Document:

Exhibit 10.39 Confidential Treatment Requested

    
      

    

    Exhibit
      10.39

     

     

    CONFIDENTIAL
      TREATMENT REQUESTED

     

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

    

    Addendum
      to the Commercial Contract

    

    Nephros
      has the proprietary filters MD190 and MD220 for mid-dilution hemodiafiltration
      therapy. Bellco has long experience and know-how in the hemodialysis field
      with
      a strong presence in Europe and in major countries in other parts of the world.
      Bellco and Nephros have the intention of increasing their strategic partnership,
      including research and development, distribution and commercial
      agreements.

    

    Based
      on
      these premises, this agreement, effective January 1, 2007, intends to outline
      modifications to the previous agreement for sale and distribution (dated January
      7, 2004 between Nephros and Bellco).

    

    
      	1.  	
              Contract
                conditions

            

    

    
      	a)  	
              The
                current Bellco-Nephros commercial contract will be amended to reflect
                a
                term ending * * *. The parties agree to negotiate in good faith by
                * * *
                for a contract extension.

            

    

     

    
      	2.  	
              MD
                Mid-Dilution Dialyzer

            

    

    
      	a)  	
              Bellco
                will commit to purchasing a minimum
                of

            

    

    
      	a.  	
              *
                *
                * MD dialyzers from January 1 to December 31,
                2007;

            

    

    
      	b.  	
              *
                *
                * MD dialyzers or from January 1 to December 31,
                2008;

            

    

    
      	c.  	
              Minimum
                increase of * * * filters per year over prior year actual thereafter.
                The
                parties agree to negotiate in good faith to revise this number upward
                upon
                introduction of the new Bellco/Nephros HDF
                machine.

            

    

    
      	d.  	
              The
                * * * MD dialyzers scheduled from January 1 to April 30, 2007 are
                included
                in the total amount of * * * mentioned in the point
                2.a)a.

            

    

    

    
      	b)  	
              Rolling
                purchase order forecasts will be provided by Bellco, in multiples
                of full
                pallet quantities, within the first 5 business days of each month
                for the
                succeeding 6 month period (e.g., Bellco will provide a rolling forecast
                by
                December 7 for succeeding months January through June), for which
                months 1
                and 2 (e.g. January and February) will be firm commitments. Nephros
                shall
                plan to ship on or before the 20th
                day of the month preceding the month of the forecast. In no event
                shall a
                monthly order be less than * * * of the annual minimum commitment
                for the
                year in which the order takes
                place.

            

    

     

    
      	c)  	
              Any
                changes in membrane, dialyzer characteristics or manufacturer must
                be
                agreed on in writing between Bellco and Nephros, subject to Nephros’s
                ability to obtain a given membrane, the continuing availability or
                viability of a given manufacturer, and
                events of force majeur.

            

    

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    
      	d)  	
              Bellco
                shall provide a report of estimated MD Filter sales to Nephros on
                a
                quarterly basis, including:

            

    

    
      	a.  	
              Number
                of MD Filters sold in the quarter;

            

    

    
      	b.  	
              Number
                of (and names of) clinics using the MD
                Filters;

            

    

    
      	c.  	
              Number
                of patients on on-going MD Filter therapy at each
                clinic.

            

    

     

    
      	e)  	
              Nephros
                shall have the right to audit these sales figures on an annual basis.
                Bellco shall cooperate in such audit; and Nephros shall have the
                right to
                have third party auditors conduct such
                audit.

            

    

    

    
      	3.  	
              Sales
                Territory

            

    

    
      	a)  	
              Bellco
                will be the exclusive distributor for * *
                *.

            

    

    
      	b)  	
              Bellco
                will be the exclusive distributor for these other countries out of
                the EU:
                * * *.

            

    

    
      	c)  	
              Bellco
                will be the exclusive distributor for * * *.

            

    

    
      	d)  	
              Nephros
                and Bellco will negotiate in good faith on a timely basis for
                non-exclusive distribution rights in * * *, and will negotiate separate
                order quantities for these countries
                accordingly.

            

    

    
      	e)  	
              Bellco
                will not market the filter in any other territories without the express
                written permission of Nephros.

            

    

    

    
      	4.  	
              Transfer
                Price

            

    

    
      	a)  	
              Different
                country markets require different pricing; non-EU countries may have
                product prices lower than EU
                countries.

            

    

    
      	b)  	
              The
                transfer price for the filter scheduled from January 1, 2007 to March
                31,
                2007 will be * * * in accordance with the previous
                agreement.

            

    

    
      	c)  	
              The
                transfer price for the filter scheduled after March 31, 2007 will
                be * *
                *.

            

    

    
      	d)  	
              Payment
                terms on filters are net 60 days, (by wire transfer to Nephros designated
                account) prorated interest accruing thereafter at 1.5% per
                month.

            

    

    

    
      	5.  	
              Product
                and Patent Registrations

            

    

    
      	a)  	
              To
                enter some new markets out of the EU, a product registration is
                required.

            

    

    
      	b)  	
              All
                the documents and the technical dossiers required for the registration
                will be provided by Nephros.

            

    

    
      	c)  	
              The
                registration cost for each country where it is incrementally required
                will
                be paid by Bellco.

            

    

    
      	d)  	
              Patent
                costs to maintain required patents as determined by Nephros will
                be paid
                by Nephros. 

            

    

    

    

    
      	6.  	
              Clinical
                Trials and Support 

            

    

    
      	a)  	
              Bellco
                and Nephros recognize that it is mutually beneficial to have clinical
                trials, scientific presentations and articles to support the mid-dilution
                therapy.

            

    

    
      	b)  	
              Bellco
                will conduct clinical trials only in the territories and centers
                that are
                covered under the commercial agreement.  Nephros will conduct
                clinical trials in the territories or centers that Bellco operates
                exclusively only by mutual agreement with
                Bellco.

            

    

    
      	c)  	
              Bellco
                and Nephros will share all data from their clinical trials related
                to
                mid-dilution therapy. 

            

    

    
      	d)  	
              Any
                serious adverse events or technical problems involving the MD190
                and MD
                220 filters will be communicated to the other party as soon as possible
                (regardless of territory or who sold the
                dialyzer).

            

    

    

     

    
 

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
 

    
      	7.  	
              Manufacturing

            

    

    
      	a)  	
              Nephros
                will deliver product in minimum batches of * * * to any Bellco facility
                within *
                *
                * (FOB
                point of shipment).  Other terms apply as specified in the
                Agreement.

            

    

    

    
      	8.  	
              Assignment

            

    

    
      	a)  	
              The
                Agreement shall be binding upon and inure to the benefit of the parties
                hereto and their respective successors and assignees; provided that
                the
                parties may assign this Agreement to an affiliate but shall remain
                fully
                responsible for the performance of this
                Agreement.

            

    

    
      	b)  	
              In
                the event an eventual Bellco successor or assignee changes the commercial
                strategy for sale of the MD filters, Nephros shall have the option
                to void
                the exclusivity provisions of this Agreement.

            

    

    
      	c)  	
              In
                the event of a change of control at Nephros, the successor or assignee
                shall have the right to renegotiate this contract after a one year
                waiting
                period following succession or
                assignment.

            

    

     

    9. Interpretation

    
      	a)  	
              In
                the event of any inconsistency between this Agreement and the original
                January 7, 2004 agreement between Nephros and Bellco, this Agreement
                shall
                govern.  All other provisions of the original January 7, 2004
                agreement not otherwise amended or superseded herein shall remain
                in full
                force and effect.

            

    

    

    10. Governing
      Law

    
      	a)  	
              In
                the event of any dispute between the parties concerning the
                interpretation, performance of obligations, breaches, termination
                or
                enforcement of this contract, the Parties will make a best effort
                to
                settle the dispute by means of a discussion between senior managers
                of
                Nephros and Bellco, in light of the premises underlying this Agreement,
                the purpose of the Agreement, and the provisions set forth in this
                Agreement.

            

    

    

    All
      disputes arising out of this contract will be settled by arbitration under
      the
      Rules of the Chamber of National and International Arbitration of Milan
      (Regolamento della Camera Arbitrale Nazionale ed Internazionale di Milano).
      The
      seat of the arbitration shall be Milan.  The language of the arbitration
      shall be English. The Arbitral Tribunal shall consist of three arbitrators
      appointed pursuant to those Rules.  The Arbitral Tribunal shall decide all
      disputes in accordance with the rules of law of Italy, with the only exception
      of disputes pertaining to intellectual property rights arising from Nephros
      intellectual property, which shall be settled by the American Arbitration
      Association in accordance with the rules of law of the State of New York,
      USA.

    

    

     

    
 

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
 

    11. Authority

    
      	a)  	
              The
                individuals executing this agreement have full power and authority
                to bind
                their respective companies hereunder and no further consent or approval
                is
                required of either party prior to this Agreement taking effect as
                of the
                effective date first above written.

            

    

    
 

    

    Nephros    /s/
      Norman Barta

                                    
      By Mr. Norman Barta

                                    
      Title: Chief Executive Officer

    

    

    Bellco
          /s/
      Alberto Cantaluppi

                                 
      By Mr. Alberto Cantaluppi

                                 
      Title: Chief Executive Officer

     

     

     

     

     

     

     

     

     

     

     

     

    4Rental Contracts

 

EXHIBIT 10.18

RENTAL AGREEMENT

BETWEEN:

INTERNATIONAL ABSORBENTS INC.

1569 DEMPSEY ROAD

NORTH VANCOUVER, B.C.

V7K 1S8

(herein referred to as the “Company”)

AND

ABE INDUSTRIES (1980) INC.

1569 DEMPSEY ROAD

NORTH VANCOUVER, B.C.

V7K 1S8

(herein referred to as “ABE”)

THIS RENTAL AGREEMENT (the “Agreement”) is made and entered into this 15th day of March, 2003,
by and between International Absorbents Inc., a British Columbia corporation and ABE Industries
(1980) Inc., a British Columbia corporation.

     Effective herewith, the Company hereby agrees to rent the premises at 1569 Dempsey Road,
North Vancouver, British Columbia (the “Premises”) and ABE hereby agrees to such rental. The
rental of premises is established to represent the Company’s head office in British Columbia.

     The term of the rental and services agreement hereunder shall be for a period of five (5)
years, commencing on the date of this Agreement. The term, subject to earlier termination as
specified hereafter, will automatically renew on the first and each subsequent anniversary of the
Agreement until terminated.

     The Premises consists of 1,640 square feet of office space. The Company shall make monthly
payments on the 1st of each month to ABE in the amount of Five Hundred Dollars ($500.00)
for the Premises provided, subject to change upon mutual agreement of the parties.

     This agreement shall terminate on the 1st of the month subsequent the date that is
two (2) months following the written submission.

The parties have executed and sealed this Agreement as of the day and year set forth above.

	 	 	 	 	 	 	 	 	 
	INTERNATIONAL ABSORBENTS INC.	 	ABE INDUSTRIES (1980) INC.	 	 
	 
	 	 	 	 	 	 	 	 
	Signed:

	 	/s/ Doug Ellis
	 	Signed:
	 	/s/ Gordon L. Ellis
	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	Douglas Ellis, Secretary
	 	 	 	Gordon L. Ellis	 	 
	 
	 	 	 	 	 	 	 	 
	Date:

	 	March 15, 2003
	 	Date:
	 	March 15, 2003

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