AURIGA LABORATORIES, INC.
SENIOR SECURED NOTE AND WARRANT
PURCHASE AGREEMENT
This
Senior Secured Note and Warrant Purchase Agreement (the
“ Agreement ”) is made as of the 13th day
of February, 2008, by and between Auriga Laboratories, Inc., a
Delaware
corporation (the “ Company ”), and
Prospector Capital Partners, LLC, a Delaware limited liability
company (the “ Purchaser ”).
RECITALS
The
Company desires to issue and sell, and the Purchaser desires
to purchase (i) a senior secured
promissory note in substantially the form attached as
Exhibit A (the “ Note ”) and (ii) a
warrant in substantially the form attached as Exhibit B
(the “ Warrant ”) which shall be
exercisable on the terms stated therein into securities of the
Company. The Note, the Warrant and any securities
issuable upon exercise of the Warrant are collectively
referred to herein as the “ Securities
.” Any capitalized term not defined herein
shall have the meaning ascribed to it in the Note, the
Warrant, the Security Agreement or the Royalty Participation
Agreement (taken together, the “ Ancillary
Agreements ”). This Agreement and the
Ancillary Agreements shall be referred to collectively as the
“ Transaction Documents ”.
AGREEMENT
In
consideration of the mutual promises contained herein and
other good and valuable consideration, receipt of which is
hereby acknowledged, the parties to this Agreement agree as
follows:
1.
Purchase and Sale of Note and Warrant
.
(a)
Sale and Issuance of Note and Warrant
. Subject to the terms and
conditions of this Agreement, the Purchaser agrees to
purchase at the Closing (as defined below) and the Company
agrees to sell and issue to the Purchaser the Note in the
principal amount of $750,000 and the Warrant.
(b)
Closing; Delivery .
(i) The
purchase and sale of the Note and
Warrant shall take place at the offices of Prospector Capital
Partners, LLC, 3112 Windsor Road, Suite A-137, Austin, TX
78703, on February 13, 2008, or at such other time and place
as the Company and the Purchaser mutually agree upon, orally
or in writing (which time and place are designated as the
“ Closing ”).
(ii) At
the Closing, the Company shall deliver to Purchaser the
executed Note and Warrant along with signed copies of the
Ancillary Agreements against (1) payment of the Purchase
Price (as defined below) therefor by check payable to the
Company or by wire transfer to a bank designated by the
Company, and (2) delivery of counterpart signature pages to
this Agreement and the Ancillary Agreements.
(iii) The
“ Purchase Price ” shall equal the
principal amount of the Note minus the Loan Origination Fee.
The “ Loan Arrangement Fee ” shall equal
10% of the principal amount of the Note. The
parties hereto agree that the “Loan Arrangement
Fee” has been fully earned by Purchaser and is
non-refundable. Purchaser, in its sole discretion,
may off-set the Loan Arrangement Fee from any amounts
provided under the Note.
2.
Security Interest . The
indebtedness represented by the Note shall be secured by
Collateral of the Company in accordance with the provisions
of a Security Agreement between the Company and the Purchaser
in the form attached to this Agreement as Exhibit C
(the “ Security Agreement ”).
3.
Representations and Warranties of the
Company . The Company hereby
represents and warrants to each Purchaser that:
(a)
Organization, Good Standing and
Qualification . The
Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and
has all requisite corporate power and authority to carry on
its business as now conducted and as proposed to be conducted
(the “ Business ”). The Company
is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to
qualify would have a material adverse effect on its Business
or properties.
(b)
Authorization .
All corporate action required on the part of the
Company, its officers, directors and stockholders necessary
for the authorization, execution and delivery of this
Agreement and the Ancillary Agreements and the authorization,
sale, issuance and delivery of the Note and Warrant, and the
performance of all obligations of the Company hereunder and
under the Ancillary Agreements has been taken or will be
taken prior to the Closing. All
corporate action required to authorize the issuance of the
Securities will be taken prior to the issuance
thereof. The Agreement, and each of the Ancillary
Agreements, when executed and delivered by the Company, shall
constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with
their respective terms except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other laws of general application
affecting enforcement of creditors’ rights generally,
and as limited by laws relating to the availability of
specific performance, injunctive relief, or other equitable
remedies.
(c)
Issuance of the Securities
. The Securities are duly authorized and, when
issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all liens. The
Company has reserved from its duly authorized capital stock
the maximum number of shares of Common Stock issuable
pursuant to the Warrant.
(d)
Litigation .
Except as set forth on Schedule 3.(d), attached
hereto, there is no claim, action, suit, proceeding,
arbitration, complaint, charge or investigation pending with
respect to which the Company has been notified or is aware,
to the Company’s knowledge, currently threatened
against the Company that, if successful, would reasonably be
expected to have, either individually or in the aggregate, a
material adverse effect on its Business or properties, or any
change in the current equity ownership of the Company, nor is
the Company aware that there is any basis for the
foregoing.
(e)
SEC Reports; Financial Statements
. To the best of its knowledge, the Company has
filed all material reports required to be filed by it under
the Securities Act and the Exchange Actfor the two years
preceding (collectively, the “ SEC Reports
”) on a timely basis. As of their respective dates, the
SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and
the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light
of the circumstances under which they were made, not
misleading.
4.
Representations and Warranties of the
Purchaser . The
Purchaser hereby represents and warrants to the Company
that:
(a)
Authorization
. The Purchaser has full power
and authority to enter into this Agreement. This
Agreement, when executed and delivered by the Purchaser, will
constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, except
as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and any
other laws of general application affecting enforcement of
creditors’ rights generally, and as limited by laws
relating to the availability of a specific performance,
injunctive relief, or other equitable remedies.
(b)
Purchase Entirely for Own Account
. This Agreement is made with
the Purchaser in reliance upon the Purchaser’s
representation to the Company, which by the Purchaser’s
execution of this Agreement, the Purchaser hereby confirms,
that the Securities to be acquired by the Purchaser will be
acquired for investment for the Purchaser’s own
account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and that the
Purchaser has no present intention of selling, granting any
participation in, or otherwise distributing the
same. By executing this Agreement, the Purchaser
further represents that the Purchaser does not presently have
any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the
Securities.
(c)
Knowledge .
The Purchaser is aware of the Company’s
business affairs and financial condition and has acquired
sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the
Securities.
(d)
Restricted Securities
. The Purchaser understands that
the Securities have not been, and will not be, registered
under the Securities Act of 1933, as amended (the “
Securities Act ”), by reason of a specific
exemption from the registration provisions of the Securities
Act which depends upon, among other things, the bona fide
nature of the investment intent and the accuracy of the
Purchaser’s representations as expressed
herein. The Purchaser understands that the
Securities are “restricted securities” under
applicable U.S. federal and state securities laws and that,
pursuant to these laws, the Purchaser must hold the
Securities
indefinitely unless they are registered with the Securities
and Exchange Commission and qua
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