CONVERTIBLE NOTE

$ 800,000.00

Maturity Date :  August __, 2012

FOR VALUE RECEIVED, the undersigned CytoSorbents Corporation (the “Company”),
promises to pay in equity as set forth below on or before August __, 2012, to
_______________ (“Creditor"), at New York, NY the principal sum of up to eight
hundred thousand dollars ($800,000.00) (the “Principal”), together with interest
accruing thereon at the rate of 8% per annum, payable on or before maturity of
the Note:

The Note will be subordinate to any future debt financing.

Conversion into New Financing: In the event that at any time during the term of
the Note,  the Company closes on any debt or equity financing in an aggregate
amount greater or equal to $750,000 including any equity financing or any
financing which provides for a right to convert into equity (such financing
shall be referred to as the “New Financing”), and if any principal and interest
owed under this Note remains outstanding, the outstanding principal and interest
in whole or in part shall, at the sole option of the Creditor, be exchanged for
the equivalent dollar amount of the package of securities sold in the New
Financing.  The Company shall notify the Creditor in writing within five (5)
business days of closing the New Financing and the Creditor shall have thirty
(30) days to exercise this option from the receipt of the notice from the
Company of the New Financing.

 In the event that the Creditor chooses not to convert the outstanding principal
and interest owed under the Note in accordance with the New Financing and during
the term of the Note, the Company closes on an additional New Financing, debt or
equity, in an aggregate amount greater or equal to $750,000 (such additional
financing shall be referred to as the “Additional New Financing”), and if any
principal and interest remains outstanding under the Note then the outstanding
principal and interest in whole or in part may, at the sole option of the
Creditor, be exchanged for the equivalent dollar amount of the package of
securities sold in the New Financing.  The Company shall notify the Creditor in
writing within five (5) business days of closing the Additional New Financing
and the Creditor shall have thirty (30) days to exercise this option from the
receipt of the notice from the Company of the Additional New Financing.  In the
event the Creditor chooses not to convert into such Additional New Financing his
right shall be deemed waived, but solely for that particular transaction, and
shall remain in full effect for any subsequent Additional New Financings, during
the term of the Note as long as the Creditor continues to hold any Principal and
interest outstanding under the Note.

Conversion in accordance with terms of Note: Alternatively at any time during
the term of the Note, at the sole option of the Creditor, the outstanding
principal and interest owed under the Note, in whole or in part, may be
converted into Common Stock of the Company at a rate of $0.10 per share of
Common.  At the maturity of the Note, any outstanding principal and interest
will be converted into Common Stock of the Company at a rate of $0.10 per share
of Common.  Based upon the above, this note will be repaid through the
conversion into equity and the Company will have no obligation to repay in cash.

Warrants:                      100% Warrant coverage as follows: The Company
will issue the Creditor five-year warrants (the
“Warrants”) to purchase :

 
1)
That number of shares of Common Stock equal to the quotient obtained by dividing
(x) 50% of the Principal, by (y) $0.10, with the resulting number of shares
having an exercise price equal to $0.10 per share of Common Stock.

 
2)
That number of shares of Common Stock equal to the quotient obtained by dividing
(x) 25% of the Principal, by (y) $0.125, with the resulting number of shares
having an exercise price equal to $0.125 per share of Common Stock.

 
3)
That number of shares of Common Stock equal to the quotient obtained by dividing
(x) 25% of the Principal, by (y) $0.15, with the resulting number of shares
having an exercise price equal to $0.15 per share of Common Stock.

Cashless Exercise of Warrants: If the current market value of the Company’s
Common Stock (as defined below) is greater than the warrant exercise price, in
lieu of delivering the exercise price in cash or check the Creditor may elect to
exchange the warrants, in whole or in part, to receive in exchange that number
of shares of Common Stock equal to the value of these Warrants or portion
thereof being exercised (the "Net Issue Exercise").  If the Creditor wishes to
elect the Net Issue Exercise, the Creditor shall notify the Company of his
election in writing at the time the Creditor delivers to the Company the notice
of exercise in the form attached hereto along with the surrender of the warrant
at the principal office of the Company.  In the event the Creditor shall elect
the Net Issue Exercise, the Creditor shall receive upon exercise of the Warrants
that number of shares of Common Stock equal to (A) the product of (i) the number
of shares purchasable under this warrant by means of a cash exercise, or portion
thereof being exercised, and (ii) the excess of the current market value (as
defined below) per share over the warrant exercise price per share, divided by
(B) the current market value, as defined below, of each share.  Current market
value of the Common Stock shall be determined as follows:
 

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(i)                If the shares are listed on a national securities exchange,
listed for trading on the Nasdaq Stock Market, listed for trading over the
counter, bulletin board or pink sheets, the current market value shall be the
volume weighted average of the reported closing sale prices of the shares on
such exchange or system for five (5) consecutive business trading days ending on
the last business trading day prior to the date of exercise of this warrant; or

(ii)                  If the shares are no longer listed as in (i) above, the
current market value shall be the volume weighted average of the reported
closing sale prices of the shares for the last fifteen (15) reported consecutive
business trading days on such exchange or system immediately preceding 180
business trading days from the delisting of the shares, within the term of the
Note; or

(iii)                    If there were no such sales during the term of the
Note, the most significant recent sale, as determined in a reasonable manner by
the Directors of the Company.

Right of First Refusal:  Defined as follows: If during the Term of the Note and
as long as the Creditor continues to have all or a portion of their original
outstanding principal balance of the Note, the Company receives an offer that is
approved by the Company’s Board of Directors (the "BOD") for  an equity
financing of less than $750,000 that values the Company on a pre-money basis at
or less than $35 million on a fully-diluted basis (the “Offer”), the Creditor
will have a right of first refusal to participate in such financing  in whole or
in part up to a maximum dollar amount of their original Principal investment in
this Note, but not to exceed the proposed amount in the Offer. However, in the
event several different Creditors express written notice of intention
to participate in the proposed Offer, the BOD at its sole discretion, may limit
the maximum investment from each Creditor to be capped at the percentage of the
Offer equal to the individual Creditor's pro rata ownership percentage of the
entire Principal raised in the aggregate in this Note.  Creditor’s participation
in such financing will require closing within the time frame stipulated in the
Offer.  The Company will notify the Creditor within five (5) days of receipt of
the Offer and if the Company does not receive notice from the Creditor of its
intention to participate in the proposed financing within five (5) days of
actual receipt by the Creditor of such notice, then such right of first refusal
shall be deemed waived, but solely for the particular transaction and shall
remain in full effect for subsequent transactions during the term of the Note.
The time period the Creditor has to exercise this Right of First Refusal and
deliver payment for their investment in the financing of the Offer shall be the
later date of either i) fifteen (15) days from the Creditor’s receipt of the
notice from the Company of the Creditor’s approved amount of participation in
the Offer, or (ii) the closing date stipulated in the Offer.

This Note and any of its terms may be changed, waived, or terminated only by a
written instrument signed by the party against which enforcement of that change,
waiver, or termination is sought.

If any action is instituted to collect this Note or enforce any terms hereof,
the Company promises to pay all legal fees and other expenses reasonably
incurred by the Creditor in connection therewith.

The Company hereby waives notice of presentment or demand for payment, protest
or notice of nonpayment or dishonor and all other notices or demands relative to
this instrument.

This Note is made in, governed by, and shall be construed in accordance with the
laws of the State of New York.

CYTOSORBENTS CORPORATION

By_______________________________

 
 

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