Exhibit 10.1
COMMON STOCK AND WARRANT PURCHASE
AGREEMENT
Dated as of February 4, 2010
by and among
ECHO THERAPEUTICS, INC.
and
THE PURCHASERS LISTED ON EXHIBIT A

 

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TABLE OF CONTENTS

                      Page     ARTICLE I     Purchase and Sale of Common Stock
and Warrants     1  
Section 1.1
  Purchase and Sale of Common Stock and Warrants     1  
Section 1.2
  Purchase Price and Closings     1  
 
            ARTICLE II     Representations and Warranties     2  
Section 2.1
  Representations and Warranties of the Company     2  
Section 2.2
  Representations and Warranties of the Purchasers     15  
 
            ARTICLE III     Covenants     17  
Section 3.1
  Securities Compliance     17  
Section 3.2
  Registration and Listing     18  
Section 3.3
  Subsequent Variable Rate Transactions     18  
Section 3.4
  Inspection Rights     18  
Section 3.5
  Compliance with Laws     18  
Section 3.6
  Keeping of Records and Books of Account     19  
Section 3.7
  Reporting Requirements     19  
Section 3.8
  Other Agreements     19  
Section 3.9
  Use of Proceeds     19  
Section 3.10
  Reporting Status     19  
Section 3.11
  Disclosure of Material Information     19  
Section 3.12
  Form D     20  
Section 3.13
  Blue Sky     20  
Section 3.14
  No Integrated Offerings     20  
Section 3.15
  Disclosure of Transaction     20  
Section 3.16
  Pledge of Securities     20  
Section 3.17
  Sarbanes-Oxley Act     20  
 
            ARTICLE IV     Conditions     21  
Section 4.1
  Conditions Precedent to the Obligation of the Company to Close and to Sell the
Securities     20  
Section 4.2
  Conditions Precedent to the Obligation of the Purchasers to Close and to
Purchase the Securities     21  
 
            ARTICLE V     Certificate Legend     23  
Section 5.1
  Legend     23  
 
            ARTICLE VI     Indemnification     24  
Section 6.1
  Company Indemnity     24  
Section 6.2
  Indemnification Procedure     25  
 
            ARTICLE VII     Miscellaneous     25  
Section 7.1
  Fees and Expenses     25  
Section 7.2
  Specific Performance; Consent to Jurisdiction; Venue     26  
Section 7.3
  Entire Agreement; Amendment     26  
Section 7.4
  Notices     26  
Section 7.5
  Waivers     27  

 

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TABLE OF CONTENTS
(continued)

                      Page    
Section 7.6
  Headings     27  
Section 7.7
  Successors and Assigns     27  
Section 7.8
  No Third Party Beneficiaries     28  
Section 7.9
  Governing Law     28  
Section 7.10
  Survival     28  
Section 7.11
  Counterparts     28  
Section 7.12
  Publicity     28  
Section 7.13
  Severability     28  
Section 7.14
  Further Assurances     28  

 

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COMMON STOCK AND WARRANT PURCHASE AGREEMENT
     This COMMON STOCK AND WARRANT PURCHASE AGREEMENT (this “Agreement”), dated
as of February 4, 2010, is entered into by and among Echo Therapeutics, Inc., a
Delaware corporation (the "Company”), and the purchasers listed on Exhibit A
hereto (each a "Purchaser” and collectively, the “Purchasers”), for the purchase
and sale of shares of the Company’s common stock, par value $0.01 per share (the
“Common Stock”) by the Purchasers.
     The parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON STOCK AND WARRANTS
          Section 1.1 Purchase and Sale of Common Stock and Warrants.
          (a) Upon the following terms and conditions, the Company shall issue
and sell to the Purchasers, and the Purchasers shall purchase from the Company,
shares of Common Stock (the "Shares”) at a price per share of $1.50 (the “Per
Share Purchase Price”) for an aggregate purchase price of up to Five Million
Dollars ($5,000,000) (the “Purchase Price”); provided, however, that in the
event that this offering is oversubscribed, the Company may, in it sole
discretion, increase the Purchase Price up to twenty percent (20%). Each
Purchaser shall pay the portion of the Purchase Price and shall receive that
number of shares set forth opposite its name on Exhibit A hereto. The Company
and the Purchasers are executing and delivering this Agreement in accordance
with and in reliance upon the exemption from securities registration afforded by
Section 4(2) of the U.S. Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the “Securities Act”), including
Regulation D (“Regulation D”), and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments to be made hereunder.
          (b) Upon the following terms and conditions, each of the Purchasers
shall be issued Warrants, in the form attached hereto as Exhibit B (the
“Warrants”), to purchase the number of shares of Common Stock equal to fifty
percent (50%) of the number of Shares purchased by each Purchaser pursuant to
the terms of this Agreement, as set forth opposite such Purchaser’s name on
Exhibit A hereto. The consideration for the Warrants shall be $0.0001 per
Warrant and shall be deemed to be included in the Per Share Purchase Price. The
Warrants shall expire five (5) years following the Closing Date at which such
Warrants were issued and shall have an initial exercise price per share equal to
$2.25, subject to appropriate adjustment as set forth in the Warrants. Any
shares of Common Stock issuable upon exercise of the Warrants (and such shares
when issued) are herein referred to as the “Warrant Shares.” The Shares, the
Warrants and the Warrant Shares are sometimes collectively referred to herein as
the “Securities.”
          Section 1.2 Purchase Price and Closings. In consideration of and in
express reliance upon the representations, warranties, covenants, terms and
conditions of this Agreement,

 

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the Company agrees to issue and sell to the Purchasers and, in consideration of
and in express reliance upon the representations, warranties, covenants, terms
and conditions of this Agreement, the Purchasers, severally but not jointly,
agree to purchase the number of Shares and Warrants set forth opposite their
respective names on Exhibit A. The Securities shall be sold and funded in a
closing (the “Closing”) that shall take place on or about February 9, 2010 (the
"Closing Date”); provided, however, that in the event that the Company receives
an aggregate Purchase Price of less than Three Million Dollars at the Closing,
it may hold one or more additional closings until it has received the maximum
aggregate Purchase Price pursuant to Section 1.1(a) above. The Closing shall
take place at the offices of the Company, 10 Forge Parkway, Franklin, MA 02038;
provided, that all of the conditions set forth in Article IV hereof and
applicable to the Closing shall have been fulfilled or waived in accordance
herewith. At the Closing and upon receipt by the Company of the appropriate
purchase price from each Purchaser (i.e., a purchase price equal to the number
of Shares to be purchased by such Purchaser multiplied by the Per Share Purchase
Price), the Company shall deliver or cause to be delivered to each such
Purchaser (x) a certificate for the number of Shares set forth opposite the name
of such Purchaser on Exhibit A hereto, (y) a Warrant to purchase such number of
shares of Common Stock as is set forth opposite the name of such Purchaser on
Exhibit A attached hereto and (z) any other documents required to be delivered
pursuant to Article IV hereof. Each Purchaser shall deliver each of the
documents required to be delivered by it pursuant to Article IV hereof as well
as its portion of the Purchase Price by wire transfer to the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
          Section 2.1 Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchasers as follows, as of the date
hereof (or other applicable date as stated in this Section 2.1) and the Closing
Date, except as set forth on the Schedule of Exceptions attached hereto with
each numbered Schedule corresponding to the section number herein:
          (a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted. The Company does not have any Subsidiaries (as defined in
Section 2.1(g)) or own securities of any kind in any other entity except as set
forth on Schedule 2.1(g) hereto. Each such Subsidiary is duly incorporated or
formed, as the case may be, validly existing and in good standing under the laws
of the state opposite its name on Schedule 2.1(g) and has the requisite power to
own, lease and operate its properties and assets and to conduct its business as
it is now being conducted. The Company and each such Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary except for any jurisdiction(s)
(alone or in the aggregate) in which the failure to be so qualified will not
have a Material Adverse Effect. For the purposes of this Agreement, “Material
Adverse Effect” means any effect on the business, results of operations, assets,
condition or prospects (financial or otherwise) of the Company that is material
and

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adverse to the Company and its Subsidiaries (as hereafter defined),
individually, or taken as a whole, and/or any condition, circumstance, or
situation that would prohibit or otherwise materially interfere with the ability
of the Company from entering into and performing any of its obligations under
the Transaction Documents (as defined below) in any material respect; provided,
however, that Material Adverse Effect shall not be deemed to include:
(i) changes in applicable law or (ii) any effect resulting from the public
announcement of the transactions contemplated by this Agreement or the
consummation of the transactions contemplated by this Agreement.
          (b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Warrants, and any and all other documents ancillary to the transactions
contemplated hereby and thereby (all of the foregoing documents collectively
called the “Transaction Documents”), and to issue and sell the Securities in
accordance with the terms hereof and to complete the transactions contemplated
by the Transaction Documents. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action. No further consent or authorization of the Company,
its Board of Directors or stockholders is required. When executed and delivered
by the Company, each of the Transaction Documents shall constitute a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms.
          (c) Capitalization. The authorized capital stock of the Company as of
the date hereof is set forth on Schedule 2.1(c) hereto. All of the outstanding
shares of the Common Stock and any other outstanding security of the Company
have been duly and validly authorized and validly issued, fully paid and
nonassessable and were issued in accordance with the registration or
qualification provisions of the Securities Act, or pursuant to valid exemptions
therefrom. Except as provided in this Agreement or as set forth on
Schedule 2.1(c) hereto, no shares of Common Stock or any other security of the
Company are entitled to preemptive rights, registration rights, rights of first
refusal or similar rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, call or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except (i) as set forth in this Agreement, and (ii) as set
forth on Schedule 2.1(c) hereto, there are no contracts, commitments,
understandings, or arrangements by which the Company or any of its Subsidiaries
are or may become bound to issue additional shares of the capital stock of the
Company or options, securities or rights convertible into shares of capital
stock of the Company. Except for customary transfer restrictions contained in
agreements entered into by the Company in order to sell restricted securities
and set forth on Schedule 2.1(c) hereto, the Company is not a party to or bound
by any agreement or understanding granting registration or anti-dilution rights
to any person with respect to any of its equity or debt securities. Except as
set forth on Schedule 2.1(c), the Company is not a party to, and neither it nor
its Subsidiaries nor any officers or directors of the Company or its
Subsidiaries has no actual or constructive knowledge of, any agreement or
understanding restricting the voting or transfer of any shares of the capital
stock of the Company. Except as disclosed on Schedule 2.1(c), (i) there are no
outstanding debt securities, or other form of material debt of the Company or
any of its Subsidiaries, (ii) there are no contracts, commitments,
understandings, agreements or arrangements under which the Company or any of its
Subsidiaries is required to register the sale

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of any of their securities under the Securities Act, (iii) there are no
outstanding securities of the Company or any of its Subsidiaries which contain
any redemption or similar provisions, and there are no contracts, commitments,
understandings, agreements or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries, (iv) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities, (v) the Company does not have any stock appreciation rights or
“phantom stock” plans or agreements, or any similar plan or agreement and
(vi) as of the date of this Agreement, to the Company’s and each of its
Subsidiaries’ Knowledge, no Person (as defined below) or group of related
Persons beneficially owns (as determined pursuant to Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the “Exchange Act”)) or has the right to
acquire by agreement with or by obligation binding upon the Company, beneficial
ownership of in excess of 5% of the Common Stock except as disclosed on
Schedule 2.1(c). Any Person with any right to purchase securities of the Company
that would be triggered as a result of the transactions contemplated hereby or
by any of the other Transaction Documents has waived such rights in writing or
the time for the exercise of such rights has passed. Except as set forth on
Schedule 2.1(c), there are no options, warrants or other outstanding securities
of the Company (including, without limitation, any equity securities issued
pursuant to any Company plan) the vesting of which will be accelerated by the
transactions contemplated hereby or by any of the other Transaction Documents.
Except as set forth in Schedule 2.1(c), none of the transactions contemplated by
this Agreement or by any of the other Transaction Documents shall cause,
directly or indirectly, the acceleration of vesting of any options issued
pursuant the Company’s stock option plans. For purposes of this Agreement,
“Knowledge” means (i) the actual knowledge of all of the Company’s executive
officers, Patrick Mooney, Harry Mitchell and Kimberly Burke, and (ii) with
respect to each Subsidiary, all of the executive officers of such Subsidiary.
For purposes of this Agreement, “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.
          (d) Issuance of Securities. The Securities to be issued at the Closing
have been duly authorized by all necessary corporate action and, when issued in
accordance with the terms hereof and the Warrants, the Shares and the Warrant
Shares will be validly issued, fully paid and nonassessable and free and clear
of all liens, encumbrances and rights of refusal of any kind and the holders
shall be entitled to all rights accorded to a holder of Common Stock. The
Company shall reserve that number of shares of its common stock sufficient to
issue the Shares and the Warrant Shares without the necessity of having to
authorize additional shares of common stock.
          (e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) violate any
provision of the Company’s Certificate of Incorporation (the “Certificate”) or
Bylaws (the “Bylaws”), each as amended to date, or any Subsidiary’s comparable
charter documents, (ii) conflict with, or constitute a default (or an event
which 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 of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation

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to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries’ respective properties or assets are bound,
or (iii) result in a violation of any federal, state or local statute, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected. Neither the Company nor any of its Subsidiaries is required under
federal, state, foreign or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under the Transaction Documents or issue and sell the Securities in
accordance with the terms hereof.
          (f) Commission Documents, Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(b) or 12(g) of the Exchange
Act, and, except as disclosed on Schedule 2.1(f) hereto, the Company has timely
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the Securities and Exchange Commission (the “Commission”)
pursuant to the reporting requirements of the Exchange Act, including pursuant
to Sections 13, 14 or 15(d) thereof (all of the foregoing and all exhibits
included therein and financial statement and schedules thereto, including
filings incorporated by reference therein being referred to herein as the
“Commission Documents”). At the times of their respective filings, all
Commission Documents complied in all material respects with the requirements of
the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and, to the knowledge of the Company, the Commission Documents at
the time of their respective filings did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. As of their respective dates, the
financial statements of the Company included in the Commission Documents
complied as to form and substance in all material respects with applicable
accounting requirements set forth in GAAP and GAAS and the published rules and
regulations of the Commission or other applicable rules and regulations with
respect thereto. Such financial statements, together with the related notes and
schedules thereto, have been prepared in accordance with GAAP and GAAS applied
on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the Notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial position of the Company and its Subsidiaries as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). The Company is in compliance with all applicable
state securities laws and regulations (“Blue Sky Laws”).
          (g) Subsidiaries. The Commission Documents set forth each Subsidiary
of the Company, showing the jurisdiction of its incorporation or organization
and showing the percentage of each person’s ownership of the outstanding stock
or other interests of such Subsidiary. For the purposes of this Agreement,
“Subsidiary” shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries. All of the
outstanding shares of capital stock of each Subsidiary

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have been duly authorized and validly issued, and are fully paid and
nonassessable. Except as set forth in Schedule 2.1(g), there is no outstanding
preemptive, conversion or other rights, options, warrants or agreements granted
or issued by or binding upon any Subsidiary for the purchase or acquisition of
any shares of capital stock of any Subsidiary or any other securities
convertible into, exchangeable for or evidencing the rights to subscribe for any
shares of such capital stock. Neither the Company nor any Subsidiary is subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of the capital stock of any Subsidiary or any convertible
securities, rights, warrants or options of the type described in the preceding
sentence except as set forth on Schedule 2.1(g) hereto. Except as set forth in
the Schedule 2.1(g), neither the Company nor any Subsidiary is party to, nor has
any Knowledge of, any agreement restricting the voting or transfer of any shares
of the capital stock of any Subsidiary.
          (h) No Material Adverse Change. Since September 30, 2009, the Company
has not experienced or suffered any Material Adverse Effect.
          (i) No Undisclosed Liabilities. Except as disclosed on Schedule 2.1(i)
hereto, since September 30, 2009, neither the Company nor any of its
Subsidiaries has incurred any liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or unsecured, absolute, accrued,
contingent or otherwise) that would be required to be disclosed on a balance
sheet of the Company or any Subsidiary (including the notes thereto) in
conformity with GAAP, other than those incurred in the ordinary course of the
Company’s or its Subsidiaries respective businesses or which, individually or in
the aggregate, will not have a Material Adverse Effect to the Company’s
Knowledge. Since September 30, 2009, except as disclosed in on Schedule 2.1(i)
hereto, none of the Company or any of its Subsidiaries has participated in any
transaction material to the condition of the Company which is outside of the
ordinary course of its business.
          (j) No Undisclosed Events or Circumstances. Since September 30, 2009,
except as disclosed on Schedule 2.1(j) hereto, no event or circumstance has
occurred or exists with respect to the Company or its Subsidiaries or their
respective businesses, properties, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed and which, individually or in the aggregate, would have a Material
Adverse Effect.
          (k) Indebtedness. Schedule 2.1(k) hereto sets forth as of the date
hereof all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments. For the
purposes of this Agreement, "Indebtedness” shall mean (a) any liabilities for
borrowed money or amounts owed in excess of $100,000 (other than trade accounts
payable incurred in the ordinary course of business), (b) all guaranties,
endorsements and other contingent obligations in respect of liabilities for
borrowed money of others in excess of $100,000, whether or not the same are or
should be reflected in the Company’s balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; (c) the
present value of any lease payments in excess of $25,000 due under leases
required to be capitalized in accordance with GAAP. Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness or any liabilities
(other than accrued liabilities or liabilities

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referenced in subsections (a) through (c) above) that are not otherwise
disclosed herein but which in the aggregate total $100,000.
          (l) Title to Assets. Each of the Company and the Subsidiaries has good
and marketable title to all of its real and personal property reflected in the
Commission Documentsthat is material to the business of the Company, free and
clear of any mortgages, pledges, charges, liens, security interests or other
encumbrances, except for those indicated on Schedule 2.1(l) hereto or such that,
individually or in the aggregate, do not cause a Material Adverse Effect, and
except for Permitted Liens. All such leases of the Company and each of its
Subsidiaries are valid and subsisting and in full force and effect in all
material respects. "Permitted Liens” means (i) statutory liens for taxes,
assessments and other governmental charges which are not yet due and payable or
are due but not delinquent or are being contested in good faith by appropriate
proceedings, (ii) statutory or common law liens to secure landlords,
sublandlords, licensors or sublicensors under leases or rental agreements,
(iii) deposits or pledges made in connection with, or to secure payment of,
workers’ compensation, unemployment insurance, old age pension or other social
security programs mandated under applicable laws, (iv) statutory or common law
liens in favor of carriers, warehousemen, mechanics, workmen, repairmen and
materialmen to secure claims for labor, materials or supplies and other like
liens, (v) restrictions on transfer of securities imposed by applicable state
and federal securities laws, (vi) any other encumbrance affecting any asset
which does not materially impede or otherwise affect the ownership or operation
of such asset, (vii) liens resulting from a filing by a lessor as a
precautionary filing for a true lease, (viii) deposits to secure the performance
of bids, trade contracts, leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business, (ix) vendor’s liens to secure payment, or
(x) rights or claims of customers or tenants under licenses or leases.
Notwithstanding the foregoing, no Permitted Lien either individually or in the
aggregate shall or does constitute a Material Adverse Effect.
          (m) ERISA. Except as set forth in the Commission Documents, no
liability to the Pension Benefit Guaranty Corporation has been incurred with
respect to any Plan by the Company or any of its Subsidiaries which is or would
be materially adverse to the Company and its Subsidiaries. The execution and
delivery of this Agreement and the issuance and sale of the Securities will not
involve any transaction which is subject to the prohibitions of Section 406 of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or in
connection with which a tax could be imposed pursuant to Section 4975 of the
Internal Revenue Code of 1986, as amended, provided that, if any of the
Purchasers, or any person or entity that owns a beneficial interest in any of
the Purchasers, is an “employee pension benefit plan” (within the meaning of
Section 3(2) of ERISA) with respect to which the Company is a “party in
interest” (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this
Section 2.1(cc), the term “Plan” shall mean an “employee pension benefit plan”
(as defined in Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
any Subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any Subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.

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          (n) Compliance with Law. The business of the Company and the
Subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth on Schedule 2.1(n) hereto or such that,
individually or in the aggregate, the noncompliance therewith would not
reasonably be expected to have a Material Adverse Effect. The Company and each
of its Subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, would
have a Material Adverse Effect.
          (o) Taxes. Except as set forth on Schedule 2.1(o) hereto, and except
for matters that would not, individually or in the aggregate, have a Material
Adverse Effect, the Company and each of the Subsidiaries has accurately prepared
and filed all federal, state and other tax returns required by law to be filed
by it, has paid all taxes shown to be due and all additional assessments, and
adequate provisions have been and are reflected in the financial statements of
the Company and the Subsidiaries for all current taxes and other charges to
which the Company or any Subsidiary is subject and which are not currently due
and payable. Except as disclosed on Schedule 2.1(o) hereto, none of the federal
income tax returns of the Company or any Subsidiary has been audited by the
Internal Revenue Service. The Company has no Knowledge of any additional
assessments, adjustments or contingent tax liability (whether federal or state)
of any nature whatsoever, whether pending or threatened against the Company or
any Subsidiary for any period, nor of any basis for any such assessment,
adjustment or contingency.
          (p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto, the
Company has not employed any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders’ structuring fees,
financial advisory fees or other similar fees in connection with the Transaction
Documents.
          (q) Disclosure. Neither this Agreement or the Schedules hereto nor any
other documents, certificates or instruments furnished to the Purchasers by or
on behalf of the Company or any Subsidiary in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements made
herein or therein, in the light of the circumstances under which they were made
herein or therein, not misleading.
          (r) Operation of Business. The Company and each of the Subsidiaries
owns or possesses the rights to use all patents, trademarks, domain names
(whether or not registered) and any patentable improvements or copyrightable
derivative works thereof, websites and intellectual property rights relating
thereto, service marks, trade names, copyrights, licenses and authorizations
which, to the Company’s Knowledge, are necessary for the conduct of its business
as now conducted, which the failure to so have would have a Material Adverse
Effect. Except as set forth on Schedule 2.1(r), neither the Company nor any
Subsidiary has received written notice that the intellectual property rights
used by the Company or any Subsidiary, and necessary for their respective
business, violates or infringes upon the rights of any third party.

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          (s) Books and Records; Internal Accounting Controls; Sarbanes-Oxley.
The records and documents of the Company and its Subsidiaries accurately reflect
in all material respects the information relating to the business of the Company
and its Subsidiaries, the location and collection of their assets, the nature
and amount of their liabilities, and the nature of all transactions giving rise
to the obligations or accounts receivable of the Company or any Subsidiary. The
Company and its officers are in material compliance with all provisions of the
Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing Date.
The Company and each of its 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, (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate actions are taken with respect to any differences and
(v) accounts, notes and other receivables and inventory are recorded accurately,
and proper and adequate procedures are implemented to effect the collection
thereof on a current and timely basis. Except as set forth on Schedule 2.1(s)
hereto, there are no significant deficiencies or material weaknesses in the
design or operation of internal controls over financial reporting that would
reasonably be expected to materially and adversely affect the Company’s ability
to record, process, summarize and report financial information, and there is no
fraud, whether or not material, that involves management or, to the Knowledge of
the Company, other employees who have a significant role in the Company’s
internal controls and the Company has provided to the Purchaser copies of any
written materials relating to the foregoing.
          (t) Material Agreements. Except for the Transaction Documents (with
respect to clause (i) of this Section 2.1(t) only) or as set forth on
Schedule 2.1(t) hereto, or as would not have a Material Adverse Effect, (i) to
the Company’s Knowledge, the Company and each of its Subsidiaries have performed
all obligations required to be performed by them to date under any written or
oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, filed or required to be filed with the Commission (the “Material
Agreements”), (ii) neither the Company nor any of its Subsidiaries has received
any notice of default under any Material Agreement and, (iii) to the Company’s
Knowledge, neither the Company nor any of its Subsidiaries is in default under
any material provision of any Material Agreement.
          (u) Transactions with Affiliates. Except as set forth on
Schedule 2.1(u) hereto, there are no loans, leases, agreements, contracts,
royalty agreements, management contracts or arrangements or other continuing or
proposed transactions exceeding $50,000 in value between (a) the Company, any
Subsidiary or any of their respective customers or suppliers on the one hand,
and (b) on the other hand, any officer, employee, consultant or director of the
Company, or any of its Subsidiaries (except for reimbursements to such persons
for reasonable expenses incurred on behalf of the Company or any Subsidiary, or
arrangements entered into by and between any such person and the Company or any
Subsidiary as part of the normal and customary terms of such person’s employment
or services as a director or consultant with the Company or any of its
Subsidiaries), or any person owning any capital stock of the Company or any
Subsidiary or any member of the immediate family of such officer, employee,
consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder, or a
member of the immediate family of such officer,

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employee, consultant, director or stockholder which, in each case, is required
to be disclosed in the Commission Documents or in the Company’s most recently
filed definitive proxy statement on Schedule 14A, that is not so disclosed in
the Commission Documents or in such proxy statement.
          (v) Securities Act of 1933. Subject to the accuracy and completeness
of the representations and warranties of the Purchasers contained in the
Transaction Documents, the Company has complied and will continuously comply
with all applicable federal and state securities laws in connection with the
offer, issuance and sale of the Securities hereunder. Neither the Company nor
anyone acting on its behalf, directly or indirectly, has or will sell, offer to
sell or solicit offers to buy any of the Securities or similar securities to, or
solicit offers with respect thereto from, or enter into any negotiations
relating thereto with, any person, or has taken or will take any action so as to
bring the issuance and sale of any of the Securities under the registration
provisions of the Securities Act and applicable state securities laws, and
neither the Company nor any of its affiliates, nor any person acting on its or
their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of any of the Securities.
          (w) Governmental Approvals. Except as set forth on Schedule 2.1(w)
hereto, and except for the filing of any notice prior or subsequent to the
Closing that may be required under applicable state and/or federal securities
laws (which if required, shall be filed on a timely basis), no authorization,
consent, approval, license, exemption of, filing or registration with any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the execution or delivery of the Securities, or for the
performance by the Company of its obligations under the Transaction Documents
except for such authorizations, consents, approvals, licenses, exemptions,
filings or registrations the Company’s failure of which to obtain would not,
individually or in the aggregate, constitute a Material Adverse Effect.
          (x) Employees. Neither the Company nor any Subsidiary has any
collective bargaining arrangements or agreements covering any of its employees,
except as set forth on Schedule 2.1(x) hereto. Except as set forth on
Schedule 2.1(x) hereto, neither the Company nor any Subsidiary has any
employment contract, agreement regarding proprietary information,
non-competition agreement, non-solicitation agreement, confidentiality
agreement, or any other similar contract or restrictive covenant, relating to
the right of any officer, employee or consultant to be employed or engaged by
the Company or such Subsidiary. Since September 30, 2009, no officer, consultant
or key employee of the Company or any Subsidiary whose termination, either
individually or in the aggregate, would be reasonably likely to have a Material
Adverse Effect, has terminated, or indicated to the Company his or her intent to
terminate, his or her employment or engagement with the Company or any
Subsidiary.
          (y) Environmental Compliance. Except as disclosed in the Commission
Documents or on Schedule 2.1(y) hereto, the Company and each of its Subsidiaries
have obtained all material approvals, authorization, certificates, consents,
licenses, orders and permits or other similar authorizations of all governmental
authorities, or from any other person, that are required under any Environmental
Laws, except where failure to obtain such material approvals, authorization,
certificates, consents, licenses, orders and permits or other similar
authorizations

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would not individually or in the aggregate have a Material Adverse Effect.
“Environmental Laws” shall mean all applicable laws relating to the protection
of the environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Except as set
forth in the Commission Documents or on Schedule 2.1(y) hereto, the Company has
all necessary governmental approvals required under all Environmental Laws and
used in its business or in the business of any of its Subsidiaries, except for
such instances as would not individually or in the aggregate have a Material
Adverse Effect. Except as disclosed in the Commission Documents, the Company and
each of its Subsidiaries are also in compliance with all other limitations,
restrictions, conditions, standards, requirements, schedules and timetables
required or imposed under all Environmental Laws, except where failure to be in
compliance would not individually or in the aggregate have a Material Adverse
Effect. Except as disclosed in the Commission Documents or for such instances as
would not individually or in the aggregate have a Material Adverse Effect, there
are no past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company or its Subsidiaries
that violate or would be reasonably likely to violate any Environmental Law
after the Closing or that would be reasonably likely to give rise to any
environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including, without limitation,
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance.
          (z) Labor Relations. Except as set forth in the Commission Documents
or as could not reasonably be expected to have a Material Adverse Effect,
(i) neither the Company nor any of its Subsidiaries is engaged in any unfair
labor practice, (ii) there is no strike, labor dispute, slowdown or stoppage
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries, and (iii) neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or contract.
          (aa) Absence of Certain Developments. Except as disclosed on
Schedule 2.1(aa) hereto, since September 30, 2009, neither the Company nor any
Subsidiary has:
               (i) issued or become obligated to issue any stock, bonds or other
corporate securities or any right, options or warrants with respect thereto
other than under the Company’s stock option plan(s) and otherwise in the
ordinary course of business;
               (ii) borrowed or become obligated to borrow any amount or
incurred or become subject to any liabilities (absolute or contingent) except
current liabilities incurred in the ordinary course of business which are
comparable in nature and amount to the current liabilities incurred in the
ordinary course of business during the comparable portion of its prior

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fiscal year, as adjusted to reflect the current nature and volume of the
Company’s or such Subsidiary’s business;
               (iii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than Permitted Liens and
current liabilities paid in the ordinary course of business;
               (iv) declared or made, or become obligated to make, any payment
or distribution of cash or other property to stockholders with respect to its
stock, or purchased or redeemed, or made any agreements so to purchase or
redeem, any shares of its capital stock other than under any equity incentive
plans of the Company or any pre-existing cashless exercise rights issued in
connection with a prior financing, which plans and/or prior financing(s) are
disclosed on Schedule 2.1(aa);
               (v) sold, assigned or transferred, or become obligated to sell,
assign or transfer, any other tangible assets, or canceled any debts or claims,
except in the ordinary course of business;
               (vi) sold, assigned or transferred, or become obligated to sell,
assign or transfer, any patent rights, trademarks, trade names, copyrights,
trade secrets or other intangible assets or intellectual property rights
necessary for the conduct of its business activities;
               (vii) suffered any material losses or waived, or agreed to waive,
any rights of material value, whether or not in the ordinary course of business;
               (viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
               (ix) made capital expenditures or commitments therefor that
aggregate in excess of $100,000;
               (x) made charitable contributions or pledges in excess of $10,000
in the aggregate;
               (xi) experienced any material problems with labor or management
in connection with the terms and conditions of their employment; or
               (xii) entered into an agreement, written or otherwise, to take
any of the foregoing actions.
          (bb) Investment Company Act Status. The Company is not, and as a
result of and immediately upon the Closing will not be, an “investment company”
or a company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended.

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          (cc) Independent Nature of Purchasers. The Company acknowledges that
the obligations of each Purchaser under the Transaction Documents are several
and not joint with the obligations of any other Purchaser, and no Purchaser
shall be responsible in any way for the performance of the obligations of any
other Purchaser under the Transaction Documents and the Company shall not be
excused from performance of its obligations to any Purchaser under the
Transaction Documents as a result of nonperformance or breach by any other
Purchaser. The Company acknowledges that the decision of each Purchaser to
purchase Securities pursuant to this Agreement has been made by such Purchaser
independently of any other purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of its Subsidiaries which may have
made or given by any other Purchaser or by any agent or employee of any other
Purchaser. The Company acknowledges that nothing contained herein, or in any
Transaction Document, and no action taken by any Purchaser pursuant hereto or
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. The Company acknowledges that 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.
          (dd) No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties herein, 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 the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act which would prevent the Company
from selling the Securities pursuant to Regulation D and Rule 506 thereof under
the Securities Act, or any applicable exchange-related stockholder approval
provisions, nor will the Company or any of its affiliates or Subsidiaries take
any action or steps that would cause the offering of the Securities to be
integrated with other offerings if such other offering, if integrated, would
cause the offer and sale of the Securities not to be exempt from registration
pursuant to Regulation D and Rule 506 thereof under the Securities Act. Except
as set forth on Schedule 2.1(dd) hereto, the Company does not have any
registration statement pending before the Commission or currently under the
Commission’s review and since June 30, 2009, the Company has not offered or sold
any of its equity securities or debt securities convertible into shares of
Common Stock.
          (ee) DTC Status. The Company’s current transfer agent is a participant
in and the Common Stock is eligible for transfer pursuant to the Depository
Trust Company Automated Securities Transfer Program. The name, address,
telephone number, fax number, contact person and email address of the Company’s
transfer agent is set forth on Schedule 2.1(ee) hereto.
          (ff) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. To the best of Company’s knowledge,
such insurance contracts and policies are

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accurate and complete. Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost. The Company currently maintains directors and officers insurance.
          (gg) Accountants. The Company’s accountants are set forth on Schedule
2.1(gg). To the Company’s knowledge, such accountants, who the Company expects
will express their opinion with respect to the financial statements to be
included in the Company’s Annual Report on Form 10-K for the year ending
December 31, 2009, are a registered public accounting firm as required by the
Securities Act and are registered with the Public Company Accounting Oversight
Board.
          (hh) No Disagreements with Accountants. There are no disagreements of
any kind presently existing, or reasonably anticipated by the Company to arise,
between the accountants formerly or presently employed by the Company and/or its
Subsidiaries, and the Company is current with respect to any fees owed to its
accountants.
          (ii) No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor, to the knowledge of the Company, any of
its directors, officers or any person acting on their behalf (i) has conducted
or will conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D) or general advertising with respect to the sale of the Securities,
or (ii) made any offers or sales of any security or solicited any offers to buy
any security under any circumstances that would require registration of the
Shares or Warrant Shares.
          (jj) Foreign Corrupt Practices. Neither the Company nor its
Subsidiaries, nor to the knowledge of the Company or its officers or directors,
any agent or other person acting on behalf of the Company or its Subsidiaries,
has (i) directly or indirectly, used any corrupt funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company or its Subsidiaries (or made
by any person acting on their behalf of which the Company or its officers or
directors are or reasonably should be aware) which is in violation of law, or
(iv) violated in any material respect any provision of the Foreign Corrupt
Practices Act of 1977, as amended.
          (kk) Certificate of Incorporation. True and correct copies of the
Company’s certificate of incorporation and the certificates of incorporation
and/or formation of the Company’s Subsidiaries are attached under
Schedule 2.1(kk).
          (ll) Litigation. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the Knowledge of the
Company, threatened, against or materially affecting the Company, any Subsidiary
or any of their respective properties, or to the Company’s Knowledge, against
any of its or its Subsidiaries’ directors, officers or key employees before or
by any court, arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an “Action”)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or (ii)

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could, if there were an unfavorable decision, have or reasonably be expected to
result in a Material Adverse Effect; nor to the Company’s knowledge does there
exist any condition which may be the basis of any such Action. Neither the
Company nor any Subsidiary, nor, to the Company’s knowledge, any director or
officer thereof, is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty or involving the Company’s business, assets or
properties, nor has any such Action been threatened by or against the Company or
any Subsidiary. There has not been, and to the Knowledge of the Company, there
is not pending or contemplated, any investigation by the Commission involving
the Company or any current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
          (mm) Anti-takeover Device. Neither the Company nor any of its
Subsidiaries has any outstanding shareholder rights plan or “poison pill” or any
similar arrangement. There are no provisions of any anti-takeover or business
combination statute applicable to the Company, the Articles and the Bylaws which
would preclude the issuance and sale of the Securities, the reservation for
issuance of the Warrant Shares and the consummation of the other transactions
contemplated by this Agreement or any of the other Transaction Documents.
          Section 2.2 Representations and Warranties of the Purchasers. Each of
the Purchasers hereby represents and warrants to the Company with respect solely
to itself and not with respect to any other Purchaser as follows as of the date
hereof, except as set forth on the Schedule of Exceptions attached hereto with
each numbered schedule corresponding to the section number herein:
          (a) Organization and Standing of the Purchasers. If the Purchaser is
an entity, such Purchaser is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
          (b) Authorization and Power. Such Purchaser has the requisite power
and authority to enter into and perform its obligations under the Transaction
Documents and to purchase the Securities being sold to it hereunder. The
execution, delivery and performance of the Transaction Documents by such
Purchaser and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate, partnership or other
action, and no further consent or authorization of such Purchaser or its Board
of Directors, stockholders, partners or members, as the case may be, is
required. When executed and delivered by the Purchasers, the Transaction
Documents shall constitute valid and binding obligations of such Purchaser
enforceable against such Purchaser in accordance with their terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor’s
rights and remedies or by other equitable principles of general application.
          (c) No Conflict. The execution, delivery and performance of the
Transaction Documents by such Purchaser and the consummation by such Purchaser
of the transactions

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contemplated thereby and hereby do not and will not (i) violate any provision of
such Purchaser’s charter or organizational documents, (ii) conflict with, or
constitute a default (or an event which 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 of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which such Purchaser is a party or by which such Purchaser’s respective
properties or assets are bound, or (iii) result in a violation of any federal,
state, local or foreign statute, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to such
Purchaser or by which any property or asset of such Purchaser are bound or
affected, except, in all cases, other than violations pursuant to clauses (i) or
(iii) (with respect to federal and state securities laws) above, for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, materially and
adversely affect such Purchaser’s ability to perform its obligations under the
Transaction Documents.
          (d) Acquisition for Investment. Such Purchaser is purchasing the
Securities solely for its own account for the purpose of investment and not with
a view to or for sale in connection with distribution. Such Purchaser does not
have a present intention to sell any of the Securities, nor a present
arrangement (whether or not legally binding) or intention to effect any
distribution of any of the Securities to or through any person or entity;
provided, however, that by making the representations herein, such Purchaser
does not agree to hold any of the Securities for any minimum or other specific
term and reserves the right to dispose of the Securities at any time in
accordance with the terms and provisions of the Transaction Documents and
Federal and state securities laws applicable to such disposition. Such Purchaser
acknowledges that (i) it has such knowledge and experience in financial and
business matters such that Purchaser is capable of evaluating the merits and
risks of Purchaser’s investment in the Company, (ii) it is able to bear the
financial risks associated with an investment in the Securities, (iii) it has
been given full access to such records of the Company and the Subsidiaries and
to the officers of the Company and the Subsidiaries as it has deemed necessary
or appropriate to conduct its due diligence investigation, (iv) it has reviewed
or received copies of the Commission Documents, (v) it and has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities,
(vi) except for this Agreement and the transactions contemplated hereby, neither
the Company nor its employees have disclosed to such Purchaser any material
non-public information that, according to applicable law, rule or regulation,
should have been disclosed publicly by the Company prior to the date hereof but
which has not been so disclosed, and (vii) it (and not the Company) shall be
responsible for its own tax liabilities that may arise as a result of this
investment or the transactions contemplated by this Agreement. Purchaser has the
financial capability to perform all of its obligations under this Agreement,
including the financial capability to purchase the Securities.
          (e) Rule 144. Such Purchaser understands that the Securities may not
be sold unless such Securities are registered under the Securities Act or an
exemption from registration is available. Such Purchaser acknowledges that such
person is familiar with Rule 144 of the rules and regulations of the Commission,
as amended, promulgated pursuant to the Securities Act (“Rule 144”), and that
such Purchaser has been advised that Rule 144 permits resales only under certain
circumstances. Such Purchaser understands that to the extent that Rule 144 is
not

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available, such Purchaser will be unable to sell any Securities without either
registration under the Securities Act or the existence of another exemption from
such registration requirement.
          (f) General. Such Purchaser understands that the Securities are being
offered and sold in reliance on a transactional exemption from the registration
requirements of federal and state securities laws and the Company is relying
upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the applicability of such exemptions and the suitability of such
Purchaser to acquire the Securities. Such Purchaser understands that no United
States federal or state agency or any government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
          (g) Accredited Investor. Such Purchaser is an “accredited investor”
(as defined in Rule 501 of Regulation D), and such Purchaser has such experience
in business and financial matters that it is capable of evaluating the merits
and risks of an investment in the Securities. Such Purchaser is not required to
be registered as a broker-dealer under Section 15 of the Exchange Act and such
Purchaser is not a broker-dealer. Such Purchaser acknowledges that an investment
in the Securities is speculative and involves a high degree of risk.
          (h) Independent Investment. Except as may be disclosed in any filings
with the Commission by the Purchasers under Section 13 and/or Section 16 of the
Exchange Act, no Purchaser has agreed to act with any other Purchaser for the
purpose of acquiring, holding, voting or disposing of the Shares purchased
hereunder for purposes of Section 13(d) under the Exchange Act, and each
Purchaser is acting independently with respect to its investment in the
Securities.
          (i) No Shorting. Since becoming aware of a potential investment
opportunity in the Company, no Purchaser has engaged in any short sales of any
securities of the Company or instructed any third parties to engage in any short
sales of securities of the Company on its behalf prior to the Closing Date. Each
Purchaser covenants and agrees that, so long as it is in possession of any
Securities, it will not be in a net short position with respect to the shares of
Common Stock issued or issuable to it.
          (j) Not an Affiliate. Such Purchaser is not an officer, director or
“affiliate” (as defined in Rule 405 of the Securities Act) of the Company.
ARTICLE III
COVENANTS
     The Company covenants with each Purchaser as follows, which covenants are
for the benefit of each Purchaser and their respective permitted assignees.
          Section 3.1 Securities Compliance. The Company shall notify the
Commission in accordance with its rules and regulations, of the transactions
contemplated by any of the Transaction Documents and shall take all other
necessary action and proceedings as

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may be required and permitted by applicable law, rule and regulation, for the
legal and valid issuance of the Securities to the Purchasers, or their
respective subsequent holders.
          Section 3.2 Registration and Listing. The Company shall use
commercially reasonable efforts to (i) cause its Common Stock to continue to be
registered under Sections 12(b) or 12(g) of the Exchange Act, (ii) to comply in
all respects with its reporting and filing obligations under the Exchange Act
and any applicable Blue Sky Laws, and (iii) to not take any action or file any
document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein. The Company will use commercially
reasonable efforts to continue the listing or trading of its Common Stock on the
OTC Bulletin Board or any successor market. If the Company enters into a
Qualified Financing (as defined below) and grants registration rights with
respect to the securities or instruments issued to investors or other
participants in the Qualified Financing, the Company shall provide registration
rights to the Purchasers with respect to the Securities upon the same terms and
conditions as those provided to the investors or other participants in the
Qualified Financing. For purposes of this Section, “Qualified Financing” means
any equity financing providing for the sale and issuance of any shares of Common
Stock or securities convertible into Common Stock, except for (i) the issuance
of Common Stock upon the exercise or conversion of any Common Stock equivalent
outstanding on the Closing Date in accordance with the terms of such Common
Stock equivalents as of such date; (ii) the grant of options to purchase Common
Stock, with exercise prices not less than the closing price of the Common Stock
on the date of grant, which are issued to employees, officers, directors or
consultants of the Company for the primary purpose of soliciting or retaining
their employment or service, and the issuance of shares of Common Stock upon the
exercise thereof; (iii) the issuance of securities in connection with strategic
business partnerships or joint ventures, the primary purpose of which, in the
reasonable judgment of the Board of Directors, is not to raise additional
capital or (iv) the issuance of securities pursuant to any equipment financing
from a bank or similar financial or lending institution approved by the Board of
Directors. If, prior to December 31, 2010, the Company proposes to file a
registration statement under the Securities Act with respect to an offering
(other than any registration statement relating solely to an underwritten public
offering or employee benefit plans or filed in connection with an exchange
offer) of shares, then the Company shall in each case give written notice of
such proposed filing to the Purchasers as soon as practicable (but no later than
ten (10) business days) before the anticipated filing date, and such notice
shall offer each Purchaser the opportunity to register such number of shares of
restricted stock as such Purchaser may request. Each Purchaser desiring to have
Securities included in such registration statement shall so advise the Company
in writing within five (5) business days after the date on which the Company’s
notice is so given, setting forth the number of shares of Securities for which
registration is requested.
          Section 3.3 [Intentionally omitted.]
          Section 3.4 Inspection Rights. The Company shall permit, during normal
business hours and upon reasonable request and reasonable notice, each
Purchaser, prospective Purchaser or any employees, agents or representatives
thereof, and for so long as any Purchaser shall be obligated hereunder to
purchase the Shares or shall beneficially own any Shares or Warrant Shares, or
as long as any prospective Purchaser has the right or option to purchase any

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Shares, for purposes reasonably related to such Purchaser’s or prospective
Purchaser’s interests as a stockholder or prospective stockholder to examine and
make reasonable copies of the records and books of account of, and visit and
inspect the properties, assets, operations and business of the Company and any
Subsidiary, and to discuss the affairs, finances and accounts of the Company and
any Subsidiary with any of its officers, consultants, directors, and key
employees. The Company agrees to make the appropriate employee(s) available for
such discussion(s).
          Section 3.5 Compliance with Laws. The Company shall comply, and cause
each Subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which would have a Material Adverse Effect.
          Section 3.6 Keeping of Records and Books of Account. The Company shall
keep and cause each Subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
Subsidiaries.
          Section 3.7 Reporting Requirements. If the Commission ceases making
the Company’s periodic reports available via the Internet without charge, then
the Company shall, promptly after filing with the Commission, furnish the
following to each Purchaser so long as such Purchaser shall be obligated
hereunder to purchase the Securities or shall beneficially own Shares or Warrant
Shares:
          (a) Quarterly Reports filed with the Commission on Form 10-Q;
          (b) Annual Reports filed with the Commission on Form 10-K; and
          (c) Copies of all notices, information and proxy statements in
connection with any meetings that are, in each case, provided to holders of
shares of Common Stock, contemporaneously with the delivery of such notices or
information to such holders of Common Stock.
          Section 3.8 Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right or ability of the Company or any Subsidiary to perform its material
obligations under the Transaction Documents.
          Section 3.9 Use of Proceeds. The net proceeds from the sale of the
Shares will be used by the Company for FDA registration, product development and
manufacturing, and for working capital to the extent not used for the foregoing
specified purposes, and, with the exception of the redemption of shares of the
Company’s Series B Preferred Stock in accordance with the Certificate of
Designation, Preferences and Rights of Series B Preferred Stock, not to redeem
any Common Stock or securities convertible, exercisable or exchangeable into
Common Stock or to settle any outstanding litigation, nor for any other purpose
not expressly specified herein.
          Section 3.10 Reporting Status. So long as a Purchaser beneficially
owns any of the Securities, the Company shall timely file all reports required
to be filed with the Commission

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pursuant to the Exchange Act, and the Company shall not terminate its status as
an issuer required to file reports under the Exchange Act even if the Exchange
Act or the rules and regulations thereunder would permit such termination.
          Section 3.11 Disclosure of Material Information. The Company covenants
and agrees that neither it nor any other person acting on its behalf has
provided or 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
representations in effecting transactions in securities of the Company.
          Section 3.12 Form D. The Company agrees to file a Form D with respect
to the Securities as required by Rule 506 under Regulation D and to provide a
copy thereof to the Purchasers promptly after such filing.
          Section 3.13 Blue Sky. The Company agrees to file any form or forms
required by any state with respect to the sale of any of the Securities
hereunder.
          Section 3.14 No Integrated Offerings. The Company shall not make any
offers or sales of any security (other than the Securities being offered or sold
hereunder) under circumstances that would require registration of the Securities
being offered or sold hereunder under the Securities Act.
          Section 3.15 Disclosure of Transaction. The Company shall file with
the Commission a Current Report on Form 8-K (the “Form 8-K”) describing the
material terms of the transactions contemplated hereby (and attaching as
exhibits thereto this Agreement and the form of Warrant) as soon as practicable
following the Closing Date but in no event more than four (4) Trading Days
following the Closing Date, which Press Release and Form 8-K shall be subject to
prior review and comment by the Purchasers. “Trading Day” means any day during
which the OTC Bulletin Board (or other principal exchange on which the Common
Stock is traded) shall be open for trading.
          Section 3.16 Pledge of Securities. The Company acknowledges and agrees
that the Securities may be pledged by a Purchaser in connection with a bona fide
margin agreement or other loan or financing arrangement that is secured by the
Common Stock. The pledge of Common Stock shall not be deemed to be a transfer,
sale or assignment of the Common Stock hereunder, and no Purchaser effecting a
pledge of Common Stock shall be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement
or any other Transaction Document; provided that a Purchaser and its pledgee
shall be required to comply with the provisions of Article V hereof in order to
effect a sale, transfer or assignment of Common Stock to such pledgee. At the
Purchasers’ expense, the Company hereby agrees to execute and deliver such
documentation as a pledgee of the Common Stock may reasonably request in
connection with a pledge of the Common Stock to such pledgee by a Purchaser.

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          Section 3.17 Sarbanes-Oxley Act. The Company shall comply with the
applicable provisions of the Sarbanes-Oxley Act, and the rules and regulations
promulgated thereunder, upon the effectiveness of such provisions or the date by
which compliance therewith by the Company is required.
ARTICLE IV
CONDITIONS
          Section 4.1 Conditions Precedent to the Obligation of the Company to
Close and to Sell the Securities. The obligation hereunder of the Company to
close and issue and sell the Securities to the Purchasers is subject to the
satisfaction or waiver, at or before the Closing, of the conditions set forth
below. These conditions are for the Company’s sole benefit and may be waived by
the Company at any time in its sole discretion.
          (a) Accuracy of the Purchasers’ Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct in
all material respects (as of the date when made and as of the Closing Date, as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
          (b) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Purchaser at or prior to the Closing Date.
          (c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
          (d) Delivery of Purchase Price. The Purchasers shall have delivered to
the Company the applicable purchase price for the Securities to be purchased by
each Purchaser.
          (e) Delivery of Transaction Documents. The Transaction Documents shall
have been duly executed and delivered by the Purchasers to the Company.
          Section 4.2 Conditions Precedent to the Obligation of the Purchasers
to Close and to Purchase the Securities. The obligation hereunder of each
Purchaser to purchase the Securities and consummate the transactions
contemplated by this Agreement is subject to the satisfaction or waiver, at or
before the Closing Date, of each of the conditions set forth below. These
conditions are for the Purchaser’s sole benefit and may be waived by the
Purchaser at any time in its sole discretion.
          (a) Accuracy of the Company’s Representations and Warranties. Each of
the representations and warranties of the Company in this Agreement, the
schedules referenced herein and attached hereto, and the other Transaction
Documents shall be true and correct in all

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material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of such date.
          (b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date.
          (c) No Suspension, Etc. Trading in the Common Stock shall not have
been suspended by the Commission or the OTC Bulletin Board (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the Closing), and, at any time prior to
the Closing Date, trading in securities generally as reported by Bloomberg
Financial Markets (“Bloomberg”) shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades are
reported by Bloomberg, or on the New York Stock Exchange, nor shall a banking
moratorium have been declared either by the United States or New York State
authorities.
          (d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
          (e) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any Subsidiary, or any of the officers, directors or affiliates
of the Company or any Subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
          (f) Shares and Warrants. At or prior to the Closing, the Company shall
have delivered to the Purchasers certificates representing the Shares (in such
denominations as each Purchaser may request) and the Warrants (in such
denominations as each Purchaser may request) duly executed by the Company, in
each case, being acquired by the Purchasers at the Closing.
          (g) Secretary’s Certificate. The Company shall have delivered to the
Purchasers a secretary’s certificate, dated as of the Closing Date, as to
(i) the resolutions adopted by the Board of Directors approving the transactions
contemplated hereby, (ii) the Certificate, (iii) the Bylaws, each as in effect
at the Closing, and (iv) the authority and incumbency of the officers of the
Company executing the Transaction Documents and any other documents required to
be executed or delivered in connection therewith.
          (h) Officer’s Certificate. On the Closing Date, the Company shall have
delivered to the Purchasers a certificate signed by an executive officer on
behalf of the Company,

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dated as of the Closing Date, confirming the accuracy of the Company’s
representations, warranties and its compliance with covenants as of the Closing
Date and confirming the compliance by the Company with the conditions precedent
set forth in paragraphs (b)-(e) of this Section 4.2 as of the Closing Date
(provided that, with respect to the matters in paragraphs (d) and (e) of this
Section 4.2, such confirmation shall be based on the Knowledge of the Company).
          (i) Material Adverse Effect. No Material Adverse Effect shall have
occurred at or before the Closing Date.
          (j) Opinion of Counsel. The Purchasers shall have received an opinion
of counsel to the Company, dated the date of such Closing, substantially in the
form of Exhibit C hereto, with such exceptions and limitations as shall be
reasonably acceptable to counsel to the Purchasers.
ARTICLE V
CERTIFICATE LEGEND
          Section 5.1 Legend. Each certificate representing the Securities shall
be stamped or otherwise imprinted with a legend substantially in the following
form (in addition to any legend required by applicable state securities or “blue
sky” laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) 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 ECHO THERAPEUTICS, INC. SHALL HAVE RECEIVED AN OPINION
OF COUNSEL TO THE HOLDER THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED.
     The Company agrees to reissue certificates representing any of the Shares
and the Warrant Shares, without the legend set forth above if at such time,
prior to making any transfer of any such Shares or Warrant Shares, such holder
thereof shall give written notice to the Company describing the manner and terms
of such transfer and removal as the Company may reasonably request. Such
proposed transfer and removal 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 the Shares or Warrant Shares, as
the case may be, 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
Commission and has become and remains effective under the Securities Act,
(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, or (iv) the holder provides the Company
with reasonable assurances that such security can be

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sold pursuant to Rule 144 under the Securities Act or another exemption
therefrom; and (b) either (i) the Company has received an opinion of counsel
reasonably satisfactory to the Company, to the effect that registration or
qualification under the securities or “blue sky” laws of any state is not
required in connection with such proposed disposition, or (ii) compliance with
applicable state securities or “blue sky” laws has been effected or a valid
exemption exists with respect thereto. The Company will respond to any such
notice from a holder within five (5) business days. In the case of any proposed
transfer under this Section 5.1, the Company will use reasonable efforts to
comply with any such applicable state securities or “blue sky” laws, but shall
in no event be required, (x) to qualify to do business in any state where it is
not then qualified, or (y) to take any action that would subject it to tax or to
the general service of process in any state where it is not then subject. The
restrictions on transfer contained in this Section 5.1 shall be in addition to,
and not by way of limitation of, any other restrictions on transfer contained in
any other section of this Agreement. Whenever a certificate representing the
Shares or Warrant Shares is required to be issued to a Purchaser without a
legend, in lieu of delivering physical certificates representing the Shares or
Warrant Shares, provided the Company’s transfer agent is participating in the
Depository Trust Company (“DTC”) Fast Automated Securities Transfer program, the
Company shall use its commercially reasonable efforts to cause its transfer
agent to electronically transmit the Shares or Warrant Shares to a Purchaser by
crediting the account of such Purchaser’s Prime Broker with DTC through its
Deposit Withdrawal Agent Commission (“DWAC”) system (to the extent not
inconsistent with any provisions of this Agreement).
ARTICLE VI
INDEMNIFICATION
          Section 6.1 Company Indemnity. The Company will indemnify and hold
harmless to the fullest extent of the law the Purchasers and their respective
directors, officers, shareholders, partners, affiliates, employees, agents,
successors and assigns (each, an “Indemnified Party”) from and against any and
all losses, liabilities, deficiencies, costs, damages, obligations, claims,
contingencies and expenses, including without limitation all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees, charges and
disbursements and costs of investigation that any such Indemnified Party may
suffer or incur (collectively, “Damages”) as a result of or relating to (a) any
inaccuracy in or breach 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, or any of them or
their respective Affiliates, by any stockholder of the Company who is not an
Affiliate of such Purchaser, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is based upon a
breach of a Purchaser’s representations, warranties or covenants under the
Transaction Documents or any agreements or understandings a Purchaser may have
with any such stockholder or any violations by a Purchaser of state or federal
securities laws or any conduct by a Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance). For purposes of this Agreement,
the term “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 144 under the
Securities Act. With respect to a Purchaser, any investment fund or

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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.
Notwithstanding any of the foregoing in this Section 6.1, the Company shall not
be liable under this Section 6.1 to any Indemnified Party to the extent that
such Damages resulted or arose from the breach by an Indemnified Party of any
representation, warranty, covenant or agreement of an Indemnified Party
contained in the Transaction Documents or the gross negligence, recklessness,
willful misconduct or bad faith of an Indemnified Party.
          Section 6.2 Indemnification Procedure. If any action is brought
against any Indemnified Party in respect of which indemnity may be sought
pursuant to this Agreement, the Indemnified Party will give written notice to
the Company of any matters giving rise to a claim for indemnification; provided,
however, that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Company of its obligations under this Article VI
except to the extent that the Company is actually prejudiced by such failure to
give notice. Upon the giving of such notice, Company shall have the right to
assume the defense of any such action with counsel of its own choosing but
reasonably acceptable to the Indemnified Party. Any Indemnified 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 Indemnified 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 Indemnified Party. In any
event, unless and until the Company elects in writing to assume and does so
assume the defense of any such action, the Indemnified Party’s costs and
expenses arising out of the defense, settlement or compromise of any such
action, shall be Damages subject to indemnification hereunder. The Indemnified
Party will cooperate fully with the Company in connection with any negotiation
or defense of any such action or claim by the Company, and shall furnish to the
Company all information reasonably available to the Indemnified Party which
relates to such action. The Company shall keep the Indemnified Party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. The Company shall not be liable for any
settlement of any action, claim or proceeding effected without its prior written
consent which shall not be unreasonably withheld. Notwithstanding anything in
this Article VI to the contrary, the Company shall not, without the Indemnified
Party’s prior written consent, settle or compromise any claim or consent to
entry of any judgment in respect thereof which imposes any future obligation on
the Indemnified Party or which does not include, as an unconditional term
thereof, the giving by the claimant or the plaintiff to the Indemnified Party of
a release from all liability in respect of such claim. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the Indemnified Party against the Company or others, and (b) any
liabilities to which the Company may be subject to pursuant to the law.
ARTICLE VII
MISCELLANEOUS
          Section 7.1 Fees and Expenses. Except as otherwise set forth in this
Agreement, each party shall pay the fees and expenses of its advisors, counsel,
accountants and

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other experts, if any, and all other expenses, incurred by such party incident
to the negotiation, preparation, execution, delivery and performance of this
Agreement. Except as disclosed on Schedule 7.1, the Purchasers have not employed
any broker or finder or incurred any liability for any brokerage or investment
banking fees, commissions, finders’ structuring fees, financial advisory fees or
other similar fees in connection with the Transaction Documents.
          Section 7.2 Specific Performance; Consent to Jurisdiction; Venue.
          (a) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the other Transaction Documents are not performed in accordance
with their specific terms or are otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the other Transaction
Documents and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
          (b) The parties agree that venue for any dispute arising under this
Agreement will lie exclusively in the state or federal courts located in New
York County, New York, and the parties irrevocably waive any right to raise
forum non conveniens or any other argument that New York is not the proper
venue. The parties irrevocably consent to personal jurisdiction in the state and
federal courts of the state of New York. The Company and each Purchaser consent
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 to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section 7.2 shall affect
or limit any right to serve process in any other manner permitted by law.
          Section 7.3 Entire Agreement; Amendment. This Agreement and the
Transaction Documents contain the entire understanding and agreement of the
parties with respect to the matters covered hereby and, except as specifically
set forth herein or in the other Transaction Documents, neither the Company nor
any Purchaser make any representation, warranty, covenant or undertaking with
respect to such matters, and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
Following the Closing, no provision of this Agreement may be waived or amended
other than by a written instrument signed by the Company and Boenning &
Scattergood, Inc. in consultation with the Purchasers. Any amendment or waiver
effected in accordance with this Section 7.3 shall be binding upon each
Purchaser (and their permitted assigns) and the Company.
          Section 7.4 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 delivery, by hand, telecopy or facsimile (or
other electronic transmission) at the address or number designated below (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. The addresses for
such communications shall be:

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If to the Company:
  Echo Therapeutics, Inc.
10 Forge Parkway
Franklin, MA 02038
Attention: Patrick Mooney, President and CEO
Tel. No.: 856-429-8778
Fax No.: 508-553-8760
 
    with copies (which copies shall not constitute notice to the Company) to:
 
   
 
  Echo Therapeutics, Inc.
10 Forge Parkway
Franklin, MA 02038
Attention: Kimberly Burke, Vice President — Corporate Counsel
Tel. No.: 919-381-9099
Fax No.: 919-251-9833
 
   
If to any Purchaser:
  At the address of such Purchaser set forth on Exhibit A to this Agreement,
with copies to Purchaser’s counsel as set forth on Exhibit A.

     Any party hereto may from time to time change its address for notices by
giving written notice of such changed address to the other parties hereto.
          Section 7.5 Waivers. No waiver by any party 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 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 accruing to it thereafter.
          Section 7.6 Headings. The article, section and subsection headings,
and the table of contents, in this Agreement are for convenience only and shall
not constitute a part of this Agreement for any other purpose and shall not be
deemed to limit or affect any of the provisions hereof.
          Section 7.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
After the Closing, the assignment by a party to this Agreement of any rights
hereunder shall not affect the obligations of such party under this Agreement.
Subject to Section 5.1 hereof, the Purchasers may assign the Securities and
their rights under this Agreement and the other Transaction Documents and any
other rights hereto and thereto without the consent of the Company; provided,
however, that such Purchaser shall not assign such Securities and such rights
under this Agreement and the other Transaction Documents to any known competitor
of the Company as identified in Schedule 7.7. Notwithstanding the foregoing, a
Purchaser may assign its rights as provided herein so long as (i) such Purchaser
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the rights

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and/or securities with respect to which such rights are being transferred or
assigned, (iii) following such transfer or assignment the further disposition of
such securities by the transferee or assignees is in compliance under the
Securities Act and applicable state securities laws, (iv) at or before the time
the Company receives the written notice contemplated by clause (ii) of this
Section 7.7, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions of this Agreement and the other Transaction
Documents, and (v) such transfer shall have been made in accordance with the
applicable requirements of this Agreement.
          Section 7.8 No Third Party Beneficiaries. Subject to the provisions of
Article VI hereof, this Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns and is not for the
benefit of, nor may any provision hereof be enforced by, any other person.
          Section 7.9 Governing Law. This Agreement 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 Agreement
shall not be interpreted or construed with any presumption against the party
causing this Agreement to be drafted.
          Section 7.10 Survival. The representations and warranties of the
Company and the Purchasers, including the contents of the schedules attached
hereto, shall survive the execution and delivery hereof and the Closing until
the first anniversary of the Closing Date.
          Section 7.11 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart.
          Section 7.12 Severability. In the event that any court of competent
jurisdiction shall determine that any one or more of the provisions or part of
the provisions contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement and this Agreement shall be construed as if such invalid or
illegal or unenforceable provision, or part of such provision, had never been
contained herein, so that such provisions would be valid, legal and enforceable
to the fullest extent of the law.
          Section 7.13 Publicity. The Company agrees that it will not disclose,
and will not include in any public announcement, the names of the Purchasers
without the prior written consent of the Purchasers, unless and until such
disclosure is required by law, rule or applicable regulation, and then only to
the extent of such requirement.
          Section 7.14 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchasers or the Company, the Company and
each Purchaser shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement and the
Warrants.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

28

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

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

[Additional Signature Pages Follow]

29

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            PURCHASER:
      By:   /s/ I. Wistar Morris         Name:   I. Wistar Morris             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Martha H. Morris         Name:   Martha H. Morris             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:

Eleventh Generation, LP
      By:   /s/ Martha H. Morris         Name:   Martha H. Morris, Agent       
     

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:

The Cotswold Foundation
      By:   /s/ Martha H. Morris         Name:   Martha H. Morris, Trustee     
                By:   /s/ I. Wistar Morris         Name:   I. Wistar Morris,
Trustee             

                                   

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Barry J. Clairmont         Name:   Barry J. Clairmont           
 

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:

South Ferry #2, LP
      By:   /s/ Morris Wolfson         Name:   Morris Wolfson, Portfolio
Manager             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Michael P. Bova         Name:   Michael P. Bova             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:

Furst Associates
      By:   /s/ Robert Schober         Name:   Robert Schober, General Partner,
Operations             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:

Cranshire Capital LP
      By:   /s/ Keith Goodman         Name:   Keith Goodman, COO, Downview
Capital, Inc.,
The General Partner     

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Michaal Galantino         Name:   MichaelGalantino             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ James J. Dengler         Name:   James J. Dengler             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Jeff Hermanson         Name:   Jeff Hermanson             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ George H. McGovern III         Name:   George H. McGovern III   
         

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Michael Kooper         Name:   Michael Kooper             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:

FM Partners
      By:   /s/ Robert Schober         Name:   Robert Schober, General Partner,
Operations             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Jayk Kooper         Name:   Jayk Kooper             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Sophie Kooper         Name:   Sophie Kooper             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Michaal Kooper         Name:   Michael Kooper, Custodian for   
      Luke Kooper, UTMA of NY     

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:

Eagle Partners
      By:   /s/ Robert Schober         Name:   Robert Schober, General Partner,
Operations             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Frank J. Gilday         Name:   Frank J. Gilday                 
    By:   /s/ Margaret F. Gilday         Name:   Margaret F. Gilday             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Barry A. Silkowitz         Name:   Barry A. Silkowitz           
 

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Marsha Bronsther         Name:   Marsha Bronsther             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Robert A. Melnick         Name:   Robert A. Melnick             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Patrick J. McCloskey         Name:   Patrick J. McCloskey       
     

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Sondra W. Margolies         Name:   Sondra W. Margolies         
   

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Elchanan Finestone         Name:   Elchanan Finestone           
 

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Michaal A. Scherer         Name:   Michael A. Scherer           
 

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ R. Ian Chaplin         Name:   R. Ian Chaplin             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Steve Hermann         Name:   Steve Hermann             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Terrence V. Fant         Name:   Terrence V. Fant             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:

The Magoo Family Limited Partnership
      By:   /s/ Sondra W. Margolies         Name:   Sondra W. Margolies, General
Partner             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Jonathan M. Kaplan         Name:   Jonathan M. Kaplan           
 

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Harry Randel         Name:   Harry Randel             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Jacob Finestone         Name:   Jacob Finestone             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Macy Lasky         Name:   Macy Lasky                      By:  
/s/ Robert T. Lasky         Name:   Robert T. Lasky             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Rodney D. Bell         Name:   Rodney D. bell             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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            PURCHASER:
      By:   /s/ Warren Sewall         Name:   Warren Sewall                     
By:   /s/ Phyllis Sewall         Name:   Phyllis Sewall             

[Signature Page to Common Stock and Warrant Purchase Agreement]

 

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EXHIBIT A
LIST OF PURCHASERS

                                  Name and Address of             No. of Shares
    No. of Warrants     Name and Address of   Purchaser     Investment Amount  
  Purchased     Purchased     Purchaser’s Counsel  

 

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EXHIBIT B
FORM OF WARRANT

 

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EXHIBIT C
FORM OF LEGAL OPINION