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-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HhB0TDQYgcCySGqIGacKK81ob0P+TS5WvJjsNh2IXvSbZBQV9FR+gBtl/0tFA09R J/DkCmpdDpCFiRFuMRTAWQ== 0000893220-08-002676.txt : 20081006 0000893220-08-002676.hdr.sgml : 20081006 20081006170929 ACCESSION NUMBER: 0000893220-08-002676 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20080930 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20081006 DATE AS OF CHANGE: 20081006 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Echo Therapeutics, Inc. CENTRAL INDEX KEY: 0001031927 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 411649949 STATE OF INCORPORATION: DE FISCAL YEAR END: 1007 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-23017 FILM NUMBER: 081110302 BUSINESS ADDRESS: STREET 1: 10 FORGE PARKWAY CITY: FRANKLIN STATE: MA ZIP: 02038 BUSINESS PHONE: 508 553-8850 MAIL ADDRESS: STREET 1: 10 FORGE PARKWAY CITY: FRANKLIN STATE: MA ZIP: 02038 FORMER COMPANY: FORMER CONFORMED NAME: SONTRA MEDICAL CORP DATE OF NAME CHANGE: 20020702 FORMER COMPANY: FORMER CONFORMED NAME: CHOICETEL COMMUNICATIONS INC/MN/ DATE OF NAME CHANGE: 20020701 FORMER COMPANY: FORMER CONFORMED NAME: SONTRA MEDICAL CORP DATE OF NAME CHANGE: 20020701 8-K 1 w71047e8vk.htm FORM 8-K ECHO THERAPEUTICS, INC. e8vk

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): September 30, 2008

Echo Therapeutics, Inc.

(Exact name of Company as specified in its charter)


Delaware (State or other jurisdiction of Incorporation)		000-23017 (Commission File Number)		41-1649949 (I.R.S. Employer Identification No.)


10 Forge Parkway Franklin, Massachusetts (Address of principal executive offices)		02038 (Zip Code)

Company’s telephone number, including area code: (508) 553-8850

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Company under any of the following provisions (see General Instruction A.2. below):


o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On September 30, 2008, Echo Therapeutics, Inc. (the “Company”) entered into an Exchange Agreement (the “Exchange Agreement”) with the investors listed on Schedule 2.1 of the Exchange Agreement (collectively, the “ Investors”). The Investors are the holders of an aggregate of $1,980,212 in principal amount of the Company’s 8% unsecured senior convertible promissory notes due February 12, 2011 (the “Original Notes”) and an aggregate $97,674.01 in principal amount of additional notes issued as interest on the Original Notes (the “PIK Notes,” and together with the Original Notes, the “Notes”), for a total aggregate of $2,077,886.01 in principal amount of Notes constituting all of the issued and outstanding Notes except for the aggregate $324,896.69 in principal amount of Notes held by Gemini Master Fund Ltd. (“Gemini”), who was not a party to the Exchange Agreement. The Notes held by Gemini remain outstanding on the terms described in Item 2.03 below. The Notes are convertible into shares of the Company’s Common Stock, $0.01 par value (the “Common Stock”), at the option of the holder at a price per share of $1.35, subject to adjustment for stock splits, combinations or similar events and subject to customary weighted average anti-dilution adjustments. The information set forth in Item 2.03 is incorporated by reference into this Item 1.01.

The terms of the Exchange Agreement state that the Company shall issue and deliver to the Investors, in exchange for the cancellation of the Notes, 1,539,161 shares of the Series A Preferred Stock (the “Exchange Preferred Shares”), plus 14 fractional shares to be settled in cash at $1.00 per share and five-year warrants (the “Exchange Warrants”) to purchase a number of shares of Common Stock equal to ten percent (10%) of the number of Exchange Preferred Shares issuable to such Investor at an exercise price per share equal to $1.00, subject to adjustment for stock splits, combinations or similar events. Pursuant to the Exchange Agreement, the Company issued Exchange Warrants to the Investors to purchase up to 153,912 shares.

Pursuant to the terms of the Certificate of Designation, Preference and Rights of Series A Convertible Preferred Stock (the “Certificate of Designation”), each share of Series A Preferred Stock is initially convertible into one share of Common Stock, subject to adjustment for stock splits, combinations or similar events and subject to customary anti-dilution provisions. The Series A Preferred Stock will pay a quarterly dividend at an annual rate of 8%, which is payable in cash or in kind at the option of the Company. Each Investor may convert its Exchange Preferred Shares at any time following issuance of the Series A Preferred Stock.

In the event of any Liquidation Event (as defined in the Certificate of Designation) the holders of Series A Preferred Stock will be entitled to receive (subject to the rights of any securities designated as senior to the Series A Preferred Stock) a liquidation preference equal to the greater of (i) $1.35 per share or (ii) the amount that would be distributed in such Liquidation Event on the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock, in each case prior to any distribution to the holders of Common Stock or any other securities designated as junior to the Series A Preferred Stock. The Company cannot create or issue any security senior to the Series A Preferred Stock without the approval of the holders of the majority of the outstanding Series A Preferred Stock.

Copies of the Exchange Agreement, the Exchange Warrant and the Certificate of Designation are filed as Exhibit 10.1, Exhibit 4.1 and Exhibit 99.1, respectively, to this Current Report on Form 8-K and are incorporated herein by reference. The description of the material terms of the Exchange Agreement is qualified in its entirety by reference to Exhibit 10.1. The description of the material terms of the Certificate of Designation is qualified in its entirety by reference to Exhibit 99.1.


Item 2.03		Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Company.

On September 30, 2008, the Company paid interest on the Original Notes in the form of additional notes (each a “PIK Note” and together with the Original Notes, the “Notes”) in aggregate principal amount of $47,492.98, the total amount of the quarterly interest payment. The PIK Notes were issued pursuant to the terms of the Original Notes and that certain Note and Warrant Purchase Agreement (the “Purchase Agreement”) dated as of February 11, 2008 with certain select institutional and strategic accredited investors (the “Purchasers”). Pursuant to the Exchange Agreement described in Item 1.01 above, the PIK Notes issued to the Investors on September 30, 2008 were exchanged for Series A Preferred Stock along with the other Notes held by the Investors. As of September 30, 2008, only the Notes issued to Gemini remain outstanding, which Notes have the terms described herein.

The Notes are convertible into shares of Common Stock at the option of the holder at a price per share of $1.35 (the “Conversion Price”), subject to adjustment for stock splits, combinations or similar events. The Conversion Price is also subject to weighted average anti-dilution adjustment in the event the Company issues Common Stock at a price per share less than the Conversion Price, subject to customary exceptions.

Interest on the Notes is payable quarterly at an annual rate of 8%. The Company may pay the interest in cash, additional PIK Notes in aggregate principal amount equal to the interest payment, or in shares of Common Stock, subject to certain restrictions and conditions. Shares of Common Stock issued as payment of interest will be valued at the lesser of the conversion price of the Note then in effect or 100% of the daily volume weighted average price of the Common Stock for the five consecutive trading days immediately preceding the interest payment date.

The Company has the right to repay the principal amount of the Notes in cash, in whole or in part, prior to maturity, and cash or shares of Common Stock in an amount equal to the amount of interest that would have otherwise accrued from the date of prepayment to either the earlier of (i) six months after such prepayment or (ii) the maturity date, subject to certain restrictions.

For so long as at least $573,115 of the principal amount of Notes are outstanding, the Company may not or permit any of its subsidiaries to incur certain additional indebtedness (excluding certain indebtedness the principal amount of which cannot exceed $5,000,000, subject to certain restrictions) without the prior written consent of the holders of at least a majority of the aggregate principal amount of the Notes outstanding. Following the consummation of the exchange of the Notes described in Item 1.01 above, the principal amount of the Notes outstanding was only $324,896.69, meaning this restriction on additional indebtedness was not effective as of September 30, 2008.

Any amount outstanding under the Notes becomes due and payable upon the occurrence of an event of default. Events of default under the Notes include (1) the Company’s failure to make payment of principal or interest when due or payable, (2) the Company’s failure to perform or observe any covenant or agreement in the Note and such failure is not cured within three business days after notice, (3) the Company’s suspension from listing, without subsequent listing on any national securities exchange or the OTC Bulletin Board for a period of five consecutive trading days, (4) the Company’s notice to the holders of the Notes of its inability or intention to not comply with requests for conversion, (5) the Company’s failure to timely deliver or cause to be delivered Common Stock upon conversion of the Notes or any interest accrued and unpaid or make the payment of any fees or liquidated damages under the Notes, the Purchase Agreement or any other transaction documents and such failure is not cured within three business days, (6) any false, incorrect or breach in any material respect of any material representation or warranty made by the Company, (7) the default of more than $100,000 of any other of the Company’s indebtedness that causes such amount to become due and payable, (8) a bankruptcy of the Company (whether voluntary or involuntary) or general assignment for the benefit of its creditors, or (9) the Company’s failure to instruct its transfer agent to remove any legends and issue unlegended certificates to the holder within five (5) business days of the holder’s request.

Under the terms of the Purchase Agreement, for so long as the Notes remain outstanding, the holders of the Notes have a right, subject to certain exceptions, to participate in any subsequent sale or exchange by the Company of Common Stock or any securities convertible into Common Stock (a “Subsequent Financing”) on the same terms and conditions as contemplated by the Subsequent Financing, up to an aggregate of 25% of the principal amount of the Notes (the “Participation Rights”). In connection with any Subsequent Financing, the purchasers are entitled to convert a portion of the principal amount of the Notes in accordance with the Participation Rights as described in the Notes.

A conversion or exercise under the Notes, or a payment of interest under the Notes in the form of shares of Common Stock, as applicable, may not result in the holder beneficially owning more than 4.99% or 9.99%, as applicable, of all of the Common Stock outstanding at the time. A holder may waive the foregoing provision upon sixty-one (61) days’ advance written notice.

Sontra Medical, Inc., a subsidiary of the Company, agreed to guarantee the Company’s obligations under the Notes pursuant to a separate guaranty agreement (the “Guaranty Agreement”). Additionally, for so long as any Notes remain outstanding, the Company agreed that it will not, nor permit its subsidiaries to, declare or pay any dividends or make any distribution to any holders of Common Stock or purchase or acquire any of its common stock or equity securities.

The foregoing description of the Notes, Guaranty Agreement and Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Note, Guaranty Agreement and Purchase Agreement, the forms of which were filed as Exhibits 10.4, 10.2 and 10.1, respectively, to the Company’s current report on Form 8-K dated February 11, 2008, filed with the Securities and Exchange Commission on February 13, 2008, and are incorporated herein by reference.

Item 3.02 Unregistered Sales of Equity Securities.

The information set forth under Item 1.01 is incorporated by reference into this Item 3.02. The Company’s issuance of the Exchange Preferred Shares pursuant to the Exchange Agreement was made in a transaction not involving any public offering pursuant to an exemption from registration under Section 4(2) of the Securities Act. The Exchange Preferred Shares may not be offered or sold in the United States in the absence of an effective registration statement or an exemption from the registration requirements under the Securities Act. An appropriate “restricted securities” legend was placed on the Exchange Preferred Shares issued pursuant to the Exchange Agreement.

The information set forth in Item 2.03 is incorporated by reference into this Item 3.02. The Company’s issuance of the PIK Notes was made in a transaction not involving any public offering pursuant to an exemption from registration under Section 4(2) of the Securities Act. The PIK Notes may not be offered or sold in the United States in the absence of an effective registration statement or an exemption from the registration requirements under the Securities Act. An appropriate “restricted securities” legend was placed on the PIK Notes issued in the transaction.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

The information set forth under Item 1.01 is incorporated by reference into this Item 5.03. On September 30, 2008, the Company filed the Certificate of Designation with the Secretary of State of the State of Delaware. The Board of Directors authorized and approved this filing on September 30, 2008 in connection with the creation, reservation and designation of 2,636,363 shares of a series of preferred stock as Series A Preferred Stock.

Item 9.01 Financial Statements and Exhibits.

The Exhibits listed in the Exhibit Index immediately preceding such Exhibits are filed with or incorporated by reference in this report.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	ECHO THERAPEUTICS, INC.
Dated: October 6, 2008
	By:	/s/ Harry G. Mitchell
		Harry G. Mitchell
		Chief Operating Officer, Chief Financial Officer and Treasurer

EXHIBIT INDEX


Exhibit No.		Description

4.1		Form of Warrant to Purchase Common Stock

10.1		Exchange Agreement by and among the Company, Platinum Long Term Growth VII, LLC and the other Investors named therein dated as of September 30, 2008.

10.2		Note and Warrant Purchase Agreement by and among the Company and the Purchasers named therein dated as of February 11, 2008 is incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K, dated February 11, 2008.

10.3		Form of Senior Convertible Promissory Note, including Form of PIK Note, is incorporated herein by reference to Exhibit 10.4 to the Company’s Form 8-K dated February 11, 2008.

10.4		Guaranty dated as of February 11, 2008 by Sontra Medical, Inc. is incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K dated February 11, 2008.

99.1		Certificate of Designation, Rights and Preferences of Series A Preferred Stock

EX-4.1 2 w71047exv4w1.htm EXHIBIT 4.1 exv4w1

EXHIBIT 4.1

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

ECHO THERAPEUTICS, INC.

WARRANT TO PURCHASE COMMON STOCK


Warrant No.		Original Issue Date: September 30, 2008 Expiration Date: October 1, 2013

Echo Therapeutics, Inc., a Delaware corporation (the “Company”), hereby certifies that, for value received, [ ] (the “Holder”) is entitled to purchase from the Company up to a total of [ ( )] shares of common stock, $0.01 par value per share (the “Common Stock”), of the Company (each such share, a “Warrant Share” and all such shares, the “Warrant Shares”) at an exercise price per Warrant Share equal to $1.00 (as adjusted from time to time as provided in Section 9 herein, the “Exercise Price”), at any time until, and from time to time after the date hereof (the “Trigger Date”) to and including, 5:30 P.M., New York City time, on October 1, 2013 (the “Expiration Date”), and subject to the following terms and conditions:

1. Recital. This Warrant (this “Warrant”) is one of a series of similar warrants issued pursuant to that certain Exchange Agreement, dated September 30, 2008, by and among the Company and the Investors identified therein (the “Agreement”). All such warrants are referred to herein, collectively, as the “Warrants.”

2. Definitions. In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein shall have the meanings given to such terms in the Agreement.

3. Registration of Warrants. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

4. Exercise and Duration of Warrant.

(a) All or any part of this Warrant shall be exercisable by the registered Holder in any manner permitted by Section 10 of this Warrant at any time until, and from time to time on or after the Trigger Date to and including, 5:30 P.M. New York City time, on the Expiration Date. At 5:30 P.M., New York City time, on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value and this Warrant shall be terminated and no longer outstanding.

(b) The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached as Schedule 1 hereto (the “Exercise Notice”), completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised (which may take the form of a “cashless exercise” if so indicated in the Exercise Notice and if a “cashless exercise” may occur at such time pursuant to Section 10 below). The date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an “Exercise Date.” The delivery by (or on behalf of) the Holder of the Exercise Notice and the applicable Exercise Price as provided above shall constitute the Holder’s certification to the Company that its representations contained in Section 2.1(c), (d) and (e) of the Agreement are true and correct as of the Exercise Date as if remade in their entirety. The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder, but if it is not so delivered then such exercise shall constitute an agreement by the Holder to deliver the original Warrant to the Company as soon as practicable thereafter. Execution and delivery of the Exercise Notice shall have the same effect as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares.

5. Delivery of Warrant Shares.

(a) Upon exercise of this Warrant, the Company shall promptly (but in no event later than five (5) Trading Days after the Exercise Date) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate (i) a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends, or (ii) an electronic delivery of the Warrant Shares to the Holder’s account at the Depository Trust Company or a similar organization, unless in the case of clause (i) and (ii) a registration statement covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder is not then effective or the Warrant Shares are not freely transferable without restriction (including requirement for current public information pursuant to Rule 144(c)) under Rule 144 by Holders who are not affiliates of the Company, in which case such Holder shall receive a certificate for the Warrant Shares issuable upon such exercise with appropriate restrictive legends. The Holder, or any Person permissibly so designated by the Holder to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the Exercise Date. If the Warrant Shares are to be issued free of all restrictive legends, the Company shall, upon the written request of the Holder, use its reasonable best efforts to deliver, or cause to be delivered, Warrant Shares hereunder electronically through the Depository Trust Company or another established clearing corporation performing similar functions, if available; provided, that, the Company may, but will not be required to, change its transfer agent if its current transfer agent cannot deliver Warrant Shares electronically through such a clearing corporation.

(b) If by the close of the fifth Trading Day after delivery of an Exercise Notice and the payment of the aggregate exercise price in any manner permitted by Section 10 of this Warrant, the Company fails to deliver to the Holder a certificate representing the required number of Warrant Shares in the manner required pursuant to Section 5(a), and if after such fifth Trading Day and prior to the receipt of such Warrant Shares, the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall, within five (5) Trading Days after the Holder’s request and in the Holder’s sole discretion, either (1) pay in cash to the Holder an amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so

purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate (and to issue such Warrant Shares) shall terminate or (2) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Warrant Shares and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of Warrant Shares, times (B) the closing bid price of a share of Common Stock on the Exercise Date.

(c) To the extent permitted by law, the Company’s obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance that might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares. Nothing herein shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

6. Charges, Taxes and Expenses. Issuance and delivery of certificates for Warrant Shares upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or the Warrants in a name other than that of the Holder or an Affiliate thereof. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a new Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction (in such case) and, in each case, a customary and reasonable indemnity and surety bond, if requested by the Company. Applicants for a new Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. If a new Warrant is requested as a result of a mutilation of this Warrant, then the Holder shall deliver such mutilated Warrant to the Company as a condition precedent to the Company’s obligation to issue the new Warrant.

8. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, 110% of the number of Warrant Shares that are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable.

The Company will take all such action as may be reasonably necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any securities exchange or automated quotation service upon which the Common Stock may be listed or quoted from time to time.

9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9.

(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides its outstanding shares of Common Stock into a larger number of shares, or (iii) combines its outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately before such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.

(b) Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding, distributes to all holders of Common Stock for no consideration (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph) or (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, “Distributed Property”), then, upon any exercise of this Warrant that occurs after the record date fixed for determination of stockholders entitled to receive such distribution, the Holder shall be entitled to receive, in addition to the Warrant Shares otherwise issuable upon such exercise (if applicable), the Distributed Property that such Holder would have been entitled to receive in respect of such number of Warrant Shares had the Holder been the record holder of such Warrant Shares immediately prior to such record date without regard to any limitation on exercise contained therein.

(c) Fundamental Transactions. If, at any time while this Warrant is outstanding (i) the Company effects (A) any merger of the Company with (but not into) another Person, in which stockholders of the Company immediately prior to such transaction own less than a majority of the outstanding stock of the surviving entity, or (B) any merger or consolidation of the Company into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer approved or authorized by the Company’s Board of Directors is completed pursuant to which holders of at least a majority of the outstanding Common Stock tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock covered by Section 9(a) above) (in any such case, a “Fundamental Transaction”), then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant without regard to any limitations on exercise contained herein (the “Alternate Consideration”), and the Holder shall

no longer have the right to receive Warrant Shares upon exercise of this Warrant. The Company shall not effect any such Fundamental Transaction unless prior to or simultaneously with the consummation thereof, any successor to the Company, surviving entity or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or Person shall assume the obligation to deliver to the Holder, such Alternate Consideration as, in accordance with the foregoing provisions, the Holder may be entitled to receive, and the other obligations under this Warrant. The provisions of this paragraph (c) shall similarly apply to subsequent transactions analogous of a Fundamental Transaction type.

(d) First Qualified Offering. If the Company, at any time while this Warrant is outstanding, completes an equity or equity-linked offering to occur after the Original Issue Date that yields gross proceeds to the Company of at least $2 million (the “Qualified Offering”), the Exercise Price shall be reduced to the lesser of (i) the then current Exercise Price in effect, or (ii) the price per share of the common stock issued in the Qualified Offering or in the case of convertible securities, the conversion price of such convertible securities. This right shall expire after the completion of the first Qualified Offering completed by the Company.

(e) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a) of this Section 9, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.

(f) Calculations. All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

(g) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will, at the written request of the Holder, promptly compute such adjustment, in good faith, in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in reasonable detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company’s transfer agent.

(h) Notice of Corporate Events. If, while this Warrant is outstanding, the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including, without limitation, any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then, except if such notice and the contents thereof shall be deemed to constitute material non-public information, the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction at least ten (10) business days prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to participate in or vote with respect to such transaction; provided, however, that the failure to

deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice.

10. Payment of Exercise Price. The Holder shall pay the Exercise Price in immediately available funds; provided, however, that if, on any Exercise Date that is more than 12 months after the Trigger Date there is not an effective registration statement registering, or no current prospectus available for, the resale of the Warrant Shares by the Holder pursuant to the Securities Act of 1933, as amended (the “Securities Act”), then the Holder may, in its sole discretion, satisfy its obligation to pay the Exercise Price through a “cashless exercise”, in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:

X = Y [(A-B)/A]

where:

X = the number of Warrant Shares to be issued to the Holder.

Y = the total number of Warrant Shares with respect to which this Warrant is being exercised.

A = the average of the Closing Sale Prices of a share of Common Stock (as reported by Bloomberg Financial Markets) for the five (5) Trading Days ending on the date immediately preceding the Exercise Date.

B = the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.

For purposes of this Warrant, “Closing Sale Price” means, for any security as of any date, the last trade price for such security on the principal securities exchange or trading market for such security, as reported by Bloomberg Financial Markets, or, if such exchange or trading market begins to operate on an extended hours basis and does not designate the last trade price, then the last trade price of such security prior to 4:00 P.M., New York City time, as reported by Bloomberg Financial Markets, or if the foregoing do not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg Financial Markets, or, if no last trade price is reported for such security by Bloomberg Financial Markets, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by Pink Sheets LLC. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then the Board of Directors of the Company shall use its good faith judgment to determine the fair market value. The Board of Directors’ determination shall be binding upon all parties absent demonstrable error. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the original Holder, and the holding period for the Warrant Shares shall be deemed to have commenced as to such original Holder, on the date this Warrant was originally

issued pursuant to the Agreement (provided that the Commission continues to take the position that such treatment is proper at the time of such exercise).

11. Limitations on Exercise.

(a) Notwithstanding anything to the contrary set forth in this Warrant, at no time may a Holder of this Warrant exercise this Warrant if the number of Warrant Shares to be issued pursuant to such exercise would exceed, when aggregated with all other shares of Common Stock owned by such Holder at such time, the number of shares of Common Stock which would result in such Holder beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules thereunder) in excess of 4.99% of all of the Common Stock outstanding at such time; provided, however, that upon a Holder of this Warrant providing the Company with sixty-one (61) days notice (the “Waiver Notice”) that such Holder would like to waive this Section 11(a) with regard to any or all Warrant Shares issuable upon exercise of this Warrant, this Section 11(a) will be of no force or effect with regard to all or a portion of the Warrant Shares referenced in the Waiver Notice; provided, further, that this Section 11(a) shall be of no further force or effect during the sixty-one (61) days immediately preceding the expiration of the term of this Warrant.

(b) Notwithstanding anything to the contrary set forth in this Warrant, at no time may a Holder of this Warrant exercise this Warrant if the number of Warrant Shares to be issued pursuant to such exercise would exceed, when aggregated with all other shares of Common Stock owned by such Holder at such time, the number of shares of Common Stock which would result in such Holder beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules thereunder) in excess of 9.99% of all of the Common Stock outstanding at such time; provided, however, that upon a Holder of this Warrant providing the Company with a Waiver Notice with regard to this Section 11(b), this Section 11(b) will be of no force or effect with regard to all or a portion of the Warrant Shares referenced in such Waiver Notice; provided, further, that this Section 11(b) shall be of no further force or effect during the sixty-one (61) days immediately preceding the expiration of the term of this Warrant.

12. No Fractional Warrant Shares. No fractional Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of any fractional shares that would otherwise be issuable, the number of Warrant Shares to be issued shall be rounded down to the next whole number and the Company shall pay the Holder in cash the fair market value (based on the Closing Sale Price) for any such fractional Warrant Shares.

13. Notices. Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice or Waiver Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in the Agreement prior to 5:30 P.M., New York City time, on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in the Agreement on a day that is not a Trading Day or later than 5:30 P.M., New York City time, on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service specifying next business day delivery, or (iv) upon actual receipt by the party to whom such notice is required to be given, if by hand delivery. The address and facsimile number of a party for such notices or communications shall be as set forth in the Agreement unless changed by such party by two (2) Trading Days’ prior notice to the other party in accordance with this Section 13.

14. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the Warrant Register.

15. Miscellaneous.

(a) No Rights as a Stockholder. The Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, amalgamation, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities, whether such liabilities are asserted by the Company or by creditors of the Company.

(b) Successors and Assigns. This Warrant may not be assigned by the Company or the Holder without the written consent of the other party, except to a successor in the event of a Fundamental Transaction. This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder, or their successors and assigns.

(c) Amendment and Waiver. Except as otherwise provided herein, the provisions of the Warrant may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holders of Warrants representing a majority of the Warrant Shares obtainable upon exercise of the Warrants then outstanding.

(d) Acceptance. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.

(e) Governing Law; Jurisdiction. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE STATE OF NEW YORK, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY

TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), 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. 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 VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THE 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. EACH PARTY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.

(f) Headings. The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

(g) Severability. In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby, and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.


	ECHO THERAPEUTICS, INC.
	By:
	Name:
	Title:

SCHEDULE 1

ECHO THERAPEUTICS, INC.

FORM OF EXERCISE NOTICE

(To be executed by the Holder to purchase shares of Common Stock under the foregoing Warrant)

Ladies and Gentlemen:

(1) The undersigned is the Holder of Warrant No. (the “Warrant”) issued by Echo Therapeutics, Inc., a Delaware corporation (the “Company”). Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.

(2) The undersigned hereby exercises its right to purchase Warrant Shares pursuant to the Warrant.

(3) The Holder intends that payment of the Exercise Price shall be made as (check one):

	o		Cash Exercise

	o		“Cashless Exercise” under Section 10

(4) If the Holder has elected a Cash Exercise, the Holder shall pay the sum of $ in immediately available funds to the Company in accordance with the terms of the Warrant.

(5) Pursuant to this Exercise Notice, the Company shall deliver to the Holder Warrant Shares determined in accordance with the terms of the Warrant.

(6) By its delivery of this Exercise Notice, the undersigned represents and warrants to the Company that in giving effect to the exercise evidenced hereby the Holder will not beneficially own in excess of the number of shares of Common Stock (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934) permitted to be owned under Section 11 of the Warrant to which this notice relates.

Dated: ,


Name of Holder:


By: Name:
Title:

(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)

EX-10.1 3 w71047exv10w1.htm EXHIBIT 10.1 exv10w1

EXHIBIT 10.1

EXCHANGE AGREEMENT

This EXCHANGE AGREEMENT (this “Agreement”) is made as of September 30, 2008 (the “Execution Date”) by and among Echo Therapeutics, Inc., a Delaware corporation (the “Company”), Platinum Long Term Growth VII, LLC (“Platinum”) and the other investors listed on the signature page attached hereto (together with Platinum, the “Investors”).

RECITALS

A. Pursuant to a Note and Warrant Purchase Agreement dated as of February 11, 2008 (the “Original Purchase Agreement”), the Company issued and sold to the Investors an aggregate $1,980,212 in principal amount of 8% unsecured senior convertible promissory notes due February 12, 2011 (the “Original Notes”). Pursuant to the terms of the Original Purchase Agreement and the Original Notes, the Company issued, and will issue for the period July 1, 2008 through September 30, 2008, an additional aggregate $97,674.01 in principal amount of Original Notes as interest on the Original Notes (the “PIK Notes,” and together with the Original Notes, the “Notes”).

B. The Notes are convertible into shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), and otherwise have the rights, preferences, privileges, powers and restrictions set forth in the Notes.

C. The Investors currently hold an aggregate $2,355,289.72 in principal amount of Notes constituting all of the now issued and outstanding Notes except for the Notes held by Gemini Master Fund Ltd., who is not a party to this Agreement. For the period July 1, 2008 through September 30, 2008, the Company owes the Investors interest on the Original Notes in the amount of $47,492.98 and the Company intends to pay such interest with PIK Notes, which shall be included in the Notes exchanged in accordance with this Agreement.

D. The Investors and the Company desire that the Investors exchange all of the Notes for shares of a newly designated series of the Company’s preferred stock (the “Exchange”), upon the terms and conditions set forth herein.

E. The Series A Preferred Stock (as defined herein) is intended to qualify as an exempted security under Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”).

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Investors agree as follows:

ARTICLE I
THE EXCHANGE

1.1 Closing. Subject to the terms and conditions set forth in this Agreement, the Company and the Investors shall exchange an aggregate $2,077,886.01 of Notes for 1,539,176 shares of the Company’s Series A Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), and the Company shall issue to the Investors five-year warrants (the “Warrants”), in substantially the form attached hereto as Exhibit A, to purchase a number of shares of Common Stock equal to 10% of the number of shares of Series A Preferred Stock issuable to such Investor hereunder at an exercise price per share equal to the Warrant Price (as defined in the Warrants). The closing of the Exchange and issuance of the Warrants (the “Closing”) shall take place at the offices of Drinker Biddle & Reath LLP, One Logan Square, 18^th and Cherry Sts., Philadelphia, PA 19103, on the date hereof or such other date as the parties shall agree (the “Closing Date”).

1.2 Exchange. At the Closing, (i) the Investors shall deliver to the Company the Notes, (ii) the Company shall deliver to the Investors stock certificates, registered in the names of the Investors, representing the Series A Preferred Stock allocated among the Investors as specified in Schedule 2.1 hereto, and (iii) the Company shall deliver to the Investors Warrants to purchase the number of shares of Common Stock as is set forth opposite the name of such Investor on Schedule 2.1.

1.3 Terms of Series A Preferred Stock. The Series A Preferred Stock shall have the rights, preferences and privileges as set forth in the Certificate of Designation, Preferences and Rights attached hereto as Exhibit B (the “Certificate of Designation”) to be filed prior to the Closing by the Company with the Secretary of State of Delaware.

1.4 Original Notes. Effective as of the Closing Date, the Notes shall be canceled and shall thereafter represent only the right to receive certificates representing shares of the Series A Preferred Stock.

ARTICLE II
REPRESENTATIONS AND WARRANTIES

2.1 Investor Representations and Warranties. Such Investor hereby represents and warrants to the Company as follows on the Execution Date and the Closing Date:

(a) Organization; Authority. Such Investor, if not a natural person, is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Such Investor has the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. This Agreement has been duly executed by such Investor, and when delivered by such Investor in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Investor, enforceable against it in accordance with its terms.

(b) Ownership of the Notes. Such Investor is the sole owner of all of the Notes set forth opposite its name on Schedule 2.1 hereof, free and clear of any and all liens, claims and encumbrances of any kind.

(c) Investment Intent. Such Investor is acquiring the Series A Preferred Stock and Warrants as principal for its own account for investment purposes only and not with a view to or for distributing or reselling such Series A Preferred Stock or Warrants or any part thereof, except pursuant to sales that are exempt from the registration requirements of the Securities Act and/or sales registered under the Securities Act. Such Investor does not have any agreement or understanding, directly or indirectly, with any person or entity to distribute the Series A Preferred Stock or Warrants. Notwithstanding anything in this Section 2.1(c) to the contrary, by making the representations herein, such Investor does not agree to hold the Series A Preferred Stock or Warrants for any minimum or other specific term and reserves the right to dispose of the Series A Preferred Stock or Warrants at any time in accordance with or pursuant to a registration statement or an exemption from the registration requirements under the Securities Act.

(d) Investor Status. At the time such Investor was offered the Series A Preferred Stock, it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) of Regulation D under the Securities Act. Such Investor is not a broker-dealer. Each Investor has completed an accredited investor certification in the form attached hereto as Exhibit C.

(e) General Solicitation. Such Investor is not acquiring the Series A Preferred Stock or Warrants as a result of or subsequent to any advertisement, article, notice or other communication regarding the Series A Preferred Stock or Warrants published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

(f) Reliance. Such Investor understands and acknowledges that (i) the Series A Preferred Stock and Warrants are being offered and sold to it without registration under the Securities Act in a transaction that is exempt from the registration provisions of the Securities Act, and (ii) the availability of such exemption depends in part on, and the Company will rely upon the accuracy and truthfulness of, the foregoing representations, and such Investor hereby consents to such reliance.

(g) Brokers and Finders. Such Investor has no knowledge of any person who will be entitled to or make a claim for payment of any finder fee or other compensation as a result of the consummation of the transactions contemplated by this Agreement.

2.2 Company Representations and Warranties. The Company hereby makes the following representations and warranties to each Investor on the Execution Date and on the Closing Date:

(a) Organization and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction where the nature of the

business it conducts makes such qualification necessary, except where the failure to do so would not have a material adverse effect on the Company.

(b) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and to issue the Series A Preferred Stock and the Conversion Shares, as such term is defined in the Certificate of Designation, upon conversion of the Series A Preferred Stock in accordance with the terms of the Certificate of Designation, to issue the Warrants and Warrant Shares, as such term is defined in the Warrants, upon exercise of the Warrants in accordance with the terms of the Warrants and otherwise to carry out its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and the Certificate of Designation and the consummation of the transactions contemplated hereby and thereby have been duly authorized by the Company’s Board of Directors, and no further consent or authorization of the Company, its Board of Directors (including any committee thereof) or any class of the Company’s stockholders is required. This Agreement, the Warrants and the Certificate of Designation have been duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligations of the Company enforceable against the Company, in accordance with their terms.

(c) Issuance of the Series A Preferred Stock. The Series A Preferred Stock, when issued at the Closing, will be duly authorized, validly issued, fully paid and non-assessable and will be free and clear of all taxes, liens, options or other encumbrances of any nature.

(d) No Conflicts. The execution, delivery and performance of this Agreement, the performance by the Company of its obligations under the Certificate of Designation and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance, as applicable, of the Series A Preferred Stock, Conversion Shares and Warrant Shares will not, (i) result in a violation of the certificate of incorporation of the Company (the “Certificate of Incorporation”) or the bylaws of the Company (the “Bylaws”) or (ii) result in a violation of any law, rule, regulation, order, judgment or decree (including United States federal and state securities laws and regulations and rules or regulations of any self-regulatory organizations to which either the Company or its securities are subject) applicable to the Company or by which any property or asset of the Company is bound or affected. The Company is not in violation of its Certificate of Incorporation, Bylaws or other organizational documents. The Company is not in default (and no event has occurred which, with notice or lapse of time or both, would put the Company in default) under, nor has there occurred any event giving others (with notice or lapse of time or both) any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company is a party except for such violations, defaults or events that have had a material adverse effect.

(e) Absence of Certain Changes. Since June 30, 2008, there has been no material adverse change and no material adverse development in the business, properties, operations, prospects, financial condition or results of operations of the Company, except as disclosed in the reports, schedules, forms, statements and other documents (including all

financial statements and schedules thereto and all exhibits included therein and documents incorporated by reference therein) required to be filed by the Company with the Securities and Exchange Commission (the “SEC”) pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended, filed before the date hereof. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy or receivership law nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings with respect to the Company.

(f) Certain Fees. No fees or commissions will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement.

ARTICLE III
OTHER COVENANTS

3.1 Securities Laws. Such Investor acknowledges that the Series A Preferred Stock and Warrants have not been registered under the Securities Act and may only be disposed of pursuant to an available exemption from or in a transaction not subject to the registration requirements of the Securities Act.

3.2 Restrictive Legend. Such Investor agrees to the imprinting of the following legend on the Series A Preferred Stock and the Warrants:

3.3 Listing/Quotation. The Company shall maintain, so long as any Investor (or any of their affiliates) owns any Series A Preferred Stock or Warrants, the listing or quotation of all Conversion Shares and Warrant Shares from time to time issuable upon conversion of the Series A Preferred Stock on each national securities exchange or automated quotation system on which shares of Common Stock are listed or quoted from time to time.

3.4 Reservation of Shares. The Company shall at all times have authorized and reserved for the purpose of issuance a sufficient number of Conversion Shares and Warrant Shares.

ARTICLE IV
MISCELLANEOUS

4.1 Fees and Expenses. Except as set forth in this Section 4.1, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of the Series A Preferred Stock.

4.2 Entire Agreement; Amendments. This Agreement, together with the exhibits and schedules hereto, contains the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

4.3 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:00 p.m. (New York City time) on a business day, against electronic confirmation thereof, (ii) the business day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 5:00 p.m. (New York City time) on any date, against electronic confirmation thereof, (iii) the business day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows:


		If to the Company:		Echo Therapeutics, Inc.
				10 Forge Parkway
				Franklin, MA 02038
				Facsimile No.: (508) 553-8760
				Attn: Chief Executive Officer

		With copies to (which shall		Drinker Biddle & Reath LLP
		not constitute notice):		One Logan Square
				18^th and Cherry Streets
				Philadelphia, PA 19103-6996
				Facsimile No.: (215) 988-2757
				Attn: Stephen T. Burdumy, Esq.

		If to the Investors:		At the address of such Investor set forth on Schedule 2.1 to this Agreement.

or such other address as may be designated in writing hereafter, in the same manner, by such person or entity.

4.4 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and by Investors holding a majority of the outstanding principal amount of the Notes as of the date hereof or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.

4.5 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

4.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. No Investor may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Company.

4.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person or entity.

4.8 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. The Company and each Investor irrevocably consent to the jurisdiction of the United States federal courts and state courts located in the State of New York in any suit or proceeding based on or arising under this Agreement and irrevocably agree that all claims in respect of such suit or proceeding may be determined in such courts.

4.9 Survival. The representations and warranties contained herein shall survive until the expiration of the first anniversary following the Closing. The agreements and covenants contained herein shall survive the Closing and the delivery of the Series A Preferred Stock until the expiration of the applicable statute of limitations (if any) therefor.

4.10 Execution. This Agreement may be executed in one or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that all parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or a scanned copy via electronic mail, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile or scanned signature page were an original thereof.

4.11 Severability. In case any one or more of the provisions of this Agreement shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining

terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision which shall be a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

4.12 Further Assurances. The parties hereto agree that each shall execute and deliver any and all further agreements, instruments, certificates and other documents, and shall take any and all action, as any of the parties hereto may reasonably deem necessary or desirable in order to carry out the intent of the parties to this Agreement.

4.13 Attorneys’ Fees. If either party shall commence an action or proceeding to enforce any provisions relating to the obligations to close the transactions contemplated by this Agreement prior to the Closing, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

[signature page follows]

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


		COMPANY:

		ECHO THERAPEUTICS, INC.

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

[Additional Signature Pages Follow]


INVESTOR:

Platinum Long Term Growth VII, LLC

By: Name:		/s/ Platinum Long Term Growth VII, LLC
Title: