Document:

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                                                                    EXHIBIT 10.4

                                                  REGISTRATION RIGHTS AGREEMENT,
                                               dated as of May 17, 2000 and
                                               amended and restated as of June
                                               26, 2003, between NEPHROS, INC.,
                                               a Delaware corporation (the
                                               "Corporation"), and the INVESTORS
                                               (as herein defined).

                The Investors own or have the right to purchase or otherwise
acquire shares of the Common Stock (as hereinafter defined) of the Corporation.
The Corporation and the Investors deem it to be in their respective best
interests to set forth the rights of the Investors in connection with public
offerings and sales of the Common Stock.

                NOW, THEREFORE, in consideration of the premises and mutual
covenants and obligations hereinafter set forth, the Corporation and the
Investors hereby agree as follows:

        Section 1. Definitions.

                As used in this Agreement, the following terms shall have the
following meanings:

                (a)     "Commission" means the Securities and Exchange
Commission or any other Federal agency at the time administering the Securities
Act.

                (b)     "Common Stock" means the common stock, $.001 par value
per share, of the Corporation.

                (c)     "Counsel" shall have the meaning ascribed to such term
in Section 6(b).

                (d)     "Exchange Act" means the Securities Exchange Act of 1934
or any successor Federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.

                (e)     "Information" shall have the meaning ascribed to such
term in Section 6(i).

                (f)     "Initial Public Offering" shall mean an initial public
offering pursuant to a registration statement on Form S-1 under the Securities
Act (or any equivalent successor form) pursuant to a bona fide firm commitment
underwriting.

                (g)     "Inspectors" shall have the meaning ascribed to such
term in Section 6(i).

                (h)     "Investors" means the Person set forth on Schedule I and
each additional Person who shall execute a counterpart signature page hereto,
and includes any

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successor to, or assignee or transferee of, any such Person who or which agrees
in writing to be treated as an Investor hereunder and to be bound by the terms
and comply with all applicable provisions hereof.

                (i)     "Other Shares" means at any time those shares of Common
Stock which do not constitute Primary Shares or Registrable Shares.

                (j)     "Person" means any individual, partnership, corporation,
group, trust, limited liability company or other legal entity.

                (k)     "Primary Shares" means at any time the authorized but
unissued shares of Common Stock and shares of Common Stock held by the
Corporation in its treasury.

                (l)     "Records" shall have the meaning ascribed to such term
in Section 6(i).

                (m)     "Registrable Shares" means Common Stock which
constitutes Restricted Shares.

                (n)     "Restricted Shares" means, in the aggregate, the Series
B Restricted Shares, Series C Restricted Shares and Series D Restricted Shares.
As to any particular Restricted Shares, once issued, such Restricted Shares
shall cease to be Restricted Shares when (i) they have been registered under the
Securities Act, the registration statement in connection therewith has been
declared effective and they have been disposed of pursuant to such effective
registration statement, (ii) they are eligible to be sold or distributed
pursuant to Rule 144 within any consecutive three month period (including,
without limitation, Rule 144(k)) without volume limitations, or (iii) they shall
have ceased to be outstanding.

                (o)     "Registration Date" means the date upon which the
registration statement pursuant to which the Corporation shall have initially
registered shares of Common Stock under the Securities Act for sale to the
public shall have been declared effective.

                (p)     "Rule 144" means Rule 144 promulgated under the
Securities Act or any successor rule thereto or any complementary rule thereto
(such as Rule 144A).

                (q)     "Securities Act" means the Securities Act of 1933 or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.

                (r)     "Securities Purchase Agreement" means the Securities
Purchase Agreement dated the date hereof, among the Corporation and the Investor
party thereto.

                (s)     "Series B Preferred" means the Series B Convertible
Preferred Stock, $.001 per value per share of the Corporation, issued to the
Investors pursuant to the Securities Purchase Agreement dated as of February 8,
2000.

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                (t)     "Series C Preferred" means the Series C Convertible
Preferred Stock, $.001 par value per share of the Corporation, issued to the
Investor pursuant to the Securities Purchase Agreement dated the date hereof.

                (u)     "Series D Preferred" means the Series D Convertible
Preferred Stock, $.001 par value per share of the Corporation.

                (v)     "Series B Restricted Shares" means shares of Common
Stock issued or issuable upon conversion of the Series B Preferred or any other
securities of the Company issued from time to time to the Investors.

                (w)     "Series C Restricted Shares" means shares of Common
Stock issued or issuable upon conversion of the Series C Preferred or any other
securities of the Company issued from time to time to the Investors.

                (x)     "Series D Restricted Shares" means shares of Common
Stock issued or issuable upon conversion of the Series D Preferred or any other
securities of the Company issued from time to time to the Investors.

        Section 2. Required Registration.

                (a)     At any time after six months after the Registration
Date, if holders of not less than 20% of the Series B Restricted Shares and
Series C Restricted Shares, in the aggregate, then outstanding shall, in
writing, state that such holders desire to sell Registrable Shares in the public
securities markets and request the Corporation to effect the registration under
the Securities Act of Registrable Shares, the Corporation shall promptly use its
best efforts to effect the registration under the Securities Act of the
Registrable Shares which the Corporation has been so requested to register.

                (b)     At any time after six months after the Registration
Date, if holders of not less than 20% of the Series D Restricted Shares, in the
aggregate, then outstanding shall, in writing, state that such holders desire to
sell Registrable Shares in the public securities markets and request the
Corporation to effect the registration under the Securities Act of Registrable
Shares, the Corporation shall promptly use its best efforts to effect the
registration under the Securities Act of the Registrable Shares which the
Corporation has been so requested to register.

                (c)     Anything contained in Sections 2(a) and 2(b) to the
contrary notwithstanding, the Corporation shall not be obligated to effect any
registration under the Securities Act pursuant to Section 2(a) or 2(b) except in
accordance with the following provisions:

                        (i)     The Corporation shall not be obligated to use
        its best efforts to file and cause to become effective (A) more than two
        registration statements initiated pursuant to Section 2(a) on Form S-1
        promulgated under the Securities Act or any successor forms thereto, (B)
        more than two registration statements initiated pursuant to Section 2(b)
        on Form S-1 promulgated under the Securities Act or any successor forms
        thereto, (C) any registration statement with respect to

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        which the reasonably anticipated proceeds shall not exceed $5,000,000 or
        (D) any registration statement during any period in which any other
        registration statement (other than on Form S-4 or Form S-8 promulgated
        under the Securities Act or any successor forms thereto) pursuant to
        which Primary Shares are to be or were sold has been filed and not
        withdrawn or has been declared effective within the prior 90 days.

                        (ii)    The Corporation may delay the filing or
        effectiveness of any registration statement for a period of up to 90
        days after the date of a request for registration pursuant to this
        Section 2 if at the time of such request (A) the Corporation is engaged,
        or has fixed plans to engage within 90 days of the time of such request,
        in a firm commitment underwritten public offering of Primary Shares in
        which the holders of Registrable Shares may include Registrable Shares
        pursuant to Section 3 or (B) the Corporation reasonably determines that
        such registration and offering would interfere with any material
        transaction involving the Corporation, as approved by the Board of
        Directors.

                        (iii)   With respect to any registration pursuant to
        this Section 2, the Corporation shall give notice of such registration
        to any Investor who does not request registration hereunder and to the
        holders of all Other Shares which are entitled to piggy back
        registration rights and the Corporation may include in such registration
        any other Registrable Shares, Primary Shares or Other Shares; provided,
        however, that if the managing underwriter advises the Corporation that
        the inclusion of all Registrable Shares, Primary Shares and/or Other
        Shares proposed to be included in such registration would interfere with
        the successful marketing (including pricing) of the Registrable Shares
        proposed to be included in such registration, then the number of
        Registrable Shares, Primary Shares and/or Other Shares proposed to be
        included in such registration shall be included in the following order:

                                (A)     first, the Registrable Shares requested
                to be included in such registration pursuant to this Section 2
                (or, if necessary, such Registrable Shares pro rata among the
                holders thereof based upon the number of Registrable Shares
                requested to be registered by each such holder); and

                                (B)     second, the Primary Shares and any Other
                Shares which are entitled to piggy back registration rights, in
                such respective orders as they shall be entitled by contract or,
                if there is no such contract, pro rata among the holders thereof
                based on the number of shares requested to be registered by each
                such party.

                (d)     At any time before the registration statement covering
Registrable Shares becomes effective, the holders of a majority of the Series B
Restricted Shares, Series C Restricted Shares and Series D Restricted Shares, in
the aggregate, requested to be included in such registration may request the
Corporation to withdraw or not to file the registration statement. In that
event, if such request of withdrawal shall not have been

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caused by, or made in response to, the material adverse effect of an event on
the business, properties, condition, financial or otherwise, or operations of
the Corporation, the holders shall have used one of their demand registration
rights under this Section 2 and the Corporation shall no longer be obligated to
register Registrable Shares pursuant to the exercise of such one registration
right pursuant to this Section 2 unless the remaining holders shall pay to the
Corporation the expenses incurred by the Corporation through the date of such
request. A registration will not count as a demand registration for purposes of
Section 2 hereof unless the Investors requesting registration are able to
register at least 85% of the Registrable Shares requested to be included in such
registration.

        Section 3. Piggyback Registration.

                If the Corporation at any time proposes for any reason to
register Primary Shares or Other Shares under the Securities Act (other than on
Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms
thereto), it shall give written notice to the Investors of its intention to so
register such Primary Shares or Other Shares at least 30 days before the initial
filing of such registration statement and, upon the written request, delivered
to the Corporation within 20 days after delivery of any such notice by the
Corporation, of the Investors to include in such registration Registrable Shares
(which request shall specify the number of Registrable Shares proposed to be
included in such registration and shall state that such Investors desire to sell
such Registrable Shares in the public securities markets), the Corporation shall
use its best efforts to cause all such Registrable Shares to be included in such
registration on the same terms and conditions as the securities otherwise being
sold in such registration; provided, however, that if the managing underwriter
advises the Corporation that the inclusion of all Registrable Shares requested
to be included in such registration would interfere with the successful
marketing (including pricing) of the Primary Shares or Other Shares proposed to
be registered by the Corporation, then the number of Primary Shares, Registrable
Shares and Other Shares proposed to be included in such registration shall be
included in the following order:

                (a)     if the Corporation proposes to register Primary Shares:

                        (i)     first, the Primary Shares;

                        (ii)    second, the Registrable Shares requested by
        Investors to be included in such registration that are Series D
        Restricted Shares (or, if necessary, such Series D Restricted Shares pro
        rata among the holders thereof based upon the number of such Series D
        Restricted Shares requested to be registered by each such holder); and

                        (iii)   third, the Registrable Shares that are not
        Series D Restricted Shares requested by the Investors to be included in
        such registration, together with Other Shares held by the parties
        exercising similar piggy-back registration rights (or, if necessary,
        such Registrable Shares and Other Shares pro rata among the holders
        thereof based upon the number of such Registrable Shares that are not

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        Series D Restricted Shares and Other Shares requested to be registered
        by each such holder).

                (b)     if the Corporation proposes to register Other Shares
pursuant to a demand registration right:

                        (i)     first, the Other Shares requested to be included
        in such registration by holders exercising such demand registration
        rights;

                        (ii)    second, the Registrable Shares requested by
        Investors to be included in such registration that are Series D
        Restricted Shares (or, if necessary, such Series D Restricted Shares pro
        rata among the holders thereof based upon the number of such Series D
        Restricted Shares requested to be registered by each such holder); and

                        (iii)   third, the Registrable Shares that are not
        Series D Restricted Shares requested by the Investors to be included in
        such registration, together with Other Shares held by parties exercising
        similar piggy-back registration rights (or, if necessary, such
        Registrable Shares and Other Shares pro rata among the holders thereof
        based upon the number of such Registrable Shares that are not Series D
        Restricted Shares and Other Shares requested to be registered by each
        such holder).

                (c)     The number of requests permitted by the Investors
pursuant to this Section 3 shall be unlimited.

        Section 4. Registrations on Form S-3.

                Anything contained in Section 2 to the contrary notwithstanding,
at such time as the Corporation shall have qualified for the use of Form S-3
promulgated under the Securities Act or any successor form thereto, the
Investors holding Registrable Shares then outstanding shall have the right to
request in writing that the Corporation effect the registration of Registrable
Shares on Form S-3 or such successor form, which request or requests shall (i)
specify the number of Registrable Shares intended to be sold or disposed of and
the holders thereof and (ii) state the intended method of disposition of such
Registrable Shares. A requested registration on Form S-3 or any such successor
form in compliance with this Section 4 shall not count as a registration
statement initiated pursuant to Section 2 but the provisions of Section 2 shall
otherwise apply to a registration initiated pursuant to this Section 4. The
number of requests permitted pursuant to this Section 4 shall be unlimited;
provided, however, that requests may only be made pursuant to this Section 4 if
the reasonably anticipated proceeds therefrom shall be at least $500,000; and
provided, further, that requests may only be made pursuant to this Section 4
once every 180 days.

        Section 5. Holdback Agreement.

                (a)     If the Corporation at shall effect an Initial Public
Offering or if at any time thereafter, the Corporation shall register its shares
of Common Stock under the

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Securities Act for sale to the public on a registration statement under which
the Investors are given the opportunity to have their Registrable Shares
registered (including any such registration in accordance with Sections 2, 3 or
4 hereof), the Investors shall not sell publicly, make any short sale of, grant
any option for the purchase of, or otherwise dispose publicly of, any
Registrable Shares (other than those shares of Common Stock included in such
registration pursuant to such Initial Public Offering or in accordance with
Sections 2, 3 or 4 hereof) without the prior written consent of the Corporation,
for a period as shall be determined by the relevant managing underwriters, which
period shall begin not more than 10 days prior to the effectiveness of the
registration statement pursuant to which such public offering shall be made and
shall not last more than 180 days after the effective date of such registration
statement. The Corporation shall obtain the agreement of any Person permitted to
sell shares of stock in a registration to be bound by and to comply with this
Section 5 as if such Person were an Investor hereunder.

                (b)     If the Corporation at any time pursuant to Sections 2 or
3 of this Agreement shall register under the Securities Act Registrable Shares
held by the Investors for sale to the public pursuant to an underwritten
offering, the Corporation shall not effect any public sale or distribution of
securities similar to those being registered, or any securities convertible into
or exercisable or exchangeable for such securities, for such period as shall be
determined by the managing underwriters.

        Section 6. Preparation and Filing.

                If and whenever the Corporation is under an obligation pursuant
to the provisions of this Agreement to use its best efforts to effect the
registration of any Registrable Shares, the Corporation shall, as expeditiously
as practicable:

                (a)     use its best efforts to cause a registration statement
that registers such Registrable Shares to become and remain effective until the
earlier of 90 days after such registration statement becomes effective or such
time as all of such Registrable Shares are eligible to be sold or distributed
pursuant to Rule 144 (including, without limitation, Rule 144(k)) within any
consecutive three-month period without volume limitations;

                (b)     furnish, at least five business days before filing a
registration statement that registers such Registrable Shares, a prospectus
relating thereto or any amendments or supplements relating to such a
registration statement or prospectus, to one counsel selected by the Investors
("Counsel") copies of all such documents proposed to be filed (it being
understood that such five-business-day period need not apply to successive
drafts of the same document proposed to be filed so long as such successive
drafts are supplied to Counsel in advance of the proposed filing by a period of
time that is customary and reasonable under the circumstances);

                (c)     prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
at least a period of 90 days or until all of such Registrable Shares have been
disposed of (if earlier)

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and to comply with the provisions of the Securities Act with respect to the sale
or other disposition of such Registrable Shares;

                (d)     promptly notify Counsel in writing (i) of the receipt by
the Corporation of any notification with respect to any comments by the
Commission with respect to such registration statement or prospectus or any
amendment or supplement thereto or any request by the Commission for the
amending or supplementing thereof or for additional information with respect
thereto, (ii) of the receipt by the Corporation of any notification with respect
to the issuance by the Commission of any stop order suspending the effectiveness
of such registration statement or prospectus or any amendment or supplement
thereto or the initiation or threatening of any proceeding for that purpose and
(iii) of the receipt by the Corporation of any notification with respect to the
suspension of the qualification of such Registrable Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purposes;

                (e)     use its best efforts to register or qualify such
Registrable Shares under such other securities or blue sky laws of such
jurisdictions as the holders of the Registrable Shares reasonably request and do
any and all other acts and things which may be reasonably necessary or advisable
to enable such holders to consummate the disposition in such jurisdictions of
such holders' Registrable Shares; provided, however, that the Corporation will
not be required to qualify generally to do business, subject itself to general
taxation or consent to general service of process in any jurisdiction where it
would not otherwise be required to do so but for this paragraph (e) or to
provide any material undertaking or make any changes in its by-laws or amended
and restated certificate of incorporation which the Board of Directors
determines to be contrary to the best interests of the Corporation or to modify
any of its contractual relationships then existing;

                (f)     furnish to the holders of such Registrable Shares such
number of copies of a summary prospectus, if any, or other prospectus, including
a preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as such holders may reasonably request in order to
facilitate the public sale or other disposition of such Registrable Shares;

                (g)     without limiting subsection (e) above, use its best
efforts to cause such Registrable Shares to be registered with or approved by
such other governmental agencies or authorities as may be necessary by virtue of
the business and operations of the Corporation to enable the holders of such
Registrable Shares to consummate the disposition of such Registrable Shares;

                (h)     notify the holders of such Registrable Shares on a
timely basis at any time when a prospectus relating to such Registrable Shares
is required to be delivered under the Securities Act within the appropriate
period mentioned in subparagraph (a) of this Section 6, 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 light of the circumstances then
existing and, at the

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request of such holders, prepare and furnish to such holders a reasonable number
of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the offerees of such shares, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing;

                (i)     subject to the execution of confidentiality agreements
in form and substance satisfactory to the Corporation, make available upon
reasonable notice and during normal business hours, for inspection by the
holders of such Registrable Shares any underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant
or other agent retained by the Investors or underwriter (collectively, the
"Inspectors"), all pertinent financial and other records, pertinent corporate
documents and properties of the Corporation (collectively, the "Records"), as
shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Corporation's officers, directors and employees to
supply all information (together with the Records, the "Information") reasonably
requested by any such Inspector in connection with such registration statement.
Any of the Information which the Corporation determines in good faith to be
confidential, and of which determination the Inspectors are so notified, shall
not be disclosed by the Inspectors unless (i) the disclosure of such Information
is necessary to avoid or correct a misstatement or omission in the registration
statement, (ii) the release of such Information is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction or (iii) such
Information has been made generally available to the public; the Investors agree
that they will, upon learning that disclosure of such Information is sought in a
court of competent jurisdiction, give notice to the Corporation and allow the
Corporation, at the Corporation's expense, to undertake appropriate action to
prevent disclosure of the Information deemed confidential;

                (j)     use its best efforts to obtain from its independent
certified public accountants "cold comfort" letters in customary form and at
customary times and covering matters of the type customarily covered by cold
comfort letters;

                (k)     use its best efforts to obtain from its counsel an
opinion or opinions in customary form;

                (l)     provide a transfer agent and registrar (which may be the
same entity and which may be the Corporation) for such Registrable Shares;

                (m)     issue to any underwriter to which the holders of such
Registrable Shares may sell shares in such offering certificates evidencing such
Registrable Shares;

                (n)     list such Registrable Shares on any national securities
exchange on which any shares of the Common Stock are listed or, if the Common
Stock is not listed on a national securities exchange, use its best efforts to
qualify such Registrable Shares for listing on the Nasdaq Stock Market, or such
other national securities exchange as the holders of a majority of such
Registrable Shares shall reasonably request;

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                (o)     otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make available to its
securityholders, as soon as reasonably practicable, earnings statements (which
need not be audited) covering a period of 12 months beginning within three
months after the effective date of the registration statement, which earnings
statements shall satisfy the provisions of Section 11(a) of the Securities Act;
and

                (p)     subject to all the other provisions of this Agreement,
use its best efforts to take all other steps necessary to effect the
registration of such Registrable Shares contemplated hereby.

                Each holder of the Registrable Shares upon receipt of any notice
from the Corporation of any event of the kind described in Section 6(h) hereof,
shall forthwith discontinue disposition of the Registrable Shares pursuant to
the registration statement covering such Registrable Shares until such holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 6(h) hereof, and, if so directed by the Corporation, such holder shall
deliver to the Corporation all copies, other than permanent file copies then in
such holder's possession, of the prospectus covering such Registrable Shares at
the time of receipt of such notice.

        Section 7. Expenses.

                All expenses (other than underwriting discounts and commissions
relating to the Registrable Shares, as provided in the last sentence of this
Section 7) incurred by the Corporation in complying with Section 6, including,
without limitation, all registration and filing fees (including all expenses
incident to filing with the National Association of Securities Dealers, Inc.),
fees and expenses of complying with securities and blue sky laws, printing
expenses, fees and expenses of the Corporation's counsel and accountants and
reasonable fees and expenses of Counsel shall be paid by the Corporation;
provided, however, that all underwriting discounts and selling commissions
applicable to the Registrable Shares shall be borne by the holders selling such
Registrable Shares, in proportion to the number of Registrable Shares sold by
each such holder.

        Section 8. Indemnification.

                (a)     In connection with any registration of any Registrable
Shares under the Securities Act pursuant to this Agreement, the Corporation
shall indemnify and hold harmless the holders of Registrable Shares, each
underwriter, broker or any other Person acting on behalf of the holders of
Registrable Shares and each other Person, if any, who controls any of the
foregoing Persons within the meaning of the Securities Act against any losses,
claims, damages or liabilities, joint or several (or actions in respect
thereof), to which any of the foregoing Persons may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or allegedly untrue statement of a material fact contained in
the registration statement under which such Registrable Shares were registered
under the Securities Act, any preliminary prospectus or final prospectus
contained therein or otherwise filed with the Commission, any amendment or

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supplement thereto or any document incident to registration or qualification of
any Registrable Shares, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading or, with respect to
any prospectus, necessary to make the statements therein in light of the
circumstances under which they were made not misleading, or any violation by the
Corporation of the Securities Act or state securities or blue sky laws
applicable to the Corporation and relating to action or inaction required of the
Corporation in connection with such registration or qualification under such
state securities or blue sky laws; and shall reimburse the holders of
Registrable Shares, such underwriter, such broker or such other Person acting on
behalf of the holders of Registrable Shares and each such controlling Person for
any legal or other expenses reasonably incurred by any of them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Corporation shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or action
(including any legal or other expenses incurred) arises out of or is based upon
an untrue statement or allegedly untrue statement or omission or alleged
omission made in said registration statement, preliminary prospectus, final
prospectus, amendment, supplement or document incident to registration or
qualification of any Registrable Shares in reliance upon and in conformity with
written information furnished to the Corporation through an instrument duly
executed by the holders of Registrable Shares specifically for use in the
preparation thereof.

                (b)     In connection with any registration of Registrable
Shares under the Securities Act pursuant to this Agreement, each holder of
Registrable Shares shall severally and not jointly indemnify and hold harmless
(in the same manner and to the same extent as set forth in the preceding
paragraph of this Section 8) the Corporation, each director of the Corporation,
each officer of the Corporation who shall sign such registration statement, each
underwriter, broker or other Person acting on behalf of the holders of
Registrable Shares and each Person who controls any of the foregoing Persons
within the meaning of the Securities Act with respect to any statement or
omission from such registration statement, any preliminary prospectus or final
prospectus contained therein or otherwise filed with the Commission, any
amendment or supplement thereto or any document incident to registration or
qualification of any Registrable Shares if such statement or omission was made
in reliance upon and in conformity with written information furnished by such
holder to the Corporation or such underwriter specifically for use in connection
with the preparation of such registration statement, preliminary prospectus,
final prospectus, amendment, supplement or document; provided, however, that the
maximum amount of liability in respect of such indemnification shall be limited,
in the case of each seller of Registrable Shares to an amount equal to the net
proceeds actually received by such seller from the sale of Registrable Shares
effected pursuant to such registration.

                (c)     Promptly after receipt by an indemnified party of notice
of the commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 8, such indemnified party will, if a claim in respect
thereof is made against an indemnifying party, give written notice to the latter
of the commencement of such action. The failure of any indemnified party to
notify an indemnifying party of any such

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action shall not (unless such failure shall have a material adverse effect on
the indemnifying party) relieve the indemnifying party from any liability in
respect of such action that it may have to such indemnified party on account of
this Section 8. In case any such action is brought against an indemnified party,
the indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be responsible for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; provided, however, that if any indemnified party shall have reasonably
concluded that there may be one or more legal or equitable defenses available to
such indemnified party which are additional to or conflict with those available
to the indemnifying party, or that such claim or litigation involves or could
have an effect upon matters beyond the scope of the indemnity agreement provided
in this Section 8, the indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party (but shall have the
right to participate therein with counsel of its choice) and such indemnifying
party shall reimburse such indemnified party and any Person controlling such
indemnified party for that portion of the fees and expenses of any counsel
retained by the indemnified party which is reasonably related to the matters
covered by the indemnity agreement provided in this Section 8. If the
indemnifying party is not entitled to, or elects not to, assume the defense of a
claim, it will not be obligated to pay the fees and expenses of more than one
counsel with respect to such claim.

                (d)     If the indemnification provided for in this Section 8 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, claim, damage, liability or action referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amounts paid or payable by such
indemnified party as a result of such loss, claim, damage, liability or action
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions which resulted in such loss, claim,
damage, liability or action as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
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. The parties agree that it would not be just
and equitable if contribution pursuant hereto were determined by pro rata
allocation or by any other method or allocation which does not take account of
the equitable considerations referred to herein. No Person guilty of fraudulent
misrepresentation shall be entitled to contribution from any Person.

                                       12

<PAGE>

        Section 9. Underwriting Agreement.

                Notwithstanding the provisions of Sections 5, 6, 7 and 8, to the
extent that the Investors shall enter into an underwriting or similar agreement,
which agreement contains provisions covering one or more issues addressed in
such Sections, the provisions contained in such agreement addressing such issue
or issues shall control. No holder may participate in any underwritten
registration hereunder unless such holder (a) agrees to sell such holder's
securities on the basis provided in any underwriting arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably and customarily required
under the terms of such underwriting arrangements.

        Section 10. Information.

                Each Investor shall furnish to the Corporation such written
information regarding such Person and the distribution proposed by such Person
as the Corporation may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Agreement.

        Section 11. Exchange Act Compliance.

                From the Registration Date or such earlier date as a
registration statement filed by the Corporation pursuant to the Securities Act
relating to any class of the Corporation's securities shall have become
effective, the Corporation shall comply with all of the reporting requirements
of the Exchange Act applicable to it (whether or not it shall be required to do
so, but specifically excluding Section 14 of the Exchange Act if not then
applicable to the Corporation) and shall comply with all other public
information reporting requirements of the Commission which are conditions to the
availability of Rule 144 for the sale of the Common Stock. The Corporation shall
cooperate with the Investors in supplying such information as may be necessary
for the Investors to complete and file any information reporting forms presently
or hereafter required by the Commission as a condition to the availability of
Rule 144.

        Section 12. No Conflict of Rights.

                The Corporation has not in the past, and shall not, after the
date hereof, grant any registration rights which conflict with or impair the
registration rights granted hereby.

        Section 13. Termination.

                This Agreement shall terminate and be of no further force or
effect when there shall no longer be any Registrable Shares outstanding.

                                       13

<PAGE>

        Section 14. Successors and Assigns.

                This Agreement shall bind and inure to the benefit of the
Corporation and the Investors and, subject to Section 15, the respective
successors and assigns of the Corporation and the Investors.

        Section 15. Assignment.

                Each Investor may assign its rights hereunder to any purchaser
or transferee of Registrable Shares; provided, however, that such purchaser or
transferee shall, as a condition to the effectiveness of such assignment, be
required to execute a counterpart to this Agreement agreeing to be treated as an
Investor, whereupon such purchaser or transferee shall have the benefits of, and
shall be subject to the restrictions contained in, this Agreement as if such
purchaser or transferee was originally included in the definition of an Investor
herein and had originally been a party hereto.

        Section 16. Entire Agreement.

                This Agreement contains the entire agreement among the Investors
and the Corporation with respect to the subject matter hereof and supersede all
prior and contemporaneous arrangements or understandings with respect thereto,
all of which are hereby automatically terminated in their entirety and of no
further force or effect, without any action by the parties thereto.

        Section 17. Notices.

                All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument delivered in person or sent by telecopy,
nationally-recognized overnight courier or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth below or such other address as may hereafter be designated in
writing by such party to the other parties:

                (i)     if to the Corporation, to:

                         Nephros, Inc.
                         3960 Broadway
                         New York, NY 10032
                         Telephone:  (212) 781-5113
                         Telecopy:  (212) 781-5166
                         Attention:  Norman Barta

                                       14

<PAGE>

                        with a copy to:

                         Kramer Levin Naftalis & Frankel, LLP
                         919 Third Avenue
                         New York, NY 10022
                         Telecopy: (212) 715-8000
                         Attention: Peter Smith, Esq.
                                    Monica C. Lord, Esq.

                (ii)    if to the Investors, to their respective addresses set
                        forth on Schedule I hereto.

All such notices, requests, consents and other communications shall be deemed to
have been delivered (a) in the case of personal delivery or delivery by
telecopy, on the date of such delivery, (b) in the case of dispatch by
nationally-recognized overnight courier, on the next business day following such
dispatch and (c) in the case of mailing, on the fifth business day after the
posting thereof.

        Section 18. Modifications; Amendments; Waivers.

                The terms and provisions of this Agreement may not be modified
or amended, nor may any provision be waived, except pursuant to a writing signed
by the Corporation and the holders of at least a majority of the Registrable
Shares then outstanding.

        Section 19. Counterparts; Facsimile Signatures.

                This Agreement may be executed in any number of counterparts,
and each such counterpart hereof shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one agreement. Facsimile
counterpart signatures to this Agreement shall be acceptable at the Closing (as
defined in the Securities Purchase Agreement) if the originally executed
counterpart is delivered within a reasonable period thereafter.

        Section 20. Headings.

                The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.

        Section 21. Governing Law.

                This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to be
performed wholly therein.

                                       15

<PAGE>

                                                     By:
                                                        ------------------------
                                                        Name:
                                                        Title:<PAGE>
                                       1

                                                                   Exhibit 10.19

                        CONFIDENTIAL TREATMENT REQUESTED
                        --------------------------------

INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND
IS IDENTIFIED BY THREE ASTERISKS, AS FOLLOWS "* * *", AN UNREDACTED VERSION OF
THIS DOCUMENT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.

                                SUPPLY AGREEMENT
                                ----------------

NEPHROS, Inc., a company organized and existing under the laws of the State of
Delaware, having offices at 3960 Broadway, New York, NY 10032, USA and at 1st
Floor, Suite 5, The Avenue, Beacon Court, Sandyford, Dublin 18, Ireland
(hereinafter referred to as "NEPHROS")

and

Membrana GmbH, a company organized and existing under the laws of Germany having
offices at Oehder Str. 28, D-42289 Wuppertal, Germany (hereinafter referred to
as "Membrana")

WHEREAS, Membrana is engaged, inter alia, in the manufacture and sale of
membranes for medical applications, in particular capillary membranes for
hemodialysis, and is interested in selling such membranes to NEPHROS;

WHEREAS, NEPHROS is a medical products company and is engaged, inter alia, in
the hemodialysis business and intends to manufacture
hemodialyzers/hemodiafilters with capillary membranes and, therefore, is
interested in purchasing capillary membranes from Membrana for incorporation
into such dialyzers.

NOW, THEREFORE, the parties hereto hereby agree to the following:

Article 1:  Scope of the Agreement
----------------------------------

This Agreement shall govern all deliveries from Membrana to NEPHROS of all blood
contacting capillary membrane types for dialysis that Membrana can, during the
term of this Agreement make, including, without limitation DIAPES HF800* or
DIAPES HF800XP capillary membranes as specified in Sheet no. 079/0107/000
attached hereto as Annex I (hereinafter referred to as "DIAPES") and the DIAPES
Capillary Membrane Primary Bundles as specified in Sheet no. 079/0000/000
attached hereto as Annex II and set forth below ("Primary Bundles"). (The use of
marketing or labelling materials containing the DIAPES(R) name by Nephros is not
allowed in Japan)

Article 2:  Specification of Primary Bundles
--------------------------------------------

Membrana shall produce Primary Bundles for NEPHROS from DIAPES according to the
specifications listed below:

                                      * * *

The parties may agree in writing to modify the above specifications and/or add
additional specifications, according to NEPHROS's needs and Membrana's
capabilities. In case of a

<PAGE>
                                       2

switch to a new specification, unless otherwise agreed to in writing by
Membrana, NEPHROS shall purchase all bundles with the former specification, if
any, which NEPHROS had ordered and, at the time of the switch, are still in
stock at Membrana.

If dialysis membrane types other than, or in addition to, DIAPES HF800* or
DIAPES HF800XP will be supplied by Membrana to NEPHROS then a signed supplement
will be added to this Agreement before the first shipment of such membranes (any
such membranes, together with DIAPES HF800* and Primary Bundles are referred to
herein collectively as "Product").

Article 3: Prices
-----------------

3.1 The prices for Products containing DIAPES shall be as follows:

     The parties agree on the following volume-discounted price schedule for the
     purchase of quantities of Product per calendar year. If any incomplete
     calendar year constitutes a portion of the term (any "Incomplete Year") of
     this Agreement, then, for such Incomplete Year, each of the volume
     thresholds set forth below shall be prorated by multiplying it by a
     fraction, the numerator of which is the number of days included in such
     Incomplete Year, and the denominator of which is 365.

           --------------------------------   ---------------------------
            Annual Volume, (Calendar Year)           Average Price
               Km of membrane (millions)               [Euro/km]
           --------------------------------   ---------------------------

                         * * *                           * * *

     For purposes of calculating prices under this table "volume" will be
     calculated as the sum of kilometres of DIAPES ordered by NEPHROS from
     Membrana through purchase orders issued for delivery during the calendar
     year indicated by the purchase order due date. Each Product delivery will
     be included in the "volume" quantity for one calendar year only. Any
     quantities of Product not delivered in the calendar year indicated by the
     purchase order due date will be deemed delivered on the due date solely for
     purposes of calculating annual volume, and shall be delivered as soon as
     possible in the next calendar year, using the original purchase order
     number.

     The final price for annual volumes that fall between these listed values is
     calculated via linear interpolation of the average prices of the
     immediately lower and higher price levels, rounding volumes to the closest
     1,000 kilometres. The resulting price will be rounded to two decimal places
     (i.e., hundredths of Euro).

     Example:
     annual volume = * * *
     actual price = * * *

     At the conclusion of the calendar year, when all purchase orders have been
     placed, the cumulative annual volume will be determined. If NEPHROS's total
     kilometres of DIAPES purchased for the year exceed the amount used to set
     the invoice price for that year, then Membrana shall pay NEPHROS a refund
     so that NEPHROS's total purchase expenditure is made equal to the
     expenditure that would have occurred if the price for the actual volume had
     been invoiced all year. Such payment shall be made by January 31 of the
     following year. Conversely, if NEPHROS's total kilometres of membrane
     purchased are less than the quantity used to set the invoice price, then
     NEPHROS shall pay Membrana a refund so that NEPHROS's total purchase
     expenditure is made equal to the expenditure that would have occurred if
     the price for

<PAGE>
                                       3

     the actual volume had been invoiced all year. Such payment shall be made by
     January 31 of the following year.
             --

3.2 Each year in * * * NEPHROS and Membrana shall reach an agreement on invoice
price for the following year. Such invoice price shall be set according to the
pricing table set forth above in paragraph 3.1, and the volume reasonably and
jointly expected for the following year.

The prices have to be understood as ex works Wuppertal, packing included.

3.3 If NEPHROS exercises the * * *, the form of which is attached hereto as
Annex III, then the prices and price adjustment provisions set forth in this
Article 3 shall only apply to purchases in calendar year 2004 to the extent that
they yield a price per kilometre that is less than * * *.

3.4 Each month NEPHROS shall provide Membrana with a non-binding forecast
indicating its expected requirements of Products for the three months following
the month for which orders have been placed.

3.5 The delivered volume per bundle type may exceed or fall below the
ordered/confirmed amount by * * *.

Article 4: Payment and Delivery Terms
-------------------------------------

4.1  NEPHROS shall send the purchase order at least * * * weeks before shipment
     date, indicating the membrane type, bundle specification, number of
     bundles, and the requested shipping date.

     Membrana will send NEPHROS an order confirmation indicating the details of
     the relevant order and providing a definite date of shipment. Any
     deviations from this confirmation will be communicated to NEPHROS as soon
     as they become known.

4.2  Membrana will invoice NEPHROS at time of shipment, consistent with ex-works
     Wuppertal terms.

4.3  NEPHROS shall effect the payment of the purchase price in Euro by * * *,
     net. Payment shall be made by wire transfer to Membrana's account * * *, or
     as otherwise specified by Membrana from time to time.

Article 5: Quality Data & Technical & Scientific Support
-------------------------------------------------------

With each shipment, Membrana shall provide to both NEPHROS and the "ship-to"
location the `QC Data List' and the `Attachment to MQ-Specification' as given in
ANNEX IV. At NEPHROS's request, Membrana shall provide NEPHROS with technical
and scientific information about each Product, including such information
regarding the membrane types used.

Article 6: This article intentionally blank.
--------------------------------------------

Article 7: Exclusivity
----------------------

7.1 Subject to paragraph 7.2, Membrana shall supply NEPHROS's requirements of
blood contacting membranes and NEPHROS agrees to use Membrana as its exclusive
outside supplier of blood contacting membranes; provided, however, that such
exclusivity shall apply for calendar year 2004 and thereafter shall apply for
each successive calendar year of the term of this Agreement only if NEPHROS and
Membrana agree in writing to Product pricing for such calendar year on or prior
to * * * of the preceding year.

7.2 If, for any reason, Membrana fails to deliver a sufficient quantity of
Products meeting applicable specifications to timely satisfy NEPHROS's
requirements for blood contacting dialysis membranes, then NEPHROS may purchase
such membranes from any other supplier thereof. If such failure constitutes a
breach of this Agreement, the exception to exclusivity contained in this Section
7.2 shall be in addition to any remedies that may be available to NEPHROS for
such breach.

Article 8: Confidentiality
--------------------------

Each of Membrana and NEPHROS (in such capacity, the "Receiving Party") shall
keep

<PAGE>
                                       4

strictly confidential any information disclosed by the other (in such
capacity, the "Disclosing Party") during the term of this Agreement which is
confidential by nature or expressly marked as confidential (collectively,
"Confidential Information"), and shall include, without limitation all purchase
orders, prices, quantities and membrane specifications. The Receiving Party
shall at all times keep documents or other materials containing Confidential
Information of the Disclosing Party in a secure place, shall not use such
Confidential Information for any purpose other than its performance under, and
its evaluation of the relationship created by, this Agreement, except as
otherwise agreed to in writing, and shall not disclose any of the Confidential
Information of the Disclosing Party in any manner whatsoever, in whole or in
part, for any reason or purpose whatsoever except if such Receiving Party is
required by a court of competent jurisdiction to so disclose after notice has
been given to the Disclosing Party and the Disclosing Party has had an
opportunity to oppose such disclosure or seek a protective order to the extent
practicable. Notwithstanding the foregoing, "Confidential Information" shall not
include anything the Receiving Party can establish (1) is generally known to the
public other than as a result of the breach by the Receiving Party or any
affiliate of the Receiving Party of an obligation of confidentiality to the
Disclosing Party, (2) was known by the Receiving Party (as evidenced by written
records) prior to its receipt by the Receiving Party from the Disclosing Party,
(3) was disclosed to the Receiving Party by a third party under no obligation of
confidence, or (4) was developed by the Receiving Party independently of any
disclosure made by the Disclosing Party to the Receiving Party, provided, that
the Receiving Party shall have the burden of showing that such information was
developed independently of any disclosure by the Disclosing Party.

Article 9: Term
---------------

9.1 This Agreement shall enter into force upon signature of the last signing
party (the "Effective Date") and shall remain in force until terminated in
accordance with this Article 9.

9.2 Either NEPHROS or Membrana (in such capacity, the "Terminator") may
terminate this Agreement by notice to the other (in such capacity, the
"Terminatee") upon the occurrence of any of the following:

     (a)  the Terminatee fails to perform any covenant or agreement contained
          herein in any material respect and such failure is not curable or if
          curable is not cured within 30 days of notice from the Terminator;

     (b)  A petition for an order of relief under any bankruptcy, insolvency, or
          reorganization statute is filed against the Terminatee and is not
          discharged or dismissed or stayed within 60 days thereafter or a
          custodian, receiver or trustee is appointed for the Terminatee or
          substantially all of its business or assets, or the Terminatee ceases
          business, makes a general assignment for the benefit of creditors,
          resolves to go into voluntary liquidation or is adjudicated a bankrupt
          or otherwise seeks relief pursuant to any bankruptcy, insolvency or
          reorganization statute or proceeding.

9.3 On or after the fourth anniversary of the Effective Date, either NEPHROS or
Membrana may terminate this Agreement at any time, with or without cause, upon
months] advance written notice to the other.

9.4 Termination of this Agreement will not affect any purchase orders existing
on the date of termination, which will continue to be governed by this
Agreement. Furthermore, Articles 6, 8 and 10 shall survive any termination of
this Agreement.

<PAGE>
                                       5

Article 10: Choice of Law, Arbitration
--------------------------------------

All disputes arising in connection with the present contract shall be finally
resolved by arbitration in New York, New York before a single arbitrator in
accordance with the rules of the American Arbitration Association then in
effect. The decision of the arbitrator shall be final, binding and conclusive on
the parties and the arbitrator shall have the power to award costs and expenses.
Any such decision may be entered in any court of competent jurisdiction.

Article 11: Miscellaneous
-------------------------

11.1 Except as otherwise provided for this agreement, Membrana's General
     Conditions of Sale (the "General Conditions"), enclosed as Annex V, shall
     apply. Without limiting the generality of the foregoing: Sections V.2.,
     VII.2., and Article XI of the General Conditions shall not apply to this
     Agreement; the references to the "Buyer" in Sections VIII.1(c) and VIII.3
     of the General Conditions shall be deemed to include any of NEPHROS's
     distributors or customers and any end-user of NEPHROS's products; and the
     limitation of liability contained in Section VIII.4 of the General
     Conditions shall not apply to damages that are brought about by wilful
     intent or gross negligence.

11.2 If any provision of this agreement should become invalid this shall in no
     way interfere with the validity of the remaining provisions. The parties
     will then replace the provision declared invalid by another provision
     coming the closest possible to the provision declared invalid.

11.3 All notices, certificates, acknowledgments, consent, approvals and other
     communications hereunder shall be in writing and shall be mailed by
     certified U.S. mail or German equivalent, sent through an international
     overnight delivery service or delivered by personal delivery to any party
     hereto at its address as set forth in the preamble to this Agreement.
     Delivery of any notice, certificate, acknowledgment, consent, approval or
     other communication hereunder shall be effective upon actual receipt
     thereof.

11.4 The rights and obligations under this Agreement shall not be assignable
     without the prior written consent of the other party.

11.5 Any modifications of this Agreement must be made in writing.

11.6 This Agreement constitutes the entire agreement between NEPHROS and
     Membrana and supersedes any previous agreement between the parties relating
     to the subject matter of this agreement.

<PAGE>
                                       6

     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the respective dates set forth below.

New York, December 17, 2003           Wuppertal,  December 16, 2003
          -----------------                       -----------------

NEPHROS, INC.                         Membrana GmbH

By: /s/ Norman J. Barta              By:  /s/ Ulf Seidel
    ---------------------------           ------------------------------
     Name:  Norman J. Barta               Name:  Dr. Ulf Seidel
     Title: CEO                           Title:  VP Sales and Marketing Medical

                                     By:  /s/ Anthony Mancusi
                                          ------------------------------

                                          Name:  Dr. Anthony Mancusi
                                          Title: Key Account Manager, Americas

<PAGE>
                                       7

                                     ANNEX I
                                     -------
                                DIAPES Data Sheet

                                      * * *

<PAGE>
                                       8

                                    ANNEX II
                                    --------
                           Primary Bundles Data Sheet

                                      * * *

<PAGE>
                                       9

                                    ANNEX III
                                    ---------
                                      * * *

<PAGE>
                                       10

                                    ANNEX IV
                                    --------
                  QC Data List & Attachment to MQ-Specification

                                      * * *

<PAGE>
                                       11

                                    ANNEX V
                                    -------

                   General Conditions of Sale of Membrana GmbH

                 I. Exclusive validity of our conditions of sale

All of our quotations and tenders are based on our General Conditions of Sale.
We accept purchase orders exclusively on these terms. General terms and
conditions of the purchaser or agreements deviating from our Commercial Code
shall be binding on us only if we expressly recognise them in writing. With the
placing of an order or the acceptance of work of services the purchaser
recognises the validity of our General Terms and Conditions not only for the
business transaction in question, but also for all future business transactions.

                             II. Area of application

Our General Terms and Conditions shall apply only to legal transactions with
companies in the sense of the German Civil Code.

                                  III. Delivery

1.   As soon as the goods leave our works or our warehouse or are made available
     to the Buyer ready for shipping in a manner establishing default in
     acceptance, all transport risks shall pass to the Buyer.

2.   Periods and deadlines agreed upon for our services and work shall only be
     deemed to be binding, if they are expressly designated as such by us. A
     delivery period or a delivery date shall be deemed to have been adhered to,
     if the goods have left our works or our sales warehouse by the expiry of
     the period.

3.   Force Majeure and other obstructions which are beyond our control such as
     war, mobilisation, fire, strike and lockout and suchlike shall exempt us,
     for the duration of such disturbance and its consequences, from the
     obligation to deliver. Should such circumstances occur, after we have
     defaulted, the consequences of default shall remain excluded for the
     duration of their effectiveness. If the delivery period agreed upon is
     exceeded by more than two months, the Buyer and the Seller shall be
     entitled to cancel the part of the contract not performed.

<PAGE>

4.   The Buyer must, if the delivery period is exceeded, set a reasonable
     extension of the period in writing. If we have not performed the work or
     service within this additional period, the Buyer shall be entitled to
     cancel the contract.

5.   From the exceeding of a period for performance or a performance date or
     from performance default the Buyer shall not be entitled to derive any
     claims for damages against us, unless the exceeding of the period or
     deadline is due to wilful intent or gross negligence on the part of one of
     our statutory representative or of one of our vicarious agents.

6.   We shall be entitled to effect part deliveries and to invoice each part
     delivery in itself, as far as a part delivery is tolerable for the Buyer.
     The re-sale of the goods delivered using decorative and packaging material
     owned by us shall require our prior written consent.

7.   Seller may deliver against any order an excess or deficiency of up to 10 %
     of the quantity ordered. The quantity actually delivered will be invoiced.

                                   IV. Payment

1.   Besides the prices agreed, the Buyer must pay the statutory value-added or
     turnover tax at the currently applicable rate.

2.   Retention of due payments or offsetting shall be possible only on the basis
     of claims of the purchaser which have been the subject of non-appealable
     court decisions or have been recognised by us in writing.

3.   All costs arising in connection with the contract in the country of the
     Buyer including fees and taxes which were not known at the time of the
     conclusion of the contract shall be borne by the Buyer.

4.   If, after the conclusion of the contract, circumstances come to our
     knowledge which appear to make the credit worthiness of the purchaser
     doubtful, we can, at our discretion, demand cash in advance or provision of
     securities.

5.   In case of late payment by Buyer, Buyer shall, without prejudice to any
     other right of Seller, be liable to pay interest at a yearly rate of 8 % in
     excess of the basic interest rate (Euribor).

<PAGE>

                              V. Retention of title

1.   The goods supplied by us shall remain our property up to the complete
     settlement of all of our receivables from the reciprocal business
     relationship including any possible current account balance. The goods may
     not be pledged to others or transferred as security.

2.   Should we as a result of a combination of the goods supplied by us with the
     goods of the purchaser not acquire co-ownership, but lose our property, the
     ownership or co-ownership of the Buyer of the new item shall immediately
     pass to us upon its creation. All expectant rights which could lead to such
     an acquisition of ownership or co-ownership by the Buyer, are now already
     assigned to us by the latter. Any possible transfer necessary by us for the
     acquisition of the ownership or co-ownership shall be replaced by the
     agreement that the party ordering a goods preserves the item for us like a
     borrower, or, if the party ordering a good does not own the item, by the
     assignment of the entitlement to surrender against the owner to us already
     agreed hereby. The ownership or co-ownership arising for us is to be
     treated legally like the original goods. Otherwise the goods supplied by us
     and subject to retention of title are also to be treated with care.

3.   If the Buyer, despite default, does not pay or if the Buyer threatens to
     become insolvent, the Buyer must, at our request, surrender the goods
     subject to retention of title for our free disposal. The taking-back of
     goods subject to retention of title does not constitute any cancellation of
     the contract.

4.   All receivables of the Buyer from re-sale of goods of which we have
     ownership or co-ownership (goods subject to retention of title) shall
     already pass to us upon the conclusion of the transaction of sale. This
     shall apply whether the goods are sold to one or to several customers. The
     purchaser must collect the receivables assigned. We can revoke this
     authority, if the purchaser does not punctually meet one of his obligations
     towards us or if circumstances come to our knowledge which make our rights
     appear threatened.

5.   We undertake, at the request of the Buyer, to release the securities (goods
     and accounts receivable) to which we are entitled according to the above
     rules at our discretion, if their value exceeds the claims to be secured by
     more than 20 %. For the valuation of the security their realisable value
     (securing value) is decisive.

6.   If our retention of title loses its validity in the case of supplies abroad
     or for other reasons, the purchaser shall be obliged to grant to us without
     delay security for the items supplied or

<PAGE>

     any other security for our accounts receivable which will be effective
     according to the law applicable in each case and come as close as possible
     to the retention of title according to German law.

7.   The Buyer shall be obliged to insure the goods subject to retention of
     title with the due care and diligence of a prudent businessman and on
     request to provide evidence to the effect that this insurance has been
     taken out. The Buyer already now assigns to us his claims under this
     insurance by way of security.

                                  VI. INCOTERMS

The usual commercial terms such as FOB and CIF shall apply in accordance with
the INCOTERMS of the International Chamber of Commerce in the version as of the
conclusion of the contract.

                         VII. Claims concerning defects

1.   Notices of defects must be sent in writing at the latest within 30 days of
     receipt of the goods - in the case of hidden defects without delay after
     their discovery - stating the invoice and packaging unit. Deviations with
     regard to the raw or colour shade of the goods supplied shall not be deemed
     to be defects, unless they lead to a considerable deterioration in the
     usability of the products made therefrom.

2.   In the case of notices of defects sent in good time and justifiably we
     shall, at our discretion, have the right to reduce the purchase price by a
     reasonable amount or to supply a replacement. In the event of a failed
     delivery of replacement the purchaser shall have the choice between repeat
     delivery of a replacement, reasonable reduction of the price and returning
     of the goods after the refunding of the purchase price. Defects in one part
     of our performance shall not entitle the Buyer to complain about the
     performance as a whole.

3.   If the Buyer wishes to further process the goods despite identifiable
     defects, he shall give us an opportunity to make comments in good time
     prior to this.

4.   Claims of the purchaser based on defects shall be subject to the statute of
     limitations 12 months after the delivery of the goods.

5.   Our warranties shall expire, if the goods are modified by others, moreover,
     our warranty shall expire, if the Buyer does not follow our instructions
     for use.

<PAGE>

                                 VIII. Liability

1.   For consequences

     a)   of errors which occur during contract negotiations, in particular for
          the consequences of inadequate or incorrect advice given to the Buyer,

     b)   the violation of non-essential contractual duties (subsidiary duties),
          for example a consulting or protection obligation,

     c)   an unlawful act, unless it consists of injury for life and limb or the
          impairing of the health of the Buyer, we shall only accept liability
          if these consequences are due to wilful intent or gross negligence of
          one of our statutory representatives or one of our vicarious agents.

2.   Should the Buyer suffer disadvantages as a result of the fact that we
     violate non-essential contractual obligations (subsidiary obligations), for
     example a consulting or protection obligation, we shall likewise only
     accept liability if these consequences are due to wilful intent or gross
     negligence of one of our statutory representatives or one of our vicarious
     agents.

3.   For consequences, as long as they do not consist of injury of life and limb
     or the impairing of the health of the Buyer, or unlawful acts which one of
     our statutory representatives or one of our vicarious agents commit, we
     shall only accept liability if these consequences were brought about by
     wilful intent or gross negligence.

4.   Where Seller gives technical advice to Buyer with respect to the processing
     or treatment of the goods, it is agreed that such advice is given without
     any liability on Seller's part.

                       IX. Make-up and packaging material

If the Buyer does not return decorative and packaging material which remains our
property within a time limit to be determined by us on the terms and conditions
laid down and in a state capable of being used we shall be entitled to invoice
the Buyer for the replacement price and to demand immediate payment for it. If
the Buyer provides evidence of damage considerably below the replacement price,
only this is to be refunded.

<PAGE>

                               X. Marks and signs

Marks and signs under which the goods are supplied must not be used for the
products produces therefrom without our prior written consent.

                              XI. Other provisions

1.   The sales contract shall be subject to German law. The use of the
     Convention of the United Nations of 11.04.1980 concerning contracts on
     international purchase of goods shall be excluded.

2.   The exclusive venue for all disputes about and resulting from the contract
     shall be Wuppertal. We shall, however, have the right to sue the Buyer at
     any other venue applicable to him.

3.   Should any provision of this contract be or become ineffective, or should a
     gap emerge in this contract, the effectiveness of the remaining provisions
     shall not be affected by this.

4.   In place of the ineffective provisions or in order to fill the gap a
     reasonable provision shall be inserted which, as far as legally possible,
     comes as close as possible to what the parties concluding the contract
     wanted or would have wanted according to the sense and purpose of the
     contract, if they had considered the point.

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