Document:

kl09044_ex10-4.htm

    
      

    

     

                                                                                            Exhibit
10.4

     

     

     

    INVESTOR
      RIGHTS AGREEMENT

     

    This
      INVESTOR RIGHTS AGREEMENT (this “Agreement”), dated as
      of September 19, 2007, is entered into by and among NEPHROS,
      INC., a Delaware corporation (the “Company”), LAMBDA
      INVESTORS LLC, a Delaware limited liability company (“Lambda”),
      and the other parties named on the signature pages to this Agreement or who
      subsequently become a party to this Agreement in accordance with the terms
      hereof (collectively, the “Covered Holders”).

     

    WHEREAS,
      to induce Lambda to make an investment in the Company, the Company and Covered
      Holders have agreed to cause two individuals having reasonably appropriate
      experience and background designated by Lambda from time to time (the “Lambda
      Nominees”) to be elected to the Board of Directors of the Company (the
“Board”); and

     

    WHEREAS,
      the parties hereto desire to enter into this Agreement to provide for the
      election of the Nominees and to address certain matters relating to the service
      of the Lambda Nominees as members of the Board.

     

    NOW
      THEREFORE, in consideration of the foregoing and the covenants and
      agreements contained in this Agreement, the sufficiency of which is hereby
      acknowledged, the parties agree as follows:

     

    1.  Board
      Representation.

     

    (a)  The
      Company, Lambda and the Covered Holders shall take such corporate actions as
      may
      be required to ensure that the number of directors constituting the Board is
      at
      all times no greater than seven (7) or such greater number as Lambda shall
      have
      agreed to in writing, provided, that a unanimous written consent of the Board,
      including the consent of the Lambda Nominees, shall constitute a writing for
      such purposes, and provided further, that a writing shall not be required if
      a
      majority of the directors on the Board approve a resolution at a Board meeting
      to increase the size of the Board and the Lambda Nominees vote in the
      majority.

     

    (b)  Lambda
      shall be entitled to (i) nominate the Lambda Nominees to the Board to serve
      as
      directors until their respective successor(s) are elected and qualified,
      (ii) nominate each successor to the Lambda Nominees, provided that any
      successor shall have reasonably appropriate experience and background, and
      (iii)
      direct the removal from the Board of any director nominated under the foregoing
      clauses (i) or (ii).

     

    (c)  Each
      nomination or any direction to remove from the Board any Lambda Nominee shall
      be
      made by delivering to the Company a notice signed by Lambda.  As
      promptly as practicable, but in any event within ten (10) days after delivery
      of
      such notice, the Company shall take or cause to be taken such corporate actions
      as may be reasonably required to cause the election or removal proposed in
      such
      notice.  Such corporate actions may include calling a meeting or
      soliciting a written consent of the Board, or calling a meeting or soliciting
      a
      written consent of the stockholders of the Company.

     

    (d)  Upon
      the
      written request of Lambda, the Company and each Covered Holder shall take such
      actions as may be reasonably required to cause the persons then serving on
      the
      Board

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    based
      on
      the nomination of Lambda to be appointed to the board of directors (or similar
      governing body) of all direct and indirect subsidiaries of the
      Company.

     

    2.  Voting
      Agreement.

     

    (a)  Each
      Covered Holder covenants and agrees to vote all common stock, par value $.001
      per share of the Company (“Common Stock”), and any other capital stock or
      other securities of the Company held by such Covered Holder that are entitled
      to
      vote in the election of the Board (“Voting Securities”) for the election
      to the Board of the Lambda Nominees in accordance with Section 1(b) and
      for the removal from the Board of the Lambda Nominees proposed to be removed
      in
      accordance with Section 1(b) and shall take all actions required on its
      behalf to give effect to the agreements set forth in this Section
      2.  Each Covered Holder covenants and agrees not to vote any
      Voting Securities for the removal of any Lambda Director except pursuant to
      direction from Lambda pursuant to Section 1(b)(iii).

     

    (b)  Each
      Covered Holder hereby grants to Lambda an irrevocable proxy, coupled with an
      interest, authorizing Lambda to act as proxy of such Covered Holder, with full
      powers of substitution and resubstitution, and hereby authorizes Lambda to
      vote,
      give consents and in all other ways act in such Covered Holder’s place with
      respect to all Voting Securities held by such Covered Holder in connection
      with
      such Covered Holder’s agreements contained in this Section 2 to vote in
      favor of or for the removal of the Lambda Nominees, which proxy shall be valid
      and remain in effect until the termination of this Agreement.

     

    3.  Vacancies
      and Removal.

     

    (a)  The
      Lambda Nominees designated pursuant to Section 1(b) will be elected at
      any annual or special meeting of the stockholders of the Company (or by written
      consent in lieu of a meeting of the stockholders) and will serve until their
      successors are duly elected and qualified or until their earlier resignation
      or
      removal.

     

    (b)  In
      the
      event a vacancy is created on the Board by reason of the death, removal or
      resignation of any Lambda Nominee, Lambda shall be entitled to nominate a
      successor Lambda Director having reasonably appropriate experience and
      background and such vacancy shall be filled in accordance with the procedures
      set forth in Section 1(c).

     

    4.  Meetings;
      Expenses; Compensation; Insurance.

     

    (a)  The
      Company shall convene meetings of the Board at least once every three
      months.  Upon any failure by the Company to convene any meeting
      required by this paragraph, a Lambda Director shall be empowered to convene
      such
      meeting.

     

    (b)  The
      Lambda Nominees shall be entitled to compensation and reimbursement for expenses
      on the same terms as other directors of the Company who are not officers or
      employees of the Company.

     

    (c)  The
      Company shall maintain a directors’ and officers’ policy of insurance in the
      amount of at least $7,000,000 per occurrence covering all
      directors.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    5.  Business
      Opportunities.

     

    (a)  In
      anticipation of Lambda becoming, indirectly or directly, a substantial
      stockholder of the Company, and in recognition of (i) the benefits to be derived
      by the Company through its continued contractual, corporate and business
      relations with Lambda (including the services of officers, directors, partners,
      managers, employees or affiliates of Lambda (collectively, “Lambda
      Persons”) as directors of the Company) and (ii) the difficulties attendant
      to any director who desires and endeavors fully to satisfy such director’s
      fiduciary duties, in determining the full scope of such duties in any particular
      situation, the provisions of this Section 5 are set forth to regulate,
      define and guide the conduct of certain affairs of the Company as they may
      involve Lambda and any Lambda Persons, and the powers, rights, duties and
      liabilities of the Company and its officers, directors and stockholders in
      connection therewith.

     

    (b)  Except
      as
      Lambda may otherwise agree in writing, Lambda shall have the right to (i)
      engage, directly or indirectly, in the same or similar business activities
      or
      lines of business as the Company and (ii) do business with any client,
      competitor or customer of the Company, with the result that the Company shall
      have no right in or to such activities or any proceeds or benefits therefrom,
      and neither Lambda nor any Lambda Person (except as provided in Section
      5(c)) shall be liable to the Company or its stockholders for breach of any
      fiduciary duty by reason of any such activities of Lambda or of such Lambda
      Person’s participation therein.  A Lambda Person who is serving as an
      officer or director of the Company may not, at the same time, serve as an
      officer or director of any entity whose principal business activity is (i)
      the
      development or sale of medical devices for the treatment of end stage renal
      disease or (ii) water filtration.  In the event that Lambda or any
      Lambda Person acquires knowledge of a potential transaction or matter that
      may
      be a corporate opportunity for both Lambda and the Company other than in the
      case of a director-related opportunity, Lambda and such Lambda Person shall
      have
      no duty to communicate or present such corporate opportunity to the Company
      and
      the Company hereby renounces any interest or expectancy it may have in such
      corporate opportunity, with the result that Lambda or such Lambda Person shall
      not be liable to the Company or its stockholders for breach of any fiduciary
      duty, including for breach of any fiduciary duty as a director or stockholder
      of
      the Company, by reason of the fact that Lambda pursues or acquires such
      corporate opportunity for itself, directs such corporate opportunity to another
      person or entity, or does not present such corporate opportunity to the
      Company.

     

    (c)  In
      the
      event that a director of the Company who is a Lambda Person acquires knowledge
      of a potential transaction or matter that may be a corporate opportunity for
      both the Company and Lambda, such corporate opportunity shall belong to Lambda,
      and the Company hereby renounces any interest or expectancy it may have in
      such
      corporate opportunity, unless such corporate opportunity is a director-related
      opportunity, in which case such corporate opportunity shall belong to the
      Company.

     

    (d)  For
      the
      purposes of this Section 5, “corporate opportunities” shall not
      include any business opportunities that the Company is not financially or
      contractually able to undertake, or that are, from their nature, not in the
      line
      of the Company’s business or are of no practical advantage to it or that are
      ones in which the Company has no interest or reasonable
      expectancy.  For the purposes of this Section 5, a
“director-related opportunity” means a potential transaction or matter
      that may be a corporate opportunity for both the Company and Lambda
      where

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    knowledge
      of such corporate opportunity is made known to a Lambda Person who is serving
      as
      a director of the Company as a result of his serving as a director of the
      Company prior to (x) Lambda or any other Lambda Person acquiring knowledge
      of such corporate opportunity, or (y) such Lambda Person acquiring knowledge
      of
      such corporate opportunity other than as a result of such Lambda Person’s
      serving as a director.

     

    (e)  For
      purposes of this Section 5 only, the “Company” shall mean the
      Company and all corporations, partnerships, joint ventures, associations and
      other entities in which the Company beneficially owns (directly or indirectly)
      fifty percent (50%) or more of the outstanding voting stock, voting power or
      similar voting interests.

     

    (f)  Neither
      the Company nor any Covered Holder will take any action to approve any amendment
      to the Certificate of Incorporation or Bylaws of the Company that is
      inconsistent with any provision of this Section 5.

     

    6.  Joinder
      Agreements; Transfers.  

     

    (a)  Except
      as
      Lambda may otherwise agree in writing, the Company shall require each person
      or
      entity who subscribes for or otherwise purchases any newly issued capital stock
      of the Company, securities convertible into or exchangeable for shares of
      capital stock of the Company, and all options, warrants, and other rights to
      purchase or otherwise acquire from the Company shares of such capital stock
      (collectively, “Equity Securities”), other than Excluded Securities (as
      defined below), after the date hereof, as a condition to the effectiveness
      of
      such subscription or purchase, to execute a joinder to this Agreement,
      substantially in the form attached hereto as Exhibit A (the “Joinder
      Agreement”), agreeing to be treated as a Covered Holder, whereupon such
      Person shall be a party to and bound by the provisions of this
      Agreement.  For purposes of this paragraph, “Excluded
      Securities” means (i) options granted to directors, officers, bona fide
      consultants and employees of the Company issued pursuant to an employee benefit
      plan of the Company and shares of capital stock at any time issuable upon the
      exercise of such options, (ii) shares of capital stock issuable upon conversion
      of the Company’s Series A 10% Secured Convertible Notes Due 2008 or Series B 10%
      Secured Convertible Notes Due 2008, (iii) warrants issuable upon conversion
      of
      the Company’s Series A 10% Secured Convertible Notes Due 2008 and shares of
      capital stock at any time issuable upon the exercise of such warrants,
      (iv) shares of Common Stock issuable upon the exercise of options, warrants
      or other securities exchangeable or exercisable for, or convertible into, shares
      of capital stock that are outstanding as of the date hereof, (v) shares of
      capital stock issued by the Company in an underwritten public offering and
      (vi)
      Equity Securities issued after the date hereof to give effect to any stock
      dividend or distribution, stock split, reverse stock split or combination or
      other similar pro rata recapitalization event affecting capital
      stock.

     

    (b)  From
      the
      date hereof until two (2) regular annual meetings of stockholders of the Company
      at which directors of the Company are elected have been conducted, no Covered
      Holder shall sell, transfer, assign, pledge, hypothecate or otherwise dispose
      of
      any Equity Securities (each, a “Transfer”), and the Company shall not
      record any such Transfer, unless and until the transferee (unless already
      subject to this Agreement) executes and delivers to the Company a Joinder
      Agreement, agreeing to be treated in the same manner as the Covered
      Holder.  Upon such Transfer and such execution and delivery, the
      transferee shall be a party to

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    and
      bound
      by this Agreement with respect to the transferred Equity Securities in the
      same
      manner as the transferring Covered Holder.  The provisions of this
Section 6(b) shall apply to all Equity Securities now owned or hereafter
      acquired by a Covered Holder.  Any Transfer of Equity Securities by a
      Covered Holder not made in accordance with this Section 6(b) shall be
      void ab initio.  The provisions of this Section 6(b) shall not apply
      to any sale of shares of Common Stock by a Covered Holder pursuant to an
      effective registration statement or Rule 144.

     

    7.  Legend.
      Each certificate representing Equity Securities held by a
      Covered Person shall, in addition to any other legends otherwise required,
      bear
      a legend substantially in the following form:

     

    “THE
      SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF THE SECURITIES REPRESENTED
      BY THIS CERTIFICATE AND THE OBLIGATIONS OF THE HOLDER OF SUCH SECURITIES IN
      RESPECT OF THE ELECTION OF DIRECTORS ARE SUBJECT TO AN INVESTOR RIGHTS AGREEMENT
      DATED AS OF SEPTEMBER ___, 2007 (AS IT MAY BE AMENDED, RESTATED OR OTHERWISE
      MODIFIED FROM TIME TO TIME), AMONG NEPHROS, INC. AND CERTAIN HOLDERS OF ITS
      OUTSTANDING CAPITAL STOCK. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST
      BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
      SECRETARY OF NEPHROS, INC.

     

    Each
      Covered Holder hereby agrees to promptly deliver to the Company upon execution
      of this Agreement any certificates representing Equity Securities for the
      purpose of adding the foregoing legend to such certificates.

     

    8.  Termination.  This
      Agreement shall automatically terminate on the first day that the aggregate
      number of shares of Common Stock held by Lambda or any Lambda Transferee (as
      defined below), or issuable to Lambda or any Lambda Transferee upon the exercise
      or conversion of Equity Securities held by Lambda or such Lambda Transferee
      (whether or not then exercisable or convertible), represents less than ten
      percent (10%) of the sum of the issued and outstanding shares of Common Stock
      of
      the Company plus the number of shares of Common Stock issuable to Lambda or
      any
      Lambda Transferee upon the exercise or conversion of Equity Securities held
      by
      Lambda (whether or not then exercisable or convertible).  In addition,
      Lambda may unilaterally terminate this Agreement at any time by giving written
      notice of such termination to the Company.  Upon the termination of
      this Agreement, the Company shall give notice of such termination to Lambda
      and
      the Covered Holders and the Covered Holders shall be entitled, upon the
      surrender of any certificates representing Equity Securities that bear the
      legend set forth in Section 7, to receive a replacement certificate
      representing such Equity Securities that does not bear such legend.

     

    9.  Representations
      and Warranties.  Each
      of the Covered Holders hereby makes the following representations and warranties
      to Lambda with respect solely to itself and not with respect to any other
      Covered Holder:

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (a)  This
      Agreement has been duly executed and delivered by each Covered Holder and
      constitutes the legal, valid and binding obligation of each Covered Holder,
      enforceable against such Covered Holder in accordance with its
      terms.

     

    (b)  Neither
      the execution, delivery nor performance of this Agreement by each Covered Holder
      violates or conflicts with, creates (with or without the giving of notice or
      the
      lapse of time, or both) a default under or a lien or encumbrance upon any of
      such Covered Holder’s assets or properties pursuant to, or requires the consent,
      approval or order of any government or governmental agency or other person
      or
      entity under (i) any note, indenture, lease, license or other agreement to
      which
      such Covered Holder is a party or by which it or any of its assets or properties
      is bound or (ii) any statute, law, rule, regulation or court decree binding
      upon
      or applicable to such Covered Holder or its assets or properties.  If
      such Covered Holder is not a natural person, the execution, delivery and
      performance by such Holder of this Agreement, have been duly authorized by
      all
      necessary corporate or other action on behalf of such Covered Holder and such
      execution, delivery and performance does not and will not constitute a breach
      or
      violation of, or default under, the charter or by-laws or equivalent governing
      documents of such Holder.

     

    10.  Miscellaneous.

    

    (a)  This
      Agreement, including the exhibits hereto, sets forth the entire understanding
      of
      the parties with respect to the subject matter hereof, supersedes all existing
      agreements among them concerning such subject matter, and the provisions hereof
      may be amended or waived, only by a written instrument duly executed by the
      party to be charged; provided, that this Agreement may be amended by a written
      instrument duly executed by the Company, Lambda and Covered Holders holding
      a
      majority of all shares of Common Stock then held by the Covered
      Holders.  Notwithstanding the foregoing, no such amendment,
      modification, supplement, waiver, consent or departure shall distinguish between
      Covered Holders or groups of Covered Holders unless any Covered Holder adversely
      affected thereby shall have consented thereto in writing.

     

    (b)  Except
      as
      otherwise specifically provided herein, any notice or other communication
      required or permitted to be given hereunder shall be in writing and shall be
      mailed by certified mail, return receipt requested, or by Federal Express,
      Express Mail or similar guaranteed overnight delivery or courier service or
      delivered in person against receipt to the party to whom it is to be
      given,

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    (i)if
      to the
      Company,

     

    Nephros,
      Inc.

    3960
      Broadway

    New
      York,
      New York  10032

    Attn:  President

    

    (ii)
      with
      a copy to,

    

    Kramer
      Levin Naftalis & Frankel LLP

    1177
      Avenue of the Americas

    New
      York,
      New York 10036

    Attention:  Thomas
      D. Balliett, Esq.

    

    (ii)
      if
      to any other party, at the address of such party set forth on the stock transfer
      records of the Company or its transfer agent,

     

    or
      in any
      case, to such other address as the party shall have furnished in writing in
      accordance with the provisions of this Section 10(b).  Any
      notice given by means permitted by this Section 10(b) shall be deemed
      given at the time of receipt thereof at the address specified in this Section
      10(b).

     

    (c)  This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and permitted assigns. The Company may not assign this
      Agreement or any rights or obligations hereunder without the prior written
      consent of Lambda.  Lambda may assign its rights, or a portion
      thereof, to any person or entity to whom it Transfers Equity Securities,
      provided that such transferee agrees in writing to be bound, with respect to
      the
      Transferred Equity Securities, by the provisions of this Agreement.  A
      person or entity to whom rights under this Agreement have been assigned by
      Lambda (either simultaneous with or subsequent to a Transfer of Equity
      Securities) is referred to herein as a “Lambda Transferee”; however, a
      person or entity to whom Lambda has Transferred Equity Securities but has not
      assigned rights under this Agreement shall not be treated as a Lambda
      Transferee.

     

    (d)  The
      headings in this Agreement are solely for convenience of reference and shall
      be
      given no effect in the construction or interpretation of this
      Agreement.

     

    (e)  This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one and the
      same
      instrument.

     

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

     

    (g)  In
      the
      event that any provision of this Agreement shall be determined to be illegal
      or
      unenforceable, that provision will be limited or eliminated to the minimum
      extent necessary so that this Agreement shall otherwise remain in full force
      and
      effect and enforceable.

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (h)  This
      Agreement does not create, and shall not be construed as creating, any rights
      enforceable by any person not a party to this Agreement.

     

    (i)  Each
      party hereto consents and submits to the exclusive jurisdiction of any state
      court sitting in the County of New York or federal court sitting in the Southern
      District of the State of New York in connection with any dispute arising out
      of
      or relating to this Agreement, and agrees that all suits, actions and
      proceedings brought by such party hereunder shall be brought only in such
      jurisdictions.  Each party hereto 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 Agreement 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.  Each party hereto agrees that
      personal service of process may be effected by any of the means specified in
      Section 10(b), addressed to such party.  The foregoing shall
      not limit the rights of any party to serve process in any other manner permitted
      by law.

     

    (j)  In
      addition to being entitled to exercise all rights provided herein or granted
      by
      law, including recovery of damages, Lambda will be entitled to specific
      performance under this Agreement.  The parties agree that monetary
      damages may not be adequate compensation for any loss incurred by reason of
      any
      breach by the Company or any Covered Holder of its respective obligations
      contained in this Agreement and hereby agree to waive and not to assert in
      any
      action for specific performance of any such obligation the defense that a remedy
      at law would be adequate.

     

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

     

    [Signature
      page follows immediately]

     

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS
      WHEREOF, the parties hereto have executed this Investor Rights Agreement
      on the date first written abobe.

     

     

                                                                               
NEPHROS,
      INC.

     

    
       

                                                  By:/s/
        Norman J.
        Barta                               

                                                    Name:  Norman
        J.
        Barta

                                                    Title:
        President and Chief
        Executive Officer

    

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

                                                LAMBDA
INVESTORS
      LLC

    

    

                                                By:/s/
      Arthur
      Amron                           

                                                   Name:
      Arthur
      Amron

                                                   Title:
      Vice
      President

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    
                                            Purchaser:GPC
      76, LLC

                                                By:
SouthpawAssetManagementLP

    

    

                                                By:/s/
      Kevin
      Wyman                        

                                                   Name:
      Kevin
      Wyman

                                                   Title:
      Investment
      Manager

    

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

                                                        Purchaser:
      Lewis P.
      Schneider

    

    

                                                        By:
/s/
      Lewis P.
      Schneider                     

                                                           Name:
      Lewis P.
      Schneider

                                                           Title:

     

     

    

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

                                                              Purchaser:
        Enso
        Global Equities Partnership LP

      

      

                                                              By:
/s/
        Joshua A.
        Fink                 

                                                                 Name:
        Joshua A.
        Fink

                                                                 Title:
        Director of
        GP

    

     

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

                                                         
3V
      Capital
      Master Fund Ltd.

    

                                                         
By:
      3V
      Capital Management LLC

    

                                                         
      By:/s/
      Scott A. Stagg    
                    
      

                                                           
Name:
      Scott A.
      Stagg

                                       
      Title: Managing Member

    
       

                                                           
        Distressed/High Yield Trading Opportunities, Ltd.

       

                                                           
By:
        Eliteperformance
        Fund, Ltd.

       

                                       
        By: /s/ Scott A.
        Stagg                             

                                          
        Name: Scott A. Stagg

                                          
        Title: Portfolio Manager

    

     

                                                         
Southpaw
      Credit Opportunity Master Fund LP

    

                                                        
By:
Southpaw
      GP LLC

    

                                                        
By:
/s/
      Kevin
      Wyman                        
      

                                                        
   Name:
      Kevin
      Wyman

                                                        
   Title:
      Managing
      Member

    

                                                        
Kudu
      Partners,
      L.P.

     

                                                        
By:
/s/
      Brian P.
      Lupien                            

                                                            Name:
      Brian P.
      Lupien

                                                            Title:
      Treasurer

    

                                                        
LJHS
      Company

    

                                                        
By:
/s/
      Jack A.
      McLeod                          

                                                            Name:
      Jack A.
      McLeod

                                                            Title:
      Agent

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

    

    JOINDER
      AGREEMENT

     

    By
      execution of this Joinder Agreement, the undersigned agrees to become a party
      to
      that certain Investor Rights Agreement, dated as of September ___, 2007, among
      Nephros, Inc., and the other persons and entities that are parties thereto
      (as
      the same may be amended, restated or otherwise modified from time to
      time).  The undersigned shall have all the rights, and shall observe
      all the obligations, applicable to a Covered Holder thereunder.

     

    Name:  __________________________

     

    Address
      for                                                                                              
with
      copies

    Notices:                                                                                         
      to:

     

    

    ___________________________                                                                                     ___________________________

    

    ___________________________                                                                                     ___________________________

    

    ___________________________                                                                                     ___________________________

    

    ___________________________                                                                                     ___________________________kl09044_ex10-5.htm

    
      

    

     

    Exhibit
      10.5

     

     

    Nephros,
      Inc.

    3960
      Broadway

    New
      York,
      NY 10032

    

    

                            September
      18,
      2007

    

    

    National
      Securities Corporation

    875
      N.
      Michigan Avenue, Suite 1560

    Chicago,
      IL 60611

    

    Gentlemen:

    

    Reference
      is made to the transactions contemplated in those several Subscription
      Agreements (each a “Subscription Agreement”) by and among
      Nephros, Inc., a Delaware corporation, (the “Company”) and each
      subscriber a party thereto (the “Buyers”) pursuant to which
      Series A 10% Secured Convertible Notes due 2008 (collectively, the
“Securities”) are being sold to the Buyers in reliance upon the
      exemption from securities registration afforded by Section 4(2) of the
      Securities Act of 1933, as amended (“1933 Act”) and Regulation
      D promulgated by the Securities and Exchange Commission (the
“SEC”) under the 1933 Act.  Reference is also made to
      that certain corporate finance engagement letter agreement dated June 8, 2007,
      as amended (the “Engagement Agreement”) by and between the
      Company, National Securities Corporation (“NSC”) and Dinosaur
      Securities LLC (“Dinosaur”) pursuant to which the Company
      engaged NSC and Dinosaur with respect to a proposed capital transaction, which
      has resulted in the financing contemplated in the Subscription Agreement
      (“Financing”).  Any terms used and not otherwise
      defined herein shall have the respective meanings set forth in the Subscription
      Agreement.

    

    1.  Representations
      and Warranties of the Company. For the benefit of NSC and Dinosaur, the
      Company hereby incorporates by reference the representations and warranties
      as
      set forth in Sections 3(a), (b), (c), (d), (e), (f), (g), (h), (i), (j), (k),
      (o), (q) and (r) of the Subscription Agreement with the same force and effect
      as
      if specifically set forth herein. In addition, at each
      closing of the Financing (“Closing”), the Company will provide NSC with copies
      of all closing documents that are furnished to the Buyers pursuant to the
      Subscription Agreement, as well as the Form D promptly following its filing
      with
      the SEC.

    

    2.  Closing;
      Fees. Simultaneously with payment for and delivery of the Securities at each
      Closing, the Company shall pay to NSC and Dinosaur the compensation (cash and
      placement agent warrants) and expense reimbursement (NSC only) as set forth
      in
      the Engagement Agreement (“General Expense Obligation”) which
      the Company shall disclose to investors in Schedule 3(f) of the disclosure
      schedules to the Subscription Agreement.  Lastly, upon the reasonable
      determination by NSC that a FINRA Rule 2710 filing is required in connection
      with the registration statement relating to the resale of the shares underlying
      the placement agent warrants, the Company will pay all filing fees, costs and
      reasonable legal fees in connection with such filing to be prepared by the
      Placement Agent’s counsel (the “2710 Filing Fee and Expense
      Obligation”).  Notwithstanding anything contained herein, the
      aggregate General Expense Obligation and 2710 Filing Fee and Expense Obligation
      shall in no event exceed $25,000 in the aggregate.

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    3.  Miscellaneous.

    

    (a).  Survival.  Notwithstanding
      anything contained herein, the Engagement Agreement remains in full force and
      effect in accordance with its terms.

    

    (b).  Representations,
      Warranties and Covenants to Survive Delivery.   The Company
      acknowledges that the representations and warranties from the Subscription
      Agreement incorporated by reference herein by the Company shall survive the
      execution and delivery of the Subscription Agreement for a period of one year
      from the First Closing (as defined in the Subscription Agreement).

    

    (c).  Applicable
      Law.   This Agreement shall be governed by and construed
      under the laws of the State of New York as applied to agreements among New
      York
      residents entered into and to be performed entirely within New
      York.  Each of the parties hereto (1) agree that any legal suit,
      action or proceeding arising out of or relating to this Agreement shall be
      instituted exclusively in New York State Supreme Court, County of New York,
      or
      in the United States District Court for the Southern District of New York,
      (2)
      waive any objection which the Company may have now or hereafter to the venue
      of
      any such suit, action or proceeding, and (3) irrevocably consent to the
      jurisdiction of the New York State Supreme Court, County of New York, and the
      United States District Court for the Southern District of New York in any such
      suit, action or proceeding.  Each of the parties hereto further agrees
      to accept and acknowledge service of any and all process which may be served
      in
      any such suit, action or proceeding in the New York State Supreme Court, County
      of New York, or in the United States District Court for the Southern District
      of
      New York and agree that service of process upon it mailed by certified mail
      to
      its address shall be deemed in every respect effective service of process upon
      it, in any such suit, action or proceeding.  THE PARTIES
      HERETO AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
      OR
      CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DOCUMENT
      OR
      AGREEMENT CONTEMPLATED HEREBY.

    

    (d).  Counterparts.  This
      Agreement may be signed in counterparts with the same effect as if both parties
      had signed one and the same instrument.

    

    (e).  Entire
      Agreement.  This Agreement, together with the Engagement
      Agreement, constitute the entire agreement between the parties hereto pertaining
      to the subject matter hereof and supersede all prior and contemporaneous
      agreements, understandings, documents, negotiations and discussions, whether
      oral or written, of the parties hereto.

    

    

    

    REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    If
      you find the foregoing is in
      accordance with our understanding, kindly sign and return to us a counterpart
      hereof, whereupon this instrument along with all counterparts will become a
      binding agreement between us.

     

     

                                                                 
Very
      truly
      yours,

     

     

                                                                   NEPHROS,
      INC.

    

    

                                                                   By:  ______________________________

                                                                           Norman
      J.
      Barta

                                              
      President and Chief Executive Officer

    

    

    

    

    AGREED
      AND ACCEPTED TO

    AS
      OF THE
      DATE FIRST WRITTEN ABOVE:

    

    NATIONAL
      SECURITIES CORPORATION

    

    

    By:
      __________________________________________

           Brian
      Friedman 

           Managing
      Director and Head of Investment Banking

    

    DINOSAUR
      SECURITIES, LLC

    

    

    By:
      __________________________________

            Glenn
      Grossman

            President

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}]]