Exhibit 4.2
WARRANT AGREEMENT
THIS WARRANT AGREEMENT, dated as of June 11, 1999, by and
between CHROMATICS COLOR SCIENCES INTERNATIONAL, INC., a New York corporation
(the "Issuer"), and LB I GROUP INC. (Xxxxxx Brothers Group Inc.), a Delaware
corporation (the "Warrant Holder").
W I T N E S S E T H
WHEREAS, the Issuer and the Warrant Holder are parties to the
Preferred Stock Purchase Agreement, dated as of the date hereof (as the same may
be amended, supplemented or otherwise modified from time to time, the "Stock
Purchase Agreement"), pursuant to which the Warrant Holder agreed to purchase
shares of Class B Series 2 Convertible Preferred Stock (the "Preferred Stock")
from the Issuer; and
WHEREAS, in order to induce the Warrant Holder to purchase the
Preferred Stock from the Issuer pursuant to the Stock Purchase Agreement, the
Issuer has agreed to execute and deliver this Warrant Agreement and to issue to
the Warrant Holder the Warrants hereinafter described;
NOW, THEREFORE, in consideration of the premises the parties
hereto agree as follows:
SECTION 1. Definitions. Capitalized terms used herein which
are defined in the Stock Purchase Agreement and are not otherwise defined herein
shall have the respective meanings given thereto in the Stock Purchase Agreement
(regardless of whether such Stock Purchase Agreement shall still be in effect);
and the following terms used herein shall have the meanings indicated below,
unless the context otherwise requires:
"Affiliate" shall have the meaning set forth in Rule 144
adopted by the Commission pursuant to the Securities Act.
"Business Day" shall mean any day except Saturday, Sunday and
any day which shall be a legal holiday or a day on which banks in New
York, New York are not authorized to conduct business or are required
to be closed.
"Capital Stock" shall have the meaning specified in Section
2(d) hereof.
"Commission" shall mean the Securities and Exchange Commission
or any entity succeeding to any or all of its functions.
"Common Stock" shall mean the common stock, $.001 par value,
of the Issuer.
"Contractual Obligation" shall mean, as to any Person, any
provision of any security issued by such Person or of any agreement,
instrument or other undertaking to which such Person is a party or by
which it or any of its property is bound.
"Convertible Securities" shall mean any stock or other
securities convertible into or exchangeable for shares of Common Stock.
"Current Market Price Per Share" shall have the meaning
specified in Section 7 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor federal statute.
"Exercise Price" shall mean the exercise price of a Warrant,
which shall be (i) with respect to the Warrants issued on the date of
the Initial Closing $8.25 per Warrant Share, or, if lower, the Current
Market Price Per Share for June 14, 1999 and (ii) with respect to the
warrants issued on the date of the Second Closing, if any (which shall
be at the option of the Issuer in the circumstances described in
Section 2.1(b)(iv) of the Stock Purchase Agreement), the Exercise Price
of the Warrants issued on the date of the Initial Closing or, if lower,
the average of the Current Market Price Per Share over the five
consecutive Trading Days ending on the date immediately prior to the
date of the Second Closing, in each case subject to adjustment as
provided in Section 11 hereof.
"Expiration Date" shall mean the five (5) year anniversary of
the date of the Initial Closing or, if such day is not a Business Day,
the next succeeding Business Day.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Management Option Plan" shall mean the Issuer's 1992 Stock
Option Plan, as in effect on the date hereof, which plan provides for
the issuance, upon exercise of the options granted pursuant thereto of
up to 4,500,000 shares of Common Stock in the aggregate to the
employees of and certain consultants to the Issuer to be designated by
the Issuer's Board of Directors.
"Management Options" shall mean options granted or issued by
the Issuer
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pursuant to the Management Option Plan.
"Person" shall mean any natural person, corporation,
partnership, limited liability company, trust or other entity.
"Preferred Stock" shall mean the Class B Series 2 Preferred
Stock, no par value, of the Issuer.
"Requirement of Law" shall mean as to any Person, the
Certificate of Incorporation and By-Laws or other organizational or
governing documents of such Person, and any law, treaty, rule or
regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its
property is subject.
"Rights" shall mean any rights to subscribe for or to
purchase, or any options or warrants for the purchase of, shares of
Common Stock or Convertible Securities. The term "Rights" shall
include, without limitation, the Warrants and the Management Options.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute.
"Total Warrants" shall mean 441,380, which is the maximum
number of Warrants contemplated under the Stock Purchase Agreement to
be issued in connection with the sale of Preferred Stock unless the
provisions of the second sentence of Section 3 hereof are applicable.
"Trading Day" shall mean a day on which the securities market
on which the Common Stock is listed is open for trading.
"Warrant" shall mean a warrant issued pursuant to this Warrant
Agreement as contemplated under the Stock Purchase Agreement entitling
the record holder thereof to purchase from the Issuer at the Warrant
Office one share of Common Stock (subject to adjustment as provided in
Section 11 hereof) at the Exercise Price at any time before 5:00 P.M.
local time on the Expiration Date.
"Warrant Certificate" shall mean a certificate evidencing one
or more Warrants, substantially in the form of Exhibit A hereto, with
such changes therein as may be required to reflect any adjustments made
pursuant to Section 11 hereof.
"Warrant Office" shall mean the office or agency of the Issuer
at which the Warrant Register shall be maintained and where the
Warrants may be presented
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for exercise, exchange, substitution and transfer, which office or
agency will be the office of the Issuer at 0 Xxxx 00xx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 which office or agency may be changed by the
Issuer pursuant to notice in writing to the Persons named in the
Warrant Register as the holders of the Warrants.
"Warrant Register" shall mean the register, substantially in
the form of Exhibit B hereto, maintained by the Issuer at the Warrant
Office.
"Warrant Shares" shall mean the shares of Common Stock issuable
or issued upon exercise of all or any of the Warrants as the number
and/or type of such shares may be adjusted from time to time pursuant
to Section 11 hereof.
SECTION 2. Representations and Warranties. The Issuer hereby represents
and warrants to the Warrant Holder as follows:
(a) The Issuer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of New York
has the corporate power and authority to execute and deliver this
Warrant Agreement and the Warrant Certificate, to issue the Warrants
and to perform its obligations under this Warrant Agreement and the
Warrant Certificate.
(b) The execution, delivery and performance by the Issuer of
this Warrant Agreement and the Warrant Certificate, the issuance of the
Warrants and the issuance of the Warrant Shares upon exercise of the
Warrants have been duly authorized by all necessary corporate action on
the part of the Issuer and do not and will not violate, or result in a
breach of, or constitute a default under, or require any consent under,
or result in the creation of a lien upon the assets of the Issuer
pursuant to, any Requirement of Law or any Contractual Obligation
binding upon the Issuer.
(c) This Warrant Agreement has been duly executed and
delivered by the Issuer and constitutes a legal, valid, binding and
enforceable obligation of the Issuer, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally
and except as equitable remedies may be limited by general principles
of equity. When the Warrants and Warrant Certificates have been issued
as contemplated hereby, (i) the Warrants and the Warrant Certificates
will constitute legal, valid, binding and enforceable obligations of
the Issuer, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and except as equitable remedies may be
limited by general principles of equity (whether such remedies are
sought in a proceeding at law or in equity) and (ii) the Warrant
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Shares, when issued upon exercise of the Warrants in accordance with
the terms hereof, will be duly authorized, validly issued, fully paid
and nonassessable shares of the Common Stock.
(d) As of the date of the Initial Closing immediately after
giving effect to the purchase and sale of the Preferred Stock and
Warrants on that date (i) the Issuer's capital stock (the "Capital
Stock") consists of (a) 1,400,000 shares of Class A preferred stock,
par value $.01 per share, of which 1,380,000 shares are issued and
outstanding, (b) 10,000,000 shares of Class B preferred stock, no par
value, of which (x) 500,000 shares have been designated Class B Series
1 Preferred Stock, par value $.001 per share, of which no shares are
issued and outstanding, and (y) 80,000 shares have been designated as
Preferred Stock, all of such Preferred Stock will be issued and
outstanding upon the consummation of the Second Closing and (c)
50,000,000 shares of Common Stock, of which 15,481,242 shares are
issued and outstanding. All issued and outstanding shares of Capital
Stock are validly authorized and issued, fully paid and nonassessable
and were issued in accordance with the registration or qualification
provisions of the Securities Act or pursuant to valid exemptions
therefrom.
SECTION 3. Issuance of Warrants. The Issuer hereby agrees to issue and
deliver to the Warrant Holder on the date of the Initial Closing Warrants
evidencing rights to purchase 5.51725 shares of Common Stock, subject to
adjustment as provided in Section 11 hereof, for each share of Preferred Stock
purchased by the Warrant Holder pursuant to the Stock Purchase Agreement on the
date of the Initial Closing and at any time on or before 5:00 P.M., New York
City time, on the Expiration Date at a price per share equal to the Exercise
Price. On the date of the Second Closing, if any (which shall be at the option
of the Issuer in the circumstances described in Section 2.1(b)(iv) of the Stock
Purchase Agreement), the Issuer hereby agrees to issue to the Warrant Holder on
the date of the Second Closing Warrants evidencing rights to purchase 5.51725
shares of Common Stock, subject to adjustment as provided in Section 11 hereof,
for each share of Preferred Stock purchased by the Warrant Holder pursuant to
the Warrant Agreement on the date of the Second Closing; provided, however, that
if the Conversion Price of the Shares issued at the Second Closing is less than
$7.25 the number of Warrants issued for each Share sold at the Second Closing
shall be adjusted by the number obtained by (i) dividing $4,000,000 by the
Conversion Price of the Shares sold at the Second Closing, (ii) multiplying the
quotient obtained from such division by .40 and (iii) dividing the product
obtained from such multiplication by 40,000. On the date of the Initial Closing
and at the Second Closing, if any, simultaneously with the purchase of the
Preferred Stock by the Warrant Holder pursuant to the Stock Purchase Agreement,
the Issuer shall deliver to the Warrant Holder a Warrant Certificate evidencing
the Warrants which the Warrant Holder is entitled to receive at the Initial
Closing and the Second Closing, as the case may be, in accordance with the terms
hereof.
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SECTION 4. Registration, Transfer and Exchange of Certificates.
(a) The Issuer shall maintain at the Warrant Office the
Warrant Register for registration of the Warrants and Warrant
Certificates and transfers thereof. On the date hereof the Issuer shall
register the outstanding Warrants and Warrant Certificates in the name
of the Warrant Holder. The Issuer may deem and treat the registered
holder(s) of the Warrant Certificates as the absolute owner(s) thereof
and the Warrants represented thereby (notwithstanding any notation of
ownership or other writing on the Warrant Certificates made by any
Person) for the purpose of any exercise thereof or any distribution to
the holder(s) thereof, and for all other purposes, and the Issuer shall
not be affected by any notice to the contrary.
(b) Subject to Section 13 hereof, the Issuer shall register
the transfer of any outstanding Warrants in the Warrant Register upon
surrender of the Warrant Certificate(s) evidencing such warrants to the
Issuer at the Warrant Office, accompanied (if so required by it) by a
written instrument or instruments of transfer in form satisfactory to
it, duly executed by the registered holder or holders thereof or by the
duly appointed legal representative thereof. Upon any such registration
of transfer, new Warrant Certificate(s) evidencing such transferred
Warrants shall be issued to the transferee(s) and the surrendered
Warrant Certificate(s) shall be canceled. If less than all the Warrants
evidenced by Warrant Certificate(s) surrendered for transfer are to be
transferred, new Warrant Certificate(s) shall be issued to the holder
surrendering such Warrant Certificate(s) evidencing such remaining
number of Warrants.
(c) Warrant Certificates may be exchanged at the option of the
holder(s) thereof, when surrendered to the Issuer at the Warrant
Office, for another Warrant Certificate or other Warrant Certificates
of like tenor and representing in the aggregate a like number of
Warrants. Warrant Certificates surrendered for exchange shall be
canceled.
(d) No charge shall be made for any such transfer or exchange
except for any tax or other governmental charge imposed in connection
therewith. Except as provided in Section 13(b) hereof, each Warrant
Certificate issued upon transfer or exchange shall bear the legend set
forth in Section 13(b) hereof if the Warrant Certificate presented for
transfer or exchange bore such legend.
SECTION 5. Mutilated or Missing Warrant Certificates. If any Warrant
Certificate shall be mutilated, lost, stolen or destroyed, the Issuer shall
issue, in exchange and substitution for and upon cancellation of the mutilated
Warrant Certificate, or in lieu of and substitution for the Warrant Certificate
lost, stolen or destroyed, a new Warrant Certificate of like tenor and
representing an equivalent number of Warrants, but only upon receipt of evidence
satisfactory to the Issuer of such loss, theft or destruction of such Warrant
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Certificate and, if reasonably requested, indemnity satisfactory to it. No
service charge shall be made for any such substitution, but all expenses and
reasonable charges associated with procuring such indemnity and all stamp, tax
and other governmental duties that may be imposed in relation thereto shall be
borne by the holder of such Warrant Certificate. Each Warrant Certificate issued
in any such substitution shall bear the legend set forth in Section 13(b) hereof
if the Warrant Certificate for which such substitution was made bore such
legend.
SECTION 6. Duration and Exercise of Warrants.
(a) The Warrants evidenced by a Warrant Certificate shall be
exercisable in whole or in part by the registered holder thereof on any
Business Day at any time from and after the date of the Initial Closing
or the Second Closing, as the case may be, and prior to 5:00 P.M. in
New York City on the Expiration Date.
(b) Subject to the provisions of this Warrant Agreement, upon
presentation of the Warrant Certificate evidencing the Warrants to be
exercised, with the form of election to purchase on the reverse thereof
duly completed and signed by the registered holder or holders thereof,
to the Issuer at the Warrant Office, and upon payment of the aggregate
Exercise Price for the number of Warrant Shares in respect of which
such Warrants are being exercised in lawful money of the United States
of America, the Issuer shall issue and cause to be delivered to or upon
the written order of the registered holder(s) of such Warrants and in
such name or names as such registered holder(s) may designate, a
certificate for the Warrant Shares issued upon such exercise of such
Warrants. Any Person(s) so designated to be named therein shall be
deemed to have become holder(s) of record of such Warrant Shares as of
the date of exercise of such Warrants. Certificates for the Warrant
Shares so purchased, representing the aggregate number of shares
specified in the Warrant Certificate, shall be delivered to the
registered holder within a reasonable time, not exceeding three (3)
Business Days, after this Warrant shall have been so exercised. The
certificates so delivered shall be in such denominations as may be
requested by the registered holder and shall be registered in the name
of the registered holder or such other name as shall be designated by
such registered holder.
(c) If less than all of the Warrants evidenced by a Warrant
Certificate are exercised at any time, a new Warrant Certificate or
Certificates shall be issued for the remaining number of Warrants
evidenced by such Warrant Certificate. Each new Warrant Certificate so
issued shall bear the legend set forth in Section 13(b) hereof if the
Warrant Certificate presented in connection with partial exercise
thereof bore such legend. All Warrant Certificates surrendered upon
exercise of Warrants shall be canceled.
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(d) Notwithstanding the foregoing, at any time after the
six-month anniversary of the date hereof, the Issuer may, at its sole
option, compel the involuntary conversion of all, but not less than
all, of the outstanding Warrants into Warrant Shares at the Exercise
Price in the event that (i) the Current Market Price Per Share (as
hereinafter defined) is equal to or in excess of two hundred percent
(200%) of the Exercise Price per Warrant Share for a period of at least
twenty consecutive Trading Days, (ii) the Warrant Shares have been
registered under the Securities Act pursuant to Section 6.1 of the
Stock Purchase Agreement and such registration has been declared
effective by the Commission and is effective on such date and (iii) the
Issuer has a sufficient number of authorized shares of Common Stock
reserved for issuance upon conversion of the Warrants. In the event
that the Issuer elects to compel such involuntary conversion of all
outstanding Warrants, it shall promptly notify the Warrant Holder of
such election at least ten (10) days in advance of the date set forth
in such conversion notice whereupon the Warrants shall be deemed
converted into shares of Common Stock as of the date set forth in the
Issuer's conversion notice.
(e) In lieu of physical delivery of the Warrants, provided
that Issuer's transfer agent is participating in The Depository Trust
Company ("DTC") Shares Fast Automated Securities Transfer ("FAST")
program, upon request of the Warrant Holder and in compliance with the
provisions hereof, the Issuer shall use its best efforts to cause its
transfer agent to electronically transmit the Warrant Shares to the
Warrant Holder by crediting the account of the Warrant Holder's prime
broker with DTC through its Deposit Withdrawal Agent Commission system.
The time period for delivery described herein shall apply to the
electronic transmittals described herein.
SECTION 7. No Fractional Shares. The Issuer shall not be required to
issue fractional shares of Common Stock upon exercise of the Warrants but may
pay for any such fraction of a share an amount in cash equal to the Current
Market Price per Share of Common Stock of such share multiplied by such
fraction. The "Current Market Price Per Share" on any date shall be deemed to
be, for any day, the last sale price for the Common Stock on the principal
securities exchange on which the Common Stock is listed or admitted to trading,
or, if not so listed or admitted to trading on any securities exchange, the last
sale price for the Common Stock on the National Association of Securities
Dealers National Market System, or, if the Common Stock shall not be listed on
such system, the closing bid price of the Common Stock in the over-the-counter
market.
SECTION 8. Payment of Taxes. The Issuer will pay all taxes (other than
any applicable income or similar taxes payable by the holders of the Warrants or
Warrant Shares) attributable to the initial issuance of Warrant Shares upon the
exercise of the Warrants; provided that the Issuer shall not be required to pay
any tax which may be
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payable in respect of any transfer involved in the issue of any Warrant
Certificate or any certificate for Warrant Shares in a name other than that of
the registered holder of a Warrant Certificate surrendered upon the exercise of
a Warrant, and the Issuer shall not be required to issue or deliver such
certificates unless or until the Person or Persons requesting the issuance
thereof shall have paid to the Issuer the amount of such tax or shall have
established to the satisfaction of the Issuer that such tax has been paid.
SECTION 9. Reservation and Issuance of Warrant Shares.
(a) The Issuer will at all times have authorized, and reserve
and keep available for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon the exercise of the Warrants,
the number of shares of Common Stock deliverable upon exercise of all
outstanding Warrants.
(b) Before taking any action which would cause an adjustment
pursuant to Section 11 hereof reducing the Exercise Price below the
then par value (if any) of the Warrant Shares issuable upon exercise of
the Warrants, the Issuer will take any corporate action which may be
necessary in order that the Issuer may validly and legally issue fully
paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
(c) The Issuer covenants that all Warrant Shares will, upon
issuance in accordance with the terms of this Warrant Agreement, be
duly and validly issued, fully paid and nonassessable and free from all
taxes with respect to the issuance thereof and from all liens, charges
and security interests created (whether by affirmative action or
inaction) by the Issuer and shall not have any legends or restrictions
on resale, except as required by Section 13(b) hereof.
(d) The Issuer shall promptly secure the listing of the shares
of Common Stock issuable upon exercise of the Warrants upon the
national securities exchange or automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official
notice of issuance upon exercise of the Warrants) and shall maintain,
so long as any other shares of Common Stock shall be so listed, such
listing of all shares of Common Stock from time to time issuable upon
the exercise of the Warrants.
SECTION 10. Obtaining of Governmental Approvals and Stock Exchange
Listings. The Issuer will, at its own expense, (a) obtain and keep effective any
and all permits, consents and approvals of governmental agencies and authorities
which may from time to time be required of the Issuer in order to satisfy its
obligations hereunder and (b) take all action which may be necessary so that the
Warrant Shares, immediately upon their issuance upon the exercise of the
Warrants, will be listed on each securities exchange or over-the-counter market,
if any, on which the Common Stock is then listed if such listing
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is permitted by applicable law, regulation or rule.
SECTION 11. Adjustment of Exercise Price and Number of Warrant Shares
Purchasable. Prior to the Expiration Date, the Exercise Price and the number of
Warrant Shares purchasable upon the exercise of each Warrant are subject to
adjustment from time to time upon the occurrence of any of the events enumerated
in this Section 11.
(a) In the event that the Issuer shall at any time after the
date of this Agreement (i) declare a dividend on the Common Stock in
Common Stock, Convertible Securities or other Rights, (ii) split or
subdivide the outstanding Common Stock, (iii) combine the outstanding
Common Stock into a smaller number of shares, or (iv) issue by
reclassification of its Common Stock any shares of Common Stock,
Convertible Securities or other Rights, then, in each such event, the
number of Warrant Shares purchasable upon exercise of each Warrant
immediately prior thereto shall be adjusted so that the holder shall be
entitled to receive the kind and number of such shares or other
securities of the Issuer which the holder would have owned or have been
entitled to receive after the happening of any of the events described
above, had such Warrant been exercised immediately prior to the
happening of such event (or any record date with respect thereto). Such
adjustment shall be made whenever any of the events listed above shall
occur. An adjustment made pursuant to this paragraph (a) shall become
effective immediately after the effective date of the event retroactive
to the record date, if any, for the event.
(b) If at any time, as a result of an adjustment made pursuant
to this Section 11, the holder of any Warrant thereafter exercised
shall become entitled to receive any shares of the Issuer other than
shares of Common Stock, thereafter the number of such other shares so
receivable upon exercise of any Warrant shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Warrant Shares
contained in this Section 11, and the provisions of this Agreement with
respect to the Warrant Shares shall apply on like terms to such other
shares.
(c) Whenever the number of Warrant Shares purchasable upon the
exercise of each warrant is adjusted pursuant to Section 11(a) hereof,
the Exercise Price per Warrant Share payable upon exercise of each
Warrant shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, the numerator of
which shall be the number of Warrant Shares purchasable upon the
exercise of each Warrant immediately prior to such adjustment, and the
denominator of which shall be the number of Warrant Shares purchasable
immediately after such adjustment; provided, however, that in no event
shall the Exercise Price be adjusted to an amount which is less than
the par value of the Common Stock.
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(d) In the event of any capital reorganization of the Issuer,
or of any reclassification of the Common Stock (other than a
reclassification referred to in Section 11(a)(iv) above), or in case of
the consolidation of the Issuer with or the merger of the Issuer with
or into any other corporation or of the sale of the properties and
assets of the Issuer as, or substantially as, an entirety to any other
Person, each Warrant shall, after such capital reorganization,
reclassification of Common Stock, consolidation, merger or sale, and in
lieu of being exercisable for Warrant Shares, be exercisable, upon the
terms and conditions specified in this Warrant Agreement, for the
number of shares of stock or other securities or assets to which a
holder of the number of Warrant Shares purchasable (at the time of such
capital reorganization, reclassification of Common Stock,
consolidation, merger or sale) upon exercise of such Warrant would have
been entitled upon such capital reorganization, reclassification of
Common Stock, consolidation, merger or sale; and in any such case, if
necessary, the provisions set forth in this Section 11 with respect to
the rights thereafter of the holders of the Warrants shall be
appropriately adjusted so as to be applicable, as nearly as they may
reasonably be, to any shares of stock or other securities or assets
thereafter deliverable on the exercise of the Warrants. The Issuer
shall not effect any such consolidation, merger or sale, unless prior
to or simultaneously with the consummation thereof the successor
corporation (if other than the Issuer) resulting from such
consolidation or merger or the corporation purchasing such assets or
the appropriate corporation or entity shall assume, by written
instrument, the obligation to deliver to the holder of each Warrant the
shares of stock, securities or assets to which, in accordance with the
foregoing provisions, such holder may be entitled and all other
obligations of the Issuer under this Warrant Agreement. The provisions
of this paragraph (d) shall apply to successive reorganizations,
reclassifications, consolidations, mergers and sales.
(e) Except with respect to Excluded Securities (as defined
below), in case the Issuer shall issue any shares of Common Stock or
Convertible Securities after the date hereof at a price per share (or
having a conversion or exercise price per share) of less than the
Exercise Price per Warrant Share, the Exercise Price per Warrant Share
shall be appropriately adjusted by decreasing (but not increasing) the
Exercise Price per Warrant Share to such lower price per share. An
adjustment made pursuant to clause (a) shall be made the next Business
Day following the date on which any such issuance is made and shall be
effective retroactively to the close of business on the date of such
issuance. For purposes of this clause (e), the consideration receivable
by the Issuer in connection with the issuance of additional shares of
Common Stock or of Convertible Securities after the date hereof shall
be deemed to be equal to (X) in the case the consideration received by
the Issuer is cash, the sum of the aggregate offering price (before
deduction of underwriting discounts or commissions and expenses payable
to third parties, if any) of all such Common Stock and/or Convertible
Securities plus the minimum aggregate amount,
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if any, payable upon conversion, exchange or exercise of any such
Convertible Securities, and (Y) in the case the consideration received
by the Issuer is other than cash, the fair market value of the
consideration received by the Issuer as determined by the good faith
judgment of the Board of Directors of the Issuer; provided, however,
that in the event the Warrant Holder disagrees in good faith with the
determination of the Board of Directors of the Issuer, such fair market
value shall be determined by a nationally recognized or major regional
investment banking firm or firm of independent certified public
accountants of recognized standing (an "Appraiser") selected in good
faith by the Warrant Holder; and provided, further, that the Issuer,
after receipt of the determination by such Appraiser shall have the
right to select in good faith an additional Appraiser meeting the same
qualifications, in which case the fair market value shall be equal to
the average of the determinations by each such Appraiser. The issuance
or reissuance of any shares of Common Stock or Convertible Securities
(whether treasury shares or newly issued shares) pursuant to a dividend
or distribution on, or subdivision, combination or reclassification of,
the outstanding shares of Common Stock requiring an adjustment in the
Exercise Price per Warrant Share pursuant to clause (a), shall not be
deemed to constitute an issuance of Common Stock or Convertible
Securities by the Issuer pursuant to which this clause (e) applies.
Upon the expiration or termination of any unconverted, unexchanged or
unexercised Convertible Securities for which an adjustment has been
made pursuant to this clause (e), the adjustments shall forthwith be
reversed to effect such Exercise Price per Warrant Share as would have
been in effect at the time of such expiration or termination had such
Convertible Securities, to the extent outstanding immediately prior to
such expiration or termination, had never been issued. For purposes of
this clause (e), "Excluded Securities" shall mean: (i) shares of Common
Stock issuable upon conversion of the Preferred Stock; (ii) shares of
Common Stock issuable or issued to employees of and consultants to the
Issuer pursuant to the Management Option Plan; (iii) any capital stock
issued as a stock dividend or upon any stock split or other subdivision
or combination of shares of the Issuer's capital stock; (iv) shares of
Common Stock issuable upon conversion of any Convertible Securities
issued prior to the date hereof and outstanding on the date hereof, (v)
shares of Common Stock issuable upon conversion of the Issuer's Class A
Convertible Preferred Stock outstanding on the date hereof or (vi)
Common Stock issued upon the conversion or exercise of Convertible
Securities issued after the date hereof as to which an adjustment to
the Exercise Price per Warrant Share has been made pursuant to this
clause (e) upon the issuance of such Convertible Securities.
(f) Irrespective of any adjustments in the Exercise Price or
the number or kind of shares purchasable upon exercise of the Warrants,
Warrant Certificates theretofore or thereafter issued may continue to
express the same Exercise Price per share and number and kind of shares
as are stated on the Warrant Certificates
12
initially issuable pursuant to this Agreement.
(g) If any question shall at any time arise with respect to
the adjusted Exercise Price or Warrant Shares issuable upon exercise,
such question shall be determined by the independent auditors of the
Issuer and such determination shall be binding upon the Issuer and the
holders of the Warrants and the Warrant Shares.
SECTION 12. Notices to the Warrant Holder. Upon any adjustment
of the Exercise Price or number of Warrant Shares issuable upon exercise
pursuant to Section 11 hereof the Issuer shall promptly, but in any event within
ten Business Days thereafter, cause to be given to the Warrant Holder, at its
address appearing on the Warrant Register by first-class mail, postage prepaid,
a certificate signed by its chief financial officer setting forth the Exercise
Price as so adjusted and/or the number of shares of Common Stock issuable upon
the exercise of each Warrant as so adjusted and describing in reasonable detail
the facts accounting for such adjustment and the method of calculation used.
Where appropriate, such certificate may be given in advance and included as a
part of the notice required to be mailed under the other provisions of this
Section 12.
In the event:
(a) the Issuer shall authorize issuance to all holders of
Common Stock of rights or warrants to subscribe for or purchase Capital
Stock of the Issuer or of any other subscription rights or warrants; or
(b) the Issuer shall authorize a dividend or other
distribution to all holders of Common Stock payable in evidences of its
indebtedness, cash or assets; or
(c) of any consolidation or merger to which the Issuer is a
party and for which approval of any stockholders of the Issuer is
required, or of the conveyance or transfer of the properties and assets
of the Issuer substantially as an entirety, or of any capital
reorganization or reclassification or change of the Common Stock (other
than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or
combination); or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Issuer; or
(e) the Issuer shall authorize any other action which would
require an adjustment of the Exercise Price or number of Warrant Shares
issuable upon exercise pursuant to Section 11 hereof;
then the Issuer shall cause to be given to the Warrant Holder at its address
appearing on
13
the Warrant Register, at least twenty (20) Business Days prior to the applicable
record date hereinafter specified (or as expeditiously as possible after the
occurrence of any involuntary dissolution, liquidation or winding up referred to
in clause (d) above), by first-class mail, postage prepaid, a written notice
stating (i) the date as of which the holders of record of Common Stock to be
entitled to receive any such rights, warrants or distribution are to be
determined, or (ii) the date on which any such consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up is expected to
become effective (or has become effective, in the case of any involuntary
dissolution, liquidation or winding up), and the date as of which it is expected
that holders of record of Common Stock shall be entitled to exchange their
shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up. The failure to give the notice required by this
Section 12 or any defect therein shall not affect the legality or validity of
any distribution, right, warrant, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up, or the vote upon any action.
SECTION 13. Restrictions on Transfer.
(a) The Warrant Holder represents that it is not acquiring the
Warrants (and upon any exercise of the Warrants, each holder represents
that it will not be acquiring the Warrant Shares) with a view to any
distribution or public offering within the meaning of the Securities
Act but subject to any requirement of law that the disposition of its
property shall at all times be within its control. The Warrant Holder
acknowledges that the Warrant Shares issuable upon exercise of the
Warrants have not as of the date hereof been registered under the
Securities Act and agrees that it will not sell or otherwise transfer
any of its Warrant Shares except upon the terms and conditions
specified herein.
(b) (i) The Warrant Holder agrees, and each subsequent
transferee described in paragraph (ii) below shall agree, that it will
not transfer any Warrant Shares except pursuant to an exemption from,
or otherwise in a transaction not subject to, the registration
requirements of the Securities Act (as confirmed in an opinion of
counsel reasonably acceptable to the Issuer to the transferor to the
effect that the proposed transfer may be effected without registration
under the Securities Act) or pursuant to an effective registration
statement under the Securities Act.
(ii) Each Warrant Certificate and each certificate for the
Warrant Shares (unless the legal opinion delivered in connection
therewith is to the effect that the first paragraph of such legend is
not required in order to ensure compliance with the Securities Act)
shall include a legend in substantially the following form:
THE WARRANTS AND UNDERLYING SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
14
OF 1933 OR STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER, AN
EXEMPTION FROM, OR OTHERWISE IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF SUCH ACT.
IN ADDITION, THE WARRANTS AND UNDERLYING SHARES MAY BE TRANSFERRED ONLY
IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THE WARRANT AGREEMENT,
DATED AS OF JUNE 11, 1999, BETWEEN THE ISSUER AND THE INITIAL HOLDER OF
THE WARRANTS NAMED THEREIN, A COMPLETE AND CORRECT COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE ISSUER AND WILL
BE FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT
CHARGE.
SECTION 14. Amendments and Waivers. Any provision of this Warrant
Agreement may be amended, supplemented, waived, discharged or terminated by a
written instrument signed by the Issuer and the holders of a majority of the
then outstanding Warrants.
SECTION 15. Notices.
(a) Any notice or demand to be given or made by the holders of
the Warrants or the Warrant Shares to the Issuer pursuant to this
Warrant Agreement shall be sufficiently given or made if personally
delivered, sent by overnight courier or telecopied (in each such case
delivery will be effective upon receipt) or mailed by certified mail,
postage prepaid, return receipt requested (delivery will be effective
three days after the date of mailing) addressed to the Issuer at the
Warrant Office.
(b) Any notice to be given by the Issuer to the Warrant Holder
shall be sufficiently given if personally delivered, sent by overnight
courier or telecopied (in each such case delivery will be effective
upon receipt) or mailed by certified mail, postage prepaid, return
receipt requested (delivery will be effective three days after the date
of mailing) addressed to such holder as such holder's name and address
shall appear on the Warrant Register.
SECTION 16. Binding Effect; Third Party Rights. This Warrant Agreement
shall be binding upon and inure to the sole and exclusive benefit of the Issuer,
its successors and assigns, the Warrant Holder, the registered holders from time
to time of the Warrants and the Warrant Shares.
15
SECTION 17. Termination. This Warrant Agreement shall terminate and be
of no further force and effect at 5:00 P.M. New York City time on the Expiration
Date or the date on which none of the Warrants shall be outstanding (whether by
reason of the involuntary conversion thereof or the expiration thereof by the
Issuer).
SECTION 18. Counterparts. This Warrant Agreement may be executed in two
or more separate counterparts and all of said counterparts taken together shall
be deemed to constitute one and the same instrument.
SECTION 19. Governing Law. This Warrant Agreement and each Warrant
Certificate shall be governed by and construed in accordance with the laws of
the State of New York without regard to the choice of law provisions thereof.
SECTION 20. Benefits of this Warrant Agreement. Nothing in this Warrant
Agreement shall be construed to give to any Person other than the Issuer and the
registered holders of the Warrants and the Warrant Shares any legal or equitable
right, remedy or claim under this Warrant Agreement.
16
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed and delivered by their proper and duly
authorized officers, as of the date and year first above written.
CHROMATICS COLOR SCIENCES
INTERNATIONAL, INC.
By: /s/ Xxxxx X. Xxxxxxxxxx
-------------------------------
Xxxxx X. Xxxxxxxxxx
Chairman and Chief Executive
Officer
LB I GROUP INC.
By: /s/ Xxxxxx Xxxxxxxxxx
-------------------------------
Xxxxxx Xxxxxxxxxx
Senior Vice President
17
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS AND UNDERLYING SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR STATE SECURITIES LAWS AND
MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER, AN EXEMPTION FROM, OR OTHERWISE IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF SUCH ACT. IN ADDITION, THE WARRANTS AND
UNDERLYING SHARES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THE WARRANT AGREEMENT, DATED AS OF JUNE 11, 1999, BETWEEN THE
ISSUER AND THE INITIAL HOLDER OF THE WARRANTS NAMED THEREIN, A COMPLETE AND
CORRECT COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF
THE ISSUER AND WILL BE FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND
WITHOUT CHARGE.
WARRANT CERTIFICATE
Evidencing Warrants
to Purchase Common Stock of
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
No. ___-___ Warrants
This Warrant Certificate certifies that __________________________
_________________________________________, or registered assigns, is the
registered holder of ____ Warrants (the "Warrants") to purchase Common Stock,
$.001 par value (the "Common Stock"), of CHROMATICS COLOR SCIENCES
INTERNATIONAL, INC., a New York corporation (the "Issuer"). Each Warrant
entitles the holder, but only subject to the conditions set forth herein and
in the Warrant Agreement referred to below, to purchase from the Issuer at any
time prior to 5:00 P.M., New York City time at the Warrant Office, on June 14,
2004 or, if such day is not a Business Day, the next succeeding Business Day
(the "Expiration Date"), one fully paid and nonassessable share of the Common
Stock of the Issuer (the "Warrant Shares") at a price (the "Exercise Price")
of $______ per Warrant Share payable in lawful money of the United States of
America, upon surrender of this Warrant Certificate, execution of the annexed
Form of Election to Purchase and payment of the Exercise Price at the
principal
place of business of the Issuer (the "Warrant Office"). The Exercise Price and
number of Warrant Shares purchasable upon exercise of the Warrants are subject
to adjustment upon the occurrence of certain events as set forth in the
Warrant Agreement referred to below.
The Issuer may deem and treat the registered holder(s) of the Warrants
evidenced hereby as the absolute owner(s) thereof (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof and of any distribution to the holder(s) hereof, and
for all other purposes, and the Issuer shall not be affected by any notice to
the contrary.
Warrant Certificates, when surrendered at the Warrant Office by the
registered holder hereof in person or by a legal representative duly
authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of
like tenor evidencing in the aggregate a like number of Warrants.
Upon due presentment for registration of transfer of this Warrant
Certificate at the Warrant Office, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued in exchange for this Warrant Certificate to the
transferee(s) and, if less than all the Warrants evidenced hereby are to be
transferred, to the registered holder hereof, subject to the limitations
provided in the Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
This Warrant Certificate is one of the Warrant Certificates referred to
in the Warrant Agreement, dated as of June 11, 1999, by and between the Issuer
and the Warrant Holder named therein (the "Warrant Agreement"). Said Warrant
Agreement is hereby incorporated by reference in and made a part of this
Warrant Certificate and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Issuer and the holders.
[The remainder of this page intentionally left blank]
2
IN WITNESS WHEREOF, the Issuer has caused this Warrant Certificate to
be signed by its duly authorized officers and has caused its corporate seal to
be affixed hereunto.
CHROMATICS COLOR SCIENCES
INTERNATIONAL, INC.
By:___________________
Name:
Title:
(CORPORATE SEAL)
ATTEST:
---------------------
Name:
Title:
3
ANNEX TO
WARRANT CERTIFICATE
[FORM OF ELECTION TO PURCHASE]
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase Warrant Shares and
herewith tenders payment for such Warrant Shares to the order of the Issuer in
the amount of $__________ in accordance with the terms hereof. The undersigned
requests that a certificate for such Warrant Shares be registered in the name
of __________________________ whose address is _______________ and that such
certificate be delivered to ________________ whose address is
____________________. If said number of Warrant Shares is less than all of the
Warrant Shares purchasable hereunder, the undersigned requests that a new
Warrant Certificate representing the remaining balance of the Warrant Shares
be registered n the name of _______________ whose address is
_______________________ and that such Warrant Certificate be delivered to
_______________________ whose address is _______________________________.
Signature:____________________________
(Signature must conform in all respects to name of holder as specified
on the face of the Warrant Certificate)
Date:_______________________________
EXHIBIT B
TO WARRANT AGREEMENT
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
Warrant No. Holder Shares Underlying Warrant
----------- ------ -------------------------
A-101 LB I Group Inc. 220,690
3 World Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
