Document:

Exhibit 10.4 - Registration Rights Agreement

NEAH POWER SYSTEMS, INC.

REGISTRATION RIGHTS AGREEMENT

April [__], 2006

TABLE OF CONTENTS

Page

1.  Registration Rights

1

1.1  Definitions

1

1.2  Company Registration

2

1.3  Obligations of the Company

3

1.4  Information from Investor

4

1.5  Expenses of Registration

4

1.6  Delay of Registration

4

1.7 Indemnification

4

1.8 Reports under the 1934 Act

6

1.9 Assignment of Registration Rights

7

1.10 “Market Stand-Off’ Agreement

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1.11  Termination of Registration Rights

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1.12  Prospectus Delivery Compliance

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2.  Miscellaneous

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2.1  Successors and Assigns

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2.2  Governing Law

8

2.3  Counterparts

8

2.4  Titles and Subtitles

8

2.5  Notices

8

2.6  Expenses

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2.7  Entire Agreement; Amendments and Waivers

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2.8  Severability

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i

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of the ____ day of April, 2006, by and among NEAH POWER SYSTEMS, INC., a Nevada corporation (the “Company”) and each person, firm or corporation who has purchased shares of Common Stock of the Company pursuant to a Subscription and Investment Representation Agreement dated of even date herewith (the “Subscription Agreement”) and who has executed a counterpart to this Agreement (each a “Investor” and collectively, the “Investors”).

RECITALS

WHEREAS, the Company has, pursuant to the terms of a private offering memorandum, dated as of April 21, 2006 (the “Memorandum”) and the Subscription Agreement, has offered to the Investors up to 5,000,000 shares of Common Stock of the Company at a purchase price of $0.50 per share (the “Shares”); and

WHEREAS, in order to induce the Investors to purchase the Shares, the Company hereby agrees that this Agreement shall govern the rights of the Investors to cause the Company to register Registrable Shares (as defined below), all on the terms set forth herein.

NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:

		
		

1.

1.        Registration Rights.  The Company and the Investors (including the Partnership) covenant and agree as follows:

1.1

Definitions.  Unless otherwise defined in this Agreement, all capitalized terms used and not defined herein shall have the meanings assigned to such terms in the Subscription Agreement.  For purposes of this Agreement:

(a)

                       
(a)        The term “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

(b)

                       
(b)        The term “Common Stock” means the Company’s common stock, par value $0.001 per share.

(c)

                       
(c)        The term “Form 10 Registration Statement” means a Form 10SB Registration Statement to be filed by the Company under the 1934 Act to register the Company’s Common Stock under Section 12(g) of the 1934 Act and make the Company a reporting company under such 1934 Act.

(d)

                       
(d)        The term “Investor” means any person, firm or corporation who has executed the Subscription Agreement and this Agreement, or any assignee of such person, firm or corporation (pursuant to an assignment effected in accordance with Section 1.11 hereof) in each case while the owner of Registrable Shares, and recorded as a stockholder on the books and records of the Company.

(e)

                       
(e)        The term “IPO” means an initial public offering of the Common Stock by the Company under the 1933 Act, pursuant to a Form SB-2 registration statement (or other relevant form of registering securities) filed by the Company with the SEC under the 1933 Act.

(f)

                       
(f)          The term “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

(g)

                       
(g)        The terms “register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the 1933 Act, and the declaration or ordering of effectiveness of such registration statement or document.

(h)

                       
(h)        The term “Resale Registration Statement” means a Form SB-2 registration statement (or other relevant form of registering securities) filed by the Company with the SEC under the 1933 Act for the purpose, in whole or in part, of registering all of the Shares for resale under the 1933 Act.  Such Resale Registration Statement may also include a registration statement filed by the Company in connection with an IPO.

(i)

                       
(i)        The term “Registrable Shares” means all of the Shares of Common Stock issued and sold to the Investors pursuant to the Subscription Agreement (including any shares of Common Stock issued with respect to such Shares in the form of a stock dividend or in connection with any stock split, recapitalization, or merger or exchange); provided, however, that Shares of Common Stock that are Registrable Shares shall cease to be Registrable Shares (i) upon any sale pursuant to a registration statement under the 1933 Act, Section 4(1) of the 1933 Act, or Rule 144 or (ii) at such time as such shares are eligible for sale pursuant to Rule 144(k).

(j)

                       
(j)        The term “Rule 144” shall mean Rule 144 under the 1933 Act.

(k)

                       
(k)        The term “Rule 144(k)” shall mean subsection (k) of Rule 144 under the 1933 Act.

(l)

                       
(l)        The term “SEC” shall mean the Securities and Exchange Commission.

1.2

Company Registration.

(a)

                       
(a)        Following the effective date of the Form 10 Registration Statement, but in no event later than ninety (90) days following completion of the Offering defined in the Memorandum and the Subscription Agreement, the Company shall cause to be filed with the SEC a Resale Registration Statement under the 1933 Act covering all of the Registrable Shares. The Company shall use its best efforts to cause such Resale Registration Statement to be declared effective by the SEC so as to permit all Investors to effect sales of their Shares pursuant to such Resale Registration Statement.  

(b)

                       
(b)        Underwriting Requirements.  In the event that, for any reason, the Company shall elect, in lieu of a Form 10 Registration Statement, to effect an IPO, subject only to this Section 1.2(b), it shall include in any such Resale Registration Statement filed under the 1933 Act in connection with such IPO, all of the Shares to be offered for resale by the Investors, as selling stockholders. In connection with an IPO involving an underwriting of shares of the 

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Company’s capital stock, the Company shall not be required under this Section 1.2 to include any of the Registrable Shares in such underwriting unless the Investors accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by the Company (or by other persons entitled to select the underwriters) and enter into an underwriting agreement in customary form with such underwriters.  If the total amount of securities, including Registrable Shares, requested by stockholders to be included in such registration exceeds the amount of securities that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall only be required to include that number of Registrable Shares that the underwriters determine in their sole discretion will not jeopardize the success of the offering.  In the event that the underwriters determine that less than all of the Registrable Shares requested to be registered can be included in such registration, then the Registrable Shares that are included shall be apportioned pro rata among the selling Investors based on the number of Registrable Shares held by all selling Investors or in such other proportions as shall mutually be agreed to by all such selling Investors.

1.3

Obligations of the Company.  In connection with any registration hereunder, the Company shall use its commercially reasonable efforts to:

(a)

                       
(a)    prepare and file with the SEC a Resale Registration Statement with respect to such Registrable Shares not later than 90 days following completion of the Offering, and use all commercially reasonable efforts to cause such registration statement to become effective, and, upon the request of the Investors of a majority of the Registrable Shares registered thereunder, keep such registration statement effective for a period of at least 180 days or, if earlier, until the distribution contemplated in the Registration Statement has been completed;

(b)

                       
(b)    prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the 1933 Act with respect to the disposition of Registrable Shares covered by such registration statement;

(c)

                       
(c)    furnish to the Investors of Registrable Shares covered by a registration statement hereunder such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the 1933 Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Shares owned by them;

(d)

                       
(d)    use all commercially reasonable efforts to register and qualify the securities covered by a registration statement filed hereunder under the state securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Investors, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;

(e)

                       
(e)    in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering;

(f)

                       
(f)    notify each Investor of Registrable Shares covered by a registration statement filed hereunder at any time when a prospectus relating thereto is required to be 

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delivered under the 1933 Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which such statements are made;

(g)

                       
(g)    cause all such Registrable Shares registered pursuant to this Section 1 to be listed on each securities exchange and trading system on which similar securities issued by the Company are then listed; and

(h)

                       
(h)    provide a transfer agent and registrar for all Registrable Shares registered pursuant hereto and a CUSIP number for all such Registrable Shares, in each case not later than the effective date of such registration.

1.4

Information from Investor.  It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 with respect to the Registrable Shares of any selling Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Shares held by him, her or it, and the intended method of disposition of such securities as shall be reasonably requested to effect the registration of such Investor’s Registrable Shares and each Investor hereby agrees to furnish such information to the Company.

1.5

Expenses of Registration.  All expenses other than underwriting discounts and commissions incurred in connection with registrations, filings or qualifications under this Sections 1, including (without limitation) all registration, filing and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company and the reasonable fees and disbursements of one counsel for the selling Investors (not to exceed $5,000) shall be borne by the Company.  

1.6

Delay of Registration.  No Investor shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1.

1.7

Indemnification.  In the event any Registrable Shares are included in a registration statement under this Section 1:

(a)

                       
(a)    To the extent permitted by law, the Company will indemnify and hold harmless each Investor, the partners, officers and directors of each Investor, legal counsel and accountants for each Investor, any underwriter (as defined in the 1933 Act) for such Investor and each person, if any, who controls such Investor or underwriter within the meaning of the 1933 Act or the 1934 Act, against any losses, claims, damages or liabilities (joint or several) to which they may become subject under the 1933 Act, the 1934 Act or any state securities law, rule or regulation insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”):  (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or 

4

alleged omission to state in such registration statement a material fact required to be stated therein, or necessary to make the statements therein not misleading under the circumstances such statements were made or (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act or any state securities law, and the Company will reimburse each such Investor, underwriter, controlling person or other aforementioned person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the indemnity agreement contained in this subsection l.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation that occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Investor, underwriter, controlling person or other aforementioned person; provided, further, however, that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Investor or underwriter or other aforementioned person, or any person controlling such Investor or underwriter, from whom the person asserting any such losses, claims, damages or liabilities purchased shares in the offering, if a copy of the most current prospectus was not sent or given by or on behalf of such Investor or underwriter or other aforementioned person to such person, if required by law to have been so delivered, at or prior to the written confirmation of the sale of the shares to such person, and if the prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or liability.

(b)

                       
(b)    To the extent permitted by law, each Investor will indemnify and hold harmless the Company, each of its directors, each of its officers, each person, if any, who controls the Company within the meaning of the 1933 Act, legal counsel and accountants for the Company, any underwriter, any other Investor selling securities in such registration statement and any controlling person of any such underwriter or other Investor, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject, under the 1933 Act, the 1934 Act or any state securities law, rule or regulation insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Investor expressly for use in connection with such registration; and each such Investor will reimburse any person intended to be indemnified pursuant to this subsection l.7(b) for any legal or other expenses reasonably incurred by such person in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the indemnity agreement contained in this subsection 1.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Investor, and provided that in no event shall any indemnity under this subsection 1.7(b) exceed the net proceeds from the offering received by such Investor.

(c)

                       
(c)    Promptly after receipt by an indemnified party under this Section 1.7 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.7, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in and, to the extent the 

5

indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel chosen by it; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.7 to the extent of such prejudice, but the omission to so deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.7.

(d)

                       
(d)    If the indemnification provided for in this Section 1.7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other hand in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations; provided, however, that no contribution by any Investor, when combined with any amounts paid by such Investor pursuant to Section 1.7(b), shall exceed the net proceeds from the offering received by such Investor.  The relative fault of the indemnifying party and the indemnified party shall be determined by reference to, among other things, whether an untrue or alleged untrue statement of a material fact or an omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

(e)

                       
(e)    Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in an underwriting agreement entered into in connection with an underwritten public offering are in conflict with the foregoing provisions, the provisions in such underwriting agreement shall control.

(f)

                       
(f)    The obligations of the Company and Investors under this Section 1.7 shall survive the completion of any offering of Registrable Shares in a registration statement under this Section 1 and otherwise.

1.8

Reports Under the 1934 Act .  With a view to making available to the Investors the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit a Investor to sell securities of the Company to the public without registration, the Company agrees that following consummation of the registration of the Common Stock under the 1934 Act, it shall use commercially reasonable efforts to:

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(a)

                       
(a)    make and keep public information available, as those terms are understood and defined in Rule 144, at all times after the earlier of (i) the effective date of the Form 10 Registration Statement, or (ii) the effective date of the Resale Registration Statement in connection with the IPO.

(b)

                       
(b)    file with the SEC in a timely manner all reports and other documents required of the Company under the 1934 Act.

1.9

Assignment of Registration Rights.  The rights to cause the Company to register Registrable Shares pursuant to this Section 1 may be assigned (but only with all related obligations) by a Investor to a transferee or assignee of Registrable Shares that (i) is a subsidiary, parent, partner, limited partner, retired partner or stockholder of a Investor, (ii) is a Investor’s family member or trust for the benefit of an individual Investor, or (iii) after such assignment or transfer, holds at least 50,000 shares of Registrable Shares (subject to appropriate adjustment for stock splits, stock dividends, combinations or the like), provided:  (a) the Company is, prior to any such transfer, furnished with written notice of the name and address of such transferee or assignee and the Registrable Shares with respect to which such registration rights are being assigned; (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, including, without limitation, by executing a delivering a counterpart to this Agreement; and (c) such assignment shall be effective only if immediately following such transfer the further disposition of such Registrable Shares by the transferee or assignee is restricted under the 1933 Act.

1.10

“Market Stand-Off” Agreement.  The following provisions of this Section 1.10 are intended to apply only in connection with an IPO by the Company, and shall not be applicable to any other Resale Registration Statement required to be filed by the Company and declared effective by the SEC hereunder.

(a)

                       
(a)    Each Investor hereby agrees that it will not, without the prior written consent of the managing underwriter or the Company’s investment banker, during the period commencing on the date of the final prospectus relating to the Company’s IPO and ending on the date specified by the Company and the managing underwriter (such period not to exceed ninety (90) days) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock held immediately prior to the effectiveness of the registration statement for such Initial Offering, or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise.  

(b)

                       
(b)    Each Investor agrees that a legend reading substantially as follows shall be placed on all certificates representing all Registrable Shares of each Investor (and the shares or securities of every other person subject to the restriction contained in this Section 1.10:

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 90 DAYS AFTER THE EFFECTIVE DATE OF THE ISSUER’S REGISTRATION STATEMENT FILED UNDER THE ACT, AS AMENDED, AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL INVESTOR OF THESE SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT THE ISSUER’S PRINCIPAL OFFICE.  SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF THESE SHARES.

1.11

Termination of Registration Rights.  No Investor shall be entitled to exercise any right provided for in this Section 1 at any time after all Registrable Shares held by such Investor (together with any affiliate of the Investor with whom such Investor must aggregate its sales under Rule 144) can be sold in any three (3)-month period without registration in compliance with Rule 144.

1.12

Prospectus Delivery Compliance.  Each Investor covenants and agrees that it will comply with the prospectus delivery requirements of the 1933 Act as applicable to it in connection with sales of Registrable Shares pursuant to any registration statement filed hereunder.

2.

2.        Miscellaneous.

2.1

Successors and Assigns.  Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any shares of Registrable Shares).  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

2.2

Governing Law.  This Agreement shall be governed by and construed under the laws of the State of Nevada as applied to agreements among Nevada residents entered into and to be performed entirely within Nevada.

2.3

Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

2.4

Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

2.5

Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed effectively given:  (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All communications shall be sent to the respective 

8

parties at the addresses set forth on the signature pages attached hereto (or at such other addresses as shall be specified by notice given in accordance with this Section 2.5).

2.6

Expenses.  If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

2.7

Entire Agreement; Amendments and Waivers.  This Agreement (including the Exhibits hereto, if any) constitutes the full and entire understanding and agreement among the parties with regard to the subjects hereof and thereof.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and Investors of at least a majority of the Registrable Shares then outstanding.  Any amendment or waiver effected in accordance with this paragraph shall be binding upon each Investor of any Registrable Shares, each future Investor of all such Registrable Shares, and the Company.

2.8

Severability.  If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.

[Remainder of Page Intentionally Blank, Signature Page Follows]

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date so indicated.

NEAH POWER SYSTEMS, INC.

By:                                                                                   

Name:  Paul Abramowitz

 

 

 

Title:

 President and CEO

Date: __________ __, 2006

INVESTOR:

By:_______________________________________

                   Signature

Print Name: _______________________

Address: __________________________________

Date:  _______________ __, 2006

SIGNATURE PAGE TO BURNLOUNGE, INC. REGISTRATION RIGHTS AGREEMENTExhibit 10.5 - Convertible Promissory Note

THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES ACT (COLLECTIVELY, THE “SECURITIES LAWS”). THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION MAY NOT BE SOLD, OFFERED FOR SALE, OR OTHERWISE TRANSFERRED UNLESS THE NOTE OR SECURITIES (i) ARE REGISTERED UNDER THE SECURITIES LAWS OR (ii) ARE EXEMPT FROM REGISTRATION UNDER THE SECURITIES LAWS AND THE CORPORATION IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

 NEAH POWER SYSTEMS, INC.

 CONVERTIBLE PROMISSORY NOTE

$____________

           

      March ___, 2006

For value received, the undersigned, NEAH POWER SYSTEMS, INC. (formerly, Growth Mergers Inc.), a Nevada corporation (the “Company”), promises to pay to ____________________ (the “Holder”), at the following address, _________________________________ or at any other address as to which the Holder shall have notified the Company in writing, the principal sum of _____________ ____________________________ ($____________), together with interest on the unpaid principal amount hereof for each day from the date hereof until paid in full at a rate of eight percent (8%) per annum. Interest shall be calculated on the basis of a 360-day year for actual days elapsed (including the first day of any period, but excluding the last day). This Note is subject to the following terms and conditions.

1.

Payment. Subject at all time to the optional and mandatory conversion provisions of this Note, as hereinafter provided, the entire principal amount of this Note, and the entire principal amount of those certain other promissory note issued by the Company to the Holder on the date hereof containing terms that are substantially similar to this Note (such other notes, together with this Note, hereinafter referred to as the “Notes”), together with all interest accrued hereon and thereon, shall be due and payable in lawful money of the United States on June 30, 2007 (the “Maturity Date”).  Mandatory conversion of the unpaid balance, including accrued interest, of this Note in accordance with Section 2(a) hereof shall constitute payment in full of this Note.  All payments shall be applied first to fees and expenses pursuant to Section 7 hereof, then to interest accrued to the date of prepayment and the balance, if any, shall then be applied to principal.  The Notes supercede and replace in their entirety, other notes issued by Neah Power Systems, Inc., a Washington corporation, to the Holder, dated February 14, 2006 and March 9, 2006 (the “Prior Notes”); which Prior Notes are hereby rendered null and void.  

Interest on this Note shall accrue and, at the sole option of the Company, shall either: (a) be added to the unpaid principal amount of this Note and converted into shares of common stock, $0.001 par value of the Company (the “Common Stock”), if this Note shall be subject to either mandatory conversion or optional conversion, as provided in Section 2 below; or (b) be paid in cash by the Company at the time of conversion of this Note or at the Maturity Date.

2.

Conversion. 

(a)

Mandatory Conversion.

 Notwithstanding anything to the contrary, express or implied, set forth in this Note, in the event that at any time on or before the Maturity Date, the Company shall have either (i) consummated the “Additional Financing” as defined in and as contemplated by an 

Convertible Promissory Note

 

  

agreement and plan of merger, dated March 9, 2006, among the Company, Neah Power Systems, Inc., a Washington corporation (“Neah”), Growth Acquisition Corp., Summit Trading Limited and Special Investments Acquisitions Associates LLC (the “Merger Agreement”), at a price per share of Company Common Stock equal to twenty cents ($0.20) or more, or (ii) the average of the Closing Prices of the Company’s Common Stock, as traded on the NASD OTC Bulletin Board, the Nasdaq Stock Exchange, the American Stock Exchange, the New York Stock Exchange or any other national securities exchange, for any ten (10) consecutive trading days shall equal or exceed twenty cents ($0.20) per share; provided, that the average daily trading volume of the Company’s Common Stock during such ten (10) consecutive trading days shall equal or exceed 10,000 shares of Common Stock (either, a “Mandatory Conversion Event”), then and upon the occurrence of any such Mandatory Conversion Event, the entire principal amount of this Note and any Prior Notes issued to the Holder, and (at the Company’s election) any interest accrued hereon and thereon, shall automatically and without any action on the part of the Holder, convert into that number of shares of Common Stock of the Company (the “Conversion Shares”), as shall be determined by dividing:

(A)

the entire principal amount of this Note and any Prior Notes issued to the Holder, and (at the Company’s election) any interest accrued hereon and thereon, by 

(B)

_______  ($____) (the “Conversion Price”).   

Upon a Mandatory Conversion Event and delivery of the Conversion Shares to the Holder, this Note and all other Prior Notes shall be deemed to be paid in full, whether or not the Holder of this Note shall surrender the same to the Company for cancellation, as provided in Section 4 below.

(b)

Optional Conversion.

  The Holder of this Note shall have the right (but not the obligation absent a Mandatory Conversion Event) to convert all or any portion of this Note into that number of Conversion Shares, as shall be determined by dividing: (i) the principal amount of this Note and any Prior Notes issued to the Holder to be voluntarily converted, and (at the Company’s election) any interest accrued hereon and thereon, by (ii) the Conversion Price. 

3.

Adjustment Provisions.

The Conversion Price and the number of Conversion Shares shall be subject to adjustment from time to time as provided in this Section 3.  In the event that any adjustment of the Conversion Price as required herein results in a fraction of a cent, such Conversion Price shall be rounded up to the nearest cent.

(a)

Subdivision or Combination of Common Stock.  If the Company at any time shall:

(i)

take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, shares of Common Stock,

(ii)

subdivide (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise) its outstanding shares of Common Stock into a greater number of shares of Common Stock, or

(iii)

combine (by reverse stock split, recapitalization, reorganization, reclassification or otherwise) its outstanding shares of Common Stock into a smaller number of shares of Common Stock,

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Convertible Promissory Note

then (x) the number of shares of Common Stock into which this Note and all Prior Notes held by the Holder is convertible immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which this Note and all Prior Notes held by the Holder is convertible immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event, and (y) the Conversion Price shall be adjusted to equal (A) the Conversion Price multiplied by the number of shares of Common Stock for which this Note and all Prior Notes held by the Holder is convertible immediately prior to the adjustment divided by (B) the number of shares for which this Note and all Prior Notes held by the Holder is convertible immediately after such adjustment.

(b)

Consolidation, Merger or Sale.  In case the Company after the date hereof shall (i) consolidate with or merge into any other entity and shall not be the continuing or surviving corporation of such consolidation or merger, or permit any other entity to consolidate with or merge into the Company and the Company shall be the continuing or surviving corporation, but, in connection with such consolidation or merger, the Common Stock shall be changed into or exchanged for stock or other securities of any other entity or cash or any other property, (ii) sell, convey or otherwise transfer all or substantially all of its properties or assets to any other entities in one or more related transactions or (iii) effect a capital reorganization or reclassification of the Common Stock, then as a condition of such consolidation, merger or sale or conveyance, the Company shall make or cause to be made adequate provision whereby the Holder of this Note and all Prior Notes will have the right to acquire and receive upon conversion of this Note and all Prior Notes in lieu of the shares of Common Stock immediately theretofore acquirable upon the conversion of this Note and all Prior Notes, the Holder of this Note, upon the conversion hereof at any time after the consummation of such transaction, shall be entitled to receive (at the aggregate Conversion Price in effect at the time of such consummation for all Common Stock issuable upon such conversion immediately prior to such consummation), in lieu of the Common Stock issuable upon such conversion prior to such consummation, the amount of securities, cash or other property to which such Holder would actually have been entitled as a stockholder upon such consummation if such Holder had converted this Note immediately prior thereto, subject to adjustments (subsequent to such consummation) as nearly equivalent as possible to the adjustments provided for in this Section 3.  In any such case, the Company will make appropriate provision to ensure that the provisions of this Section 3 hereof will thereafter be applicable as nearly as may be in relation to any shares of stock or securities thereafter deliverable upon the conversion of this Note and all Prior Notes.  The Company will not effect any consolidation, merger or sale or conveyance unless prior to the consummation thereof, the successor corporation (if other than the Company) assumes by written instrument this Note, including, without limitation, the obligations under this Section 3 and the obligations to deliver to the Holder of this Note such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to acquire.

(c)

Distribution of Assets.  In case the Company shall declare or make any distribution of its assets (including cash) to holders of Common Stock as a partial liquidating dividend, by way of return of capital or otherwise, then, after the date of record for determining stockholders entitled to such distribution, but prior to the date of distribution, the Holder of this Note shall be entitled upon conversion of this Note and all Prior Notes for the purchase of any or all of the shares of Common Stock subject hereto, to receive the amount of such assets which would have been payable to the Holder had such Holder been the holder of such shares of Common Stock on the record date for the determination of stockholders entitled to such distribution.

 (d)

Notice of Adjustment.  Upon the occurrence of any event which requires any adjustment pursuant to this Section 3, then, and in each such case, the Company shall give notice thereof to the 

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Convertible Promissory Note

Holder of this Note, which notice shall state the Conversion Price resulting from such adjustment and the increase or decrease in the number of Conversion Shares purchasable at such Conversion Price upon exercise, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.  Such calculation shall be certified by the principal financial officer of the Company.

(e)

Minimum Adjustment of Conversion Price.  No adjustment of the Conversion Price shall be made in an amount of less than $0.01, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustments so carried forward, shall amount to not less than $0.01.

(f)

No Fractional Shares.  No fractional shares of Common Stock are to be issued upon the conversion of this Note and all Prior Notes, but the Company shall pay a cash adjustment in respect of any fractional share which would otherwise be issuable in an amount equal to the same fraction of the Market Price of a share of Common Stock on the date of such exercise.

(g)

Other Notices.  In case at any time:

(i)

the Company shall declare any dividend upon the Common Stock payable in shares of stock of any class or make any other distribution (including dividends or distributions payable in cash out of retained earnings) to the holders of the Common Stock;

(ii)

the Company shall offer for subscription pro rata to the holders of the Common Stock any additional shares of stock of any class or other rights;

(iii)

there shall be any capital reorganization of the Company, or reclassification of the Common Stock, or consolidation or merger of the Company with or into, or sale of all or substantially all its assets to, another corporation or entity; or

(iv)

there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company;

then, in each such case, the Company shall give to the Holder of this Note (a) notice of the date on which the books of the Company shall close or a record shall be taken for determining the holders of Common Stock entitled to receive any such dividend, distribution, or subscription rights or for determining the holders of Common Stock entitled to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place.  Such notice shall also specify the date on which the holders of Common Stock shall be entitled to receive such dividend, distribution, or subscription rights or to exchange their Common Stock for stock or other securities or property deliverable upon such reorganization, re-classification, consolidation, merger, sale, dissolution, liquidation, or winding-up, as the case may be.  Such notice shall be given at least 30 days prior to the record date or the date on which the Company's books are closed in respect thereto.  In furtherance of the foregoing, the Holder shall be entitled to the same rights to receive notice of corporate action as any holder of Common Stock.

(h)

Certain Events.  If any event occurs of the type contemplated by the adjustment provisions of this Section 3 but not expressly provided for by such provisions, the Company will give 

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Convertible Promissory Note

notice of such event as provided in Section 3(d) hereof, and the Company's Board of Directors will make an appropriate adjustment in the Conversion Price and the number of shares of Common Stock acquirable upon conversion of this Note and all Prior Notes so that the rights of the Holder shall be neither enhanced nor diminished by such event.

4.

Mechanics of Conversion. 

(a)

In the event of a mandatory conversion pursuant to Section 2(a) above, immediately subsequent to the issuance of the Conversion Shares, the principal amount of this Note and all Prior Notes, together with (at the Company’s election) all or any portion of the accrued interest hereon and thereon, shall be deemed null and void, and no further payments shall thereafter accrue or be owing hereunder or thereunder.  

(b)

In the event of an optional conversion pursuant to Section 2(b) above, the Holder of this Note shall deliver to the Company a notice (the “Conversion Notice”) indicating (i) how much of this Note and the Prior Notes the Holder elects to convert into shares of Common Stock.  If all of this Note and the Prior Notes, together with accrued interest hereon and thereon is to be converted, the Company shall advise the Holder within ten (10) days of receipt of the Conversion Notice whether the Company elects to pay all or any portion of the accrued interest hereon and thereon in cash.  

(c)

Upon such conversion, Holder shall return this Note and all Prior Notes to the Company at the address set forth below, or such other place as the Company may require in writing. Within ten (10) days after receipt of this Note and any Prior Notes, the Company shall cause to be issued in the name of and delivered to the Holder at the address set forth above, or to such other address as to which the Holder shall have notified the Company in writing, a stock certificate evidencing the number of Conversion Shares to which the Holder is entitled. No fractional securities will be issued upon conversion of the Note. If on conversion of the Note a fraction of a security results, the Company shall round up the total number of securities to be issued to the Holder to the nearest whole number.

(d)

The Holder of this Note and all Prior Notes shall be deemed, for all purposes, to be the record and beneficial owner of the appropriate and applicable number of Company Conversion Shares as at the date of the Conversion Notice, irrespective of the date of actual delivery of stock certificates evidencing such Conversion Shares.

5.

Default. In the event of any default, at the option of the Holder, all sums owing and to become owing hereon shall become immediately due and payable in full and shall bear interest thereafter at the Default Rate. A “default” shall mean (i) any failure to pay any principal or interest or any other sum owing hereon when due; (ii) any admission in writing by the Company of its inability to pay its debts generally; or (iii) upon the insolvency of the Company, the commission of any act of bankruptcy by the Company, the execution by the Company of a general assignment for the benefit of creditors, the filing by or against the Company of a petition in bankruptcy or any petition for relief under the federal bankruptcy act or the continuation of such petition without dismissal for a period of ninety (90) days or more, or the appointment of a receiver or trustee to take possession of the property or assets of the Company.  

6.

Default Rate of Interest. In the event of default in the payment of any installment of principal or interest hereunder, or if this Note is not fully paid when due, the principal and all accrued but unpaid interest hereunder shall thereupon bear and accrue interest at the rate of twelve percent (12%) per annum.

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Convertible Promissory Note

7.

Attorneys’ Fees. The Company agrees to pay all costs and expenses which the Holder may incur by reason of any default, including, without limitation, reasonable attorneys’ fees with respect to legal services relating to any default and to a determination of any rights or remedies of the Holder under this Note, and reasonable attorneys’ fees relating to any actions or proceedings which the Holder may institute or in which the Holder may appear to participate and in any review of any appeals therefrom, and all such sums shall be evidenced hereby. Any judgment recovered hereon by the Holder shall bear interest at the default rate specified above, not to exceed, however, the highest rate then permitted by law on such judgment.

8.

Liability.  The Company hereby waives demand, presentment for payment, protest and notice of protest and of nonpayment. The Company agrees that any modification or extension of the terms of payment made by the Holder, with or without notice, or a release of any party liable hereon, shall not diminish or impair such person’s liability for the payment hereof.

9.

Maximum Interest. Notwithstanding any other provision of this Note, interest, fees and charges payable by reason of the indebtedness evidenced hereby shall not exceed the maximum, if any, permitted by any governing law.

10.

Transfer of Note. This Note is non-negotiable and may not be transferred, in whole or in part, to any person or entity other than an affiliate of the above-named Holder. In such circumstances, transfer of this Note shall be made by presentation of this Note to the Company with written instructions for such transfer duly signed by the Holder. Upon such presentation for transfer, the Company shall promptly execute and deliver a new Note or Notes in the form hereof in the name of the assignee or assignees and in the denominations specified in such instructions. Upon transfer, such assignee or assignees shall become the Holder. The Company shall pay all expenses incurred by it in connection with the preparation, issuance, and delivery of Notes under this paragraph. As used herein, “affiliate” means any person or entity controlled by or under common control with the Holder.

11.

Governing Law. This Note shall be governed by and construed in accordance with, and all actions arising therefrom shall be governed by, the laws of the State of Washington.  All parties consent to the exclusive jurisdiction and venue in King County, Washington.

12.

Assignment. Subject to paragraph 10 above, the right and obligations of the Company and the Holder shall be binding upon and shall inure to the benefit of their successors, assigns, heirs, administrators and transferees.

13.

Waiver and Agreement. The provisions of this Note may be amended, waived or modified only upon the written consent of the Holders of a majority in interest of the Notes and the Company.

14.

Notices. All notices provided for in this Note shall be in writing and deemed to be duly given upon personal delivery (whether by hand delivery or by Federal Express or other similar overnight courier) upon confirmation of telephone facsimile transmission, or ten (10) days after deposit in the United States mail, certified or registered, postage prepaid, addressed to the Company or the Holder as specified in this Note.

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

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Convertible Promissory Note

IN WITNESS WHEREOF, the Company has caused this Note to be signed in its corporate name by its President and dated the day and year first above written.

NEAH POWER SYSTEMS, INC.

(a Nevada corporation)

By:

     David W. Dorheim, President & CEO

Address: 22118 20th Avenue SE, Suite 161

  Bothell, WA 98021

ACCEPTED AND AGREED TO:

_____________________________

By:__________________________________

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Convertible Promissory Note

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