AMENDMENT TO LOAN DOCUMENTS Dated as of February 15, 2008
AMENDMENT
TO LOAN DOCUMENTS
Dated
as
of February 15, 2008
This
AMENDMENT AND WAIVER TO THE LOAN DOCUMENTS (this “Amendment”)
amends
(i) the Promissory Note dated as of November 13, 2007 (the “Note”),
by
and between Neah Power Systems, Inc., a Nevada corporation (the “Company”),
and
EPD Investment Co., LLC, a California limited liability company (the
“Holder”),
(ii)
the Security Interest Agreement dated as of November 12, 2007 by and between
the
Company and the Holder (the “Security
Agreement”),
(iii)
the Pledge Agreement dated as of November 12, 2007 by and between the Company
and the Holder (the “Pledge
Agreement”),
(iv)
the Escrow Agreement dated as of November 13, 2007 by and among the Company,
the
Holder and Xxxxxx Xxxxx Xxxxx Xxxxxx Xxxxx Xxxxxx LLP , f/k/a Xxxxxx Xxxxx
&
Xxxxx LLP (the “Escrow
Agreement”),
(v)
the Purchase Agreement dated as of November 9, 2007 by and between the Company
and the Holder (the “Purchase
Agreement”
and
together with the Note, the Security Agreement, the Pledge Agreement and the
Escrow Agreement, the “Loan
Documents”).
Capitalized terms not otherwise defined in this Amendment have the meanings
ascribed to such terms in the respective Loan Document.
WHEREAS,
the Company and the Holder desire to amend the Loan Documents and waive certain
defaults thereunder;
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the Loan Documents are hereby amended and
modified as follows:
1. Amendment
to Section 2(iii) of the Note.
Section
2(iii) of the Note is hereby deleted in its entirety.
2. Amendment
to Section 7(b) of the Note.
Section
7(c) of the Note is hereby deleted in its entirety and replaced with the
following:
“(c) Conversion
Price.
Notwithstanding the foregoing, the initial conversion price in effect on any
Conversion Date shall be adjusted to: (i) $0.08 per share of Common Stock for
the number of shares sold into the market prior to the date hereof, which total
782,195 shares, (ii) $0.08 per share for one million additional shares, and
(iii) a price per share agreed between the parties for an additional number
of
shares agreed between the parties. Purchaser hereby agrees that it will not
sell
any further Equity Shares (as defined in the Purchase Agreement) in the open
market until after the shares provided for in the preceding sentence have been
sold or the full balance due under this Note has been converted.”
3. Reduction
of Note Balance.
Holder
hereby converts $62,575.60 of the current amount due under the Note into 782,195
shares of Common Stock at $0.08 per share.
4. Amendment
to Section 3 of the Escrow Agreement.
Section
3 of the Escrow Agreement is hereby deleted in its entirety.
5. Amendment
to Section 1(b) of the Pledge Agreement.
Both
Sections 1(b) of the Pledge Agreement are hereby deleted in their entirety
and
replaced with the following:
“(b) The
Pledgor represents and warrants to the Secured Party that the Pledged Shares
are
duly authorized, validly issued, fully paid and non assessable and that it
will
not permit the transfer of the Pledged Shares except in accordance with this
Pledge Agreement while the same is in effect. The 12,500,000 Pledged Shares,
together with any substitutes therefor, or proceeds thereof, are hereinafter
referred to collectively as the “Collateral”.”
6. Amendment
to Section 1(a)(iv) of the Purchase Agreement.
The
following sentence is inserted at the end of Section 1(a)(iv) of the Purchase
Agreement:
“Provided,
however,
that
the $100,000 amount will be reduced pro rata in proportion to the amount by
which the balance then due under the Note is below the initial principal balance
of the Note.”
7. Amendment
to Section 1(a) of the Purchase Agreement.
The
following section is hereby inserted at the end of Section 1(a) as new Section
1(a)(vii) of the Purchase Agreement:
“(vii) Notwithstanding
anything to the contrary herein, the Company agrees not to issue to the
Purchaser Equity Shares which would result in beneficial ownership by the
Purchaser and its affiliates of more than 4.99% of the outstanding shares of
capital stock of the Company; provided, however, this restriction on the Company
set forth herein may be waived by the Purchaser. For purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance
with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and
Regulations 13D-G thereunder.”
8. Amendment
to Section 11 of the Security Agreement.
Section
11 of the Security Agreement is deleted in its entirety and replaced with the
following:
“Upon
payment or other satisfaction in full of the Note held by the Secured Party,
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.”
9. Waiver
of Default.
The
Holder hereby waives any prior or existing default of the Company under the
Note, the Pledge Agreement or the Escrow Agreement, including without limitation
any default due to any breach by the Company of Section 2(iii) of the Note,
Section 1(b) of the Pledge Agreement or Section 3 of the Escrow
Agreement.
10. Share
Issuance.
Company
shall promptly issue and deliver to the Holder such additional number of duly
authorized, validly issued and fully paid shares of its Common Stock as may
due
or issuable pursuant to the foregoing amendments.
11. Ratification
of Loan Documents.
Except
as specifically amended by this Amendment, all provisions of the Loan Documents
are hereby ratified and shall remain in full force and effect.
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12. Counterparts;
Facsimile Signatures.
This
Amendment may be executed in two or more counterparts and by facsimile, each
of
which will be deemed an original, but all of which together will constitute
one
and the same instrument.
IN
WITNESS WHEREOF, the parties have caused this Amendment to be duly executed
as
of the date first above written.
COMPANY:
A
Nevada
corporation
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HOLDER:
EPD
INVESTMENT CO., LLC
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CONSENTED
TO AND AGREED:
A
Washington Corporation
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By:
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By:
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