exv10w1






Exhibit 10.1




COMMON STOCK AND WARRANT PURCHASE




AGREEMENT




Dated as of November 13, 2009




by and among




ECHO THERAPEUTICS, INC.




and




THE PURCHASERS LISTED ON EXHIBIT A




 









 






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	 	 	2	 
	 
	 	 	 	 	 	 
	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	 	 	18	 
	Section 3.1
	 	Securities Compliance	 	 	18	 
	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	 	 	19	 
	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	 	 	20	 
	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	 	 	21	 
	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	 	 	26	 
	Section 7.1
	 	Fees and Expenses	 	 	26	 
	Section 7.2
	 	Specific Performance; Consent to Jurisdiction; Venue	 	 	26	 
	Section 7.3
	 	Entire Agreement; Amendment	 	 	26	 
	Section 7.4
	 	Notices	 	 	27	 
	Section 7.5
	 	Waivers	 	 	27	 






 









 






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	 	 	29	 
	Section 7.14
	 	Further Assurances	 	 	29	 







 











 





COMMON STOCK AND WARRANT PURCHASE AGREEMENT




     This COMMON STOCK AND WARRANT PURCHASE AGREEMENT (this “Agreement”), dated as of
November 13, 2009, 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 $1.25 (the “Per Share Purchase Price”) for an
aggregate purchase price of at least Two Million Dollars ($2,000,000) and no more than Three
Million Dollars ($3,000,000) (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 seventy percent (70%) 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 $2.00, subject to appropriate adjustment as set forth in the Warrants.
Notwithstanding the foregoing, (i) each Purchaser (including for these purposes its employees
and/or any affiliates of either of them) who purchases shares of Common Stock for a purchase price
of at least $750,000 shall be issued Warrants equal to one hundred percent (100%) of the number of
Shares purchased by such Purchaser pursuant to the terms of this Agreement, and (ii) each Purchaser
(including for these purposes its employees and/or any affiliates of either of them) who purchases
shares of Common Stock for a purchase price of at
least $1,000,000 shall be issued Warrants equal to one hundred percent (100%) of the number of




 









 







Shares purchased by such Purchaser pursuant to the terms of this Agreement with an initial exercise
price equal to $1.60. 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, 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 November 13, 2009
(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 an escrow account designated by the escrow
agent prior to the Closing. The Company may also accept certain non-cash consideration or cash
consideration delivered directly to the Company, as agreed upon between the Company and any
Purchaser and set forth on Exhibit A hereto.




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



2









 




(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 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, as well as the Escrow Agreement
by and among the Company, the Purchasers and the escrow agent in the form of Exhibit C
attached hereto (the “Escrow Agreement”) 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




3









 







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 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





4









 







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
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




5









 







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 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 June 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 June 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 June 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 June 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.




6









 








          (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 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 Documents that
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





7









 







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.




          (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.





8









 








          (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.




          (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



9









 




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, 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 June 30, 2009, no
officer, consultant or key employee of the Company or any Subsidiary whose termination,





10









 







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 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 June 30, 2009, neither the Company nor any Subsidiary has:





11









 








               (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 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



12









 





               (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.




          (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 April
1, 2009, the Company has not offered or sold any of its equity securities or debt securities
convertible into shares of Common Stock.





13









 








          (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 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.




14









 








          (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)
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





15









 







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 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





16









 







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
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. 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.





17









 








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 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.




          Section 3.3 Subsequent Variable Rate Transactions. Until the second anniversary of
the Closing Date, the Company shall be prohibited from effecting or entering into an agreement to
effect any “Variable Rate Transaction” without the consent of MKM Capital Advisors, LLC. The term
“Variable Rate Transaction” shall mean a transaction in which the Company (i) issues or
sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or
include the right to receive, additional shares of Common Stock, either (A) at a conversion,
exercise or exchange rate or other price that is based upon and/or varies with the trading prices
of or quotations for the shares of Common Stock at any time after the initial issuance of such debt
or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being
reset at some future date after the initial issuance of such debt or equity security or upon the
occurrence of specified or contingent events directly or indirectly related to the business of the
Company or the market for the Common Stock (other than pursuant to standard anti-dilution features)
or (ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby
the Company may sell securities at a future determined price.




          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 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






18









 







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
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.





19









 








          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.




          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.





20












 





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 and, with respect to the Escrow Agreement, the escrow
agent, 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 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


21









 







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, 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


22









 







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) Escrow Agreement. At the Closing, the Company and the escrow agent shall have
executed and delivered the Escrow Agreement, in the form attached hereto as Exhibit C, to
each Purchaser.




          (j) Material Adverse Effect. No Material Adverse Effect shall have occurred at or
before the Closing Date.




          (k) 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 D
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,



23









 







or (iv) the holder provides the Company with reasonable assurances that such security can be 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


24









 







under Rule 144 under the Securities Act. With respect to a
Purchaser, any investment fund or 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.




25









 








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 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 that the Company shall reimburse MKM
Capital Advisors, LLC for its legal fees not to exceed $7,500 and shall pay Kramer Levin Naftalis &
Frankel LLP for legal fees not to exceed $5,000, which shall be paid at the Closing. 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 MKM
Capital Advisors, LLC in consultation with the other 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.




26









 








          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:




	 	 	 
	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


27









 







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 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.




28









 








          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]




29









 








     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:  	Chairman and CEO 	 
	 



[Additional Signature Pages Follow]




30









 








	 	 	 	 	 
	 	EL EQUITIES, LLC

 	 
	 	By:  	/s/ Eli Levitin
 	 
	 	 	Name:  	Eli Levitin 	 
	 	 	Title:  	Manager 	 
	 



[Signature Page to Common Stock and Warrant Purchase Agreement]




 









 








	 	 	 	 	 
	 	GEMINI MASTER FUND, LTD.

 	 
	 	By:  	/s/ Steven W. Winters
 	 
	 	 	Name:  	Steven W. Winters 	 
	 	 	Title:  	President of Gemini Strategies, LLC

Investment Manager to Gemini Master

Fund Ltd. 	 
	 



[Signature Page to Common Stock and Warrant Purchase Agreement]




 









 








	 	 	 	 	 
	 	MKM OPPORTUNITY MASTER FUND, LTD.

 	 
	 	By:  	/s/ David Skriloff
 	 
	 	 	Name:  	David Skriloff 	 
	 	 	Title:  	Portfolio Manager 	 
	 



[Signature Page to Common Stock and Warrant Purchase Agreement]




 









 








	 	 	 	 	 
	 	 	 
	 	     /s/ Lewis C. Pell
 	 
	 	Name:  	Lewis C. Pell 	 
	 	 	 
	 



[Signature Page to Common Stock and Warrant Purchase Agreement]




 









 








	 	 	 	 	 
	 	PLATINUM-MONTAUR LIFE SCIENCES, LLC

 	 
	 	By:  	/s/ Michael M. Goldberg
 	 
	 	 	Name:  	Michael M. Goldberg 	 
	 	 	Title:  	Portfolio Manager 	 
	 



[Signature Page to Common Stock and Warrant Purchase Agreement]




 









 








	 	 	 	 	 
	 	SDS CAPITAL GROUP, SPC LTD.

 	 
	 	By:  	/s/ Steve Derby
 	 
	 	 	Name:  	Steve Derby 	 
	 	 	Title:  	Investment Manager 	 
	 



[Signature Page to Common Stock and Warrant Purchase Agreement]




 









 








	 	 	 	 	 
	 	SOUTH FERRY #2 LP

 	 
	 	By:  	/s/ Morris Wolfson
 	 
	 	 	Name:  	Morris Wolfson 	 
	 	 	Title:  	Portfolio Manager 	 
	 



[Signature Page to Common Stock and Warrant Purchase Agreement]




 









 








	 	 	 	 	 
	 	SYMMETRY PARALLAX PARTNERS, LP

 	 
	 	By:  	/s/ Kellie Seringer
 	 
	 	 	Name:  	Kellie Seringer 	 
	 	 	Title:  	General Partner 	 
	 



[Signature Page to Common Stock and Warrant Purchase Agreement]




 









 








	 	 	 	 	 
	 	 	 
	 	     /s/ Aaron Wolfson
 	 
	 	Name:  	Aaron Wolfson 	 
	 	 	 
	 



[Signature Page to Common Stock and Warrant Purchase Agreement]