WARRANT AGREEMENT
THIS WARRANT AGREEMENT, dated as of July 2, 2001, by and between CHROMATICS
COLOR SCIENCES INTERNATIONAL, INC., a New York corporation (the "Issuer"), and
GAC-LABS, LLC. (the "Warrant Holder"),
W I T N E S S E T H
WHEREAS, pursuant to a Share Subscription and Redemption Agreement, dated
as of June 19, 2001 (the "Purchase Agreement"), the Warrant Holder acquired
certain shares (the "Shares") of common stock of ▇▇▇▇▇▇ Acquisition Corp.,
previously a wholly-owned subsidiary of the Issuer; and
WHEREAS, pursuant to a Purchase Option Agreement, dated as of July 2, 2001
(the "Option Agreement"), the Warrant Holder granted to the Issuer an option to
purchase the Shares (the "Option"); and
WHEREAS, in consideration for the Option, 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. 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.
"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.
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"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 equal to (i) $0.50 per Warrant Share if the Issuer does not
consummate a Rights Offering prior to the Expiration Date and (ii) $0.10
per Warrant Share if the Issuer, after obtaining the prior approval with
respect to the Rights Offering and the increase in the number of Warrants
issuable hereunder as a result thereof from the holders of a majority of
the outstanding stock of the Issuer entitled to vote thereon, consummates a
Rights Offering prior to the Expiration Date, in each case subject to
adjustment as provided in Section 11 hereof.
"Expiration Date" shall mean (i) if the Issuer exercises the Option
prior to the expiration thereof, the date of the closing of the exercise of
the Option under the Option Agreement and (ii) if the Issuer does not
exercise the Option prior to the expiration thereof, the fifth day after
the one year anniversary of the date hereof, in each case, 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.
"Mandatory Exercise Threshold" shall mean One Dollar ($1.00).
"Person" shall mean any natural person, corporation, partnership,
limited liability company, trust or other entity.
"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.
"Rights Offering" shall mean a public offering by the Issuer to the
holders of record of Common Stock of the right to subscribe for newly
issued shares of Common Stock (or any other security or lending arrangement
that provides rights to convert to Common or Preferred Stock) and/or a
private placement by the Issuer of its securities.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute.
"Total Warrants" shall mean (i) One Million Six Hundred Thousand
(1,600,000) if the Issuer does not consummate a Rights Offering prior to
the Expiration Date and (ii) Eight Million Nine Hundred Sixty Thousand
(8,960,000) if the Issuer, after obtaining the prior approval with respect
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to the Rights Offering and the increase in the number of Warrants issuable
hereunder as a result thereof from the holders of a majority of the
outstanding stock of the Issuer entitled to vote thereon, consummates a
Rights Offering prior to the Expiration Date.
"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 entitling the record holder thereof to purchase from the Issuer
at the Warrant Office one (1) share of Common Stock per Warrant (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 for exercise, exchange, substitution and transfer, which
office or agency will be the office of the Issuer at ▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, 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 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.
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(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 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.
SECTION 3. Issuance of Warrants. The Issuer hereby agrees to issue and
deliver to the Warrant Holder on the date hereof Warrants evidencing rights to
purchase a number of shares of Common Stock equal to the Total Warrants, subject
to adjustment as provided in Section 11 hereof, 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 hereof, the Issuer shall deliver to the Warrant
Holder a Warrant Certificate evidencing the Warrants that the Warrant Holder is
entitled to receive in accordance with the terms hereof.
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 of 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.
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(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
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 hereof 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.
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(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.
(d) 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.
(e) To the extent the Warrants have not been previously exercised, if
(i) the Issuer gives notice of its election to exercise the Option in
accordance with the provisions of the Option Agreement, (ii) the Common
Stock has not been the subject of a reverse stock split effected after the
date hereof in a ratio of greater than 10 to 1, (iii) the Rights Offering
has been consummated and (iv) the Current Market Price Per Share has
exceeded the Mandatory Exercise Threshold for a period of at least ten (10)
consecutive Trading Days from and after the date the Issuer gives notice of
its election to exercise the Option in accordance with the provisions of
the Option Agreement, the Warrants shall be subject to mandatory exercise
by the Warrant Holder from and after the tenth (10th) such Trading Day, at
such time until the Expiration Date as the Issuer may determine in its
discretion, provided that notice of any such mandatory exercise shall be
given by the Issuer to the Warrant Holder no later than three (3) Business
Days prior to such mandatory exercise.
(f) To the extent the Warrants have not been previously exercised, if
(i) the Issuer has filed the Registration Statement referred to in Section
14 hereof and such Registration Statement has been declared effective by
the Commission, (ii) the Common Stock has not been the subject of a reverse
stock split effected after the date hereof in a ratio of greater than 10 to
1, (iii) the Rights Offering has been consummated and (iv) the Current
Market Price Per Share has exceeded the Mandatory Exercise Threshold for a
period of at least ten (10) consecutive Trading Days from and after the
effective date of such Registration Statement, the Warrants shall be
subject to mandatory exercise by the Warrant Holder prior to the expiration
of the Option, provided that notice of any such mandatory exercise shall be
given by the Issuer to the Warrant Holder no later than five (5) Business
Days after the tenth (10th) such Trading Day. In the event of any mandatory
exercise of the Warrants pursuant to this clause (f), the Issuer shall
permit the Warrant Holder to effect payment of the aggregate Exercise Price
through the means of a broker's cashless exercise transaction.
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(g) In the event of a mandatory exercise under clause (e) of this
section of all of the Warrants, the Issuer shall permit the Warrant Holder
to effect payment of the aggregate Exercise Price by means of delivering to
the Issuer, free and clear of all liens and encumbrances, the
certificate(s) for the Shares, duly endorsed for transfer in favor of the
Issuer or accompanied by a duly executed stock power with respect to such
certificate(s) in favor of the Issuer.
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 multiplied by such fraction. The "Current Market Price Per Share" on
any date shall be deemed to be, for any day, the last bid 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 shall 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 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.
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(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 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. Any 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.
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(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.
(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) In case the Issuer shall issue any shares of Common Stock in any
Rights Offering after the date hereof at a price per share less than the
Exercise Price, (i) the Exercise Price shall be appropriately adjusted by
decreasing (but not increasing) the Exercise Price to such lower price per
share, and (ii) the number of Warrant Shares shall be adjusted to be equal
to the quotient obtained by dividing (x) $896,000 by (y) such lower price
per share. An adjustment made pursuant to clause (e) 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.
(f) Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of the Warrants, Warrant
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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 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 (10)
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 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
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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 (SUBJECT TO SECTION 14 OF THE
WARRANT AGREEMENT (AS DEFINED BELOW)) 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 JULY 2, 2001 (THE "WARRANT AGREEMENT"), BETWEEN THE ISSUER
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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. Registration of Warrant Shares.
(a) The Issuer shall, at the Issuer's expense, register under the
Securities Act the Warrant Shares and in that connection shall file a
registration statement with respect to the Warrant Shares (the
"Registration Statement") with the Commission (i) by no later than the date
on which the registration statement with respect to the shares of Common
Stock offered in the Rights Offering is filed, if the Issuer consummates a
Rights Offering prior to September 1, 2001, and (ii) by no later than
November 1, 2001 if the Issuer does not consummate a Rights Offering prior
to September 1, 2001 (in each case, the "Filing Date"). The Issuer shall
use its commercially reasonable best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof. The number of shares of Common Stock
included in the Registration Statement shall at all times be at least equal
to the number of Warrant Shares. Notice of effectiveness of the
Registration Statement shall be furnished promptly to the Warrant Holder.
The Issuer shall use its commercially reasonable best efforts to maintain
the effectiveness of the Registration Statement and from time to time will
amend or supplement such Registration Statement and the prospectus
contained therein as and to the extent necessary to comply with the
Securities Act to permit the resale of the Warrant Shares by the Warrant
Holder. The Issuer shall use its commercially reasonable best efforts to
maintain the effectiveness of the Registration Statement with respect to
the Warrant Shares until all of the Warrant Shares have been sold by the
Warrant Holder pursuant thereto or such date as all of the Warrant Shares
may be sold by Warrant Holder without registration.
(b) As a condition to the inclusion of the Warrant Shares in the
Registration Statement, the Warrant Holder shall furnish to the Issuer such
information with respect to the Warrant Holder as is required to be
disclosed in the Registration Statement (and the prospectus included
therein) by the applicable rules, regulations and guidelines of the
Commission.
SECTION 15. 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 16. 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
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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 17. 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.
SECTION 18. 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 19. Counterparts. This Warrant Agreement may be executed in one or
more separate counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
SECTION 20. 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 21. 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.
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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:_____________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Chairperson
GAC-LABS, LLC
By:______________________________
Name:
Title:
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EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS AND UNDERLYING SHARES (SUBJECT TO SECTION 14 OF THE WARRANT
AGREEMENT (AS DEFINED BELOW)) 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 JULY 2, 2001 (THE "WARRANT AGREEMENT"),
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 the
Expiration Date (as defined in the Warrant Agreement), one fully paid and
nonassessable share of the Common Stock of the Issuer (the "Warrant Shares") at
a price per Warrant Share equal to the Exercise Price (as defined in the Warrant
Agreement), 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.
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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 __, 2001, 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]
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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:
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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 in 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:_________________________________
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