THIS
HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE, IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT 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, AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS NOTE MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
Original
Issue Date: February 13, 2008$750,000
Amended
and Restated: June 9, 2008
AMENDED AND RESTATED SENIOR SECURED CONVERTIBLE PROMISSORY
NOTE
DUE
February 12, 2009
FOR
VALUE RECEIVED, Auriga Laboratories, Inc., a Delaware corporation
(the “Company”) promises to pay to Prospector Capital
Partners, LLC or its registered assigns (the “Holder”),
the principal sum of $750,000 on or before February 12, 2009 as set
forth below (the “Maturity Date”). This Note was
originally issued pursuant to the Senior Secured Note and Warrant
Purchase Agreement, dated February 13, 2008 and amended and
restated as of June 9, 2008, and is subject to the following
additional provisions:
Section
1.
Definitions . For the purposes hereof, the
following terms shall have the following meanings:
“Business
Day” means any day except Saturday, Sunday and any day which
shall be a federal legal holiday in the United States or a day on
which banking institutions in the State of Georgia are authorized
or required by law or other government action to
close.
“Event
of Default” shall have the meaning set forth in
Section 3.
“Maturity
Date” shall have the meaning set forth in Section 2 of this
Note.
“Original
Issue Date” shall mean the date of the first issuance of this
Note regardless of the number of transfers of this Note and
regardless of the number of instruments which may be issued to
evidence this Note.
“Person”
means a corporation, an association, a partnership, organization, a
business, an individual, a government or political subdivision
thereof or a governmental agency.
“Trading
Day” means a day on which the Common Stock is traded on a
Trading Market.
“Trading
Market” means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in
question: the Nasdaq SmallCap Market, the American Stock Exchange,
the New York Stock Exchange, the Nasdaq National Market or the OTC
Bulletin Board.
Section
2.
Maturity . On February 12, 2009
(the “Maturity Date”), the entire outstanding principal
balance of this Note shall mature and be due and payable to the
Holder by the Company. The Company may not prepay this
Note without the consent of the Holder.
Section
3.
Conversion .
(a)
Investment by the Holder . The Holder shall have
the option of converting the entire principal amount on this Note
into shares of the Company’s equity securities (the
“Equity Securities”) issued and sold at the close of
the Company’s next equity financing or other transaction in
with equity securities are issued (the “Next Equity
Financing”). The number of shares of Equity
Securities to be issued upon such conversion shall be equal to the
quotient obtained by dividing (i) the entire principal amount of
this Note by (ii) the product of (A) (1) 90% if the Equity Line
Termination Obligation (as defined below) is met or (2) 80% if the
Equity Line Termination Obligation is not met and (B) the price per
share of the Equity Securities, rounded to the nearest whole share,
and the issuance of such shares upon such conversion shall be upon
the terms and subject to the conditions applicable to the Next
Equity Financing. Notwithstanding the above, the Holder shall also
have the option of converting the entire principal amount of this
Note into such number of shares of the Company’s Common Stock
as is obtained by dividing (x) the entire principal amount of this
Note plus, if applicable, accrued interest by (y) $.02 per share
(as adjusted for stock splits, stock dividends, recapitalizations
and like transactions), rounded to the nearest whole
share.
(b)
Mechanics and Effect of Conversion . No
fractional shares of the Company’s capital stock will be
issued upon conversion of this Note. In lieu of any
fractional share to which the Holder would otherwise be entitled,
the Company will pay to the Holder in cash the amount of the
unconverted principal and interest balance of this Note that would
otherwise be converted into such fractional share. Upon
conversion of this Note pursuant to this Section 3, the Holder
shall surrender this Note, duly endorsed, at the principal offices
of the Company or any transfer agent of the Company. At
its expense, the Company will, as soon as practicable thereafter,
issue and deliver to such Holder, at such principal office, a
certificate or certificates for the number of shares to which such
Holder is entitled upon such conversion, together with any other
securities and property to which the Holder is entitled upon such
conversion under the terms of this Note, including a check payable
to the Holder for any cash amounts payable as described
herein. Upon conversion of this Note, the Company will
be forever released from all of its obligations and liabilities
under this Note with regard to that portion of the principal amount
and accrued interest being converted including without limitation
the obligation to pay such portion of the principal amount and
accrued interest.
Section
4.
Events of Default .
(a)
“Event
of Default”, wherever used herein, means any one of the
following events (whatever the reason and whether it shall be
voluntary or involuntary or effected by operation of law or
pursuant to any judgment, decree or order of any court, or any
order, rule or regulation of any administrative or governmental
body):
(i)
any
default in the payment of the principal of amount of this Note, as
and when the same shall become due and payable (whether on the
Maturity Date or by acceleration or otherwise) which default is not
cured, within 5 Trading Days;
(ii)
the
Company shall fail to observe or perform any other covenant or
agreement contained in this Note which failure is not cured, if
possible to cure, within 5 Trading Days after notice of such
default sent by the Holder;
(iii)
any
representation or warranty made herein shall be untrue or incorrect
in any material respect as of the date when made or deemed
made;
(iv)
the
Company fails to make any payment due under either the Royalty
Participation Agreement, dated February 13, 2008, by and between
the Company and the Holder or the Royalty Participation Agreement,
dated as of the date hereof, by and between the Company and
Prospector Capital Partners II, LLC;
(v)
(i) the
Company shall commence, or there shall be commenced against the
Company, a case under any applicable bankruptcy or insolvency laws
as now or hereafter in effect or any successor the
| 
