Contract
Exhibit
4.2
THIS
NOTE IS SUBJECT TO THE TERMS OF AN EXCHANGE AGREEMENT, A COPY OF WHICH IS ON
FILE WITH, AND AVAILABLE FROM, THE SECRETARY OF NEPHROS,
INC.
THIS
NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. THIS NOTE AND SUCH
SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH
RESPECT TO SUCH SECURITIES UNDER THE SECURITIES ACT OR AN AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. ANY SUCH
TRANSFER MAY ALSO BE SUBJECT TO COMPLIANCE WITH APPLICABLE STATE SECURITIES
LAWS.
THE
SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE ARE ISSUED SUBJECT TO THE
PROVISIONS OF A REGISTRATION RIGHTS AGREEMENT, AND ANY TRANSFEREE OF SUCH
SECURITIES SHALL BE BOUND BY THE PROVISIONS OF SAID AGREEMENT, A COPY OF WHICH
IS ON FILE WITH, AND AVAILABLE FROM, THE SECRETARY OF NEPHROS,
INC.
NEPHROS,
INC.
No.
[__]
Series
B 10% Secured Convertible Note due 2008
$[___________]
September
___,
2007
Nephros,
Inc., a Delaware corporation, (the “Company”), for value received, hereby
promises to pay to [_________________________________________], or registered
assigns (as applicable, the “Holder”), the principal sum set forth above, with
interest thereon at a rate equal to ten percent 10% per annum, on the Maturity
Date. Payment shall be made upon surrender of this Note (as defined
below) at such place as designated by the Company, and shall be in such coin
or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts. Payment
shall be made to the Holder at its address as set forth on the registration
records of the Company or, at the request of the Holder, by wire transfer to
an
account specified by the Holder. This Note is one of a duly
authorized issue of up to $5,300,000 aggregate principal amount of Nephros,
Inc.
Series B 10% Secured Convertible Notes due 2008 (individually a “Note” and
collectively the “Notes”). Certain capitalized terms used herein are defined in
Section 9. Capitalized terms used herein without definition have the
respective meanings specified therefor in the Exchange Agreement. The
Notes are secured by the Collateral pursuant to the Exchange
Agreement.
SECTION
1. Interest.
The
Company will pay interest in arrears on the Maturity Date. Interest
on this Note will accrue daily at a rate of ten percent (10%) per annum from
the
date of its issuance set forth above and shall be compounded
annually. Notwithstanding the foregoing, the Company hereby
unconditionally promises to pay to the order of the Holder interest on any
principal or interest payable hereunder that shall not be paid in full when
due,
whether at the Maturity Date or upon acceleration or declaration or otherwise,
for the period from and including the due date of such payment to but excluding
the date the same is paid in full, at a rate of eighteen (18%) per annum (but
in
no event in excess of the maximum rate permitted under applicable
law). Interest will cease to accrue on the Automatic Conversion
Date.
SECTION
2. Prepayment.
This
Note
may not be prepaid in whole or in part.
SECTION
3. Conversion
(a) Conversion. On
the Automatic Conversion Date, this Note and all accrued but unpaid interest
thereon shall immediately, and without any action on the part of the Company
or
the Holder, convert into shares of the Company’s common stock, par value $0.001
per share (the “Common Stock”), at a conversion price per share of Common Stock
equal to $0.706 (the “Conversion Price”). This Note may not be
converted by the Holder at any time.
No
greater than 20 nor fewer than 5 days prior to the Automatic Conversion Date,
notice (the “Automatic Conversion Notice”) by first class mail, postage prepaid,
shall be given to the Holder, addressed to the Holder at its last address as
shown on the registration records of the Company. The Automatic
Conversion Notice shall specify the date fixed for conversion, the place or
places for surrender of Notes, and the then effective Conversion Rate pursuant
to this Section 3.
Any
Automatic Conversion Notice which is mailed as herein provided shall be
conclusively presumed to have been duly given by the Company on the date
deposited in the mail, whether or not the Holder receives such notice; and
failure properly to give such notice by mail, or any defect in such notice,
to
the Holder shall not affect the validity of the proceedings for the conversion
of this Note. Notwithstanding that this Note shall not have been
surrendered, this Note shall no longer be deemed outstanding and all rights
whatsoever with respect to this Note, except the right to receive the number
of
full shares of Common Stock to which such person shall be entitled upon
conversion hereof, shall terminate.
(b) Conversion
Procedures.
(i) As
promptly as practicable after the Automatic Conversation Date, the Holder shall
surrender this Note at the place designated in the Automatic Conversion Notice,
duly endorsed. The Holder shall also submit a notice (the “Notice of
Conversion”) specifying the name or names (with address) in which a certificate
or certificates evidencing shares of Common Stock are to be issued;
provided, however, the Company shall not be required to honor any
Notice of Conversion unless the Secured Party shall have provided the Company
with any
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authorizations
as may be requested by the Company to file a termination statement with respect
to the Secured Party’s security interest in the Collateral, as set forth in the
Exchange Agreement. The surrender of the Note and the delivery of the
Notice of Conversion and authorizations to file a termination statement are
the
only procedures required of the Holder upon the conversion of this
Note. No additional legal opinion or other information or
instructions shall be required of the Holder upon the conversion of this
Note.
(ii) The
Company will make a notation of the date that a Notice of Conversion is
received, which date of receipt shall be deemed to be the date of receipt for
purposes hereof.
(iii) The
Company shall, or shall direct its transfer agent to, within 10 days after
such
deposit of any Note accompanied by a Notice of Conversion and compliance with
any other conditions herein contained, deliver to the person for whose account
such Note was so surrendered certificates evidencing the number of full shares
of Common Stock to which such person is entitled as aforesaid, subject to
Section 4.
(iv) Such
conversion shall be deemed to have been made as of the Automatic Conversion
Date, and the person or persons entitled to receive the Common Stock 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 upon conversion hereof; provided, however, that the
Company shall not be required to issue any certificates representing shares
of
Common Stock (x) until such Note has been received at the place designated
in
the Automatic Conversion Notice; and (y) if the Note is received while the
stock
transfer books of the Company are closed for any purpose, but such certificates
shall be issued immediately upon the reopening of such books as if the Note
had
been received on the date of such reopening.
(c) Adjustment
of Conversion Price. In the event the Company shall, at any time or from
time to time after the date hereof, and prior to the Automatic Conversion Date
(i) pay a dividend or make a distribution on its Common Stock in shares of
Common Stock, (ii) subdivide its outstanding shares of Common Stock into a
greater number of shares or (iii) combine its outstanding shares of Common
Stock into a smaller number of shares (each of (i) through (iii), a “Change
of Shares”), then (x) the Conversion Price shall be changed to a price (rounded
to the nearest one-tenth of a cent) determined by multiplying the Conversion
Price in effect immediately prior to such Change of Shares by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
(excluding treasury stock) immediately prior to the Change of Shares and the
denominator of which shall be the number of shares of Common Stock outstanding
(excluding treasury stock) immediately following the Change of
Shares.
(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 send such certificate by ordinary first class mail to the Holder at its
last address as it shall appear on the
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registration
records of the Company. No failure to mail such certificate nor any
defect therein or in the mailing thereof shall affect the validity of such
adjustment. The certificate of the Secretary or an Assistant
Secretary of the Company that such certificate has been mailed shall, in the
absence of fraud, be prima facie evidence of the facts therein
stated. The transfer agent, if other than the Company, may rely on
the information in the certificate as true and correct and has no duty nor
obligation independently to verify the amounts or calculations therein set
forth.
(e) Reservation
of Shares; Transfer Taxes; Etc. The Company shall at all times
reserve and keep available, out of its authorized and unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the Notes, such
number of shares of its Common Stock free of preemptive rights as shall be
sufficient to effect the conversion of all of the 2007 Notes. The
Company covenants that such shares of Common Stock so issuable and deliverable
shall, upon issuance in accordance with the terms hereof, be duly authorized
and
validly issued and fully paid and nonassessable. The Company shall
use its reasonable best efforts from time to time, in accordance with the laws
of the State of Delaware, to increase the authorized number of shares of Common
Stock if at any time the authorized number of shares of Common Stock not
outstanding shall not be sufficient to permit the conversion of all the
then-outstanding 2007 Notes.
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) Other
Changes in Conversion Price. The Company from time to time may
decrease the Conversion Price by mailing to the Holder an irrevocable notice
of
the decrease at least 15 days before the date the decreased Conversion Price
takes effect, and such notice shall state the decreased Conversion Price and
the
resulting increased Conversion Rate.
(g) Minimum
Conversion Price. Notwithstanding anything to the contrary
herein, in no case shall the Conversion Price be adjusted to an amount less
than
$0.001 per share, the current par value of the Common Stock.
SECTION
4. Fractional
Shares.
No
fractional shares or scrip representing fractional shares of Common Stock shall
be issued upon conversion of this Note. If more than one certificate
evidencing Notes shall be surrendered for conversion at one time by the same
Holder, the number of full shares issuable upon conversion thereof shall be
computed on the basis of the aggregate principal amount and accrued interest
of
the Notes so surrendered. Instead of any fractional share of Common
Stock which would otherwise be issuable upon conversion of this Note (or of
such
aggregate number of Notes), the number of shares of Common Stock will be rounded
to the nearest whole share (with a .5 of a share rounded upward).
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SECTION
5. Covenants. The
Company hereby covenants and agrees that between the date hereof and the
Automatic Conversion Date, the Company will not:
(a) create,
issue, incur (by conversion, exchange or otherwise), assume, guarantee or
otherwise become or remain directly or indirectly liable for any
Indebtedness;
(b) declare
any dividend (or any other distribution) or redeem or repurchase any of its
capital stock or other securities;
(c) authorize
the granting to the holders of Common Stock of rights or warrants to subscribe
for or purchase any shares of stock of any class or of any other rights or
warrants;
(d) reclassify
the Common Stock (other than a subdivision or combination of the outstanding
Common Stock, or a change in par value, or from par value to no par value,
or
from no par value to par value);
(e) be
a
party to any merger or consolidation for which approval of any stockholders
of
the Company shall be required, or of the sale or transfer of all or
substantially all of the assets of the Company or of any compulsory share
exchange whereby the Common Stock is converted into other securities, cash
or
other property; or
(f) cause
or
permit any Liquidation Event; or
(g) take
any
action to approve any of the foregoing.
SECTION
6. Events
of Default Defined.
The
following shall each constitute an “Event of Default” hereunder:
(a) the
failure of the Company to make any payment of principal of or interest on this
Note when due;
(b) the
Company shall, (i) apply for or consent to the appointment of a receiver,
trustee, liquidator or custodian of itself or of all or a substantial part
of
its property, (ii) be unable to, or admit in writing its inability, pay its
debts generally as they mature, (iii) make a general assignment for the benefit
of its or any of its creditors, (iv) be dissolved or liquidated, (v) commence
a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency
or
other similar law now or hereafter in effect or consent to any such relief
or to
the appointment of or taking possession of its property by any official in
an
involuntary case or other proceeding commenced against it, or (vi) take any
action for the purpose of effecting any of the foregoing;
(c) proceedings
for the appointment of a receiver, trustee, liquidator or custodian of the
Company or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to the Company or the debts thereof under any
bankruptcy, insolvency or other similar law now or
5
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 Exchange Agreement by the Company was not true or correct
in
any material respect when made;
(e) the
Company shall breach any of its covenants contained in this Note or in the
Exchange Agreement and shall not cure such breach within ten calendar days
after
notice of such breach is given to the Company by any Registered
Holder;
(f) any
director who was requested to be elected by the Secured Party shall be removed
as a director without the written consent of the Secured Party;
(g) the
Company shall Incur any Indebtedness without the prior written approval of
the
Secured Party; and
(h) the
Company shall default in the performance of any of its obligations under, or
shall otherwise breach, any covenant in any agreement or instrument for borrowed
money in an aggregate amount in excess of $500,000, the effect of which causes
or permits any holder or holders of such agreement or instrument to cause such
borrowed money to be declared due and payable prior to its stated maturity
and
such holder or holders in fact declare such money due and payable, except for
any default set forth on Schedule 6(h).
SECTION
7. Remedies
upon Event of Default.
(a) If
an
Event of Default occurs and is continuing for a period of 15 or more consecutive
days, the Registered Holders of 2007 Notes constituting a majority of the
principal amount of 2007 Notes then outstanding (the “Majority Noteholders”), by
notice to the Company, may declare the unpaid principal of and accrued interest
on all the 2007 Notes then outstanding to be due and payable without
presentment, demand, protest or any other notice of any kind, all of which
are
hereby expressly waived (an “Acceleration”); provided, an Acceleration shall
automatically occur upon the occurrence of an Event of Default specified in
Section 6(b) or (c). Upon any Acceleration, all principal and accrued
interest, fees, charges or damages for early prepayment on the 2007 Notes shall
be due and payable immediately. Majority Noteholders may rescind an
Acceleration and its consequences; provided, however, that no such
rescission shall effect any subsequent Default or impair any right consequent
thereto.
(b) Majority
Noteholders or Secured Party may waive an existing Default or Event of Default
and its consequences. Upon any such waiver, such Default shall cease
to exist and any Event of Default arising therefrom shall be deemed to have
been
cured for every purpose of this Note; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
(c) Upon
the
occurrence and during the continuance of an Event of Default, Secured Party
may,
at its election, without notice of its election and without demand, take any
action permitted by law, including the exercise of any rights accorded a secured
creditor under the Uniform Commercial Code as in effect in New York and any
rights granted in the Exchange Agreement.
6
(d) The
remedies provided in this Note shall be cumulative and in addition to all other
remedies available under this Note and the Exchange Agreement at law or in
equity (including a decree of specific performance and/or other injunctive
relief), and nothing herein shall limit the Holder’s right to pursue damages for
any failure by the Company to comply with the terms of this
Note. Amounts set forth or provided for herein with respect to
payments, redemption and the like (and the computation thereof) shall be the
amounts to be received by the Holder and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at
law
for any such breach may be inadequate. The Company therefore agrees that, in
the
event of any such breach or threatened breach, the Holder shall be entitled,
in
addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond
or
other security being required.
SECTION
8. Lost,
Mutilated, etc. Note.
Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Note and of indemnity or bond
reasonably satisfactory to it, and upon reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation
of
this Note (in case of mutilation) the Company will make and deliver in lieu
of
this Note a new Note of like tenor and unpaid principal amount and dated as
of
the date to which interest has been paid on the unpaid principal amount of
this
Note in lieu of which such new Note is made and delivered.
SECTION
9. Certain
Definitions.
(a) “2007
Notes” shall mean, collectively, the Notes and the Nephros, Inc. Series A 10%
Secured Convertible Notes.
(b) “Automatic
Conversion Date” shall mean the twenty-first (21st) day after
the
Company sends or gives its stockholders a definitive Schedule 14C information
statement relating to written consent of stockholders of the Company approving
the issuance of the Common Stock and Warrants issuable upon the conversion
of
the 2007 Notes and the amendment of the Company’s Certificate of Incorporation
to increase the number of authorized shares of Common Stock to 60,000,000
shares.
(c) “Collateral”
includes all of the property of the Company whether now owned or hereafter
acquired, regardless where located, including without limitation the
following: (a) all accounts and other rights of the Company to
payment of money, no matter how evidenced, all chattel paper, instruments and
other writings evidencing any such right, and all goods repossessed or returned
in connection therewith; (b) all chattel paper (including electronic chattel
paper); (c) all inventory, including but not limited to all raw materials,
work
in process, materials used or consumed in the Company’s business, and finished
goods, together with all additions and accessions thereto and replacements
therefor, all substitutes therefor, all
7
improvements
to and returns of such inventory, and products thereof; (d) all deposit accounts
and all funds, certificates, documents, instruments, checks, drafts, wire
transfer receipts and other earnings, profits or other proceeds from time to
time representing, evidencing, deposited into or held in the deposit accounts
or
payable to the Company in respect thereof; (e) all general intangibles; (f)
all
equipment, fixtures and real property; (g) all intellectual property, including,
without limitation, all copyrights, trademarks and patents and all applications
and licenses thereof; (h) all commodity contracts, security entitlements;
financial assets and investment property, including, without limitation, all
capital stock and other ownership interests and the certificates (if any)
representing such capital stock and ownership interests and all dividends,
cash,
instruments and other property from time to time received, receivable or
otherwise distributed or distributable in respect of or in exchange for any
or
all of the foregoing; (i) all money; (j) all commercial tort claims; (k) all
Debt from time to time owed to the Company by any person or entity, including
without limitation, all instruments evidencing such Debt; (l) all letter of
credit rights and letters of credit; (m) all automobiles and motor vehicles;
(n)
all computer hardware and software; (o) all consumer goods; (p) all supporting
obligations arising from or related to any of the property described in
clauses (a) through (o) above; (q) any and all rights
in and claims under insurance policies, judgments and rights thereunder and
tort
claims; (r) all documents, books and records; (s) all other goods and personal
property of the Company of any kind or character, whether tangible or
intangible; (t) all rights of the Company in all of the foregoing; and (u)
all
products and proceeds, in cash or otherwise, of any of the foregoing
property.
(d) “Conversion
Price” shall initially be $0.706 per share of Common Stock, subject to
adjustment as provided herein, representing an initial conversion rate (subject
to adjustment) of approximately 1,416.43 shares of Common Stock per $1,000
of principal amount of Note being converted (the “Conversion
Rate”).
(e) “Default”
means an event which, with notice or the passage of time, or both, would become
an Event of Default.
(f) “Exchange
Agreement” means the exchange agreement of even date herewith entered into
between the Company, the Holder and the other parties thereto.
(g) “Incur”
means, with respect to any Indebtedness or other obligation of any person,
to
create, issue, incur (by conversion, exchange or otherwise), assume, guarantee
or otherwise become or remain directly or indirectly liable for such
Indebtedness or other obligation.
(h) “Indebtedness”
means (a) any liabilities for borrowed money (other than trade accounts
payable incurred in the ordinary course of business), (b) every obligation
of
the Company evidenced by bonds, debentures, notes or other similar instruments,
(c) all guaranties, endorsements and other contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection
or
similar transactions in the ordinary course of business; and (d) the
present value of any lease payments due under leases required to be capitalized
in accordance with United States generally accepted accounting
principles.
8
(i) “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.
(j) “Maturity
Date” means September [_], 2008.
(k) “Registered
Holder,” with respect to any 2007 Note, shall mean the holder of record
thereof.
(l) “Registration
Rights Agreement” means the registration rights agreement, of even date
herewith, among the Company and the Holders listed on Schedule 1 attached
thereto, in the form attached to the Exchange Agreement as Exhibit
E.
(m) “Secured
Party” means Lambda Investors LLC.
(n) “Securities
Act” means the United Stated Securities Act of 1933, as amended.
(o) “SEC”
means the Securities and Exchange Commission.
(p) “Warrants”
shall mean the warrants to purchase shares of Common Stock that are being issued
pursuant to the Nephros, Inc. Series A 10% Secured Convertible
Notes.
SECTION
10. Miscellaneous.
(a) This
Note
may be amended only by mutual written agreement of the Company and the Holder
or, if such amendment shall apply to all outstanding 2007 Notes, with the
written consent of the Company and the Majority Noteholders; provided,
however, without the consent of the holder of this Note, no such
amendment may be approved that would have the effect of (i) decreasing the
principal amount or rate of interest payable hereunder, (ii) extending the
Automatic Conversion Date or Maturity Date, (iii) increasing the Conversion
Price or decreasing the Conversion Rate; or (iv) affect any adjustment under
Section 3 of this Note. Furthermore, the Company may take any action
herein prohibited or omit to take any action herein required to be performed
by
it, and any breach of any covenant, agreement, warranty or representation may
be
waived, if the Company has obtained the written consent or waiver of the Holder
or, if such consent or waiver shall apply to all outstanding 2007 Notes, the
Majority Noteholders. Any amendments approved in compliance with this
Section 10(a) shall bind the Holder’s successors and assigns.
(b) Forbearance
from Suit. No holder of Notes shall institute any suit or
proceeding for the enforcement of the payment of principal or interest unless
the Secured Party joins in such suit or proceeding.
9
(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 Exchange 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.
(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) Exchange
Agreement. This Note is subject to the terms contained in the
Exchange Agreement and the Holder of this Note is entitled to the benefits
of
such Exchange Agreement to the extent provided therein.
(j) Jurisdiction;
Forum. Any dispute arising out of or relating to this Note shall
be resolved, and all suits, actions and proceedings brought by the Company
or
Holder hereunder shall be brought only in, any state court sitting in the County
of New York or federal court sitting in the Southern District of the State
of
New York. The Company waives any objection to the laying of venue in
such courts and any claim that any such action has been brought in an
inconvenient forum. To the extent permitted by law, any judgment in
respect of a dispute arising out of or relating to this Note may be enforced
in
any other jurisdiction within or outside the United States by suit on the
judgment, a certified copy of such judgment being conclusive evidence of the
fact and amount of such judgment.
(k) Attorneys’
Fees. In the event of any litigation or other proceeding
concerning this Note or the transactions contemplated hereby, including any
such
litigation
10
or
proceeding with respect to the collection or other enforcement of this Note
against the Company, the prevailing party in such litigation or proceeding
shall
be entitled to reimbursement from the party opposing such prevailing party
for
all attorneys’ fees and costs incurred by such prevailing party in such
litigation or proceeding.
[Signature
page follows immediately]
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IN
WITNESS WHEREOF, this Series B 10% Secured Convertible Note due 2008 has been
executed and delivered on the date first above written by the duly authorized
representative of the Company.
NEPHROS,
INC.
By:_____________________________________
Name:
Title:
12
Schedule
6(h)
On
July
23, 2007, the Company received a letter from counsel for Receiver in the action
captioned Xxxxx Xxxxxxxxx, Esq. as Receiver for Lancer Offshore, Inc. v.
Nephros, Inc., Case No. 04-CV-20547 notifying the Company of its failure to
pay
the third installment due to the Receiver pursuant to a Settlement Agreement
between the Receiver and the Company, and asking the Company to cure such
default by July 30, 2007. The Company failed to cure such default in
the specified time period. On August 20, 2007, counsel for Receiver
filed in the United States District Court for the Southern District of Florida
(the “Court”) a motion to enforce the Settlement Agreement and for entry of
Final Default Judgment against the Company in the amount of $700,000 plus
interest and attorney’s fees and costs. On August 29, 2007, the Court
granted a motion of an extension of time until October 4, 2007 for the Company
to serve its opposition to the Receiver’s motion to enforce Settlement Agreement
and for entry of Final Default Judgment. Pursuant to an e-mail from
counsel for Receiver sent to counsel for the Company on August 24, 2007, the
Receiver has agreed to the following:
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1.
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If
the Company makes the late $200,000 payment required under the Settlement
Agreement by October 4, 2007, then the default under the Settlement
Agreement will be cured.
|
|
2.
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Thereafter,
the Company’s only remaining payment obligation under the Settlement
Agreement will be to make a $200,000 payment by January 18,
2008.
|
|
3.
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If
the Company fails to make the payment described in (1) above by October
4,
2007, the Company will not file a response to the motion to enforce
Settlement Agreement and for entry of default judgment. The
Receiver may then advise the Court and request immediate entry of
an order
granting the relief requested.
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