DEBENTURE PURCHASE AGREEMENT

 

This Debenture Purchase Agreement (this “Agreement”) is dated as of February
___, 2012 between CytoSorbents Corporation, a corporation formed under the laws
of the State of Nevada (the “Company”), and each of the entities and persons
identified on the signature pages hereto (including their successors and
assigns, each a “Purchaser” and collectively the “Purchasers”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and Rule 506 promulgated thereunder and Regulation S, the
Company desires to issue and sell to each Purchaser, and each Purchaser desires
to purchase from the Company, securities of the Company as more fully described
in this Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:

 

ARTICLE I.

DEFINITIONS

 

1.1 Definitions.  In addition to the terms defined elsewhere in this Agreement:
(a) capitalized terms that are not otherwise defined herein have the meanings
given to such terms in the Debentures (as defined herein), and (b) the following
terms have the meanings set forth in this Section 1.1:

 

“Action” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act.  With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as such Purchaser will be deemed to be an Affiliate of such Purchaser.

 

“Board of Directors” means the board of directors of the Company.

 

“Business Day” means any day except any Saturday, any Sunday, or any day which
is a federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

 

“Closing” means the closing of the purchase and sale of the Debentures pursuant
to Section 2.1.

 

“Closing Date” means the Business Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to pay the Purchase
Price and (ii) the Company’s obligations to deliver the Debentures have been
satisfied or waived, including without limitation the Company’s written
acceptance of the subscriptions as set forth in Section 2.1.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the Common Stock of the Company, par value $.001 per share
and any other class of securities into which such securities may hereafter be
reclassified or changed into.

 

“Debentures” means the 8% Convertible Debentures to be issued by the Company to
the Purchasers hereunder, in the form of Exhibit A attached hereto.

 

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

 

“GAAP” shall have the meaning ascribed to such term in Section 3.1(f).

 

“Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(b).

 

“OTCBB” means the OTC Bulletin Board.

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.

 

“Purchase Price” shall mean the aggregate of up to $[___________] payable by the
Purchasers for an aggregate of a like amount of Debenture principal.

 

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.4.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

 

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

 

“Transaction Documents” means this Agreement, the Debentures, all exhibits and
schedules thereto and hereto and any other documents or agreements executed in
connection with the transactions contemplated hereunder.

 

“Underlying Securities” means the Common Stock issuable upon conversion of the
Debentures.

 

ARTICLE II.

PURCHASE AND SALE

 

2.1 Closing.  On the Closing Date, upon the terms and subject to the conditions
set forth herein, substantially concurrent with the execution and delivery of
this Agreement by the parties hereto, the Company agrees to sell, and the
Purchasers agree to purchase in the aggregate, for the Purchase Price of up to
$[__________] in principal amount of the Debentures.  Each Purchaser shall
deliver to the Company, by certified check payable to the Company or by wire
transfer to a bank account designated by the Company, immediately available
funds equal to such Purchaser’s pro-rata portion of the Purchase Price and the
Company shall deliver to each Purchaser such Purchaser’s Debentures, as
determined pursuant to Section 2.2(a), and the Company and each Purchaser shall
deliver the other items set forth in Section 2.2 deliverable at the
Closing.  Upon satisfaction of the conditions set forth in Sections 2.2 and 2.3,
and receipt and acceptance of the Purchase Price, the Closing shall occur at
such location as the parties shall mutually agree.

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2.2 Deliveries.

 

(a) On the Closing Date, the Company shall deliver or cause to be delivered to
each Purchaser the following:

 

(i) this Agreement duly executed by the Company;

 

(ii) a Debenture with a principal amount equal to such Purchaser’s Purchase
Price, registered in the name of such Purchaser; and

 

(iii) a certificate from an officer of the Company certifying that the approval
by the Company’s Board of Directors of the execution and delivery of this
Agreement and every other Transaction Document and any and all of the Company’s
obligations hereunder and thereunder has been obtained.

 

(b) On the Closing Date, each Purchaser shall deliver or cause to be delivered
to the Company the following:

 

(i) this Agreement duly executed by such Purchaser; and

 

(ii) such Purchaser’s pro-rata portion of the Purchase Price by wire transfer to
the account as specified by the Company.

 

2.3 Closing Conditions.

 

(a) The obligations of the Company hereunder in connection with the Closing are
subject to the following conditions being met:

 

(i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Purchasers contained herein;

 

(ii) all obligations, covenants and agreements of the Purchasers required to be
performed at or prior to the Closing Date shall have been performed;

 

(iii) Company’s written acceptance of subscriptions referenced in Section 2.1,
which acceptance shall be at the sole discretion of the Company; and

 

(iv) the delivery by the Purchasers of the items set forth in Section 2.2(b) of
this Agreement.

 

(b) The respective obligations of the Purchasers hereunder in connection with
the Closing are subject to the following conditions being met:

 

(i) the accuracy in all material respects when made and on the Closing Date of
the representations and warranties of the Company contained herein;

 

(ii) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed;

 

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(iii) the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement; and

 

(iv) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1 Representations and Warranties of the Company. The Company hereby makes the
following representations and warranties to the Purchasers on the Closing Date:

 

(a) Subsidiaries.  All of the direct and indirect Subsidiaries of the Company as
of the date of this Agreement and the Closing Date are identified on Schedule
3.1(a).  The Company owns, directly or indirectly, all of the capital stock or
other equity interests of each Subsidiary free and clear of any Liens, and all
of the issued and outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of preemptive and
similar rights to subscribe for or purchase securities. If the Company has no
Subsidiaries as of the date of this Agreement and as of the Closing, all other
references to the Subsidiaries or any of them in the Transaction Documents shall
be disregarded.

 

(b) Organization and Qualification.  The Company and each of the Subsidiaries is
an entity duly incorporated or otherwise organized, validly existing under the
laws of the jurisdiction of its incorporation or organization (as applicable),
with the requisite power and authority to own and use its properties and assets
and to carry on its business as currently conducted.  Neither the Company nor
any Subsidiary is in violation or default of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational or charter documents.  Each of the Company and the Subsidiaries
is duly qualified to conduct business as a foreign corporation or other entity
in each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not have or
reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business, or
condition (financial or otherwise) of the Company, taken as a whole, (iii) a
material adverse effect on the Company’s ability to perform in any material
respect on a timely basis its obligations under any Transaction Document, a
“Material Adverse Effect”) and, to the knowledge of the Company, no Proceeding
has been instituted in any such jurisdiction revoking, limiting or curtailing or
seeking to revoke, limit or curtail such power and authority or qualification.

 

(c) Authorization; Enforcement.  The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder.  The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company, the Board of Directors or the Company’s stockholders in connection
therewith.  Each Transaction Document has been (or upon delivery will have been)
duly executed by the Company and, when delivered in accordance with the terms
hereof and thereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except (i)
as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.

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(d) No Conflicts.  The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the other
transactions contemplated hereby and thereby do not and will not: (i) conflict
with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter
documents, or (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the Company or any
Subsidiary except as created by the Transaction Documents, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) conflict with or result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected.

  

(e) Issuance of the Debentures.  The Debentures are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on transfer described
in the Transaction Documents.  

 

(f) Financial Statements.  The Company’s financial statements have been prepared
in accordance with generally accepted accounting principles of the United States
(“GAAP”) applied on a consistent basis throughout the periods covered thereby,
fairly present the financial condition, results of operations and cash flows of
the Company and the Subsidiaries as of the respective dates thereof and for the
periods referred to therein and are consistent with the books and records of the
Company and the Subsidiaries, except as may be otherwise specified in such
financial statements or the notes thereto and except that the Company Financial
Statements may not contain all footnotes required by GAAP and normal year-end
adjustments.

 

(g) Material Changes.  Since the last Company financial statement filed on
EDGAR, (i) there has been no event, occurrence or development that has had or
that could reasonably be expected to result in a Material Adverse Effect, (ii)
the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the ordinary course of
business, and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP, (iii) the Company has not altered its
method of accounting, and (iv) the Company has not declared or made any cash
dividend or distribution of cash to its stockholders.

 

(h) Litigation.  Other than as set forth on Schedule 3.1(h), there is no action,
suit, inquiry, notice of violation, or investigation pending or, to the
knowledge of the Company, threatened or likely against or affecting the Company,
any Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) or
Proceeding which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Debentures, or (ii)
could, if there were an unfavorable decision, have or reasonably be expected to
result in a Material Adverse Effect.  Neither the Company nor any Subsidiary,
nor any manager, director or officer thereof, is or has been the subject of any
Action or Proceeding involving a claim of violation of or liability under
applicable securities laws or a claim of breach of fiduciary duty.  There has
not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation or Proceeding by the Commission or any state
securities administrator, secretary of state, or state agency involving the
Company or any current or former director or officer of the Company.

 

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(i) Internal Accounting Controls.  The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

  

(j) Private Placement.  Assuming the accuracy of the Purchasers’ representations
and warranties set forth in Section 3.2, no registration under the Securities
Act or any other applicable law rule or regulation is required for the offer and
sale of the Debentures by the Company to the Purchasers as contemplated hereby.

   

(k) Disclosure.  All disclosure furnished by or on behalf of the Company to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Disclosure Schedules to this Agreement, is true and
correct in all material respects and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.   The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section 3.2 hereof.

 

(l) No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the Company,
nor any of its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering of the Debentures to be integrated with prior offerings by the Company
for purposes of the Securities Act which would require the registration of any
such securities under the Securities Act.

 

(m) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary applicable tax
returns and has paid or accrued all taxes shown as due thereon, and the Company
has no knowledge of a tax deficiency which has been asserted or threatened
against the Company or any Subsidiary.

 

(n) No General Solicitation. Neither the Company nor any person acting on behalf
of the Company has offered or sold any of the Debentures by any form of general
solicitation or general advertising.  The Company has offered the Debentures for
sale only to the Purchasers and certain other “accredited investors” within the
meaning of Rule 501 under the Securities Act.

 

(o) No Disagreements with Accountants and Lawyers.  There are no disagreements
of any kind presently existing, or reasonably anticipated by the Company to
arise, between the Company and the accountants and lawyers formerly or presently
employed by the Company and the Company is current with respect to any fees owed
to its accountants and lawyers which could affect the Company’s ability to
perform any of its obligations under any of the Transaction Documents.

 

(p) Acknowledgment Regarding Purchasers’ Purchase of Debentures.  The Company
acknowledges and agrees that each of the Purchasers is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents
and the transactions contemplated thereby.  The Company further acknowledges
that no Purchaser is acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by any Purchaser or any
of their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Purchasers’ purchase of the Debentures.  The Company further represents to the
Purchasers that the Company’s decision to enter into this Agreement and the
other Transaction Documents has been based solely on the independent evaluation
of the transactions contemplated hereby by the Company and its representatives.

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3.2 Representations and Warranties of the Purchaser.  Each Purchaser, severally
and not jointly, hereby represents and warrants, with respect only to itself, as
of the date hereof and as of the Closing Date to the Company as follows:

 

(a) Organization; Authority.  Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction Documents have
been duly authorized by all necessary corporate or similar action on the part of
such Purchaser.  Each Transaction Document to which it is a party has been duly
executed by such Purchaser, and when delivered by such Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding obligation
of such Purchaser, enforceable against it in accordance with its terms, except
(i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.

 

(b) Own Account.  Such Purchaser understands that the Debentures are “restricted
securities” and have not been registered under the Securities Act or any
applicable state securities law and is acquiring the Debentures as principal for
its own account and not with a view to or for distributing or reselling such
Debentures or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Debentures in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Debentures
(this representation and warranty not limiting such Purchaser’s right to sell
the Debentures pursuant to a registration statement or otherwise in compliance
with applicable federal and state securities laws) in violation of the
Securities Act or any applicable state securities law.  Such Purchaser is
acquiring the Debentures hereunder in the ordinary course of its business. The
undersigned acknowledges that (i) the Debentures will be issued pursuant to
applicable exemptions from registration under the Securities Act and any
applicable state securities laws, and (ii) the Debentures have not been
registered under the Securities Act, in reliance on the exemption from
registration provided by Section 4(2) thereof. In connection therewith, the
undersigned hereby covenants and agrees that it will not offer, sell, or
otherwise transfer the Debentures unless and until it obtains the consent of the
Company and such Debentures are registered pursuant to the Act and the laws of
all jurisdictions which in the opinion of the Company may be applicable or
unless such Debentures are, in the opinion of the Company, otherwise exempt from
registration thereunder.

 

(c) Purchaser Status.  At the time such Purchaser was offered the Debentures, it
was, and at the date hereof it is, and on each date on which it converts any
Debentures it will be either: (i) an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a
“qualified institutional buyer” as defined in Rule 144A(a) under the Securities
Act.  Such Purchaser is not required to be registered as a broker-dealer under
Section 15 of the Exchange Act.

7

 

 

(d) Experience of the Purchaser.  Such Purchaser, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Debentures, and has so evaluated the
merits and risks of such investment.  Such Purchaser has had the opportunity to
ask questions and obtain information necessary to make an investment decision.
To the extent the undersigned has taken advantage of such opportunity, they have
received satisfactory answers concerning the purchase of the Debentures. Such
Purchaser understands that the offer and sale of the Debentures is being made
only by means of this Agreement. Such Purchaser understands that the Company has
not authorized the use of, and such Purchaser confirms that such Purchaser is
not relying upon any other information, written or oral, other than material
contained in this Agreement and the Transaction Documents. Such Purchaser is
able to bear the economic risk of an investment in the Debentures and, at the
present time, is able to afford a complete loss of such investment and its
financial condition is such that it has no need for liquidity with respect to
its investment in the Debentures to satisfy any existing or contemplated
undertaking or indebtedness. Such Purchaser has discussed with its professional,
legal, tax and financial advisers the suitability of an investment in the
Company by the undersigned for its particular tax and financial situation. All
information that the undersigned has provided to the Company concerning itself
and its financial position is correct and complete as of the date set forth
below, and if there should be any material change in such information, the
undersigned will immediately provide such information to the Company.

 

(e) General Solicitation. Such Purchaser is not purchasing the Debentures as a
result of any advertisement, article, notice or other communication regarding
the Debentures published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

 

(f) Reliance. Such Purchaser acknowledges that the Company will be relying on
the foregoing representations and warranties in making a determination as to the
availability of federal and state securities laws exemptions. The Company
acknowledges and agrees that each Purchaser does not make or has not made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1 Transfer Restrictions.

 

(a) The Debentures may only be disposed of in compliance with state and federal
securities laws.  In connection with any transfer of Debentures other than
pursuant to an effective registration statement or Rule 144, to the Company or
to an Affiliate of the Purchaser, in connection with a pledge as contemplated in
Section 4.1(b), the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Debentures under the Securities
Act.  As a condition of transfer, any such transferee shall agree in writing to
be bound by the terms of this Agreement and shall have the rights of a Purchaser
under this Agreement.

 

(b) The Purchasers agree to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Debentures in the following form:

 

THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH
SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.

8

 

 

The Company acknowledges and agrees that a Purchaser may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Debentures to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, such Purchaser may
transfer pledged or secured Debentures to the pledgees or secured parties.  Such
a pledge or transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or pledgor shall be
required in connection therewith.  Further, subject to the aforesaid, no notice
shall be required of such pledge.  At the Purchaser’s expense, the Company will
execute and deliver such reasonable documentation as a pledgee or secured party
of Debentures may reasonably request in connection with a pledge or transfer of
the Debentures.

 

4.2 Integration.  From and after the Closing Date, the Company shall not sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Debentures to the Purchasers in a
manner that would require the registration under the Securities Act of the sale
of the Debentures to the Purchasers, nor enter into any purchase, sale, merger
or business combination transaction pursuant to which the business of another
Person is combined with that of the Company, in whatever form, or enter into any
other agreement or series of related agreements (including, without limitation,
joint venture, sale of assets, license agreement, distribution agreement, etc.).

 

4.3 Non-Public Information.  The Company covenants and agrees that neither it
nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information.  The Company understands and confirms that each Purchaser shall be
relying on the foregoing covenant in effecting transactions in securities of the
Company.

 

4.4 Indemnification of Purchasers.  Subject to the provisions of this Section
4.4, the Company will indemnify and hold each Purchaser and their respective
directors, officers, stockholders, members, partners, employees and agents (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls any Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, stockholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling person (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a Purchaser
Party in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser Party, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of the Purchaser Party’s
representations, warranties or covenants under the Transaction Documents or any
agreements or understandings the Purchaser Party may have with any such
stockholder or any violations by the Purchaser Party of state or federal
securities laws or any conduct by the Purchaser Party which constitutes fraud,
negligence, willful misconduct or malfeasance).  If any action shall be brought
against any Purchaser Party in respect of which indemnity may be sought pursuant
to this Agreement, such Purchaser Party shall promptly notify the Company in
writing, and the Company shall have the right to assume the defense thereof with
counsel of its own choosing reasonably acceptable to the Purchaser Party.  Any
Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Purchaser Party except to the extent
that (i) the employment thereof has been specifically authorized by the Company
in writing, (ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action there is, in
the reasonable opinion of such separate counsel, a material conflict on any
material issue between the position of the Company and the position of such
Purchaser Party, in which case the Company shall be responsible for the
reasonable fees and expenses of no more than one such separate counsel.  The
Company will not be liable to any Purchaser Party under this Agreement (i) for
any settlement by a Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or (ii) to the
extent, but only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party’s breach of any of the representations,
warranties, covenants or agreements made by such Purchaser Party in this
Agreement or in the other Transaction Documents.

 

9

 

4.5 Equal Treatment of Purchasers.  No consideration shall be offered or paid to
any Person to amend or consent to a waiver or modification of any provision of
any of the Transaction Documents unless the same consideration is also offered
to all of the parties to the Transaction Documents. Further, the Company shall
not make any payment of principal or interest on the Debentures in amounts which
are disproportionate to the respective principal amounts outstanding on the
Debentures at any applicable time.  For clarification purposes, this provision
constitutes a separate right granted to each Purchaser by the Company and
negotiated separately by each Purchaser, and is intended for the Company to
treat the Purchasers as a class and shall not in any way be construed as the
Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Debentures or otherwise.

 

4.6 Form D; Blue Sky Filings.  The Company agrees to timely file a Form D with
respect to the Debentures as required under Regulation D and to provide a copy
thereof to each Purchaser promptly upon filing. The Company shall take such
action as the Company shall reasonably determine is necessary in order to obtain
an exemption for, or to qualify the Debentures for, sale to the Purchasers at
the Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall promptly provide evidence of such actions promptly upon
request of any Purchaser.

 

4.7 Preservation of Corporate Existence. The Company shall preserve and maintain
for itself and each Subsidiary its corporate existence, rights, privileges and
franchises in the jurisdiction of its incorporation, and qualify and remain
qualified, as a foreign corporation in each jurisdiction in which such
qualification is necessary in view of its business or operations and where the
failure to qualify or remain qualified might reasonably have a Material Adverse
Effect.

 

10

 

ARTICLE V.

MISCELLANEOUS

 

5.1  Termination.  This Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect whatsoever on the
obligations between the Company and the other Purchasers, by written notice to
the other parties, if this Agreement has not been previously accepted by the
Company.

 

5.2  Fees and Expenses. Except as expressly set forth in the Transaction
Documents, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all transfer agent fees,
stamp taxes and other taxes and duties levied in connection with the delivery of
any Debentures to the Purchasers.

 

5.3 Entire Agreement.  The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

 

5.4 Notices.  Any and all notices or other communications or deliveries to be
provided by the Purchasers hereunder, shall be in writing and delivered
personally, by facsimile, pdf or other electronic delivery, or sent by a
nationally recognized overnight courier service, addressed to the Company, at
the address set forth below, or such other email address, facsimile number or
address as the Company may specify for such purpose by notice to the Holder
delivered in accordance with this Section 5.4.  Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile, or sent by a nationally
recognized overnight courier service addressed to the Holder at the address set
forth below.  Any notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile or electronic delivery
at the facsimile number or email address specified in this Section 5.4 prior to
5:30 p.m. (New York City time), (ii) the Business Day immediately following the
date of transmission, if such notice or communication is delivered via facsimile
or electronic delivery at the facsimile number or email address specified in
this Section 5.4 between 5:30 p.m. (New York City time) and 11:59 p.m. (New York
City time) on any date, (iii) the second Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be given.

 

If to the Company, to:

 

CytoSorbents Corporation

7 Deer Park Drive, Suite K

Monmouth Junction, New Jersey 08852

Attn: Phillip Chan, Chief Executive Officer

 

If to the Purchasers, to the addresses set forth on the signature pages.

 

5.5 Amendments; Waivers.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and each such purchaser hereto, or, in the
case of a waiver, by the party against whom enforcement of any such waived
provision is sought.  No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right.

 

11

 

5.6 Headings.  The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof.

 

5.7 Successors and Assigns.  This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns.  The
Company may not assign this Agreement or any rights or obligations hereunder.  A
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom such Purchaser assigns or transfers any Debentures, provided that such
transferee agrees in writing to be bound, with respect to the transferred
Debentures, by the provisions of the Transaction Documents that apply to the
“Purchasers.”

 

5.8 No Third-Party Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.

 

5.9 Applicable law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state
and county of New York. The parties to this Agreement hereby irrevocably waive
any objection to jurisdiction and venue of any action instituted hereunder and
shall not assert any defense based on lack of jurisdiction or venue or based
upon forum non conveniens. The prevailing party shall be entitled to recover
from the other party its reasonable attorney’s fees and costs. In the event that
any provision of this Agreement or any other agreement delivered in connection
herewith is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of any agreement. Each party hereby irrevocably waives personal service of
process and consents to process being served in any suit, action or proceeding
in connection with this Agreement or any other Transaction Document by mailing a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law.

 

5.10 Survival.  The representations and warranties shall survive the Closing and
the delivery of the Debentures for a period of one (1) year from the date this
Agreement is executed.

 

5.11 Execution.  This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart.  In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or “.pdf” signature page were an original thereof.

 

5.12 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

 

12

 

5.13 Rescission and Withdrawal Right.  Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) any of the other
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.

 

5.14 Replacement of Debentures.  If any certificate or instrument evidencing any
Debentures is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction.  The applicant
for a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs (including customary indemnity) associated with the
issuance of such replacement Debentures.

 

5.15 Remedies.  In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchasers
and the Company will be entitled to specific performance under the Transaction
Documents.  The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
contained in the Transaction Documents and hereby agrees to waive and not to
assert in any action for specific performance of any such obligation the defense
that a remedy at law would be adequate.

 

5.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

 

5.17 Usury.  To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will resist any
and all efforts to be compelled to take the benefit or advantage of, usury laws
wherever enacted, now or at any time hereafter in force, in connection with any
claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document.  Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the “Maximum Rate”),
and, without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate.  It is agreed that if the
maximum contract rate of interest allowed by law and applicable to the
Transaction Documents is increased or decreased by statute or any official
governmental action subsequent to the date hereof, the new maximum contract rate
of interest allowed by law will be the Maximum Rate applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law.  If under any circumstances whatsoever, interest
in excess of the Maximum Rate is paid by the Company to any Purchaser with
respect to indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser’s election.

 

13

 

5.18 Independent Nature of Purchasers’ Obligations and Rights.  The obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Document.  Nothing contained herein or in any
other Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents.  Each Purchaser shall be entitled to independently
protect and enforce its rights, including without limitation the rights arising
out of this Agreement or out of the other Transaction Documents, and it shall
not be necessary for any other Purchaser to be joined as an additional party in
any proceeding for such purpose.  Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents.  The Company has elected to provide all Purchasers with the same
terms and Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Purchasers.

 

5.19 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall not be a Business Day, then such action may be taken or such right may be
exercised on the next succeeding Business Day.

 

5.20 Waiver of Jury Trial.  In any action, suit or proceeding in any
jurisdiction brought by any party against any other party, the parties each
knowingly and intentionally, to the greatest extent permitted by applicable law,
hereby absolutely, unconditionally, irrevocably and expressly waives forever
trial by jury.

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOLLOWS]

 

14

 

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

 

 

CYTOSORBENTS CORPORATION

 

 

 

 

__________________________________________

By: Phillip Chan

Title: Chief Executive Officer

 

 

  

 

 

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

15

 

[PURCHASER SIGNATURE PAGES TO CYTOSORBENTS CORPORATION

DEBENTURE PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned have caused this Debenture Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

 

 

Name of Purchaser:
_________________________________________________________________

 

Signature of Authorized Signatory of Purchaser:
__________________________________________

 

Name of Authorized Signatory:
_______________________________________________________

 

Title of Authorized Signatory:
________________________________________________________

 

Email Address of Purchaser:
_________________________________________________________

 

Facsimile Number of Purchaser:
_____________________________________________________

 

Address for Notice of Purchaser:
_____________________________________________________

 

________________________________________________________________________________

 

Address for Delivery of Debentures for Purchaser (if not same as address for
notice):

 

_____________________________________________________________________________

 

_____________________________________________________________________________

 

Purchase Price and Principal Amount of Debenture: US$
_______________________________

 

EIN Number, if applicable, will be provided under separate cover:
________________________

 

16

 

LIST OF EXHIBITS AND SCHEDULES

 

Exhibit A Form of Debenture

Schedule 3.1(a) Subsidiaries

Schedule 3.1(h) Litigation

 

17

 

EXHIBIT A

FORM OF DEBENTURE

CONVERTIBLE NOTE

 

$ _____

 

Maturity Date : 12 Months from Note closing date

 

FOR VALUE RECEIVED, the undersigned CytoSorbents Corporation (the “Company”),
promises to pay in equity as set forth below on or before xx/xx/xx, to________
(“Creditor"), at New York, NY the principal sum of __________ ($0.00) (the
“Principal”), together with interest accruing thereon at the rate of 8% per
annum, payable on or before maturity of the Note. This Note together with any
Warrants issued hereunder shall be defined as the Securities (the “Securities”).

 

The Note will be subordinate to any future debt financing. There are no
registration rights for

the Common Stock underlying the Note, interest, or Warrants.

 

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 Securities may, at the sole option
of the Creditor, be exchanged for the equivalent dollar amount 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 Securities
may, at the sole option of the Creditor, be exchanged for the equivalent dollar
amount of securities sold in the Additional 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.

 

18

 

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 $0.15 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 $0.15 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: 25% Warrant coverage as follows: The Company will issue the Creditor
five-year warrants (the “Warrants”) to purchase 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
$0.175 per share of Common Stock. The Warrants shall only begin to be
exercisable at the earlier of either (i) the Maturity Date, or (ii) the date on
which the total outstanding principal and interest has been converted into
Common Stock of the Company at a rate of $0.15 as defined above.

 

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:

 

(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.

 

19

 

Compliance with Securities Laws: (i)   The Creditor, by acceptance hereof,
acknowledges that this Note and the shares of Common Stock to be issued upon
conversion hereof are being acquired solely for the Creditor’s own account and
not as a nominee for any other party, and for investment, and that the Creditor
will not offer, sell or otherwise dispose of this Note or any shares of Common
Stock to be issued upon conversion hereof except pursuant to an effective
registration statement, or an exemption from registration, under the Securities
Act and any applicable state securities laws. (ii)   Except as provided in
paragraph (iii) below, this Note and all certificates representing shares of
Common Stock issued upon conversion hereof shall be stamped or imprinted with a
legend in substantially the following form:

 

THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH
SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.

 

 (iii)   The Company agrees to reissue the certificates representing any of the
Common Stock, without the legend set forth above if at such time, prior to
making any transfer of any such securities, the Creditor shall give written
notice to the Company describing the manner and terms of such transfer. Such
proposed transfer will not be effected until: (a) either (i) the Company has
received an opinion of counsel reasonably satisfactory to the Company, to the
effect that the registration of such securities under the Securities Act is not
required in connection with such proposed transfer, (ii) a registration
statement under the Securities Act covering such proposed disposition has been
filed by the Company with the United States Securities and Exchange Commission
and has become effective under the Securities Act, or (iii) the Company has
received other evidence reasonably satisfactory to the Company that such
registration and qualification under the Securities Act and state securities
laws are not required.

 

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_______________________________

Name: Phillip Chan

Title: Chief Executive Officer

20