THE SECURITIES REPRESENTED BY THIS CERTIFICATE 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.
 
Number of Shares:                                           500,000 shares of
Common Stock (subject to adjustment)
Date of Issuance:                                           February 13, 2008
Warrant Number:                                           W-___
 
AURIGA LABORATORIES, INC.
 
Common Stock Warrant
 
Auriga Laboratories, Inc., a Delaware corporation (the “Company”), for value
received, hereby certifies that Prospector Capital Partners, LLC, or its
registered assigns (the “Registered Holder”), is entitled, subject to the terms
set forth below, to purchase from the Company, at any time after the date hereof
and on or before the Expiration Date (as defined in Section 6 below), up to
500,000 shares (subject to adjusted from time to time pursuant to the provisions
of this Warrant) of common stock, par value $0.001, of the Company (“Common
Stock”), at the purchase price set  forth in Section 1 below.  The shares
purchasable upon exercise of this Warrant and the purchase price per share, as
adjusted from time to time pursuant to the provisions of this Warrant, are
sometimes hereinafter referred to as the “Warrant Shares” and the “Purchase
Price,” respectively.
 
1.           Purchase Price.  The Purchase Price shall be $ $0.039 per share,
subject to adjustment as provided in this Warrant.
 
2.           Exercise.
 
(a)           Manner of Exercise.  This Warrant may be exercised by the
Registered Holder in whole or in part, by surrendering this Warrant, with the
purchase/exercise form appended hereto as Exhibit A duly executed by such
Registered Holder or by such Registered Holder’s duly authorized attorney, at
the principal office of the Company, or at such other office or agency as the
Company may designate, accompanied by payment in full of the Purchase Price
payable in respect of the number of Warrant Shares purchased upon such
exercise.  Except as set forth in Section 2(c) below, the Purchase Price may
only be paid by cash, check, wire transfer or by the surrender of promissory
notes or other instruments representing indebtedness of the Company to the
Registered Holder.
 
(b)           Net Issue Exercise.
 
(i)           In lieu of exercising this Warrant in the manner provided above in
Section 2(b), the Registered Holder may elect to receive shares equal to the
value of this Warrant (or the portion thereof being canceled) by surrender of
this Warrant at the principal office of the Company together with notice of such
election on the purchase/exercise form appended hereto as Exhibit A duly
executed by such Registered Holder or such Registered Holder’s duly authorized
attorney, in which event the Company shall issue to the Registered Holder a
number of shares of Common Stock computed using the following formula:
 
 
X =
Y (A - B)

A
 
X = The number of shares of Common Stock to be issued to the Registered Holder.
 
Y = The number of shares of Common Stock purchasable under this Warrant (at the
date of such calculation).
 
A = The fair market value of one share of Common Stock (at the date of such
calculation).
 
B = The Purchase Price (as adjusted to the date of such calculation).
 
(ii)           For purposes of this Section 2(b), the fair market value of one
share of Common Stock on the date of calculation shall be determined as
follows:  (i) if traded on a securities exchange or through the Nasdaq National
Market, the value shall be deemed to be the average of the closing prices of the
securities on such exchange over the five (5) day period ending three (3) days
prior to the net exercise election; (ii) if traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the five (5) day period ending three (3) days prior to the
net exercise; and (iii) if there is no active public market, the value shall be
the fair market value thereof, as determined in good faith by the Board of
Directors of the Company.  Notwithstanding any other provision hereof, the
maximum number of shares of Common Stock to be issued to the Registered Holder
pursuant to this net exercise shall not exceed the total number of shares of
Common Stock issuable upon exercise of this Warrant.
 
(c)           Effective Time of Exercise.  Each exercise of this Warrant shall
be deemed to have been effected immediately prior to the close of business on
the day on which this Warrant shall have been surrendered to the Company as
provided in Section 2(a) above.  At such time, the person or persons in whose
name or names any certificates for Warrant Shares shall be issuable upon such
exercise as provided in Section 2(e) below shall be deemed to have become the
holder or holders of record of the Warrant Shares represented by such
certificates.
 
(d)           Delivery to Holder.  As soon as practicable after the exercise of
this Warrant in whole or in part, and in any event within ten (10) days
thereafter, the Company at its expense will cause to be issued in the name of,
and delivered to, the Registered Holder, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct:
 
(i)           a certificate or certificates for the number of Warrant Shares to
which such Registered Holder shall be entitled; and
 
(ii)           in case such exercise is in part only, a new warrant or warrants
(dated the date hereof) of like tenor, calling in the aggregate on the face or
faces thereof for the number of Warrant Shares equal (without giving effect to
any adjustment therein) to the number of such shares called for on the face of
this Warrant minus the number of such shares purchased by the Registered Holder
upon such exercise as provided in Section 2(a) above.
 
3.           Adjustments.
 
(a)           Stock Splits and Dividends.  If outstanding shares of the
Company’s Common Stock shall be subdivided into a greater number of shares or a
dividend in Common Stock shall be paid in respect of Common Stock, the Purchase
Price in effect immediately prior to such subdivision or at the record date of
such dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately
reduced.  If outstanding shares of Common Stock shall be combined into a smaller
number of shares, the Purchase Price in effect immediately prior to such
combination shall, simultaneously with the effectiveness of such combination, be
proportionately increased.  When any adjustment is required to be made in the
Purchase Price, the number of Warrant Shares purchasable upon the exercise of
this Warrant shall be changed to the number determined by dividing:  (i) an
amount equal to the number of shares issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Purchase Price in effect
immediately prior to such adjustment; by (ii) the Purchase Price in effect
immediately after such adjustment.
 
(b)           Reclassification, Etc.  In case of any reclassification or change
of the outstanding securities of the Company or of any reorganization of the
Company (or any other corporation the stock or securities of which are at the
time receivable upon the exercise of this Warrant) or any similar corporate
reorganization on or after the date hereof, then and in each such case the
holder of this Warrant, upon the exercise hereof at any time after the
consummation of such reclassification, change, reorganization, merger or
conveyance, shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property to which such holder
would have been entitled upon such consummation if such holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in Section 3(a); and in each such case, the terms of this Section 3
shall be applicable to the shares of stock or other securities properly
receivable upon the exercise of this Warrant after such consummation.
 
(c)           Adjustment Certificate.  When any adjustment is required to be
made in the number of Warrant Shares or the Purchase Price pursuant to this
Section 3, the Company shall promptly mail to the Registered Holder a
certificate setting forth:  (i) a brief statement of the facts requiring such
adjustment; (ii) the Purchase Price after such adjustment; and (iii) the kind
and amount of stock or other securities or property into which this Warrant
shall be exercisable after such adjustment.
 
4.           Transfers.
 
(a)           Unregistered Security.  Each holder of this Warrant acknowledges
that this Warrant and the Warrant Shares have not been registered under the
Securities Act of 1933, as amended (the “Securities Act”), and agrees not to
sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this
Warrant or any Warrant Shares issued upon its exercise in the absence of:  (i)
an effective registration statement under the Securities Act as to this Warrant
or such Warrant Shares and registration or qualification of this Warrant or such
Warrant Shares under any applicable U.S. federal or state securities law then in
effect; or (ii) an opinion of counsel, satisfactory to the Company, that such
registration and qualification are not required.  Each certificate or other
instrument for Warrant Shares issued upon the exercise of this Warrant shall
bear a legend substantially to the foregoing effect.
 
(b)           Transferability.  Subject to the provisions of Section 4(a)
hereof, this Warrant and all rights hereunder are transferable, in whole or in
part, upon surrender of the Warrant with a properly executed assignment (in the
form of Exhibit B hereto) at the principal office of the Company.
 
(c)           Warrant Register.   The Company will maintain a register
containing the names and addresses of the Registered Holders of this
Warrant.  Until any transfer of this Warrant is made in the warrant register,
the Company may treat the Registered Holder of this Warrant as the absolute
owner hereof for all purposes; provided, however, that if this Warrant is
properly assigned in blank, the Company may (but shall not be required to) treat
the bearer hereof as the absolute owner hereof for all purposes, notwithstanding
any notice to the contrary.  Any Registered Holder may change such Registered
Holder’s address as shown on the warrant register by written notice to the
Company requesting such change.
 
5.           Representations of Registered Holder.  The Registered Holder hereby
represents and warrants to the Company that:
 
(a)           Purchase Entirely for Own Account.  The Warrant and Warrant Shares
(collectively, the “Securities”) will be acquired for investment for the
Registered Holder’s own account, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof in violation of the Securities
Act, and that the Registered Holder has no present intention of selling,
granting any participation in, or otherwise distributing the same.  The
Registered Holder further represents that the Registered Holder 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.  The Registered Holder has not
been formed for the specific purpose of acquiring any of the Securities.
 
(b)           Knowledge.  The Registered Holder 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.
 
(c)           Restricted Securities.  The Registered Holder understands that the
Securities have not been registered under 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 Registered Holder’s representations as expressed
herein.  The Registered Holder understands that the Securities are “restricted
securities” under applicable U.S. federal and state securities laws and that,
pursuant to these laws, the Registered Holder 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 Registered
Holder 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 Registered
Holder’s control.
 
(d)           Legends.  The Registered Holder understands that the Securities,
and any securities issued in respect thereof or exchange therefor, may bear one
or all of the following legends:
 
(i)           “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, 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, AS AMENDED.”
 
(ii)           Any 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 Registered Holder is an “accredited
investor” as such term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act.
 
6.           Term of Warrant.Subject to the other terms and conditions set forth
herein, this Warrant shall be exercisable, in whole or in part, at any time on
or after the date hereof and at or prior to 11:59 p.m., local time in Los
Angeles, California, U.S.A., 900 days from the Date of Issuance (the “Expiration
Date”). Notwithstanding the above, if the closing sales price of the Common
Stock on the Expiration Date is greater than 110% of the Exercise Price on the
Expiration Date, then this Warrant shall be deemed to have been exercised in
full (to the extent not previously exercised) on a “cashless exercise” basis at
11:59 p.m. local time in Los Angeles, California on the Expiration Date. The
Company may not call or redeem all or any portion of this Warrant without the
prior written consent of the Registered Holder.
 
7.           Notices of Certain Transactions.  In case:
 
(a)           the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to receive any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right, to subscribe for or purchase any shares of stock of any class or any
other securities, or to receive any other right;
 
(b)           of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the Company,
any consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the surviving
entity), or any transfer of all or substantially all of the assets of the
Company; or
 
(c)           of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
 
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder a notice specifying, as the case may be:  (i) the date on
which a record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right; or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon such reorganization, reclassification, consolidation,
merger, transfer, dissolution, liquidation or winding-up) are to be
determined.  Such notice shall be mailed at least ten (10) days prior to the
record date or effective date for the event specified in such notice.
 
8.           Reservation of Stock.  The Company will at all times reserve and
keep available, solely for the issuance and delivery upon the exercise of this
Warrant, such Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
 
9.           Exchange of Warrants.  Upon the surrender by the Registered Holder
of any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 4
hereof, issue and deliver to or upon the order of such holder, at the Company’s
expense, a new Warrant or Warrants of like tenor, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
 
10.           Replacement of Warrants.  Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
 
11.           Notices.  Any notice required or permitted by this Warrant shall
be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid,
addressed:  (a) if to the Registered Holder, to the address of the Registered
Holder most recently furnished in writing to the Company; and (b) if to the
Company, to the address set forth below or subsequently modified by written
notice to the Registered Holder.
 
12.           No Rights as Stockholder.  Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
 
13.           No Fractional Shares.  No fractional shares of Common Stock will
be issued in connection with any exercise hereunder.  In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company’s Board of Directors.
 
14.           Amendment or Waiver.  Any term of this Warrant may be amended or
waived only by an instrument in writing signed by the party against which
enforcement of the amendment or waiver is sought.
 
15.           Headings.  The headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
 
16.           Governing Law. This Warrant shall be governed, construed and
interpreted in accordance with the laws of the State of California, without
giving effect to principles of conflicts of law.
 
AURIGA LABORATORIES, INC.
 
By:                                                      
Its:                                                      

Address: 5284 Adolfo Road
Camarillo, CA  93012
Fax: (805) 299-4932
 
AGREED AND ACCEPTED:
 
REGISTERED HOLDER
 
PROSPECTOR CAPITAL PARTNERS, LLC
 
By:  Hudson & Co., LLC, its manager
 

 
By:  ____________________________
Name: Christopher S. Walton
Title: Authorized Person

Address: 3112 Windsor Road
Suite A-137
Austin, TX 78703
Fax:  (866) 477-2971

 
 

--------------------------------------------------------------------------------

 

EXHIBIT A
 
PURCHASE/EXERCISE FORM
 
 
To:           Auriga Laboratories,
Inc.                                                                Dated:________________________
 
The undersigned, pursuant to the provisions set forth in the attached Warrant
No. ___, hereby irrevocably elects to (a) purchase _____ shares of the Common
Stock covered by such Warrant and herewith makes payment of $ _________,
representing the full purchase price for such shares at the price per share
provided for in such Warrant, or (b) exercise such Warrant for _______ shares
purchasable under the Warrant pursuant to the Net Issue Exercise provisions of
Section 2(c) of such Warrant.
 
The undersigned acknowledges that it has reviewed the representations and
warranties contained in Section 5 of the Warrant and by its signature below
hereby makes such representations and warranties to the Company.
 
Signature:                                                                
Name (print):
Title (if applic.)
Company (if applic.):

 
 

--------------------------------------------------------------------------------

 

EXHIBIT B
 
ASSIGNMENT FORM
 
FOR VALUE RECEIVED, _________________________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant with respect to the number of shares of Common Stock covered thereby set
forth below, to:
 
Name of Assignee
Address/Fax Number
No. of Shares
                       

 
Dated:_________________                                                                                     Signature:
 

 
 
Witness: