EXHIBIT 10.1
____________________________________________________________________________
PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT
by and
among
CARRINGTON LABORATORIES, INC.
and
THE PARTIES NAMED HEREIN ON SCHEDULE 1, AS PURCHASERS
November 18, 2005
____________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS
.............................................. 1
1.1 Definitions
................................................... 1
ARTICLE II PURCHASE AND SALE
........................................ 3
2.1 Closing
.......................................................
3
2.2 Conditions to Obligations of
Purchasers to Effect the Closing.. 4
2.3 Conditions to Obligations of the
Company to Effect the Closing. 5
ARTICLE III REPRESENTATIONS AND WARRANTIES
......................... 5
3.1 Representations and Warranties of
the Company ................. 5
3.2 Representations And Warranties Of
The Purchasers .............. 8
ARTICLE IV OTHER AGREEMENTS OF THE
PARTIES .......................... 11
4.1 Transfer Restrictions.
........................................ 11
4.2 Legends
.......................................................
11
4.3 Public Announcements
.......................................... 12
4.4 Registration Rights.
.......................................... 12
4.5 Fees and Expenses
............................................. 15
4.6 Indemnification for Brokerage Fees
............................ 15
4.7 Allocation of Partial Prepayments
............................. 15
4.8 Reservation of Warrant Shares
................................. 15
4.9 Consent of Purchasers
......................................... 15
ARTICLE V TERMINATION, AMENDMENT, AND WAIVER
....................... 15
5.1 Termination
................................................... 15
5.2 Effect of Termination
......................................... 16
5.3 Amendment
..................................................... 16
5.4 Waiver
........................................................
16
ARTICLE VI SURVIVAL OF
REPRESENTATIONS; INDEMNIFICATION ............. 16
6.1 Survival
...................................................... 16
6.2 Indemnification by Company
.................................... 16
6.3 Indemnification by the Purchasers
............................. 16
6.4 Procedure for Indemnification
................................. 16
ARTICLE VII MISCELLANEOUS
.......................................... 17
7.1 Notices
.......................................................
17
7.2 Entire Agreement
.............................................. 17
7.3 Binding Effect; Assignment; No
Third Party Benefit ............ 17
7.4 Severability
.................................................. 17
7.5 Governing Law
................................................. 18
7.6 Counterparts
.................................................. 18
<PAGE>
PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT
THIS
PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT (this "Agreement")
is dated as of November 18, 2005, among Carrington
Laboratories, Inc.,
a
Texas corporation (the "Company"),
and the purchasers identified on Schedule
1 hereto (each a "Purchaser" and
collectively the "Purchasers").
WHEREAS,
subject to
the terms and conditions set forth in this
Agreement and pursuant
to Section 4(2)
of the Securities
Act (as defined
below), and Rule 506 promulgated thereunder, the
Company desires to
issue
and sell to the Purchasers, and
the Purchasers,
severally and not
jointly,
desire to purchase from the
Company in the
aggregate, $5,000,000
principal
amount of the Company's 6.0%
Subordinated
Promissory Notes and Warrants to
purchase 5,000,000 shares of
Common Stock.
NOW,
THEREFORE, in consideration of the mutual covenants contained
in
this Agreement, and for
other good and
valuable consideration
the receipt
and adequacy of which are hereby acknowledged, the Company and each
Purchaser agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions.
In addition to the terms defined elsewhere in this
Agreement, for all purposes of
this Agreement, the following terms have the
meanings indicated in this Section
1.1:
"Affiliate" means any Person that, directly or indirectly
through
one or more intermediaries,
controls or is controlled by or is under common
control with a Person, as
such terms are used
in and construed under
Rule
144. With respect to a Purchaser, any investment fund or managed account
that is managed on a discretionary
basis by the same
investment manager
as
such Purchaser will be deemed to
be an Affiliate of such Purchaser.
"Agreement" shall have the meaning ascribed to such term in the
Preamble.
"Applicable Law" means any statute, law, rule or regulation or
any
judgment, order, writ, injunction
or decree of
any Governmental
Entity to
which a specified Person or
property is subject.
"Business Day" means any day except Saturday, Sunday and any
day
which shall be a federal legal holiday or a day on which banking
institutions in the State of Texas are authorized or required by law or
other governmental action to
close.
"Closing" shall have the meaning ascribed to such term in
Section
2.1(a).
"Closing Date" shall
have the meaning
ascribed to such term
in
Section 2.1(a).
"Commission" means the
United States Securities and Exchange
Commission.
"Common Stock" means
the common stock of
the Company, $.01
par
value per share, and any securities into which such common stock may
hereafter be reclassified.
"Company" shall have
the meaning ascribed
to such term in the
Preamble.
"Damages" shall have the meaning ascribed to such term in
Section
6.2.
"Disclosure Schedules" means the Disclosure Schedules
concurrently
delivered herewith.
"Exchange Act" means
the Securities
Exchange Act of 1934, as
amended.
"Final Memorandum"
means that certain
final Private Placement
Memorandum dated November 14, 2005
provided by the Company to the Purchasers
relating to the private offering
of the Securities.
"Governmental Entity"
means any court or tribunal in any
jurisdiction (domestic or foreign)
or any public, governmental or regulatory
body, agency, department,
commission, board,
bureau or other
authority or
instrumentality (domestic or
foreign).
"Person" means an individual or corporation, partnership,
trust,
incorporated or unincorporated
association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any
kind.
"PPM Draft" means that certain draft Private Placement Memorandum
dated November 14, 2005 provided
by the Company to the
Purchasers
relating
to the private offering of the
Securities.
"Proceedings"
means all
proceedings, actions, suits,
investigations, and inquiries
by or before
any arbitrator or
Governmental
Entity.
"Promissory Notes" means the 6.0% Subordinated Promissory Notes
of
the Seller, which shall be in the
form attached as Exhibit A hereto.
"Purchaser" shall have the meaning ascribed to such term in the
Preamble.
"Registrable Securities" means (a) the Warrant Shares or other
securities issued or issuable to each Purchaser or its transferee or
designee (i) upon exercise
of the Warrants, or
(ii) upon any
distribution
with respect to, any exchange for or any replacement of such Warrants or
(iii) upon any conversion,
exercise or exchange of any securities issued in
connection with any such distribution, exchange or replacement; (b)
securities issued or issuable upon any stock split, stock dividend,
recapitalization or similar event
with respect to the foregoing; and (c) any
other security issued as a
dividend or other
distribution with respect to,
in exchange for, or in replacement
or redemption of, any
of the securities
referred to in the preceding clauses; provided, however, that such
securities shall cease
to be Registrable Securities
when such securities
have been sold to or through a broker dealer or underwriter in a public
distribution or a public
securities transaction or when such securities may
be sold without any restriction pursuant
to Rule 144(k)
as determined
by
counsel to the Company.
"Registration Statement" shall have the meaning ascribed to
such
term in Section 4.4(b).
"Required Minimum" means the maximum aggregate number of shares
of
Common Stock then issued or
issuable pursuant to the Transaction Documents.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant
to the Securities Act, as such
Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as
such Rule.
"SEC Filings" shall
have the meaning
ascribed to
such term in
Section 3.1(h).
"Securities" means the
Promissory Notes,
the Warrants
and the
Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Warrants"
means the Series A Common Stock Purchase
Warrants, in the form of Exhibit B
hereto.
"Series B Warrants"
means the Series B Common Stock Purchase
Warrants, in the form of Exhibit C
hereto.
"Subordination Agreement" means the Subordination Agreement,
dated
as of the date hereof, by and
among the Purchasers, the Company and Comerica
Bank, in the form of Exhibit D
hereto.
"Subscription Amount" means, as to each Purchaser, the amount
set
forth beside such Purchaser's
name on Schedule 1
hereto, in United
States
dollars and in immediately
available funds.
"Transaction
Documents" means
this Agreement, the Promissory
Notes, the Warrants and any other documents or agreements executed in
connection with the transactions
contemplated hereunder.
"Warrants" means the Series A Warrants and the Series B
Warrants.
"Warrant Shares" means
the shares of Common
Stock issuable
upon
exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE
2.1 Closing.
(a) The closing
of the transactions contemplated under this
Agreement (the "Closing") will
take place as promptly as practicable, but no
later than five (5) Business Days following
satisfaction or waiver
of the
conditions set forth in
Sections 2.2 and 2.3
(other than those
conditions
which by their terms are not to
be satisfied or waived
until the
Closing),
at the offices of the Company at
2001 Walnut Hill Lane, Irving, Texas 75038
(or remotely via exchange of documents and signatures) or at such other
place or day as may be mutually acceptable to the Purchasers and the
Company. The date on which the
Closing occurs is the "Closing Date".
(b) At the Closing, the Purchasers shall purchase, severally
and
not jointly, and the Company shall issue and sell, in the aggregate,
$5,000,000 principal amount of Promissory Notes, Series A Warrants to
purchase 2,500,000 shares of
Common Stock and Series B Warrants to purchase
2,500,000 shares of Common Stock
on the Closing Date.
Each Purchaser
shall
purchase severally, and not
jointly, from the Company, and the Company shall
issue and sell to each Purchaser, a Promissory
Note in a principal
amount
equal to such Purchaser's
Subscription Amount
and Warrants to purchase the
number of shares of Common Stock as indicated on Schedule 1 for such
Purchaser.
2.2
Conditions to Obligations of Purchasers to Effect the Closing.
The
obligations of each Purchaser to effect the Closing and the transactions
contemplated by this Agreement
shall be subject to
the satisfaction at
or
prior to the Closing of each of
the following
conditions, any of which may
be waived, in writing, by such
Purchaser:
(a) At the Closing
(unless otherwise specified below) the Company
shall deliver or cause to be
delivered to each Purchaser the following:
(i) this Agreement,
duly executed by the Company;
(ii) a Promissory Note
in the principal amount equal to such
Purchaser's Subscription Amount as set forth on Schedule 1 hereto,
registered in the name of such
Purchaser;
(iii) a Series A
Warrant, registered in the name of such
Purchaser, pursuant to which such
Purchaser shall have the right to acquire
up to the number of shares of Common Stock as set forth on Schedule 1
hereto; and
(iv) a Series
B Warrant,
registered
in the name of such
Purchaser, pursuant to which such
Purchaser shall have the right to acquire
up to the number of shares of Common Stock as set forth on Schedule 1
hereto.
(b) All
representations and
warranties of the
Company contained
herein shall remain true and
correct as of the
Closing Date as though
such
representations and warranties were made on such date (except those
representations and warranties
that address matters only as of a particular
date will remain true and correct
as of such date) and
the Purchaser
shall
have received a certificate signed
by the Company's chief executive officer
and chief financial officer to
such effect.
(c) The Company
shall sell Promissory Notes with a minimum
aggregate principal amount of
$2,500,000.
(d) No Proceeding
shall,
on the Closing Date, be pending or
threatened seeking to restrain,
prohibit, or obtain damages or other relief
in connection with any Transaction Document or the consummation of the
transactions contemplated
thereby.
2.3 Conditions
to Obligations of the Company to Effect the Closing. The
obligations of the Company to effect the Closing and the transactions
contemplated by this Agreement
shall be subject to
the satisfaction at
or
prior to the Closing of each of the following conditions with respect
to
such Purchaser, any of which may
be waived, in writing, by the Company:
(a) At the Closing,
such Purchaser shall
deliver or cause to
be
delivered to the Company the
following:
(i) this Agreement,
duly executed by such Purchaser;
(ii) a Subordination Agreement; and
(iii) such Purchaser's Subscription Amount, by wire transfer
of immediately available
funds.
(b) All
representations and
warranties of
each such Purchaser
contained herein shall
remain true and
correct as of
the Closing Date
as
though such representations and
warranties were made on such date.
(c) No Proceeding
shall,
on the Closing Date, be pending or
threatened seeking to restrain,
prohibit, or obtain damages or other relief
in connection with any Transaction Document or the consummation of the
transactions contemplated
thereby.
(d) The Company
shall sell Promissory Notes with a minimum
aggregate principal amount of
$2,500,000.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1
Representations and Warranties of the Company. Except as set
forth
under the corresponding section of the Disclosure Schedules delivered
concurrently herewith, the Company hereby makes the following
representations and warranties as
of the date hereof and
as of the Closing
Date to each Purchaser:
(a) Corporate
Organization.
The Company is a
corporation duly
organized, validly existing,
and in good standing under the laws of the
State of Texas and has all
requisite corporate power and corporate authority
to own, lease, and operate
its properties and to
carry on its business
as
now being conducted.
(b) Qualification. The Company is duly qualified or licensed to
do business and is in good standing in each jurisdiction in which the
property owned, leased,
or operated by
it or the conduct of its business
requires such qualification or
licensing, except jurisdictions in which the
failure to be so qualified or licensed would not, individually or in the
aggregate, have a material adverse
effect on the
business, assets,
results
of operations, or financial
condition of the Company.
(c) Capitalization of the Company.
(i) The authorized
capital stock of the
Company consists of
(i) 30,000,000 shares of
Common Stock, of
which, as of November
14, 2005,
10,790,230 shares were
outstanding, and (ii)
1,000,000 shares of
Preferred
Stock, par value $100 per share,
of which, as of November 14, 2005, none of
which were outstanding.
All outstanding shares of capital stock of the
Company have been validly issued
and are fully paid and
nonassessable, and
no shares of capital stock of the
Company are subject to, nor have any been
issued in violation of,
preemptive or similar
rights. As of
November 14,
2005, (A) an aggregate of
1,444,881 shares of Common Stock are issuable upon
the exercise of outstanding
options granted under
the Company's 1995
Stock
Option Plan, (B) an aggregate of
500,000 shares of Common Stock are reserved
for issuance under the Company's 2004 Stock Option Plan, of which an
aggregate of 170,500 shares of
Common Stock are
issuable upon the
exercise
of outstanding options granted thereunder, (C) an aggregate of 1,250,000
shares of Common Stock are reserved for issuance under the Company's
Employee Stock Purchase
Plan, of which
an aggregate of
960,112 shares
of
Common Stock have been
issued thereunder, and
(D) an aggregate of
300,000
shares of a series of the
Company's Preferred
Stock designated as Series D
Preferred Stock are reserved for issuance upon the exercise of certain
preferred share purchase rights associated with the Common Stock, which
rights become exercisable by the holders thereof upon the occurrence of
certain events, including
the acquisition of,
or the announcement of the
intention to acquire, more than
15% of the outstanding
Common Stock by
any
Person or group.
(ii) Except as set forth above in this Section 3(c) and as
contemplated by this Agreement, as of November 14, 2005, there are
outstanding (A) no shares of
capital stock or other voting securities of the
Company, (B) no securities of the
Company convertible
into or
exchangeable
for shares of capital stock or
other voting
securities of the Company, (C)
no options or other rights to
acquire from the Company, and no obligation of
the Company to issue or
sell, any shares of
capital stock or other
voting
securities of the Company or any
securities of the Company convertible into
or exchangeable for such capital stock or voting securities, and (D) no
equity equivalents, interests in
the ownership or earnings, or other similar
rights of or with respect to the
Company.
(d) Authority Relative
to this Agreement.
The Company has full
corporate power and corporate
authority to execute, deliver, and perform the
Transaction Documents and to consummate the transactions contemplated
thereby. The execution, delivery, and
performance by the
Company of
the
Transaction Documents,
and the consummation by it of the transactions
contemplated thereby, have been
duly authorized by all
necessary
corporate
action of the Company.
The Transaction
Documents have been
duly executed
and delivered by the Company and constitute valid and legally binding
obligations of the Company, enforceable against
the Company in
accordance
with their respective terms,
except that such enforceability may be limited
by (i) applicable bankruptcy, insolvency, reorganization, moratorium,
and similar laws affecting creditors' rights generally, (ii) equitable
principles which may limit the availability
of certain equitable
remedies
(such as specific performance) in certain instances, and (iii) public
policy considerations with respect to the enforceability of rights of
indemnification.
(e) Noncontravention.
The execution, delivery, and performance by
the Company of the Transaction
Documents and the
consummation by it of
the
transactions contemplated thereby
do not and will not
(i) conflict with
or
result in a violation of any provision of the Restated Articles of
Incorporation or Bylaws of
the Company, (ii)
conflict with or
result in a
violation of any provision of, or
constitute (with or without the giving of
notice or the passage of time or
both) a default under,
or give rise (with
or without the giving of notice or
the passage of time or both) to any right
of termination, cancellation,
or acceleration under,
any bond, debenture,
note, mortgage, indenture, lease, agreement, or other instrument or
obligation to which the Company is
a party or by which the Company or any of
its properties may be bound, (iii)
result in the creation
or imposition of
any lien or encumbrance upon the
properties of the Company, or (iv) assuming
compliance with the matters referred to in Section 3.1(f), violate any
Applicable Law (as hereinafter
defined) binding upon the Company, except, in
the case of clauses (ii), (iii), and (iv) above, for any such conflicts,
violations, defaults,
terminations, cancellations, accelerations, liens, or
encumbrances which would not, individually or in the aggregate, have a
material adverse effect on the
business, assets,
results of operations,
or
financial condition of the Company or on the ability of the Company to
consummate the transactions
contemplated hereby.
(f) Governmental
Approvals.
No consent,
approval, order, or
authorization of, or declaration, filing, or registration with, any
Governmental Entity (as
hereinafter defined) is required to be obtained
or
made by the Company in connection with the execution, delivery, or
performance by the Company of the
Transaction Documents or the consummation
by it of the transactions contemplated
thereby, other than
(i) compliance
with any applicable requirements
of the Securities Act; (ii) compliance with
any applicable requirements of the
Exchange Act; (iii)
compliance with
any
applicable state securities laws;
and (iv) such consents, approvals, orders,
or authorizations which, if not
obtained, and such declarations, filings, or
registrations which, if not made, would not, individually or in the
aggregate, have a material adverse
effect on the
business, assets,
results
of operations, or financial
condition of the
Company or on the
ability of
the Company to consummate the transactions contemplated hereby. The
representations and warranties of the Company contained in this Section
3.1(f), insofar as such
representations and warranties pertain to compliance
by the Company with the requirements of the
Securities Act and
applicable
state securities laws, are
based on the
representations and
warranties of
the Purchasers contained in
Section 3.2.
(g) Authorization of
Issuance. The Securities have been duly
authorized for issuance
and, when issued
and delivered by
the Company
in
accordance with the provisions of
the applicable Transaction Documents, will
be validly issued, fully paid, and
nonassessable. The
Warrant Shares,
when
issued in accordance with
the terms of the
Transaction Documents,
will be
validly issued, fully paid and
nonassessable. The
Company has reserved from
its duly authorized capital stock a number of shares of Common Stock for
issuance of the Warrant Shares at
least equal to the Required Minimum on the
date hereof. The issuance of the Securities and the Warrant Shares
is not
subject to any preemptive or
similar rights.
(h) Private Placement Memorandum; SEC Filings.
(i) None of
the information contained in the Final
Memorandum, as of such date
or as of the
date hereof, contains
any untrue
statement of a material fact or
omits to state any material fact required to
be stated therein or necessary in order to make the statements contained
therein, in light of the circumstances under which they are made, not
misleading.
(ii) The Company has delivered to each Purchaser accurate and
complete copies of (A) the
Company
