CONVERTIBLE PROMISSORY NOTE
$240,000 PLUS INTEREST DUE & PAYABLE
DOCUMENT A-01152008
THIS
NOTE AND THE SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS NOTE AND THE SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT OR APPLICABLE EXEMPTION OR SAFE HARBOR
PROVISION.
FOR
VALUE RECEIVED, on the Effective Date, as defined below,
Auriga
Laboratories Inc. as Obligor ("Borrower,” or
“Obligor”), hereby promises to pay to the Lender
(“Lender” or “ Holder”), as defined
below, the Principal Sum, as defined below, along with the
Interest Rate, as defined below, according to the terms
herein.
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The
"Effective Date" shall be:
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January
15, 2008
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The
"Lender" shall be:
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JMJ
Financial / Its Principal, or Its Assignees
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The
"Principal Sum" shall be:
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$240,000
(two hundred forty thousand US Dollars); Subject to the
following: accrued, unpaid interest shall be added to the
Principal Sum.
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The
“Consideration” shall be:
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$200,000
(two hundred thousand) dollars in the form of cashier’s
check.
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The
"Interest Rate" shall be:
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12%
one-time interest charge on the Principal
Sum. No interest or
principal payments are required until the Maturity Date, but
both principal and interest may be included in conversion
prior to maturity date.
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The
"Conversion Price" shall be the following price:
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As
applied to the Conversion Formula set forth in 2.2, sixty
percent of the average of the 3 (three) lowest closing bid
prices in the 20 trading days previous to the conversion; as
applies to Auriga Laboratories Inc. voting common
stock.
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The
“Prepayment Terms” shall be:
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Prepayment
is permitted at any time in the amount of 130% of the
outstanding principal and interest note balance at the time of
the prepayment.
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The
"Maturity Date" is the date upon which the Principal Sum of
this Note, as well as any unpaid interest shall be due and
payable, and that date shall be:
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January
15, 2011
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ARTICLE 1 PAYMENT-RELATED PROVISIONS
1.1 Demand. Upon notice by
holder, this Note is payable on Demand at any time for any
reason.
1.2 Interest Rate. Subject
to the Holder's right to convert, interest payable on this
Note will accrue interest at the Interest Rate and shall be
applied to the Principal Sum.
ARTICLE 2 CONVERSION RIGHTS
The Holder will have the
right to convert the Principal Sum and accrued interest under
this Note into Shares of the Borrower's Common Stock as set
forth below.
2.1 Conversion Rights and
Cashless Exercise. The Holder will have the right at its
election from and after the Effective Date, and then at any
time, to convert all or part of the outstanding and unpaid
Principal Sum and accrued interest into shares of fully paid
and nonassessable shares of common stock of Auriga
Laboratories Inc. (as such stock exists on the date of
issuance of this Note, or any shares of capital stock of
Auriga Laboratories Inc. into which
such stock is hereafter changed or reclassified, the "Common
Stock") as per the Conversion Formula set forth in Section
2.2. Any such conversion shall be cashless, and shall not
require further payment from Holder. Unless
otherwise agreed in writing by both the Borrower and the
Holder, at no time will the Holder convert any amount of the
Note into common stock that would result in the Holder owning
more than 4.99% of the common stock outstanding of Auriga
Laboratories Inc. Shares from any such
conversion will be delivered to Holder within 2 (two)
business days of conversion notice delivery (see 3.1) via
10:30am priority overnight delivery service (see Section
2.6).
2.2.
Conversion Formula. The number of shares issued through
conversion is the conversion amount divided by the conversion
price.
#
Shares = Conversion
Amount
Conversion Price
2.3
Conversion Formula Adjustments. The Conversion Formula
described in Sections 2.2 and the number and kind of shares or
other securities to be issued upon conversion is subject to
adjustment upon any of the events as described in 2.3.1 to
2.3.3, or any other event as mutually agreed in writing by
both the Holder and Borrower. The adjustment due to
any of the described events shall be: The result of the
Conversion Formula described in 2.2 above shall be multiplied
by (2) two, such that the number of shares calculated in the
Conversion Formula would be doubled.
2.3.1.
Merger, Consolidation or Sale of Assets. If the Borrower at
any time consolidates with or merges into, or sells or conveys
all or substantially all of its assets to, any other entity,
the unpaid Principal Sum of this Note and accrued interest
thereon will thereafter be deemed to evidence the right to
purchase such number and kind of shares or other securities
and property as would have been issuable or distributable, on
account of such consolidation, merger, sale or conveyance,
upon or with respect to the securities subject to the
conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing
provision will similarly apply to successive transactions of a
similar nature by any such successor or purchaser. Without
limiting the generality of the foregoing, the anti-dilution
provisions of this Note will apply to such securities of such
successor or purchaser after any such consolidation, merger,
sale or conveyance.
2.3.2. Reclassification. If
the Borrower at any time, by reclassification or otherwise,
changes the Common Stock into the same or a different number
of securities of any class or classes, the unpaid Principal
Sum of this Note and accrued interest thereon will thereafter
be deemed to evidence the right to purchase such number and
kind of securities as would have been issuable as the result
of such change with respect to the Common Stock immediately
prior to such reclassification or other change.
2.3.3.
Stock Splits, Stock Dividends, and Combinations. If
the shares of Common Stock are subdivided or
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