Document:

kl09044_ex4-2.htm

    
      

    

    Exhibit
      4.2

     

    THIS
      NOTE IS SUBJECT TO THE TERMS OF AN EXCHANGE AGREEMENT, A COPY OF WHICH IS ON
      FILE WITH, AND AVAILABLE FROM, THE SECRETARY OF NEPHROS,
      INC.

     

    THIS
      NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
      REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
      “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS.  THIS NOTE AND SUCH
      SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR
      OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
      WITH
      RESPECT TO SUCH SECURITIES UNDER THE SECURITIES ACT OR AN AVAILABLE EXEMPTION
      FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  ANY SUCH
      TRANSFER MAY ALSO BE SUBJECT TO COMPLIANCE WITH APPLICABLE STATE SECURITIES
      LAWS.

     

    THE
      SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE ARE ISSUED SUBJECT TO THE
      PROVISIONS OF A REGISTRATION RIGHTS AGREEMENT, AND ANY TRANSFEREE OF SUCH
      SECURITIES SHALL BE BOUND BY THE PROVISIONS OF SAID AGREEMENT, A COPY OF WHICH
      IS ON FILE WITH, AND AVAILABLE FROM, THE SECRETARY OF NEPHROS,
      INC.

    

    

    NEPHROS,
      INC.

     

                                    No.
      [__]

    

    Series
      B 10% Secured Convertible Note due 2008

     

    $[___________]

                                September
      ___,
      2007

     

    Nephros,
      Inc., a Delaware corporation, (the “Company”), for value received, hereby
      promises to pay to [_________________________________________], or registered
      assigns (as applicable, the “Holder”), the principal sum set forth above, with
      interest thereon at a rate equal to ten percent 10% per annum, on the Maturity
      Date.  Payment shall be made upon surrender of this Note (as defined
      below) at such place as designated by the Company, and shall be in such coin
      or
      currency of the United States of America as at the time of payment shall be
      legal tender for the payment of public and private debts.  Payment
      shall be made to the Holder at its address as set forth on the registration
      records of the Company or, at the request of the Holder, by wire transfer to
      an
      account specified by the Holder.  This Note is one of a duly
      authorized issue of up to $5,300,000 aggregate principal amount of Nephros,
      Inc.
      Series B 10% Secured Convertible Notes due 2008 (individually a “Note” and
      collectively the “Notes”). Certain capitalized terms used herein are defined in
      Section 9.  Capitalized terms used herein without definition have the
      respective meanings specified therefor in the Exchange Agreement.  The
      Notes are secured by the Collateral pursuant to the Exchange
      Agreement.

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    SECTION
      1.     Interest.

     

    The
      Company will pay interest in arrears on the Maturity Date.  Interest
      on this Note will accrue daily at a rate of ten percent (10%) per annum from
      the
      date of its issuance set forth above and shall be compounded
      annually.  Notwithstanding the foregoing, the Company hereby
      unconditionally promises to pay to the order of the Holder interest on any
      principal or interest payable hereunder that shall not be paid in full when
      due,
      whether at the Maturity Date or upon acceleration or declaration or otherwise,
      for the period from and including the due date of such payment to but excluding
      the date the same is paid in full, at a rate of eighteen (18%) per annum (but
      in
      no event in excess of the maximum rate permitted under applicable
      law).  Interest will cease to accrue on the Automatic Conversion
      Date.

    

    SECTION
      2.     Prepayment.

     

    This
      Note
      may not be prepaid in whole or in part.

     

    SECTION
      3.     Conversion

     

    (a)  Conversion.  On
      the Automatic Conversion Date, this Note and all accrued but unpaid interest
      thereon shall immediately, and without any action on the part of the Company
      or
      the Holder, convert into shares of the Company’s common stock, par value $0.001
      per share (the “Common Stock”), at a conversion price per share of Common Stock
      equal to $0.706 (the “Conversion Price”).  This Note may not be
      converted by the Holder at any time.

     

    No
      greater than 20 nor fewer than 5 days prior to the Automatic Conversion Date,
      notice (the “Automatic Conversion Notice”) by first class mail, postage prepaid,
      shall be given to the Holder, addressed to the Holder at its last address as
      shown on the registration records of the Company.  The Automatic
      Conversion Notice shall specify the date fixed for conversion, the place or
      places for surrender of Notes, and the then effective Conversion Rate pursuant
      to this Section 3.

     

    Any
      Automatic Conversion Notice which is mailed as herein provided shall be
      conclusively presumed to have been duly given by the Company on the date
      deposited in the mail, whether or not the Holder receives such notice; and
      failure properly to give such notice by mail, or any defect in such notice,
      to
      the Holder shall not affect the validity of the proceedings for the conversion
      of this Note.  Notwithstanding that this Note shall not have been
      surrendered, this Note shall no longer be deemed outstanding and all rights
      whatsoever with respect to this Note, except the right to receive the number
      of
      full shares of Common Stock to which such person shall be entitled upon
      conversion hereof, shall terminate.

    

    (b)  Conversion
      Procedures.

     

    (i)  As
      promptly as practicable after the Automatic Conversation Date, the Holder shall
      surrender this Note at the place designated in the Automatic Conversion Notice,
      duly endorsed.  The Holder shall also submit a notice (the “Notice of
      Conversion”) specifying the name or names (with address) in which a certificate
      or certificates evidencing shares of Common Stock are to be issued;
provided, however, the Company shall not be required to honor any
      Notice of Conversion unless the Secured Party shall have provided the Company
      with any

     

     

     

     

    
      
        
        

      

      
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    authorizations
      as may be requested by the Company to file a termination statement with respect
      to the Secured Party’s security interest in the Collateral, as set forth in the
      Exchange Agreement.  The surrender of the Note and the delivery of the
      Notice of Conversion and authorizations to file a termination statement are
      the
      only procedures required of the Holder upon the conversion of this
      Note.  No additional legal opinion or other information or
      instructions shall be required of the Holder upon the conversion of this
      Note.

     

    (ii)  The
      Company will make a notation of the date that a Notice of Conversion is
      received, which date of receipt shall be deemed to be the date of receipt for
      purposes hereof.

     

    (iii)  The
      Company shall, or shall direct its transfer agent to, within 10 days after
      such
      deposit of any Note accompanied by a Notice of Conversion and compliance with
      any other conditions herein contained, deliver to the person for whose account
      such Note was so surrendered certificates evidencing the number of full shares
      of Common Stock to which such person is entitled as aforesaid, subject to
      Section 4.

     

    (iv)  Such
      conversion shall be deemed to have been made as of the Automatic Conversion
      Date, and the person or persons entitled to receive the Common Stock deliverable
      upon conversion of such Note shall be treated for all purposes as the record
      holder or holders of such Common Stock on such date and the Note shall no longer
      be deemed outstanding and all rights whatsoever in respect thereof (including
      the right to receive interest thereon) shall terminate except the right to
      receive the number of full shares of Common Stock to which such person shall
      be
      entitled upon conversion hereof; provided, however, that the
      Company shall not be required to issue any certificates representing shares
      of
      Common Stock (x) until such Note has been received at the place designated
      in
      the Automatic Conversion Notice; and (y) if the Note is received while the
      stock
      transfer books of the Company are closed for any purpose, but such certificates
      shall be issued immediately upon the reopening of such books as if the Note
      had
      been received on the date of such reopening.

     

    (c)  Adjustment
      of Conversion Price. In the event the Company shall, at any time or from
      time to time after the date hereof, and prior to the Automatic Conversion Date
      (i) pay a dividend or make a distribution on its Common Stock in shares of
      Common Stock, (ii) subdivide its outstanding shares of Common Stock into a
      greater number of shares or (iii) combine its outstanding shares of Common
      Stock into a smaller number of shares (each of (i) through (iii), a “Change
      of Shares”), then (x) the Conversion Price shall be changed to a price (rounded
      to the nearest one-tenth of a cent) determined by multiplying the Conversion
      Price in effect immediately prior to such Change of Shares by a fraction, the
      numerator of which shall be the number of shares of Common Stock outstanding
      (excluding treasury stock) immediately prior to the Change of Shares and the
      denominator of which shall be the number of shares of Common Stock outstanding
      (excluding treasury stock) immediately following the Change of
      Shares.

     

    (d)  Anti-Dilution
      Notices.  After each adjustment of the Conversion Price pursuant
      to Subsection 3(c), the Company will prepare a certificate signed by the Chief
      Executive Officer or President, and by the Treasurer or an Assistant Treasurer
      or the Secretary or an Assistant Secretary, of the Company setting
      forth:  (i) the Conversion Price as so adjusted and (ii) a brief
      statement of the facts accounting for such adjustment.  The Company
      will send such certificate by ordinary first class mail to the Holder at its
      last address as it shall appear on the

     

     

     

    
      
        
        

      

      
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    registration
      records of the Company.  No failure to mail such certificate nor any
      defect therein or in the mailing thereof shall affect the validity of such
      adjustment.  The certificate of the Secretary or an Assistant
      Secretary of the Company that such certificate has been mailed shall, in the
      absence of fraud, be prima facie evidence of the facts therein
      stated.  The transfer agent, if other than the Company, may rely on
      the information in the certificate as true and correct and has no duty nor
      obligation independently to verify the amounts or calculations therein set
      forth.

     

    (e)  Reservation
      of Shares; Transfer Taxes; Etc.  The Company shall at all times
      reserve and keep available, out of its authorized and unissued shares of Common
      Stock, solely for the purpose of effecting the conversion of the Notes, such
      number of shares of its Common Stock free of preemptive rights as shall be
      sufficient to effect the conversion of all of the 2007 Notes.  The
      Company covenants that such shares of Common Stock so issuable and deliverable
      shall, upon issuance in accordance with the terms hereof, be duly authorized
      and
      validly issued and fully paid and nonassessable.  The Company shall
      use its reasonable best efforts from time to time, in accordance with the laws
      of the State of Delaware, to increase the authorized number of shares of Common
      Stock if at any time the authorized number of shares of Common Stock not
      outstanding shall not be sufficient to permit the conversion of all the
      then-outstanding 2007 Notes.

     

    The
      Company shall pay any and all issue or other taxes (other than income taxes)
      that may be payable in respect of any issue or delivery of shares of Common
      Stock on conversion of the Notes.  The Company shall not, however, be
      required to pay any tax which may be payable in respect of any transfer involved
      in the issue or delivery of Common Stock (or other securities or assets) in
      a
      name other than that in which the Notes so converted were registered, and no
      such issue or delivery shall be made unless and until the person requesting
      such
      issue has paid to the Company the amount of such tax or has established, to
      the
      satisfaction of the Company, that such tax has been paid.

     

    (f)  Other
      Changes in Conversion Price.  The Company from time to time may
      decrease the Conversion Price by mailing to the Holder an irrevocable notice
      of
      the decrease at least 15 days before the date the decreased Conversion Price
      takes effect, and such notice shall state the decreased Conversion Price and
      the
      resulting increased Conversion Rate.

     

    (g)  Minimum
      Conversion Price.  Notwithstanding anything to the contrary
      herein, in no case shall the Conversion Price be adjusted to an amount less
      than
      $0.001 per share, the current par value of the Common Stock.

     

    SECTION
      4.     Fractional
      Shares.

     

    No
      fractional shares or scrip representing fractional shares of Common Stock shall
      be issued upon conversion of this Note.  If more than one certificate
      evidencing Notes shall be surrendered for conversion at one time by the same
      Holder, the number of full shares issuable upon conversion thereof shall be
      computed on the basis of the aggregate principal amount and accrued interest
      of
      the Notes so surrendered.  Instead of any fractional share of Common
      Stock which would otherwise be issuable upon conversion of this Note (or of
      such
      aggregate number of Notes), the number of shares of Common Stock will be rounded
      to the nearest whole share (with a .5 of a share rounded upward).

     

     

     

    
      
        
        

      

      
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    SECTION
      5.    Covenants.  The
      Company hereby covenants and agrees that between the date hereof and the
      Automatic Conversion Date, the Company will not:

     

    (a)  create,
      issue, incur (by conversion, exchange or otherwise), assume, guarantee or
      otherwise become or remain directly or indirectly liable for any
      Indebtedness;

     

    (b)  declare
      any dividend (or any other distribution) or redeem or repurchase any of its
      capital stock or other securities;

     

    (c)  authorize
      the granting to the holders of Common Stock of rights or warrants to subscribe
      for or purchase any shares of stock of any class or of any other rights or
      warrants;

     

    (d)  reclassify
      the Common Stock (other than a subdivision or combination of the outstanding
      Common Stock, or a change in par value, or from par value to no par value,
      or
      from no par value to par value);

     

    (e)  be
      a
      party to any merger or consolidation for which approval of any stockholders
      of
      the Company shall be required, or of the sale or transfer of all or
      substantially all of the assets of the Company or of any compulsory share
      exchange whereby the Common Stock is converted into other securities, cash
      or
      other property; or

     

    (f)  cause
      or
      permit any Liquidation Event; or

     

    (g)  take
      any
      action to approve any of the foregoing.

     

    SECTION
      6.    Events
      of Default Defined.

     

    The
      following shall each constitute an “Event of Default” hereunder:

     

    (a)  the
      failure of the Company to make any payment of principal of or interest on this
      Note when due;

     

    (b)  the
      Company shall, (i) apply for or consent to the appointment of a receiver,
      trustee, liquidator or custodian of itself or of all or a substantial part
      of
      its property, (ii) be unable to, or admit in writing its inability, pay its
      debts generally as they mature, (iii) make a general assignment for the benefit
      of its or any of its creditors, (iv) be dissolved or liquidated, (v) commence
      a
      voluntary case or other proceeding seeking liquidation, reorganization or other
      relief with respect to itself or its debts under any bankruptcy, insolvency
      or
      other similar law now or hereafter in effect or consent to any such relief
      or to
      the appointment of or taking possession of its property by any official in
      an
      involuntary case or other proceeding commenced against it, or (vi) take any
      action for the purpose of effecting any of the foregoing;

     

    (c)  proceedings
      for the appointment of a receiver, trustee, liquidator or custodian of the
      Company or of all or a substantial part of the property thereof, or an
      involuntary case or other proceedings seeking liquidation, reorganization or
      other relief with respect to the Company or the debts thereof under any
      bankruptcy, insolvency or other similar law now or

     

     

     

    
      
        
        

      

      
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    hereafter
      in effect shall be commenced and an order for relief entered or such proceeding
      shall not be dismissed or discharged within 90 days of
      commencement;

     

    (d)  any
      representation, warranty or certification made herein or pursuant hereto (or
      in
      any modification or supplement hereto) or under the Registration Rights
      Agreement or the Exchange Agreement by the Company was not true or correct
      in
      any material respect when made;

     

    (e)  the
      Company shall breach any of its covenants contained in this Note or in the
      Exchange Agreement and shall not cure such breach within ten calendar days
      after
      notice of such breach is given to the Company by any Registered
      Holder;

     

    (f)  any
      director who was requested to be elected by the Secured Party shall be removed
      as a director without the written consent of the Secured Party;

     

    (g)  the
      Company shall Incur any Indebtedness without the prior written approval of
      the
      Secured Party; and

     

    (h)  the
      Company shall default in the performance of any of its obligations under, or
      shall otherwise breach, any covenant in any agreement or instrument for borrowed
      money in an aggregate amount in excess of $500,000, the effect of which causes
      or permits any holder or holders of such agreement or instrument to cause such
      borrowed money to be declared due and payable prior to its stated maturity
      and
      such holder or holders in fact declare such money due and payable, except for
      any default set forth on Schedule 6(h).

     

    SECTION
      7.     Remedies
      upon Event of Default.

     

    (a)  If
      an
      Event of Default occurs and is continuing for a period of 15 or more consecutive
      days, the Registered Holders of 2007 Notes constituting a majority of the
      principal amount of 2007 Notes then outstanding (the “Majority Noteholders”), by
      notice to the Company, may declare the unpaid principal of and accrued interest
      on all the 2007 Notes then outstanding to be due and payable without
      presentment, demand, protest or any other notice of any kind, all of which
      are
      hereby expressly waived (an “Acceleration”); provided, an Acceleration shall
      automatically occur upon the occurrence of an Event of Default specified in
      Section 6(b) or (c).  Upon any Acceleration, all principal and accrued
      interest, fees, charges or damages for early prepayment on the 2007 Notes shall
      be due and payable immediately.  Majority Noteholders may rescind an
      Acceleration and its consequences; provided, however, that no such
      rescission shall effect any subsequent Default or impair any right consequent
      thereto.

     

    (b)  Majority
      Noteholders or Secured Party may waive an existing Default or Event of Default
      and its consequences.  Upon any such waiver, such Default shall cease
      to exist and any Event of Default arising therefrom shall be deemed to have
      been
      cured for every purpose of this Note; but no such waiver shall extend to any
      subsequent or other Default or impair any right consequent thereon.

     

    (c)  Upon
      the
      occurrence and during the continuance of an Event of Default, Secured Party
      may,
      at its election, without notice of its election and without demand, take any
      action permitted by law, including the exercise of any rights accorded a secured
      creditor under the Uniform Commercial Code as in effect in New York and any
      rights granted in the Exchange Agreement.

     

     

     

    
      
        
        

      

      
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    (d)  The
      remedies provided in this Note shall be cumulative and in addition to all other
      remedies available under this Note and the Exchange Agreement at law or in
      equity (including a decree of specific performance and/or other injunctive
      relief), and nothing herein shall limit the Holder’s right to pursue damages for
      any failure by the Company to comply with the terms of this
      Note.  Amounts set forth or provided for herein with respect to
      payments, redemption and the like (and the computation thereof) shall be the
      amounts to be received by the Holder and shall not, except as expressly provided
      herein, be subject to any other obligation of the Company (or the performance
      thereof). The Company acknowledges that a breach by it of its obligations
      hereunder will cause irreparable harm to the Holder and that the remedy at
      law
      for any such breach may be inadequate. The Company therefore agrees that, in
      the
      event of any such breach or threatened breach, the Holder shall be entitled,
      in
      addition to all other available remedies, to an injunction restraining any
      breach, without the necessity of showing economic loss and without any bond
      or
      other security being required.

     

    SECTION
      8.     Lost,
      Mutilated, etc. Note.

     

    Upon
      receipt by the Company of evidence reasonably satisfactory to it of the loss,
      theft, destruction or mutilation of this Note and of indemnity or bond
      reasonably satisfactory to it, and upon reimbursement to the Company of all
      reasonable expenses incidental thereto, and upon surrender and cancellation
      of
      this Note (in case of mutilation) the Company will make and deliver in lieu
      of
      this Note a new Note of like tenor and unpaid principal amount and dated as
      of
      the date to which interest has been paid on the unpaid principal amount of
      this
      Note in lieu of which such new Note is made and delivered.

     

    SECTION
      9.     Certain
      Definitions.

    

    (a)  “2007
      Notes” shall mean, collectively, the Notes and the Nephros, Inc. Series A 10%
      Secured Convertible Notes.

    

    (b)  “Automatic
      Conversion Date” shall mean the twenty-first (21st) day after
      the
      Company sends or gives its stockholders a definitive Schedule 14C information
      statement relating to written consent of stockholders of the Company approving
      the issuance of the Common Stock and Warrants issuable upon the conversion
      of
      the 2007 Notes and the amendment of the Company’s Certificate of Incorporation
      to increase the number of authorized shares of Common Stock to 60,000,000
      shares.

    

    (c)  “Collateral”
      includes all of the property of the Company whether now owned or hereafter
      acquired, regardless where located, including without limitation the
      following:  (a) all accounts and other rights of the Company to
      payment of money, no matter how evidenced, all chattel paper, instruments and
      other writings evidencing any such right, and all goods repossessed or returned
      in connection therewith; (b) all chattel paper (including electronic chattel
      paper); (c) all inventory, including but not limited to all raw materials,
      work
      in process, materials used or consumed in the Company’s business, and finished
      goods, together with all additions and accessions thereto and replacements
      therefor, all substitutes therefor, all

     

     

     

     

    
      
        
        

      

      
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    improvements
      to and returns of such inventory, and products thereof; (d) all deposit accounts
      and all funds, certificates, documents, instruments, checks, drafts, wire
      transfer receipts and other earnings, profits or other proceeds from time to
      time representing, evidencing, deposited into or held in the deposit accounts
      or
      payable to the Company in respect thereof; (e) all general intangibles; (f)
      all
      equipment, fixtures and real property; (g) all intellectual property, including,
      without limitation, all copyrights, trademarks and patents and all applications
      and licenses thereof; (h) all commodity contracts, security entitlements;
      financial assets and investment property, including, without limitation, all
      capital stock and other ownership interests and the certificates (if any)
      representing such capital stock and ownership interests and all dividends,
      cash,
      instruments and other property from time to time received, receivable or
      otherwise distributed or distributable in respect of or in exchange for any
      or
      all of the foregoing; (i) all money; (j) all commercial tort claims; (k) all
      Debt from time to time owed to the Company by any person or entity, including
      without limitation, all instruments evidencing such Debt; (l) all letter of
      credit rights and letters of credit; (m) all automobiles and motor vehicles;
      (n)
      all computer hardware and software; (o) all consumer goods; (p) all supporting
      obligations arising from or related to any of the property described in
clauses (a) through (o) above; (q) any and all rights
      in and claims under insurance policies, judgments and rights thereunder and
      tort
      claims; (r) all documents, books and records; (s) all other goods and personal
      property of the Company of any kind or character, whether tangible or
      intangible; (t) all rights of the Company in all of the foregoing; and (u)
      all
      products and proceeds, in cash or otherwise, of any of the foregoing
      property.

     

    (d)  “Conversion
      Price” shall initially be $0.706 per share of Common Stock, subject to
      adjustment as provided herein, representing an initial conversion rate (subject
      to adjustment) of approximately 1,416.43 shares of Common Stock per $1,000
      of principal amount of Note being converted (the “Conversion
      Rate”).

     

    (e)  “Default”
      means an event which, with notice or the passage of time, or both, would become
      an Event of Default.

     

    (f)  “Exchange
      Agreement” means the exchange agreement of even date herewith entered into
      between the Company, the Holder and the other parties thereto.

     

    (g)  “Incur”
      means, with respect to any Indebtedness or other obligation of any person,
      to
      create, issue, incur (by conversion, exchange or otherwise), assume, guarantee
      or otherwise become or remain directly or indirectly liable for such
      Indebtedness or other obligation.

     

    (h)  “Indebtedness”
      means (a) any liabilities for borrowed money (other than trade accounts
      payable incurred in the ordinary course of business), (b) every obligation
      of
      the Company evidenced by bonds, debentures, notes or other similar instruments,
      (c) all guaranties, endorsements and other contingent obligations in
      respect of Indebtedness of others, whether or not the same are or should be
      reflected in the Company’s balance sheet (or the notes thereto), except
      guaranties by endorsement of negotiable instruments for deposit or collection
      or
      similar transactions in the ordinary course of business; and (d) the
      present value of any lease payments due under leases required to be capitalized
      in accordance with United States generally accepted accounting
      principles.

     

     

     

    
      
        
        

      

      
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    (i)  “Liquidation
      Event” means any (i) liquidation, dissolution or winding up of the Company,
      whether voluntary or involuntary, (ii) a sale or other disposition of all
      or substantially all of the assets of the Company or (iii) any consolidation,
      merger, combination, reorganization or other transaction in which the Company
      is
      not the surviving entity or shares of Common Stock constituting in excess of
      50%
      of the voting power of the Company are exchanged for or changed into stock
      or
      securities of another entity, cash and/or any other property.

     

    (j)  “Maturity
      Date” means September [_], 2008.

     

    (k)  “Registered
      Holder,” with respect to any 2007 Note, shall mean the holder of record
      thereof.

     

    (l)  “Registration
      Rights Agreement” means the registration rights agreement, of even date
      herewith, among the Company and the Holders listed on Schedule 1 attached
      thereto, in the form attached to the Exchange Agreement as Exhibit
      E.

     

    (m)  “Secured
      Party” means Lambda Investors LLC.

     

    (n)  “Securities
      Act” means the United Stated Securities Act of 1933, as amended.

     

    (o)  “SEC”
      means the Securities and Exchange Commission.

     

    (p)  “Warrants”
      shall mean the warrants to purchase shares of Common Stock that are being issued
      pursuant to the Nephros, Inc. Series A 10% Secured Convertible
      Notes.

    

    SECTION
      10.     Miscellaneous.

    

    (a)  This
      Note
      may be amended only by mutual written agreement of the Company and the Holder
      or, if such amendment shall apply to all outstanding 2007 Notes, with the
      written consent of the Company and the Majority Noteholders; provided,
however, without the consent of the holder of this Note, no such
      amendment may be approved that would have the effect of (i) decreasing the
      principal amount or rate of interest payable hereunder, (ii) extending the
      Automatic Conversion Date or Maturity Date, (iii) increasing the Conversion
      Price or decreasing the Conversion Rate; or (iv) affect any adjustment under
      Section 3 of this Note.  Furthermore, the Company may take any action
      herein prohibited or omit to take any action herein required to be performed
      by
      it, and any breach of any covenant, agreement, warranty or representation may
      be
      waived, if the Company has obtained the written consent or waiver of the Holder
      or, if such consent or waiver shall apply to all outstanding 2007 Notes, the
      Majority Noteholders.  Any amendments approved in compliance with this
      Section 10(a) shall bind the Holder’s successors and assigns.

     

    (b)  Forbearance
      from Suit.  No holder of Notes shall institute any suit or
      proceeding for the enforcement of the payment of principal or interest unless
      the Secured Party joins in such suit or proceeding.

     

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

     

    (c)  Governing
      Law.  This Note shall be governed by, and construed in accordance
      with, the laws of the State of New York, excluding the body of law relating
      to
      conflict of laws.  Notwithstanding anything to the contrary contained
      herein, in no event may the effective rate of interest collected or received
      by
      the Holder exceed that which may be charged, collected or received by the Holder
      under applicable law.

     

    (d)  Interpretation.  If
      any term or provision of this Note shall be held invalid, illegal or
      unenforceable, the validity of all other terms and provisions hereof shall
      in no
      way be affected thereby.

     

    (e)  Successors
      and Assigns.  Subject to the restrictions on transfer contained
      herein, this Note shall be binding upon the Company and its successors and
      assigns and shall inure to the benefit of the Holder and its successors and
      registered assigns.

     

    (f)  Assignment
      by the Holder.  This Note and any of the rights, interests or
      obligations hereunder, may be assigned at any time in whole or in part by the
      Holder, without the consent of the Company, if the transferee is an “accredited
      investor” as defined in Regulation D under the Securities Act and agrees to be
      bound by all of the provisions of the Note, the Exchange Agreement and the
      Registration Rights Agreement, including without limitation, making
      representations and warranties identical to those of the Holder contained in
      such documents but with respect to such transferee and as of the date of such
      transfer.

     

    (g)  Assignment
      by the Company.  Neither this Note nor any of the rights,
      interests or obligations hereunder may be assigned, by operation of law or
      otherwise, in whole or in part, by the Company without the prior written consent
      of the Holder.

     

    (h)  Saturdays,
      Sundays, Holidays.  If any date that may at any time be specified
      in this Note as a date for the making of any payment of principal or interest
      under this Note shall fall on Saturday, Sunday or on a day which in New York
      shall be a legal holiday, then the date for the making of that payment shall
      be
      the next subsequent day which is not a Saturday, Sunday or legal
      holiday.

     

    (i)  Exchange
      Agreement.  This Note is subject to the terms contained in the
      Exchange Agreement and the Holder of this Note is entitled to the benefits
      of
      such Exchange Agreement to the extent provided therein.

     

    (j)           Jurisdiction;
      Forum.  Any dispute arising out of or relating to this Note shall
      be resolved, and all suits, actions and proceedings brought by the Company
      or
      Holder hereunder shall be brought only in, any state court sitting in the County
      of New York or federal court sitting in the Southern District of the State
      of
      New York.  The Company waives any objection to the laying of venue in
      such courts and any claim that any such action has been brought in an
      inconvenient forum.  To the extent permitted by law, any judgment in
      respect of a dispute arising out of or relating to this Note may be enforced
      in
      any other jurisdiction within or outside the United States by suit on the
      judgment, a certified copy of such judgment being conclusive evidence of the
      fact and amount of such judgment.

     

    (k)           Attorneys’
      Fees.  In the event of any litigation or other proceeding
      concerning this Note or the transactions contemplated hereby, including any
      such
      litigation

     

     

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

     

     

    or
      proceeding with respect to the collection or other enforcement of this Note
      against the Company, the prevailing party in such litigation or proceeding
      shall
      be entitled to reimbursement from the party opposing such prevailing party
      for
      all attorneys’ fees and costs incurred by such prevailing party in such
      litigation or proceeding.

     

    [Signature
      page follows immediately]

    

     

     

     

    
 

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
 

    IN
      WITNESS WHEREOF, this Series B 10% Secured Convertible Note due 2008 has been
      executed and delivered on the date first above written by the duly authorized
      representative of the Company.

     

                NEPHROS,
      INC.

     

                By:_____________________________________                                                                

                Name:

                Title:

    

     

    
 

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Schedule
      6(h)

    

    On
      July
      23, 2007, the Company received a letter from counsel for Receiver in the action
      captioned Marty Steinberg, Esq. as Receiver for Lancer Offshore, Inc. v.
      Nephros, Inc., Case No. 04-CV-20547 notifying the Company of its failure to
      pay
      the third installment due to the Receiver pursuant to a Settlement Agreement
      between the Receiver and the Company, and asking the Company to cure such
      default by July 30, 2007.  The Company failed to cure such default in
      the specified time period.  On August 20, 2007, counsel for Receiver
      filed in the United States District Court for the Southern District of Florida
      (the “Court”) a motion to enforce the Settlement Agreement and for entry of
      Final Default Judgment against the Company in the amount of $700,000 plus
      interest and attorney’s fees and costs.  On August 29, 2007, the Court
      granted a motion of an extension of time until October 4, 2007 for the Company
      to serve its opposition to the Receiver’s motion to enforce Settlement Agreement
      and for entry of Final Default Judgment.  Pursuant to an e-mail from
      counsel for Receiver sent to counsel for the Company on August 24, 2007, the
      Receiver has agreed to the following:

    

    
      	
              1.  

            	
              If
                the Company makes the late $200,000 payment required under the Settlement
                Agreement by October 4, 2007, then the default under the Settlement
                Agreement will be cured.

            

    

    
      	 	 

      	
              2.  

            	
              Thereafter,
                the Company’s only remaining payment obligation under the Settlement
                Agreement will be to make a $200,000 payment by January 18,
                2008.

            

    

    
      	 	 

      	
              3.  

            	
              If
                the Company fails to make the payment described in (1) above by October
                4,
                2007, the Company will not file a response to the motion to enforce
                Settlement Agreement and for entry of default judgment.  The
                Receiver may then advise the Court and request immediate entry of
                an order
                granting the relief requested.

            

    

    

     

     

     

     

     

    
 

     

    13kl09044_ex4-3.htm

    
      

    

    Exhibit
      4.3

     

    THE
      TERMS OF THIS WARRANT ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT
      AND
      ANY TRANSFEREE OF SUCH SECURITIES SHALL BE BOUND BY THE PROVISIONS OF SAID
      AGREEMENT, COPIES OF WHICH ARE ON FILE WITH, AND AVAILABLE FROM, THE SECRETARY
      OF NEPHROS, INC.

     

    THIS
      WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
      BEEN
      REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
      “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS.  SUCH SECURITIES MAY
      NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED
      IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH
      SECURITIES UNDER THE SECURITIES ACT OR AN AVAILABLE EXEMPTION FROM THE
      REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  ANY SUCH TRANSFER
      MAY ALSO BE SUBJECT TO COMPLIANCE WITH APPLICABLE STATE SECURITIES
      LAWS.

     

    THE
      SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT ARE ISSUED SUBJECT TO THE
      PROVISIONS OF A REGISTRATION RIGHTS AGREEMENT, AND ANY TRANSFEREE OF SUCH
      SECURITIES SHALL BE BOUND BY THE PROVISIONS OF SAID AGREEMENT, A COPY OF WHICH
      IS ON FILE WITH, AND AVAILABLE FROM, THE SECRETARY OF NEPHROS,
      INC.

     

    NEPHROS,
      INC.

     

    Class
      D Warrant for the Purchase of Shares of Common Stock

     

    No.:
      D-
      __ 

    Number
      of
      Shares: ___________

    Date
      of
      Issuance: _____ __, 2007

     

    FOR
      VALUE
      RECEIVED, the undersigned, NEPHROS, INC., a Delaware corporation (together
      with
      its successors and assigns, the “Company”), hereby certifies that
      _______________________________ or its registered assigns (the “Holder”)
      is entitled to subscribe for and purchase from the Company, subject to the
      provisions of this Warrant (this “Warrant” and, together with any other Class D
      Warrants to purchase shares of Common Stock, collectively, the
“Warrants”), at any time on or prior to 5:00 P.M., New York City time, on
[_____ __], 2012 (the “Termination Date”),
      [________________] (___________) fully paid and non-assessable shares of the
      Common Stock, par value $.001 per share, of the Company (“Common Stock”),
      at an exercise price per share of Common Stock equal to $0.90 per share (the
      “Per Share Exercise Price”), as such price may be adjusted from time to
      time as shall result from the adjustments specified in this
      Warrant.

     

    1.           Exercise
      of Warrant.

     

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

     

    (a)           Exercise.  This
      Warrant may be exercised in whole or in part, at any time by its holder prior
      to
      the Termination Date by presentation and surrender of this Warrant, together
      with the duly executed notice of exercise form attached at the end hereof,
      at
      the address set forth in Subsection 8(c) hereof, together with payment to the
      Company of an amount of consideration therefor equal to the Per Share Exercise
      Price in effect on the date of such exercise multiplied by the number of shares
      of Common Stock issuable upon exercise of any Warrant or Warrants or otherwise
      issuable pursuant to any Warrant or Warrants then being exercised (the
“Warrant Shares”), payable by certified or official bank check or by wire
      transfer to an account designated by the Company. The delivery of the
      notice of exercise and payment of the Per Share Exercise Price are the only
      procedures required of the Holder to exercise this Warrant.  No
      additional legal opinion or other information or instructions shall be required
      of the Holder upon the exercise of this Warrant.

     

    (b)           Cashless
      Exercise.  If, and only if, at the time of exercise pursuant to
      this Section 1 there is no effective registration statement registering, or
      no current prospectus available for, the sale of the Warrant Shares to the
      Holder or the resale of the Warrant Shares by the Holder and the VWAP (as
      defined below) is greater than the Per Share Exercise Price at the time of
      exercise, then this Warrant may also be exercised at such time and with respect
      to such exercise by means of a “cashless exercise” in which the Holder shall be
      entitled to receive a certificate for the number of Warrant Shares equal to
      the
      quotient obtained by dividing (i) the result of (x) the difference of (A) minus
      (B), multiplied by (y) (C), by (ii) (A), where: 

     

    
      	 	(A)
              = the VWAP (as defined below) on the Trading Day (as defined below)
              immediately preceding the date of such election;   
              

      	
               

            	
              (B)
                = the Per Share Exercise Price of this Warrant, as adjusted;
                and

            

    

    
      	
               

            	
              (C)
                = the number of Warrant Shares issuable upon exercise of this Warrant
                in
                accordance with the terms of this Warrant by means of a cash exercise
                rather than a cashless exercise.

            

    

    

    “VWAP”
      means, for any date, the price determined by the first of the following clauses
      that applies: (a) if the Common Stock is then listed or quoted for trading
      on the New York Stock Exchange, American Stock Exchange, Nasdaq Capital Market,
      Nasdaq Global Market, Nasdaq Global Select Market or the OTC Bulletin Board,
      or
      any successor to any of the foregoing (a “Trading Market”), the daily
      volume weighted average price of the Common Stock on the Trading Market on
      which
      the Common Stock is then listed or quoted for trading as reported by Bloomberg
      L.P. for such date if such date is a date on which the Trading Market on which
      the Common Stock is then listed or quoted for trading (a “Trading Day”)
      or the nearest preceding Trading Date (based on a Trading Day from 9:30 a.m.
      (New York City time) to 4:02 p.m. (New York City time); (b) if the Common
      Stock is not then listed or quoted for trading on a Trading Market and if prices
      for the Common Stock are then reported in the “Pink Sheets” published by Pink
      Sheets, LLC (or a similar organization or agency succeeding to its functions
      of
      reporting prices), the most recent bid price per share of the Common Stock
      so
      reported; or (c) in all other cases, the fair market value of a share of
      Common Stock as determined by an independent appraiser selected in good faith
      by
      the Holder and reasonably acceptable to the Company.

     

    (c)           Partial
      Exercise.  If this Warrant is exercised in part only, the Company
      shall, upon presentation of this Warrant upon such exercise, execute and deliver
      (along with the

     

     

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

     

    certificate
      for the Warrant Shares purchased) a new Warrant evidencing the rights of the
      Holder hereof to purchase the balance of the Warrant Shares purchasable
      hereunder upon the same terms and conditions as herein set
      forth.  Upon proper exercise of this Warrant, the Company promptly
      shall deliver certificates for the Warrant Shares to the Holder.

     

    2.           Stock
      Fully Paid; Reservation and Listing of Shares;
      Covenants.

     

    (a)           Authorization,
      Reservation of Shares; Etc.  The Company shall at all times
      reserve and keep available, out of its authorized and unissued shares of Common
      Stock, solely for the purpose of effecting the exercise of this Warrant, such
      number of shares of its Common Stock free of preemptive rights as shall be
      sufficient to effect the exercise of this Warrant.  The Company shall
      use its commercially reasonable best efforts from time to time, in accordance
      with the laws of the State of Delaware, to increase the authorized number of
      shares of Common Stock if at any time the number of shares of Common Stock
      not
      outstanding shall not be sufficient to permit the exercise of this
      Warrant.  The Company covenants that all Warrant Shares so issuable
      and deliverable shall, upon issuance and the payment of the applicable Per
      Share
      Exercise Price in accordance with the terms hereof, be duly authorized and
      validly issued and fully paid and nonassessable. The Company will take all
      such
      action as may be necessary to assure that such shares of Common Stock may be
      issued as provided herein without violation of any applicable law or regulation,
      or of any requirements of any securities exchange or automated quotation system
      upon which the Common Stock may be listed.

    

    (b)           Payment
      of Taxes.  The Company shall pay any and all issue or other taxes
      (other than income taxes) that may be payable in respect of any issue or
      delivery of Warrant Shares on exercise of this Warrant.  The Company
      shall not, however, be required to pay any tax which may be payable in respect
      of any transfer involved in the issue or delivery of Warrant Shares (or other
      securities or assets) in a name other than that in which Warrant was registered,
      and no such issue or delivery shall be made unless and until the person
      requesting such issue has paid to the Company the amount of such tax or has
      established, to the satisfaction of the Company, that such tax has been
      paid.

     

    (c)           Loss,
      Theft, Destruction of Warrants.  Upon receipt of evidence
      satisfactory to the Company of the ownership of and the loss, theft, destruction
      or mutilation of this Warrant and, in the case of any such loss, theft or
      destruction, upon receipt of indemnity or security satisfactory to the Company
      (which may include a bond) or, in the case of any such mutilation, upon
      surrender and cancellation of such Warrant, the Company will make and deliver,
      in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant
      of
      like date, tenor and denomination.

    

    (d)           Delivery
      of Warrant Shares.

    

    (i)           Upon
      the exercise of this Warrant, the Company shall promptly (but in no event later
      than three Trading Days after the exercise date) issue or cause to be issued
      and
      cause to be delivered to or upon the written order of the Holder and in such
      name or names as the Holder may designate, a certificate for the Warrant Shares
      issuable upon such exercise, free of restrictive legends unless a registration
      statement covering the resale of the Warrant Shares and naming the Holder as
      a
      selling stockholder thereunder is not then effective and the Warrant Shares
      are
      not freely transferable without volume restrictions pursuant to Rule 144 under
      the Securities Act.  The Holder, or any Person so

     

     

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    designated
      by the Holder to receive Warrant Shares, shall be deemed to have become holder
      of record of such Warrant Shares as of the exercise date. Notwithstanding any
      provision of this Warrant requiring the delivery of certificates, the Company
      shall, upon request of the Holder, use its commercially reasonable efforts
      to
      deliver Warrant Shares hereunder electronically through the Depository Trust
      Corporation or another established clearing corporation performing similar
      functions.  Any obligation to deliver certificates under this Warrant
      shall be deemed satisfied if Warrant Shares are delivered electronically in
      accordance with the preceding sentence.

    

    (ii)           If
      the Company fails to cause its transfer agent to transmit to the Holder a
      certificate or certificates representing the Warrant Shares pursuant to this
      Section 2(d)(ii) by the third Trading Day following the Warrant Share date
      of exercise, then the Holder shall have the right to rescind such
      exercise.

    

    (iii)           In
      addition to any other rights available to a Holder, if the Company fails to
      deliver to the Holder a certificate representing Warrant Shares by the third
      Trading Day after exercise of this Warrant in full compliance with Section
      1,
      and if after such third Trading Day the Holder purchases (in an open market
      transaction) shares of Common Stock to deliver in satisfaction of a sale by
      the
      Holder of the Warrant Shares that the Holder anticipated receiving from the
      Company (a “Buy-In”) upon such exercise, then the Company shall, within
      three Trading Days after the Holder’s request and in the Holder’s discretion,
      either (x) pay cash to the Holder in an amount equal to the Holder’s total
      purchase price (including brokerage commissions, if any) for the shares of
      Common Stock so purchased (the “Buy-In Price”), at which point the
      Company’s obligation to deliver such certificate (and to issue such Warrant
      Shares) shall terminate, or (y) promptly honor its obligation to deliver to
      the
      Holder a certificate or certificates representing such Common Stock and pay
      cash
      to the Holder in an amount equal to the excess (if any) of the Buy-In Price
      over
      the product of (1) the number of shares of Common Stock purchased in the Buy-In,
      times (2) the closing price on the date of the exercise.  The Holders
      shall provide the Company written notice indicating the amounts payable to
      the
      Holder in respect of the Buy-In, together with applicable confirmations and
      other evidence reasonably requested by the Company.

    

    (iv)           Except
      as provided in clause (x) of Section 2(d)(iii), the Company’s obligations to
      issue and deliver Warrant Shares upon an exercise in accordance with Section
      1
      above are absolute and unconditional, irrespective of any action or inaction
      by
      the Holder to enforce the same, any waiver or consent with respect to any
      provision hereof, the recovery of any judgment against any person or entity
      or
      any action to enforce the same, or any setoff, counterclaim, recoupment,
      limitation or termination, or any breach or alleged breach by the Holder or
      any
      other person or entity of any obligation to the Company or any violation or
      alleged violation of law by the Holder or any other person or entity, and
      irrespective of any other circumstance which might otherwise limit such
      obligation of the Company to the Holder in connection with the issuance of
      Warrant Shares. Nothing herein shall limit a Holder’s right to pursue any
      other remedies available to it hereunder, at law or in equity, including,
      without limitation, a decree of specific performance and/or injunctive relief
      with respect to the Company’s failure to timely deliver certificates
      representing shares of Common Stock upon exercise of the Warrant as required
      pursuant to the terms hereof.

     

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    
 

    3.           Protection
      Against Dilution.

     

    (a)           In
      case the Company shall, at any time or from time to time hereafter (i) pay
      a
      dividend or make a distribution on its Common Stock in shares of Common Stock,
      (ii) subdivide its outstanding shares of Common Stock into a greater number
      of
      shares or (iii) combine its outstanding shares of Common Stock into a smaller
      number of shares (each of (i) through (iii), a “Change of Shares”), then
      (1) the number of shares of Common Stock for which this Warrant is exercisable
      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 Warrant is exercisable immediately prior
      to the occurrence of such event would own or be entitled to receive after the
      happening of such event, and (2) the Per Share Exercise Price in effect
      immediately prior to the occurrence of such event shall be adjusted to equal
      (A)
      the Per Share Exercise Price in effect immediately prior to the occurrence
      of
      such event multiplied by (B) the number of shares of Common Stock for which
      this
      Warrant is exercisable immediately prior to the adjustment divided by (C) the
      number of shares of Common Stock for which this Warrant is exercisable
      immediately after such adjustment.  An adjustment made pursuant to
      this Subsection 3(a) shall become effective immediately after the record date
      in
      the case of a dividend or distribution and shall become effective immediately
      after the effective date in the case of a subdivision, combination or
      reclassification.

     

    (b)           If
      the Company, at any time while this Warrant is outstanding, distributes to
      holders of Common Stock (i) evidences of its indebtedness, (ii) any security
      (other than a distribution of Common Stock covered by paragraph (a) above or
      a
      security issued in a capital reorganization or reclassification, consolidation
      or merger covered by paragraph (c) below), (iii) rights, warrants or options
      to
      subscribe for or purchase any security, or (iv) any other asset (in each case,
      “Distributed Property”), then in each such case (1) the Per Share
      Exercise Price in effect immediately prior to the record date fixed for
      determination of stockholders entitled to receive such Distributed Property
      shall be adjusted (effective on such record date) to equal the product of such
      Per Share Exercise Price times a fraction of which the denominator shall be
      the
      VWAP for the Trading Day immediately prior to (but not including) such record
      date and of which the numerator shall be the difference between such VWAP minus
      the then fair market value of the Distributed Property distributed in respect
      of
      one outstanding share of Common Stock, as determined by the Board of Directors
      of the Company in good faith, and (2) the number of shares of Common Stock
      for
      which this Warrant is exercisable immediately prior to such record date shall
      be
      adjusted to equal (A) the number of shares of Common Stock for which this
      Warrant is exercisable immediately prior to such record date multiplied by
      (B)
      the Per Share Exercise Price in effect immediately prior to such record date
      divided by (C) the Per Share Exercise Price in effect immediately after such
      record date.

     

    (c)           In
      the event of any capital reorganization or reclassification, or any
      consolidation or merger to which the Company is a party (other than a merger
      or
      consolidation in which the Company is the continuing corporation and in which
      no
      securities, cash or other property is distributed to holders of Common Stock),
      or in case of any sale or conveyance to another entity of the property of the
      Company as an entirety or substantially as an entirety, or in the case of any
      statutory exchange of securities with another corporation (including any
      exchange effected in connection with a merger of a third corporation into the
      Company), the Holder of this Warrant shall have the right thereafter to receive
      on the exercise of this Warrant the kind and amount of

     

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

     

    securities,
      cash or other property which the Holder would have owned or have been entitled
      to receive immediately after such reorganization, reclassification,
      consolidation, merger, statutory exchange, sale or conveyance had this Warrant
      been exercised immediately prior to the effective date of such reorganization,
      reclassification, consolidation, merger, statutory exchange, sale or conveyance
      and in any such case, if necessary, appropriate adjustment shall be made in
      the
      application of the provisions set forth in this Section 3 with respect to the
      rights and interests thereafter of the Holder of this Warrant to the end that
      the provisions set forth in this Section 3 shall thereafter correspondingly
      be
      made applicable, as nearly as may reasonably be, in relation to any shares
      of
      stock or other securities or property thereafter deliverable on the exercise
      of
      this Warrant.  A sale of all or substantially all of the assets of the
      Company for a consideration consisting primarily of securities shall be deemed
      a
      consolidation or merger for the foregoing purposes.

     

    (d)           Anti-Dilution
      Adjustments.

     

    (i)           (A)    Except
      as
      otherwise provided in Subparagraph 3(d)(iii)(B), or for Changes of Shares in
      the
      event the Company shall, at any time or from time to time after the date hereof,
      sell or issue any shares of Common Stock for a consideration per share less
      than
      the Conversion Price in effect on the date of such sale or issuance (any such
      sale or issuance, a “Dilutive Issuance”), then, and thereafter upon each
      further Dilutive Issuance, the Per Share Exercise Price in effect immediately
      prior to such Dilutive Issuance shall be changed to a price equal to the
      consideration per share received by the Company in respect of the shares issued
      in such Dilutive Issuance (rounded to the nearest tenth of a cent) (determined
      as provided in Clause 3(d)(ii)(D) below).  Such adjustment shall be
      made successively whenever such an issuance is made.

     

    (B)           Upon
      any adjustment of the Per Share Exercise Price as provided in this Subparagraph
      3(d), the number of shares of Common Stock for which this Warrant is exercisable
      immediately after the occurrence of any such event shall be adjusted to equal
      (1) the number of shares of Common Stock for which this Warrant was exercisable
      immediately prior to the adjustment multiplied by (2) the Per Share Exercise
      Price in effect immediately prior to the occurrence of such event divided by
      (3)
      the Per Share Exercise Price in effect immediately after the occurrence of
      such
      event.

     

    (ii)           For
      purposes of Paragraph 3(d)(i), the following Subparagraphs (A) to (E) shall
      also
      be applicable:

     

    (A)           No
      adjustment in the Per Share Exercise Price shall be required unless such
      adjustment would require a decrease of at least $0.001 per share of Common
      Stock; provided, however, that any adjustments which by reason of
      this Subsection 3(d)(ii)(A) are not required to be made shall be carried forward
      and shall be made at the time of and together with adjustments so carried
      forward, shall require a decrease of at least $0.001 per share of Common Stock
      in the Per Share Exercise Price hereunder.

     

    (B)           In
      case of the sale or other issuance by the Company (including as a component
      of a
      unit) of any rights or warrants to subscribe for or purchase, or any options
      for
      the purchase of, Common Stock or any securities

     

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

     

    convertible
      into or exchangeable for Common Stock (such securities convertible, exercisable
      or exchangeable into Common Stock being herein called “Convertible
      Securities”), whether or not such rights, warrants or options, or the right
      to convert or exchange such Convertible Securities, are immediately exercisable,
      if the consideration per share for which Common Stock is issuable upon the
      exercise, conversion or exchange of such Convertible Securities (determined
      by
      dividing (x) the minimum aggregate consideration, as set forth in the instrument
      relating thereto without regard to any antidilution or similar provisions
      contained therein for a subsequent adjustment of such amount, payable to the
      Company upon the exercise of such Convertible Securities, plus the consideration
      received by the Company for the issuance or sale of such Convertible Securities,
      by (y) the total maximum number, as set forth in the instrument relating thereto
      without regard to any antidilution or similar provisions contained therein
      for a
      subsequent adjustment of such amount, of shares of Common Stock issuable upon
      the exercise, conversion or exchange of such Convertible Securities) is less
      than the Per Share Exercise Price as of the date of the issuance or sale of
      such
      Convertible Securities, then such total maximum number of shares of Common
      Stock
      issuable upon the exercise, conversion or exchange of such Convertible
      Securities (as of the date of the issuance or sale of such rights, warrants
      or
      options) shall be deemed to be “Common Stock” for purposes of Paragraph 3(d)(i)
      and shall be deemed to have been sold for an amount equal to such consideration
      per share and shall cause an adjustment to be made in accordance with Paragraph
      3(d)(i).

     

    (C)           In
      case the rights of conversion, exchange or exercise of any of the securities
      referred to in Subparagraph (B) of this Paragraph 3(d)(ii) or any other
      securities of the Company convertible, exchangeable or exercisable for shares
      of
      Common Stock are modified for any reason other than an event that would require
      adjustment to prevent dilution under another paragraph in this Section 3, so
      that the consideration per share received by the Company after such modification
      is less than the Per Share Exercise Price as of the date prior to such
      modification, then such securities, to the extent not theretofore exercised,
      converted or exchanged, shall be deemed to have expired or terminated
      immediately prior to the date of such modification and the Company shall be
      deemed, for purposes of calculating any adjustments pursuant to this Subsection
      3(d), to have issued such new securities upon such new terms on the date of
      modification.  Such adjustment shall become effective as of the date
      upon which such modification shall take effect.

     

    (D)           In
      case of the sale of any shares of Common Stock, any Convertible Securities,
      any
      rights or warrants to subscribe for or purchase, or any options for the purchase
      of, Common Stock or Convertible Securities, the consideration received by the
      Company therefor shall be deemed to be the gross sales price therefor without
      deducting therefrom any expense paid or incurred by the Company or any
      underwriting discounts or commissions or concessions paid or allowed by the
      Company in connection therewith.  In the event that any securities
      shall be issued in connection with any other securities of the Company, together
      comprising one integral transaction in which no specific consideration is
      allocated among the securities, then each of such securities shall be deemed
      to

     

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

     

    have
      been
issued
      for such consideration as the Board of Directors of the Company determines
      in
      good faith.  In case of the sale of any shares of Common Stock, any
      Convertible Securities, any rights or warrants to subscribe for or purchase,
      or
      any options for the purchase of, Common Stock or Convertible Securities for
      any
      non-cash consideration, then the non-cash component of the consideration for
      such securities shall be deemed to be such amount as the Board of Directors
      of
      the Company determines in good faith.

     

    (iii)           Notwithstanding
      any other provision hereof, no adjustment to the Per Share Exercise Price will
      be made:

     

    (A)           upon
      the issuance or exercise of any options or other awards granted pursuant to
      a
      stock incentive plan or similar plan of the Company in effect on the date hereof
      (but without giving effect to any amendment thereto after the date hereof)
      or
      approved by the Warrant Majority or otherwise issued as compensation or
      inducement to employment or engagement in the ordinary course of business;
      or

     

    (B)           upon
      exercise or conversion of any Convertible Securities that are outstanding as
      of
      the date hereof, or upon the issuance, conversion or exercise of any Warrants
      or
      warrants issued as compensation in connection with the transactions that gave
      rise to the issuance of the Warrants; or

     

    (C)           upon
      the issuance, exercise or conversion of Common Stock, Convertible Securities
      or
      options, warrants or other rights to acquire Common Stock or Convertible
      Securities in connection with any of the following: (v) settlement of any actual
      or threatened litigation or other claims; (w) customer or vendor alliances;
      (x)
      joint ventures or manufacturing, marketing or distribution alliances; (y)
      equipment leasing transactions or borrowing transactions with institutional
      lenders; and (z) acquisitions, joint ventures or other strategic transactions;
      provided, that in each such case the Board of Directors has determined in good
      faith that such transaction is not primarily a capital raising transaction;
      or

     

    (D)           upon
      the issuance or sale of Common Stock or other securities upon exercise,
      conversion or exchange of any Convertible Securities, whether or not such
      Convertible Securities were outstanding on the date hereof or are hereafter
      issued or sold; provided, that any adjustment was either made or not required
      to
      be made upon the issuance or sale of such Convertible Securities or any
      modification of the terms thereof were so made; or

     

    (E)           if
      the Company shall take a record of the holders of its Common Stock for the
      purpose of entitling them to receive a dividend or distribution or subscription
      or purchase rights and shall, thereafter and before the distribution to
      stockholders thereof, legally abandon its plan to pay or deliver such dividend,
      distribution, subscription or purchase rights, and any such adjustment
      previously made in respect thereof shall be rescinded and annulled.

     

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

     

    Notwithstanding
      anything to the contrary in this Paragraph 3(d)(iii), Subparagraph 3(d)(ii)(C)
      shall apply to any modification of the rights of conversion, exchange or
      exercise of any of the securities referred to in Subparagraphs (B) and (D)
      of
      this Paragraph 3(d)(iii).

     

    (v)           As
      used in this Subsection 3(c), the term “Common Stock” shall mean and include the
      Company’s Common Stock authorized on the date hereof and shall also include any
      capital stock of any class of the Company thereafter authorized which shall
      not
      be limited to a fixed sum or percentage in respect of the rights of the holders
      thereof to participate in dividends and in the distribution of assets upon
      the
      voluntary liquidation, dissolution or winding up of the Company, and the number
      of “shares” thereof for purposes hereof shall be based on the ratio by which
      such new securities participate equally with the Common Stock.

     

    (d)           All
      calculations under this Section 3 shall be made to the nearest tenth of a cent
      or to the nearest 1/100th of a share, as the case may be.  Anything in
      this Section 3 to the contrary notwithstanding, the Company shall be entitled
      to
      make such reductions in the Per Share Exercise Price, in addition to those
      required by this Section 3, as it in its discretion shall deem to be advisable
      in order that any stock dividend, subdivision of shares or distribution of
      rights to purchase stock or securities convertible or exchangeable for stock
      hereafter made by the Company to its stockholders shall not be
      taxable.

     

    (e)           If,
      as a result of an adjustment made pursuant to this Section 3, the Holder of
      any
      Warrant thereafter surrendered for exercise shall become entitled to receive
      shares of two or more classes of capital stock or shares of Common Stock and
      other capital stock of the Company, the Board of Directors shall determine
      in
      good faith the allocation of the adjusted Per Share Exercise Price between
      or
      among shares or such classes of capital stock or shares of Common Stock and
      other capital stock.

     

    4.           Prior
      Notice of Certain Events.  In case:

     

    (i)           
      the Company shall declare any dividend (or any other distribution);

     

    (ii)          
       the Company shall authorize the granting to the holders of Common
      Stock of rights or warrants to subscribe for or purchase any shares of stock
      of
      any class or of any other rights or warrants;

     

    (iii)           of
      any reclassification of Common Stock (other than a subdivision or combination
      of
      the outstanding Common Stock, or a change in par value, or from par value to
      no
      par value, or from no par value to par value);

     

    (iv)           of
      any consolidation or merger to which the Company is a party and for which
      approval of any stockholders of the Company shall be required, or of the sale
      or
      transfer of all or substantially all of the assets of the Company or of any
      compulsory share exchange whereby the Common Stock is converted into other
      securities, cash or other property; or

     

    (v)           any
      (x) liquidation, dissolution or winding up of the Company, whether voluntary
      or
      involuntary, (y) a sale or other disposition of all or substantially all of
      the

     

     

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

     

    assets
      of
      the Company or (z) any consolidation, merger, combination, reorganization or
      other transaction in which the Company is not the surviving entity or shares
      of
      Common Stock constituting in excess of 50% of the voting power of the Company
      are exchanged for or changed into stock or securities of another entity, cash
      and/or any other property;

     

    then
      the
      Company shall cause to be mailed to the Holder, at its last address as it shall
      appear upon the warrant registration records of the Company or its transfer
      agent, at least ten days prior to the applicable date hereinafter specified,
      a
      notice stating (x) the date on which a record (if any) is to be taken for the
      purpose of such dividend. distribution or granting of rights or warrants or,
      if
      a record is not to be taken, the date as of which the holders of Common Stock
      of
      record to be entitled to such dividend, distribution, rights or warrants are
      to
      be determined and a description of the cash, securities or other property to
      be
      received by such holders upon such dividend, distribution or granting of rights
      or warrants or (y) the date on which such reclassification, consolidation,
      merger, sale, transfer, share exchange or Liquidation Event is expected to
      become effective, the date as of which it is expected that holders of Common
      Stock of record shall be entitled to exchange their shares of Common Stock
      for
      securities or other property deliverable upon such exchange or Liquidation
      Event
      and the consideration, including securities or other property, to be received
      by
      such holders upon such exchange; provided, however, that no failure to mail
      such
      notice or any defect therein or in the mailing thereof shall affect the validity
      of the corporate action required to be specified in such notice.

     

    5.           Notice
      of Adjustments.  Whenever the Per Share Exercise Price is
      adjusted as provided in Section 3 and upon any modification of the rights of
      a
      Holder of Warrants in accordance with Section 3, the Chief Financial Officer,
      or
      equivalent officer, of the Company shall promptly prepare a certificate setting
      forth the Per Share Exercise Price and the number of Warrant Shares after such
      adjustment or the effect of such modification, a brief statement of the facts
      requiring such adjustment or modification and the manner of computing the same
      and cause copies of such certificate to be mailed to the Holder.

     

    6.           Fractional Shares.  No
      fractional shares or scrip representing fractional Warrant Shares shall be
      issued upon conversion of this Warrant.  If more than one certificate
      evidencing Warrants shall be surrendered for conversion at one time by the
      same
      Holder, the number of full shares issuable upon conversion thereof shall be
      computed on the basis of the aggregate number of shares of Common Stock that
      may
      be purchased pursuant to the Warrants so surrendered.  Instead of any
      fractional Warrant Shares which would otherwise be issuable upon exercise of
      this Warrant (or of such aggregate number of Warrants), the Company may elect,
      in its sole discretion, independently for each Holder, whether such number
      of
      Warrant Shares will be rounded to the nearest whole share (with a .5 of a share
      rounded upward) or whether such Holder will be given cash, in lieu of any
      fractional share, in an amount equal to the same fraction of the fair market
      value per share of Common Stock at such time, as determined by the Board of
      Directors of the Company in good faith as of the close of business on the day
      of
      exercise.

     

    7.           Securities
      Laws Matters.

     

    (a)           The
      Holder represents, by accepting this Warrant, that it understands that this
      Warrant and any securities obtainable upon exercise of this Warrant have not
      been registered for sale under Federal or state securities laws and are being
      offered and sold to the Holder pursuant

     

     

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

     

    to
      one or
      more exemptions from the registration requirements of such securities
      laws.  The Holder further represents that it is an “accredited
      investor” within the meaning of Regulation D under the Securities
      Act.  In the absence of an effective registration of such securities
      or an exemption therefrom, any certificates for such securities shall bear
      a
      legend similar to the legend set forth in Section 7(c) hereof.  The
      Holder understands that it must bear the economic risk of its investment in
      this
      Warrant and any securities obtainable upon exercise of this Warrant for an
      indefinite period of time, as this Warrant and such securities have not been
      registered under Federal or state securities laws and therefore cannot be sold
      unless subsequently registered under such laws, unless as exemption from such
      registration is available.

     

    (b)           
      The Holder, by his acceptance of this Warrant, represents to the Company that
      it
      is acquiring this Warrant and will acquire any securities obtainable upon
      exercise of this Warrant for its own account for investment and not with a
      view
      to, or for sale in connection with, any distribution thereof in violation of
      the
      Securities Act.  The Holder agrees that this Warrant and any such
      securities will not be sold or otherwise transferred unless (i) a registration
      statement with respect to such transfer is effective under the Securities Act
      and any applicable state securities laws or (ii) such sale or transfer is made
      pursuant to one or more exemptions from the Securities Act.

     

    (c)           
      All certificates representing Warrant Shares issued upon exercise hereof shall
      be stamped or imprinted with a legend in substantially the following
      form:

     

    THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
      SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE
      SECURITIES LAWS.  SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE,
      PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
      REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH SECURITIES UNDER THE
      SECURITIES ACT OR AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
      OF
      THE SECURITIES ACT.  ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO
      COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.

     

    THE
      SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF A REGISTRATION
      RIGHTS AGREEMENT, AND ANY TRANSFEREE OF SUCH SECURITIES SHALL BE BOUND BY THE
      PROVISIONS OF SAID AGREEMENT, A COPY OF WHICH IS ON FILE WITH, AND AVAILABLE
      FROM, THE SECRETARY OF NEPHROS, INC.

     

    8.           Miscellaneous

     

    (a)           This
      Warrant may be amended only by mutual written agreement of the Company and
      the
      Holder or, if such amendment shall apply to all outstanding Warrants, with
      the
      written consent of the Company and the registered holders of Warrants to
      purchase a majority of the shares of Common Stock or other securities or
      property issuable upon exercise of all outstanding Warrants (the “Warrant
      Majority”); provided, however, without the consent of the Holder of this
      Warrant, no such amendment may be approved that would have the effect of (i)
      increasing the Per Share Exercise Price of this Warrant, (ii) decreasing the
      number of shares of

     

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

     

    Common
      Stock for which this Warrant is exercisable, (iii) accelerating the Termination
      Date; or (iv) except as permitted by the following proviso, waive any adjustment
      under Section 3 of this Agreement; provided, further, that the Warrant Majority
      may waive the application of any adjustment under Subsection 3(d) of this
      Agreement, however, that (x) such waiver must be given in writing prior to
      the
      date such adjustment would otherwise become effective, and (y) for purposes
      of
      determining a Warrant Majority for such purpose any holder of Warrants (and
      any
      Warrants held by such holders) participating in the transaction that would
      otherwise give rise to such adjustment shall be excluded from such
      determination.  Furthermore, the Company may take any action herein
      prohibited or omit to take any action herein required to be performed by it,
      and
      any breach of any covenant, agreement, warranty or representation may be waived,
      if the Company has obtained the written consent or waiver of the
      Holder.  Any amendments approved in compliance with this Section 8
      shall bind the Holder’s successors and assigns.

     

    (b)           This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York, without giving effect to principles governing conflicts
      of
      law that would defer to the substantive law of another
      jurisdiction.

     

    (c)           Notice.  Any
      notice or other communication required or permitted to be given hereunder shall
      be in writing and shall be mailed by certified mail, return receipt requested,
      or by Federal Express, Express Mail or similar guaranteed overnight delivery
      or
      courier service or delivered in person against receipt to the party to whom
      it
      is to be given,

     

    
      	
               

            	
              (i)

            	
              if
                to the Company,

            

    

     

    Nephros,
      Inc.

    3960
      Broadway

    New
      York,
      New York  10032

    Attn:
      President

     

    (ii)           with
      a copy to,

     

    Kramer
      Levin Naftalis & Frankel LLP

    1177
      Avenue of the Americas

    New
      York,
      New York 10036

    Attention:  Thomas
      D. Balliett, Esq.

    

    
      	
               

            	
               (iii)

            	
              if
                to the Holder, at the address set forth on the Company’s
                records,

            

    

     

    or
      in
      either case, to such other address as the party shall have furnished in writing
      in accordance with the provisions of this Section 8(c).  Any notice
      given by means permitted by this Section 8(c) shall be deemed given at the
      time of receipt thereof at the address specified in this Section
      8(c).

     

    (d)           Interpretation.  If
      any term or provision of this Warrant shall be held invalid, illegal or
      unenforceable, the validity of all other terms and provisions hereof shall
      in no
      way be affected thereby.

     

    (e)           Successors
      and Assigns.  Subject to the restrictions on transfer contained in
      Section 7 of this Agreement, this Warrant shall be binding upon the Company
      and
      its

     

     

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

     

    successors
      and assigns and shall inure to the benefit of the Holder and its successors
      and
      registered assigns.

     

    (f)           Assignment
      by the Company.  Neither this Warrant nor any of the rights,
      interests or obligations hereunder may be assigned, by operation of law or
      otherwise, in whole or in part, by the Company without the prior written consent
      of the Holder.

     

    (g)           Saturdays,
      Sundays, Holidays.  If any date that may at any time be specified
      in this Warrant as a date for the taking of any action under this Warrant shall
      fall on Saturday, Sunday or on a day which in New York shall be a legal holiday,
      then the date for the making of that payment shall be the next subsequent day
      which is not a Saturday, Sunday or legal holiday.

     

    (h)           Jurisdiction;
      Forum.  Any dispute arising out of or relating to this Warrant
      shall be resolved, and all suits, actions and proceedings brought by the Company
      or Holder hereunder shall be brought only in, any state court sitting in the
      County of New York or federal court sitting in the Southern District of the
      State of New York.  The Company waives, and upon delivery of a Notice
      of Election the Holder waives, any objection to the laying of venue in such
      courts and any claim that any such action has been brought in an inconvenient
      forum.  To the extent permitted by law, any judgment in respect of a
      dispute arising out of or relating to this Warrant may be enforced in any other
      jurisdiction within or outside the United States by suit on the judgment, a
      certified copy of such judgment being conclusive evidence of the fact and amount
      of such judgment.

     

    (i)           Attorneys’
      Fees.  In the event of any litigation or other proceeding
      concerning this Warrant or the transactions contemplated hereby, including
      any
      such litigation or proceeding with respect to the enforcement of this Warrant
      against any defaulting party, the prevailing party in such litigation or
      proceeding shall be entitled to reimbursement from the party opposing such
      prevailing party for all attorneys’ fees and costs incurred by such prevailing
      party in such litigation or proceeding.

     

    9.           Registration
      Rights.  The Holder of this Warrant is entitled to the benefit of
      certain registration rights with respect to the Warrant Shares issuable upon
      the
      exercise of this Warrant pursuant to that certain Registration Rights Agreement
      by and among the Company and persons listed on Schedule I thereto (the
“Registration Rights Agreement”) and the registration rights with respect
      to the Warrant Shares issuable upon the exercise of this Warrant by any
      subsequent Holder may only be assigned in accordance with the terms and
      provisions of the Registrations Rights Agreement.

     

    10.           Headings.  The
      headings of the Sections of this Warrant are for convenience of reference only
      and shall not, for any purpose, be deemed a part of this Warrant.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF, the Company has executed this Warrant as of the day and year
      first above written.

     

                NEPHROS,
      INC.

     

                By: __________________________________                                                                          

                      Name:

                      Title:

     

     

     

    
 

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    NOTICE
      OF EXERCISE-CASH PAYMENT

     

    

     

    

     

    The
      undersigned, ____________________________, pursuant to the provisions of the
      foregoing Warrant, hereby elects to exercise the within Warrant to the extent
      of
      purchasing _____________________ shares of Common Stock of Nephros, Inc.
      thereunder and hereby makes payment of $_______________ by certified or official
      bank check in payment of the exercise price therefor.  The undersigned
      hereby confirms the representations, warranties and covenants made by it in
      the
      Warrant.

     

    

     

    Dated:_______________                        Signature:_____________________________

     

                                 
      Address:______________________________

    

     

    

     

    NOTICE
      OF EXERCISE-CASHLESS EXERCISE

     

    

     

    The
      undersigned, ____________________________, pursuant to the provisions of the
      foregoing Warrant, hereby elects to exercise the within Warrant as it relates
      to
      _____________________ shares of Common Stock of Nephros, Inc. by means of a
      cashless exercise pursuant to Section 1(d) of the Warrant.  As a
      result of such exercise, and based on a VWAP of $_______ per share, the
      undersigned is entitled to receive _____________ shares of Common
      Stock.  The undersigned hereby confirms the representations,
      warranties and covenants made by it in the Warrant.

     

    

     

    Dated:_______________                        Signature:_____________________________

     

                                           Address:______________________________

    

     

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    ASSIGNMENT

     

    FOR
      VALUE
      RECEIVED _______________________________________ hereby sells, assigns and
      transfers unto _____________________________________ the foregoing Warrant
      and
      all rights evidenced thereby, and does irrevocably constitute and appoint
      _____________________________, attorney, to transfer said Warrant on the books
      of Nephros, Inc.

     

    Dated:_______________

     

                                                    Signature:_____________________________

     

                                                    Address:______________________________

    

    

    

    

    PARTIAL
      ASSIGNMENT

     

    FOR
      VALUE
      RECEIVED __________________________ hereby assigns and transfers unto
      _________________________ the right to purchase __________ shares of the Common
      Stock, $0.001 par value per share, of Nephros, Inc. covered by the foregoing
      Warrant, and a proportionate part of said Warrant and the rights evidenced
      thereby, and does irrevocably constitute and appoint __________________________,
      attorney, to transfer that part of said Warrant on the books of Nephros,
      Inc.

     

    Dated:_______________

     

                                                    Signature:___________________________

     

                                                    Address:____________________________

     

     

     

     

     

    
 

    16

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