Chromatics Adopts Shareholder Rights Plan
NEW YORK, Dec. 31 /PRNewswire/ -- Chromatics Color Sciences International, Inc. (Nasdaq: CCSI - news) announced today that its Board of Directors has adopted a Shareholders Rights Plan designed to protect shareholders from various abusive or coercive takeover tactics, including attempts to acquire control of the Company at an inadequate price. The Plan also is intended to provide additional protection from partial or two-tiered takeover attempts, coercive stock accumulation programs, street-sweeps, squeeze-outs and other tactics that may be used to gain control of the Company without offering an adequate price to all shareholders. Chromatics said that the Rights Plan is similar to plans adopted by many public companies.
Under the Plan, each shareholder will receive a dividend of one Right for each share of the Company's outstanding common stock. Subject to the terms of the Rights Agreement, each Right will entitle the holder to purchase one one- hundredth of a share of the Company's new Class B Series 1 Preferred Stock at an initial exercise price of $28. Until the Rights become exercisable, they will be represented by, and trade with, the outstanding common stock; no separate certificates will be issued for the Rights at this time.
Initially, the Rights are attached to the Company's common stock and are not exercisable. They become detached from the common stock, and become immediately exercisable, (i) following expiration of the Board's right to redeem the Rights during the 10 day period (the ''Window Period''), or any extension of the Window Period, after any person or group (other than an exempted shareholder) becomes the beneficial owner of 20 percent or more of the Company's common stock (other than acquisitions which are approved in advance by the Company's Board of Directors), or (ii) ten days after any person or group announces a tender or exchange offer that would result in that same beneficial ownership level (other than pursuant to certain
permitted offers).
If a person (other than an exempted shareholder or pursuant to a pre-approved acquisition) becomes a 20 percent owner in the Company, all Rights holders, other than such person, will be entitled to purchase shares of the Company's stock at a discounted price. If the Company is acquired in a merger after such an acquisition, all Rights holders except the buyer also will be entitled to purchase stock in the buyer at a discount. Details of the Plan and the Rights are outlined in a Form 8-A filing being made with the Securities and Exchange Commission.
The Plan exempts any existing shareholder (including Darby Macfarlane, the Company's founder and Chief Executive Officer, her heirs and entities controlled by her, currently the owners of approximately 861,896 shares of common stock, 1,380,000 shares of Class A Preferred Stock and 750,000 options granted pursuant to the Company's 1992 Stock Option Plan), so long as the number of shares of common stock beneficially owned by that shareholder does not exceed, with respect to all such exempt shareholders other than Mrs. Macfarlane, by more than one percent (by acquisition) the number of shares of common stock beneficially owned by that shareholder as of December 30, 1998. In the case of Mrs. Macfarlane, such ownership cannot exceed by more than one percent the sum of (i) the shares of common stock beneficially owned by Mrs. Macfarlane as of December 30, 1998, plus (ii) all shares acquired upon exercise of options issued to Mrs. Macfarlane and her heirs, relatives and entities controlled by her, including without limitation, options issued under the Company's 1992 Stock Option Plan, plus (iii) all shares issued upon conversion of the Class A Preferred Stock owned by Mrs. Macfarlane and her heirs, relatives and entities controlled by her. Accordingly, all shareholders beneficially owning (or contemplating transactions in which they would beneficially own) more than 20 percent of the Company's common stock should read the Plan carefully before acquiring additional shares after December 30, 1998. The Plan also exempts acquisitions which, as described above, are approved in advance by the Board of Directors.
The distribution of Rights will be made on January 11, 1999 to shareholders of record of common stock on that date, and shares of common stock that are newly issued after that date will also carry Rights until the Rights become detached from the common stock. The Rights will expire on January 11, 2009. The Rights distribution is not taxable to shareholders. The Company may redeem the Rights for $0.001 each at any time during the Window Period, or any extension thereof, after a buyer acquires a 20 percent position in the Company, and under certain other circumstances.
Details of the Rights distribution are contained in a ''Summary of Rights to Purchase Shares,'' which will be mailed to all shareholders of record of the Company.
Chromatics Color Sciences is in the business of color science and has developed technologies and intellectual properties that it believes have medical applications involving the detection and monitoring of certain chromogenic diseases or disorders such as bilirubin infant jaundice. The Company defines chromogenic diseases or disorders as those diagnosed or monitored by the coloration of the human skin, tissue or fluid being affected. In this regard, the Company has received Food and Drug Administration (FDA) clearance for commercial marketing of its medical device for detection and monitoring of bilirubin infant jaundice.
Other medical applications will require additional clinical trials and FDA clearance. The Company's technologies and intellectual properties also have other applications, including the scientific color measurement and classification of human skin, certain color-sensitive consumer products, and in determining the color compatibility of such skin and product color classification for use in a variety of industries including the cosmetic, beauty-aid and fashion industries.
Certain of the matters discussed in this announcement contain forward-looking statements that involve material risks to and uncertainties in the Company's business that may cause actual results to differ materially from those anticipated by the statements made herein. Such risks and uncertainties include, among other things, the availability of any needed financing, the Company's ability to implement its long range business plan for various applications for its technologies, the Company's ability to enter into agreements with marketing and distribution partners, the impact of competition, the obtaining and maintaining of regulatory clearances applicable to applications of the Company's technology, management of growth and other risks and uncertainties that may be detailed from time to time in the Company's reports filed with the Securities and Exchange Commission, including those set forth in its annual report on Form 10-K for the year ended December 31, 1997 and its Form 10-Q for the quarter ended September 30, 1998.
SOURCE: Chromatics Color Sciences International, Inc.
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