Document:

Amended and Restated Employment Agreement.

 Exhibit 10.45 
  
 EXECUTION COPY 
  
 AMENDED AND RESTATED EMPLOYMENT AGREEMENT 
  
 This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made, entered into, and effective as of May 17, 2004 (hereinafter referred
to as the “Effective Date”), by and between SMART & FINAL INC., a Delaware corporation (hereinafter referred to as the “Company”), and ETIENNE SNOLLAERTS, an individual (hereinafter referred to as “Executive”).

  
 RECITALS 
  
 WHEREAS, Executive and the Company are parties to that certain Employment
Agreement (the “Original Agreement”), made, entered into and effective as of August 4, 2003, which provides, among other matters, for Executive to serve as the Chief Operating Officer of the Company pursuant to the terms thereof; and

  
 WHEREAS, Executive is presently serving as the Chief Operating
Officer and a member of the Board of Directors of the Company (the “Board”); and 
  
 WHEREAS, Executive possesses considerable experience and an intimate knowledge of the business and affairs of the Company, its policies, methods, personnel and operations; and 
  
 WHEREAS, the Company recognizes that Executive has demonstrated unique
qualifications to act in an executive capacity for and on behalf of the Company; and 
  
 WHEREAS, the Company is desirous of amending Executive’s title, duties and responsibilities, in the manner described in this Agreement, and Executive is desirous of being employed by the Company in such manner;
and 
  
 WHEREAS, Executive and the Company desire to amend and
restate, in its entirety, the Original Agreement on the terms set forth in this Agreement. 
  
 NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements of the parties set forth in this Agreement, and of other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 
  
 AGREEMENT 
  
 Section 1. Term of Employment 
  
 1.1. The
Company hereby agrees to employ Executive and Executive hereby agrees to serve the Company, in accordance with the terms and conditions set forth herein, from the Effective Date of this Agreement until May 17, 2007 (unless extended pursuant to
Section 1.2 below); subject, however, to earlier termination as expressly provided in Section 6 below (such period, including, if elected, the extension pursuant to Section 1.2 hereof, the “Term” or the
“Term of this Agreement”). 

 1.2. Not earlier than May 1, 2006 nor later than May 31, 2006, the Company may, in its sole discretion,
give notice to Executive of the Company’s election to extend this Agreement for a three (3) year period from May 17, 2007. Failure by the Company to give any such notice of election to extend this Agreement shall be deemed an election by the
Company not to extend the Term hereof and, in such case, this Agreement shall terminate as otherwise provided herein. 
  
 Section 2. Positions and Responsibilities 
  
 2.1. Throughout the Term of this Agreement, Executive shall serve as the President and Chief Executive Officer of the Company, and shall have and perform
the duties and responsibilities customarily performed by a president and chief executive officer of a company. In addition, the Company shall recommend Executive for election to the Board each time during the Term that Executive is eligible for
nomination. 
  
 Section 3. Standard of Care and Performance; Location

  
 3.1. During the Term of this Agreement, Executive agrees
to devote substantially his full time, attention and energies to the Company’s business. 
  
 3.2. Nothing in this Section 3 shall be construed as preventing Executive from participating in charitable activities, community or industry affairs or from investing his personal assets in such form or manner as will
not require his services in the daily operations of the affairs of the companies in which such investments are made. In addition, nothing in this Section 3 shall be construed as preventing Executive from serving on the board of directors of any
not-for-profit company or, with the prior written approval of the Company, on the board of directors of any for-profit company so long as such activity does not materially interfere with the performance of Executive’s duties hereunder or create
a conflict of interest. 
  
 3.3. Executive shall perform his
duties and responsibilities under this Agreement in the City of Commerce, Los Angeles County, California, or such other location(s) within the greater metropolitan Los Angeles County area as may be required by the Company from time to time.

  
 Section 4. Compensation and Benefits 
  
 The Compensation Committee of the Board shall be solely responsible for
setting Executive’s pay, as remuneration for all services to be rendered by Executive during the Term of this Agreement, and as consideration for complying with the covenants herein. The compensation and benefits provided to Executive shall be
as follows: 
  
 4.1. Base Salary. During the Term of this
Agreement, the Company shall pay to Executive an annual salary (a “Base Salary”) in the amount of Six Hundred Fifty Thousand Dollars ($650,000) per annum. 
  

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 (a) Executive’s Base Salary shall be paid to Executive in equal installments, throughout the year,
consistent with the normal payroll practices of the Company. 
  
 (b) Executive’s Base Salary shall be reviewed annually in accordance with the Company’s executive merit pay policy, as amended from time to time, and at the sole discretion of the Compensation Committee the Base Salary may be
increased, but in no event shall the Base Salary be decreased to an amount less than Six Hundred Fifty Thousand Dollars ($650,000) per annum. 
  
 4.2. Initial Option Grant. As compensation for the services of Executive hereunder, the Company has previously granted to Executive a non-qualified
stock option to purchase One Hundred Fifty Thousand (150,000) shares of the Company’s common stock (“Common Stock”), at an exercise price per share of $12.89. Executive hereby acknowledges receipt of such stock option on March 30,
2004. Such option grant is evidenced by a written option award agreement in the form attached hereto as Exhibit “A”. 
  
 4.3. Initial Grant of Shares of Restricted Common Stock. As compensation for the services of Executive hereunder, the Company has previously
granted to Executive Sixty Thousand (60,000) performance-based units (“Smart Shares”). Executive hereby acknowledges receipt of such Smart Shares on March 30, 2004. Such grant is evidenced by a written award agreement in the form attached
hereto as Exhibit “B”. 
  
 4.4. Annual
Bonus. Executive shall be eligible to earn an annual bonus (“Annual Bonus”), at a level that, in the sole and absolute discretion of the Compensation Committee of the Board, is commensurate with the bonuses offered to executives having
the same or similar duties and responsibilities as those of Executive at companies of similar size, scope, business and financial condition as that of the Company, as more fully described below. 
  
 (a) If and to the extent that the Board decides to award annual bonuses
during the Term of this Agreement, Executive shall be eligible to earn an Annual Bonus at the sole discretion of the Board. The target for any such Annual Bonus shall be not less than One Hundred Percent (100%) nor greater than Two Hundred Percent
(200%) of Executive’s Base Salary for such period. Executive’s Annual Bonus for any partial years of service hereunder shall be prorated. 
  
 (b) Nothing in this Section shall be construed as obligating the Company to pay Executive an Annual Bonus or to refrain from changing and/or amending the
annual bonus/incentive plan so long as such changes are similarly applicable to all executives generally. 
  
 4.5. Long-Term Incentives. During the period of time that Executive serves as the Company’s President and Chief Executive Officer, Executive
shall be eligible to receive long-term incentive awards (the “Long-Term Incentives”) of restricted stock or options to purchase Common Stock (“Options”), in accordance with the guidelines set forth in the 
  

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 Company’s executive compensation policies as determined by the Compensation Committee of the Board. All such
Long-Term Incentives and Options shall be awarded to Executive no less frequently than such awards are made to other senior executives of the Company and shall exceed the value of awards made to any single senior executive for any given award.

  
 4.6. Retirement Benefits. 
  
 (a) Executive shall be eligible to participate in the Company’s
qualified defined benefit and defined contribution retirement plans, including, but not limited to, the 401(k) savings plan (including matching contributions from the Company), and the pension plan. Executive shall also be eligible to participate in
the Smart & Final Supplemental Deferred Compensation Plan (including deferral of up to One Hundred Percent (100%) of Base Salary and any Annual Bonus) and the Directors Deferred Compensation Plan, subject to the eligibility and participation
requirements of any such plans. 
  
 (b) Executive shall be
eligible to participate in the Company’s Supplemental Executive Retirement Plan (“SERP”), subject to the eligibility and participation requirements of such plan; provided, however, that 
  
 (i) Executive’s benefits under such plan shall vest at
the rate of four percent (4%) per year; 
  
 (ii)
the five (5) year delay period referred to in Section 3.1(e) of the Supplemental Executive Retirement Plan, Master Plan Document, as amended and restated through May 16, 2000, shall not apply to Executive, and Executive shall be eligible to elect
Early Retirement under Section 1.11 of the SERP as if he has ten (10) Years of Service at age 55; and 
  
 (iii) notwithstanding anything to the contrary herein, any benefits to which Executive may otherwise be entitled under such plan shall be
forever forfeited by Executive if Executive accepts any position with Casino Guichard-Perrachon, S.A., or any of its foreign or domestic subsidiaries (“Casino”), within six (6) months following the termination of his employment with the
Company. 
  
 4.7. Employee Benefits. During the Term and as
otherwise provided by the provisions of each of the respective plans, the Company shall provide to Executive all of the benefits that other executives and employees of the Company are entitled to receive, as commensurate with Executive’s
position. The benefits, and the terms of conditions thereof, to which Executive shall be entitled, are set forth in the Company’s Employee Benefits package, as the same may, from time to time, be amended or modified. 
  
 4.8. Benefit Reimbursements. The Company shall reimburse Executive up
to Twelve Thousand Dollars ($12,000) per calendar year for medical, dental and vision insurance expenses, and shall provide Executive with executive life insurance and long-term disability insurance. 
  

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 4.9. Vacation. Executive shall be entitled to five (5) weeks of paid vacation per calendar year,
prorated for any partial years of services, in accordance with the standard written policy of the Company with regard to vacations of employees. Unused vacation shall accrue from year to year, but shall be capped at ten (10) weeks. 
  
 4.10. Automobile Allowance. During the Term, Executive shall receive
(i) an automobile allowance of One Thousand Dollars ($1,000) per month, (ii) Two Thousand Five Hundred Dollars ($2,500) per calendar year (in accordance with the Company’s written policies) to be used for maintenance expenses for such
automobile or as a supplement to Executive’s monthly automobile allowance set forth in (i) above; (iii) a credit card to be used for the purchase of gasoline for such automobile, and (iv) automobile insurance for such automobile paid for by the
Company. 
  
 4.11. Financial Planning/Tax Expenses. During
the Term, the Company shall reimburse Executive for financial planning and tax expenses paid to a financial services provider of Executive’s choosing, in an amount not to exceed Fifteen Thousand Dollars ($15,000) per calendar year. 

 
 4.12. Expatriate Compensation. Executive shall receive expatriation
compensation in accordance with that certain Expatriate Compensation Agreement between Executive and the Company, effective as of August 4, 2003. 
  
 4.13. Perquisites. The Company shall provide to Executive, at the Company’s cost, all perquisites to which other executives of the Company are
entitled to receive and such other perquisites that are suitable to the character of Executive’s position with the Company and adequate for the performance of his duties hereunder. 
  
 4.14. Right To Change Plans. By reason of the provisions herein, the Company shall not be obligated to institute,
maintain, change, amend or discontinue, or to refrain from changing, amending or discontinuing, any benefit plan, program or perquisite referenced in Section 4.7 above, so long as such changes are similarly applicable to executive employees
generally. 
  
 4.15. Benefits Conflicts. Executive’s
benefits and perquisites shall be as set forth in this Agreement, subject, however, to the Company’s right to change the plans set forth in Section 4.14 above. 
  
 Section 5. Expenses 
  
 5.1. Reimbursements. The Company shall, according to its written
policies, pay or reimburse Executive for all ordinary and necessary expenses, in a reasonable amount, which Executive incurs in performing his duties under this Agreement including, but not limited to, travel, entertainment, professional dues and
subscriptions, and all dues, fees, and expenses associated with membership in various professional, business, and civic associations and societies of which Executive’s participation is in the best interest of the Company. 
  

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 5.2. Relocation Expenses. 
  
 (a) The Company shall reimburse Executive for all reasonable relocation expenses, which Executive incurs in relocating to
California including, but not limited to, moving and travel expenses, upon submission of documentation acceptable to the Company. The reimbursement of relocation expenses as set forth in this Section 5.2 shall include such additional payment as is
necessary (after taking into account all federal, state and local income and payroll taxes payable by Executive as a result of the receipt of such reimbursement) to place Executive in the same after-tax position (including federal, state and local
income and payroll taxes) as Executive would have been in had no such tax been paid or incurred by Executive as a result of such reimbursement. 
  
 (b) On one other occasion and only during the initial Term of this Agreement, the Company shall reimburse Executive for reasonable relocation expenses,
which reimbursement shall be limited to expenses associated solely with the transfer of household goods (and not personal travel expenses), upon submission of documentation acceptable to the Company. All such amounts shall be “grossed-up”
as set forth in Section 5.2(a) above. 
  
 (c) Notwithstanding the
reimbursement for relocation expenses described in Sections 5.2(a) and 5.2(b) above, the Company shall reimburse Executive for all reasonable relocation expenses, which Executive incurs in relocating to France (or to another location provided that
the relocation expense does not exceed the expense to relocate to France) including, but not limited to, moving and travel expenses, upon submission of documentation acceptable to the Company, provided, however, that such
benefit will be available: 
  
 (i) only (a) for
a termination without Cause by the Company or a resignation for Good Reason by Executive, occurring during the Term of this Agreement, or (b) if there shall have been no termination or resignation during the Term, then upon expiration of the Term,
and 
  
 (ii) only if Executive does not accept
any position with Casino within six (6) months following the termination of his employment with the Company. 
  
 Section 6. Employment Terminations 
  
 6.1. Termination Due To Retirement. In the event Executive’s employment is terminated by reason of Executive’s Retirement (as defined under the then established rules of the Company’s
tax-qualified retirement plan) then, upon the effective date of such termination, the Company’s obligation to pay and provide to Executive Base Salary, Annual Bonus and Long-Term Incentives (as provided in Section 4 hereof), shall immediately
expire. Upon such termination, Executive shall be entitled, and his sole remedy under this Agreement shall be, to receive the severance benefits payable to a Tier I Executive upon termination of employment due to Retirement pursuant to Section 4.5
of the Company’s 2004 Executive Severance Plan (the “Severance Plan”). 
  

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 6.2. Termination Due To Death. In the event Executive’s employment is terminated by reason of
the death of Executive then, upon the date of such termination, the Company’s obligation to pay and provide to Executive Base Salary, Annual Bonus and Long-Term Incentives (as provided in Section 4 hereof) shall immediately expire. Upon such
termination, Executive shall be entitled, and his sole remedy under this Agreement shall be, to receive the severance benefits payable to a Tier I Executive upon termination of employment due to death pursuant to Section 4.5 of the Severance Plan.

  
 6.3. Termination Due To Disability. In the event that
Executive becomes Disabled during the Term of this Agreement and is, therefore, unable to perform his duties hereunder for a period of more than ninety (90) calendar days in the aggregate, during any period of twelve (12) consecutive months, or in
the event of the Board’s reasonable expectation that Executive’s Disability will exist for more than a period of ninety (90) calendar days, the Company shall have the right to terminate Executive’s active employment as provided in
this Agreement. However, the Board shall deliver written notice to Executive of the Company’s intent to terminate for Disability at least thirty (30) calendar days prior to the effective date of such termination. 
  
 A termination for Disability shall become effective upon the end of such
thirty (30) day notice period. Upon such effective date, the Company’s obligation to pay and provide to Executive Base Salary, Annual Bonus and Long-Term Incentives (as provided in Section 4 hereof), shall immediately expire. Upon such
termination, Executive shall be entitled, and his sole remedy under this Agreement shall be, to receive the severance benefits payable to a Tier I Executive upon termination of employment due to Disability pursuant to Section 4.4 of the Severance
Plan. 
  
 The term “Disability” shall, for all purposes
of this Agreement, have the meaning ascribed to such term in the Severance Plan. 
  
 It is expressly understood that the Disability of Executive for a period of ninety (90) calendar days or less in the aggregate during any period of twelve (12) consecutive months, in the absence of any reasonable
expectation that his Disability will exist for more than such a period of time, shall not constitute a failure by him to perform his duties hereunder and shall not be deemed a breach or default, and Executive shall receive full compensation for any
such period of Disability or for any other temporary illness or incapacity during the Term of this Agreement. 
  
 6.4. Voluntary Termination By Executive Without Good Reason. Executive may terminate this Agreement at any time by giving the Board written notice
of intent to terminate, delivered at least ninety (90) calendar days prior to the effective date of such termination (such period not to include vacation). The termination automatically shall become effective upon the expiration of the notice
period. 
  
 Upon such termination, Executive shall be entitled,
and his sole remedy under this Agreement shall be, to receive the severance benefits payable to a Tier I Executive upon termination of employment by such executive, other than for Retirement, pursuant to Section 4.6 of the Severance Plan.

  

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 6.5. Termination By The Company Without Cause. At any time during the Term, the Board may
terminate Executive’s employment, as provided under this Agreement, at any time, for reasons other than death, Disability, Retirement or for Cause, by notifying Executive in writing of the Company’s intent to terminate, at least thirty
(30) calendar days prior to the effective date of such termination. 
  
 Upon such termination, Executive shall be entitled, and his sole remedy under this Agreement shall be, to receive the severance benefits payable to a Tier I Executive upon termination of employment by the Company other than for Cause, death
or Disability pursuant to Section 4.2 of the Severance Plan (as well as (a) any accrued but unpaid bonus for the year preceding the year in which such termination occurs (b) additional service and compensation credit under the SERP for the duration
of the General Severance Period (as defined in the Severance Plan), and (c) continued participation in all Company fringe and employee benefit plans, programs and arrangements (without duplication of benefits otherwise provided under this Agreement
or the Severance Plan) on the same after-tax basis as during Executive’s active employment, except that the following benefits shall be excluded to the extent that the law or the plan or benefit program does not permit such benefit to be made
available to Executive, the Company’s (i) life and accidental insurance plans and programs, (ii) employee assistance programs, (iii) long-term disability plans and programs, (iv) paid time off benefits and programs, and (v) (active
participation in) equity plans and programs, 401(k) and other pension plans and programs); provided, however, that notwithstanding the provisions of the Severance Plan, Executive’s General Severance Period shall be
twenty-four (24) months. 
  
 6.6. Termination By The Company
For Cause. At any time during the Term of this Agreement, the Board, acting in good faith and pursuant to a determination approved by at least a majority of the Board, may terminate Executive’s employment hereunder for “Cause”,
provided that the Board determines that the conduct of Executive has a significant impact on the business of the Company. Prior to any such termination, (a) the Board shall provide Executive ten (10) days’ written notice setting forth in
reasonable detail the facts and circumstances providing the basis for such contemplated termination, and (b) Executive shall have an opportunity to appear before the Board to respond thereto. 
  
 “Cause” shall be defined as conduct of Executive that (a) is
finally adjudged to be knowingly fraudulent, deliberately dishonest or willful misconduct and (b) has a significant impact on the business of the Company. 
  
 Upon such termination by the Company for Cause, Executive shall be entitled, and his sole remedy under this Agreement shall be, to receive the severance
benefits payable to a Tier I Executive upon termination of employment by the Company for Cause pursuant to Section 4.6 of the Severance Plan. 
  
 6.7. Termination By Executive For Good Reason. At any time during the Term of this Agreement, Executive may terminate this Agreement for “Good
Reason” (as defined in the Severance Plan and modified to include the following additional events: (a) Executive’s failure to be re-elected to the Board during the Term, (b) any diminution in Executive’s title or reporting lines or
material reduction in Executive’s authority or responsibilities, (c) failure of any successor to assume this Agreement in writing, and (d) a 
  

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 material breach of this Agreement by the Company that remains uncured after expiration of the first ten (10) days of
Executive’s required thirty (30)-day notice period have elapsed) by giving the Board thirty (30) calendar days written notice of intent to terminate, which notice sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for such termination. 
  
 Upon the expiration of the thirty
(30)-day notice period, such termination shall become effective, unless, to the extent applicable, the Company shall have previously cured within the time frame set forth above in this Section 6.7. 
  
 Upon a termination of Executive’s employment for Good Reason at any time
other than during the six-month period preceding or the twenty-four (24) month period following the effective date of a Change in Control (as defined in Section 7.1 below), Executive shall be entitled, and his sole remedy under this Agreement shall
be, to receive the same severance payments and benefits as he is entitled to receive following an involuntary termination of his employment by the Company without Cause, as specified in Section 6.5 herein. Upon a termination for Good Reason during
the six months preceding or the twenty-four (24) months following the effective date of a Change in Control, Executive shall be entitled, and his sole remedy under this Agreement shall be, to receive the payments and benefits set forth in Section
7.1 herein in lieu of those set forth in this Section 6.7. 
  
 Executive’s right to terminate employment for Good Reason shall not be affected by Executive’s incapacity due to physical or mental illness. Executive’s continued employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting Good Reason herein. 
  
 6.8. Accelerated Vesting. If (a) this Agreement is terminated pursuant to Section 6.5 or Section 6.7 hereof, (b) this Agreement is not renewed by the Company after expiration of the Term, or (c) there is a
Change in Control then, in such circumstances (i) all Options received by Executive during the Term of this Agreement shall immediately become vested and (ii) all restrictions applicable to any shares of restricted stock or performance-based units
of the Company received by Executive during the Term of this Agreement shall immediately lapse (to the fullest extent possible). 
  
 Section 7. Change In Control 
  
 7.1. Employment Terminations In Connection With A Change In Control. In the event of a termination of Executive’s employment by the Company
without Cause or by Executive for Good Reason within the six months preceding or the twenty-four (24) months following the effective date of a Change in Control (as defined in the Severance Plan) then, in lieu of all other benefits provided to
Executive under the provisions of this Agreement, Executive shall be entitled, and his sole remedy under this Agreement shall be, to receive the severance benefits payable to a Tier I Executive (as modified in Section 6.5 hereof) upon a Change in
Control pursuant to Sections 5.1, 5.3 and 5.4 of the Severance Plan. 
  

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 7.2. Excise Tax Equalization Payment. In the event that Executive becomes entitled to payments
and/or benefits hereunder which would constitute “parachute payments” within the meaning of Section 280G(b) of the Internal Revenue Code of 1986, as amended, the provisions of Article 6 of the Severance Plan and of Exhibit
“B” to the Severance Plan shall apply to Executive in their entirety. 
  
 7.3. Acceptance of Position With Casino. Notwithstanding anything to the contrary herein, Executive shall not be eligible to receive any severance benefits, whether payable to a Tier I Executive upon a Change
in Control or otherwise, if Executive accepts any position with Casino, within six (6) months following any such change of control event. 
  
 Section 8. Certain Covenants 
  
 8.1. Competition. Without the prior written consent of the Company, during the Term of this Agreement and during the General Severance Period (as
set forth in Section 6.5 hereof), Executive shall not engage directly or indirectly (whether as an employee, investor, officer, director, partner, member, manager, shareholder, lender, consultant or otherwise), in any business or enterprise that is
“in competition” (as defined in Section 10.1 of the Severance Plan) with the Company or its successors or assigns. Notwithstanding the foregoing, nothing contained in this Section 8.1 shall prevent Executive from owning securities in
companies listed on a national securities exchange or traded on a national over-the-counter market, in an amount not to exceed 5% of the outstanding securities of any such company(ies). 
  
 8.2. Confidential Information. For purposes of this Agreement, “Confidential Information” means all
information that is not generally known or available to the public and gives Company a competitive advantage over others who do not know or use it, which Executive obtains from Company, or learns, discovers, develops, conceives, or creates while
employed or otherwise retained by Company, and which relates to the business or assets of Company (whether obtained, learned, discovered, developed, conceived or created preceding, on or after the Effective Date and prior to the termination of
Executive’s employment with the Company). The term “Confidential Information” includes, but is not limited to, inventions, ideas, computer programs, protocols, designs, processes, techniques, research and development information;
identities of clients and customers; financial data and information; business plans, strategies and processes; pricing and contract terms; client and customer preferences and requirements; and any other information of Company that Company shares
with Executive or that Executive should know, by virtue of Executive’s position or the circumstances under which Executive learned it, should be kept confidential. Confidential Information also includes information obtained by Company in
confidence from its clients, customers, vendors and other third parties. 
  
 (a) No Disclosure. Executive acknowledges that Company has a compelling business interest in preventing unfair competition stemming from the use or disclosure of its Confidential Information. Executive
therefore agrees that Executive will not disclose to others in any manner (except as may be necessary in the performance of his duties for the Company), use for Executive’s own benefit or for the benefit of anyone other than Company, any
Confidential Information, and Executive shall take all reasonable measures, in accordance with policies established by Company and instructions from the Board of Directors of Company, to protect Confidential Information from any accidental,
unauthorized, or inappropriate use or 
  

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 disclosure. Executive’s obligations under this Section 8.2 shall continue for so long as Executive is employed or
otherwise retained or compensated by Company, and shall continue thereafter for twenty-four (24) months, and with respect to Confidential Information constituting a trade secret within the meaning of the Uniform Trade Secrets Act, for such longer
period as such Confidential Information remains a trade secret. 
  
 (b) Company’s Ownership of Information. Executive further agrees that all files, records, documents, data, specification, equipment, software, hardware and similar items, whether maintained in hard copy or on line relating, to
Company’s business, whether prepared by Executive or others, and whether Confidential Information or not, are and shall remain exclusively the property of Company. 
  
 8.3. Covenants Regarding Other Employees. Executive recognizes that Company’s employees are unique and valuable
resources of Company who have knowledge of and access to Confidential Information and trade secrets of Company, and who have been trained by Company, and that the Executive’s employment requires Executive to have access to and interaction with
Company’s other employees. Executive agrees that for so long as Executive remains employed by Company under this Agreement and for a period of twenty four (24) months thereafter, Executive shall not, directly or indirectly, recruit or solicit
any employee, or group of employees, of Company to terminate employment with Company, or to become employed by or contract with Executive or any other person or entity. 
  
 8.4. Intent; Separate Covenants. Executive agrees that the covenants contained in this Section 8 are reasonable in
light of the nature of the Company’s business and Executive’s role in the business of Company. The covenants contained in this Agreement shall be construed as a series of separate and severable covenants. If any covenant contained in this
Agreement is determined, by any court of competent jurisdiction, to be unenforceable or unreasonable, Executive agrees that such covenants may and shall be modified by such court, but only to the extent necessary to eliminate those restrictions
determined to be unenforceable or unreasonable. Nothing contained in this Section 8 or elsewhere in this Agreement is intended to or shall modify or reduce in any way Executive’s obligations to comply, while employed or thereafter, with
applicable laws relating to trade secrets, or unfair competition. 
  
 8.5. Remedies. Executive acknowledges and agrees that Executive’s breach of any provision of this Section 8 of this Agreement is likely to cause irrevocable harm to Company, for which there may be an inadequate remedy at law and
which the ascertainment of damages would be difficult. Accordingly, in the event of a breach by Executive of any term of Section 8 of this Agreement, Company shall be entitled, in addition to and without having to prove the inadequacy of other
remedies at law (including, without limitation, damages for prior breaches hereof), to specific performance of this Agreement, as well as injunctive relief (without being required to post bond or other security). 
  

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 Section 9. Indemnification; Insurance 
  
 9.1. The Company hereby covenants and agrees to indemnify and hold harmless Executive, to the fullest extent permitted by
Delaware law, against and in respect to any and all actions, suits, proceedings, claims, demands, judgments, costs, expenses (including attorneys’ fees) losses, and damages resulting from Executive’s good faith performance of his duties
and obligations under the terms of this Agreement. 
  
 9.2. The
Company hereby covenants and agrees to have and maintain, during the Term of this Agreement, Director and Officers (D&O) insurance covering Executive in an amount and with such limits as necessary to cover any liability with regard to
Executive’s actions and inactions in relation to his duties as a director or officer of the Company. 
  
 Section 10. Assignment 
  
 10.1. Assignment By Company. This Agreement may and shall be assigned or transferred to, and shall be binding upon and shall inure to the benefit of, any successor of the Company, and any such successor shall be deemed substituted
for all purposes of the “Company” under the terms of this Agreement. As used in this Agreement, the term “successor” shall mean any person, firm, corporation or business entity which at any time, whether by merger, purchase, or
otherwise, acquires all or essentially all of the assets of the Company. Notwithstanding such assignment, the Company shall remain, with such successor, jointly and severally liable for all its obligations hereunder. 
  
 10.2. Assignment By Executive. This Agreement shall inure to the
benefit of and be enforceable by Executive’s personal or legal representatives, executors and administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amounts payable to Executive hereunder
remain outstanding, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee or other designee or, in the absence of such designee, to Executive’s
estate. 
  
 Section 11. Dispute Resolution and Notice 
  
 11.1. Dispute Resolution. Except as otherwise expressly provided in
Section 8.5 of this Agreement, any dispute arising under or in connection with this Agreement shall be settled exclusively by arbitration. 
  
 Such proceeding shall be conducted before a panel of three (3) arbitrators sitting in a location selected by Executive within fifty (50) miles from the
location of his principal place of employment, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the award of the arbitrator in any court having jurisdiction. 
  

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 All expenses of such arbitration, including the reasonable fees and expenses of the legal representation,
and necessary costs and disbursements incurred as a result of such dispute, and any prejudgment interest, shall be borne by the non-prevailing party, but only to the extent such costs do not exceed 1% of the non-prevailing party’s total assets.

  
 11.2. Notice. Any notices, requests, demands or other
communications provided for by this Agreement shall be sufficient if in writing and if sent by registered or certified mail to Executive at the last address he has filed in writing with the Company or, in the case of the Company, at its principal
offices. 
  
 Section 12. Miscellaneous 
  
 12.1. Entire Agreement. This Agreement supersedes all negotiations or
understandings, oral or written, between Executive and the Company, with respect to the subject matter hereof, including the Original Agreement, and constitutes the entire Agreement of the parties with respect thereto. To the extent that this
Agreement is inconsistent with the Severance Plan, the terms of this Agreement shall prevail. 
  
 12.2. Modification. This Agreement shall not be varied, altered, modified, canceled, changed or in any way amended except by mutual agreement of the parties in a written instrument executed by the parties
hereto or their legal representatives. 
  
 12.3.
Severability. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full
force and effect. 
  
 12.4. Counterparts. This Agreement
may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. 
  
 12.5. Tax Withholding. The Company may withhold from any benefits payable under this Agreement all federal, state,
city, or other taxes as may be required pursuant to any law or governmental regulation or ruling. 
  
 12.6. Beneficiaries. Executive may designate one or more persons or entities as the primary and/or contingent beneficiaries of any amounts to be
received under this Agreement. Such designation must be in the form of a signed writing acceptable to the Board or the Board’s designee. Executive may make or change such designation at any time. 
  
 12.7. Legal Expenses. The Company will pay any legal fees incurred by
Executive (i) associated with the negotiation and preparation of this Agreement up to Twenty Five Thousand Dollars ($25,000) and (ii) in any disputes that Executive and the Company may have with respect to this Agreement or the breach thereof of
Executive’s employment or the termination thereof or matters related to any of the foregoing, provided that Executive prevails in at least one material respect with respect to such dispute. 
  

 13 

 12.8. Governing Law. To the extent not preempted by federal law, the provisions of this Agreement
shall be construed and enforced in accordance with the laws of the State of California. 
  
 12.9. No Mitigation; No Offset. In the event of any termination of employment hereunder, Executive shall be under no obligation to seek other employment and there shall be no offset against any amounts due
Executive under this Agreement on account of any remuneration attributable to any subsequent employment that Executive may obtain, except as otherwise set forth in this Agreement relating to Executive’s subsequent employment with Casino. The
amounts payable hereunder shall not be subject to setoff, counterclaim, recoupment, defense or other right that the Company may have against Executive or others. 
  
 IN WITNESS WHEREOF, Executive and the Company (pursuant to a resolution adopted at a duly constituted meeting of its Board
of Directors) have executed this Agreement, as of the day and year first above written. 
  

			
	 “Executive”

		
	 By:
	 	 /s/ Etienne Snollaerts

	 	 	 ETIENNE SNOLLAERTS

	
	 “Company”

	
	 SMART & FINAL INC., a Delaware
 corporation

		
	 By:
	 	 /s/ Timm F. Crull

	 Its:
	 	 Chairman of the Compensation Committee

  

 14 

 Exhibit “A” 
  
 Form of Option Agreement 
  

 A-1 

 Nonqualified Stock Option Award Agreement 
 Smart & Final Inc. Long-Term Equity Compensation Plan 
  
 Etienne Snollaerts has been awarded nonqualified stock options (“Options”) as set forth below under the Smart & Final Inc. Long-Term Equity
Compensation Plan (the “Plan”). This agreement provides a brief summary of your rights under the Plan, although reference is made to the Plan for the details of all of your rights under the Plan and this Agreement, as well as all of the
conditions and limitations affecting such rights. If there is any inconsistency between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control. Capitalized terms used are not defined herein shall have the meaning
ascribed to them in the Plan. The Options granted to you under this Agreement are Nonqualified Stock Options as defined in the Plan. 
  
 Overview of Your Stock Options 
  

						
	 1.      Number of Options Granted:
	  	 	150,000
		
	 2.      Date of Grant:
	  	 	02/17/04
		
	 3.      Exercise Price:
	  	$	12.89

  

	4.	Option Term: This Option has been granted for a period of ten years and one day from the Date of Grant (the “Option Term”). 

  

	5.	Vesting and Exercise of Option: This Option does not provide you with any rights or interests therein until it vests and becomes exercisable in accordance with the following:

  
 a). One-third of the Options, on a cumulative
basis, vest and become exercisable on each of the second, third, and fourth anniversaries of the Date of Grant, provided you have continued in the employment of the Company through such anniversary or anniversaries or your employment has terminated
due to a Disability. 
  
 b). Subject to paragraph 7, the balance
or all of the Options vest and become exercisable upon the termination of your employment due to death. 
  
 Options which are not and do not become exercisable at the time of your termination of employment, or a Disability shall, coincident with the termination of your employment, terminate and be of no force or effect.

	6.	How to Exercise: The Option hereby granted shall be exercised by written notice to the Lily Harada of the Company’s Human Resources Department specifying the number of
shares you then desire to purchase, which may not be fewer than twenty-five (25), together with (a) a check payable to the order of Smart & Final Inc. for an amount in United States dollars equal to the option price of such shares or (b) shares
of Common Stock which have been held by you for at least six months having an aggregate fair market value (as of the trading date immediately preceding the date of exercise) equal to such option price, or a combination of cash and such shares. The
Option also may be exercised through a “cashless” exercise with a broker (which broker and provision for a cashless exercise and payments have been approved in advance by the Company) as permitted under the Federal Reserve Board’s
Regulation T. Please contact the Company’s Human Resources Department for further information regarding the manner of exercise of the Options. 

  
 As soon as practicable after receipt of such written notification and payment, the Company shall issue or transfer to you
the number of shares with respect to which such Option shall be so exercised and shall, upon receipt of applicable withholding taxes, deliver to you a certificate or certificate thereof, registered in your name. 
  

	7.	Termination of Options: The Options, which become exercisable as provided in paragraph 5 above, shall terminate and be of no force or effect as follows:

  
 a). If your employment terminates during the
Option Term by reason of Death, Disability, or Normal Retirement, the Options terminate and has no force or effect upon the earlier to occur of the expiration of the Option Term or three (3) years after the date of termination of your employment;

  
 b). If your employment terminates during the Option Term for
any other reason than those set forth in Section 7(a), the Options terminate and has no force or effect upon the earlier to occur of the expiration of the Option Term or three (3) months after termination of your employment; and 
  
 c). If you continue in the employ of the Company through the Option Term,
the Option terminates and has no force or effect upon the expiration of the Option Term. 
  

	8.	Change in Control: In the event of a Change in Control, all Options immediately shall become one hundred (100%) vested and shall remain exercisable for the entire Option
Term. 

  

	9.	Who Can Exercise: During your lifetime the Options shall be exercisable only by you. No assignment or transfer of the Options, whether voluntary or involuntary, by operation
of law or otherwise, except by will or the laws of descent and distribution or pursuant to a Qualified Domestic Relations Order, shall vest in the assignee or transferee any interest whatsoever. 

  
 Please acknowledge your agreement to participate in the Plan and this
Agreement, and to abide by all of the governing terms and provisions, by signing the following representation: 

 AGREEMENT TO PARTICIPATE 
  
 By signing a copy of this Agreement and returning it to the Human Resources Department of the Company, I acknowledge that I have read the
Plan, and that I fully understand all of my rights under the Plan, as well as all of the terms and conditions which may limit my eligibility to exercise the Options. Without limiting the generality of the preceding sentence, I understand that my
right to exercise the Options is conditioned upon my continued employment with the Company. I further am reminded and acknowledge previous review and familiarity with the Memorandum on Confidentiality for Key Management Personnel and the Smart &
Final Code of Ethics. 
  
 Executed at Commerce, California as of March 30,
2004. 
  

							
	THE CORPORATION:	 	 	 	Smart & Final Inc.
	 	 	 	 	A Delaware Corporation
				
	 	 	 	 	By	 	 /s/ Jeff Whynot

	 	 	 	 	Its	 	Sr. VP, Human Resources
				
	THE PARTICIPANT:	 	 	 	 	 	 
			
	Participant Name:	 	Etienne Snollaerts	 	 Date: March 30, 2004

		
	Participant Signature	 	 /s/ Etienne Snollaerts

 Exhibit “B” 
  
 Form of Restricted Stock Agreement 
  

 B-1 

 SmartShare Award Agreement 
 Long-Term Equity Compensation Plan 
  
 Etienne
Snollaerts has been awarded performance-based units (“SmartShares”) as set forth below under the Long Term Equity Compensation Plan (the “Plan”). This Agreement provides a brief summary of your rights under the Plan, although
reference is made to the Plan for the details of all of your rights under the Plan and this Agreement, as well as all of the conditions and limitations affecting such rights. If there is any inconsistency between the terms of this Agreement and the
terms of the Plan, the terms of the Plan shall control. Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Plan. 
  
 Overview of Your SmartShares 
  

						
			
	 1.
	  	 Date of Grant:
	  	 	02/17/04
			
	 2.
	  	 Number of SmartShares Granted:
	  	 	60,000
			
	 3.
	  	 Value of Share on Date of Grant:
	  	$	12.89
			
	 4.
	  	 Performance Objective Share Price:
	  	$	19.335

  

	5.	Vesting Date: The earlier to occur of the Performance Objective Date described in paragraph B below or 5 years from date of Grant. 

  

	6.	Employment by the Company: These SmartShares are awarded on the condition that the Participant remain in the employ of Smart & Final Inc. (the “Company”) from
the Date of Grant through (and including) the Vesting Date. The Award of these SmartShares, however, shall not impose upon the Company any obligation to retain the Participant in its employ for any given period or upon any specific terms of
employment. 

  

	7.	Value of SmartShares: Each SmartShare will have a value equal to the Fair Market Value of one (1) share (a “Share”) of Smart & Final common stock

  

	8.	Achievement of Performance Objective: The performance objective shall be deemed to have been met on any date (the “Performance Objective Date”) if on such date the
average closing sales price for a Share on the New York Stock Exchange over the twenty (20) consecutive trading days ending on such date equals or exceeds the Performance Objective Share Price. 

  

	9.	Dividend Equivalents: Until the SmartShares are vested or forfeited, the Participant is entitled to receive all dividends and other distributions paid with respect to an
equivalent number of Shares while the SmartShares are held. The value of any such dividends or distributions shall be accrued and paid out in accordance with the payment of the underlying SmartShares as set forth in paragraph 12 below.

  

 Page 1 of 3 

	10.	Termination of Employment By Reason of Death, Disability, Retirement, and Vesting in Connection with a Change in Control: In the event the Participant’s employment is
terminated by reason of death, Disability, or Qualified Early Retirement (as shall be determined by the Committee), prior to the Vesting Date, the Participant shall have the number of SmartShares granted herein recomputed by multiplying the number
of SmartShares granted hereby by a fraction, the numerator of which is the number of months of active service by the Participant following the Date of Grant, and the denominator of which is thirty-six (36). Such prorated amount will be payable upon
vesting in accordance with paragraph 12. In the event the Participant’s employment is terminated by Normal Retirement, the SmartShares granted herein shall continue to vest in accordance with the terms of this agreement. In the event of a
change in Control prior to the Vesting Date, all SmartShares then outstanding immediately shall become one hundred percent (100%) vested. 

  

	11.	Termination of Employment for Other Reasons: In the event the Participant’s employment is terminated prior to the Vesting Date for reasons other than those described in
paragraph 10 above all unvested SmartShares granted hereunder shall immediately be forfeited by the Participant. 

  

	12.	Form and Timing of Payment of SmartShares: Payment of the vested SmartShares and any accrued dividends or distributions shall be made in Shares, which Shares shall have an
aggregate Fair Market Value equal to the value of the vested SmartShares on the Vesting Date. Payment for vested SmartShares shall be made within forty-five (45) calendar days following the Vesting Date. Amounts to be paid in connection with vested
SmartShares may be deferred in accordance with the Smart & Final Supplemental Deferred Compensation Plan. 

  

	13.	Transferability: These SmartShares are not transferable by the Participant, whether voluntarily or involuntarily, by operation of law or otherwise, except as provided in the
Plan. If any assignment, pledge, transfer, or other disposition, voluntary or involuntary, of these SmartShares shall be made, or if any attachment, execution, garnishment, or lien shall be issued against or placed upon the SmartShares, then the
Participant’s right to the SmartShares shall immediately cease and terminate and the Participant shall promptly forfeit to the Company all SmartShares awarded under this Agreement. 

  

	14.	Status of Shares: The shares of the Company’s common stocks which are the subject of the SmartShares have not been registered with the Securities and Exchange Commission
(the “SEC”) under the Securities Act of 1933, as amended, and may only be sold in compliance with Rule 144 issued by the SEC. Please contact the Company’s Human Resources Department regarding the transferability of the shares
underlying the SmartShares. 

  
 Please acknowledge your agreement to
participate in the Plan and this Agreement and to abide by all of the governing terms and provisions by signing the following representation: 
  

 Page 2 of 3 

 AGREEMENT TO PARTICIPATE 
  
 By signing a copy of this Agreement and returning it to the Human Resources Department of the Company, I acknowledge that I
have read the Plan, and that I fully understand all of my rights under the Plan, as well as all of the term and conditions which may limit my eligibility to receive these SmartShares. Without limiting the generality of the preceding sentence, I
understand that my right to acquire these SmartShares is conditioned upon my continued employment with the Company. I further am reminded and acknowledge previous review and familiarity with the Memorandum on Confidentiality for Key Management
Personnel and the Smart & Final Code of Ethics. 
  
 Executed at Commerce,
California, as of February 17, 2004. 
  

									
	 THE CORPORATION:
	 	 	 	 Smart & Final Inc.,
 a Delaware Corporation

				
	 	 	 	 	 By:
	 	 /s/ Jeff Whynot

				
	 	 	 	 	 Its
	 	 Sr. VP, Human Resources

				
	 THE PARTICIPANT:
	 	 	 	 	 	 
				
	 Participant Name:
	 	 Etienne Snollaerts
	 	 	 	 Date: March 30, 2004

					
	 Participant Signature:
	 	 /s/ Etienne Snollaerts

	 	 	 	 	 	 

  

 Page 3 of 3<PAGE>

                                                                     Exhibit 4.3

                                    [FORM OF]

                           CONVERTIBLE PROMISSORY NOTE

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND IT MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS IT HAS BEEN SO REGISTERED OR AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

                                  NEPHROS, INC.
                           6% NOTE DUE AUGUST 7, 2002

$                                                                  April 8, 2002
  ---------

     NEPHROS, INC. (the "Company"), for value received, hereby promises to pay
to               , or permitted assigns (the "Payee"), on August 7, 2002, the
   --------------
principal sum of             thousand dollars ($           ), together with
                 -----------                    -----------
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the unpaid principal amount hereof at the rate of six percent (6%) per annum,
compounded semi-annually, from the date hereof.

1.   Prepayment

     The Company shall have the right to prepay all or any part of the principal
amount of this Note, together with accrued interest thereon through the date of
prepayment (except as provided in the following sentence), without penalty,
either (x) in cash or (y) by delivery to the Payee of the number of shares of
capital stock of the Company into which the principal amount of this Note to be
so prepaid would then be convertible as provided Section 3 below. To the extent
that the principal amount of this Note is so prepaid within 120 days after the
date hereof, no interest on the principal amount so prepaid shall be due or
payable. In the event that the Company determines to prepay this Note in cash,
it shall provide the Payee with at least 10 days advance notice of such
prepayment in order to afford the Payee the opportunity, prior to such
prepayment, to convert this Note into capital stock of the Company pursuant to
Section 3 below.

2.   Events of Default

     Any of the following shall constitute an Event of Default hereunder ("Event
of Default"):

          (a) the Company shall fail to make any payment of principal or
interest when due hereunder;

          (b) the Company shall become insolvent or admits its inability to pay
its debts as they become due, or any proceeding shall be instituted by the
Company seeking relief on its behalf as debtor, or to adjudicate it a bankrupt
or insolvent, or seeking liquidation, reorganization, arrangement, adjustment or
composition or other relief with respect to it or its

<PAGE>

debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or any similar law now or hereafter in effect, or seeking
appointment of a receiver, trustee, liquidator, custodian or other similar
official for it or for any part of its property, or the Company shall consent by
answer or otherwise to any such relief or to the institution of any such
proceeding against it;

          (c) any proceeding is instituted against the Company seeking to have
an order for relief entered against it as debtor or to adjudicate it a bankrupt
or insolvent, or seeking liquidation, reorganization, arrangement, adjustment or
composition or other relief with respect to it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors or any
similar law now or hereafter in effect, or seeking appointment of a receiver,
trustee, custodian, liquidator or other similar official for it or for any part
of its property which either (i) results in any such entry of an order for
relief, adjudication of bankruptcy or insolvency or issuance or entry of any
other order having a similar effect or (ii) remains undismissed for a period of
forty-five (45) days;

          (d) a receiver, trustee, liquidator, custodian or other similar
official is appointed for any part of the Company's assets; or

          (e) any assignment is made for the benefit of the Company's creditors.

     The entire unpaid principal balance of this Note, together with interest
accrued thereon, shall become immediately due and payable (i) automatically upon
the occurrence of any Event of Default described in clauses (b) through (e)
above, or (ii) immediately upon written notice from the Payee to the Company
upon the occurrence of any Event of Default described in clause (a) above.

3.   Conversion

     This Note shall be convertible on the terms set forth below into shares of
the Company's Series C Convertible Preferred Stock, $.001 par value, or, at the
Company's option, into shares of the Company's Series A Convertible Preferred
Stock or into shares of a new class or series of the Company's capital stock
having rights and preferences substantially equivalent to those of the Series C
or Series A Convertible Preferred Stock (such Series C or Series A Convertible
Preferred Stock or substantially equivalent capital stock of the Company, the
"Conversion Stock").

          (a) The Company shall use its reasonable efforts in good faith to take
such corporate and other action as may be required to authorize and permit the
issuance and delivery of the Conversion Stock upon prepayment or conversion of
this Note in accordance with its terms, including, without limitation, the
amendment of the Company's Certificate of Incorporation (and, to the extent
applicable, the Certificate of Designation, Preferences and Rights of the Series
C and/or Series A Convertible Preferred Stock). After the completion of such
action, the Payee shall have the right, at its option, at any time and from time
to time, to convert all or any part of this Note into the number of fully paid
and nonassessable shares of Conversion Stock of the Company equal to the
quotient obtained by dividing (A) the principal amount of the Note then being
converted by (B) the Conversion Price (as defined below), as last

                                      -2-

<PAGE>

adjusted and then in effect. The conversion price per share at which shares of
Conversion Stock shall be issuable upon conversion of this Note shall be $1.00
(in each case, the "Conversion Price"), as adjusted pursuant to paragraph (c)
below. The Payee may exercise the conversion right pursuant to this paragraph
(a) by delivering to the Company the Note to be converted, accompanied by
written notice stating that the Payee elects to convert all or a specified
portion of the principal amount of the Note and stating the name or names (with
address) in which the certificate or certificates for the shares of Conversion
Stock are to be issued. Conversion shall be deemed to have been effected on the
date when such delivery is made (the "Conversion Date").

          (b) As promptly as practicable after the conversion of any portion of
this Note into Conversion Stock under paragraph (a) above, the Company shall
issue and deliver to or upon the written order of the Payee, to the place
designated by the Payee, a certificate or certificates for the number of full
shares of Conversion Stock to which the Payee is entitled, and a cash amount in
respect of any fractional interest in a share of Conversion Stock equal to the
product of $1.00 multiplied by such fractional interest. The person in whose
name the certificate or certificates for Conversion Stock are to be issued shall
be deemed to have become a stockholder of record on the applicable Conversion
Date. Upon conversion of only a portion of this Note surrendered for conversion,
the Company shall issue and deliver to or upon the written order of the Payee,
at the expense of the Company, a new Note representing the unconverted portion
of the principal amount hereof.

          (c) The Conversion Price shall be subject to adjustment from time to
time as follows:

               (i) If the Company shall, at any time or from time to time after
     the date hereof, issue any shares of its Series C Convertible Preferred
     Stock (or other class or series of its capital stock then constituting
     Conversion Stock) without consideration or for a consideration per share
     less than the Conversion Price in effect immediately prior to the issuance
     of such Conversion Stock, then such Conversion Price, as in effect
     immediately prior to each such issuance, shall forthwith be lowered to a
     price equal to the quotient obtained by dividing:

                    (A) an amount equal to the sum of (x) the total number of
               shares of Conversion Stock outstanding on a fully diluted basis
               immediately prior to such issuance, multiplied by the Conversion
               Price in effect immediately prior to such issuance, and (y) the
               consideration (as reasonably determined by the Board of Directors
               of the Company in the case of any consideration other than cash)
               received by the Company upon such issuance; by

                    (B) the total number of shares of Conversion Stock
               outstanding on a fully diluted basis immediately after the
               issuance of such Conversion Stock.

               (ii) In the event of any capital reorganization of the Company,
     any reclassification of the stock of the Company, any stock dividend or
     subdivision, split-up or combination of shares, or any consolidation or
     merger of the Company, this Note shall thereafter be convertible into the
     kind and number of shares of stock or other securities or property of the
     Company or of the company resulting from such consolidation or

                                      -3-

<PAGE>

     surviving such merger to which the holder of the number of shares of
     Conversion Stock deliverable (immediately prior to the time of such
     reorganization, reclassification, dividend, subdivision, split-up,
     combination of shares, consolidation or merger) upon conversion of this
     Note would have been entitled upon such event.

4.   Warrants

     Subject to completion of such corporate and other action as may be required
therefor, which the Company shall use its reasonable efforts in good faith to
take within 120 days after the date hereof, the Company shall issue and deliver
to or upon the written order of the Payee warrants ("Warrants") to purchase for
cash an additional     shares of Conversion Stock (that is, an amount equal to
                   ---
50% of the number of shares of Conversion Stock into which this Note shall be
convertible) at a warrant exercise price per share equal to the Conversion Price
as adjusted from time to time pursuant to paragraph 3(c).

5.   Reservation of Shares

     The Company shall at all times keep reserved, free from preemptive rights,
out of its authorized but unissued shares of capital stock, (A) solely for the
purpose of effecting the conversion or prepayment of this Note and exercise of
the Warrants, sufficient shares of Conversion Stock to provide for the
conversion or prepayment of the outstanding principal amount of this Note and
exercise of the Warrants, and (B) solely for the purpose of effecting the
conversion of the Conversion Stock by its terms into shares of the Company's
Common Stock, $.001 par value ("Common Stock"), sufficient shares of Common
Stock to provide for the conversion of the Conversion Stock then outstanding or
issuable upon conversion or prepayment of this Note and exercise of the
Warrants.

6.   Miscellaneous

     This Agreement shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of New York applicable to
contracts executed and fully performed within the State of New York.

     All notices and other communications provided for under or otherwise made
in connection with this Note shall be in writing (including telegraphic, telex,
and facsimile transmissions) and mailed or transmitted or delivered, (i) if to
the Company, at the Company's address at 3960 Broadway, New York, NY 10032,
Attention: Norman Barta, or at such other address as shall be designated by the
Company by written notice to the Payee from time to time, and (ii) if to the
Payee, at the Payee's address at                                     , Personal
                                 ------------------------------------
& Confidential, or at such other address as shall be designated by the Payee by
written notice to the Company from time to time. Except as otherwise provided in
this Note, all such notices and communications shall be effective when deposited
in the mails or delivered to the telegraph company, or sent, answer back
received or confirmed, by telex or facsimile transmission, respectively,
addressed as aforesaid.

     No failure or delay on the part of the Payee in exercising any right,
power, privilege or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, power, privilege or
remedy preclude any other or further exercise thereof or the

                                      -4-

<PAGE>

exercise of any other right, power, privilege or remedy hereunder. The rights
and remedies provided herein are cumulative, and are not exclusive of any other
rights, powers, privileges or remedies, now or hereafter existing, at law or in
equity or otherwise.

     No amendment, modification or waiver of any provision of this Note nor
consent to any departure by the Company therefrom shall be effective unless the
same shall be in writing and signed by the Payee, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.

     This Note shall be binding upon the Company and its legal representatives,
successors and assigns and the terms hereof shall inure to the benefit of the
Payee and his legal representatives, successors and assigns.

     The provisions of this Note are severable, and if any provision shall be
held invalid or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall not in any manner affect such provision in
any other jurisdiction or any other provision of this Note in any jurisdiction.

     This Note sets forth the entire agreement of the Company and the Payee with
respect to this Note and may be modified only by a written instrument executed
by the Company and the Payee.

     The Company agrees that in any action or proceeding brought on or in
connection with this Note (i) the Supreme Court of the State of New York for the
County of New York, or (in a case involving diversity of citizenship) the United
States District Court of the Southern District of New York, shall have
jurisdiction of any such action or proceeding, to which jurisdiction the Company
irrevocably submits, irrevocably waiving any objection to the laying of venue in
any such court and further irrevocable waiving any claim that any such action or
proceeding in any such court is in an inconvenient forum, (ii) service of any
summons and complaint or other process in any such action or proceeding may be
made by the Payee upon the Company by registered or certified mail directed to
the Company at its address referenced above, the Company hereby waiving personal
service thereof, and (iii) within thirty (30) days after such mailing the
Company shall appear or answer to any summons and complaint or other process,
and should the Company fail to appear to answer within said thirty (30) day
period, it shall be deemed in default and judgment may be entered by the Payee
against the Company for the amount as demanded in any summons or complaint or
other process so served.

     The Company agrees to pay all expenses reasonably incurred by the Payee in
connection with the collection and enforcement of this Note, including, without
limitation, reasonable attorney's fees and disbursements.

     The Company hereby waives presentment, demand for payment, notice of
dishonor, notice of protest, and protest, and all other notices or demands in
connection with the delivery, acceptance, performance, default or endorsement of
this instrument. This Note may not be negotiated, endorsed, assigned,
transferred, hypothecated or pledged except with the prior written consent of
the Company (which consent shall not unreasonably be withheld). In the event

                                      -5-

<PAGE>

that this Note is negotiated, endorsed, assigned, transferred, hypothecated
and/or pledged, the obligations of the Company hereunder shall continue in full
force and effect.

     IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed as of April 8, 2002.

                                         NEPHROS, INC.

                                         By:
                                             -----------------------------------

                                       -6-

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