-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U7bhhtOO+cri/qQSA/YpYSKSIvKXPMu/aFtjEMkpUfLn7wfV69P0UrkuacyW1Xcn tgL2HCzk5afusS9RwgC5Ew== 0000922423-05-000416.txt : 20050303 0000922423-05-000416.hdr.sgml : 20050303 20050302184009 ACCESSION NUMBER: 0000922423-05-000416 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050302 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050303 DATE AS OF CHANGE: 20050302 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEPHROS INC CENTRAL INDEX KEY: 0001196298 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 133971809 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-32288 FILM NUMBER: 05655703 BUSINESS ADDRESS: STREET 1: 3960 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10032 BUSINESS PHONE: 2127815113 8-K 1 kl00305_8k.txt FORM 8-K CURRENT REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) March 2, 2005 ------------- Nephros, Inc. ------------- (Exact Name of Registrant as Specified in Charter) Commission File Number: 001-32288 --------- Delaware 13-3971809 -------- ---------- (State or other Jurisdiction of (I.R.S. Employer Incorporation) Identification No.) 3960 Broadway, New York, New York 10032 --------------------------------------- (Address of Principal Executive Offices) (Zip Code) (212) 781-5113 -------------- (Registrant's telephone number, including area code) Not Applicable -------------- (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01. Entry into a Material Definitive Agreement On March 2, 2005, Nephros, Inc. ("Nephros") entered into an agreement with Asahi Kasei Medical Co., Ltd., a business unit of Asahi Kasei Corporation, ("Asahi") granting Asahi exclusive rights to manufacture and distribute filter products based on the Nephros OLpur (TM) MD190 hemodiafilter in Japan for 10 years. In exchange for these rights, Nephros will receive an up front license fee in the amount of $1.75 million, plus additional royalties and milestone payments based on the future sales of the product in Japan. Japanese filter sales are subject to regulatory approval in that country, and the agreement contemplates that Asahi will conduct trials and make regulatory submissions to seek such approval. In addition, Nephros and Asahi entered into a Subscription Agreement dated March 2, 2005, pursuant to which Asahi shall purchase 184,250 shares of Nephros common stock from Nephros by March 16, 2005, for an aggregate of 100 million Japanese Yen (approximately $956,000). The Subscription Agreement prohibits Asahi from transferring the shares purchased thereunder for a period of 12 months without Nephros's written consent. Item 8.01. Other Events. On March 2, 2005, Nephros, Inc. issued a press release announcing the transactions discussed above. Item 9.01. Financial Statements and Exhibits. (c) Exhibits 10.1 HDF Cartridge License Agreement, dated as of March 2, 2005, between Nephros, Inc. and Asahi Kasei Medical Co., Ltd. 10.2 Subscription Agreement, dated as of March 2, 2005, between Asahi Kasei Medical Co., Ltd. and Nephros, Inc. 99.1 Press Release issued by Nephros, Inc. dated March 2, 2005. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: March 2, 2005 NEPHROS, INC. By: /s/ Marc L. Panoff -------------------------- Marc L. Panoff Chief Financial Officer (Principal Financial and Accounting Officer) EX-10 2 kl00305_ex10-1.txt EXHIBIT 10.1 HDF CARTRIDGE LICENSE AGREEMENT Exhiibit 10.1 HDF-CARTRIDGE LICENSE AGREEMENT This Agreement is entered into as of the 2nd day of March, 2005 (hereinafter called "Effective Date") by and between Nephros, Inc., a Delaware corporation with an office and place of business at 3960 Broadway, New York, NY 10032 (hereinafter called "Nephros") and Asahi Kasei Medical Co., Ltd., a Japanese corporation with an office and place of business at 9-1, Kanda Mitoshirocho, Chiyoda-ku, Tokyo 101-8482, Japan (hereinafter called "Asahi"). WITNESSETH: WHEREAS, Nephros represents that it owns certain intellectual property rights covering certain technology relating to the mid-dilution hemodiafiltration; WHEREAS, Nephros and Asahi entered into the "CONFIDENTIALITY AGREEMENT" dated 14 September, 2004 for evaluating the possibility of entering into a license agreement on such technology; and WHEREAS, as a result of such evaluation, Asahi desires to obtain and Nephros is willing to grant, such license; NOW, THEREFORE, in consideration of the mutual covenants and obligations assumed by the parties hereto, Nephros and Asahi agree as follows: Article 1. Definitions - ---------------------- For the purposes of this Agreement, the following words and phrases shall have the meanings as shown: 1.1 "Licensed Technology" shall mean the technology relating to a cartridge of single filter type for mid-dilution hemodiafiltration, including without limitation the technology relating to a use of such cartridge in a hemodialysis/hemodiafiltration system. It is confirmed that the technology relating to substitution fluid filter OLpur(TM) H2H(TM) shall not be included in the Licensed Technology. 1 1.2 "Licensed Patents" shall mean (i) all the Japanese patent applications listed in Exhibit 1, and (ii) any Japanese patent application on their improvement or modification, and their issued patents and divisions thereof, which Nephros as of the Effective Date and during the term of this Agreement owns or controls, or under which Nephros as of the Effective Date and during the term of this Agreement shall have the right to grant a sublicense, to the extent covering the Licensed Technology. 1.3 "Licensed Key Patent" shall mean the Japanese patent application listed as the "key patent" in Exhibit 1 and its issued patent and divisions thereof, which Nephros as of the Effective Date owns or controls, to the extent covering the Licensed Technology. 1.4 "Know-How" shall mean all information and improvement or modification in the possession of Nephros as of the Effective Date and during the term of this Agreement, whether or not patentable, constituting materials, methods, processes, techniques and data for the Licensed Technology, which Nephros is free to transfer or disclose without violating existing contractual obligations to third parties including, without limitation, marketing strategies and promotional plans. It is confirmed that the technical matters or items listed in Exhibit 2 shall be included in Know-How. 1.5 "Licensed Cartridges" shall mean the mid-dilution hemodiafiltration cartridges based on the Licensed Technology. 1.6 "Payment Cartridges" shall mean the mid-dilution hemodiafiltration cartridges of the Licensed Cartridges, which are encompassed within the scope of the issued claims of the Licensed Patents as long as the Licensed Key Patent remains in effect. 1.7 "Invalid" shall mean that a decision or judgment that all claims contained within the Licensed Key Patent are invalid or nullified is final and conclusive. 1.8 "Territory" shall mean the geographical country of Japan. 1.9 "MOH" shall mean Ministry of Health, Labor and Welfare of Japan. 2 1.10 "Net Sales" shall mean the prices billed by Asahi to the customer of the Payment Cartridges which are manufactured or had manufactured and sold by Asahi in the Territory, less (i) transportation and insurance charges or allowances, if any included in such price; (ii) discounts allowed, and commissions paid in lieu of trade discounts in amounts customary in the trade; (iii) credits and allowances, if any, given or made on account of the return or rejection of the Payment Cartridges previously delivered or retroactive price reductions, (iv) tax or other governmental charge on sale, transportation or delivery of such Payment Cartridges which is borne by Asahi and (v) the cost of packaging materials of such Payment Cartridges. 1.11 "Government Approval Date" shall mean the date of approval by the MOH set forth in Article 4.1. Article 2. Grant of License - --------------------------- 2.1 Exclusive License Nephros hereby grants Asahi an exclusive right and license under the Licensed Patents and Know-How (including that disclosed by Nephros under Article 3) to practice or use the Licensed Technology, including without limitation to manufacture, have manufactured, use, market, distribute and sell the Licensed Cartridges within the Territory and to have the Licensed Cartridges manufactured by Asahi's subsidiary in the People's Republic of China for Asahi's sale in the Territory. Asahi agrees to indemnify Nephros for direct damages to the Licensed Technology of Nephros arising from the manufacture of Licensed Cartridges in the People's Republic of China. The term "Asahi's subsidiary" shall mean any corporation or legal entity of which Asahi owns and will own directly or indirectly fifty percent (50%) or more of the issued and outstanding capital stock having the right to vote for the election of directors. During the term of this Agreement, Nephros may not exercise or use such right or license in the Territory. 3 2.2 Non-Assertion Nephros shall not assert any infringement claims with respect to the Licensed Patents or Know-How against Asahi's customers or users in the Territory. 2.3 Right of First Negotiation Before Nephros negotiates with any third party to grant an option or license under its patents and know-how to practice or use the Licensed Technology in any geographical countries of the People's Republic of China, the Republic of Korea (South Korea), Taiwan, Thailand, India, Malaysia, the Philippines, Singapore, Nephros shall offer in writing and negotiate in good faith with Asahi to grant such license. If an agreement of such license in a geographical country is not reached by the parties within ninety (90) days after commencement date of negotiation, Nephros may negotiate with such third party to grant such license in such geographical country. Article 3. Disclosure of Know-How and Asahi's Improvement - --------------------------------------------------------- 3.1 Within ninety (90) days after the Effective Date, Nephros shall disclose to Asahi all Know-How owned by Nephros as of the Effective Date. 3.2 If Nephros develops or obtains any of the Know-How and the Licensed Patents during the term of this Agreement, Nephros discloses to Asahi the same. 3.3 If Asahi develops or obtains any improvement or modification to the Licensed Technology during the term of this Agreement, Asahi may at its discretion disclose to Nephros such improvement or modification. If Nephros requests Asahi to obtain a license of such improvement or modification, Asahi shall, for at least a 90 day period, negotiate with Nephros to grant such license in countries to be negotiated. Article 4. Approval and Cooperation - ----------------------------------- 4.1 When Asahi conducts preclinical and clinical trial(s) of the Licensed Cartridges and makes all regulatory submissions necessary for the approval 4 by the MOH with respect to the right to market the Licensed Cartridges in Japan, Nephros shall at the request of Asahi cooperate with Asahi for such trial(s) and regulatory submissions. Such cooperation shall include providing Asahi with data of preclinical and clinical trials in the U.S.A as well as other countries. Article 5. Investment and Consideration - --------------------------------------- 5.1 Investment Within fourteen (14) days after the Effective Date, Asahi shall conclude an investment in newly issued common stock of Nephros as described in Schedule 1. 5.2 Initial License Fee In consideration of the right and license granted to Asahi hereunder, Asahi shall pay to Nephros the initial license fee set forth in Schedule 2. 5.3 Milestone Payment In consideration of the right and license granted to Asahi (including non-assertion) hereunder, Asahi shall pay to Nephros the milestone payments set forth in Schedule 3. It is confirmed that Asahi shall not be required to make any milestone payment set forth in this Article 5.3 during the term of this Agreement after the Licensed Key Patent becomes Invalid or expires. 5.4 Royalty 5.4.1 Running Royalty In consideration of the right and license granted to Asahi (including non-assertion) hereunder, Asahi shall pay to Nephros the running royalty equal to the percentage of the Net Sales as set forth in Schedule 4 in each fiscal year of Asahi (hereinafter called "Fiscal Year") within sixty (60) days after the end of such Fiscal Year. 5 5.4.2 Minimum Sales Volumes The minimum volumes of sales of the Payment Cartridges by Asahi in the Territory shall be as set forth in Schedule 5 and shall be adjusted to each Fiscal Year by both parties in writing after the Government Approval Date. If the actual volumes of sales of the Payment Cartridges in a Fiscal Year are less than the minimum volumes thereof, Asahi pays, instead of the running royalty set forth in Article 5.4.1 and unless the Licensed Key Patent becomes Invalid or expires, the minimum royalty equal to the applicable percentage (set forth in Article 5.4.1) of the amount calculated by multiplying the minimum volume by the average of the Net Sales in such Fiscal Year. 5.4.3 Royalty Payment The payment of the running royalty or the minimum royalty set forth in Article 5.4.1 or 5.4.2 shall be made paid in US dollars. The amounts due shall be calculated in Japanese Yen (hereinafter called JY") and then converted into USD at the Telegraphic Transfer Selling (TTS) exchange rate as quoted and published by the Bank of Mitsui-Sumitomo (or such other source as agreed to by the parties from time to time) as of the last business day of the Fiscal Year for which such payment is due. It is confirmed that Asahi shall not be required to make any payment set forth in Articles 5.4.1 and 5.4.2 during the term of this Agreement if the Licensed Key Patent becomes Invalid or expires. 5.4.4 Report Asahi shall make written reports on the running royalty set forth in Article 5.4.1 semi-annually within sixty (60) days after the first day of April and October of each year, stating the type of the Payment Cartridges sold, the quantity of each type and the total Net Sales of each type sold, and expressed in JY, during the period as to such payment. Within sixty (60) days after the first day of July and January of each year, Asahi shall provide an estimate of the sales for the preceding three months. 5.4.5 Records Asahi shall keep adequate and complete records of the Payment Cartridges sold with respect to which the running royalty payment is due by Asahi hereunder for three (3) years after such payment. Such records shall 6 include all information necessary to verify the total amount and computation of such payment due Nephros hereunder, and shall, at the request of Nephros, with respect to any year ending not more than two (2) years prior to the date of such request, be open to inspection by Nephros during reasonable business hours to the extent necessary to verify the amount thereof. Such inspection shall be made not more than once each Fiscal Year of Asahi at the expense of Nephros by a Certificate Public Accountant appointed by Nephros and consented to by Asahi. 5.5 Remittance All payments made by Asahi to Nephros pursuant to Articles 5.1 through 5.4 shall be made in USD by telegraphic transfer to the account of Nephros at a bank to be designated in writing by Nephros. 5.6 Withholding Tax All payments made by Asahi to Nephros pursuant to Articles 5.2 through 5.4 shall be made free of any and all taxes of a country of the Territory as imposed on such payments. Notwithstanding the above, Asahi may deduct from such payments any and all withholding taxes paid by Asahi to such country's tax authorities. Upon such deduction, Asahi shall supply certificates to Nephros immediately upon receipt thereof. Article 6. Licensed Patents - --------------------------- 6.1 Nephros shall, through its own patent attorney and at its own cost and expense, cause to be filed and prosecuted the Licensed Patents and all future Licensed Patents which lend protection to the Licensed Cartridges in the Territory. Nephros agrees to exercise all reasonable efforts to cause such Licensed Patents to be prosecuted and all Licensed Patents issued in respect thereof to be maintained in such manner that the best possible patent protection may be obtained thereon, provided that (i) Nephros shall, in advance, consult Asahi on the steps for the filing, prosecution and/or maintenance of any Licensed Patents in the relevant patent office in the Territory and take such steps fully considering Asahi's opinion and (ii) Nephros shall keep Asahi promptly and fully informed of the course of the filing, prosecution and/or maintenance of any Licensed Patents in the 7 Territory by providing Asahi with copies of communications between Nephros and the relevant patent office in the Territory. 6.2 The Grant of Exclusive License on the Licensed Key Patent Whenever the Licensed Key Patent is issued in Japan, Asahi shall, in the name of Nephros but at Asahi's own cost and expense, have the right to have the grant of the Exclusive License set forth in article 77 of Japanese Patent Law on the Licensed Key Patent registered with the Japanese Patent Office and Nephros shall cooperate with Asahi to register the grant of the Exclusive License on the Licensed Key Patent. The term "Exclusive License" shall mean "SENYO JISSIKEN" set forth in article 77 of the Japanese Patent Law, the grant, transfer (except those by inheritance or other general succession), modification or extinguishment (except those resulting from a merger or the extinguishment of the patent right) of which, or a restriction on the disposal thereof shall be of no effect unless they are registered. Asahi will, at its cost, follow the necessary procedures to cancel the registration upon termination or cancellation of this Agreement pursuant to Article 8.2.3 or 8.3. 6.3 Infringement of Licensed Patents In the event that either party shall become aware that any Licensed Patent is being infringed by a third party, such party shall notify the other of the facts in respect thereof. Asahi shall have the first right to enforce the Licensed Patents against such infringer in the name of Asahi, in the name of Nephros or in both their names. Nephros shall cooperate with Asahi as reasonably requested by Asahi in taking any such actions against such infringer. Asahi shall be entitled to all amounts recovered as a result or consequence of such actions up to the total amount of (i) the costs and expenses (including attorney's fee) incurred by Asahi in such actions and (ii) the running royalty paid by Asahi to Nephros hereunder. If Asahi does not take such action within ninety (90) days after the receipt of written notice from Nephros requiring Asahi to take such action, Nephros shall be entitled to enforce the Licensed Patents against such infringer at its own cost and shall be entitled to all amounts recovered as a result or consequence of such actions. 8 Article 7 Representation, Warranty and Indemnification - ------------------------------------------------------ 7.1 Representation and Warranty 7.1.1 Nephros represents and warrants that (i) it is and will during the term of Agreement be the sole and exclusive owner of the Licensed Patents and Know-How to the extent required for granting the right and license contained herein; and (ii) it has full power, right and authority to grant the right and license contained herein. 7.1.2 Asahi represents and warrants that it has full power, right and authority to enter into and carry out its obligations under this Agreement. 7.2 Disclaimer of Warranties; No Liability UNLESS EXPRESSLY OTHERWISE SET FORTH HEREIN, EITHER PARTY ("DISCLAIMING PARTY") SHALL NOT BE LIABLE FOR ANY LOSS OR DAMAGE ARISING OUT OF OR RESULTING FROM THE EXERCISE BY THE DISCLAIMING PARTY OF ANY RIGHT AND LICENSE GRANTED HEREUNDER, OR BE LIABLE TO THE OTHER PARTY FOR ANY CONSEQUENTIAL DAMAGES UNDER ANY CIRCUMSTANCES, EXCEPT IN CASE THAT SUCH LOSS OR DAMAGE ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL ACT OF THE DISCLAIMING PARTY. NEPHROS HAS NO RESPONSIBILITY FOR CLAIMS OF PRODUCT LIABILITY ON THE LICENSED CARTRIDGES MANUFACTURED BY ASAHI HEREUNDER. 7.3 Third Party's Right Nephros agrees (i) to defend any and all claims, actions and suits alleging that the manufacture, having manufactured, use or sale of the Licensed Cartridges by Asahi in the Territory infringes any patent or other intellectual property right of any third party during the term of this Agreement, except to the extent such claims, actions and suits arise out of material modifications made by Asahi to the Licensed Technology or material breach hereof by Asahi; and (ii) to hold Asahi harmless from all loss, damage, expense and 9 liability on account of any such infringement, provided that Nephros shall have prompt notice of the commencement of any such action or suit and full opportunity to defend the same. Asahi shall, at its expense, be entitled to participate in the defense of any such, claim action or suit through counsel selected by it. Article 8. Term and Termination - ------------------------------- 8.1 This Agreement shall be effective on the Effective Date and shall, unless earlier terminated or cancelled under Articles 8.2 or 8.3 below, remain in full force and effect for ten (10) years period from the Government Approval Date. Provided, however, that after such ten year period, Asahi has the right to retain the right and license granted to Asahi hereunder: (a) With the obligation to pay to Nephros the running royalty as set forth in Schedule 4 until and as long as the Licensed Key Patent remains in effect or until it becomes Invalid; and (b) Without any obligation to pay to Nephros any royalty or other consideration after the Licensed Key Patent expires or it becomes Invalid; or (c) Without any obligation to pay to Nephros any royalty or other consideration if the Licensed Key Patent has expired or becomes Invalid on or before such ten year period. 8.2 Termination 8.2.1 One party ("terminating party") shall have the right to terminate this Agreement, in the event that: (a) the other party fails to fulfill its obligations hereunder and that such failure is not remedied within ninety (90) days after the other party's receipt of written notice from the terminating party; or (b) the other party ("liquidating party") goes into liquidation, or seeks the benefit of any bankruptcy or insolvency act, or a receiver or trustee is appointed for the property or estate of the liquidating party, or the liquidating party makes an assignment for the benefit of creditors, and whether any of the aforesaid events be the outcome of the voluntary act of the liquidating party or otherwise. 10 8.2.2 The termination of this Agreement shall be without prejudice to the terminating party's right to receive all payments accrued and unpaid hereunder at the effective date of such termination as to periods prior to termination and to the remedy of the terminating party in respect of any previous breach of any of the covenants herein contained. 8.2.3 Upon termination of this Agreement by Nephros, Asahi shall have no right to manufacture or have manufactured and market the Licensed Cartridges except that Asahi may dispose of inventory on hand. Upon termination of this Agreement by Asahi, Asahi shall retain the right and licenses granted to Asahi hereunder without any payment to Nephros after such termination. 8.3 Cancellation If it becomes impossible or unreasonably difficult to (i) obtain the approval by the MOH set forth in Article 4.1 or (ii) manufacture or sell the Licensed Cartridges due to a reason not attributable to Asahi, Asahi has the right to cancel this Agreement during the term of this Agreement upon ninety (90) days written notice to Nephros. Upon cancellation of this Agreement, Asahi shall have no right to manufacture or have manufactured and market the Licensed Cartridges except that Asahi may dispose of inventory on hand. Cancellation of this Agreement for any reason shall not relieve Asahi of the obligation to pay, if any, all fees, payments and royalties then due up to the date of such cancellation. Article 9. General - ------------------ 9.1 Force Majeure Neither party to this Agreement shall be liable for any delay or failure of performance that is the result of any happening or event that could not reasonably have been avoided or that is otherwise beyond its control. Such happenings or events shall include, but not be limited to: fire, flood, explosion, action of the elements, inability to obtain or shortage of material, equipment or transportation, governmental orders, regulations, restrictions, priorities or rationing, acts of God, accidents and strikes, lockouts or other labor trouble or shortage. 11 9.2 Confidentiality During the term of this Agreement and for a period of five (5) years thereafter or for ten (10) years after the effective date hereof, whichever is longer, each party agrees to keep confidential and not to disclose to any third party the Confidential Information (as defined below), except to the extent necessary for the commercialization of the Licensed Cartridge and for the purpose of performance of this Agreement. The term "Confidential Information" shall mean all technical and economic information relating to the Licensed Technology, including without limitation Licensed Patents, Know-How and Asahi's improvements thereto, which is furnished by the disclosing party to the receiving party and which is marked or otherwise identified by the disclosing party as "Confidential". If Confidential Information is disclosed between the parties in oral or other intangible form, the disclosing party shall thereafter summarize it in writing and transmit it to the receiving party within thirty (30) days from such disclosure. From Confidential Information shall be excluded any information which the receiving party can demonstrate by written records: (a) Was already in the receiving party's possession or control prior to the date of disclosure; or (b) Was on the date of disclosure to the receiving party in or thereafter enters the public domain other than as a result of disclosure by it in breach of this Agreement; or (c) Becomes available to the receiving party on a non-confidential basis from a source other than the disclosing party, provided that such source has the right to disclose such information and is not prohibited by a confidentiality agreement with or other contractual, legal or fiduciary obligation of nondisclosure to the disclosing party or to another third party; or (d) Is independently developed by the receiving party without any breach of this Agreement. Notwithstanding the foregoing, a party shall be entitled to disclose the Confidential Information if required in legal proceedings; provided that the disclosing party shall provide the other party with prompt notice of any such requirement so that the other party may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this 12 Agreement, and that the disclosing party shall disclose only that portion of the Confidential Information which is legally required to be disclosed. 9.3 Press Release Neither party may issue any press release or make any public announcement concerning the transactions contemplated by this Agreement and the existence of this Agreement without the prior written consent of the other party, except as required by law. 9.4 Notices Any notices, request or other document to be given hereunder to a party hereto shall be effective when received and shall be given in writing and delivered in person or sent by overnight courier, registered or certificated mail, or postage prepaid or by telecopy (receipt confirmed) to the address of the respective party set forth below or to such other address as such party may hereafter designate by notice in accordance with this Article 9.4. To Nephros: Mr. Norman Barta Nephros, Inc. 3960 Broadway New York, NY 10032, U.S.A. Phone: (212) 781-5113 Fax: (212) 781-5166 To Asahi: Mr. Kenji Nakamae Asahi Kasei Medical Co., Ltd. 9-1, Kanda Mitoshirocho, Chiyoda-ku, Tokyo, Japan Phone: 3-3259-5890 Fax: 3-3259-5899 Notices shall be deemed to have been given on the date of receipt if delivered in person or sent by telecopy, or on the tenth business day after posting if sent by overnight courier, registered or certified mail, or postage prepaid. 13 9.5 Assignment This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assignees; provided that neither of the parties hereto may assign or transfer its rights or obligations hereunder to an entity that is a direct competitor with the other party without the prior written consent of the other party hereto, and that it is understood that each party hereto may assign or transfer its rights or obligations hereunder to its affiliate (as defined below) and any entity that is not a direct competitor with the other party without prior written consent of the other party hereto. The term "affiliate" shall mean an entity that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with, a party hereto on the Effective Date. As used in the above, " control" means the ability to own directly or indirectly fifty percent (50%) or more of the issued and outstanding capital stock having the right to vote for the election of directors. 9.6 Entire Agreement This Agreement supersedes all prior agreements, understandings, representations, and statements, if any, regarding the subject matter contained herein, whether oral or written (with the exception of the CONFIDENTIALITY AGREEEMNT set forth in second Whereas hereof) and no amendment of this Agreement shall be valid and binding upon the parties unless made in writing and signed on behalf of each of such parties by their respective authorized officers. 9.7 Severability If any provision or provisions of this Agreement shall be held to be illegal, invalid or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 9.8 Waiver The waiver of any default under this Agreement by either party shall not constitute a waiver of any rights for any subsequent default. 14 9.9 Governing Law This Agreement shall be construed and interpreted in accordance with the laws of the State of New York, U.S.A., without regard to conflicts of laws principles thereof. 9.10 Arbitration In the event of any dispute arising in connection with this Agreement, the parties will endeavor to negotiate a mutually satisfactory solution. If such solution cannot be reached, the dispute shall, at either party's advance written demand, be finally settled by arbitration in accordance with the rules of Conciliation and Arbitration of the International Chamber of Commerce. Nephros and Asahi shall each appoint one arbitrator and these two arbitrators shall appoint the third. If the two arbitrators cannot agree on the third arbitrator, he shall then be appointed in accordance with such Rules. The arbitration shall take place: (a) in New York, U.S.A. if the arbitration is demanded by Asahi; and (b) in Tokyo, Japan if the arbitration is demanded by Nephros. The arbitration shall be held in the English language. 9.11 Counterparts This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 15 IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Nephros, Inc. By: /s/ Norman J. Barta -------------------------------------- Title: CEO ----------------------------------- Date: 25 Feb. 05 ----------------------------------- Asahi Kasei Medical Co., Ltd. By: /s/ Kenji Nakamae --------------------------------------- Title: President ------------------------------------- Date: March 2nd, 2005 -------------------------------------- 16 EX-10 3 kl00305_ex10-2.txt EXHIBIT 10.2 SUBSCRIPTION AGREEMENT Exhibit 10.2 SUBSCRIPTION AGREEMENT THIS SUBSCRIPTION AGREEMENT, dated as of March 2nd, 2005 between Asahi Kasei Medical Co., Ltd., a corporation organized and existing under the laws of Japan (the "Purchaser"), and Nephros, Inc., a Delaware corporation (the "Company"). WHEREAS, the Purchaser and the Company are entering into a Technology License Agreement (the "License Agreement"), dated as of the date hereof, pursuant to which the Purchaser will obtain a license from the Company for certain of the Company's intellectual property; and WHEREAS, in connection with the parties' entry into the License Agreement, the Purchaser has agreed to purchase from the Company 184,250 shares of common stock, par value $0.001 per share (the "Shares") of the Company. NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS ----------- 1.1 Definitions. (a) As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Affiliate" means, with respect to a specified Person, a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with, the Person specified. "Agreement" means this Agreement as the same may be amended, supplemented or modified in accordance with the terms hereof. "Arbitrator" has the meaning set forth in Section 6.5 of this Agreement. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in Japan or the State of New York are authorized or required by law or executive order to close. "Closing" has the meaning set forth in Section 2.2 of this Agreement. "Company" has the meaning set forth in the recitals to this Agreement. "Contractual Obligations" means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument to which such Person is a party or by which it or any of its property is bound. "$" means United States Dollars. "Governmental Authority" means the government of any nation, state, city, locality or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "ICC Rules" has the meaning set forth in Section 6.5 of this Agreement. "Indemnifying Party" has the meaning set forth in Section 5.3 of this Agreement. "JPY" means Japanese Yen. "License Agreement" has the meaning set forth in the recitals to this Agreement. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, voting restriction (statutory or other), lien (statutory or other) or preference, priority, right or other security interest or preferential arrangement of any kind or nature whatsoever. "Loss" has the meaning set forth in Section 5.1 of this Agreement. "Person" means any individual, firm, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, limited liability company, Governmental Authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity. "Purchased Shares" has the meaning set forth in Section 2.1 of this Agreement "Purchaser" has the meaning set forth in the preamble to this Agreement. "Requirement of Law" means, as to any Person, any law, statute, treaty, rule, regulation, right or determination of an Arbitrator or a court or other Governmental Authority or stock exchange, in each case applicable or binding upon such Person or any of its property or to which such Person or any of its property is subject or pertaining to any or all of the transactions contemplated or referred to herein. "Securities Act" means the United States Securities Act of 1933, as amended, and the rules and regulations of the United States Securities and Exchange Commission thereunder. (b) All defined terms used but not defined in this Agreement have the meaning given such terms in the License Agreement. 2 ARTICLE II PURCHASE AND SALE OF SHARES --------------------------- 2.1 Purchase and Sale of Shares. At the Closing provided for in Section 2.2, upon the terms and subject to the conditions of this Agreement, the Company agrees to issue and sell to the Purchaser, and the Purchaser agrees to purchase from the Company, 184,250 Shares (the "Purchased Shares") for an aggregate purchase price equal to the lesser of $1,000,000 and JPY 100,000,000 (the "Purchase Price"), to be paid in accordance with Section 2.3. 2.2 Closing; Closing Date. The closing of the Stock Purchase (the "Closing") shall take place simultaneous with the closing of the License Agreement by the parties hereto. 2.3 Deliveries. (a) Company Deliveries. At the Closing, the Company shall deliver to the Purchaser (i) one or more stock certificates representing the Purchased Shares, issued in the name of the Purchaser and (ii) an original counterpart to this Agreement. (b) Purchaser Deliveries. At the Closing, the Purchaser shall deliver to the Company (i) the Purchase Price by wire transfer of immediately available funds to a United States dollar account designated by the Company and (ii) an original counterpart to this Agreement. 2.4 Transfer Restriction. The Purchaser shall not, for a period of 12 months after the Closing, sell, assign, dispose of, subject to option, or otherwise transfer the Purchased Shares without the written consent of the Company, and for a period of 12 months thereafter . The Purchaser shall have the right to sell the Purchased Shares subject to Rule 144 of the Securities Act . ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ----------------------------------------------- The Purchaser hereby represents and warrants to the Company as follows: 3.1 Due Incorporation; Authority. The Purchaser is duly incorporated or otherwise authorized to do business under the relevant laws of the jurisdictions in which it is formed and has full authority to enter into and to perform its obligations under this Agreement. 3.2 Authorization; Binding Effect; Non-Contravention. This Agreement has been fully authorized, executed and delivered by the Purchaser and it has full legal right, power and authority to enter into and perform this Agreement, which constitutes a valid and binding obligation of the Purchaser and that does not conflict with or result in a breach of the terms of any understanding, arrangement or agreement to which the Purchaser is a party. 3.3 Accredited Investor; Purchase for Own Account; Legends 3 (a) The Purchaser is an "accredited investor" within the meaning of Rule 501 of Regulation D under the Securities Act. (b) The Purchased Shares are being acquired for the Purchaser's own account and with no intention of distributing or reselling such Purchased Shares or any part thereof in any transaction that would be in violation of the securities laws of the United States of America or any state thereof. If the Purchaser should in the future decide to dispose of any Purchased Shares, the Purchaser understands and agrees that the Purchaser may do so only in compliance with the Securities Act and applicable state securities laws, as then in effect. The Purchaser agrees to the imprinting, so long as required by law, of a legend on certificates representing all of the Purchased Shares to the following effect: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES LAWS. 3.4 Restricted Securities. The Purchaser understands that the Purchased Shares will not be registered at the time of their issuance under the Securities Act for the reason that the sale provided for in this Agreement is exempt pursuant to Section 4(2) of the Securities Act and that the reliance of the Company on such exemption is predicated in part on the Purchaser's representations set forth herein, all of which shall survive beyond the Closing. 3.5 Independent Investigation. The Purchaser acknowledges that the Company is not providing the Purchaser with any representation or warranty concerning the business, operations, financial performance or prospects of the Company. The Purchaser has conducted its own independent review of the business, operations, financial performance and prospects of the Company and has determined to purchase the Purchased Shares solely on the basis of such review. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY --------------------------------------------- 4.1 Due Incorporation; Authority. The Company is duly incorporated or otherwise authorized to do business under the relevant laws of the jurisdictions in which it is formed and has full authority to enter into and to perform its obligations under this Agreement. 4.2 Authorization; Binding Effect; Non-Contravention. This Agreement has been fully authorized, executed and delivered by the Company and it has full legal right, power and authority to enter into and perform this Agreement, which constitutes a valid and binding 4 obligation of the Company and that does not conflict with or result in a breach of the terms of any understanding, arrangement or agreement to which the Company is a party.4.3 Purchased Shares. The Company represents and warrants to the Purchaser that the Purchased Shares are duly authorized, and when issued pursuant to this Agreement, will be validly issued, fully paid and non-assessable, and will be free and clear of all other Liens. ARTICLE V INDEMNIFICATION --------------- 5.1 Indemnification by the Company. The Company shall indemnify, defend and hold harmless the Purchaser, its Affiliates, agents, directors, officers and employees from and against any loss, damage, action, proceeding, expense or liability (including attorney's fees incurred in any action between the Company and the Purchaser, between the Purchaser and a third party, or otherwise) ("Loss") arising from or in connection with any breach of any representation, covenant, warranty or obligation by Company hereunder. 5.2 Indemnification by the Purchaser. The Purchaser shall indemnify, defend and hold harmless the Company, its Affiliates, agents, directors, officers and employees from and against any Loss arising from or in connection with any breach of any representation, covenant, warranty or obligation by Purchaser hereunder. 5.3 Indemnification Procedure. As a condition of obtaining an indemnity in the circumstances set out above, the party seeking an indemnity shall: (a) fully and promptly notify the party from which an indemnity is sought (the "Indemnifying Party") of any claim or proceeding, or threatened claim or proceeding; (b) permit the Indemnifying Party to take full care and control of the defense of such claim or proceeding; (c) cooperate in the investigation and defense of such claim or proceeding; (d) not compromise or otherwise settle any such claim or proceeding without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed; and (e) take all reasonable steps to mitigate any loss or liability in respect of any such claim or proceeding. 5 ARTICLE VI MISCELLANEOUS ------------- 6.1 Notices. All notices and other communications pursuant to this Agreement shall be in writing, shall be effective when received, and shall be deemed to have been received on the date of delivery if delivered personally; or on the second Business Day after the Business Day of deposit with Federal Express or other similar courier for overnight delivery, freight prepaid; in each such case, addressed as follows (until any such address is changed by notice duly given): to Purchaser: Asahi Kasei Medical Co., Ltd. Attn: Kenji Nakamae, President 9-1, Kanda Mitoshirocho, Chiyoda-ku, Tokyo, Japan Phone: 3-3259-5890 Fax: 3-3259-5899 to Company: Nephros, Inc. Attn: Norman Barta, CEO 3960 Broadway, 4th Floor New York, NY 10032 Phone: 212-781-5113 : (212) 781-5166 6.2 Successors and Assigns; Third Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto. Neither party may assign any of its rights under this Agreement without the prior written consent of the other party. No Person other than the parties hereto and their successors and permitted assigns is intended to be a beneficiary of this Agreement. 6.3 Amendment and Waiver. Failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of such rights nor shall a waiver by either party in one or more instances be construed as constituting a continuing waiver or as a waiver in other instances. No amendment, waiver or consent to this Agreement shall be effective unless signed in writing by both parties hereto. 6.4 Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 6.5 Governing Law; Dispute Resolution. 6 (a) This Agreement shall be governed by and construed in accordance with the laws of the State of New York, U.S.A. without regard to the principles of conflicts of law thereof. (b) Any and all differences, controversies and disputes of any nature whatsoever arising out of or relating to this Agreement, including, without limitation, any dispute relating to its validity, interpretation, performance or termination, shall be finally settled by three arbitrators (the "Arbitrators") under the Rules of Arbitration of the International Chamber of Commerce (the "ICC Rules"). The Purchaser and the Company shall each appoint one Arbitrator and these two Arbitrators shall appoint the third. The arbitration proceedings shall be conducted in the English language and the seat of the arbitration shall be (i) New York City (United States of America) if the Purchaser demands and (ii) Tokyo (Japan) if the Company demands. The Arbitrators shall be knowledgeable of New York laws and fluent in the English language. Any award shall be final and not subject to appeal and the parties waive all challenge to any award of the Arbitrators under this Section 6.5. Any award may be entered or presented by any of the parties for enforcement in any court of competent jurisdiction sitting in New York, Tokyo, or in any other appropriate court. Each party further agrees that service of any process, summons, notice or document in the manner provided for notices in Section 6.1 shall be effective service for purposes of any such enforcement action. 6.6 Severability. Each party agrees that, should any provision of this Agreement be determined by a court of competent jurisdiction to violate or contravene any applicable law or policy, such provision will be severed or modified by the court to the extent necessary to comply with the applicable law or policy, and such modified provision and the remainder of the provisions hereof will continue in full force and effect. 6.7 Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes any and all prior negotiations, correspondence and understandings between the parties with respect to the subject matter hereof, whether oral or in writing. 6.8 Further Assurances. Each of the parties shall execute such documents and perform such further acts as may be reasonably required or desirable to carry out or to perfor m the provisions of this Agreement. 6.9 Expenses. Each party to this Agreement shall bear and pay all of its own fees, costs and expenses (including legal fees and accounting fees) that have been incurred or that are incurred by such party in connection with the transactions contemplated by this Agreement and the negotiations leading up to the execution of this Agreement. [Remainder of page intentionally left blank] 7 IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Agreement on the date first written above. COMPANY NEPHROS, INC. By: /s/ Norman J. Barta --------------------------------- Name: Norman J. Barta Title: President and CEO PURCHASER ASAHI KASEI MEDICAL CO., LTD. By: /s/ Kenji Nakamae --------------------------------- Name: Kenji Nakamae Title: President EX-99 4 kl00305_ex99-1.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 NEPHROS Contact: Marc Panoff, CFO Nephros, Inc. Tel: 212-781-5113 FOR IMMEDIATE RELEASE NEPHROS ENTERS INTO HEMODIAFILTER MANUFACTURING AND DISTRIBUTION RIGHTS AGREEMENT WITH ASAHI KASEI MEDICAL New York--- March 2, 2005--Nephros, Inc. (AMEX: NEP) today announced it has entered into an agreement with Asahi Kasei Medical Co., Ltd., a business unit of Asahi Kasei Corporation, granting Asahi Kasei Medical exclusive rights to manufacture and distribute filter products based on the Nephros OLpur (TM) MD190 hemodiafilter in Japan for 10 years. In addition to an initial license fee, royalties and milestone payments, Asahi Kasei Medical will make an investment in Nephros common stock. Asahi Kasei Medical is the leading provider of dialysis filters in Japan and one of the three largest dialyzer providers in the world. The announcement was made by Nephros CEO Norman Barta. "OLpur(TM) MD190 technology coupled with our state-of-the-art hollow-fiber technologies will result in a hemodialyzer filter product that further contributes to the quality of life of ESRD patients in Japan, whose numbers exceed 230,000," says Kenji Nakamae, President of Asahi Kasei Medical. The OLpur(TM) MD190 is an advanced proprietary cartridge that refines the process of hemodiafiltration by combining two forms of therapy known as post-dilution and pre-dilution diafiltration into a single filter. As a result, the OLpur(TM) MD190 combines the superior clearance of small molecular weight toxins (such as urea) attributed to post-dilution hemodiafiltration with the superior clearance of middle-molecules (such as Beta 2 microglobulin (b2m)) associated with pre-dilution hemodiafiltration. The OLpur (TM) MD190 is designed for use with existing hemodiafiltration machines, has received CE marking, and is currently in sales in Europe. Japanese filter sales are subject to regulatory approval in that country. "Asahi is one of the major global forces in this marketplace. We feel Asahi's decision to manufacture and distribute hemodiafilters based on the OLpur(TM) MD190 technology in Japan is an important validation of our product design," says Mr. Barta. "I believe hemodiafiltration offers a substantially better modality for ESRD therapy over hemodialysis. Studies show that patients on hemodiafiltration have fewer complications and hospitalizations, require fewer drugs and live longer," says Eric A. Rose, M.D., Chairman, Department of Surgery at NewYork-Presbyterian Hospital/Columbia University Medical Center, and Chairman of the Board of Nephros. "I believe the Nephros mid-dilution technology provides an elegant means to really maximize performance in the hemodiafiltration realm." About Nephros, Inc. Nephros, Inc., headquartered in New York, is a medical device company developing and marketing products designed to improve the quality of life for the End Stage Renal Disease (ESRD) patient, while addressing the critical financial and clinical needs of the care provider. ESRD is a disease state characterized by the irreversible loss of kidney function. Nephros believes that its products remove a range of harmful substances more effectively, and more cost-effectively, than existing treatment methods; particularly with respect to substances known collectively as "middle molecules", due to their molecular weight, that have been found to contribute to such conditions as carpal tunnel syndrome, dialysis related amyloidosis, degenerative bone disease, and ultimately, to mortality in the ESRD patient. About Asahi Kasei Medical Co., Ltd. Asahi Kasei Medical, headquartered in Tokyo, Japan, is a world leader in the research, development, and production of devices and systems for extracorporeal blood treatment and purification based on advanced membrane separation and absorption technologies. It serves the global market with a wide variety of innovative products to help meet the needs of dialysis patients and clinical staff. Asahi Kasei Medical is a business unit of Asahi Kasei Corporation, a US$7 billion technology company that provides innovative, science-based solutions to a diverse range of markets including chemicals and plastics, apparel, housing and construction, healthcare, and electronics. For additional information on Asahi Kasei Medical, visit www.asahi-kasei.co.jp/medical/en/. Forward Looking Statements This news release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, including statements regarding the efficacy and intended utilization of Nephros's technologies under development, are not guarantees of future performance, are based on certain assumptions and are subject to risks and uncertainties, many of which are beyond the control of Nephros. Actual results may differ materially from the expectations contained in the forward-looking statements. Factors that may cause such differences include the risk that potential products that appeared promising in early research or clinical trials to Nephros do not demonstrate efficacy or safety in subsequent pre-clinical or clinical trials, and the risk that Nephros will not obtain appropriate or necessary governmental approvals to market products. More detailed information about Nephros and the risk factors discussed above is set forth in Nephros' filings with the Securities and Exchange Commission, including Nephros's Quarterly Report on Form 10-QSB filed with the SEC on November 15, 2004. Investors and security holders are urged to read such document free of charge at the Commission's web site at www.sec.gov. Nephros does not undertake an obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise. -----END PRIVACY-ENHANCED MESSAGE-----