<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|_| Preliminary proxy statement
|X| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Chromatics Color Sciences International, 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
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
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:
- -------------------------------------------------------------------------------
(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.
(1) Amount previously paid:
- -------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- -------------------------------------------------------------------------------
(3) Filing Party:
- -------------------------------------------------------------------------------
(4) Date Filed:
- -------------------------------------------------------------------------------
<PAGE>
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
-------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-------------------------------
The Annual Meeting of Shareholders of Chromatics Color Sciences
International, Inc. (the "Company"), a New York corporation, will be held at
the offices of the Company at 5 East 80th Street, New York, New York, on
Tuesday, May 27, 1997, at 10:00 A.M., for the following purposes:
1. To elect three directors of the Company to serve for a term of one
year and until their respective successors shall be elected and shall qualify;
2. To consider and act upon an amendment to the Company's Certificate
of Incorporation to extend for one year from December 31, 1997 to December 31,
1998 the expiration date of the period during which the Company's outstanding
Class A Convertible Preferred Stock, par value $.01 per share (the "Preferred
Stock") can become convertible into Common Stock upon the Company's achieving
certain stock performance or earnings goals and to likewise extend the date by
which the Company is to call the Preferred Stock for redemption if such goals
are not met;
3. To ratify the appointment of Wiss & Company, LLP as auditors of the
Company for the year ending December 31, 1997; and
4. To consider and act upon such other matters as may properly come
before the meeting.
The approval and adoption of each matter to be presented to the
shareholders is independent of the approval and adoption of each other matter
to be presented to the shareholders.
Only shareholders of record at the close of business on April 15, 1997
are entitled to notice of and to vote at the meeting, including any
adjournments thereof.
By order of the Board of Directors
Darby S. Macfarlane
Chairperson of the Board
New York, New York
April 29, 1997
<PAGE>
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
-------------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 27, 1997
-------------------------------
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of CHROMATICS COLOR SCIENCES
INTERNATIONAL, INC. (the "Company"), a New York corporation, for use at the
Annual Meeting of Shareholders of the Company (the "Meeting") which will be
held at the offices of the Company at 5 East 80th Street, New York, New York
10021, on Tuesday, May 27, 1997, at 10:00 A.M., and at any adjournments
thereof.
Shareholders who execute proxies retain the right to revoke them at
any time by notice in writing to the Secretary of the Company, by revocation in
person at the Meeting or by presenting a later dated proxy. Unless so revoked,
the shares represented by such proxies will be voted at the Meeting in
accordance with the directions given therein. Shareholders vote at the Meeting
by casting ballots (in person or by proxy) which are tabulated by a person who
is appointed by the Board of Directors before the Meeting to serve as inspector
of election at the Meeting and who has executed and verified an oath of office.
Abstentions and broker "non-votes" are included in the determination of the
number of shares present at the Meeting for quorum purposes but are not counted
in the tabulations of the votes cast on proposals presented to shareholders. A
broker "non-vote" occurs when a nominee holding shares for a beneficial owner
does not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not received
instructions from the beneficial owner.
Darby Simpson Macfarlane, who is Chief Executive Officer, Assistant
Treasurer and a member of the Board of Directors of the Company, possesses in
the aggregate the power to vote approximately 2,090,813 shares of the
outstanding voting stock of the Company (representing approximately 24.1% of
the shares entitled to vote at the meeting). (See "Security Ownership of
Certain Beneficial Owners and Management.") Mrs. Macfarlane has advised the
Company that she intends to vote all of the shares which she is entitled to
vote in favor of each proposal presented at the Meeting.
The principal executive offices of the Company are located at 5 East
80th Street, New York, New York 10021. The approximate date on which this Proxy
Statement and the enclosed form of proxy will first be sent or given to
shareholders is April 29, 1997.
Shareholders of record of the Company's common stock, par value $0.001
per share (the "Common Stock"), and the Company's preferred stock, par value
$0.01 per share, designated as Class A Convertible Preferred Stock (the "Class
A Preferred Stock"), at the close of business on April 15, 1997 shall be
entitled to one vote for each share then held.
<PAGE>
On such date, there were outstanding 7,313,487 shares of Common Stock and
1,380,000 shares of Class A Preferred Stock.
Only shareholders of record at the close of business on April 15, 1997
are entitled to notice of and to vote at the meeting, including any
adjournments thereof.
By order of the Board of Directors
Darby S. Macfarlane
Chairperson of the Board
New York, New York
April 29, 1997
IMPORTANT: The prompt return of proxies will save the
Company the expense of further requests for proxies and will
ensure that your shares are voted.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of April 15, 1997, the beneficial
ownership of the Common Stock: (i) by each stockholder known by the Company to
beneficially own more than 5% of the Common Stock; (ii) by each director of the
Company; (iii) by the Company's Chief Executive Officer; and (iv) by all
executive officers and directors of the Company as a group. Except as otherwise
indicated below, each named beneficial owner has sole voting and investment
power with respect to the shares of Common Stock listed.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class
- ------------------- -------------------- ----------------
<S> <C> <C>
Darby Simpson Macfarlane (1) 2,090,813 24.1%
10 Old Jackson Avenue, #28
Hastings-on-Hudson, NY 10706
David Kenneth Macfarlane (2) 2,090,813 24.1%
10 Old Jackson Avenue, #28
Hastings-on-Hudson, NY 10706
Leslie Foglesong (3) 50,000 *
116 Lafayette Avenue
Brooklyn, NY 11217
Mellon Bank Corporation (4) 1,035,000 11.9%
One Mellon Bank Center
Pittsburgh, PA 15258
Janssen-Meyers Associates, L.P. (5) 1,641,100 18.9%
17 State Street
New York, NY 10001
All directors and executive officers 2,140,813 24.5%
as a group (3 persons) (6)
</TABLE>
- ----------------------------
* Less than one percent
(1) Includes all of the 1,380,000 issued and outstanding shares of the
Company's redeemable Convertible Preferred Stock owned by Mrs.
Macfarlane.
(2) Includes the 1,380,000 issued and outstanding shares of the Company's
redeemable Convertible Preferred Stock owned by Mrs. Macfarlane, and
the 710,813 issued and outstanding shares of the Company's Common
Stock beneficially owned by Mrs. Macfarlane.
(3) Includes 50,000 shares issuable upon the exercise of options which are
exercisable within the next 60 days.
(4) Includes indirect beneficial ownership of the holdings of two
subsidiaries, Mellon Bank N.A. and the Dreyfus Corporation.
(5) Based on Amendment No. 17 to Form 13D dated February 11, 1997.
Includes 1,570,626 shares issuable upon the exercise of Warrants which
are exercisable within the next 60 days.
(6) Includes 50,000 shares issuable upon the exercise of options which are
exercisable within the next 60 days and 1,380,000 issued and
outstanding shares of the Company's redeemable Convertible Preferred
Stock.
2
<PAGE>
ELECTION OF DIRECTORS
Three directors will be elected at the Meeting to serve for a term of
one year and until their respective successors shall have been elected and
shall qualify. The election of directors requires the affirmative vote of a
majority of the shares of Common Stock present in person or by proxy at the
Meeting. Proxies received in response to this solicitation will be voted FOR
the persons named below unless otherwise specified in the proxy. At this time,
the Board of Directors of the Company knows of no reason why any nominee might
be unable to serve; however, should such a situation arise, proxies may be
voted for the election of such other person(s) as director(s) as the holders of
the proxies may, in their discretion, determine. There is no arrangement or
understanding between any director and any other person pursuant to which such
person was elected as a director.
The following table sets forth information concerning each of the
directors and executive officers of the Company:
Name Age Position
---- --- --------
Darby Simpson Macfarlane 52 Director, Chairperson of the
Board, Chief Executive Officer,
Assistant Treasurer
David Kenneth Macfarlane 50 Director, Vice President-
Research and Development
Leslie Foglesong 41 Director, Secretary and Treasurer
Arthur Guiry 57 President
Mrs. Macfarlane co-founded the Company in March 1984. She has been
Chairperson of the Board, Chief Executive Officer, Assistant Treasurer and a
director of the Company since formation and also served in the capacity of
President until April 9, 1995. Prior to such time, Mrs. Macfarlane was the
co-founder in 1974 of Personalized Colors, Inc. Commencing in 1978, Mrs.
Macfarlane and Mr. Macfarlane led and directed the Company's research and
development and mass-manufacturing efforts of the color science technology,
instrumentation and cosmetic and related products now offered by the Company.
Mr. Macfarlane co-founded the Company and is also one of the primary
inventors of the patented technologies used in the Colormate(TM) II System. In
addition, Mr. Macfarlane developed the manufacturing, technical and engineering
specifications necessary to have miniaturized and mass manufactured the
Colormate(TM) II System. Mr. Macfarlane has been Vice President-Research and
Development, and a director of the Company since formation. Prior to 1984, Mr.
Macfarlane held a variety of executive positions with finance, sales,
marketing, research and development and manufacturing companies in Europe,
South
3
<PAGE>
Africa and the United States, including International Technical Research and
Development, Ltd., and Trumach, Inc.
Leslie Foglesong has been the Secretary, Treasurer and a director of
the Company since its formation.
From January 1, 1995 to March 1995, Mr. Arthur Guiry provided
consulting services to the Company in connection with the marketing of the
Company's medical applications for its technology. On April 10, 1995, Mr. Guiry
commenced his duties as President. Mr. Guiry has held positions as an executive
in sales for divisions of Bristol-Myers, Smith & Nephew Ltd. and Solzer for the
past 18 years. He also holds a physics degree from Manhattan College.
Darby Simpson Macfarlane and David Kenneth Macfarlane are the founders
of the Company and, as such, may be deemed "promoters" of the Company as those
terms are defined in the rules and regulations promulgated under the Securities
Act of 1933, as amended. There is no family relationship among any other
directors or executive officers of the Company.
The Company has agreed with the placement agent of the Company's 1995
private placement offering of Common Stock (the "Offering") that the Company
will use its best efforts to elect the placement agent's designee to the
Company's Board of Directors for a period of five years following the
completion of the Offering. To date, the placement agent has not requested
election of any designee.
Directors are elected annually by the shareholders and hold office
until the next annual meeting and until their respective successors are elected
and qualified.
During the fiscal year ended December 31, 1996, the Company's Board of
Directors met on six occasions. All of the directors participated in all such
meetings.
The Board of Directors has not established any standing audit,
nominating or compensation committees. The functions that otherwise would be
performed by such committees are performed by the full Board of Directors.
4
<PAGE>
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY
RECOMMENDS A VOTE IN FAVOR OF THE RE-ELECTION OF THE THREE
NOMINEES
TO THE COMPANY'S BOARD OF DIRECTORS
Executive Officers
Executive officers are elected by the Board of Directors, serve at the
direction of the Board and hold office until their respective successors are
elected and qualified.
Executive Compensation
Summary Compensation Table
The following table summarizes all plan and non-plan compensation
awarded to, earned by, or paid to, the Company's executive officers for
services rendered in all capacities to the Company for the last three fiscal
years. See "Employment Agreements."
<TABLE>
<CAPTION>
Long-Term All Other
Annual Compensation Compensation Compensation
------------------- ------------ ------------
Awards
Name and ------
Principal Salary Bonus Options
Position Year ($) ($) (#)
- --------- ---- ----- ----- -------
<S> <C> <C> <C> <C> <C>
Darby Simpson Macfarlane, 1994 125,000 0 0 85,000(1)
Chief Executive Officer ----
1995 125,037 0 0 26,689(2)
----
1996 125,000 20,000 300,000 5,617(3)
----
Arthur Guiry, President 1995 168,101(4) 200,000 0
1996 200,000 0 0
David Kenneth Macfarlane, 1994 100,000 0 0 0
Vice President, 1995 114,034(5) 0 0 0
Research and Development 1996 125,000 4,500 200,000 5,950(3)
Leslie Foglesong, 1994 75,000 0 10,000
Secretary and Treasurer 1995 75,000 0 50,000 0
1996 75,000 103,650(6) 100,000 0
</TABLE>
- ----------------------
(1) Represents payment pursuant to Mrs. Macfarlane's employment agreement,
under which she is entitled to receive 33% of the first $1,000,000 of the
Company's net recovery in excess of $2,000,000 from the Avon lawsuit.
(2) Represents interest payments pursuant to the $262,400 balance owed to Mrs.
Macfarlane pursuant to the Avon Settlement.
(3) Includes premiums paid by the Company on the term life insurance policies
and disability insurance policies of Mrs. and Mr. Macfarlane.
(4) Includes $23,000 of fees paid to Mr. Guiry in 1995 as a consultant prior
to his employment as President.
(5) Includes $14,000 of fees paid to Mr. Macfarlane in 1995 as a consultant.
(6) Includes 1995 bonus not paid until 1996.
5
<PAGE>
Options Grants in Last Fiscal Year
The following table sets forth information with respect to the grant
of stock options under the Stock Option Plan by the Company during the fiscal
year ended December 31, 1996 to the Company's executive officers:
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------------
Percentage
of Total
Options
Granted to
Employees Exercise or
in Base
Options Fiscal Year Price Expiration
Name Granted (#) (%) ($/sh) Date
- ---- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Darby Simpson Macfarlane.............. 300,000 39% $4.375 10/28/01
David Kenneth Macfarlane.............. 200,000 26 4.375 10/28/01
Leslie Foglesong...................... 50,000 6.5 4.25 7/31/01
50,000 6.5 4.375 10/28/01
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year End Option Value Table
The following table sets forth information with respect to stock
options exercised during the fiscal year ended December 31, 1996 and the value
at December 31, 1996 of unexercised stock options held by the Chief Executive
Officer and the other executive officers of the Company:
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options
Fiscal at Fiscal
Year-End Year-End(2)
Shares ------------- -------------
Acquired on Value Exercisable/ Exercisable/
Exercise Realized(1) Unexercisable Unexercisable
Name (#) ($) (#) $
- --------------------------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Darby Simpson Macfarlane 40,000 210,000 0/300,000 NA/O
Arthur Guiry(3) N/A N/A 66,666/133,334 75,000/150,000
David Kenneth Macfarlane 40,000 330,000 0/200,000 NA/O
Leslie Foglesong 20,000 73,750 50,000/100,000 10,000/18,750
</TABLE>
- ---------------------------
(1) Based on the fair market value of securities underlying the options minus
the exercise price of the options. On January 26, 1996, Mrs. Macfarlane
exercised an option to purchase 40,000 shares of Common Stock at an
exercise price of $2.50. On
6
<PAGE>
April 23, 1996, Mr. Macfarlane exercised an option to purchase 40,000
shares of Common Stock at an exercise price of $2.50 per share. On January
12, 1996, Ms. Foglesong exercised an option to purchase 20,000 shares of
Common Stock (10,000 shares at an exercise price of $2.25 per share and
10,000 shares at an exercise price of $2.50 per share).
(2) Based on the fair market value of securities underlying the options minus
the exercise price of the options at the fiscal year end. At December 31,
1996 (the last business day of the fiscal year), the closing bid price of
the Common Stock on NASDAQ was $4.50.
(3) As of March 20, 1997, 133,334 options were exercisable.
Compensation of Directors
The current directors do not receive any compensation or reimbursement
of expenses for their attendance at Board of Directors' meetings.
Employment Agreements
The Company has entered into separate employment agreements with each
of Darby Simpson Macfarlane and David Kenneth Macfarlane, providing for Mrs.
Macfarlane's employment as Chief Executive Officer and for Mr. Macfarlane's
employment as Vice President, Research and Development. The agreements with
Mrs. and Mr. Macfarlane provide for current annual base salaries in 1996 of
$125,000 and $125,000, respectively, subject to annual increases at the
discretion of the Board of Directors. In addition, Mrs. Macfarlane's agreement
provided for a bonus payment of 33% of the first million of the Company's net
recovery in excess of $2,000,000 from the Avon Litigation. Accordingly, Mrs.
Macfarlane is to receive $361,200, of which $98,800 has been paid. The
remaining $262,400 is currently payable and accrues interest at the rate of 10%
per annum. Under the agreements, the Company is obligated to provide Mr.
Macfarlane with $300,000 and Mrs. Macfarlane with a $500,000 term life
insurance policy and disability insurance. The Company maintains key-man life
insurance on each of Mrs. and Mr. Macfarlane in the amount of $1,000,000.
The agreements provide for the payment of termination benefits by the
Company if employment thereunder is terminated (i) by the Company for any
reason other than death, disability or "cause" as set forth therein or (ii) by
reason of death or disability. If Mr. or Mrs. Macfarlane's employment is
terminated by the Company for any reason other than death, disability or
"cause," the Company is required by each agreement to pay to the terminated
employee an amount equal to the greater of (a) the aggregate base salary
payable for the remainder of the employment period of the agreement and (b) the
aggregate base salary payable thereunder for two years, plus, in each case, an
amount not less than any bonus granted by the Board of Directors of the Company
to the employee in the year immediately preceding the year in which termination
occurred. If the employee's employment is terminated by reason of death or
disability, the Company is required to pay to Mrs. Macfarlane and Mr.
Macfarlane, as applicable, an amount equal to two years aggregate base salary
in the case of Mrs. Macfarlane, and one year's base salary in the case of Mr.
Macfarlane, plus in each case an amount not less than the pro rata portion of
any bonus granted to the employee in the year immediately preceding the year in
such termination occurs.
7
<PAGE>
The Company has entered into a five year employment agreement,
commencing on April 10, 1995, with Arthur Guiry providing for Mr. Guiry to
serve as President of the Company. The agreement provides for an annual base
salary of $200,000, subject to annual increases at the discretion of the Board
of Directors, plus options to purchase an aggregate of 200,000 shares of Common
Stock at an exercise price of $3.375 per share under the Company's 1992 Stock
Option Plan. Mr. Guiry shall be entitled to an annual bonus subject to the
discretion of the Board of Directors. The Company, at its option, can maintain
keyman insurance on Mr. Guiry in the amount of $1,000,000. The agreement
provides for the payment of termination benefits by the Company if employment
thereunder is terminated by the Company for any reason other than death,
disability, "cause" as set forth therein, or voluntary resignation. If Mr.
Guiry's employment is terminated by the Company for any reason other than
death, disability, "cause," or voluntary resignation, the Company is required
to pay to Mr. Guiry an amount equal to the aggregate base salary for the
remainder of the employment period plus an amount equal to the bonus granted
for the year immediately preceding the year in which such termination occurs.
If Mr. Guiry's employment is terminated by reason of death, disability, cause
or voluntary resignation, he will not receive any other compensation besides
accrued salary through the date of such termination and an amount equal to the
pro rata portion of any bonus granted for the year immediately proceeding the
year in which such termination occurs.
The Company has entered into separate five year employment agreements
commencing on August 21, 1995, with Arthur Rocco and Mark Harwood, providing
for each to serve as an engineer of the Company (the "Agreements"). Mr. Rocco's
agreement provides for an annual base salary of $75,000 per annum, subject to
annual increases at the discretion of the Board of Directors, plus options to
purchase an aggregate of 50,000 shares of Common Stock at an exercise price of
$2.6875 per share under the Company's 1992 Stock Option Plan. Mr. Harwood's
agreement provides for an annual base salary of $55,000 per annum, subject to
annual increases at the discretion of the Board of Directors, plus options to
purchase an aggregate of 20,000 shares of Common Stock at an exercise price of
$2.6875 per share under the Company's 1992 Stock Option Plan.
The Agreements provide for the payment of termination benefits by the
Company if employment thereunder is terminated by the Company for any reason
other than death, disability, "cause" as set forth therein, or voluntary
resignation. If employment is terminated by the Company for any reason other
than death, disability, "cause," or voluntary resignation, the Company is
required to pay an amount equal to the aggregate base salary for the remainder
of the employment period. If employment is terminated by reason of death,
disability, "cause," or voluntary resignation, no compensation will be received
other than accrued salary through the date of such termination.
All of the agreements described above prohibit disclosure of
proprietary and confidential information regarding the Company and its business
to anyone outside the Company both during and subsequent to employment and
provide certain non-competition and non-solicitation restrictions on the
employee for the duration of employment with the Company, and for one year
thereafter.
8
<PAGE>
Filing Requirements
The Company became subject to the reporting requirements of Section 13
of the Exchange Act on February 5, 1993 and, accordingly, the Company's
officers, directors and greater than 10 percent beneficial owners were subject
to the reporting requirements of Section 16(a) of the Exchange Act during the
year ended December 31, 1993. The Company believes that except as described
below, during the fiscal year ended December 31, 1996, all filing requirements
under Section 16(a) applicable to its officers, directors and greater than ten
percent beneficial owners were complied with on a timely basis.
Janssen/Meyers Associates, L.P., a direct beneficial owner of more
than 10 percent of the Company's Common Stock, Meyers Janssen Securities
Corporation, Bruce Meyers and Peter Janssen, each as indirect beneficial owners
of more than 10 percent of the Company's Common Stock by virtue of ownership of
Janssen/Meyers Associates, L.P. and Meyers Janssen Securities Corporation, as
applicable, failed to file on a timely basis a number of Form 4s with respect
to certain transactions in the Company's securities.
Darby S. Macfarlane and David Kenneth Macfarlane each failed to file
on a timely basis one Form 4 with respect to one option grant. Leslie Foglesong
failed to file on a timely basis two Form 4s with respect to two separate
option grants. Filings on Form 4 with respect to these transactions have since
been made for Mr. Macfarlane, Ms. Macfarlane and Ms. Foglesong.
PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE
OF INCORPORATION TO EXTEND THE EXPIRATION DATE OF THE
CONVERSION PERIOD FOR THE PREFERRED STOCK
The Company's Certificate of Incorporation currently allows holders of
the outstanding shares of Preferred Stock to convert each such share into
.6521739 of a share of Common Stock at their option upon written notice duly
given to the Company ("Election Notice") within 30 days of such holders
receiving written notice from the Company ("Election Notice Period") of the
first to occur of the following events (each, an "Event"): (i) the Company's
combined pretax net operating income before interest and extraordinary items
exceed $20,000,000 (excluding the effect of business combinations) for any two
consecutive calendar years during the period ending December 31, 1997 (the
"Earnings Test"), or (ii) the closing bid quotation of the Common Stock exceeds
$46.67 for 30 consecutive trading days at any time prior to December 31, 1997
(the "Stock Test"). If (i) the Company does not receive an Election Notice
after the expiration of the Election Notice Period, or (ii) the Company
determines that an Event has not occurred within the relevant periods
specified, not later than 10 days after such expiration or such determination,
the Company shall call for redemption of (a) shares of Class A Preferred Stock
that are not the subject of an Election Notice or (b) shares of Class A
Preferred Stock if the Board has determined that no Event has occurred,
following December 31, 1997 at $.01 per share plus any declared but unpaid
dividends, provided, however, that the Board of Directors shall make such
determination on or prior to the 120th day after December 31, 1997.
9
<PAGE>
In the fall of 1994, Mrs. Macfarlane approached the Board of Directors
to request an extension of the period (the "Conversion Period") during which
the Earnings Test and the Stock Test could be met. Acting through Leslie
Foglesong, the sole disinterested member of the Board of Directors with respect
to this matter, the Board determined in March 1995 that it was in the best
interests of the Company to maintain an appropriate incentive program for Mrs.
Macfarlane, taking into account her salary, the number of options she then
held, and the bonus package provided under her employment agreement.
Accordingly, the Board of Directors, acting in the manner described above,
determined to extend the termination date of the Conversion Period for one
year, to December 31, 1997, in consideration of Mrs. Macfarlane agreeing to
delay payment from August 1994 to January 1996 on the note she received under
her employment agreement in respect of the Avon Settlement, forego any
discretionary performance bonus under her employment agreement for 1994 and
1995 and with the understanding that she would not receive any further stock
options in 1995 or with respect to the Company's performance for that year. All
other terms of the Preferred Stock remained unchanged. The shareholders of the
Company approved this action of the Board of Directors at the 1995 Annual
Meeting held on May 26, 1995.
In April 1997, Mrs. Macfarlane again approached the Board of Directors
to request an extension of the Conversion Period. The Board of Directors of the
Company, acting through Leslie Foglesong, the sole disinterested member of the
Board with respect to this matter, determined in April 1997 that it was in the
best interests of the Company to continue an appropriate incentive program for
Mrs. Macfarlane, taking into account her salary, the number of options she
currently holds, and the bonus package provided under her employment agreement.
The Board of Directors determined to extend the termination date of the
Conversion Period for one additional year, to December 31, 1998, in
consideration of Mrs. Macfarlane agreeing to delay payment to January 1998 on
the note she received under her employment agreement in respect of the Avon
Settlement, extend her existing employment agreement until February 12, 1999,
forego any discretionary performance bonus under her employment agreement for
1997 and 1998 and with the understanding that she would not receive any stock
options in 1997 or with respect to the Company's performance for that year. All
other terms of the Preferred Stock would remain unchanged.
The Board of Directors of the Company, by action of Leslie Foglesong,
sole disinterested member of the Board of Directors with respect to the
proposed extension, recommends that the shareholders adopt and approve an
amendment ("Charter Amendment III") to the Company's Certificate of
Incorporation to extend the end of the period during which the Preferred Stock
can become convertible into Common Stock upon the Company achieving the
Earnings Test and/or the Stock Test from December 31, 1997 to December 31, 1998
and to likewise extend the date by which the Company is to call the Preferred
Stock for redemption if such goals are not met.
The text of Charter Amendment III is set forth as Exhibit A hereto.
The approval of the majority of issued and outstanding Common Stock
and Preferred Stock, voting as a single class, is necessary to adopt Charter
Amendment III. Proxies received in response to this solicitation will be voted
FOR Charter Amendment III unless otherwise specified in the proxy.
10
<PAGE>
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE IN
FAVOR OF THE ADOPTION OF CHARTER AMENDMENT III.
SELECTION OF AUDITORS
The Board of Directors has selected Wiss & Company, LLP, independent
auditors, to serve as auditors of the Company for the fiscal year ending
December 31, 1997. Although shareholder ratification of the Board of the
Directors' action in this respect is not required, the Board considers it
desirable for shareholders to pass upon the selection of auditors and, if the
shareholders disapprove of the selection, intends to consider the selection of
other auditors for the current fiscal year.
Representatives of Wiss & Company, LLP are expected to be present at
the Meeting, will have an opportunity to make a statement if they so desire and
will be available to respond to appropriate questions from shareholders.
Proxies received in response to this solicitation will be voted FOR
the ratification of the appointment of the auditors unless otherwise specified
in the proxy. THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A
VOTE IN FAVOR OF RATIFICATION OF THE APPOINTMENT OF WISS & COMPANY, LLP.
MISCELLANEOUS
Any proposal of an eligible stockholder intended to be presented at
the next Annual Meeting of Shareholders must be received by the Company for
inclusion in its proxy material and form of proxy relating to that Annual
Meeting by January 13, 1998.
The Board of Directors of the Company does not intend to present, and
does not have any reason to believe that others intend to present, any matter
or business at the Meeting other than that set forth in the accompanying Notice
of Annual Meeting of Shareholders. However, if other matters properly come
before the Meeting, it is the intention of the persons named in the enclosed
form of proxy to vote any proxies in accordance with their judgment.
The Company will bear the cost of preparing, assembling and mailing
the enclosed form of proxy, this Proxy Statement and other material which may
be sent to shareholders in connection with the solicitation. Solicitation may
be made by mail, telephone and personal interview. The Company may reimburse
persons holding shares in their names or in the names of nominees for their
reasonable expenses in sending proxies and proxy material to their principals.
11
<PAGE>
The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1996 is being distributed to shareholders with this mailing. A
list of the exhibits to the Form 10-KSB is included therein, and such exhibits
will be provided upon written request (directed to Leslie Foglesong, Secretary,
at the Company's executive offices) for a fee limited to the Company's
reasonable expenses in furnishing such exhibit.
By order of the Board of Directors,
Darby S. Macfarlane
Chairperson of the Board
New York, New York
April 29, 1997
12
<PAGE>
EXHIBIT A
---------
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
------------------------
Under Section 805 of the
Business Corporation Law
------------------------
We, the undersigned, Darby S. Macfarlane, Chief Executive Officer, and
Leslie Foglesong, Secretary, of Chromatics Color Sciences International, Inc.
(the "Corporation"), a corporation organized and existing under the Business
Corporation Law of the State of New York, do hereby certify as follows:
1. The name of the Corporation is CHROMATICS COLOR SCIENCES
INTERNATIONAL, INC.
2. The Certificate of Incorporation of the Corporation was filed by
the Department of State on March 30, 1984. The Corporation was formed under the
name Chromatics International, Inc.
3. The Certificate of Incorporation of the Corporation, as heretofore
amended, is hereby further amended to extend for one year from December 31,
1997 to December 31, 1998 the expiration date of the period during which the
Corporation's outstanding Class A Convertible Preferred Stock, par value $0.01
per share (the "Preferred Stock") can become
<PAGE>
convertible into Common Stock upon the Corporation's achieving certain stock
performance or earnings goals and to likewise extend the date by which the
Corporation is to call the Preferred Stock for redemption if such goals are not
met.
4. To accomplish the foregoing,
(i) Paragraph c(4)(a) of Article FOURTH of the Certificate of
Incorporation of the Corporation, relating to the authorized shares of the
Corporation, is hereby amended to read in its entirety as follows:
"(a) Subject to Section C.(5) of this Article FOURTH, upon
the first to occur of (i) the Corporation's combined pre-tax
net operating income (before interest expense), as reflected
on the Corporation's audited financial statements (but
excluding, in each case, any extraordinary items and any
revenues or earnings generated by businesses acquired by the
Corporation by merger, consolidation, asset or stock
acquisition or similar transaction, in each case after the
date (the "Commencement Date") of the filing of the
Certificate of Amendment to the Certificate of Incorporation
of the Corporation of which this provision is a part) for any
two consecutive calendar years during the period commencing
on the Commencement Date and ending on December 31, 1998
exceeding $20,000,000 or (ii) the closing bid quotation of
the Common Stock on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") (or the last
sales price, if the Common Stock is principally traded on a
national securities exchange or the NASDAQ National Market
System) being at least $46.67 on 30 consecutive trading days
at any time during the period commencing on the Commencement
Date and ending on December 31, 1998 (each such event
referred to in the preceding subclauses (i) and (ii) being
hereinafter referred to as an "Event" and each such date
being hereinafter referred to as the "Event Date"), each
share of Class A Preferred Stock outstanding immediately
prior to the Event Date shall be, at the option of the
holders thereof upon written notice (the "Election Notice")
duly given to the Corporation within 30 days (the "Election
Notice Period") of such holders receiving written notice from
the Corporation (which notice shall be sent by
2
<PAGE>
certified mail, return receipt requested, to the address of
such holder as it shall appear on the stock register of the
Corporation) of the occurrence of the Event, convertible into
.6521739 shares of Common Stock, subject to the provisions
for adjustment hereinafter set forth. Until such time as the
certificates representing the Class A Preferred Stock to be
converted pursuant to any such Election Notice shall have
been surrendered and certificates evidencing the Common Stock
to be issued shall have been issued in accordance with the
provisions of paragraph (c) of this subsection (4), the
certificates representing the Class A Preferred Stock shall
represent the shares of Common Stock Issuable upon the
conversion of such Class A Preferred Stock and the holders
thereof shall be entitled to all the rights and privileges of
the holders of the Common Stock. The Corporation shall give
prompt written notice to the holders of the Class A Preferred
Stock of the occurrence of an Event (which in any event shall
be given not later than five days after the occurrence of
such Event)."
(ii) The first sentence of Paragraph C(5)(a) of Article
Fourth is hereby amended to read as follows:
"(a) The Corporation shall (i) not later than 10 days after
the expiration of the Election Notice Period without the
Corporation having received an Election Notice, if
applicable, or (ii) not later than 10 days after a
determination (the "Determination") by the Board of Directors
of the Corporation that an Event has not occurred within the
relevant periods specified in Section C.(4) of this Article
FOURTH, if applicable, call for redemption (A) each share of
Class A Preferred Stock that is not the subject of an
Election Notice, or (B) all shares of Class A Preferred
Stock, if the Board of Directors shall have made the
Determination, as applicable, at a price per share of $.01
per share, plus any declared but unpaid dividends on such
shares of Class A Preferred Stock, provided, however, that
the Board of Directors shall make a Determination on or prior
to the 120th day after December 31, 1998."
3
<PAGE>
5. The foregoing amendment to the Certificate of Incorporation of the
Corporation has been duly authorized by unanimous consent of the Board of
Directors of the Corporation, followed by the vote of the holders of at least a
majority of all of the outstanding shares of the Corporation entitled to vote
on said amendments to the Certificate of Incorporation.
IN WITNESS WHEREOF, the undersigned have signed this Certificate and
affirm under the penalties of perjury that the statements made herein are true
this ___ day of May, 1997.
--------------------------------
Darby S. Macfarlane,
Chief Executive Officer
--------------------------------
Leslie Foglesong,
Secretary
4
<PAGE>
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
May 27, 1997
This Proxy is solicited by the Board of Directors.
The undersigned shareholder of Chromatics Color Sciences
International, Inc. (the "Company") hereby appoints Darby Simpson Macfarlane
and Leslie Foglesong, or either of them, attorneys and proxies, with full power
of substitution, to represent the undersigned and vote all shares of the Common
Stock of the Company which the undersigned is entitled to vote, with all powers
the undersigned would possess if personally present, at the Annual Meeting of
Shareholders of the Company to be held at the offices of the Company at 5 East
80th Street, New York, New York at 10:00 A.M., on May 27, 1997, and at any
adjournments thereof, with respect to the proposals hereinafter set forth and
upon such other matters as may properly come before the Meeting and any
adjournments thereof.
Unless otherwise specified, this proxy will be voted "FOR" the
election of all nominees as directors of the Company, "FOR" the adoption of
Charter Amendment III, "FOR" the ratification of Wiss & Company, LLP as
auditors of the Company and in the discretion of the proxies with respect to
all other matters which may properly come before the Meeting and any
adjournments thereof. The undersigned acknowledges receipt of the accompanying
Notice of Annual Meeting and Proxy Statement.
Please mark boxes [X] [ ] in blue or black ink.
1. Election of Directors
[ ] FOR all nominees listed ] ] WITHHOLD AUTHORITY to
below (except as marked vote for all nominees
to the contrary below) listed below
Nominees: Darby Simpson Macfarlane, David Kenneth Macfarlane and
Leslie Foglesong
Instruction: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below.
---------------------------------------------------
2. Adoption of Charter Amendment III
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
3. Ratification of the selection of Wiss & Company, LLP as auditors of
the Company for the year ending December 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, on any other matters that may properly come
before the Meeting and any adjournments thereof.
Dated: ______________, 1997
------------------------------
Signature of Shareholder(s)
------------------------------
Name of Shareholder(s)
NOTE: When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee, custodian, guardian or
corporate officer, please give your
full title as such. If a corporation,
please sign full corporate name by
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD
PROMPTLY
