AURIGA LABORATORIES, INC. SENIOR SECURED NOTE AND WARRANT PURCHASE AGREEMENT
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, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, 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 qualified
by
state authorities, or an exemption from such registration and qualification
requirements is available. The Purchaser acknowledges that the
Company has no obligation to register or qualify the Securities for
resale. The Purchaser further acknowledges that if an exemption from
registration or qualification is available, it may be conditioned on various
requirements including, but not limited to, the time and manner of sale, the
holding period for the Securities, and on requirements relating to the Company
which are outside of the Purchaser’s control, and which the Company is under no
obligation and may not be able to satisfy.
(e) Legends. The
Purchaser understands that the Securities may bear one or all of the following
legends:
(i) “THE
SECURITIES REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933.”
(ii) Any
other legend required by the Blue Sky laws of any state to the extent such
laws
are applicable to the shares represented by the certificate so
legended.
(f) Accredited
Investor. The Purchaser is an accredited investor
as defined in Rule 501(a) of Regulation D promulgated under the Securities
Act.
5. Conditions
of the Purchasers’ Obligations at
Closing. The obligations of each
Purchaser to the Company under this Agreement are subject to the fulfillment,
on
or before the Closing, of each of the following conditions, unless otherwise
waived:
(a) Representations
and Warranties. The representations and
warranties of the Company contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the date of the Closing.
(b) Qualifications. All
authorizations, approvals or permits, if any, of any governmental authority
or
regulatory body of the United States or of any state that are required in
connection with the lawful issuance and sale of the Notes pursuant to this
Agreement shall be obtained and effective as of the Closing.
(c) Security
Agreement. The Company and the Purchaser shall have
executed the Security Agreement.
(d) Royalty
Participation Agreement. The Company and the Purchaser
shall have executed the Royalty Participation Agreement attached hereto as
Exhibit D.
(e) Good
Standing Certificates. The Company shall have
delivered a certified copy of its Certificate of Incorporation, a certified
copy
of any form qualifying it to do business issued by the jurisdictions in which
the Company conducts or intends to conduct its business or operations within
the
period prior to the Initial Financing and, shall have ordered good standing
certificates from such jurisdictions and its state of incorporation
6. Conditions
of the Company’s Obligations at
Closing. The obligations of the Company
to each Purchaser under this Agreement are subject to the fulfillment, on or
before the Closing, of each of the following conditions, unless otherwise
waived:
(a) Representations
and Warranties. The representations and
warranties of the Purchaser contained in Section 4 shall be true on and as
of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
(b) Qualifications. All
authorizations, approvals or permits, if any, of any governmental authority
or
regulatory body of the United States or of any state that are required in
connection with the lawful issuance and sale of the Note and Warrant pursuant
to
this Agreement shall be obtained and effective as of the Closing.
(c) Ancillary
Agreements. The Company and the Purchaser, and the other
parties thereto, if any, shall have executed all of the Ancillary
Agreements.
7. Additional
Agreements
(a) Indemnification
of Purchaser. The Company hereby indemnifies and holds
the Purchaser and its managers, members, affiliates and agents (each, a
“Purchaser Party”) harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including
all
judgments, amounts paid in settlements, court costs and reasonable attorneys’
fees and costs of investigation (collectively, “Losses”) that any such
Purchaser Party may suffer or incur as a result of or relating to (a) any
misrepresentation, breach or inaccuracy, or any allegation by a third party
that, if true, would constitute a breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by the Company in
this
Agreement or in the other Transaction Documents; or (b) any cause of action,
suit or claim brought or made against such Purchaser Party and solely arising
out of or solely resulting from the execution, delivery, performance or
enforcement of this Agreement or any of the other Transaction
Documents. Notwithstanding the above, the Company shall not be liable
in any such case for any loss, liability, obligation, claim, contingency,
damage, cost or expense to the extent that it arises out of or is based written
information furnished, or any other act or omission, by any such Purchaser
Party. The Company will reimburse such Purchaser for its reasonable legal and
other expenses incurred in connection therewith, as such expenses are
incurred. The Purchaser Party may not, without the prior written
consent of the Company, agree to any settlement of any claim or action with
respect to which the Company is required to indemnify the Purchaser Party
pursuant to this Section 7(a). The obligations of the Company under this Section
7(a) shall survive the payment and performance of the Company’s obligations
under the Transaction Documents.
(b) Non-Public
Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use
of
such information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing representations in effecting
transactions in securities of the Company.
(c) Release. The
Company, its subsidiaries, officers, directors, managers, employees,
shareholders, creditors, agents, heirs, representatives and any permitted
successors, and assigns (each a “Company Releasing Party”) hereby fully,
finally, completely, and forever releases, discharges, acquits, and relinquishes
the Purchaser, its managers, members and agents and the affiliates of each
of
the foregoing(the “Purchaser Released Parties”) from and against all
loss, cost, damage, claim, liability, or expense, including reasonable
attorneys’ fees and costs , in any way arising from or related to the sale and
issuance of the Note and Warrant and the entering into by the parties of the
remaining Ancillary Agreements. The Company (for and on behalf of
each Company Releasing Party) hereby agrees (a) not to file any lawsuit or
pursue any other action with respect to any of the foregoing matters and (b)
to
indemnify and hold harmless, jointly and severally, any and all of the Company
Released Parties from any and all injuries, harm, damages, costs, losses,
expenses and/or liability, including reasonable attorneys’ fees and court costs,
as incurred and when incurred as a result of the filing of any such lawsuit
or
the pursuit of any other action with respect to any of the foregoing matters.
The agreement and obligations of the Company under this Section 7(c) shall
survive the payment and performance of the Company’s obligations under the
Transaction Documents.
8. Miscellaneous.
(a) Assignment;
Successors and Assigns. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
(b) Waiver
of Conflicts. Each
party to this Agreement acknowledges that each of ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, the
authorized signer of the Purchaser’s manager and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, counsel for
the Purchaser, have in the past performed and may continue to perform legal
and/or consulting services for the Company in matters unrelated to the
transactions described in this Agreement, including the representation of the
Company in financings and other matters. Accordingly, each party to
this Agreement hereby (a) acknowledges that they have had an opportunity to
ask
for information relevant to this disclosure; and (b) gives its informed consent
to ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇’▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇’▇ representation of and/or
performance of consulting services for the Company in such unrelated matters
and
to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇’▇ representation of the Purchaser in connection with this
Agreement and the transactions contemplated hereby.
(c) Governing
Law. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the
laws
of the State of Texas, without giving effect to principles of conflicts of
law.
(d) Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original and all of which together shall constitute one
instrument.
(e) Titles
and Subtitles. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
(f) Notices. Any
notice required or permitted by this Agreement shall be in writing and shall
be
deemed sufficient upon receipt, when delivered personally or by courier,
overnight delivery service or confirmed facsimile, or 48 hours after being
deposited in the U.S. mail as certified or registered mail with postage prepaid,
if such notice is addressed to the party to be notified at such party’s address
or facsimile number as set forth below or as subsequently
modified by written notice.
(g) Finder’s
Fee. Each party represents that it
neither is nor will be obligated for any finder’s fee or commission in
connection with this transaction. Each Purchaser agrees to indemnify
and to hold harmless the Company from any liability for any commission or
compensation in the nature of a finder’s fee (and the costs and expenses of
defending against such liability or asserted liability) for which each
Purchaser or any of its officers, employees, or representatives is
responsible. The Company agrees to indemnify and hold harmless each
Purchaser from any liability for any commission or compensation in the
nature of a finder’s fee (and the costs and expenses of defending against such
liability or asserted liability) for which the Company or any of its officers,
employees or representatives is responsible.
(h) Amendments
and Waivers. Any term of this Agreement
may only be amended or waived with the written consent of the Company and the
holders of at least a majority in interest of the Notes. Any
amendment or waiver effected in accordance with this Section 8(h) shall be
binding upon each Purchaser and each transferee of the Securities, each future
holder of all such Securities, and the Company.
(i) Severability. If
one or more provisions of this Agreement are held to
be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith, in order to maintain the economic
position enjoyed by each party as close as possible to that under the provision
rendered unenforceable. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then
(i) such provision shall be excluded from this Agreement, (ii) the
balance of the Agreement shall be interpreted as if such provision were so
excluded and (iii) the balance of the Agreement shall be enforceable in
accordance with its terms.
(j) Entire
Agreement. This Agreement, and the
documents and agreements referred to herein constitute the entire agreement
between the parties hereto pertaining to the subject matter hereof, and any
and
all other written or oral agreements existing between the parties hereto are
expressly canceled.
[Signature
Pages Follow]
The
parties have executed this Senior Secured Note and
Warrant Purchase Agreement as of the date first written
above.
COMPANY
|
By:
|
|
|
Name:
|
|
|
Title:
|
Address:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
PURCHASER:
PROSPECTOR
CAPITAL PARTNERS,
LLC
By: ▇▇▇▇▇▇
&
Co.,
LLC,
its manager
By: ____________________________
Name:
▇▇▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇
Title:
Authorized Person
Address: ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇
▇-▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
EXHIBITS
Exhibit A- Form
of Senior Secured Promissory Note
Exhibit B- Form
of Warrant
Exhibit
C- Form
of Security Agreement
Exhibit
D- Form
of Royalty Participation Agreement
EXHIBIT
A
FORM
OF SENIOR SECURED PROMISSORY NOTE
EXHIBIT
B
FORM
OF WARRANT
EXHIBIT
C
FORM
OF SECURITY AGREEMENT
Schedule II
EXHIBIT
D
FORM
OF ROYALTY PARTICIPATION AGREEMENT
Schedule II
Schedule
3(d)
Gardena
Hospital, L.P., et. al. v. Auriga Laboratories, Inc., Los Angeles County
Superior Court Case No. SC097013
Laboratories
Carilene S.A.S. v. Auriga Laboratories, United States District Court,
Southern District of New York Case No. ’07 CIV 9616
Threatened
employment litigation by former employee, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, against Auriga
Laboratories
Schedule II