SECURED & COLLATERALIZED PROMISSORY NOTE
 
$1,800,000 PLUS INTEREST DUE & PAYABLE
 
DOCUMENT C-01152008
 
 
 
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
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, JMJ Financial (the
"Borrower,” or “Writer”), 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.
 
 
 
 
 
 
 
The "Effective Date" shall be:
 
 
 
January 15, 2008
 
 
 
The "Holder" shall be:
 
 
 
Auriga Laboratories Inc.
 
 
 
The "Principal Sum" shall be:
 

$1,800,000 (one million eight hundred thousand US Dollars); Subject to the
following: accrued, unpaid interest shall be added to the Principal Sum.
 
 
 
The “Consideration” shall be:
 
 
 
 
 
$1,800,000 (one million eight hundred thousand) dollars in the form of this
$1,800,000 Secured & Collateralized Promissory Note as memorialized and
evidenced by the attached Exhibit A Collateral and Security Agreement.
 
 
 
The "Interest Rate" shall be:
 
 
 
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 prepaid prior to maturity date.  
 
 
 
The “Recourse” terms shall be:
 

This is a full recourse Note such that, for example, if the Writer defaults on
the payment of this Note, forcing the Holder to foreclose on the
security/collateral and there is a deficiency between (1) the outstanding
principal and interest amount and (2) the foreclosure liquidation amount; then
the Holder has the right to pursue additional claims against the Writer for that
deficiency.
 
 
 
 
 
The “Collateral” or “Security” shall be:
 
 
 

$1,800,000 WORTH OF A-1 MONEY MARKET FUND, as memorialized and evidenced by the
attached Exhibit A Collateral and Security Agreement.
 
 
 
 
 
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:
 
 
 

 
January 15, 2012
 
 
 
The “Prepayment Terms” shall be:
 
 
 
Prepayment is permitted at any time by payment in the form of  any of the
following: (1) cash, or (2) other negotiated form of payment mutually agreed to
in writing, or (3) by surrender of the Convertible Promissory Note Document
B-01152008, or (4) by surrender of the of the Collateral or Security with which
this Promissory Note is secured.
 

ARTICLE 1 PAYMENT-RELATED PROVISIONS
 
 
 
1.1 Loan Payment Schedule. While no principal or interest payments are required
until the Maturity Date, unless otherwise adjusted by Writer with written notice
to Holder, or unless otherwise prepaid as set forth above whereby prepayment is
permitted at any time by payment of cash, or other mutually agreed and
negotiated payment, or by surrender of the Convertible Promissory Note Document
B-01152008, or by surrender of the Collateral or Security related hereto;
provided that all conversions are honored as set forth under Convertible
Promissory Note Document B-01152008 and provided that Rule 144 is available to
remove the restrictive legend from those shares obtained in those conversions
and such that the shares effectively become immediately freely tradable, Writer
will plan to make monthly payments of $100,000 beginning 210 days from the
execution of this agreement.  Writer reserves the right to (1) make payments
prior to 210 days from the execution of this agreement, and (2) to make payments
in amounts in excess of $100,000, and (3) to adjust this payment schedule and
payment amounts with written notice to Holder.
 
 
 
            1.2 Interest Rate.  Interest payable on this Note will accrue
interest at the Interest Rate and shall be applied to the Principal Sum.
 
 
 
1.3 Application of Payment.  Unless otherwise specified in writing by Writer,
all payments made on this Note will be first applied to the Principal Sum.
 
 
 
           
 
 
 
ARTICLE 2 MISCELLANEOUS
 
 
 
            2.1. Notices. Any notice required or permitted hereunder must be in
writing and be either personally served, sent by facsimile or email
transmission, or sent by overnight courier.  Notices will be deemed effectively
delivered at the time of transmission if by facsimile or email, and if by
overnight courier the business day after such notice is deposited with the
courier service for delivery.
 
 
 
            2.2. Amendment Provision. The term "Note" and all reference thereto,
as used throughout this instrument, means this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented.
 
 
 
            2.3. Assignability. This Note will be binding upon the Writer and
its successors and permitted assigns, and will inure to the benefit of the
Holder and its successors and permitted assigns, and may be assigned by the
Holder only with written consent by Writer.
 
 
 
            2.4. Governing Law. This Note will be governed by, and construed and
enforced in accordance, with the laws of the State of Florida, without regard to
the conflict of laws principles thereof.
 
 
 
            2.5. Maximum Payments. Nothing contained herein may be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum will be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Writer.
 
 
 
2.6. Attorney Fees. In the event any attorney is employed by either party to
this Note with regard to any legal or equitable action, arbitration or other
proceeding brought by such party for the enforcement of this Note or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Note, the prevailing party in such proceeding will be
entitled to recover from the other party reasonable attorneys' fees and other
costs and expenses incurred, in addition to any other relief to which the
prevailing party may be entitled.
 
 
 
2.7. No Public Announcement. No public announcement may be made regarding this
Note, payments, or conversions without written permission by both Writer and
Holder.
 
 
 
2.8. Transfer, Pledge, Sale, Collateral, Offer.  Holder may not transfer,
pledge, sell, use as collateral, offer, or hypothecate this Note to any third
party without written approval from Writer. 
 
 
 
2.9. Effective Date.  This Note will become effective only upon occurrence of
the three following events: the Effective Date of January 15, 2008 has been
reached, execution by both parties, delivery of Document B-01152008 by the
Writer. 
 
 
 
 
 
 
 
 
 
 
 
HOLDER:                                                                  WRITER:
 
                                               
 
 
 
           
                                                                        /s/ JMJ
Financial
 
____________________________                           
____________________________
 
Frank Greico                                                                JMJ
Financial / Its Principal
 
CEO & CFO
 
Auriga Laboratories Inc.
 

Dated: ________________________                         Dated:
________________________
 
 
 
 
 
 
 

EXHIBIT A
 
COLLATERAL & SECURITY AGREEMENT
 
 
 
 
 
1. Security Interest. Writer hereby grants to Holder a security interest in the
following described property (“Security” or “Collateral” or “Security
Interest”):
 
 
 
$1,800,000 WORTH OF A-1 MONEY MARKET FUND
 
 
 
This Collateral and security interest will secure the payment and performance of
the Writer’s Secured & Collateralized Promissory Note Document C-01152008 in the
amount of $1,800,000 (one million eight hundred thousand).
 
 
 
 
 
            2. Warranties and Covenants of Writer.  Writer makes the following
warranties and covenants to Holder:
 
 
 
(A) Writer is the sole owner of the Collateral free from any lien, security
interest, or encumbrance, and Writer will defend the Collateral against all
claims and demands of all parties at any time claiming interest therein.
 
 
 
(B) This Collateral has not been pledged, assigned, or hypothecated for any
other purpose, and no financing statement is on file in any local, state, or
federal institution, bureau, government, or public office.
 
 
 
(C) While the principal and interest balance of the Secured & Collateralized
Promissory Note Document C-01152008 remains outstanding, Writer will not
transfer, sell, offer to sell, assign, pledge, liquidate, spend, or otherwise
transfer to any party an amount of the Collateral equal to or greater than the
outstanding balance of the Secured & Collateralized Promissory Note Document
C-01152008.
 
 
 
(D) Writer will pay promptly when due all taxes, expenses, and assessments upon
the Collateral.
 
 
 
 
 
3. Perfection. Holder has the right, upon its election, to perfect the
Collateral and security and this Collateral and Security Agreement by filing a
financing statement or like instrument with its proper local, state, or federal
institution, bureau, government, or public office.  Holder is encouraged to
perfect this instrument, and Writer will reasonably assist in Holder’s doing so.
 
 
 
 
 
4. Remedies Upon Default. In the event of Writer’s default on the Secured &
Collateralized Promissory Note Document C-01152008, Holder may declare all
obligations secured hereby immediately due and payable and shall have the
remedies of a secured party, including without limitation the right to take
immediate and exclusive possession of the Collateral or any part thereof, or to
obtain a court order to do so; and the Writer must surrender the security and
Collateral to the Holder within 5 (five) business days of receiving written
notice that Holder is taking possession of the Collateral as remedy of default.
 
 
 
5. Normal Course of Business.  Provided that no default has occurred on the
Secured & Collateralized Promissory Note Document C-01152008, Writer will use
and possess the Collateral in the normal course of business.  Further, Writer
may liquidate, transfer, or exchange the Collateral into another viable
investment vehicle with equal or greater market value, such as liquidation of
money market fund into cash, or liquidation of money market fund for purposes of
investing in other viable investment vehicles including but not limited to
bonds, other money market funds, mutual funds, or stocks.  However, any
liquidation, transfer, or exchange into another viable investment vehicle will
not affect Holder’s security, rights, or claims to the underlying Collateral. At
any time upon Holder’s request, Writer will promptly provide update on the
investment vehicle placement of this Collateral.
 
           
 
           
 
            6. Termination of Security.  At the time of prepayment or payoff of
the Secured & Collateralized Promissory Note Document C-01152008 to Holder by
Writer, Holder’s security interest in this Collateral shall automatically
terminate.  In the event that the Collateral and security interest were
perfected by Holder as set forth in Section 3, upon termination of security as
set forth in this section 6, the Holder will withdraw any and all perfection
instruments on the collateral and security within 5 (five) business days.
 
 
 
 
 
7. Governing Law. This agreement will be governed by, and construed and enforced
in accordance, with the laws of the State of Florida, without regard to the
conflict of laws principles thereof.
 
 
 
 
 
8. No Public Announcement. No public announcement may be made regarding this
Collateral & Security Agreement without written permission by both Writer and
Holder.  In the event that any securities law requires this document to be filed
publicly, all information regarding description of the Collateral that is
considered personal financial information shall be struck out with X and listed
as follows:
 
 
 
$1,800,000 WORTH OF A-1 MONEY MARKET FUND
 
 
 
 
 
9. Effective Date.  This agreement will become effective as set forth in Section
2.9 of Secured & Collateralized Promissory Note Document C-01152008.
 
 
 
 
 
 
 
HOLDER/SECURED PARTY:                                WRITER:
 
                                               
 
 
 
           
                                                                        /s/ JMJ
Financial
 
____________________________                           
____________________________
 
Frank Greico                                                                JMJ
Financial / Its Principal
 
CEO & CFO
 
Auriga Laboratories Inc.
 

Dated: ________________________                         Dated:
________________________