of the original Warrant for registration of transfer, duly endorsed, or
accompanied by a duly executed written instrument of transfer in form
satisfactory to the Company. Thereupon, a new warrant in substantially the form
hereof will be issued to, and registered in the name of, the transferee.

          (c) Warrant Register. The Company will maintain a register containing
the names and addresses of the Holders of this Warrant. Until any transfer of
this Warrant is made in the warrant register, the Company may treat the Holder
of this Warrant as the absolute owner hereof for all purposes; provided,
however, that if this Warrant is properly assigned in blank, the Company may
(but shall not be required to) treat the bearer hereof as the absolute owner
hereof for all purposes, notwithstanding any notice to the contrary. Any Holder
may change such Holder’s address as shown on the warrant register by written
notice to the Company requesting such change.

     5. No Impairment. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will (subject to Section 14 below) at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.

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     6. Termination. This Warrant (and the right to purchase securities upon
exercise hereof) shall automatically terminate upon the earliest to occur of the
following (the “Expiration Date”): (a) XXXXXXX, 2014; (b) immediately prior to a
Change of Control; (c) the closing of a firm commitment underwritten public
offering pursuant to a registration statement under the Securities Act; or (d)
the date that is thirty (30) days following the Maturity Date of the Note(s)
issued to the Holder contemporaneously with the issuance of this Warrant in the
event the Next Financing does not occur prior to the Maturity Date of such
Note(s) and a Negotiated Conversion does not occur within thirty (30) days
following the Maturity Date of such Note(s).

          The term “Change of Control” shall mean the sale, conveyance or other
disposition of all or substantially all of the Company’s property or business or
the Company’s merger with or into or consolidation with any other corporation,
limited liability company or other entity (other than a wholly owned subsidiary
of the Company), provided that the term “Change of Control” shall not include a
merger of the Company effected exclusively for the purpose of changing the
domicile of the Company, to an equity financing in which the Company is the
surviving corporation, or to a transaction in which the stockholders of the
Company immediately prior to the transaction own 50% or more of the voting power
of the surviving corporation following the transaction.

     7. Notices of Certain Transactions. In case:

          (a) the Company shall take a record of the holders of its Preferred
Stock (or other stock or securities at the time deliverable upon the exercise of
this Warrant) for the purpose of entitling or enabling them to receive any
dividend or other distribution, or to receive any right to subscribe for or
purchase any shares of stock of any class or any other securities, or to receive
any other right, to subscribe for or purchase any shares of stock of any class
or any other securities, or to receive any other right;

          (b) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the Company,
any consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the surviving
entity), or any transfer of all or substantially all of the assets of the
Company;

          (c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company; or

          (d) of any redemption of the Common Stock or Preferred Stock,

then, and in each such case, the Company will mail or cause to be mailed to the
Holder of this Warrant a notice specifying, as the case may be, (i) the date on
which a record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right; or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of Preferred Stock (or such other
stock or securities at the time deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation,
winding-up, redemption or conversion) are to be determined. Such notice shall be
mailed at least ten (10) days prior to the record date or effective date for the
event specified in such notice.

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     8. Reservation of Stock. The Company will at all times reserve and keep
available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant Stock and other stock, securities and property,
as from time to time shall be issuable upon the exercise of this Warrant.

     9. Exchange of Warrants. Upon the surrender by the Holder of any Warrant or
Warrants, properly endorsed, to the Company at the principal office of the
Company, the Company will, subject to the provisions of Section 4 hereof, issue
and deliver to or upon the order of such Holder, at the Company’s expense, a new
Warrant or Warrants of like tenor, in the name of such Holder or as such Holder
(upon payment by such Holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for the number of shares
of Warrant Stock called for on the face or faces of the Warrant or Warrants so
surrendered.

     10. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.

     11. Mailing of Notices. Any notice required or permitted pursuant to this
Warrant shall be in writing and shall be deemed sufficient upon receipt, when
delivered personally or sent by courier, three days after deposit with an
overnight delivery service, or confirmed facsimile, addressed (a) if to the
Holder, to the address of the Holder most recently furnished in writing to the
Company; and (b) if to the Company, to the address set forth below or
subsequently modified by written notice to the Holder.

     12. No Rights as Stockholder. Until the exercise of this Warrant, the
Holder of this Warrant shall not have or exercise any rights by virtue hereof as
a stockholder of the Company.

     13. No Fractional Shares. No fractional shares of Warrant Stock will be
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Warrant Stock on the date of exercise, as determined in good faith by the
Company’s Board of Directors.

     14. Amendment or Waiver. Any term of this Warrant may be amended or waived
upon written consent of the Company and the holders of at least a majority of
the Warrant Stock issuable upon exercise of outstanding warrants purchased
pursuant to the Purchase Agreement. By acceptance hereof, the Holder
acknowledges that in the event the required consent is obtained, any term of
this Warrant may be amended or waived with or without the consent of the Holder;
provided, however, that any amendment hereof that would materially adversely
affect the Holder in a manner different from the holders of the remaining
warrants issued pursuant to the Purchase Agreement shall also require the
consent of Holder.

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     15. Headings. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.

     16. Governing Law. This Warrant shall be governed, construed and
interpreted in accordance with the laws of the State of Delaware, without giving
effect to principles of conflicts of law.

     17. Counterparts. This Warrant may be executed in counterparts and by
facsimile, each of which will be deemed to be an original and all of which
together will constitute a single agreement.

[Signature Page Follows]

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     This Warrant was executed as of the date first above written.

COMPANY:    MTI MICROFUEL CELLS INC.        /s/ Peng K. Lim    Peng K. Lim 
Chief Executive Officer    Address:     

AGREED TO AND ACCEPTED:

HOLDER:

COUNTER POINT VENTURES FUND II, LP
 

/s/ Walter L. Robb    Walter L. Robb, General Partner        Address:     c/o
Vantage Management, Inc.    3000 Troy Schenectady Road    Schenectady, NY 12309 

 

 

 

SIGNATURE PAGE TO WARRANT

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EXHIBIT A

PURCHASE/EXERCISE FORM

To:     MTI MICROFUEL CELLS INC.  Dated: ______________

     The undersigned, pursuant to the provisions set forth in the attached
Warrant No. _______, hereby irrevocably elects to (i) purchase __________ shares
of the _________ Stock covered by such Warrant and herewith makes payment of
$__________, representing the full purchase price for such shares at the price
per share provided for in such Warrant; or (ii) exercise such Warrant for
__________ shares purchasable under the Warrant pursuant to the Net Issue
Exercise provisions of Section 2(c) of such Warrant.

     The undersigned acknowledges that it has reviewed the representations and
warranties contained in Section 4 of the Purchase Agreement (as defined in the
Warrant) and by its signature below hereby makes such representations and
warranties to the Company. Defined terms contained in such representations and
warranties shall have the meanings assigned to them in the Purchase Agreement,
provided that the term “Purchaser” shall refer to the undersigned and the term
“Securities” shall refer to the Warrant Stock and the Common Stock of the
Company issuable upon conversion of the Warrant Stock, if applicable.

      The undersigned further acknowledges that it has reviewed the lock-up
agreement set forth in Section 7 of the Purchase Agreement, and agrees to be
bound by such provisions.

  Print Name of Holder      Signature      Print Name and Title of Signatory (if
entity) 

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