Exhibit 10.8
SECURITY AGREEMENT
(Revenue)
 
THIS SECURITY AGREEMENT (this “Agreement”), is made as of this ________ day of
August, 2012, by and among ECHO THERAPEUTICS, INC., a Delaware corporation, with
an address of  8 Penn Center, 1628 JFK Blvd., Suite 300, Philadelphia, PA 19103
(the “Maker”), SONTRA MEDICAL, INC., a Delaware corporation, with an address of
c/o Echo Therapeutics, Inc., 8 Penn Center, 1628 JFK Blvd., Suite 300,
Philadelphia, PA 19103 (the “Guarantor” and, together with the Maker,
collectively the “Debtors”), and PLATINUM-MONTAUR LIFE SCIENCES, LLC, a Delaware
limited liability company, with an address of 152 West 57th Street, 4th
Floor,  New York, NY 10019 (the “Secured Party”).
 
WHEREAS, the  Maker and the Secured Party are entering into that certain Loan
Agreement (the “Loan Agreement”), pursuant to which the Secured Party shall
extend credit to the Maker and the Maker shall issue a promissory note to the
Secured Party in the principal amount of $20,000,000 (as amended, restated,
supplemented or otherwise modified, the “Note”);
 
WHEREAS, pursuant to a guaranty agreement dated on or about the date hereof (the
“Guaranty”), the Guarantor has agreed to guarantee the obligations of the Maker
under the Note to the Secured Party;
 
WHEREAS, in order to induce the Secured Party to extend the loans evidenced by
the Note, each Debtor has agreed to execute and deliver to the Secured Party
this Agreement and to grant the Secured Party a security interest in certain
property of such Debtor to secure the prompt payment, performance and discharge
in full of all of the Maker’s obligations under the Note and the  Guarantor’s
obligations under the Guaranty.
 
WHEREAS, the Secured Party is not willing to enter into the Loan Agreement
unless the obligations under the Note are secured by a pledge and perfected
security interest in the Collateral (as defined below); and
 
WHEREAS, the Maker is willing to secure its obligations under the Note and the
Guarantor is willing to secure its obligations under the Guaranty in favor of
the Secured Party.
 
NOW THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereby agree as follows:
 
ARTICLE 1 - DEFINITIONS

 
Section 1.1
Terms Generally

 
All capitalized terms used herein or in any certificate or other document
delivered pursuant hereto shall have the meanings assigned to them below (unless
otherwise defined herein).  Except as otherwise defined herein, capitalized
terms used herein shall have the respective meanings given in the Loan
Agreement.
 
Section 1.2
Certain Terms

 
As used herein, the following terms have the following meanings:
 
“Accounts” shall have the meaning given thereto in the UCC.
 
“Collateral”  is defined in Article 2 below.
 
“Event of Default”  is defined in Article 6  below.
 
“Lien”  means any mortgage, pledge, security interest, lien or other charge or
encumbrance of any kind or nature upon or with respect to any property.
 
“Necessary Endorsement” means undated stock powers endorsed in blank or other
proper instruments of assignment duly executed and such other instruments or
documents as the Secured Party may reasonably request.
 
 
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“Obligation(s)” means all of the liabilities and obligations (primary,
secondary, direct, contingent, sole, joint or several) due or to become due, or
that are now or may be hereafter contracted or acquired, or owing, of any Debtor
to the Secured Party under this Agreement, the Loan Agreement, the Note, the
Guaranty and any other instruments, agreements or other documents executed
and/or delivered in connection herewith or therewith, in each case, whether now
or hereafter existing, voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from the Secured Party as a
preference, fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to time, but
specifically excluding any liability or obligation of any Debtor to the Secured
Party relating to preferred stock or securities convertible into common
stock.  Without limiting the generality of the foregoing, the term “Obligations”
shall include, without limitation: (i) principal of, and interest on, the Note
and the loans extended pursuant thereto; (ii) any and all other fees,
indemnities, costs, obligations and liabilities of the Debtors from time to time
under or in connection with this Agreement, the Note, the Guaranty and any other
instruments, agreements or other documents executed and/or delivered in
connection herewith or therewith; (iii) all amounts (including but not limited
to post-petition interest) in respect of the foregoing that would be payable but
for the fact that the obligations to pay such amounts are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving any Debtor; and (iv) all Obligations under and as defined
in the Loan Agreement.
 
“Organizational Documents” means, with respect to any Debtor, the documents by
which such Debtor was organized (such as a certificate of incorporation,
certificate of limited partnership or articles of organization, and including,
without limitation, any certificates of designation for preferred stock or other
forms of preferred equity) and which relate to the internal governance of such
Debtor (such as bylaws, a partnership agreement or an operating, limited
liability or members agreement).
 
“Permitted Liens” shall have the meaning assigned to such term in the Loan
Agreement.
 
“Revenue” means (i) all rights of the Debtors to payment of monetary
obligations, including rights to payment for goods and general intangibles sold,
leased, licensed, assigned or otherwise disposed of; (ii) all rights of the
Debtors to payment for services rendered or to be rendered; (iii) all rights of
the Debtors under all documents and instruments and all sums of money or other
proceeds due or becoming due thereon to the extent the same result from the
sale, license or other disposition of property, products or services, and all
rights pertaining to and interest in such documents and instruments; (iv) all
other rights and claims of the Debtors to the payment of money, under contracts
or otherwise; all rights of the Debtors to payment evidenced by chattel paper or
an instrument to the extent the same result from the sale, license or other
disposition of property, products or services; (v) all deposit accounts of the
Debtors to the extent that such deposit accounts contain any of the foregoing
items; and (vi) all other property constituting Accounts.
 
“Transaction Documents” means and includes the Note, the Loan Agreement, the
Guaranty, the “Loan Documents” defined in the Loan Agreement, and all documents
and instruments executed and delivered in connection therewith, in each case, as
amended, restated, supplemented or otherwise modified.
 
“Uniform Commercial Code” or “UCC”  means the Uniform Commercial Code as in
effect in the State of New York.
 
Section 1.3
UCC Terms

 
As used herein, each of the following terms, whether or not capitalized, has the
meaning specified in the Uniform Commercial Code:
 
(a)  
Chattel Paper;

(b)  
Documents;

(c)  
Electronic Chattel Paper;

(d)  
Instruments.

 
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ARTICLE 2 - Grant

 
As an inducement for the Secured Party to extend the loans evidenced by the Note
and to secure the payment and performance of the Obligations, each Debtor hereby
assigns and pledges to the Secured Party all of such Debtor’s rights, title and
interest in, and grants to the Secured Party a continuing security interest in:
(a) all Revenue; and (b) all additions, accessions, accessories, amendments,
attachments, modifications, substitutions, and replacements, proceeds and
products of any of the foregoing (all of the foregoing, collectively the
“Collateral”).
 
ARTICLE 3 - Delivery of Certain Collateral

 
Contemporaneously with or prior to the execution of this Agreement, each Debtor
shall deliver or cause to be delivered to the Secured Party any and all
certificates and other instruments representing or evidencing the Collateral,
together with all Necessary Endorsements.
 
ARTICLE 4 - Representations, Warranties and Covenants

 
Each Debtor represents and warrants to, and covenants and agrees with, the
Secured Party as follows, each of which representations, warranties and
covenants shall be continuing and in force so long as any Obligations remain
outstanding:
 
Section 4.1
Ownership and Location of Collateral; Absence of Liens and Restrictions

 
Each Debtor is the sole legal and equitable owner of the Collateral pledged by
such Debtor hereunder, holding good and marketable title to the same free and
clear of all Liens except for the security interests granted hereunder and
Permitted Liens, and has legal power and authority to execute, deliver and
perform its obligations hereunder, and to collaterally assign, deliver and
create a security interest in the Collateral in the manner herein contemplated.
Except for the restrictions set forth herein and in the Note and as may exist in
respect of the Permitted Liens, the Collateral is not subject to any restriction
that would prohibit or restrict the assignment, delivery or creation of the
security interests contemplated hereunder.
 
Section 4.2
Legal, Valid and Binding Agreement; No Conflicts

 
  The execution, delivery and performance by each Debtor of this Agreement and
the filings contemplated herein have been duly authorized by all necessary
action on the part of such Debtor and no further action is required by such
Debtor.  This Agreement has been duly executed by each Debtor.  This Agreement
constitutes the legal, valid and binding obligation of each Debtor, enforceable
against each Debtor in accordance with its terms except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization and similar
laws of general application relating to or affecting the rights and remedies of
creditors and by general principles of equity.
 
The execution, delivery and performance of this Agreement by the Debtors do not
(i) violate any of the provisions of any Organizational Documents of any Debtor
or any judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation applicable to any Debtor 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, 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 any Debtor's debt or otherwise) or other understanding to
which any Debtor is a party or by which any property or asset of any Debtor is
bound or affected. If any, all required consents (including, without limitation,
from stockholders or creditors of any Debtor) necessary for any Debtor to enter
into and perform its obligations hereunder have been obtained.

 
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Section 4.3
First Priority Security Interest

 
This Agreement, together with the filing of Uniform Commercial Code financing
statements in the office of the Secretary of State of each Debtor’s state of
formation, creates a valid and continuing first lien on and perfected security
interest in the Collateral (except for property located in the United States in
which a security interest may not be perfected by filing under the Uniform
Commercial Code), prior to all other Liens (other than Permitted Liens), and is
enforceable as such against creditors of the Debtors, any owner of the real
property where any of the Collateral is located, any purchaser of such real
property and any present or future creditor obtaining a lien on such real
property.  No written claim has been received by any Debtor that any Collateral
or Debtor's use of any Collateral violates the rights of any third party. There
has been no adverse decision to any Debtor's claim of ownership rights in or
exclusive rights to use the Collateral in any jurisdiction or to any Debtor's
right to keep and maintain such Collateral in full force and effect, and there
is no proceeding involving said rights pending or, to the best knowledge of any
Debtor, threatened before any court, judicial body, administrative or regulatory
agency, arbitrator or other governmental authority.
 
Section 4.4
Sales and Further Liens

 
The Debtors shall not grant or permit to exist any Liens on any of the
Collateral other than Permitted Liens.  The Debtors shall not sell, grant,
assign or transfer any interest in, any of the Collateral to any person or
entity other than the Secured Party.  Each  Debtor shall defend its title to and
the Secured Party’s interest in the Collateral against all material and adverse
claims and take any action necessary to remove any Liens other than Permitted
Liens.
 
Section 4.5
Inspection; Verification of Accounts

 
Each Debtor shall at all reasonable times and upon reasonable notice allow the
Secured Party to examine, inspect or make extracts from or copies of such
Debtor’s books and records, inspect the Collateral and arrange for verification
of Accounts constituting Collateral directly with such Debtor’s accountants,
and, upon and after any Event of Default, account obligors and/or account
debtors or by other methods.
 
Section 4.6
Accounts:  Collection and Delivery of Proceeds

 
Each Debtor shall diligently collect all of its Accounts until such time as an
Event of Default has occurred and is continuing and during which the Secured
Party exercises its rights to collect the Accounts pursuant to this
Agreement.  After the occurrence and during the continuance of an Event of
Default, the Debtors shall, at the request of the Secured Party, notify account
debtors of the security interest of the Secured Party in any Account and that
payment thereof is to be made directly to the Secured Party.  After the
occurrence and during the continuance of an Event of Default, upon request of
the Secured Party, all Revenue received by the Debtors, whether in the form of
cash, checks, notes or other instruments, shall be held in trust for the Secured
Party and the Debtors shall deliver said proceeds daily to the Secured Party,
without commingling, in the identical form received (properly endorsed or
assigned where required to enable the Secured Party to collect the same).
 
Section 4.7
Name or Organizational Change.

 
No Debtor shall change its place of organization, name, identity, type of
entity, chief executive office or place where its business records are kept, or
merge into or consolidate with any other entity, unless such Debtor shall have
given the Secured Party at least 30 days’ prior written notice thereof and shall
have delivered to the Secured Party such new Uniform Commercial Code financing
statements or other documentation as may be reasonably necessary or required by
the Secured Party to ensure the continued perfection and priority of the
security interests granted by this Agreement.
 
Section 4.8
Collateral in the Possession of a Bailee

 
If any Collateral is at any time in the possession of a bailee, the Debtors
shall promptly notify the Secured Party thereof and, at the Secured Party’s
request and option, shall promptly obtain an acknowledgement from the bailee, in
form and substance satisfactory to the Secured Party, that the bailee holds such
Collateral for the benefit of the Secured Party and such bailee’s agreement to
comply, without further consent of the Debtors, at any time with instructions of
the Secured Party as to such Collateral. The Secured Party agrees with the
Debtors that the Secured Party shall not give any such instructions unless an
Event of Default has occurred and is continuing or would occur after taking into
account any action by the Debtors with respect to the bailee.

 
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Section 4.9
Electronic Chattel Paper

 
If any Debtor at any time holds or acquires an interest in any electronic
chattel paper constituting or evidencing Collateral, such Debtor shall promptly
notify the Secured Party thereof and, at the request and option of the Secured
Party, shall take such action as the Secured Party may reasonably request to
vest in the Secured Party control, under the UCC, of such electronic chattel
paper. The Secured Party agrees with the Debtors that the Secured Party will
arrange, pursuant to procedures satisfactory to the Secured Party and so long as
such procedures will not result in the Secured Party’s loss of control, for the
Debtors to make alterations to the electronic chattel paper permitted under the
UCC for a party in control to make without loss of control, unless an Event of
Default has occurred and is continuing or would occur after taking into account
any action by the Debtors with respect to such electronic chattel paper.
 
Section 4.10
Other Actions as to any and all Collateral

 
Each Debtor further agrees, upon request of the Secured Party and at the Secured
Party’s option, to take any and all other actions as the Secured Party may
determine to be necessary or useful for the attachment, perfection and first
priority of, and the ability of the Secured Party to enforce, the Secured
Party’s security interest in any and all of the Collateral, including, without
limitation, (i) executing, delivering and, where appropriate, filing financing
statements and amendments relating thereto under the UCC, to the extent, if any,
that any Debtor’s signature thereon is required therefor, (ii) causing the
Secured Party’s name to be noted as secured party on any certificate of title
for a titled good if such notation is a condition to attachment, perfection or
priority of, or ability of the Secured Party to enforce, the Secured Party’s
security interest in such Collateral, (iii) complying with any provision of any
statute, regulation or treaty of the United States as to any Collateral if
compliance with such provision is a condition to attachment, perfection or
priority of, or ability of the Secured Party to enforce, the Secured Party’s
security interest in such Collateral, (iv) obtaining governmental and other
third party waivers, consents and approvals in form and substance satisfactory
to the Secured Party, including, without limitation, any consent of any
licensor, lessor or other person obligated on Collateral, (v) obtaining waivers
from mortgagees and landlords in form and substance satisfactory to the Secured
Party and (vi) taking all actions under any earlier versions of the UCC or under
any other law, as reasonably determined by the Secured Party to be applicable in
any relevant UCC or other jurisdiction, including any foreign jurisdiction.
 
At any time and from time to time that any Collateral consists of instruments or
other items that require or permit possession by the Secured Party to perfect
the security interest created hereby, the applicable Debtor shall deliver such
Collateral to the Secured Party.
 
Each Debtor agrees that it shall not permit any person or entity other than the
Secured Party to have “control” within the meaning of Article 8 of the UCC of
any portion of the Collateral.
 
If there is any Collateral that can be perfected by “control” through an account
control agreement, the applicable Debtor shall cause such an account control
agreement, in form and substance in each case satisfactory to the Secured Party,
to be entered into and delivered to the Secured Party.
 
Section 4.11
Material Adverse Change in the Collateral

 
The Debtors shall, within five (5) Business Days of obtaining knowledge thereof,
advise the Secured Party promptly, in sufficient detail, of any material adverse
change in the Collateral, and of the occurrence of any event which would have a
material adverse effect on the value of the Collateral or on the Secured Party’s
security interest therein.
 
Section 4.12
Joinder

 
Each Debtor shall cause each future subsidiary of such Debtor with operations or
material operations (which, if in doubt, shall be in the sole determination of
the Secured Party) to immediately become a party hereto (an “Additional
Debtor”), by executing and delivering an Additional Debtor Joinder in
substantially the form of Annex A attached hereto and comply with the provisions
hereof applicable to the Debtors.  As of the date hereof, each Debtor represents
and warrants that it has no subsidiaries (other than the Guarantor, which is a
subsidiary of the Maker).  The Additional Debtor shall deliver such opinions of
counsel, authorizing resolutions, good standing certificates, incumbency
certificates, organizational documents, financing statements and other
information and documentation as the Secured Party may reasonably request.  Upon
delivery of the foregoing to the Secured Party, the Additional Debtor shall be
and become a party to this Agreement with the same rights and obligations as the
Debtors, for all purposes hereof as fully and to the same extent as if it were
an original signatory hereto and shall be deemed to have made the
representations, warranties and covenants set forth herein as of the date of
execution and delivery of such Additional Debtor Joinder, and all references
herein to the “Debtors” shall be deemed to include each Additional Debtor.

 
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Section 4.13
Further Assurances

 
Upon the written request of the Secured Party, and at the sole expense of the
Debtors, the Debtors shall promptly execute and deliver such further instruments
and documents and take such further actions as the Secured Party reasonably may
deem desirable to obtain the full benefits of this Agreement and of the rights
and powers herein granted.  Each Debtor authorizes the Secured Party to file one
or more financing statements which may describe the Collateral as set forth
above in the definition of “Collateral”, and to file a copy of this Agreement in
lieu of a financing statement, in such places and with such governmental offices
as the Secured Party reasonably determines to be appropriate or advisable. If
any amount payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note or other instrument in an amount in
excess of $10,000, such note or instrument shall be, upon the Secured Party’s
request, delivered to the Secured Party, duly endorsed in a manner satisfactory
to it, unless such item is in the process of collection in the ordinary course
of business.
 
ARTICLE 5 - Secured Party’s Rights With Respect To Collateral

 
Section 5.1
Secured Party’s Rights

 
The Secured Party may, at any time upon and after an Event of Default and during
the continuation thereof, at its option and, whether or not the Obligations are
due, without notice or demand on any  Debtor, take the following actions with
respect to the Collateral:
 
5.1.1  
with respect to any Accounts (i) notify account debtors  of the security
interest of the Secured Party in such Accounts and that payment thereof is to be
made directly to the Secured Party; (ii) demand, collect, and provide receipt
for any amounts relating thereto, as the Secured Party may determine; (iii)
commence and prosecute any actions in any court for the purposes of collecting
any such Accounts and enforcing any other rights in respect thereof; (iv)
defend, settle or compromise any action brought and, in connection therewith,
give such discharges or releases as the Secured Party may deem appropriate; (v)
receive, open and dispose of mail addressed to any Debtor and endorse checks,
notes, drafts, acceptances, money orders, bills of lading, warehouse receipts or
other instruments or documents evidencing payment, shipment or storage of the
goods giving rise to such Accounts or securing or relating to such Accounts, on
behalf of and in the name of any Debtor; and (vi) sell, assign, transfer, make
any agreement in respect of, or otherwise deal with or exercise rights in
respect of, any such Accounts or the goods or services which have given rise
thereto, as fully and completely as though the Secured Party were the absolute
owner thereof for all purposes.

 
Except as otherwise provided herein, the Secured Party shall have no duty as to
the collection or protection of the Collateral nor as to the preservation of any
rights pertaining thereto, beyond the safe custody of any Collateral in its
possession.
 
ARTICLE 6 -  Defaults

 
Section 6.1
Events of Default

 
The occurrence of any one or more of the following events shall constitute an
“Event of Default” under this Agreement:
 
6.1.1  
Payments.  If (a) any payment of principal or interest under the Note is not
paid in full within five (5) Business Days after the date such payment is due
and payable, or (b) any payment under any other Obligation shall not be paid in
full within five (5) Business Days after the date that such payment is due and
payable.

 
6.1.2  
Covenants.  If any Debtor fails to perform or observe any covenant or agreement
(other than as referred to in Section 6.1.1 above) contained in this Agreement,
and such failure remains un-remedied for the earlier of ten (10) days after (a)
the Secured Party gives written notice thereof to such Debtor or (b) such Debtor
becomes aware of such failure.

 
 
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6.1.3  
Validity Of Documents.  If (a) any material provision, in the reasonable opinion
of Secured Party, of any Transaction Document shall at any time for any reason
cease to be valid, binding and enforceable against any Debtor; (b) the validity,
binding effect or enforceability of any Transaction Document shall be contested
by anyone other than the Secured Party; or (c) any Transaction Document shall be
terminated, invalidated or set aside, or be declared ineffective or inoperative
or in any way cease to give or provide to Secured Party the benefits purported
to be created thereby.

 
6.1.4  
Transaction Documents.  If any “Event of Default” shall have occurred under and
as defined in any Transaction Document.

 
ARTICLE 7 - Secured Party’s Rights and Remedies

 
Section 7.1
Rights of Secured Party Upon an Event of Default

 
So long as any Event of Default shall have occurred and is continuing:
 
7.1.1  
the Secured Party may, at its option, without notice or demand, cause all of the
Obligations to become immediately due and payable in accordance with the Note
and take immediate possession of the Collateral, and for that purpose the
Secured Party may, so far as the Debtors can give authority therefor, enter upon
any premises on which any of the Collateral is situated and remove the same
therefrom or remain on such premises and in possession of such Collateral for
purposes of conducting a sale or enforcing the rights of the Secured Party;

 
7.1.2  
the Debtors will, upon demand, assemble the Collateral and make it available to
the Secured Party at a place and time designated by the Secured Party that is
reasonably convenient to both parties;

 
7.1.3  
the Secured Party may collect and receive all income and proceeds in respect of
the Collateral and exercise all rights of the Debtors and perform any of the
Debtors’ obligations hereunder with respect thereto, all without liability
except to account for property actually received (but the Secured Party shall
have no duty to exercise any of the aforesaid rights, privileges or options and
shall not be responsible for any failure to do so or delay in so doing);

 
7.1.4  
the Secured Party may sell, lease or otherwise dispose of the Collateral at a
public or private sale, with or without having the Collateral at the place of
sale, and upon such terms and in such commercially reasonable manner as the
Secured Party may determine, and the Secured Party may purchase any Collateral
at any such sale.  Unless the Collateral threatens to decline rapidly in value
or is of the type customarily sold on a recognized market, the Secured Party
shall send to the Debtors prior written notice (which, if given at least five
(5) Business Days prior to any sale, shall be deemed to be reasonable) of the
time and place of any public sale of the Collateral or of the time after which
any private sale or other disposition thereof is to be made.  Each Debtor agrees
that upon any such sale the Collateral shall be held by the purchaser free from
all claims or rights of every kind and nature, including any equity of
redemption or similar rights, and all such equity of redemption and similar
rights are hereby expressly waived and released by the Debtors.  In the event
any consent, approval or authorization of any governmental agency is necessary
to effectuate any such sale, the Debtors shall execute all applications or other
instruments as may be required; and

 
7.1.5  
in any jurisdiction where the enforcement of its rights hereunder is sought, the
Secured Party shall have, in addition to all other rights and remedies provided
for in its loan documentation, the rights and remedies of a Secured Party under
the Uniform Commercial Code.

 
 
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Section 7.2
Application of Proceeds

 
The Secured Party shall be entitled to retain and to apply the proceeds of any
disposition of the Collateral, first, to its reasonable expenses of retaking,
holding, protecting and maintaining, and preparing for disposition and disposing
of, the Collateral, including reasonable attorneys’ fees and other legal
expenses incurred by it in connection therewith; and second, to the payment of
the Obligations in such order of priority as provided in the Note.  Any surplus
remaining after such application shall be paid to the Debtors or to whomever may
be legally entitled thereto, provided that in no event shall the Debtors be
credited with any part of the proceeds of the disposition of the Collateral
until such proceeds shall have been received in cash by the Secured Party.  The
Debtors shall remain liable for any deficiency.
 
Section 7.3
Grant of License to Secured Party

 
Solely for purposes of exercising its remedies set forth in Section 7.1 above,
the Secured Party is hereby granted a license or other right to use, without
charge, the Debtors’ labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks and advertising matter, or any property
of a similar nature, in each case, which constitutes and relates to the
Collateral, in completing production of, advertising for sale and selling any
Collateral; and subject to limitations contained therein, the Debtors’ rights
under all licenses and all franchise agreements constituting Collateral shall
inure to the Secured Party’s benefit.
 
Section 7.4
Remedies are Cumulative

 
The remedies in this Section are in addition to, not in limitation of, any other
right, power, privilege, or remedy, either in law, in equity, or otherwise, to
which the Secured Party may be entitled.  No failure or delay on the part of the
Secured Party in exercising any right, power, or remedy will operate as a waiver
thereof, nor will any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right hereunder.  The
remedies in this Agreement are in addition to, not in limitation of, any other
right, power, privilege, or remedy, either in law, in equity, or otherwise, to
which the Secured Party may be entitled.  All Secured Party’s rights and
remedies, whether evidenced by this Agreement or by any other agreement,
instrument or document shall be cumulative and may be exercised singularly or
concurrently.
 
Section 7.5
Default Rate

 
Until paid, all amounts due and payable by the Debtors hereunder shall be a debt
secured by the Collateral and shall bear, whether before or after judgment and
from the date that is five (5) Business Days after the Secured Party’s demand
therefor, interest at the Applicable Rate (as that term is defined in the Note),
or after an Event of Default and during the continuation thereof, interest at
the Default Rate (as that term is defined in the Note).
 
Section 7.6
Commercial Reasonableness

 
To the extent that applicable law imposes duties on the Secured Party to
exercise remedies in a commercially reasonable manner, each Debtor acknowledges
and agrees that it is not commercially unreasonable for the Secured Party (i) to
fail to incur expenses reasonably deemed significant by the Secured Party to
prepare Collateral for disposition or otherwise to fail to complete raw material
or work in process into finished goods or other finished products for
disposition, (ii) to fail to obtain third party consents for access to
Collateral to be disposed of, or to obtain or, if not required by other law, to
fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (iii) to fail to
exercise collection remedies against account debtors or other persons obligated
on Collateral or to fail to remove liens or encumbrances on or any adverse
claims against Collateral, (iv) to exercise collection remedies against account
debtors and other persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (vi) to contact other
persons, whether or not in the same business as the Debtors, for expressions of
interest in acquiring all or any portion of the Collateral, (vi) to hire one or
more professional auctioneers to assist in the disposition of Collateral,
whether or not the collateral is of a specialized nature, (vii) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capability of
doing so, or that match buyers and sellers of assets, (viii) to dispose of
assets in wholesale rather than retail markets, (ix) to disclaim disposition
warranties, (x) to purchase insurance or credit enhancements to insure the
Secured Party against risks of loss, collection or disposition of Collateral or
to provide to the Secured Party a guaranteed return from the collection or
disposition of Collateral, or (xi) to the extent deemed appropriate by the
Secured Party, to obtain the services of other brokers, investment bankers,
consultants and other professionals to assist the Secured Party in the
collection or disposition of any of the Collateral. Each Debtor acknowledges
that the purpose of this Section is to provide non-exhaustive indications of
what actions or omissions by the Secured Party would fulfill the Secured Party’s
duties under the UCC in the Secured Party’s exercise of remedies against the
Collateral and that other actions or omissions by the Secured Party shall not be
deemed to fail to fulfill such duties solely on account of not being indicated
in this Section.  Without limitation upon the foregoing, nothing contained in
this Section shall be construed to grant any rights to the Debtors or to impose
any duties on the Secured Party that would not have been granted or imposed by
this Agreement or by applicable law in the absence of this Section.
 
 
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ARTICLE 8 - Waivers

 
Except as required by applicable law and cannot be waived, each Debtor waives
presentment, demand, notice, protest, notice of acceptance of this Agreement,
notice of any loans made, credit or other extensions granted, collateral
received or delivered or any other action taken in reliance hereon and all other
demands and notices of any description, except for such demands and notices as
are expressly required to be provided to the Debtors under this Agreement or any
other document evidencing the Obligations.  With respect to both the Obligations
and the Collateral, each Debtor assents to any extension or postponement of the
time of payment or any other forgiveness or indulgence, to any substitution,
exchange or release of Collateral, to the addition or release of any party or
person primarily or secondarily liable, to the acceptance of partial payment
thereon and the settlement, compromise or adjustment of any thereof, all in such
manner and at such time or times as the Secured Party reasonably may deem
advisable.  The Secured Party may exercise its rights with respect to the
Collateral without resorting, or regard, to other collateral or sources of
reimbursement for Obligations.  The Secured Party shall not be deemed to have
waived any of its rights with respect to the Obligations or the Collateral
unless such waiver is in writing and signed by the Secured Party.  No delay or
omission on the part of the Secured Party in exercising any right shall operate
as a waiver of such right or any other right.  A waiver on any one occasion
shall not bar or waive the exercise of any right on any future occasion.  All
rights and remedies of the Secured Party in the Obligations or the Collateral,
whether evidenced hereby or by any other instrument or papers, are cumulative
and not exclusive of any remedies provided by law or any other agreement, and
may be exercised separately or concurrently.
 
ARTICLE 9 - Marshalling

 
The Secured Party shall not be required to marshal any present or future
collateral security (including but not limited to the Collateral) for, or other
assurances of payment of, the Obligations or any of them or to resort to such
collateral security or other assurances of payment in any particular order, and
all of its rights and remedies hereunder and in respect of such collateral
security and other assurances of payment shall be cumulative and in addition to
all other rights and remedies, however existing or arising. To the extent that
each of them lawfully may, the Debtors hereby agree that each of them will not
invoke any law relating to the marshalling of collateral which might cause delay
in or impede the enforcement of the Secured Party’s rights and remedies under
this Agreement or under any other instrument creating or evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which any
of the Obligations is secured or payment thereof is otherwise assured, and, to
the extent that each of them lawfully may, the Debtors hereby irrevocably waive
the benefits of all such laws.
 
ARTICLE 10 - Expenses

 
The Debtors shall, promptly on demand, pay or reimburse the Secured Party for
all reasonable expenses (including reasonable attorneys’ fees of outside counsel
or allocated costs of in house counsel) incurred or paid by the Secured Party in
connection with the preparation, negotiation, closing, administration or
enforcement, of this Agreement, or the Secured Party’s on-site periodic
examinations of the Collateral, and for any other amounts permitted to be
expended by the Secured Party hereunder, including without limitation such
expenses as are incurred to preserve the value of the Collateral and the
validity, perfection, priority and value of any security interest created hereby
(including without limitation the costs and expenses of filing financing
statements, continuation statements and other UCC forms and amendments), the
collection, sale or other disposition of any of the Collateral or the exercise
by the Secured Party of any of the rights conferred upon it hereunder.  The
obligation to pay any such amount shall be an additional Obligation secured
hereby and, to the extent permitted by law, each such amount shall bear interest
from the date that is five (5) Business Days after the Secured Party’s demand
therefor at the Applicable Rate (as that term is defined in the Note), or after
an Event of Default and during the continuation thereof, interest at the Default
Rate (as that term is defined in the Note).
 
ARTICLE 11 - Notices

 
Any demand upon or notice to any Debtor that the Secured Party may give shall be
effective when delivered by hand, properly deposited in the  mail as certified
mail, postage prepaid and return receipt requested, or sent by electronic
facsimile transmission, receipt acknowledged, or delivered to an overnight
courier, in each case addressed to such Debtor at the address shown on the first
page of this Agreement or such other address as such Debtor may advise the
Secured Party in writing.  Any notice by any Debtor to the Secured Party shall
be given as aforesaid, addressed to the Secured Party at the address shown on
the first page of this Agreement or such other address as the Secured Party may
advise the Debtors in writing.
 
 
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ARTICLE 12  - Successors and Assigns

 
This Agreement shall be binding upon the Debtors, their successors and assigns,
and shall inure to the benefit of and be enforceable by the Secured Party and
its successors and assigns.  Notwithstanding the foregoing sentence, (i) the
Debtors shall not have the right to assign or otherwise transfer their
respective rights and obligations under this Agreement without the prior written
consent of the Secured Party, and (ii) the Secured Party shall not have the
right to assign or otherwise transfer its rights and obligations under this
Agreement without the prior written consent of the Debtors, except that (a) the
Secured Party may assign or otherwise transfer its rights and obligations under
this Agreement to an Affiliate of the Secured Party without obtaining the
Debtors’ consent, and (b) upon the occurrence of an Event of Default, the
Secured Party may assign or otherwise transfer its rights and obligations under
this Agreement to any person or entity without obtaining the Debtors’ consent.
 
ARTICLE 13 - Miscellaneous

 
Section 13.1
Amendments

 
This Agreement may not be amended or modified except by a writing signed by the
Debtors and the Secured Party, nor may any Debtor assign any of its rights
hereunder, except with the Secured Party’s prior written consent as set forth in
Article 12 above.
 
Section 13.2
Governing Law

 
This Agreement and the terms, covenants and conditions hereof shall be construed
in accordance with, and governed by, the laws of the State of New York (without
giving effect to any conflicts of law provisions contained therein).
 
Section 13.3
Consent to Jurisdiction

 
Each Debtor and the Secured Party (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 Agreement and (ii) hereby waives, and agrees not to
assert in any such suit, action or proceeding, any 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 Debtor and the Secured Party consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address of such party first set forth above and
agrees that such service shall constitute good and sufficient service of process
and notice thereof.  Nothing in this Section 13.3 shall affect or limit any
right to serve process in any other manner permitted by law.  Each Debtor and
the Secured Party hereby agrees that the prevailing party in any suit, action or
proceeding arising out of or relating to this Agreement shall be entitled to
reimbursement for reasonable legal fees from the non-prevailing party.
 
Section 13.4
Collateral in the name of the Debtors and others

 
In the event that any Collateral stands in the name of any Debtor and another or
others jointly, as between the Secured Party and such Debtor, the Secured Party
may deal with the same for all purposes as if it belonged to or stood in the
name of such Debtor alone.
 
Section 13.5
Section Headings

 
Article and Section headings are for convenience of reference only and are not a
part of this Agreement.
 
Section 13.6
WAIVER OF JURY TRIAL

 
EACH DEBTOR AND THE SECURED PARTY HEREBY WAIVES TRIAL BY JURY IN ANY LITIGATION
IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH OR, ARISING OUT OF: (A) THIS
SECURITY AGREEMENT OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED IN CONNECTION
HEREWITH; (B) THE VALIDITY, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF;
OR (C) ANY OTHER CLAIM OR DISPUTE HOWEVER ARISING BETWEEN THE DEBTORS AND THE
SECURED PARTY IN RESPECT OF THIS AGREEMENT.

 
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ARTICLE 14 - Power of Attorney

 
Section 14.1
Appointment and Powers of Secured Party

 
Each Debtor hereby irrevocably constitutes and appoints the Secured Party and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorneys-in-fact with full irrevocable power and authority in the place
and stead of such Debtor or in the Secured Party’s own name, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate action
and to execute any and all documents and instruments that may be necessary or
useful to accomplish the purposes of this Agreement and, without limiting the
generality of the foregoing, hereby gives said attorneys the power and right, on
behalf of such Debtor, without notice to or assent by such Debtor except as
expressly provided for herein, to do the following:
 
14.1.1  
upon the occurrence and during the continuance of an Event of Default, generally
to sell, transfer, pledge, make any agreement with respect to or otherwise
dispose of or deal with any of the Collateral in such manner as is consistent
with the UCC and as fully and completely as though the Secured Party were the
absolute owner thereof for all purposes, and to do, at the Debtors’ expense, at
any time, or from time to time, all acts and things which the Secured Party
deems necessary or useful to protect, preserve or realize upon the Collateral
and the Secured Party’s security interest therein, in order to effect the intent
of this Agreement, all no less fully and effectively as the Debtors might do,
including, without limitation, (A) the filing and prosecuting of registration
and transfer applications with the appropriate federal, state or local agencies
or authorities with respect to trademarks, copyrights and patentable inventions
and processes, (B) upon written notice to the Debtors, the exercise of voting
rights with respect to voting securities, which rights may be exercised, if the
Secured Party so elects, with a view to causing the liquidation of assets of the
issuer of any such securities and (C) the execution, delivery and recording, in
connection with any sale or other disposition of any Collateral, of the
endorsements, assignments or other instruments of conveyance or transfer with
respect to such Collateral; and

 
14.1.2  
to file financing statements with respect hereto, with or without any Debtor’s
signature, or a photocopy of this Agreement in substitution for a financing
statement, as the Secured Party may deem appropriate and to execute in any
Debtor’s name such financing statements and amendments thereto and continuation
statements which may require such Debtor’s signature.

 
Section 14.2
Ratification by Debtors

 
To the extent permitted by law, each Debtor hereby ratifies all that said
attorneys shall lawfully do or cause to be done by virtue hereof. This power of
attorney is a power coupled with an interest and is irrevocable.
 
Section 14.3
No Duty on Secured Party

 
The powers conferred on the Secured Party hereunder are solely to protect its
interests in the Collateral and shall not impose any duty upon it to exercise
any such powers. The Secured Party shall be accountable only for the amounts
that it actually receives as a result of the exercise of such powers, and
neither it nor any of its officers, directors, employees or agents shall be
responsible to any Debtor for any act or failure to act, except for the Secured
Party’s own gross negligence or willful misconduct.
 
Section 14.4
References to “Debtors,” “Guarantor” and “Subsidiaries”

 
In the event that the Maker does not have any subsidiaries, then references
herein to “debtors,” “guarantor,” and “subsidiaries” shall be deemed to refer to
the Maker.
 
ARTICLE 15 - Termination

 
This Agreement and the security interests granted hereunder shall terminate upon
payment, in full, of all the Obligations then outstanding, whereupon the Secured
Party shall forthwith cause to be assigned, transferred and delivered, upon the
request and at the expense of the Debtors, any remaining Collateral to or on the
order of Debtors.  At the same time Secured Party shall execute and deliver to
the Debtors, at the Debtors’ expense, such Uniform Commercial Code termination
statements as shall be reasonably requested by the Debtors to effect the
termination and release of the security interests in favor of the Secured Party
affecting the Collateral.
 
[signature page follows]
 
 
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IN WITNESS WHEREOF, the parties have caused this Security Agreement to be duly
executed as of the date first written above.

Debtors

ECHO THERAPEUTICS, INC.

By:  /s/ Christopher P. Schnittker
                 Name:  Christopher P. Schnittker
 Title:  SVP and CFO

SONTRA MEDICAL, INC.

By:  /s/ Patrick Mooney
 Name:  Patrick Mooney
 Title:  Chief Executive Officer
 
 

Secured Party

PLATINUM-MONTAUR LIFE SCIENCES, LLC

By:  /s/ Michael M. Goldberg, M.D.
                 Name:  Michael M. Goldberg, M.D.
 Title:   _______________

 
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ANNEX A
to
SECURITY
AGREEMENT

FORM OF ADDITIONAL DEBTOR JOINDER

 
Reference is hereby made to the Security Agreement dated as of ______________,
2012 made by ECHO THERAPEUTICS, INC. and its subsidiaries party thereto from
time to time, as Debtors to and in favor of the Secured Party identified therein
(the “Security Agreement”). Capitalized terms used herein and not otherwise
defined herein shall have the meanings given to such terms in, or by reference
in, the Security Agreement.
 
The undersigned hereby agrees that upon delivery of this Additional Debtor
Joinder to the Secured Party referred to above, the undersigned shall (a) be an
Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the same
extent as if the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth therein as of the date
of execution and delivery of this Additional Debtor Joinder.  WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE
SECURED PARTY A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH IN
THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL
PROVISIONS SET FORTH THEREIN.
 
An executed copy of this Joinder shall be delivered to the Secured Party, and
the Secured Party may rely on the matters set forth herein on or after the date
hereof.  This Joinder shall not be modified, amended or terminated without the
prior written consent of the Secured Party.
 
[signature page follows]

 
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IN WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
the name and on behalf of the undersigned.
 

 
[Name of Additional Debtor]

 
By: ___________________________

 
Name:

 
Title:

 
Address:

 

Dated:
_______________________