SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or
(S) 240.14a-12
CARRINGTON LABORATORIES, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other
than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
1) Title of each class of securities to which
transaction applies:
2) Aggregate number of securities to which
transaction applies:
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was
determined):
4) Proposed maximum aggregate value of
transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee
was paid previously. Identify the previous filing
by registration statement number, or the Form or
Schedule and the date of its filing.<PAGE>
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
CARRINGTON LABORATORIES, INC.
2001 Walnut Hill Lane
Irving, Texas 75038
(214) 518-1300
SUPPLEMENT TO PROXY STATEMENT
For Annual Meeting of Shareholders
To Be Held On May 14, 1998
This Supplement to Proxy Statement ("Supplement") is furnished
to the shareholders of Carrington Laboratories, Inc. (the "Company")
in connection with the solicitation of proxies by the Board of
Directors of the Company for use at the annual meeting of
shareholders to be held on May 14, 1998 (the "annual meeting"), and
supplements the Proxy Statement dated April 14, 1998 (the "Proxy
Statement") previously furnished to the Company's shareholders. The
approximate date on which this Supplement and the accompanying proxy
are first being sent to shareholders is April 24, 1998.
ADDITIONAL INFORMATION AFFECTING PROPOSAL TO
APPROVE AMENDMENTS TO 1995 STOCK OPTION PLAN
As described in the Proxy Statement, one of the items that
shareholders of the Company will be asked to vote on at the annual
meeting is a proposal to approve amendments (the "1998 Amendments")
to the Company's 1995 Stock Option Plan (the "Option Plan"). See
"Proposal to Approve Amendments to 1995 Stock Option Plan" on pages
7-15 of the Proxy Statement. Among the information disclosed in that
section of the Proxy Statement is the fact that, effective January
30, 1998, the Company granted certain options (collectively, the
"January director options") to the six non-employee directors
("outside directors") of the Company to purchase shares of the
Company's Common Stock ("Common Stock") at a price of $4.8125 per
share. The January director options consisted of (i) options for an
aggregate of 52,500 shares issued in exchange for old options for the
same aggregate number of shares, which old options were surrendered
by the outside directors in connection with an option exchange offer
that the Company also made to its employees; (ii) options for an
aggregate of 15,000 shares (2,500 for each outside director), for
which no old options were surrendered; and an option for 32,600
shares granted to Thomas J. Marquez to replace two options that had
previously terminated due to his ceasing to be an employee-director
and becoming an outside director. The January director options were
subject to the approval by the shareholders of the 1998 Amendments
and could not be exercised unless and until the shareholders approved
the 1998 Amendments.
<PAGE>
After preparation of the Proxy Statement had been completed, the
Company became aware of an accounting rule applicable to stock
options that are granted prior to, and subject to, an amendment to a
stock option plan that requires shareholder approval. That rule
provides that if stock options are granted subject to shareholder
approval of an amendment to the stock option plan governing the
options, and if the market price of the stock on the date that the
shareholders approve the amendment is in excess of the exercise price
of the options that were granted subject to that approval, the
difference in price constitutes compensation expense to the company
that granted the options. The effect of this rule is to reduce the
company's pre-tax earnings by the amount of the difference between
the two amounts, multiplied by the number of affected option shares.
Under the accounting rule mentioned above, if the shareholders
approve the 1998 Amendments at the annual meeting, and if the closing
price of the Common Stock on the Nasdaq Stock Market ("Nasdaq") on
the date of that approval were in excess of the exercise price of the
January director options, the Company would be required to treat the
excess as a compensation expense, which would have the effect of
reducing the Company's 1998 pre-tax earnings. For example, if the
shareholders approve the 1998 Amendments on May 14, 1998, and the
closing price of the Common Stock on Nasdaq on that date were
$5.8125, the Company would be required to treat as compensation
expense the difference between that amount and the exercise price of
the January director options, multiplied by the number of shares
covered by the January director options, as follows:
($5.8125 - $4.8125) x 100,100 shares = $100,100 compensation
expense
In this example, the effect of the rule would be to reduce the
Company's 1998 pre-tax earnings by $100,100.
On April 20, 1998, the closing price of the Common Stock on
Nasdaq was $6.375 per share.
Rescission of January Director Options and Conditional Grant of
Outside Director Replacement Options
<PAGE>
In light of the effect of the accounting rule described above,
the Stock Option and Compensation Committee (the "Committee") of the
Company's Board of Directors, with the consent of the outside
directors, has rescinded the January director options and, subject to
the approval by shareholders of the 1998 Amendments, has authorized
the grant of replacement options to the outside directors
(collectively, the "replacement options") for the same numbers of
shares on the date of the annual meeting. The exercise price of the
replacement options would be equal to the closing price of the Common
Stock on Nasdaq on the date of the annual meeting. The replacement
options would be identical to the rescinded January director options,
as described in the Proxy Statement, except that (i) the four-year
term of the replacement options would begin on their date of grant,
whereas the four-year term of the rescinded January director options
began on January 30, 1998; (ii) the replacement options would be
exercisable in whole or in part at any time from their date of grant
until the expiration of their four-year term; and (iii) the exercise
price of the replacement options would be equal to the closing price
of the Common Stock on Nasdaq on their date of grant. That price
could be higher or lower than the exercise price of the rescinded
January director options.
The rescission of the January director options will enable the
Company to avoid the compensation expense and reduction of 1998 pre-
tax earnings that would have otherwise occurred if the January
director options remained outstanding, the shareholders approved the
1998 Amendments, and the closing price of the Common Stock on Nasdaq
on the date of that approval was more than $4.8125 per share.
If the shareholders do not approve the 1998 Amendments, the
replacement options will not be granted, and the options for a total
of 52,500 shares that the outside directors surrendered in exchange
for January director options for the same aggregate number of shares
will be reinstated, except to the extent that any of those
surrendered options shall have expired since they were surrendered.
<PAGE>
Amendment of New Plan Benefits Table in Proxy Statement
As a result of the actions described above, the information
shown in the table under "Proposal to Approve Amendments to 1995
Stock Option Plan - New Plan Benefits" in the Proxy Statement has
changed insofar as the Non-Executive Director Group is concerned.
That entry in the table and the related footnotes should now read as
follows:
No. of Shares
Underlying Exercise Price Expiration Date
Name and Position New Options of New Options of New Options
Non-Executive Director 100,100(3) Closing Price of 05/13/02
Group (2) Common Stock
on Nasdaq on
Date of Grant
(2) Includes Robert A. Fildes, Ph.D., who is currently serving
as interim Executive Vice President, Research and
Development but is not an employee of the Company.
(3) Includes options for an aggregate of 52,500 shares to be
issued in exchange for old surrendered options for the same
aggregate number of shares; options to be issued for an
aggregate of 15,000 shares, for which no old options were
surrendered; and an option for 32,600 shares to be granted
to Thomas J. Marquez to replace options that had previously
terminated.
Recommendation of the Board of Directors
AS INDICATED IN THE PROXY STATEMENT, THE BOARD OF DIRECTORS
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE
1998 AMENDMENTS TO THE OPTION PLAN. PROXIES RECEIVED IN RESPONSE TO
THE SOLICITATION BY THE BOARD OF DIRECTORS WILL BE VOTED IN FAVOR OF
THE PROPOSAL UNLESS SHAREHOLDERS SPECIFY OTHERWISE.
<PAGE>
RETURN OF PROXY
Enclosed is a form of proxy that is identical to the form of
proxy that accompanied the Proxy Statement. If you have not already
returned your proxy, you are urged to mark, sign and date the
enclosed proxy and return it promptly in the enclosed envelope,
regardless of whether you plan to attend the meeting in person. If
you have already returned your proxy but wish to revoke it and change
your vote, you may do so by promptly marking, signing and dating the
enclosed proxy and returning it in the enclosed envelope. In such
event, please be sure that you date the enclosed proxy as of a later
date than your earlier proxy. If you attend the meeting in person,
you may withdraw your proxy and vote in person, if you wish. The
prompt return of proxies will assure the representation of sufficient
shares to take the actions described in the Proxy Statement and save
your Company the expense of further solicitation.
By Order of the Board of Directors
George DeMott
Chairman of the Board
Irving, Texas
April 21, 1998
