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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
OCTOBER 31, 2000
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CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
NEW YORK
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(State or other jurisdiction of incorporation)
0-21168 13-3253392
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(Commission File Number) (IRS Employer Identification Number)
5 EAST 80TH STREET, NEW YORK, NEW YORK 10021
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(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 717-6544
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ITEM 5. OTHER EVENTS
On October 11, 2000, Chromatics Color Sciences International, Inc. (the
"Company") obtained commitments from three of its major investors, Millennium
Partners, L.P. ("Millennium"), LB I Group, Inc. ("Lehman") and the holders (the
"Holders") of its 14% Senior Convertible Debentures, dated April 15, 1999 (the
"Debentures"), to restructure the terms of their respective securities. The
purpose of this restructuring was to assist the Company in meeting the net
tangible assets requirement for continued listing of its common stock, par value
$.001 per share (the "Common Stock"), on the Nasdaq SmallCap Market ("Nasdaq").
These commitments of the investors were subject to certain conditions, which
were subsequently satisfied on October 31, 2000, including the Company's
securing confirmation from Nasdaq of the Company's eligibility for continued
listing on Nasdaq and the closing of a proposed additional financing with
Crescent International Ltd. ("Crescent"), pursuant to which the Company would
issue and sell to Crescent, and Crescent would purchase, shares of a
newly-authorized series of preferred stock of the Company (the "Crescent
Preferred") and a five-year warrant to purchase up to 270,000 shares of Common
Stock at an exercise price equal to $1.00 per share, subject to adjustment in
certain circumstances (the "Crescent Warrant"), for an aggregate purchase price
of not less than $2,000,000. In consideration of their agreements to restructure
their respective securities, the Company agreed to issue to each of Lehman and
the Holders 200,000 five-year warrants to purchase shares of the Common Stock of
the Company at an exercise price of $1.50 per share (the "New Lehman Warrants"
and the "Holders' Warrants," respectively). The Company also agreed with the
Holders (i) not to incur or permit any future liens on any of its properties or
assets, (ii) not to grant any security interests in its future revenues and
(iii) not to consummate any future financings which contemplate the issuance of
debentures by the Company.
Millennium is the holder of (i) 641,026 shares of Common Stock (the
"Millennium Shares") issued pursuant to that certain Securities Purchase
Agreement, dated as of August 16, 2000 (the "Millennium Purchase Agreement"),
and (ii) warrants to purchase Common Stock, including a warrant (the "Adjustable
Warrant") pursuant to which the number of shares issuable upon the exercise
thereof (the "Adjustable Warrant Shares") is based upon a formula involving the
closing bid prices of the Common Stock on certain future dates (the "Adjustment
Period Price").
Pursuant to a letter agreement (the "Millennium Letter Agreement"), the
Company and Millennium agreed to amend the Millennium Purchase Agreement and the
Adjustable Warrant to delete any provision granting Millennium the right to
require the Company to repurchase the Millennium Shares or redeem the Adjustable
Warrant Shares, as the case may be, for cash except in the event that the
Company (i) engages in a "Rule 13e-3 transaction" (as defined in Rule 13e-3
under the Securities Exchange Act of 1934, as amended) or (ii) fails to file a
request to accelerate the effectiveness of the registration statement covering
the Millennium Shares and the shares underlying the warrants issued to
Millennium promptly after securing confirmation from Nasdaq of the Company's
eligibility for continued listing of the Common Stock on Nasdaq.
The Company and Millennium further agreed to amend the Adjustable Warrant
(i) to reduce the number of dates (each, a "Vesting Date") upon which the number
of shares to be issued upon the exercise of the Adjustable Warrant would be
determined from three to two, (ii) to postpone the first Vesting Date thereunder
(the "First Vesting Date") until March 31, 2001, at which time the number of
shares to be issued thereunder would be determined based on an Adjustment Period
Price of not less than $1.00 and (iii) to postpone the second Vesting Date
thereunder (the "Second Vesting Date") until November 1, 2001, at which time the
number of shares to be issued thereunder (in addition to the number of shares
determined as of the First Vesting Date) would be determined based on an
Adjustment Period Price which would not be subject to a $1.00 minimum (as was
the
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case on the First Vesting Date). The Company and Millennium also agreed (x) to
amend that certain Registration Rights Agreement, dated as of August 16, 2000,
to eliminate the provisions imposing monetary penalties upon the delisting of
the Common Stock from Nasdaq, (y) to waive any events of default occurring prior
to the execution of the Millennium Letter Agreement that would entitle
Millennium to any monetary penalties from the Company and (z) to irrevocably
waive its right to adjust the exercise price of the Adjustable Warrant or the
number of Adjustable Warrant Shares as a result of the issuance of the Crescent
Preferred.
Lehman is the holder of (i) 25,000 shares of the Class B Series 2
Convertible Preferred Stock of the Company and 40,000 shares of the Class B
Series 3 Convertible Preferred Stock of the Company (collectively, the "Lehman
Preferred") and (ii) warrants (the "Lehman Warrants") to purchase Common Stock.
Pursuant to a letter agreement, the Company and Lehman agreed to amend those
certain Preferred Stock Purchase Agreements, dated as of June 11, 1999 and
February 11, 2000, respectively, to eliminate the provisions imposing monetary
penalties in the event that the Common Stock is delisted from Nasdaq.
The Company and Lehman further agreed to amend the Certificate of
Incorporation of the Company to delete any provision granting Lehman the right
to require the Company to redeem the shares of Lehman Preferred for cash.
Pursuant to such amendments the Company is now required to convert the shares of
Lehman Preferred into Common Stock on the third anniversary of their respective
issuance dates unless the Company elects, at its option, to extend the mandatory
conversion date to the fifth anniversary of the respective issuance dates of the
shares of Lehman Preferred. Lehman further agreed to waive its right to decrease
the conversion price of the Lehman Preferred and the exercise price of the
Lehman Warrants as a result of (i) the issuance of the Crescent Preferred and
the Crescent Warrant on October 31, 2000 for aggregate proceeds of $2,000,000 or
any future issuances of preferred stock or warrants to Crescent which do not
exceed an aggregate purchase price of $2,000,000, (ii) the issuance of warrants
to the Company's financial adviser in connection with the Crescent financing,
(iii) the issuance of the New Lehman Warrants and the Holders' Warrants and (iv)
the determination on the First Vesting Date of the number of shares of Common
Stock issuable with respect to the Adjustable Warrant. In addition, Lehman
agreed (A) that the deemed exercise price (the "Deemed Exercise Price") with
respect to the number of shares of Common Stock issuable pursuant to the
Adjustable Warrant on the Second Vesting Date would be the greater of (i) $1.00
and (ii) the exercise price calculated in the manner set forth in that certain
Letter Agreement, dated as of August 16, 2000, by and between the Company and
Lehman, and (B) to waive its right to decrease the Conversion Price of the
Lehman Preferred and the exercise price of the Lehman Warrants to a price which
is less than the Deemed Exercise Price.
Pursuant to a letter agreement, the Company and the Holders agreed to
convert the entire principal amount of the Debentures, and any accrued but
unpaid interest thereon, into a newly-authorized series of convertible preferred
stock of the Company (the "New Preferred"), effective October 31, 2000. Prior to
their conversion, the Debentures had a principal face amount of $5,000,000,
accrued but unpaid interest in the amount of $1,079,167 and were due on April
15, 2002. The Company and the Holders further agreed that (i) the New Preferred
would be convertible into shares of Common Stock at a conversion price of $4.68
per share, subject to adjustment for stock splits, combinations and similar
recapitalizations affecting the Common Stock, (ii) with respect to the
distribution of assets on the liquidation, dissolution or winding up of the
Company, the New Preferred shall rank senior and prior to all classes or series
of capital stock of the Company issued prior thereto or thereafter issued, (iii)
cumulative dividends would accrue on the New Preferred beginning on April 15,
2002 at a rate of 8% per annum (subject to increase to 11% per annum during any
period in which such cumulative dividends are not currently paid), and (iv) the
New Preferred would be subject to involuntary conversion into shares of Common
Stock at the option of the Company at a conversion price of $4.68 per share if
the average closing bid price of the Company's Common Stock for ten consecutive
trading days exceeds $10.29. The Company also agreed with the Holders (i) not to
incur or permit any future liens on any of its properties or assets, (ii) not to
grant any security interests in its future revenues and (iii) not to consummate
any future financings which contemplate the issuance of debentures by the
Company.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
4.1 Letter Agreement, dated as of October 11, 2000, between Chromatics
Color Sciences International, Inc. (the "Company") and Millennium
Partners, L.P. ("Millennium").
4.2 Certificate of Amendment of the Certificate of Incorporation of the
Company, dated November 1, 2000, relating to the Class B Series 2
Preferred Stock of the Company.
4.3 Certificate of Amendment of the Certificate of Incorporation of the
Company, dated November 1, 2000, relating to the Class B Series 3
Preferred Stock of the Company.
4.4 Letter Agreement, dated as of October 11, 2000, between the Company
and LB I Group Inc. ("Lehman").
4.5 Letter Agreement, dated as of November 1, 2000, between the Company
and Lehman.
4.6 Letter Agreement, dated as of August 16, 2000, between the Company and
Lehman.
4.7 Certificate of Amendment of the Certificate of Incorporation of the
Company, dated November 1, 2000, relating to the Class B Series 5
Preferred Stock of the Company.
4.8 Letter Agreement, dated as of October 11, 2000, among the Company and
the holders of the 14% Senior Convertible Debentures, dated April 15,
1999 and due April 15, 2002, in the principal amount of $5,000,000,
issued by the Company to Gary W. Schreiner.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
CHROMATICS COLOR SCIENCES
INTERNATIONAL, INC.
By: /s/ Darby S. Macfarlane
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Name: Darby S. Macfarlane
Title: Chairperson of the Board
Date: November 3, 2000
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EXHIBIT INDEX
4.1 Letter Agreement, dated as of October 11, 2000, between Chromatics
Color Sciences International, Inc. (the "Company") and Millennium
Partners, L.P. ("Millennium").
4.2 Certificate of Amendment of the Certificate of Incorporation of the
Company, dated November 1, 2000, relating to the Class B Series 2
Preferred Stock of the Company.
4.3 Certificate of Amendment of the Certificate of Incorporation of the
Company, dated November 1, 2000, relating to the Class B Series 3
Preferred Stock of the Company.
4.4 Letter Agreement, dated as of October 11, 2000, between the Company
and LB I Group Inc. ("Lehman").
4.5 Letter Agreement, dated as of November 1, 2000, between the Company
and Lehman.
4.6 Letter Agreement, dated as of August 16, 2000, between the Company and
Lehman.
4.7 Certificate of Amendment of the Certificate of Incorporation of the
Company, dated November 1, 2000, relating to the Class B Series 5
Preferred Stock of the Company.
4.8 Letter Agreement, dated as of October 11, 2000, among the Company and
the holders of the 14% Senior Convertible Debentures, dated April 15,
1999 and due April 15, 2002, in the principal amount of $5,000,000,
issued by the Company to Gary W. Schreiner.
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