Purchase Agreement

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.

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 th