Item 1.01
Entry into a Material Definitive Agreement.
Effective as of May 18,
2017, TOT Payments, LLC, TOT New Edge, LLC, Process Pink, LLC and TOT FBS, LLC, as co-borrowers (collectively, the “Borrower”),
each an indirect subsidiary of Net Element, Inc. (the “Company”), entered into a Loan Agreement (the “Loan Agreement”)
and Security Agreement (the “Security Agreement”) with Priority Payment Systems LLC d/b/a Cynergy Data (the “Lender”),
and issued to the Lender a Promissory Note, dated May 18, 2017 (the “Note”). Pursuant to the Loan Agreement and the
Note, the Borrower borrowed from the Lender $2,000,000. Prior to maturity of the loan, the principal amount of the loan will carry
a floating interest rate of prime rate plus 6% per annum. The Borrower may prepay the loan in whole or in part at any time. The
loan is repayable in monthly installments as detailed in Schedule I to the Note, which shall be due and payable on the twentieth
day of each month, consisting of principal plus interest. This loan maturing and becoming due and payable in full on May 20, 2019
to the extent not prepaid or amortized as described above.
Pursuant to the Security
Agreement, the loan is secured by a collateral consisting of accounts, cash or cash equivalents, residuals related to the merchants
originated by Borrower and processed by Lender now or in the future (the “Merchants”), and any proceeds, products,
substitutions or replacements for any of the foregoing. The Loan Agreement, the Note and the Security Agreement contain customary
representations, warranties, events of default, remedies and affirmative and negative covenants, as well as the right of first
refusal and the right related to the Merchants, each fully detailed in the attached hereto copies of the Loan Agreement, the Note
and the Security Agreement.
Effective as of May 17,
2017, the Company entered into a Corporate Guaranty (the “Guaranty”) in favor of the Lender, pursuant to which the
Company unconditionally guaranteed to the Lender the full and prompt payment of each present and future liability, debt and obligation
of the Borrower under the Loan Agreement, the Note, the Security Agreement and other related documents.
The above description of
Loan Agreement, the Note, the Security Agreement and the Guaranty is intended as a summary only and is qualified in its entirety
by the terms and conditions set forth therein. Copies of the Loan Agreement, the Note, the Security Agreement and the Guaranty
are attached hereto as Exhibits 10.1, 10.2, 10.3, 10.4, respectively, and each is incorporated herein by this reference. All readers
are encouraged to read the entire text of such documents.