EXCHANGE AGREEMENT
EXHIBIT 10.1
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
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 Xxxxxx & Xxxxx LLP, One Xxxxx Square,
18th and Cherry Sts., Xxxxxxxxxxxx, XX 00000, 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
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
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:
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.
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
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. | |||
| 00 Xxxxx Xxxxxxx | ||||
| Xxxxxxxx, XX 00000 | ||||
| Facsimile No.: (000) 000-0000 | ||||
| Attn: Chief Executive Officer | ||||
| With copies to (which shall | Drinker Xxxxxx & Xxxxx LLP | |||
| not constitute notice): | One Xxxxx Square | |||
| 00xx xxx Xxxxxx Xxxxxxx | ||||
| Xxxxxxxxxxxx, XX 00000-0000 | ||||
| Facsimile No.: (000) 000-0000 | ||||
| Attn: Xxxxxxx X. Xxxxxxx, 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/ Xxxxxxx X. Xxxxxx |
|||||
| Name: | Xxxxxxx X. Xxxxxx | |||||
| 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: |
||||
[Signature Page to Exchange Agreement]
| INVESTOR: | ||||
| Xxxxxxx X. Xxxxxx Family Trust | ||||
By:
|
/s/ Xxxxxxx X. Xxxxxx
|
|||
Name:
|
Xxxxxxx X. Xxxxxx | |||
Title:
|
Trustee | |||
[Signature Page to Exchange Agreement]
| INVESTOR: | ||||
| The Price Family Trust | ||||
By:
|
/s/ Xxxxx X. Xxxxx
|
|||
Name:
|
Xxxxx X. Xxxxx | |||
Title:
|
Trustee | |||
[Signature Page to Exchange Agreement]
| INVESTOR: | ||||
| Xxxxxxx X. Xxxxxx | ||||
By: Name: |
/s/ Xxxxxxx X. Xxxxxx
|
|||
Title:
|
Investor | |||
[Signature Page to Exchange Agreement]
| INVESTOR: | ||||
| Xxxxxx X. Xxxxxx | ||||
By:
|
/s/ Xxxxxx X. Xxxxxx
|
|||
Name:
|
Xxxxxx X. Xxxxxx | |||
Title:
|
Trustee | |||
[Signature Page to Exchange Agreement]
| INVESTOR: | ||||
| Xxxxx Xxxxxx Revocable Trust | ||||
By:
|
/s/ Xxxxx Xxxxxx
|
|||
Name:
|
Xxxxx Xxxxxx | |||
Title:
|
Trustee | |||
[Signature Page to Exchange Agreement]
| INVESTOR: | ||||
| Xxxx Xxxxxx Revocable Trust | ||||
By:
|
/s/ Xxxx Xxxxxx
|
|||
Name:
|
Xxxx Xxxxxx | |||
Title:
|
Trustee | |||
[Signature Page to Exchange Agreement]
| INVESTOR: | ||||
| Xxxx van der Toorn | ||||
By:
|
/s/ Xxxx van der Toorn
|
|||
Name:
|
Xxxx van der Toorn | |||
Title:
|
Investor | |||
[Signature Page to Exchange Agreement]
Schedule 2.1
Investors
| Original | Preferred | |||||||||||||||
| Investor | Notes | PIK Notes | Stock* | Warrants | ||||||||||||
Platinum Long Term Growth
VII, LLC |
1,561,740.00 | 80,721.02 | 1,216,636 | 121,663 | ||||||||||||
Xxxxxxx X. Xxxxxx Family Trust |
124,899.00 | 5,059.88 | 96,264 | 9,626 | ||||||||||||
The Price Family Trust |
124,899.00 | 5,059.88 | 96,264 | 9,626 | ||||||||||||
Xxxxxxx X. Xxxxxx |
62,449.00 | 2,529.89 | 48,131 | 4,813 | ||||||||||||
Xxxxxx X. Xxxxxx |
31,225.00 | 1,265.00 | 24,065 | 2,406 | ||||||||||||
Xxxxx Xxxxxx Revocable Trust |
25,000.00 | 1,012.78 | 19,267 | 1,926 | ||||||||||||
Xxxx Xxxxxx Revocable Trust |
25,000.00 | 1,012.78 | 19,267 | 1,926 | ||||||||||||
Xxxx van der Toorn |
25,000.00 | 1,012.78 | 19,267 | 1,926 | ||||||||||||
| * | Fractional shares issuable upon exchange shall be settled in cash at Closing. |
