Document:

exv10w4

Exhibit
10.4

 

 

    SUBSCRIPTION
    AGREEMENT

    (Series A-2 —
    Debt Exchange)

 

    THIS SUBSCRIPTION AGREEMENT (this
    “Agreement”) dated as
    of March 18,
    2009, by and between Irvine Sensors Corporation, a Delaware
    corporation (the “Company”) and the
    Purchasers identified on the signature page hereto (each a
    “Purchaser” and collectively, the
    “Purchasers”).

 

    WHEREAS, the Company and the Purchasers are executing and
    delivering this Agreement in reliance upon an exemption from
    securities registration afforded by the provisions of
    Section 3(a)(9), Section 4(2)
    and/or
    Regulation D (“Regulation D”)
    as promulgated by the United States Securities and Exchange
    Commission (the “Commission”) under the
    Securities Act of 1933, as amended (the
    “1933 Act”).

 

    WHEREAS, the Company currently has outstanding
    Series 1 Senior Subordinated Secured Convertible Notes
    dated as of December 30, 2005 in favor of the Purchasers
    (the “Series 1 Notes”).

 

    WHEREAS, in connection herewith, the Purchasers desire to
    purchase shares of
    Series A-2
    10% Cumulative Convertible Preferred Stock (the
    “Series A-2
    Stock”) as described in a Certificate of
    Designations of Rights, Preferences, Privileges and Limitations
    attached hereto as Exhibit A
    (“Certificate of Designations”) in
    exchange solely for a portion of the Series 1 Notes through
    the cancellation of part of the principal and interest under the
    Series 1 Notes, as more fully described herein. Each share
    of
    Series A-2
    Stock issuable hereunder is initially convertible into
    100 shares of the Company’s Common Stock (the
    “Common Shares”). The
    Series A-2
    Stock being sold to the Purchasers hereunder and the Common
    Shares that are issuable upon conversion of such
    Series A-2
    Stock hereunder shall be referred to hereunder as the
    “Securities.”

 

    NOW, THEREFORE, in consideration of the mutual covenants
    and other agreements contained in this Agreement the Company and
    the Purchasers hereby agree as follows:

 

    1. The Closing.

 

    (a) Closing Date.  The “Closing
    Date” shall be the date on which the Company issues
    the
    Series A-2
    Stock to the Purchasers pursuant to Section 1(c) below. The
    consummation of the transactions contemplated herein shall take
    place at the offices of Grushko & Mittman, P.C.,
    551 Fifth Avenue, Suite 1601, New York, New York
    10176, upon the satisfaction or waiver of all conditions to
    closing set forth in Section 1(c) below.

 

    (b) Closing.  Subject only to the
    satisfaction or waiver of the conditions set forth in
    Section 1(c) below, on the Closing Date, each Purchaser
    shall purchase at a purchase price per share of $40.00 (the
    “Purchase Price”) that number of shares
    of
    Series A-2
    Stock determined by multiplying such Purchaser’s Pro Rata
    Portion (as defined below) by the quotient obtained by dividing
    $1,000,000 by the Purchase Price. The aggregate Purchase Price
    shall be paid solely by surrendering such Purchaser’s
    evidence of the Series 1 Notes in exchange for such shares
    of
    Series A-2
    Stock by cancelling the applicable portion of the principal and
    interest under such Purchaser’s evidence of the
    Series 1 Notes. For purposes of this Agreement,
    Longview’s “Pro Rata Portion” shall
    equal 90.1627% and Alpha Capital’s “Pro Rata
    Portion” shall equal 9.8373%.

 

    (c) Conditions to Closing.  The obligation
    of the Company to issue, and the obligation of the Purchasers to
    accept, the
    Series A-2
    Stock in exchange for a portion of the Series 1 Notes shall
    be conditioned upon (i) the earlier to occur of either
    (1) the determination by the Supreme Court of the State of
    New York that Optex Systems, Inc. is the substantially
    prevailing party in its Complaint filed January 22, 2009
    against TWL Group, LP for declaratory relief that the
    October 14, 2008 public foreclosure sale of the collateral
    conducted by Optex Systems, Inc. (the “Foreclosure
    Sale”) was commercially reasonable and in
    compliance with New York law, or (2) it being otherwise
    determined by a court of law that Optex Systems, Inc. is the
    substantially prevailing party in any Complaint filed by Timothy
    Looney, TWL Group, LP or their Affiliates related to the
    revocability of the Foreclosure Sale, or (3) Timothy
    Looney, TWL Group, LP or their Affiliates entering into an
    irrevocable settlement agreement with Purchasers related to the
    Foreclosure Sale, or (4) any Complaint filed by Timothy
    Looney, TWL Group, LP or their Affiliates related to the
    Foreclosure Sale is abandoned or dismissed, in either case with
    prejudice against the reinstitution of any claim in connection
    with the Foreclosure Sale; (ii) approval by the
    Company’s

    

 

    stockholders of the issuance of the
    Series A-2
    Stock prior to December 31, 2009; (iii) the filing of
    the Certificate of Designations with the Secretary of State of
    the State of Delaware; (iv) the issuance to the Purchasers
    of a certificate representing the number of shares of
    Series A-2
    Stock calculated pursuant to Section 1(b) above; and
    (v) the truth and accuracy of the representations and
    warranties of the Company set forth in Section 3 of this
    Agreement and the continuing truth and accuracy of such
    representations and warranties as of the Closing Date, except
    for such changes as would not have a Material Adverse Effect (as
    defined below). In the event that the condition set forth in
    clause (ii) above has not been satisfied by
    December 31, 2009, then Lenders shall no longer have any
    obligation to purchase from the Company, and the Company shall
    no longer have any obligation to issue to Lenders, any preferred
    stock described in this Agreement.

 

    2. Purchasers’ Representations and
    Warranties.  Each Purchaser hereby represents and
    warrants to and agrees with the Company only as to such
    Purchaser that:

 

    (a) Information on Company.  The Purchaser
    has been furnished with or has had access at the EDGAR Website
    of the Commission to the Company’s
    Form 10-K
    for the year ended September 28, 2008, and all periodic
    reports filed with the Commission thereafter, but not later than
    five days before the date of this Agreement (hereinafter
    referred to as the “Reports”). In
    addition, the Purchaser has received in writing from the Company
    such other information concerning its operations, financial
    condition and other matters as the Purchaser has requested in
    writing (such other information is collectively, the
    “Other Written Information”), and
    considered all factors such Purchaser deems material in deciding
    on the advisability of investing in the
    Series A-2
    Stock.

 

    (b) Information on Purchaser.  The
    Purchaser is, and will be at the time of issuance of the
    Series A-2
    Stock, an “accredited investor,” as such
    term is defined in Regulation D promulgated by the
    Commission under the 1933 Act, is experienced in
    investments and business matters, has made investments of a
    speculative nature and has purchased securities of United States
    publicly-owned companies in private placements in the past and,
    with its representatives, has such knowledge and experience in
    financial, tax and other business matters as to enable the
    Purchaser to utilize the information made available by the
    Company to evaluate the merits and risks of and to make an
    informed investment decision with respect to the proposed
    purchase, which represents a speculative investment. The
    Purchaser is not a broker-dealer under Section 15 of the
    Exchange Act. The Purchaser has the authority and is duly and
    legally qualified to purchase and own the Securities. The
    Purchaser is able to bear the risk of such investment for an
    indefinite period and to afford a complete loss thereof. The
    information set forth on the signature page hereto regarding the
    Purchaser is accurate.

 

    (c) Purchase of Securities.  The Purchaser
    is acquiring the Securities in the ordinary course of its
    business as principal for its own account for investment only
    and not with a view toward, or for resale in connection with,
    the public sale or any distribution thereof. Such Purchaser does
    not have any agreement or understanding, directly or indirectly,
    with any Person to distribute any of the Securities. The
    Purchaser acquired the Series 1 Notes for purposes of
    investment only in order to earn a profit in the form of
    interest. The Purchaser is not providing any consideration other
    than the Series 1 Notes in connection with the exchange of
    such Series 1 Notes for the
    Series A-2
    Stock.

 

    (d) Compliance with Securities Act.  The
    Purchaser understands and agrees that the Securities have not
    been registered under the 1933 Act or any applicable state
    securities laws, by reason of their issuance in a transaction
    that does not require registration under the 1933 Act
    (based in part on the accuracy of the representations and
    warranties of Purchaser contained herein), and that such
    Securities must be held indefinitely unless a subsequent
    disposition is registered under the 1933 Act or any
    applicable state securities laws or is exempt from such
    registration. Notwithstanding anything to the contrary contained
    in this Agreement, such Purchaser may transfer (without
    restriction and without the need for an opinion of counsel) the
    Securities to its Affiliates (as defined below) provided that
    each such Affiliate is an “accredited investor” under
    Regulation D and such Affiliate agrees to be bound by the
    terms and conditions of this Agreement. For the purposes of this
    Agreement, an “Affiliate” of any person
    or entity means any other person or entity directly or
    indirectly controlling, controlled by or under direct or
    indirect common control with such person or entity. The term
    “Affiliate” when employed in connection with the
    Company includes each Subsidiary (as defined in
    Section 3(a)) of the Company. For purposes of this
    definition, “control” means the power to
    direct the management and policies of such person or firm,
    directly or indirectly, whether through the ownership of voting
    securities, by contract or otherwise.

    

    2

 

    (e) Restrictive Legend.   The shares of
    Series A-2
    Stock issuable hereunder shall bear the following or similar
    legend:

 

    “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
    REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
    STATE SECURITIES LAWS OR BLUE SKY LAWS. SUCH SHARES MAY NOT BE
    SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
    TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
    STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
    LAWS OR BLUE SKY LAWS, OR AN OPINION OF COUNSEL REASONABLY
    SATISFACTORY TO IRVINE SENSORS CORPORATION THAT SUCH
    REGISTRATION IS NOT REQUIRED.”

 

    (f) Communication of Offer.  The offer to
    sell the Securities was directly communicated to the Purchaser
    by the Company. At no time was the Purchaser presented with or
    solicited by any leaflet, newspaper or magazine article, radio
    or television advertisement, or any other form of general
    advertising or solicited or invited to attend a promotional
    meeting otherwise than in connection and concurrently with such
    communicated offer.

 

    (g) Authority; Enforceability.  If the
    Purchaser is an entity, it is duly organized, validly existing
    and in good standing under the laws of the jurisdiction of its
    organization with the requisite corporate, limited liability
    company or partnership power and authority to enter into and to
    consummate the transactions contemplated by this Agreement and
    otherwise to carry out its obligations hereunder and thereunder.
    This Agreement and other agreements delivered together with this
    Agreement or in connection herewith have been duly authorized,
    executed and delivered by the Purchaser and are valid and
    binding agreements enforceable in accordance with their terms,
    subject to bankruptcy, insolvency, fraudulent transfer,
    reorganization, moratorium and similar laws of general
    applicability relating to or affecting creditors’ rights
    generally and to general principles of equity; and Purchaser has
    full corporate power and authority necessary to enter into this
    Agreement and such other agreements and to perform its
    obligations hereunder and under all other agreements entered
    into by the Purchaser relating hereto.

 

    (h) No Governmental Review.  Each
    Purchaser understands that no United States federal or state
    agency or any other governmental or state agency has passed on
    or made recommendations or endorsement of the Securities or the
    suitability of the investment in the Securities nor have such
    authorities passed upon or endorsed the merits of the offering
    of the Securities.

 

    (i) Correctness of Representations.  Each
    Purchaser represents as to such Purchaser that the foregoing
    representations and warranties are true and correct as of the
    date hereof and, unless a Purchaser otherwise notifies the
    Company prior to the Closing Date shall be true and correct as
    of the Closing Date.

 

    (j) Survival.  The foregoing
    representations and warranties shall survive the Closing Date.

 

    3. Company Representations and
    Warranties.  Except as set forth in a disclosure
    schedule delivered to the Purchasers on the date hereof (the
    “Disclosure Schedule”), the Company
    represents and warrants to and agrees with each Purchaser that:

 

    (a) Due Incorporation.  The Company is a
    corporation duly organized, validly existing and in good
    standing under the laws of the jurisdiction of its incorporation
    and has the requisite corporate power to own its properties and
    to carry on its business as disclosed in the Reports. The
    Company is duly qualified as a foreign corporation to do
    business and is in good standing in each jurisdiction where the
    nature of the business conducted or property owned by it makes
    such qualification necessary, other than those jurisdictions in
    which the failure to so qualify would not have a Material
    Adverse Effect. For purpose of this Agreement, a
    “Material Adverse Effect” shall mean a
    material adverse effect on the financial condition, results of
    operations, properties or business of the Company taken
    individually, or in the aggregate, as a whole. For purposes of
    this Agreement, “Subsidiary” means, with
    respect to any entity at any date, any corporation, limited or
    general partnership, limited liability company, trust, estate,
    association, joint venture or other business entity) of which
    more than 50% of (i) the outstanding capital stock having
    (in the absence of contingencies) ordinary voting power to elect
    a majority of the board of directors or other managing body of
    such entity, (ii) in the case of a partnership or limited
    liability company, the interest in the capital or profits of
    such partnership or limited liability company or (iii) in
    the case of a trust, estate, association, joint venture or other
    entity, the beneficial interest in such trust, estate,
    association or other entity business is, at the

    

    3

 

    time of determination, owned or controlled directly or
    indirectly through one or more intermediaries, by such entity.
    All the Company’s Subsidiaries as of the date hereof are
    set forth on Schedule 3(a) hereto.

 

    (b) Outstanding Stock.  All issued and
    outstanding shares of capital stock of the Company and each
    Subsidiary have been duly authorized and validly issued and are
    fully paid and nonassessable.

 

    (c) Authority; Enforceability.  This
    Agreement and any other agreements delivered to Purchasers
    together with this Agreement or in connection herewith to which
    the Company is a party (collectively “Transaction
    Documents”) have been duly authorized, executed and
    delivered by the Company and are valid and binding agreements
    enforceable against the Company in accordance with their terms,
    subject to bankruptcy, insolvency, fraudulent transfer,
    reorganization, moratorium and similar laws of general
    applicability relating to or affecting creditors’ rights
    generally and to general principles of equity. The Company and
    Subsidiaries have full corporate power and authority necessary
    to enter into and deliver the Transaction Documents and to
    perform their obligations thereunder.

 

    (d) Additional Issuances.  There are no
    outstanding agreements or preemptive or similar rights affecting
    the Company’s common stock or equity and no outstanding
    rights, warrants or options to acquire, or instruments
    convertible into or exchangeable for, or agreements or
    understandings with respect to the sale or issuance of any
    shares of common stock or equity of the Company or Subsidiaries
    or other equity interest in any of the Subsidiaries of the
    Company except as described on Schedule 3(d). The
    Common Stock of the Company on a fully diluted basis outstanding
    as of the last Business Day preceding the date hereof is set
    forth on Schedule 3(d). “Business
    Day” and “trading day”
    shall mean any day that the New York Stock Exchange is open for
    trading for three or more hours. On February 3, 2009, the
    Company completed its bridge offering of $1,000,000 through the
    issuance of secured promissory notes. Prior to the Closing Date,
    the Purchasers may convert the Series 1 Notes into shares
    of the Company’s Common Stock, or the Company may repay the
    Series 1 Notes in cash, in accordance with the terms of
    such Series 1 Notes. The first two sentences of
    Section 5.4 of that certain Memorandum of Understanding for
    Settlement and Debt Conversion, dated as of September 19,
    2008 among the Company and the Purchasers, are deleted.

 

    (e) Consents.  No consent, approval,
    authorization or order of any court, governmental agency or body
    or arbitrator having jurisdiction over the Company or any of its
    Affiliates is required for the execution by the Company of the
    Transaction Documents and compliance and performance by the
    Company of its obligations under the Transaction Documents,
    including, without limitation, the issuance and sale of the
    Securities, except for the filing by the Company of a Notice of
    Sale of Securities on Form D with the Commission under
    Regulation D of the Securities Act, stockholder approval,
    the notice by the Company to NCM regarding listing of additional
    shares, and applicable Blue Sky filings. The Transaction
    Documents and the Company’s performance of its obligations
    thereunder have been approved unanimously by the Company’s
    directors.

 

    (f) No Violation or Conflict.  Except as
    set forth on Schedule 3(f) or in the Other Written
    Information, neither the issuance and sale of the Securities nor
    the performance of the Company’s obligations under this
    Agreement and all other agreements entered into by the Company
    relating thereto by the Company will:

 

    (i) violate, conflict with, result in a breach of, or
    constitute a default (or an event which with the giving of
    notice or the lapse of time or both would be reasonably likely
    to constitute a default) under (A) the certificate of
    incorporation, charter or bylaws of the Company, (B) to the
    Company’s knowledge, any decree, judgment, order, law,
    treaty, rule, regulation or determination applicable to the
    Company of any court, governmental agency or body, or arbitrator
    having jurisdiction over the Company or any of its Subsidiaries
    or over the properties or assets of the Company or any of its
    Subsidiaries, (C) the terms of any bond, debenture, note or
    any other evidence of indebtedness, or any agreement, stock
    option or other similar plan, indenture, lease, mortgage, deed
    of trust or other instrument to which the Company or any of its
    Subsidiaries is a party, by which the Company or any of its
    Subsidiaries is bound, or to which any of the properties of the
    Company or any of its Subsidiaries is subject, or (D) the
    terms of any
    “lock-up”
    or similar provision of any underwriting or similar agreement to
    which the Company, or any of its Subsidiaries is a party except
    the violation, conflict, breach, or default of which would not
    have a Material Adverse Effect on the Company; or

    

    4

 

    (ii) result in the creation or imposition of any lien,
    charge or encumbrance upon the Securities or any of the assets
    of the Company or any of its Subsidiaries; or

 

    (iii) result in the activation of any anti-dilution rights
    or a reset or repricing of any debt or security instrument of
    any other creditor or equity holder of the Company, nor result
    in the acceleration of the due date of any obligation of the
    Company.

 

    (g) The Securities.  The Securities upon
    issuance:

 

    (i) are, or will be, free and clear of any security
    interests, liens, claims or other encumbrances, subject to
    restrictions upon transfer under the 1933 Act and any
    applicable state securities laws;

 

    (ii) have been, or will be, duly and validly authorized and
    on the date of conversion of the
    Series A-2
    Stock and issuance of the Common Shares upon conversion therefor
    will be duly and validly issued, fully paid and nonassessable;

 

    (iii) will not have been issued or sold in violation of any
    preemptive or other similar rights of the holders of any
    securities of the Company;

 

    (iv) will not subject the holders thereof to personal
    liability by reason of being such holders; and

 

    (v) will have been issued in reliance upon an exemption
    from the registration requirements of and will not result in a
    violation of Section 5 under the 1933 Act, provided
    that the representations and warranties of the Purchasers
    hereunder shall remain true on the date of issuance of the
    Securities.

 

    (h) Reporting Company.   The Company is a
    publicly-held company subject to reporting obligations pursuant
    to Section 13 of the Securities Exchange Act of 1934, as
    amended (the “1934 Act”) and has a
    class of common stock registered pursuant to Section 12(g)
    of the 1934 Act. Pursuant to the provisions of the
    1934 Act, the Company has timely filed all reports and
    other materials required to be filed thereunder with the
    Commission during the preceding twelve months.

 

    (i) Information Concerning Company.  The
    Reports contain all material information relating to the Company
    and its operations and financial condition as of their
    respective dates which information is required to be disclosed
    therein. Since the date of the latest financial statements
    included in the Reports, and except as modified in the Other
    Written Information or in the Schedules hereto, there has been
    no material adverse change in the Company’s business,
    financial condition or affairs not disclosed in the Reports (it
    being understood that by signing this Agreement, the Purchasers
    shall be deemed to have agreed in writing to receiving such
    Other Written Information and Schedules). The Reports do not
    contain any untrue statement of a material fact or omit to state
    a material fact required to be stated therein or necessary to
    make the statements therein not misleading in light of the
    circumstances when made.

 

    (j) No Market Manipulation.  The Company
    will not take, directly or indirectly, any action designed to,
    or that might reasonably be expected to, cause or result in
    stabilization or manipulation of the price of the Common Stock
    of the Company to facilitate the sale or resale of the
    Securities or affect the price at which the Securities may be
    issued or resold.

 

    (k) Listing.  As of the date of this
    Agreement, the Company’s common stock is listed on the
    Nasdaq Capital Market under the symbol IRSN.

 

    (l) Stop Transfer.  The Securities, when
    issued, will be restricted securities. The Company will not
    issue any stop transfer order or other order impeding the sale,
    resale or delivery of any of the Securities, except as may be
    required in order to facilitate compliance with applicable
    federal or state securities laws and unless contemporaneous
    notice of such instruction is given to the Purchaser.

 

    (m) Not an Integrated Offering.  Neither
    the Company, nor any of its Affiliates, nor to its knowledge,
    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 offer of the Securities pursuant to this Agreement to
    be integrated with prior offerings by the Company for purposes
    of the 1933 Act or the rules and regulations of the NCM
    which would impair the exemptions relied upon in this Offering
    or the Company’s ability to

    

    5

 

    timely comply with its obligations hereunder. Nor will the
    Company or any of its Affiliates take any action or steps that
    would cause the offer or issuance of the Securities to be
    integrated with other offerings which would impair the
    exemptions relied upon in this Offering or the Company’s
    ability to timely comply with its obligations hereunder. The
    Company will not conduct any offering other than the
    transactions contemplated hereby that will be integrated with
    the offer or issuance of the Securities, which would impair the
    exemptions relied upon in this Offering or the Company’s
    ability to timely comply with its obligations hereunder.

 

    (n) No General Solicitation.  Neither the
    Company, nor any of its Affiliates, nor to its knowledge, 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 1933 Act) in connection with
    the offer or sale of the Securities.

 

    (o) Dilution.  The Company’s
    executive officers and directors understand the nature of the
    Securities being sold hereby and recognize that the issuance of
    the Securities will have a potential dilutive effect on the
    equity holdings of other holders of the Company’s equity or
    rights to receive equity of the Company. The board of directors
    of the Company has unanimously concluded, in its good faith
    business judgment, that the issuance of the Securities is in the
    best interests of the Company. The Company specifically
    acknowledges that its obligation to issue the Common Shares upon
    conversion of the
    Series A-2
    Stock is binding upon the Company and enforceable regardless of
    the dilution such issuance may have on the ownership interests
    of other stockholders of the Company or parties entitled to
    receive equity of the Company.

 

    (p) No Disputes with Accountants.  There
    are no disputes of any kind presently existing, or reasonably
    anticipated by the Company to arise, between the Company and the
    accountants formerly or presently employed by the Company,
    including but not limited to disputes or conflicts over payment
    owed to such accountants.

 

    (q) Subsidiary Representations.  The
    Company makes each of the representations contained in
    Sections 3(a), (b), (c), (d), (e), (f) and (p) of
    this Agreement, as same may relate to each Subsidiary of the
    Company, with the same qualifications to each such
    representation.

 

    (r) DTC Status/Transfer Agent.  The
    Company’s transfer agent is eligible to participate in and
    the Common Stock is eligible for transfer through DWAC pursuant
    to the Depository Trust Company Automated Securities
    Transfer Programs, subject to any restrictions imposed by
    securities laws. The name, address, telephone number, fax
    number, contact person and email address of the Company transfer
    agent are set forth on Schedule 3(r) hereto.

 

    (s) Correctness of Representations.  The
    Company represents that the foregoing representations and
    warranties are true and correct as of the date hereof in all
    material respects, and, unless the Company otherwise notifies
    the Purchasers prior to the Closing Date, shall be true and
    correct in all material respects as of the Closing Date.

 

    (t) Bankruptcy.   The Company has no plan
    to file for protection under any federal or state bankruptcy or
    debtor protection law or regulation.

 

    (u) Survival.  The foregoing
    representations and warranties shall survive the Closing Date.

 

    4. Regulation D Offering/Legal
    Opinion.  The offer and issuance of the Securities
    to the Purchasers is being made pursuant to the exemption from
    the registration provisions of the 1933 Act afforded by
    Section 3(a)(9), Section 4(2) or Section 4(6) of
    the 1933 Act
    and/or
    Rule 506 of Regulation D promulgated thereunder.
    Provided that the representations and warranties of the
    Purchasers contained herein are true and accurate on the Closing
    Date and that no facts have changed since the date of this
    Agreement, the Company will provide on the Closing Date an
    opinion reasonably acceptable to such Purchasers from the
    Company’s legal counsel in the form annexed hereto as
    Exhibit B opining on the availability of an
    exemption from registration under the 1933 Act as it
    relates to the offer and issuance of the Securities and other
    matters reasonably requested by the Purchasers. The Company will
    provide, at the Company’s expense, such other legal
    opinions in the future as are reasonably necessary for the
    issuance and resale of the Common Stock issuable upon conversion
    of the
    Series A-2
    Stock pursuant to an effective registration statement,
    Rule 144, as amended, under the 1933 Act
    (“Rule 144”) or an exemption from
    registration.

    

    6

 

    5. Covenants of the Company.  The Company
    covenants and agrees with the Purchasers as follows:

 

    (a) Stop Orders.  The Company will advise
    the Purchasers, within twenty-four hours after the Company
    receives notice of issuance by the Commission, Nasdaq Capital
    Market, Nasdaq Global Market, Nasdaq Global Select Market, or
    New York Stock Exchange (whichever of the foregoing is at the
    time the principal trading exchange or market for the Common
    Stock (the “Principal Market”)) or any
    other trading or listing market, any state securities commission
    or any other regulatory authority of any stop order or of any
    order preventing or suspending any offering of any Securities,
    or of the suspension of the qualification of the Securities for
    offering or sale in any jurisdiction, or the initiation of any
    proceeding for any such purpose.

 

    (b) Market Regulations.  The Company shall
    notify the Commission, Principal Market and applicable state
    authorities, in accordance with their requirements, of the
    transactions contemplated by this Agreement, 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 and
    promptly provide copies thereof to Purchasers.

 

    (c) Reservation.  Prior to the Closing
    Date, the Company will reserve from its authorized but unissued
    Common Stock, on behalf of the Purchasers, 150% of the amount of
    Common Stock required to allow conversion of all of the
    Series A-2
    Stock issued pursuant to this Agreement at the conversion price
    in effect on the Closing Date (“Required
    Reservation”). Failure to have reserved the
    Required Reservation on or prior to the Closing Date (or such
    later date as may be approved with the consent of the holders of
    Series A-2
    Stock) shall be a material default of the Company’s
    obligations under this Agreement and an Event of Default under
    the Certificate of Designations.

 

    (d) Confidentiality/Public
    Announcement.  From the date of this Agreement and
    until the sooner of (i) three (3) years after the
    Closing Date, or (ii) until all the Common Shares have been
    resold or transferred by all the Purchasers pursuant to the
    Registration Statement or pursuant to Rule 144, without
    regard to volume limitations, the Company agrees that except in
    connection with a
    Form 8-K,
    Form 10-K,
    Form 10-Q,
    Form D, Principal Market notices, Proxy or the Registration
    Statement, it will not disclose publicly or privately the
    identity of the Purchasers unless expressly agreed to in writing
    by a Purchaser (which approval will not be unreasonably withheld
    or delayed) or only to the extent required by law and then only
    upon five days prior notice to Purchaser. Notwithstanding the
    foregoing, the Company and Purchasers agree that a copy of this
    Agreement may be required to be filed with the Commission. In
    any event and subject to the foregoing, the Company undertakes
    to file a
    Form 8-K
    or make a public announcement describing the Offering not later
    than the fourth business day after the date this Agreement is
    fully executed. In the
    Form 8-K
    or public announcement, the Company will specifically disclose
    the amount of Common Stock outstanding immediately after the
    Closing.

 

    (e) Non-Public Information.  The Company
    covenants and agrees that neither it nor any other person acting
    on its behalf will provide any Purchaser with any information
    that the Company believes constitutes material non-public
    information, unless prior thereto such Purchaser shall have
    agreed in writing to receive such information or has designated
    an agent of Purchaser to receive such information on its behalf.
    The Company understands and confirms that each Purchaser shall
    be relying on the foregoing representations in effecting
    transactions in securities of the Company.

 

    (f) Offering Restrictions.  Until the
    expiration of the “Exclusion Period,”
    which shall be until the earlier of (i) 180 days
    following the Closing Date or (ii) the date on which the
    Company repays its debt obligations to the Purchasers, except
    for the Excepted Issuances (as defined in the Certificate of
    Designations) and any debt or equity offering with net proceeds
    to the Company of at least $2,000,000, the Company will not
    enter into an agreement to nor issue any equity, convertible
    debt or other securities convertible into Common Stock or equity
    of the Company nor modify any of the foregoing which may be
    outstanding at anytime, without the prior written consent of the
    Purchasers, which consent may be withheld for any reason. For so
    long as the
    Series A-2
    Stock remains outstanding, except for the Excepted Issuances (as
    defined in the Certificate of Designations) and any debt or
    equity offering with net proceeds to the Company of at least
    $2,000,000, the Company will not enter into any equity line of
    credit or similar bank financing agreement, nor issue nor agree
    to issue any floating or variable priced equity linked
    instruments nor any of the foregoing or equity with price reset
    rights, except with the consent of the Purchasers. The
    restriction described in the previous sentence shall only apply
    for 365 calendar days following the date hereof.

    

    7

 

    (g) Delivery of Unlegended Shares.  Within
    three (3) business days (such third business day being the
    “Unlegended Shares Delivery Date”) after the
    business day on which the Company has received (i) a notice
    that Common Shares held by a Purchaser have been sold pursuant
    to Rule 144, (ii) a representation that the
    requirements of Rule 144 have been satisfied, and
    (iii) the original share certificates representing the
    Common Shares that have been sold, and (iv) customary
    representation letters of the Purchaser
    and/or
    Purchaser’s broker regarding compliance with the
    requirements of Rule 144, the Company at its expense,
    (y) shall deliver, and shall cause legal counsel selected
    by the Company to deliver to its transfer agent (with copies to
    Purchaser) an appropriate instruction and opinion of such
    counsel, directing the delivery of shares of Common Stock
    without any legends including the legend set forth in
    Section 2(e) above (the “Unlegended
    Shares”); and (z) cause the transmission of the
    certificates representing the Unlegended Shares together with a
    legended certificate representing the balance of the submitted
    Common Shares certificate, if any, to the Purchaser at the
    address specified in the notice of sale, via express courier, by
    electronic transfer or otherwise on or before the Unlegended
    Shares Delivery Date. In lieu of delivering physical
    certificates representing the Unlegended Shares, if the
    Company’s transfer agent is participating in the Depository
    Trust Company (“DTC”) Fast Automated
    Securities Transfer program, upon request of a Purchaser, so
    long as the certificates therefor do not bear a legend and such
    Purchaser is not obligated to return such certificate for the
    placement of a legend thereon, the Company shall cause its
    transfer agent to electronically transmit the Unlegended Shares
    by crediting the account of Purchaser’s prime broker with
    DTC through its Deposit Withdrawal Agent Commission system. Such
    delivery must be made on or before the Unlegended Shares
    Delivery Date.

 

    6. Broker.

 

    The Company on the one hand, and each Purchaser (for himself
    only) on the other hand, agrees to indemnify the other against
    and hold the other harmless from any and all liabilities to any
    persons claiming brokerage commissions or finder’s fees on
    account of services purported to have been rendered on behalf of
    the indemnifying party in connection with this Agreement or the
    transactions contemplated hereby and arising out of such
    party’s actions. The Company and each Purchaser represents
    that there are no parties entitled to receive fees, commissions,
    or similar payments in connection with the sale of the
    Series A-2
    Stock to the Purchasers.

 

    7. Covenants of the Company and Purchaser Regarding
    Indemnification.

 

    (a) The Company agrees to indemnify, hold harmless,
    reimburse and defend the Purchasers, the Purchasers’
    officers, directors, agents, Affiliates, control persons, and
    principal shareholders, against any claim, cost, expense,
    liability, obligation, loss or damage (including reasonable
    legal fees) of any nature, incurred by or imposed upon the
    Purchaser or any such person which results, arises out of or is
    based upon (i) any material misrepresentation by Company or
    breach of any warranty by Company in this Agreement or in any
    Exhibits or Schedules attached hereto, or other agreement
    delivered pursuant hereto; or (ii) after any applicable
    notice
    and/or cure
    periods, any breach or default in performance by the Company of
    any covenant or undertaking to be performed by the Company
    hereunder, or any other agreement entered into by the Company
    and Purchaser relating hereto; or (iii) any claim filed by
    Timothy Looney, TWL Group, LP or their Affiliates in a court of
    law directly related to this Agreement.

 

    (b) In no event shall the liability of any Purchaser or
    permitted successor hereunder or under any other agreement
    delivered in connection herewith be greater in amount than the
    dollar amount of the net proceeds actually received by such
    Purchaser upon the sale of the Common Shares.

 

    (c) The Purchaser’s indemnification rights and rights
    of enforcement and the right to receive indemnification related
    payments will continue to be due and exercisable pursuant to the
    terms of the documents giving rise to such rights.

 

    8. Miscellaneous.

 

    (a) Notices.   All notices, demands,
    requests, consents, approvals, and other communications required
    or permitted hereunder shall be in writing and, unless otherwise
    specified herein, shall be (i) personally served,
    (ii) deposited in the mail, registered or certified, return
    receipt requested, postage prepaid, (iii) delivered by
    reputable overnight courier service with charges prepaid, or
    (iv) transmitted by hand delivery, electronic mail, or
    facsimile, addressed as set forth below or to such other address
    as such party shall have specified most recently by written
    notice. Any notice or other communication required or permitted
    to be given hereunder shall be deemed

    

    8

 

    effective (a) upon hand delivery or delivery by electronic
    mail or facsimile, with accurate confirmation generated by the
    transmitting facsimile machine, 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: (i) if to the Company, to:
    Irvine Sensors Corporation, 3001 Red Hill Avenue, Costa Mesa, CA
    92650, Attn: Chief Financial Officer, facsimile:
    (714) 444-8773,
    with a copy by facsimile only to: Dorsey & Whitney
    LLP, 38 Technology Drive, Irvine, CA 92618, Attn: Ellen S.
    Bancroft, Esq., facsimile:
    (949) 271-5318,
    and (ii) if to the Purchasers, to: the one or more
    addresses and facsimile numbers indicated on the signature pages
    hereto, with an additional copy by facsimile only to:
    Grushko & Mittman, P.C., 551 Fifth Avenue,
    Suite 1601, New York, New York 10176, facsimile:
    (212) 697-3575.

 

    (b) Entire Agreement; Assignment; Waiver.
      This Agreement and other documents delivered in
    connection herewith represent the entire agreement between the
    parties hereto with respect to the subject matter hereof and may
    be amended only by a writing executed by both parties. Neither
    the Company nor the Purchasers have relied on any
    representations not contained or referred to in this Agreement
    and the documents delivered herewith. No right or obligation of
    the Company shall be assigned or waived without prior notice to
    and the written consent of the Purchasers.

 

    (c) Counterparts/Execution.   This
    Agreement may be executed in any number of counterparts and by
    the different signatories hereto on separate counterparts, each
    of which, when so executed, shall be deemed an original, but all
    such counterparts shall constitute but one and the same
    instrument. This Agreement may be executed by facsimile
    signature and delivered by facsimile transmission.

 

    (d) Law Governing this Agreement.   This
    Agreement shall be governed by and construed in accordance with
    the laws of the State of New York without regard to principles
    of conflicts of laws. Any action brought by either party against
    the other concerning the transactions contemplated by this
    Agreement shall be brought only in the state courts of New York
    or in the federal courts located in the State of New York.
    The parties and the individuals executing this Agreement and
    other agreements referred to herein or delivered in connection
    herewith on behalf of the Company agree to submit to the
    jurisdiction of such courts and waive trial by jury. The
    prevailing party shall be entitled to recover from the other
    party its reasonable attorney’s fees and costs. In the
    event that any provision of this Agreement or any other
    agreement delivered in connection herewith is invalid or
    unenforceable under any applicable statute or rule of law, then
    such provision shall be deemed inoperative to the extent that it
    may conflict therewith and shall be deemed modified to conform
    with such statute or rule of law. Any such provision which may
    prove invalid or unenforceable under any law shall not affect
    the validity or enforceability of any other provision of any
    agreement.

 

    (e) Specific Enforcement, Consent to Jurisdiction.
      The Company and each Purchaser acknowledge and agree
    that irreparable damage would occur in the event that any of the
    provisions of this Agreement were not performed in accordance
    with their specific terms or were 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 and to enforce specifically the
    terms and provisions hereof, this being in addition to any other
    remedy to which any of them may be entitled by law or equity.
    Subject to Section 8(d) hereof, each of the Company, the
    Purchasers and any signatory hereto in his personal capacity
    hereby waives, and agrees not to assert in any such suit, action
    or proceeding, any claim that it is not personally subject to
    the jurisdiction in New York of such court, that the suit,
    action or proceeding is brought in an inconvenient forum or that
    the venue of the suit, action or proceeding is improper. Nothing
    in this Section shall affect or limit any right to serve process
    in any other manner permitted by law.

 

    (f) 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. The Company acknowledges that the decision of each
    Purchaser to purchase Securities has been made by such Purchaser
    independently of any other Purchaser and independently of any

    

    9

 

    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 which may have been made or given by
    any other Purchaser or by any agent or employee of any other
    Purchaser, and no Purchaser or any of its agents or employees
    shall have any liability to any Purchaser (or any other person)
    relating to or arising from any such information, materials,
    statements or opinions. The Company acknowledges that nothing
    contained 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 the 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. The Company acknowledges that it has elected to provide
    all Purchasers with the same terms and Transaction Documents for
    the convenience of the Company and not because Company was
    required or requested to do so by the Purchasers. The Company
    acknowledges that such procedure with respect to the Transaction
    Documents in no way creates a presumption that the Purchasers
    are in any way acting in concert or as a group with respect to
    the Transaction Documents or the transactions contemplated
    thereby.

 

    (g) Consent.   As used in the Agreement,
    “consent of the Purchasers” or similar language means
    the consent of holders of not less than 80% of the
    Series A-2
    Stock then outstanding.

 

    (h) Equal Treatment.   No consideration
    shall be offered or paid to any person to amend or consent to a
    waiver or modification of any provision of the Transaction
    Documents unless the same consideration is also offered and paid
    to all the parties to the Transaction Documents.

 

    (i) No Waiver.   Nothing in the
    Transaction Documents shall be deemed a waiver, extension or
    modification by Purchasers of any of their rights under any
    other agreement between or among them and the Company. Nothing
    in the Transaction Documents shall be deemed extension of any
    time period, waiver or forebearance of any obligation of the
    Company in any such other agreement. All such other agreements
    remain in full force and effect. Without limiting the foregoing,
    the Purchasers are specifically not waiving any anti-dilution,
    ratchet or similar rights in connection with the Company.

 

    (j) Expenses.   The Company shall pay
    Purchasers’ legal expenses in connection with this
    Agreement and the release of Purchasers’ security interest
    in certain assets of the Company in the amount of $25,000.

 

    [THIS
    SPACE INTENTIONALLY LEFT BLANK]

    

    10

 

    SIGNATURE
    PAGE TO SUBSCRIPTION AGREEMENT (A)

 

    Please acknowledge your acceptance of the foregoing Subscription
    Agreement by signing and returning a copy to the undersigned
    whereupon it shall become a binding agreement between us.

 

    IRVINE SENSORS CORPORATION,

    a Delaware corporation

 

			
	 	    By: 
	
    /s/ JOHN J. STUART    

    Name: John J. Stuart

			
	 	    Title: 
	
    Senior Vice President and

    Chief Financial Officer

 

    Dated: March 18, 2009

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 
	
 
	
 
	
    No. of Shares

    
	
 
	
 
	
 
	
    Debt Exchanged

    
	
 

	
 
	
 
	
 
	
    of Series A-2

    
	
 
	
 
	
 
	
    
	
 

	
 
	
 
	
 
	
    Stock

    
	
 
	
 
	
 
	
    Total Purchase

    
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
     Purchaser
	
 
	
 
	
    Purchased
	
 
	
 
	
 
	
    Price
	
 
	
 
	
 
	
    Principal
	
 
	
 
	
 
	
    Interest
	
 

	

    LONGVIEW FUND, LP

    600 Montgomery Street, 44th Floor

    San Francisco, CA 94111

    Fax:
    (415) 981-5301

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	

    By: /s/ S. MICHAEL RUDOLPH     
    

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	

    (Signature)

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	

    Print Name:  S. Michael Rudolph
    

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	

    Title: CFO-Investment Advisor
    

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

    

    C-11

 

    SIGNATURE
    PAGE TO SUBSCRIPTION AGREEMENT (B)

 

    Please acknowledge your acceptance of the foregoing Stock
    Purchase Agreement by signing and returning a copy to the
    undersigned whereupon it shall become a binding agreement
    between us.

 

    IRVINE SENSORS CORPORATION

    a Delaware corporation

 

			
	 	    By: 
	
    /s/ JOHN J. STUART

    Name: John J. Stuart

			
	 	    Title: 
	
    Senior Vice President and

    Chief Financial Officer

 

    Dated: March 18, 2009

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 
	
 
	
 
	
    No. of Shares

    
	
 
	
 
	
 
	
    Debt Exchanged

    
	
 

	
 
	
 
	
 
	
    of Series A-2

    
	
 
	
 
	
 
	
    
	
 

	
 
	
 
	
 
	
    Stock

    
	
 
	
 
	
 
	
    Total Purchase

    
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
     Purchaser
	
 
	
 
	
    Purchased
	
 
	
 
	
 
	
    Price
	
 
	
 
	
 
	
    Principal
	
 
	
 
	
 
	
    Interest
	
 

	

    ALPHA CAPITAL ANSTALT

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
    $
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	

    Pradafant 7

    9490 Furstentums

    Vaduz, Lichtenstein

    Fax:
    011-42-32323196

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	

    By: /s/ KONRAD ACKERMAN     
    

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	

    (Signature)

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	

    Print Name: Konrad Ackerman
    

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	

    Title: Director
    

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

    

    C-12exv10w1

Exhibit 10.1

March 23, 2009

Imperium Master Fund, Ltd.

c/o Imperium Advisers, LLC

1120 Avenue of the Americas

New York, NY 10036

Attention: John Michaelson

Dear Mr. Michaelson,

     Reference is made to that certain Securities Purchase and Loan Agreement (as amended to date,
the “Loan Agreement”), dated as of March 24, 2008, by and between Echo Therapeutics, Inc.,
a Delaware corporation (the “Company”), and Imperium Master Fund, Ltd., a Cayman Islands
company (“Imperium”). Reference is also made to that certain Original Issue Discount
Senior Secured Note, dated March 24, 2008 (the “Senior Secured Note”), issued by the
Company to Imperium pursuant to the Loan Agreement. Capitalized terms used herein but not defined
shall have the meanings ascribed thereto in the Loan Agreement and/or the Senior Secured Note.
Pursuant to Section 5(c) of the Senior Secured Note, the terms of the Senior Secured Note may be
amended or waived by a written instrument executed by the Company and Imperium.

     The Company and Imperium hereby agree that, notwithstanding anything in the Senior Secured
Note, the Loan Agreement or the other Transaction Documents to the contrary, the Maturity Date of
the Senior Secured Note shall be extended to April 24, 2009. The purpose of the foregoing
extension is to provide the Company and Imperium sufficient time to amend the Loan Agreement and
the senior secured notes issued by the Company thereunder (the “Notes”), to provide for, subject to
certain conditions, a one-year extension of the maturity of the Notes.

     This letter agreement constitutes the entire agreement between the parties hereto with respect
to the subject matter hereof, superseding all prior and existing written or oral agreements,
negotiations, discussions, undertakings, representations, warranties and understandings. This
letter agreement constitutes a valid and binding obligation of each of the parties hereto,
enforceable against each of them in accordance with law. This letter agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to contracts made and
to be performed entirely within the State of New York. In the event of a conflict between the
provisions of this letter agreement and the terms of the Loan Agreement or the Senior Secured Note,
this letter agreement shall control.

	 	 	 	 	 
	 	Sincerely,

ECHO THERAPEUTICS, INC.

 	 
	 	By:  	/s/ Patrick T. Mooney
 	 
	 	 	Patrick T. Mooney, CEO and Chairman 	 
	 	 	 	 
	 

Acknowledged and agreed to as of the date first written above:

	 	 	 	 	 
	IMPERIUM MASTER FUND, LTD.

 	 
	By:  	 	 
	 	Name:  	 	 
	 	Title:

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