Platinum-Montaur Life Sciences, LLC 152 West 57th Street, 4th Floor New York, NY 10019

Echo Therapeutics, Inc.

$5,000,000 initially, subject to increase in $3 million increments upon satisfaction of the Increase Conditions to an amount not to exceed to $20,000,000.

Each Draw of the Term Loan Facility shall be in a minimum amount of $1,000,000, or in whole multiples of $100,000 in excess thereof.  Amounts repaid may not be reborrowed.

 

The Lender shall have no obligation to fund any Draw upon the issuance by the Borrower of shares of its common stock and/or securities convertible into, exchangeable for, or exercisable for common stock of the Borrower at a price of less than $4 per share (a “Dilutive Issuance”), other than issuances of common stock, options to acquire common stock or similar equity incentive grants and awards to the Borrower’s employees, directors and consultants pursuant to equity incentive plans approved by the shareholders of the Borrower.

Ten percent (10%) per annum, compounding monthly.

On closing, the Borrower shall deliver to the Lender a warrant to purchase 4,000,000 shares of the Borrower’s common stock, such warrant to have an exercise price of $2.00 per share and a term of five years (the “Commitment Fee Warrant”).

The delivery by the Borrower to the Lender of a warrant to purchase 1,000,000 shares of the Borrower’s common stock per $1,000,000 of the amount of each Draw (a “Draw Warrant” and together with the Commitment Fee Warrant, the “Warrants”) shall be a condition precedent to the funding of each Draw. Each Draw Warrant shall have a term of five years from the date of the Draw and an exercise price equal to the lesser of: (a) 150% of the market price of the Borrower’s common stock at the time of the applicable Draw (but in no event less than $2.00 per share), or (b) $4.00 per share.

The Warrants shall provide for cashless exercise unless an effective registration statement providing for the registration of all warrant shares is available for resales. The exercise price of the Warrants shall be subject to a full ratchet adjustment in the event of a Dilutive Issuance.  The Borrower shall provide typical indemnification in connection with any sales made via a prospectus.

 

To provide working capital to the Borrower for its general corporate purposes.

Five years from the date of closing.

The Term Loan Facility shall be initially be secured by a pledge of the Pledged Revenue of the Borrower and its subsidiaries.  Upon the earlier of an event of default under or the maturity date of the Term Loan Facility, the Term Loan Facility shall be secured by substantially all assets of the Borrower and its subsidiaries, it being understood that such lien shall not attach and be effective until such event of default or maturity.  Such grants of collateral shall be evidenced by one or more security agreements (“Security Agreements”).

 

As used herein, “Pledged Revenue” means (i) all rights of payment of monetary obligations, including rights to payment for goods and general intangibles sold, leased, licensed, assigned or otherwise disposed of; (ii) all rights to payment for services rendered or to be rendered; (iii) all rights under all documents and instruments and all sums of money or other proceeds due or becoming due thereon to the extent the same result from the sale, license or other disposition of the Borrower’s property, products or services, and all rights pertaining to and interest in such documents and instruments; (iv) all other rights and claims to the payment of money, under contracts or otherwise; all rights to payment evidenced by chattel paper or an instrument to the extent the same result from the sale, license or other disposition of the Borrower’s property, products or services; (v) all deposit accounts to the extent that such deposit accounts contain any of the foregoing items; and (vi) all other property constituting accounts (as defined in the UCC).  “Pledged Revenues” shall not include funds received by the Borrower from capital raising activities.

The Loan Documents shall contain customary and typical senior secured indebtedness covenants, including without limitation covenants regarding prohibitions on liens, indebtedness, organic changes, redemptions, affiliate transactions, dividends and investments, together with covenants regarding maintenance of assets, reporting requirements, and listing eligibility.  Further, the Borrower shall covenant to promptly provide, at the Borrower’s sole expense, any and all necessary legal opinions and other documentation as may be reasonably required by the Lender or the Borrower’s transfer agent to effect transactions under Rule 144, and otherwise by the Lender in the common stock to be received upon exercise of the Commitment Fee Warrant and the Draw Warrants.

All subsidiaries of the Borrower shall execute and deliver to the Lender a guaranty of the Borrower’s obligations under the Term Loan Facility (the “Guaranty”).

The closing of the Term Loan Facility is subject to documentation acceptable to the Lender.

Unless an Event of Default shall have occurred, the Lender may not assign all or any part of the Term Loan Facility without the Borrower’s consent; provided, that, the Lender shall have the right to assign all or part of the Term Loan Facility to any affiliate of the Lender without the prior consent of the Borrower; and provided, further, that the Lender shall be free to assign, sell, pledge, or otherwise dispose of the Warrants (and the stock underlying the Warrants) in its discretion.  The Borrower shall not have the right to assign the Term Loan Facility without the Lender’s prior written consent.

The Borrower shall indemnify, defend and hold the Lender (and the Lender’s members, officers, managers, employees and agents) harmless against any and all losses, liabilities, claims, damages or expenses incurred in connection with  the Term Loan Facility except to the extent same are incurred solely by reason of the gross negligence or willful misconduct of the Lender (or the Lender’s members, officers, managers, employees or agents), including, without limitation, any brokerage commissions or finder’s fees claimed by any broker or other party in connection with the transactions contemplated hereby.

Whether or not the transactions contemplated hereby are consummated, the Borrower shall pay all expenses incurred by the Lender in the preparation of this commitment letter, and the negotiation, execution, and delivery of the documents and instruments evidencing the Term Loan Facility (including without limitation a Loan Agreement, a promissory note, the Guaranty, the Security Agreements, an opinion of the Borrower’s counsel, and the Commitment Fee Warrant, collectively the “Loan Documents”), including attorneys’ fees reasonably incurred, subject to the limitation set forth below.

Definitive documentation to be executed and delivered by the Borrower and its subsidiaries no later than August 24, 2012, with closing to occur no later than September 24, 2012.

The Borrower hereby accepts and agrees to the terms and conditions set forth above: