8-K

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) July 25, 2011

NEPHROS, INC.

(Exact name of registrant as specified in its charter)

Delaware

 (State or other jurisdiction of incorporation)

001-32288	13-3971809
(Commission File Number)	(IRS Employer ID Number)

41 Grand Avenue, River Edge, New Jersey	07661
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code (201) 343-5202

__________________

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 July 25, 2011, Nephros, Inc. entered into a letter agreement with DHR International, Inc., an international executive search firm, whereby DHR International will conduct a search to recruit a chief executive officer for Nephros.

Under the agreement, Nephros will pay DHR International a retainer consisting of $100,000 in cash and equity worth $25,000.  The cash retainer is due in three equal installments.  The first retainer payment was due and paid on execution of the agreement.  The second retainer is due when Nephros begins the first round of interviews and the third retainer is due upon a candidate’s acceptance of an offer from Nephros.  The stock portion of the retainer is in the form of an option for 20,000 shares of common stock with an exercise price of $1.25 per share, which was the closing price of our common stock on July 25, 2011 as reported on the Over-the-Counter Bulletin Board.  The option is fully vested and has a term of 10 years.

In addition to the payments discussed above, Nephros will reimburse DHR International for indirect out-of-pocket expenses related to the executive search, such as administrative, database management and reproduction costs, which are estimated to run 12% of the aggregate retainer, and are payable in three equal installments to be billed at the same time as the three retainer installments.  Nephros also must reimburse DHR International for any direct out-of-pocket expenses, such as travel and lodging, which will be billed monthly as incurred.

In the event that Nephros hires a candidate provided by DHR International for any position other than chief executive officer, Nephros will be obligated to pay DHR International a fee equal to 33% of the individual’s projected first year total cash compensation.

DHR International anticipates the search to be completed in three months.  If the search is not completed by that time, DHR International will continue the search without charge for a period not to exceed six months.

Nephros may cancel the agreement at any time. If Nephros cancels within 60 days of execution of the agreement, the second and third cash retainers and the reimbursable indirect costs will be prorated through the date of cancellation.

If Nephros hires a candidate presented by DHR International and that individual is terminated, either voluntarily or involuntarily, within two years from the hiring date, DHR International will, at Nephros’ option, refill the position for no additional fee.

The description of the license agreement set forth above is not complete and is qualified in its entirety by reference to the agreement, which is attached as Exhibit 10.63 to this report and is incorporated by reference.

On July 26, 2011, Nephros issued a press release announcing, among other things, its entry into the letter agreement.  A copy of the press release is attached as Exhibit 99.1.

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Item 2.02 Results of Operations and Financial Condition.

On July 26, 2011, Nephros issued a press release that reported, among other things, the amount of revenue Nephros has received for the first six months of 2011 from the Office of Naval Research for work related to an advanced water purification system for military field use that Nephros is developing using its proprietary dual stage cold sterilization ultrafilter as the basis of the portable system. For 2011, Nephros has generated approximately $249,000 of revenue through June 30 from its U.S. Defense Department project.  A copy of the press release is attached as Exhibit 99.1.

Item 8.01 Other Events.

On July 26, 2011, Nephros issued a press release that provided a corporate update on its operations and strategy.  A copy of the press release is attached as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No. Description

10.63	Letter agreement, dated June 27, 2011, between Nephros, Inc. and DHR International, Inc., entered into as of July 25, 2011.
99.1	Press release dated July 26, 2011.

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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.

	Nephros, Inc.
	By:	/s/ Gerald J. Kochanski
Dated:  July 26, 2011		Gerald J. Kochanski
		Chief Financial Officer

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EX-10.63

Exhibit 10.63

CONFIDENTIAL

June 27, 2011

Paul Mieyal

Acting Chief Executive Officer

Nephros, Inc.

41 Grand Avenue

River Edge, NJ  07661

Dear Paul:

We are pleased to propose the arrangements under which DHR International will conduct a search to recruit a Chief Executive Officer who will report to James Scibetta, Chairman of the Board of Directors.

We are guided by your desire to have this individual located as quickly as possible.  Work on the assignment will begin immediately upon our receipt of a signed copy of this agreement.

Professional Retainer and Fees

Consistent with the standards of the retained executive search profession, our professional fees are non-contingent and non-refundable and are equal to one-third of the first year estimated total cash compensation; however, we will conduct this assignment at a fixed fee of $100,000 plus an additional fee of $25,000 being payable in equity.  Our fee is payable in three equal installments.  When we are retained, an invoice for the first installment will be payable upon receipt as a non-refundable initial retainer.  Invoices for the second and third installments would normally then be sent in thirty and sixty days and be payable upon receipt.  However, we agree that for this search that the second retainer would not be billed and due until Nephros initiates the first round of candidate interviews and that the third and final retainer would be billable upon the candidate’s acceptance of an offer from Nephros.  Also consistent with executive search practices, DHR International is reimbursed for search-related indirect out-of-pocket expenses which include allocated support expenses such as administrative, communications (voice and data), reproduction and report production, database management, and computer services, which historically have represented twelve percent of the applicable retainer.  These expenses are pro-rated and billed with the three retainers.  Any direct, out-of-pocket expenses such as candidate and consultant travel, lodging and video-conferencing will be billed on a monthly basis as incurred.

Additionally, if any candidate presented by DHR is employed by Nephros, Inc. or any affiliate for a position other than that called for by this assignment, you agree to pay DHR an amount equal to thirty threepercent of each additional hire’s projected first year total cash compensation.

DHR International   |  Asia  |   Europe  |  North America  |  South America  |  www.dhrinternational.com

Duration/Scope

It is planned that this search assignment can be completed by the end of the traditional three-month retainer period.  Should this not occur, we will continue the search without charge for a period not to exceed six months.

Cancellation

DHR International recognizes that a client’s recruiting needs may change over time.  If you cancel the search by written confirmation within sixty days, we will forward a final statement for our professional services prorated through the date of cancellation, and for expenses related to the search.

Except as provided above, in no event shall you pay DHR less than the first retainer plus direct and indirect expenses.  It is further understood that our search will include the evaluation of any candidates who may have been or may be identified by you or others, or may be already employed by you, and that any and all such individuals shall be deemed candidates presented by us for purposes of this letter.

If the search is cancelled by either party, your obligations under this agreement, including but not limited to those described in “Professional Retainer and Fees” above, will survive.

Two-Year Guarantee

If the employment of a DHR placed executive is terminated (voluntarily or involuntarily) within two years from the hiring date with Nephros, Inc., we will, at your option, refill that position for no additional fee.

Confidentiality

DHR International will maintain the confidentiality of all proprietary and confidential information supplied by you, it being understood that proprietary and confidential information does not include, and this obligation will not apply to, any information (i) in the public domain, (ii) which is or comes into DHR’s possession without an obligation of confidentiality, or (iii) which is required by law or Nasdaq/securities exchange requirements to be disclosed.

General

This agreement constitutes the entire agreement between the parties with respect to the subject matter and supersedes any previous oral or written arrangements or understanding.  Equal Employment Opportunity is a federal law, and in providing services under this agreement, DHR International will adhere to all prohibitions on discrimination on the basis of race, color, religion, national origin, disability or handicap, sex, age, marital status, sexual orientation, or military veteran’s status.

DHR International   |  Asia  |   Europe  |  North America  |  South America  |  www.dhrinternational.com

It is DHR International’s standard policy to commence work on any search assignment only after written confirmation of the Agreement has been received by DHR.  If you are in agreement with the terms and conditions as stated above, please sign and return a copy of this letter to me as our formal authorization to proceed.

We look forward to the opportunity of working with you and sincerely hope that you select DHR International to conduct this important assignment.

Best regards,

DHR International, Inc.

Donald Kilinski

Managing Director

DK/lk

Accepted:

/s/ Paul  Mieyal

Paul Mieyal

Acting Chief Executive Officer

Nephros, Inc.

7/25/11

Date

DHR International   |  Asia  |   Europe  |  North America  |  South America  |  www.dhrinternational.com

EX-99.1

    Unassociated Document