Document:

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                                                                    Exhibit 10.1

                                 MATRITECH, INC.

                      INVESTOR RELATIONS WARRANT AGREEMENT

                              Dated: July 14, 2000
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         THIS WARRANT AGREEMENT (this "Agreement") dated July 14, 2000 is made
and entered into by and between Matritech, Inc., a corporation organized under
the laws of the State of Delaware (the "Company"), and the individuals set forth
on Exhibit A hereto (collectively, the "Warrantholders" or "Holders,"
individually, each a "Warrantholder" or "Holder").

         Subject to the terms and conditions hereof, the Company agrees to issue
to each Warrantholder warrants as hereinafter described (the "Warrants") to
purchase the shares of the common stock, par value $.01 per share (the "Common
Stock"), of the Company set forth opposite each Warrantholder's respective name
on Exhibit A. As used herein, the terms "Share" or "Shares" shall mean
collectively the Common Stock issuable upon exercise of the Warrants together
with any other securities issuable upon such exercise as provided in Section 8
of this Agreement. Except where otherwise specified, the terms of this Agreement
shall apply to each Warrantholder.

         For the purpose of defining the terms and provisions of the Warrants
and the respective rights and obligations thereunder, the Company and each
Warrantholder, for value received, hereby agree as follows:

         Section 1.  TRANSFERABILITY AND FORM OF WARRANTS.

         1.1. REGISTRATION. The Warrants shall be numbered and shall be
registered on the books of the Company when issued, in accordance with Delaware
corporate practice.

         1.2. TRANSFER. The Warrants shall be transferable only on the books of
the Company maintained at its principal office in Newton, Massachusetts, or
wherever its principal office may then be located, upon delivery thereof duly
endorsed by the Warrantholder seeking such transfer or by its duly authorized
attorney or representative, accompanied by proper evidence of succession,
assignment or authority to transfer. Upon any registration of transfer, the
Company shall execute and deliver new Warrants to the person entitled thereto.

         1.3. LIMITATIONS ON TRANSFER OF THE WARRANTS. Subject to the provisions
of Section 11 of this Agreement, the Warrants shall not be sold, assigned,
hypothecated or otherwise transferred except to any person acquiring the
Warrants upon the death of a Warrantholder by will or the laws of descent and
distribution. The term "Warrants" shall include any and all warrants outstanding
pursuant to this Agreement, including those evidenced by a certificate or
certificates issued upon division, exchange, substitution or transfer pursuant
to this Agreement.

         1.4. FORM OF WARRANTS. The form of certificate evidencing the Warrants
shall be substantially as set forth in Exhibit B attached hereto. Certificates
evidencing the Warrants shall be executed on behalf of the Company by its
Chairman, President or by any Vice President, shall be attested to by its
Secretary or any Assistant Secretary, and shall be dated as of the date of
execution thereof.

         1.5. LEGEND ON COMMON STOCK. The Warrants, and the Shares have not been
registered under the Securities Act of 1933, as amended (the "Act"). Each
certificate for

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Shares shall bear the following legend unless, at the time of exercise, such
Shares are the subject of a currently effective registration statement under the
Act:

                  "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
                  NOT BEEN REGISTERED UNDER THE UNITED STATES
                  SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
                  STATE OF THE UNITED STATES. SUCH SECURITIES MAY NOT
                  BE SOLD, ASSIGNED, EXCHANGED, HYPOTHECATED OR
                  OTHERWISE TRANSFERRED IN ANY MANNER EXCEPT IN
                  COMPLIANCE WITH SECTION 11 OF THE WARRANT AGREEMENT
                  BY AND BETWEEN THE ISSUER AND THE ORIGINAL HOLDERS OF
                  THESE SECURITIES DATED JULY 14, 2000."

         Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the Act of
the securities represented thereby) shall also bear the above legend unless, in
the opinion of the Company's counsel, the securities represented thereby need no
longer be subject to such restrictions.

         Section 2. EXCHANGE OF WARRANT CERTIFICATE. Any Warrant certificate may
be exchanged for another certificate or certificates entitling a Warrantholder
to purchase a like aggregate number of Shares as the certificate or certificates
surrendered then entitles such Warrantholder to purchase. Any Warrantholder
desiring to exchange a Warrant certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed, the
certificate evidencing the Warrant to be so exchanged. Thereupon, the Company
shall execute and deliver to the person entitled thereto a new Warrant
certificate as so requested.

         Section 3.  TERM OF WARRANTS; EXERCISE OF WARRANTS

         (a) Subject to the terms of this Agreement, each Warrantholder shall
have the right, at any time during the period commencing at 9:00 a.m., Eastern
Time, on July 14, 2000 (the "Commencement Date") and ending at 5:00 p.m.,
Eastern Time, on July 14, 2005 (the "Termination Date"), to purchase from the
Company up to the number of fully paid and nonassessable Shares which such
Warrantholder may at the time be entitled to purchase pursuant to this
Agreement, upon surrender to the Company at its principal office of the
certificates evidencing the Warrants to be exercised, with the purchase form on
the reverse thereof duly completed and signed, and upon payment to the Company
of the Warrant Price (as defined in and determined in accordance with the
provisions of this Section 3 and Sections 7 and 8 hereof) for the number of
Shares in respect of which such Warrants are then exercised, but in no event for
fewer than 100 Shares (unless fewer than an aggregate of 100 Shares are then
purchasable under all outstanding Warrants held of record by a Warrantholder).
Payment of the aggregate Warrant Price shall be made in cash or by certified or
cashier's check, in next day funds, or any combination thereof.

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         (b) Upon surrender of Warrant certificates and payment of the Warrant
Price, the Company shall issue and cause to be delivered with all reasonable
dispatch to or upon the written order of a Warrantholder, and (subject to
Section 11 hereof) in such name or names as such Warrantholder may designate, a
certificate or certificates for the number of full Shares so acquired upon the
exercise of the Warrant, together with cash, as provided in Section 9 hereof, in
respect of any fractional Shares otherwise issuable upon such surrender. Such
certificate or certificates shall be deemed to have been issued and any person
so designated to be named therein shall be deemed to have become a holder of
record of such Shares as of the date of surrender of the Warrants being
exercised and payment of the Warrant Price notwithstanding that the certificate
or certificates representing such securities shall not actually have been
delivered or that the stock transfer books of the Company shall then be closed.
The Warrants shall be exercisable at the election of a Warrantholder either in
full or from time to time in part and, in the event that a certificate
evidencing Warrants is exercised in respect of fewer than all of the Shares
specified therein at any time prior to the Termination Date, a new certificate
evidencing the remaining portion of the Warrants shall be issued by the Company.

         Section 4. PAYMENT OF TAXES. The Company will pay all taxes and fees,
if any (other than any income taxes that may be imposed on the exercise of the
Warrants or on the subsequent sale of the Shares), attributable to the initial
issuance of the Warrants or the issuance of Shares upon exercise of the
Warrants; provided that the Company shall not be required to pay any tax or fee
which may be payable in respect of any secondary transfer of the Warrants or
such Shares.

         Section 5. MUTILATED OR MISSING WARRANTS. In case the certificate or
certificates evidencing any Warrants shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the affected Warrantholder,
issue and deliver in exchange and substitution for and upon cancellation of the
mutilated certificate or certificates, or in lieu of and substitution for the
certificate or certificates lost, stolen or destroyed, a new Warrant certificate
or certificates of like tenor and representing an equivalent right or interest,
but only upon receipt of evidence satisfactory to the Company of the loss, theft
or destruction of such Warrant and, if requested, at the cost and expense of the
Warrantholder, a bond of indemnity in form and amount satisfactory to the
Company. Applicants for such substitute Warrants certificate shall also comply
with such other reasonable regulations as the Company may prescribe.

         Section 6. RESERVATION OF COMMON STOCK. There has been reserved, and
the Company shall at all times keep reserved so long as any Warrants remain
outstanding, out of its authorized share capital, such number of Common Stock as
shall be subject to purchase under all outstanding Warrants. Every transfer
agent for the Common Stock and other securities of the Company issuable upon the
exercise of Warrants will be irrevocably authorized and directed at all times to
reserve such number of authorized shares of Common Stock and other securities as
shall be requisite for such purpose. The Company will keep a copy of this
Agreement on file with every transfer agent for the Common Stock and other
securities of the Company issuable upon the exercise of the Warrants. The
Company will supply every such transfer agent with duly executed stock

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and other certificates, as appropriate, for such purpose and will provide or
otherwise make available any cash which may be payable as provided in Section 9
hereof.

         Section 7. WARRANT PRICE. "Warrant Price" shall mean the price per
Share at which Shares shall at any time be purchasable upon the exercise of the
Warrants. The initial Warrant Price shall be $2.50, subject to adjustment
pursuant to Section 8 hereof.

         Section 8. ADJUSTMENT OF NUMBER AND KIND OF SECURITIES. The number and
kind of securities purchasable upon the exercise of the Warrants and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events, as follows:

         8.1.  ADJUSTMENTS.

                  (a) In case the Company shall (i) pay a dividend in Common
         Stock or make a distribution in Common Stock, (ii) subdivide its
         outstanding Common Stock, (iii) combine its outstanding Common Stock
         into a smaller number of shares of Common Stock, or (iv) issue, by
         reclassification of its Common Stock, other securities of the Company,
         the number of Shares or other securities purchasable upon exercise of
         the Warrants immediately prior thereto shall be adjusted so that each
         Warrantholder shall be entitled to receive the kind and number of
         shares of Common Stock or other securities of the Company which it
         would have owned or would have been entitled to receive immediately
         after the happening of any of the events described above, had the
         Warrants been exercised immediately prior to the happening of such
         event or any record date with respect thereto. Any adjustment made
         pursuant to this subsection 8.1(a) shall become effective immediately
         on the effective date of such event retroactive to the record date, if
         any, for such event.

                  (b) In case the Company shall issue rights, options, warrants
         or convertible securities to all or substantially all holders of its
         Common Stock without any charge to such holders, entitling them to
         subscribe for or purchase shares of Common Stock at a price per share
         which, at the record date mentioned below, is lower than the then
         effective Warrant Price (calculated pursuant to this Section 8), the
         number of Shares thereafter purchasable upon the exercise of each
         Warrant shall be determined by multiplying the number of Shares
         theretofore purchasable upon exercise of the Warrant by a fraction, of
         which the numerator shall be the number of shares of Common Stock
         outstanding immediately prior to the issuance of such rights, options,
         warrants or convertible securities plus the number of additional Common
         Stock offered for subscription or purchase, and of which the
         denominator shall be the number of shares of Common Stock outstanding
         immediately prior to the issuance of such rights, options, warrants or
         convertible securities plus the number of shares which the aggregate
         offering price of the total number of shares offered would purchase at
         such then effective Warrant Price. Such adjustment shall be made
         whenever such rights, options, warrants or convertible securities are
         issued, and shall become effective immediately and retroactive to the
         record date for the determination of shareholders entitled to receive
         such rights, options, warrants or convertible

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         securities, provided no such adjustment shall be made for rights issued
         in connection with what is customarily referred to as a "poison pill"
         or "shareholder rights plan."

                  (c) In case the Company shall distribute to all or
         substantially all holders of its Common Stock evidences of its
         indebtedness or assets (excluding cash dividends or distributions out
         of earnings) or rights, options, warrants or convertible securities
         containing the right to subscribe for or purchase Shares (excluding
         those referred to in subsection 8.1(b) above and rights in connection
         with a shareholder rights plan), then in each case the number of Shares
         thereafter purchasable upon the exercise of the Warrants shall be
         determined by multiplying the number of Shares theretofore purchasable
         upon exercise of the Warrants by a fraction, of which the numerator
         shall be the then effective Warrant Price as of the date of such
         distribution calculated pursuant to this Section 8, and of which the
         denominator shall be such then effective Warrant Price on such date
         minus the then fair value (determined as provided in subparagraph (f)
         below) of the portion of the assets or evidences of indebtedness so
         distributed or of such subscription rights, options, warrants or
         convertible securities applicable to one share. Such adjustment shall
         be made whenever any such distribution is made and shall become
         effective on the date of distribution retroactive to the record date
         for the determination of shareholders entitled to receive such
         distribution.

                  (d) No adjustment in the number of Shares purchasable pursuant
         to the Warrants shall be required unless such adjustment would require
         an increase or decrease of at least one percent in the number of Shares
         then purchasable upon the exercise of the Warrants or, if the Warrants
         are not then exercisable, the number of Shares purchasable upon the
         exercise of the Warrants on the first date thereafter that the Warrants
         become exercisable; provided that any adjustments which by reason of
         this subsection 8.1(d) are not required to be made immediately shall be
         carried forward and taken into account in any subsequent adjustment.

                  (e) Whenever the number of Shares purchasable upon the
         exercise of a Warrant is adjusted, as herein provided, the Warrant
         Price payable upon exercise of such Warrant shall be adjusted by
         multiplying such Warrant Price immediately prior to such adjustment by
         a fraction, of which the numerator shall be the number of Shares
         purchasable upon the exercise of the Warrant immediately prior to such
         adjustment, and of which the denominator shall be the number of Shares
         so purchasable upon the exercise of the Warrant immediately thereafter.

                  (f) Whenever the number of Shares purchasable upon the
         exercise of Warrants is adjusted as herein provided, the Company shall
         cause to be promptly mailed to the Warrantholders by first class mail,
         postage prepaid, notice of such adjustment and a certificate of the
         chief financial officer of the Company setting forth the number of
         Shares purchasable upon the exercise of the Warrants after such
         adjustment, a brief statement of the facts requiring such adjustment
         and the computation by which such adjustment was made.

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                  (g) For the purpose of this subsection 8.1, the term Common
         Stock shall mean (i) the class of Common Stock designated as the Common
         Stock of the Company at the date of this Agreement, or (ii) any other
         class of shares resulting from successive changes or reclassification
         of such Common Stock consisting solely of changes in par value, or from
         par value to no par value, or from no par value to par value. In the
         event that at any time, as a result of an adjustment made pursuant to
         this Section 8, a Warrantholder shall become entitled to purchase any
         securities of the Company other than Common Stock, (i) if the
         Warrantholders' right to purchase is on any other basis than that
         available to all holders of the Common Stock, the Company shall obtain
         an opinion of an independent investment banking firm valuing such other
         securities and (ii) thereafter the number of such other securities so
         purchasable upon exercise of the Warrants shall be subject to
         adjustment from time to time in a manner and on terms as nearly
         equivalent as practicable to the provisions with respect to the Common
         Stock contained in this Section 8.

                  (h) Upon the expiration of any rights, options, warrants or
         conversion privileges, if such shall not have been exercised, the
         number of Shares purchasable upon exercise of the Warrants, to the
         extent the Warrants have not then been exercised, shall, upon such
         expiration, be readjusted and shall thereafter be such as they would
         have been had they been originally adjusted (or had the original
         adjustment not been required, as the case may be) on the basis of (A)
         the fact that the only shares of Common Stock so issued were the shares
         of Common Stock, if any, actually issued or sold upon the exercise of
         such rights, options, warrants or conversion privileges, and (B) the
         fact that such shares of Common Stock, if any, were issued or sold for
         the consideration actually received by the Company upon such exercise
         plus the consideration, if any, actually received by the Company for
         the issuance, sale or grant of all such rights, options, warrants or
         conversion privileges whether or not exercised; provided, however, that
         no such readjustment shall have the effect of decreasing the number of
         Shares purchasable upon exercise of the Warrants by an amount in excess
         of the amount of the adjustment initially made in respect of the
         issuance, sale or grant of such rights, options, warrants or conversion
         privileges.

         8.2. NO ADJUSTMENT FOR DIVIDENDS. Except as provided in subsection 8.1,
no adjustment to the Warrants or any provision or condition thereof in respect
of any dividends or distributions out of earnings shall be made during the term
of the Warrants or upon the exercise of Warrants.

         8.3. NO ADJUSTMENT IN CERTAIN CASES. No adjustments to the Warrants or
any provision or condition thereof shall be made pursuant to Section 3 or
Section 8 hereof in connection with (i) the issuance of Common Stock upon
exercise of the Warrants, (ii) the grant or exercise of the options to purchase
Common Stock under the Company's Stock Plans or any future option plan for the
sole benefit of the Company's employees, consultants and directors, or (iii) the
issuance of securities in an equity financing regardless of the offering price.

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         8.4. PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger
of the Company into another entity or in case of any sale or conveyance to
another entity of the property, assets or business of the Company as an entirety
or substantially as an entirety, the Company or such successor or purchasing
entity, as the case may be, shall execute with the Warrantholders an agreement
that the Warrantholders shall have the right thereafter, upon exercise of the
Warrants and payment of the Warrant Price in effect immediately prior to such
consolidation, merger or sale, to purchase the kind and amount of shares and
other securities and property which it would have been entitled to receive after
the happening of such consolidation, merger, sale or conveyance had the Warrants
been exercised immediately prior thereto. In the event of a merger described in
Section 368(a)(2)(E) of the Internal Revenue Code of 1986 (or any successor
provision), in which the Company is the surviving corporation, the right to
purchase Shares under the Warrants shall terminate on the date of such merger
and thereupon the Warrants shall become null and void, but only if the
controlling corporation (after such event) shall agree to substitute for the
Warrants its warrants entitling the holder thereof to purchase the kind and
amount of shares and other securities and property which it would have been
entitled to receive had the Warrants been exercised immediately prior to such
merger. Any such agreements referred to in this subsection 8.4 shall provide for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in Section 8 hereof, and shall contain substantially
the same terms, conditions and provisions as are contained herein immediately
prior to such event. The provisions of this subsection 8.4 shall similarly apply
to successive consolidations, mergers, sales or conveyances.

         8.5. NOMINAL VALUE OF COMMON STOCK. Before taking any action which
would cause an adjustment effectively reducing the portion of the Warrant Price
allocable to each Share below the then nominal value per Share issuable upon
exercise of the Warrants, the Company will take any corporate action which may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable Shares upon exercise of
the Warrants.

         8.6. INDEPENDENT PUBLIC ACCOUNTANTS. The Company may retain a firm of
independent public accountants of recognized national standing in the United
States (which may be any such firm regularly employed by the Company) to make
any computation required under this Section 8, and a certificate signed by such
firm shall be evidence of the correctness of any computation made under this
Section 8.

         8.7. STATEMENT ON WARRANT CERTIFICATES. Irrespective of any adjustments
in the number of securities issuable upon exercise of Warrants, Warrant
certificates theretofore or thereafter issued may continue to express the same
number of securities as are stated in the similar Warrant certificates initially
issuable pursuant to this Agreement. However, the Company may, at any time in
its reasonable discretion, make any change in the form of Warrant certificate
that it may deem appropriate and that does not affect the substance thereof; and
any Warrant certificate hereafter issued, whether upon registration of transfer
of, or in exchange or substitution for, an outstanding Warrant certificate, may
be in the form so changed.

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         Section 9. FRACTIONAL INTERESTS; MARKET PRICE. The Company shall not be
required to issue fractional Shares upon the exercise of any Warrant. If any
fraction of a Share would, except for the provisions of this Section 9, be
issuable on the exercise of any Warrant (or specified portion thereof), the
Company shall pay an amount in cash equal to the Market Price multiplied by such
fraction. For all purposes of this Agreement, the term Market Price as of any
specified date shall mean (i) if the Common Stock is traded in the United States
over-the-counter market and not on the Nasdaq System or on any United States
national securities exchange, the average of the mean between the bid and asked
prices of the Common Stock on each of the five consecutive trading days
immediately preceding the date in question, as reported by the National
Quotation Bureau Incorporated or an equivalent generally accepted reporting
service, or (ii) if the Common Stock is traded on the Nasdaq System or on one or
more United States national securities exchanges, the average, for the five
consecutive trading days immediately preceding the date in question, of the
daily closing price of the Common Stock on the Nasdaq System or the daily
closing price for consolidated transactions on the principal United States
national securities exchange on which the Common Stock is listed, or (iii) if
the Common Stock is not traded in the United States over-the-counter market, the
Nasdaq System or any United States national securities exchange, the average,
for the five consecutive trading days immediately preceding the date in
question, of the daily closing price of the Common Stock on the principal
non-United States exchange on which the Common Stock is listed. The daily
closing price referred to in clauses (ii) and (iii) above shall be the last
reported sale price on the day in question or, if no reported sale takes place
on such day, the average of the reported closing bid and asked prices.

         Section 10. NO RIGHTS AS SHAREHOLDER; NOTICES TO WARRANTHOLDERS.
Nothing contained in this Agreement or in the Warrants shall be construed as
conferring upon the Warrantholder or any transferee of a Warrant any rights as a
shareholder of the Company, including (without limitation) the right to vote,
receive dividends, consent or receive notices as a shareholder in respect of any
meeting of shareholders for the election of directors of the Company or any
other matter. If, however, at any time prior to the expiration of the Warrants
and prior to their exercise in full, any one or more of the following events
shall occur:

                  (a) any action which would require an adjustment pursuant to
         Section 8.1 or 8.4; or

                  (b) a dissolution, liquidation or winding up of the Company
         (other than in connection with a consolidation, merger or sale of its
         property, assets and business as an entirety or substantially as an
         entirety) shall be proposed;

then the Company shall give notice in writing of such event to each of the
Warrantholders, as provided in Section 14 hereof, at least 20 days prior to the
date fixed as a record date or the date of closing the transfer books for the
determination of the shareholders entitled to any relevant dividend,
distribution, subscription rights or other rights or for the determination of
shareholders entitled to vote on such proposed dissolution, liquidation or
winding up. Such notice shall specify such record date or the

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date of closing the transfer books, as the case may be. Failure to mail or
receive such notice or any defect therein shall not affect the validity of any
action taken with respect thereto.

         Section 11.  RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.

                  (a) There shall be no transfers of Warrants except as
permitted pursuant to Section 1.3 hereof. If any Warrantholder proposes to sell
or otherwise transfer any Shares, and if such Shares are not then registered for
resale pursuant to an effective registration statement under the Act, the
Warrantholder proposing to make such transfer shall give written notice to the
Company describing briefly the manner in which any such proposed transfer is to
be made; and no such transfer shall be made unless the Company shall notify such
Warrantholder that in the opinion counsel reasonably satisfactory to such
Warrantholder, registration under the Act is not required with respect to such
transfer.

                  (b) Subject to the provisions set forth in this Section 11, if
at any time during the period prior to the Termination Date the Shares are not
subject to an effective registration statement under the Act (a "Registration
Statement"), the Company shall be obligated to the Warrantholders and the
registered holders of the Shares issued upon exercise of the Warrants
(collectively with the Warrantholders, the "Holders"), as follows:

                           (i) Whenever during the five-year period beginning on
         the Commencement Date and ending on the Termination Date, the Company
         proposes to file with the Securities and Exchange Commission (the
         "Commission") a Registration Statement (other than a registration
         statement on Form S-8 (or other form) relating solely to securities
         issued pursuant to an employee benefit plan, or a registration
         statement on Form F-4 or S-4 or any successor form thereto), the
         Company shall, at least 30 days prior to each such proposed filing,
         give written notice (the "Piggyback Notice") thereof to the Holders at
         their respective addresses appearing on the records of the Company, and
         shall offer to include and shall include in such filing any Shares as
         to which written requests (the "Piggyback Request") for such inclusion
         are received by the Company from Holders not more than 20 days after
         such Piggyback Notice is mailed to the Holders. The Shares which are
         the subject of a valid Piggyback Request from Holders are hereinafter
         referred to as the "Piggyback Shares." If such registration statement
         relates in whole or in part to an underwritten public offering of the
         Common Stock by the Company, the right of any Holder to registration
         pursuant to this Section 11(b) shall be conditioned upon such Holder's
         participation in any underwriting of the Company's public offering. All
         Holders proposing to distribute their Piggyback Shares through such
         underwriting shall (together with the Company and other holders of
         Common Stock participating in such underwriting) enter into an
         underwriting agreement in customary form with the underwriter or
         underwriters selected for such underwriting by the Company. In
         addition, if, after the number of Piggyback Shares is

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         determined, the managing underwriter of such offering determines that
         marketing factors require a limitation on the number of shares of
         Common Stock to be underwritten other than those to be offered by the
         Company for its own account, the managing underwriter may exclude any
         or all of the Piggyback Shares from such registration statement and
         underwriting, but only to the extent that the Company excludes Common
         Stock which other shareholders of the Company have requested the
         Company to include in such registration statement and underwriting
         pursuant to "piggyback rights" similar to those granted in this Section
         11(b) (such other Common Stock which is the subject of such requests
         are hereinafter referred to as "Other Piggyback Shares"). In the event
         that any Piggyback Shares are so excluded, the number of Piggyback
         Shares and Other Piggyback Shares that shall be included in such
         registration statement and underwriting shall be allocated equally
         among all Holders and the holders of Other Piggyback Shares in
         proportion, as nearly as practicable, to the total number of Piggyback
         Shares and Other Piggyback Shares. The rights granted to a Holder under
         this subparagraph shall terminate upon the failure by such Holder to
         submit a valid Piggyback Request to the Company upon receipt of a
         Piggyback Notice.

                      (ii) In addition to any Registration Statement pursuant to
         subparagraph (i) above, during the five-year period beginning on the
         Commencement Date and ending on the Termination Date, the Company
         shall, as promptly as practicable (but in any event within 75 days),
         after receipt of a written request (the "Registration Request") by a
         Holder or Holders holding of record (or having the right to acquire
         upon exercise of Warrants) at least 75% of the total number of shares
         of Common Stock issuable upon exercise of the Warrants, prepare and
         file with the Commission at the Holders' expense a Registration
         Statement, and (if required) any related filing with any State
         securities regulator, sufficient to permit the public offering of the
         Shares covered by the Registration Request. Within ten days of the
         Company's receipt of a Registration Request, it shall give written
         notice thereof to the Holders who did not join in the Registration
         Request, at their respective addresses appearing on the records of the
         Company, and shall offer to include and shall include in such
         Registration Statement any Shares as to which written requests for such
         inclusion are received by the Company from such Holders not more than
         20 days after the Company's notice is mailed to such Holders. The
         Company will use its best efforts, at the Holders' expense, to cause
         such Registration Statement to become effective under the Act as
         promptly as practicable and to maintain such effectiveness until the
         earlier of the time that all the registered Shares have been sold or
         the expiration of three hundred sixty-five (365) days from the
         effective date of the Registration Statement. The Company shall be
         required to file not more than one Registration Statement under this
         Section 11(b)(ii).

                  (c) In connection with any Registration Statement filed
pursuant to paragraph (b) of this Section 11, the Company shall take such action
as may be necessary

                                      -10-
<PAGE>   12
or appropriate to comply with the securities or blue sky laws of such states of
the United States as shall reasonably be requested by the Holders, and shall do
any and all other acts which may be necessary or advisable to permit the
proposed sale or other disposition of the Shares in any such state; provided
that in no event shall the Company be obligated in connection therewith to
qualify as a foreign corporation or as a dealer in any jurisdiction where it is
not already so qualified, or to execute a general consent for service of process
in suits other than those arising out of the offer and sale of the Shares, or to
take any action which would subject it to taxation in any jurisdiction where it
is not then so subject.

                  (d) The Company's obligations under paragraph (b) of this
Section 11 with respect to any Holder shall be conditioned in each instance upon
the timely receipt by the Company in writing of (i) information from such Holder
as to the proposed plan of distribution of such Holder's Shares to be included
in a Registration Statement, and (ii) such other information as may be required
by law from such holder, or its underwriter or other agent, for inclusion in
such Registration Statement.

                  (e) Each Holder will not make any sale of the Shares, pursuant
to the Registration Statement referred to in this Section 11 without effectively
causing the prospectus delivery requirements under the Securities Act to be
satisfied. Each Holder acknowledges that there may occasionally be times when
the Company must suspend the use of the prospectus forming a part of the
Registration Statement until such time as an amendment to such registration
statement has been field by the Company and declared effective by the Commission
or until the Company has amended or supplemented such prospectus. The Company
will use its best efforts to cause such amended registration statement to be
declared effective and/or to deliver such amended or supplemented prospectus as
soon as possible. Each Holder hereby covenants that it will not sell any Shares
pursuant to said prospectus without first confirming with the Company that the
Registration Statement has not been suspended, and during the period commencing
at the time at which the Company gives the Holder notice of the suspension of
the use of said prospectus and ending at the time the Company gives the Holder
notice that the Holder may thereafter effect sales pursuant to said prospectus.

                  (f) The Holders shall pay all fees, disbursements and
out-of-pocket expenses payable in connection with (i) any Registration Statement
filed under paragraph 11(b), and (ii) compliance with applicable state
securities and blue sky laws. In connection with registrations pursuant to
paragraph 11(b) (i) hereof, each Holder shall also pay its pro-rata portion of
any filing fee required by the Securities and Exchange Commission. The Company
at the Holders' expense will supply the Holders of Shares included in a
Registration Statement with copies of such Registration Statement and the
prospectus included therein and other related documents and opinions and
no-action letters, in such quantities as may be reasonably requested by such
Holders. In connection with each Registration Statement, the Company shall
furnish to Holders of Shares included therein such opinions of counsel, comfort
letters of accountants, certificates and other documents that are customary in
connection with underwritten public offerings and that are reasonably requested
by such Holders.

                                      -11-
<PAGE>   13
                  (g) The Company shall not be required by this Section 11 to
include or maintain in any Registration Statement any Shares which, in the
opinion of counsel for the Company, could be sold pursuant to Rule 144 under the
Act in any three-month period without volume limitation.

                  (h) The Company represents that the registration rights
provided in this Section 11 are not inconsistent with, and will in no way be
limited by, registration rights previously granted by the Company to its
securityholders.

         Section 12.  INDEMNIFICATION.

                  (a) In the event that any Registration Statement is filed
pursuant to Section 11 hereof, the Company will indemnify and hold harmless each
Holder identified as a selling security holder therein, and each person, if any,
who controls such Holder within the meaning of the Act, against any and all
losses, claims, damages or liabilities, joint or several (including any
reasonable investigation, legal and other expenses incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they or any of them may become subject under the Act,
the Securities Exchange Act of 1934, as amended (the "Exchange Act") or other
federal or state law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in any such Registration Statement, any related
preliminary prospectus, final prospectus, or amendment thereof or supplement
thereto, or any related blue sky filing, or (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided that the Company shall not be
liable under this section 12(a) in any such case to the extent that any such
losses, claims, damages or liabilities arise solely out of or are based upon an
untrue statement of a material fact contained in, or any omission of a material
fact from, such Registration Statement, preliminary prospectus, final prospectus
or amendment thereof or supplement thereto in reliance upon, and in conformity
with, information furnished in writing to the Company by such Holder
specifically for use therein. This indemnity will be in addition to any
liability which the Company may otherwise have.

                  (b) Each Holder who is identified as a selling security holder
in a filed Registration Statement will severally, and not jointly, indemnify and
hold harmless the Company, each other person referred to in subparts (1), (2)
and (3) of Section 11(a) of the Act in respect of the Registration Statement,
and each person, if any, who controls the Company or any such person within the
meaning of Section 15 of the Act, against any and all losses, claims, damages or
liabilities (including any reasonable investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted), to which they, or any of them, may
become subject under the Act, the Exchange Act or other federal or state law or
regulation, at common law, or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in such Registration Statement, any related preliminary prospectus,
final prospectus or amendment thereof or

                                      -12-
<PAGE>   14
supplement thereto, or any related blue sky filing, or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, in each case to the extent, but only to
the extent, that such untrue statement or omission was made in such Registration
Statement, preliminary prospectus, final prospectus or amendment thereof or
supplement thereto in reliance upon, and in conformity with, information
furnished in writing to the Company by such Holder specifically for use therein.
This indemnity will be in addition to any liability which a Holder may otherwise
have to the Company.

                  (c) Any party that proposes to assert the right to be
indemnified under this Section 12 shall, promptly after receipt of notice of the
commencement of any action, suit or proceeding against such party in respect of
which a claim is to be made against an indemnifying party or parties under this
Section, notify each such indemnifying party of the commencement thereof,
enclosing a copy of all papers served. No indemnification provided for in
Section 12(a) or 12(b) shall be available to any party who shall fail to give
notice as provided in this Section 12(c) if the party to whom notice was not
given was unaware of the proceeding to which such notice would have related and
was materially prejudiced by the failure to give such notice, but the omission
so to notify such indemnifying party of any such action, suit or proceeding
shall not relieve it from any liability that it may have to any indemnified
party otherwise than under this Section 12 or Section 13. In case any such
action, suit or proceeding is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, such indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party,
and, after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and the approval by the indemnified
party of such counsel (which approval shall not unreasonably be withheld), the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses, except as provided below and except for the reasonable costs
of investigation subsequently incurred by such indemnified party in connection
with the defense thereof. The indemnified party shall have the right to employ
its own counsel in any such action, suit or proceeding but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
employment of counsel by such indemnified party has been authorized in writing
by the indemnifying parties, (ii) the indemnified party shall have reasonably
concluded that there may be differing or additional defenses available to it and
not to one or more of the indemnifying parties in such action, suit or
proceeding (in which case the indemnifying parties shall not have the right to
direct the defense of such action, suit or proceeding on behalf of the
indemnified party), or (iii) the indemnifying parties shall not have employed
counsel to assume the defense of such action within a reasonable time after
notice of the commencement thereof, in each of which cases the fees and expenses
of the indemnified party's counsel shall be at the expense of the indemnifying
parties; however, the indemnifying party shall not, in connection with any one
such action, suit or proceeding or separate but substantially similar or related
actions, suits or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for the Holders and
controlling persons, which firm shall be designated in writing by a

                                      -13-
<PAGE>   15
majority in interest of such Holders and controlling persons (based upon the
value of the Shares included in the Registration Statement). An indemnifying
party shall not be liable for any settlement of any action, suit, proceeding or
claim effected without its written consent.

         Section 13. CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 12 is due in accordance with its terms but for any reason is held to be
unavailable or insufficient to hold harmless an indemnified party, the Company
(including for this purpose any controlling person of the Company, any director
of the Company and any officer of the Company who signed the Registration
Statement) on the one hand, and the Holders (including for this purpose any
controlling persons thereof) on the other hand, shall, in lieu of indemnifying
such indemnified party, contribute to the aggregate losses, claims, damages or
liabilities referred to in Section 12 above (including any investigation, legal
and other expenses reasonably incurred in connection with, and any amount paid
in settlement of, any action, suit or proceeding or any claims asserted, but
after deducting any contribution received by or payable to the Company from
other persons other than the Holders, such as other selling securityholders,
persons who control the Company within the meaning of the Act, officers of the
Company who signed the Registration Statement, and directors of the Company),
(a) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Holders from the offering or offerings covered
by the Registration Statement or, (b) if the allocation provided by clause (a)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (a) above but
also the relative fault of the Company and the Holders in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and any Holder on
the other hand shall be deemed to be in the same proportion as (x) the total
proceeds (if any) received by the Company from the offering or offerings covered
by the Registration Statement (net of underwriting discounts but before
deducting expenses, if applicable), plus all cash proceeds received by the
Company from the exercise of the Warrants for the Shares of such Holder included
in the Registration Statement, bear to (y) the total proceeds received by such
Holder from the sale of Shares included in the Registration Statement. The
relative fault of the Company and any Holder shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission related to information supplied by the Company or such
Holder, and their relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Holders agree that it would not be just and equitable if contribution
pursuant to this Section 13 were determined by pro rata allocation (even if the
Holders were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this Section 13, in no case shall
any Holder (except as may be provided by agreement among them) be liable or
responsible for any amount in excess of the proceeds received by such Holder
from the sale of the Shares included in the Registration Statement; provided
that no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 13,

                                      -14-
<PAGE>   16
each person, if any, who controls a Holder within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act shall have the same rights to
contribution as such Holder, and each person, if any, who controls the Company
within the meaning of the Section 15 of the Act or Section 20(a) of the Exchange
Act, each director of the Company and each officer of the Company who shall have
signed the Registration Statement, shall have the same rights to contribution as
the Company, subject in each case to clauses (i) and (ii) in the immediately
preceding sentence of this Section 13. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 13, notify such
party or parties from whom contribution may be sought, and the omission so to
notify such party or parties from whom contribution may be sought shall relieve
the party or parties from whom contribution may be sought (if such party was
unaware of such action, suit or proceeding and was materially prejudiced by such
omission) from any liability under this Section 13, but not from any other
obligation it or they may have hereunder or otherwise than under this Section
13. No party shall be liable for contribution with respect to any settlement of
an action, suit, proceeding or claim effected without its written consent. The
obligations of the Holders to contribute pursuant to this Section 13 are several
in proportion to their respective number of Shares included in the Registration
Statement, and not joint.

         Section 14. NOTICES. Any notice pursuant to this Agreement shall be in
writing and shall be deemed to have been duly given (i) if given by facsimile
transmission on the business day on which such transmission is sent and
confirmed, (ii) if given by air courier, two business days following the date it
was sent or (iii) if mailed by certified mail, return receipt requested, ten
business days following the date it was mailed, to the following addresses
(unless another address is herein specified):

                  (a) If to a Holder, addressed to: c/o Sunrise Financial Group,
         Inc., 135 East 57th Street, 11th Floor, New York, New York 10022,
         Attention: Mr. Nathan Low (fax: 212-421-5924), with a copy to Carter,
         Ledyard & Milburn, 2 Wall Street, New York, New York 10005, Attention:
         Steven J. Glusband, Esq. (fax: 212-732-3232).

                  (b) If to the Company, addressed to: 330 Nevada Street,
         Newton, Massachusetts 02160, Attention: Stephen D. Chubb (fax:
         617-928-0821) with a copy to: Testa, Hurwitz & Thibeault, LLP, 125 High
         Street, Boston, Massachusetts 02110, Attention: Rufus C. King, Esq.
         (fax: 617-248-7100)

Each party may from time to time change the address or fax number to which
notices to it are to be delivered or mailed hereunder by notice in accordance
herewith to the other party.

         Section 15. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company and the Holders shall bind and
inure to the benefit of their respective successors and assigns.

                                      -15-
<PAGE>   17
         Section 16. MERGER OR CONSOLIDATION OF THE COMPANY. The Company shall
not merge or consolidate with or into any other corporation or sell all or
substantially all of its property to another corporation, unless the provisions
of Section 8.4 are complied with.

         Section 17. APPLICABLE LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF SAID SATE (WITHOUT REFERENCE TO ITS RULES AS TO CONFLICTS OF
LAWS). The parties hereby agree to the exclusive jurisdiction of the courts of
the Commonwealth of Massachusetts or the federal courts sitting in the
Commonwealth of Massachusetts in connection with any action arising out of this
Agreement.

         Section 18. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Warrantholders and holders of Shares any legal or equitable right, remedy or
claim under this Agreement. This Agreement shall be for the sole and exclusive
benefit of the Company and the Holders.

         Section 19. AMENDMENT AND WAIVER. This Agreement and the Warrants may
only be amended, or any term hereof waived, in writing by signed by the Company
and Warrantholders holding a majority of the Shares issued or issuable upon
exercise of the Warrants, whether or not an individual Warrantholder consents
thereto.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      -16-
<PAGE>   18
         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the date and year first above written.

                                         MATRITECH, INC.

                                         By:_________________________________
                                            Stephen Chubb
                                            Chairman and Chief Executive Officer

                                         WARRANTHOLDERS

                                         ____________________________________
                                         Nathan Low

                                         ____________________________________
                                         Derek Caldwell

                                         ____________________________________
                                         Dwight Miller

                                         ____________________________________
                                         Sean Gallagher

                                         ____________________________________
                                         Marc Seelenfreund

                                         ____________________________________
                                         Matthew Toole

                                      -17-
<PAGE>   19
                                                                       Exhibit A

<TABLE>
<CAPTION>
    ---------------------------  ---------------------------------
    Warrantholder                       Number of Shares
    ---------------------------  ---------------------------------
<S>                              <C>
    Nathan Low                              200,000

    Derek Caldwell                          200,000

    Dwight Miller                            15,000

    Sean Gallagher                           15,000

    Marc Seelenfreund                        15,000

    Matthew Toole                             5,000

                         Total              450,000
</TABLE>

                                      A-1
<PAGE>   20
                                                                       Exhibit B

            THE WARRANTS REPRESENTED BY THIS CERTIFICATE, AND THE
            SECURITIES ISSUABLE UPON EXERCISE OF SUCH WARRANTS,
            HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
            SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
            STATE OF THE UNITED STATES. SUCH WARRANTS AND
            SECURITIES MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
            HYPOTHECATED OR OTHERWISE TRANSFERRED IN ANY MANNER
            EXCEPT IN COMPLIANCE WITH SECTION 11 OF THE INVESTOR
            RELATIONS WARRANT AGREEMENT BY AND BETWEEN THE ISSUER
            AND EACH OF THE ORIGINAL HOLDERS OF THE WARRANTS
            DATED _______, 2000.

                                         WARRANT CERTIFICATE NO. IRW-< CERT_NO >

                                 MATRITECH, INC.

                            (ORGANIZED UNDER THE LAWS
                            OF THE STATE OF DELAWARE)

                        WARRANTS TO PURCHASE COMMON STOCK

         This certifies that, for value received, < NAME >. (the
"Warrantholder") is the registered owner of < NUMBER > warrants (the "Warrants")
to purchase from Matritech, Inc. (the "Company"), at any time during the period
commencing at 9:00 a.m., Eastern Time, on _______, 2000 and ending at 5:00 p.m.,
Eastern Time, on ________, 2005, at an initial purchase price per share of $2.50
(the "Warrant Price"), one share of Common Stock of the Company. The Warrants
are subject to, and each Warrantholder, by acceptance of this certificate,
consents to all the terms and provisions of the Warrant Agreement dated as of
________, 2000, between the Company and the Warrantholder, pursuant to which the
Warrants evidenced hereby were issued (the "Warrant Agreement").

         The Warrants evidenced hereby may be exercised in whole or in part by
presentation of this Warrant Certificate with the Purchase Form herein duly
executed (with a signature guarantee as provided therein), and simultaneous
payment of the Warrant Price for each Warrant exercised, at the principal office
of the Company. Payment of such price shall be made at the option of each
Warrantholder in cash or by certified or cashier's check, in next day funds.

         Upon any partial exercise of the Warrants evidenced hereby, there shall
be signed and issued to the Warrantholder effecting such partial exercise a new
Warrant Certificate in respect of the Common Stock as to which the Warrants
evidenced hereby shall not have been exercised.

                                     -B-1-
<PAGE>   21
These Warrants may be exchanged at the office of the Company by surrender of
this Warrant Certificate properly endorsed for one or more new Warrants of the
same aggregate number of shares of Common Stock as here evidenced by the Warrant
or Warrants exchanged. No fractional shares of Common Stock will be issued upon
the exercise of rights to purchase hereunder, but the Company shall pay the cash
value of any fraction upon the exercise of one or more Warrants. These Warrants
are transferable at the office of the Company in the manner and subject to the
limitations set forth in the Warrant Agreement.

         This Warrant Certificate does not entitle any Warrantholder to any of
the rights of a shareholder of the Company.

                                        MATRITECH, INC.

                                        By: _____________________________
                                            Stephen Chubb
                                            Chairman and Chief Executive Officer

ATTEST:

___________________________

Dated:________________, 2000

                                     -B-2-
<PAGE>   22
PURCHASE FORM

Matritech, Inc.
330 Nevada Street
Newton, Massachusetts 02160

         Pursuant to paragraph 3(a) of the Warrant Agreement, the undersigned
hereby irrevocably elects to exercise the right of purchase represented by this
Warrant Certificate for, and to purchase thereunder, __________ shares of Common
Stock ("Common Stock") provided for therein, and requests that certificates for
such Common Stock be issued in the name of:

                       ___________________________________
  (Please Print or Type Name(s), Address and Taxpayer Identification Number(s))

                       ___________________________________

                       ___________________________________

                       ___________________________________

If this Warrant Certificate is hereby being exercised with respect to fewer than
all the Common Stock specified herein, please issue a new Warrant Certificate
for the unexercised balance of the Warrants, registered in the name of the
undersigned Warrantholder or his assignee as below indicated and delivered to
the address stated below.

Dated: _______________________

Name of Warrantholder(s)
    or Assignee(s) (Please Print):  _____________________________

                                    _____________________________

Address (Please Print): _________________________________________

                  _______________________________________________

Signature(s):     _______________________________________________

                  _______________________________________________

                  Note: The above signature(s) must correspond exactly with the
         name(s) as written upon the face of this Warrant Certificate, without
         alteration or enlargement or any change whatever, unless these Warrants
         have been assigned.

                                     -B-3-
<PAGE>   23
ASSIGNMENT
                 (To be signed only upon assignment of Warrants)

  FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto

                       ___________________________________

                       ___________________________________

                       ___________________________________

     (Name(s) and Address(es) of Assignee(s) Must be Printed or Typewritten)
the within Warrants, hereby irrevocably constituting and appointing
________________________ the undersigned's attorney-in-fact to transfer said
Warrants on the books of the Company, with full power of substitution.

Dated:  __________              ___________________________________

                                ___________________________________
                                Signature(s) of Registered Holder(s)

                  Note: The above signature(s) must correspond exactly with the
         name(s) as written upon the face of this Warrant Certificate, without
         alteration or enlargement or any change whatever.

                                     -B-4-<PAGE>

                     DISBURSEMENT REQUEST AND AUTHORIZATION

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
 PRINCIPAL      LOAN DATE      MATURITY       LOAN NO        CALL      COLLATERAL          ACCOUNT        OFFICER        INITIALS
<S>            <C>            <C>             <C>           <C>          <C>               <C>             <C>             <C>
$250,000.00    06-13-2000     09-20-2004       56064                      0020              206368          125
----------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan
or item.
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

BORROWER: FOTOBALL USA, INC.            LENDER: SCRIPPS BANK
          3738 RUFFIN ROAD                      CORPORATE LENDING - KEARNY MESA
          SAN DIEGO, CA 92123                   9005 COMPLEX DRIVE
                                                SAN DIEGO,CA 92123

================================================================================

LOAN TYPE. This is a Fixed Rate (9.500%), Non-Revolving Line of Credit Loan to a
Corporation for $250,000.00 due on September 20, 2004.

PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:

     [ ] PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL INVESTMENT.

     [X] BUSINESS (INCLUDING REAL ESTATE INVESTMENT).

SPECIFIC PURPOSE. The specific purpose of this loan is: FINANCE:NEW PITNEY BOWES
SHIPMENT ENHANCEMENT SYSTEM.

DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $250,000.00 as follows:

               UNDISBURSED FUNDS:                           $250,000.00
                                                            -----------

               NOTE PRINCIPAL:                              $250,000.00

CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:

               PREPAID FINANCE CHARGES PAID IN CASH:            $250.00
                          $250.00 DOCUMENTATION FEES

               OTHER CHARGES PAID IN CASH:                       $50.00
                          $50.00 UCC FEES                   -----------

               TOTAL CHARGES PAID IN CASH:                      $300.00

LOAN ADVANCE AGREEMENT CONDITION. FUNDS TO BE DISBURSED PER LOAN ADVANCE
AGREEMENT.

FINANCIAL STATEMENT CERTIFICATION. The undersigned, on behalf of the above
entities, for the purpose of procuring and establishing credit from time to time
with Scripps Bank and to induce Scripps Bank to permit the undersigned to become
indebted to Scripps Bank on notes, endorsements, guarantees, overdrafts or
otherwise, furnish all current and future statements as being a true statement
of the financial condition of the undersigned and agrees to notify Scripps Bank
immediately of the extent and character of any material change in said financial
condition. If any of the representations in all current and future statements,
prove to be untrue, or if the undersigned fails to notify Scripps Bank of any
material change as above agreed, then and in such case, at Scripps Bank option,
all of the obligations of the undersigned to Scripps Bank, or held by Scripps
Bank shall immediately become due and payable, without demand or notice.

The undersigned does further agree that any spaces in all current and future
statements under "Liabilities" or "Contingent Liabilities", which have been or
may be left blank, shall be construed by Scripps Bank, the same as though the
word "none" were written in each of such spaces.

All current and future statements shall also be construed by Scripps Bank to be
a continuing statement of the condition of the undersigned, and a new and
original statement of all assets and liabilities upon each and every transaction
in and by which the undersigned hereafter becomes indebted to Scripps Bank,
until the undersigned advises in writing to the contrary.

FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION
AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED JUNE 13, 2000.

BORROWER:

FOTOBALL USA, INC.

BY:
    ----------------------------
    CLIFF LYON, SVP/CFO

================================================================================
Fixed Rate. Line of Credit.  LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.29(C)
                             Concentrex 2000 All Rights reserved.
                             [CA-120 56064UCC.LN C8.OVL]

<PAGE>

                                PROMISSORY NOTE
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
 PRINCIPAL      LOAN DATE      MATURITY       LOAN NO        CALL      COLLATERAL          ACCOUNT        OFFICER        INITIALS
<S>            <C>            <C>             <C>           <C>          <C>               <C>             <C>             <C>
$250,000.00    06-13-2000     09-20-2004       56064                      0020              206368          125
----------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan
or item.
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

BORROWER: FOTOBALL USA, INC.            LENDER: SCRIPPS BANK
          3738 RUFFIN ROAD                      CORPORATE LENDING - KEARNY MESA
          SAN DIEGO, CA 92123                   9005 COMPLEX DRIVE
                                                SAN DIEGO,CA 92123

================================================================================

                                                     DATE OF NOTE: JUNE 13, 2000

PRINCIPAL AMOUNT: $250,000.00           INTEREST RATE: 9.500%

PROMISE TO PAY. FOTOBALL USA, INC. ("BORROWER") PROMISES TO PAY TO SCRIPPS BANK
("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE
PRINCIPAL AMOUNT OF TWO HUNDRED FIFTY THOUSAND & 00/100 DOLLARS ($250,000.00) OR
SO MUCH AS MAY BE OUTSTANDING, TOGETHER WITH INTEREST AT THE RATE OF 9.500% PER
ANNUM ON THE UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH ADVANCE. INTEREST
SHALL BE CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL REPAYMENT OF EACH
ADVANCE.

PAYMENT. BORROWER WILL PAY THIS LOAN ON DEMAND, OR IF NO DEMAND IS MADE, IN
ACCORDANCE WITH THE FOLLOWING PAYMENT SCHEDULE:

     3 CONSECUTIVE MONTHLY INTEREST PAYMENTS ON THE TWENTIETH OF EACH MONTH,
     BEGINNING JULY 20, 2000. FOLLOWED BY 48 CONSECUTIVE MONTHLY PAYMENTS
     BEGINNING OCTOBER 20, 2000 IN A MONTHLY PAYMENT AMOUNT NECESSARY TO FULLY
     AMORTIZE THE LOAN BALANCE OWING ON SEPTEMBER 20, 2000. A FINAL PAYMENT IS
     DUE SEPTEMBER 20, 2004 FOR ALL REMAINING UNPAID PRINCIPAL AND ACCRUED
     INTEREST.

Interest on this Note is computed on a 365/365 simple interest basis; that is,
by applying the ratio of the annual interest rate over the number of days in a
year, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.

PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even upon
full prepayment of this Note, Borrower understands that Lender is entitled to A
MINIMUM INTEREST CHARGE OF $100.00. Other than Borrower's obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to continue
to make payments of accrued unpaid interest. Rather, they will reduce the
principal balance due.

LATE CHARGE. If a payment is 10 DAYS OR MORE LATE, Borrower will be charged
5.000% OF THE REGULARLY SCHEDULED PAYMENT OR $5.00, WHICHEVER IS GREATER.

DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the indebtedness is impaired. (i) Lender
in good faith deems itself insecure.

If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender demanding
cure of such default: (a) cures the default within fifteen (15) days; or (b) if
the cure requires more than fifteen (15) days, immediately initiates steps which
Lender deems in Lender's sole discretion to be sufficient to cure the default
and thereafter continues and completes all reasonable and necessary steps
suficient to produce compliance as soon as reasonably practical.

LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to pay
all amounts declared due pursuant to this section, including failure to pay upon
final maturity, Lender, at its option, may also, if permitted under applicable
law, do one or both of the following: (a) increase the interest rate on this
Note 5.000 percentage points, and (b) add any unpaid accrued interest to
principal and such sum will bear interest therefrom until paid at the rate
provided in this Note (including any increased rate). Lender may hire or pay
someone else to help collect this Note if Borrower does not pay. Borrower also
will pay Lender that amount. This includes, subject to any limits under
applicable law, Lender's attorneys' fees and Lender's legal expenses whether or
not there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection services.
Borrower also will pay any court costs, in addition to all other sums provided
by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE
STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S
REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF SAN DIEGO COUNTY, THE
STATE OF CALIFORNIA. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF CALIFORNIA.

RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including without limitation
all accounts held jointly with someone else and all accounts Borrower may open
in the future, excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on this Note against any and all such accounts.

LINE OF CREDIT. This Note evidences a straight line of credit. Once the total
amount of principal has been advanced, Borrower is not entitled to further loan
advances. Advances under this Note may be requested either orally or in writing
by Borrower or as provided in this paragraph. Lender may, but need not, require
that all oral requests be confirmed in writing. All communications,
instructions, or directions by telephone or otherwise to Lender are to be
directed to Lender's office shown above. The follwoing party or parties are
authorized as provided in this paragraph to request advances under the line of
credit until Lender receives from Borrower at Lender's address shown above
written notice of revocation of their authority: CLIFF LYON, SVP/CFO. UNADVANCED
FUNDS ARE AVAILABLE UNTIL SEPTEMBER 20, 2000. Borrower agrees to be liable for
all sums either: (a) advanced in accordance with the instructions of an
authorized person or (b) credited to any of Borrower's accounts with Lender. The
unpaid principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internal records, including daily
computer print-outs. Lender will have no obligation to advance funds under this
Note if: (a) Borrower or any guarantor is in default under the terms of this
Note or any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (b) Borrower or
any guarantor ceases doing business or is insolvent; (c) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; (d) Borrower has applied
funds provided pursuant to this Note for purposes other than those authorized by
Lender; or (e) Lender in good faith deems itself insecure under this Note or any
other agreement between Lender and Borrower.

GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. Lender may delay or forgo enforcing
any of its rights or remedies under this Note without losing them. Borrower and
any other person who signs, guarantees, or endorses this Note, to the extent
allowed by law, waive any applicable statute of limitations, presentment, demand
for payment, protest and notice of dishonor. Upon any change in the terms of
this Note, and unless otherwise expressly stated in writing, no party who signs
this Note, whether as maker, guarantor, accommodation maker or endorser, shall
be released from liability. All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan, or release any party
or guarantor or collateral; or impair, fail to realize upon or perfect Lender's
security interest in the collateral; and take any other action deemed necessary
by Lender without the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made.

<PAGE>

06-13-2000                       PROMISSORY NOTE                          PAGE 2
LOAN NO 56064                      (CONTINUED)

================================================================================

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF
A COMPLETED COPY OF THE NOTE.

BORROWER:

FOTOBALL USA, INC.

BY:
    ----------------------------
    CLIFF LYON, SVP/CFO

================================================================================
Fixed Rate. Line of Credit.  LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.29(C)
                             Concentrex 2000 All Rights reserved.
                             [CA-D20 56064UCC.LN C8.OVL]

<PAGE>

                            BUSINESS LOAN AGREEMENT
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
 PRINCIPAL      LOAN DATE      MATURITY       LOAN NO        CALL      COLLATERAL          ACCOUNT        OFFICER        INITIALS
<S>            <C>            <C>             <C>           <C>          <C>               <C>             <C>             <C>
$250,000.00    06-13-2000     09-20-2004       56064                      0020              206368          125
----------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan
or item.
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

BORROWER: FOTOBALL USA, INC.            LENDER: SCRIPPS BANK
          3738 RUFFIN ROAD                      CORPORATE LENDING - KEARNY MESA
          SAN DIEGO, CA 92123                   9005 COMPLEX DRIVE
                                                SAN DIEGO,CA 92123

================================================================================

THIS BUSINESS LOAN AGREEMENT BETWEEN FOTOBALL USA, INC. ("BORROWER") AND SCRIPPS
BANK ("LENDER") IS MADE AND EXECUTED ON THE FOLLOWING TERMS AND CONDITIONS.
BORROWER HAS RECEIVED PRIOR COMMERCIAL LOANS FROM LENDER OR HAS APPLIED TO
LENDER FOR A COMMERCIAL LOAN OR LOANS AND OTHER FINANCIAL ACCOMMODATIONS,
INCLUDING THOSE WHICH MAY BE DESCRIBED ON ANY EXHIBIT OR SCHEDULE ATTACHED TO
THIS AGREEMENT. ALL SUCH LOANS AND FINANCIAL ACCOMMODATIONS, TOGETHER WITH ALL
FUTURE LOANS AND FINANCIAL ACCOMMODATIONS FROM LENDER TO BORROWER, ARE REFERRED
TO IN THIS AGREEMENT INDIVIDUALLY AS THE "LOAN" AND COLLECTIVELY AS THE "LOANS."
BORROWER UNDERSTANDS AND AGREES THAT: (a) IN GRANTING, RENEWING, OR EXTENDING
ANY LOAN, LENDER IS RELYING UPON BORROWER'S REPRESENTATIONS, WARRANTIES, AND
AGREEMENTS, AS SET FORTH IN THIS AGREEMENT; (b) THE GRANTING, RENEWING, OR
EXTENDING OF ANY LOAN BY LENDER AT ALL TIMES SHALL BE SUBJECT TO LENDER'S SOLE
JUDGMENT AND DISCRETION; AND (c) ALL SUCH LOANS SHALL BE AND SHALL REMAIN
SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS OF THIS AGREEMENT.

TERM. This Agreement shall be effective as of June 13, 2000, and shall continue
thereafter until all indebtedness of Borrower to Lender has been performed in
full and the parties terminate this Agreement in writing.

DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.

     AGREEMENT. The word "Agreement" means this Business Loan Agreement, as this
     Business Loan Agreement may be amended or modified from time to time,
     together with all exhibits and schedules attached to this Business Loan
     Agreement from time to time.

     BORROWER. The word "Borrower" means FOTOBALL, USA, INC. The word "Borrower"
     also includes, as applicable, all subsidiaries and affiliates of Borrower
     as provided below in the paragraph titled "Subsidiares and Affiliates."

     CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
     Compensation, and Liability Act of 1980, as amended.

     COLLATERAL. The word "Collateral" means and includes without limitation
     all property and assets granted as collateral security for a Loan, whether
     real or personal property, whether granted directly or indirectly, whether
     granted now or in the future, and whether granted in the form of a
     security interest, mortgage, deed of trust, assignment, pledge, chattel
     mortgage, chattel trust, factor's lien, equipment trust, conditional sale,
     trust receipt, lien, charge, lien or title retention contract, lease or
     consignment intended as a security device, or any other security or lien
     interest whatsoever, whether created by law, contract, or otherwise.

     ERISA. The word "ERISA" means the Employee Retirement Income Security Act
     of 1974, as amended.

     EVENT OF DEFAULT. The words "Event of Default" mean and include without
     limitation any of the Events of Default set forth below in the section
     titled "EVENTS OF DEFAULT."

     GRANTOR. The word "Grantor" means and includes without limitation each and
     all of the persons or entities granting a Security Interest in any
     Collateral for the indebtedness, including without limitation all Borrowers
     granting such a Security Interest.

     GUARANTOR. The word "Guarantor" means and includes without limitation each
     and all of the guarantors, sureties, and accommodation parties in
     connection with any indebtedness.

     INDEBTEDNESS. The word "Indebtedness" means and includes without limitation
     all Loans, together with all other obligations, debts and liabilities of
     Borrower to Lender, or any one or more of them, as well as all claims by
     Lender against Borrower, or any one or more of them; whether now or
     hereafter existing, voluntary or involuntary, due or not due, absolute or
     contingent, liquidated or unliquidated; whether Borrower may be liable
     individually or jointly with others; whether Borrower may be obligated as a
     guarantor, surety, or otherwise; whether recovery upon such Indebtedness
     may be or hereafter may become barred by any statute of limitations; and
     whether such Indebtedness may be or hereafter may become otherwise
     unenforceable.

     LENDER. The word "Lender" means Scripps Bank, its successors and assigns.

     LOAN. The word "Loan" or "Loans" means and includes without limitation any
     and all commercial loans and financial accommodations from Lender to
     Borrower, whether now or hereafter existing, and however evidenced,
     including without limitation those loans and financial accommodations
     described herein or described on any exhibit or schedule attached to this
     Agreement from time to time.

     NOTE. The word "Note" means and includes without limitation Borrower's
     promissory note or notes, if any, evidencing Borrower's Loan obligations in
     favor of Lender, as well as any substitute, replacement or refinancing note
     or notes therefor.

     PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and security
     interests securing Indebtedness owed by Borrower to Lender; (b) liens for
     taxes, assessments, or similar charges either not yet due or being
     contested in good faith; (c) liens of materialmen, mechanics, warehousemen,
     or carriers, or other like liens arising in the ordinary course of business
     and securing obligations which are not yet delinquent; (d) purchase money
     liens or purchase money security interests upon or in any property acquired
     or held by Borrower in the ordinary course of business to secure
     Indebtedness outstanding on the date of this Agreement or permitted to be
     incurred under the paragraph of this Agreement titled "Indebtedness and
     Liens"; (e) liens and security interests which, as of the date of this
     Agreement, have been disclosed to and approved by the Lender in writing;
     and (f) those liens and security interests which in the aggregate
     constitute an immaterial and insignificant monetary amount with respect to
     the net value of Borrower's assets.

     RELATED DOCUMENTS. The words "Related Documents" mean and include without
     limitation all promissory notes, credit agreements, loan agreements,
     environmental agreements, guaranties, security agreements, mortgages, deeds
     of trust, and all other instruments, agreements and documents, whether now
     or hereafter existing, executed in connection with the Indebtedness.

     SECURITY AGREEMENT. The words "Security Agreement" mean and include without
     limitation any agreements, promises, covenants, arrangements,
     understandings or other agreements, whether created by law, contract, or
     otherwise, evidencing, governing, representing, or creating a Security
     Interest.

     SECURITY INTEREST. The words "Security Interest" mean and include without
     limitation any type of collateral security, whether in the form of a lien,
     charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
     chattel trust, factor's lien, equipment trust, conditional sale, trust
     receipt, lien or title retention contract, lease or consignment intended as
     a security device, or any other security or lien interest whatsoever,
     whether created by law, contract, or otherwise.

     SARA. The word "SARA" means the Superfund Amendments and Reauthorization
     Act of 1986 as now or hereafter amended.

CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the Initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.

     LOAN DOCUMENTS. Borrower shall provide to Lender in form satisfactory to
     Lender the following documents for the Loan; (a) the Note, (b) Security
     Agreements granting to Lender security interests in the Collateral, (c)
     Financing Statements perfecting Lender's Security Interests; (d) evidence
     of insurance as required below; and (e) any other documents required under
     this Agreement or by Lender or its counsel.

     BORROWER'S AUTHORIZATION. Borrower shall have provided in form and
     substance satisfactory to Lender property certified resolutions, duly
     authorizing the execution and delivery of this Agreement, the Note and the
     Related Documents, and such other authorizations and other documents and
     instruments as Lender or its counsel, in their sole discretion, may
     require.

     PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all fees,
     charges, and other expenses which are then due and payable as specified in
     this Agreement or any Related Document.

     REPRESENTATIONS AND WARRANTIES. The representations and warranties set
     forth in this Agreement, in the Related Documents, and in any document or
     certificate delivered to Lender under this Agreement are true and correct.

     NO EVENT OF DEFAULT. There shall not exist at the time of any advance a
     condition which would constitute an Event of Default under this Agreement.

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:

     ORGANIZATION. Borrower is a corporation which is duly organized, validly
     existing, and in good standing under the laws of the State of California

<PAGE>

06-13-2000                    BUSINESS LOAN AGREEMENT                     PAGE 2
LOAN NO 56064                       (CONTINUED)

================================================================================

     and is validly existing and in good standing in all states in which
     Borrower is doing business. Borrower has the full power and authority to
     own its properties and to transact the businesses in which it is presently
     engaged or presently proposes to engage. Borrower also is duly qualified as
     a foreign corporation and is in good standing in all states in which the
     failure to so qualify would have a material adverse effect on its
     businesses or financial condition.

     AUTHORIZATION. The execution, delivery, and performance of this Agreement
     and all related Documents by Borrower, to the extent to be executed,
     delivered or performed by Borrower, have been duly authorized by all
     necessary action by Borrower; do not require the consent or approval of any
     other person, regulatory authority or governmental body; and do not
     conflict with, result in a violation of, or constitute a default under (a)
     any provision of its articles of incorporation or organization, or bylaws,
     or any agreement or other instrument binding upon Borrower or (b) any law,
     governmental regulation, court decree, or order applicable to Borrower.

     FINANCIAL INFORMATION. Each financial statement of Borrower supplied to
     Lender truly and completely disclosed Borrower's financial condition as of
     the date of the statement, and there has been no material adverse change in
     Borrower's financial condition subsequent to the date of the most recent
     financial statement supplied to Lender. Borrower has no material contingent
     obligations except as disclosed in such financial statements.

     LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
     required hereunder to be given by Borrower when delivered will constitute,
     legal, valid and binding obligations of Borrower enforceable against
     Borrower in accordance with their respective terms.

     PROPERTIES. Except as contemplated by this Agreement or as previously
     disclosed in Borrower's financial statements or in writing to Lender and as
     accepted by Lender, and except for property tax liens for taxes not
     presently due and payable, Borrower owns and has good title to all of
     Borrower's properties free and clear of all Security Interest, and has not
     executed any security documents or financing statements relating to such
     properties. All of Borrower's properties are titled in Borrower's legal
     name, and Borrower has not used, or filed a financing statement under, any
     other name for at least the last five (5) years.

     HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance,"
     "disposal," "release," and "threatened release," as used in this Agreement,
     shall have the same meanings as set forth in the "CERCLA," "SARA," the
     Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.,
     the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
     seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and
     Safety Code, Section 25100, et seq., or other applicable state or Federal
     laws, rules, or regulations adopted pursuant to any of the foregoing.
     Except as disclosed to and acknowledged by Lender in writing, Borrower
     represents and warrants that: (a) During the period of Borrower's ownership
     of the properties, there has been no use, generation, manufacture, storage,
     treatment, disposal, release, or threatened release of any hazardous waste
     or substance by any person on, under, about or from the properties. (b)
     Borrower has no knowledge of, or reason to believe that there has been (i)
     any use, generation, manufacture, storage, treatment, disposal, release, or
     threatened release of any hazardous waste or substance on, under, about or
     from the properties by any prior owners or occupants of any of the
     properties, or (ii) any actual or threatened litigation or claims of any
     kind by any person relating to such matters. (c) Neither Borrower nor any
     tenant, contractor, agent or other authorized user of any of the properties
     shall use, generate, manufacture, store, treat, dispose of, or release any
     hazardous waste or substance on, under, about or from any of the
     properties; and any such activity shall be conducted in compliance with all
     applicable federal, state, and local laws, regulations, and ordinances,
     including without limitation those laws, regulations and ordinances
     described above. Borrower authorizes Lender and its agents to enter upon
     the properties to make such inspections and tests as Lender may deem
     appropriate to determine compliance of the properties with this section of
     the Agreement. Any inspections or tests made by Lender shall be at
     Borrower's expense and for Lender's purposes only and shall not be
     construed to create any responsibility or liability on the part of Lender
     to Borrower or to any other person. The representations and warranties
     contained herein are based on Borrower's due diligence in investigating the
     properties for hazardous waste and hazardous substances. Borrower hereby
     (a) releases and waives any future claims against Lender for indemnity or
     contribution in the event Borrower becomes liable for cleanup or other
     costs under any such laws, and (b) agrees to indemnify and hold harmless
     Lender against any and all claims, losses, liabilities, damages, penalties,
     and expenses which Lender may directly or indirectly sustain or suffer
     resulting from a breach of this section of the Agreement or as a
     consequence of any use, generation, manufacture, storage, disposal, release
     or threatened release of a hazardous waste or substance on the properties.
     The provisions of this section of the Agreement, including the obligation
     to indemnify, shall survive the payment of the Indebtedness and the
     termination or expiration of this Agreement and shall not be affected by
     Lender's acquisition of any interest in any of the properties, whether by
     foreclosure or otherwise.

     LITIGATION AND CLAIMS. No litigation, claim, investigation, administrative
     proceeding or similar action (including those for unpaid taxes) against
     Borrower is pending or threatened, and no other event has occurred which
     may materially adversely affect Borrower's financial condition or
     properties, other than litigation, claims, or other events, if any, that
     have been disclosed to and acknowledged by Lender in writing.

     TAXES. To the best of Borrower's knowledge, all tax returns and reports of
     Borrower that are or were required to be filed, have been filed, and all
     taxes, assessments and other governmental charges have been paid in full,
     except those presently being or to be contested by Borrower in good faith
     in the ordinary course of business and for which adequate reserves have
     been provided.

     LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
     Borrower has not entered into or granted any Security Agreements, or
     permitted the filing or attachment of any Security Interests on or
     affecting any of the collateral directly or indirectly securing repayment
     of Borrower's Loan and Note, that would be prior or that may in any way be
     superior to Lender's Security Interests and rights in and to such
     Collateral.

     BINDING EFFECT. This Agreement, the Note, all Security Agreements directly
     or indirectly securing repayment of Borrower's Loan and Note and all of the
     Related Documents are binding upon Borrower as well as upon Borrower's
     successors, representatives and assigns, and are legally enforceable in
     accordance with their respective terms.

     COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for
     business or commercial related purposes.

     EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower may
     have any liability complies in all material respects with all applicable
     requirements of law and regulations, and (i) no Reportable Event nor
     Prohibited Transaction (as defined in ERISA) has occurred with respect to
     any such plan, (ii) Borrower has not withdrawn from any such plan or
     initiated steps to do so, (iii) no steps have been taken to terminate any
     such plan, and (iv) there are no unfunded liabilities other than those
     previously disclosed to Lender in writing.

     INVESTMENT COMPANY ACT. Borrower is not an "investment company" or a
     company "controlled" by an "investment company", within the meaning of the
     Investment Company Act of 1940, as amended.

     PUBLIC UTILITY HOLDING COMPANY ACT. Borrower is not a "holding company", or
     a "subsidiary company" or a "holding company", or an "affiliate" of a
     "holding company" or of a "subsidiary company" of a "holding company",
     within the meaning of the Public Utility Holding Company Act of 1935, as
     amended.

     REGULATIONS G, T AND U. Borrower is not engaged principally, or as one of
     its important activities, in the business of extending credit for the
     purpose of purchasing or carrying margin stock (within the meaning of
     Regulations G, T and U of the Board of Governors of the Federal Reserve
     System).

     LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of business,
     or Borrower's Chief executive office, if Borrower has more than one place
     of business, is located at 3738 RUFFIN ROAD, SAN DIEGO, CA 92123. Unless
     Borrower has designated otherwise in writing this location is also the
     office or offices where Borrower keeps its records concerning the
     Collateral.

     INFORMATION. All information heretofore or contemporaneously herewith
     furnished by Borrower to Lender for the purposes of or in connection with
     this Agreement or any transaction contemplated hereby is, and all
     information hereafter furnished by or on behalf of Borrower to Lender will
     be, true and accurate in every material respect on the date as of which
     such information is dated or certified; and none of such information is or
     will be incomplete by omitting to state any material fact necessary to make
     such information not misleading.

     CLAIMS AND DEFENSES. There are no defenses or counterclaims, offsets or
     other adverse claims, demands or actions of any kind, personal or
     otherwise, that Borrower, Grantor, or any Guarantor could assert with
     respect to the Note, Loan, Indebtedness, this Agreement, or the Related
     Documents.

     SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees
     that Lender, without independent investigation, is relying upon the above
     representations and warranties in extending Loan Advances to Borrower.
     Borrower further agrees that the foregoing representations and warranties
     shall be continuing in nature and shall remain in full force and effect
     until such time as Borrower's Indebtedness shall be paid in full, or until
     this Agreement shall be terminated in the manner provided above, whichever
     is the last to occur.

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:

     LITIGATION. Promptly inform Lender in writing of (a) all material adverse
     changes in Borrower's financial condition, and (b) all existing and all
     threatened litigation, claims, investigations, administrative proceedings
     or similar actions affecting Borrower or any Guarantor which could
     materially affect the financial condition of Borrower or the financial
     condition of any Guarantor.

     FINANCIAL RECORDS. Maintain its books and records in accordance with
     generally accepted accounting principles, applied on a consistent basis,
     and permit Lender to examine and audit Borrower's books and records at all
     reasonable times.

<PAGE>

06-13-2000                    BUSINESS LOAN AGREEMENT                     PAGE 3
LOAN NO 56064                       (CONTINUED)

================================================================================

     ADDITIONAL INFORMATION. Furnish such additional information and statements,
     lists of assets and liabilities, agings of receivables and payables,
     inventory schedules, budgets, forecasts, tax returns, and other reports
     with respect to Borrower's financial condition and business operations as
     Lender may request from time to time.

     INSURANCE. Maintain fire and other risk insurance, public liability
     insurance, and such other insurance as Lender may require with respect to
     Borrower's properties and operations, in form, amounts, coverages and with
     insurance companies reasonably acceptable to Lender. Borrower, upon request
     of Lender, will deliver to Lender from time to time the policies or
     certificates of insurance in form satisfactory to Lender, including
     stipulations that coverages will not be cancelled or diminished without at
     least ten (10) days' prior written notice to Lender. Each insurance policy
     also shall include an endorsement providing that coverage in favor of
     Lender will not be impaired in any way by any act, omission or default of
     Borrower or any other person. In connection with all policies covering
     assets in which Lender holds or is offered a security interest for the
     Loans, Borrower will provide Lender with such loss payable or other
     endorsements as Lender may require.

     INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on
     each existing insurance policy showing such information as Lender may
     reasonably request, including without limitation the following: (a) the
     name of the insurer; (b) the risks insured; (c) the amount of the policy;
     (d) the properties insured; (e) the then current property values on the
     basis of which insurance has been obtained, and the manner of determining
     those values; and (f) the expiration date of the policy. In addition, upon
     request of Lender (however not more often than annually), Borrower will
     have an independent appraiser satisfactory to Lender determine, as
     applicable, the actual cash value or replacement cost of any Collateral.
     The cost of such appraisal shall be paid by Borrower.

     OTHER AGREEMENTS. Comply with all terms and conditions of all other
     agreements, whether now or hereafter existing, between Borrower and any
     other party and notify Lender immediately in writing of any default in
     connection with any other such agreements.

     LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business
     operations, unless specifically consented to the contrary by Lender in
     writing.

     TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
     indebtedness and obligations, including without limitation all assessments,
     taxes, governmental charges, levies and liens, of every kind and nature,
     imposed upon Borrower or its properties, income, or profits, prior to the
     date on which penalties would attach, and all lawful claims that, if
     unpaid, might become a lien or charge upon any of Borrower's properties,
     income, or profits. Provided however, Borrower will not be required to pay
     and discharge any such assessment, tax, charge, levy, lien or claim so long
     as (a) the legality of the same shall be contested in good faith by
     appropriate proceedings, and (b) Borrower shall have established on its
     books adequate reserves with respect to such contested assessment, tax,
     charge, levy, lien, or claim in accordance with generally accepted
     accounting practices. Borrower, upon demand of Lender, will furnish to
     Lender evidence of payment of the assessments, taxes, charges, levies,
     liens and claims and will authorize the appropriate governmental official
     to deliver to Lender at any time a written statement of any assessments,
     taxes, charges, levies, liens and claims against Borrower's properties,
     income, or profits.

     PERFORMANCE. Perform and comply with all terms, conditions, and provisions
     set forth in this Agreement and in the Related Documents in a timely
     manner, and promptly notify Lender if Borrower learns of the occurrence of
     any event which constitutes an Event of Default under this Agreement or
     under any of the Related Documents.

     OPERATIONS. Maintain executive and management personnel with substantially
     the same qualifications and experience as the present executive and
     management personnel; provide written notice to Lender of any change in
     executive and management personnel; conduct its business affairs in a
     reasonable and prudent manner and in compliance with all applicable
     federal, state and municipal laws, ordinances, rules and regulations
     respecting its properties, charters, businesses and operations, including
     without limitation, compliance with the Americans With Disabilities Act and
     with all minimum funding standards and other requirements of ERISA and
     other laws applicable to Borrower's employee benefit plans.

     ENVIRONMENTAL STUDIES. Promptly conduct and complete, at Borrower's
     expense, all such investigations, studies, samplings and testings as may be
     requested by Lender or any governmental authority relative to any substance
     defined as toxic or a hazardous substance under any applicable federal,
     state, or local law, rule, regulation, order or directive, or any waste or
     by-product thereof, at or affecting any property or any facility owned,
     leased or used by Borrower.

     INSPECTION. Permit employees or agents of Lender at any reasonable time to
     inspect any and all Collateral for the Loan or Loans and Borrower's other
     properties and to examine or audit Borrower's books, accounts, and records
     and to make copies and memoranda of Borrower's books, accounts, and
     records. If Borrower now or at any time hereafter maintains any records
     (including without limitation computer generated records and computer
     software programs for the generation of such records) in the possession of
     a third party, Borrower, upon request of Lender, shall notify such party to
     permit Lender free access to such records at all reasonable times and to
     provide Lender with copies of any records it may request, all at Borrower's
     expense.

     COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender
     at least annually and at the time of each disbursement of Loan proceeds
     with a certificate executed by Borrower's chief financial officer, or other
     officer or person acceptable to Lender, certifying that the representations
     and warranties set forth in this Agreement are true and correct as of the
     date of the certificate and further certifying that, as of the date of the
     certificate, no Event of Default exists under this Agreement.

     ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all respects
     with all environmental protection federal, state and local laws, statutes,
     regulations and ordinances; not cause or permit to exist, as a result of an
     intentional or unintentional action or omission on its part or on the part
     of any third party, on property owned and/or occupied by Borrower, any
     environmental activity where damage may result to the environment, unless
     such environmental activity is pursuant to and in compliance with the
     conditions of a permit issued by the appropriate federal, state or local
     governmental authorities; shall furnish to Lender promptly and in any event
     within thirty (30) days after receipt thereof a copy of any notice,
     summons, lien, citation, directive, letter or other communication from any
     governmental agency or instrumentality concerning any intentional or
     unintentional action or omission on Borrower's part in connection with any
     environmental activity whether or not there is damage to the environment
     and/or other natural resources.

     ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
     notes, mortgages, deeds of trust, security agreements, financing
     statements, instruments, documents and other agreements as Lender or its
     attorneys may reasonably request to evidence and secure the Loans and to
     perfect all Security Interests.

NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:

     INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the normal
     course of business and indebtedness to Lender contemplated by this
     Agreement, create, incur or assume Indebtedness for borrowed money,
     including capital leases, (b) except as allowed as a Permitted Lien, sell,
     transfer, mortgage, assign, pledge, lease, grant a security interest in, or
     encumber any of Borrower's assets, or (c) sell with recourse any of
     Borrower's accounts, except to Lender.

     CONTINUITY OF OPERATIONS. (a) Engage in any business activities
     substantially different than those in which Borrower is presently engaged,
     (b) cease operations, liquidate, merge, transfer, acquire or consolidate
     with any other entity, change ownership, change its name, dissolve or
     transfer or sell Collateral out of the ordinary course of business, (c) pay
     any dividends on Borrower's stock (other than dividends payable in its
     stock), provided, however that notwithstanding the foregoing, but only so
     long as no Event of Default has occurred and is continuing or would result
     from the payment of dividends, if Borrower is a "Subchapter S Corporation"
     (as defined in the Internal Revenue Code of 1986, as amended), Borrower may
     pay cash dividends on its stock to its shareholders from time to time in
     amounts necessary to enable the shareholders to pay income taxes and make
     estimated income tax payments to satisfy their liabilities under federal
     and state law which arise solely from their status as Shareholders of a
     Subchapter S Corporation because of their ownership of shares of stock of
     Borrower, or (d) purchase or retire any of Borrower's outstanding shares or
     alter or amend Borrower's capital structure.

     LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance money or
     assets, (b) purchase, create or acquire any interest in any other
     enterprise or entity, or (c) incur any obligation as surety or guarantor
     other than in the ordinary course of business.

CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Lender in good faith deems itself
insecure, even though no Event of Default shall have occurred.

LOAN AGREEMENT COVENANT & CONDITIONS ADDENDUM. The Loan Agreement Covenant &
Conditions Addendum attached as Exhibit "A" to this agreement is incorporated by
reference herein in full.

RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including without limitation
all accounts held jointly with someone else and all accounts Borrower may open
in the future, excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent

<PAGE>

06-13-2000                    BUSINESS LOAN AGREEMENT                     PAGE 4
LOAN NO 56064                       (CONTINUED)

================================================================================

permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts.

EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:

     DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when due
     on the Loans.

     OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to
     perform when due any other term, obligation, covenant or condition
     contained in this Agreement or in any of the Related Documents, or failure
     of Borrower to comply with or to perform any other term, obligation,
     covenant or condition contained in any other agreement between Lender and
     Borrower.

     DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default
     under any loan, extension of credit, security agreement, purchase or sales
     agreement, or any other agreement, in favor of any other creditor or person
     that may materially affect any of Borrower's property or Borrower's or any
     Grantor's ability to repay the Loans or perform their respective
     obligations under this Agreement or any of the Related Documents.

     FALSE STATEMENTS. Any warranty, representation or statement made or
     furnished to Lender by or on behalf of Borrower or any Grantor under this
     Agreement or the Related Documents is false or misleading in any material
     respect at the time made or furnished, or becomes false or misleading at
     any time thereafter.

     DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents
     ceases to be in full force and effect (including failure of any Security
     Agreement to create a valid and perfected Security Interest) at any time
     and for any reason.

     INSOLVENCY. The dissolution or termination of Borrower's existence as a
     going business, the insolvency of Borrower, the appointment of a receiver
     for any part of Borrower's property, any assignment for the benefit of
     creditors, any type of creditor workout, or the commencement of any
     proceeding under any bankruptcy or insolvency laws by or against Borrower.

     CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
     forfeiture proceedings, whether by judicial proceeding, self-help,
     repossession or any other method, by any creditor of Borrower, any creditor
     of any Grantor against any collateral securing the Indebtedness, or by any
     governmental agency. This includes a garnishment, attachment, or levy on or
     of any of Borrower's deposit accounts with Lender. However, this Event of
     Default shall not apply if there is a good faith dispute by Borrower or
     Grantor, as the case may be, as to the validity or reasonableness of the
     claim which is the basis of the creditor or forfeiture proceeding, and if
     Borrower or Grantor gives Lender written notice of the creditor or
     forfeiture proceeding and furnishes reserves or a surety bond for the
     creditor or forfeiture proceeding satisfactory to Lender.

     EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect
     to any Guarantor of any of the Indebtedness or any Guarantor dies or
     becomes incompetent, or revokes or disputes the validity of, or liability
     under, any Guaranty of the Indebtedness. Lender, at its option, may, but
     shall not be required to, permit the Guarantor's estate to assume
     unconditionally the obligations arising under the guaranty in a manner
     satisfactory to Lender, and, in doing so, cure the Event of Default.

     CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%)
     or more of the common stock of Borrower.

     ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
     condition, or Lender believes the prospect of payment or performance of the
     indebtedness is impaired.

     INSECURITY. Lender, in good faith, deems itself insecure.

     RIGHT TO CURE. If any default, other than a Default on Indebtedness, is
     curable and if Borrower or Grantor, as the case may be, has not been given
     a notice of a similar default within the preceding twelve (12) months, it
     may be cured (and not Event of Default will have occurred) if Borrower or
     Grantor, as the case may be, after receiving written notice from Lender
     demanding cure of such default; (a) cures the default within fifteen (15)
     days; or (b) if the cure requires more than fifteen (15) days, immediately
     initiates steps which Lender deems in Lender's sole discretion to be
     sufficient to cure the default and thereafter continues and completes all
     reasonable and necessary steps sufficient to produce compliance as soon as
     reasonably practical.

EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
Loan Advances or disbursements), and, at Lender's option, all indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity or otherwise.
Except as may be prohibited by applicable law, all of Lender's rights and
remedies shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:

     AMENDMENTS. This Agreement, together with any Related Documents,
     constitutes the entire understanding and agreement of the parties as to the
     matters set forth in this Agreement. No alteration of or amendment to this
     Agreement shall be effective unless given in writing and signed by the
     party or parties sought to be charged or bound by the alteration or
     amendment.

     APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
     LENDER IN THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES
     UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF SAN
     DIEGO COUNTY, THE STATE OF CALIFORNIA. THIS AGREEMENT SHALL BE GOVERNED BY
     AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.

     CAPTION HEADINGS. Caption headings in this Agreement are for convenience
     purposes only and are not to be used to interpret or define the provisions
     of this Agreement.

     CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's
     sale or transfer, whether now or later, of one or more participation
     interests in the Loans to one or more purchasers, whether related or
     unrelated to Lender. Lender may provide, without any limitation whatsoever,
     to any one or more purchasers, or potential purchasers, any information or
     knowledge Lender may have about Borrower or about any other matter relating
     to the Loan, and Borrower hereby waives any rights to privacy it may have
     with respect to such matters. Borrower additionally waives any and all
     notices of sale of participation interests, as well as all notices of any
     repurchase of such participation interests. Borrower also agrees that the
     purchasers of any such participation interests will be considered as the
     absolute owners of such interests in the Loans and will have all the rights
     granted under the participation agreement or agreements governing the sale
     of such participation interests. Borrower further waives all rights of
     offset or counterclaim that it may have now or later against Lender or
     against any purchaser of such a participation interest and unconditionally
     agrees that either Lender or such purchaser may enforce Borrower's
     obligation under the Loans irrespective of the failure or interests
     irrespective of any personal claims or defenses that Borrower may have
     against Lender.

     BORROWER INFORMATION. Borrower consents to the release of information on or
     about Borrower by Lender in accordance with any court order, law or
     regulation and in response to credit inquiries concerning Borrower.

     NON-LIABILITY OF LENDER. The relationship between Borrower and Lender is a
     debtor and creditor relationship and not fiduciary in nature, nor is the
     relationship to be construed as creating any partnership or joint venture
     between Lender and Borrower. Borrower is exercising its own judgment with
     respect to Borrower's business. All information supplied to Lender is for
     Lender's protection only and no other party is entitled to rely on such
     information. There is no duty for Lender to review, inspect, supervise, or
     inform Borrower of any matter with respect to Borrower's business. Lender
     and Borrower intend that Lender may reasonably rely on all information
     supplied by Borrower to Lender, together with all representations and
     warranties given by Borrower to Lender, without investigation or
     confirmation by Lender and that any investigation or failure to investigate
     will not diminish Lender's right to so rely.

     NOTICE OF LENDER'S BREACH. Borrower must notify Lender in writing of any
     breach of this Agreement or the Related Documents by Lender and any other
     claim, cause of action or offset against Lender within thirty (30) days
     after the occurrence of such breach or after the accrual of such claim,
     cause of action or offset. Borrower waives any claim, cause of action or
     offset for which notice is not given in accordance with this paragraph.
     Lender is entitled to rely on any failure to give such notice.

     BORROWER INDEMNIFICATION. Borrower shall indemnify and hold Lender harmless
     from and against all claims, costs, expenses, losses, damages, and
     liabilities of any kind, including but not limited to attorneys' fees and
     expenses, arising out of any matter relating directly or indirectly to the
     indebtedness, whether resulting from internal disputes of the Borrower,
     disputes between Borrower and any Guarantor, or whether involving any third
     parties, or out of any other matter whatsoever related to this Agreement or
     the Related Documents, but excluding any claim or liability which arises as
     a direct result of Lender's gross negligence or willful misconduct. This
     indemnity shall survive full repayment and satisfaction of the indebtedness
     and termination of this Agreement.

     COUNTERPARTS. This Agreement may be executed in multiple counterparts, each
     of which, when so executed, shall be deemed an original, but all such
     counterparts, taken together, shall constitute one and the same Agreement.

     COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
     expenses, including without limitation attorneys' fees, incurred in
     connection with the preparation, execution, enforcement, modification and
     collection of this Agreement or in connection with the Loans made

<PAGE>

06-13-2000                    BUSINESS LOAN AGREEMENT                     PAGE 5
LOAN NO 56064                       (CONTINUED)

================================================================================

     pursuant to this Agreement, Lender may pay someone else to help collect,
     the Loans and to enforce this Agreement, and Borrower will pay that amount.
     This includes, subject to any limits under applicable law, Lender's
     attorneys' fees and Lender's legal expenses, whether or not there is a
     lawsuit, including attorneys' fees for bankruptcy proceedings (including
     efforts to modify or vacate any automatic stay or injunction), appeals, and
     any anticipated post-judgment collection services. Borrower also will pay
     any court costs, in addition to all other sums provided by law.

     NOTICES. All notices required to be given under this Agreement shall be
     given in writing, may be sent by telefacsimile (unless otherwise required
     by law), and shall be effective when actually delivered or when deposited
     with a nationally recognized overnight courier or deposited in the United
     States mail, first class, postage prepaid, addressed to the party to whom
     the notice is to be given to at the address shown above. Any party may
     change its address for notices under this Agreement by giving formal
     written notice to the other parties, specifying that the purpose of the
     notice is to change the party's address. To the extent permitted by
     applicable law, if there is more than one Borrower, notice to any Borrower
     will constitute notice to all Borrowers. For notice purposes, Borrower will
     keep Lender informed at all times of Borrower's current address(es).

     SEVERABILITY. If a court of competent jurisdiction finds any provision of
     this Agreement to be invalid or unenforceable as to any person or
     circumstance, such finding shall not render that provision invalid or
     unenforceable as to any other persons or circumstances. If feasible, any
     such offending provision shall be deemed to be modified to be within the
     limits of enforceability or validity; however, if the offending provision
     cannot be so modified, it shall be stricken and all other provisions of
     this Agreement in all other respects shall remain valid and enforceable.

     SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
     provisions of this Agreement makes it appropriate, including without
     limitation any representation, warranty or covenant, the word "Borrower" as
     used herein shall include all subsidiaries and affiliates of Borrower.
     Notwithstanding the foregoing however, under no circumstances shall this
     Agreement be construed to require Lender to make any Loan or other
     financial accommodation to any subsidiary or affiliate of Borrower.

     SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
     behalf of Borrower shall bind its successors and assigns and shall inure to
     the benefit of Lender, its successors and assigns. Borrower shall not,
     however, have the right to assign its rights under this Agreement or any
     interest therein, without the prior written consent of Lender.

     SURVIVAL. All warranties, representations, and covenants made by Borrower
     in this Agreement or in any certificate or other instrument delivered by
     Borrower to Lender under this Agreement shall be considered to have been
     relied upon by Lender and will survive the making of the Loan and delivery
     to Lender of the Related Documents, regardless of any investigation made by
     Lender or on Lender's behalf.

     TIME IS OF THE ESSENSE. Time is of the essence in the performance of this
     Agreement.

     WAIVER. Lender shall not be deemed to have waived any rights under this
     Agreement unless such waiver is given in writing and signed by Lender. No
     delay or omission on the part of Lender in exercising any right shall
     operate as a waiver of such right or any other right. A waiver by Lender of
     a provision of this Agreement shall not prejudice or constitute a waiver of
     Lendner's right otherwise to demand strict compliance with that provision
     or any other provision of this Agreement. No prior waiver by Lender, nor
     any course of dealing between Lender and Borrower, or between Lender and
     any Grantor, shall constitute a waiver of any of Lender's rights or of any
     obligations of Borrower or of any Grantor as to any future transactions.
     Whenever the consent of Lender is required under this Agreement, the
     granting of such consent by Lender in any instance shall not constitute
     continuing consent in subsequent instances where such consent is required,
     and in all cases such consent may be granted or withheld in the sole
     discretion of Lender.

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
JUNE 13, 2000.

BORROWER:

FOTOBALL USA, INC.

BY:
    ----------------------------
    CLIFF LYON, SVP/CFO

LENDER:

SCRIPPS BANK

BY: /s/
    ----------------------------
    AUTHORIZED OFFICER

================================================================================
                             LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.29(C)
                             Concentrex 2000 All Rights reserved.
                             [CA-C40 56064UCC.LN C8.OVL]

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