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                                                                     Exhibit 4.3

THIS WARRANT AND THE COMMON  SHARES  ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THIS WARRANT
AND THE COMMON  SHARES  ISSUABLE  UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED  FOR SALE,  PLEDGED  OR  HYPOTHECATED  IN THE  ABSENCE  OF AN  EFFECTIVE
REGISTRATION  STATEMENT  UNDER  SAID ACT OR AN  OPINION  OF  COUNSEL  REASONABLY
SATISFACTORY TO CEPTOR CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

                                                  Right to Purchase ________
                                                  shares of Common Stock of
                                                  CepTor Corporation (subject to
                                                  adjustment as provided herein)

                      FORM OF COMMON STOCK PURCHASE WARRANT

No. 2006-A-001                                         Issue Date: May ___, 2006

         CEPTOR CORPORATION, a corporation organized under the laws of the State
of Delaware (the "Company"), hereby certifies that, for value received,
__________________________________, _________________________________ or its
assigns (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company at any time after the Issue Date until 5:00 p.m.,
E.S.T on the fifth (5th) anniversary after the Issue Date, which may be extended
as described in Section 10 hereof (the "Expiration Date"), _________ fully paid
and nonassessable shares of Common Stock at a per share purchase price of $0.30.
The aforedescribed purchase price per share, as adjusted from time to time as
herein provided, is referred to herein as the "Purchase Price." The number and
character of such shares of Common Stock and the Purchase Price are subject to
adjustment as provided herein. The Company may reduce the Purchase Price without
the consent of the Holder. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Subscription Agreement
(the "SUBSCRIPTION AGREEMENT"), dated May ___, 2006, entered into by the Company
and Holders of the Warrants.

         As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:

         (a) The term "Company" shall include CepTor Corporation and any
corporation which shall succeed or assume the obligations of CepTor Corporation
hereunder.

         (b) The term "Common Stock" includes (a) the Company's Common Stock,
$0.0001 par value per share, as authorized on the date of the Subscription
Agreement, and (b) any other securities into which or for which any of the
securities described in (a) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.

         (c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 5 or otherwise.

         (d) The term "Warrant Shares" shall mean the Common Stock issuable upon
exercise of this Warrant.

                                       1

         1. EXERCISE OF WARRANT.

                  1.1. NUMBER OF SHARES ISSUABLE UPON EXERCISE. From and after
the Issue Date through and including the Expiration Date, the Holder hereof
shall be entitled to receive, upon exercise of this Warrant in whole in
accordance with the terms of subsection 1.2 or upon exercise of this Warrant in
part in accordance with subsection 1.3, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4.

                  1.2. FULL EXERCISE. This Warrant may be exercised in full by
the Holder hereof by delivery of an original or facsimile copy of the form of
subscription attached as Exhibit A hereto (the "Subscription Form") duly
executed by such Holder and surrender of the original Warrant within four (4)
days of exercise, to the Company at its principal office or at the office of its
Warrant Agent (as provided hereinafter), accompanied by payment, in cash, wire
transfer or by certified or official bank check payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price then in
effect.

                  1.3. PARTIAL EXERCISE. This Warrant may be exercised in part
(but not for a fractional share) by surrender of this Warrant in the manner and
at the place provided in subsection 1.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of whole shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may request, the whole number of shares of Common
Stock for which such Warrant may still be exercised.

                  1.4. FAIR MARKET VALUE. Fair Market Value of a share of Common
Stock as of a particular date (the "Determination Date") shall mean:

                           (a) If the Company's Common Stock is traded on an
exchange or is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ"), National Market System, the NASDAQ Capital
Market or the American Stock Exchange, LLC, then the closing or last sale price,
respectively, reported for the last business day immediately preceding the
Determination Date;

                           (b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System, the NASDAQ Capital Market or
the American Stock Exchange, Inc., but is traded in the over-the-counter market,
then the average of the closing bid and ask prices reported for the last
business day immediately preceding the Determination Date;

                           (c) Except as provided in clause (d) below, if the
Company's Common Stock is not
publicly traded, then as the Holder and the Company agree, or in the absence of
such an agreement, by arbitration in accordance with the rules then standing of
the American Arbitration Association, before a single arbitrator to be chosen
from a panel of persons qualified by education and training to pass on the
matter to be decided; or

                           (d) If the Determination Date is the date of a
liquidation, dissolution or winding
up, or any event deemed to be a liquidation, dissolution or winding up pursuant
to the Company's charter, then all amounts to be payable per share to holders of
the Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Common Stock in liquidation under the charter, assuming for the
purposes of this clause (d) that all of the shares of Common Stock then issuable
upon exercise of all of the Warrants are outstanding at the Determination Date.

                                       2

                  1.5. COMPANY ACKNOWLEDGMENT. The Company will, at the time of
the exercise of the Warrant, upon the request of the Holder hereof acknowledge
in writing its continuing obligation to afford to such Holder any rights to
which such Holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the Holder shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford to such Holder any such rights.

                  1.6. TRUSTEE FOR WARRANT HOLDERS. In the event that a
qualified bank or trust company shall have been appointed as trustee for the
Holder of the Warrants pursuant to Subsection 3.2, such bank or trust company
shall have all the powers and duties of a warrant agent (as hereinafter
described) and shall accept, in its own name for the account of the Company or
such successor person as may be entitled thereto, all amounts otherwise payable
to the Company or such successor, as the case may be, on exercise of this
Warrant pursuant to this Section 1.

                  1.7 DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. The
Company agrees that the shares of Common Stock purchased upon exercise of this
Warrant shall be deemed to be issued to the Holder hereof as the record owner of
such shares as of the close of business on the date on which this Warrant shall
have been surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder hereof, or as such Holder
(upon payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such Holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share of Common Stock, together with any other stock or
other securities and property (including cash, where applicable) to which such
Holder is entitled upon such exercise pursuant to Section 1 or otherwise. The
Company understands that a delay in the delivery of the Warrant Shares after the
Warrant Share Delivery Date could result in economic loss to the Holder. As
compensation to the Holder for such loss, the Company agrees to pay (as
liquidated damages and not as a penalty) to the Holder for late issuance of
Warrant Shares upon exercise of this Warrant the amount of $100 per business day
after the Warrant Share Delivery Date for each $10,000 of Purchase Price of
Warrant Shares for which this Warrant is exercised which are not timely
delivered. The Company shall pay any payments incurred under this Section in
immediately available funds upon demand. Furthermore, in addition to any other
remedies which may be available to the Holder, in the event that the Company
fails for any reason to effect delivery of the Warrant Shares by the Warrant
Share Delivery Date, the Holder may revoke all or part of the relevant Warrant
exercise by delivery of a notice to such effect to the Company whereupon the
Company and the Holder shall each be restored to their respective positions
immediately prior to the exercise of the relevant portion of this Warrant,
except that the liquidated damages described above shall be payable through the
date notice of revocation or rescission is given to the Company.

          2.      CASHLESS EXERCISE.

                  (a) Except as described below, if a Registration Statement (as
defined in the Subscription Agreement) ("Registration Statement") is effective
and the Holder may sell its shares of Common Stock upon exercise hereof pursuant
to the Registration Statement, this Warrant may be exercisable in whole or in
part for cash only as set forth in Section 1 above. If no such Registration
Statement is available during the time that such Registration Statement is
required to be effective pursuant to the terms of the Subscription Agreement,
then commencing one year after the Issue Date, payment upon exercise may be made
at the option of the Holder either in (i) cash, wire transfer or by certified or
official bank check payable to the order of the Company equal to the applicable
aggregate Purchase Price, (ii) by cashless exercise in accordance with Section
(b) below or (iii) by a combination of any of the foregoing methods, for the
number of shares of Common Stock specified in such form (as such exercise number

                                       3

shall be adjusted to reflect any adjustment in the total number of shares of
Common Stock issuable to the Holder per the terms of this Warrant) and the
Holder shall thereupon be entitled to receive the number of duly authorized,
validly issued, fully-paid and non-assessable shares of Common Stock (or Other
Securities) determined as provided herein.

                  (b) If the Fair Market Value of one share of Common Stock is
greater than the Purchase Price (at the date of calculation as set forth below),
in lieu of exercising this Warrant for cash, the Holder may elect to receive
shares equal to the value (as determined below) of this Warrant (or the portion
thereof being cancelled) by surrender of this Warrant at the principal office of
the Company together with the properly endorsed Subscription Form in which event
the Company shall issue to the Holder a number of shares of Common Stock
computed using the following formula:

                           X=Y (A-B)
                             -------
                                A

                  Where    X=       the number of shares of Common Stock to be
                                    issued to the holder

                           Y=       the number of shares of Common Stock
                                    purchasable under the Warrant or, if only a
                                    portion of the Warrant is being exercised,
                                    the portion of the Warrant being exercised
                                    (at the date of such calculation)

                           A=       the average of the closing sale prices of
                                    the Common Stock for the five (5) Trading
                                    Days immediately prior to (but not
                                    including) the Exercise Date

                           B=       Purchase Price (as adjusted to the date of
                                    such calculation)

                  (c) The Holder may employ the cashless exercise feature
described in Section (b) above only during the pendency of a Non-Registration
Event as described in Section 11 of the Subscription Agreement.

         For purposes of Rule 144 promulgated under the 1933 Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
commenced, on the date this Warrant was originally issued pursuant to the
Subscription Agreement.

         3.       ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.

                  3.1. REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case at
any time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1, at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.

                  3.2. DISSOLUTION. In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense deliver or
cause to be delivered the stock and other securities and property (including
cash, where applicable) receivable in accordance with Section 3.1 by the Holder

                                       4

of the Warrants upon their exercise after the effective date of such dissolution
pursuant to this Section 3 to a bank or trust company (a "Trustee") having its
principal office in New York, NY, as trustee for the Holder of the Warrants.

                  3.3. CONTINUATION OF TERMS. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the Other Securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any Other Securities, including, in the case of any
such transfer, the person acquiring all or substantially all of the properties
or assets of the Company, whether or not such person shall have expressly
assumed the terms of this Warrant as provided in Section 4. In the event this
Warrant does not continue in full force and effect after the consummation of the
transaction described in this Section 3, then only in such event will the
Company's securities and property (including cash, where applicable) receivable
by the Holder of the Warrants be delivered to the Trustee as contemplated by
Section 3.2.

                  3.4 SHARE ISSUANCE. Until the Expiration Date, if the Company
shall issue any Common Stock except for the Excepted Issuances (as defined in
the Subscription Agreement), prior to the complete exercise of this Warrant for
a consideration less than the Purchase Price that would be in effect at the time
of such issue, then, and thereafter successively upon each such issue, the
Purchase Price shall be reduced to such other lower issue price. For purposes of
this adjustment, the issuance of any security or debt instrument of the Company
carrying the right to convert such security or debt instrument into Common Stock
or of any warrant, right or option to purchase Common Stock shall result in an
adjustment to the Purchase Price upon the issuance of the above-described
security, debt instrument, warrant, right, or option if such issuance is at a
price lower than the Purchase Price in effect upon such issuance. The reduction
of the Purchase Price described in this Section 3.4 is in addition to the other
rights of the Holder described in the Subscription Agreement.

         4. EXTRAORDINARY EVENTS REGARDING COMMON STOCK. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the Holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be adjusted to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Purchase Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Purchase Price in effect
on the date of such exercise.

         5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other

                                       5

Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the Holder of the Warrant and any
Warrant Agent of the Company (appointed pursuant to Section 11 hereof).

         6. RESERVATION OF STOCK, ETC. ISSUABLE ON EXERCISE OF WARRANT;
FINANCIAL STATEMENTS. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrants, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant as described in the Subscription Agreement. This Warrant entitles
the Holder hereof to receive copies of all financial and other information
distributed or required to be distributed to the holders of the Company's Common
Stock.

         7. ASSIGNMENT; EXCHANGE OF WARRANT. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "Transferor"). On the
surrender for exchange of this Warrant, with the Transferor's endorsement in the
form of Exhibit B attached hereto (the "Transferor Endorsement Form") and
together with an opinion of counsel reasonably satisfactory to the Company that
the transfer of this Warrant will be in compliance with applicable securities
laws, the Company at its expense, twice, only, but with payment by the
Transferor of any applicable transfer taxes, will issue and deliver to or on the
order of the Transferor thereof a new Warrant or Warrants of like tenor, in the
name of the Transferor and/or the transferee(s) specified in such Transferor
Endorsement Form (each a "Transferee"), calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face or
faces of the Warrant so surrendered by the Transferor. No such transfers shall
result in a public distribution of the Warrant.

         8. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense, twice only, will execute and deliver, in lieu thereof, a new Warrant of
like tenor.

         9. REGISTRATION RIGHTS. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in the Subscription Agreement. The terms of the Subscription Agreement are
incorporated herein by this reference. In the event the Registration Statement
(as defined in Section 11.1(iv) of the Subscription Agreement) is not declared
effective by the Commission within 180 days after the Issue Date ("Warrant
Registration Default"), then the Expiration Date of this Warrant shall be five
years after the Issue Date.

         10. MAXIMUM EXERCISE. The Holder shall not be entitled to exercise this
Warrant on an exercise date, in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates on an exercise date,
and (ii) the number of shares of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this limitation is being made
on an exercise date, which would result in beneficial ownership by the Holder
and its affiliates of more than 4.99% of the outstanding shares of Common Stock
on such date. For the purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to
the foregoing, the Holder shall not be limited to aggregate exercises which
would result in the issuance of more than 4.99%. The restriction described in
this paragraph may be waived, in whole or in part, upon sixty-one (61) days
prior notice from the Holder to the Company to increase such percentage to up to
9.99%. The Holder may decide whether to convert a Convertible Note or exercise

                                       6

this Warrant to achieve an actual 4.99% or up to 9.99% ownership position as
described above.

         11. WARRANT AGENT. The Company may, by written notice to the Holder of
the Warrant, appoint an agent (a "Warrant Agent") for the purpose of issuing
Common Stock (or Other Securities) on the exercise of this Warrant pursuant to
Section 1, exchanging this Warrant pursuant to Section 7, and replacing this
Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such Warrant Agent.

         12. TRANSFER ON THE COMPANY'S BOOKS. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.

         13. NOTICES. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur or (c) three
business days after deposited in the mail if delivered pursuant to subsection
(ii) above. The addresses for such communications shall be: (i) if to the
Company to: CepTor Corporation, 200 International Circle, Suite 5100, Hunt
Valley, Maryland 21030, Attn: William Pursley, CEO, telecopier: (410) 527-9867,
with a copy by telecopier only to: Olshan Grundman Frome Rosenzweig & Wolosky
LLP, Park Avenue Tower, 65 East 55th Street, New York, NY 10022, Attn: Harvey
Kesner, Esq., telecopier: (212) 451-2222, and (ii) if to the Subscriber, to: the
one or more addresses and telecopier numbers indicated on the signature pages
hereto, with an additional copy by telecopier only to: Grushko & Mittman, P.C.,
551 Fifth Avenue, Suite 1601, New York, New York 10176, telecopier number: (212)
697-3575.

         14. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York County in the State of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.

                                       7

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

                                              CEPTOR CORPORATION

                                              By: ______________________________
                                                  Name:
                                                  Title:

Witness:

______________________________

                                       8

                                    EXHIBIT A

                              FORM OF SUBSCRIPTION
                   (to be signed only on exercise of Warrant)

TO:  CEPTOR CORPORATION

The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):

___      ________ shares of the Common Stock covered by such Warrant; or

___ the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
___ $__________ in lawful money of the United States; and/or ___ the
cancellation of the Warrant to the extent necessary, in accordance with the
formula set forth in Section 2, to exercise this Warrant with respect to the
maximum number of shares of Common Stock purchasable pursuant to the cashless
exercise procedure set forth in Section 2.

The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to _____________________________________ whose address is
________________________________________________________________________________
________________________________________________________________________________
Number of Shares of Common Stock Beneficially Owned on the date of exercise:
Less than five percent (5%) of the outstanding Common Stock of CepTor
Corporation

The undersigned represents and warrants that the representations and warranties
in Section 4 of the Subscription Agreement (as defined in this Warrant) are true
and accurate with respect to the undersigned on the date hereof.

The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act"), or pursuant to an exemption from
registration under the Securities Act.

Dated:___________________          _____________________________________________
                                   (Signature must conform to name of holder as
                                   specified on the face of the Warrant)

                                   _____________________________________________
                                   _____________________________________________
                                   (Address)

                                       9

                                    EXHIBIT B

                         FORM OF TRANSFEROR ENDORSEMENT
                   (To be signed only on transfer of Warrant)

         For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of CEPTOR CORPORATION to which the within Warrant relates
specified under the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of CEPTOR
CORPORATION with full power of substitution in the premises.

--------------------------------------------------------------------------------
Transferees                       Percentage Transferred      Number Transferred
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Dated:___________, ______          _____________________________________________
                                   (Signature must conform to name of holder as
                                   specified on the face of the Warrant)

Signed in the presence of:

_______________________________    _____________________________________________
         (Name)                    _____________________________________________
                                   (address)

ACCEPTED AND AGREED:               _____________________________________________
[TRANSFEREE]                       _____________________________________________
                                   (address)
_______________________________
         (Name)Exhibit 4.1 Note

    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.
      1

    Form
      of 

    6%
      Secured Convertible Note due 2012

     

    $_____________

                                    _____
      __,
      2006

     

    Nephros,
      Inc., a Delaware corporation, (the “Company”), for value received, hereby
      promises to pay to ____________________ (the “Holder” or “Registered Holder”),
      or registered assigns, the principal sum set forth above, with accrued but
      unpaid interest thereon at a rate equal to six percent (6%) per annum, on the
      Maturity Date. Payment shall be made at such place as designated by the Company
      upon surrender of this Note (as defined below), 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. This Note is one
      of a
      duly authorized issue of up to $__________ aggregate principal amount of
      Nephros, Inc. 6% Secured Convertible Notes due 2012 (individually a “Note” and
      collectively the “Notes”). Certain capitalized terms used herein are defined in
      Section 8. 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 six percent (6%) per annum from the date of
      its
      issuance set forth above and shall be compounded annually.

     

    
      	SECTION
              2.  	
              Prepayment.

            

    

     

    (a)  Upon
      prior written notice to the Holder (an “Optional
      Prepayment Notice”),
      this
      Note (including interest accrued on the principal hereof) may be prepaid by
      the
      Company, at any time, in whole or in part, which prepayment shall be, except
      as
      expressly provided in clauses (b) through (e) of this Section 2, without penalty
      or premium (an “Optional
      Prepayment”).
      Prepayments shall be applied first to accrued and unpaid interest on this Note,
      then to the unpaid principal amount of this Note.

     

    (b)  In
      addition to all other rights of the Holder contained herein, in connection
      with
      any Major Asset Sale (as defined below), the Company shall offer by written
      notice to the Holder (such notice an “Asset
      Sale Notice”
and,
      with Optional Prepayment Notices, each a “Prepayment
      Notice”)
      to
      prepay (a “Major
      Asset Sale Mandatory Prepayment”
and,
      with Optional Prepayments, each a “Prepayment”)
      outstanding principal and interest on the Notes with the net cash proceeds
      of
      such asset sale actually received by the Company or any subsidiary (the
“Net
      Proceeds”).
      As
      used in this Note, “Major
      Asset Sale”
means
      the sale or transfer of assets of the Company having a Fair Market Value in
      excess of $250,000, other than in the ordinary course of business, in one or
      a
      related series of transactions. The Note may be converted prior to the
      Redemption Date (as defined below), at the option of the Holder in accordance
      with Section
      3.
      Notwithstanding anything to the contrary in this Note, the Company’s obligations
      under this Section
      2(b),
      with
      respect to any Major Asset Sale, may be waived on behalf of all Holders of
      Notes
      by a writing signed by the Secured Party. In the event that the Net Proceeds
      are
      less than the amount of outstanding principal and interest and any premium
      required pursuant to Section
      2(d)
      on the
      Notes then outstanding, then the Net Cash Proceeds allocated for prepayment
      of
      the Notes will be applied to such prepayment of the Notes on a pro rata basis
      to
      the Holders thereof based on then outstanding principal amounts. Any outstanding
      principal and interest on the Notes not redeemed pursuant to an Asset Sale
      Notice shall continue to remain outstanding pursuant to the terms hereof. Any
      such outstanding principal not prepaid shall not then be subject to Section
      2(d)
      or Section 2(e) with respect to such prepayment. In no event shall outstanding
      principal, interest and premium on the Notes in excess of the Net Proceeds
      of
      any Major Asset Sale be required to be prepaid under this
      provision.

     

    (c)  Each
      Prepayment Notice shall set forth: (i) the date fixed for prepayment (the
“Redemption
      Date”),
      which
      must be at least fourteen (14) days after the date of the Prepayment Notice;
      (ii) the amount of accrued and unpaid interest, as of the Redemption Date,
      per
      $1,000 principal amount of Notes to be prepaid pursuant to the Prepayment
      Notice; and (iii) the Conversion Price of the Notes in effect at such time.
      Each
      Asset Sale Notice sent to a Holder which has executed a confidentiality
      agreement in the form entered into by the initial Holder of this Note, or
      another form of confidentiality agreement reasonably acceptable to the Company,
      shall, subject to any applicable law or contractual obligations of
      confidentiality, include a description of the transaction constituting a Major
      Asset Sale and an undertaking to provide to 

     

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    the
      Holder during the period prior to the Redemption Date such reasonably available
      additional information with respect to the Major Asset Sale as the Holder may
      reasonably request.

     

    (d)  The
      Company shall pay to each Holder a premium in connection with any Prepayment
      hereunder equal to the Applicable Percentage (as defined below) of the principal
      amount of Notes held by such Holder actually prepaid. The “Applicable
      Percentage”
shall
      be fifteen percent (15%) in connection with Prepayments with a Redemption Date
      on or before June __, 2008, and five percent (5%) in connection with Prepayments
      with a Redemption Date thereafter.

     

    (e)  In
      connection with any Prepayment with a Redemption Date on or before June __,
      2008, or a prepayment of less than the entire then outstanding principal amount
      of Notes after June __, 2008, the Company shall issue to each Holder a common
      stock purchase warrant, substantially in the form of Exhibit
      A
      hereto,
      representing the right to purchase at issuance a number of shares of Common
      Stock equal to the product of (i) 750,000 (subject to adjustment as provided
      below) and (ii) the quotient obtained by dividing (x) the principal amount
      of
      the Notes held by such Holder actually redeemed, by (y) five million
      (5,000,000). The number set forth in clause (i) of the preceding sentence shall
      be equitably adjusted from time to time in the event of and to reflect any
      Change of Shares (as defined below). 

     

    
      	SECTION
              3.  	
              Conversion

            

    

     

    (a)  Conversion.
      The
      Holder may elect, at any time prior to the Maturity Date, to convert this Note
      or any portion thereof and all accrued interest hereon into a number of shares
      of Common Stock equal to the quotient of (i) the sum of the principal amount
      of
      Note being converted plus all interest accrued and unpaid on such principal
      amount, divided by (ii) the then current Conversion Price. 

     

    (b)  Conversion
      Procedures.
      (i)
      Any
      Holder of a Note desiring to convert such Note into Common Stock shall surrender
      such Note at the Company’s principal executive office, accompanied by proper
      instruments of transfer to the Company or in blank, accompanied by irrevocable
      written notice to the Company that the Holder elects so to convert such Note
      (the “Notice of Conversion”) and specifying the name or names (with address) in
      which a certificate or certificates evidencing shares of Common Stock are to
      be
      issued; provided,
      however,
      that if
      the Holder submits a Notice of Conversion with respect to all outstanding Notes,
      then the Company shall not be required to honor such Notice of Conversion unless
      the Secured Party shall have provided the Company with any authorizations
      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 Section 6
      of the Subscription Agreement.

     

    (ii)  The
      Company need not deem a Notice of Conversion to be received unless the Holder
      complies with all the provisions hereof. 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, within 15 days after such deposit of any Note accompanied by
      a
      Notice of Conversion and compliance with any other conditions herein contained,
      deliver to the person for whose account such Note was so surrendered
      certificates 

     

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    evidencing the
      number of full shares of Common Stock to which such person shall be entitled
      as
      aforesaid, subject to Section 4.

     

    (iv)  Subject
      to the following provisions of this paragraph 3(b)(iv), such conversion shall
      be
      deemed to have been made as of the date of such surrender of the Note to be
      converted (the “Conversion Date”), and the person or persons entitled to receive
      the Common Stock deliverable upon conversion of such Note shall be treated
      for
      all purposes as the record holder or holders of such Common Stock on such date
      and the Note shall no longer be deemed outstanding and all rights whatsoever
      in
      respect thereof (including the right to receive interest thereon) shall
      terminate except the right to receive the number of full shares of Common Stock
      to which such person shall be entitled hereunder; provided,
      however,
      that
      the Company shall not be required to convert any Note while the stock transfer
      books of the Company are closed for any purpose, but the surrender of a Note
      for
      conversion during any period while such books are so closed shall become
      effective for conversion immediately upon the reopening of such books as if
      the
      surrender had been made on the date of such reopening, and the Conversion Date
      shall be the date of such reopening and the conversion shall be at the
      Conversion Rate in effect on the Conversion Date.

     

    (c)  
Adjustment
      of Conversion Rate and Conversion Price.
      

     

    (i)        
      Anti-Dilution
      Adjustments.

     

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

     

    (B)  For
      purposes of Subparagraph 3(c)(i)(A), the following Clauses I through V shall
      also be applicable:

     

    (I)  No
      adjustment of the Conversion Price shall be made unless such adjustment would
      require a decrease of at least $.01; provided that any adjustments which by
      reason of this Clause 3(c)(i)(B)(I) are not required to be made shall be carried
      forward and shall be made at the time of and together with the next subsequent
      adjustment which, together with adjustments so carried forward, shall require
      a
      decrease of at least $.01 in the Conversion Price then in effect
      hereunder.

     

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

     

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

     

    (III)  In
      case
      the Company shall modify the rights of conversion, exchange or exercise of
      any
      of the securities referred to in Clause (II) of this Subparagraph 3(c)(i)(B)
      or
      any other securities of the Company convertible, exchangeable or exercisable
      for
      shares of Common Stock, for any reason other than an event that would require
      adjustment to prevent dilution, so that the consideration per share received
      by
      the Company after such modification is less than the Conversion Price as of
      the
      date prior to such modification, then such securities, to the extent not
      theretofore exercised, converted or exchanged, shall be deemed to have expired
      or terminated immediately prior to the date of such modification and the Company
      shall be deemed, for purposes of calculating any adjustments pursuant to this
      Subsection 3(c), to have issued such new securities upon such new terms on
      the
      date of modification. Such adjustment shall become effective as of the date
      upon
      which such modification shall take effect. On the expiration or cancellation
      of
      any 

     

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    right,
      warrant or option or the termination or cancellation of any such right to
      convert or exchange any Convertible Securities, the issuance of which, in either
      case, constituted a Dilutive Issuance, the Conversion Price then in effect
      hereunder shall forthwith be readjusted to such Conversion Price as would have
      obtained (x) had the adjustments made upon the issuance or sale of such rights,
      warrants, options or Convertible Securities been made upon the basis of the
      issuance of only the number of shares of Common Stock actually delivered (and
      the total consideration received therefor) upon the exercise of such rights,
      warrants or options or upon the conversion or exchange of such Convertible
      Securities and (y) had adjustments been made on the basis of the Conversion
      Price as adjusted under clause (x) of this sentence for all transactions made
      after the issuance or sale of such rights, warrants, options or Convertible
      Securities.

     

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

     

    (V)  Upon
      the
      exercise of any rights, warrants or options or the conversion or exchange of
      any
      Convertible Securities, the issuance of which, in either case, constituted
      a
      Dilutive Issuance, the Conversion Price then in effect hereunder shall forthwith
      be readjusted if the actual price per share for which Common Stock is issued
      upon the exercise of such right, warrant or option or the conversion or exchange
      of such Convertible Securities (determined by dividing (x) the total amount
      of
      consideration received by the Company for the sale of such rights, warrants,
      options or Convertible Securities, plus the actual amount of additional
      consideration, if any, other than such rights, warrants, options or Convertible
      Securities, payable upon the exercise, conversion or exchange thereof, by (y)
      the actual number of shares of Common Stock issued upon the exercise conversion
      or exchange of such Convertible Securities) is greater than the deemed price
      per
      share thereof (determined by dividing (x) the total 

     

    6

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    amount
      of
      consideration received by the Company for the sale of such rights, warrants,
      options or Convertible Securities, plus the minimum aggregate amount, as set
      forth in the instrument relating thereto without regard to any antidilution
      or
      similar provisions contained therein for a subsequent adjustment of such amount,
      of additional consideration, if any, other than such rights, warrants, options
      or Convertible Securities, payable upon the exercise, conversion or exchange
      thereof, by (y) the total maximum number, as set forth in the instrument
      relating thereto without regard to any antidilution or similar provisions
      contained therein for a subsequent adjustment of such amount, of shares of
      Common Stock issuable upon the exercise, conversion or exchange of such rights,
      warrants, options or Convertible Securities). In such event, the Conversion
      Price shall be adjusted to such Conversion Price as would have obtained (x)
      had
      the adjustments made upon the issuance or sale of such rights, warrants, options
      or Convertible Securities been made upon the basis of the issuance of only
      the
      number of shares of Common Stock actually delivered (and the total consideration
      received therefor) upon the exercise of such rights, warrants or options or
      upon
      the conversion or exchange of such Convertible Securities and (y) had
      adjustments been made on the basis of the Conversion Price as adjusted under
      clause (x) of this sentence for all transactions made after the issuance or
      sale
      of such rights, warrants, options or Convertible Securities.

     

    (C)  Notwithstanding
      any other provision hereof, no adjustment to the Conversion Price will be
      made:

     

    (I)  upon
      the
      issuance or exercise of any options or other awards granted pursuant to a stock
      incentive plan or similar plan of the Company that was approved by the
      stockholders of the Company or otherwise issued as compensation or inducement
      to
      employment or engagement, so long as the number of shares of Common Stock
      issuable with respect to such awards and other compensation that are outstanding
      at such time does not, in the aggregate, constitute more than 2,818,095 shares;
      or

     

    (II)  upon
      the
      sale of any shares of Common Stock, warrants to purchase Common Stock or
      Convertible Securities in a firm commitment underwritten public offering,
      including, without limitation, shares sold upon the exercise of any
      overallotment option granted to the underwriters in connection with such
      offering; or

     

    (III)  upon
      exercise of any options or warrants that are outstanding as of the date hereof,
      or upon the issuance, conversion of or exercise of any Notes or Warrants;
      or

     

    (IV)  upon
      the
      issuance, exercise or conversion of Common Stock, Convertible Securities or
      options, warrants or other rights to acquire Common Stock or Convertible
      Securities in connection with any 

     

    7

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    of
      the
      following: (v) settlement of any actual or threatened litigation or other
      claims; (w) customer or vendor alliances; (x) joint ventures or manufacturing,
      marketing or distribution alliances; (y) equipment leasing transactions or
      borrowing transactions with institutional lenders; and (z) acquisitions of
      businesses or assets, excluding any portions of such acquisitions that are
      capital raising; or

     

    (V)  upon
      the
      issuance or sale of Common Stock or Convertible Securities, or any rights,
      options or warrants for the purchase of, Common Stock or Convertible Securities,
      pursuant to the exercise of any rights, options or warrants to receive,
      subscribe for or purchase such securities, whether or not such rights, warrants
      or options were outstanding on the Closing Date or were thereafter issued or
      sold, provided that an adjustment was either made or not required to be made
      in
      accordance with Subparagraph 3(c)(i)(A) in connection with the issuance or
      sale
      of such securities or any modification of the terms thereof; or

     

    (VI)  upon
      the
      issuance or sale of Common Stock or other securities upon conversion or exchange
      of any Convertible Securities, provided that any adjustment was either made
      or
      not required to be made upon the issuance or sale of such Convertible Securities
      or any modification of the terms thereof were so made, and whether or not such
      Convertible Securities were outstanding on the Closing Date or were thereafter
      issued or sold.

     

    Notwithstanding
      anything to the contrary in this Subparagraph 3(c)(i)(C), Clause 3(c)(i)(B)(III)
      shall apply to any modification of the rights of conversion, exchange or
      exercise of any of the securities referred to in Clauses (V) and (VI) of this
      Subparagraph 3(c)(i)(C).

     

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

     

    (ii)  Change
      of Shares Adjustments.
      In the
      event the Company shall, at any time or from time to time after the date hereof
      (i) issue any shares of Common Stock as a stock dividend to the holders of
      Common Stock or (ii) subdivide or combine the outstanding shares of Common
      Stock
      into a greater or lesser number of shares (any such issuance, subdivision or
      combination being herein called a “Change of Shares”), then the Conversion Price
      shall be changed to a price (rounded to the nearest 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 immediately 

     

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    prior
      to
      the Change of Shares and the denominator of which shall be the number of shares
      of Common Stock outstanding immediately following the Change of
      Shares.

     

    (d)  Anti-Dilution
      Notices.
      After
      each adjustment of the Conversion Price pursuant to Subsection 3(c), the Company
      will prepare a certificate signed by the Chief Executive Officer or President,
      and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
      Secretary, of the Company setting forth: (i) the Conversion Price as so adjusted
      and (ii) a brief statement of the facts accounting for such adjustment. The
      Company will file such certificate with the transfer agent for the Notes and
      cause a brief summary thereof to be sent by ordinary first class mail to each
      Registered Holder at its last address as it shall appear on the transfer agent’s
      record books. No failure to mail such notice nor any defect therein or in the
      mailing thereof shall affect the validity of such adjustment. The certificate
      of
      an officer of the transfer agent or the Secretary or an Assistant Secretary
      of
      the Company that such notice has been mailed shall, in the absence of fraud,
      be
      prima facie evidence of the facts therein stated. The transfer agent, if other
      than the Company, may rely on the information in the certificate as true and
      correct and has no duty nor obligation independently to verify the amounts
      or
      calculations therein set forth.

     

    (e)  Reservation
      of Shares; Transfer Taxes; Etc.
      The
      Company shall at all times reserve and keep available, out of its authorized
      and
      unissued shares of Common Stock, solely for the purpose of effecting the
      conversion of the Notes, such number of shares of its Common Stock free of
      preemptive rights as shall be sufficient to effect the conversion of all Notes
      from time to time outstanding. 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
      number of shares of Common Stock not outstanding shall not be sufficient to
      permit the conversion of all the then-outstanding Notes.

     

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

     

    (f)  
Prior
      Notice of Certain Events.
      In
      case:

     

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

     

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

     

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

     

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

     

    (v)  of
      any
      Liquidation Event;

     

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

     

    (g)  Other
      Changes in Conversion Rate.
      The
      Company from time to time may increase the Conversion Rate by any amount for
      any
      period of time if the period is at least 20 days and if the increase is
      irrevocable during the period. Whenever the Conversion Rate is so increased,
      the
      Company shall mail to the Registered Holders a notice of the increase at least
      15 days before the date the increased Conversion Rate takes effect, and such
      notice shall state the increased Conversion Rate and the period it will be
      in
      effect.

     

    (h)  Minimum
      Conversion Price.
      Notwithstanding anything to the contrary herein, in no case shall the Conversion
      Price be adjusted to an amount less than $.001 per share, the current par value
      of the Common Stock.

     

    (i)  Limitation
      on Conversion.
      Notwithstanding anything to the contrary set forth herein, unless and until
      the
      Stockholder Approval (as defined below) has been obtained, the Company shall
      not
      issue in excess of an aggregate of 2,451,280 shares of Common Stock upon
      conversion of the Notes and exercise of Warrants, subject to adjustment upon
      any
      Change of Shares (such number of shares, as the same may be adjusted, the
“Issuable Maximum”). The Issuable Maximum equals approximately 19.9% of the
      number of shares of Common Stock outstanding immediately prior to the first
      issuance of any Notes. If on any Conversion Date (A) the Conversion Price then
      in effect is such that the aggregate number of shares of Common Stock previously
      issued upon conversion of a converting Registered Holder’s Notes and exercise of
      Warrants issued in respect of such Notes (the “Converting Holder’s Previous
      Shares”), together with the shares of Common Stock into which such Registered
      Holder requests conversion of Notes pursuant to Section 3(b), would equal or
      exceed such Registered Holder’s pro rata share (calculated based on the portion
      of $5,000,000 represented by the principal amount outstanding

     

    10

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     of
      such Notes) of the Issuable Maximum (the “Converting Holder’s Maximum”), and (B)
      the Company shall not have previously obtained the vote of stockholders (the
      “Stockholder Approval”), if any, as may be required by the applicable rules and
      regulations of the American Stock Exchange (or any successor entity or any
      other
      Stock Market on which the Common Stock is then listed or quoted) applicable
      to
      approve the issuance of shares of Common Stock in excess of the Issuable Maximum
      pursuant to the terms hereof, then the converting Registered Holder’s request
      for conversion shall be deemed a request to convert only that portion of the
      Notes surrendered for conversion that is convertible into a number of shares
      of
      Common Stock equal to the positive excess of the Converting Holder’s Maximum
      above the Converting Holder’s Previous Shares and, with respect to the remainder
      of Notes such Registered Holder surrendered for conversion (the “Excess Notes”),
      the Company shall deliver such Registered Holder a new Note representing the
      Excess Notes.

     

    (j)  Automatic
      Conversion.
      At its
      option, at any time, the Company may cause the Notes to be converted in whole
      or
      in part, on a pro rata basis, into fully paid and nonassessable shares of Common
      Stock at the then effective Conversion Rate if the Market Price of the Common
      Stock is equal to or greater than 240% of the Conversion Price for the 30
      trading days immediately preceding the delivery of the Mandatory Conversion
      Notice (as defined below), provided that, during such 30 trading day period,
      the
      average daily volume of shares traded is at least 35,000 (subject to adjustment
      for any Change of Shares); provided that no Default or Event of Default shall
      have occurred and be continuing on the date on which the Mandatory Conversion
      Notice is given; and, provided, that if such conversion is prior to a
      Stockholder Approval, such conversion shall be limited to the extent necessary
      to ensure that no Registered Holder receives a number of shares which, together
      with such Converting Holder’s Previous Shares, would exceed such Converting
      Holder’s Maximum. Any Notes so converted shall be treated as having been
      surrendered by the holder thereof for conversion pursuant to Section 3 on the
      date of such mandatory conversion (unless previously converted at the option
      of
      the holder) and shall be subject to the limitations of Section
      3(i).

     

    No
      greater than 60 nor fewer than 20 days prior to the date of any such mandatory
      conversion, notice (the “Mandatory Conversion Notice”) by first class mail,
      postage prepaid, shall be given to the Registered Holders of the Notes to be
      converted, addressed to such Registered Holders at their last addresses as
      shown
      on the stock transfer books of the Company. Each such Mandatory 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 Section
      3.

     

    Any
      Mandatory 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 Registered Holder receives such
      notice; and failure properly to give such notice by mail, or any defect in
      such
      notice, to the Registered Holders of any Note to be converted shall not affect
      the validity of the proceedings for the conversion of any other Notes. On or
      after the date fixed for conversion as stated in the Mandatory Conversion
      Notice, each holder of Notes called to be converted shall surrender such Notes
      to the Company at the place designated in such Mandatory Conversion Notice
      for
      conversion. Notwithstanding that the Notes properly called for conversion shall
      not have been surrendered, the Notes shall no longer be deemed outstanding
      and
      all rights whatsoever with respect to the Notes so called for conversion (except
      the right of the holders to convert such Notes upon surrender thereof) shall
      terminate.

     

    11

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    (k)  Ambiguities/Errors.
      The
      Board of Directors of the Company shall have the power to resolve any ambiguity
      or correct any error in the provisions relating to the convertibility of the
      Notes, and its actions in so doing shall be final and conclusive.

     

    
      	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 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 Company
      may
      elect, in its sole discretion, independently for each Holder, whether such
      number of shares of Common Stock will be rounded to the nearest whole share
      (with a .5 of a share rounded upward) or whether such Holder will be given
      cash,
      in lieu of any fractional share, in an amount equal to the same fraction of
      the
      Market Price as of the close of business on the day of conversion.

     

    
      	SECTION
              5.  	
              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 Incur any Senior Debt without the prior written approval of the
      Secured Party;

     

    12

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (f)  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;
      and

     

    (g)  one
      or
      more judgments for the payment of money in any aggregate amount in excess of
      $500,000 (to the extent not covered by insurance) shall be rendered against
      the
      Company and the same shall remain undischarged for a period of 90 days during
      which execution shall not be effectively stayed, or any action shall be legally
      taken by a judgment creditor to levy upon assets or properties of the Company
      to
      enforce such judgment.

     

    
      	SECTION
              6.  	
              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
      holder or holders of Notes constituting a majority of the principal amount
      of
      Notes then outstanding (the
      “Majority Noteholders”), by notice to the Company, may declare the unpaid
      principal of and accrued interest on all the 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”). Upon any
      such declaration, such principal and accrued interest 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 their 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.

     

    (d)  To
      the
      extent permitted by law, the remedies provided herein shall be exclusive of
      any
      other remedies now or hereafter existing at law or in equity or by statute
      or
      otherwise.

     

    (e)  In
      any
      suit for the enforcement of any right or remedy under this Note or the
      Subscription Agreement, a court in its discretion may require the filing by
      any
      party litigant in the suit of an undertaking to pay the costs of the suit,
      and
      the court in its discretion may assess reasonable costs, including reasonable
      attorneys’ fees, against any party litigant in the suit, having due regard to
      the merits and good faith of the claims or defenses made by the party
      litigant.

     

    13

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SECTION
      7.  Lost,
      Mutilated, etc. Note.

     

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

     

    
      	SECTION
              8.  	
              Certain
                Definitions.
                

            

    

     

    (a)  “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.

     

    (b)  The
      “Conversion Price” shall initially be $2.10 per share of Common Stock, subject
      to adjustment as provided below, representing an initial conversion rate
      (subject to adjustment) of approximately 476.19 shares of Common Stock per
      $1,000 of principal amount of Note being converted (the “Conversion
      Rate”).

     

    14

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

    (d)  “Fair
      Market Value” of any asset (including any security) means the fair market value
      thereof as determined by the Board of Directors of the Company in good
      faith.

     

    (e)  “Incur”
      means, with respect to any Senior Debt 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 Senior
      Debt
      or other obligation. 

     

    (f)  “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.

     

    (g)  “Maturity
      Date” means _____ __, 2012.

     

    (h)  “Market
      Price,” with respect to any security, shall mean the average last sale price
      thereof on the relevant Stock Market for the thirty (30) consecutive trading
      days ending with the trading day immediately preceding the date as of which
      the
      Market Price is being determined (with appropriate adjustments for subdivisions
      or combinations of shares effected during such period), provided that if there
      no sales of such security on the Stock Market for a majority of the trading
      days
      in the measurement period, then “Market Price” shall mean Fair Market
      Value.

     

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

     

    (j)  “Senior
      Debt” means (without duplication), whether recourse to all or a portion of the
      assets of the Company and whether or not contingent, (i) every obligation of
      the
      Company for money borrowed and (ii) every obligation of the Company evidenced
      by
      bonds, debentures, notes or other similar instruments, including obligations
      incurred in connection with the acquisition of property, assets or businesses,
      in each case, that is senior or pari passu in right of payment to the Notes.
      In
      no event shall “Senior Debt” include any trade payable or accrued expenses
      arising in the ordinary course of business which are not more than 180 days
      past
      due or which are being contested in good faith and by appropriate
      proceedings.

     

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

     

    (l)  “Secured
      Party” means Southpaw Credit Opportunity Master Fund LP.

     

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

     

    15

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (n)  “Stock
      Market” shall mean, with respect to any security, the principal national
      securities exchange on which such security is listed or admitted to trading
      or,
      if such security is not listed or admitted to trading on any national securities
      exchange, shall mean The Nasdaq National Market System (“NNM”) or The Nasdaq
      SmallCap Market (“SCM” and, together with NNM, “Nasdaq”) or, if such security is
      not quoted on Nasdaq, shall mean the OTC Bulletin Board or, if such security
      is
      not quoted on the OTC Bulletin Board, shall mean the over-the-counter market
      as
      furnished by any NASD member firm selected from time to time by the Company
      for
      that purpose.

     

    
      	SECTION
              9.  	
              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 Notes, with the written
      consent of the Company and the Secured Party. 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 Notes, the Secured Party. Any amendments approved in compliance
      with
      this Section 9 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 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.

     

    (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.

     

    16

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (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
      registered Holder of this Note is entitled to the benefits of such Subscription
      Agreement to the extent provided therein.

     

    

    [Signature
      page follows immediately]

     

     

     

     

    17

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, this 6% Secured Convertible Note due 2012 has been executed
      and
      delivered on the date first above written by the duly authorized representative
      of the Company.

     

    NEPHROS,
      INC.

     

    By:______________________________

    Name: 

    Title: 

    

    

    

    

    18

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