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) June 1,
2006
Nephros,
Inc.
(Exact
Name of Registrant as Specified in Charter)
Commission
File Number: 001-32288
|
Delaware
|
|
13-3971809
|
|
(State
or other Jurisdiction of
Incorporation)
|
|
(I.R.S.
Employer 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
June
1, 2006, Nephros, Inc. (“Nephros”) entered into a
Subscription Agreement with each of Southpaw
Credit Opportunity Master Fund LP,
3V
Capital Master Fund Ltd and Distressed/High Yield Trading Opportunities, Ltd.
(collectively, the “Investors”), pursuant to which the Investors agreed to
purchase an aggregate of $5 million principal amount ($2 million, $1.5 million
and $1.5 million, respectively) of 6% Secured Convertible Notes due 2012
(“Notes”) of Nephros, for the face value thereof.
The
Notes
accrue interest at a rate of 6% per annum, compounded annually and payable
in
arrears at maturity. Principal and accrued interest on the Notes are convertible
at any time at the holder’s option into shares of common stock, par value $0.001
per share, of Nephros (“Common Stock”) at an initial conversion price of $2.10
per share (subject to anti-dilution adjustments upon the occurrence of certain
events). The Notes are secured by substantially all of Nephros’s
assets.
Outstanding
principal and interest on the Notes may be prepaid by Nephros at any time,
subject to applicable premiums. In addition to the applicable prepayment
premium, upon any prepayment of the Notes occurring on or before June 1, 2008,
Nephros must issue the holder of such Notes warrants (“Prepayment Warrants”) to
purchase a quantity of Common Stock equal to three shares for every $20
principal amount of Notes prepaid at an exercise price of $0.01 per share
(subject to adjustment). Unless and until Nephros’s stockholders approve the
issuance of shares of Common Stock in excess of such amount, the number of
shares of Common Stock issuable upon conversion of the Notes and exercise of
the
Prepayment Warrants, in the aggregate, is limited to 2,451,280 shares, which
equals approximately 19.9% of the number of shares of Common Stock outstanding
immediately prior to the issuance of the Notes. Nephros may cause the Notes
to
be converted at their then effective conversion price, if the Common Stock
achieves average last sales prices of at least 240% of the then effective
conversion price and average daily volume of at least 35,000 shares (subject
to
adjustment) over a prescribed time period.
In
connection with the sale of the Notes, Nephros and the Investors have entered
into a Registration Rights Agreement pursuant to which Nephros granted the
Investors certain demand and piggy-back registration rights with respect to
the
shares of Common Stock issuable upon conversion of the Notes or exercise of
Prepayment Warrants, if any.
The
forms
of the Subscription Agreement, the Note and the Prepayment Warrant, and a copy
of the Registration Rights Agreement, are being filed as exhibits to this
Current Report on Form 8-K, and the descriptions of such documents set forth
herein are summary only and are qualified in their entirety by reference to
such
exhibits, which are incorporated herein by reference.
Item
2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
Certain
disclosure required by this item is included in Item 1.01 above and is
incorporated herein by reference.
Subject
to certain terms and conditions, the outstanding principal of and accrued
interest on the Notes may become immediately due and payable upon the occurrence
of any of the following events of default: Nephros’s failure to pay principal or
interest on the Notes when due; certain bankruptcy-related events with respect
to Nephros; material breach of any representation, warranty or certification
made by Nephros in or pursuant to the Note, or under the Registration Rights
Agreement or the Subscription Agreement; Nephros’s incurrence of Senior Debt (as
defined in the Note); the acceleration of certain other debt of Nephros; or
the
rendering of certain judgments against Nephros.
Item
3.02. Unregistered Sales of Equity Securities.
Certain
disclosure required by this item is included in Item 1.01 above and is
incorporated herein by reference.
Nephros
has determined that the issuance of the Notes and any securities issuable upon
conversion or prepayment of the Notes or exercise of Prepayment Warrants are
exempt from registration under the Securities Act of 1933, as amended, in
reliance on Section 4(2) thereof and/or Regulation D promulgated thereunder.
The
Investors represented their status as sophisticated investors, as well as their
intention to acquire the Notes and any Common Stock issuable upon conversion
thereof for investment only and not with a view to or for sale in connection
with any distribution thereof, and appropriate legends have been affixed to
the
Notes and will be affixed to the share certificates for any such Common Stock.
Moreover, each Investor either received adequate information about Nephros
or
had access to such information.
Item
8.01. Other Events.
On
June
2, 2006, Nephros, Inc. issued a press release entitled “Nephros Completes $5
Million Private Placement” announcing the transactions discussed above. A copy
of such press release is attached hereto as Exhibit 99.1.
Item
9.01. Financial Statements and Exhibits.
(d) Exhibits
| |
4.1
|
Form
of 6% Secured Convertible Note due
2012
|
| |
4.2
|
Form
of Prepayment Warrant
|
| |
10.1
|
Form
of Subscription Agreement, dated as of June 1, 2006, between Nephros
and
each Investor
|
| |
10.2 |
Registration Rights Agreement, dated as of June
1, 2006,
among Nephros and the Investors |
| |
99.1 |
Press Release issued by Nephros, Inc. dated June
2,
2006. |
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:
June 2, 2006
NEPHROS,
INC.
By:
/s/
Mark W. Lerner
Mark W. Lerner
Chief Financial Officer (Principal
Financial and Accounting Officer)