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.
 

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Number of Shares:     [  ] (subject to vesting and subject to adjustment)
Date of Issuance:       [September ___, 2007]
Warrant Number:       [W-0___]
 
AURIGA LABORATORIES, INC.
 
Common Stock Warrant
 
Auriga Laboratories, Inc., a Delaware corporation (the “Company”), for value
received, hereby certifies that [   ], 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 [   ] shares (subject
to vesting and as 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 Fifty Three Cents ($0.53) per
share, subject to adjustment as provided in this Warrant.
 
2. Exercise.
 
(a) Vesting. One Hundred Percent (100%) of the Warrant Shares shall vest on the
date hereof.
 
(b) Manner of Exercise. This Warrant may be exercised by the Registered Holder,
subject to the vesting schedule set forth in Section 2(a) above, 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.
 
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(c) 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(c), the fair market value of one share of
Common Stock on the date of calculation shall mean:
 
(A) if the exercise is in connection with an initial public offering of the
Company’s Common Stock, and if the Company’s Registration Statement relating to
such public offering has been declared effective by the Securities and Exchange
Commission, then the fair market value of Common Stock shall be the initial
“Price to Public” per share specified in the final prospectus with respect to
the offering; or
 
(B) if (A) is not applicable, the fair market value shall be the highest price
per share which the Company could obtain on the date of calculation from a
willing buyer (not a current employee or director) for shares of Common Stock
sold by the Company, from authorized but unissued shares, as determined in good
faith by the Board of Directors, unless the Company is at such time subject to
an acquisition as described in Section 7(b) below, in which case the fair market
value per share of Common Stock shall be deemed to be the value of the
consideration per share received by the holders of such stock pursuant to such
acquisition.
 
(d) 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(b) 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.
 
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(e) 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(b) 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.
 
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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.
 
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(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 CONNEC-TION 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., on the three (3) year anniversary of the date hereof (the
“Expiration Date”).
 
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.
 
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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.
 
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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:
     
Philip S. Pesin, Chairman & CEO
 
 
Address: 10635 Santa Monica Blvd. #120
   
     Los Angeles, California 90025

 
 
AGREED AND ACCEPTED:
 
 
REGISTERED HOLDER
 
 
By:
     
[Name of Holder]
 

 
Address:
[Street Address]
   
[City, State ZIP]
 
Fax:
(___) ___-____
 

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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.): 
 

 

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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:

 

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