SECURED CONVERTIBLE PROMISSORY NOTE

Effective Date: May 5, 2014

U.S. $832,500.00

FOR VALUE RECEIVED, NEAH POWER SYSTEMS, INC., a Nevada corporation (“Borrower”),
promises to pay to INTER-MOUNTAIN CAPITAL CORP., a Delaware corporation, or its
successors or assigns (“Lender”), $832,500.00 and any interest, fees, charges
and late fees on the date that is seventeen (17) months after the Purchase Price
Date (as defined below) (the “Maturity Date”) in accordance with the terms set
forth herein and to pay interest on the Outstanding Balance (as defined below)
(without regard to Conversion Eligible Tranches (as defined below)) at the rate
of five percent (5%) per annum from the Effective Date (as defined below) until
the same is paid in full. This Secured Convertible Promissory Note (this “Note”)
is issued and made effective as of May 5, 2014 (the “Effective Date”). For
purposes hereof, the “Outstanding Balance” of this Note means, as of any date of
determination, the Purchase Price (as defined below), as reduced or increased,
as the case may be, pursuant to the terms hereof for redemption, conversion or
otherwise, plus any original issue discount (“OID”), the Transaction Expense
Amount (as defined below), accrued but unpaid interest, collection and
enforcements costs (including attorneys’ fees) incurred by Lender, transfer,
stamp, issuance and similar taxes and fees related to Conversions (as defined
below), and any other fees or charges (including without limitation late
charges) incurred under this Note. This Note is issued pursuant to that certain
Securities Purchase Agreement dated May 5, 2014, as the same may be amended from
time to time (the “Purchase Agreement”), by and between Borrower and Lender. All
interest calculations hereunder shall be computed on the basis of a 360-day year
comprised of twelve (12) thirty (30) day months, shall compound daily and shall
be payable in accordance with the terms of this Note. Certain capitalized terms
used herein but not otherwise defined shall have the meaning ascribed thereto in
the Purchase Agreement. Certain other capitalized terms used herein are defined
in Attachment 1 attached hereto and incorporated herein by this reference.

This Note carries an OID of $75,000.00. In addition, Borrower agrees to pay
$7,500.00 to Lender to cover Lender’s legal fees, accounting costs, due
diligence, monitoring and other transaction costs incurred in connection with
the purchase and sale of this Note (the “Transaction Expense Amount”), all of
which amount  is included in the initial principal balance of this Note. The
purchase price for this Note shall be $750,000.00 (the “Purchase Price”),
computed as follows: $832,500.00 original principal balance, less the OID, less
the Transaction Expense Amount. The Purchase Price shall be payable by delivery
to Borrower at Closing of the Buyer Trust Deed Notes, and a wire transfer of
immediately available funds in the amount of the Initial Cash Purchase Price.
For purposes hereof, the term “Purchase Price Date” means the date the Initial
Purchase Price is delivered by Lender to Borrower.

Notwithstanding any other provision contained in this Note, the conversion by
Lender of any portion of the Outstanding Balance shall only be exercisable in
three (3) tranches (each, a “Tranche”), consisting of (i) an initial Tranche in
an amount equal to $502,500.00 and any interest, costs, fees or charges accrued
thereon or added thereto under the terms of this Note and the other Transaction
Documents (as defined in the Purchase Agreement) (“Tranche #1”), and (ii) two
(2) additional Tranches, each in the amount of $165,000.00, plus any interest,
costs, fees or charges accrued thereon or added thereto under the terms of this
Note and the other Transaction Documents (each, a “Subsequent Tranche”). Tranche
#1 shall correspond to the Initial Cash Purchase Price, $45,000.00 of the OID
and the Transaction Expense Amount, and may be converted any time subsequent to
the Effective Date. The first Subsequent Tranche shall correspond to Buyer Trust
Deed Note #1 and $15,000.00 of the OID, and the second Subsequent Tranche shall
correspond to Buyer Trust Deed Note #2 and $15,000.00 of the OID. Lender’s right
to convert any portion of any of the Subsequent Tranches is conditioned upon
Lender’s payment in full of the Buyer Trust Deed Note, as applicable,
corresponding to such Subsequent Tranche (upon the satisfaction of such
condition, such Subsequent Tranche becomes a “Conversion Eligible Tranche”). For
the avoidance of doubt, subject to the other terms and conditions hereof,
Tranche #1 shall be deemed a Conversion Eligible Tranche as of the Purchase
Price Date for all purposes hereunder and

1

--------------------------------------------------------------------------------

may be converted in whole or in part at any time subsequent to the Purchase
Price Date, and each Subsequent Tranche that becomes a Conversion Eligible
Tranche may be converted in whole or in part at any time subsequent to the first
date on which such Subsequent Tranche becomes a Conversion Eligible Tranche. For
all purposes hereunder, Conversion Eligible Tranches shall be converted (or
redeemed, as applicable) in order of the lowest-numbered Conversion Eligible
Tranche. At all times hereunder, the aggregate amount of any costs, fees or
charges incurred by or assessable against Borrower hereunder, including, without
limitation, any fees, charges or premiums incurred in connection with an Event
of Default (as defined below), shall be added to the lowest-numbered
then-current Conversion Eligible Tranche.

1. Payment; Prepayment. Provided there is an Outstanding Balance, on each
Installment Date (as defined below), Borrower shall pay to Lender an amount
equal to the Installment Amount (as defined below) due on such Installment Date
in accordance with Section 8. All payments owing hereunder shall be in lawful
money of the United States of America or Conversion Shares (as defined below),
as provided for herein, and delivered to Lender at the address furnished to
Borrower for that purpose. All payments shall be applied first to (a) costs of
collection, if any, then to (b) fees and charges, if any, then to (c) accrued
and unpaid interest, and thereafter, to (d) principal. Notwithstanding the
foregoing or anything to the contrary herein, so long as Borrower has not
received a Lender Conversion Notice (as defined below) or an Installment Notice
(as defined below) from Lender where the applicable Conversion Shares have not
yet been delivered and so long as no Event of Default has occurred since the
Effective Date (whether declared by Lender or undeclared), then Borrower shall
have the right, exercisable on not less than five (5) Trading Days prior written
notice to Lender to prepay the Outstanding Balance of this Note, in full, in
accordance with this Section 1. Any notice of prepayment hereunder (an “Optional
Prepayment Notice”) shall be delivered to Lender at its registered address and
shall state: (y) that Borrower is exercising its right to prepay this Note, and
(z) the date of prepayment, which shall be not less than five (5) Trading Days
from the date of the Optional Prepayment Notice. On the date fixed for
prepayment (the “Optional Prepayment Date”), Borrower shall make payment of the
Optional Prepayment Amount (as defined below) to or upon the order of Lender as
specified by Lender in writing to Borrower not more than one (1) Trading Day
prior to the Optional Prepayment Date. If Borrower exercises its right to prepay
this Note, Borrower shall make payment to Lender of an amount in cash (the
“Optional Prepayment Amount”) equal to 125% multiplied by the then Outstanding
Balance of this Note. If Borrower delivers an Optional Prepayment Notice and
fails to pay the Optional Prepayment Amount due to Lender within two (2) Trading
Days following the Optional Prepayment Date, Borrower shall forever forfeit its
right to prepay this Note pursuant to this Section.

2. Security. This Note is secured by that certain Security Agreement of even
date herewith, as the same may be amended from time to time (the “Security
Agreement”), executed by Borrower in favor of Lender encumbering the Buyer Trust
Deed Notes, as more specifically set forth in the Security Agreement, all the
terms and conditions of which are hereby incorporated into and made a part of
this Note.

3. Lender Optional Conversion.

3.1. Lender Conversion Price. Subject to adjustment as set forth in this Note,
the conversion price for each Lender Conversion (as defined below) shall be
$0.05 (the “Lender Conversion Price”).

3.2. Lender Conversions. Lender has the right at any time after the date that is
six (6) months from the Purchase Price Date, including without limitation until
any Optional Prepayment Date (even if Lender has received an Optional Prepayment
Notice), at its election, to convert (each instance of conversion is referred to
herein as a “Lender Conversion”) all or any part of the Outstanding Balance into
shares (“Lender Conversion Shares”) of fully paid and non-assessable common
stock, $0.001 par value per share (“Common Stock”), of Borrower as per the
following conversion formula: the number of

2

--------------------------------------------------------------------------------

Lender Conversion Shares equals the amount being converted (the “Conversion
Amount”) divided by the Lender Conversion Price. Conversion notices in the form
attached hereto as Exhibit A (each, a “Lender Conversion Notice”) may be
effectively delivered to Borrower by any method of Lender’s choice (including
but not limited to facsimile, email, mail, overnight courier, or personal
delivery), and all Lender Conversions shall be cashless and not require further
payment from Lender. Borrower shall deliver the Lender Conversion Shares from
any Lender Conversion to Lender in accordance with Section 9 below within three
(3) Trading Days of Lender’s delivery of the Lender Conversion Notice to
Borrower.

3.3. Application to Installments. Notwithstanding anything to the contrary
herein, including without limitation Section 8 hereof, Lender may, in its sole
discretion, apply all or any portion of any Lender Conversion toward any
Installment Conversion (as defined below), even if such Installment Conversion
is pending, as determined in Lender’s sole discretion, by delivering written
notice of such election (which notice may be included as part of the applicable
Lender Conversion Notice) to Borrower at any date on or prior to the applicable
Installment Date. In such event, Borrower may not elect to allocate such portion
of the Installment Amount being paid pursuant to this Section 3.3 in the manner
prescribed in Section 8.3; rather, Borrower must reduce the applicable
Installment Amount by the Conversion Amount described in this Section 3.3.

4. Defaults and Remedies.

4.1. Defaults. The following are events of default under this Note (each, an
“Event of Default”): (i) Borrower shall fail to pay any principal when due and
payable (or payable by Conversion) hereunder; or (ii) Borrower shall fail to
deliver any Conversion Shares or True-Up Shares (as defined below) in accordance
with the terms hereof; or (iii) Borrower shall fail to pay any interest or any
other amount when due and payable (or payable by Conversion) hereunder; or (iv)
a receiver, trustee or other similar official shall be appointed over Borrower
or a material part of its assets and such appointment shall remain uncontested
for twenty (20) days or shall not be dismissed or discharged within one hundred
twenty (120) days; or (v) Borrower shall become insolvent or generally fails to
pay, or admits in writing its inability to pay, its debts as they become due,
subject to applicable grace periods, if any; or (vi) Borrower shall make a
general assignment for the benefit of creditors; or (vii) Borrower shall file a
petition for relief under any bankruptcy, insolvency or similar law (domestic or
foreign); or (viii) an involuntary proceeding shall be commenced or filed
against Borrower; or (ix) Borrower shall become delinquent in its filing
requirements as a fully-reporting issuer registered with the SEC; or (x)
Borrower shall fail to observe or perform any covenant, obligation, condition or
agreement of Borrower contained herein or in any other Transaction Document,
including without limitation all covenants to timely file all required quarterly
and annual reports and any other filings that are necessary to enable Lender to
sell Conversion Shares, Warrant Shares and True-Up Shares pursuant to Rule 144;
or (xi) any representation, warranty or other statement made or furnished by or
on behalf of Borrower to Lender herein, in any Transaction Document, or
otherwise in connection with the issuance of this Note shall be false,
incorrect, incomplete or misleading in any material respect when made or
furnished; or (xii) the occurrence of a Fundamental Transaction without Lender’s
prior written consent; or (xiii) Borrower shall fail to maintain the Share
Reserve as required under the Purchase Agreement; or (xiv) Borrower effectuates
a reverse split of its Common Stock without twenty (20) Trading Days prior
written notice to Borrower; or (xv) any money judgment, writ or similar process
shall be entered or filed against Borrower or any subsidiary of Borrower or any
of its property or other assets for more than $100,000, and shall remain
unvacated, unbonded or unstayed for a period of twenty (20) calendar days unless
otherwise consented to by Lender.

4.2. Remedies. Upon the occurrence of any Event of Default, Lender may at any
time thereafter accelerate this Note by written notice to Borrower, with the
Outstanding Balance becoming immediately due and payable in cash at the
Mandatory Default Amount (as defined hereafter). Notwithstanding the foregoing,
upon the occurrence of any Event of Default, Lender may, at its option, elect to
increase the Outstanding Balance by applying the Default Effect (subject to the
limitation set forth

3

--------------------------------------------------------------------------------

below) via written notice to Borrower without accelerating the Outstanding
Balance, in which event the Outstanding Balance shall be increased as of the
date of the occurrence of the applicable Event of Default pursuant to the
Default Effect, but the Outstanding Balance shall not be immediately due and
payable unless so declared by Lender (for the avoidance of doubt, if Lender
elects to apply the Default Effect pursuant to this sentence, it shall reserve
the right to declare Outstanding Balance immediately due and payable at any time
and no such election by Lender shall be deemed to be a waiver of its right to
declare the Outstanding Balance immediately due and payable as set forth herein
unless otherwise agreed to by Lender in writing). Notwithstanding the foregoing,
upon the occurrence of any Event of Default described in clauses (iv), (v),
(vi), (vii) or (viii) of Section 4.1, the Outstanding Balance as of the date of
acceleration shall become immediately and automatically due and payable in cash
at the Mandatory Default Amount, without any written notice required by Lender.
The “Mandatory Default Amount” means the greater of (i) the Outstanding Balance
(without regard to whether any Tranches are Conversion Eligible Tranches)
divided by the Installment Conversion Price (as defined below) on the date the
Mandatory Default Amount is either demanded or paid in full, whichever has a
lower Installment Conversion Price, multiplied by the volume weighted average
price (the “VWAP”) on the date the Mandatory Default Amount is either demanded
or paid in full, whichever has a higher VWAP, or (ii) 125% multiplied by the
Outstanding Balance (the “Default Effect”), provided that the Default Effect may
only be applied with respect to two (2) Events of Default. At any time following
the occurrence of any Event of Default, upon written notice given by Lender to
Borrower, (a) interest shall accrue on the Outstanding Balance beginning on the
date the applicable Event of Default occurred at an interest rate equal to the
lesser of 22% per annum or the maximum rate permitted under applicable law
(“Default Interest”), (b) the Lender Conversion Price for all Lender Conversions
occurring after the date of the applicable Event of Default shall equal the
lower of the Lender Conversion Price applicable to any Lender Conversion and the
Market Price (as defined below) as of any applicable date of Conversion, and (c)
the true-up provisions of Section 11 below shall apply to all Lender Conversions
that occur after the date the applicable Event of Default occurred.
Additionally, following the occurrence of any Event of Default, Borrower may, at
its option, pay any Lender Conversion in cash instead of Lender Conversion
Shares by paying to Lender on or before the applicable Delivery Date (as defined
below) a cash amount equal to the number of Lender Conversion Shares set forth
in the applicable Lender Conversion Notice multiplied by the highest intra-day
trading price of the Common Stock that occurs during the period beginning on the
date the applicable Event of Default occurred and ending on the date of the
applicable Lender Conversion Notice. In connection with acceleration described
herein, Lender need not provide, and Borrower hereby waives, any presentment,
demand, protest or other notice of any kind, and Lender may immediately and
without expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under applicable law.
Such acceleration may be rescinded and annulled by Lender at any time prior to
payment hereunder and Lender shall have all rights as a holder of the Note until
such time, if any, as Lender receives full payment pursuant to this Section 4.2.
No such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon. Nothing herein shall limit Lender’s right
to pursue any other remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief
with respect to Borrower’s failure to timely deliver Conversion Shares upon
Conversion of the Notes as required pursuant to the terms hereof.

4.3. Certain Additional Rights. Notwithstanding anything to the contrary herein,
in the event Borrower fails to make any payment or otherwise to deliver any
Conversion Shares as and when required under this Note, then (i) the Lender
Conversion Price for all Lender Conversions occurring after the date of such
failure to pay shall equal the lower of the Lender Conversion Price applicable
to any Lender Conversion and the Market Price as of any applicable date of
Conversion, and (ii) the true-up provisions of Section 11 below shall apply to
all Lender Conversions that occur after the date of such failure to pay,
provided that all references to the “Installment Notice” in Section 11 shall be
replaced with references to a “Lender Conversion Notice” for purposes of this
Section 4.3, all references to “Installment Conversion Shares” in Section 11
shall be replaced with references to “Lender Conversion Shares” for

4

--------------------------------------------------------------------------------

purposes of this Section 4.3, and all references to the “Installment Conversion
Price” in Section 11 shall be replaced with references to the “Lender Conversion
Price” for purposes of this Section 4.3.

4.4. Cross Default. A breach or default by Borrower of any covenant or other
term or condition contained in any Other Agreements (as defined below) shall, at
the option of Lender, be considered a default under this Note, in which event
Lender shall be entitled (but in no event required) to apply all rights and
remedies of Lender under the terms of this Note. “Other Agreements” means,
collectively, (a) all existing and future agreements and instruments between,
among or by Borrower (or an affiliate), on the one hand, and Lender (or an
affiliate), on the other hand, and (b) any financing agreement or a material
agreement that affects the Company’s ongoing business operations. For the
avoidance of doubt, all existing and future loan transactions between Borrower
and Lender and their respective affiliates will be cross-defaulted with each
other loan transaction and with all other existing and future debt of Borrower
to Lender.

5. Unconditional Obligation; No Offset. Borrower acknowledges that this Note is
an unconditional, valid, binding and enforceable obligation of Borrower not
subject to offset (except as set forth in Section 20 below), deduction or
counterclaim of any kind. Borrower hereby waives any rights of offset it now has
or may have hereafter against Lender, its successors and assigns, and agrees to
make the payments or conversions called for herein in accordance with the terms
of this Note.

6. Waiver. No waiver of any provision of this Note shall be effective unless it
is in the form of a writing signed by the party granting the waiver. No waiver
of any provision or consent to any prohibited action shall constitute a waiver
of any other provision or consent to any other prohibited action, whether or not
similar. No waiver or consent shall constitute a continuing waiver or consent or
commit a party to provide a waiver or consent in the future except to the extent
specifically set forth in writing.

7. Rights Upon Issuance of Securities.

7.1. [Intentionally Deleted].  

7.2. Adjustment of Lender Conversion Price upon Subdivision or Combination of
Common Stock. Without limiting any provision hereof, if Borrower at any time on
or after the Effective Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Lender Conversion Price in
effect immediately prior to such subdivision will be proportionately reduced.
Without limiting any provision hereof, if Borrower at any time on or after the
Effective Date combines (by combination, reverse stock split or otherwise) one
or more classes of its outstanding shares of Common Stock into a smaller number
of shares, the Lender Conversion Price in effect immediately prior to such
combination will be proportionately increased. Any adjustment pursuant to this
Section 7.2 shall become effective immediately after the effective date of such
subdivision or combination. If any event requiring an adjustment under this
Section 7.2 occurs during the period that a Lender Conversion Price is
calculated hereunder, then the calculation of such Lender Conversion Price shall
be adjusted appropriately to reflect such event.

7.3. [Intentionally Deleted].  

8. Borrower Installments.

8.1. Installment Conversion Price. Subject to the adjustments set forth herein,
the conversion price for each Installment Conversion (the “Installment
Conversion Price”) shall be the lesser of (i) the Lender Conversion Price, and
(ii) 75% (the “Conversion Factor”) of the average of the three (3) lowest VWAPs
in the twenty (20) Trading Days immediately preceding the applicable

5

--------------------------------------------------------------------------------

Conversion (the “Market Price”), provided that if at any time the average of the
three (3) lowest VWAPs in the twenty (20) Trading Days immediately preceding any
date of measurement is below $0.01, then in such event the Conversion Factor
shall be reduced to 70% for all future Conversions.

8.2. Installment Conversions. Beginning on the date that is six (6) months after
the Purchase Price Date and on the same day of each month thereafter until the
Maturity Date (each, an “Installment Date”), Borrower shall pay to Lender the
applicable Installment Amount due on such date, subject to the provisions of
this Section 8. Payments of each Installment Amount may be made (a) in cash, or
(b) by converting such Installment Amount into shares of Common Stock
(“Installment Conversion Shares”, and together with the Lender Conversion
Shares, the “Conversion Shares”) in accordance with this Section 8 (each an
“Installment Conversion”, and together with Lender Conversions, a “Conversion”)
per the following formula: the number of Installment Conversion Shares equals
the portion of the applicable Installment Amount being converted divided by the
Installment Conversion Price, or (c) by any combination of the foregoing, so
long as the cash is delivered to Lender on the applicable Installment Date and
the Installment Conversion Shares are delivered to Lender on or before the
applicable Delivery Date. Notwithstanding the foregoing, Borrower will not be
entitled to elect an Installment Conversion with respect to any portion of any
applicable Installment Amount and shall be required to pay the entire amount of
such Installment Amount in cash if on the applicable Installment Notice Due Date
(defined below) there is an Equity Conditions Failure (as defined below), and
such failure is not waived in writing by Lender. Moreover, in the event Borrower
desires to pay all or any portion of any Installment Amount in cash, it must
notify Lender in writing of such election and the portion of the applicable
Installment Amount it elects to pay in cash not more than twenty-five (25) or
less than fifteen (15) Trading Days prior to the applicable Installment Date. If
Borrower fails to so notify Lender, it shall not be permitted to elect to pay
any portion of such Installment Amount in cash unless otherwise agreed to by
Lender in writing or proposed by Lender in an Installment Notice delivered by
Lender to Borrower. Notwithstanding the foregoing or anything to the contrary
herein, Borrower shall only be obligated to deliver Installment Amounts with
respect to Tranches that have become Conversion Eligible Tranches and shall have
no obligation to pay to Lender any Installment Amount with respect to any
Tranche that has not become a Conversion Eligible Tranche. In furtherance
thereof, in the event Borrower has repaid all Conversion Eligible Tranches
pursuant to the terms of this Note, it shall have no further obligations to
deliver any Installment Amount to Lender unless and until any Subsequent Tranche
that was not previously a Conversion Eligible Tranche becomes a Conversion
Eligible Tranche pursuant to the terms of this Note.

8.3. Allocation of Installment Amounts. On or prior to each Installment Date
(each, an “Installment Notice Due Date”), Lender may, but shall not be obligated
to, propose an allocation of the applicable Installment Amount between payment
of the applicable Installment Amount in cash and via an Installment Conversion
by delivery of a notice to Borrower by email or fax substantially in the form
attached hereto as Exhibit B (each, an “Installment Notice”). Following its
receipt of such an Installment Notice, Borrower may either ratify Lender’s
proposed allocation or elect to change the allocation by written notice to
Lender by email or fax on or before 12:00 p.m. New York time on the applicable
Installment Date, so long as the sum of the cash payments and the amount of
Installment Conversions equal the applicable Installment Amount, provided that
Borrower may not change the allocation to increase the portion of the
Installment Amount payable in cash unless it has previously given Lender not
more than twenty-five (25) or less than fifteen (15) Trading Days advance
written notice of such election as set forth in Section 8.2 above. If Borrower
fails to notify Lender of its election to change the allocation prior to the
deadline set forth in the previous sentence, it shall be deemed to have ratified
and accepted the allocation set forth in the applicable Installment Notice. If
Lender does not deliver an Installment Notice to Borrower as set forth above in
this Section 8.3, then Borrower may, subject to the last two sentences of
Section 8.2 above, propose an allocation in an Installment Notice delivered to
Lender by email or fax on or before 5:00 p.m. New York time on the applicable
Installment Date, provided that if Borrower fails to notify Lender of its
allocation election prior to such deadline, it shall be deemed to have elected
to allocate the entire Installment Amount to be converted via an Installment
Conversion. Borrower

6

--------------------------------------------------------------------------------

acknowledges and agrees that regardless of which party prepares the applicable
Installment Notice, the amounts and calculations set forth thereon are subject
to correction or adjustment because of error, mistake, or any adjustment
resulting from an Event of Default or other adjustment permitted under the
Transaction Documents (an “Adjustment”). Furthermore, no error or mistake in the
preparation of such notices, or failure to apply any Adjustment that could have
been applied prior to the preparation of an Installment Notice may be deemed a
waiver of Lender’s right to enforce the terms of any Note, even if such error,
mistake, or failure to include an Adjustment arises from Lender’s own
calculation. Borrower shall deliver the Installment Conversion Shares from any
Installment Conversion to Lender in accordance with Section 9 below on or before
each applicable Installment Date.

9. Method of Conversion Share Delivery. On or before the close of business on
the third (3rd) Trading Day following the Installment Date or the third (3rd)
Trading Day following the date of delivery of a Lender Conversion Notice, as
applicable (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible
at such time, deliver or cause its transfer agent to deliver the applicable
Conversion Shares electronically via DWAC to the account designated by Lender in
the applicable Lender Conversion Notice or Installment Notice. If Borrower is
not DWAC Eligible, it shall deliver to Lender or its broker (as designated in
the Lender Conversion Notice or Installment Notice, as applicable), via
reputable overnight courier, a certificate representing the number of shares of
Common Stock equal to the number of Conversion Shares to which Lender shall be
entitled, registered in the name of Lender or its designee. For the avoidance of
doubt, Borrower has not met its obligation to deliver Conversion Shares by the
Delivery Date unless Lender or its broker, as applicable, has actually received
the certificate representing the applicable Conversion Shares no later than the
close of business on the relevant Delivery Date pursuant to the terms set forth
above.

10. Conversion Delays. If Borrower fails to deliver Conversion Shares or True-Up
Shares (as defined below) in accordance with the timeframes stated in Sections
3, 8, or 11, as applicable, Lender, at any time prior to selling all of those
Conversion Shares or True-Up Shares, as applicable, may rescind in whole or in
part that particular Conversion attributable to the unsold Conversion Shares or
True-Up Shares, with a corresponding increase to the Outstanding Balance (any
returned Conversion Amount will tack back to the Purchase Price Date). In
addition, for each Conversion, in the event that Conversion Shares or True-Up
Shares are not delivered by the fourth Trading Day (inclusive of the day of the
Conversion or the True-Up Date (as defined below), as applicable), a late fee
equal to the higher of $500.00 per day and 2% of the applicable Conversion
Amount or Installment Amount, as applicable (but in any event the cumulative
amount of such late fees shall not exceed the applicable Conversion Amount or
Installment Amount) will be assessed for each day after the third Trading Day
(inclusive of the day of the Conversion and the True-Up Date) until Conversion
Share or True-Up Share delivery is made; and such late fee will be added to the
Outstanding Balance (under Lender’s and Borrower’s expectations that any late
fees charged will tack back to the Purchase Price Date).

11. True-Up. On the date that is twenty (20) Trading Days (a “True-Up Date”)
from each date Borrower delivers Free Trading (as defined below) Installment
Conversion Shares to Lender, there shall be a true-up where Lender shall have
the right to require Borrower to deliver to Lender additional Installment
Conversion Shares (“True-Up Shares”) if the Installment Conversion Price as of
the True-Up Date is less than the Installment Conversion Price used in the
applicable Installment Notice. In such event, Borrower shall deliver to Lender
within three (3) Trading Days of the date Lender delivers notice of its right to
receive True-Up Shares to Borrower (pursuant to a form of notice substantially
in the form attached hereto as Exhibit C) the number of True-Up Shares equal to
the difference between the number of Installment Conversion Shares that would
have been delivered to Lender on the True-Up Date based on the Installment
Conversion Price as of the True-Up Date and the number of Installment Conversion
Shares originally delivered to Lender pursuant to the applicable Installment
Notice.  If the Installment Conversion Price as of the True-Up Date is higher
than the Installment Conversion Price set forth in the applicable Installment
Notice, the Lender shall be required to either (a) return any excess Installment
Conversion Shares to Borrower or (b) credit such excess Installment Conversion
Shares toward the next

7

--------------------------------------------------------------------------------

delivery of Installment Conversion Shares or Lender Conversion Shares (as
applicable) under this Note, as determined in the sole discretion of the Lender.
 

12. Ownership Limitation. Notwithstanding anything to the contrary contained in
this Note or the other Transaction Documents, if at any time Lender shall or
would be issued shares of Common Stock under any of the Transaction Documents,
but such issuance would cause Lender (together with its affiliates) to
beneficially own a number of shares exceeding 4.99% of the number of shares of
Common Stock outstanding on such date (including for such purpose the shares of
Common Stock issuable upon such issuance) (the “Maximum Percentage”), then
Borrower must not issue to Lender shares of the Common Stock which would exceed
the Maximum Percentage. For purposes of this Section, beneficial ownership of
Common Stock will be determined pursuant to Section 13(d) of the 1934 Act. The
shares of Common Stock issuable to Lender that would cause the Maximum
Percentage to be exceeded are referred to herein as the “Ownership Limitation
Shares”. Borrower will reserve the Ownership Limitation Shares for the exclusive
benefit of Lender. From time to time, Lender may notify Borrower in writing of
the number of the Ownership Limitation Shares that may be issued to Lender
without causing Lender to exceed the Maximum Percentage. Upon receipt of such
notice, Borrower shall be unconditionally obligated to immediately issue such
designated shares to Lender, with a corresponding reduction in the number of the
Ownership Limitation Shares. Notwithstanding the forgoing, the term “4.99%”
above shall be replaced with “9.99%” at such time as the Market Capitalization
of the Common Stock is less than $10,000,000.00. Notwithstanding any other
provision contained herein, if the term “4.99%” is replaced with “9.99%”
pursuant to the preceding sentence, such increase to “9.99%” shall remain at
9.99% until increased, decreased or waived by Lender as set forth below.

13. Payment of Collection Costs. If this Note is placed in the hands of an
attorney for collection or enforcement prior to commencing legal proceedings, or
is collected or enforced through any legal proceeding, or Lender otherwise takes
action to collect amounts due under this Note or to enforce the provisions of
this Note then Borrower shall pay the reasonable costs incurred by Lender for
such collection, enforcement or action including, without limitation, reasonable
attorneys’ fees and disbursements. Borrower also agrees to pay for any costs,
fees or charges of its transfer agent that are charged to Lender pursuant to any
Conversion or issuance of shares pursuant to this Note.

14. Opinion of Counsel. In the event that an opinion of counsel is needed for
any matter related to any Note, Lender has the right to have any such opinion
provided by its counsel. Lender also has the right to have any such opinion
provided by Borrower’s counsel.

15. Governing Law. This Note shall be construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and
performance of this Note shall be governed by, the internal laws of the State of
Utah, without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of Utah or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of Utah.
The provisions set forth in the Purchase Agreement to determine the proper venue
for any disputes are incorporated herein by this reference.

16. Resolution of Disputes.

16.1. Arbitration of Disputes. By its acceptance of this Note, each party agrees
to be bound by the Arbitration Provisions set forth as an Exhibit to the
Purchase Agreement.

16.2. Calculation Disputes. Notwithstanding the Arbitration Provisions, in the
case of a dispute as to any arithmetic calculation hereunder, including without
limitation calculating the Outstanding Balance, Lender Conversion Price, Lender
Shares to be delivered, Installment Conversion Price, Installment Conversion
Shares to be delivered, the Market Price, or the VWAP (collectively,
“Calculations”), Borrower or Lender (as the case may be) shall submit the
disputed determinations or

8

--------------------------------------------------------------------------------

arithmetic calculations (as the case may be) via facsimile or email with
confirmation of receipt (a) within two (2) Trading Days after receipt of the
applicable notice giving rise to such dispute to Borrower or Lender (as the case
may be) or (b) if no notice gave rise to such dispute, at any time after Lender
learned of the circumstances giving rise to such dispute. If Lender and Borrower
are unable to agree upon such determination or calculation within two
(2) Trading Days of such disputed determination or arithmetic calculation (as
the case may be) being submitted to Borrower or Lender (as the case may be),
then Borrower shall, within two (2) Trading Days, submit via facsimile the
disputed Calculation to an independent, reputable investment bank or accounting
firm selected by Lender. Borrower shall cause the investment bank or accounting
firm to perform the determinations or calculations (as the case may be) and
notify Borrower and Lender of the results no later than ten (10) Trading Days
from the time it receives such disputed determinations or calculations (as the
case may be). Such investment bank’s or accounting firm’s determination or
calculation with respect to the disputes set forth in this Section 16.2 (as the
case may be) shall be binding upon all parties absent demonstrable error. The
investment banker’s or accounting firm’s fee for performing such Calculation
shall be paid by the incorrect party, or if both parties are incorrect, by the
party whose Calculation is furthest from the correct Calculation as determined
by the investment banker or accounting firm. In the event Borrower is the losing
party, no extension of the Delivery Date shall be granted and Borrower shall
incur all effects for failing to deliver the applicable Conversion Shares in a
timely manner as set forth in this Note.

17. Cancellation. After repayment or conversion of the entire Outstanding
Balance (including without limitation delivery of True-Up Shares pursuant to the
payment of the final Installment Amount, if applicable), this Note shall be
deemed paid in full, shall automatically be deemed canceled, and shall not be
reissued.

18. Amendments. The prior written consent of both parties hereto shall be
required for any change or amendment to this Note.

19. Assignments. Borrower may not assign this Note without the prior written
consent of Lender. This Note and any shares of Common Stock issued upon
conversion of this Note may be offered, sold, assigned or transferred by Lender
without the consent of Borrower.

20. Offset Rights. Notwithstanding anything to the contrary herein or in any of
the other Transaction Documents, (a) the parties hereto acknowledge and agree
that Lender maintains a right of offset pursuant to the terms of the Buyer Trust
Deed that, under certain circumstances, permits Lender to deduct amounts owed by
Borrower under this Note from amounts otherwise owed by Lender under the Buyer
Trust Deed Notes (the “Lender Offset Right”), and (b) in the event of the
occurrence of any Event of Default (as defined the Buyer Trust Deed Notes, or
any other note issued by the initial Lender in connection with the Purchase
Agreement), or at any other time, Borrower shall be entitled to deduct and
offset any amount owing by the initial Lender under the Buyer Trust Deed Notes,
as applicable, from any amount owed by Borrower under this Note (the “Borrower
Offset Right”). In the event that Borrower’s exercise of Borrower Offset Right
results in the full satisfaction of Borrower’s obligations under this Note,
Lender shall return the original Note to Borrower marked “cancelled” or, in the
event this Note has been lost, stolen or destroyed, a lost note affidavit in a
form reasonably acceptable to Borrower. For the avoidance of doubt, Borrower
shall not incur any prepayment premium set forth in Section 1 hereof with
respect to any portions of this Note that are satisfied by way of Borrower
Offset Right.

21. Time of the Essence. Time is expressly made of the essence of each and every
provision of this Note and the documents and instruments entered into in
connection herewith.

22. Notices. Whenever notice is required to be given under this Note, unless
otherwise provided herein, such notice shall be given in accordance with the
subsection of the Purchase Agreement titled “Notices.”

9

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the
Effective Date set out above.

BORROWER:

NEAH POWER SYSTEMS, INC.

By: ________________________

Name:  _____________________

Title: _______________________

ACKNOWLEDGED, ACCEPTED AND AGREED:

LENDER:

INTER-MOUNTAIN CAPITAL CORP.

By: _________________________

       John M. Fife, President

[Signature Page to Secured Convertible Promissory Note]

--------------------------------------------------------------------------------

ATTACHMENT 1

DEFINITIONS

For purposes of this Note, the following terms shall have the following
meanings:

A1. “Deemed Issuance” means an issuance of Common Stock that shall be deemed to
have occurred on the latest possible permitted date pursuant to the terms hereof
in the event Borrower fails deliver Conversion Shares as and when required
pursuant to Sections 3 or 8 of the Note. For the avoidance of doubt, if Borrower
has elected or is deemed under Section 8.3 to have elected to make an
Installment Payment in Installment Conversion Shares and fails to deliver such
Installment Conversion Shares, such failure shall be considered a Deemed
Issuance hereunder even if an Equity Conditions Failure exists at that time or
other relevant date of determination.   

A2. “DTC” means the Depository Trust Company.

A3. “DTC Eligible” means, with respect to the Common Stock, that such Common
Stock is eligible to be deposited in certificate form at the DTC, cleared and
converted into electronic shares by the DTC and held in the name of the clearing
firm servicing Lender’s brokerage firm for the benefit of Lender.

A4. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer
Program.

A5. “DWAC” means Deposit Withdrawal at Custodian as defined by the DTC.

A6. “DWAC Eligible” means that (i) Borrower’s Common Stock is eligible at DTC
for full services pursuant to DTC’s operational arrangements, including without
limitation transfer through DTC’s DWAC system, (ii) Borrower has been approved
(without revocation) by the DTC’s underwriting department, (iii) Borrower’s
transfer agent is approved as an agent in the DTC/FAST Program, (iv) the
Conversion Shares (as defined below) are otherwise eligible for delivery via
DWAC; (v) Borrower has previously delivered all Conversion Shares to Lender via
DWAC; and (vi) Borrower’s transfer agent does not have a policy prohibiting or
limiting delivery of the Conversion Shares via DWAC.

A7. “Equity Conditions Failure” means that any of the following conditions has
not been satisfied during any applicable Equity Conditions Measuring Period (as
defined below): (i) with respect to the applicable date of determination all of
the Conversion Shares are freely tradable under Rule 144 or without the need for
registration under any applicable federal or state securities laws (in each
case, disregarding any limitation on conversion of this Note); (ii) on each day
during the period beginning one month prior to the applicable date of
determination and ending on and including the applicable date of determination
(the “Equity Conditions Measuring Period”), the Common Stock is listed or
designated for quotation (as applicable) on any of The New York Stock Exchange,
NYSE Amex, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq
Capital Market, the OTC Bulletin Board, the OTCQX or the OTCQB (each, an
“Eligible Market”) and shall not have been suspended from trading on any such
Eligible Market (other than suspensions of not more than two (2) Trading Days
and occurring prior to the applicable date of determination due to business
announcements by Borrower); (iii) on each day during the Equity Conditions
Measuring Period, Borrower shall have delivered all shares of Common Stock
issuable upon conversion of this Note on a timely basis as set forth in
Section 9 hereof and all other shares of capital stock required to be delivered
by Borrower on a timely basis as set forth in the other Transaction Documents;
(iv) any shares of Common Stock to be issued in connection with the event
requiring determination may be issued in full without violating Section 12
hereof (Lender acknowledges that Borrower shall be entitled to assume that this
condition has been met for all purposes hereunder absent written notice from
Lender); (v) any shares of Common Stock to be issued in connection with the
event requiring determination may be issued in full without violating the rules
or regulations of the Eligible Market on which the Common Stock is then listed
or designated for quotation (as applicable); (vi) on each day during the Equity
Conditions Measuring Period, no public announcement of a pending, proposed or
intended Fundamental Transaction shall have occurred which has not been
abandoned, terminated or consummated; (vii) Borrower shall have no knowledge of
any fact that would reasonably be expected to cause any of the Conversion Shares
to not be freely tradable without the need for registration under any applicable
state securities laws (in each case, disregarding any limitation on conversion
of this Note); (viii) on each day during the Equity Conditions Measuring Period,
Borrower otherwise shall have been in material compliance with each, and shall
not have breached any, term, provision, covenant, representation or warranty of
any Transaction Document; (ix) without limiting clause (viii) above, on each day
during the Equity Conditions Measuring Period, there shall not have occurred an
Event of Default or an event that with the passage of time or giving of notice
would constitute an

--------------------------------------------------------------------------------

Event of Default; (x) on each Installment Notice Due Date and each Installment
Date, the average and median daily dollar volume of the Common Stock on its
principal market for the previous twenty (20) Trading Days shall be greater than
$20,000.00; (xi) the ten (10) day average VWAP of the Common Stock is greater
than $0.005, and (xii) the Common Stock shall be DWAC Eligible as of each
applicable Installment Notice Due Date and Installment Date.

A8. “Free Trading” means that (a) the shares or certificate(s) representing the
applicable shares of Common Stock have been cleared and approved for public
resale by the compliance departments of Lender’s brokerage firm and the clearing
firm servicing such brokerage, and (b) such shares are held in the name of the
clearing firm servicing Lender’s brokerage firm and have been deposited into
such clearing firm’s account for the benefit of Lender.

A9. “Fundamental Transaction” means that (y) (i) Borrower or any of its
subsidiaries shall, directly or indirectly, in one or more related transactions,
consolidate or merge with or into (whether or not Borrower or any of its
subsidiaries is the surviving corporation) any other person or entity, or
(ii) Borrower or any of its subsidiaries shall, directly or indirectly, in one
or more related transactions, sell, lease, license, assign, transfer, convey or
otherwise dispose of all or substantially all of its respective properties or
assets to any other person or entity, or (iii) Borrower or any of its
subsidiaries shall, directly or indirectly, in one or more related transactions,
allow any other person or entity to make a purchase, tender or exchange offer
that is accepted by the holders of more than 50% of the outstanding shares of
voting stock of Borrower (not including any shares of voting stock of Borrower
held by the Person or Persons making or party to, or associated or affiliated
with the persons or entities making or party to, such purchase, tender or
exchange offer), or (iv) Borrower or any of its subsidiaries shall, directly or
indirectly, in one or more related transactions, consummate a stock or share
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with any
other person or entity whereby such other person or entity acquires more than
50% of the outstanding shares of voting stock of Borrower (not including any
shares of voting stock of Borrower held by the other persons or entities making
or party to, or associated or affiliated with the other persons or entities
making or party to, such stock or share purchase agreement or other business
combination), or (v) Borrower or any of its subsidiaries shall, directly or
indirectly, in one or more related transactions, reorganize, recapitalize or
reclassify the Common Stock, other than an increase in the number of authorized
shares of Borrower’s Common Stock, or (z) any “person” or “group” (as these
terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the
rules and regulations promulgated thereunder) is or shall become the “beneficial
owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of
50% of the aggregate ordinary voting power represented by issued and outstanding
voting stock of Borrower.

A10.  “Installment Amount” means $69,375.00 ($832,500.00 ÷ 12), plus the sum of
any accrued and unpaid interest that has been added to the lowest-numbered
then-current Conversion Eligible Tranche as of the applicable Installment Date
and accrued, and unpaid late charges that have been added to the lowest-numbered
then-current Conversion Eligible Tranche, if any, under this Note as of the
applicable Installment Date, and any other amounts accruing or owing to Lender
under this Note as of such Installment Date; provided, however, that, if the
remaining amount owing under all then-existing Conversion Eligible Tranches or
otherwise with respect to this Note as of the applicable Installment Date is
less than the Installment Amount set forth above, then the Installment Amount
for such Installment Date (and only such Installment Amount) shall be reduced
(and only reduced) by the amount necessary to cause such Installment Amount to
equal such outstanding amount.

A11. “Market Capitalization of the Common Stock” shall mean the product equal to
(a) the average VWAP of the Common Stock for the immediately preceding fifteen
(15) Trading Days, multiplied by (b) the aggregate number of outstanding shares
of Common Stock as reported on Borrower’s most recently filed Form 10-Q or Form
10-K. By written notice to Borrower, Lender may increase, decrease or waive the
Maximum Percentage as to itself but any such waiver will not be effective until
the 61st day after delivery thereof. The foregoing 61-day notice requirement is
enforceable, unconditional and non-waivable and shall apply to all affiliates
and assigns of Lender.

A12. “Payment Default” means (i) an Event of Default that occurs pursuant to
Sections 4.1(i), 4.1(ii) or 4.1(iii) hereof, or (ii) any failure, for any
reason, by Borrower to timely pay any amount due hereunder, whether by
Installment Amount, or pursuant to a Lender Conversion, Maturity Date or
otherwise. For avoidance of doubt, any such failure shall be a Payment Default
for purposes of this Note including, without limitation, Section 16.1 hereof,
irrespective of any defenses, excuses or Claims asserted by Borrower.

 

--------------------------------------------------------------------------------

A13. “Trading Day” shall mean any day on which the Common Stock is traded or
tradable for any period on the Common Stock’s principal market, or on the
principal securities exchange or other securities market on which the Common
Stock is then being traded.

--------------------------------------------------------------------------------

EXHIBIT A

INTER-MOUNTAIN CAPITAL CORP.

303 East Wacker Drive, Suite 1200

Chicago, Illinois 60601

Neah Power Systems, Inc.

Date: __________________

Attn: Gerard C. D'Couto,

22118 20th Avenue SE, Suite 142

Bothell, WA 98021

LENDER CONVERSION NOTICE

The above-captioned Lender hereby gives notice to Neah Power Systems, Inc., a
Nevada corporation (the “Borrower”), pursuant to that certain Secured
Convertible Promissory Note made by Borrower in favor of Lender on May 5, 2014
(the “Note”), that Lender elects to convert the portion of the Note balance set
forth below into fully paid and non-assessable shares of Common Stock of
Borrower as of the date of conversion specified below. Said conversion shall be
based on the Lender Conversion Price set forth below. In the event of a conflict
between this Lender Conversion Notice and the Note, the Note shall govern, or,
in the alternative, at the election of Lender in its sole discretion, Lender may
provide a new form of Lender Conversion Notice to conform to the Note.
Capitalized terms used in this notice without definition shall have the meanings
given to them in the Note.

A.

Date of Conversion:

____________

B.

Lender Conversion #:

 ____________

C.

Conversion Amount:

 ____________

D.

Lender Conversion Price:  _______________

E.

Lender Conversion Shares:  _______________ (C divided by D)

F.

Remaining Outstanding Balance of Note:  ____________*

G.

Remaining balance of Buyer Trust Deed Note(s): ____________*

H.    Outstanding Balance of Note net of balance of Buyer Trust Deed Note(s):
____________* (F minus G)

* Subject to adjustments for corrections, defaults, interest and other
adjustments permitted by the Transaction Documents (as defined in the Purchase
Agreement).

The Conversion Amount converted hereunder shall be deducted from the following
Conversion Eligible Tranche(s):

Conversion Amount

Tranche No.

Please transfer the Lender Conversion Shares electronically (via DWAC) to the
following account:

Broker:  ___________________

Address:__________________

DTC#:   ___________________                                             
__________________

Account #: _________________                                             
__________________

Account Name:______________ 

--------------------------------------------------------------------------------

To the extent the Lender Conversion Shares are not able to be delivered to
Lender electronically via the DWAC system, deliver all such certificated shares
to Lender via reputable overnight courier after receipt of this Conversion
Notice (by facsimile transmission or otherwise) to:

_____________________________________

_____________________________________

_____________________________________

Sincerely,

Lender:

INTER-MOUNTAIN CAPITAL CORP.

By: _________________________

       John M. Fife, President

--------------------------------------------------------------------------------

EXHIBIT B

Neah Power Systems, Inc.

22118 20th Avenue SE, Suite 142

Bothell, WA 98021

Inter-Mountain Capital Corp.

Date: _____________

Attn: John Fife

303 E. Wacker Dr., Suite 1200

Chicago, IL 60601

INSTALLMENT NOTICE

The above-captioned Borrower hereby gives notice to Inter-Mountain Capital
Corp., a Delaware corporation (the “Lender”), pursuant to that certain Secured
Convertible Promissory Note made by Borrower in favor of Lender on May 5, 2014
(the “Note”), of certain Borrower elections and certifications related to
payment of the Installment Amount of $_________________ due on ___________, 201_
(the “Installment Date”). In the event of a conflict between this Installment
Notice and the Note, the Note shall govern, or, in the alternative, at the
election of Lender in its sole discretion, Lender may provide a new form of
Installment Notice to conform to the Note. Capitalized terms used in this notice
without definition shall have the meanings given to them in the Note.

INSTALLMENT CONVERSION AND CERTIFICATIONS

AS OF THE INSTALLMENT DATE

A. INSTALLMENT CONVERSION

A.

Installment Date: ____________, 201_

B.

Installment Amount:

 ____________

C.

Portion of Installment Amount Borrower elected to pay in cash: ____________

D.

Portion of Installment Amount to be converted into Common Stock: ____________ (B
minus C)

E.

Installment Conversion Price:  _______________ (lower of (i) Lender Conversion
Price in effect and (ii) Market Price as of Installment Date)

F.

Installment Conversion Shares:  _______________ (D divided by E)

G.

Remaining Outstanding Balance of Note:  ____________ *

H.

Remaining balance of Buyer Trust Deed Note(s): ____________*

I.

Outstanding Balance of Note net of balance of Buyer Trust Deed Note(s):
____________* (G minus H)

B. EQUITY CONDITIONS CERTIFICATION

1.

Market Capitalization of the Common Stock:________________

(Check One)

2.

_________ Borrower herby certifies that no Equity Conditions Failure exists as
of the Installment Date.

3.

_________ Borrower hereby gives notice that an Equity Conditions Failure has
occurred and requests a waiver from Lender with respect thereto. The Equity
Conditions Failure is as follows:

--------------------------------------------------------------------------------

__________________________________________________________________________________________________________________________________________________________

__________________________________________________________________________________________________________________________________________________________

_________________________________________________________________________________________________________________________________________________________

Sincerely,

Borrower:  Neah Power Systems, Inc.

By: ___________________________________

Name: ______________________________

Title: ______________________________

--------------------------------------------------------------------------------

EXHIBIT C

Inter-Mountain Capital Corp.

303 East Wacker Drive, Suite 1200

Chicago, Illinois 60601

Neah Power Systems, Inc.

Date: __________________

Attn: _________________

22118 20th Avenue SE, Suite 142

Bothell, WA 98021

TRUE-UP NOTICE

The above-captioned Lender hereby gives notice to Neah Power Systems, Inc., a
Nevada corporation (the “Borrower”), pursuant to that certain Secured
Convertible Promissory Note made by Borrower in favor of Lender on May 5, 2014
(the “Note”), of True-Up Conversion Shares related to _____________, 201_ (the
“Installment Date”). In the event of a conflict between this True-Up Notice and
the Note, the Note shall govern, or, in the alternative, at the election of
Lender in its sole discretion, Lender may provide a new form of True-Up Notice
to conform to the Note. Capitalized terms used in this notice without definition
shall have the meanings given to them in the Note.

TRUE-UP CONVERSION SHARES AND CERTIFICATIONS

AS OF THE TRUE-UP DATE

1.  TRUE-UP CONVERSION SHARES

A.

Installment Date: ____________, 201_

B.

True-Up Date: ____________, 201_

C.

Portion of Installment Amount converted into Common Stock:

 _____________

D.

True-Up Conversion Price:  _______________ (lower of (i) Lender Conversion Price
in effect and (ii) Market Price as of True-Up Date)

E.

True-Up Conversion Shares:  _______________ (C divided by D)

F.

Installment Conversion Shares delivered: ________________

G.

True-Up Conversion Shares to be delivered: ________________ (only applicable if
E minus F is greater than zero)

2.  EQUITY CONDITIONS CERTIFICATION (Section to be completed by Borrower)

A.

Market Capitalization of the Common Stock:________________

(Check One)

B.

_________ Borrower herby certifies that no Equity Conditions Failure exists as
of the applicable True-Up Date.

 

--------------------------------------------------------------------------------

C.   _________ Borrower hereby gives notice that an Equity Conditions Failure
has occurred and requests a waiver from Lender with respect thereto. The Equity
Conditions Failure is as follows:

_______________________________________________________________________________________________________________________________________________________

_______________________________________________________________________________________________________________________________________________________

_______________________________________________________________________________________________________________________________________________________

Sincerely,

Lender:

 

INTER-MOUNTAIN CAPITAL CORP.

By: _________________________

       John M. Fife, President

ACKNOWLEDGED AND CERTIFIED BY:

Borrower:  

NEAH POWER SYSTEMS, INC.

By: ___________________________________

Name: _____________________________

Title: ______________________________