Execution
Version
 
 
 PATENT
SECURITY AGREEMENT
 
 (Patents,
Patent Applications and Patent Licenses)
 
 This Patent Security Agreement (the
“Patent
Security Agreement”), dated as of February 12, 2009, is by and between
(i) Neah Power Systems,
Inc., a Nevada corporation (the “Debtor”),
and (ii) Agile Opportunity
Fund, LLC, a Delaware limited liability company (“Agile”),
and Capitoline Advisors
Inc., a New York corporation (“Capitoline”;
together with Agile, the “Secured
Parties”, each a “Secured
Party”).
 
 Background
 
 1.
              The
      Secured Parties have purchased from the Debtor Original Issue Discount
      Term Secured Convertible Promissory Notes (the “Notes”)
      in the aggregate face amount of $262,500.00 pursuant to a Securities
      Purchase Agreement between the Debtor and the Secured Parties dated as of
      the date hereof (the “Securities
      Purchase Agreement”), and, subject to the terms of the Securities
      Purchase Agreement, may purchase additional Notes in the aggregate face
      amount of $787,500.00 at the Subsequent Closing.  Capitalized
      terms used herein and not otherwise defined herein shall have the meanings
      specified in the Securities Purchase
Agreement.
 
 2.
              To
      induce the Secured Parties to purchase the Notes and pursuant to (i) a
      Security Agreement dated of even date herewith (as amended or supplemented
      from time to time in accordance with the terms thereof, the “Security
      Agreement”) between the Debtor and the Secured Parties (the Secured
      Parties in the capacity of secured parties under the Security Agreement,
      together with their successors in such capacity, are referred to as the
      “Grantees”)
      and (ii) certain other collateral documents (including this Patent
      Security Agreement), the Debtor has granted for the benefit of such
      Grantees a continuing security interest in personal property of the
      Debtor, including all right, title and interest of the Debtor in, to and
      under the Patent Collateral (as defined below), to secure the Debtor’s
      secured obligations under the Security
  Agreement.
 
 N O W, T
H E R E F O R E,
  For good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Debtor grants
to the Grantees, to secure the Debtor’s secured obligations under the Security
Agreement, a continuing security interest in all of the Debtor’s right, title
and interest in, to and under the following (all of the following items or types
of property being herein collectively referred to as the “Patent
Collateral”), whether now owned or existing or hereafter acquired or
arising:
   1
 (i)
              each
      patent owned and patent application (including all reissues, divisions,
      continuations, continuation-in-part, extensions and reexaminations
      thereof) registered or applied for in the United States and all other
      nations throughout the world by the Debtor, including, without limitation,
      each patent and patent application referred to in Schedule I hereto (each,
      a “Patent”);
  (ii)
              each
      patent license to which the Debtor is a party, including, without
      limitation, each patent license identified in Schedule II hereto (each, a
      “Patent
      License”); and
  (iii)
              all
      proceeds of and revenues from the foregoing, including, without
      limitation, all proceeds of and revenues from any claim by the Debtor
      against third parties for past, present or future infringement of any
      Patent owned by the Debtor and all rights and benefits of the Debtor under
      any Patent License.
  The
Debtor irrevocably constitutes and appoints the Grantees and any officer or
agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full power and authority in the name of the Debtor or in
any Grantee’s name, from time to time, in any Grantee’s discretion, so long as
any Event of Default (as defined in the Notes) shall have occurred and be
continuing, to take with respect to the Patent Collateral any and all
appropriate action which the Debtor might take with respect to the Patent
Collateral and to execute any and all documents and instruments which may be
necessary or desirable to carry out the terms of this Patent Security Agreement
and to accomplish the purposes hereof.
 
 Except in the ordinary course of
business or to the extent expressly permitted in the Security Agreement or the
Notes, the Debtor agrees not to sell, license, exchange, assign or otherwise
transfer or dispose of, or grant any rights with respect to, or mortgage or
otherwise encumber, any of the Patent Collateral.
 
 The foregoing security interest is
granted in conjunction with the security interests granted by the Debtor to the
Grantees pursuant to the Security Agreement.  The Debtor acknowledges
and affirms that the rights and remedies of the Grantees with respect to the
security interest in the Patent Collateral granted hereby are more fully set
forth in the Security Agreement, the terms and provisions of which are
incorporated by reference herein as if fully set forth herein.
 
 Each
Grantee hereby agrees that the security interest granted to each Grantee hereby
secures the Obligations (as identified in the Security Agreement) and that the
claim of each such Grantee in the Patent Collateral shall rankpari passu with respect to
that of each other Grantee, and that any payment or distribution made to the
Grantees upon or with respect to their respective security interests in the
Patent Collateral shall be made pro rata in accordance with the then outstanding
principal amounts of the Notes purchased by each such Grantee.
 
 2
 This security interest shall terminate
upon the repayment in full of the Notes or conversion thereof upon which the
Grantees shall cooperate in the filing of the necessary or appropriate documents
and instruments to release the security interest created hereby and will execute
and deliver any and all documents and/or instruments reasonably requested by
Debtor in connection therewith.
 
 [Remainder of Page
Intentionally Left Blank; Signature Page Follows]
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   IN WITNESS WHEREOF, the Debtor has
caused this Patent Security Agreement to be duly executed by its officer
thereunto duly authorized as of the  12th  day of February,
2009.
 
 NEAH
      POWER SYSTEMS, INC.By:Name:
      Chris D’CoutoTitle:
      CEO
 
 
 ACKNOWELDGED:
 
 SECURED
PARTIES:
 
 
 AGILE
OPPORTUNITY FUND, LLC
 By: AGILE
INVESTMENTS, LLC, Managing Member
 
 
 By:Name:
      David I. PropisTitle:
      Managing Member
 
 
 CAPITOLINE
ADVISORS INC.
 
 
 By:Name:Title:
 
 
  4
 
 
 
 
 STATE
      OF
              ))
      ss.:COUNTY
      OF
              )
 
 
 I, _________________________, a Notary
Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY, that
Chris D’Couto,
CEO of Neah Power
Systems, Inc. (the “Company”), personally known to
me to be the same person whose name is subscribed to the foregoing instrument
appeared before me this day in person and acknowledged that he signed, executed
and delivered the said instrument as her/his own free and voluntary act and as
the free and voluntary act of said Company, for the uses and purposes therein
set forth being duly authorized so to do.
 
 GIVEN under my hand and Notarial Seal
this 12th day of February, 2009.
 
 
 
 [Seal]
 
 
 
 ________________________________
 Signature
of notary public
 My
commission expires ____________
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 Schedule
I
 to
Patent Security Agreement
 
 PATENTS AND PATENT
APPLICATIONS
 
 
 Patents  Issued:
 
 
 
 
 
 
 
 
 
 Patent
Applications:
 
 
 
 
  6
 
 
 
 
 Schedule
II
 To
Patent Security Agreement
 
 PATENT
LICENSES
 
 
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