INDEMNIFICATION AGREEMENT
 
This Indemnification Agreement (“Agreement”) is entered into as of
_______________ by and between Neah Power Systems, Inc. (“Company”), and
____________ (“Indemnitee”).
 
RECITALS
 
A.     It is important to the Company to attract and retain as directors the
most capable persons reasonably available.
 
B.      Indemnitee is becoming or continuing as a director of the Company.
 
C.     Both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors of companies in
today’s environment.
 
D.     The Company’s Certificate of Incorporation and By-laws (the “Constituent
Documents”) provide that the Company will indemnify its directors and the
Company’s By-laws provide that the Company will advance expenses in connection
therewith, and Indemnitee’s willingness to serve as a director of the Company is
based in part on Indemnitee’s reliance on such provisions.
 
E.     In recognition of Indemnitee’s need for substantial protection against
personal liability in order to enhance Indemnitee’s continued service to the
Company in an effective manner, and Indemnitee’s reliance on the aforesaid
provisions of the Constituent Documents, and to provide Indemnitee with express
contractual indemnification (regardless of, among other things, any amendment to
or revocation of such provisions or any change in the composition of the
Company’s Board of Directors (the “Board”) or any acquisition or business
combination transaction relating to the Company), the Company wishes to provide
in this Agreement for the indemnification of and the advancement of Expenses to
Indemnitee as set forth in this Agreement and, to the extent insurance is
maintained, for the continued coverage of Indemnitee under the Company’s
directors’ and officers’ liability insurance policies.
 
NOW, THEREFORE, the parties hereby agree as follows:
 
1.     Definitions. In addition to terms defined elsewhere herein, the following
terms have the following meanings when used in this Agreement with initial
capital letters:
 
(a)     “Affiliate” has the meaning given to that term in Rule 405 under the
Securities Act of 1933, provided, however, that for purposes of this Agreement
the Company and its subsidiaries will not be deemed to constitute Affiliates of
Indemnitee or the Indemnitee.
 
(b)     “Claim” means any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether instituted, made or
conducted by the Company or any other party, including without limitation any
governmental entity, that Indemnitee determines might lead to the institution of
any such action, suit or proceeding, whether civil, criminal, administrative,
arbitrative, investigative or other.

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(c)     “Expenses” includes attorneys’ and experts’ fees, expenses and charges
and all other costs, expenses and obligations paid or incurred in connection
with investigating, defending, being a witness in or participating in (including
on appeal), or preparing to defend, be a witness in or participate in, any
Claim.
 
(d)     “Indemnifiable Losses” means any and all Expenses, damages, losses,
liabilities, judgments, fines, penalties and amounts paid in settlement
(including without limitation all interest, assessments and other charges paid
or payable in connection with or in respect of any of the foregoing)
(collectively, “Losses”) relating to, resulting from or arising out of any act
or failure to act by the Indemnitee, or his or her status as any person referred
to in clause (i) of this sentence, (i) in his or her capacity as a director,
officer, employee or agent of the Company, any of its Affiliates or any other
entity as to which the indemnitee is or was serving at the request of the
Company as a director, officer, employee, member, manager, trustee or agent of
another corporation, limited liability company, partnership, joint venture,
trust or other entity or enterprise, whether or not for profit and (ii) in
respect of any business, transaction or other activity of any entity referred to
in clause (i) of this sentence.
 
2.     Indemnification. The Company will indemnify and hold harmless Indemnitee,
to the fullest extent permitted by the laws of the State of Delaware in effect
on the date hereof or as such laws may from time to time hereafter be amended to
increase the scope of such permitted indemnification, against all Indemnifiable
Losses relating to, resulting from or arising out of any Claim. The failure by
Indemnitee to notify the Company of such Claim will not relieve the Company from
any liability hereunder unless, and only to the extent that, the Company did not
otherwise learn of the Claim and such failure results in forfeiture by the
Company of substantial defenses, rights or insurance coverage. Except as
provided in Section 16, however, Indemnitee will not be entitled to
indemnification pursuant to this Agreement in connection with any Claim
initiated by Indemnitee against the Company or any director or officer of the
Company unless the Company has joined in or consented to the initiation of such
Claim. If so requested by Indemnitee, the Company will advance within two
business days of such request any and all Expenses to Indemnitee which
Indemnitee determines reasonably likely to be payable, provided, however, that
Indemnitee will return, without interest, any such advance which remains unspent
at the final conclusion of the Claim to which the advance related.
 
3.     Additional Expenses. Without limiting the generality or effect of the
foregoing, the Company will indemnify Indemnitee against and, if requested by
Indemnitee, will within two business days of such request advance to Indemnitee,
any and all attorneys’ fees and other Expenses paid or incurred by Indemnitee in
connection with any Claim asserted or brought by Indemnitee for (i)
indemnification or advance payment of Expenses by the Company under this
Agreement or any other agreement or under any provision of the Company’s
Constituent Documents now or hereafter in effect relating to Claims for
Indemnifiable Losses and/or (ii) recovery under any directors’ and officers’
liability insurance policies maintained by the Company, regardless of whether
Indemnitee ultimately is determined to be entitled to such indemnification,
advance expense payment or insurance recovery, as the case may be.
 
4.     Partial Indemnity. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of any
Indemnifiable Loss but not for all of the total amount thereof, the Company will
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is
entitled. Moreover, notwithstanding any other provision of this Agreement, to
the extent that Indemnitee has been successful on the merits or otherwise in
defense of any or all Claims relating in whole or in part to an Indemnifiable
Loss or in defense of any issue or matter therein, including without limitation
dismissal without prejudice, Indemnitee will be indemnified against all Expenses
incurred in connection therewith. In connection with any determination as to
whether Indemnitee is entitled to be indemnified hereunder, there will be a
presumption that Indemnitee is so entitled, which presumption the Company may
overcome only by its adducing clear and convincing evidence to the contrary.

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5.     No Other Presumption. For purposes of this Agreement, the termination of
any Claim by judgment, order, settlement (whether with or without court
approval) or conviction, or upon a plea of nolo contendere or its equivalent,
will not create a presumption that Indemnitee did not meet any particular
standard of conduct or have any particular belief or that a court has determined
that indemnification is not permitted by applicable law.
 
6.     Non-Exclusivity. The rights of Indemnitee hereunder will be in addition
to any other rights Indemnitee may have under the Constituent Documents, or the
substantive laws of the Company’s jurisdiction of incorporation, any other
contract or otherwise (collectively, “Other Indemnity Provisions”); provided,
however, that (i) to the extent that Indemnitee otherwise would have any greater
right to indemnification under any Other Indemnity Provision, Indemnitee will be
deemed to have such greater right hereunder and (ii) to the extent that any
change is made to any Other Indemnity Provision which permits any greater right
to indemnification than that provided under this Agreement as of the date
hereof, Indemnitee will be deemed to have such greater right hereunder. The
Company will not adopt any amendment to any of the Constituent Documents the
effect of which would be to deny, diminish or encumber Indemnitee’s right to
indemnification under this Agreement or any Other Indemnity Provision.
 
7.     Liability Insurance. To the extent the Company maintains an insurance
policy or policies providing directors’ and officers’ liability insurance,
Indemnitee will be covered by such policy or policies, in accordance with its or
their terms, to the maximum extent of the coverage available for any director of
the Company. The Company will not be required to create a trust fund, grant a
security interest, obtain a letter of credit, or use other means to ensure the
payment of such amounts as may be necessary to satisfy its obligations to
indemnify and advance expenses pursuant to this Agreement.
 
8.     Subrogation. In the event of payment under this Agreement, the Company
will be subrogated to the extent of such payment to all of the related rights of
recovery of Indemnitee against other persons or entities (other than
Indemnitee’s successors). The Indemnitee will execute all papers reasonably
required to evidence such rights of recovery (all of Indemnitee’s reasonable
Expenses, including attorneys’ fees and charges, related thereto to be
reimbursed by or, at the option of Indemnitee, advanced by the Company).
 
9.     No Duplication of Payments. The Company will not be liable under this
Agreement to make any payment in connection with any Indemnifiable Loss made
against Indemnitee to the extent Indemnitee has otherwise actually received
payment (net of Expenses incurred in connection therewith) under any insurance
policy, the Constituent Documents and Other Indemnity Provisions or otherwise of
the amounts otherwise indemnifiable hereunder.

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10.     Defense of Claims. The Company will be entitled to participate in the
defense of any Claim or to assume the defense thereof, with counsel reasonably
satisfactory to the Indemnitee, provided that in the event that (i) the use of
counsel chosen by the Company to represent Indemnitee would present such counsel
with an actual or potential conflict, (ii) the named parties in any such Claim
(including any impleaded parties) include both the Company and Indemnitee and
Indemnitee shall conclude that there may be one or more legal defenses available
to him or her that are different from or in addition to those available to the
Company, or (iii) any such representation by the Company would be precluded
under the applicable standards of professional conduct then prevailing, then
Indemnitee will be entitled to retain separate counsel (but not more than one
law firm in respect of any particular Claim) at the Company’s expense. The
Company will not, without the prior written consent of the Indemnitee, effect
any settlement of any threatened or pending Claim which the Indemnitee is or
could have been a party unless such settlement solely involves the payment of
money and includes an unconditional release of the Indemnitee from all liability
on any claims that are the subject matter of such Claim.
 
11.     Successors and Binding Agreement.
 
(a)     The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in form
and substance satisfactory to Indemnitee and his or her counsel, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent the Company would be required to perform if no such succession had taken
place. This Agreement will be binding upon and inure to the benefit of the
Company and any successor to the Company, including without limitation any
person acquiring directly or indirectly all or substantially all of the business
or assets of the Company whether by purchase, merger, consolidation,
reorganization or otherwise (and such successor will thereafter be deemed the
“Company” for purposes of this Agreement), but will not otherwise be assignable
or delegatable by the Company.
 
(b)     This Agreement will inure to the benefit of and be enforceable by the
Indemnitee’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, legatees and other successors.
 
(c)     This Agreement is personal in nature and neither of the parties hereto
will, without the consent of the other, assign or delegate this Agreement or any
rights or obligations hereunder except as expressly provided in Sections 11(a)
and 11(b). Without limiting the generality or effect of the foregoing,
Indemnitee’s right to receive payments hereunder will not be assignable, whether
by pledge, creation of a security interest or otherwise, other than by a
transfer by the Indemnitee’s will or by the laws of descent and distribution,
and, in the event of any attempted assignment or transfer contrary to this
Section 11(c), the Company will have no liability to pay any amount so attempted
to be assigned or transferred.
 
12.     Notices. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five business days
after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid or one business day after having been sent
for next-day delivery by a nationally recognized overnight courier service,
addressed to the Company (to the attention of the Secretary of the Company) and
to the Indemnitee at the addresses shown on the signature page hereto, or to
such other address as any party may have furnished to the other in writing and
in accordance herewith, except that notices of changes of address will be
effective only upon receipt.

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13.     Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to the
principles of conflict of laws of such State. Each party consents to
non-exclusive jurisdiction of any Delaware state or federal court or any court
in any other jurisdiction in which a Claim is commenced by a third person for
purposes of any action, suit or proceeding hereunder, waives any objection to
venue therein or any defense based on forum non conveniens or similar theories
and agrees that service of process may be effected in any such action, suit or
proceeding by notice given in accordance with Section 12.
 
14.     Validity. If any provision of this Agreement or the application of any
provision hereof to any person or circumstance is held invalid, unenforceable or
otherwise illegal, the remainder of this Agreement and the application of such
provision to any other person or circumstance will not be affected, and the
provision so held to be invalid, unenforceable or otherwise illegal will be
reformed to the extent, and only to the extent, necessary to make it
enforceable, valid or legal.
 
15.     Miscellaneous. No provision of this Agreement may be waived, modified or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by Indemnitee and the Company. No waiver by either party hereto at any
time of any breach by the other party hereto or compliance with any condition or
provision of this Agreement to be performed by such other party will be deemed a
waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
expressed or implied with respect to the subject matter hereof have been made by
either party that are not set forth expressly in this Agreement. References to
Sections are to references to Sections of this Agreement.
 
16.     Legal Fees. It is the intent of the Company that the Indemnitee not be
required to incur legal fees and or other Expenses associated with the
interpretation, enforcement or defense of Indemnitee’s rights under this
Agreement by litigation or otherwise because the cost and expense thereof would
substantially detract from the benefits intended to be extended to the
Indemnitee hereunder. Accordingly, without limiting the generality or effect of
any other provision hereof, if it should appear to the Indemnitee that the
Company has failed to comply with any of its obligations under this Agreement or
in the event that the Company or any other person takes or threatens to take any
action to declare this Agreement void or unenforceable, or institutes any
litigation or other action or proceeding designed to deny, or to recover from,
the Indemnitee the benefits provided or intended to be provided to the
Indemnitee hereunder, the Company irrevocably authorizes the Indemnitee from
time to time to retain counsel of Indemnitee’s choice, at the expense of the
Company as hereafter provided, to advise and represent the Indemnitee in
connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation or other legal
action, whether by or against the Company or any director, officer, stockholder
or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Indemnitee’s
entering into an attorney-client relationship with such counsel, and in that
connection the Company and the Indemnitee agree that a confidential relationship
shall exist between the Indemnitee and such counsel. Without respect to whether
the Indemnitee prevails, in whole or in part, in connection with any of the
foregoing, the Company will pay and be solely financially responsible for any
and all attorneys’ and related fees and expenses incurred by the Indemnitee in
connection with any of the foregoing.
 

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17.     Interpretation. No provision of this Agreement will be interpreted in
favor of, or against, either of the parties hereto by reason of the extent to
which any such party or its counsel participated in the drafting thereof or by
reason of the extent to which any such provision is inconsistent with any prior
draft hereof or thereof.
 
18.     Counterparts. This Agreement may be executed by facsimile and in one or
more counterparts, each of which will be deemed to be an original but all of
which together will constitute one and the same agreement.
 
IN WITNESS WHEREOF, Indemnitee has executed and the Company has caused its duly
authorized representative to execute this Agreement as of the date first above
written.

        INDEMNITEE:               ___________________________________________   
    Name: ____________________________________________    

 

        NEAH POWER SYSTEMS, INC.  
   
   
    By:   _______________________________________________   Name: 
_______________________________________________   Title:
_______________________________________________

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