Document:

Exhibit
10.1

     

    STOCKERYALE,
INC.

     

    SUMMARY
OF 2009 STOCK OPTION AND CASH INCENTIVE COMPENSATION PLAN

     

    On
January 16, 2009, the Governance, Nominating and Compensation Committee of the
Board of Directors of StockerYale, Inc. (the “Corporation”) established a
performance-based stock option and cash incentive compensation plan pursuant to
which (i) grants of performance-based stock options to purchase shares of the
Corporation’s common stock at the closing price of the Corporation’s common
stock on the Nasdaq Capital Market on January 16, 2009 and (ii) cash bonuses to
each of the Corporation’s executive officers and other senior executives were
approved.

     

    The stock
options granted under this plan only vest and become exercisable if the
Corporation is cash flow neutral for fiscal 2009 and will vest and become
exercisable or terminate on the day the Corporation publicly releases its
financial results for the fiscal year ending December 31, 2009, provided the
recipient continues to remain employed by the Corporation, or a subsidiary of
the Corporation, until such date.

     

    The stock
options granted to the executive officers of the Corporation (as defined by
Section 16 of the Securities Exchange Act of 1934, as amended) under this
plan are as follows:

     

    
      
        	
                
                  Name

                

              	
                  

              	
                Number
      of Stock Options

              
	
                Mark
      W. Blodgett

              	
                  

              	
                600,000

              
	
                Timothy
      P. Losik

              	
                  

              	
                350,000

              

      

    

    

    The cash
bonuses approved under this plan will only be earned by the executive officers
upon the Corporation (i) being cash flow neutral for fiscal 2009 and (ii)
generating operating income of at least $99,000 for fiscal 2009 (before
disbursement of cash bonuses).  Should the operating income of the
Corporation for fiscal 2009 be between $99,000 and $299,000, such amount (up to
$200,000) will be allocated to a pool (the “Pool”).  In addition, 25%
of any operating income of the Corporation for fiscal 2009 in excess of $299,000
(before disbursement of cash bonuses) will also be allocated to the
Pool.  Cash bonuses will only be distributed from the Pool according
to the percentage allocated to each executive officer, if at all, on the day the
Corporation publicly releases its financial results for the fiscal year ending
December 31, 2009, provided the recipient continues to remain employed by the
Corporation, or a subsidiary of the Corporation, until such
date.  Should the Corporation only generate operating income of
$99,000 in fiscal 2009, no cash bonuses will be distributed as the Pool will not
have been funded.

    

    The cash
bonuses the executive officers of the Corporation are eligible to receive under
this plan are as follows:

    

    
      
        
          
            	
                    Name

                  	
                    Bonus
      Target as a Percentage of Base Salary*

                  
	
                    Blodgett,
      Mark

                  	
                    30%**

                  
	
                    Losik,
      Tim

                  	
                    25%

                  

          

        

      

    

    *The
amounts in this column assume the Corporation will be cash flow neutral for
fiscal 2009 and will generate an operating income of $299,000 in fiscal 2009.
The amount to be paid to each executive officer is subject to upwards and
downward adjustment based on the Corporation’s operating income, and, thereby,
the amount which is allocated to the Pool.

    ** Based
on Mr. Blodgett’s base salary prior to the 10% voluntary reduction for
2009.Exhibit
10.1

     

    December
31, 2008

    

    CAMHZN
Master LDC

    c/o
Centrecourt Asset Management LLC

    350
Madison Avenue

    New York,
New York 10017

    

    Ladies
and Gentlemen:

    

    We refer
to (i) the Purchase Agreement (the “Purchase Agreement”) dated November 27, 2007
between Neah Power Systems, Inc., a Nevada corporation (the “Borrower”), and
CAMHZN Master LDC (the “Lender”), (ii) the 12% Secured Promissory Note in the
principal amount of $500,000 dated November 27, 2007 issued by the Borrower to
the Lender (the “Note”), (iii) the Security Interest and Pledge Agreement dated
November 27, 2007 by and between the Borrower and the Lender (the “Pledge
Agreement”), (iv) the Warrant dated November 27, 2007 issued by the Borrower to
the Lender (the “Warrant”), and (v) the letter agreement by and between the
Borrower and the Lender, November 27, 2007 (the “Letter
Agreement”).  The Purchase Agreement, the Note, the Pledge Agreement,
the Warrant and the Letter Agreement are referred to herein as the “Loan
Documents.” Unless otherwise defined herein, capitalized terms have the meanings
assigned to them in the Loan Documents.

     

    The
Borrower confirms and agrees as follows:

     

    Outstanding
Debt.  The Borrower is indebted to the Lender in the principal
sum of $500,000, plus all accrued interest thereon and costs and expenses
(including legal expenses) incurred in connection therewith (the
“Obligations”).  The Obligations arose under, and are evidenced by,
the Loan Documents and the documents, agreements and instruments pertaining
thereto.  The Obligations are secured, among other things, by a first
priority security interest in the Pledged Securities, and all products and
proceeds of the foregoing in any form.

     

     Default.
The Borrower acknowledges that (i) certain events of default have occurred and
are continuing under the Loan Documents and (ii) all obligations on the Lender’s
part to make advances or otherwise provide financial accommodations to the
Borrower have terminated.  The Borrower waives any requirement of
notice with respect to existing events of default, or any other notice to which
the Borrower may be entitled under the Loan Documents.

     

    Issuances.  The
Borrower shall issue additional shares of its common stock as new collateral in
order to secure the Borrower’s obligations pursuant to this letter.

     

    Forbearance.  The
Lender agrees to forbear from exercising any further remedies available under
the Loan Documents or applicable law for a period ending on March 29, 2009 (the
“Forbearance Period”).  In consideration of Lender’s agreement to so
forbear as set forth above, Borrower agrees to increase the amount of the Note
by $567,000. This amount ($567,000) will be payable in cash or stock, at the
company discretion, after the reverse split is completed.  Borrower
shall cause to be delivered to the Lender or its designees (i) evidence of the
increased principal amount of the Note, (ii) additional shares as fees for a
management fee and for legal expenses, and (ii) all documentation necessary or
appropriate to consummate the transactions contemplated hereby, including but
not limited to, medallion guaranteed stock powers, opinions of counsel and/or
irrevocable letters of instruction directed to the Borrower’s Transfer Agent. As
additional consideration for such forbearance, the Borrower releases the Lender
from any claim, damage, suit or liability arising on or before the date hereof
relating to the Loan Documents or otherwise.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Additional
Documents.  The Borrower agrees that it will, at the Lender's
request, execute such documents and provide such information as the Lender may
deem necessary or desirable, including without limitation to evidence the
additional indebtedness of the Borrower to the Lender, to confirm the Lender’s
security interest in the Collateral and the Pledged Securities or to effect the
disposition, collection, or other realization upon the Collateral and the
Pledged Securities in the event the Lender elects to exercise remedies following
the Forbearance Period.

     

    Effectiveness
of Loan Documents.  The Borrower confirms that the Loan
Documents remain in full force and effect in accordance with their respective
terms and that the Lender has not waived its rights or remedies, whether under
the Loan Documents or otherwise, except only to the extent of the forbearance
described herein.

     

    Representations,
Warranties and Covenants.  The Borrower represents, warrants
and covenants as follows:  (i) the Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada; (ii) the execution, delivery and performance by the Borrower of this
letter is within the powers of the Borrower, have been duly authorized by all
necessary action, and do not contravene (A) the Borrower’s certificate of
incorporation or by-laws or (B) (x) any law or (y) any agreement or document
binding on or affecting the Borrower, (iii) no authorization or approval or
other action by, and no notice to or filing with, any governmental authority,
regulatory body or third person is required for the due execution, delivery and
performance by the Borrower of this letter; (iv) this letter constitutes the
legal, valid and binding obligation of the Borrower enforceable against it in
accordance with its terms except as enforcement hereof may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors’ rights generally and subject to the applicability of general
principles of equity; (v) there is no pending or, to the knowledge of the
Borrower, threatened action or proceeding affecting the Borrower before any
governmental agency or arbitrator which challenges or relates to this letter or
which may otherwise have a material adverse effect on the Borrower, and (vi)
Borrower shall, within 4 Trading Days of the date hereof, issue a Current Report
on Form 8-K disclosing the material terms of the transactions contemplated
hereby.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    This
letter shall be governed by and construed in accordance with the laws of the
State of New York without regard to its conflict of laws rules.  This
letter may be amended or modified only by a written instrument signed by the
Lender and the Borrower.  The Lender’s failure at any time to require
the performance of any provision of this letter shall in no manner affect the
Lender’s right at a later time to enforce the same
provision.  Headings are inserted for convenience of reference only
and shall not effect the interpretation of this letter.  This letter
shall be binding upon the Borrower, and its legal representatives, successors
and permitted assigns.  In no event may the Borrower assign any rights
or obligations under this letter without the Lender’s prior written consent,
which consent may be conditioned, withheld or delayed,  and any
purported assignment without such consent shall be null and void.

     

    
      
        
          
            
              	 	Very
      truly yours,	 
	 	 	 
	 	

                      Neah
      Power Systems, Inc.

                        a
      Nevada corporation

                    	 
	 	 	 	 
	
                       

                    	
                      By:
      

                    	/s/
      Gerard C D’Couto	 
	 	 	Name:
      Gerard C D’Couto, Ph.D.	 
	 	 	Title:  
      President and CEO	 

            

          

        

      

    

     

     

    

    AGREED:

    

    CAMHZN
Master LDC

    

    
      
        
          
            
              	 	 	 	 	 	 
	By:	
                      /s/
      Michael Loew

                    	 	 	
                       

                    	 
	 	
                      Name:
      Michael Loew

                    	 	 	
                       

                    	 
	 	
                      Title: 
      General Councel

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