Exhibit 10.1

 

LOAN AGREEMENT

 

This LOAN AGREEMENT (this “Agreement”) is made and entered into as of October 7,
2020, by and among Specialty Renal Products, Inc., a Delaware corporation
(“Borrower”), and Nephros, Inc., a Delaware corporation (the “Lender”).

 

RECITALS

 

A. Borrower wishes to borrow from the Lender up to $1,258,555.56 for the
purposes described in Section 2.1 hereof.

 

B. The Lender desires on the terms hereinafter set forth to make loans to the
Borrower from time to time for such purposes.

 

NOW, THEREFORE, in consideration of the foregoing, the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:

 

ARTICLE I.

DEFINITIONS

 

1.1. Certain Definitions. For the purposes of this Agreement, the following
terms have the following meanings:

 

(a) “Additional Amounts” has the meaning given to it in Section 2.6(b).

 

(b) “Affiliate” means, with respect to any Person, (a) any other Person directly
or indirectly controlling, controlled by, or under common control with that
Person; (b) any other Person owning beneficially or controlling ten percent
(10%) or more of the equity interest in such Person; (c) any officer, director,
partner, member, or shareholder of such Person; or (d) any spouse, parent,
sibling (natural born or adopted) or child (natural born or adopted) of such
Person. As used in this definition of “Affiliate,” the term “control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities or partnership or other ownership interest, by contract, or
otherwise.

 

(c) “Balance” means, at a given time, the outstanding principal balance
outstanding under the Loan, together with accrued and unpaid interest thereon.

 

(d) “Business Day” means a day on which banks are open for business in New York,
New York.

 

(e) “Cash” means, with respect to a Person, the amount of cash, cash equivalents
and liquid investments on hand or credited to any account open in the name of
such Person with a third party financial institution (plus all uncollected bank
deposits, accrued interest and less all outstanding checks).

 

 

 

 

(f) “Change of Control” means (i) a merger, acquisition or other transaction not
intended solely to provide financing for the Borrower, after which current
stockholders of the Borrower do not control more than fifty percent (50%) of the
outstanding voting stock of the surviving or resulting entity; (ii) the closing
of the transfer, in one transaction or a series of related transactions to which
the Borrower is party, to a person or group of affiliated persons (other than an
underwriter of the Borrower’s securities), of the Borrower’s securities if,
after such closing, such person or group of affiliated persons would hold fifty
percent (50%) or more of the outstanding voting stock of the Borrower (or the
surviving or acquiring entity); or (iii) a sale, conveyance, mortgage, pledge,
exclusive license, transfer or other disposition of all or substantially all of
the assets or intellectual property of the Borrower. For the avoidance of doubt,
a Financing Event shall not constitute a Change of Control.

 

(g) “Code” means the Internal Revenue Code of 1986, as amended, and any Treasury
Regulations promulgated thereunder.

 

(h) “Commitment Period Expiration Date” means the earliest to occur of (i) the
date on which any Event of Default occurs, and (ii) November 30, 2021.

 

(i) “Conversion Price” means an amount equal to 100% of the applicable Financing
Event Purchase Price.

 

(j) “Conversion Securities” means any New Securities of Borrower (including any
Borrower securities issuable upon conversion or exchange of such New Securities)
issued or issuable to Borrower in accordance with Section 2.9 hereof.

 

(k) “Default” means any event which, at the giving of notice, lapse of time or
fulfillment of any other applicable condition (or any combination of the
foregoing), would constitute an Event of Default.

 

(l) “Disbursement” means an advance of cash proceeds by the Lender to Borrower
pursuant to the Loan.

 

(m) “Disbursement Date” means the date on which a Disbursement occurs.

 

(n) “Disbursement Request” has the meaning given to it in Section 2.2(a).

 

(o) “Event of Default” has the meaning given to it in Section 5.1.

 

(p) “Evidence of Disbursement” has the meaning given to it in Section 2.2(a).

 

(q) “Exchange Act” means the Securities Exchange Act of 1934, as amended,
including the rules and regulations promulgated thereunder.

 

(r) “Excluded Taxes” means all income taxes, minimum or alternative minimum
income taxes, withholding taxes imposed on gross amounts, any tax determined
based upon income, capital gains, gross income, sales, net profits, windfall
profits or similar items, franchise taxes (or any other tax measured by capital,
capital stock or net worth), gross receipts taxes, branch profits taxes, margin
taxes (or any other taxes imposed on or measured by net income, or imposed in
lieu of net income) payable by the Lender in any jurisdiction to any Government
Authority (or political subdivision or taxing authority thereof) in connection
with any payments received under this Agreement by the Lender, or any such tax
imposed in connection with the execution and delivery of, and the performance of
its obligations under, this Agreement.

 

-2-

 

 

(s) “FDA” means the United States Food and Drug Administration.

 

(t) “Final Payment” means such amount as may be necessary to repay the Loan in
full and any other amounts owing by the Borrower to the Lender pursuant to the
Financing Documents.

 

(u) “Final Payment Date” means the earlier of (i) the date on which the borrower
repays the outstanding Balance (together with any other amounts unpaid under
this Agreement) to the Lender pursuant to this Agreement, (ii) the date on which
a Financing Event is consummated (to the extent Lender has not exercised its
right to convert the outstanding Balance pursuant to Section 2.9 hereof), and
(iii) December 31, 2021.

 

(v) “Financing Documents” means this Agreement, the Note and any other document
or instrument delivered in connection with any of the foregoing whether or not
specifically mentioned herein or therein.

 

(w) “Financing Event” means the Borrower’s sale of New Securities in a single
private transaction or in a series of related private transactions effected
primarily for financing purposes and resulting in gross cash proceeds to the
Borrower equal to $2,000,000 or more in the aggregate (excluding conversion of
the Balance outstanding under the Note and any other indebtedness outstanding on
the date hereof), in each case occurring after the date hereof and on or before
the Maturity Date.

 

(x) “Financing Event Purchase Price” means an amount equal to the lowest per
share (or per unit price in the event the Borrower issues units of stock and
other securities) purchase price at which shares of the New Securities are or
have been sold to new investors in a specified Financing Event.

 

(y) “Government Authority” means any government, governmental department,
ministry, cabinet, commission, board, bureau, agency, tribunal, regulatory
authority, instrumentality, judicial, legislative, fiscal, or administrative
body or entity, domestic or foreign, federal, state or local having jurisdiction
over the matter or matters and Person or Persons in question, including, with
limitation, the FDA and the U.S. Securities and Exchange Commission.

 

(z) “Lien” means any lien, pledge, preferential arrangement, mortgage, security
interest, deed of trust, charge, assignment, hypothecation, title retention,
privilege or other encumbrance on or with respect to property or interest in
property having the practical effect of constituting a security interest with
respect to the payment of any obligation with, or from the proceeds of, any
asset or revenue of any kind.

 

-3-

 

 

(aa) “Loan” means the loan to be made available by the Lender to the Borrower
pursuant to Section 2.2 in the maximum principal amount of $1,258,555.56 or, as
the context may require, the principal amount thereof from time to time
outstanding.

 

(bb) “Material Adverse Effect” means a material adverse effect on (a) the
business, operations, prospects, condition (financial or otherwise) or property
of the Borrower; (b) the validity or enforceability of any provision of any
Financing Document; (c) the ability of the Borrower to timely perform its
obligations under each Financing Document; or (d) the rights and remedies of the
Lender under any Financing Document.

 

(cc) “Note” means the notes issued to the Lender in the form attached hereto
Exhibit A.

 

(dd) “Obligations” means all obligations (monetary or otherwise) of the Borrower
arising under or in connection with the Financing Documents.

 

(ee) “Organizational Documents” means the Certificate of Incorporation and
Bylaws of the Borrower, each as amended from time to time.

 

(ff) “New Securities” means shares of the Borrower’s equity securities, either
alone or as part of units with other equity or equity-linked securities of the
Borrower, issued and sold in connection with a Financing Event.

 

(gg) “Permitted Indebtedness” means: (i) Indebtedness of Borrower in favor of
Lender arising under this Agreement or any other financial document; (ii)
Indebtedness existing as of the date hereof (which the Borrower represents to
not be in excess of $50,000 (iii) Indebtedness to trade creditors incurred in
the ordinary course of business; and (iv) extensions, refinancing and renewals
of any items of Permitted Indebtedness, provided that the principal amounts are
not increased or the terms modified to impose terms that are in any respect more
burdensome upon the Borrower.

 

(hh) “Permitted Liens” means: (i) Liens existing on the date hereof and
disclosed on Exhibit B hereof; (ii) Liens in favor of the Lender; (iii)
statutory Liens created by operation of applicable law; (iv) Liens arising in
the ordinary course of business and securing obligations that are not overdue or
are being contested in good faith by appropriate proceedings; (v) Liens securing
purchase money or capitalized lease equipment financing; and (vi) Liens for
Taxes not yet due and payable or that are being contested in good faith by
appropriate proceedings.

 

(ii) “Person” means and includes any natural person, individual, partnership,
joint venture, corporation, trust, limited liability company, limited company,
joint stock company, unincorporated organization, government entity or any
political subdivision or agency thereof, or any other entity.

 

(jj) “Securities Act” means the Securities Act of 1933, as amended, including
the rules and regulations promulgated thereunder

 

-4-

 

 

(kk) “Subsidiary or Subsidiaries: means, as to Borrower, any corporation or
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by
such Borrower.

 

(ll) “Taxes” means all deductions or withholdings for any and all present and
future taxes, levies, imposts, stamp or other duties, fees, assessments,
deductions, withholdings, all other governmental charges, and all liabilities
with respect thereto.

 

1.2. Interpretation. In this Agreement, unless the context otherwise requires,
all words and personal pronouns relating thereto shall be read and construed as
the number and gender of the party or parties requires and the verb shall be
read and construed as agreeing with the required word and pronoun; the division
of this Agreement into Articles and Sections and the use of headings and
captions is for convenience of reference only and shall not modify or affect the
interpretation or construction of this Agreement or any of its provisions; the
words “herein,” “hereof,” “hereunder,” “hereinafter” and “hereto” and words of
similar import refer to this Agreement as a whole and not to any particular
Article or Section hereof; the words “include,” “including,” and derivations
thereof shall be deemed to have the phrase “without limitation” attached thereto
unless otherwise expressly stated; references to a specified Article, Exhibit,
Section or Schedule shall be construed as a reference to that specified Article,
Exhibit, Section or Schedule of this Agreement; and any reference to this
Agreement or any of the Financing Documents means such agreement or document as
the same shall be amended, supplemented or modified and from time to time in
effect. All references to “dollars” or “$” in this Agreement refer to United
States dollars, which is the currency used for all purposes in this Agreement.

 

1.3. Business Day Adjustment. Where the day by which a payment is due to be made
is not a Business Day, that payment shall be made by the next succeeding
Business Day.

 

ARTICLE II.

AGREEMENT FOR THE LOAN

 

2.1. Use of Proceeds. The Borrower shall use the Loan proceeds only to fund the
preparation and submission to the FDA of Borrower’s hemodialysis filtration
(“HDF”) product for 510(k) clearance, conducting clinical trial and commercial
launch activities for the Borrower’s HDF product, and for general corporate
purposes.

 

2.2. Disbursements.

 

(a) The Borrower hereby acknowledges that as of the date of this Agreement, the
Lender has made an aggregate Disbursement of $758,555.56 under the Loan.

 

(b) Subject to satisfaction of the conditions contained in Section 2.3, further
Disbursements under the Loan in an aggregate amount not to exceed $500,000.00
shall be made upon the Borrower’s written request (a “Disbursement Request”) in
the form of Schedule 1, delivered to the Lender not less than five Business Days
prior to the proposed Disbursement Date. Each such Disbursement shall be in
installments of $250,000.00, unless otherwise agreed to by the Lender. Against
each Disbursement, the Borrower shall deliver to the Lender a completed receipt
(the “Evidence of Disbursement”) in the form of Schedule 2, which receipt shall
not be effective until the Disbursement is actually advanced to the Borrower.
The Lender shall have no obligation to honor more than one Disbursement Request
in any three-month period.

 

-5-

 

 

(c) The Lender shall not be required to make any Disbursement under the Loan if
(i) the Commitment Period Expiration Date shall have occurred, or (ii) after
giving effect thereto, the aggregate outstanding principal amount of the Loan
would exceed $1,258,555.56.

 

2.3. Conditions to Disbursements. The obligations of the Lender to make any
Disbursement of the Loan shall be subject to the fulfillment of the following
conditions:

 

(a) On the date of this Agreement, the Lender shall have received a copy of all
documents authorizing the Borrower to execute, deliver and perform each of the
Financing Documents and to engage in the transactions contemplated thereby, as
well as an opinion of Borrower’s counsel satisfactory to the Lender.

 

(b) The Borrower’s Cash balance shall be less than $100,000 as of the last day
of the month preceding the Disbursement Request.

 

(c) The Borrower’s representations and warranties made in this Agreement shall
be true and correct in all material respects as of the applicable Disbursement
Date as though made on such date (except to the extent such representations and
warranties expressly related to an earlier date, in which case such
representations and warranties shall be true and correct on and as of such
earlier date).

 

(d) The Borrower shall have performed and complied with all obligations and
covenants required by this Agreement to be performed by the Borrower as of such
Disbursement Date.

 

Any of the foregoing conditions may be waived in writing by the Lender in
respect of any Disbursement, provided that any such waiver shall not apply with
respect to any subsequent Disbursement unless the terms of such waiver so
expressly provides.

 

2.4. Repayment. The Borrower may repay all or any portion of the Loan at any
time and from time to time prior to the Final Payment Date. The Borrower shall
remit the Final Payment to Lender on the earlier to occur of (i) the Final
Payment Date and (ii) an Event of Default.

 

2.5. Payments. Payments of any amounts due to the Lender under this Agreement
shall be made in U.S. dollars in immediately available funds prior to 5:00 p.m.
New York, New York time on such date that any such payment is due, at such bank
or places, as the Lender shall from time to time designate in writing. The
Borrower shall pay all and any costs (administrative or otherwise) imposed by
banks, clearing houses, or any other financial institution, in connection with
making any payments under any of the Financing Documents, except for any costs
imposed by the Lender’s banking institutions.

 

-6-

 

 

2.6. Taxes, Duties and Fees.

 

(a) The Borrower shall pay or cause to be paid all present and future Taxes
(other than Excluded Taxes, if any), duties, fees and other charges of
whatsoever nature, if any, now or at any time hereafter levied or imposed by any
Government Authority, by any department, agency, political subdivision or taxing
or other authority thereof or therein, by any organization of which the
applicable Government Authority is a member, or by any jurisdiction through
which the Borrower makes payments hereunder, on or in connection with the
payment of any and all amounts due under this Agreement, and all payments of
principal and other amounts due under this Agreement shall be made without
deduction for or on account of any such Taxes, duties, fees and other charges,
except for Excluded Taxes, which may be deducted or withheld from payments made
by the Borrower only if such deduction or withholding is required by applicable
law.

 

(b) If the Borrower is required to withhold any such amount or is prevented by
operation of law or otherwise from paying or causing to be paid such Taxes,
duties, fees or other charges as aforesaid except for Excluded Taxes, the
principal or other amounts due under this Agreement (as applicable) shall be
increased to such amount as shall be necessary to yield and remit to the Lender
the full amount it would have received taking into account any such Taxes
(except for Excluded Taxes), duties, fees or other charges payable on amounts
payable by the Borrower under this Section 2.6(b) had such payment been made
without deduction of such Taxes, duties, fees or other charges (all and any of
such additional amounts, herein referred to as the “Additional Amounts”).

 

(c) If Section 2.6(b) above applies and the Lender so require the Borrower shall
deliver to the Lender official tax receipts evidencing payment (or certified
copies of them) of the Additional Amounts within thirty (30) days of the date of
payment.

 

(d) If the Lender receive a refund from a Government Authority to which the
Borrower has paid withholding Taxes pursuant to this Section 2.6, the Lender
shall pay such refund to the Borrower.

 

2.7. Interest Rate. Simple interest shall accrue daily on the unpaid principal
balance of the amounts funded under any Disbursement commencing on the date such
Disbursement is made and continuing until repaid or converted in full at a rate
per annum equal to 8.00% (the “Interest Rate”).

 

2.8. Interest on Late Payments. Without limiting the remedies available to the
Lender under the Financing Documents or otherwise, to the maximum extent
permitted by applicable law, if the Borrower fails to make any payment of
principal or interest with respect to the Loan, the Borrower shall pay, in
respect of the outstanding principal amount and interest of the Loan, interest
at the rate per annum equal to the Interest Rate plus 4.00% for so long as such
payment remains outstanding (the “Default Interest”). Such interest shall be
payable on demand.

 

-7-

 

 

2.9. Right to Convert Loan Amount.

 

(a) Conversion upon Financing Event. In the event the Borrower consummates a
Financing Event prior to the Final Payment Date, the Lender shall have the right
to convert all or a portion of the Balance as specified by the Lender (the
“Conversion Amount”) into that number of shares or units of New Securities sold
by the Borrower in such Financing Event determined by dividing the Conversion
Amount by the Conversion Price. The Borrower shall give written notice to the
Lender as soon as practicable but in no event less than ten Business Days prior
to the consummation of such Financing Event (a “Financing Event Notice”)
specifying the terms and conditions of the Financing Event and the anticipated
date of closing thereof. If the Lender elects to convert all or a portion of the
Balance pursuant to this Section 2.9(a), then the Lender shall deliver to the
Borrower a written notice of conversion not less than seven Business Days
following delivery of the Financing Event Notice, which notice shall specify the
Conversion Amount; provided, however, that if Lender fails to deliver such
conversion notice within such 7-Buinsess Day period, Lender shall be deemed to
have declined to elect any conversion under this Section 2.9(a) with respect to
such Financing Event. Any acquisition of New Securities pursuant to this Section
2.9(a) shall be on the same terms and conditions of the other purchasers of New
Securities in such Financing Event and the Lender agrees to execute and become a
party to all transaction agreements to be delivered by the other purchasers of
New Securities in such Financing Event. The effectiveness of any conversion made
pursuant to this Section 2.9(a) shall be conditioned upon the consummation of
the applicable Financing Event. For the avoidance of doubt, to the extent that
Lender declines to exercise its conversion rights under this Section 2.9(a) with
respect to a Financing Event, the remaining Balance shall be immediately payable
upon the consummation of the Financing Event.

 

(b) Termination of Rights Upon Conversion. Except for the rights to obtain
certificates representing New Securities in the case of a conversion pursuant to
Section 2.9(a), all rights of the Lender under the Financing Documents with
respect to such Conversion Amount shall terminate, whether or not the Note has
been surrendered to Borrower for cancellation.

 

(c) Delivery of Stock Certificates; No Fractional Shares. Subject to Section
2.9(b) above, as promptly as practicable after any conversion of this Note,
Borrower at its expense, will issue and deliver to Lender a certificate or
certificates evidencing the number of full equity securities as are issuable to
Lender in connection with a conversion under this Section 2.9. No fractional
shares of any of Borrower’s equity securities will be issued in connection with
any conversion hereunder.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1. Representations and Warranties of the Borrower. The Borrower represents and
warrants as of the date hereof and as of each Disbursement Date as follows:

 

(a) The Borrower is a corporation duly organized and validly existing under the
laws of the State of Delaware.

 

-8-

 

 

(b) The Borrower is conducting its business in compliance with its
Organizational Documents. The Organizational Documents of the Borrower
(including all amendments thereto) as currently in effect have been furnished to
the Lender and remain in full force and effect with no defaults outstanding
thereunder.

 

(c) The Borrower has full power and authority to enter into each of the
Financing Documents and to make the borrowings and the other transactions
contemplated thereby.

 

(d) All authorizations, consents, approvals, registrations, exemptions and
licenses with or from Government Authorities or other Persons that are necessary
for the conduct of its business as currently conducted and as proposed to be
conducted, for the borrowing hereunder, the execution and delivery of the
Financing Documents and the performance by the Borrower of its obligations
thereunder, have been obtained and are in full force and effect.

 

(e) Each Financing Document has been duly authorized, executed and delivered by
the Borrower and constitutes the valid and legally binding obligation of the
Borrower, enforceable in accordance with its terms, except as such
enforceability may be limited by (i) applicable insolvency, bankruptcy,
reorganization, moratorium or other similar laws affecting creditors’ rights
generally, and (ii) applicable equitable principles (whether considered in a
proceeding at law or in equity).

 

(f) No Default or Event of Default (or any other default or event of default,
however described) has occurred under any of the Financing Documents.

 

(g) Neither the entering into any of the Financing Documents nor the compliance
with any of its terms conflicts with, violates or results in a breach of any of
the terms of, or constitutes a default or event of default (however described)
or requires any consent under, any agreement or to which the Borrower is a party
or by which it is bound, or violates any of the terms of the Organizational
Documents or any judgment, decree, resolution, award or order or any statute,
rule or regulation applicable to the Borrower or its assets.

 

(h) The Borrower is not engaged in or the subject of any litigation,
arbitration, administrative regulatory compliance proceeding, or investigation,
nor are there any litigation, arbitration, administrative regulatory compliance
proceedings or investigations pending or, to the knowledge of the Borrower,
threatened before any court or arbitrator or before or by any Government
Authority against the Borrower, and the Borrower is not aware of any facts
likely to give rise to any such proceedings.

 

(i) The Borrower (i) is capable of paying its debts as they fall due, is not
unable and has not admitted its inability to pay debts as they fall due, (ii) is
not bankrupt or insolvent and (iii) has not taken action, and no such action has
been taken by a third party, for the Borrower’s winding up, dissolution, or
liquidation or similar executory or judicial proceeding or for the appointment
of a liquidator, custodian, receiver, trustee, administrator or other similar
officer for the Borrower or any or all of its assets or revenues.

 

(j) No Lien exists on Borrower’s property, except for Permitted Liens.

 

-9-

 

 

(k) The obligation of the Borrower to make any payment under this Agreement
(together with all charges in connection therewith) is absolute and
unconditional, and there exists no right of setoff or recoupment, counterclaim,
cross-claim or defense of any nature whatsoever to any such payment.

 

3.2. Borrower Acknowledgment. The Borrower acknowledges that it has made the
representations and warranties referred to in Section 3.1 with the intention of
persuading the Lender to enter into the Financing Documents and that the Lender
has entered into this Financing Documents on the basis of, and in full reliance
on, each of such representations and warranties. The Borrower represents and
warrants to the Lender that none of such representations and warranties omits
any matter the omission of which makes any of such representations and
warranties misleading.

 

3.3. Representations and Warranties of the Lender. The Lender represents and
warrants to the Borrower as of the date hereof that:

 

(a) It is acquiring the Note and any Conversion Securities solely for its
account for investment and not with a view to or for sale or distribution of the
Note or any Conversion Securities or any part thereof. Each of the Lender also
represents that the entire legal and beneficial interests of the Note and any
Conversion Securities the Lender is acquiring is being acquired for, and will be
held for, its account only.

 

(b) The Note and any Conversion Securities have not been, and will not be,
registered under the Securities Act on the basis that no distribution or public
offering of the stock of the Borrower is to be effected. The Lender realizes
that the basis for the exemptions may not be present, if notwithstanding its
representations Lender has a present intention of acquiring the securities for a
fixed or determinable period in the future, selling (in connection with a
distribution or otherwise), granting any participation in, or otherwise
distributing the securities. Lender has no such present intention.

 

(c) The Note and any Conversion Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption for such
registration is available.

 

(d) Neither the Note nor any Conversion Securities may be sold pursuant to Rule
144 adopted under the Securities Act unless certain conditions are met,
including, among other things, the existence of a public market for the shares,
the availability of certain current public information about the Borrower, the
resale following the required holding period under Rule 144 and the number of
shares being sold during any three month period not exceeding specified
limitation.

 

(e) It understands and agrees that all certificates evidencing the Note and any
Conversion Securities to be issued to the Lender may bear a legend substantially
as follows.

 

-10-

 

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER SAID ACT INCLUDING, WITHOUT LIMITATION,
PURSUANT TO RULES 144 OR 144A UNDER SAID ACT”

 

(f) Such Lender is an “accredited investor” as defined in Regulation D
promulgated under Act.

 

ARTICLE IV.

COVENANTS

 

4.1. Affirmative Covenants. Unless the Lender shall otherwise agree:

 

(a) The Borrower shall (i) maintain its existence and qualify and remain
qualified to do its business as currently conducted; (ii) maintain all approvals
necessary for the Financing Documents; and (iii) continue at all times to
operate its business in the ordinary course, with due diligence and efficiency,
and in conformity with sound business practices, except where the failure to so
maintain or operate, individually or in the aggregate, would not have a Material
Adverse Effect.

 

(b) The Borrower shall comply in all material respects with all applicable laws,
rules, regulations and orders of any Government Authority, except where the
necessity of compliance therewith is contested in good faith by appropriate
proceedings or where the failure to so comply, individually or in the aggregate,
would not have a Material Adverse Effect.

 

(c) The Borrower shall obtain, make and keep in full force and effect all
licenses, contracts, consents, approvals and authorizations from and
registrations with Government Authorities that may be required to conduct its
business.

 

(d) The Borrower shall promptly notify the Lender of the occurrence of (i) any
Default or Event of Default; or (ii) any claims, litigation, arbitration,
mediation or administrative or regulatory proceedings that are instituted or
threatened against the Borrower, except for matters that, individually or in the
aggregate, could not have a Material Adverse Effect; and (iii) each event which,
at the giving of notice, lapse of time, determination of materiality or
fulfillment of any other applicable condition (or any combination of the
foregoing), could constitute an event of default (however described) under any
of the Financing Documents.

 

(e) The Borrower shall comply with the terms of each of the Financing Documents.

 

(f) The Borrower will provide to the Lender copies of all documents, reports,
financial data and other information as the Lender may reasonably request,
including without limitation monthly and quarterly financial statements, and
permit the Lender to visit and inspect any of the properties of the Borrower and
its Subsidiaries, and to discuss its and their affairs, finances and accounts
with its and their officers, all at such times as the Lender may reasonably
request.

 

-11-

 

 

(g) Lender shall have the right to consult with and advise the management of the
Borrower and its Subsidiaries on matters relating to the operation of the
Borrower and its Subsidiaries.

 

4.2. Negative Covenants. Unless the Lender shall otherwise agree:

 

(a) The Borrower shall not undertake or permit any (i) conversion of the
Borrower into another form; (ii) any sale, transfer, lease or exchange or other
action with respect to the disposal of, or disposition of rights to assets or
business lines of the Borrower that are necessary for the development of the
Company’s products and product candidates in a single transaction or series of
transactions; (iii) any transaction or series of related transactions that
results in a Change of Control; or (iv) change in its current line of business
of developing and commercializing medical device products for the treatment of
renal disease, including adding new lines of business.

 

(b) The Borrower shall not (i) liquidate or dissolve or (ii) consolidate with or
merge into any other entity or reorganize without the consent of the Lender;
provided, however, that the Lender can withhold such consent only if they
reasonably determine that the consolidation or merger would have a Material
Adverse Effect, or (iii) enter into any transaction whereby its income or
profits are, or might be shared with any other Person, or enter into any
management contract or similar arrangement whereby its business or operations
are managed by another Person.

 

(c) The Borrower shall not: (i) create, incur or suffer any Lien upon any of its
assets, now owned or hereafter acquired, except Permitted Liens; or (ii) assign,
sell transfer or otherwise dispose of, any of the Financing Documents, or the
rights and obligations thereunder.

 

(d) The Borrower shall not create, incur assume, guarantee, or be or remain
liable with respect to any Indebtedness, other than Permitted Indebtedness, or
prepay any Indebtedness or take any actions which impose on the Borrower an
obligation to prepay any Indebtedness, except Indebtedness owed to the Lender.

 

(e) The Borrower shall not enter into any transactions between the Borrower and
any of its non-wholly-owned Affiliates (other than Lender), except for (i)
changes in the compensation of the Borrower’s officers, and (ii) transactions
that are, upon fair and reasonable terms, no less favorable to the Corporation
that would be obtained in an arm’s-length transaction with an unrelated third
party, in each case as approved by a majority of the disinterested directors and
a majority of the Preferred Directors then in office

 

(f) The Borrower shall not sell, license, transfer, assign, encumber or
otherwise dispose of any ownership rights to the intellectual property relating
to any of the Company’s products or product candidates or any product developed
from such intellectual property, except in connection with any Strategic
Transaction.

 

4.3. Reimbursement of Taxes. The Borrower shall pay all Taxes, duties, fees or
other charges payable on or in connection with the execution, issue, delivery,
registration, notarization or enforcement of the Financing Documents and shall,
upon notice from the Lender, reimburse the Lender for any such Taxes, duties,
fees or other charges paid by the Lender thereon; provided, however, that
notwithstanding the foregoing, under no circumstances shall the Borrower have
any obligation to reimburse the Lender for Excluded Taxes.

 

-12-

 

 

ARTICLE V.

EVENTS OF DEFAULT

 

5.1. General Acceleration Provision upon Events of Default. If one or more of
the events specified in this Section 5.1 (each an “Event of Default”) shall have
happened and be continuing beyond the applicable cure period, the Lender, by
written notice to the Borrower, may cancel the Borrower’s right to request
Disbursements and declare the entire outstanding Balance or any part thereof
(together with any other amounts payable under this Agreement) to be, and the
same shall thereupon become, immediately due and payable without any further
notice and without any presentment, demand or protest of any kind, all of which
are hereby expressly waived by the Borrower, and take any further action
available at law or in equity, including, without limitation, the sale of the
Loan and all other rights acquired in connection with the Loan:

 

(a) The Borrower shall have defaulted or failed to comply in any material
respect with the due observance or performance of any covenant contained in this
Agreement or any Note and such default or failure to comply shall not have been
cured by Borrower within 15 calendar days after receiving written notice of such
default or failure from the Lender.

 

(b) Any representation or warranty made by the Borrower in any Financing
Document shall be found to have been incorrect, false or misleading in any
material respect as of the date it was made, deemed made, reaffirmed or
confirmed.

 

(c) (i) The Borrower shall generally not pay its debts as such debts become due,
or shall admit in writing its inability to pay its debts as they come due or
shall make a general assignment for the benefit of creditors; (ii) the Borrower
shall declare a moratorium on the payment of its debts; (iii) the commencement
by the Borrower of proceedings to be adjudicated bankrupt or insolvent, or the
consent by it to the commencement of bankruptcy or insolvency proceedings
against it, or the filing by it of a petition or answer or consent seeking
reorganization, intervention or other similar relief under any applicable law,
or the consent by it to the filing of any such petition or to the appointment of
an intervenor, receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) or of any substantial part of its assets; (iv) the
commencement against the Borrower or any substantial part of its assets of a
proceeding in any court of competent jurisdiction under any bankruptcy or other
applicable law (as now or hereafter in effect) seeking its liquidation, winding
up, dissolution, reorganization, arrangement, adjustment, or the appointment of
an intervenor, receiver, liquidator, assignee, trustee, sequestrator (or other
similar official), and any such proceeding shall continue undismissed, or any
order, judgment or decree approving or ordering any of the foregoing shall
continue unstayed or otherwise in effect, for a period of ninety (90) days; (v)
the making by the Borrower of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debt generally as they
become due; or (vi) any other event shall have occurred which under any
applicable law would have an effect analogous to any of those events listed
above in this subsection.

 

-13-

 

 

(d) One or more judgments against the Borrower taken as a whole or attachments
against any of its property, which in the aggregate exceed $100,000, or which
could reasonable expected to interfere materially and adversely with the conduct
of the business of the borrower remain(s) unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of thirty (30) days from the
date of entry of such judgment.

 

(e) Any authorization necessary for the execution, delivery or performance of
any Financing Document or for the validity or enforceability of any of the
Borrower’s obligations under any Financing Document is not effected or given or
is withdrawn or ceases to remain in full force or effect.

 

(f) The validity of or any Financing Document shall be contested by any
legislative, executive or judicial body of any jurisdiction, or any treaty, law,
regulation, communiqué, decree, ordinance or policy of any jurisdiction shall
purport to render any material provision of any Financing Document invalid or
unenforceable or shall purport to prevent or materially delay the performance or
observance by the Borrower of its obligations hereunder or thereunder (as
applicable).

 

(g) If there is a default or other failure to perform in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of $100,000.

 

5.2. Automatic Acceleration on Dissolution or Bankruptcy. Notwithstanding any
other provisions of this Agreement, if an Event of Default under Section 5.1(c)
shall occur, the outstanding Balance (together with any other amounts payable
under this Agreement) shall thereupon become immediately due and payable without
any presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by the Borrower.

 

5.3. Recovery of Amounts Due. If any amount payable hereunder is not paid as and
when due, the Borrower hereby authorizes the Lender to proceed, to the fullest
extent permitted by applicable law, without prior notice, by right of set-off,
banker’s lien or counterclaim, against any moneys or other assets of the
Borrower to the full extent of all amounts payable to the Lender.

 

ARTICLE VI.

MISCELLANEOUS

 

6.1. Notices. All notices and other communications hereunder shall be in writing
and shall be deemed duly given (a) on the date of delivery if delivered
personally, (b) on the date of confirmation of receipt (or, the first (1st)
Business Day following such receipt if the date is not a Business Day) of
transmission by email, telecopy or telefacsimile, or (c) on the date of
confirmation of receipt (or, the first (1st) Business Day following such receipt
if the date is not a Business Day) if delivered by a nationally recognized
courier service. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:

 

-14-

 

 

For the Borrower:

 

Specialty Renal Products, Inc.

380 Lackawanna Place

South Orange, New Jersey 07079

Attn: Chief Executive Officer

Email: daron@nephros.com

 

For the Lender:

 

Nephros, Inc.

380 Lackawanna Place

South Orange, New Jersey 07079

Attn: Chief Executive Officer

Email: andy@nephros.com

 

6.2. Waiver of Notice. Whenever any notice is required to be given to the Lender
or the Borrower under the any of the Financing Documents, a waiver thereof in
writing signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.

 

6.3. Reimbursement of Legal and Other Expenses. If any amount owing to the
Lender under any Financing Document shall be collected through enforcement of
this Agreement, any refinancing or restructuring of the Loan in the nature of a
work-out, settlement, negotiation, or any process of law, or shall be placed in
the hands of third Persons for collection, the Borrower shall pay (in addition
to all monies then due in respect of the Loan or otherwise payable under any
Financing Document) documented attorneys’ and other fees and expenses incurred
in respect of such collection.

 

6.4. Governing Law. This Agreement shall be governed by the internal law of the
State of Delaware without regard to principles of conflicts of law.

 

6.5. Jurisdiction and Venue; Waiver of Jury Trial.

 

(a) The parties (i) hereby irrevocably and unconditionally submit to the
jurisdiction of the state courts of New Jersey and to the jurisdiction of the
United States District Court for the District of New Jersey for the purpose of
any suit, action or other proceeding arising out of or based upon this Agreement
or any of the other Financing Documents, (ii) agree not to commence any suit,
action or other proceeding arising out of or based upon this Agreement or any of
the other Financing Documents except in the state courts of New Jersey or the
United States District Court for the District of New Jersey and (iii) hereby
waive, and agree not to assert, by way of motion, as a defense, or otherwise, in
any such suit, action or proceeding, any claim that it is not subject personally
to the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that the suit, action or proceeding is
brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper or that this Agreement, any Financing Document or the
subject matter hereof or thereof may not be enforced in or by such court.

 

-15-

 

 

(b) EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER FINANCING
DOCUMENTS OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING,
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS
BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT
BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND
REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND
THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.

 

6.6. Successor and Assigns.

 

(a) This Agreement shall bind and inure to the respective successors and assigns
of the Parties, except that the Borrower may not assign or otherwise transfer
all or any part of its rights or obligations under this Agreement without the
prior written consent of the Lender.

 

(b) Notwithstanding anything to the contrary contained herein, if any assignment
or participation is to any Person that is not a “United States person” within
the meaning of Section 7701(a)(30) of the Code, then such Person shall submit to
the Borrower, on or before the date of such assignment or participation an IRS
Form W-8BEN (or any successor form) certifying as to such Person’s status for
purposes of determining exemption from United States withholding tax,
information reporting and backup withholding with respect to all payments to be
made to such Person. Any attempted assignment or participation in violation of
this Section 6.6 shall be void and of no force and effect. Until there has been
a valid assignment of this Agreement and of all of the rights hereunder by a
Lender in accordance with this Section 6.6, the Borrower shall deem and treat
the Lender as the absolute beneficial owner and holder of this Agreement and of
all of the rights hereunder for all purposes.

 

6.7. Entire Agreement. The Financing Documents contain the entire understanding
of the Parties with respect to the matters covered thereby and supersede any and
all other written and oral communications, negotiations, commitments and
writings with respect thereto. The provisions of this Agreement may be waived,
modified, supplemented or amended only by an instrument in writing signed by the
authorized officer of each Party.

 

6.8. Amendments. Any provision of this Agreement may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by the
Parties.

 

6.9. Severability. If any one or more of the provisions contained in this
Agreement shall be invalid, illegal or unenforceable in any respect under any
law, the validity, legality and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby. The Parties shall endeavor in
good faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.

 

-16-

 

 

6.10. Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Counterparts may be
delivered via facsimile, electronic mail (including .pdf or any electronic
signature complying with the U.S. federal ESIGN Act of 2000, e.g.,
www.docusign.com) or other transmission method and any counterpart so delivered
shall be deemed to have been duly and validly delivered and be valid and
effective for all purposes.

 

6.11. Survival.

 

(a) This Agreement and all agreements, representations and warranties made in
the Financing Documents, and in any document, certificate or statement delivered
pursuant thereto or in connection therewith shall be considered to have been
relied upon by the other Parties and shall survive the execution and delivery of
this Agreement and the making of the Loan hereunder regardless of any
investigation made by any such other Party or on its behalf, and shall continue
in force until all amounts payable under the Financing Documents shall have been
fully paid in accordance with the provisions hereof and thereof, and the Lender
shall not be deemed to have waived, by reason of making the Loan, any Default
that may arise by reason of such representation or warranty proving to have been
false or misleading, notwithstanding that the Lender may have had notice or
knowledge of any such Default or may have had notice or knowledge that such
representation or warranty was false or misleading at the time any Disbursement
was made hereunder.

 

(b) The obligations of the Borrower under Sections 2.6, 2.7 and 2.8 and the
obligations of the Borrower and the Lender under this ARTICLE VI hereof shall
survive and remain in full force and effect regardless of the consummation of
the transactions contemplated hereby, the repayment of the Loan, or the
termination of this Agreement or any provision hereof.

 

6.12. Waiver. Neither the failure of, nor any delay on the part of, any Party in
exercising any right, power or privilege hereunder, or under any agreement,
document or instrument mentioned herein, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder,
or under any agreement, document or instrument mentioned herein, preclude other
or further exercise thereof or the exercise of any other right, power or
privilege; nor shall any waiver of any right, power, privilege or default
hereunder, or under any agreement, document or instrument mentioned herein,
constitute a waiver of any other right, power, privilege or default or
constitute a waiver of any default of the same or of any other term or
provision. No course of dealing and no delay in exercising, or omission to
exercise, any right, power or remedy accruing to the Lender upon any default
under this Agreement, or any other agreement shall impair any such right, power
or remedy or be construed to be a waiver thereof or an acquiescence therein; nor
shall the action of the Lender in respect of any such default, or any
acquiescence by it therein, affect or impair any right, power or remedy of the
Lender in respect of any other default. All rights and remedies herein provided
are cumulative and not exclusive of any rights or remedies otherwise provided by
law.

 

-17-

 

 

6.13. No Usury. The Financing Documents are hereby expressly limited so that in
no contingency or event whatsoever, whether by reason of acceleration or
otherwise, shall the amount paid or agreed to be paid to the Lender for the Loan
exceed the maximum amount permissible under applicable law. If from any
circumstance whatsoever fulfillment of any provision hereof, at the time
performance of such provision shall be due, shall involve transcending the limit
of validity prescribed by law, then, ipso facto, the obligation to be fulfilled
shall be reduced to the limit of such validity, and if from any such
circumstance the Lender shall ever receive anything which might be deemed
interest under applicable law, that would exceed the highest lawful rate, such
amount that would be deemed excessive interest shall be applied to the reduction
of the principal amount owing on account of the Loan, or if such deemed
excessive interest exceeds the unpaid balance of principal of the Loan, such
deemed excess shall be refunded to the Borrower. All sums paid or agreed to be
paid to the Lender for the Loan shall, to the extent permitted by applicable
law, be deemed to be amortized, prorated, allocated and spread throughout the
full term of the Loan until payment in full so that the deemed rate of interest
on account of the Loan is uniform throughout the term thereof. The terms and
provisions of this paragraph shall control and supersede every other provision
of this Agreement and the Note.

 

6.14. Further Assurances. From time to time, the Borrower shall perform any and
all acts and execute and deliver to the Lender such additional documents as may
be necessary or as requested by the Lender to carry out the purposes of any
Financing Document or any or to preserve and protect the Lender’s rights as
contemplated therein.

 

6.15. Termination. Subject to the provisions of Section 6.11(b), upon repayment
of the entire Balance (together with any other amounts unpaid under this
Agreement), the Borrower may terminate this Agreement upon 10 days’ notice to
the Lender.

 

6.16. Waiver of Conflict of Interest. Each of Borrower and Lender is aware that
Fredrikson & Byron P.A. (“F&B”) has previously performed and may continue to
perform certain legal services for Borrower in matters unrelated to F&B’s
representation of the Lender in connection with this Agreement and the Loan. In
connection with its Borrower representation, F&B may have obtained confidential
information of the Borrower that could be material to F&B’s representation of
the Lender in connection with negotiation, execution and performance of this
Agreement. By signing this Agreement, each of the Borrower and the Lender hereby
acknowledges that the terms of this Agreement were negotiated between the
Borrower and the Lender and are fair and reasonable and waives any potential
conflict of interest arising out of such representation (including any future
representation of such parties) or such possession of confidential information.
Each of Borrower and Lender further represents that it has had the opportunity
to be, or has been, represented by independent counsel in giving the waivers
contained in this Section 6.16.

 

[SIGNATURE PAGE FOLLOWS]

 

-18-

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized respective officers as of the date first written above.

 

  SPECIALTY RENAL PRODUCTS, INC.         By: /s/ Daron Evans   Name: Daron Evans
  Title: Chief Executive Officer         NEPHROS, INC.         By: /s/ Andrew
Astor   Name: Andrew Astor   Title: Chief Executive Officer

 

Signature Page to Loan Agreement

 

 

 

 

SCHEDULE 1

 

FORM OF DISBURSEMENT REQUEST

 

[LETTERHEAD OF THE BORROWER]

 

[Date]

 

Ladies and Gentlemen:

 

Request for Disbursement of the Loan

 

1. Please refer to the Loan Agreement (the “Loan Agreement”), dated as of [●],
2020, between Specialty Renal Products, Inc. (the “Borrower”) and Nephros, Inc.
(the “Lender”). Terms defined in the Loan Agreement shall have the same meanings
herein.

 

2. The Borrower hereby requests a Disbursement, on [date], of the amount of
$[________], in accordance with the provisions of Section [___] of the Loan
Agreement. You are requested to pay the amount to the following account:

 

Name of Bank:

Address of Bank:

 

Account No:

Account Name: Specialty Renal Products, Inc.

 

3. Attached hereto is a signed but undated receipt for the amount hereby
requested to be disbursed, and we hereby authorize the Lender to date such
receipt as of the date of actual disbursement by the Lender of the funds hereby
requested to be disbursed.

 

4. The Borrower hereby certifies as follows:

 

(a) The Borrower’s current Cash balance on the date hereof is $[_________], as
evidenced by the attached balance sheet of the Borrower dated as of the month
ended [DATE];

 

(b) The representations and warranties in Article III of the Loan Agreement are
true in all material respects on the date hereof with the same effect as though
such representations and warranties had been made on today’s date; provided,
however, that for the purposes of this clause (b), the representation and
warranty in Section 3.1(h) shall be deemed to refer to litigation, arbitration,
proceeding or investigation that could have a Material Adverse Effect;

 

 

 

 

(c) The Borrower has performed and complied with all covenants, agreements,
obligations and conditions contained in the Loan Agreement that are required to
be performed or complied with by the Borrower on or before the date hereof; and

 

(d) All of the conditions set forth in Section 2.3 of the Loan Agreement have
been satisfied.

 

5. The above certifications are effective as of the date of this request for
Disbursement and will continue to be effective as of the Disbursement Date. If
any of these certifications is no longer valid as of or prior to the
Disbursement Date, the Borrower will immediately notify the Lender and will
repay the amount disbursed upon demand by the Lender if Disbursement is made
prior to the receipt of such notice.

 

  SPECIALTY RENAL PRODUCTS, INC.         By:             Name:     Title:  

 

 

 

 

SCHEDULE 2

 

FORM OF EVIDENCE OF DISBURSEMENT

 

[LETTERHEAD OF THE BORROWER]

 

[Date]

 

Ladies and Gentlemen:

 

Re: Disbursement Receipt

 

Specialty Renal Products, Inc. (the “Borrower”) hereby acknowledge receipt of
the sum of [insert amount of disbursement] disbursed to the Borrower by Nephros,
Inc. (the “Lender”) under the Loan provided for in the Loan Agreement, dated as
of October [●], 2020, between the Borrower and the Lender.

 

  Yours truly,         SPECIALTY RENAL PRODUCTS, INC.         By:             
Name:   Title:

 

 

 

 

EXHIBIT A

 

THE OFFER AND SALE OF THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. FURTHER, THIS NOTE IS
SUBJECT TO SIGNIFICANT RESTRICTIONS ON TRANSFER BY THE HOLDER HEREOF, AS
DESCRIBED MORE FULLY HEREIN.

 

8% CONVERTIBLE PROMISSORY NOTE

 

$[________]1   October [●], 2020

 

FOR VALUE RECEIVED, SPECIALTY RENAL PRODUCTS, INC, a Delaware corporation (the
“Borrower”), by means of this Promissory Note (this “Note”) hereby
unconditionally promises to pay to the order of NEPHROS, INC., a Delaware
corporation (the “Lender”), the aggregate principal sum equal to the amount
advanced by the Lender from time to time under the Loan Agreement (as defined
below) to or for the benefit of the Borrower (the “Loan”), in lawful money of
the United States of America and in immediately available funds, on the dates
provided in the Loan Agreement. The maximum principal sum payable under this
Note shall be $[________]2.

 

The principal balance of this Note outstanding at any time shall bear interest
from the date of disbursement until full payment, conversion or other
satisfaction of the principal hereof as set forth in the Loan Agreement dated as
of October [●], 2020, among the Borrower and the Lender (as modified and
supplemented and in effect from time to time, the “Loan Agreement”). All
capitalized terms used but not otherwise defined in this Note shall have the
meanings ascribed to such terms in the Loan Agreement. Each Disbursement made by
the Lender to the Borrower pursuant to the Loan Agreement, and all payments made
on account of principal thereof, shall be recorded by the Lender and, prior to
any transfer hereof, endorsed on the grid attached hereto which is part of this
Note; provided that the failure of the Lender to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Loan Agreement. Borrower shall make all payments to the Lender of principal
under this Note in the manner provided in and otherwise in accordance with the
Loan Agreement. The outstanding principal balance of this Note shall be due and
payable in full on the Final Payment Date

 

The following is a statement of the rights of Lender and the terms and
conditions to which this Note is subject and to which the Lender, by acceptance
of this Note, agrees:

 

 

1 NTD: Amount to represent $1,250,000 plus interest accrued through date of Note
on the $750,000 previously advanced. As of October 2, 2020, accrued interest
totals approximately $7,700.

2 See Footnote 5.

 

 

 

 

1. Ranking. Unless otherwise agreed by the Lender, the obligations of Borrower
under this Note shall senior to all other Indebtedness of the Borrower, except
Permitted Indebtedness.

 

2. No Transfer and Exchange. Subject to compliance with this Section 2, the
holder of this Note may, prior to the Final Payment Date or the conversion in
full of such Note in accordance with Section 2.9 of the Loan Agreement,
surrender such Note at the principal office of the Borrower for transfer or
exchange. Within a reasonable time after notice to the Borrower from such holder
of its intention to make such exchange and without expense to such holder,
except for any transfer or similar tax which may be imposed on the transfer or
exchange, the Borrower shall issue in exchange therefor another note or notes
for the same aggregate principal amount as the unpaid principal amount of the
Note so surrendered, having the same maturity and rate of interest, containing
the same provisions and subject to the same terms and conditions as the Note so
surrendered. Each new Note shall be made payable to such person or persons, or
transferees, as the holder of such surrendered Note may designate, and such
transfer or exchange shall be made in such a manner that no gain or loss of
principal or interest shall result therefrom. The Borrower may elect not to
permit a transfer of the Note if it has not obtained satisfactory assurance that
such transfer: (a) is exempt from the registration requirements of, or covered
by an effective registration statement under, the Act and the rules and
regulations thereunder and (b) is in compliance with all applicable state
securities laws, including without limitation receipt of an opinion of counsel,
which opinion shall be satisfactory to the Borrower.

 

3. New Note. Upon receipt of evidence reasonably satisfactory to the Borrower of
the loss, theft, destruction or mutilation of the Note, the Borrower shall issue
a new Note, of like tenor and amount and dated the date to which interest has
been paid, in lieu of such lost, stolen, destroyed or mutilated Note, and in
such event the Lender agrees to indemnify and hold harmless the Borrower in
respect of any such lost, stolen, destroyed or mutilated Note.

 

4. Conversion of Note. The Balance shall be convertible into Conversion
Securities in accordance with the terms of Section 2.9 of the Loan Agreement.
This Note does not by itself entitle the Lender to any voting rights or other
rights as a stockholder of the Borrower. In the absence of conversion of this
Note, no provisions of this Note, and no enumeration herein of the rights or
privileges of the Lender, shall cause the Lender to be a stockholder of the
Borrower for any purpose.

 

5. Events of Default. If default is made in the punctual payment of principal or
any other amount under this Note in accordance with the Loan Agreement, or if
any other Event of Default has occurred, this Note shall, at the Payee’s option
exercised at any time upon or after the occurrence of any such payment default
or other Event of Default, become immediately due and payable.

 

7. Governing Law. This Note shall be governed by the internal law of the State
of Delaware without regard to principles of conflicts of law.

 

8. Waiver. Borrower hereby waives presentment, protest, demand for payment,
notice of dishonor, and any and all other notices or demands in connection with
the deliver, acceptance, performance, default, or enforcement of this Note.

 

A-2

 

 

9. Severability. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision.

 

10. Registered Instrument. This Note is a registered instrument and is not a
bearer instrument. This Note is registered as to both principal and interest
with the Borrower and all payments hereunder shall be made to the named Lender
or, in the event of a transfer pursuant to Section 6.6 of the Loan Agreement, to
the transferee identified in the record of ownership of this Note maintained by
the Lender on behalf of the Borrower. Transfer of this Note may not be effected
except in accordance with the provisions hereof.

 

11. Notices. Any notice required or permitted hereunder shall be made in the
manner set forth in Section 6.1 of the Loan Agreement.

 

12. Headings; Interpretation. In this Note, (i) the meaning of defined terms
shall be equally applicable to both the singular and plural forms of the terms
defined, (ii) the captions and headings are used only for convenience and are
not to be considered in construing or interpreting this Note and (iii) the words
“including,” “includes” and “include” shall be deemed to be followed by the
words “without limitation”. All references in this Note to sections, paragraphs,
exhibits and schedules shall, unless otherwise provided, refer to sections and
paragraphs hereof and exhibits and schedules attached hereto, all of which
exhibits and schedules are incorporated herein by this reference.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

A-3

 

 

IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed by
its duly authorized officers as of the date first above written.

 

  BORROWER:       SPECIALTY RENAL PRODUCTS, INC.       By:     Name: Daron Evans
  Title: Chief Executive Officer

 

Signature Page to Convertible Promissory Note

 

 

 

 

EXHIBIT B

 

Permitted Liens

 

None