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.





     
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]




      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  






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. 

-5- 




               (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. 

-6- 




          (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. 

-7- 




     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]

-8- 




     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  






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. 

-10- 




     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; 

-11- 




                    (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.

-12- 




          (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. 

-13- 




     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.


-14- 




     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.


-15- 




     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] 

-16- 





     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






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)