NEAH POWER SYSTEMS, INC.
 
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
 
June 18, 2008
 
 
 
 

 
 
 

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NEAH POWER SYSTEMS, INC.
 
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
 
This Series A Preferred Stock Purchase Agreement (this “Agreement”) is made and
entered into as of June 18, 2008, by and among Neah Power Systems, Inc., a
Nevada corporation (the “Company”), and the persons identified on the signature
block hereto (collectively, the “Purchasers”).
 
RECITALS
 
Whereas, the Company has authorized the sale and issuance of not less than
7,500,000 shares (the “Shares”) of its Series A Preferred Stock, par vgalue
$0.001 per share (the “Series A Preferred Stock” or the “Shares”), at a price of
$0.04 per share; and
 
Whereas, the Company desires to use the proceeds from the sale of the Series A
Preferred Stock for working capital purposes; and
 
Whereas, the Purchaser desires to purchase the Series A Preferred Stock on the
terms and conditions set forth herein; and
 
Whereas, the Company desires to issue and sell the Series A Preferred Stock to
Purchaser on the terms and conditions set forth herein.
 
AGREEMENT
 
Now, Therefore, in consideration of the foregoing recitals and the mutual
promises, representations, warranties, and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
 
 
ARTICLE I
 
DEFINITIONS
 
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
for all purposes of this Agreement, the following terms shall have the meanings
indicated in this Section 1.1:
 
“Affiliate” means, with respect to any Person, any other Person that, directly
or indirectly through one or more intermediaries, Controls, is controlled by or
is under common control with such Person. With respect to a Purchaser, any
investment fund or managed account that is managed on a discretionary basis by
the same investment manager as such Purchaser will be deemed to be an Affiliate
of such Purchaser.
 
“Business Day” means a day, other than a Saturday, Sunday or federal holiday.
 
 
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“Closing” means the closing of the purchase and sale of the Shares pursuant to
this Agreement.
 
“Closing Date” means the date of the Closing, and shall be June 23, 2008 (or
such other date and time as is mutually agreed to by the Company and each
Purchaser).
 
"Commission” means the United States Securities and Exchange Commission.
 
“Common Stock” means shares of the Company’s common stock, par value $0.001 per
share.
 
“Company’s Knowledge” means the actual knowledge of the executive officers of
the Company.
 
“Control” (including the terms “controlling”, “controlled by” or “under common
control with”) means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
 
“Conversion Shares” means the shares of the Company’s Common Stock into which
the Series A Preferred Stock converts at $0.0015 per share at the discretion of
the Company’s Board of Directors.
 
“Disclosure Materials” has the meaning set forth in Section 3.1(h).
 
“Environmental Laws” has the meaning set forth in Section 3.1(l).
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.
 
“GAAP” means U.S. generally accepted accounting principals as applied by the
Company.
 
“Indemnified Person” has the meaning set forth in Section 4.7(b).
 
“License Agreements” has the meaning set forth in Section 3.1(r).
 
“Lien” means any lien, charge, encumbrance, security interest, right of first
refusal, preemptive right or other restrictions of any kind.
 
“Losses” has the meaning set forth in Section 4.7(a).
 
“Material Adverse Effect” has the meaning set forth in Section 3.1(a).
 
“Material Permits” has the meaning set forth in Section 3.1(p).
 
 
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“Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein.
 
“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened in writing.
 
“Prohibited Transaction” has the meaning set forth in Section 3.2(g).
 
“Purchase Price” means, with respect to each Purchaser, the sum of $0.04 per
Share, multiplied by the number of Shares purchased by the Purchaser.
 
“Purchaser Party” has the meaning set forth in Section 4.7(a).
 
“Regulation D” means Regulation D promulgated under the Securities Act by the
Commission.
 
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
 
“SEC Reports” has the meaning set forth in Section 3.1(h).
 
“Securities Act means the Securities Act of 1933, as amended, and the
regulations promulgated by the Commission thereunder.
 
“Secretary’s Certificate” has the meaning set forth in Section 2.2(a)(vi).
 
“Shares” means the shares of Series A Preferred Stock, par value $0.001, of
Company being purchased by the Purchaser pursuant to this Agreement.
 
“Short Sales” include, without limitation, all “short sales” as defined in
Rule 3b-3 of the Exchange Act and Rule 200 promulgated under Regulation SHO
under the Exchange Act, whether or not against the box, and all types of direct
and indirect stock pledges, forward sale contracts, options, puts, calls, short
sales, swaps, “put equivalent positions” (as defined in Rule 16a-1(h) under the
Exchange Act) and similar arrangements (including on a total return basis), and
sales and other transactions through non-US broker dealers or foreign regulated
brokers having the effect of hedging the securities or investment made under
this Agreement.
 
“Trading Affiliate” has the meaning set forth in Section 3.2(g).
 
 
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“Trading Day” means a day on which the Series A Preferred Stock is listed or
quoted on any Trading Market; provided, that in the event that the Series A
Preferred Stock is not listed or quoted on any Trading Market, then Trading Day
shall mean a Business Day.
 
“Trading Market” means the OTC Bulletin Board or other stock exchange on which
the Conversion Shares are quoted or listed for trading on the date in question.
 
“Transaction Documents” means this Agreement, the schedules and exhibits
attached hereto, and any other documents or agreements executed in connection
with the transactions contemplated hereunder and incorporated herein.
 
“Transfer Agent” means Corporate Stock Transfer or any successor transfer agent
for the Company.
 
ARTICLE II
 
PURCHASE AND SALE
 
2.1  Closing. Subject to the terms and conditions set forth in this Agreement,
at the Closing, the Company shall issue and sell to each Purchaser, and each
Purchaser shall, severally and not jointly, purchase from the Company, such
number of Shares set forth opposite such Purchaser’s name on the signature pages
attached hereto in exchange for the Purchase Price. The Closing shall take place
on the Closing Date or at such other time as the parties may agree.
 
2.2  Closing Deliveries.
 
(a)  On the Closing Date, the Company shall issue, deliver or cause to be
delivered to each Purchaser the following:
 
(i)  This Agreement, duly executed by the Company;
 
(ii)  One or more stock certificates, with a restrictive and other legends,
evidencing such number of Shares equal to the number set forth below such
Purchaser’s name on the signature pages hereto under the heading “Number of
Shares”, registered in the name of such Purchaser, or irrevocable instructions
to the Transfer Agent to issue same;
 
(iii)  a legal opinion of counsel to the Company, in the form of Exhibit C
attached hereto, executed by such counsel and addressed to the Purchasers; and
 
(iv)  a certificate of the Secretary of the Company (the “Secretary’s
Certificate”), dated as of the Closing Date, certifying the resolutions adopted
by the Board of Directors of the Company approving the transactions contemplated
by this Agreement and the other Transaction Documents and the issuance of the
Shares, certifying the current versions of the Articles of Incorporation and
by-laws of the Company and certifying as to the signatures and authority of
persons signing the Transaction Documents and related documents on behalf of the
Company.
 
 
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(b)  On the Closing Date, each Purchaser shall deliver or cause to be delivered
to the Company the following:
 
(i)  this Agreement, duly executed by such Purchaser;
 
(ii)  the purchase price set forth below such Purchaser’s name on the signature
pages hereto under the heading “Purchase Price,” in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose, as set forth on Exhibit B-1 annexed
hereto;
 
(iii)  a fully completed and duly executed Stock Certificate Questionnaire and
Purchaser Certificate in the forms attached hereto as Exhibits B-1 and B-2.
 
ARTICLE III
 
REPRESENTATIONS AND WARRANTIES
 
3.1  Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchasers that, except as set forth in the SEC
Reports or the Schedules delivered herewith:
 
(a)  Organization and Qualification. The Company is an entity duly incorporated,
validly existing and in good standing under the laws of the State of Nevada,
with the requisite power and authority to own or lease and use its properties
and assets and to carry on its business as currently conducted. The Company is
not in violation of any of the provisions of its Articles of Incorporation or
bylaws. The Company is duly qualified to conduct business and is in good
standing as a foreign corporation in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary or appropriate, except where the failure to be so qualified or in good
standing, as the case may be, individually or in the aggregate, have not and
could not reasonably be expected to result in (i) a material and adverse effect
on the legality, validity or enforceability of any Transaction Document, (ii) a
material and adverse effect on the results of operations, assets, prospects,
business or financial condition of the Company, or (iii) a material and adverse
impairment to the Company’s ability to perform on a timely basis its obligations
under any Transaction Document (a “Material Adverse Effect”).
 
 
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(b)  Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents to which it is a party and otherwise to carry
out its obligations hereunder and thereunder. The execution and delivery of each
of the Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including, but not limited to, the
sale and delivery of the Shares) have been duly authorized by all necessary
corporate action on the part of the Company and no further corporate action is
required by the Company, its Board of Directors or its stockholders. Each
Transaction Document to which it is a party has been (or upon delivery will have
been) duly executed by the Company and, when delivered in accordance with the
terms hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.
 
(c)  No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby or thereby do not and will not (i) conflict with or violate
any provision of the Company’s Articles of Incorporation or bylaws,
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company debt or otherwise) or other understanding to
which the Company is a party or by which any property or asset of the Company is
bound, except to the extent that such conflict, default, termination, amendment,
acceleration or cancellation right could not reasonably be expected to have a
Material Adverse Effect, or (iii) result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company is subject (including
federal and state securities laws and regulations and the rules and regulations,
assuming the correctness of the representations and warranties made by the
Purchasers herein, of any self-regulatory organization to which the Company or
its securities are subject, or by which any property or asset of the Company is
bound, except to the extent that such violation could not reasonably be expected
to have a Material Adverse Effect.
 
(d)  Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) filings required by applicable state securities laws, (ii) the filing of a
Notice of Sale of Securities on Form D with the Commission under Regulation D of
the Securities Act and (iii) those that have been made or obtained prior to the
date of this Agreement.
 
(e)  Issuance of the Shares and the Conversion Shares. The Shares and Conversion
Shares are duly authorized and, when issued and paid for in accordance with the
terms of the Transaction Documents, will be duly and validly issued, fully paid
and nonassessable, free and clear of all liens other than restrictions on
transfer provided for in the Transaction Documents or imposed by applicable
securities laws and shall not be subject to preemptive or similar rights of
stockholders. Assuming the accuracy of the representations and warranties of the
Purchasers, the Shares will be issued in compliance with all applicable federal
and state securities laws. The issue and sale of the Shares will not,
immediately or with the passage of time, obligate the Company to issue shares of
its Series A Preferred Stock or other securities to any person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under such
securities.
 
 
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(f)  Capitalization. The approximate aggregate number of shares and type of all
authorized, issued and outstanding classes of capital stock, options and other
securities of the Company (whether or not presently convertible into or
exercisable or exchangeable for shares of capital stock of the Company) is
specified in the SEC Reports (as defined below). Except as specified in the SEC
Reports, no securities of the Company are entitled to preemptive or similar
rights, and no person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents; except as specified in the SEC
Reports, the Company has not issued any other options, warrants or scrip rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities, rights or obligations convertible into or exchangeable for, or
entered into any agreement giving any person any right to subscribe for or
acquire, any shares of Series A Preferred Stock; except as specified in the SEC
Reports, there are no contracts, commitments, understandings, or arrangements by
which the Company is or may become bound to issue additional shares of the
capital stock of the Company or options, securities or rights convertible into
shares of capital stock of the Company; except for customary adjustments as a
result of stock dividends, stock splits, combination of shares, reorganizations,
recapitalizations, reclassifications or other similar events, there are no
anti-dilution or price adjustment provisions contained in any security issued by
the Company (or in any agreement providing rights to security holders) and the
issuance and sale of the Shares will not obligate the Company to issue shares of
Series A Preferred Stock or other securities to any person (other than the
Purchasers) and will not result in a right of any holder of securities to adjust
the exercise, conversion, exchange or reset price under such securities; the
Company is not a party to, and it has no knowledge of, any agreement restricting
the voting or transfer of any shares of the capital stock of the Company.
 
(g)  SEC Reports. The Common Stock of the Company is registered pursuant to
Section 12(g) of the Exchange Act. The Company has filed all reports required to
be filed by it under the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the calendar year prior to the Closing Date (the foregoing
materials being collectively referred to herein as the “SEC Reports” and
together with this Agreement, the “Disclosure Materials”) on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their respective
dates, or to the extent corrected by a subsequent restatement, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
 
 
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(h)  Financial Statements. The financial statements of the Company included in
the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing (or to he extent corrected by a
subsequent restatement). Such financial statements have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
year-end audit adjustments.
 
(i)  Tax Matters. The Company (i) has accurately and timely prepared and filed
all foreign, federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) has paid
all material taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith, with respect to which
adequate reserves have been set aside on the books of the Company and (iii) has
set aside on its books provision reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for such claim. The Company has not waived or extended
any statute of limitations at the request of any taxing authority. There are no
outstanding tax sharing agreements or other such arrangements between the
Company and any other corporation or entity and the Company is not presently
undergoing any audit by a taxing authority.
 
(j)  Environmental Matters. To the Company’s knowledge, the Company (i) is not
in violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), (ii) does not own or
operate any real property contaminated with any substance in violation of any
Environmental Laws, (iii) is not liable for any off-site disposal or
contamination pursuant to any Environmental Laws, and (iv) is not subject to any
claim relating to any Environmental Laws; which violation, contamination,
liability or claim has had or could reasonably be expected to have a Material
Adverse Effect, individually or in the aggregate; and there is no pending or, to
the Company’s knowledge, threatened investigation that might lead to such a
claim.
 
 
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(k)  Litigation. There is no pending action which adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Shares.
 
(l)  Employment Matters. To the Company’s knowledge, the Company is in
compliance with all federal, state, local and foreign laws and regulations
respecting labor, employment and employment practices and benefits, terms and
conditions of employment and wages and hours, except where the failure to be in
compliance would not, either individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect. The Company is not a party to
any collective bargaining agreement.
 
(m)  Compliance. The Company, except in each case as, individually or in the
aggregate, has not and could not reasonably be expected to result in a Material
Adverse Effect (i)  is in violation of any order of any court, arbitrator or
governmental body having jurisdiction over the Company or its properties or
assets, or (ii) to the Company’s knowledge, is or has been in violation of any
statute, rule or regulation of any governmental authority applicable to the
Company.
 
(n)  Regulatory Permits. To the Company’s knowledge, the Company possesses all
certificates, authorizations and permits issued by the federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses
as described in the SEC Reports, except where the failure to possess such
permits, individually or in the aggregate, has not and could not reasonably be
expected to result in a Material Adverse Effect (“Material Permits”), and the
Company has not received any notice of proceedings relating to the revocation or
modification of any such Material Permit.
 
(o)  Title to Assets. The Company has good and marketable title in all personal
property owned by it that is material to the business of the Company, in each
case free and clear of all Liens, except for Liens that do not, individually or
in the aggregate, have or result in a Material Adverse Effect.
 
(p)  Patents and Trademarks. To the Company’s knowledge, the Company owns,
possesses, licenses or has other rights to use all foreign and domestic patents,
patent applications, trade and service marks, trade and service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets,
technology, Internet domain names, know-how and other intellectual property
(collectively, the “Intellectual Property”) necessary for the conduct of its
business as now conducted or as proposed to be conducted; except as set forth in
the SEC Reports and except where such violations or infringements would not
reasonably be expected to result in a Material Adverse Effect, and (a) to the
Company’s knowledge, there are no rights of third parties to any such
Intellectual Property; (b) to the Company’s knowledge, there is no infringement
by third parties of any such Intellectual Property; (c) there is no pending or,
to the Company’s knowledge, threatened action, suit, proceeding or claim by
others challenging the Company’s rights in or to any such Intellectual Property,
and the Company is unaware of any facts which would form a reasonable basis for
any such claim; (d) there is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by others challenging the validity
or scope of any such Intellectual Property; and (e) there is no pending or, to
the Company’s knowledge, threatened action, suit, proceeding or claim by others
that the Company infringes or otherwise violates any patent, trademark,
copyright, trade secret or other proprietary rights of others, and the Company
is unaware of any other fact which would form a reasonable basis for any such
claim. All of the licenses and sublicenses and consent, royalty or other
agreements concerning Intellectual Property which are necessary for the conduct
of the Company’s business as currently conducted to which the Company is a party
or by which any of its material assets are bound (other than generally
commercially available, non-custom, off the shelf software application programs
having a retail acquisition price of less than $10,000 per license)
(collectively, “License Agreements’) are valid and binding obligations of the
Company and, to the Company’s knowledge, the other parties thereto, enforceable
in accordance with their respective terms, except to the extent that enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws affecting the
enforcement of creditors’ rights generally, and there exists no event or
condition which will result in a material violation or breach of or constitute
(with or without due notice or lapse of time or both) a default by the Company
under such License Agreement.
 
 
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(q)  Insurance. The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses and location in which the Company is engaged. To
the Company’s knowledge, it will be able to renew existing insurance coverage
for the Company as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business without a
significant increase in cost.
 
(r)  Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports made on or prior to the date hereof, none of the officers or directors
of the Company and, to the Company’s knowledge, none of the employees of the
Company is presently a party to any transaction with the Company or to a
presently contemplated transaction (other than for services as employees,
officers and directors) that would be required to be disclosed pursuant to
Item 404 of Regulation S-K promulgated under the Securities Act.
 
(s)  Sarbanes Oxley Act. The Company is in compliance with applicable
requirements of the Sarbanes Oxley Act of 2002 and applicable rules and
regulations promulgated by the Commission thereunder, except where such
noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect.
 
(t)  Private Placement. Assuming the accuracy of the Purchaser’s representations
and warranties set forth in Section 2, no registration under the Securities Act
is required for the offer and sale of the Shares and the Conversion Shares by
the Company to the Purchasers under the Transaction Documents. The Company’s
Common Stock is registered pursuant to Section 15(d) of the Exchange Act, and
the Company has taken no action designed to, or which to its knowledge is likely
to have the effect of terminating the registration of the Series A Preferred
Stock under the Exchange Act, nor has the Company received any notification that
the Commission is contemplating terminating such registration.
 
 
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(u)  No Directed Selling Efforts or General Solicitation. Neither the Company,
nor any of its affiliates, nor any person acting on its or their behalf has
conducted any “general solicitation” or “general advertising” (as those terms
are used in Regulation D) in connection with the offer or sale of any of the
Shares.
 
(v)  Investment Company. The Company is not required to be registered as, and is
not an affiliate of, and immediately following the Closing will not be required
to register as, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.
 
(w)  Questionable Payments. Neither the Company nor, to the Company’s knowledge,
directors, officers, employees, agents or other persons acting on behalf of the
Company has, in the course of its actions for, or on behalf of, the Company:
(a) used any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to foreign or domestic political activity;
(b) made any direct or indirect unlawful payments to any foreign or domestic
governmental officials or employees from corporate funds; (c) violated in any
material respect any provision of the Foreign Corrupt Practices Act of 1977, as
amended or (d) made any other unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.
 
(x) Application of Takeover Protections. Except as described in the SEC Reports,
there is no control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s charter documents or the laws of the
State of Nevada that is or could reasonably be expected to become applicable to
Purchasers as a result of the parties fulfilling their obligations or exercising
their rights under the Transaction Documents, including without limitation the
Company’s issuance of the Shares and the Purchaser’s ownership of the Shares.
 
3.2  Representations and Warranties of the Purchaser. Each Purchaser hereby, for
itself and for no other Purchaser, represents and warrants to the Company as
follows:
 
(a)  Organization; Authority. If such Purchaser is an entity, it is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the applicable Transaction Documents and otherwise to carry out
its obligations hereunder and thereunder. The execution, delivery and
performance by such Purchaser of the transactions contemplated by this Agreement
has been duly authorized by all necessary corporate or, if such Purchaser is not
a corporation, such partnership, limited liability company or other applicable
like action, on the part of such Purchaser. This Agreement has been duly
executed by such Purchaser, and when delivered by such Purchaser in accordance
with its terms hereof, will constitute the valid and legally binding obligation
of such Purchaser, enforceable against it in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.
 
 
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(b)  Investment Intent. Such Purchaser understands that the Shares and
Conversion Shares are “restricted securities” and have not been registered under
the Securities Act or any applicable state securities law and is acquiring the
Shares and the Conversion Shares as principal for its own account for investment
purposes only and not with a view to or for distributing or reselling such
Shares and Conversion Shares or any part thereof, without prejudice, however, to
such Purchaser’s right, subject to the provisions of this Agreement, at all
times to sell or otherwise dispose of all or any part of such Shares and
Conversion Shares pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in compliance
with applicable federal and state securities laws. Subject to the immediately
preceding sentence, nothing contained herein shall be deemed a representation or
warranty by such Purchaser to hold the Shares or Conversion Shares for any
period of time. Such Purchaser is acquiring the Shares hereunder in the ordinary
course of its business. Such Purchaser does not have any agreement, plan or
understanding, directly or indirectly, with any Person to distribute any of the
Shares and Conversion Shares.
 
(c)  Purchaser Status. In the event that at the time such Purchaser was offered
the Shares, it was, and at the date hereof it is, an “accredited Purchaser” as
defined in Rule 501(a) under the Securities Act, such Purchaser has completed
Exhibit B-2. Such Purchaser is not a registered broker-dealer under Section 15
of the Exchange Act.
 
(d)  Experience of Such Purchaser. Such Purchaser, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Shares, and has so evaluated the
merits and risks of such investment. Such Purchaser is able to bear the economic
risk of an investment in the Shares and, at the present time, is able to afford
a complete loss of such investment.
 
(e)  Access to Information. Such Purchaser acknowledges that it reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Shares and the Conversion Shares and the merits and risks of
investing in the Shares and Conversion Shares; (ii) access to information (other
than material non-public information) about the Company and the Subsidiary and
their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Purchaser or its representatives or counsel shall modify,
amend or affect such Purchaser’s right to rely on the truth, accuracy and
completeness of the Disclosure Materials and the Company’s representations and
warranties contained in the Transaction Documents.
 
 
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(f)  Residency. Such Purchaser has, if an entity, its principal place of
business or, if an individual, its primary residence in the jurisdiction set
forth immediately below such Purchaser’s name on the signature pages hereto.
 
(g)  Prohibited Trading Activities. Since the earlier to occur of (1) the time
that such Purchaser was first contacted by the Company or any other Person
regarding an investment in the Company and (2) the 10th Trading Day prior to the
date of this Agreement, neither the Purchaser nor any Affiliate of such
Purchaser which (x) had knowledge of the transactions contemplated hereby,
(y) has or shares discretion relating to such Purchaser’s investments or trading
or information concerning such Purchaser’s investments, including in respect of
the Shares, or (z) is subject to such Purchaser’s review or input concerning
such Affiliate’s investments or trading (collectively, “Trading Affiliates”) has
directly or indirectly, nor has any Person acting on behalf of or pursuant to
any understanding with such Purchaser or Trading Affiliate, effected or agreed
to effect any transactions in the securities of the Company (including, without
limitation, any Short Sales involving the Company’s securities) (each, a
“Prohibited Transaction”). Such Purchaser shall not, and shall cause its Trading
Affiliates not to, engage, directly or indirectly, in a Prohibited Transaction
or in any financial transaction that in any way changes the Purchaser’s or its
Trading Affiliates’ economic position in the Company during the period from the
date hereof until the later of the Effective Date or 90 days from the Closing
Date. Each Purchaser agrees that it will not use any of the Shares or Conversion
Shares acquired pursuant to this Agreement to cover any short position in the
Shares or Conversion Shares. Each Purchaser acknowledges that it is aware that
the Commission has published its position that covering a short position
established prior to effectiveness of a resale registration statement with
shares included in such registration statement would be a violation of Section 5
of the Securities Act.
 
(h)  Brokers and Finders. Other than Jesup & Lamont Capital Markets, Inc., no
Person will have, as a result of the transactions contemplated by this
Agreement, any valid right, interest or claim against or upon the Company, or
any Purchaser for any commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into by or on behalf of the
Purchaser.
 
(i)  Independent Investment Decision. Such Purchaser has independently evaluated
the merits of its decision to purchase Shares pursuant to the Transaction
Documents, and such Purchaser confirms that it has not relied on the advice of
any other Purchaser’s business and/or legal counsel in making such decision.
Such Purchaser understands that nothing in this Agreement or any other materials
presented by or on behalf of the Company to the Purchaser in connection with the
purchase of the Shares constitutes legal, tax or investment advice. Such
Purchaser has consulted such legal, tax and investment advisors as it, in its
sole discretion, has deemed necessary or appropriate in connection with its
purchase of the Shares.
 
 
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The Company acknowledges and agrees that no Purchaser has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
 
ARTICLE IV
 
OTHER AGREEMENTS OF THE PARTIES
 
4.1  (a)  Compliance with Laws. Notwithstanding any other provision of this
Article IV, each Purchaser covenants that the Shares and Conversion Shares may
only be disposed of pursuant to an effective registration statement under, and
in compliance with the requirements of, the Securities Act, or pursuant to an
available exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act, and in compliance with any applicable state
and federal securities laws. In connection with any transfer of the Shares or
the Conversion Shares other than pursuant to an effective registration
statement, pursuant to Rule 144(b) or in connection with a pledge as
contemplated in Section 4.1(b), except as otherwise provided herein, the
transferor will provide to the Company an opinion of counsel selected by the
transferor, which counsel and the form and substance of which opinion shall be
reasonably satisfactory to the Company and its legal counsel, to the effect that
such transfer does not require registration of such transferred Shares under the
Securities Act. Notwithstanding the foregoing, the Company hereby consents to
and agrees to register on the books of the Company and with its transfer agent,
without any such legal opinion, except to the extent that the transfer agent
requests such legal opinion, any transfer of Shares by a Purchaser to an
Affiliate of such Purchaser, provided that the transferee agrees to the terms
and conditions of the Shares, certifies to the Company that it is an “accredited
Purchaser” as defined in Rule 501(a) under the Securities Act and provided that
such Affiliate does not request any removal of any existing legends on any
certificate evidencing the Shares.
 
(b)  Legends. Certificates evidencing the Shares and Conversion Shares will
contain the following legend, until such time as they are not required under
Section 4.1(c):
 
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.
 
 
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The Company acknowledges and agrees that a Purchaser may from time to time
pledge, and/or grant a security interest in some or all of the legended Shares
and Conversion Shares, in compliance with applicable securities laws, pursuant
to a bona fide margin agreement in connection with a bona fide margin loan. Such
a pledge would not be subject to approval or consent of the Company and no legal
opinion of legal counsel to the pledgee, secured party or pledgor shall be
required in connection with the pledge, but such legal opinion shall be required
in connection with a subsequent transfer or foreclosure following default by the
Purchaser transferee of the pledge. No notice shall be required of such pledge
but Purchaser’s transferee shall promptly notify the Company of the pledge. Each
Purchaser acknowledges that the Company shall not be responsible for any pledges
relating to, or the grant of any security interest in, any of the Shares or
Conversion Shares or for any agreement, understanding or arrangement between any
Purchaser and its pledgee or secured party. Provided that the Company is in
compliance with the terms of this Section 4.1(b), the Company’s indemnification
obligations pursuant to this Agreement shall not extend to any Proceeding or
Losses arising out of or related to this Section 4.1(b).
 
(c)  Removal of Legends. The Company agrees to reissue certificates representing
any of the Shares, without the legend set forth above (i) following any sale of
such Shares pursuant to Rule 144 (assuming the transferor is not an affiliate of
the Company), (ii) if such Shares are eligible for sale under Rule 144(b) (to
the extent that the applicable Purchaser provides a certification or legal
opinion to the Company to that effect), or (iii) if such legend is not required
under applicable requirements of the Securities Act (including controlling
judicial interpretations and pronouncements issued by the Commission). The
Company also will issue cause to be prepared a reasonably acceptable opinion of
counsel to the extent required by Section 4.1(a), and to have reissued a
certificate representing such Shares that is free from all restrictive and other
legends. The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section.
 
(d)  Acknowledgement. Each Purchaser hereunder acknowledges its primary
responsibilities under the Securities Act and accordingly will not sell the
Shares or Conversion Shares or any interest therein without complying with the
requirements of the Securities Act. To provide further assurance in connection
with de-legending, each Purchaser hereunder commits that it will continue to
hold the Shares and Conversion Shares in its own name, and not in the name of a
nominee, until such time as the shares are duly and properly sold in compliance
with all relevant securities laws. Both the Company and its transfer agent, and
their respective directors, officers, employees and agents, may rely on this
subsection (d) and each Purchaser hereunder will indemnify and hold harmless
each of such persons from any breaches or violations of this paragraph.
 
4.2 Furnishing of Information. As long as any Purchaser owns the Shares and
Conversion Shares, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Purchaser owns Shares or Conversion Shares, if the
Company is not required to file reports pursuant to such laws, it will prepare
and furnish to the Purchasers and make publicly available in accordance with
Rule 144(c) such information as is required for the Purchasers to sell the
Shares under Rule 144. The Company further covenants that it will take such
further action as any holder of Shares or Conversion Shares may reasonably
request, all to the extent required from time to time to enable such Person to
sell the Shares or Conversion Shares without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144.
 
 
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4.3  No Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that will be integrated with the offer or sale
of the Shares in a manner that would require the registration under the
Securities Act of the sale of the Shares to the Purchasers, or that will be
integrated with the offer or sale of the Shares for purposes of the rules and
regulations of any Trading Market.
 
4.4  Indemnification. 
 
(a)  Indemnification of Purchasers. In addition to the indemnity provided in the
Registration Rights Agreement, the Company will indemnify and hold the
Purchasers and their directors, officers, shareholders, partners, employees and
agents (each, a “Purchaser Party”) harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation (collectively, “Losses”) that any
such Purchaser Party may suffer or incur as a result of or relating to any
material misrepresentation, breach or inaccuracy of any representation,
warranty, covenant or agreement made by the Company in any Transaction Document.
In addition to the indemnity contained herein, the Company will reimburse each
Purchaser Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred. If and to the extent
that such indemnification is unenforceable for any reason, the Company shall
make the maximum contribution to the payment and satisfaction of such losses
permissible under applicable law.
 
(b)  Conduct of Indemnification Proceedings. Promptly after receipt by any
Person (the “Indemnified Person”) of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 4.7(a), such Indemnified Person shall promptly notify
the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses; provided,
however, that the failure of any Indemnified Person so to notify the Company
shall not relieve the Company of its obligations hereunder except to the extent
that the Company is actually and materially prejudiced by such failure to
notify. In any such proceeding, any Indemnified Person shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless: (i) the Company and the
Indemnified Person shall have mutually agreed to the retention of such counsel;
or (ii) in the reasonable judgment of counsel to such Indemnified Person
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. The Company shall not be
liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, delayed or
conditions, but if settled without such consent, or if there be a final judgment
for the plaintiff, the Company shall indemnify and hold harmless such
Indemnified Person from and against any Losses by reason of such settlement or
judgment. Without the prior written consent of the Indemnified Person, the
Company shall not effect any settlement of any pending or threatened proceeding
in respect of which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Person
from all liability arising out of such proceeding.
 
 
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4.5  Use of Proceeds. The Company intends to use the net proceeds from the sale
of the Shares hereunder for working capital and general corporate purposes and
not to redeem any Series A Preferred Stock.
 
ARTICLE V
 
CONDITIONS PRECEDENT TO CLOSING
 
5.1  Conditions Precedent to the Obligations of the Purchasers to Purchase
Shares. The obligation of each Purchaser to acquire Shares at the Closing is
subject to the fulfillment to such Purchase’s satisfaction, on or prior to the
Closing Date, of each of the following conditions, any of which may be waived by
such Purchaser (as to itself only):
 
(a)  Representations and Warranties. The representations and warranties made by
the Company in Section 3.1 hereof shall be true and correct in all material
respects as of the date when made and as of the Closing Date, as though made on
and as of such date;
 
(b)  Performance. The Company and each other Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by it at or prior to the Closing Date;
 
(c)  No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits
the consummation of any of the transactions contemplated by the Transaction
Documents;
 
(d)  Consents. The Company shall have obtained in a timely fashion any and all
consents, permits, approvals, registrations and waivers necessary or appropriate
for consummation of the purchase and sale of the Shares, and all of which shall
be and remain so long as necessary in full force and effect;
 
 
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(e)  No Suspensions of Trading in Common Stock; Listing. Trading in the Common
Stock shall not have been suspended by the Commission or any Trading Market
(except for any suspensions of trading of not more than one Trading Day solely
to permit dissemination of material information regarding the Company) at any
time since the date of execution of this Agreement, and the Common Stock shall
have been at all times since such date listed for trading on a Trading Market;
 
(f)  Company Deliverables. The Company shall have delivered the items set forth
in Section 2.2(a); and
 
(g)  Compliance Certificate. The Company shall have delivered to each Purchaser
a certificate, dated as of the Closing Date and signed by its Chief Executive
Officer or its Chief Financial Officer, dated as of the Closing Date, certifying
to the fulfillment of the conditions specified in Sections 5.1(a), (b), (c),
(d), (e) and (f).
 
5.2  Conditions Precedent to the Obligations of the Company to Sell Shares. The
Company’s obligation to sell and issue the Shares at the Closing is subject to
the fulfillment to the satisfaction of the Company on or prior to the Closing
Date of the following conditions, any of which may be waived by the Company:
 
(a)  Representations and Warranties. The representations and warranties made by
the Purchasers in Section 3.2 hereof shall be true and correct in all material
respects as of the date when made, and as of the Closing Date as though made on
and as of such date;
 
(b)  Performance. The Purchaser shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Purchaser at or prior to the Closing;
 
(c)  No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits
the consummation of any of the transactions contemplated by the Transaction
Documents; and
 
(d)  Purchasers Deliverables. Each Purchaser shall have delivered the items set
forth in Section 2.2(b).
 
ARTICLE VI
 
MISCELLANEOUS
 
6.1  Fees and Expenses. The Company and the Purchasers shall each pay the fees
and expenses of their respective advisers, counsel, accountants and other
experts, if any and all other expenses incurred by such party in connection with
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all Transfer Agent fees, stamp taxes and other
taxes and duties levied in connection with the sale and issuance of the Shares.
 
 
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6.2  Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such
notice or communication is delivered via facsimile, email (provided the sender
receives a machine-generated confirmation of successful transmission) at the
facsimile number specified in this Section prior to 5:00 p.m. (Pacific time) on
a Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day or later than 5:00
p.m. (Pacific time) on any Trading Day, (c) the Trading Day following the date
of mailing, if sent by U.S. nationally recognized overnight courier service, or
(d) upon actual receipt by the party to whom such notice is required to be
given. The address and facsimile numbers for such notices and communications are
those set forth on the signature pages hereof, or such other address or
facsimile number as may be designated in writing hereafter, in the same manner,
by any such Person. Copies of any notices or other communications or deliveries
to the Company shall be sent to:
 
Neah Power Systems, Inc.
22118 20th Ave. SE, Suite 142
Bothell, Washington 98021
Facsimile No.: (425) 483-8454
Attention: Purchaser Relations
 
with a copy (for informational purposes only) to:
 
Seyfarth Shaw LLP
815 Connecticut Avenue, N.W., Suite 500
Washington, D.C. 20006
Facsimile No.: (202) 641-9260
Attention: Ernest M. Stern, Esq.
 
6.3  Amendments; Waivers; No Additional Consideration. No provision of this
Agreement may be waived or amended except in a written instrument signed, in the
case of an amendment, by the Company and each of the Purchasers or, in the case
of a waiver, by the party against whom enforcement of any such waiver is sought.
No waiver of any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right. No consideration shall be offered or paid to any Purchaser to amend or
consent to a waiver or modification of any provision of any Transaction Document
unless the same consideration is also offered to all Purchasers who then hold
Shares.
 
 
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6.4  Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.
 
6.5  Successors and Assigns. The provisions of this Agreement shall inure to the
benefit of and be binding upon the parties and their successors and permitted
assigns. This Agreement, or any rights or obligations hereunder, may not be
assigned by the Company without the prior written consent of the Purchasers. Any
Purchaser may assign its rights hereunder in whole or in part to any Person to
whom such Purchaser assigns or transfers any Shares in compliance with this
Agreement and applicable law, provided such transferee shall agree in writing to
be bound, with respect to the transferred Shares, by the terms and conditions of
this Agreement that apply to the “Purchasers.”
 
6.6  No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except each Purchaser Party is an intended third party beneficiary of
Section 4.7 and may enforce the provisions of such Section directly against the
parties with obligations thereunder .
 
6.7  Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Nevada, without regard to the principles of conflicts of law thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence a Proceeding to
enforce any provisions of a Transaction Document, then the prevailing party in
such Proceeding shall be reimbursed by the other party for its reasonable
attorney’s fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such Proceeding.
 
6.8  Survival. Subject to applicable statute of limitations, the
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery of the Shares.
 
6.9  Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
 
 
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6.10  Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
 
6.11  Replacement of Certificates. If any certificate or instrument evidencing
any Shares is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and the execution by the holder
thereof of a customary lost certificate affidavit of that fact and an agreement
to indemnify and hold harmless the Company for any losses in connection
therewith. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with
the issuance of such replacement certificates. If a replacement certificate or
instrument evidencing any Shares is requested due to a mutilation thereof, the
Company may require delivery of such mutilated certificate or instrument as a
condition precedent to any issuance of a replacement.
 
6.12  Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchasers
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation (other than in connection with any
action for a temporary restraining order) the defense that a remedy at law would
be adequate.
 
6.13  Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
 
 
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6.14  Independent Nature of Purchasers’ Obligations and Rights. The obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance of the obligations of any other Purchaser under any
Transaction Document. The decision of each Purchaser to purchase Shares pursuant
to the Transaction Documents has been made by such Purchaser independently of
any other Purchaser and independently of any information, materials, statements
or opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company or the Subsidiary which may have been made or given by
any other Purchaser or by any agent or employee of any other Purchaser, and no
Purchaser and any of its agents or employees shall have any liability to any
other Purchaser (or any other Person) relating to or arising from any such
information, materials, statement or opinions. Nothing contained herein or in
any Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Purchaser acknowledges that no other Purchaser has acted as agent for such
Purchaser in connection with making its investment hereunder and that no
Purchaser will be acting as agent of such Purchaser in connection with
monitoring its investment in the Shares or enforcing its rights under the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the
Purchasers has been provided with the same Transaction Documents for the purpose
of closing a transaction with multiple Purchasers and not because it was
required or requested to do so by any Purchaser.
 
6.15  Termination. This Agreement may be terminated and the sale and purchase of
the Shares abandoned at any time prior to the Closing by either the Company or
any Purchaser (with respect to itself only) upon written notice to the other, if
the Closing has not been consummated on or prior to 5:00 p.m. (Pacific time) on
the Outside Date; provided, however, that the right to terminate this Agreement
under this Section 6.16 shall not be available to any Person whose failure to
comply with its obligations under this Agreement has been the cause of or
resulted in the failure of the Closing to occur on or before such time. Nothing
in this Section 6.16 shall be deemed to release any party from any liability for
any breach by such party of the terms and provisions of this Agreement or the
other Transaction Documents or to impair the right of any party to compel
specific performance by any other party of its obligations under this Agreement
or the other Transaction Documents.
 
6.16  Entire Agreement. The Transaction Documents, together with the Exhibits
and Schedules thereto which are incorporated herein by reference, contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements, understandings, discussions and
representations, oral or written, with respect to such matters, which the
parties acknowledge have been merged into such documents, exhibits and
schedules. At or after the Closing, and without further consideration, the
Company and the Purchasers will execute and deliver to the other such further
documents as may be reasonably requested in order to give practical effect to
the intention of the parties under the Transaction Documents.
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
 

 
NEAH POWER SYSTEMS, INC.
     
By:_____________________________________
 
Name:___________________________________
 
Title:____________________________________

 

 
 
[SIGNATURE PAGES OF PURCHASERS TO FOLLOW]
 
 
24

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PURCHASER:
 
 
By:___________________________
 
 
Address:  
 
 
 
Fax: (    )
 
Amount of Purchase: $_______________
 

 

 

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EXHIBIT A
 
INSTRUCTION SHEET FOR INVESTOR 
 
(to be read in conjunction with the entire
 
Stock Purchase Agreement)
 
 
A.  Complete the following items in the Stock Purchase Agreement:
 
1.  Complete and execute the Investor signature page. The Agreement must be
executed by an individual authorized to bind the Investor.
 
2.  Exhibit B-1 — Stock Certificate Questionnaire:
 
Provide the information requested by the Stock Certificate Questionnaire.
 
3.  Exhibit B-2 — Purchaser Certificate:
 
Provide the information requested by either (a) the Certificate for Corporate,
Partnership, Trust, Foundation and Joint Purchasers, or (b) the Certificate for
Individual Purchasers.
 
4.  Return, via facsimile, the signed Stock Purchase Agreement including the
properly completed Exhibits B-1 and B-2, to:
 
Seyfarth Shaw LLP
Attn: Ernest M. Stern, Esq.
Facsimile No.: (202) 641-9260
 
6.  After completing instruction number four (4) above, deliver the original
signed Stock Purchase Agreement including the properly completed Exhibits B-1
and B-2 to:
 
Seyfarth Shaw LLP
815 Connecticut Avenue, N.W.
Suite 500
Washington, D.C. 20006
Attn: Ernest M. Stern, Esq.
 
 

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B. Wire to the following account, immediately available funds in an amount equal
to the Purchase Price set forth on the signature page to the Stock Purchase
Agreement.
 
Wire to:
 
Acct. Name:
Seyfarth Shaw LLP
 
Client Fund Account
Bank Name:
Northern Trust Co.
ABA Number:
071000152
A/C Number:
725269
FBO:
Subscriber Name
 
Social Security Number
 
Address
    Memo:  Neah Power, Inc. Escrow

 
 
 
 

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EXHIBIT B-1
 
NEAH POWER SYSTEMS, INC.
 
STOCK CERTIFICATE QUESTIONNAIRE 
 
Please provide us with the following information:
 
 
 
1.
The exact name that the Shares are to be registered in (this is the name that
will appear on the stock certificate(s)). You may use a nominee name if
appropriate:
 
 
2.
The relationship between the Purchaser of the Shares and the Registered Holder
listed in response to item 1 above:
 
 
3.
The mailing address, telephone and telecopy number of the
Registered Holder listed in response to item 1 above:
 
 
4.
The Tax Identification Number of the Registered Holder listed in
response to item 1 above:
   

 
 
 

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EXHIBIT B-2
 
NEAH POWER SYSTEMS, INC.
 
CERTIFICATE FOR ACCREDITED, CORPORATE, PARTNERSHIP, 
 
TRUST, FOUNDATION AND JOINT PURCHASERS 
 
If the Purchaser is an accredited investor under Rule 501(a) of Regulation D
and/or is a corporation, partnership, trust, pension plan, foundation, joint
Investor (other than a married couple) or other entity, then the Purchaser, or
an authorized officer, partner, or trustee if the Purchaser is an entity, must
complete, date and sign this Certificate.
 
CERTIFICATE 
 
The undersigned certifies that the representations and responses below are true
and accurate:
 
(a) The Purchaser has been duly formed and is validly existing and has full
power and authority to invest in the Company. The person signing on behalf of
the undersigned has the authority to execute and deliver the Stock Purchase
Agreement on behalf of the Purchaser and to take other actions with respect
thereto.
 
(b) Indicate the form of entity of the undersigned:
 
 
 
 
 
      
      
      
 
Limited
General
Corporation
Partnership
Partnership
 

 
     Revocable Trust (identify each grantor and indicate under what
circumstances the trust is revocable by the grantor).
 
(Continue on a separate piece of paper, if necessary.)
 
     Other type of Trust (indicate type of trust and, for trusts other than
pension trusts, name the grantors and beneficiaries).
 
(Continue on a separate piece of paper, if necessary.)
 
     Other form of organization (indicate form of organization ( ).
 
(c) Indicate the approximate date the undersigned entity was formed:
 
(d) In order for the Company to offer and sell the Shares in conformance with
state and federal securities laws, the following information must be obtained
regarding your investor status. Please initial each category applicable to you
as an investor in the Company.
 
 

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     1. A bank as defined in Section 3(a)(2) of the Securities Act, or any
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity;

       
 
 
 
     2. A broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934;

       
 
 
 
     3. An insurance company as defined in Section 2(13) of the Securities Act;

       
 
 
 
     4. An investment company registered under the Investment Company Act of
1940 or a business development company as defined in Section 2(a)(48) of that
Act;

       
 
 
 
     5. A Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958;

       
 
 
 
     6. A plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total assets in
excess of $5,000,000;

       
 
 
 
     7. An employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, if the investment decision is made by a plan
fiduciary, as defined in Section 3(21) of such Act, which is either a bank,
savings and loan association, insurance company, or registered investment
advisor, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made solely by
persons that are accredited Purchasers;

       
 
 
 
     8. A private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940;

       
 
 
 
     9. An organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the Shares, with total assets in
excess of $5,000,000;

 
 

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     10. A trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Shares, whose purchase is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) of the Exchange Act;

 
 
 
 
 
      11. An entity in which all of the equity owners qualify under any of the
above subparagraphs. If the undersigned belongs to this investor category only,
list the equity owners of the undersigned, and the investor category which each
such equity owner satisfies:

 
 

       
 
 
 
12.  I am a natural person and am an Accredited Investor under Rule 501(a) of
Regulation D on the following basis:

 

  _______  I have individual net worth, or joint net worth with my spouse, at
the time of this purchase in excess of $1,000,000; and/or         _______
 I had an individual income in excess of $200,000 in each of the two most recent
years or joint income with my spouse in excess of $300,000 in each of those
years and have a reasonable expectation of reaching the same income level in the
current year.

        (Continue on a separate piece of paper, if necessary.)
 
 

          
(Name of Investor) [Please print/type]
             
By:
    
   
(Authorized Signature of Officer, Partner or Trustee)
       
Title:
   

 
 

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EXHIBIT C
 
NEAH POWER SYSTEMS, INC.
 
FORM OF LEGAL OPINION OF SEYFARTH SHAW LLP
 
Based on the foregoing, and subject to the qualifications and assumptions stated
herein, we are of the opinion that:
 
1.  The Company is a corporation validly existing and in good standing under the
laws of the State of Nevada and has all requisite corporate power and authority
to own, lease and operate its properties and to conduct its business as
presently being conducted.
 
2.  The Shares and Conversion Shares to be issued by the Company pursuant to the
Agreement have been duly authorized and, when issued and delivered in the manner
contemplated by the Agreement, will be validly issued, fully paid and
nonassessable, and free of preemptive rights arising under law or pursuant to
the Company’s Articles of Incorporation.
 
3.  The Company has all requisite corporate power and authority to execute and
deliver the Transaction Documents and to perform its obligations thereunder. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated thereby
have been duly authorized by all requisite corporate action on the part of the
Company.
 
4.  The Agreement has been duly and validly executed and delivered by the
Company and (assuming the due authorization, execution and delivery thereof by
the Purchasers) constitutes the legal, valid and binding obligation of the
Company, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
conservatorship, moratorium and similar laws affecting creditors’ rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (irrespective of whether enforcement is sought in a proceeding at law or
in equity) and except that (A) rights to indemnification and contribution
thereunder may be limited by federal or state securities laws or public policy
relating thereto, and (B) no opinion is expressed herein with respect to
Sections 6.7 and 6.8 of the Agreement
 
5.  The execution and delivery by the Company of the Agreement, and the
performance by the Company with its obligations thereunder, do not constitute a
default under or violate (i) any provisions of the Articles of Incorporation or
by-laws of the Company presently in effect or (ii) any Nevada corporate or
United States federal law or regulation (other than federal and state securities
or “blue sky” laws, as to which we express no opinion in this paragraph 7).
 
6.  No consent, approval, waiver, license or authorization or other action by or
filing or registration with any Nevada or United States federal public or
governmental authority is required in connection with the valid execution and
delivery by the Company of the Agreement or the consummation by the Company of
the transactions contemplated thereby, except for filings, registrations and
other actions required pursuant to the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and the respective rules and
regulations thereunder, filings in connection with state securities or “blue
sky” laws, in each case as to which we express no opinion in this paragraph 8,
and those which already have been obtained by the Company.
 
 

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