Exhibit 10.1
ECHO THERAPEUTICS, INC.
10% Senior Secured Promissory Note

             
 
           
Issuance Date:
  June 1, 2009    
Principal Amount:
  $ 1,990,000      

     For value received, ECHO THERAPEUTICS, INC., a Delaware corporation (the
“Maker”), hereby promises to pay to the order of Platinum Montaur Life Sciences,
LLC, a Delaware limited liability company with an address of 152 West 57th
Street, 54th Floor, New York, NY 10019 (together with its successors,
representatives, and permitted assigns, the “Holder”), in accordance with the
terms hereinafter provided, the principal amount of ONE MILLION NINE HUNDRED AND
NINETY THOUSAND DOLLARS ($1,990,000), together with interest thereon.
     All payments under or pursuant to this Note shall be made in United States
Dollars in immediately available funds to the Holder at the address of the
Holder first set forth above or at such other place as the Holder may designate
from time to time in writing to the Maker or by wire transfer of funds to the
Holder’s account, as requested by the Holder. The outstanding principal balance
of this Note, together with all accrued and unpaid interest, shall be due and
payable in full on June 29, 2009 (the “Maturity Date”) or at such earlier time
as provided herein.
ARTICLE I
PAYMENT
          Section 1.1 Interest. Beginning on the date of this Note (the
“Issuance Date”), the outstanding principal balance of this Note shall bear
interest, in arrears, at a rate per annum equal to ten percent (10%), payable on
the Maturity Date. Interest shall be computed on the basis of a 360-day year of
twelve (12) 30-day months, shall compound monthly and shall accrue commencing on
the Issuance Date. Furthermore, upon the occurrence of an Event of Default (as
defined in Section 2.1 hereof), the Maker will pay interest to the Holder,
payable on demand, on the outstanding principal balance of and unpaid interest
on the Note from the date of the Event of Default until such Event of Default is
cured at the rate of the lesser of eighteen percent (18%) and the maximum
applicable legal rate per annum. To the extent permitted by law, if amounts
outstanding hereunder are not paid in full on the Maturity Date hereof, the
Maker shall be obligated to pay to the Holder a late payment fee equal to 10% of
the principal amount then outstanding.
          Section 1.2 Payment of Principal; Prepayment. The Principal Amount
hereof shall be paid in full on the earliest of (i) the Maturity Date, (ii) the
due date of any mandatory prepayment as set forth herein, or (iii) upon
acceleration of this Note in accordance with the terms hereof. Any amount of
principal repaid hereunder may not be reborrowed. The Maker may prepay all or
any portion of the principal amount of this Note upon not less than two
(2) business days’ prior written notice to the Holder without premium or
penalty.
          Section 1.3 Security Agreement; Covenants. The obligations of the
Maker hereunder are together with interest thereon and all other charges as
provided herein, and in any

1

--------------------------------------------------------------------------------

 

other instrument or document executed in connection herewith, and together with
all other sums due from Maker to Holder (collectively, the “Obligations”), shall
be secured by the Collateral (as defined below).
     (a) The Maker hereby grants, assigns and pledges to the Holder all of its
rights, title and interest in, and a continuing security interest in all
Inventory (as defined herein), all Accounts from the sale of Inventory,
receivable, contract rights, chattel paper and payment intangibles, and General
Intangibles relating to any of the foregoing types of property; and all
additions, accessions, accessories, amendments, attachments, modifications,
substitutions, and replacements, proceeds and products of any of the foregoing,
together with all other property which the Maker purchases using the proceeds of
this Note (together referred to as the “Collateral”). This Note shall serve as a
security agreement securing Holder’s right in and to the Collateral for the
repayment of the Obligations. Maker authorizes Holder to file such UCC-1
Financing Statements listing Holder as Secured Party and Maker as Debtor as
Holder may require (which financing statements may describe the collateral as
“all assets”). The terms Inventory, Accounts and General Intangibles shall have
the respective meanings provided under the Uniform Commercial Code of the State
of New York.
     (b) Except for the security interest of the Holder therein (and any
security interest granted to the holders of indebtedness that is to be repaid
with the proceeds of this Note, upon which repayment such security interest
shall terminate), the Maker is, and as to Collateral acquired after the date
hereof the Maker shall and will be, the owner of all Collateral free from any
lien, security interest, encumbrance or other right, title or interest of any
other person, firm or corporation, and the Maker shall defend the Collateral
against all claims and demands of all persons at any time claiming the same or
any interest therein adverse to the Holder.
     (c) The Maker will maintain, keep and preserve its business assets in good
working order and condition, ordinary wear and tear excepted. The Maker agrees
to maximize collections on all accounts receivable and contract rights and to
diligently pursue the collection of all sums due the Maker under any purchase
orders placed with Maker and all account obligors. The Maker shall not sell or
license any of its assets, other than in the ordinary course of business and
consistent with past practices.
     (d) The Maker will not create, incur, assume, or suffer to exist any lien,
mortgage, pledge, encumbrance, security interest, attachment or charge of any
kind upon the Collateral, except:
          (i) liens in favor of the Holder;
          (ii) liens for taxes or assessments or other government charges or
levies not yet due and payable or, if due and payable, that are being contested
in good faith by appropriate proceedings diligently prosecuted and for which
appropriate reserves are maintained; and
          (iii) liens imposed by law, such as mechanics’, materialmen’s, and
similar liens, securing obligations incurred in the ordinary course of business
which are not past due for more than thirty (30) days or which are being
contested in good faith by appropriate proceedings diligently prosecuted and for
which appropriate reserves have been established.

-2-

--------------------------------------------------------------------------------

 

     (e) The Maker will not create, incur, assume, or suffer to exist any debt
(as defined below), except:
          (i) debt of the Maker under this Note; and
          (ii) debt described in Exhibit A attached hereto, but no renewals,
extensions, or refinancings thereof; and
          (iii) trade debt incurred in the ordinary course of business and
consistent with past practices.
As used in this Section 1.3(e), the term “debt” shall include all obligations,
contingent and otherwise, that in accordance with generally accepted accounting
principles should be classified upon the obligor’s balance sheet as liabilities,
or to which reference should be made by footnotes thereto, including without
limitation all debt and similar monetary obligations, whether direct or
indirect, all liabilities secured by any mortgage, pledge, security interest,
lien, charge or other encumbrance, and all guarantees, endorsements and other
contingent obligations whether direct or indirect in respect of indebtedness of
others.
          Section 1.4 Payment on Non-Business Days. Whenever any payment to be
made shall be due on a Saturday, Sunday or a public holiday under the laws of
the State of New York, such payment may be due on the next succeeding business
day and such next succeeding day shall be included in the calculation of the
amount of accrued interest payable on such date.
          Section 1.5 Use of Proceeds. The Maker shall use the proceeds of this
Note only for general working capital and to repay outstanding senior
indebtedness of the Maker.
          Section 1.6 Term Sheet and Definitive Documentation. The Maker agrees
to negotiate, in good faith, with the Holder to consummate the transactions
described in the Term Sheet, dated the date hereof, between the Holder and the
Maker. The Maker acknowledges that the Holder’s agreement to extend credit
pursuant to this Note is made in connection with the Holder’s potential
investment in the Maker as described in the Term Sheet, and a failure of the
Maker to act in good faith to negotiate the consummation of the transactions
described in the Term Sheet shall be deemed an Event of Default hereunder.
ARTICLE II
EVENTS OF DEFAULT; REMEDIES
          Section 2.1 Events of Default. The occurrence of any of the following
events shall be an “Event of Default” under this Note:
          (a) any default in the payment of (1) the principal amount hereunder
when due, or (2) interest on, or liquidated damages in respect of, this Note,
within three (3) business days after the same shall become due and payable
(whether on the Maturity Date or by acceleration or otherwise); or

-3-

--------------------------------------------------------------------------------

 

          (b) the Maker shall fail to observe or perform any other covenant or
agreement contained in this Note, which failure is not cured, if possible to
cure, within 3 business days after notice of such default sent by the Holder; or
          (c) [Reserved]; or
          (d) any material representation or warranty made by the Maker herein
or otherwise to Holder shall prove to have been false or incorrect or breached
in a material respect on the date as of which made; or
          (e) the Maker shall (A) default in any payment of any amount or
amounts of principal of or interest on any indebtedness (other than the
indebtedness hereunder) the aggregate principal amount of which indebtedness is
in excess of $20,000 or (B) default in the observance or performance of any
other agreement or condition relating to any indebtedness, that, in the
aggregate, exceeds $20,000, or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders or beneficiary or beneficiaries of
such indebtedness to cause with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity; or
          (f) the Maker shall (i) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property or assets, (ii) make a
general assignment for the benefit of its creditors, (iii) commence a voluntary
case under the United States Bankruptcy Code (as now or hereafter in effect) or
under the comparable laws of any jurisdiction (foreign or domestic), (iv) file a
petition seeking to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of creditors’
rights generally, (v) acquiesce in writing to any petition filed against it in
an involuntary case under United States Bankruptcy Code (as now or hereafter in
effect) or under the comparable laws of any jurisdiction (foreign or domestic),
(vi) issue a notice of bankruptcy or winding down of its operations or issue a
press release regarding same, or (vii) take any action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the foregoing; or
          (g) a proceeding or case shall be commenced in respect of the Maker,
without its application or consent, in any court of competent jurisdiction,
seeking (i) the liquidation, reorganization, moratorium, dissolution, winding
up, or composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of it or of all or any
substantial part of its assets in connection with the liquidation or dissolution
of the Maker or (iii) similar relief in respect of it under any law providing
for the relief of debtors, and such proceeding or case described in clause (i),
(ii) or (iii) shall continue undismissed, or unstayed and in effect, for a
period of thirty (30) days or any order for relief shall be entered in an
involuntary case under United States Bankruptcy Code (as now or hereafter in
effect) or under the comparable laws of any jurisdiction (foreign or domestic)
against the Maker or action under the laws of any jurisdiction (foreign or
domestic) analogous to any of the foregoing shall be taken with respect to the
Maker and shall continue undismissed, or unstayed and in effect for a period of
thirty (30) days.

-4-

--------------------------------------------------------------------------------

 

          Section 2.2 Remedies Upon An Event of Default. If an Event of Default
shall have occurred and shall be continuing, the Holder of this Note may, at any
time, at its option, declare the entire unpaid principal balance of this Note,
together with all interest accrued hereon, due and payable, and thereupon, the
same shall be accelerated and so due and payable, without presentment, demand,
protest, or notice, all of which are hereby expressly unconditionally and
irrevocably waived by the Maker. Upon an Event of Default, the Holder may
proceed to exercise all rights and remedies against any and all collateral
pledged to the Holder as security for this Note, including all collateral
pledged hereunder. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note, at law or in equity
(including, without limitation, a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit a holder’s right to pursue actual damages for any failure by the
Maker to comply with the terms of this Note.
ARTICLE III
MISCELLANEOUS
          Section 3.1 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, telecopy or facsimile at the
address or number set forth on the signature page hereto (if delivered on a
business day during normal business hours where such notice is to be received),
or the first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur.
          Section 3.2 Governing Law. This Note shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction. This Note shall
not be interpreted or construed with any presumption against the party causing
this Note to be drafted.
          Section 3.3 Headings. Article and section headings in this Note are
included herein for purposes of convenience of reference only and shall not
constitute a part of this Note for any other purpose.
          Section 3.4 Binding Effect; Amendments. The obligations of the Maker
and the Holder set forth herein shall be binding upon the successors and assigns
of each such party. This Note may not be modified or amended in any manner
except in writing executed by the Maker and the Holder.
          Section 3.5 Consent to Jurisdiction. Each of the Maker and the Holder
(i) hereby irrevocably submits to the exclusive jurisdiction of the United
States District Court sitting in the Southern District of New York and the
courts of the State of New York located in New York county for the purposes of
any suit, action or proceeding arising out of or relating to this Note and
(ii) hereby waives, and agrees not to assert in any such suit, action or
proceeding, any

-5-

--------------------------------------------------------------------------------

 

claim that it is not personally subject to the jurisdiction of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Each of the Maker and the
Holder consents to process being served in any such suit, action or proceeding
by mailing a copy thereof to such party at the address in effect for notices
hereunder and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section shall affect or
limit any right to serve process in any other manner permitted by law.
          Section 3.6 Failure or Indulgence Not Waiver. No failure or delay on
the part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.
          Section 3.7 Maker Waivers; Dispute Resolution. Except as otherwise
specifically provided herein, the Maker and all others that may become liable
for all or any part of the obligations evidenced by this Note, hereby waive
presentment, demand, notice of nonpayment, protest and all other demands’ and
notices in connection with the delivery, acceptance, performance and enforcement
of this Note, and do hereby consent to any number of renewals of extensions of
the time or payment hereof and agree that any such renewals or extensions may be
made without notice to any such persons and without affecting their liability
herein and do further consent to the release of any person liable hereon, all
without affecting the liability of the other persons, firms or Maker liable for
the payment of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.
          (a) No delay or omission on the part of the Holder in exercising its
rights under this Note, or course of conduct relating hereto, shall operate as a
waiver of such rights or any other right of the Holder, nor shall any waiver by
the Holder of any such right or rights on any one occasion be deemed a waiver of
the same right or rights on any future occasion.
          (b) THE MAKER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS
A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW,
HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.
          Section 3.8 Fees and Expenses. Upon execution of this Note, the Maker
shall reimburse the Holder for legal fees incurred by the Holder in the drafting
and negotiation of this Note (which amount may be withheld by the Holder from
amounts to be delivered to the Maker in connection with the issuance of this
Note). The Maker will pay on demand all costs of collection and attorneys’ fees
paid or incurred by the Holder in enforcing the obligations of the Maker. The
Maker represents and warrants that this Note is the legal, valid and binding
obligation of the Maker, enforceable in accordance with its terms.

-6-

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the Maker has caused this Note to be duly executed by
its duly authorized officer as of the date first above indicated.

            ECHO THERAPEUTICS, INC.
      By:     /s/ Patrick T. Mooney       Name:   Patrick T. Mooney     
Title:   Chief Executive Officer     

The undersigned Guarantor herby acknowledges and agrees that the obligations of
the Maker contained in this Note jointly and severally and unconditionally
guaranteed by the undersigned.

          GUARANTOR:     SONTRA MEDICAL INC.    
 
       
 
       
By:
  /s/ Patrick T. Mooney    
 
       
Name:
  Patrick T. Mooney    
Title:
  Chief Executive Officer    

Accepted and agreed to by the undersigned as Holder.

         
 
        PLATINUM MONTAUR LIFE SCIENCES, LLC    
 
       
By:
  /s/ Michael M. Goldberg    
 
       
Name:
  Michael M. Goldberg    
Title:
  Portfolio Manager    

-7-

--------------------------------------------------------------------------------

 

Exhibit A
     The Company has outstanding approximately $312,247.00 in principal amount
of 8% Senior Convertible Promissory Notes due February 12, 2011. The terms of
these notes require the Company to make quarterly interest payments that may be
satisfied by the payment of cash, the issuance of additional shares of common
stock (valued at the quotient of (x) the applicable interest payment divided by
(y) the lesser of (A) the conversion price then in effect and (B) 100% of the
volume weighted average price for the five consecutive trading days immediately
preceding the interest payment date) or the issuance of additional 8% senior
convertible promissory notes with an aggregate principal amount equal to such
interest payment. The Company has paid a total of $25,739.20 in interest through
March 31, 2009 by payment in kind in the form of additional 8% Senior
Convertible Promissory Notes. The Company’s subsidiary, Sontra Medical, Inc.,
agreed to guarantee the obligations of the Company under its 8% Senior
Convertible Promissory Notes due February 12, 2011 pursuant to a separate
guaranty agreement.
     The Company finances its liability insurance through an insurance funding
company. The total amount financed at 4.73% was approximately $60,834, with
monthly principal and interest payments of $7,113. The Company’s current
obligation on the insurance financing is approximately $28,175. Payments are due
in arrears on the first of each month through October 1, 2009.
     The Company leases 12,999 square feet of office, laboratory and
manufacturing space in Franklin, Massachusetts under a lease expiring March 31,
2010. Future minimum rental payments under this operating lease are
approximately as follows:

              Amount  
For the years ended December 31,
       
 
       
2009 (June through December, 2009)
  $ 113,000  
 
       
2010
  $ 49,000  
 
     
 
       
Total
  $ 162,000  

-8-