Contract
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
SENIOR
SECURED 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 is issued pursuant to the
Senior Secured Note and Warrant Purchase Agreement, dated the date hereof,
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
January 31, 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. Prepayment. The
Company may prepay this Note at any time without prior consent of the Holder
and
all obligations of the Company under this Note of shall terminate at such
time. Notwithstanding the above, prepayment shall not affect the term
of the Warrant or the parties’ ongoing rights and obligations under the Senior
Secured Note and Warrant Purchase Agreement and Royalty Participation Agreement,
each of even date herewith.
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) (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 thereto, or the Company commences any other proceeding under
any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Company or (ii) there is
commenced against the Company any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 60 days; or (iii) the
Company is adjudicated by a court of competent jurisdiction insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or (iv) the Company suffers any appointment of any
custodian or the like for it or any substantial part of its property which
continues undischarged or unstayed for a period of 60 days; or (v) the
Company makes a general assignment for the benefit of creditors; or
(vi) the Company shall fail to pay, or shall state that it is unable to
pay, or shall be unable to pay, its debts generally as they become due; or
(vii) the Company shall call a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of its debts; or
(viii) the Company shall by any act or failure to act expressly indicate
its consent to, approval of or acquiescence in any of the foregoing; or
(ix) any corporate or other action is taken by the Company for the purpose
of effecting any of the foregoing; or
(v) except
with respect to those liabilities set forth on Schedule 4(a)(v), attached
hereto, the Company shall default in any of its obligations under any mortgage,
credit agreement or other facility, indenture agreement, factoring agreement
or
other instrument under which there may be issued, or by which there may be
secured or evidenced any indebtedness for borrowed money or money due under
any
long term leasing or factoring arrangement of the Company in an amount exceeding
$100,000, whether such indebtedness now exists or shall hereafter be created
and
such default shall result in such indebtedness becoming or being declared due
and payable prior to the date on which it would otherwise become due and
payable.
(b) Remedies
Upon Event of Default. If any Event of Default occurs, the full
principal amount of this Note to the date of acceleration shall become, at
the
Holder’s election, immediately due and payable in full. The
Holder need not provide and the Company hereby waives any presentment, demand,
protest or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable
law. Such declaration may be rescinded and annulled by the Holder at
any time prior to payment hereunder and the Holder shall have all rights as
a
Note holder until such time, if any, as the full payment under this Section
shall have been received by it. No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent
thereon.
Section
5. Miscellaneous.
(a) Notices. Any
and all notices or other communications or deliveries to be provided by the
Holder hereunder by facsimile, sent by a nationally recognized overnight courier
service, addressed to the Company, at 0000 Xxxxxx Xxxx, Xxxxxxxxx,
Xxxxxxxxxx 00000, xxxxxxxxx number, (000) 000-0000, Attn: CEO and Corporate
Counsel, or such other address or facsimile number as the Company may specify
for such purposes by notice to the Holder delivered in accordance with this
Section. Any and all notices or other communications or deliveries to
be provided by the Company hereunder shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier
service addressed to the Holder at the facsimile telephone number or address
of
such Xxxxxx appearing on the books of the Company, or if no such facsimile
telephone number or address appears, at the principal place of business of
the
Holder. Any notice or other communication or deliveries hereunder
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 telephone number specified in this Section prior to 5:30 p.m. (local
time in Los Angeles, California), (ii) the date after the date of
transmission, if such notice or communication is delivered via facsimile at
the
facsimile telephone number specified in this Section later than 5:30 p.m. (local
time in Los Angeles, California) on any date and earlier than 11:59 p.m. (local
time in Los Angeles, California) on such date, (iii) the second 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.
(b) Absolute
Obligation. Except as expressly provided herein, no provision of this Note
shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of this Note at the time, place, and rate,
and in the coin or currency, herein prescribed. This Note is a direct
debt obligation of the Company.
(c) Lost
or Mutilated Note. If this Note shall be mutilated, lost, stolen
or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Note, or in lieu of or
in
substitution for a lost, stolen or destroyed Note, a new Note for the principal
amount of this Note so mutilated, lost, stolen or destroyed but only upon
receipt of evidence of such loss, theft or destruction of such Note, and of
the
ownership hereof, and indemnity, if requested, all reasonably satisfactory
to
the Company.
(d) Security
Interest. This Note is a direct debt obligation of the Company
and is secured by a first priority perfected security interest in all of the
assets of the Company for the benefit of the Holder. The Holder and
the Company have agreed to and more fully provided the Holder’s Security
Interest in that certain Security Agreement, by and among the Parties hereto,
of
even date herewith, attached hereto as Exhibit A (the “Security
Agreement”). The Security Agreement is incorporated by reference
herein in its entirety.
(e) Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of this Note shall be governed by and construed
and enforced in accordance with the internal laws of the State of Texas, without
regard to the principles of conflicts of law thereof.
(f) Waiver. Any
waiver by the Company or the Holder of a breach of any provision of this Note
shall not operate as or be construed to be a waiver of any other breach of
such
provision or of any breach of any other provision of this Note. The
failure of the Company or the Holder to insist upon strict adherence to any
term
of this Note on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence
to
that term or any other term of this Note. Any waiver must be in
writing.
(g) Severability. If
any provision of this Note is invalid, illegal or unenforceable, the balance
of
this Note shall remain in effect, and if any provision is inapplicable to any
Person or circumstance, it shall nevertheless remain applicable to all other
Persons and circumstances. If it shall be found that any interest or
other amount deemed interest due hereunder violates applicable laws governing
usury, the applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum permitted rate of interest. The Company covenants
(to the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal of or
interest on this Note as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance
of
this Note, and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefits or advantage of any such law, and covenants that
it will not, by resort to any such law, hinder, delay or impede the execution
of
any power herein granted to the Holder.
(h) Next
Business Day. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made
on
the next succeeding Business Day.
(i) Headings. The
headings contained herein are for convenience only, do not constitute a part
of
this Note and shall not be deemed to limit or affect any of the provisions
hereof.
(j) Seniority. This
Note is senior in right of payment to any and all other indebtedness of the
Company, provided, however, Xxxxxx agrees to subordinate this Note to (i) a
receivables line of credit of up to $1.5 million; or (ii) a term loan of up
to
$1.0 million, in the event that the Company enters into either during the term
of the Note with a reputable commercial bank.
*********************
Page
IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed by a
duly
authorized officer as of the date first above indicated.
|
By:
Name: ________________________
Title: Chief
Executive Officer
|
AGREED
AND ACKNOWLEDGED
PROSPECTOR
CAPITAL PARTNERS, LLC
By:
Xxxxxx & Co., LLC, its manager
Name:
Xxxxxxxxxxx X. Xxxxxx
Title:
Authorized Person
Page
EXHIBIT
A
Security
Agreement
Schedule
4(a)(v)
Gardena
Hospital, L.P., et. al. v. Auriga Laboratories, Inc., Los Angeles County
Superior Court Case No. SC097013
