Document:

exv10w4

 

Exhibit 10.4

SUBSIDIARY GUARANTEE

     THIS SUBSIDIARY GUARANTEE, dated as of March 24, 2008, (this “Guarantee”), is by and among
each of the undersigned subsidiaries (together with any other entity that may become an additional
guarantor hereunder, the “Guarantors”) of Echo Therapeutics, Inc., a Minnesota corporation (the
"Company”), for the benefit of Imperium Advisers, LLC, as collateral agent (in such capacity, the
"Collateral Agent”), and the holders (the “Holders”) of the Original Issue Discount Senior Secured
Notes (the “Notes”) issued as of the date hereof, pursuant to the Securities Purchase and Loan
Agreement, dated as of the date hereof (as amended, restated, supplemented or otherwise modified
from time to time, the “Securities Purchase Agreement”), by and between the Company and Imperium
Master Fund, Ltd. (“Imperium”). Capitalized terms used herein and not otherwise defined shall have
the respective meanings specified in the Securities Purchase Agreement. The Holders and the
Collateral Agent are sometimes collectively referred to herein as the “Secured Parties”.

W I T N E S S E T H:

     WHEREAS, it is a condition to the obligation of Imperium to enter into the transactions
contemplated by the Securities Purchase Agreement that the Guarantors execute and deliver to the
Collateral Agent for the benefit of the Holders this Guarantee; and

     WHEREAS, each Guarantor, as a Subsidiary of the Company, will directly or indirectly benefit
from the extension of credit to the Company represented by the issuance of the Notes and the other
transactions contemplated by the Transaction Documents.

     NOW, THEREFORE, in consideration of the agreements herein contained and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:

     1. GUARANTEE.

     1.1 Guarantee of Obligations.

          (a) Each Guarantor hereby, jointly and severally, unconditionally and irrevocably, guarantees
to each Secured Party and its lawful successors, endorsees, transferees and assigns, the prompt and
complete payment and performance by the Company and each other Guarantor when due (whether at the
stated maturity, by acceleration or otherwise) of all obligations and undertakings of the Company
and the Guarantors of whatever nature, monetary or otherwise, under the Notes, the Securities
Purchase Agreement, the Warrant, the Registration Rights Agreement, the Security Agreement and the
other Transaction Documents, together with all reasonable attorneys’ fees, disbursements and all
other costs and expenses of collection incurred by Holders or the Collateral Agent in enforcing any
of such obligations and/or this Guarantee (collectively, the “Obligations”). This Guarantee shall
remain in full force and effect until all the

 

 

Obligations and the obligations of each Guarantor under this Guarantee shall have been
satisfied by payment and performance in full. Each Guarantor shall be regarded, and shall be in
the same position, as principal debtor with respect to the Obligations.

          (b) Anything herein or in any other Transaction Document to the contrary notwithstanding, the
maximum liability of each Guarantor hereunder and under the other Transaction Documents shall in no
event exceed the amount which can be guaranteed by such Guarantor under applicable federal and
state laws, including laws relating to the insolvency of debtors, fraudulent conveyance or transfer
or laws affecting the rights of creditors generally (after giving effect to the right of
contribution established in Section 1.3 of this Guarantee).

     1.2 Guarantee Absolute and Unconditional. Each Guarantor understands and agrees that
this Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment
and performance without regard to (a) the validity or enforceability of any of the Transaction
Documents, any of the Obligations or any other collateral security therefor or guarantee or right
of offset with respect thereto at any time or from time to time held by the Secured Parties, (b)
any defense, set-off or counterclaim (other than a defense of payment or performance or fraud or
misconduct by the Secured Parties) which may at any time be available to or be asserted by the
Company or any other Person against the Secured Parties, or (c) any other circumstance whatsoever
(with or without notice to or knowledge of the Company or such Guarantor) which constitutes, or
might be construed to constitute, an equitable or legal discharge of the Company for the
Obligations, or of such Guarantor under this Guarantee, in bankruptcy or in any other instance.

     1.3 Right of Contribution. Each Guarantor hereby agrees that to the extent that a
Guarantor shall have paid more than its proportionate share of any payment made hereunder, such
Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor
hereunder which has not paid its proportionate share of such payment. Each Guarantor’s right of
contribution shall be subject to the terms and conditions of Section 1.4 of this Guarantee. The
provisions of this Section 1.3 shall in no respect limit the obligations and liabilities of any
Guarantor to the Secured Parties, and each Guarantor shall remain liable to the Secured Parties for
the full amount guaranteed by such Guarantor hereunder.

     1.4 No Subrogation. Notwithstanding any payment made by any Guarantor hereunder or
any set-off or application of funds of any Guarantor by the Secured Parties, no Guarantor shall be
entitled to be subrogated to any of the rights of the Secured Parties against the Company or any
other Guarantor or any collateral security or guarantee or right of offset held by the Secured
Parties for the payment of the Obligations, nor shall any Guarantor seek or be entitled to seek any
contribution or reimbursement from the Company or any other Guarantor in respect of payments made
by such Guarantor hereunder, until all amounts owing to the Secured Parties by the Company and the
Guarantors on account of the Obligations are paid in full. If any amount shall be paid to any
Guarantor on account of such subrogation rights at any time when all of the Obligations shall not
have been paid in full, such amount shall be held by such Guarantor in trust for the benefit of the
Secured Parties, segregated from other funds of such Guarantor, and shall, forthwith upon receipt
by such Guarantor, be turned over to the Collateral Agent in the exact form received by such
Guarantor (duly indorsed by such Guarantor to the Collateral Agent, if required), to be applied

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against the Obligations, whether matured or unmatured, in such order as the Secured Parties
may determine.

     1.5 Modification of Guaranteed Obligations. Each Guarantor shall remain obligated
hereunder notwithstanding that, without any reservation of rights against any Guarantor and without
notice to or further assent by any Guarantor, any demand for payment of any of the Obligations made
by the Secured Parties may be rescinded by the Secured Parties and any of the Obligations
continued, and the Obligations, or the liability of any other Person upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with respect thereto, may, from
time to time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by the Secured Parties, and the Transaction Documents
may be amended, modified, supplemented or terminated, in whole or in part, as the Secured Parties
may deem advisable from time to time, and any collateral security, guarantee or right of offset at
any time held by the Secured Parties for the payment of the Obligations may be sold, exchanged,
waived, surrendered or released. The Secured Parties shall have no obligation to protect, secure,
perfect or insure any Lien at any time held by them as security for the Obligations or for this
Guarantee or any property subject thereto.

     1.6 Waiver. Each Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Obligations and notice of or proof of reliance by the Secured
Parties upon the guarantees contained in this Section 1 or acceptance of the guarantees contained
in this Section 1. The Obligations shall conclusively be deemed to have been created, contracted
or incurred, or renewed, extended, amended or waived, in reliance upon the guarantees contained in
this Section 1. All dealings between the Company and any of the Guarantors, on the one hand, and
the Secured Parties, on the other hand, shall be conclusively presumed to have been had or
consummated in reliance upon the guarantees contained in this Section 1. Each Guarantor waives, to
the extent permitted by law, diligence, presentment, protest, demand for payment and notice of
default or nonpayment to or upon the Company or any of the Guarantors with respect to the
Obligations.

     1.7 Enforcement of Guarantee.

          (a) When making any demand hereunder or otherwise pursuing its rights and remedies hereunder
against any Guarantor, the Collateral Agent, acting on behalf of each Holder, may, but shall be
under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as
the Collateral Agent, acting on behalf of the Holders, may have against the Company, any other
Guarantor or any other Person or against any collateral security or guarantee for the Obligations
or any right of offset with respect thereto, and any failure by the Collateral Agent, acting on
behalf of the Holders, to make any such demand, to pursue such other rights or remedies or to
collect any payments from the Company, any other Guarantor or any other Person or to realize upon
any such collateral security or guarantee or to exercise any such right of offset, or any release
of the Company, any other Guarantor or any other Person or any such collateral security, guarantee
or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and
shall not impair or affect the rights and remedies, whether express, implied or available as a
matter of law, of the Secured Parties against any Guarantor. For the purposes hereof, “demand”
shall include the commencement and continuance of any legal proceedings.

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          (b) Expenses; Indemnification.

               (i) Each Guarantor agrees to pay, or reimburse the Collateral Agent, acting on behalf of the
Holders, all of the Collateral Agent’s costs and expenses incurred in collecting against such
Guarantor under this Guarantee or otherwise enforcing or preserving any rights under this Guarantee
and the other Transaction Documents to which such Guarantor is a party, including, without
limitation, the reasonable fees and disbursements of counsel to the Collateral Agent.

               (ii) Each Guarantor agrees to pay, and to save the Secured Parties harmless from, any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the enforcement, performance and
administration of this Guarantee, except any such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements which result from the gross
negligence or willful misconduct of a Secured Party as determined by a final nonappealable decision
of a court of competent jurisdiction.

               (iii) Notwithstanding anything to the contrary in this Agreement, with respect to any
defaulted non-monetary Obligations the specific performance of which by the Guarantors is not
reasonably possible (e.g., the issuance of the Company’s Common Stock), the Guarantors shall only
be liable for making the Secured Parties whole on a monetary basis for the Company’s failure to
perform such Obligations in accordance with the Transaction Documents.

     1.8 Right to Set-Off. Each Guarantor hereby irrevocably authorizes the Collateral
Agent, acting on behalf of the Holders, at any time and from time to time while an Event of Default
 under any of the Transaction Documents shall have occurred and be continuing, without
notice to such Guarantor or any other Guarantor, any such notice being expressly waived by each
Guarantor, to set-off and appropriate and apply any and all deposits, credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured
or unmatured, at any time held or owing by a Secured Party to or for the credit or the account of
such Guarantor, or any part thereof in such amounts as the Collateral Agent may elect, against and
on account of the obligations and liabilities of such Guarantor to the Secured Parties hereunder in
any currency arising hereunder or under the Security Agreement as the Collateral Agent may elect,
whether or not a Secured Party has made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. The Collateral Agent shall notify such
Guarantor promptly of any such set-off and the application made by the Collateral Agent of the
proceeds thereof, provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Secured Party under this Section 1.8 are in
addition to other rights and remedies (including, without limitation, other rights of set-off)
which the Collateral Agent, acting on behalf of the Holders, may have.

     1.9 Payments. In addition to the terms of the guaranty set forth in Section 1.1, and
in no manner imposing any limitation on such terms, it is expressly understood and agreed that, if,
at any time, any of the Obligations are declared to be immediately due and payable by a Guarantor,
then the Guarantors shall, upon ten (10) Business Days’ notice, pay to the Collateral Agent, acting
on

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behalf of the Holders, the entire amount of such Obligations as has been declared due and
payable to the Secured Parties. Payment by the Guarantors shall be made to the Collateral Agent in
immediately available Federal funds to an account designated by the Collateral Agent or at the
address set forth herein for the giving of notice to the Collateral Agent or at any other address
that may be specified in writing from time to time by the Collateral Agent, and shall be credited
and applied to the Obligations.

     1.10 Release. Subject to Section 2, each Guarantor will be released from all liability
hereunder concurrently with the repayment and performance in full of the Obligations. No payment
made by the Company, any of the Guarantors, any other guarantor or any other Person or received or
collected by the Holders or the Collateral Agent from the Company, any of the Guarantors, any other
guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation
or application at any time or from time to time in reduction of or in payment of the Obligations
(other than any payment made by such Guarantor in respect of the Obligations or any payment
received or collected from such Guarantor in respect of the Obligations), shall be deemed to
modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall,
notwithstanding any such payment, remain liable for the Obligations up to the maximum liability of
such Guarantor hereunder until the Obligations are paid and performed in full.

2. REINSTATEMENT.

     The guarantees contained in Section 1 shall continue to be effective, or be reinstated, as the
case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or
must otherwise be restored or returned by the Holders or the Collateral Agent upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Company or any Guarantor, or upon or
as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Company or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.

3. REPRESENTATIONS AND WARRANTIES.

     Each Guarantor hereby represents and warrants to the Secured Parties as of the date hereof as
follows:

     3.1 Organization and Qualification. Each Guarantor is duly organized, validly existing
and in good standing under the laws of its formation, with the requisite power and authority to own
and use its properties and assets and to carry on its business as currently conducted. Each
Guarantor is duly qualified to do business and is in good standing as a foreign corporation or
limited liability company in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of any of this Guarantee in any material
respect, (y) have a material adverse effect on the results of operations, assets, prospects, or
financial condition of the Guarantor or (z) adversely impair in any material respect the
Guarantor’s ability to perform fully on a timely basis its obligations under this Guarantee (a
“Material Adverse Effect”).

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     3.2 Authorization; Enforcement. Each Guarantor has the requisite corporate or other
power and authority to enter into and to consummate the transactions contemplated by this
Guarantee, and otherwise to carry out its obligations hereunder. The execution and delivery of this
Guarantee by each Guarantor and the consummation by it of the transactions contemplated hereby have
been duly authorized by all requisite corporate action on the part of the Guarantor, and no further
consent or authorization of the Guarantor, its board of directors (or Persons performing similar
functions), shareholders or members, or to its knowledge, any governmental authority or
organization, or any other person or entity is required in connection therewith. This Guarantee has
been duly executed and delivered by each Guarantor and constitutes the valid and binding obligation
of such Guarantor enforceable against such Guarantor in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general application.

     3.3 Securities Purchase Agreement. The representations and warranties of the Company
set forth in the Securities Purchase Agreement as they relate to each Guarantor, each of which is
hereby incorporated herein by reference, are true and correct as of the date hereof, and the
Secured Parties shall be entitled to rely on each of them as if they were fully set forth herein,
provided, that each reference in each such representation and warranty to the Company’s knowledge
shall, for the purposes of this Section 3.3, be deemed to be a reference to such Guarantor’s
knowledge.

     3.4 Independence of Parties. The Secured Parties have no fiduciary relationship with
or duty to any Guarantor arising out of or in connection with this Guarantee or any of the other
Transaction Documents; the relationship between the Guarantors, on the one hand, and the Secured
Parties, on the other hand, in connection herewith or therewith is solely that of debtor and
creditor; and no joint venture is created hereby or by the other Transaction Documents or otherwise
exists by virtue of the transactions contemplated hereby among the Guarantors and the Secured
Parties.

     3.5 Counsel. Each Guarantor has been advised by counsel in the negotiation, execution
and delivery of this Guarantee and the other Transaction Documents to which it is a party.

4. COVENANTS.

     4.1 Further Assurances. Each Guarantor covenants and agrees with the Collateral
Agent, on behalf of each Holder, that, from and after the date of this Guarantee until the
Obligations shall have been paid in full, such Guarantor shall (i) take, and/or shall refrain from
taking, as the case may be, such commercially reasonable action that is necessary to be taken or
not taken, as the case may be, so that no Event of Default is caused by the failure to take such
action or to refrain from taking such action by such Guarantor and (ii) execute and deliver to the
Collateral Agent, from time to time, any additional instruments or documents which are reasonably
necessary to cause this Guarantee to be, become or remain valid and effective in accordance with
its terms.

     4.2 Additional Guarantors. If the Company or a Guarantor creates or acquires any new
Subsidiary, then the Company or such Guarantor shall cause such new Subsidiary to become party

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to this Guarantee for all purposes of this Guarantee by executing and delivering an Assumption
Agreement in the form of Annex A hereto.

5. MISCELLANEOUS.

     5.1 Severability. In the event that any provision of this Guarantee becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Guarantee
shall continue in full force and effect without said provision; provided that in such case the
parties shall negotiate in good faith to replace such provision with a new provision which is not
illegal, unenforceable or void, as long as such new provision does not materially change the
economic benefits of this Guarantee to the parties.

     5.2 Successors and Assigns. The terms and conditions of this Guarantee shall inure to
the benefit of and be binding upon the respective successors and permitted assigns of the parties.
Nothing in this Guarantee, express or implied, is intended to confer upon any party other than the
parties hereto or their respective successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Guarantee, except as expressly provided in
this Guarantee. A Holder may assign its rights hereunder in connection with any valid private sale
or transfer of the Notes in accordance with the terms thereof and of the other Transaction
Documents, as long as, as a condition precedent to such transfer, the transferee executes an
acknowledgement agreeing to be bound by the applicable provisions of this Guarantee, in which case
the term “Holder” shall be deemed to refer to such transferee as though such transferee were an
original party hereto. No Guarantor may assign its rights or obligations under this Guarantee.

     5.3 Injunctive Relief. Each Guarantor acknowledges and agrees that a material breach
by it of its obligations hereunder will cause irreparable harm to each Secured Party and that the
remedy or remedies at law for any such breach will be inadequate and agrees, in the event of any
such material breach, in addition to all other available remedies, the Collateral Agent, acting on
behalf of the Holders, shall be entitled to an injunction restraining such breach and requiring
immediate and specific performance of such obligations without the necessity of showing economic
loss or the posting of any bond.

     5.4 Governing Law; Jurisdiction. This Guarantee shall be governed by and construed
under the laws of the State of New York applicable to contracts made and to be performed entirely
within the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in the City and County of New York for the adjudication of
any dispute hereunder or in connection herewith or with any transaction contemplated hereby and
hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding
is improper. Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof to such party
at the address in effect for notices to it under this Guarantee and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner permitted by law.

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     5.5 Counterparts. This Guarantee may be executed in any number of counterparts, each
of which shall be deemed an original, and all of which together shall constitute one and the same
instrument. Any executed signature page delivered by facsimile or e-mail transmission shall be
binding to the same extent as an original executed signature page, with regard to any agreement
subject to the terms hereof or any amendment thereto.

     5.6 Headings. The headings used in this Guarantee are used for convenience only and
are not to be considered in construing or interpreting this Guarantee.

     5.7 Notices. Any notice, demand or request required or permitted to be given by a
Guarantor, the Collateral Agent or a Holder pursuant to the terms of this Guarantee shall be in
writing and shall be deemed delivered (i) when delivered personally or by verifiable facsimile
transmission, unless such delivery is made on a day that is not a Business Day, in which case such
delivery will be deemed to be made on the next succeeding Business Day, (ii) on the next Business
Day after timely delivery to an overnight courier and (iii) on the Business Day actually received
if deposited in the U.S. mail (certified or registered mail, return receipt requested, postage
prepaid), addressed as follows:

If to a Guarantor:

c/o Echo Therapeutics, Inc.

10 Forge Parkway

Franklin, MA 02038

Attn: Chief Financial Officer

Tel: (508) 530-0311

Fax: (508) 553-8760

With a copy (which shall not constitute notice) to:

Drinker Biddle & Reath LLP

One Logan Square

18th & Cherry Streets

Philadelphia, PA 19103

Attn: Stephen T. Burdumy, Esq.

Tel: (215) 988-2700

Fax: (215) 988-2757

If to the Collateral Agent:

Imperium Advisers, LLC

153 East 53rd Street

29th Floor

New York, NY 10022

Attn: Maurice Hryshko, Esq.

Tel: (212) 433-1360

Fax: (212) 433-1361

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and if to any Holder, to such address for such party as shall appear on the signature page of the
Securities Purchase Agreement executed by such party, or as shall be designated by such party in
writing to the other parties hereto in accordance with this Section 5.7.

     5.8 Entire Agreement; Amendments. This Guarantee and the other Transaction Documents
constitute the entire agreement between the parties with regard to the subject matter hereof and
thereof, superseding all prior agreements or understandings, whether written or oral, between or
among the parties. No (i) amendment to this Guarantee or (ii) waiver of any agreement or other
obligation of the Guarantors under this Guarantee may be made or given except pursuant to a written
instrument executed by the Guarantors, the Collateral Agent and the Holders holding a majority of
the outstanding principal of the Notes. Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.

[SIGNATURE PAGE FOLLOWS]

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     IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be duly executed and
delivered as of the date first above written.

	 	 	 	 	 
	 	ECHO THERAPEUTICS, INC. (DE), AS GUARANTOR

 	 
	 	By:  	Patrick T. Mooney, M.D.
 	 
	 	 	Patrick T. Mooney, M.D. 	 
	 	 	Chief Executive Officer 	 
	 
	 	SONTRA MEDICAL, INC., AS GUARANTOR

 	 
	 	By:  	Patrick T. Mooney, M.D.
 	 
	 	 	Patrick T. Mooney, M.D. 	 
	 	 	Chief Executive Officer 	 
	 
	 	IMPERIUM ADVISERS, LLC, AS COLLATERAL AGENT

 	 
	 	By:  	Maurice Hryshko, Esq.
 	 
	 	 	Maurice Hryshko, Esq. 	 
	 	 	General Counsel 	 
	 
	 	IMPERIUM MASTER FUND, LTD., AS HOLDER

 	 
	 	By:  	Maurice Hryshko, Esq.
 	 
	 	 	Maurice Hryshko, Esq. 	 
	 	 	General Counsel 	 
	 

 

 

ANNEX A

     THIS ASSUMPTION AGREEMENT, dated as of                     , 20       
     
, is made by
              
       , a
                                         , in connection with the Subsidiary Guarantee, dated as of March 24, 2008 (as
amended, the “Guarantee”), entered into by Echo Therapeutics, Inc., a Minnesota corporation, and
its subsidiaries for the benefit of the collateral agent and the note holders party to the
Guarantee.

W I T N E S S E T H :

     WHEREAS, the Guarantee requires the undersigned to become a party to the Guarantee; and

     WHEREAS, the undersigned has agreed to execute and deliver this Assumption Agreement in order
to become a party to the Guarantee;

     NOW, THEREFORE, IT IS AGREED:

     1. Assumption. By executing and delivering this Assumption Agreement, the undersigned
hereby becomes a party to the Guarantee as a Guarantor (as defined in the Guarantee) thereunder
with the same force and effect as if originally named therein as a Guarantor and, without limiting
the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a
Guarantor thereunder. The undersigned hereby represents and warrants that each of the
representations and warranties contained in Section 3 of the Guarantee is true and correct on and
as the date hereof as to the undersigned (after giving effect to this Assumption Agreement) as if
made on and as of such date.

     2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
TO BE PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK.

 

 

     IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be duly executed
and delivered as of the date first above written.

	 	 	 	 	 
	 	[ADDITIONAL GUARANTOR]

 	 
	 	  	 	 
	 	  	By:	 
	 	 	Title:exv10w5

 

Exhibit 10.5

SECURITY AGREEMENT

     THIS SECURITY AGREEMENT, dated as of March 24, 2008 (this “Agreement”), is by and among Echo
Therapeutics, Inc., a Minnesota corporation (the “Company”), and each of the direct or indirect
subsidiaries of the Company (whether now or hereafter existing, such subsidiaries, the
“Subsidiaries” and, collectively with the Company, the “Debtors”), and Imperium Advisers, LLC, in
its capacity as collateral agent (in such capacity, the “Collateral Agent”), for the benefit of
Imperium Master Fund, Ltd. (“Imperium” and collectively with its permitted successors and assigns,
the “Holders”) of the Original Issue Discount Notes (the “Notes”), issued by the Company as of the
date hereof, pursuant to the Securities Purchase and Loan Agreement, dated as of the date hereof
(as amended, restated, modified or supplemented from time to time, the “Securities Purchase
Agreement”), by and between the Company and Imperium. The Holders and the Collateral Agent are
sometimes collectively referred to herein as the “Secured Parties”.

W I T N E S S E T H:

     WHEREAS, it is a condition to the obligation of Imperium to enter into the transactions
contemplated by the Securities Purchase Agreement that the Debtors execute and deliver to the
Collateral Agent for the benefit of the Holders this Agreement; and

     WHEREAS, the Company and each Debtor that is a subsidiary of the Company will directly or
indirectly benefit from the extension of credit to the Company represented by the issuance of the
Notes and the other transactions contemplated by the Securities Purchase Agreement.

     NOW, THEREFORE, in consideration of the agreements herein contained and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:

     1. DEFINITIONS.

        (a) Terms Defined in the Uniform Commercial Code. Terms used herein that are defined
in Article 9 of the UCC but not otherwise defined in this Agreement (such as “account”, “chattel
paper”, “commercial tort claim”, “deposit account”, “document”, “equipment”, “fixtures”, “general
intangibles”, “goods”, “instruments”, “inventory”, “investment property”, “letter-of-credit
rights”, “proceeds” and “supporting obligations”) shall have the respective meanings given such
terms in Article 9 of the UCC.

        (b) Defined Terms. The following terms shall apply to this Agreement:

          “Collateral” means the collateral in which the Secured Parties are granted a security interest
by this Agreement and which shall include all present and after-acquired personal property of the
Debtors, including the following personal property presently owned or hereafter acquired by the
Debtors, wherever situated, and all additions and accessions thereto and all substitutions and
replacements thereof, and all proceeds, products and accounts thereof, including, without

 

 

limitation, all proceeds from the sale or transfer of the Collateral and of insurance covering the
same and of any tort claims in connection therewith, and all dividends, interest, cash, notes,
securities, equity interest or other property at any time and from time to time acquired,
receivable or otherwise distributed in respect of, or in exchange for, any or all of the Pledged
Securities:

               (i) All goods, including, without limitation, (A) all machinery, equipment, computers, motor
vehicles, trucks, tanks, boats, ships, appliances, furniture, special and general tools, fixtures,
test and quality control devices and other equipment of every kind and nature and wherever
situated, together with all documents of title and documents representing the same, all additions
and accessions thereto, replacements therefore, all parts therefore, and all substitutes for any of
the foregoing and all other items used and useful in connection with any Debtor’s businesses and
all improvements thereto; and (B) all inventory;

               (ii) All contract rights and other general intangibles, including, without limitation, all
partnership interests, membership interests, stock or other securities, rights under any of the
Organizational Documents, agreements related to the Pledged Securities, licenses, distribution and
other agreements, computer software (whether “off-the-shelf”, licensed from any third party or
developed by any Debtor), computer software development rights, leases, franchises, customer lists,
quality control procedures, grants and rights, goodwill, trademarks, service marks, trade styles,
trade names, patents, patent applications, copyrights, Intellectual Property and income tax
refunds;

               (iii) All accounts, together with all instruments, all documents of title representing any of
the foregoing, all rights in any merchandising, goods, equipment, motor vehicles and trucks which
any of the same may represent, and all right, title, security and guaranties with respect to each
account, including any right of stoppage in transit;

               (iv) All documents, letter-of-credit rights, instruments and chattel paper;

               (v) All commercial tort claims;

               (vi) All deposit accounts and all cash (whether or not deposited in such deposit accounts);

               (vii) All investment property;

               (viii) All supporting obligations;

               (ix) All files, records, books of account, business papers, and computer programs; and

               (x) All products and proceeds of all of the foregoing Collateral set forth in clauses (i)-(ix)
above.

          “Event of Default” means the occurrence of either of the following: (i) an Event of Default;
or (ii) any provision of this Agreement shall at any time for any reason be declared to be

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null and
void, or the validity or enforceability thereof shall be contested by a Debtor, or a proceeding
shall be commenced by a Debtor, or by any Governmental Authority having jurisdiction over a Debtor,
seeking to establish the invalidity or unenforceability thereof, or a Debtor shall deny that such
Debtor has any liability or obligation purported to be created under this Agreement.

          “Intellectual Property” means the collective reference to all existing rights, priorities and
privileges relating to intellectual property, whether arising under United States, multinational or
foreign laws or otherwise, including, without limitation, (i) all copyrights arising under the laws
of the United States, any other country or any political subdivision thereof, whether registered or
unregistered and whether published or unpublished, all registrations and recordings thereof, and
all applications in connection therewith; (ii) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions thereof, and all
applications for letters patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof; (iii) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade dress, service marks, logos,
domain names and other source or business identifiers, and all goodwill associated therewith, now
existing or hereafter adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any state thereof or any other country or any
political subdivision thereof, or otherwise, and all common law rights related thereto; (iv) all
trade secrets arising under the laws of the United States, any other country or any political
subdivision thereof; (v) all rights to obtain any reissues, renewals or extensions of the
foregoing; (vi) all licenses for any of the foregoing, and (vii) all causes of action for
infringement of the foregoing.

          “Obligations” means all of the Debtors’ obligations under the Transaction Documents, in each
case, whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not
from time to time decreased or extinguished and later increased, created or incurred, and all or
any portion of such obligations or liabilities that are paid, to the extent all or any part of such
payment is avoided or recovered directly or indirectly from any of the Secured Parties as a
preference, fraudulent transfer or otherwise as such obligations may be amended, supplemented,
converted, extended or modified from time to time. Without limiting the generality of the
foregoing, the term “Obligations” shall include (i) any and all other fees, indemnities, costs,
obligations and liabilities of the Debtors from time to time under or in connection with the
Transaction Documents; and (ii) all amounts (including but not limited to post-petition interest)
in respect of the foregoing that would be payable but for the fact that the obligations to pay such
amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or
similar proceeding involving any Debtor.

          “Organizational Documents” means with respect to an entity, the documents by which such entity
was organized (such as a certificate of incorporation, certificate of limited partnership or
articles of organization, and including, without limitation, any certificates of designation for
preferred stock or other forms of preferred equity) and which relate to the internal
governance of such entity (such as bylaws, a partnership agreement or an operating, limited
liability or members agreement).

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          “Pledged Securities” means all investment property and general intangibles respecting
ownership and/or other equity interests in each Subsidiary, including, without limitation, the
shares of capital stock and the other equity interests listed on Schedule I (as the same may be
modified from time to time pursuant to the terms hereof), and any other shares of capital stock
and/or other equity interests of any other Subsidiary of any Debtor obtained in the future, and in
each case, all certificates representing such shares and/or equity interests and, in each case, all
rights, options, warrants, stock, other securities and/or equity interests that may hereafter be
received, receivable or distributed in respect of, or exchanged for, any of the foregoing, and all
rights arising under or in connection with the foregoing, including, but not limited to, all
dividends, interest and cash.

          “Transaction Documents” means this Agreement, the Notes, the Warrant, the Guarantee, the
Registration Rights Agreement and the other agreements, instruments or other documents delivered by
or on behalf of any of the Debtors in furtherance of any of the foregoing documents.

          “UCC” means the Uniform Commercial Code of the State of New York and or any other applicable
laws of the United States or any state or other political subdivision thereof, which has
jurisdiction with respect to all, or any portion of, the Collateral or this Agreement, from time to
time. It is the intent of the parties that defined terms in the UCC should be construed in their
broadest sense so that the term “Collateral” will be construed in its broadest sense. Accordingly
if there are, from time to time, changes to defined terms in the UCC that broaden the definitions,
they are incorporated herein and if existing definitions in the UCC are broader than the amended
definitions, the existing ones shall be controlling.

     (c) Terms Defined in the Securities Purchase Agreement. Any capitalized term used but
not defined herein has the meaning specified in the Securities Purchase Agreement.

     (d) Usage. All definitions contained in this Agreement are equally applicable to the
singular and plural forms of the terms defined. The words “hereof”, “herein” and “hereunder” and
words of similar import refer to this Agreement as a whole and not to any particular provision of
this Agreement.

2. GRANT OF SECURITY INTEREST.

     As an inducement for the Secured Parties to enter into the transactions contemplated by the
Securities Purchase Agreement and to secure the complete and timely payment, performance and
discharge in full, as the case may be, of all of the the Obligations of the Debtors, each Debtor
hereby unconditionally and irrevocably pledges, grants and hypothecates to the Collateral Agent, in
each case for the benefit of each Secured Party pari passu with each of the other Secured Parties,
a continuing security interest in and to, a lien upon and a right of set-off against all of their
respective right, title and interest of whatsoever kind and nature in and to, the Collateral (the
“Security Interest”). Notwithstanding the foregoing, nothing herein shall be deemed to constitute
an assignment of any asset which, in the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise prohibited by applicable law (in each case
to the extent that such applicable law is not overridden by Sections 9-406, 9-407 and/or 9-408 of

4

 

the UCC or other similar applicable law); provided, however, that to the extent permitted by
applicable law, this Agreement shall create a valid security interest in such asset and, to the
extent permitted by applicable law, this Agreement shall create a valid security interest in the
proceeds of such asset.

3. DELIVERY OF CERTAIN COLLATERAL.

     Contemporaneously or prior to the execution of this Agreement, each Debtor shall deliver or
cause to be delivered to the Collateral Agent, for the benefit of the Secured Parties (a) any and
all certificates and other instruments representing or evidencing the Pledged Securities; and (b)
any and all certificates and other instruments or documents representing any of the other
Collateral, in each case, together with all necessary endorsements. The Debtors are,
contemporaneously with the execution hereof, delivering to the Collateral Agent, for the benefit of
the Secured Parties, or have previously delivered to the Secured Parties, a true and correct copy
of each Organizational Document governing any of the Pledged Securities.

	4.	 	REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE DEBTORS.

     Each Debtor represents and warrants to, and covenants and agrees with, the Collateral Agent,
for the benefit of the Secured Parties, as follows:

     4.1 Good Standing; Due Authorization; Enforceability.

          (a) Each Debtor is duly organized and in good standing in the jurisdiction of its formation.
Each Debtor shall at all times preserve and keep in full force and effect its valid existence and
good standing and any rights and franchises material to its business.

          (b) Each Debtor has the requisite corporate, partnership, limited liability company or other
power and authority to enter into this Agreement and otherwise to carry out its obligations
hereunder. The execution, delivery and performance by each Debtor of this Agreement and the filings
contemplated therein have been duly authorized by all necessary corporate, partnership, limited
liability company or other action on the part of such Debtor and no further action is required by
such Debtor. This Agreement has been duly executed and delivered by each Debtor.

          (c) This Agreement constitutes the legal, valid and binding obligation of each Debtor,
enforceable against each Debtor in accordance with its terms except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization and similar laws of general
application relating to or affecting the rights and remedies of creditors and by general principles
of equity.

     4.2 No Conflicts. The execution, delivery and performance of this Agreement by the
Debtors do not (i) violate any of the provisions of any Organizational Documents of any Debtor or
any judgment, decree, order or award of any court, governmental body or arbitrator or any
applicable law, rule or regulation applicable to any Debtor; or (ii) conflict with, or constitute a

5

 

default (or an event that with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument
(evidencing any Debtor’s debt or otherwise) or other understanding to which any Debtor is a party
or by which any property or asset of any Debtor is bound or affected. No consent (including,
without limitation, from stockholders or creditors of any Debtor) is required for any Debtor to
enter into and perform its obligations hereunder.

     4.3 Debtor Information; Validity, Perfection and Maintenance of Security Interests.

          (a) All of the information set forth on Schedule II is true, correct and complete in all
respects. No Debtor shall change its name, type of organization, jurisdiction of organization,
organizational identification number (if it has one), legal or corporate structure, or identity, or
add any new fictitious name unless it provides at least thirty (30) days’ prior written notice to
the Secured Parties of such change and, at the time of such written notification, such Debtor
provides any financing statements or fixture filings necessary to perfect and continue perfected
the perfected Security Interest granted and evidenced by this Agreement; provided, however, no such
notice shall be necessary in connection with or in furtherance of a migratory merger between the
Company and its subsidiary Echo Therapeutics, Inc., a Delaware corporation (the “Echo Delaware
Subsidiary”), where the Echo Delaware Subsidiary shall be the surviving entity of such merger.

          (b) This Agreement creates in favor of the Collateral Agent for the benefit of the Secured
Parties a valid security interest in the Collateral of the Debtors, securing the payment and
performance of the Obligations. Upon filing of UCC-1 financing statements covering all assets and
properties of each Debtor with the secretary of state’s office of the state in which such Debtor is
organized (collectively, the “Financing Statements”), and payment of the applicable filing fees,
all security interests created hereunder in any Collateral owned by such Debtor which may be
perfected by filing UCC-1 financing statements shall have been duly perfected. Except as provided
herein, no consent of any third parties and no authorization, approval or other action by, and no
notice to or filing with, any Governmental Authority is required for (i) the execution, delivery
and performance of this Agreement; (ii) the creation or perfection of the Collateral Agent’s
Security Interests created hereunder in the Collateral; or (iii) the enforcement of the rights of
the Secured Parties hereunder.

          (c) Each Debtor hereby authorizes the Secured Parties, or any of them, to file the Financing
Statements and any other financing statements or other similar filings under the UCC with respect
to the Security Interest with the proper filing and recording agencies in any jurisdiction deemed
necessary by them. The Debtors shall, at the Debtors’ sole cost and expense, promptly execute
and/or deliver to the Secured Parties such further deeds, mortgages, assignments, security
agreements, financing statements or other instruments, documents, certificates and assurances and
take such further action as the Secured Parties may from time to time reasonably request and may in
their sole, reasonable discretion deem necessary to perfect, protect or enforce its security
interest in the Collateral including, without limitation, if applicable, the execution and delivery of
a separate security agreement and assignment with respect to the Debtors’ Intellectual Property in
which the Secured Parties have been granted a security interest hereunder, substantially in a form
reasonably satisfactory to the Secured Parties.

6

 

          (d) The Debtors shall at all times maintain the Security Interest provided for hereunder as
valid and perfected security interests in the Collateral in favor of the Secured Parties until this
Agreement and the Security Interest hereunder shall be terminated pursuant to Section 12. The
Debtors hereby agree to defend the same against the claims of any and all Persons. The Debtors
shall obtain and furnish to the Secured Parties from time to time, upon demand, such releases
and/or subordinations of claims and Liens which may be required to maintain the priority of the
Security Interest hereunder.

     4.4 Collateral.

          (a) Except for the Security Interest granted hereunder, each Debtor is, as to all Collateral
presently purported to be owned by it, the owner, or in the case of leased or licensed assets, the
lessee or licensee, of such Collateral (except for licenses granted by any Debtor in the ordinary
course of business or as otherwise disclosed in the Securities Purchase Agreement) free and clear
of any Liens (other than Permitted Liens), and are fully authorized to grant the Security Interest.
Except as otherwise set forth in the Securities Purchase Agreement, there has been no adverse
decision to any Debtor’s claim of ownership rights in or exclusive rights to use the Collateral in
any jurisdiction or to any Debtor’s right to keep and maintain such Collateral in full force and
effect, and there is no proceeding involving said rights pending or, to the best knowledge of any
Debtor, threatened before any Governmental Authority.

          (b) The Debtors shall keep and preserve their equipment, inventory and other tangible
Collateral in good condition, repair and order, ordinary wear and tear excepted. Each Debtor shall
take all steps reasonably necessary to diligently pursue and seek to preserve, enforce and collect
any rights, claims, causes of action and accounts receivable in respect of the Collateral
consistent with past practices.

          (c) The Debtors shall not transfer, pledge, hypothecate, encumber, license, sell or otherwise
dispose of any of the Collateral except as otherwise permitted or required under the Securities
Purchase Agreement or any other Transaction Document. The Debtors shall not operate or locate any
such Collateral (or cause to be operated or located) in any area excluded from insurance coverage.

          (d) So long as this Agreement shall be in effect, the Debtors shall not execute and shall not
knowingly permit to be on file in any such office or agency any such financing statement or other
document or instrument (except to the extent filed or recorded in favor of the Secured Parties
pursuant to the terms of this Agreement).

          (e) The capital stock and other equity interests listed on Schedule I represent all of the
capital stock and other equity interests of the Company Subsidiaries, and represent all capital
stock and other equity interests owned, directly or indirectly, by the Debtors. All of the Pledged
Securities are validly issued, fully paid and nonassessable (as applicable), and the Debtors
are the legal and beneficial owner of the Pledged Securities, free and clear of any Lien except for
Permitted Liens. The ownership and other equity interests in partnerships and limited liability
companies (if any) included in the Pledged Securities by their express terms do not provide that

7

 

they are securities governed by Article 8 of the UCC and are not held in a securities account or by
any financial intermediary. Each Debtor shall vote the Pledged Securities to comply with the
covenants and agreements set forth herein and the other Transaction Documents.

          (f) Each Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the Secured
Parties, in sufficient detail, of any material change in the Collateral, and of the occurrence of
any event which would have a material adverse effect on the value of the Collateral or on the
Secured Parties’ security interest therein. Upon not less than five Business Days’ prior notice,
each Debtor shall permit the Secured Parties and their representatives and agents to inspect the
Collateral at any time during normal business hours, and to make copies of records pertaining to
the Collateral as may be reasonably requested by a Secured Party from time to time.

          (g) All information heretofore or herein supplied to the Secured Parties by or on behalf of
the Debtors with respect to the Collateral is accurate and complete in all material respects as of
the date furnished.

     4.5 Insurance. Each Debtor shall maintain with financially sound and reputable
insurers, insurance as required under the Securities Purchase Agreement. Each Debtor shall cause
each insurance policy issued in connection herewith to provide, and the insurer issuing such policy
to certify to the Secured Parties that (a) the Secured Parties will be named as lender loss payee
and additional insured, as applicable, under each such insurance policy; (b) if such insurance be
proposed to be cancelled or materially changed for any reason whatsoever, such insurer will
promptly notify the Secured Parties and such cancellation or change shall not be effective as to
the Secured Parties for at least thirty (30) days after receipt by the Secured Parties of such
notice, unless the effect of such change is to extend or increase coverage under the policy; and
(c) the Secured Parties will have the right (but no obligation) at their election to remedy any
default in the payment of premiums within thirty (30) days of notice from the insurer of such
default. If no Event of Default exists and if the proceeds arising out of any claim or series of
related claims do not exceed $25,000, loss payments in each instance will be applied by the
applicable Debtor to the repair and/or replacement of property with respect to which the loss was
incurred to the extent reasonably feasible, and any loss payments or the balance thereof remaining,
to the extent not so applied, shall be payable to the applicable Debtor; provided, however, that
payments received by any Debtor after an Event of Default occurs and is continuing or in excess of
$25,000 for any occurrence or series of related occurrences shall be paid to the Secured Parties,
on a pari passu basis with each of the other Secured Parties, and, if received by such Debtor,
shall be held in trust for and immediately paid over to the Secured Parties unless otherwise
directed in writing by the Secured Parties. Copies of such policies or the related certificates,
in each case, naming the Secured Parties as lender loss payee and additional insured shall be
delivered to the Secured Parties at least annually and at the time any new policy of insurance is
issued.

     4.6 Distributions. Upon the occurrence of and during the continuation of an Event of
Default, no Debtor shall declare or make any dividend or other distribution of cash or any other
assets (or rights to acquire such assets) to the shareholders, members, partners or other
equity holders of such Debtor.

8

 

     4.7 Additional Debtors. If a Debtor creates or acquires any new Subsidiary, then such
Debtor shall cause such new Subsidiary to become party to this Agreement for all purposes of this
Agreement by executing and delivering an Assumption Agreement in the form of Annex A hereto.

5. DUTY TO HOLD IN TRUST.

     5.1 Cash and Payment Obligations. Upon the occurrence and during the continuation of
an Event of Default, if requested to do so by the Collateral Agent in writing, each Debtor shall,
upon receipt of any revenue, income, dividend, interest or other sums subject to the Security
Interest, whether payable pursuant to the Notes or otherwise, or of any check, draft, note, trade
acceptance or other instrument evidencing an obligation to pay any such sum, hold the same in trust
for and on behalf of and for the benefit of the Secured Parties, and shall forthwith endorse and
transfer any such sums or instruments, or both (to the extent permitted by law), to the Collateral
Agent for distribution to the Secured Parties on a pro rata basis for application to the
satisfaction of the Obligations.

     5.2 Securities and Other Assets. If a Debtor shall become entitled to receive or
shall receive any securities or other property (including, without limitation, shares of Pledged
Securities or instruments representing Pledged Securities acquired after the date hereof, or any
options, warrants, rights or other similar property or certificates representing a dividend, or any
distribution in connection with any recapitalization, reclassification or increase or reduction of
capital, or issued in connection with any reorganization of any of its Subsidiaries) in respect of
the Pledged Securities (whether as an addition to, in substitution of, or in exchange for, such
Pledged Securities or otherwise), such Debtor agrees to (i) accept the same as the agent of the
Secured Parties; (ii) hold the same in trust on behalf of and for the benefit of the Secured
Parties; and (iii) deliver any and all certificates or instruments evidencing the same to the
Collateral Agent, for the benefit of the Secured Parties, on or before the close of business on the
fifth Business Day following the receipt thereof by such Debtor, in the exact form received
together with all requisite and necessary endorsements, to be held by the Collateral Agent subject
to the terms of this Agreement as Collateral.

6. RIGHTS AND REMEDIES UPON DEFAULT.

     6.1 Scope of Rights and Remedies. Upon the occurrence and during the continuation of
an Event of Default, the Collateral Agent, for the benefit of the Secured Parties, acting through
any agent appointed by it for such purpose, shall have the right to exercise all of the remedies
conferred hereunder and under the other Transaction Documents, and the Collateral Agent, for the
benefit of the Secured Parties, shall have all the rights and remedies of a secured party under the
UCC. Without limiting any of the foregoing, upon the occurrence and during the continuation of an
Event of Default, the Collateral Agent shall have the following rights and powers:

          (a) The Collateral Agent shall have the right to take possession of the Collateral and, for
that purpose, enter, with the aid and assistance of any Person, any premises where the
Collateral, or any part thereof, is or may be placed and remove the same, and upon request of
the Collateral Agent, the Debtors shall assemble the Collateral and make it available to the
Collateral Agent at places which the Collateral Agent shall reasonably select, whether at the
Debtors’

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premises or elsewhere, and make available to the Collateral Agent, without rent, all of
the Debtors’ premises and facilities for the purpose of the Collateral Agent taking possession of,
removing or putting the Collateral in saleable or disposable form.

          (b) Upon reasonable notice to the Debtors by the Collateral Agent, all rights of the Debtors
to exercise the voting and other consensual rights which it would otherwise be entitled to exercise
and all rights of the Debtors to receive the dividends and interest which it would otherwise be
authorized to receive and retain, shall cease. Upon such reasonable notice, the Collateral Agent
shall have the right to receive any interest, cash dividends or other payments on the Collateral
and, at the option of the Collateral Agent, to exercise in the Collateral Agent’s discretion all
voting rights pertaining thereto. Without limiting the generality of the foregoing, the Collateral
Agent shall have the right (but not the obligation) to exercise all rights with respect to the
Collateral as if it were the sole and absolute owner thereof, including, without limitation, to
vote and/or to exchange, at its sole discretion, any or all of the Collateral in connection with a
merger, reorganization, consolidation, recapitalization or other readjustment concerning or
involving the Collateral or a Debtor or any of its Subsidiaries.

          (c) The Collateral Agent shall have the right to operate the business of the Debtors using the
Collateral and shall have the right to assign, sell, lease or otherwise dispose of and deliver all
or any part of the Collateral, at public or private sale or otherwise, either with or without
special conditions or stipulations, for cash or on credit or for future delivery, in such parcel or
parcels and at such time or times and at such place or places, and upon such terms and conditions
as the Collateral Agent may deem commercially reasonable, all without (except as shall be required
by applicable statute and cannot be waived) advertisement or demand upon or notice to the Debtors
or right of redemption of the Debtors, which are hereby expressly waived. Upon each such sale,
lease, assignment or other transfer of Collateral, the Collateral Agent may, unless prohibited by
applicable law which cannot be waived, purchase all or any part of the Collateral being sold, free
from and discharged of all trusts, claims, right of redemption and equities of any Debtor, which
are hereby waived and released.

          (d) The Collateral Agent shall have the right (but not the obligation) to notify any account
debtors and any obligors under instruments or accounts to make payments directly to the Collateral
Agent and to enforce the Debtors’ rights against such account debtors and obligors.

          (e) The Collateral Agent may (but is not obligated to) direct any financial intermediary or
any other Person holding any investment property to transfer the same to the Collateral Agent or
its designee.

          (f) The Collateral Agent may (but is not obligated to) transfer any or all Intellectual
Property registered in the name of any Debtor at the United States Patent and Trademark Office
and/or Copyright Office into the name of the Collateral Agent or any designee or any purchaser of
any Collateral.

     6.2 Disposition of Collateral. The Collateral Agent may comply with any applicable
law in connection with a disposition of Collateral and such compliance will not be considered to
adversely affect the commercial reasonableness of any sale of the Collateral. The Collateral Agent

10

 

may sell the Collateral without giving any warranties and may specifically disclaim such
warranties. If the Collateral Agent sells any of the Collateral on credit, the Debtors will only
be credited with payments actually made by the purchaser. In addition, each Debtor waives any and
all rights that it may have to a judicial hearing in advance of the enforcement of any of the
Collateral Agent’s rights and remedies hereunder, including, without limitation, its right
following and during the continuation of an Event of Default to take immediate possession of the
Collateral and to exercise its rights and remedies with respect thereto.

     6.3 License to Use Intellectual Property. For the purpose of enabling the Collateral
Agent to further exercise rights and remedies under this Section 6 or elsewhere provided by
agreement or applicable law, each Debtor hereby grants to the Collateral Agent an irrevocable,
nonexclusive license (exercisable without payment of royalty or other compensation to such Debtor)
to use, license or sublicense following and during the continuation of an Event of Default, any
Intellectual Property now owned or hereafter acquired by such Debtor, and wherever the same may be
located, and including in such license access to all media in which any of the licensed items may
be recorded or stored and to all computer software and programs used for the compilation or
printout thereof.

7. APPLICATIONS OF PROCEEDS.

     The proceeds of any such sale, lease or other disposition of the Collateral hereunder shall be
applied first, to the expenses of retaking, holding, storing, processing and preparing for sale,
selling and the like (including, without limitation, any taxes, fees and other costs incurred in
connection therewith) of the Collateral, to the reasonable attorneys’ fees and expenses incurred by
the Collateral Agent and Secured Parties in enforcing their rights hereunder and in connection with
collecting, storing and disposing of the Collateral, and then to satisfaction of the Obligations
pro rata among the Secured Parties, and to the payment of any other amounts required by applicable
law, after which the Secured Parties shall pay to the Debtors any surplus proceeds. If, upon the
sale, license or other disposition of the Collateral, the proceeds thereof are insufficient to pay
all amounts to which the Secured Parties are legally entitled, the Debtors will be liable for the
deficiency, together with interest thereon, at an interest rate equal to the Default Interest Rate,
and the reasonable fees of any attorneys employed by the Collateral Agent and the Secured Parties
to collect such deficiency. To the extent permitted by applicable law, each Debtor waives all
claims, damages and demands against the Collateral Agent and the Secured Parties arising out of the
repossession, removal, retention or sale of the Collateral, unless due solely to the gross
negligence or willful misconduct of the Collateral Agent or the Secured Parties as determined by a
final judgment (not subject to further appeal) of a court of competent jurisdiction.

8. SECURITIES LAW PROVISION.

     Each Debtor recognizes that the Collateral Agent may be limited in its ability to effect a
sale to the public of all or part of the Pledged Securities by reason of certain prohibitions in
the Securities Act or other federal or state securities laws (collectively, the “Securities Laws”),
and may be compelled to resort to one or more sales to a restricted group of purchasers who may be
required to agree to acquire the Pledged Securities for their own account, for investment and not
with a view to the distribution or resale thereof. Each Debtor agrees that sales so made may be at

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prices and on terms less favorable than if the Pledged Securities were sold to the public, and that
the Secured Parties have no obligation to delay the sale of any Pledged Securities for the period
of time necessary to register the Pledged Securities for sale to the public under the Securities
Laws. Each Debtor shall cooperate with the Collateral Agent in its attempt to satisfy any
requirements under the Securities Laws (including, without limitation, registration thereunder if
requested by the Collateral Agent) applicable to the sale of the Pledged Securities by the
Collateral Agent.

9. COSTS AND EXPENSES.

     Each Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses incurred in
connection with any filing required hereunder, including, without limitation, any financing
statements pursuant to the UCC, continuation statements, partial releases and/or termination
statements related thereto or any expenses of any searches reasonably required by the Secured
Parties. The Debtors shall also pay, upon demand, all other claims and charges which in the
reasonable opinion of the Secured Parties might materially prejudice, imperil or otherwise
adversely affect the Collateral or the Security Interest therein. The Debtors will also, upon
demand, pay to the Collateral Agent, for the benefit of the Secured Parties, but without
duplicating the Debtors’ obligation to pay certain costs and expenses with respect to any of the
Transaction Documents, the amount of any and all reasonable expenses, including the reasonable fees
and expenses of its counsel and of any experts and agents, which the Secured Parties may incur in
connection with (i) the enforcement of this Agreement or any other Transaction Document; or (ii)
the custody or preservation of, or the sale of, collection from, or other realization upon, any of
the Collateral.

10. RESPONSIBILITY FOR COLLATERAL.

     The Debtors assume all liabilities and responsibility in connection with all Collateral, and
the Obligations shall in no way be affected or diminished by reason of the loss, destruction,
damage or theft of any of the Collateral or its unavailability for any reason. The Collateral
Agent agrees to act in accordance with commercially reasonable standards and the UCC. Without
limiting the generality of the foregoing, (a) no Secured Party (i) has any duty (either before or
after an Event of Default) to collect any amounts in respect of the Collateral or to preserve any
rights relating to the Collateral, or (ii) has any obligation to clean-up or otherwise prepare the
Collateral for sale; and (b) each Debtor shall remain obligated and liable under each contract or
agreement included in the Collateral to be observed or performed by such Debtor thereunder. No
Secured Party shall have any obligation or liability under any such contract or agreement by reason
of or arising out of this Agreement or the receipt by any Secured Party of any payment relating to
any of the Collateral, nor shall any Secured Party be obligated in any manner to perform any of the
obligations of any Debtor under or pursuant to any such contract or agreement, to make inquiry as
to the nature or sufficiency of any payment received by any Secured Party in respect of the
Collateral or as to the sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any performance or to
collect the payment of any amounts which may have been assigned to any Secured Party or to which it
may be entitled at any time or times.

11. SECURITY INTEREST ABSOLUTE.

12

 

     All rights of the Secured Parties and all obligations of the Debtors hereunder, shall be
absolute and unconditional, irrespective of: (a) any lack of validity or enforceability of any of
the Transaction Documents; (b) any change in the time, manner or place of payment or performance
of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of any
of the Transaction Documents (other than any agreement signed by the Secured Parties specifically
releasing such obligations); (c) any exchange, release or nonperfection of any of the Collateral,
or any release or amendment or waiver of or consent to departure from any other collateral for, or
any guaranty, or any other security, for all or any of the Obligations; (d) any action by any of
the Secured Parties to obtain, adjust, settle and cancel in its sole discretion any insurance
claims or matters made or arising in connection with the Collateral; or (e) any other circumstance
which might otherwise constitute any legal or equitable defense available to a Debtor, or a
discharge of all or any part of the Security Interest granted hereby. Until the Obligations shall
have been paid and performed in full, the rights of the Secured Parties shall continue even if the
Obligations are barred for any reason, including, without limitation, the running of the statute of
limitations or bankruptcy. Each Debtor expressly waives presentment, protest, notice of protest,
demand, notice of nonpayment and demand for performance. In the event that at any time any
transfer of any Collateral or any payment received by the Collateral Agent for the benefit of any
Secured Party hereunder shall be deemed by final order of a court of competent jurisdiction to have
been a voidable preference or fraudulent conveyance under the bankruptcy or insolvency laws of the
United States, or shall be deemed to be otherwise due to any party other than the Secured Parties,
then, in any such event, each Debtor’s obligations hereunder shall survive cancellation of this
Agreement, and shall not be discharged or satisfied by any prior payment thereof and/or
cancellation of this Agreement, but shall remain a valid and binding obligation enforceable in
accordance with the terms and provisions hereof. Each Debtor waives all right to require any
Secured Party to proceed against any other Person or to apply any Collateral which the Collateral
Agent or any Secured Parties may hold at any time, or to marshal assets, or to pursue any other
remedy. Each Debtor waives any defense arising by reason of the application of the statute of
limitations to any obligation secured hereby.

12. TERM OF AGREEMENT.

     This Agreement and the Security Interest shall terminate on the date on which all Obligations
have been indefeasibly paid or otherwise satisfied in full; provided, however, that all indemnities
of the Debtors contained in this Agreement shall survive and remain operative and in full force and
effect regardless of the termination of this Agreement.

13. POWER OF ATTORNEY.

     Each Debtor authorizes the Collateral Agent, and does hereby make, constitute and appoint the
Collateral Agent and its officers, agents, successors or assigns with full power of substitution,
as such Debtor’s true and lawful attorney-in-fact, with power, in the name of the various Secured
Parties or such Debtor, to, after the occurrence and during the continuance of an Event of Default,
(i) endorse any note, checks, drafts, money orders or other instruments of payment (including
payments payable under or in respect of any policy of insurance) in respect of the Collateral
that may come into possession of the Secured Parties; (ii) sign and endorse any financing statement
pursuant to the UCC or any invoice, freight or express bill, bill of lading, storage or warehouse

13

 

receipts, drafts against debtors, assignments, verifications and notices in connection with
accounts, and other documents relating to the Collateral; (iii) pay or discharge taxes, Liens
(other than Permitted Liens), or other encumbrances at any time levied or placed on or threatened
against the Collateral; (iv) demand, collect, receipt for, compromise, settle and sue for monies
due in respect of the Collateral; (v) transfer any Intellectual Property or provide licenses
respecting any Intellectual Property; and (vi) generally, at the option of the Collateral Agent,
and at the expense of the Debtors, at any time, or from time to time, execute and deliver any and
all documents and instruments and do all acts and things which the Collateral Agent deems necessary
to protect, preserve and realize upon the Collateral and the Security Interest granted therein in
order to effect the intent of this Agreement and the other Transaction Documents all as fully and
effectually as the Debtors might or could do. Each Debtor hereby ratifies all that said attorney
shall lawfully do or cause to be done by virtue of the foregoing sentence. The designation set
forth herein shall be deemed to amend and supersede any inconsistent provision in the
Organizational Documents or other documents or agreements to which any Debtor or any of the Pledged
Securities is subject or to which any Debtor is a party. Without limiting the generality of the
foregoing, after the occurrence and during the continuance of an Event of Default, the Collateral
Agent is specifically authorized to execute and file any applications for or instruments of
transfer and assignment of any patents, trademarks, copyrights or other Intellectual Property with
the United States Patent and Trademark Office and the United States Copyright Office. This power of
attorney is coupled with an interest and shall be irrevocable for the term of this Agreement and
thereafter as long as any of the Obligations shall be outstanding. 

14. OTHER SECURITY.

     To the extent that the Obligations are now or hereafter secured by property other than the
Collateral or by the guarantee, endorsement or property of any other Person, then the Collateral
Agent shall have the right, in its sole discretion, to pursue, relinquish, subordinate, modify or
take any other action with respect thereto, without in any way modifying or affecting any of the
Secured Parties’ rights and remedies hereunder.

15. COLLATERAL AGENT.

     15.1 Appointment, Resignation and Removal. The Secured Parties hereby appoint
Imperium Advisers, LLC to act as the Collateral Agent for purposes of exercising any and all rights
and remedies of the Secured Parties hereunder. Any Person serving as the Collateral Agent may
resign as Collateral Agent hereunder at any time by giving written notice thereof to each Holder,
and such resignation shall become effective upon the effectiveness of the appointment of a
successor agent in accordance with Section 15.2. Any Person serving as Collateral Agent may be
removed at any time or from time to time by the affirmative vote of the Holders holding a majority
of the outstanding principal of the Notes, and such removal shall become effective upon the
effectiveness of the appointment of a successor agent in accordance with Section 15.2.

     15.2 Successor Agent. Upon the resignation or removal of a Collateral Agent, a
successor agent may (or, in the case of removal, shall) be appointed by the Holders holding a
majority of the outstanding principal of the Notes, and such appointment shall become effective
upon such successor agent accepting such appointment in writing. If no successor agent shall have

14

 

been so appointed by the Holders within thirty (30) days after receipt of a resignation notice from
the Collateral Agent, then the Collateral Agent shall have the right to appoint a successor agent
in its sole and absolute discretion, and such successor agent shall commence serving as the
Collateral Agent hereunder upon such successor agent’s acceptance of such appointment in writing.

     15.3 Exculpation; Limitation and Delegation of Duties. Neither the Collateral Agent
nor any of its directors, officers, partners, agents, representatives, advisors or employees
(collectively, the “Collateral Agent Parties”) shall be liable to any Holder for any action taken
or omitted to be taken by any of them hereunder, except for their own gross negligence or willful
misconduct. None of Collateral Agent Parties shall be responsible for, or have any duty to
ascertain the veracity, performance or satisfaction of, any representation, warranty, covenant,
agreement or condition made or contained in this Agreement or any other Transaction Document. The
Collateral Agent may undertake any of its duties as Collateral Agent hereunder by or through
employees, agents and attorneys-in-fact and shall not be liable to any Holder for the negligence or
misconduct of any such agents or attorneys-in-fact selected in good faith by the Collateral Agent.

     15.4 Indemnification by Holders. The Holders hereby indemnify each of the Collateral
Agent Parties for any losses, obligations, damages, penalties, actions, judgments, suits, costs,
expenses, disbursements and other liabilities of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Collateral Agent in any way relating to or arising
out of the Collateral Agent’s performance of its obligations under this Agreement, except for (i)
those costs that are actually reimbursed by the Debtors under this Agreement; and (ii) liabilities
directly attributable to the gross negligence or willful misconduct of any Collateral Agent Party.
The payment of any indemnification obligation hereunder shall be made by each Holder on a pro rata
basis, based on the principal amount of the Notes then owned by such Holder as compared to the
aggregate principal amount of the Notes then outstanding.

16. INDEMNIFICATION.

     The Debtors shall jointly and severally indemnify, reimburse and hold harmless the Secured
Parties and their respective partners, members, shareholders, officers, directors, employees and
agents (collectively, “Indemnitees”) from and against any and all losses, claims, liabilities,
damages, penalties, suits, costs and expenses, of any kind or nature, (including fees relating to
the cost of investigating and defending any of the foregoing) imposed on, incurred by or asserted
against such Indemnitee in any way related to or arising from or alleged to arise from this
Agreement or the Collateral, except any such losses, claims, liabilities, damages, penalties,
suits, costs and expenses which result from the gross negligence or willful misconduct of such
Indemnitee as determined by a final, nonappealable decision of a court of competent jurisdiction.
This indemnification provision is in addition to, and not in limitation of, any other
indemnification provision in the other Transaction Documents.

17. MISCELLANEOUS.

     17.1 Severability. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision; provided, however, that in such
case

15

 

the parties shall negotiate in good faith to replace such provision with a new provision which
is not illegal, unenforceable or void, as long as such new provision does not materially change the
economic benefits of this Agreement to the parties.

     17.2 Successors and Assigns. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective successors and permitted assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as expressly provided in
this Agreement. A Holder may assign its rights hereunder in connection with any private sale or
transfer of its Note in accordance with the terms thereof and of the other Transaction Documents,
as long as, as a condition precedent to such transfer, the transferee executes an acknowledgment
agreeing to be bound by the applicable provisions of this Agreement, in which case the term
“Holder” shall be deemed to refer to such transferee as though such transferee were an original
signatory hereto. No Debtor may assign its rights or obligations under this Agreement.

     17.3 Injunctive Relief. Each Debtor acknowledges and agrees that a material breach by
it of its obligations hereunder will cause irreparable harm to each Secured Party and that the
remedy or remedies at law for any such breach will be inadequate and agrees, in the event of any
such material breach, in addition to all other available remedies, such Secured Party shall be
entitled to an injunction restraining such breach and requiring immediate and specific performance
of such obligations without the necessity of showing economic loss or the posting of any bond.

     17.4 Governing Law; Jurisdiction. This Agreement shall be governed by and construed
under the laws of the State of New York applicable to contracts made and to be performed entirely
within the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in the City and County of New York for the adjudication of
any dispute hereunder or in connection herewith or with any transaction contemplated hereby and
hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding
is improper. Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof to such party
at the address in effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner permitted by law.

     17.5 Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, and all of which together shall constitute one and the same
instrument. Any executed signature page delivered by facsimile or e-mail transmission shall be
binding to the same extent as an original executed signature page, with regard to any agreement
subject to the terms hereof or any amendment thereto.

     17.6 Headings. The headings used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this Agreement.

16

 

     17.7 Notices. Any notice, demand or request required or permitted to be given by any
Debtor, Collateral Agent or a Holder pursuant to the terms of this Agreement shall be in writing
and shall be deemed delivered (i) when delivered personally or by verifiable facsimile
transmission, unless such delivery is made on a day that is not a Business Day, in which case such
delivery will be deemed to be made on the next succeeding Business Day; (ii) on the next Business
Day after timely delivery to an overnight courier; and (iii) on the Business Day actually received
if deposited in the U.S. mail (certified or registered mail, return receipt requested, postage
prepaid), addressed as follows:

If to any Debtor:

c/o Echo Therapeutics, Inc.

10 Forge Parkway

Franklin, MA 02038

Attn: Chief Financial Officer

Tel: (508) 530-0311

Fax: (508) 553-8760

With a copy (which shall not constitute notice) to:

Drinker Biddle & Reath LLP

One Logan Square

18th & Cherry Streets

Philadelphia, PA 19103

Attn: Stephen T. Burdumy, Esq.

Tel: (215) 988-2700

Fax: (215) 988-2757

If to the Collateral Agent or any Secured Party:

Imperium Advisers, LLC

153 East 53rd Street

29th Floor

New York, NY 10022

Attn: Maurice Hryshko, Esq.

Tel: (212) 433-1360

Fax: (212) 433-1361

or as shall otherwise be designated by such party in writing to the other parties hereto in
accordance with this Section 17.1.

     17.8 Entire Agreement; Amendments. This Agreement and the other Transaction Documents
constitute the entire agreement between the parties with regard to the subject matter hereof and
thereof, superseding all prior agreements or understandings, whether written or oral, between or
among the parties. No (i) amendment to this Agreement or (ii) waiver of any agreement

17

 

or other
obligation of a Debtor under this Agreement may be made or given except pursuant to a written
instrument executed by the Debtors, the Collateral Agent and the Holders holding a majority of the
outstanding principal of the Notes. Any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

[SIGNATURE PAGES FOLLOW]

18

 

     IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed
as of the day and year first above written.

	 	 	 	 	 
	 	 	ECHO THERAPEUTICS, INC., AS DEBTOR
	 
	 	 	 	 
	 

	 	By:
	 	Patrick T. Mooney, M.D.
	 

	 	 	 	 
	 

	 	 	 	Patrick T. Mooney, M.D.
	 

	 	 	 	Chief Executive Officer
	 
	 	 	 	 
	 	 	SONTRA MEDICAL, INC., AS DEBTOR
	 
	 	 	 	 
	 

	 	By:
	 	Patrick T. Mooney, M.D.
	 

	 	 	 	 
	 

	 	 	 	Patrick T. Mooney, M.D.
	 

	 	 	 	Chief Executive Officer
	 
	 	 	 	 
	 	 	ECHO THERAPEUTICS, INC. (DE), AS DEBTOR
	 
	 	 	 	 
	 

	 	By:
	 	Patrick T. Mooney, M.D.
	 

	 	 	 	 
	 

	 	 	 	Patrick T. Mooney, M.D.
	 

	 	 	 	Chief Executive Officer
	 
	 	 	 	 
	 	 	IMPERIUM ADVISERS, LLC, AS COLLATERAL AGENT
	 
	 	 	 	 
	 

	 	By:
	 	Maurice Hryshko, Esq.
	 

	 	 	 	 
	 

	 	 	 	Maurice Hryshko, Esq.
	 

	 	 	 	General Counsel
	 
	 	 	 	 
	 	 	IMPERIUM MASTER FUND, LTD., AS SECURED
	 	 	PARTY
	 
	 	 	 	 
	 

	 	By:
	 	Maurice Hryshko, Esq.
	 

	 	 	 	 
	 

	 	 	 	Maurice Hryshko, Esq.
	 

	 	 	 	General Counsel

 

 

SCHEDULES AND ANNEX TO SECURITY AGREEMENT

Schedule I—Pledged Securities

Schedule II—Debtor Information

Annex A—Form of Assumption Agreement

 

 

ANNEX A

     THIS ASSUMPTION AGREEMENT, dated as of                     , 20          , is made by          
           , a
                
         
               , in connection with the Security Agreement, dated as of March 24, 2008 (the
“Security Agreement”), entered into by Echo Therapeutics, Inc., a Minnesota corporation, and its
subsidiaries for the benefit of the collateral agent and the note holders party to the Security
Agreement.

W I T N E S S E T H :

     WHEREAS, the Security Agreement requires the undersigned to become a party to the Security
Agreement; and

     WHEREAS, the undersigned has agreed to execute and deliver this Assumption Agreement in order
to become a party to the Security Agreement;

     NOW, THEREFORE, IT IS AGREED:

     1. Assumption. By executing and delivering this Assumption Agreement, the undersigned
hereby becomes a party to the Security Agreement as a Debtor (as defined in the Security Agreement)
thereunder with the same force and effect as if originally named therein as a Debtor and, without
limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities
of a Debtor thereunder. The undersigned hereby represents and warrants that each of the
representations and warranties contained in Section 4 of the Security Agreement is true and correct
on and as the date hereof as to the undersigned (after giving effect to this Assumption Agreement)
as if made on and as of such date.

     2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
TO BE PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK.

 

 

     IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be duly executed
and delivered as of the date first above written.

	 	 	 	 	 
	 	 	[ADDITIONAL DEBTOR]
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:

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