SECURITY
      INTEREST AGREEMENT

     

    SECURITY
      INTEREST AGREEMENT (“Security
      Agreement”),
      dated
      as of November
      12, 2007, by and among EPD Investment Co., LLC, a California limited liability
      company (“Secured
      Party”
      and
      collectively with any assignee or designee, the “Secured
      Parties”)
      and
      Neah Power Systems, Inc., a Nevada corporation
      (the
“Debtor”).

     

    RECITALS

     

    A.  Reference
      is made to (i) the Purchase Agreement dated November 9, 2007 (the “Purchase
      Agreement”)
      to
      which the Debtor and Secured Party
      are
      parties, and (ii) the Transaction Agreements (as defined in the
      Purchase
      Agreement),
      including, without limitation, the Note. Capitalized terms not otherwise defined
      herein shall have the meanings ascribed to them in the relevant Transaction
      Agreements.

     

    B.  Pursuant
      to the Transaction Agreements, the Debtor has certain obligations to each
of
      the
      Secured Parties (all such obligations under all Transaction Agreements, the
      “Obligations”).

     

    C.
       The
      Debtor has determined that it shall benefit from the execution of the
Transaction
      Agreements and the transactions contemplated thereby. In furtherance thereof,
      and not in limitation thereof, the Debtor has deemed that the execution
and
      delivery of this Security Interest Agreement to which it is a party, and the
      Debtor’s
      performance of its obligations under each of them, to be necessary and
      convenient to the
      conduct, promotion or attainment of the business of the Debtor from the
Purchase Agreement
      or otherwise.


     

    D. In
      order
      to induce the Secured Parties to execute and deliver the Transaction
Agreements
      and to make the payments to the Debtor contemplated thereby, and as contemplated
      by
      the
      Purchase Agreement and the Note, the Debtor has agreed to grant to the Secured
      Parties a security interest in the Collateral (as defined below) to secure
      the
      due and punctual fulfillment
      of the Obligations. The Secured Parties are willing to enter into the
Purchase
      Agreement and the other Transaction Agreements only upon receiving the Debtor’s
execution
      of this Security Interest Agreement.

     

    AGREEMENT

     

    NOW,
      THEREFORE, in consideration of the premises, the mutual covenants and conditions
      contained herein, and for other good and valuable consideration, the receipt
      and
sufficiency
      of which are hereby acknowledged, the parties hereto hereby agree as
      follows:

     

    1. Grant
      of Security Interest.

     

    (a)  In
      order
      to secure the due and punctual fulfillment of the Obligations, the Debtor
hereby
      grants, conveys, transfers and assigns to the Secured Parties (and to each
      of
      them based on their
      respective Allocable Shares, as defined below) a continuing security interest
      in
      the Collateral.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b)  For
      purposes of this Agreement, the following terms shall have the meanings
      indicated:

     

    “COLLATERAL”
      is all right, title and interest of Debtor in and to all of the following,
      whether
      now owned or hereafter arising or acquired and wherever located: All assets
      of
the
      Debtor, including, but not limited to: all personal and fixture property of
      every kind and
      nature, including without limitation all goods (including inventory, equipment
      and any accessions
      thereto), instruments (including promissory notes), documents, accounts
(including
      accounts receivable), chattel paper (whether tangible or electronic), deposit
      accounts, letter-of-credit rights (whether or not the letter of credit is
      evidenced by a writing),
      commercial tort claims, Securities and all other investment property, supporting
      obligations,
      any other contract rights or rights to the payment of money, insurance claims
      and
      proceeds, and all general intangibles (including all payment intangibles);
      all
Equipment;
      all Intellectual Property; and any and all claims, rights and interests in
      any
      of the
      above, and all guaranties and security for any of the above, and all
      substitutions and replacements
      for, additions, accessions, attachments, accessories, and improvements to,
      and
      proceeds (including proceeds of any insurance policies, proceeds of proceeds
      and
claims
      against third parties) of, any and all of the above, and all Debtor’s books
      relating to any
      and
      all of the above and includes, without limiting the generality of the above,
      the
Intellectual
      Property listed in the attached Exhibit
      B.


     

    “CODE”
is
      the Uniform Commercial Code, in effect in the State of Nevada as in effect
      from
      time
      to time.

     

    “COPYRIGHTS”
      are all copyrights, copyright rights, applications or registrations and like
      protections
      in each work or authorship or derivative work, whether published or not
(whether
      or not it is a trade secret) now or later existing, created, acquired or
      held.

     

    “EQUIPMENT”
      has the meaning set forth in the Code and includes all present and future
      machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools,
      parts and attachments
      in which Debtor has any interest.

     

    “INTELLECTUAL
      PROPERTY” is all present and future (a) Copyrights, (b) trade secret
rights,
      including all rights to unpatented inventions and know-how, and confidential
      information; (c) mask work or similar rights available for the protection of
      semiconductor chips;
      (d) Patents; (e) Trademarks; (f) computer software and computer software
      products; (g)
      designs and design rights; (h) technology; (i) all claims for damages by way
      of
      past, present
      and future infringement of any of the rights included above; (j) all licenses
      or
      other rights
      to
      use any property or rights of a type described above; a schedule of Intellectual
      Property
      and a schedule of Intellectual Property applications is provided in Exhibit
      B,
      but
such
      listing shall not limit the Secured Party’s interest in any other Intellectual
      Property or Intellectual
      Property applications.

     

    
      
         

      

      
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    “PATENTS”
      are patents, patent applications and like protections, including improvements,
      divisions, continuations, renewals, reissues, extensions and
      continuations-in-part
      of the same.

     

    “SECURITIES”
      has the meaning ascribed to it in the Securities Act of 1933, as amended,
and
      includes, but is not necessarily limited to, common stock, preferred stock,
      warrants, rights and other options, promissory notes or other instruments
      reflecting obligations of other
      entities; in furtherance of the foregoing, but not in limitation thereof, the
      term “Securities”
      specifically includes the securities listed in the attached Exhibit
      A.

     

    “TRADEMARKS”
      are trademarks, servicemarks, trade styles, and trade names, whether
or
      not
      any of the foregoing are registered, and all applications to register and
      registrations of
      the
      same and like protections, and the entire goodwill of the business of Debtor
      connected
      with and symbolized by any such trademarks.

     

    (c)
      The
      security interests granted pursuant to this Section (the “Security Interests”)
      are granted
      as security only and shall not subject any of the Secured Parties to, or
      transfer or in any way
      affect or modify, any obligation or liability of the Debtor under any of the
      Collateral or any transaction
      which gave rise thereto.

     

    (d)
      The
      term “Allocable Share” means, with respect to each Secured Party (if there is
more
      than
      one Secured Party), as of the relevant date, the fraction equal to (i) the
      outstanding principal of the Notes then held by such Secured Party, divided
      by
      (ii) the aggregate outstanding principal of the Notes then held by all Secured
      Parties. If there is only one Secured Party, the “Allocable Share” shall mean
      one hundred percent (100%).

     

    Section
      2.
      Filing; Further Assurances.

     

    (a)  The
      Debtor will, at its expense, cause to be searched the public records with
respect
      to the Collateral and will execute, deliver, file and record (in such manner
      and
      form as each
      of
      the Secured Parties may require), or permit each of the Secured Parties to
      file
      and record. as its attorney in fact, any financing statement, any carbon,
      photographic or other reproduction of a
      financing statement or this Security Agreement (which shall be sufficient as
      a
      financing statement
      hereunder), any specific assignments or other paper that may be reasonably
      necessary or
      desirable, or that the Secured Parties may request, in order to create,
      preserve, perfect or validate
      any Security Interest or to enable each of the Secured Parties to exercise
      and
      enforce its rights hereunder with respect to any of the Collateral. The Debtor
      hereby appoints each Secured Party as Debtor’s attorney-in-fact to execute in
      the name and behalf of Debtor such additional financing statements as such
      Secured Party may request.

     

    
      
         

      

      
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    (b)  Each
      Secured Party has designated an Agent as provided in the Section titled
“Agent”
      below. Among other things, such Agent shall be agent of each such Secured Party
      for execution of and identification on any financing statement or similar
      instrument referring to or describing the Collateral.

     

    (c)
      The
      Agent is authorized to execute and file any and all financing statements
desired
      to be filed by the relevant Secured Party to reflect the security interest
      in
      the Collateral in any
      and
      all jurisdictions (including the U.S. Patent and Trademark Office). For such
      purposes, the
      Debtor irrevocably appoints the Agent,
      with
      full power of substitution to execute and file such financing statements
      naming the Debtor as debtor thereon.

     

    Section
      3. Representations and Warranties of Debtor. The
      Debtor hereby represents and
      warrants to each Secured Party (a) that the Debtor is, or to the extent that
      certain of the Collateral is to be acquired after the date hereof, will be,
      the
      owner of the Collateral free from any adverse lien, security interest or
      encumbrance; (b) that
      no
      financing statement covering the Collateral is on file in any public office,
      other
      than the financing statements filed pursuant to this Security Agreement; and
      (c)
that
      the
      statements made
      in
      the Recitals of this Security Interest Agreement, which are deemed incorporated
      herein by
      reference, are true, accurate and complete.


     

    Section
      4. Covenants of Debtor. The
      Debtor hereby covenants and agrees with each Secured
      Party that the Debtor (a) will, at the Debtor’s sole cost and expense, defend
      the Collateral against
      all claims and demands of all persons at any time claiming any interest therein
      junior to the
      Secured Party’s interest; (b) will provide the Secured Party with prompt written
      notice of (i) any
      change in the chief executive officer of the Debtor or the office where the
      Debtor maintains its
      books
      and records pertaining to the Collateral; (ii) the movement or location of
      all
      or a material
      part of the Collateral to or at any address other than the address of Debtor
      set
      forth in its public filings with the U.S. Securities and Exchange
      Commission;
      and
      (iii) any facts which constitute a Debtor
      Event of Default (as such term is defined below), or which, with the giving
      of
      notice and/or
      the passage of time, could or would constitute a Debtor Event of Default,
      pursuant to the Section
      titled “Debtor Events of Default” below; (c) will promptly pay any and all
      taxes, assessments
      and governmental charges upon the Collateral prior to the date penalties are
      attached thereto,
      except to the extent that such taxes, assessments and charges shall be contested
      in good faith
      by
      the Debtor; (d) will immediately notify the Secured Party of any event causing
      a
substantial
      loss or diminution in the value of all or any material part of the Collateral
      and the amount
      or
      an estimate of the amount of such loss or diminution; (e) will have and maintain
      adequate
      insurance at all times with respect to the Collateral, for such other risks
      as
      are customary in
      the
      Debtor’s industry for the respective items included in the Collateral, such
      insurance to be payable to the Secured Party and the Debtor as their respective
      interests may appear, and shall provide
      for a minimum of ten (10) days prior written notice of cancellation to the
      Secured Party, and
      Debtor shall furnish the Secured Party with certificates or other evidence
      satisfactory to the Secured Party of compliance with the foregoing insurance
      provisions; (f) will not sell or offer to sell or otherwise assign, transfer
      or
      dispose of the Collateral or any interest therein, without the prior
      written consent of the Secured Party, except in the ordinary course of business;
      (g) will keep

     

    the
      Collateral free from any adverse lien, security interest or
      encumbrance
      and in
      good order and repair, reasonable wear and tear excepted, and will not waste
      or
      destroy the Collateral or any part thereof; and (h) will not use the Collateral
      in material violation of any statute or ordinance the violation of which
could
      materially and adversely affect the Debtor’s business.

     

    
      
         

      

      
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    Section
      5. Records Relating To Collateral. The
      Debtor will keep its records concerning
      the Collateral at its offices designated in the caption of this Security
      Interest Agreement
      or at such other place or places of business of which the Secured Party shall
      have been notified
      in writing no less than ten (10) days prior thereto. The Debtor will hold and
      preserve such records
      and chattel paper and will permit representatives of the Secured Party at any
      time during normal
      business hours upon reasonable notice to examine and inspect the Collateral
      and
      to make abstracts
      from such records and chattel paper, and will furnish to the Secured Party
      such
information
      and reports regarding the Collateral as the Secured Party may from time to
      time
reasonably
      request.

     

    Section
      6.
      General Authority. From
      and
      during the term of any Debtor Event of Default,
      the Debtor hereby appoints the Secured Party the Debtor’s lawful attorney, with
      full power
      of
      substitution, in the name of the Debtor, for the sole use and benefit of the
      Secured Party, but
      at
      the Debtor’s expense, to exercise, all or any of the following powers with
      respect to all or any
      of
      the Collateral:

     

    (a)  to
      demand, sue for, collect, receive and give acquittance for any and all monies
      due or
      to
      become due;

     

    (b)  to
      receive, take, endorse, assign and deliver all checks, notes, drafts, documents
      and
      other
      negotiable and non- negotiable instruments and chattel paper taken or received
      by the Secured
      Party;

     

    (c)  to
      settle, compromise, prosecute or defend any action or proceeding with respect
      thereto;

     

    (d)  to
      sell,
      transfer, assign or otherwise deal in or with the same or the proceeds
thereof
      or the related goods securing the Collateral, as fully and effectually as if
      the
      Secured Party were
      the
      sole and absolute owner thereof;

     

    (e) to
      extend
      the time of payment of any or all thereof and to make any allowance and
other
      adjustments with reference thereto; and

     

    to
      discharge any taxes, liens, security interests or other encumbrances at any
      time
placed
      thereon;

     

    provided
      that the Secured Party or the Agent shall give the Debtor not less than ten
      (10)
      business days
      prior written notice of the time and place of any sale or other intended
      disposition of any of the
      Collateral.

     

    
      
         

      

      
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    The
      exercise by the Secured Party or the Agent of or failure to so exercise any
      authority granted
      herein shall in no manner affect Debtor’s liability to the Secured Party, and
      provided, further,
      that the Secured Party and the Agent shall be under no obligation or duty to
      exercise any of
      the
      powers hereby conferred upon them and they shall be without liability for any
      act or failure to
      act in
      connection with the collection of, or the preservation of, any rights under
      any
      of the Collateral
      and Secured Party shall not be required to proceed against any other person
      or
      entity who
      or
      which has guaranteed the performance of the Obligations or provided any security
      therefor before
      proceeding against Debtor or the Collateral.

     

    Section
      7.
      Debtor Events of Default.

     

    (a) The
      Debtor shall be in default under this Security Agreement upon the occurrence
      of
      any of
      the following (each, a “Debtor
      Event of Default”):

     

    	 	(i)  
            an Event of Default (as defined in the Note);


    	 	(ii) any
            representation or warranty made by the Debtor in this Security
            Interest Agreement shall be false or misleading in any material respect;
            or


    	 	(iii)
            Debtor
            shall breach any covenant of Debtor in this Security Interest Agreement
            or
            in any other document or instrument executed by Debtor in favor of or
            for
            the benefit of the Secured Parties as contemplated by any of the
            Transaction Agreements.


    	 	
          


    (b)  The
      Debtor hereby irrevocably agrees that, upon the occurrence of a Debtor Event
      of
      Default, the Debtor shall be deemed to have consented to an immediate conveyance
      and transfer
      to the Secured Party of the copyrights and all other rights the Debtor may
      have
      in the software
      included in the Collateral.
      In
      furtherance of the foregoing, and not in limitation thereof,
      the Debtor will, upon the occurrence of a Debtor Event of Default, deliver
      to
      the Secured Party
      copies of the source code of the relevant software, with accompanying written
      assignment of
      the
      software to the Secured Party. Without limiting the foregoing, such source
      code
      and assignment shall be in form sufficient to enable the Secured Party to
      register the software in Secured Party’s name with the Copyright Register. The
      Debtor hereby agrees to take all steps necessary
      or appropriate, as requested by the Secured Party, to effectuate and reflect
      such conveyance
      and transfer or assignment to Secured Party. In all events, such conveyance,
      transfer or
      assignment shall be deemed to vest title in such software in the Secured
      Party.

     

    
      
         

      

      
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    (c)  In
      furtherance of the foregoing and not in limitation thereof, the Debtor
      acknowledges and agrees that the Secured Party may, upon the occurrence of
      a
      Debtor Event of Default,
      seek the immediate entry of a preliminary injunction prohibiting the Debtor’s
      use of such software
      in any shape, way or manner, including, but not necessarily limited to, through
      the sale of
      products that use any of such software, and the Debtor hereby irrevocably agrees
      that it will not contest
      an application seeking entry of a preliminary injunction and that it will accept
      the entry of such
      injunction.

     

    Section
      8. Remedies Upon Debtor Event of Default.
      If any
      Debtor Event of Default shall
      have occurred, then in addition to the provisions of Section 7 hereof, the
      Secured Party may exercise
      all the rights and remedies of a secured party under the Code. The Secured
      Party
      may require
      the Debtor to assemble all or any part of the Collateral and make it available
      to the Secured
      Party at a place to be designated by the Secured Party which is reasonably
      convenient. The
      Secured Party shall give the Debtor ten (10) business days prior written notice
      of the Secured Party’s intention to make any public or private sale or sale at a
      broker’s board or on a securities exchange
      of the Collateral. At any such sale the Collateral may be sold in one lot as
      an
      entirety or in
      separate parcels, as the Secured Party, in its sole discretion, may determine.
      The Secured Party shall
      not
      be obligated to make any such sale pursuant to any such notice. The Secured
      Party may, without
      notice or publication, adjourn any public or private sale or cause the same
      to
      be adjourned from
      time
      to time by announcement at the time and place fixed for the sale, and such
      sale
      may be made
      at
      any time or place to which the same may be adjourned. The Secured Party, instead
      of exercising
      the power of sale herein conferred upon it, may proceed by a suit or suits
      at
      law or in equity
      to
      foreclose the Security Interests and sell the Collateral, or any portion
      thereof, under a judgment
      or decree of a court or courts of competent jurisdiction.

     

    Section
      9. Application of Collateral and Proceeds. The
      proceeds of any sale of, or other
      realization upon, all or any part of the Collateral shall be applied in the
      following order of priorities:
      (a) first, to pay the reasonable expenses of such sale or other realization,
      including, without
      limitation, reasonable attorneys’ fees, and all expenses, liabilities and
      advances reasonably
      incurred or made by the Secured Party in connection therewith, and any other
      unreimbursed expenses for which the Secured Party is to be reimbursed pursuant
      to the Section titled “Expenses; Secured Party’s Lien” below; (b) second, to the
      payment of the Obligations in such
      order of priority as the Secured Party, in its sole discretion, shall determine;
      and (c) finally, to
      pay to
      the Debtor, or its successors or assigns, or as a court of competent
      jurisdiction may direct,
      any surplus then remaining from such proceeds.

     

    Section
      10. Expenses; Secured Party’s Lien. If
      any
      Debtor Event of Default shall have occurred,
      the Debtor will forthwith upon demand pay to the Secured Party: (a) the amount
      which the
      Secured Party may have been required to pay to free any of the Collateral from
      any lien thereon;
      and (b) the amount of any and all reasonable out-of-pocket expenses, including,
      without limitation,
      the reasonable fees and disbursements of its counsel, and of any agents not
      regularly in its employ, which the Secured Party may incur in connection with
      the collection, sale or other disposition
      of any of the Collateral.

     

    
      
         

      

      
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    Section
      11. Termination of Security Interests; Release of Collateral. Upon
      the
      earlier to occur of (a) payment or other
      satisfaction in full of the Note held by the Secured Party or (b) 45 days after
      the Registration Date (as defined in the Purchase Agreement), the Security
      Interests shall terminate
      and all rights to the Collateral shall revert to the Debtor. Upon any such
      termination of the
      Security Interests or release of Collateral, the Secured Party will, at the
      Debtor’s expense, to the
      extent permitted by law, execute and deliver to the Debtor such documents as
      the
      Debtor shall reasonably
      request to evidence the termination of the Security Interests or the release
      of
      such Collateral,
      as the case may be.

     

    Section
      12. Notices. All
      notices, demands, requests, consents, approvals, and other communications
      required or permitted hereunder shall be in writing and, unless otherwise
specified
      herein, shall be (a) personally served, (b) deposited in the mail, registered
      or
      certified, return
      receipt requested, postage prepaid, (c) delivered by reputable air courier
      service with charges
      prepaid, or (d) transmitted by hand delivery, telegram, or facsimile, addressed
      as set forth below
      or
      to such other address as such party shall have specified most recently by
      written notice given in accordance herewith. Any notice or other communication
      required or permitted to be given hereunder shall be deemed effective (i) upon
      hand delivery or delivery by facsimile, with accurate
      confirmation generated by the transmitting facsimile machine, at the address
      or
      number designated
      below (if delivered on a business day during normal business hours where such
      notice is to be received), or the first business day following such delivery
      (if
      delivered other than on a business
      day during normal business hours where such notice is to be received) or (ii)
      on
      the second
      business day following the date of mailing by express courier service or on
      the
      fifth business
      day after deposited in the mail, in each case, fully prepaid, addressed to
      such
      address, or upon
      actual receipt of such mailing, whichever shall first occur. The addresses
      for
      such communications
      shall be for (i) the Debtor as provided in the Purchase Agreement,
      (ii)
      for each Secured Party as provided in the Purchase Agreement for notices to
      the
      Purchaser and (iii) for the Agent as provided in the Purchase
      Agreement
      for notices to the Purchaser.
      Any party hereto may from time to time change its address or facsimile number
      for
      notices under this Section in the manner contemplated by the Purchase
      Agreement.

     

    Section
      13.Agent.
      

     

    (a)  Anything
      in the other provisions of this Security Interest Agreement to the contrary
      notwithstanding, the Secured Party may designate another entity to act as agent
      (the “Agent”)
      for
      the Secured Party with respect to any one or more of the rights of Secured
      Party
      hereunder, including, but not necessarily limited to, the right to hold the
      security interest and/or be
      named
      as secured party (as agent for the Secured Party) in any filed financing
      statement and to take
      action in the name and stead of the Secured Party hereunder. Such designation
      may be made with
      or
      without power of substitution, Such designation shall remain in effect until
      canceled by the Secured Party, as provided herein; provided, however, that
      such
      cancellation shall not affect the
      validity of any action theretofore taken by such agent pursuant to this Security
      Interest Agreement. The Debtor acknowledges and agrees to honor such designation
      and acknowledges that
      the
      Agent is acting as the agent of the Secured Party and not as a
      principal.

     

    
      
         

      

      
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    (b)  Each
      Secured Party hereby confirms that the Secured Party has designated EPD
      Investment Co. LLC as its initial Agent, with full right of
      substitution.

     

    (c)  if
      there
      is more than one Secured Party, the Agent shall act as agent for all Secured
      Parties.
      Any revocation of the authority of the Agent or the designation of an alternate
      Agent shall
      be
      done only by Secured Parties who represent a Majority in Interest of all the
      Note Holders (as defined below) at that time; provided that at all times all
      Secured Parties shall be represented by
      one
      and the same Agent. The term “Note Holder” means the Holder, as of the relevant
      date, of the
      Note.
      The term “Majority in Interest” means, as of the relevant date, with respect to
      the relevant
      classification of Note Holders, one or more Note Holders whose respective
      outstanding principal
      amounts of the Notes held by each of them, as of such date, aggregate more
      than
      fifty percent
      (50%) of the Allocable Shares on that date.

    


    Section
      14.Miscellaneous.

     

    (a)  No
      failure on the part of the Secured Party to exercise, and no delay in
      exercising, and
      no
      course of dealing with respect to, any right, power or remedy under this
      Security Interest Agreement
      shall operate as a waiver thereof; nor shall any single or partial exercise
      by
      the Secured
      Party of any right, power or remedy under this Security Interest Agreement
      preclude the exercise,
      in whole or in part, of any other right, power or remedy. The remedies in this
      Security Interest Agreement are cumulative and are not exclusive of any other
      remedies provided by law. Neither this Security Interest Agreement nor any
      provision hereof may be changed, waived, discharged or terminated orally but
      only by a statement in writing signed by the party against which
      enforcement of the change, waiver, discharge or termination is
      sought.

     

    (b)  The
      execution and delivery by Debtor of this Security Interest Agreement and all
      documents
      delivered in connection herewith have been duly and validly authorized by all
      necessary
      corporate action of Debtor and this Agreement and all documents delivered in
      connection
      herewith have been duly and validly executed and delivered by Debtor. The
      execution and
      delivery by Debtor of this Security Interest Agreement and all documents
      delivered in connection
      herewith will not result in a breach or default of or under the Certificate
      of
Incorporation,
      By-laws or any agreement, contract or indenture of Debtor. This Security
      Interest Agreement
      and all documents delivered in connection therewith are legal, valid and binding
      obligations
      of Debtor enforceable against Debtor in accordance with their
      terms.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    (c)
      In
      the event that any action is taken by Debtor or Secured Party in connection
      with
the
      this
      Security Interest Agreement, or any related document or matter, the losing
      party
      in such legal
      action, in addition to such other damages as he or it may be required to pay,
      shall pay reasonable
      attorneys’ fees to the prevailing party.

     

    Section
      15. Separability. If
      any
      provision hereof shall prove invalid or unenforceable in any
      jurisdiction whose laws shall be deemed applicable, the other provisions hereof
      shall remain in
      full
      force and effect in such jurisdiction and shall be liberally construed in favor
      of the Secured Party.

     

    Section
      16.Governing
      Law.

     

    (a)
      This
      Security Interest Agreement shall be governed by and construed in accordance
      with the laws of the State of Nevada for contracts to be wholly performed in
      such state
      and
      without giving effect to the principles thereof regarding the conflict of laws.
      To
      the
      extent determined by the court, the
      Debtor shall reimburse the Secured Party for any reasonable legal fees and
      disbursements incurred
      by the Secured Party in enforcement of or protection of any of its rights under
      this Security
      Interest Agreement. Nothing in this Section shall affect or limit any right
      to
      serve process
      in any other manner permitted by law.

     

    (b)
      The
      Debtor and the Secured Party acknowledge and agree that irreparable damage
      would
      occur in the event that any of the provisions of this Security Interest
      Agreement were not performed
      in accordance with their specific terms or were otherwise breached. It is
      accordingly agreed
      that the parties shall be entitled to an injunction or injunctions to prevent
      or
      cure breaches of
      the
      provisions of this Security Interest Agreement and to enforce specifically
      the
      terms and provisions
      hereof, this being in addition to any other remedy to which any of them may
      be
entitled
      by law or equity.

     

    Section
      17. Jury Trial Waiver. The
      Debtor and the Secured Party hereby waive a trial by
      jury
      in any action, proceeding or counterclaim brought by either of the parties
      hereto against the
      other
      in respect of any matter arising out of or in connection with the Note or this
      Security Interest
      Agreement.

     

    Section
      18. Assignment. Only
      in
      connection with the transfer of all of the rights under the
      Transaction Agreements in accordance with their terms, a Secured Party may
      assign or transfer
      the whole of its security interest granted hereunder. Any transferee of the
      Collateral shall be
      vested
      with all of the rights and powers of the assigning Secured Party hereunder
      with
      respect to
      the
      Collateral.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    Section
      19. Waiver. The
      Debtor waives any right that it may have to require Secured Party
      to
      proceed against any other person, or proceed against or exhaust any other
      security, or pursue
      any other remedy Secured Party may have.

     

    IN
      WITNESS WHEREOF, the Parties have executed this Security Interest Agreement
      as
of
      the
      day, month and year first above written.

     

    SECURED
      PARTY:

     

    EPD
      INVESTMENT CO. LLC

    


    


    By:
      _________________________________

    Name:
      

    Title:
      

    


    


    COMPANY:
      

    


    NEAH
      POWER SYSTEMS, INC.

    


    


    By:
      _________________________________

    Name:
      

    Title:
      


    
      
        
           

        

         

      

      
        11

        
          

        

      

      
         

        
          


        

      

    


    EXHIBIT
      A

    


    SECURITIES

    


    All
      capital stock of Neah Power Systems, Inc., a Washington
      corporation.

     

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    


    EXHIBIT
      B

    


    INTELLECTUAL
      PROPERTY

    


    U.S.
      Patents:

    


    	1.  	
            U.S.
              Patent No. 6,641,948
              entitled “Fuel Cells Having Silicon Substrates And/Or Sol-Gel Derived
              Support Structures” issued November 4, 2003. (401) Expires: April 5,
              2020.

          


    	2.  	
            U.S.
              Patent No. 6,720,105
              entitled “Metallic Blocking Layers Integrally Associated With Fuel Cell
              Electrode Structures And Fuel Cell Electrode Stack Assemblies” issued
              April 13, 2004. (401C2) Expires: April 5,
              2020.

          


    	3.  	
            U.S.
              Patent No. 6,808,840
              entitled “Silicon-Based Fuel Cell Electrode Structures And Fuel Cell
              Electrode Stack Assemblies” issued October 26, 2004. (401C3) Expires:
              April 5, 2020.

          


    	4.  	
            U.S.
              Patent No. 6,811,916
              entitled “Fuel Cell Electrode Pair Assemblies And Related Methods” issued
              November 2, 2004. (402) Expires: December 12,
              2021.

          


    	5.  	
            U.S.
              Patent No. 6,852,443
              entitled “Fuel Cells Having Silicon Substrates And/Or Sol-Gel Derived
              Support Structures” issued February 8, 2005. (401D1) Expires: April 5,
              2020

          


    	6.  	
            U.S.
              Patent No. 6,924,058
              entitled “Hydrodynamic Transport and Flow Channel Passageways Associated
              with Fuel Cell Electrode Structures and Fuel Cell Electrode Assemblies”
              issued Aug. 2, 2005. (401C5) Expires: April 5,
              2020.

          


    	7.  	
            U.S.
              Patent No. 7,105,245 entitled
              “Fuel Cell System Reactant Supply and Effluent Storage Cartridges” issued
              September 12, 2006. (404C2)
              Expires: December 20, 2024.

          


    	8.  	
            U.S.
              Patent No. 7,118,822
              entitled “Fuel Cell Electrode Pair Assemblies and Related Methods” issued
              October 10, 2006. (402C1) Expires: October 16,
              2022.

          


    	9.  	
            U.S.
              Pat. No. 7,157,177
              entitled “Porous Fuel Cell Electrode Structures Having Conformal
              Electrically Conductive Layers Thereon” issued January 2, 2007. (403)
              Expires: Sept. 29, 2023.

          


    	10.  	
            U.S.
              Pat. No. 7,198,864
              entitled “Silicon-Based Fuel Cell Electrode Structures” issued April 3,
              2007. (401D2)
              Expires: April
              5, 2020.

          


    	11.  	
            U.S.
              Pat. No. 7,205,665
              entitled “Porous Silicon Undercut Etching Deterrent Masks and Related
              Methods” issued April 17, 2007. (414) Expires Nov. 11,
              2025.

          


    


    Foreign
      Patents:

    


    	1.  	
            Chinese
              Patent No. CN1205685C entitled “Fuel Cells Having Silicon Substrates
              And/Or Sol-Gel Derived Support Structures” issued June 1, 2005.
              (401CN)

          


     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    U.S.
      Utility Patent Applications:

    


    	1.  	
            U.S.
              Pat. Appl. No. 10/251,518 entitled “Fuel Cells Having Internal Multistream
              Laminar Flow” filed September 20, 2002.
              (404C1)

          


    	2.  	
            U.S.
              Pat. Appl. No. 10/966,721 entitled “Nitric Acid Regeneration Fuel Cell
              Systems” filed Oct. 15, 2004. (405)

          


    	3.  	
            U.S.
              Pat. Appl. No. 10/892,876 entitled “Fuel Cells Having Cross Directional
              Laminar Flowstreams” filed Jul. 16, 2004.
              (406)

          


    	4.  	
            U.S.
              Pat. Appl. No. 11/313,550 entitled
              “Detachable Reactant Supply and Effluent Storage Cartridges, Layered
              Pump
              Assemblies, and Rotatable Fluid Transfer Valve Disk Assemblies for
              Use
              with Regenerative Fuel Cell Systems” filed Dec. 20, 2005.
              (413)

          


    	5.  	
            U.S.
              Pat. Appl. No. 11/530,815 entitled “Closed Liquid Feed Fuel Cell Systems
              And Reactant Supply And Effluent Storage Cartridges Adapted For Use
              With
              The Same” filed September 11, 2006.
              (404C3)

          


    	6.  	
            U.S.
              Pat. Appl. No. 11/669,895 entitled “Liquid-liquid Fuel Cell Systems Having
              Flow-Through Anodes and Flow-By Cathodes” filed January 31, 2007.
              (416)

          


    


    PCT
      and Foreign Patent Applications:

    


    	1.  	
            Canadian
              Pat. Appl. No. 2,392,115 entitled “Fuel Cells Having Silicon Substrates
              And/Or Sol-Gel Derived Support Structures” filed July 27, 2002.
              (401CA)

          


    	2.  	
            Chinese
              Pat. Appl. No. 00818422.4 entitled “Fuel Cells Having Silicon Substrates
              And/Or Sol-Gel Derived Support Structures” filed July 26, 2002.
              (401CN)

          


    	3.  	
            European
              Pat. Appl. No. 00991398.9 entitled “Fuel Cells Having Silicon Substrates
              And/Or Sol-Gel Derived Support Structures” filed May 17, 2002.
              (401EP)

          


    	4.  	
            Japanese
              Pat. Appl. No. 2001-537811 entitled “Fuel Cells Having Silicon Substrates
              And/Or Sol-Gel Derived Support Structures” filed May 17, 2002.
              (401JP)

          


    	5.  	
            Canadian
              Pat. Appl. No. 2,444,688 entitled “Porous Silicon And Sol-Gel Derived
              Electrode Structures And Assemblies For Use With Fuel Cell Systems” filed
              October 17, 2003. (401CCA)

          


    	6.  	
            Chinese
              Pat. Appl. No. 02811803.0 entitled “Porous Silicon And Sol-Gel Derived
              Electrode Structures And Assemblies For Use With Fuel Cell Systems” filed
              October 20, 2003. (401CCN)

          


    	7.  	
            European
              Pat. Appl. No. 02731430.1 entitled “Porous Silicon And Sol-Gel Derived
              Electrode Structures And Assemblies For Use With Fuel Cell Systems” filed
              November 19, 2003. (401CEP)

          


    	8.  	
            Japanese
              Pat. Appl. No. 2002-584409 entitled “Porous Silicon And Sol-Gel Derived
              Electrode Structures And Assemblies For Use With Fuel Cell Systems” filed
              October 20, 2003. (401CJP)

          


    	9.  	
            Canadian
              Pat. Appl. No. 2,472,232 entitled “Porous Fuel Cell Electrode Structures
              Having Conformal Electrically Conductive Layers Thereon” filed July 3,
              2004. (403CA)

          


    	10.  	
            Chinese
              Pat. Appl. No. 03801936.1 entitled “Porous Fuel Cell Electrode Structures
              Having Conformal Electrically Conductive Layers Thereon” filed July 2,
              2004. (403CN)

          


    	11.  	
            European
              Pat. Appl. No. 03701220.0 entitled “Porous Fuel Cell Electrode Structures
              Having Conformal Electrically Conductive Layers Thereon” filed July 3,
              2004. (403EP)

          


    	12.  	
            Japanese
              Pat. Appl. No. 2003-558944 entitled “Porous Fuel Cell Electrode Structures
              Having Conformal Electrically Conductive Layers Thereon” filed July 2,
              2004. (403JP)

          


    


    
      
         

      

      14