<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:
/X/ Preliminary proxy statement
/ / 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 [ ] 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 II System. In addition, Mr. Macfarlane developed the
manufacturing, technical and engineering specifications necessary
to have miniaturized and mass manufactured the Colormate 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 Africa
3
<PAGE>
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>
Annual Long-Term All Other
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 $14,000 of fees paid to Mr. Macfarlane in 1995 as a
consultant.
(6) Includes 1995 bonus not paid until 1996.
5
<PAGE>
Options Grants in Last Fiscal Year
The following table sets forth information with respect to the
grant of stock options under the Stock Option Plan by the Company
during the fiscal year ended December 31, 1996 to the Company's
executive officers:
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------
Percentage
of Total
Options
Granted to
Employees
in Exercise or
Fiscal Base
Options Year Price Expiration
Name Granted (#) (%) ($/sh) Date
---- ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Darby Simpson Macfarlane 300,000 39% $4.375 10/28/01
David Kenneth Macfarlane 200,000 26 4.375 10/28/01
Leslie Foglesong 50,000 6.5 4.25 7/31/01
50,000 6.5 4.375 10/28/01
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year End Option Value Table
The following table sets forth information with respect to
stock options exercised during the fiscal year ended December 31,
1996 and the value at December 31, 1996 of unexercised stock options
held by the Chief Executive Officer and the other executive officers
of the Company:
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options
Fiscal at Fiscal
Year-End Year-End(2)
-------------- --------------
Acquired on Value Exercisable/ Exercisable/
Exercise Realized(1) Unexercisable Unexercisable
Name (#) ($) (#) $
------------------------ ----------- ----------- -------------- --------------
<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, Mrs.
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 key-man
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 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."
<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
<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 / / / / 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
