Item 1.01
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Entry into a Material Definitive Agreement.
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Loan and Security Agreement
On June 30, 2016
(the “Closing Date”), CytoSorbents Corporation, a Delaware corporation (the “Company”), along with
CytoSorbents Medical, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“CytoSorbents
Medical” and, together with the Company, the “Borrower”), entered into a Loan and Security Agreement (the
“Loan and Security Agreement”) with Bridge Bank, a division of Western Alliance Bank,
an Arizona corporation (the “Bank”), pursuant to which the Bank agreed to loan up to an aggregate of $10 million
to the Borrower, to be disbursed in two equal tranches of $5 million (the first tranche, the “Term A Loan”, the
second tranche, the “Term B Loan”, and the Term A Loan and Term B Loan together, the “Term Loans”).
The proceeds from the Term Loans will be used for working capital purposes and to fund general business requirements in
accordance with the terms of the Loan and Security Agreement. Interest under the Term Loans shall bear interest, on the
outstanding daily balance thereof, at a floating per annum rate equal to the Effective Interest Rate (as defined in the Loan
and Security Agreement).
On May 27, 2016, the
Borrower paid a diligence deposit to the Bank, which amounts shall be applied toward the Bank Expenses (as defined the Loan and
Security Agreement) payable on the Closing Date and, if any diligence deposit is remaining thereafter, towards the non-refundable
closing fee of $50,000 which was due and payable on the Closing Date. Commencing on the first calendar day of the calendar month
after a Term Loan is made, the Borrower shall make monthly interest payments during the term of each Term Loan. Commencing on August
1, 2017, if the Term B Loan is not made (or February 1, 2018, if the Term B Loan is made), the Borrower shall make equal monthly
payments of principal, together with accrued and unpaid interest, pursuant to the terms of the Loan and Security Agreement. All
unpaid principal and accrued and unpaid interest shall be due and payable in full on July 1, 2020. In addition, the Loan
and Security Agreement requires the Borrower to pay a non-refundable final fee equal to 2.5% of the principal amount of each Term
Loan funded upon the earlier of the (i) July 1, 2020 maturity date or (ii) termination of the Term Loan via acceleration or prepayment. The Term Loans shall be evidenced
by one or more secured promissory notes issued to the Bank by the Borrower. If the Borrower elects to prepay the Term Loan(s) pursuant
to the terms of the Loan and Security Agreement, it will owe a prepayment fee to the Bank, as follows: (1) for a prepayment made
on or after the funding date of a Term Loan through and including the first anniversary of such funding date, an amount equal to
2.0% of the principal amount of such Term Loan prepaid; (2) for a prepayment made after the first anniversary of the funding date
of a Term Loan through and including the second anniversary of such funding date, an amount equal to 1.5% of the principal amount
of such Term Loan prepaid; and (3) for a prepayment made after the second anniversary of the funding date of a Term Loan through
June 30, 2020, an amount equal to 1.0% of the principal amount of such Term Loan prepaid.
Events of default which
may cause repayment of the Term Loans to be accelerated include, among other customary events of default, (1) non-payment
of any obligation when due, (2) the failure to perform any obligation required under the Loan and Security Agreement and to
cure such default within a reasonable time frame, (3) the occurrence of a Material Adverse Event (as defined in the Loan and Security
Agreement), (4) the attachment or seizure of a material portion of the Borrower’s assets if such attachment or seizure is
not released, discharged or rescinded within 10 days, and (5) if the Borrower becomes insolvent or starts an insolvency proceeding
or if an insolvency proceeding is brought by a third party against the Borrower and such proceeding is not dismissed or stayed
within 30 days. The Loan and Security Agreement includes customary loan conditions, Borrower representations and warranties, Borrower
affirmative covenants and Borrower negative covenants for secured transactions of this type.
The Company’s
and CytoSorbents Medical’s obligations under the Loan and Security Agreement are joint and several. The obligations under
the Loan and Security Agreement are secured by a first priority security interest in favor of the Bank with respect to the Borrower’s
Shares (as defined in the Loan and Security Agreement) and the Borrower’s Collateral (as defined in the Loan and Security
Agreement), which definition excludes the Borrower’s intellectual property and other customary exceptions.
A copy of the Loan
and Security Agreement is attached hereto as Exhibit 10.1 and is incorporated herein by reference. The foregoing is a summary description
of the terms of the Loan and Security Agreement and does not purport to be complete.
Success Fee Letter
In connection with
the Loan and Security Agreement, the Borrower simultaneously entered into a Success Fee Letter (the “Letter”) with
the Bank. Pursuant to the Letter, the Borrower shall pay to the Bank a success fee in the amount equal to 6.37% of the funded amount of the Term Loans (the “Success Fee”) upon the first occurrence of any of the following events (each
a “Liquidity Event”): (a) a sale or other disposition by the Borrower of all or substantially all of its assets; (b)
a merger or consolidation of the Borrower into or with another person or entity, where the holders of the Borrower’s outstanding
voting equity securities as of immediately prior to such merger or consolidation hold less than a majority of the issued and outstanding
voting equity securities of the successor or surviving person or entity as of immediately following the consummation of such merger
or consolidation; (c) a transaction or a series of related transactions in which any “person” or “group”
(within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”))
becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of a sufficient
number of shares of all classes of stock then outstanding of the Borrower ordinarily entitled to vote in the election of directors,
empowering such “person” or “group” to elect a majority of the Board of Directors of the Borrower, who
did not have such power before such transaction; or (d) the closing price per share for the Company’s common stock on the
NASDAQ Capital Market being $8.00 (after giving effect to any stock splits or consolidations effected after the date hereof) or
more for five successive business days.
If the Success Fee
is due pursuant to a Liquidity Event described in clause (d) of the definition thereof, the Company may elect, in lieu of paying
the Success Fee in cash, to issue and sell to the Bank, in exchange for the Success Fee, such number of shares of the Company’s
common stock as would be equal to the quotient (calculated by rounding up the nearest whole number) obtained by dividing (a) the
Success Fee by (b) the volume weighted average price per share of the Company’s common stock for the same five successive
business days on which the closing price per share of the Company’s common stock caused the Success Fee to become payable.
The Bank’s right to receive the Success Fee and the Borrower’s obligation to pay such Success Fee terminate on June
30, 2021, and shall survive the termination of the Loan and Security Agreement and any prepayment of the Term Loans.
A copy of the Letter
is attached hereto as Exhibit 10.2 and is incorporated herein by reference. The foregoing is a summary description of the terms
of the Letter and does not purport to be complete.