Archive for the ‘Promissory Note’ category

Carrington Laboratories Inc Promissory Note and Warrant Agreement from RealDealDocs.com

June 4, 2008

Another double header for you today: both a Promissory Note and a Warrant Agreement from Amlaw pro bono honored law firm Patterson, Belk Webb & Tyler. This copy is complimentary from my friends at RealDealDocs.com – the online leader in legal documents. To search millions of legal docs for free, please visit www.RealDealDocs.com!

 

                                                                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

                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’s Annual Report on Form 10-K for the year

 ended December 31, 2004, (B) the Company’s Annual Report to Shareholders for

 the fiscal year ended December 31,  2004, (C) the Company’s Proxy  Statement

 dated April 14, 2005,  relating to the 2005  Annual Meeting of  Shareholders

 and (D) the Company’s  Quarterly Report on Form  10-Q for the quarter  ended

 September 30, 2005, in each case in the  form filed by the Company with  the

 Commission (collectively,  the “SEC  Filings”).   None of  the SEC  Filings,

 including,  without  limitation,  any  financial  statements  or   schedules

 included therein, as  of the date  of filing thereof,  contained any  untrue

 statement of a material fact or omitted 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 were  made,  not

 misleading.  The  financial statements of  the Company included  in the  SEC

 Filings present  fairly, in  conformity with  generally accepted  accounting

 principles applied on a consistent basis (except as may be indicated in  the

 notes thereto), the consolidated financial position of the Company as of the

 dates thereof and its consolidated results of operations and cash flows  for

 the periods then ended (subject to normal year-end audit adjustments in  the

 case of any unaudited interim financial statements).

 

           (i) Absence  of Undisclosed  Liabilities.   Except  as and  to the

 extent disclosed in the  Private Placement Memorandum  and the SEC  Filings,

 (a) as of September 30, 2005, the Company had no liabilities or  obligations

 (whether accrued, absolute, contingent, unliquidated, or otherwise) material

 to the  Company, and  (b) since  September  30, 2005,  the Company  has  not

 incurred any  such material  liabilities or  obligations, other  than  those

 incurred in the ordinary course of business.

 

           (j) Absence  of  Certain  Changes.   Except  as  disclosed  in the

 Private Placement Memorandum and the SEC Filings, since September 30,  2005,

 there has not  been any  material adverse  change in  the business,  assets,

 results of operations, or financial condition of the Company.

 

           (k) Scope of  Representations and Warranties.  Except as set forth

 in this Agreement, the Company makes no representations or warranties to the

 Purchasers and hereby  disclaims all  liability and  responsibility for  any

 representation, warranty,  statement, or  information made  or  communicated

 (orally or in writing)  to any Purchaser (including  but not limited to  any

 opinion, information, projection, or advice that  may have been provided  to

 the Purchasers  by any  officer, director,  employee, agent,  consultant  or

 representative of the Company).

 

     3.2 Representations  And  Warranties Of The Purchasers.  Each  Purchaser

 hereby, for itself and for no other Purchaser, represents and warrants as of

 the date hereof and as of the Closing Date to the Company as follows:

 

           (a) Organization.  Such Purchaser  (other than  individuals) is an

 entity duly organized, validly existing and in good standing under the  laws

 of the jurisdiction of its organization.

 

           (b) Authority Relative to this Agreement.  Such Purchaser has full

 power and  authority  to  execute,  deliver,  and  perform  the  Transaction

 Documents and to consummate the transactions contemplated thereby.  If  such

 Purchaser is an  entity, the execution,  delivery, and  performance by  such

 Purchaser of  the Transaction  Documents to  which it  is a  party, and  the

 consummation by it of the transactions contemplated thereby, have been  duly

 authorized by all necessary corporate, or similar action on the part of such

 Purchaser.  Each of the Transaction  Documents to which such Purchaser is  a

 party has been duly executed and delivered by such Purchaser and constitutes

 a valid  and  legally  binding obligation  of  such  Purchaser,  enforceable

 against such  Purchaser  in accordance  with  its 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.

 

           (c) Noncontravention.  The execution, delivery, and performance by

 such Purchaser of the Transaction Documents to  which it is a party and  the

 consummation by it of the transactions contemplated thereby do not and  will

 not (i) if  such  Purchaser is  an  entity, conflict  with  or result  in  a

 violation of any provision of the charter, bylaws, or similar organizational

 documents of such Purchaser or (ii) violate any Applicable Law binding  upon

 such Purchaser, except for any such violations which would not, individually

 or in the aggregate affect the  ability of such Purchaser to consummate  the

 transactions contemplated hereby.

 

           (d) Governmental  Approvals.    No  consent,  approval,  order, or

 authorization  of,  or  declaration,  filing,  or  registration  with,   any

 Governmental Entity is required to be obtained or made by such Purchaser  in

 connection with the execution, delivery, or performance by such Purchaser of

 the Transaction Documents to which it is  a party or the consummation by  it

 of the transactions contemplated thereby.

 

           (e) General  Solicitation.  Such Purchaser  is not  purchasing the

 Securities as  a  result of  any  advertisement, article,  notice  or  other

 communication regarding the Securities published in any newspaper,  magazine

 or similar media or broadcast over  television or radio or presented at  any

 seminar or any other general solicitation or general advertisement.

 

           (f) No  Public   Sale  or  Distribution.  Such  Purchaser  is  (i)

 acquiring the Promissory Notes  and Warrants and (ii)  upon exercise of  the

 Warrants will acquire the Warrant Shares, for its own account and not with a

 view towards,  or  for  resale  in  connection  with,  the  public  sale  or

 distribution thereof; provided, however, that by making the  representations

 herein, such Purchaser does not agree to hold any of the Securities for  any

 minimum or other  specific term  and reserves the  right to  dispose of  the

 Securities at any  time in  accordance with  or pursuant  to a  registration

 statement or an exemption under the Securities Act.  Such Purchaser does not

 have any agreement or understanding, directly or indirectly, with any Person

 to distribute any of the Securities.

 

           (g) Purchaser  Status. At the time  such Purchaser was offered the

 Securities, it was, and at the date hereof it is, and on each date on  which

 it exercises any Warrants, it will  be either: (i) an “accredited  investor”

 as defined  in  Rule 501  under  the Securities  Act  or (ii)  a  “qualified

 institutional buyer” as defined in Rule 144A under the Securities Act.  Such

 Purchaser is a resident of the jurisdiction set forth below such Purchaser’s

 name  on Schedule  1 attached hereto.  Such Purchaser  is not acquiring  the

 Securities as  part  of a  “group”  as  such term  is  generally  understood

 pursuant to Section 13(d) of Regulation 13D-G of the Exchange Act or if such

 Purchaser is a member  of a group, the group  will beneficially own,  within

 the meaning of Section 13(d) of  Regulation 13D-G of the Exchange Act,  less

 than 15%  of  the Common  Stock  after  giving effect  to  the  transactions

 contemplated hereby.

 

           (h) Reliance  on  Exemptions.  Such  Purchaser  understands   that

 the  Promissory  Notes and Warrants  are  being  offered  and  sold  to  the

 Purchasers   in  reliance  on  specific  exemptions  from  the  registration

 requirements  of United States federal  and state  securities laws  and that

 the Company is relying in part upon the  truth  and  accuracy of,  and  such

 Purchaser’s compliance  with,  the representations,  warranties, agreements,

 acknowledgments and understandings  of such  Purchaser set  forth herein  in

 order to determine the availability of  such exemptions and the  eligibility

 of such Purchaser to acquire the Promissory Notes and Warrants.

 

           (i) Information.  Such Purchaser  and its  advisors, if  any, have

 been furnished  with  all  publicly  available  materials  relating  to  the

 business, finances and  operations of the  Company and  such other  publicly

 available materials relating to the offer  and sale of the Promissory  Notes

 and Warrants as have  been requested by such  Purchaser. Such Purchaser  has

 received a copy of  the Final Memorandum, and  acknowledges and agrees  that

 (a) the Final Memorandum supersedes the PPM Draft and (b) such Purchaser  is

 not  relying  on  the  PPM  Draft  in  making  the  investment  contemplated

 hereunder.  Such Purchaser and its advisors, if any, have been afforded  the

 opportunity to ask questions of the Company. Neither such inquiries nor  any

 other due  diligence  investigations  conducted by  such  Purchaser  or  its

 advisors, if any, or its representatives shall modify, amend or affect  such

 Purchaser’s right to  rely on the  Company’s representations and  warranties

 contained herein.  Such Purchaser  understands that  its investment  in  the

 Promissory Notes and Warrants involves a high degree of risk. Other than  to

 other  Persons  party  to  this  Agreement,  Purchaser  has  maintained  the

 confidentiality of  all  disclosures made  to  it in  connection  with  this

 transaction (including the existence and terms of this transaction).

 

           (j) Experience of  Such Purchaser. Such Purchaser, either alone or

 together with its  representatives, has such  knowledge, sophistication  and

 experience  in  business  and  financial  matters,  including  investing  in

 companies engaged in the business in which the Company is engaged, so as  to

 be capable of evaluating the merits and risks of the prospective  investment

 in the Promissory Notes  and Warrants, and has  so evaluated the merits  and

 risks of such investment. Such Purchaser  is able to bear the economic  risk

 of an investment in the Promissory Notes and Warrants and is able to  afford

 a complete loss of such investment.

 

           (k) No  Governmental  Review. Such  Purchaser understands  that no

 United  States  federal  or  state  agency   or  any  other  government   or

 governmental agency has passed on or made any recommendation or  endorsement

 of the Promissory Notes and Warrants  or the fairness or suitability of  the

 investment in the Promissory Notes and  Warrants, nor have such  authorities

 passed upon or endorsed the merits  of the offering of the Promissory  Notes

 and Warrants.

                                 ARTICLE IV

                       OTHER AGREEMENTS OF THE PARTIES

 

     4.1 Transfer Restrictions.

 

           (a) The  Securities may  only  be disposed  of in  compliance with

 state and  federal  securities laws.  In  connection with  any  transfer  of

 Securities other than  pursuant to an  effective registration statement,  to

 the Company or to an Affiliate of a Purchaser (who is an accredited investor

 and executes a customary representation letter), the Company may require the

 transferor thereof to provide to the Company an opinion of counsel  selected

 by the  transferor,  the  form  and substance  of  which  opinion  shall  be

 reasonably satisfactory to  the Company, to  the effect  that such  transfer

 does not  require  registration of  such  transferred Securities  under  the

 Securities Act.

 

           (b) As  a condition  to such  transfer, any  such transferee shall

 agree in writing to be bound by the  terms of this Agreement and shall  have

 the rights of a Purchaser under this Agreement.

 

           (c) While  any  Warrants  of  such  Purchaser  are  outstanding, a

 Purchaser may  not  transfer  its  Promissory  Note  unless  such  Purchaser

 simultaneously  transfers   (in  compliance   with  this   Agreement)   such

 Purchaser’s Warrants, and  while any Promissory  Note of  such Purchaser  is

 outstanding, a Purchaser may  not transfer any of  its Warrants unless  such

 Purchaser simultaneously transfers (in compliance with this Agreement)  such

 Purchaser’s Promissory Note.

 

     4.2 Legends.   It is agreed and understood  by each  Purchaser that  the

 form of Promissory Note, form of Warrants and any certificates  representing

 the Securities  to be  purchased by  it or  into which  such Securities  are

 convertible shall each conspicuously set forth on the face or back  thereof,

 in addition to any other legends required by agreement or Applicable Law,  a

 legend in substantially the following form:

 

           THE  SECURITIES   REPRESENTED  HEREBY   HAVE  NOT   BEEN

           REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,

           AND MAY NOT BE  OFFERED, SOLD, ASSIGNED OR  TRANSFERRED,

           IN THE ABSENCE  OF AN  EFFECTIVE REGISTRATION  STATEMENT

           UNDER SAID ACT  OR UNLESS  THE COMPANY  HAS RECEIVED  AN

           OPINION  OF  COUNSEL  REASONABLY  SATISFACTORY  TO   THE

           COMPANY  THAT  REGISTRATION  UNDER   SAID  ACT  IS   NOT

           REQUIRED.

 

           THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN

           RESTRICTIONS ON TRANSFER CONTAINED IN A PROMISSORY  NOTE

           AND WARRANT  PURCHASE AGREEMENT  AMONG THE  COMPANY  AND

           CERTAIN OTHER PARTIES THERETO. A COPY OF SUCH  AGREEMENT

           AND ALL APPLICABLE AMENDMENTS THERETO WILL BE  FURNISHED

           BY THE COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE  UPON

           WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF

           BUSINESS OR REGISTERED OFFICE.

 

     4.3 Public  Announcements.   No  Purchaser  or any  of  their respective

 Affiliates shall  issue  any press  release  or otherwise  make  any  public

 statement with  respect to  the Transaction  Documents or  the  transactions

 contemplated thereby without the prior written consent of the Company.

 

     4.4 Registration Rights.

 

           (a) Registration  of  Registrable  Securities.    Subject  to  the

 occurrence of the Closing  and the terms and  provisions of this  Agreement,

 the Company shall use  its commercially reasonable  efforts to register  the

 Registrable Securities with the Commission under  the Securities Act  to the

 extent requisite to  permit the  sale or  other disposition  thereof by  the

 Purchasers.

 

           (b) Registration  Procedures.  The commercially reasonable efforts

 of the  Company under  Section  4.4(a) shall  mean  that the  Company  will,

 subject  to  the  terms  and  provisions  of  this  Section  4.4,  use   its

 commercially reasonable efforts to:

 

                (i)  prepare  and  file with the  Commission within  90  days

 following  the   Closing  a   registration  statement   (the   “Registration

 Statement”) covering the Registrable  Securities and cause the  Registration

 Statement to  become  effective  and to  keep  such  Registration  Statement

 continuously effective under the  Securities Act until such  date as is  the

 earlier of (A)  the date  when all  Registrable Securities  covered by  such

 Registration  Statement  have  been   sold  pursuant  to  the   Registration

 Statement, and (B) with respect to any holder, such time as all  Registrable

 Securities held by such holder may be sold without any restriction  pursuant

 to Rule 144;

 

                (ii) prepare and file with the Commission such amendments and

 supplements to  the  Registration  Statement and  the  prospectus  contained

 therein as may be  necessary to keep  the Registration Statement  effective,

 and comply with the  provisions of the Securities  Act, with respect to  the

 sale or  other  disposition  of  the  Registrable  Securities  whenever  the

 Purchasers shall desire to sell or  otherwise dispose of the same, but  only

 to the extent provided in this Section 4.4;

 

                (iii) furnish to each Purchaser such numbers of copies of the

 Registration Statement,  the prospectus  contained therein  (including  each

 preliminary  prospectus),  and   each  amendment  and   supplement  to   the

 Registration  Statement  and  such   prospectus,  in  conformity  with   the

 requirements of the Securities Act, as such Purchaser may reasonably request

 in order to  facilitate the  sale or  other disposition  of the  Registrable

 Securities;

 

                (iv) register or qualify the Registrable Securities for  sale

 under the securities or blue sky laws  of such states as the Purchasers  may

 reasonably request (except to the  extent exemptions from such  registration

 or qualification are available),  and do any and  all other acts and  things

 that may reasonably be necessary under  such securities or blue sky laws  to

 enable the Purchasers  to consummate the  sale or other  disposition of  the

 Registrable Securities in such states,  provided, however, that the  Company

 shall not  in  any  event be  required  to  keep any  such  registration  or

 qualification in effect after the expiration of the period during which  the

 Company maintains the effectiveness of the Registration Statement and  shall

 not for any such purpose be required to qualify to do business as a  foreign

 corporation in any state wherein it is not so qualified or to subject itself

 to taxation in any such state; and

 

                (v) before  filing the Registration Statement, any prospectus

 to be used in connection with the  offering to be conducted pursuant to  the

 Registration Statement, or any amendments or supplements to the Registration

 Statement or such prospectus  with the Commission,  furnish counsel to  each

 Purchaser with copies of all such documents proposed to be filed.

 

           (c) Required  Information.  The  Company shall not  be required to

 use its  commercially  reasonable  efforts  to  register,  or  maintain  the

 effectiveness of any registration of, Registrable Securities of a  Purchaser

 under the Securities Act or  the securities or blue  sky laws of any  states

 unless and until such  Purchaser furnishes to  the Company such  information

 regarding such Purchaser  and its  Registrable Securities  and the  intended

 method of  disposition of  such Registrable  Securities as  the Company  may

 reasonably request in order to satisfy  the requirements applicable to  such

 registration.

 

           (d) Limitations  on Registration.   The  rights of  the Purchasers

 pursuant to this Section 4.4 shall be subject to the following limitations:

 

                (i) If  at   any  time  or  from  time  to  time  during  the

 effectiveness of the Registration  Statement, the Company  is engaged in  or

 proposes to engage  in a  registered public  offering of  securities of  the

 Company or  any other  transaction  or activity  which,  in the  good  faith

 determination of the Board of Directors  of the Company, would be  adversely

 affected by offers or  sales of the Registrable  Securities pursuant to  the

 Registration Statement to the detriment of the Company, then the  Purchasers

 shall, upon the  written request  by the  Company, cease  making offers  and

 sales of the Registrable Securities  pursuant to the Registration  Statement

 (including sales pursuant  to Rule  144 under  the Securities  Act) for  the

 period of time specified by the  Company, which period shall not (i) in  the

 case of a registered public offering,  exceed the period beginning ten  days

 prior to the effective date of  the registration statement relating to  such

 offering and ending 120 days after such effective date, and (ii) in the case

 of any other transaction or activity,  exceed the period beginning ten  days

 prior to, and ending 120 days after, the date of commencement of such  other

 activity or date of consummation of such other transaction.  Each  Purchaser

 agrees to  enter  into such  further  agreements  with the  Company  or  any

 underwriter of securities of the Company deemed necessary by the Company  or

 any such underwriter to carry out the purposes  of this subsection (i).  The

 period of time that the Company  is obligated to maintain the  effectiveness

 of the Registration Statement  hereunder shall be  tolled during the  period

 the Purchasers  must  cease  making offers  and  sales  of  the  Registrable

 Securities pursuant to the Company’s request under this subsection (i).

 

                (ii) The  obligations  of  the Company  pursuant  to Sections

 4.4(a) and  (b)  shall  cease  (i) as  to  Registrable  Securities  sold  or

 otherwise disposed of pursuant to the Registration Statement or Section 4(1)

 of the Securities Act, or sold or otherwise  disposed of in any manner to  a

 person which, by virtue of this Section  4.4, is not entitled to the  rights

 provided by this Section 4.4, and (ii) as to Registrable Securities eligible

 for sale  pursuant to  Rule 144  promulgated under  the Securities  Act,  as

 amended from  time  to time,  or  any similar  rule  that may  hereafter  be

 adopted.

 

                (iii) In no event shall the Company be obligated to have more

 than  one  Registration  Statement  with  respect  to  the  registration  of

 Registrable Securities under the  Securities Act be  effective at any  given

 time, however if the conditions in (A)  or (B) of Section 4.4(b)(i) are  not

 satisfied and  the resale  of the  Registrable  Securities pursuant  to  the

 Registration Statement will no longer be allowed  as a result of the 3  year

 limitation of Rule 415  (effective December 1,  2005) promulgated under  the

 Securities Act  (or any  other similar  provision), the  Company shall  file

 additional Registration  Statements  and  use  its  commercially  reasonable

 efforts to  fully  satisfy  the intent  of  this  Section 4.4  to  have  the

 Registrable covered by an effective  Registration Statement until such  time

 as the he conditions in (A) or (B) of Section 4.4(b)(i) are satisfied.

 

                (iv) The rights and obligations of the Purchasers under  this

 Section 4.4 may  not be assigned  or transferred to  any person without  the

 prior written consent of the Company except with respect to the Transfer  of

 the Warrants (in which case such rights and obligations are transferred with

 such Warrants).

 

           (e) Expenses of Registration.  In connection with any registration

 of the Registrable  Securities pursuant to  the provisions  of this  Section

 4.4, each Purchaser shall pay any  brokerage and underwriting discounts  and

 commissions payable in respect  of the Registrable  Securities sold on  such

 Purchaser’s behalf, all fees and expenses  of any attorneys and  accountants

 employed by such Purchaser,  and any other costs  directly incurred by  such

 Purchaser, and the Company shall pay or cause to be paid and shall indemnify

 and hold harmless the  Purchasers from and against  any and all other  costs

 and expenses incurred in connection with such registration and related  blue

 sky registrations and qualifications.

 

           (f) Indemnification.   In connection with  any registration of the

 Registrable Securities pursuant to the provisions  of this Section 4.4,  the

 Company shall, to the extent permitted by Applicable Law, indemnify and hold

 harmless each Purchaser to the extent that companies generally indemnify and

 hold harmless underwriters  in connection  with public  offerings under  the

 Securities Act, and  each Purchaser shall  indemnify and  hold harmless  the

 Company, each  director and  officer of  the Company,  and each  person  who

 controls the Company within the meaning of the Securities Act to the  extent

 that selling shareholders generally indemnify  and hold harmless issuers  of

 securities in connection with public offerings under the Securities Act with

 respect to the information provided by such Purchaser for use by the Company

 in the preparation of the Registration Statement.

 

           (g) Inclusion  of Other  Securities.   Each Purchaser acknowledges

 that the Registration Statement, and any prospectus used in connection  with

 the offering  conducted pursuant  thereto, may  cover,  in addition  to  the

 Registrable Securities, other shares of Common Stock or other securities  of

 the Company to be sold by the Company or other persons.

 

     4.5 Fees  and Expenses.  Except as  otherwise expressly provided in this

 Agreement, all fees and expenses incurred in connection with the Transaction

 Documents and the  transactions contemplated thereby  shall be  paid by  the

 party incurring such fee or expense.

 

     4.6 Indemnification for Brokerage Fees.  The parties hereto  acknowledge

 and agree  that,  except  for  fees payable  by  the  Company  to  Stonewall

 Securities, Inc., no brokerage or finder’s  fees or commissions are or  will

 be  payable  in  connection  with  the  transactions  contemplated  by  this

 Agreement.  Each of the parties hereto agrees to indemnify and hold harmless

 each other  party  from  and against  any  other  claims or  demands  for  a

 commission or other  compensation by  any other  financial advisor,  broker,

 agent, finder, or similar intermediary claiming to have been employed by  or

 on behalf of such indemnifying party and to bear the cost of legal fees  and

 expenses incurred in defending against any such claim or demand.

 

     4.7 Allocation  of Partial  Prepayments.   In the  case of  each partial

 prepayments of the Promissory Notes, the  Company shall cause the  principal

 amounts of the Promissory Notes to be paid to be allocated among all of  the

 Promissory Notes  outstanding  at such  time  in proportion,  as  nearly  as

 practicable,  to  the  respective  unpaid  principal  amount  thereof.   Any

 Purchaser may waive this requirement with respect to its Promissory Note.

 

     4.8 Reservation  of  Warrant  Shares.   So  long  as  any  Warrants  are

 outstanding,  the  Company  shall  reserve  and  set  aside  from  its  duly

 authorized capital stock a number of shares of Common Stock for issuance  of

 the Warrant Shares  at least equal  to the maximum  number of shares  Common

 Stock that may be issued upon the exercise of all then outstanding Warrants.

 

     4.9   Consent  of  Purchasers.    By  executing  this  Agreement,   each

 Purchaser hereby  consents and  agrees that  one of  the Purchasers  may  be

 purchasing a  Promissory  Note  through  a  profit  sharing  trust  (Related

 Purchasing Trust) or similar entity and purchasing the Warrants accompanying

 such Promissory  Note  in  such  Purchaser’s  individual  capacity  (Related

 Purchasing  Individual).  If the foregoing  occurs,  the Related  Purchasing

 Trust and Related Purchasing  Individual will each executed  a copy of  this

 Agreement and will each hereby agree that all of the terms of this Agreement

 and the  Transaction Documents  shall apply  to  them as  if they  were  one

 Purchaser.

                                  ARTICLE V

                      TERMINATION, AMENDMENT, AND WAIVER

 

     5.1 Termination.   This Agreement may be terminated and the transactions

 contemplated hereby  abandoned at  any  time prior  to  the Closing  in  the

 following manner:

 

           (a) by  mutual written consent of  the Company and the Purchasers;

 or

 

           (b) by the Company, if, on the Closing Date, any of the conditions

 set forth in Section 2.3  shall not have been  satisfied and shall not  have

 been waived by the Company; or

 

           (c) by  the  Purchasers,  if,  on the  Closing  Date,  any  of the

 conditions set forth in Section 2.2 shall not have been satisfied and  shall

 not have been waived by the Purchasers.

 

     5.2 Effect  of Termination.   In  the event  of the  termination of this

 Agreement pursuant to Section 5.1  by the Company, on  the one hand, or  the

 Purchasers, on the other, written notice thereof shall forthwith be given to

 the other  party specifying  the provision  hereof  pursuant to  which  such

 termination is  made, and  this  Agreement shall  become  void and  have  no

 effect, except that the agreements contained in this Section and in Sections

 4.3, 4.5,  and 4.6  and Article  VI shall  survive the  termination  hereof.

 Nothing contained in this Section shall relieve any party from liability for

 any breach of this Agreement.

 

     5.3 Amendment.    This  Agreement  may  not  be  amended  except  by  an

 instrument in writing signed by or on behalf of all the parties hereto.

 

     5.4 Waiver.   No failure  or delay by  a party hereto  in exercising any

 right, power, or privilege hereunder shall  operate as a waiver thereof  nor

 shall any single or partial exercise  thereof preclude any other or  further

 exercise thereof or the  exercise of any other  right, power, or  privilege.

 The provisions of this Agreement may  not be waived except by an  instrument

 in writing signed by or on behalf of  the party against whom such waiver  is

 sought to be enforced.

                                 ARTICLE VI

                         SURVIVAL OF REPRESENTATIONS;

                               INDEMNIFICATION

     6.1 Survival.   The representations and warranties of the parties hereto

 contained in this Agreement or in  any certificate, instrument, or  document

 delivered pursuant  hereto  shall survive  the  Closing, regardless  of  any

 investigation made by or on behalf of any party.

 

     6.2 Indemnification  by Company.   The Company  shall indemnify, defend,

 and hold  harmless the  Purchasers  from and  against  any and  all  claims,

 actions, causes of action, demands, losses, damages, liabilities, costs, and

 expenses (including reasonable attorneys’ fees and expenses)  (collectively,

 “Damages”), asserted against, resulting to, imposed upon, or incurred by the

 Purchasers, directly  or indirectly,  by reason  of  or resulting  from  any

 breach by the Company of any of its representations, warranties,  covenants,

 or agreements contained in any Transaction Documents.

 

     6.3 Indemnification  by the Purchasers.   Each  Purchaser severally (but

 not jointly) shall indemnify, defend, and hold harmless the Company from and

 against any and all Damages asserted against, resulting to, imposed upon, or

 incurred by the Company, directly or  indirectly, by reason of or  resulting

 from any breach by such Purchaser of any of its representations, warranties,

 covenants, or agreements contained in any Transaction Document.

 

     6.4 Procedure  for  Indemnification.    Promptly  after  receipt  by  an

 indemnified party under Section 6.2 or 6.3 of notice of the commencement  of

 any action, such indemnified party shall,  if a claim in respect thereof  is

 to be made against  an indemnifying party under  such Section, give  written

 notice to  the  indemnifying party  of  the commencement  thereof,  but  the

 failure so to  notify the  indemnifying party shall  not relieve  it of  any

 liability that it may have to any indemnified party except to the extent the

 indemnifying  party  demonstrates  that  the  defense  of  such  action   is

 prejudiced thereby.   In case any  such action shall  be brought against  an

 indemnified party and it shall give written notice to the indemnifying party

 of the commencement  thereof, the indemnifying  party shall  be entitled  to

 participate therein  and, to  the extent  that it  may wish,  to assume  the

 defense thereof  with counsel  reasonably satisfactory  to such  indemnified

 party.   If the  indemnifying party  elects to  assume the  defense of  such

 action, the  indemnified  party shall  have  the right  to  employ  separate

 counsel at its own expense  and to participate in  the defense thereof.   If

 the indemnifying party elects not to assume (or fails to assume) the defense

 of such  action, the  indemnified  party shall  be  entitled to  assume  the

 defense of such action with counsel of its own choice, at the expense of the

 indemnifying party.  If the action is asserted against both the indemnifying

 party and the indemnified party and  there is a conflict of interests  which

 renders it  inappropriate  for  the  same  counsel  to  represent  both  the

 indemnifying party and the indemnified  party, the indemnifying party  shall

 be responsible for paying  for separate counsel  for the indemnified  party;

 provided, however, that  if there is  more than one  indemnified party,  the

 indemnifying party shall  not be responsible  for paying for  more than  one

 separate firm of attorneys to represent the indemnified parties,  regardless

 of the number of indemnified parties.  The indemnifying party shall have  no

 liability with  respect  to  any compromise  or  settlement  of  any  action

 effected without  its  written  consent (which  shall  not  be  unreasonably

 withheld).

                                 ARTICLE VII

                                MISCELLANEOUS

     7.1 Notices.   All notices, requests,  demands, and other communications

 required or permitted  to be  given or made  hereunder by  any party  hereto

 shall be in writing and shall be deemed to  have been duly given or made  if

 delivered personally or transmitted by  first class registered or  certified

 mail, postage  prepaid, return  receipt requested,  to  the parties  at  the

 addresses set forth opposite  their names on the  signature page hereof  (in

 the case  of the  Company) and  on Schedule  1 hereto  (in the  case of  the

 Purchasers) (or at such other addresses as shall be specified by the parties

 by like notice).

 

     7.2 Entire  Agreement.  This Agreement  constitutes the entire agreement

 between the parties  hereto with respect  to the subject  matter hereof  and

 supersedes all prior agreements and  understandings, both written and  oral,

 between the parties with respect to the subject matter hereof.

 

     7.3 Binding Effect;  Assignment; No Third Party Benefit.  This Agreement

 shall be binding upon  and inure to  the benefit of  the parties hereto  and

 their respective  heirs, legal  representatives, successors,  and  permitted

 assigns.  Except as  otherwise provided  in  this  Agreement,  neither  this

 Agreement nor any of the rights,  interests, or obligations hereunder  shall

 be assigned  by any  of the  parties  hereto.  Nothing  in  this  Agreement,

 express or implied,  is intended to  or shall confer  upon any person  other

 than the parties hereto, and their respective heirs, legal  representatives,

 successors, and permitted assigns, any rights, benefits, or remedies of  any

 nature whatsoever under or by reason of this Agreement.

 

     7.4 Severability.   If  any provision  of this  Agreement is  held to be

 unenforceable,  this  Agreement  shall  be  considered  divisible  and  such

 provision  shall  be  deemed  inoperative  to   the  extent  it  is   deemed

 unenforceable, and in all other respects this Agreement shall remain in full

 force and effect; provided however, that  if any such provision may be  made

 enforceable by limitation thereof, then such provision shall be deemed to be

 so limited  and shall  be enforceable  to the  maximum extent  permitted  by

 applicable law.

 

     7.5 Governing  Law.  THIS  AGREEMENT SHALL BE  GOVERNED BY AND CONSTRUED

 AND ENFORCED IN  ACCORDANCE WITH  THE LAWS OF  THE STATE  OF TEXAS,  WITHOUT

 REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

 

     7.6 Counterparts.   This Agreement may be executed by the parties hereto

 in any number of  counterparts, each of which  shall be deemed an  original,

 but all  of  which  shall constitute  one  and  the same  agreement.    Each

 counterpart may consist  of a number  of copies hereof  each signed by  less

 than all, but together signed by all, the parties hereto.

 

 

      IN WITNESS WHEREOF, the parties hereto have executed this Agreement  as

 of the date first above written.

 

                                         COMPANY:

 

 Address for Notice:                     CARRINGTON LABORATORIES, INC.

 2001 Walnut Hill Lane

 Irving, Texas 75038

 Attn:  Dr. Carlton E. Turner

 

                                         By:

                                         —————————–

 With a Copy to:                         Name: Carlton E. Turner

 Patterson, Belknap, Webb & Tyler LLP    Title: President and CEO

 1133 Avenue of the Americas

 New York, New York  10036

 Attention:  Peter J. Schaeffer

 

                                    PURCHASER:

                                    [Print Exact Name]

                                         By:  —————————–

                                         Name: —————————–

                                         Title: —————————–

 SSN/EIN: —————————–

 Subscription Amount: $ —————-

 

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