Document:

Exhibit 10.37

               EIGHTH AMENDED AND RESTATED JOINT FILING AGREEMENT
                          PURSUANT TO RULE 13d-1(k)(1)

This Eighth Amended and Restated Agreement is made pursuant to Rule 13d-1(k)(1)
under the Securities Exchange Act of 1934, as amended (the "Act") by and among
the parties listed below, each referred to herein as a "Joint Filer." The Joint
Filers agree that a statement of beneficial ownership as required by Section
13(d) of the Act and the Rules thereunder may be filed on each of their behalf
on Schedule 13D or Schedule 13G, as appropriate, and that said joint filing may
thereafter be amended by further joint filings. The Joint Filers state that they
each satisfy the requirements for making a joint filing under Rule 13d-1.

Dated:      September 25, 2007

                     [remainder of page intentionally blank]

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

                                    Flag Luxury Riv, LLC

                                    By: /s/  Paul Kanavos
                                        -----------------------------------
                                    Name: Paul Kanavos
                                    Title: President

                                    RH1, LLC

                                    By: FX Luxury Realty, LLC
                                        -----------------------------------
                                        Its sole member

                                       By: Flag Luxury Properties, LLC
                                           --------------------------------
                                           Its Managing Member

                                          By:  /s/  Paul Kanavos
                                             ------------------------------
                                          Name: Paul Kanavos
                                          Title: President

                                    FX Real Estate and Entertainment
                                      Inc.

                                    By: /s/  Paul Kanavos
                                        ----------------------------------
                                    Name: Paul Kanavos
                                    Title: President

                                    Flag Leisure Group, LLC

                                    By: /s/  Paul Kanavos
                                        ---------------------------------
                                    Name: Paul Kanavos
                                    Title: President

                                    Flag Luxury Properties, LLC

                                    By: /s/  Paul Kanavos
                                        ---------------------------------
                                    Name: Paul Kanavos
                                    Title: President

                                    Paul Kanavos

                                    /s/  Paul Kanavos
                                    -------------------------------------

<PAGE>

                                    FX Luxury Realty, LLC

                                       By: Flag Luxury Properties, LLC
                                           ------------------------------
                                           Its Managing Member

                                          By:  /s/  Paul Kanavos
                                              ---------------------------
                                          Name: Paul Kanavos
                                          Title: President

<PAGE>

                                    CKX FXLR Stockholder Distribution
                                    Trust I

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

                                    CKX FXLR Stockholder Distribution
                                    Trust I

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

<PAGE>

                                    MJX Flag Associates, LLC

                                    By:   /s/  Robert F.X. Sillerman
                                        ---------------------------------
                                    Name: President
                                    Title: Robert F.X. Sillerman

                                    CKX, Inc.

                                    By: /s/  Robert F.X. Sillerman
                                       ----------------------------------
                                    Name:  Robert F.X. Sillerman
                                    Title:  Chief Executive Officer

                                    MJX Real Estate Ventures, LLC

                                    By:   /s/  Robert F. X. Sillerman
                                       ----------------------------------
                                    Name: Robert F.X. Sillerman
                                    Title: Member

                                    Robert F.X. Sillerman

                                    /s/  Robert F.X. Sillerman
                                    -------------------------------------

<PAGE>

                                    LMN 134 Family Company LLC

                                    By: /s/  Mitchell J. Nelson
                                        ---------------------------------
                                    Name: Mitchell J. Nelson
                                    Title: Managing Member

                                    Mitchell J. Nelson

                                    /s/  Mitchell J. Nelson
                                    -------------------------------------

<PAGE>

                                    ONIROT Living Trust dated 06/20/2000

                                    By: /s/  Brett Torino
                                       ----------------------------------
                                    Name:  Brett Torino
                                    Title:  Trustee

                                    Brett Torino

                                    /s/  Brett Torino
                                    -------------------------------------

<PAGE>

                                    Rivacq LLC

                                    By: SOF U.S. Hotel Co-Invest
                                    Holdings, L.L.C.

                                       By: SOF-VII U.S. Hotel Holdings,
                                           L.L.C.

                                          By: /s/  Barry S. Sternlicht
                                              --------------------------------
                                          Name: Barry S. Sternlicht
                                          Title: Chief Executive Officer

                                       By: I-1/I-2 U.S. Holdings, L.L.C.

                                          By: /s/  Barry S. Sternlicht
                                              -------------------------------
                                          Name: Barry S. Sternlicht
                                          Title: Chief Executive Officer

                                    SOF U.S. Hotel Co-Invest Holdings,
                                    L.L.C.

                                    By: SOF-VII U.S. Hotel Holdings,
                                        L.L.C.

                                        By: /s/  Barry S. Sternlicht
                                            --------------------------------
                                        Name: Barry S. Sternlicht
                                        Title: Chief Executive Officer

                                    By: I-1/I-2 U.S. Holdings, L.L.C.

                                       By: /s/  Barry S. Sternlicht
                                           ---------------------------------
                                       Name: Barry S. Sternlicht
                                       Title: Chief Executive Officer

                                    SOF-VII U.S. Hotel Holdings, L.L.C.

                                    By: /s/  Barry S. Sternlicht
                                        ------------------------------------
                                    Name: Barry S. Sternlicht
                                    Title: Chief Executive Officer

                                    I-1/I-2 U.S. Holdings, L.L.C.

                                    By: /s/  Barry S. Sternlicht
                                        ------------------------------------
                                    Name: Barry S. Sternlicht
                                    Title: Chief Executive Officer

<PAGE>

                                    Starwood Global Opportunity Fund
                                    VII-A, L.P.

                                    By: SOF-VII Management, L.L.C.
                                        ------------------------------------
                                        Its General Partner

                                        By: Starwood Capital Group
                                            Global, L.L.C.
                                            --------------------------------
                                            Its General Manager

                                            By: /s/  Barry S. Sternlicht
                                                ----------------------------
                                                Name: Barry S. Sternlicht
                                                Title: Chief Executive Officer

                                    Starwood Global Opportunity Fund VII-B,
                                    L.P.

                                    By:   SOF-VII Management, L.L.C.
                                          ----------------------------------
                                    Its General Partner

                                        By: Starwood Capital Group Global,
                                            L.L.C.
                                            --------------------------------
                                        Its General Manager

                                            By: /s/  Barry S. Sternlicht
                                                ----------------------------
                                                Name: Barry S. Sternlicht
                                                Title: Chief Executive Officer

                                    Starwood U.S. Opportunity Fund

                                    VII-D, L.P.

                                    By: SOF-VII Management, L.L.C.
                                        ------------------------------------
                                        Its General Partner

                                        By: Starwood Capital Group Global,
                                            L.L.C.
                                            --------------------------------
                                            Its General Manager

                                               By: /s/  Barry S. Sternlicht
                                                   -------------------------
                                                   Name: Barry S. Sternlicht
                                                   Title: Chief Executive
                                                          Officer

<PAGE>

                                    Starwood U.S. Opportunity Fund
                                    VII-D-2, L.P.

                                    By: SOF-VII Management, L.L.C.
                                        ------------------------------------
                                        Its General Partner

                                        By: Starwood Capital Group
                                            Global, L.L.C.
                                            --------------------------------
                                            Its General Manager

                                               By: /s/  Barry S. Sternlicht
                                                   -------------------------
                                                   Name: Barry S. Sternlicht
                                                   Title: Chief Executive
                                                          Officer

                                    Starwood Capital Hospitality Fund
                                    I-1, L.P.

                                    By: SCG Hotel Management, L.L.C.
                                        ------------------------------------
                                        Its General Partner

                                        By: Starwood Capital Group
                                            Global, L.L.C.
                                            --------------------------------
                                        Its General Manager

                                               By: /s/  Barry S. Sternlicht
                                                   -------------------------
                                               Name: Barry S. Sternlicht
                                               Title: Chief Executive
                                                      Officer

                                    Starwood Capital Hospitality Fund
                                    I-2, L.P.

                                    By: SCG Hotel Management, L.L.C.
                                        ------------------------------------
                                        Its General Partner

                                        By: Starwood Capital Group
                                            Global, L.L.C.
                                            --------------------------------
                                        Its General Manager

                                              By: /s/  Barry S. Sternlicht
                                                  --------------------------
                                                  Name: Barry S. Sternlicht
                                                  Title: Chief Executive Officer

<PAGE>

                                    SOF-VII Management, L.L.C.

                                    By: Starwood Capital Group Global, L.L.C.
                                        -------------------------------------
                                        Its General Manager

                                        By: /s/  Barry S. Sternlicht
                                            --------------------------------
                                        Name: Barry S. Sternlicht
                                        Title: Chief Executive Officer

                                    SCG Hotel Management, L.L.C.

                                    By: Starwood Capital Group Global, L.L.C.
                                        -------------------------------------
                                        Its General Manager

                                         By: /s/  Barry S. Sternlicht
                                             -------------------------------
                                         Name: Barry S. Sternlicht
                                         Title: Chief Executive Officer

                                    Starwood Capital Group Global, LLC

                                    By: /s/  Barry S. Sternlicht
                                        ------------------------------------
                                    Name: Barry S. Sternlicht
                                    Title: Chief Executive Officer

                                    Barry S. Sternlicht

                                    /s/  Barry S. Sternlicht
                                    ----------------------------------------kl09044_ex4-1.htm

    
      

    

     

    Exhibit
      4.1

     

    THIS
      NOTE IS SUBJECT TO THE TERMS OF A SUBSCRIPTION 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
      A 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 $15,000,000 aggregate principal amount of Nephros,
      Inc. Series A 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 Subscription
      Agreement.  The Notes are secured by the Collateral pursuant to the
      Subscription 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 (i) 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”), and (ii) Class D Warrants (the
“Warrants”) for the purchase of shares of Common Stock in an amount equal to 50%
      of the number of shares of Common Stock issued to the Holder in accordance
      with
      clause (i) in this Section 3(a) (rounded up to the nearest whole share and
      subject to adjustment as provided in Section 3(c) below) at an exercise price
      per share of Common Stock, subject to adjustment as provided in Section 3(c)
      below, equal to $0.90 per share (the “Exercise Price”), such Warrants to have
      the terms and conditions set forth in the form of Warrant attached hereto as
      Exhibit A.  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 and Warrants to which such person shall be entitled
      upon conversion hereof, shall terminate.

     

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    
 

    (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 and the Warrants 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 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 Subscription 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 (x) certificates evidencing the number of full
      shares of Common Stock to which such person is entitled as aforesaid, subject
      to
      Section 4, and (y) Warrants evidencing the number of full shares of Common
      Stock
      to which such person is entitled as aforesaid upon exercise of such
      Warrants.

     

    (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 and
      Warrants deliverable upon conversion of such Note shall be treated for all
      purposes as the record holder or holders of such Common Stock and Warrants
      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 and Warrants 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 and
      Warrants (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 and Warrant Terms. 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

     

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

     

    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.  If between the date hereof and the Automatic Conversion Date
      any transaction or event occurs that, if the Warrants were then outstanding,
      would result in an adjustment to the Per Share Exercise Price (as such term
      is
      defined in the Form of Warrant) or the number of shares of Common Stock covered
      by the Warrants (other than an adjustment to such number of shares of Common
      Stock that has already been effected by an adjustment to the number of shares
      of
      Common Stock issued upon the conversion of this Note), then the Exercise Price
      and number of shares covered by the Warrants issued upon the conversion of
      this
      Note shall be adjusted to take into account such transaction or event as if
      such
      Warrants were outstanding during the period from the date hereof through the
      Automatic Conversion Date.

     

    (d)  Anti-Dilution
      Notices.  After each adjustment of the Conversion Price and
      Warrant terms 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, Exercise
      Price and number of shares covered by the Warrants 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 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 and
      exercise of the Warrants, 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 and exercise of all Warrants from time to time
      outstanding.  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 and the exercise
      of
      all Warrants issuable upon conversion of the 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 or Warrants 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 Warrants (or
      other
      securities or assets) in a name other than that in which the Notes so converted
      

     

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     

     

    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).

     

    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

     

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

     

    (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 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 Subscription 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
      Subscription 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).

     

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

     

    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 Subscription Agreement.

     

    (d)  The
      remedies provided in this Note shall be cumulative and in addition to all other
      remedies available under this Note and the Subscription 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

     

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

     

    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 B 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 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”).

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

     

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

     

    (f)  “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.

     

    (g)  “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.

     

    (h)  “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.

     

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

     

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

     

    (k)  “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 Subscription Agreement as Exhibit C.

     

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

     

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

     

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

     

    (o)  “Subscription
      Agreement” means the subscription agreement of even date herewith entered into
      between the Company and the Holder.

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

     

    (p)  “Warrants”
      shall mean the warrants to purchase shares of Common Stock that are being issued
      pursuant to the 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.

     

    (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 Warrants, the Subscription
      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.

     

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (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)  Subscription
      Agreement.  This Note is subject to the terms contained in the
      Subscription Agreement and the Holder of this Note is entitled to the benefits
      of such Subscription 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 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 A 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.

            

    

    

     

     

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    
 

    EXHIBIT
      A

    

    [FORM
      OF
      WARRANT]

     

     

     

     

     

     

     

     

     

     

     

    

    
 

    14

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