Document:

Filed by Bowne Pure Compliance

 

Exhibit 10.3

AURIGA LABORATORIES, INC.

2007 Stock Option Plan

NOTICE OF STOCK OPTION GRANT

Grantee: Elliot Maza

You have been granted an option to purchase Common Stock (“Common Stock”) of Auriga
Laboratories, Inc. (the “Company”) as follows:

	 	 	 
	Board Approval Date:

	 	5/4/2007 
	 
	 	 
	Date of Grant:

	 	5/4/2007 
	 
	 	 
	Vesting Commencement Date:

	 	5/8/2007 
	 
	 	 
	Exercise Price Per Share:

	 	$1.37 
	 
	 	 
	Total Number of Shares Granted:

	 	150,000 
	 
	 	 
	Type of Option:

	 	NON-STATUTORY STOCK OPTION
	 
	 	 
	Term/Expiration Date:

	 	5/8/2017 
	 
	 	 
	Vesting Schedule:

	 	The shares subject to the Option shall
vest as follows: Twenty-five Percent
(25%) of the shares shall vest on the
Vesting Commencement Date; so long as you
remain in Continuous Service with the
Company, 1/24th of the total remaining
number of shares subject to the Option
shall vest each month thereafter.
	 
	 	 
	Termination Period:

	 	This Option may be exercised for three
months after termination of employment or
consulting relationship except as set out
in Sections 6 and 7 of the Stock Option
Agreement (but in no event later than the
Expiration Date).

By your signature and the signature of the Company’s representative below, you and the Company
agree that this option is granted under and governed by the terms and conditions of the 2007 STOCK
OPTION PLAN and the Stock Option Agreement, both of which are attached and made a part of this
document.

	 	 	 	 	 
	GRANTEE	 	AURIGA LABORATORIES, INC.
	 
	 	 	 	 
	/s/ Elliot Maza

	 	By:
	 	./s/ Philip S. Pesin
	 

	 	 	 	 
	Signature
	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:
	 	Philip S. Pesin
	 

	 	 	 	 
	 
	 	 	 	 
	Elliot Maza
	 	 	 	 
	 

Print Name

	 	Title:
	 	 Chief
Executive Officer
	 

	 	 	 	 

 

 

 

AURIGA LABORATORIES, INC.

2007 STOCK OPTION PLAN

STOCK OPTION AGREEMENT

1. Grant of Option. Auriga Laboratories, Inc., a Delaware corporation (the
“Company”), hereby grants to GRANTEE (“Optionee”) an option (the “Option”)
to purchase a total number of shares of Common Stock (the “Shares”) set forth in the Notice
of Stock Option Grant, at the exercise price per share set forth in the Notice of Stock Option
Grant (the “Exercise Price”) subject to the terms, definitions and provisions of the Auriga
Laboratories, Inc. 2007 Stock Option Plan (the “Plan”) adopted by the Company, which is
incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan
shall have the same defined meanings in this Option.

If designated an Incentive Stock Option, this Option is intended to qualify as an Incentive
Stock Option as defined in Section 422 of the Code.

2. Exercise of Option. This Option shall be exercisable during its Term in accordance
with the Vesting Schedule set out in the Notice of Stock Option Grant and with the provisions of
Sections 7 and 8 of the Plan as follows:

(a) Right to Exercise.

(i) This Option may be exercised in whole or in part at any time after the Date of Grant, as
to Shares which have not yet vested under the vesting schedule indicated on the Notice of Stock
Option Grant; provided, however, that Optionee shall execute as a condition to such exercise of
this Option, the Early Exercise Notice and Restricted Stock Purchase Agreement attached hereto as
Exhibit A (the “Early Exercise Agreement”). If Optionee chooses to exercise this
Option solely as to Shares which have vested under the vesting schedule indicated on the Notice of
Stock Option Grant, Optionee shall complete and execute the form of Exercise Notice and Restricted
Stock Purchase Agreement attached hereto as Exhibit B (the “Exercise Agreement”).
Notwithstanding the foregoing, the Company may in its discretion prescribe or accept a different
form of notice of exercise and/or stock purchase agreement if such forms are otherwise consistent
with this Agreement, the Plan and then-applicable law.

(ii) This Option may not be exercised for a fraction of a share.

(iii) In the event of Optionee’s death, disability or other termination of employment or
consulting relationship, the exercisability of the Option is governed by Sections 5, 6 and 7 below,
subject to the limitation contained in Section 2(a)(iv) below.

(iv) In no event may this Option be exercised after the Expiration Date of this Option as set
forth in the Notice of Stock Option Grant.

(b) Method of Exercise. This Option shall be exercisable by execution and delivery of
the Early Exercise Agreement or the Exercise Agreement, whichever is applicable, or of any other
written notice approved for such purpose by the Company which shall state the election to exercise
the Option, the number of Shares in respect of which the Option is being exercised, and such other
representations and agreements as to the holder’s investment intent with respect to such shares of
Common Stock as may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by Optionee and shall be delivered in person or by certified mail to
the Secretary of the Company. Subject to Section 2(c) below, the written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to be exercised upon
receipt by the Company of such written notice accompanied by the Exercise Price.

No Shares will be issued pursuant to the exercise of an Option unless such issuance and such
exercise shall comply with all relevant provisions of applicable law, including the requirements of
any stock exchange upon which the Shares may then be listed. Assuming such compliance, for income
tax purposes the Shares shall be considered
transferred to Optionee on the date on which the Option is exercised with respect to such
Shares.

 

 

 

(c) Net Issue Exercise.

(i) In lieu of exercising this Option in the manner provided above in Section 2(b), the
Optionee may elect to receive shares equal to the value of this Option (or the portion thereof
being canceled) by surrender of this Option at the principal office of the Company together with
the Early Exercise Agreement or Exercise Agreement, as the case may be, duly executed by such
Optionee, in which event the Company shall issue to holder a number of shares of Common Stock
computed using the following formula:

X = Y (A — B)

     A

	 	 	 	 	 
	Where

	 	X =
	 	The number of shares of Common Stock to be issued to the Optionee.
	 
	 	 	 	 
	 

	 	Y =
	 	The number of shares of Common Stock purchasable under this Option (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).

3. Method of Payment. Payment of the Exercise Price shall be by cash, check, or any
other form approved by the Company), or any other method permitted under the Plan; provided however
that the Administrator may refuse to allow Optionee to tender a particular form of payment (other
than cash or check) if, in the Administrator’s sole discretion, acceptance of such form of
consideration would not be in the best interests of the Company at such time.

4. Restrictions on Exercise. This Option may not be exercised until such time as the
Plan has been approved by the shareholders of the Company, or if the issuance of such Shares upon
such exercise or the method of payment of consideration for such shares would constitute a
violation of any applicable federal or state securities or other law or regulation, including any
rule under Part 207 of Title 12 of the Code of Federal Regulations as promulgated by the Federal
Reserve Board. As a condition to the exercise of this Option, the Company may require Optionee to
make any representation and warranty to the Company as may be required by any applicable law or
regulation.

5. Termination of Relationship. In the event of termination of Optionee’s Continuous
Status as an Employee or Consultant, Optionee may, to the extent otherwise so entitled at the date
of such termination (the “Termination Date”), exercise this Option during the Termination
Period set forth in the Notice of Stock Option Grant. To the extent that Optionee was not entitled
to exercise this Option at such Termination Date, or if Optionee does not exercise this Option
within the Termination Period, the Option shall terminate.

6. Disability of Optionee.

(a) Notwithstanding the provisions of Section 5 above, in the event of termination of
Optionee’s Continuous Status as an Employee or Consultant as a result of his or her total and
permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only within
twelve months from the Termination Date (but in no event later than the Expiration Date set forth
in the Notice of Stock Option Grant and in Section 9 below), exercise this Option to the extent he
or she was entitled to exercise it at such Termination Date. To the extent that Optionee was not
entitled to exercise the Option on the Termination Date, or if Optionee does not exercise such
Option to the extent so entitled within the time specified in this Section 6(a), the Option shall
terminate.

(b) Notwithstanding the provisions of Section 5 above, in the event of termination of
Optionee’s consulting relationship or Continuous Status as an Employee as a result of a disability
not constituting a total and permanent disability (as set forth in Section 22(e)(3) of the Code),
Optionee may, but only within six months from the Termination Date (but in no event later than the
Expiration Date set forth in the Notice of Stock Option Grant and in Section 9 below), exercise the Option to the extent Optionee was entitled
to exercise

 

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it as of such Termination Date; provided, however, that if this is an Incentive Stock
Option and Optionee fails to exercise this Incentive Stock Option within three months from the
Termination Date, this Option will cease to qualify as an Incentive Stock Option (as defined in
Section 422 of the Code) and Optionee will be treated for federal income tax purposes as having
received ordinary income at the time of such exercise in an amount generally measured by the
difference between the Exercise Price for the Shares and the Fair Market Value of the Shares on the
date of exercise. To the extent that Optionee was not entitled to exercise the Option at the
Termination Date, or if Optionee does not exercise such Option to the extent so entitled within the
time specified in this Section 6(b), the Option shall terminate.

7. Death of Optionee. In the event of the death of Optionee (a) during the Term of
this Option and while an Employee or Consultant of the Company and having been in Continuous Status
as an Employee or Consultant since the date of grant of the Option, or (b) within 30 days after
Optionee’s Termination Date, the Option may be exercised at any time within six months following
the date of death (but in no event later than the Expiration Date set forth in the Notice of Stock
Option Grant and in Section 9 below), by Optionee’s estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the Termination Date.

8. Non-Transferability of Option. This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by him or her. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of Optionee.

9. Term of Option. This Option may be exercised only within the Term set forth in the
Notice of Stock Option Grant, subject to the limitations set forth in Section 6 of the Plan.

10. Tax Consequences. Set forth below is a brief summary as of the date of this
Option of certain of the federal and state tax consequences of exercise of this Option and
disposition of the Shares under the laws in effect as of the Date of Grant. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD
CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

(a) Exercise of Incentive Stock Option. If this Option qualifies as an Incentive
Stock Option, there will be no regular federal or state income tax liability upon the exercise of
the Option, although the excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price will be treated as an adjustment to the alternative minimum tax
for federal tax purposes and may subject Optionee to the alternative minimum tax in the year of
exercise.

(b) Exercise of Nonstatutory Stock Option. If this Option does not qualify as an
Incentive Stock Option, there may be a regular federal income tax liability and a state income tax
liability upon the exercise of the Option. Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the fair
market value of the Shares on the date of exercise over the Exercise Price. If Optionee is a
current or former employee, the Company may be required to withhold from Optionee’s compensation or
collect from Optionee and pay to the applicable taxing authorities an amount equal to a percentage
of this compensation income at the time of exercise.

(c) Disposition of Shares. In the case of a Nonstatutory Stock Option, if Shares are
held for more than one year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal and state income tax purposes. In the case of an Incentive
Stock Option, if Shares transferred pursuant to the Option are held for more than one year after
exercise and are disposed of at least two years after the Date of Grant, any gain realized on
disposition of the Shares will also be treated as long-term capital gain for federal and state
income tax purposes. In either case, the long-term capital gain will be taxed for federal income
tax and alternative minimum tax purposes at a maximum rate of 20% if the Shares are held more than
one year after exercise. If Shares purchased under an Incentive Stock Option are disposed of
within one year after exercise or within two years after the Date of Grant, any gain realized on
such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the difference between the Exercise Price and the lesser of (i)
the Fair Market Value of the Shares on the date of exercise, or (ii) the sale price of the Shares.

 

3

 

(d) Notice of Disqualifying Disposition of Incentive Stock Option Shares. If the
Option granted to Optionee herein is an Incentive Stock Option, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the Incentive Stock Option on or before the
later of (i) the date two years after the Date of Grant, or (ii) the date one year after the date
of exercise, Optionee shall immediately notify the Company in writing of such disposition.
Optionee acknowledges and agrees that he or she may be subject to income tax withholding by the
Company on the compensation income recognized by Optionee from the early disposition by payment in
cash or out of the current earnings paid to Optionee.

11. Withholding Tax Obligations.

(a) General Withholding Obligations. As a condition to the exercise of Option granted
hereunder, Optionee shall make such arrangements as the Administrator may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in
connection with the exercise, receipt or vesting of the Option. The Company shall not be required
to issue any Shares under the Plan until such obligations are satisfied. Optionee understands
that, upon exercising a Nonstatutory Stock Option, he or she will recognize income for tax purposes
in an amount equal to the excess of the then Fair Market Value of the Shares over the Exercise
Price. If Optionee is an employee, the Company will be required to withhold from Optionee’s
compensation, or collect from Optionee and pay to the applicable taxing authorities an amount equal
to a percentage of this compensation income. Additionally, Optionee may at some point be required
to satisfy tax withholding obligations with respect to the disqualifying disposition of an
Incentive Stock Option. Optionee shall satisfy his or her tax withholding obligation arising upon
the exercise of this Option by one or some combination of the following methods: (i) by cash or
check payment, (ii) out of Optionee’s current compensation, (iii) if permitted by the
Administrator, in its discretion, by surrendering to the Company Shares which (A) in the case of
Shares previously acquired from the Company, have been owned by Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value determined as of the applicable Tax Date
(as defined in Section 11(c) below) on the date of surrender equal to the amount required to be
withheld, or (iv) by electing to have the Company withhold from the Shares to be issued upon
exercise of the Option, or the Shares to be issued in connection with the Stock Purchase Right, if
any, that number of Shares having a Fair Market Value determined as of the applicable Tax Date
equal to the amount required to be withheld.

(b) Stock Withholding to Satisfy Withholding Tax Obligations. In the event the
Administrator allows Optionee to satisfy his or her tax withholding obligations as provided in
Section 11(a)(iii) or (iv) above, such satisfaction must comply with the requirements of this
Section (11)(b) and all applicable laws. All elections by Optionee to have Shares withheld to
satisfy tax withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:

(i) the election must be made on or prior to the applicable Tax Date (as defined in Section
11(c) below);

(ii) once made, the election shall be irrevocable as to the particular Shares of the Option as
to which the election is made; and

(iii) all elections shall be subject to the consent or disapproval of the Administrator.

In the event the election to have Shares withheld is made by Optionee and the Tax Date is
deferred under Section 83 of the Code because no election is filed under Section 83(b) of the Code,
Optionee shall receive the full number of Shares with respect to which the Option is exercised but
Optionee shall be unconditionally obligated to tender back to the Company the proper number of
Shares on the Tax Date.

(c) Definitions. For purposes of this Section 11, the Fair Market Value of the Shares
to be withheld shall be determined on the date that the amount of tax to be withheld is to be
determined under the Applicable Laws (the “Tax Date”).

 

4

 

12. Market Standoff Agreement. In connection with the initial public offering of the
Company’s securities and upon request of the Company or the underwriters managing such underwritten
offering of the Company’s securities, Optionee agrees not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any securities of the Company (other
than those included in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180 days) from the
effective date of such registration as may be requested by the Company or such managing
underwriters and to execute an agreement reflecting the foregoing as may be requested by the
underwriters at the time of the Company’s initial public offering.

[Signature Page Follows]

 

5

 

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 document.

	 	 	 	 	 
	 	 	AURIGA LABORATORIES, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Philip S. Pesin
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:
	 	Philip S. Pesin
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:
	 	Chief Executive Officer
	 

	 	 	 	 

OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS
EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT
OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY’S STOCK OPTION PLAN
WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO
CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH
OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S EMPLOYMENT OR CONSULTANCY AT ANY
TIME, WITH OR WITHOUT CAUSE.

Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar
with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had
an opportunity to obtain the advice of counsel prior to executing this Option and fully understands
all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Administrator upon any questions arising under the Plan or
this Option.

	 	 	 
	Dated: 5/4/2007

	 	/s/ Elliot Maza
	 

	 	 
	 

	 	Signature- Elliot Maza

 

6

 

EXHIBIT A

AURIGA LABORATORIES, INC.

2007 Stock Option Plan

EARLY EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT

This Agreement (“Agreement”) is made as of                                         , by and between
Auriga Laboratories, Inc., a Delaware corporation (the “Company”), and
                                         (“Purchaser”). To the extent any capitalized terms used in this
Agreement are not defined, they shall have the meaning ascribed to them in the 2007 Stock Option
Plan.

1. Exercise of Option. Subject to the terms and conditions hereof, Purchaser hereby
elects to exercise his or her option to purchase                      shares of the Common Stock (the
“Shares”) of the Company under and pursuant to the Company’s 2007 Stock Option Plan (the
“Plan”) and the Stock Option Agreement dated                      (the “Option
Agreement”). Of these Shares, Purchaser has elected to purchase                      of those
Shares which have become vested as of the date hereof under the Vesting Schedule set forth in the
Notice of Stock Option Grant (the “Vested Shares”) and                      Shares which have not
yet vested under such Vesting Schedule (the “Unvested Shares”). The purchase price for the
Shares shall be $                     per Share for a total purchase price of $                    , which
amount shall be paid for by a check in the amount of $                    . The term “Shares”
refers to the purchased Shares and all securities received in replacement of the Shares or as stock
dividends or splits, all securities received in replacement of the Shares in a recapitalization,
merger, reorganization, exchange or the like, and all new, substituted or additional securities or
other properties to which Purchaser is entitled by reason of Purchaser’s ownership of the Shares.

2. Time and Place of Exercise. The purchase and sale of the Shares under this
Agreement shall occur at the principal office of the Company simultaneously with the execution and
delivery of this Agreement in accordance with the provisions of Section 2(b) of the Option
Agreement. On such date, the Company will deliver to Purchaser a certificate representing the
Shares to be purchased by Purchaser (which shall be issued in Purchaser’s name) against payment of
the purchase price therefor by Purchaser by (a) check made payable to the Company, (b) cancellation
of indebtedness of the Company to Purchaser, (c) delivery of shares of the Common Stock of the
Company in accordance with Section 3 of the Option Agreement, or (d) a combination of the
foregoing.

3. Limitations on Transfer. In addition to any other limitation on transfer created
by applicable securities laws, Purchaser shall not assign, encumber or dispose of any interest in
the Shares while the Shares are subject to the Company’s Repurchase Option (as defined below).
After any Shares have been released from such Repurchase Option, Purchaser shall not assign,
encumber or dispose of any interest in such Shares except in compliance with the provisions below
and applicable securities laws.

(a) Repurchase Option.

(i) In the event of the voluntary or involuntary termination of Purchaser’s employment or
consulting relationship with the Company for any reason (including death or disability), with or
without cause, the Company shall upon the date of such termination (the “Termination Date”)
have an irrevocable, exclusive option (the “Repurchase Option”) for a period of 90 days
from such date to repurchase all or any portion of the Shares held by Purchaser as of the
Termination Date which have not yet been released from the Company’s Repurchase Option at the
original purchase price per Share specified in Section 1 (adjusted for any stock splits, stock
dividends and the like).

(ii) Unless the Company notifies Purchaser within 90 days from the date of termination of
Purchaser’s employment or consulting relationship that it does not intend to exercise its
Repurchase Option with respect to some or all of the Shares, the Repurchase Option shall be deemed
automatically exercised by the Company as of the 90th day following such termination, provided that
the Company may notify Purchaser that it is exercising its Repurchase Option as of a date prior to
such 90th day. Unless Purchaser is otherwise notified by the Company pursuant to the preceding sentence that the Company does not intend to exercise its
Repurchase

 

A-1

 

Option as to some or all of the Shares to which it applies at the time of termination,
execution of this Agreement by Purchaser constitutes written notice to Purchaser of the Company’s
intention to exercise its Repurchase Option with respect to all Shares to which such Repurchase
Option applies. The Company, at its choice, may satisfy its payment obligation to Purchaser with
respect to exercise of the Repurchase Option by either (A) delivering a check to Purchaser in the
amount of the purchase price for the Shares being repurchased, or (B) in the event Purchaser is
indebted to the Company, canceling an amount of such indebtedness equal to the purchase price for
the Shares being repurchased, or (C) by a combination of (A) and (B) so that the combined payment
and cancellation of indebtedness equals such purchase price. In the event of any deemed automatic
exercise of the Repurchase Option pursuant to this Section 3(a)(ii) in which Purchaser is indebted
to the Company, such indebtedness equal to the purchase price of the Shares being repurchased shall
be deemed automatically canceled as of the 90th day following termination of Purchaser’s employment
or consulting relationship unless the Company otherwise satisfies its payment obligations. As a
result of any repurchase of Shares pursuant to this Section 3(a), the Company shall become the
legal and beneficial owner of the Shares being repurchased and shall have all rights and interest
therein or related thereto, and the Company shall have the right to transfer to its own name the
number of Shares being repurchased by the Company, without further action by Purchaser.

(iii) One hundred percent (100%) of the Shares shall initially be subject to the Repurchase
Option. The Unvested Shares shall be released from the Repurchase Option in accordance with the
Vesting Schedule set forth in the Notice of Stock Option Grant until all Shares are released from
the Repurchase Option. Fractional shares shall be rounded to the nearest whole share.

(b) Right of First Refusal. Before any Shares held by Purchaser or any transferee of
Purchaser (either being sometimes referred to herein as the “Holder”) may be sold or
otherwise transferred (including transfer by gift or operation of law), the Company or its
assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions
set forth in this Section 3(b) (the “Right of First Refusal”).

(i) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the
Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to
sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other
transferee (“Proposed Transferee”); (iii) the number of Shares to be transferred to each
Proposed Transferee; and (iv) the terms and conditions of each proposed sale or transfer. The
Holder shall offer the Shares at the same price (the “Offered Price”) and upon the same
terms (or terms as similar as reasonably possible) to the Company or its assignee(s).

(ii) Exercise of Right of First Refusal. At any time within 30 days after receipt of
the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect
to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more
of the Proposed Transferees, at the purchase price determined in accordance with subsection (iii)
below.

(iii) Purchase Price. The purchase price (“Purchase Price”) for the Shares
purchased by the Company or its assignee(s) under this Section 3(b) shall be the Offered Price. If
the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash
consideration shall be determined by the Board of Directors of the Company in good faith.

(iv) Payment. Payment of the Purchase Price shall be made, at the option of the
Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any
outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an
assignee, to the assignee), by net exercise pursuant to Section 2(c) of the Option Agreement, or by
any combination thereof within 30 days after receipt of the Notice or in the manner and at the
times set forth in the Notice.

(v) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be
transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s)
as provided in this Section 3(b), then the Holder may sell or otherwise transfer such Shares to
that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or
other transfer is consummated within 60 days after the date of the Notice and provided further that
any such sale or other transfer is effected in accordance with any applicable securities laws and
the Proposed Transferee agrees in writing that the provisions of this Section 3

 

A-2

 

shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares
described in the Notice are not transferred to the Proposed Transferee within such period, or if
the Holder proposes to change the price or other terms to make them more favorable to the Proposed
Transferee, a new Notice shall be given to the Company, and the Company and/or its assignees shall
again be offered the Right of First Refusal before any Shares held by the Holder may be sold or
otherwise transferred.

(vi) Exception for Certain Family Transfers. Anything to the contrary contained in
this Section 3(b) notwithstanding, the transfer of any or all of the Shares during Purchaser’s
lifetime or on Purchaser’s death by will or intestacy to Purchaser’s Immediate Family (as defined
below) or a trust for the benefit of Purchaser’s Immediate Family shall be exempt from the
provisions of this Section 3(b). “Immediate Family” as used herein shall mean spouse,
lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so transferred subject to the provisions of
this Section, and there shall be no further transfer of such Shares except in accordance with the
terms of this Section 3.

(c) Involuntary Transfer.

(i) Company’s Right to Purchase upon Involuntary Transfer. In the event, at any time
after the date of this Agreement, of any transfer by operation of law or other involuntary transfer
(including divorce or death, but excluding, in the event of death, a transfer to Immediate Family
as set forth in Section 3(b)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have the right to purchase all of the Shares transferred at the greater
of the purchase price paid by Purchaser pursuant to this Agreement or the Fair Market Value of the
Shares on the date of transfer. Upon such a transfer, the person acquiring the Shares shall
promptly notify the Secretary of the Company of such transfer. The right to purchase such Shares
shall be provided to the Company for a period of 30 days following receipt by the Company of
written notice by the person acquiring the Shares.

(ii) Price for Involuntary Transfer. With respect to any stock to be transferred
pursuant to Section 3(c)(i), the price per Share shall be a price set by the Board of Directors of
the Company that will reflect the current value of the stock in terms of present earnings and
future prospects of the Company. The Company shall notify Purchaser or his or her executor of the
price so determined within 30 days after receipt by it of written notice of the transfer or
proposed transfer of Shares. However, if the Purchaser does not agree with the valuation as
determined by the Board of Directors of the Company, the Purchaser shall be entitled to have the
valuation determined by an independent appraiser to be mutually agreed upon by the Company and the
Purchaser and whose fees shall be borne equally by the Company and the Purchaser.

(d) Assignment. The right of the Company to purchase any part of the Shares may be
assigned in whole or in part to any shareholder or shareholders of the Company or other persons or
organizations.

(e) Restrictions Binding on Transferees. All transferees of Shares or any interest
therein will receive and hold such Shares or interest subject to the provisions of this Agreement,
including, insofar as applicable, the Repurchase Option. In the event of any purchase by the
Company hereunder where the Shares or interest are held by a transferee, the transferee shall be
obligated, if requested by the Company, to transfer the Shares or interest to the Purchaser for
consideration equal to the amount to be paid by the Company hereunder. In the event the Repurchase
Option is deemed exercised by the Company pursuant to Section 3(a)(ii) hereof, the Company may deem
any transferee to have transferred the Shares or interest to Purchaser prior to their purchase by
the Company, and payment of the purchase price by the Company to such transferee shall be deemed to
satisfy Purchaser’s obligation to pay such transferee for such Shares or interest, and also to
satisfy the Company’s obligation to pay Purchaser for such Shares or interest. Any sale or
transfer of the Shares shall be void unless the provisions of this Agreement are satisfied.

(f) Termination of Rights. The Right of First Refusal and the Company’s right to
repurchase the Shares in the event of an involuntary transfer pursuant to Section 3(c) above shall
terminate upon the listing of Common Stock of the Company on a national exchange.

 

A-3

 

(g) Market Standoff Agreement. In connection with the initial public offering of the
Company’s securities and upon request of the Company or the underwriters managing such underwritten
offering of
the Company’s securities, Purchaser agrees not to sell, make any short sale of, loan, grant
any option for the purchase of, or otherwise dispose of any securities of the Company (other than
those included in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180 days) from the
effective date of such registration as may be requested by the Company or such managing
underwriters and to execute an agreement reflecting the foregoing as may be requested by the
underwriters at the time of the Company’s initial public offering.

4. Escrow of Unvested Shares. For purposes of facilitating the enforcement of the
provisions of Section 3 above, Purchaser agrees, immediately upon receipt of the certificate(s) for
the Shares subject to the Repurchase Option, to deliver such certificate(s), together with an
Assignment Separate from Certificate in the form attached to this Agreement as Attachment A
executed by Purchaser and by Purchaser’s spouse (if required for transfer), in blank, to the
Secretary of the Company, or the Secretary’s designee, to hold such certificate(s) and Assignment
Separate from Certificate in escrow and to take all such actions and to effectuate all such
transfers and/or releases as are in accordance with the terms of this Agreement. Purchaser hereby
acknowledges that the Secretary of the Company, or the Secretary’s designee, is so appointed as the
escrow holder with the foregoing authorities as a material inducement to make this Agreement and
that said appointment is coupled with an interest and is accordingly irrevocable. Purchaser agrees
that said escrow holder shall not be liable to any party hereof (or to any other party). The
escrow holder may rely upon any letter, notice or other document executed by any signature
purported to be genuine and may resign at any time. Purchaser agrees that if the Secretary of the
Company, or the Secretary’s designee, resigns as escrow holder for any or no reason, the Board of
Directors of the Company shall have the power to appoint a successor to serve as escrow holder
pursuant to the terms of this Agreement.

5. Investment and Taxation Representations. In connection with the purchase of the
Shares, Purchaser represents to the Company the following:

(a) 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 Shares. Purchaser is purchasing the Shares for investment for his or her own
account only and not with a view to, or for resale in connection with, any “distribution” thereof
within the meaning of the Securities Act. Purchaser does not have any present intention to
transfer the Shares to any other person or entity.

(b) Purchaser understands that the Shares have not been registered under the Securities Act by
reason of a specific exemption therefrom, which exemption depends upon, among other things, the
bona fide nature of Purchaser’s investment intent as expressed herein.

(c) Purchaser understands that the Shares are “restricted securities” under applicable U.S.
federal and state securities laws and that, pursuant to these laws, Purchaser must hold the Shares
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. Purchaser acknowledges that the Company has no obligation to register or qualify the
Shares for resale. 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 Shares, and 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.

(d) Purchaser understands that Purchaser may suffer adverse tax consequences as a result of
Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has
consulted any tax consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.

6. Restrictive Legends and Stop-Transfer Orders.

(a) Legends. The certificate or certificates representing the Shares shall bear the
following legends (as well as any legends required by applicable state and federal corporate and
securities laws):

 

A-4

 

(i) THE SHARES 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.

(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.

(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure compliance with
the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions
to its transfer agent, if any, and that, if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.

(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its
books any Shares that have been sold or otherwise transferred in violation of any of the provisions
of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

(d) Removal of Legend. When all of the following events have occurred, the Shares
then held by Purchaser will no longer be subject to the legend referred to in Section 6(a)(ii):
(i) the termination of the Right of First Refusal; (ii) the expiration or termination of the market
standoff provisions of Section 3(g) (and of any agreement entered pursuant to Section 3(g)); and
(iii) the expiration or exercise in full of the Repurchase Option. After such time, and upon
Purchaser’s request, a new certificate or certificates representing the Shares not repurchased
shall be issued without the legend referred to in Section 6(a)(ii), and delivered to Purchaser.

7. No Employment Rights. Nothing in this Agreement shall affect in any manner
whatsoever the right or power of the Company, or a Parent or Subsidiary of the Company, to
terminate Purchaser’s employment or consulting relationship, for any reason, with or without cause.

8. Section 83(b) Election. Purchaser understands that Section 83(a) of the Internal
Revenue Code of 1986, as amended (the “Code”), taxes as ordinary income for a Nonstatutory
Stock Option and as alternative minimum taxable income for an Incentive Stock Option the difference
between the amount paid for the Shares and the Fair Market Value of the Shares as of the date any
restrictions on the Shares lapse. In this context, “restriction” means the right of the
Company to buy back the Shares pursuant to the Repurchase Option set forth in Section 3(a) of this
Agreement. Purchaser understands that Purchaser may elect to be taxed at the time the Shares are
purchased, rather than when and as the Repurchase Option expires, by filing an election under
Section 83(b) (an “83(b) Election”) of the Code with the Internal Revenue Service within 30
days from the date of purchase. Even if the Fair Market Value of the Shares at the time of the
execution of this Agreement equals the amount paid for the Shares, the election must be made to
avoid income and alternative minimum tax treatment under Section 83(a) in the future. Purchaser
understands that failure to file such an election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser further understands that an additional copy of such election
form should be filed with his or her federal income tax return for the calendar year in which the
date of this Agreement falls. Purchaser acknowledges that the foregoing is only a summary of the
effect of United States federal income taxation with respect to purchase of the Shares hereunder,
and does not purport to be complete. Purchaser further acknowledges that the Company has directed
Purchaser to seek independent advice regarding the applicable provisions of the Code, the income
tax laws of any municipality, state or foreign country in which Purchaser may reside, and the tax
consequences of Purchaser’s death.

Purchaser agrees that he or she will execute and deliver to the Company with this executed
Agreement a copy of the Acknowledgment and Statement of Decision Regarding Section 83(b) Election
(the “Acknowledgment”) attached hereto as Attachment B. Purchaser further agrees
that he or she will execute and submit with the Acknowledgment a copy of the 83(b) Election
attached hereto as Attachment C (for tax purposes in connection with
the early exercise of an option) if Purchaser has indicated in the Acknowledgment his or her
decision to make such an election.

 

A-5

 

9. Miscellaneous.

(a) 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 Georgia, without giving effect to principles of conflicts
of law.

(b) Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter herein and merges all
prior discussions between them. No modification of or amendment to this Agreement, nor any waiver
of any rights under this Agreement, shall be effective unless in writing signed by the parties to
this Agreement. The failure by either party to enforce any rights under this Agreement shall not
be construed as a waiver of any rights of such party.

(c) 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 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.

(d) Construction. This Agreement is the result of negotiations between and has been
reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this
Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be
construed in favor of or against any one of the parties hereto.

(e) Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient when delivered personally or sent by telegram or fax or 48 hours
after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and
addressed to the party to be notified at such party’s address as set forth below or as subsequently
modified by written notice.

(f) 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.

(g) Successors and Assigns. The rights and benefits of this Agreement shall inure to
the benefit of, and be enforceable by the Company’s successors and assigns. The rights and
obligations of Purchaser under this Agreement may only be assigned with the prior written consent
of the Company.

(h) Georgia Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE
OF GEORGIA, OR ANY OTHER STATE, AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY
PART OF THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

(i) California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE DEPARTMENT OF CORPORATIONS OF THE STATE
OF CALIFORNIA, OR ANY OTHER STATE, AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

[Signature Page Follows]

 

A-6

 

The parties have executed this Agreement as of the date first set forth above.

	 	 	 	 	 
	 	 	COMPANY:
	 
	 	 	 	 
	 	 	AURIGA LABORATORIES, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

	 	 	 
	Address:

	 	2029 Century Park East, Suite 1130
	 

	 	Los Angeles, CA 90067 

	 	 	 
	 

	 	PURCHASER:
	 
	 	 
	 

	 	 
	 

	 	Signature
	 
	 	 
	 

	 	 
	 

	 	Print Name
	 
	 	 
	 

	 	 
	 

	 	Address
	 
	 	 
	 

	 	 
	 

	 	Address

 

A-7

 

ATTACHMENT A

ASSIGNMENT SEPARATE FROM CERTIFICATE

FOR VALUE RECEIVED and pursuant to that certain Early Exercise Notice and Restricted Stock
Purchase Agreement between the undersigned (“Purchaser”) and Auriga Laboratories, Inc. (the
“Company”) dated                     , ___(the “Agreement”), Purchaser hereby sells,
assigns and transfers unto the Company                                          (___) shares of the Common
Stock of the Company, standing in Purchaser’s name on the books of the Company and represented by
Certificate No. ___, and does hereby irrevocably constitute and appoint
                                         to transfer said stock on the books of the Company with full power of
substitution in the premises. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND
THE ATTACHMENTS THERETO.

Dated:                                         

	 	 	 
	 

	 	Signature:
	 
	 	 
	 
	 	 
	 

	 	 
	 

	 	Signature
	 
	 	 
	 

	 	 
	 

	 	Print Name

Instruction: Please do not fill in any blanks other than the signature line. The purpose
of this assignment is to enable the Company to exercise its Repurchase Option set forth in the
Agreement without requiring additional signatures on the part of Purchaser.

 

A-A-1

 

ATTACHMENT B

ACKNOWLEDGMENT AND STATEMENT OF DECISION

REGARDING SECTION 83(b) ELECTION

The undersigned (which term includes the undersigned’s spouse), a purchaser of                     
shares of Common Stock of Auriga Laboratories, Inc., a Delaware corporation (the “Company”)
by exercise of an option (the “Option”) granted pursuant to the Company’s 2007 Stock Option
Plan (the “Plan”), hereby states as follows:

1. The undersigned acknowledges receipt of a copy of the Plan relating to the offering of such
shares. The undersigned has carefully reviewed the Plan and the option agreement pursuant to which
the Option was granted.

2. The undersigned either [check and complete as applicable]:

	 	 	 	 	 	 	 
	 

	 	(a)
	 	          
	 	has consulted, and has been fully advised by, the
undersigned’s own tax advisor,                                         , whose business
address is                                         , regarding the federal, state and local tax
consequences of purchasing shares under the Plan, and particularly regarding
the advisability of making elections pursuant to Section 83(b) of the Internal
Revenue Code of 1986, as amended (the “Code”) and pursuant to the
corresponding provisions, if any, of applicable state law; or
	 
	 	 	 	 	 	 
	 

	 	(b)
	 	          
	 	has knowingly chosen not to consult such a tax advisor.

3. The undersigned hereby states that the undersigned has decided [check as applicable]:

	 	 	 	 	 	 	 
	 

	 	(a)
	 	          
	 	to make an election pursuant to Section 83(b) of the Code,
and is submitting to the Company, together with the undersigned’s executed
Early Exercise Notice and Restricted Stock Purchase Agreement, an executed
form entitled “Election Under Section 83(b) of the Internal Revenue Code of
1986;” or
	 
	 	 	 	 	 	 
	 

	 	(b)
	 	          
	 	not to make an election pursuant to Section 83(b) of the Code.

4. Neither the Company nor any subsidiary or representative of the Company has made any
warranty or representation to the undersigned with respect to the tax consequences of the
undersigned’s purchase of shares under the Plan or of the making or failure to make an election
pursuant to Section 83(b) of the Code or the corresponding provisions, if any, of applicable state
law.

	 	 	 	 	 
	Date:
	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	Signature

 

A-B-1

 

ATTACHMENT C

ELECTION UNDER SECTION 83(b)

OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue
Code, to include in taxpayer’s gross income or alternative minimum taxable income, as applicable,
for the current taxable year, the amount of any income that may be taxable to taxpayer in
connection with taxpayer’s receipt of the property described below:

1. The name, address, taxpayer identification number and taxable year of the undersigned are
as follows:

	 	 	 	 	 	 	 
	 

	 	NAME OF TAXPAYER:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 

	 	ADDRESS:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 

	 	IDENTIFICATION NO. OF TAXPAYER:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	TAXABLE YEAR:                     	 	 	 	 

	 	2.	 	The property with respect to which the election is made is described as follows:

	 
	 	 	 	                     shares of the Common Stock of Auriga Laboratories, Inc., a
Delaware corporation (the “Company”).

	 
	 	3.	 	The date on which the property was transferred is:                     

	 
	 	4.	 	The property is subject to the following restrictions:

	 
	 	 	 	Repurchase option at cost in favor of the Company upon termination of taxpayer’s
employment or consulting relationship.

5. The fair market value at the time of transfer, determined without regard to any restriction
other than a restriction which by its terms will never lapse, of such property is:
$                                        

The amount (if any) paid for such property: $                                        

The undersigned has submitted a copy of this statement to the person for whom the services were
performed in connection with the undersigned’s receipt of the above-described property. The
transferee of such property is the person performing the services in connection with the transfer
of said property.

The undersigned understands that the foregoing election may not be revoked except with the consent
of the Commissioner.

	 	 	 	 	 
	Date:
	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	Signature

 

A-C-1

 

RECEIPT AND CONSENT

The undersigned hereby acknowledges receipt of a photocopy of Certificate No.            for
                     shares of Common Stock of Auriga Laboratories, Inc. (the “Company”).

The undersigned further acknowledges that the Secretary of the Company, or his or her
designee, is acting as escrow holder pursuant to the Early Exercise Notice and Restricted Stock
Purchase Agreement Purchaser has previously entered into with the Company. As escrow holder, the
Secretary of the Company, or his or her designee, holds the original of the aforementioned
certificate issued in the undersigned’s name.

	 	 	 	 	 
	Dated:
	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	Name:

 

 

 

EXHIBIT B

AURIGA LABORATORIES, INC.

2007 Stock Option Plan

EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT

This Agreement (“Agreement”) is made as of                     , by and between Auriga
Laboratories, Inc., a Delaware corporation (the “Company”), and                     
(“Purchaser”). To the extent any capitalized terms used in this Agreement are not defined,
they shall have the meaning ascribed to them in the 2007 Stock Option Plan.

1. Exercise of Option. Subject to the terms and conditions hereof, Purchaser hereby
elects to exercise his or her option to purchase                      shares of the Common Stock (the
“Shares”) of the Company under and pursuant to the Company’s 2007 Stock Option Plan (the
“Plan”) and the Stock Option Agreement dated                     , (the “Option
Agreement”). The purchase price for the Shares shall be $                     per Share for a total
purchase price of $                    . The term “Shares” refers to the purchased Shares and
all securities received in replacement of the Shares or as stock dividends or splits, all
securities received in replacement of the Shares in a recapitalization, merger, reorganization,
exchange or the like, and all new, substituted or additional securities or other properties to
which Purchaser is entitled by reason of Purchaser’s ownership of the Shares.

2. Time and Place of Exercise. The purchase and sale of the Shares under this
Agreement shall occur at the principal office of the Company simultaneously with the execution and
delivery of this Agreement in accordance with the provisions of Section 2(b) of the Option
Agreement. On such date, the Company will deliver to Purchaser a certificate representing the
Shares to be purchased by Purchaser (which shall be issued in Purchaser’s name) against payment of
the purchase price therefor by Purchaser by (a) check made payable to the Company, (b) cancellation
of indebtedness of the Company to Purchaser, (c) delivery of shares of the Common Stock of the
Company in accordance with Section 3 of the Option Agreement, or (d) a combination of the
foregoing.

3. Limitations on Transfer. In addition to any other limitation on transfer created
by applicable securities laws, Purchaser shall not assign, encumber or dispose of any interest in
the Shares except in compliance with the provisions below and applicable securities laws.

(a) Right of First Refusal. Before any Shares held by Purchaser or any transferee of
Purchaser (either being sometimes referred to herein as the “Holder”) may be sold or
otherwise transferred (including transfer by gift or operation of law), the Company or its
assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions
set forth in this Section 3(a) (the “Right of First Refusal”).

(i) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the
Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to
sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other
transferee (“Proposed Transferee”); (iii) the number of Shares to be transferred to each
Proposed Transferee; and (iv) the terms and conditions of each proposed sale or transfer. The
Holder shall offer the Shares at the same price (the “Offered Price”) and upon the same
terms (or terms as similar as reasonably possible) to the Company or its assignee(s).

(ii) Exercise of Right of First Refusal. At any time within 30 days after receipt of
the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect
to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more
of the Proposed Transferees, at the purchase price determined in accordance with subsection (iii)
below.

(iii) Purchase Price. The purchase price (“Purchase Price”) for the Shares
purchased by the Company or its assignee(s) under this Section 3(a) shall be the Offered Price. If
the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash
consideration shall be determined by the Board of Directors of the Company in good faith.

 

B-1

 

(iv) Payment. Payment of the Purchase Price shall be made, at the option of the
Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any
outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an
assignee, to the assignee), by net exercise pursuant to Section 2(c) of the Option Agreement, or by
any combination thereof within 30 days after receipt of the Notice or in the manner and at the
times set forth in the Notice.

(v) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be
transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s)
as provided in this Section 3(a), then the Holder may sell or otherwise transfer such Shares to
that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or
other transfer is consummated within 60 days after the date of the Notice and provided further that
any such sale or other transfer is effected in accordance with any applicable securities laws and
the Proposed Transferee agrees in writing that the provisions of this Section 3 shall continue to
apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the
Notice are not transferred to the Proposed Transferee within such period, or if the Holder proposes
to change the price or other terms to make them more favorable to the Proposed Transferee, a new
Notice shall be given to the Company, and the Company and/or its assignees shall again be offered
the Right of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.

(vi) Exception for Certain Family Transfers. Anything to the contrary contained in
this Section 3(a) notwithstanding, the transfer of any or all of the Shares during Purchaser’s
lifetime or on Purchaser’s death by will or intestacy to Purchaser’s Immediate Family (as defined
below) or a trust for the benefit of Purchaser’s Immediate Family shall be exempt from the
provisions of this Section 3(a). “Immediate Family” as used herein shall mean spouse,
lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so transferred subject to the provisions of
this Section, and there shall be no further transfer of such Shares except in accordance with the
terms of this Section 3.

(b) Involuntary Transfer.

(i) Company’s Right to Purchase upon Involuntary Transfer. In the event, at any time
after the date of this Agreement, of any transfer by operation of law or other involuntary transfer
(including divorce or death, but excluding, in the event of death, a transfer to Immediate Family
as set forth in Section 3(a)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have the right to purchase all of the Shares transferred at the greater
of the purchase price paid by Purchaser pursuant to this Agreement or the Fair Market Value of the
Shares on the date of transfer. Upon such a transfer, the person acquiring the Shares shall
promptly notify the Secretary of the Company of such transfer. The right to purchase such Shares
shall be provided to the Company for a period of 30 days following receipt by the Company of
written notice by the person acquiring the Shares.

(ii) Price for Involuntary Transfer. With respect to any stock to be transferred
pursuant to Section 3(b)(i), the price per Share shall be a price set by the Board of Directors of
the Company that will reflect the current value of the stock in terms of present earnings and
future prospects of the Company. The Company shall notify Purchaser or his or her executor of the
price so determined within 30 days after receipt by it of written notice of the transfer or
proposed transfer of Shares. However, if the Purchaser does not agree with the valuation as
determined by the Board of Directors of the Company, the Purchaser shall be entitled to have the
valuation determined by an independent appraiser to be mutually agreed upon by the Company and the
Purchaser and whose fees shall be borne equally by the Company and the Purchaser.

(c) Assignment. The right of the Company to purchase any part of the Shares may be
assigned in whole or in part to any shareholder or shareholders of the Company or other persons or
organizations.

(d) Restrictions Binding on Transferees. All transferees of Shares or any interest
therein will receive and hold such Shares or interest subject to the provisions of this Agreement.
Any sale or transfer of the Shares shall be void unless the provisions of this Agreement are
satisfied.

 

B-2

 

(e) Termination of Rights. The Right of First Refusal and the Company’s right to
repurchase the Shares in the event of an involuntary transfer pursuant to Section 3(b) above shall
terminate upon the listing of Common Stock of the Company on a national exchange.

(f) Market Standoff Agreement. In connection with the initial public offering of the
Company’s securities and upon request of the Company or the underwriters managing such underwritten
offering of the Company’s securities, Purchaser agrees not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any securities of the Company (other
than those included in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180 days) from the
effective date of such registration as may be requested by the Company or such managing
underwriters and to execute an agreement reflecting the foregoing as may be requested by the
underwriters at the time of the Company’s initial public offering.

4. Investment and Taxation Representations. In connection with the purchase of the
Shares, Purchaser represents to the Company the following:

(a) 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 Shares. Purchaser is purchasing the Shares for investment for his or her own
account only and not with a view to, or for resale in connection with, any “distribution” thereof
within the meaning of the Securities Act.

(b) Purchaser understands that the Shares have not been registered under the Securities Act by
reason of a specific exemption therefrom, which exemption depends upon, among other things, the
bona fide nature of Purchaser’s investment intent as expressed herein.

(c) Purchaser understands that the Shares are “restricted securities” under applicable U.S.
federal and state securities laws and that, pursuant to these laws, Purchaser must hold the Shares
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. Purchaser acknowledges that the Company has no obligation to register or qualify the
Shares for resale. 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 Shares, and 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.

(d) Purchaser understands that Purchaser may suffer adverse tax consequences as a result of
Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has
consulted any tax consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.

5. Restrictive Legends and Stop-Transfer Orders.

(a) Legends. The certificate or certificates representing the Shares shall bear the
following legends (as well as any legends required by applicable state and federal corporate and
securities laws):

(i) THE SHARES 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.

(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.

 

B-3

 

(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure compliance with
the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions
to its transfer agent, if any, and that, if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.

(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its
books any Shares that have been sold or otherwise transferred in violation of any of the provisions
of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

(d) Removal of Legend. When all of the following events have occurred, the Shares
then held by Purchaser will no longer be subject to the legend referred to in Section 5(a)(ii):
(i) the termination of the Right of First Refusal; and (ii) the expiration or termination of the
market standoff provisions of Section 3(f) (and of any agreement entered pursuant to Section 3(f)).
After such time, and upon Purchaser’s request, a new certificate or certificates representing the
Shares not repurchased shall be issued without the legend referred to in Section 5(a)(ii), and
delivered to Purchaser.

6. No Employment Rights. Nothing in this Agreement shall affect in any manner
whatsoever the right or power of the Company, or a Parent or Subsidiary of the Company, to
terminate Purchaser’s employment or consulting relationship, for any reason, with or without cause.

7. Miscellaneous.

(a) 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 Georgia, without giving effect to principles of conflicts
of law.

(b) Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter herein and merges all
prior discussions between them. No modification of or amendment to this Agreement, nor any waiver
of any rights under this Agreement, shall be effective unless in writing signed by the parties to
this Agreement. The failure by either party to enforce any rights under this Agreement shall not
be construed as a waiver of any rights of such party.

(c) 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 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.

(d) Construction. This Agreement is the result of negotiations between and has been
reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this
Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be
construed in favor of or against any one of the parties hereto.

(e) Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient when delivered personally or sent by telegram or fax or 48 hours
after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and
addressed to the party to be notified at such party’s address as set forth below or as subsequently
modified by written notice.

(f) 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.

(g) Successors and Assigns. The rights and benefits of this Agreement shall inure to
the benefit of, and be enforceable by the Company’s successors and assigns. The rights and
obligations of Purchaser under this Agreement may only be assigned with the prior written consent
of the Company.

 

B-4

 

(h) Georgia Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE
OF GEORGIA, OR ANY OTHER STATE, AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY
PART OF THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

(i) California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE DEPARTMENT OF CORPORATIONS OF THE STATE
OF CALIFORNIA, OR ANY OTHER STATE, AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

[Signature Page Follows]

 

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The parties have executed this Agreement as of the date first set forth above.

	 	 	 	 	 
	 	 	COMPANY:
	 
	 	 	 	 
	 	 	AURIGA LABORATORIES, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

	 	 	 
	Address:

	 	2029 Century Park East, Suite 1130
	 

	 	Los Angeles, CA 90067 

	 	 	 
	 

	 	PURCHASER:
	 
	 	 
	 
	 	 
	 

	 	 
	 

	 	Signature
	 
	 	 
	 

	 	 
	 

	 	Print Name
	 
	 	 
	 

	 	 
	 

	 	Address
	 
	 	 
	 

	 	 
	 

	 	Address

 

B-6

 

RECEIPT

Auriga Laboratories, Inc. (the “Company”) hereby acknowledges receipt of (check as applicable):

	 	 	 	 	 
	 

	 	          
	 	A check in the amount of $                    
	 
	 	 	 	 
	 

	 	          
	 	The cancellation of indebtedness in the amount of $                    
	 
	 	 	 	 
	 

	 	          
	 	           shares of (or cancellation of the right to exercise)
the Company’s Common Stock with a fair market value of $                    

given by                      as consideration for Certificate No.            for                      shares of Common
Stock of the Company.

Dated:                                         

	 	 	 	 	 
	 	 	AURIGA LABORATORIES, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:Filed by Bowne Pure Compliance

 

Exhibit 10.4

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (“the Agreement”) is effective May 9, 2007 (the “Effective
Date”), by and between Auriga Laboratories, Inc., (the “Company”) and Philip S. Pesin
(“Executive”).

1. ENGAGEMENT AND DUTIES

1.1 Engagement. Subject to the terms and conditions set forth in this Agreement, the
Company hereby continues to employ Executive as Chief Executive Officer of the Company, pursuant to
the terms of this Agreement. Executive hereby accepts such engagement and continued employment,
pursuant to the terms of this Agreement. This Agreement supersedes Executive’s prior employment
agreement with the Company which was executed prior to the Effective Date between Executive and
Company.

1.2 Employment Period. Unless terminated earlier pursuant to Section 4, Executive’s
term of employment as Chief Executive Officer under this Agreement shall commence on the Effective
Date and shall continue for a period of two (2) years following the Effective Date. If the parties
mutually agree, the parties shall have the option to extend the term of this Agreement for an
additional two (2) year period upon either party notifying the other party, in accordance with
section 7.2, of intent to renew at least ninety (90) days prior to the end of the initial two (2)
year term, subject to acceptance of such renewal by the other party. The initial two (2) year
term, and any additional renewal period, shall together be referred to as the “Employment Period”
as such term is used in this Agreement.

1.3 Duties and Responsibilities. During the Employment Period, the duties, authority
and responsibilities of Executive shall be commensurate with the duties, authority and
responsibilities customarily accorded a Chief Executive Officer at comparable companies, and shall
include such duties and responsibilities as may be legally assigned to Executive by the Board of
Directors of the Company (the “Board”). During the Employment Period, Executive shall report to
the Board. Executive shall exercise such authority and perform such duties and services,
consistent with his position, as may be assigned to him from time to time by the Board and the
Executive hereby agrees to perform well and faithfully such duties and responsibilities. The Board
further agrees to nominate Executive to the Board of Directors of the Company.

1.4 Devotion of Time and Best Efforts. Except for vacations as provided herein and
absences due to temporary illness, under an approved leave, or as required by applicable law,
Executive agrees to devote his best efforts, and energies on a full time basis during the
Employment Period to the performance of his duties hereunder and to advance the Company’s
interests. Notwithstanding the foregoing, Executive acknowledges during his employment with the
Company, Executive may engage in any other business activity, whether or not such business activity
is pursued for profit, or other pecuniary advantage, including, without limitation, personal
investments, conducting private business affairs, participating on boards of nonprofit foundations
and similar activities which, in each such case, do not materially interfere with the services
rendered by Executive under this Agreement.

 

 

 

Pesin Employment Agreement

2. COMPENSATION

2.1 Base Salary. During the Employment Period, in exchange for the services provided
by Executive hereunder, Executive shall receive an annual “Base Salary” of Four Hundred Twenty Five
Thousand Dollars ($425,000) commencing on the first day of the Employment Period, but with
retroactive effect to April 1, 2007, payable in accordance with the Company’s regular payroll
practices and policies which are in effect from time to time. The Board, and/or the Compensation
Committee of the Board, as applicable, shall review the Base Salary at least once a year to
determine whether the Base Salary should be increased effective January 1st of any year
during the Employment Period. The amount of the increase shall be determined no later than two (2)
weeks prior to the annual filing of the Company’s Form 10k and any such increase shall be
retroactive until January 1st of the year in which the salary increase occurs. The
Company shall deduct and withhold all necessary social security and withholding taxes and any other
similar sums required by law from such Base Salary, bonuses, benefits and other payments to the
Executive, as applicable.

2.2 Bonus. During the Employment Period, the Executive shall be entitled to receive
an annual bonus based on increases in market capitalization of the Company which occur subsequent
to the Effective Date such that Executive shall be entitled to the amount of one hundred thousand
dollars for every ten million dollars increase in market capitalization, with the foregoing bonus
being payable each calendar quarter (“Quarterly Bonus”). Such Quarterly Bonus shall be prorated
for any partial increase in market capitalization of the Company measured each quarter of the year.
By way of example, if, during the first calendar quarter subsequent to the Effective Date, the
market capitalization of the Company increases from $60 million to $62 million, Executive would be
entitled to a Quarterly Bonus of $20,000. If, however, the market capitalization of the Company
was only to remain at $60 million during the first calendar quarter subsequent to the Effective
Date, Executive would receive no Quarterly Bonus. Notwithstanding the foregoing, Executive shall
not be entitled to any Quarterly Bonus if the amount of market capitalization of the Company is
below any previous market capitalization amount on which Executive was paid. The amount of such
Quarterly Bonus shall be payable to Executive within fifteen (15) days of the end of each calendar
quarter. In addition to and without in any way limiting Executive rights to receive the Quarterly
Bonus, Executive shall also be entitled to participate in any bonuses provided to senior management
personnel of the Company as determined by the Board in their discretion.

2.3 Equity Incentive Award. Concurrently herewith, the Company is granting Executive
an award consisting of options to purchase Three Million (3,000,000) shares of common stock of the
Company at the stock closing price on the Effective Date, pursuant to the terms of the 2007 Stock
Option Plan and Stock Option Agreement of the Company, or any successor thereto, as applicable,
under which such options shall vest twenty-five percent (25%) on the first anniversary of the
Effective Date and, thereafter, the remainder of such unvested options shall vest equally on a
monthly basis over months thirteen to thirty-six until fully vested on the third anniversary of the
Effective Date. Executive shall continue to have the right to exercise any vested options for a
period of at least twelve (12) months after the date of termination of employment for any of the
reasons set forth in paragraph 4, below, other than for a termination for Cause. Executive shall
be entitled to continue to participate in any pre-existing equity or warrant grants prior to the
Effective Date of this Agreement pursuant to the stock

 

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Pesin Employment Agreement

option plans or warrant agreement plans applicable to such equity or warrant grants,
including, without limitation, the Warrant Agreement dated March 29, 2006. Additionally, Executive
shall be entitled to participate in any equity grants provided to senior management personnel of
the Company under the 2007 Stock Option Plan or any successor thereto as determined by the Board in
their discretion.

2.4 Expense Reimbursements. The Company agrees that during the Employment Period, the
Executive shall be authorized to incur ordinary and necessary expenses in connection with the
promotion, operation and furtherance of the business affairs of the Company, including reasonable
expenses incurred for purposes of entertainment, travel, business and educational/professional
meetings, as shall be in accordance with normal Company policy approved by the Board and which are
in accordance with Executive’s position as Chief Executive Officer of the Company. The Executive
shall be entitled to reimbursement by the Company for such reasonable business expenditures upon
presentation by the Executive to the Company of an itemized account of such expenditures, together
with appropriate receipts and vouchers or other evidence as shall be required for tax or accounting
purposes.

3. BENEFITS

3.1 Health and Welfare. During the Employment Period, Executive shall be eligible to
participate in the health and welfare benefits generally available to other senior management
employees of the Company and shall have the same rights and privileges to participate in any
employee benefit plans and arrangements, in accordance with the Company’s policies in effect from
time to time as any other senior management employee of the Company.

3.2 Pension & Retirement Benefits. During the Employment Period, Executive shall be
eligible to participate in the qualified and nonqualified pension, profit sharing and retirement
plans generally available to other senior management employees of the Company.

3.3 Vacation. During the Employment Period, the Executive shall be entitled to five
weeks of vacation each full calendar year in accordance with the Company’s policies and procedures
related to vacation time. Executive may accrue up to a maximum of 2 times his yearly vacation
allotment. However, upon reaching this maximum level of accrual, Executive will cease to accrue
additional vacation time until the level of accrual falls below this maximum accrual cap.

3.4 Legal Fees. Company shall pay Executive’s legal fees in conjunction with the
drafting and negotiation of this Agreement in an amount not to exceed ten thousand dollars .

4. TERMINATION OF EMPLOYMENT

4.1 Death or Disability. If the Executive dies during the Employment Period, the
Executive’s employment shall be deemed to terminate on or after the date of death, as of the date
the Executive’s death is established by reasonable documentation. If the Executive is
incapacitated or disabled by accident, sickness or otherwise so as to render him mentally or
physically incapable of fully performing the essential functions of his position with reasonable
accommodation for a period of six (6) months or more during any consecutive twelve (12) month
period or twelve (12) consecutive weeks, after such twelve (12) month period, the Company, in

 

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Pesin Employment Agreement

its reasonable discretion, may terminate Executive’s employment due to “Disability” by
providing written notice of such termination to Executive. A termination of Executive’s
employment, and the Employment Period, by either Executive or the Company, for Disability shall be
communicated to the other party by written notice, and shall be effective the thirtieth
(30th) day after receipt of such notice of Disability by the other party.

4.2 Termination for Cause. The Company may terminate the Employment Period and the
Executive’s employment for “Cause” (such termination being hereinafter called a “Termination For
Cause”) by giving the Executive notice in writing of such termination which sets forth in general
the grounds for such termination. Such termination shall be effective immediately upon such
notice. For purposes of this Agreement, “Cause” shall mean Executive’s conviction of a felony. A
termination of Executive’s employment for Cause shall be effective when and if (a) for a felony
under the laws of any federal or state jurisdiction in the United States, a resolution is duly
adopted at such special meeting of the Board, by the majority vote of the members of the Board
other than Executive, and (b) for a felony under the laws of any other jurisdiction, a resolution
is duly adopted at such special meeting of the Board, by the unanimous vote of the members of the
Board other than Executive, in each such case, terminating Executive’s employment for Cause,
subject to de novo review in each such case of the question whether Cause existed through
arbitration and arbitration of such issue shall take place in accordance with JAMS then current
employment arbitration rules as the sole arbitrable issue before an arbitrator mutually agreed to
by Executive and Company and the costs of such arbitration shall be paid by Company (provided, for
avoidance of doubt, that if Cause is determined through such arbitration to not have existed, the
termination of Executive’s employment shall not be reversed and shall instead be treated as a
“Termination Without Cause” as such term is defined in section 4.3, entitling Executive to any
severance and benefits which may result from a Termination Without Cause).

4.3 Termination Without Cause. The Company may terminate Executive’s employment at
any time during the Employment Period without “Cause” by giving the Executive written notice of
such termination which shall be effective immediately upon such notice.

4.4 Voluntary Termination. Executive may terminate the Employment Period and his
employment hereunder by providing the Company with thirty (30) days written notice of his
resignation. Any termination of the employment of the Executive hereunder by resignation (or other
voluntary action of the Executive) shall be deemed to be a “Voluntary Termination.”

4.5 Termination by Executive for Good Reason. Executive’s Employment Period may be
terminated by Executive for Good Reason. For purposes of this Agreement, “Good Reason” shall mean
termination by Executive for any reason on or after a Change in Control, as defined below, or the
occurrence of any one or more of the following events without Executive’s prior written consent,
unless Company fully cures the circumstances constituting Good Reason (provided such circumstances
are capable of cure) within thirty (30) business days of receipt of written notice of such
circumstances by Company from Executive:

(a) A material reduction in Executive’s titles, duties, authority and responsibilities, or the
assignment to Executive of any duties materially inconsistent with
Executive’s position, authority, duties or responsibilities without the written consent of
Executive; or

 

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Pesin Employment Agreement

(b) Company’s reduction of Executive’s annual Base Salary or bonus opportunity, each as in
effect on the date hereof or as the same may be increased from time to time; or failure to pay Base
Salary or bonus on a timely basis; or the relocation of Company’s headquarters to a location more
than twenty-five (25) miles from Company’s current headquarters in Los Angeles, California; or

(c) The Board of Director’s failure to respond to a written request by Executive to address
any business matters pertaining to the Company for a period exceeding ten (10) calendar days after
the date of such written request by Executive; or

(d) Company’s failure to cure a material breach of its obligations under this Agreement within
thirty (30) business days after written notice is delivered to the Board by Executive which
specifically identifies the manner in which Executive believes that Company has breached its
obligations under Agreement.

For purposes of this Agreement, “Change in Control” shall mean (A) the dissolution or
liquidation of the Company; (B) a reorganization, merger or consolidation of the Company with one
or more corporations as a result of which the Company is not the surviving corporation; (C)
approval by the stockholders of the Company of any sale, lease, exchange or other transfer (in one
or a series of transactions) of all or substantially all of the assets of the Company; (D) approval
by the stockholders of the Company of any merger or consolidation of the Company in which the
holders of voting stock of the Company immediately before the merger or consolidation will not own
fifty percent (50%) or more of the voting shares of the continuing or surviving corporation
immediately after such merger or consolidation; or (E) a change of fifty percent (50%) (rounded to
the next whole person) in the membership of the Board of Directors of the Company within a twelve
(12) month period, unless the election or nomination for election by stockholders of each new
director within such period was approved by the vote of two-thirds (2/3) (rounded to the next whole
person) of the directors then still in office who were in office at the beginning of the twelve
(12) month period.

Any termination for Good Reason must occur during a pre-determined limited period of time not
to exceed two (2) years following the initial existence of one or more of the above conditions
constituting “Good Reason”, as defined above. Executive is required to provide notice to Company
of the existence of any condition constituting “Good Reason” within a period of ninety (90) days of
the initial existence of any such condition and Company shall have the opportunity to remedy the
condition within thirty (30) days.

5. EFFECT OF TERMINATION OF EMPLOYMENT

5.1 Termination of Employment Other Than For Cause. Upon the termination of the
Executive’s employment hereunder for Death or Disability (Paragraph 4.1) or Termination Without
Cause by the Company (Paragraph 4.3) or by Executive for Good Reason (Paragraph 4.5), Executive, or
his estate in the case of Executive’s death, shall have the right to receive: (i) any unpaid
portion of Executive’s Base Salary and prorated bonus as of the date of termination;

 

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Pesin Employment Agreement

(ii) payment for any accrued, but unused, vacation pay and documented unreimbursed expenses;
(iii) severance equal to continuation of Executive’s then current Base Salary and all insurance
benefits provided hereunder (including those benefits applicable to Executive’s family) for a two
(2) year period from the date of termination; and (iv) acceleration of any unvested shares of
restricted stock or options and no early expiration of exercise period due to termination of the
Employment Period. Such amounts shall be in addition to any benefits Executive may receive under
any insurance plan provided by the Company or from the State of California or Workers’ Compensation
and the cash portions of the foregoing shall be paid in a single lump sum severance amount as soon
as practicable following such termination of employment, but in no event later than thirty (30)
days after the effective date after such termination of employment. Should Company fail to pay the
single lump sum severance amount described above, or any portion thereof, in the aforementioned
time period, Company shall issue to Executive, on or before the first (1st) business day after the
expiration of such time period, a senior convertible note secured by the Company’s assets, bearing
interest at an annual rate equal to the then prevailing Prime Rate (as reported in the Wall Street
Journal “Money Rates” section or such other comparable reporting source as may exist) plus two (2)
percent, and in a principal amount equal to such lump sum severance amount, or portion thereof,
which was not paid within the aforementioned time period. The terms of foregoing note shall also
provide that such note shall be convertible at any time at Executive’s option into such number of
shares of common stock of the Company as is determined by dividing the principal amount of such
note, together with all accrued but unpaid interest thereon, by the per-share closing price of such
common stock as of the effective date of termination of employment. Notwithstanding the foregoing,
Executive shall subordinate any such note issued by the Company to any revolving line of credit
with Comerica Bank or any other similar revolving line of credit which may be in effect at the time
of issuance of any such note.

5.2 Voluntary Termination or Termination For Cause. Upon the termination of
Executive’s employment hereunder pursuant to a Voluntary Termination (Paragraph 4.4) or a
Termination For Cause (Paragraph 4.2), Executive shall have the right to receive (i) any unpaid
portion of his Base Salary and Bonus as of the date of termination; (ii) payment for any accrued
but unused vacation pay and documented unreimbursed expenses; and (iii) any benefits payable under
the provisions of the Company’s benefit plans.

5.3 Additional Payments by Company. In the event that any payments under this
Agreement or any other compensation, benefit or other amounts payable from the Company for the
benefit of Executive are subject to the tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the “Code”) (including any applicable interest and penalties, the “Excise Tax”),
no such payment (“Parachute Payment”) shall be reduced (except for required tax withholdings) and
the Company shall pay to Executive by the earlier of the date such Excise Tax is withheld from
payments made to Executive or the date such Excise Tax becomes due and payable by Executive, an
additional amount (the “Gross-Up Payment”) such that the net amount retained by Executive (after
deduction of any Excise Tax on the Parachute Payments, taxes based upon the Tax Rate (as defined
below) upon the payment provided for by this Section 5.3 and Excise Tax upon the payment provided
for by this Section 5.3), shall be equal to the amount Executive would have received if no Excise
Tax had been imposed. A Tax counsel chosen by the Company’s independent auditors, provided such
person is reasonably acceptable to Executive (“Tax Counsel”), shall determine in good faith whether
any of the

 

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Pesin Employment Agreement

Parachute Payments are subject to the Excise Tax and the amount of any Excise Tax, and Tax
Counsel shall promptly notify Executive of its determination. The Company and Executive shall file
all tax returns and reports regarding such Parachute Payments in a manner consistent with the
Company’s reasonable good faith determination. For purposes of determining the amount of the
Gross-Up Payment, Executive shall be deemed to pay taxes at the Tax Rate applicable at the time of
the Gross-Up Payment. In the event that the Excise Tax is subsequently determined to be less than
the amount taken into account hereunder at the time a Parachute Payment is made, Executive shall
repay to the Company promptly following the date that the amount of such reduction in Excise Tax is
finally determined the portion of the Gross-Up Payment attributable to such reduction (without
interest). In the event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time a Parachute Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall pay
Executive an additional amount with respect to the Gross-Up Payment in respect of such excess (plus
any interest or penalties payable in respect of such excess) at the time that the amount of such
excess is finally determined. The Company shall reimburse Executive for all reasonable fees,
expenses, and costs related to determining the reasonableness of any Company position in connection
with this paragraph and preparation of any tax return or other filing that is affected by any
matter addressed in this paragraph, and any audit, litigation or other proceeding that is affected
by any matter addressed in this Section 5.3 and an amount equal to the tax on such amounts at
Executive’s Tax Rate. For the purposes of the foregoing, “Tax Rate” means Executive’s effective
tax rate based upon the combined federal and state and local income, earnings, Medicare and any
other tax rates applicable to Executive, all at the highest marginal rate of taxation in the
country and state of Executive’s residence on the date of determination, net of the reduction in
federal income taxes which could be obtained by deduction of such state and local taxes.”

6. CONFIDENTIAL INFORMATION

6.1 Confidential Information. In the course of his employment with Company, Executive
will have access to confidential and proprietary information and records, data and other trade
secrets of Company (“Confidential Information”). Confidential Information shall include, without
limitation, the following types of information or material, both existing and contemplated,
regarding Company: Corporate information, including plans, strategies, policies, resolutions and
any litigation or negotiations; marketing information, including strategies, methods, customers,
prospects or market research data; financial information, including cost and performance data, debt
arrangement, equity structure, investors and holdings; operational and scientific information,
including trade secrets and technical information; and personnel information, including personnel
lists, resumes, personnel data, organizational structure, compensation structure and performance
evaluations. Executive shall not directly or indirectly disclose Confidential Information to any
person or entity or use any Confidential Information in any way except as required in the
performance of his duties for the Company. For purposes of this paragraph, Confidential
Information does not include any publicly available information or any information, prints, patents
or other rights that Executive had or owned prior to employment with Company.

 

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Pesin Employment Agreement

7. MISCELLANEOUS

7.1 Severability. If any one or more provisions contained in this Agreement shall,
for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this Agreement, but this
Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been
contained herein.

7.2 Notices. All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be mailed, telecopied, dispatched by reputable commercial
courier or delivered by hand as follows:

If to Executive:

c/o Loeb & Loeb LLP

Attn: Paul Severin, Esq.

10100 Santa Monica Blvd, Suite 2200

Los Angeles, CA 90067

Telephone: 310-282-2000

Facsimile: 310-282-2200

With a copy to:

Singer, Lewak, Greenbaum and Goldstein LLP

Attn: Steve Cupingood

10960 Wilshire Blvd., Suite 1100

Los Angeles, CA 90024

Telephone: 310-477-3931

Facsimile: 310-477-8565

If to the Company:

2029 Century Park East, Suite 1130

Los Angeles, CA 90067

Telephone: 877- 287-4428

Facsimile: 678-282-1700

If any notice, request, demand, direction or other communication required or permitted to be given
hereunder is given by mail, it will be effective on the third calendar day after deposit in the
United States mail with first class or airmail postage prepaid; if given by telecopier during
regular business hours of the recipient, when sent; if given by telecopier outside regular business
hours of the recipient, at the opening of business on the next business day; if dispatched by
reputable commercial courier, on the scheduled delivery date; or if given by personal delivery,
when delivered.

 

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Pesin Employment Agreement

7.3 Binding Agreement. The provisions of this Agreement will be binding upon, and
will inure to the benefit of, the respective heirs, legal representatives and successors of the
parties hereto.

7.4 Governing Law. This Agreement and all amendments thereof shall be governed by,
and construed and enforced in all respects in accordance with, the laws of the State of California.

7.5 Waiver of Breach. The waiver by either party of a breach of any provision of this
Agreement by the other party must be in writing and shall not operate or be construed as a waiver
of any subsequent breach by such other party.

7.6 Entire Agreement. This Agreement contains the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior and contemporaneous
agreements, terms sheets, oral or written representations and understandings among the parties with
respect thereto.

7.7 Amendments. This agreement may be amended only by an agreement in writing signed
by Executive and the Chairman of the Board of the Company.

7.8 Assignment. This Agreement is personal in its nature and the parties hereto shall
not, without the consent of the other, assign or transfer this agreement or any rights or
obligations hereunder.

7.9 Attorneys Fees. If any Party brings an action or proceeding involving this
Agreement, the prevailing party in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorneys’ fees

7.10 Section 409A. Unless otherwise expressly provided, any payment of compensation
by Company to Executive, whether pursuant to this Agreement or otherwise, shall be made within two
and one-half months (21/2 months) after the later of the end of the calendar year of the Company’s
fiscal year in which Executive’s right to such payment vests (i.e., is not subject to a
“substantial risk of forfeiture” for purposes of Code Section 409A of the Internal Revenue Code of
1986, as amended (“Code”)). To the extent that any severance payments (including payments on
termination for “good reason”) come within the definition of “involuntary severance” under Code
Section 409A, such amounts up to the lesser of two times the Executive’s annual compensation for
the year preceding the year of termination or two times the 401(a)(17) limit for the year of
termination, shall be excluded from “deferred compensation” as allowed under Code Section 409A, and
shall not be subject to the following Code Section 409A compliance requirements. All
payments of “nonqualified deferred compensation” (within the meaning of Section 409A) are intended
to comply with the requirements of Code Section 409A, and shall be interpreted in accordance
therewith. Neither party individually or in combination may accelerate any such deferred payment,
except in compliance with Code Section 409A, and no amount shall be paid prior to the earliest date
on which it is permitted to be paid under Code Section 409A. In the event that Executive is
determined to be a “key employee” (as defined in Code Section 416(i) (without regard to paragraph
(5) thereof)) of Company at a time when its stock is deemed to be publicly traded on an established
securities market, payments

 

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Pesin Employment Agreement

determined to be “nonqualified deferred compensation” payable following termination of
employment shall be made no earlier than the earlier of (i) the last day of the sixth (6th)
complete calendar month following such termination of employment, or (ii) Executive’s death,
consistent with the provisions of Code Section 409A. Any payment delayed by reason of the prior
sentence shall be paid out in a single lump sum at the end of such required delay period in order
to catch up to the original payment schedule. Notwithstanding anything herein to the contrary, no
amendment may be made to this Agreement if it would cause the Agreement or any payment hereunder
not to be in compliance with Code Section 409A.

7.11 Arm’s Length Agreement. This Agreement has been negotiated at arm’s length
between persons knowledgeable in the matters dealt with herein. Each of the parties hereto has
been represented by independent legal counsel of its own choice. Accordingly, any rule of law or
any statute, legal decision, or common law principle of similar effect, that would require
interpretation of any ambiguity in this Agreement against the party that drafted it, is of no
application and is hereby expressly waived. The provisions of this Agreement shall be interpreted
in a reasonable manner to effect the intentions of the parties hereto.

IN WITNESS WHEREOF, Executive has hereunto set his hand and, pursuant to due authorization
from the Board, the Company has caused these promises to be executed in its name on its behalf, all
as of the day and year first above written.

	 	 	 	 	 	 	 
	“COMPANY” — Auriga Laboratories, Inc.	 	 	 	“EXECUTIVE”
	 
	 	 	 	 	 	 
	By:

	 	/s/ Charles R. Bearchell
	 	 	 	/s/ Philip S. Pesin
	 

	 	 
	 	 	 	 
	Name:

	 	Charles R. Bearchell
	 	 	 	Philip S. Pesin
	 

	 	 	 	 	 	 
	Its:

	 	Chief Financial Officer	 	 	 	 
	 

	 	 	 	 	 	 

 

-10-

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