SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 21, 1997
CARRINGTON LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
Texas 0-11997 75-1435663
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
2001 Walnut Hill Lane, Irving, Texas 75038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(972) 518-1300
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Item 5. Other Events.
On May 21, 1997, the Registrant repurchased all 330 outstanding
shares of its Series E Convertible Preferred Stock, par value $100 per
share (the "Series E Shares"), from the 10 holders thereof (the "Series
E Shareholders") for a total cash purchase price of approximately
$3,852,000. The purchase price was determined through discussions
between the Registrant and a representative of the Series E Shareholders
and was based on the original price at which the Series E Shareholders
had purchased the Series E Shares from the Registrant ($10,000 per
share) plus a premium of $1,490 per share (equal to the premium that
would have resulted from a conversion of the Series E Shares into Common
Stock of the Registrant at the applicable conversion price) plus
interest at the rate of 7% per annum on $10,000 per Series E Share from
February 15, 1997 through the date of the purchase (approximately
$60,000). The Registrant was already obligated to pay the interest
portion of the purchase price through May 15, 1997 pursuant to
agreements entered into with the Series E Shareholders in March 1997 in
connection with the Registrant's previous repurchase of other Series E
Shares. The Registrant used funds already on hand to pay the purchase
price of the Series E Shares. On May 31, 1997, the Registrant's balance
of cash and cash equivalents was approximately $1,173,000 excluding a
$1,500,000 certificate of deposit that is pledged to secure a letter of
credit issued to a supplier.
In connection with the May 21, 1997 repurchase of Series E Shares,
the Registrant and the Series E Shareholders agreed to terminate their
existing Registration Rights Agreements, thereby relieving the
Registrant of certain obligations, including (i) the obligation to
register the shares of Common Stock into which the Series E Shares were
convertible with the Securities and Exchange Commission, and (ii) the
obligation to pay the Series E Shareholders certain "periodic amounts"
if the registration statement covering such shares of Common Stock was
not declared effective on or before May 15, 1997.
The Series E Shareholders from whom the Registrant purchased the
Series E Shares were Kapok International Inc., Bridge Ltd., EuroFactors
International Inc., Bernstein, Liebhard & Lifshitz, Harmen Partners,
Wolfson Equities, The Tail Wind Fund Ltd., Colophon N.V., FTS Worldwide
Corporation, and Ramlu Trading Corporation.
<PAGE>
Pro forma balance sheet information as of March 31, 1997 follow
assuming the repurchase of the shares had been consummated as of that
date.
As Reported Pro forma
----------- ---------
Working Capital $ 10,377 $ 6,525
Total Assets 27,073 23,221
Shareholders' Investment 23,973 20,121
For earnings per share purposes, the preminum of $1,490 per share
($491,700) was previously recognized as a deduction from net income to
arrive at net income attributable to common stock holders in the fourth
quarter of 1996. Therefore, the payment of the premium will not impact
earnings per share for the quarter ended June 30, 1997. The $60,000
payment of interest, net of accrued interest recognized as a deduction
from net income to arrive at net income attributable to common stock
holders in the first quarter of 1997, will reduce earnings per share
attributable to common stock holders by approximately $.003 for the quarter
ended June 30, 1997 and would have reduced the loss per common and common
equivalent share available to common shareholders from $.74 to $.75 if this
transaction had been made as of the beginning of the fiscal year.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Item Exhibit
10.1 Form of Letter Agreement dated May 9, 1997
between the Registrant and each holder of
Series E Convertible Preferred Stock
10.2 Form of Second Offer and Agreement of Sale
and Purchase dated May 15, 1997 between
the Registrant and each holder of Series E
Convertible Preferred Stock
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Date: June 5, 1997 CARRINGTON LABORATORIES, INC.
By: ________________________________
Carlton E. Turner, Ph.D., D.Sc.
President and Chief Executive
Officer
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Date: June 5, 1997 CARRINGTON LABORATORIES, INC.
By: /s/ Carlton E. Turner
Carlton E. Turner, Ph.D., D.Sc.
President and Chief Executive
Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
10.1 Form of Letter Agreement dated May 9, 1997 between the
Registrant and each holder of Series E Convertible
Preferred Stock
10.2 Form of Second Offer and Agreement of Sale and
Purchase dated May 15, 1997 between the Registrant and
each holder of Series E Convertible Preferred Stock
<PAGE>
CARRINGTON LABORATORIES, INC.
2001 Walnut Hill Lane
Irving, Texas 75038
May 9, 1997
TO: Each Holder of Series E Convertible Preferred Stock
Carrington Laboratories, Inc. (the "Company") proposes to make an
offer (the "Offer") to purchase all of your shares of the Company's
outstanding Series E Convertible Preferred Stock (the "Series E Shares")
for cash. A summary of the principal terms of the proposed Offer is
enclosed. Neither this letter nor the enclosed summary constitutes the
Offer. The Offer, if made, will be set forth in a separate written
document to be sent to you in the near future.
As indicated in the enclosed summary, a condition to Carrington's
willingness to make the Offer is that each of the holders of the Series
E Shares (the "Series E Shareholders") agree in writing to the
following:
1. If all of the Series E Shareholders sign a counterpart of
this agreement and the Offer is made and accepted and the
Company's purchase of the Series E Shares is consummated
pursuant to the Offer,
(a) the Company will not be obligated to pay the "Periodic
Amounts" that would otherwise be payable pursuant to
the Registration Rights Agreements that the Company
entered into with the holders of the Series E Shares
in October 1996, as amended by the Offer and Agreement
of Sale and Purchase dated February 26, 1997 between
the Company and each of the Series E Shareholders, if
the Company's pending Form S-3 Registration Statement
(the "Registration Statement") is not declared
effective by the Securities and Exchange Commission
(the "SEC") on or before May 15, 1997; and
(b) the Company's obligation to pay 7% interest pursuant
to the Offer (as outlined in paragraph 1(b) of the
enclosed summary) will replace the Company's
obligation to pay 7% interest in respect of the Series
E Shares under the Offer and Agreement of Sale and
Purchase dated February 26, 1997 between the Company
and each Series E Shareholder (collectively, the
"First Repurchase Agreements").
<PAGE>
2. If all of the Series E Shareholders sign a counterpart of
this agreement and the Offer is not made and accepted or the
purchase of the Series E Shares is not consummated pursuant
to the Offer,
(a) the obligations of the Company to pay the Periodic
Amounts and the 7% interest will be reinstated
automatically to read as originally set forth in the
First Repurchase Agreements, except that paragraph 2
of the First Repurchase Agreements will be amended
automatically to change the May 15 and 16 and June 15
and 16 dates therein to dates that are, respectively,
30 and 31 days (in the case of the May dates) and 60
and 61 days (in the case of the June dates) after the
earlier of May 30, 1997 (if the Offer is not made on
or before that date) or the date on which the Offer is
rejected or withdrawn or expires without the purchase
of the Series E Shares being consummated pursuant
thereto; and
(b) within 48 hours after the earlier of May 30, 1997 (if
the Offer is not made on or before that date) or the
date on which the Offer is rejected or withdrawn or
expires without the purchase of the Series E Shares
being consummated pursuant thereto, the Company will
request that the SEC declare the Registration
Statement effective on the next business day following
the submission of such request.
If you want to receive the Offer and you agree to the terms set
forth in paragraphs 1 and 2 above, please so indicate by signing this
letter in the space provided below and returning it to the Company by
overnight delivery, or by telefacsimile (at (972) 756-0108), so that the
Company will receive it not later than noon, Central time, on May 14,
1997.
If the Company does not receive signed counterparts of this
agreement from all of the Series E Shareholders by the time stated in
the immediately preceding paragraph, the Company may elect not to make
the Offer and may seek to have the Registration Statement declared
effective by the SEC on May 15, 1997.
Sincerely,
CARRINGTON LABORATORIES, INC.
By: ______________________________
Sheri L. Pantermuehl
Treasurer and Chief Financial
Officer
Accepted and agreed to as of the date first set forth above:
Name of Series E Shareholder
By:__________________________
Name:________________________
Title:_______________________
<PAGE>
CARRINGTON LABORATORIES, INC.
2001 Walnut Hill Lane
Irving, Texas 75038
SECOND OFFER AND AGREEMENT OF SALE AND PURCHASE
May 15, 1997
TO: Each Holder of Series E Convertible Preferred Stock
This letter constitutes an offer (the "Offer") by Carrington
Laboratories, Inc. (the "Company") to purchase all outstanding shares of
the Company's Series E Convertible Preferred Stock (the "Series E
Shares") for the consideration, and subject to the terms, set forth
herein. If you accept the Offer with respect to your Series E Shares,
this letter will also constitute a legally binding agreement (this
"Agreement") between the Company and you in accordance with the terms
hereof. In addition, if the holders of all of the Series E Shares
accept the Offer, and the purchases contemplated by the Offer are
consummated, this Agreement will have the effect of terminating the
Registration Rights Agreements that the Company entered into with you
and the other holders of the Series E Shares (the "Series E
Shareholders") in October 1996 (collectively, the "Registration
Agreements"), as amended by the Offer and Agreement of Sale and Purchase
dated February 26, 1997 between the Company and each of the Series E
Shareholders. (The Registration Agreements, as so amended, are
hereinafter collectively called the "Amended Registration Agreements.")
More specifically, the terms of this Agreement are as follows:
1. Agreement of Sale and Purchase. At the Closing (as herein
defined), and subject to you and the other Series E Shareholders
tendering an aggregate of 330 Series E Shares to the Company for
purchase, the Company will purchase from you, and you will sell to the
Company, all of your Series E Shares (including fractional shares) in
consideration of the payment of the purchase price payable by the
Company to you at the Closing in the amount set forth in Paragraph 2
hereof. At or before the Closing, (i) you will deliver your stock
certificate representing all of your Series E Shares, together with a
duly executed Stock Power in the form enclosed herewith, to the Company
in care of First Granite Securities, Inc., as agent (the "Agent"), at
1276 50th Street, Suite 700, Brooklyn, New York 11210, and (ii) the
Company will wire transfer to the Agent (or, if you so elect, to you)
funds in the amount of the purchase price payable to you for your Series
E Shares at the Closing.
[Note: Please indicate in the blank beside your signature block
on page 3 of this Agreement the number of Series E Shares you are
tendering for purchase by the Company pursuant to the Offer. If you
prefer to have the cash payment set forth in Paragraph 2 wire
transferred directly to your account rather than to the Agent, please so
indicate by completing the optional wire transfer instructions beside
your signature block on page 3 of this Agreement.]
<PAGE>
The closing of the sale and purchase of the Series E Shares (the
"Closing") will occur at 10:00 a.m., Eastern Time, on May 21, 1997 or on
such earlier date as the Company may, in its discretion, designate
following the Agent's receipt of stock certificates and duly executed
Stock Powers for 330 Series E Shares. If the Agent does not receive
stock certificates and Stock Powers for an aggregate of 330 Series E
Shares by 6:00 p.m., Eastern Time, on May 20, 1997, the Offer will
expire. Notwithstanding the foregoing, the Company reserves the right
at its discretion to withdraw or amend the Offer at any time prior to
the Closing or to extend the Offer and the date of the Closing beyond
the above-specified time and date of expiration.
2. Purchase Price. At the Closing, the Company will pay you,
as the purchase price for your Series E Shares, an amount equal to the
sum of
(a) $11,490 for each whole Series E Share, and a pro rata
portion of that amount for any fractional Series E Share,
that the Company purchases from you, plus
(b) interest at the rate of 7% per annum on $10,000 for each
whole Series E Share, and interest at the rate of 7% per
annum on a pro rata portion of $10,000 for any fractional
Series E Share, that the Company purchases from you for the
period from February 15, 1997 through the date of the
Closing.
3. Certain Representations. The Company represents and
warrants that it is duly authorized, and has full corporate power and
authority, to execute, deliver and perform this Agreement. You
represent and warrant to the Company that (i) you have received and read
the Confidential Disclosure Memorandum dated May 15, 1997, delivered to
you by the Company in connection with the Offer, and each of the
documents incorporated by reference therein as listed on pages 1 and 2
thereof; (ii) you are duly authorized, and have full power and
authority, to execute, deliver and perform this Agreement; and (iii) you
have, and at the Closing the Company will receive, good and marketable
title to all of the Series E Shares registered in your name and tendered
by you for purchase pursuant to the Offer, free and clear of any liens,
security interests, pledges, voting trusts, voting agreements, stock
transfer restrictions or other encumbrances of any nature whatsoever.
4. Termination of Amended Registration Agreement. Upon
consummation of the Company's purchase of your Series E Shares pursuant
to the Offer, the Amended Registration Agreement between you and the
Company will terminate automatically, and you and the Company will
thereafter have no further liabilities or obligations to each other
thereunder.
5. Miscellaneous Provisions.
(a) Applicable Law. This Agreement will be governed by,
and construed in accordance with, the laws of the
State of New York.
<PAGE>
(b) Entire Agreement; Amendment. This Agreement
constitutes the entire agreement between the Company
and you with respect to the subject matter hereof.
This Agreement may not be amended except by an
instrument in writing executed by both the Company and
you.
(c) Successors and Permitted Assigns. This Agreement will
be binding upon, and will inure to the benefit of, the
Company, its successors and assigns, and you, your
successors, assigns, heirs, devisees and personal
representatives. Neither the Company nor you may
assign this Agreement without the prior written
consent of the other party hereto.
If you wish to accept the Offer, and if this Agreement correctly
reflects your understanding with the Company, please so indicate by
completing and signing this Agreement and returning a signed original of
this Agreement to the Agent, together with your stock certificate and
duly executed Stock Power.
Sincerely yours,
CARRINGTON LABORATORIES, INC.
By:
Sheri L. Pantermuehl
Treasurer and Chief Financial
Officer
ACCEPTED AND AGREED:
____________________
[Print or Type Name of Number of Series E Shares
Shareholder of Record] Tendered for Purchase:
_________________________________
By:________________________ Optional Wire Transfer Instructions:
[Signature of Authorized Person]
Bank:_____________________________
Name:_______________________
Account No.:______________________
Title:______________________
ABA Routing No.:__________________
cc: First Granite Securities, Inc.
Samuel Krieger, Esq.
<PAGE>
