SPECIALTY
RENAL PRODUCTS, INC.


 


RIGHT
OF FIRST REFUSAL

AND CO-SALE AGREEMENT


 


THIS
RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT (this “Agreement”), is made as of September 5, 2018, by and among
Specialty Renal Products, Inc., a Delaware corporation (the “Company”), the Investors listed on Schedule
A and the Key Holders listed on Schedule B.


 


WHEREAS,
each Key Holder is the beneficial owner of shares of Capital Stock;


 


WHEREAS,
the Company and the Investors are parties to the Series A Preferred Stock Purchase Agreement, of even date herewith (the “Purchase
Agreement”), pursuant to which the Investors have agreed to purchase shares of the Series A Preferred Stock of the Company,
par value $0.0001 per share (“Series A Preferred Stock”); and


 


WHEREAS,
the Key Holders and the Company desire to further induce the Investors to purchase the Series A Preferred Stock;


 


NOW,
THEREFORE, the Company, the Key Holders and the Investors, intending to be legally bound, hereby agree as follows:


 


1.
Definitions.


 


1.1
“Affiliate” means, with respect to any specified Investor, any other Person who directly or indirectly, controls,
is controlled by or is under common control with such Investor, including, without limitation, any general partner, managing member,
officer or director of such Investor, or any venture capital, hedge or private equity fund now or hereafter existing which is
controlled by one or more general partners or managing members of, or shares the same management company with, such Investor.


 


1.2
“Capital Stock” means (a) shares of Common Stock and Preferred Stock (whether now outstanding or hereafter
issued in any context), (b) shares of Common Stock issued or issuable upon conversion of Preferred Stock, and (c) shares of Common
Stock issued or issuable upon exercise or conversion, as applicable, of stock options, warrants or other convertible securities
of the Company, in each case now owned or subsequently acquired by any Key Holder, any Investor, or their respective successors
or permitted transferees or assigns. For purposes of the number of shares of Capital Stock held by an Investor or Key Holder (or
any other calculation based thereon), all shares of Preferred Stock shall be deemed to have been converted into Common Stock at
the then-applicable conversion ratio.


 


1.3
“Change of Control” means a transaction or series of related transactions in which a person, or a group of
related persons, acquires from stockholders of the Company shares representing more than fifty percent (50%) of the outstanding
voting power of the Company.


 




    	 



    	 



    

 


1.4
“Common Stock” means shares of Common Stock of the Company, $0.0001 par value per share.


 


1.5
“Company Notice” means written notice from the Company notifying the selling Key Holders that the Company intends
to exercise its Right of First Refusal as to some or all of the Transfer Stock with respect to any Proposed Key Holder Transfer.


 


1.6
“Form S-1”
means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities
Act subsequently adopted by the SEC.


 


1.7
“Form S-3” means such form under the Securities Act as in effect on the date hereof or any registration form
under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to
other documents filed by the Company with the SEC.


 


1.8
“Investor Notice” means written notice from an Investor notifying the Company and the selling Key Holder that
such Investor intends to exercise its Secondary Refusal Right as to a portion of the Transfer Stock with respect to any Proposed
Key Holder Transfer and shall indicate how much of the Transfer Stock such Investor desires to purchase from the Key Holder.


 


1.9
“Investors” means the persons named on Schedule A hereto, each person to whom the rights of an Investor
are assigned pursuant to Subsection 6.9, each person who hereafter becomes a signatory to this Agreement pursuant to Subsection
6.11 and any one of them, as the context may require.


 


1.10
“IPO”
means the Company’s first underwritten public offering of its Common Stock under the Securities Act.


 


1.11
“Key Holders” means the persons named on Schedule B hereto, each person to whom the rights of a Key
Holder are assigned pursuant to Subsection 3.1, each person who hereafter becomes a signatory to this Agreement pursuant
to Subsection 6.9 or 6.17 and any one of them, as the context may require.


 


1.12
“Nephros” means Nephros, Inc., a Delaware corporation.


 


1.13
“Person” shall mean an individual, firm, corporation, partnership, association, limited liability company,
trust or any other entity.


 


1.14
“Preferred Stock” means collectively, all shares of Series A Preferred Stock.


 


1.15
“Proposed Key Holder Transfer” means any assignment, sale, offer to sell, pledge, mortgage, hypothecation,
encumbrance, disposition of or any other like transfer or encumbering of any Transfer Stock (or any interest therein) proposed
by any of the Key Holders.


 




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1.16
“Proposed Transfer Notice” means written notice from a Key Holder setting forth the terms and conditions of
a Proposed Key Holder Transfer.


 


1.17
“Prospective Transferee” means any person to whom a Key Holder proposes to make a Proposed Key Holder Transfer.


 


1.18
“Qualified Public Offering” shall have the meaning ascribed thereto in the Restated Certificate.


 


1.19
“Restated Certificate” means the Company’s Amended and Restated Certificate of Incorporation, as amended
from time to time.


 


1.20
“Right of Co-Sale” means the right, but not an obligation, of an Investor to participate in a Proposed Key
Holder Transfer on the terms and conditions specified in the Proposed Transfer Notice.


 


1.21
“Right of First Refusal” means the right, but not an obligation, of the Company, or its permitted transferees
or assigns, to purchase some or all of the Transfer Stock with respect to a Proposed Key Holder Transfer, on the terms and conditions
specified in the Proposed Transfer Notice.


 


1.22
“SEC” means the U.S. Securities and Exchange Commission.


 


1.23
“Secondary Notice” means written notice from the Company notifying the Investors and the selling Key Holder
that the Company does not intend to exercise its Right of First Refusal as to all shares of Transfer Stock with respect to any
Proposed Key Holder Transfer.


 


1.24
“Secondary Refusal Right” means the right, but not an obligation, of each Investor to purchase up to its pro
rata portion (based upon the total number of shares of Capital Stock then held by all Investors) of any Transfer Stock not purchased
pursuant to the Right of First Refusal, on the terms and conditions specified in the Proposed Transfer Notice.


 


1.25
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.


 


1.26
“Series A Conversion Price” shall have the meaning ascribed thereto in the Restated Certificate.


 


1.27
“Series A Director” means any director of the Company that the holders
of the Series A Preferred Stock are entitled to elect pursuant to the Restated Certificate.


 


1.28
“Transfer Stock” means shares of Capital Stock owned by a Key Holder, or issued to a Key Holder after the date
hereof (including, without limitation, in connection with any stock split, stock dividend, recapitalization, reorganization, or
the like), but does not include any shares of Preferred Stock or of Common Stock that are issued or issuable upon conversion of
Preferred Stock.


 




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1.29
“Undersubscription Notice” means written notice from an Investor notifying the Company and the selling Key
Holder that such Investor intends to exercise its option to purchase all or any portion of the Transfer Stock not purchased pursuant
to the Right of First Refusal or the Secondary Refusal Right.


 


2.
Agreement Among the Company, the Investors and the Key Holders.


 


2.1
Right of First Refusal.


 


(a)
Grant. Subject to the terms of Section 3 below, each Key Holder hereby unconditionally and irrevocably grants to
the Company a Right of First Refusal to purchase all or any portion of Transfer Stock that such Key Holder may propose to transfer
in a Proposed Key Holder Transfer, at the same price and on the same terms and conditions as those offered to the Prospective
Transferee.


 


(b)
Notice. Each Key Holder proposing to make a Proposed Key Holder Transfer must deliver a Proposed Transfer Notice to the
Company and each Investor not later than forty-five (45) days prior to the consummation of such Proposed Key
Holder Transfer. Such Proposed Transfer Notice shall contain the material terms and conditions (including price and form of consideration)
of the Proposed Key Holder Transfer, the identity of the Prospective Transferee and the intended date of the Proposed Key Holder
Transfer. To exercise its Right of First Refusal under this Section 2, the Company must deliver a Company Notice to the
selling Key Holder within fifteen (15) days after delivery of the Proposed Transfer Notice. In the event of a conflict between
this Agreement and any other agreement that may have been entered into by a Key Holder with the Company that contains a preexisting
right of first refusal, the Company and the Key Holder acknowledge and agree that the terms of this Agreement shall control and
the preexisting right of first refusal shall be deemed satisfied by compliance with Subsection 2.1(a) and this Subsection
2.1(b). In the event of a conflict between this Agreement and the Company’s Bylaws containing a preexisting right of
first refusal, the terms of this Agreement will control and compliance herewith shall be deemed compliance with the Bylaws in
full.


 


(c)
Grant of Secondary Refusal Right to Investors. Subject to the terms of Section 3 below, each Key Holder hereby unconditionally
and irrevocably grants to the Investors a Secondary Refusal Right to purchase all or any portion of the Transfer Stock not purchased
by the Company pursuant to the Right of First Refusal, as provided in this Subsection 2.1(c). If the Company does not intend
to exercise its Right of First Refusal with respect to all Transfer Stock subject to a Proposed Key Holder Transfer, the Company
must deliver a Secondary Notice to the selling Key Holder and to each Investor to that effect no later than fifteen (15) days
after the selling Key Holder delivers the Proposed Transfer Notice to the Company. To exercise its Secondary Refusal Right, an
Investor must deliver an Investor Notice to the selling Key Holder and the Company within ten (10) days after the Company’s
deadline for its delivery of the Secondary Notice as provided in the preceding sentence (each Investor which delivers a Secondary
Notice, an “Exercising Investor”). Each Investor may purchase up to an amount of Transfer Stock equal to the
product obtained by multiplying (i) the aggregate number of shares of Transfer Stock subject to the Proposed Key Holder Transfer
(excluding shares purchased by the Company pursuant to the Right of First Refusal) by (ii) a fraction, the numerator of which
is the number of shares of Capital Stock owned by such Investor immediately before consummation of the Proposed Key Holder Transfer
and the denominator of which is the total number of shares of Capital Stock owned, in the aggregate, by all Investors immediately
prior to the consummation of the Proposed Key Holder Transfer, plus the number of shares of Transfer Stock held by the selling
Key Holder.


 




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(d)
Undersubscription of Transfer Stock. If options to purchase have been exercised by the Company and the Exercising Investors
with respect to some but not all of the Transfer Stock by the end of the ten (10) day period specified in the last sentence of
Subsection 2.1(c) (the “Investor Notice Period”), then the Company shall, immediately after the expiration
of the Investor Notice Period, send written notice (the “Company Undersubscription Notice”) to those Exercising
Investors who fully exercised their Secondary Refusal Right within the Investor Notice Period (the “Fully Exercising
Investors”). Each Fully Exercising Investor shall, subject to the provisions of this Subsection 2.1(d), have
an additional option to purchase all or any part of the balance of any such remaining unsubscribed shares of Transfer Stock on
the terms and conditions set forth in the Proposed Transfer Notice. To exercise such option, a Fully Exercising Investor must
deliver an Undersubscription Notice to the selling Key Holder and the Company within ten (10) days after the expiration of the
Investor Notice Period. In the event there are two (2) or more such Fully Exercising Investors that choose to exercise the last-mentioned
option for a total number of remaining shares in excess of the number available, the remaining shares available for purchase under
this Subsection 2.1(d) shall be allocated to the Fully Exercising Investors pro rata such that each Fully Exercising Investor
may purchase up to an amount of Transfer Stock equal to the product obtained by multiplying (i) the aggregate number of shares
of Transfer Stock subject to the Proposed Key Holder Transfer (excluding shares purchased by the Company pursuant to the Right
of First Refusal) by (ii) a fraction, the numerator of which is the number of shares of Capital Stock owned by such Fully Exercising
Investor immediately before consummation of the Proposed Key Holder Transfer and the denominator of which is the total number
of shares of Capital Stock owned, in the aggregate, by all Fully Exercising Investors immediately prior to the consummation of
the Proposed Key Holder Transfer, plus the number of shares of Transfer Stock held by the selling Key Holder. If the options to
purchase the remaining shares are exercised in full by the Fully Exercising Investors, the Company shall immediately notify all
of the Fully Exercising Investors and the selling Key Holder of that fact.


 


(e)
Consideration; Closing. If the consideration proposed to be paid for the Transfer Stock is in property, services or other
non-cash consideration, the fair market value of the consideration shall be as determined in good faith by the Board (including
at least one Series A Director if then in office ) and as set forth in the Company Notice. If the Company or any Investor cannot
for any reason pay for the Transfer Stock in the same form of non-cash consideration, the Company or such Investor may pay the
cash value equivalent thereof, as determined in good faith by the Board (including at least one Series A Director if then in office)
and as set forth in the Company Notice. The closing of the purchase of Transfer Stock by the Company and the Investors shall take
place, and all payments from the Company and the Investors shall have been delivered to the selling Key Holder, by the later of
(i) the date specified in the Proposed Transfer Notice as the intended date of the Proposed Key Holder Transfer; and (ii) forty-five
(45) days after delivery of the Proposed Transfer Notice.


 




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2.2
Right of Co-Sale.


 


(a)
Exercise of Right. If any Transfer Stock subject to a Proposed Key Holder Transfer is not purchased pursuant to Subsection
2.1 above and thereafter is to be sold to a Prospective Transferee, each respective Investor may elect to exercise its Right
of Co-Sale and participate on a pro rata basis in the Proposed Key Holder Transfer as set forth in Subsection 2.2(b)
below and, subject to Subsection 2.2(d), otherwise on the same terms and conditions specified in the Proposed Transfer
Notice. Each Investor who desires to exercise its Right of Co-Sale (each, a “Participating Investor”) must
give the selling Key Holder written notice to that effect within fifteen (15) days after the deadline for delivery of the Secondary
Notice described above, and upon giving such notice such Participating Investor shall be deemed to have effectively exercised
the Right of Co-Sale.


 


(b)
Shares Includable. Each Participating Investor which timely exercises its Right of Co-Sale by delivering the written notice
provided for above in Section 2.2(a) may include in the Proposed Key Holder Transfer all or any part of such Participating Investor’s
Capital Stock equal to the product obtained by multiplying (i) the aggregate number of shares of Transfer Stock subject to the
Proposed Key Holder Transfer (excluding shares purchased by the Company or the Participating Investors pursuant to the Right of
First Refusal or the Secondary Refusal Right) by (ii) a fraction, the numerator of which is the number of shares of Capital Stock
owned by such Participating Investor immediately before consummation of the Proposed Key Holder Transfer and the denominator of
which is the total number of shares of Capital Stock owned, in the aggregate, by all Participating Investors immediately prior
to the consummation of the Proposed Key Holder Transfer, plus the number of shares of Transfer Stock held by the selling Key Holder.
To the extent one (1) or more of the Participating Investors exercise such right of participation in accordance with the terms
and conditions set forth herein, the number of shares of Transfer Stock that the selling Key Holder may sell in the Proposed Key
Holder Transfer shall be correspondingly reduced.


 


(c)
Purchase and Sale Agreement. The Participating Investors and the selling Key Holder agree that the terms and conditions
of any Proposed Key Holder Transfer in accordance with Subsection 2.2 will be memorialized in, and governed by, a written
purchase and sale agreement with the Prospective Transferee (the “Purchase and Sale Agreement”) with customary
terms and provisions for such a transaction, and the Participating Investors and the selling Key Holder further covenant and agree
to enter into such Purchase and Sale Agreement as a condition precedent to any sale or other transfer in accordance with this
Subsection 2.2.


 


(d)
Allocation of Consideration.


 


(i)
Subject to Subsection 2.2(d)(ii), the aggregate consideration payable to the Participating Investors and the selling Key
Holder shall be allocated based on the number of shares of Capital Stock sold to the Prospective Transferee by each Participating
Investor and the selling Key Holder as provided in Subsection 2.2(b), provided that if a Participating Investor
wishes to sell Preferred Stock, the price set forth in the Proposed Transfer Notice shall be appropriately adjusted based on conversion
of the Preferred Stock into Common Stock in accordance with the Series A Conversion Price.


 




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(ii)
In the event that the Proposed Key Holder Transfer constitutes a Change of Control, the terms of the Purchase and Sale Agreement
shall provide that the aggregate consideration from such transfer shall be allocated to the Participating Investors and the selling
Key Holder in accordance with Sections 2.1, 2.2 and 2.3 of Article IV(B) of the Restated Certificate as if (A) such transfer were
a Deemed Liquidation Event (as defined in the Restated Certificate), and (B) the Capital Stock sold in accordance with the Purchase
and Sale Agreement were the only Capital Stock outstanding. In the event that a portion of the aggregate consideration payable
to the Participating Investor(s) and selling Key Holder is placed into escrow, the Purchase and Sale Agreement shall provide that
(x) the portion of such consideration that is not placed in escrow (the “Initial Consideration”) shall be allocated
in accordance with Section 2.1, 2.2 and 2.3 of Article IV(B) of the Restated Certificate as if the Initial Consideration were
the only consideration payable in connection with such transfer, and (y) any additional consideration which becomes payable to
the Participating Investor(s) and selling Key Holder upon release from escrow shall be allocated in accordance with Section 2.1,
2.2 and 2.3 of Article IV(B) of the Restated Certificate after taking into account the previous payment of the Initial Consideration
as part of the same transfer.


 


(e)
Purchase by Selling Key Holder; Deliveries. Notwithstanding Subsection 2.2(c) above, if any Prospective Transferee
or Transferees refuse(s) to purchase securities subject to the Right of Co-Sale from any Participating Investor or Investors or
upon the failure to negotiate a Purchase and Sale Agreement reasonably satisfactory to the Participating Investors, no Key Holder
may sell any Transfer Stock to such Prospective Transferee or Transferees unless and until, simultaneously with such sale, such
Key Holder purchases all securities subject to the Right of Co-Sale from such Participating Investor or Investors on the same
terms and conditions (including the proposed purchase price) as set forth in the Proposed Transfer Notice and as provided in Subsection
2.2(d)(i); provided, however, if such sale constitutes a Change of Control, the portion of the aggregate
consideration paid by the selling Key Holder to such Participating Investor or Investors shall be deemed part of the aggregate
consideration from such transfer and shall be allocated in accordance with the first sentence of Subsection 2.2(d)(ii).
In connection with such purchase by the selling Key Holder, such Participating Investor or Investors shall deliver to the selling
Key Holder any stock certificate or certificates, properly endorsed for transfer, representing the Capital Stock being purchased
by the selling Key Holder (or request that the Company effect such transfer in the name of the selling Key Holder). Any such shares
transferred to the selling Key Holder will be transferred to the Prospective Transferee against payment therefor in consummation
of the sale of the Transfer Stock pursuant to the terms and conditions specified in the Proposed Transfer Notice, and the selling
Key Holder shall concurrently therewith remit or direct payment to each such Participating Investor the portion of the aggregate
consideration to which each such Participating Investor is entitled by reason of its participation in such sale as provided in
this Subsection 2.2(e).


 


(f)
Additional Compliance. If any Proposed Key Holder Transfer is not consummated within forty-five (45) days after receipt
of the Proposed Transfer Notice by the Company, the Key Holders proposing the Proposed Key Holder Transfer may not sell any Transfer
Stock unless they first comply in full with each provision of this Section 2. The exercise or election not to exercise
any right by any Investor hereunder shall not adversely affect its right to participate in any other sales of Transfer Stock subject
to this Subsection 2.2.


 




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2.3
Effect of Failure to Comply.


 


(a)
Transfer Void; Equitable Relief. Any Proposed Key Holder Transfer not made in compliance with the requirements of this
Agreement shall be null and void ab initio, shall not be recorded on the books of the Company or its transfer agent and shall
not be recognized by the Company. Each party hereto acknowledges and agrees that any breach of this Agreement would result in
substantial harm to the other parties hereto for which monetary damages alone could not adequately compensate. Therefore, the
parties hereto unconditionally and irrevocably agree that any non-breaching party hereto shall be entitled to seek protective
orders, injunctive relief and other remedies available at law or in equity (including, without limitation, seeking specific performance
or the rescission of purchases, sales and other transfers of Transfer Stock not made in strict compliance with this Agreement).


 


(b)
Violation of First Refusal Right. If any Key Holder becomes obligated to sell any Transfer Stock to the Company or any
Investor under this Agreement and fails to deliver such Transfer Stock in accordance with the terms of this Agreement, the Company
and/or such Investor may, at its option, in addition to all other remedies it may have, send to such Key Holder the purchase price
for such Transfer Stock as is herein specified and transfer to the name of the Company or such Investor (or request that the Company
effect such transfer in the name of an Investor) on the Company’s books any certificates, instruments, or book entry representing
the Transfer Stock to be sold.


 


(c)
Violation of Co-Sale Right. If any Key Holder purports to sell any Transfer Stock in contravention of the Right of Co-Sale
(a “Prohibited Transfer”), each Investor who desires to exercise its Right of Co-Sale under Subsection 2.2
may, in addition to such remedies as may be available by law, in equity or hereunder, require such Key Holder to purchase
from such Investor the type and number of shares of Capital Stock that such Investor would have been entitled to sell to the Prospective
Transferee had the Prohibited Transfer been effected in compliance with the terms of Subsection 2.2. The sale will be made
on the same terms, including, without limitation, as provided in Subsection 2.2(d)(i) and the first sentence of Subsection
2.2(d)(ii), as applicable, and subject to the same conditions as would have applied had the Key Holder not made the Prohibited
Transfer, except that the sale (including, without limitation, the delivery of the purchase price) must be made within ninety
(90) days after the Investor learns of the Prohibited Transfer, as opposed to the timeframe proscribed in Subsection 2.2.
Such Key Holder shall also reimburse each Investor for any and all reasonable and documented out-of-pocket fees and expenses,
including reasonable legal fees and expenses, incurred pursuant to the exercise or the attempted exercise of the Investor’s
rights under Subsection 2.2.


 




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3.
Exempt Transfers.


 


3.1
Exempted Transfers. Notwithstanding the foregoing or anything to the contrary herein, the provisions of Subsections
2.1 and 2.2 shall not apply (a) in the case of Nephros, upon a transfer to its stockholders, (b) to a repurchase of
Transfer Stock from a Key Holder by the Company at a price no greater than that originally paid by such Key Holder for such Transfer
Stock (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after
the date hereof) and pursuant to an agreement containing vesting and/or repurchase provisions approved by a majority of the Board
(including at least one Series A Director if then in office), (c) to a pledge of Transfer Stock that creates a mere security interest
in the pledged Transfer Stock; provided that the pledgee thereof agrees in writing in advance to be bound by and comply
with all applicable provisions of this Agreement to the same extent as if it were the Key Holder making such pledge, or (d) in
the case of a Key Holder that is a natural person, upon a transfer of Transfer Stock by such Key Holder made for bona fide estate
planning purposes, either during his or her lifetime or on death by will or intestacy to his or her spouse, child (natural or
adopted), or any other direct lineal descendant of such Key Holder (or his or her spouse) (all of the foregoing collectively referred
to as “family members”), or any other relative/person approved by the Board of the Company (including at least one
Series A Director if then in office), or any custodian or trustee of any trust, partnership or limited liability company for the
benefit of, or the ownership interests of which are owned wholly by such Key Holder or any such family members; provided
that in the case of clause(s) (a), (c), or (d), or, the Key Holder shall deliver prior written notice to the Investors of such
pledge, gift or transfer and such shares of Transfer Stock shall at all times remain subject to the terms and restrictions set
forth in this Agreement and such transferee shall, as a condition to such issuance, deliver a counterpart signature page to this
Agreement as confirmation that such transferee shall be bound by all the terms and conditions of this Agreement as a Key Holder
(but only with respect to the securities so transferred to the transferee), including the obligations of a Key Holder with respect
to Proposed Key Holder Transfers of such Transfer Stock pursuant to Section 2; and provided further in the case
of any transfer pursuant to clause (a) or (c) above, that such transfer is made pursuant to a transaction in which there is no
consideration actually paid for such transfer.


 


3.2
Exempted Offerings. Notwithstanding the foregoing or anything to the contrary herein, the provisions of Section 2
shall not apply to the sale of any Transfer Stock (a) to the public in an offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended (a “Public Offering”); or (b) pursuant to a Deemed Liquidation
Event (as defined in the Company’s Certificate of Incorporation).


 


3.3
Prohibited Transferees. Notwithstanding the foregoing, no Key Holder shall transfer any Transfer Stock to (a) any entity
which, in the determination of the Company’s Board of Directors (the “Board”) (including at least one
Series A Director if then in office), directly or indirectly competes with the Company; or (b) any customer, distributor or supplier
of the Company, if the Board (including at least one Series A Director if then in office) should determine that such transfer
would result in such customer, distributor or supplier receiving information that would place the Company at a competitive disadvantage
with respect to such customer, distributor or supplier.


 


4. Legend.
Each certificate, instrument, or book entry representing shares of Transfer Stock held by the Key Holders or issued to any permitted
transferee in connection with a transfer permitted by Subsection 3.1 hereof shall be notated with the following legend:


 




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THE
SALE, PLEDGE, HYPOTHECATION, OR TRANSFER OF THE SECURITIES REPRESENTED HEREBY IS SUBJECT TO, AND IN CERTAIN CASES PROHIBITED BY,
THE TERMS AND CONDITIONS OF A CERTAIN RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT BY AND AMONG THE STOCKHOLDER, THE CORPORATION
AND CERTAIN OTHER HOLDERS OF STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY
OF THE CORPORATION.


 


Each
Key Holder agrees that the Company may instruct its transfer agent to impose transfer restrictions on the shares notated with
the legend referred to in this Section 4 above to enforce the provisions of this Agreement, and the Company agrees to promptly
do so. The legend shall be removed upon termination of this Agreement at the request of the holder.


 


5.
Market Standstill.


 


5.1
Lock Up. Each Key Holder and Investor hereby agrees that it will not, without the prior written consent of the managing
underwriter, during the period commencing on the date of the final prospectus relating to the registration
by the Company of shares of its Common Stock or any other equity securities under the Securities
Act on a registration statement on Form S-1 or Form S-3, and ending on the date specified
by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days in the case of the IPO, which
period may be extended upon the request of the managing underwriter, to the extent required by any FINRA rules, for an additional
period of up to fifteen (15) days if the Company issues or proposes to issue an earnings or other public release within fifteen
(15) days of the expiration of the 180-day lockup period), lend; offer; pledge; sell; contract to sell; sell any option or contract
to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable
(directly or indirectly) for Common Stock held immediately before the effective date
of the registration statement for such offering, or (ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of such securities, whether
any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in
cash, or otherwise. The foregoing provisions of this Subsection 5.1 shall apply only to the IPO, shall not apply to the sale of
any shares to an underwriter pursuant to an underwriting agreement, or the transfer of any shares
to any Affiliate of the Investor or any Key Holder or any trust for the direct or indirect benefit of the Key Holder or the Investor
or the immediate family of the Key Holder or the Investor, provided that the trustee of the Affiliate or trust, as the
case may be, agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall
not involve a disposition for value, and shall be applicable to the Key Holders and the Investors only if all officers
and directors are subject to the same restrictions and the Company obtains a similar agreement from all directors and stockholders
individually owning more than one percent (1%) of the Company’s outstanding Common Stock (after giving effect to conversion
into Common Stock of all outstanding Series A Preferred Stock). The underwriters in connection with such
registration are intended third-party beneficiaries of this Subsection 5.1 and shall have the right, power and authority
to enforce the provisions hereof as though they were a party hereto. Each Key Holder and Investor further agrees to execute such
agreements as may be reasonably requested by the underwriters in connection with such registration
that are consistent with this Subsection 5.1 or that are necessary to give further effect thereto. Any discretionary waiver
or termination of the restrictions of any or all of such agreements by the Company or the underwriters shall apply pro rata to
all Key Holders and all Investors subject to such agreements, based on the number of shares subject to such agreements.


 




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5.2
Stop Transfer Instructions. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions
with respect to the shares of Capital Stock of each Key Holder (and transferees and assignees thereof) until the end of such restricted
period.


 


6.
Miscellaneous


 


6.1
Term. This Agreement shall automatically terminate upon the earlier of (a) immediately prior to the consummation of the
Company’s Qualified Public Offering; and (b) the consummation of a Deemed Liquidation Event (as defined in the Restated
Certificate); provided however that Sections 5 and 6 shall survive the termination of this Agreement.


 


6.2
Stock Split. All references to numbers of shares in this Agreement shall be appropriately adjusted to reflect any stock
dividend, split, combination or other recapitalization affecting the Capital Stock occurring after the date of this Agreement.


 


6.3
Ownership. Each Key Holder represents and warrants that such Key Holder is the sole legal and beneficial owner of the shares
of Transfer Stock subject to this Agreement and that no other person or entity has any interest in such shares (other than a community
property interest as to which the holder thereof has acknowledged and agreed in writing to the restrictions and obligations hereunder).


 


6.4
Dispute Resolution. 


 


(a)
The parties (i) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of New York and to the jurisdiction
of the United States District Court for the Southern District of New York for the purpose of any suit, action or other proceeding
arising out of or based upon this Agreement, (ii) agree not to commence any suit, action or other proceeding arising out of or
based upon this Agreement except in the state courts of New York and to the jurisdiction of the United States District Court for
the Southern District of New York, 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 or the subject matter hereof may not
be enforced in or by such court. The prevailing party shall be entitled to reasonable attorney’s fees, costs, and necessary
disbursements in addition to any other relief to which such party may be entitled. Each of the parties to this Agreement consents
to personal jurisdiction for any equitable action sought in the United States District Court for the Southern District of New
York or any court of the State of New York having subject matter jurisdiction.


 


(b)
Waiver of Jury Trial: 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 TRANSACTION DOCUMENTS, THE SECURITIES 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.


 




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6.5
Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be
deemed effectively given upon the earlier of actual receipt or (a) personal delivery to the party to be notified, (b) when sent,
if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business
hours, then on the recipient’s next business day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier,
freight prepaid, specifying next business day delivery, with written verification of receipt. All communications shall be sent
to the respective parties at their address as set forth on Schedule A or Schedule B hereof, as the case may be, or to such email
address, facsimile number or address as subsequently modified by written notice given in accordance with this Section 6.5. If
notice is given to the Company, it shall be sent to 380 Lackawanna Place, South Orange, NJ 07079, Attn: Chief Financial Officer,
email: andy@nephros.com; and a copy (which shall not constitute notice) shall also be sent to Fredrikson & Byron, P.A., 200
South Sixth Street, Suite 4000, Minneapolis, MN 55402-1425, Attn: Christopher J. Melsha, Esq., email: cmelsha@fredlaw.com.


 


6.6
Entire Agreement. This Agreement (including, the Exhibits and Schedules hereto) constitutes the full and entire understanding
and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating
to the subject matter hereof existing between the parties are expressly canceled.


 


6.7
Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement,
upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching
or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or
of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind
or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of
any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set
forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative
and not alternative.


 




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6.8
Amendment; Waiver and Termination. This Agreement may be amended, modified or terminated (other than pursuant to Section
6.1 above) and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively
or prospectively) only by a written instrument executed by (a) the Company, (b) the Key Holders holding at least a majority of
the shares of Transfer Stock then held by all of the Key Holders, and (c) the holders of a majority of the shares of Common Stock
issued or issuable upon conversion of the then outstanding shares of Preferred Stock held by the Investors (voting as a single
class and on an as-converted basis). Any amendment, modification, termination or waiver so effected shall be binding upon the
Company, the Investors, the Key Holders and all of their respective successors and permitted assigns whether or not such party,
assignee or other shareholder entered into or approved such amendment, modification, termination or waiver. Notwithstanding the
foregoing, (i) this Agreement may not be amended, modified or terminated and the observance of any term hereunder may not be waived
with respect to any Investor or Key Holder without the written consent of such Investor or Key Holder unless such amendment, modification,
termination or waiver applies to all Investors and Key Holders, respectively, in the same fashion, and (ii) the consent of the
Key Holders shall not be required for any amendment, modification, termination or waiver if such amendment, modification, termination
or waiver does not apply to the Key Holders, and (iii) Schedule A hereto may be amended by the Company from time to time
in accordance with the Purchase Agreement to add information regarding Additional Purchasers (as defined in the Purchase Agreement)
without the consent of the other parties hereto. The Company shall give prompt written notice of any amendment, modification or
termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, modification, termination
or waiver. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision. A waiver, modification
or amendment of this Agreement by a party shall only be effective if (a) it is in writing and signed by applicable party(ies),
as set forth in this Section 6.8, (b) it specifically refers to this Agreement, and (c) it specifically states that the party
or parties, as the case may be, is waiving, modifying or amending its rights hereunder. Any such amendment, modification or waiver
shall be effective only in the specific instance and for the specific purpose for which it was given. 


 


6.9
Assignment of Rights.


 


(a)
The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and permitted
assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and permitted assigns any rights, remedies, obligations, or liabilities under or by reason
of this Agreement, except as expressly provided in this Agreement.


 


(b)
Any successor or permitted assignee of any Key Holder, including any Prospective Transferee who purchases shares of Transfer Stock
in accordance with the terms hereof, shall deliver to the Company and the Investors, as a condition to any transfer or assignment,
a counterpart signature page hereto pursuant to which such successor or permitted assignee shall confirm their agreement to be
subject to and bound by all of the provisions set forth in this Agreement that were applicable to the predecessor or assignor
of such successor or permitted assignee.


 




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(c)
The rights of the Investors hereunder are not assignable without the Company’s written consent (which shall not be unreasonably
withheld, delayed or conditioned), except (i) by an Investor to any Affiliate, or (ii) to an assignee or transferee who acquires
at least 250,000 shares of Capital Stock (as adjusted for any stock combination, stock split, stock dividend, recapitalization
or other similar transaction), it being acknowledged and agreed that any such assignment, including an assignment contemplated
by the preceding clauses (i) or (ii) shall be subject to and conditioned upon any such assignee’s delivery to the Company
and the other Investors of a counterpart signature page hereto pursuant to which such assignee shall confirm their agreement to
be subject to and bound by all of the provisions set forth in this Agreement that were applicable to the assignor of such assignee.


 


(d)
Except in connection with an assignment by the Company by operation of law to the acquirer of the Company, the rights and obligations
of the Company hereunder may not be assigned under any circumstances.


 


6.10
Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability
of any other provision.


 


6.11
Additional Investors. Notwithstanding anything to the contrary contained herein, if the Company issues additional shares
of the Company’s Series A Preferred Stock after the date hereof, the Company shall cause any purchaser of such shares of
Series A Preferred Stock to become a party to this Agreement by causing such party to execute and deliver an additional counterpart
signature page to this Agreement and thereafter shall be deemed an “Investor” for all purposes hereunder.


 


6.12
Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles of conflicts of law.


 


6.13
Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered
in construing or interpreting this Agreement.


 


6.14
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. 


 


6.15
Aggregation of Stock. All shares of Capital Stock held or acquired by Affiliated entities or persons shall be aggregated
together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion
such rights as among themselves in any manner they deem appropriate.


 


6.16
Specific Performance. In addition to any and all other remedies that may be available at law in the event of any breach
of this Agreement, each Investor shall be entitled to specific performance of the agreements and obligations of the Company and
the Key Holders hereunder and to such other injunction or other equitable relief as may be granted by a court of competent jurisdiction.


 




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6.17
Additional Key Holders . In the event that after the date of this Agreement, (i) the Company issues shares of Common
Stock, or options to purchase Common Stock, to any employee or consultant, (ii) or any Person otherwise becomes a holder of shares
of Common Stock, which shares or options would collectively constitute with respect to such employee or consultant (taking into
account all shares of Common Stock, options and other purchase rights held by such employee or consultant) one percent (1%) or
more of the Company’s then outstanding Common Stock (treating for this purpose all shares of Common Stock issuable upon
exercise of or conversion of outstanding options, warrants or convertible securities, as if exercised or converted), the Company
shall, as a condition to such issuance, cause such Person, employee or consultant to execute a counterpart signature page hereto
as a Key Holder, and such Person shall thereby be bound by, and subject to, all the terms and provisions of this Agreement applicable
to a Key Holder. 


 


6.18
Consent of Spouse. If any Key Holder is married on the date of this Agreement, such holder’s spouse shall execute
and deliver to the Company a consent of spouse in the form of Exhibit A hereto (“Consent of Spouse”),
effective on the date hereof. Notwithstanding the execution and delivery thereof, such consent shall not be deemed to confer or
convey to the spouse any rights in such Key Holder’s shares of Transfer Stock that do not otherwise exist by operation of
law or the agreement of the parties. If any Key Holder should marry or remarry subsequent to the date of this Agreement, such
Key Holder shall within thirty (30) days thereafter obtain his/her new spouse’s acknowledgement of and consent to the existence
and binding effect of all restrictions contained in this Agreement by causing such spouse to execute and deliver a Consent of
Spouse acknowledging the restrictions and obligations contained in this Agreement and agreeing and consenting to the same.


 


[Remainder
of Page Intentionally Left Blank]


 







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IN
WITNESS WHEREOF, the parties have executed this Right of First Refusal and Co-Sale Agreement as of the date first written above.


 








	 	SPECIALTY
    RENAL PRODUCTS, INC.:
	 	 	 
	 	By:	/s/
    Andrew Astor
	 	Name:	Andrew
    Astor
	 	Title:	Chief
    Financial Officer
	 	 	 
	 	Address:	380
    Lackawanna Place
	 	 	South
    Orange, NJ 07079


 


SIGNATURE
PAGE TO RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT


 




    	 



    	 



    

 


IN
WITNESS WHEREOF, the parties have executed this Right of First Refusal and Co-Sale Agreement as of the date first written above.


 


	 	KEY
    HOLDERS:
	 	 
	 	NEPHROS,
    INC.
	 	 	 
	 	By:	/s/
    Andrew Astor
	 	 	Andrew
    Astor
	 	 	Chief
    Financial Officer


 





SIGNATURE
PAGE TO RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT


 







    	 



    	 



    

 


IN
WITNESS WHEREOF, the parties have executed this Right of First Refusal and Co-Sale Agreement as of the date first written above.


 


	 	INVESTORS:
	 	 	 
	 	By:	          
	 	Name:
    	 
	 	Title:
    	 


 


SIGNATURE
PAGE TO RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT


 




    	 



    	 



    

 


SCHEDULE
A

INVESTORS


 




    	 



    	 



    

 


SCHEDULE
B


 


KEY
HOLDERS


 


	Name
of Key Holders

	 
	Nephros,
    Inc.


 




    	 



    	 



    

 


EXHIBIT
A

CONSENT OF SPOUSE


 


I,
[____________________], spouse of [______________], acknowledge that I have read the Right of First Refusal and Co-Sale Agreement,
dated as of [_____ __, 201__], to which this Consent is attached as Exhibit A (the “Agreement”), and
that I know the contents of the Agreement. I am aware that the Agreement contains provisions regarding certain rights to certain
other holders of Capital Stock of the Company upon a Proposed Common Holder Transfer of shares of Transfer Stock of the Company
which my spouse may own including any interest I might have therein.


 


I
hereby agree that my interest, if any, in any shares of Transfer Stock of the Company subject to the Agreement shall be irrevocably
bound by the Agreement and further understand and agree that any community property interest I may have in such shares of Transfer
Stock of the Company shall be similarly bound by the Agreement.


 


I
am aware that the legal, financial and related matters contained in the Agreement are complex and that I am free to seek independent
professional guidance or counsel with respect to this Consent. I have either sought such guidance or counsel or determined after
reviewing the Agreement carefully that I will waive such right.


 


Dated
as of the [__] day of [__________, _____].


 


	 	 
	 	Signature
	 	 
	 	 
	 	Print
    Name