SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
SCHEDULE TO
ISSUER TENDER OFFER STATEMENT
UNDER SECTION 14(d)(1) OR 13(e)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
CCA INDUSTRIES, INC.
(NAME OF ISSUER)
CCA INDUSTRIES, INC.
(NAME OF PERSON(S) FILING STATEMENT)
Common Stock, Par Value $0.01 per share
(Title of Class of Securities)
124867102
(CUSIP Number of Class of Securities)
Ira W. Berman
Executive Vice President, General Counsel and Secretary
CCA Industries, Inc.
200 Murray Hill Parkway
East Rutherford, NJ 07030
(201) 330-1400
Copies to:
Michael I. Stolzar, Esq.
Zissu Gumbinger & Stolzar LLP
950 Third Avenue
New York, New York 10022
(212) 371-3900
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of
Person(s) Filing Statement)
CALCULATION OF FILING FEE
Transaction Valuation: $2,500,000 (a)
Amount of Filing Fees: $500.00 (b)
_________
(a) Calculated as the aggregate maximum purchase price to be paid
for 2,500,000 shares in the offer based on its market value in
accordance with Section (a)(4) of Regulation 240.0-11(a), i.e.
its last sales price reported for June 1, 2000.
(b) Calculated as 1/50 of 1% of the Transaction Valuation.
[ ] Check box if any part of the fee is offset as provided by
Rule 0-11 (a) (2) and identify the filing with which the offsetting
fee was previously paid. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
Amount Previously Paid: N/A
Form or Registration No.: N/A
Filing Party: N/A
Date Filed: N/A
[ ] Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to
which the statement relates:
[ ] third-party tender offer subject to Rule 14d-1.
[ X ] issuer tender offer subject to Rule 13e-4.
[ ] going-private transaction subject to Rule 13e-3.
[ ] amendment to Schedule 13D under Rule 13d-2.
[ ] Check the following box if the filing is a final amendment
reporting the results of the tender offer.
ITEM 1. SUMMARY TERM SHEET.
Reference is hereby made to the "Summary Term Sheet" of the
Offer to Purchase, dated May 30, 2000 (the "Offer to Purchase"),
which is attached hereto as Exhibit (a) (1) and incorporated herein
by reference.
ITEM 2. SUBJECT COMPANY INFORMATION.
(a) Name and Address. The name of the issuer is CCA
Industries, Inc., a Delaware Corporation ("CCA" or the "Company").
The principal executive office of the Company is located at 200
Murray Hill Parkway, East Rutherford, NJ 07030. The telephone
number of the principal executive office of the Company is (201)
330-1400.
(b) Securities. The title of the securities being sought is
Common Stock, par value $0.01 per share (the "Common Stock") . As
of May , 2000 there were approximately 6,321,151 shares of Common
Stock issued and outstanding.
(The Company also has authorized, issued and outstanding
shares of Class A Common Stock, but shares of Class A Common Stock
are not the subject of the Offer to Purchase.)
(c) Trading Market and Price
CCA's Common Stock is traded on NASDAQ, National Market. The
high and low sales prices during the two years ended November 30,
1998 and 1999, were as follows:
Quarter Ended 1999 1998
Feb. 28 2.125 - 1.1252 11/16 - 2 1/16
May 31 1.5 - 1.0633 5/16 - 2 3/8
Aug. 31 1.781 - 1.1562 3/4 - 1 5/8
Nov. 30 2.031 - 1.251 7/8 - 1 1/16
The high and low prices during the quarter ended February 29,
2000, were 1.750 and 1.125. The high and low prices thereafter,
until May 26, 2000, were 1.50 and .813.
(d) Dividends
The Company has not paid any Common Stock (or other)
dividend during the last two years.
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(e) Prior Public Offerings
The Company has not made a registered or exempt-from-
registration public offering of Common Stock for cash during the
past three years.
(f) Prior Stock Purchases
The Company purchased, and placed in treasury, 88,496 shares
of Common Stock during the past two years, for per share prices
ranging form $1.43 to $1.93, at the average purchase price per
quarter of $1.82 (all in September of 1998), and $1.57 (during
October - December 1998).
David Edell and Ira W. Berman, each a director and executive
officer of the Company, exercised, respectively, 50,000 options to
purchase 50,000 shares of Common Stock at $.50 per share, and
20,000 options to purchase 20,000 shares of Common Stock at $.50
per share, in December of 1997. (The Company's fiscal year end is
November 30. Thus, December 1997 purchases were in fiscal 1998.)
They paid therefor, respectively, by giving the Company 11,675 and
4,705 shares of its Common Stock. In November of 1999, Mr. Edell
exercised 27,500 options, at $.55 per share, and 32,500 options at
$.50 per share to purchase a total of 60,000 shares of Common
Stock, and paid therefor by giving the Company 15,000 shares of its
Common Stock, plus cash. At the same time, Mr. Berman exercised
40,000 options, at $.50 per share to purchase 40,000 shares of
Common Stock, and paid therefor by giving the Company 10,000 shares
of its Common Stock.
There have been no other purchases of Common Stock of the
Company by the Company, its officers and/or directors and/or
affiliates during the last two years.
ITEM 3. IDENTITY AND BACKGROUND OF THE FILING PERSON.
The name of the filing person is CCA Industries, Inc. The
name, business address and business telephone number of the Company
is CCA Industries, Inc., 200 Murray Hill Parkway, East Rutherford,
NJ 07073; telephone number (201) 330-1400.
The following persons are executive officers of the Company,
whose principal occupation and employment is in service of the
Company, and has been for more than five years. Their addresses
are c/o CCA Industries, Inc., 200 Murray Hill Parkway, East
Rutherford, NJ 07073:
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. David Edell
. Ira W. Berman
. Dunnan Edell
. Drew Edell
. John Bingman
(Messrs. David and Dunnan Edell, and Ira W. Berman are also
Directors. Mr. Berman is Chairman of the Board.)
The following presents biographical information for those
directors who are not employees of the Company:
Jack Polak has been a private investment consultant since
April 1982. His business address is 90 Park Avenue, NY, NY 10017.
Stanley Kreitman, has been Vice Chairman of the Board of
Manhattan Associates, an equity - investment firm, since 1994. His
business address is c/o Manhattan Associates, 12 East 49th Street
NY, NY.
Sidney Dworkin is a business consultant and has been for more
than the last five years. His business address is 1550 No.
Powerline Road, Pompano, FL 33069.
Rami G. Abada, is the President and Chief Operating Officer of
Jennifer Convertibles, Inc. He has been its Chief Operating
Officer since April of 1994. His business address is c/o Jennifer
Convertibles, Inc. 419 Cross Ways Park Drive, Woodbury, New York
11797.
None of the executive officers and/or directors has been
convicted in a criminal proceeding during the past five years (or
prior thereto), nor party to any administrative or judicial
proceeding that resulted in a judgment, decree or final order
enjoining any of them from further violations of, or prohibiting
activities subject to, federal or state securities laws, or finding
any violation of federal or state securities laws.
All of the executive officers and directors of the Company are
citizens of the United States of America.
ITEM 4. TERMS OF THE TRANSACTION.
The Company is seeking tenders for up to 2,500,000 shares of
Common Stock in exchange (per share) for a 5 year, 6% interest, $2
subordinated debenture, maturing August 1, 2005. Upon the terms
and subject to the conditions set forth in the Offer to Purchase
and the related Letter of Transmittal (which, together with the
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Offer to Purchase, constitute the "Offer"). Tendering shareholders
will receive subordinated debentures, and interest payments will be
made semi-annually, as described in the Offer to Purchase and
related Letter of Transmittal. The scheduled expiration date is
July 31, 2000, unless extended as described in the Offer to
Purchase. (The later of July 31, 2000 or the date of the extended
expiration date is referred to as the "Expiration Date.") As
described in the Offer to Purchase, shareholders may withdraw
Common Stock tendered in the Offer at any time prior to the
Expiration Date. The procedures for tendering and withdrawing
shares of Common Stock, the manner in which shares will be accepted
for payment, the Company's intentions in the event the Offer is
oversubscribed, Risk Factors, and Federal Income Tax Consequences
of the Offer are described in the Offer to Purchase. The Company is
not aware of any Common Stock to be purchased from any officer,
director or affiliate of the Company pursuant to the Offer. Copies
of the Offer to Purchase and the form of Letter of Transmittal are
attached hereto as Exhibits (a) (1) and (a) (2), respectively, and
are incorporated herein by reference.
ITEM 5. PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Reference is hereby made to Section 9 of the Offer to
Purchase, "Interest of Executive Officers and Directors;
Transactions and Arrangements Concerning the Common Stock" which is
incorporated herein by reference. Except as set forth therein, the
Company does not know of any agreement, arrangement or
understanding, whether or not legally enforceable, between the
Company, any of the its executive officers or directors, any
controlling person or any officer or director of any corporation
ultimately in control of the Company and any person with respect to
any securities of the Company.
ITEM 6. PURPOSE OF THE TRANSACTION AND PLANS OR PROPOSALS.
Reference is hereby made to the following Sections of the
Offer to Purchase, which are incorporated herein by reference:
Section 6, "Purpose of the Offer/Plans or Proposals"; Section 9,
"Interest of Executive Officers and Directors; Transactions and
Arrangements Concerning the Common Stock"; Section 10, "Certain
Effects of the Offer"; Section 11, "Source and Amount of Funds";
and to the information in the Summary Term Sheet preceding Section
1.
The Company has no plans or proposals to cause (a) an
extraordinary transaction, such as a merger, reorganization or
liquidation; (b) any purchase, sale or transfer of a material
amount of the Company's assets; (c) any material change in the
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Company's present dividend rate or policy, or indebtedness or
capitalization other than that caused as the result of the
transaction that is the subject of this Schedule; (d) any change in
the Company's present Board of Directors or management, including,
but not limited to, any plans or proposals to change the number or
the term of Directors, or to fill any existing vacancy on the Board
of Directors or to change any material term of the employment
contract of any executive officer; (e) any other material change in
the Company's corporate structure or business; (f) the delisting of
a class of equity securities of the Company from a national
securities exchange, or cessation of authorization for quotation on
an inter-dealer quotation system of a registered national
securities association (but, inasmuch as the Company cannot know
how many Common Stock shares will be outstanding after the Offer,
or what their market price will be, the possibility that the Common
Stock, at some future date, will not qualify for trading or NASDAQ
cannot be discounted); (g) a class of equity security of the
Company becoming eligible for termination of registration under
Section 12g(4) of the Securities And Exchange Act of 1934, as
amended; (h) the suspension of the Company's obligation to file
reports pursuant to Section 15(d) of the Securities Exchange Act of
1934, as amended; (i) the acquisition by any person of additional
securities of the Company or the disposition of securities of the
Company; or (j) changes in the Company's Certificate of
Incorporation, bylaws or any other governing instrument or other
actions which may impede the acquisition of control of the Company
by any person.
ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Reference is hereby made to Section 11 of the Offer to
Purchase, "Source and Amounts of Funds", which is incorporated
herein by reference.
ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
Reference is hereby made to Section 9 of the Offer to
Purchase, "Interest of Executive Officers and Directors;
Transactions and Arrangements Concerning the Common Stock," and to
the financial statements included as part of Exhibit (a) (1)
attached hereto, which are incorporated herein by reference. There
have not been any transactions involving the Common Stock of the
Company that were effected during the past 60 days by the Company,
any executive officer or Director, any person controlling the
Company, any executive officer or director of any corporation
ultimately in control of the Company or by any associate or
subsidiary of any of the foregoing, including any executive officer
or director of any such subsidiary.
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ITEM 9. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.
No persons have been employed, retained or are to be
compensated by or on behalf of the Company to make solicitations or
recommendations in connection with the Offer.
ITEM 10. FINANCIAL INFORMATION.
(a)-(b) Reference is hereby made to the financial statements
included as part of Exhibit (a) (1) attached hereto, which are
incorporated herein by reference.
ITEM 11. ADDITIONAL INFORMATION.
(a)(1) Reference is hereby made to Section 9 of the Offer to
Purchase, "Interests of Executive Officers and Directors;
Transactions and Arrangements Concerning the Common Stock," which
is incorporated herein by reference.
(a)(2) through (a) (5) Not applicable.
(b) The Offer to Purchase, attached hereto as Exhibit (a) (1),
is incorporated herein by reference in its entirety.
ITEM 12. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase (including Financial Statements)
(a)(2) Form of Letter of Transmittal (including Guidelines
for Certification of Taxpayer Identification Number)
(b)(1) Trust Indenture between CCA Industries, Inc. and
American Stock Transfer & Trust Company, as
Trustee
ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3.
Not applicable.
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SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
Dated: May 30, 2000
CCA INDUSTRIES, INC.
By: s/ IRA W.BERMAN
Ira W. Berman, Secretary
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
(a)(1) Offer to Purchase (including Financial Statements)
(a)(2) Form of Letter of Transmittal (including Guidelines for
Certification of Tax Identification Number)
(a)(3) Form of Brokers' Letter to Beneficial Owners
(b)(1) Trust Indenture between CCA Industries, Inc. and, as Trustee, The
American Stock Transfer & Trust Company
Exhibit (a) (1)
CCA INDUSTRIES, INC.
OFFER TO PURCHASE 2,500,000 OF ITS
ISSUED AND OUTSTANDING SHARES OF COMMON STOCK
IN EXCHANGE FOR A SUBORDINATED DEBENTURE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT
EASTERN STANDARD TIME ON JULY 31, 2000, UNLESS THE OFFER IS EXTENDED. TO ENSURE
PROCESSING OF YOUR REQUEST, A LETTER OF TRANSMITTAL OR A MANUALLY SIGNED
FACSIMILE OF IT (TOGETHER WITH ANY CERTIFICATES FOR COMMON STOCK AND ALL OTHER
REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY (AS DEFINED BELOW) ON
OR BEFORE JULY 31, 2000.
To the Holders of Common Stock of
CCA INDUSTRIES, INC.:
CCA Industries, Inc. (the "Company") is offering to purchase up to
2,500,000 shares of its Common Stock, (but not Class A Common Stock), with par
value of $0.01 per share ("Common Stock"), in exchange (per share) for a $2.00
subordinated debenture, payable with 6% interest, maturing August 1, 2005.
Accrued interest will be paid semi-annually, commencing 6 months after the
expiration date of the offer. The tendering, acceptance and withdrawal of
tenders are subject to the terms and conditions set forth in this Offer to
Purchase and the related Letter of Transmittal (which together constitute the
"Offer"). The Offer is scheduled to terminate as of 12:00 Midnight Eastern
Standard time on July 31, 2000, unless extended by an action of the Company's
Board of Directors. The Common Stock is traded on the NASDAQ National Market.
The purpose of the Offer is to reduce the number of outstanding shares, given
that the market valuation of the Common Stock, in the judgment of the Company's
Board of Directors and Management, has not reflected the fair value of the
Common Stock. See Section 6.
If more than 2,500,000 shares of Common Stock are duly tendered prior to
the expiration of the Offer, and not withdrawn, the Company, at present, and
subject to the condition that there have been no changes in the factors
originally considered by the Board of Directors when it determined to make the
Offer, and to the other conditions set forth in Section 5, intends to purchase
2,500,000 shares of Common Stock as follows:
First, the Company will accept all validly tendered shares, not withdrawn,
of each shareholder who beneficially owns as of the date of the Offer to
Purchase (and continues to own as of the Expiration Date) an aggregate of less
than 100 shares (and pro rata from such shareholders to the extent that more
than 2,500,000 shares satisfy this criteria). Second, the Company will accept
other validly tendered shares not withdrawn on a pro rata basis (with appro-
priate adjustments in both "First" and "Second" circumstances to avoid the pur-
chase of fractional shares) so that the Company accepts an aggregate of
2,500,000 Shares pursuant to the Offer.
THIS OFFER IS BEING MADE TO ALL SHAREHOLDERS
OF THE COMPANY AND IS NOT CONDITIONED UPON ANY
MINIMUM NUMBER OF SHARES OF COMMON STOCK BEING TENDERED.
THIS OFFER IS SUBJECT TO CERTAIN CONDITIONS. SEE SECTION 5.
SUMMARY TERM SHEET
THIS SUMMARY HIGHLIGHTS CERTAIN INFORMATION IN THIS OFFER TO PURCHASE. YOU
SHOULD CAREFULLY READ THE ENTIRE OFFER TO PURCHASE AND RELATED LETTER OF
TRANSMITTAL FOR A MORE COMPLETE DESCRIPTION OF THE TERMS AND CONDITIONS OF
THE OFFER AND TO FULLY UNDERSTAND THESE TERMS AND CONDITIONS.
The Company
CCA INDUSTRIES, INC. was incorporated in Delaware in 1983.
The Company operates in what may be generally described as the
health-and-beauty aids business, selling numerous products, in several
health-and-beauty aids categories. All Company products are manufactured by
contract manufacturers, pursuant to the Company's specifications and
formulations.
The Company owns registered trademarks, or exclusive licenses to use
registered trademarks, that identify its products by brand-name. Under most of
the brand names, the Company markets several different but categorically-
related products. The brand and trademark names include "Plus+White" (oral
health-care products), "Sudden Change" (skin-care products), "Bikini Zone"
(after-shave analgesic products for women), "Wash n Curl," "Wash n Straight"
and "Pro Perm" (hair-care products), "Permathene" and "Mega 16" (dietary
products), "Nutra Nail" and "Nutra Nail 60" (nail treatments), "Hair Off"
(depilatories), "IPR" (foot-care products), "Solar Sense" and "Kid Sense"
(sun-care products), "Mood Magic" (lipsticks), "Cloud Dance" and "Cherry
Vanilla" (perfumes).
All Company products are marketed and sold to major drug and food chains,
mass merchandisers, and wholesale beauty-aids distributors throughout the
United States and Canada.
Reference is hereby made to the financial statements attached hereto as
Exhibit (a). Such financial statements are incorporated herein by reference.
The Offer
The Company is offering to purchase up to 2,500,000 shares of outstanding
Common Stock which are properly tendered and accepted for payment prior to the
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Expiration Date of the Offer. The tendering, acceptance and withdrawal of ten-
ders are subject to the terms and conditions set forth in this Offer to Pur-
chase and the related Letter of Transmittal. See Sections 1, 2, 3, 4 and 5.
The Company may terminate the Offer, amend its terms, reject Common Stock
tendered for payment or postpone payment if, during the tender period,
circumstances or events occur which make it inadvisable to proceed with the
Offer, in the consideration of the Board of Directors. See Sections 5, 14 and
15.
The "Purchase Price"/Redemption
The consideration to be paid by the Company per tendered share of Common
Stock accepted and not withdrawn is one $2, five year subordinated debenture,
with 6% simple interest thereon, payable as accrued, every six months. The
subordinated debentures will be subordinated in right of payment to all
indebtedness of the Company except for the indebtedness of the subordinated
debentures. See Sections 1 through 5. The cost of purchasing the entire
2,500,000 shares of Common Stock pursuant to the Offer would be approximately
$5,000,000 plus interest. (See below, "Risk Factors").
The subordinated debentures issuable in the offer are redeemable by the
Company after August 1, 2001. See Section 4.
Purpose of the Offer
The purpose of this Offer is to give shareholders an opportunity to
exchange shares of Common Stock for a $2.00 debenture per share, and to reduce
the number of market shares, given that, in the judgment of the Board of
Directors and management, the market has not reflected the Common Stock's fair
value.
Accounting Treatment
Upon and assuming the completion and closing of the Offer, an entry will
be made on the books of the Company showing an increase in long-term debt for
the face amount of the debentures issued and a corresponding increase in the
amount of treasury stock owned by the Company (which is a reduction in the
equity section of the balance sheet). The interest expense will be recorded
monthly as incurred and an accrual will be reflected on the books until the
semi-annual payments are made.
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Rick Factors
1. There can be no assurance that the Company will have the resources
to pay, or to obtain financing to pay the subordinated debentures at maturity.
The subordinated debentures issuable to tendering shareholders will be
subordinate to all other indebtedness, and no sinking fund is required to be
established as security for payment at maturity. Moreover, the indenture does
not contain any restrictive financial covenants and the Company will continue
to be entitled, after issuance of subordinated debentures, to borrow and other-
wise "take on" indebtedness senior to the subordinated debentures. See Section
4.
As a result, in the event of bankruptcy, liquidation or reorganization or
certain other events, the Company's assets will be available to pay obligations
on the subordinated debentures only after all other indebtedness of the Company
and its subsidiaries has been paid in full. After repaying such other
indebtedness, the Company may not have assets sufficient to pay the sub-
ordinated debentures.
2. Tendering shareholders, whose tenders are accepted, will incur tax
consequences. See Section 13. (The Company urges shareholders to consult
their own investment and tax advisors.)
3. There can be no assurance that any market for the subordinated
debentures, which will not be traded on NASDAQ, or on any exchange or listing,
will develop.
The Expiration Date
The Offer is scheduled to terminate as of 12:00 Midnight Eastern Standard
time on July 31, 2000, unless extended by action of the Company's Board of
Directors. The later of July 31, 2000 or the latest time and date to which the
Offer extended is the "Expiration Date". If the expiration date is extended,
the Company will make a public announcement of the new expiration date. See
Sections 1 and 14.
Tendering Common Stock
Shareholders seeking to tender their Common Stock pursuant to the Offer
must send to the Company's Depositary, on or before the Expiration Date, a
properly completed and executed Letter of Transmittal (or manually signed
facsimile thereof), Common Stock certificates and other documents required by
the Letter of Transmittal. See Section 2.
Withdrawing Tenders
Shareholders seeking to withdraw tenders of Common Stock must send to the
Company's Depositary a written, telegraphic, telex or facsimile transmission
notice of withdrawal that specifies the name of the person withdrawing a tender
of Common Stock, the number of shares of Common Stock to be withdrawn, and, if
certificates representing such Common Stock have been delivered or otherwise
identified to the Depositary, the name of the registered holder(s) of such
Common Stock. Shareholders may withdraw Common Stock tendered at any time prior
to the Expiration Date.
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IMPORTANT
If you desire to tender all or any portion of your Common Stock, you should
either (1) complete and sign the Letter of Transmittal and mail or deliver it
along with the referable Common Stock certificate(s) and any other required
documents to the "Depositary," The American Stock Transfer & Trust Company (The
American Stock Transfer & Trust Company will also serve as "Trustee," pursuant
to the Indenture); or (2) request your broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for you. If your Common
Stock is registered in the name of a broker, dealer, commercial bank, trust
company or other nominee, you must contact such broker, dealer, commercial
bank, trust company or other nominee if you desire to tender your Common Stock.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF
SUCH SHAREHOLDER'S COMMON STOCK. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY
ALL INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISERS
AND MAKE THEIR OWN DECISIONS WHETHER TO TENDER COMMON STOCK AND, IF SO, HOW
MANY SHARES TO TENDER.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER COMMON STOCK PURSUANT TO
THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED
HEREIN OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION
AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
Questions and requests for assistance may be directed to the Company at
the address and telephone number set forth below. Requests for additional
copies of this Offer to Purchase and the Letter of Transmittal should be
directed to American Stock Transfer & Trust Company, at the address and tele-
phone number set forth below.
May 30, 2000
CCA INDUSTRIES, INC.
200 Murray Hill Parkway
East Rutherford, NJ 07073
(201) 330-1400
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Depositary:
By Mail, Hand Delivery or Courier:
AMERICAN STOCK TRANSFER & TRUST COMPANY
40 Wall Street
New York, New York 10005
(718) 921-8209
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TABLE OF CONTENTS
SECTION
1. Price; Number of Common Stock
2. Procedure for Tendering Common Stock
3. Withdrawal Rights
4. Payment for Shares
5. Certain Conditions of the Offer
6. Purpose of the Offer/Plans or Proposals
7. Price Range of Common Stock; Dividends
8. The Company's Executive Officers and Directors
9. Interest of Directors and Executive
Officers; Transactions and Arrangements
Concerning the Common Stock
10. Certain Effects of the Offer
11. Source and Amount of Funds
12. Additional Information
13. Certain Federal Income Tax Consequences
14. Extension of Tender Period; Termination;
Amendments
15. Miscellaneous
EXHIBIT a: Audited Financial Statements for the
Fiscal Years Ended November 30, 1999 and 1998
Unaudited Financial Statements for
the Quarter Ended February 29, 2000
Pro Forma Financial Statements as at
November 30, 1999 and February 29, 2000
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1. PRICE; NUMBER OF SHARES OF COMMON STOCK.
The Company will, upon the terms and subject to the conditions of the
Offer, accept for exchange (and thereby purchase) 2,500,000 or such lesser
number of its issued and outstanding shares of Common Stock $.01 par value, as
are properly tendered (and not withdrawn in accordance with Section 3) prior to
12:00 Midnight Eastern Standard time on July 31, 2000 (such time and date being
hereinafter called the "Expiration Date"). If less than 2,500,000 shares have
been properly tendered (and not withdrawn) by the Initial Expiration Date. The
Company reserves the right to extend the Offer. See Section 14. The later of
the Initial Expiration Date or the latest time and date to which the Offer is
extended is hereinafter called the "Expiration Date."
The "Purchase Price" per share of Common Stock is one $2 subordinated
debenture, bearing simple interest at the annual rate of 6%, maturing five
years from the Expiration Date, with accrued interest payments to be made every
six months, from the Expiration Date to maturity.
The Offer is being made to all shareholders of the Company's Common Stock
and is not conditioned upon any minimum number of shares of Common Stock being
tendered. If more than 2,500,000 shares are duly tendered prior to the
expiration of the Offer and not withdrawn, the Company will accept 2,500,000
shares, as follows:
First, the Company will accept all validly tendered shares, not withdrawn,
of each shareholder who beneficially owns as of the date of the Offer to Pur-
chase (and continues to own as of the Expiration Date) an aggregate of less
than 100 shares (and pro rata from such shareholders to the extent that more
than 2,500,000 shares satisfy this criteria). Second, the Company will accept
other validly tendered Shares not withdrawn on a pro rata basis (with appro-
priate adjustments in both "First and Second" circumstances to avoid the pur-
chase of fractional shares) so that the Company accepts an aggregate of
2,500,000 Shares pursuant to the Offer.
On May 30, 2000 there were approximately 6,321,151 shares of Common Stock
issued and outstanding. The Company has been advised that no officers or
affiliates of the Company intend to tender any shares pursuant to the Offer.
(The Company also has authorized, issued and outstanding shares of Class A
Common Stock, but shares of Class A Common Stock are not subject of this Offer
to Purchase.)
The Company reserves the right, in its sole discretion, at any time or
from time to time, to extend the period of time during which the Offer is open
by giving oral or written notice of such extension to the Depositary and making
a public announcement thereof. See Section 14. There can be no assurance,
however, that the Company will exercise its right to extend the Offer. If the
Company decides, in its sole discretion, to decrease the number of shares of
Common Stock being sought and, at the time that notice of such decrease is
first published, sent or given to holders of Common Stock in the manner
specified below, the Offer is scheduled to expire at any time earlier than
the tenth business day from the date that such notice is first so published,
sent or given, the Offer will be extended at least until the end of such ten
business day period.
8
2. PROCEDURE FOR TENDERING COMMON STOCK.
Proper Tender of Common Stock. For Common Stock to be properly tendered
pursuant to the Offer, a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile thereof) with any required signature
guarantees, certificates for such Common Stock, and any other documents re-
quired by the Letter of Transmittal, must be received on or before the
Expiration Date by the Depositary at its address set forth on page 6 of this
Offer to Purchase.
It is a violation of Section 14(e) of the Securities and Exchange Act of
1934 (the "Exchange Act"), and Rule 14e-4 promulgated thereunder, for a person
to tender Common Stock in a partial tender offer for such person's own account
unless at the time of tender and until such time as the securities are accepted
for payment the person so tendering has a net long position equal to or greater
than the amount tendered in (i) the Common Stock, and will deliver or cause to
be delivered such shares for purposes of tender to the Company prior to or on
the Expiration Date, or (ii) an equivalent security and, upon the acceptance
of his or her tender will acquire the Common Stock by conversion, exchange, or
exercise of such equivalent security to the extent required by the terms of the
Offer, and will deliver or cause to be delivered the Common Stock so acquired
for the purpose of tender to the Company prior to or on the Expiration Date.
Section 14(e) and Rule 14e-4 provide a similar restriction applicable to
the tender or guarantee of a tender on behalf of another person.
The acceptance of Common Stock by the Company for payment will constitute
a binding agreement between the tendering shareholder and the Company upon the
terms and subject to the conditions of the Offer, including the tendering
shareholder's representation that (i) such shareholder has a net long position
in the Common Stock being tendered within the meaning of Rule 14e-4 promulgated
under the Exchange Act and (ii) the tender of such Common Stock complies with
Rule 14e-4.
Signature Guarantees and Method of Delivery. Signatures on the Letter of
Transmittal are required to be guaranteed by a bank or trust company; a broker-
dealer; a credit union; a national securities exchange, registered securities
association or clearing agency; a savings and loan association; or a federal
savings bank (an "Eligible Institution"). If Common Stock is registered in the
name of a person or persons other than the signer of the Letter of Transmittal
or (a) if payment is to be made to, or (b) if unpurchased Common Stock is to be
registered in the name of or (c) if any certificates for unpurchased Common
Stock are to be returned to any person other than the registered owner, then
the Letter of Transmittal and, if applicable, the tendered Common Stock certi-
ficates must be endorsed or accompanied by appropriate authorizations, in
either case signed exactly as such name or names appear on the registration of
the Common Stock with the signatures on the certificates or authorizations
guaranteed by an Eligible Institution. If signature is by attorney-in-fact,
executor, administrator, Director, guardian, officer of a corporation or
another acting in a fiduciary or representative capacity, other legal documents
will be required. See Instructions 1 and 4 of the Letter of Transmittal.
9
Payment for Common Stock tendered and accepted for payment pursuant to the
Offer will be made only after receipt by the Depositary on or before the
Expiration Date of a properly completed and duly executed Letter of Transmittal
(or manually signed facsimile thereof), the referable Common Stock certifi-
cates, and any other documents required by the Letter of Transmittal.
THE METHOD OF DELIVERY OF ANY DOCUMENTS, INCLUDING CERTIFICATES FOR COMMON
STOCK, IS AT THE ELECTION AND RISK OF THE PARTY TENDERING COMMON STOCK. IF
DOCUMENTS ARE SENT BY MAIL, IT IS RECOMMENDED THAT THEY BE SENT BY REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED.
Determinations of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of tenders will be
determined by the Company, in its sole discretion, and such determinations
shall be final and binding. The Company reserves the absolute right to reject
any or all tenders determined by it not to be in appropriate form or the accep-
tance of or payment for which may, in the opinion of the Company's counsel, be
unlawful. The Company also reserves the absolute right to waive any of the
conditions of the Offer or any defect in any tender with respect to any
particular shares of Common Stock or any particular shareholder, and the
Company's interpretations of the terms and conditions of the Offer will be final
and binding. Unless waived, any defects or irregularities in connection with
tenders must be cured within such times as the Company shall determine.
Tendered Common Stock will not be accepted for payment unless the defects or
irregularities have been cured within such time or waived. Neither the Company,
the Depositary nor any other person shall be obligated to give notice of any
defects or irregularities in tenders, nor shall any of them incur any liability
for failure to give such notice.
Federal Income Tax Withholding. To prevent backup federal income tax
withholding equal to 31% of the gross payments made pursuant to the Offer, each
shareholder who has not previously submitted a Form W-9 to the Depositary or
does not otherwise establish an exemption from such withholding must notify the
Depositary of such shareholder's correct taxpayer identification number (or
certify that such taxpayer is awaiting a taxpayer identification number) and
provide certain other information by completing the Form W-9 enclosed with the
Letter of Transmittal. Foreign shareholders who are resident aliens and who
have not previously submitted a Form W-9, or other foreign shareholders who
have not previously submitted a Form W-8, to the Company must do so in order
to avoid backup withholding.
The Depositary will withhold 30% of the gross payments payable to a foreign
shareholder unless the Depositary determines that a reduced rate of withholding
or an exemption from withholding is applicable. (Exemption from backup
withholding does not exempt a foreign shareholder from the 30% withholding.)
For this purpose, a foreign shareholder, in general, is a shareholder that is
10
not (i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in or under the laws of the United States or
any political subdivision thereof, (iii) an estate the income of which is sub-
ject to United States federal income taxation regardless of the source of such
income or (iv) a company whose administration is subject to the primary juris-
diction of a United States court and which has one or more United States
fiduciaries who have the authority to control all substantial decisions of such
company. The Depositary will determine a shareholder's status as a foreign
shareholder and eligibility for a reduced rate of, or an exemption from, with-
holding by reference to the shareholder's address and to any outstanding
certificates or statements concerning eligibility for a reduced rate of, or
exemption from, withholding unless facts and circumstances indicate that
reliance is not warranted. A foreign shareholder who has not previously
submitted the appropriate certificates or statements with respect to a reduced
rate of, or exemption from, withholding for which such shareholder may be
eligible should consider doing so in order to avoid over-withholding. A foreign
shareholder may be eligible to obtain a refund of tax withheld if such share-
holder meets one of the three tests for capital gain or loss treatment
described in Section 13 or is otherwise able to establish that no
tax or a reduced amount of tax was due.
For a discussion of certain other federal income tax consequences to
tendering shareholders, see Section 13.
3. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 3, tenders of Common Stock
made pursuant to the Offer will be irrevocable. You may withdraw Common Stock
tendered at any time prior to the Expiration Date.
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must be timely received by the Depositary at the address
set forth on page 6 of this Offer to Purchase. Any notice of withdrawal must
specify the name of the person having tendered the Common Stock to be with-
drawn, the number of shares of Common Stock to be withdrawn, and the name of
the registered holders(s) of the certificates representing the Common Stock
delivered or otherwise identified to the Depositary subject of the withdrawal,
and the name of the registered holder(s) of such Common Stock as set forth in
such certificates if different from the name of the person tendering the Common
Stock. If certificates have been delivered to the Depositary, then, prior to
the release of such certificates, you must also submit the certificate numbers
shown on the particular certificates evidencing such Common Stock and the
signature on the notice of withdrawal.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Company in its sole discretion,
and such determinations shall be final and binding. Neither the Company nor
the Depositary or any other person is or will be obligated to give any notice
of any defects or irregularities in any notice of withdrawal, and none of them
will incur any liability for failure to give any such notice. Common Stock
properly withdrawn shall not thereafter be deemed to be tendered for purposes
11
of the Offer. However, withdrawn Common Stock may be re-entered by following
the procedures described in Section 2 prior to the Expiration Date.
4. PAYMENT FOR SHARES: THE SUBORDINATED DEBENTURES AND INDENTURE.
A. PAYMENT
For purposes of the Offer, the Company will be deemed to have accepted for
payment (and thereby purchased) Common Stock which is tendered and not with-
drawn when, as and if it gives oral or written notice to the Depositary of its
acceptance of such common stock for payment pursuant to the Offer.
Payment for Common Stock purchased pursuant to the Offer will be made by
depositing the subordinated debentures therefor with the Depositary, which will
act as agent for tendering shareholders for the purpose of receiving payment
from the Company, and transmitting the subordinated debentures directly to the
tendering shareholders.
In all cases, payment for Common Stock accepted for payment pursuant to
the Offer will be made only after timely receipt by the Depositary, as required
pursuant to the Offer, of a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile thereof), with certificates
representing such Common Stock, and any other required documents. Certificates
for Common Stock not purchased (See Sections 1 and 5), or for Common Stock not
tendered included in certificates forwarded to the Depositary, will be returned
promptly following termination, expiration or withdrawal of the Offer, without
expense to the tendering shareholder.
B. THE SUBORDINATED DEBENTURES
The subordinated debentures issuable in the Offer will issue under an
indenture dated as of July 31, 2000 between the Company and The American Stock
Transfer & Trust Company, as trustee. The following are summaries of material
portions of the subordinated debentures and the indenture. For more detailed
information, you are directed to the form of indenture and subordinated deben-
ture which are included as exhibits to an Issuer Tender Offer Statement on
Schedule TO that has been filed with the Securities And Exchange Commission
(the "Commission"). See Section 12 as to the availability of such documents
from the Commission, by mail and through the Commission's Internet website.
The summaries are qualified by reference to the provisions of the subordinated
debentures and the indenture, including the definitions of certain terms that
are not defined in this Offer. References in this section to the Company are
to CCA Industries, Inc. and its subsidiaries, unless expressly stated to the
contrary.
The subordinated debentures are general unsecured obligations of the
Company. The subordinated debentures are limited to an aggregate principal
12
amount at maturity of $5,000,000. The subordinated debentures will mature on
August 1, 2005. The subordinated debentures will be subordinate to all of the
Company's existing and future indebtedness. Neither the Company nor its
subsidiaries are restricted under the indenture from incurring any indebted-
ness.
The Company will maintain an office where holders may surrender
subordinated debentures for payment in the Borough of Manhattan, the City of
New York, which shall initially be an office or agency of The American Stock
Transfer & Trust Company, the Depositary, the Indenture Trustee and "Paying
Agent."
If a subordinated debenture becomes mutilated, defaced, destroyed, lost or
stolen, the Company will execute and the trustee will authenticate and deliver
a new subordinated debenture in the same form and same principal amount as the
original subordinated debenture. Depending upon the circumstances, the Company
may require a security, indemnity, evidence of destruction or loss, or payment
to cover related fees and expenses.
The Company has the option to redeem the subordinated debentures
No sinking fund is provided for the subordinated debentures. On or after
August 1, 2001, the Company may, at its option, redeem the subordinated
debentures in whole or in part at any time or from time to time after August 1,
2001 at the redemption prices (expressed in percentages of principal amount)
set forth below, plus accrued interest, if any, to the redemption date, if
redeemed during the 12-month period beginning August 1 of the years indicated
below.
Year Percentage
2001 106%
2002 105
2003 104
2004 and thereafter 103
If the Company decides to redeem less than all of the outstanding
subordinated debentures, the trustee will select the subordinated debentures to
be redeemed by the following methods:
. by lot;
. pro rata; or
. by another method that complies with the requirements of any
exchange on which the subordinated debentures may be listed.
All subordinated debentures which the Company redeems or acquires prior to
maturity will be immediately canceled. The subordinated debentures may not be
held, reissued or resold.
13
Subordination
The debentures are subordinated to all existing and future indebtedness
of the Company and its subsidiaries. The holders of such "senior indebtedness"
will be entitled to receive payment in full before the holders of subordinated
debentures will be entitled to receive any payment on the subordinated deben-
tures if the Company pays or distributes assets in any of the following circum-
stances: dissolution, winding up, voluntary or involuntary bankruptcy,
insolvency, liquidation, or reorganization.
If the Company defaults in payment on any senior indebtedness, the Company
will not make payments on the subordinated debentures until it has paid in full
the senior indebtedness, it has cured or received a waiver from the holder of
senior indebtedness, or the default has ceased.
Upon an event of default on any senior indebtedness, other than a payment
default which permits a holder of senior indebtedness to accelerate its matur-
ity, and if a holder of senior indebtedness provides written notice of default
to the trustee, then the Company will not make payments on the subordinated de-
bentures until the default has been cured, waived or has ceased to exist.
The Company may, however, resume payments, not otherwise prohibited by the
previous sentence on the subordinated debentures for a period of more than 180
days after the notice of default is given, unless the maturity of the senior
indebtedness has been accelerated. If the senior indebtedness has been
accelerated, the Company will not make any payment on the subordinated deben-
tures until the acceleration has been waived, rescinded or annulled or until
the senior indebtedness has been paid in full.
In the event that the trustee and paying agent or any holder of
subordinated debentures receives any payment or distribution of assets from the
Company in violation of these subordination provisions before all senior
indebtedness is paid in full, the payment or distribution will be held in trust
for holders of senior indebtedness or their representatives to the extent
necessary to make payment in full of all senior indebtedness.
If the Company files for bankruptcy, dissolves or reorganizes, holders of
senior indebtedness may receive more ratably, and holders of the subordinated
debentures may receive less ratably, than others of the Company's creditors.
The subordination will not prevent the occurrence of any event of default under
the indenture.
As of February 29, 2000, the Company's material indebtedness outstanding
that would constitute senior indebtedness consisted, primarily, of approxi-
mately $7,965,672 owed as trade and other payables, and approximately
$1,600,000 indebtedness to PNC Bank. (The Company has a PNC Bank credit line
of $7 million pursuant to a revolving credit agreement.) The indenture does
not limit the amount of indebtedness, including senior indebtedness, that the
Company or any subsidiary can create, incur, assume or guarantee. (As at
14
February 29, 2000, the Company had total liabilities of $9,565,672 and total
assets of $24,497,287. See the financial statements hereto attached as Exhibit
a.)
Definitions
The term indebtedness means:
. all outstanding indebtedness and obligations of the Company and its
subsidiaries except for the indebtedness for the subordinated debentures;
. any indebtedness of others that the Company has guaranteed or for which
it is otherwise liable or that is secured by a lien on any asset of the
Company; and
. any amendment, renewal, extension, deferral, modification, restructuring
or refunding of any such indebtedness, obligation or guarantee.
The term senior indebtedness means the principal of and premium, if any,
interest and other amounts payable on or in respect of any of the Company's
current or future indebtedness unless the instrument creating or evidencing the
indebtedness expressly provides that the indebtedness will not be senior in
right of payment to, will be junior in right of payment to, or will be on the
same basis in right of payment with, the subordinated debentures. However, the
term senior indebtedness will not include:
. indebtedness evidenced by the subordinated debentures; and
. the Company's indebtedness to one of its subsidiaries.
C. THE INDENTURE
Circumstances when the Company is in default
The Company will be in default under the indenture if:
(1) it defaults in payment of interest on any subordinated debenture
when the same becomes due and the default continues for a period of
30 days;
(2) it defaults in the payment of the principal of (or premium, if any,
on) any subordinated debenture when the same becomes due and payable
at maturity, upon acceleration, redemption or otherwise;
(3) it fails to comply with any of its other agreements or covenants in,
or provisions of, the subordinated debenture or the related
indenture, and the default continues for the period and after the
notice specified below;
15
(4) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the
Company or any subsidiary which remain undischarged and unbonded for
a period (during which execution shall not be effectively stayed) of
60 days, provided that the aggregate of all such judgments (to the
extent not paid or covered by insurance) exceeds $2,500,000;
(5) the Company or any significant subsidiary or subsidiaries, pursuant
to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief against it in an
involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
(D) makes a general assignment for the benefit of its creditors,
or
(E) generally is not paying its debts as the same become due
unless such debts are the subject of a bona fide dispute; or
(6) a court of competent jurisdiction enters an order ordecree under any
Bankruptcy Law that:
(A) is for relief against the Company or any significant
subsidiary or subsidiaries in an involuntary case or
proceeding,
(B) appoints a Custodian of the Company or any significant
subsidiary or subsidiaries or for all or substantially all of
its property; or
(C) orders the liquidation of the Company or any significant
subsidiary or subsidiaries; and in each case the order or
decree remains unstayed and in effect for 60 days.
A default under clause (3) above is not a default until the trustee
notifies the Company in writing, or the holders of at least 25% in principal
amount of the subordinated debentures then outstanding notify the Company and
the trustee in writing of the default, and the Company does not cure the de-
fault within 30 days after receipt of the notice.
The trustee will give notice to holders of the subordinated debentures of
any continuing default known to the trustee within 90 days after the occurrence
of the default. However, the trustee may withhold notice if it determines in
good faith that withholding the notice is in the interests of the holders of
the subordinated debentures.
16
If the Company defaults under the circumstances described above and the
default continues, the trustee or the holders of at least 25% in principal
amount at maturity of the subordinated debentures then outstanding may declare,
by giving proper notice, the outstanding subordinated debentures immediately
due and payable immediately, including accrued and unpaid interest.
Holders of a majority in principal amount at maturity of the outstanding
subordinated debentures may waive certain existing defaults or events of de-
fault and its consequences on behalf of all holders. However, the holders may
not waive existing default in the payment on the subordinated debentures.
A holder may pursue remedies under the indenture against the Company if:
. the holder gives the trustee written notice of a continuing event of
default;
. holders of at least a majority in principal amount at maturity of the
outstanding subordinated debentures make a written request to the trustee
to pursue the remedy;
. the holders offer satisfactory indemnity to the trustee against any
loss, liability, cost or expense;
. the trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
. the trustee has not have received during the 60-day period a contrary
direction from the holders of a majority in principal amount at maturity
of the outstanding subordinated debentures.
The Company must deliver an officers' certificate to the trustee within
105 days after the end of its fiscal year that states whether or not it knows
of any default or event of default, and if so, describe the default and the
efforts to remedy the default. The Company must also deliver a comparable
accountant's certificate to the trustee within 105 days after the end of each
of its fiscal years.
Amendments
The Company and the trustee may amend or supplement the indenture or the
subordinated debentures with the written consent of the holders of at least a
majority in principal amount at maturity of the outstanding subordinated
debentures. The holders of a majority in principal amount at maturity of the
subordinated debentures outstanding may waive compliance by the Company, in a
particular instance, with any provision of the indenture or the subordinated
debentures without notice to any holder. However, each affected holder must
consent to any amendment, supplement or waiver which:
17
. reduces the percentage of holders that must consent to an amendment,
supplement or waiver;
. reduces the principal amount at maturity;
. extends the stated maturity of any subordinated debenture;
. reduces the percentage necessary to waive defaults or events of
default;
. modifies the subordination provisions in a manner adverse to the
debenture holders;
. changes the currency of any subordinated debenture; or
. impairs the right to enforce payment of the subordinated
debentures.
The Company and the trustee may amend or supplement the indenture without
the consent of holders in the following situations:
. to comply with certain conversion adjustment, liquidation and merger
provisions described in the indenture;
. to cure any ambiguity, defect or inconsistency or to make any other
change that does not adversely affect the rights of the holders;
. to comply with the provisions of the trust indenture act of 1939; or
. to appoint a successor trustee.
No amendment may be made to the subordination provisions if it adversely
affects any holders of senior indebtedness, unless the holders consent to the
amendment, as required pursuant to the terms of the senior indebtedness.
5. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, the Company shall not be
required to accept any Common Stock tendered, and may terminate or amend the
Offer or may postpone the acceptance of Common Stock tendered, if at any time
18
at or before the time of purchase of any such Common Stock, any of the follow-
ing circumstances or events shall have occurred (or shall have been determined
by the Company to have occurred), in the Company's sole judgment in any such
case and regardless of the circumstances (including any action or omission to
act by the Company): (1) in the reasonable judgment of the Board of Directors,
in consideration of circumstances prevailing at the Expiration Date, acceptance
and purchase of tendered stock would not be in the Company's best interest; or
(2) there is, in the Board of Director's reasonable judgment, any (a) material
legal action or proceeding instituted or threatened challenging such trans-
actions or otherwise materially adversely affecting the Company, (b) suspension
of or limitation on prices for trading securities generally on any United
States national securities exchange or in the over-the-counter market, (c)
declaration of a banking moratorium by federal or state authorities or any sus-
pension of payment by banks in the United States, (d) limitation affecting the
Company imposed by federal or state authorities on the extension of credit by
lending institutions, (e) commencement of war, armed hostilities or other
international or national calamity directly or indirectly involving the United
States or (f) other event or condition which would have a material adverse
effect on the Company or the holders of its Common Stock if the tendered
Common Stock are accepted for exchange.
The foregoing conditions are for the Company's sole benefit and may be
asserted regardless of the circumstances giving rise to any such condition
(including any action or inaction by the Company), and any such condition may
be waived by the Company in whole or in part, at any time and from time to
time in its sole discretion. The Company's failure at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right;
the waiver of any such right with respect to particular facts and circumstances
shall not be deemed a waiver with respect to any other facts or circumstances;
and each such right shall be deemed an ongoing right which may be asserted at
any time and from time to time. Any determination by the Company concerning
the events described in this Section 5 shall be final and shall be binding on
all parties.
If the Company determines to terminate or amend the Offer or to postpone
the acceptance of Common Stock tendered, it will, to the extent necessary, ex-
tend the period of time during which the Offer is open as provided in Section
14. Moreover, in the event any of the foregoing conditions are modified or
waived in whole or in part at any time, the Company will promptly make a public
announcement of such waiver and may, depending on the materiality of the
modification or waiver, extend the Offer period as provided in Section 14.
6. PURPOSE OF THE OFFER/PLANS OR PROPOSALS.
The purpose of this Offer is to give shareholders an opportunity to
exchange shares of Common Stock for a $2.00 debenture per share, and to reduce
the number of market shares, given that, in the judgment of the Board of
Directors and management, the market has not reflected the Common Stock's fair
value.
The Company has no present plans or proposals which relate to or would
19
result in any extraordinary transaction such as a merger, reorganization or
liquidation involving the Company; any purchase, sale or transfer of a material
amount of the assets of the Company other than in its ordinary course of
business; any material changes in the Company's present capitalization (except
as resulting from the Offer or otherwise set forth herein); or any other
material changes in the Company's structure or business.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF
SUCH SHAREHOLDER'S COMMON STOCK AND HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY
SUCH RECOMMENDATION. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMA-
TION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE THEIR
OWN DECISIONS WHETHER TO TENDER COMMON STOCK AND, IF SO, HOW MANY SHARES OF
COMMON STOCK TO TENDER.
7. PRICE RANGE OF COMMON STOCK; DIVIDENDS.
Trading Market and Price
CCA's Common Stock is traded on NASDAQ, National Market. The high and low
sales prices during the two years ended November 30, 1998 and 1999, were as
follows:
Quarter Ended 1999 1998
Feb. 28 2.125 - 1.1252 11/16 - 2 1/16
May 31 1.5 - 1.0633 5/16 - 2 3/8
Aug. 31 1.781 - 1.1562 3/4 - 1 5/8
Nov. 30 2.031 - 1.251 7/8 - 1 1/16
The high and low prices during the quarter ended February 29, 2000, were
1.750 and 1.125. The high and low prices thereafter, until May 26, 2000, were
1.50 and .813.
Dividends
The Company has not paid any Common Stock (or other) dividend during the
last two years.
Prior Public Offerings
The Company has not made a registered or exempt-from-registration public
offering of Common Stock for cash during the past three years.
20
8. THE COMPANY'S EXECUTIVE OFFICERS AND DIRECTORS.
The following persons are executive officers of the Company, whose
principal occupation and employment is in service of the Company, and has been
for more than five years. Their addresses are c/o CCA Industries, Inc., 200
Murray Hill Parkway, East Rutherford, NJ 07073:
. David Edell
. Ira W. Berman
. Dunnan Edell
. Drew Edell
. John Bingman
(Messrs. David and Dunnan Edell, and Ira W. Berman are also Directors.
Mr. Berman is Chairman of the Board.)
The following presents biographical information for those directors who
are not employees of the Company:
Jack Polak, has been a private investment consultant since April 1982.
His business address is 90 Park Avenue, NY, NY.
Stanley Kreitman, has been Vice Chairman of the Board of Manhattan
Associates, an equity - investment firm, since 1994. His business address is
c/o Manhattan Associates, 12 East 49th Street NY, NY 10017.
Sidney Dworkin is a business consultant, and has been for more than five
years. His business address is 1550 No. Powerline Road, Pompano, FL 33069.
Rami G. Abada, is the President and Chief Operating Officer of Jennifer
Convertibles, Inc. He has been its Chief Operating Officer since April of
1994. His business address is c/o Jennifer Convertibles, Inc. 419 Cross Ways
Park Drive, Woodbury, New York 11797.
None of the executive officers and/or directors has been convicted in a
criminal proceeding during the past five years (or prior thereto), nor party to
any administrative or judicial proceeding that resulted in a judgment, decree
or final order enjoining any of them from further violations of, or prohibiting
activities subject to, federal or state securities laws, or finding any
violation of federal or state securities laws.
All of the executive officers and directors of the Company are citizens of
the United States of America.
21
9. INTEREST OF EXECUTIVE OFFICERS AND DIRECTORS; TRANSACTIONS AND
ARRANGEMENTS CONCERNING THE COMMON STOCK.
The Company has Common Stock and Class A Common Stock issued and
outstanding. The Class A Common Stock, which elects four of seven directors,
is not a security subject of the Offer, but Class A Common Stock may be con-
verted, at any time, into Common Stock. The following table presents the
Common Stock, Class A Common Stock, and Common Stock options (all of which are
immediately exercisable) owned by directors and executive officers, and each
person known by the Company to own, beneficially, more than 5% of the Common
Stock, as at May 26, 2000; and, under the column heading "Percentage Owner-
ship," representing the percentage Common Stock ownership of each (a) as if
each, and no other, had (i) converted Class A Common Stock owned, if any, to
Common Stock and (ii) exercised all Common Stock options, if any; (b) the
percentage ownership of the group, assuming Class A conversions and option
exercises by all.
Number of
Names Shares Owned:
Common Percentage
Stock Class A Options Ownership
David Edell 279,535 484,615 457,500 16.20
Ira W. Berman 234,595 473,615 502,000 16.07
Jack Polak 25,000 47,700 0 1.14
Rami G. Abada - - 25,000 0.39
Stanley Kreitman - - 25,000 0.39
Dunnan Edell 41,250 - 116,250 1.81
Drew Edell 51,250 - 126,250 1.96
Sidney Dworkin 50,000 - 75,000 1.17
John Bingman - - 0 0
Officers and Directors 681,630 1,005,930 1,184,500 31.24
as a group (9 persons)
______________________
22
David Edell, Ira Berman and Jack Polak own over 98% of the outstanding
shares of Class A Common Stock. Messrs. David Edell, Dunnan Edell and Ira
Berman are officers and directors. Messrs. Bingman and Drew Edell are
officers. Messrs. Abada, Kreitman, Polak, and Dworkin are directors.
The Company has been informed that no executive officer, director or
affiliate of the Company intends to tender any Common Stock pursuant to the
Offer.
Based upon the Company's records and upon information provided by its
executive officers, directors and affiliates (as such term is used in the
Securities Exchange Act of 1934), neither the Company nor, to the best of the
Company's knowledge, any of the executive officers or directors of the Company,
nor any affiliates of any of the foregoing, has effected any transactions in
the Common Stock during the 60 day period prior to the date hereof.
Neither the Company nor, to the best of the Company's knowledge, any of
its affiliates, directors or executive officers, is a party to any agreement,
arrangement or understanding, whether or not legally enforceable, between the
Company, any of the Company's executive officers or directors, any person
controlling the Company or any officer or director of any corporation ul-
timately in control of the Company and any other person with respect to any
securities of the Company.
Prior Stock Purchases
The Company purchased, and placed in treasury, 88,496 shares of Common
Stock during the past two years, for per share prices ranging form $1.43 to
$1.93, at the average purchase price per quarter of $1.82 (all in September of
1998), and $1.57 (during October - December 1998).
David Edell and Ira W. Berman, each a director and executive officer of
the Company, exercised, respectively, 50,000 options to purchase 50,000 shares
of Common Stock at $.50 per share, and 20,000 options to purchase 20,000 shares
of Common Stock at $.50 per share, in December of 1997. (The Company's fiscal
year end is November 30, and December 1997 purchases were in fiscal 1998.)
They paid therefore, respectively, by giving the Company 11,675 and 4,705
shares of its Common Stock. In November of 1999, Mr. Edell exercised 27,500
options, at $.55 per share, and 32,500 options at $.50 per share to purchase a
total of 60,000 shares of Common Stock, and paid therefor by giving the Company
15,000 shares of its Common Stock, plus cash. At the same time, Mr. Berman
exercised 40,000 options, at $.50 per share to purchase 40,000 shares of Common
Stock, and paid therefore by giving the Company 10,000 shares of its Common
Stock.
23
There have been no other purchases of Common Stock of the Company by the
Company, its officers and/or directors and/or affiliates during the last two
years.
There have not been any transactions involving the Common Stock of the
Company that were effected during the past 60 days by the Company, any execu-
tive officer or Director, any person controlling the Company, any executive
officer or director of any corporation ultimately in control of the Company or
by any associate or subsidiary of any of the foregoing, including any executive
officer or director of any such subsidiary.
10. CERTAIN EFFECTS OF THE OFFER.
The purchase of Common Stock pursuant to the Offer will have the effect of
increasing the proportionate interest in the Company of shareholders who do not
tender their Common Stock. If you retain your Common Stock, you will be subject
to any increased risks that may result from the reduction in the Company's
aggregate assets resulting from payment for the tendered Common Stock. All
Common Stock purchased by the Company pursuant to the Offer will be held in
treasury pending disposition.
11. SOURCE AND AMOUNT OF FUNDS.
The total cost to the Company of purchasing the full 2,500,000 shares of
Common Stock pursuant to the Offer would be $5,000,000, plus interest. The
Company anticipates that interest payments pursuant to the Offer will first be
derived from cash on hand, and then from the proceeds from the sale of cash
equivalents held by the Company. Whereas the debentures are subordinated, and
no sinking fund is required to be established to pay principal, and whereas
principal payments will not be due until August 1, 2005, no source of funds for
payment of principal can be identified in or by this Offer.
12. ADDITIONAL INFORMATION.
The Company's Issuer Tender Offer Statement on Schedule TO includes cer-
tain additional information relating to the Offer. Such material may be in-
spected and copied at prescribed rates at the Commission's public reference
facilities at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549;
Jacob K. Javits Federal Building, 26 Federal Plaza, New York, New York 10278;
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may also be obtained by mail at
prescribed rates from the Public Reference Branch of the Commission at 450
24
Fifth Street, N.W., Washington, D.C. 20549. In addition, the Issuer Tender
Offer Statement on Schedule TO is available along with other related materials
at the Commission's Internet website (http://www.sec.gov).
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following discussion is a general summary of the federal income tax
consequences of a sale of Common Stock pursuant to the Offer. Shareholders
should consult their own tax advisers regarding the tax consequences of a sale
of Common Stock pursuant to the Offer, as well as the effects of state, local
and foreign tax laws and any proposed tax law changes.
The sale of Common Stock pursuant to the offer will be a taxable
transaction for federal income tax purposes, either as a "sale or exchange", or
under certain circumstances, as a "dividend". Under section 302(b) of the
Internal Revenue Code of 1986, as amended (the "Code). A sale of Common Stock
pursuant to the Offer generally will be treated as a "sale or exchange" if the
receipt of the debenture by the shareholder or by the Depositary on behalf of
the shareholder: (a) results in a "complete termination" of the shareholder's
interest in the Company, (b) is "substantially disproportionate" with respect
to the shareholder, or (c) is not "essentially equivalent to a dividend" with
respect to the shareholder. In determining whether any of these tests has been
met, Common Stock actually owned, as well as Common Stock considered to be
owned by the shareholder by reason of certain constructive ownership rules set
forth in Section 318 of the Code, generally must be taken into account. If any
of these three tests for "sale or exchange" treatment is met, a shareholder
will recognize gain or loss equal to the difference between the dollar amount
of debentures received by the shareholder and the shareholder's tax basis of
the Common Stock tendered. If such Common Stock are held as a capital asset,
the gain or loss will be a capital gain or loss. The maximum tax rate applic-
able to net capital gains recognized by individuals and other non-corporate
taxpayers is (i) the same as the applicable ordinary income rate for capital
assets held for one year or less or (ii) 20% for capital assets held for more
than one year. The maximum long-term capital gains rate for corporations is
35%.
If none of the tests set forth in Section 302(b) of the Code is met,
amounts received by a shareholder or by the Depositary on behalf of a
shareholder, as the case may be, who sells Common Stock pursuant to the Offer
will be taxable to the shareholder as a "dividend" to the extent of such
shareholder's allocable share of the Company's current or accumulated earnings
and profits, and the excess of such amounts received over the portion that is
taxable as a dividend would constitute a non-taxable return of capital (to the
extent of the shareholder's tax basis in the Common Stock sold pursuant to the
offer) and any amounts in excess of the shareholder's tax basis would consti-
tute taxable gain. Thus, a shareholder's tax basis in the Common Stock sold
will not reduce the amount of the "dividend". Any remaining tax basis in the
Common Stock tendered to the Company will be transferred to any remaining
Common Stock held by such shareholder. In addition, if a tender of Common stock
is treated as a "dividend" to a tendering shareholder, a constructive dividend
25
under Section 305(c) of the Code may result to a non-tendering shareholder
whose proportionated interest in the earnings and assets of the Company has
been increased by such tender. The Company believes, however, that the nature
of the repurchase will be such that a tendering shareholder will qualify for
"sale or exchange" treatment (as opposed to "dividend" treatment).
14. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS.
The Company reserves the right, at any time and from time to time, to
extend the period of time during which the Offer is pending by making a public
announcement thereof. In the event that the Company so elects to extend the
tender period, and the Offer will terminate as of 12:00 Midnight Eastern
Standard time on the Expiration Date, as extended. During any such extension,
all Common Stock previously tendered and not purchased or withdrawn will remain
subject to the Offer. The Company also reserves the right, at any time and from
time to time up to and including the Expiration Date, to (a) terminate the
Offer and not to purchase or pay for any Common Stock or, subject to applicable
law, postpone payment for Common Stock upon the occurrence of any of the condi-
tions specified in Section 5, and (b) amend the Offer in any respect by making
a public announcement thereof. Such public announcement will be issued no later
than 9:00 A.M. Eastern Standard time on the next business day after the pre-
viously scheduled Expiration Date and will disclose the approximate number of
shares of Common Stock tendered as of that date. Without limiting the manner
in which the Company may choose to make a public announcement of extension,
termination or amendment, except as provided by applicable law, the Company
shall have no obligation to publish, advertise or otherwise communicate any
such public announcement, other than by making a release to the Dow Jones
News Service.
If the Company materially changes the terms of the Offer or the informa-
tion concerning the Offer, or if it waives a material condition of the Offer,
the Company will extend the Offer to the extent required by Rule 13e-4 promul-
gated under the Exchange Act. These rules require that the minimum period
during which an offer must remain open following material changes in the terms
of the offer or information concerning the offer (other than a change in price
or a change in percentage of securities sought) will depend on the facts and
circumstances, including the relative materiality of such terms or information.
If (i) the Company increases or decreases the price to be paid for Common
Stock, or the Company increases the number of shares of Common Stock being
sought by an amount exceeding 2% of the outstanding Common Stock, or the
Company decreases the number of shares of Common Stock being sought and (ii)
the Offer is scheduled to expire at any time earlier than the expiration of a
period ending on the tenth business day from, and including, the date that
notice of such increase or decrease is first published, sent or given, the
Offer will be extended at least until the expiration of such period of ten
business days.
26
15. MISCELLANEOUS.
The Offer is not being made to, nor will the Company accept tenders from,
owners of Common Stock in any jurisdiction in which the Offer or its acceptance
would not comply with the securities or Blue Sky laws of such jurisdiction. The
Company is not aware of any jurisdiction in which the making of the Offer or
the tender of Common Stock would not be in compliance with the laws of such
jurisdiction. However, the Company reserves the right to exclude holders in any
jurisdiction in which it is asserted that the Offer cannot lawfully be made. So
long as the Company makes a good-faith effort to comply with any state law
deemed applicable to the Offer, the Company believes that the exclusion of
holders residing in such jurisdiction is permitted under Rule 13e-4(f) (9)
promulgated under the Exchange Act. In any jurisdiction the securities or Blue
Sky laws of which require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on the Company's behalf by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
May 30, 2000
CCA INDUSTRIES, INC.
By: s/ IRA W. BERMAN
Ira W. Berman, Secretary
27
CCA INDUSTRIES, INC.
REGULATION M-A
SECTION 229.1010
FINANCIAL STATEMENTS
Rule 13e-4
Item 1010 (a) FINANCIAL INFORMATION
(1) Audited financial statements for the past two
fiscal years. - see attached
(2) Most recent 10Q - see attached
(3) Ratio of earnings to fixed charges:
Earnings Fixed Charges Ratio Difficiency
February 29, 2000 ($297,796) $5,424 -55:1 $303,220
November 30, 1999 $1,370,389 $0 N/A
November 30, 1998 $2,719,080 $0 N/A
(4) Book value per share as of February 29, 2000
Book Value Shares Outstanding Book value per share
February 29, 2000 $14,931,615 $7,246,085 2.06
Item 1010 (b) PRO FORMA INFORMATION
(1) Pro Forma Balance Sheet -February 29, 2000 - see
attached
(2) Pro Forma Statement of Income and
Earnings per share -
February 29, 2000 and November 30, 1999 - see
attached
Ratio of earnings to fixed charges:
<---------------PRO FORMA------------->
Earnings Fixed Charges Ratio Difficiency
February 29, 2000 -$297,796 $80,424 -4:1 $378,220
November 30, 1999 $1,370,389 $300,000 5:1
(3)
Pro Forma Book Value per share as of February 29, 2000
<----------------PRO FORMA---------->
Book Value Shares Book value per share
Outstanding
February 20, 2000 $9,931,615 $4,746,085 $2.09
Item 1010 (c) SUMMARY INFORMATION
(1) (i)
February November 30, November 30,
29,2000 1999 1998
Current Assets $21,503,062 $18,620,795 $20,543,315
Noncurrent Assets $2,994,225 $2,874,192 $3,466,621
Total Assets $24,497,287 $21,494,987 $24,009,936
Current Liabilities $9,565,672 $6,328,905 $8,410,687
Noncurrent Liabilties $0 $0 $0
Total Liabilities $9,565,672 $6,328,905 $8,410,687
Shareholders' Equity $14,931,615 $15,166,082 $15,599,249
Total Liabilities & $24,497,287 $21,494,987 $24,009,936
Shareholders' Equity
(1) (ii)
Gross Revenues $8,636,120 $37,211,756 $37,720,974
Gross Profit $4,869,888 $23,015,886 $23,150,794
Income (Loss) from
continuing operations
before extraordinary
items and cumulative
effects of
accounting changs ($196,047) $851,583 $1,606,404
Net Income (Loss) ($206,122) ($291,099) $1,667,974
(1)(iii) Summarized financial information for
unconsolidated subsidiaries and 50% or less
owned persons - NONE
(2) Income per common share from
continuing operations
February November 30, November 30,
29,2000 1999 1998
Basic ($0.03) $0.12 $0.22
Diluted ($0.03) $0.11 $0.21
(3) Net income per common share
February November 30, November 30,
29,2000 1999 1998
Basic ($0.03) ($0.04) $0.23
Diluted ($0.03) ($0.04) $0.21
(4) Ratio of earnings to fixed charges:
Earnings Fixed Ratio Difficiency
Charges
February 29, 2000 ($297,796) $5,424 -55:1 $303,220
November 30, 1999 $1,370,389 $0 N/A
November 30, 1998 $2,719,080 $0 N/A
November 30, 1997 $3,278,711 $5,888 557:1
November 30, 1996 $1,965,382 $50,756 39:1
November 30, 1995 ($2,174,521) $56,003 -39:1 $2,230,524
(5) Book value per share as of February 29, 2000
Book Value Shares Book value per share
Outstanding
February 29, 2000 $14,931,615 $7,246,085 $2.06
(6) PRO FORMA
Item 1010 (c) SUMMARY INFORMATION
(1) (i) <-----------PROFORMA----------------->
February November 30, November 30,
29,2000 1999 1998
Current Assets $21,503,062 $18,620,795 $20,543,315
Noncurrent Assets $2,994,225 $2,874,192 $3,466,621
Total Assets $24,497,287 $21,494,987 $24,009,936
Current Liabilities $9,565,672 $6,328,905 $8,410,687
Noncurrent Liabilties $5,000,000 $5,000,000 $5,000,000
Total Liabilities $14,565,672 $11,328,905 $13,410,687
Shareholders' Equity $9,931,615 $10,166,082 $10,599,249
Total Liabilities & $24,497,287 $21,494,987 $24,009,936
Shareholders' Equity
(1) (ii) <------------PROFORMA---------------->
Gross Revenues $8,636,120 $37,211,756 $37,720,974
Gross Profit $4,869,888 $23,015,886 $23,150,794
Income (Loss) from
continuing operations
before extraordinary
items and cumulative
effects of accounting
changes ($244,542) $665,163 $1,429,170
Net Income (Loss) ($254,617) ($477,519) $1,490,740
(1)(iii) Summarized financial information for
unconsolidated subsidiaries and 50% or less
owned persons - NONE
(2) Pro Forma income per common share from
continuing operations
February November 30, November 30,
29,2000 1999 1998
Basic ($0.05) $0.14 $0.30
Diluted ($0.05) $0.13 $0.26
(3) Pro Forma net income per common share
February November 30, November 30,
29,2000 1999 1998
Basic ($0.05) ($0.10) $0.31
Diluted ($0.05) ($0.10) $0.27
(4) Pro Forma ratio of earnings to fixed
charges:
Earnings Fixed Ratio
Charges Difficiency
February 29, 2000 ($297,796) $80,424 -4:1 $378,220
November 30, 1999 $1,370,389 $300,000 5:1
November 30, 1998 $2,719,080 $300,000 9:1
November 30, 1997 $3,278,711 $305,888 11:1
November 30, 1996 $1,965,382 $350,756 6:1
November 30, 1995 ($2,174,521) $356,003 -6:1 $2,530,524
(5) Pro Forma book value per share as of
February 29, 2000
Book Value Shares Book value per share
Outstanding
February $9,931,615 $4,746,085 $2.09
29,2000
EXHIBIT 12
February November November November November November
29,2000 30, 1999 30, 1998 30, 1997 30, 1996 30, 1995
Earnings:
Pre-tax income for continuing
operations before minority interests or
income (loss)from equity investees ($303,220) $1,370,389 $2,719,080 $3,272,823 $1,914,626 ($2,230,524)
Fixed Charges $5,424 $0 $0 $5,888 $50,756 $56,003
Amortization of Capitalized Interest $0 $0 $0 $0 $0 $0
Distributed income of equity investees $0 $0 $0 $0 $0 $0
Share of pre-tax losses of equity
investees for which charges arising from
guarantees are included in
fixed charges $0 $0 $0 $0 $0 $0
($297,796) $1,370,389 $2,719,080 $3,278,711 $1,965,382 ($2,174,521)
Less:
Interest capitalized $0 $0 $0 $0 $0 $0
Preference security dividend
requirements of consolidated subsidiaries
that have not incurred fixed charges $0 $0 $0 $0 $0 $0
Minority interest in pre-tax
income of subs that have not incurred
fixed charges $0 $0 $0 $0 $0 $0
EARNINGS ($297,796) $1,370,389 $2,719,080 $3,278,711 $1,965,382 ($2,174,521)
Fixed Charges:
Interest expensed and capitalized $5,424 $0 $0 $5,888 $50,756 $56,003
Amortized premiums, discounts
and capitalized expenses related
to indebtedness $0 $0 $0 $0 $0 $0
Estimate of interest within
rental expense $0 $0 $0 $0 $0 $0
Preference security dividend
requirements of consolidated
subsidiaries $0 $0 $0 $0 $0 $0
Total Fixed Charges $5,424 $0 $0 $5,888 $50,756 $56,003
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1999 AND 1998
C O N T E N T S
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS . . . . . . . . . .1
FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS . . . . . . . . . . . . . . . . . . . . .2-3
CONSOLIDATED STATEMENTS OF INCOME (LOSS). . . . . . . . . . . . . . . .4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME. . . . . . . . . . . .5
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY . . . . . . . . . . . .6
CONSOLIDATED STATEMENTS OF CASH FLOWS . . . . . . . . . . . . . . . .7-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. . . . . . . . . . . . . 9-30
INDEPENDENT AUDITORS' REPORT
Board of Directors
CCA Industries, Inc.
East Rutherford, New Jersey
We have audited the consolidated balance sheets of CCA Industries, Inc.
and Subsidiaries as of November 30, 1999 and 1998, and the related consoli-
dated statements of income (loss), comprehensive income, shareholders'
equity and cash flows for each of the three years in the period ended
November 30, 1999. These consolidated financial statements are the
responsibility of management. Our responsibility is to express an opinion
on these consolidated financial statements and related schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain a reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
related schedules. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of CCA Industries, Inc. and Subsidiaries as of November 30, 1999 and 1998, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended November 30, 1999, in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The supplemental schedules
listed in the index to Item 14 are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
consolidated financial statements. The supplemental schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, present fairly, in all material
respects, in relation to the basic consolidated financial statements.
SHEFT KAHN & COMPANY LLP
CERTIFIED PUBLIC ACCOUNTANTS
February 11, 2000
Jericho, New York
-1-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
November 30,
1999 1998
Current Assets
Cash and cash equivalents $ 807,360 $ 542,289
Short-term investments and marketable
securities (Notes 2 and 6) 1,490,469 1,633,452
Accounts receivable, net of allowances of
$1,183,576 and $1,318,185, respectively
(Note 7) 7,371,532 7,878,000
Inventories (Notes 2, 3 and 7) 6,235,270 8,372,292
Prepaid expenses and sundry receivables 822,816 317,118
Prepaid income taxes and refunds due 714,835 72,513
Deferred income taxes (Note 8) 1,178,513 974,922
Net assets from discontinued operations - 752,729
Total Current Assets 18,620,795 20,543,315
Property and Equipment, net of accumulated
depreciation and amortization
(Notes 2 and 4) 739,728 866,663
Intangible Assets, net of accumulated
amortization (Notes 2 and 5) 169,756 180,310
Other Assets
Marketable securities (Notes 2 and 6) 1,809,770 2,172,253
Due from officers - Non-current (Note 14) 57,918 65,250
Deferred income taxes (Note 8) 42,031 127,256
Other 54,989 54,889
Total Other Assets 1,964,708 2,419,648
Total Assets $21,494,987 $24,009,936
See Notes to Consolidated Financial Statements.
-2-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
November 30,
1999 1998
Current Liabilities
Notes payable (Note 7) $ 1,400,000 $ 1,550,000
Accounts payable and accrued
liabilities (Note 10) 4,928,905 6,259,967
Income taxes payable (Note 8) - 600,720
Total Current Liabilities 6,328,905 8,410,687
Commitments and Contingencies
(Note 12)
Shareholders' Equity
Common stock, $.01 par; authorized
15,000,000 shares; issued and
outstanding 6,321,151 and 6,246,151
shares, respectively 63,212 62,462
Class A common stock, $.01 par; authorized
5,000,000 shares; issued and outstanding
and 1,020,930 shares, respectively 10,209 10,209
Additional paid-in capital 4,453,478 4,454,228
Retained earnings 10,955,203 11,246,302
Accumulated other comprehensive income
(Note 6) ( 150,854) ( 18,343)
15,331,248 15,754,858
Less: Treasury Stock (95,996 and
89,519 shares at November 30,
1999 and November 30, 1998,
respectively) 165,166 155,609
Total Shareholders' Equity 15,166,082 15,599,249
Total Liabilities and Shareholders' Equity $21,494,987 $24,009,936
See Notes to Consolidated Financial Statements.
-3-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Years Ended November 30,
1999 1998 1997
Revenues
Sales of health and beauty
aid products, net $36,926,287 $37,402,678 $37,708,922
Other income 285,469 318,296 293,953
37,211,756 37,720,974 38,002,875
Costs and Expenses
Cost of sales 13,910,401 14,251,884 14,460,364
Selling, general and
administrative expenses 12,302,919 11,621,706 11,146,894
Advertising, cooperative and
promotions 8,910,758 8,432,765 8,450,461
Research and development 581,340 562,708 684,224
Provision for doubtful accounts 135,949 132,831 ( 17,779)
Interest expense - - 5,888
35,841,367 35,001,894 34,730,052
Income before Provision
for Income Taxes 1,370,389 2,719,080 3,272,823
Provision for Income Tax 518,806 1,112,676 1,241,329
Net Income from
Continuing Operations 851,583 1,606,404 2,031,494
Discontinued Operations:
Income (loss) from operations of
Fragrance Corp. of America
(net of income taxes (benefit)
of ($549,205) in 1999 and
$51,524 in 1998) ( 841,573) 61,570 -
(Loss) on abandonment of
intangibles (net of income
taxes (benefit) of
($183,068) in 1999) ( 301,109) - -
(Loss) Income from Discontinued
Operations ( 1,142,682) 61,570 -
Net (Loss) Income ($ 291,099) $ 1,667,974 $ 2,031,494
Weighted Average Shares
Outstanding
Basic 7,174,203 7,243,956 7,205,904
Diluted 7,660,796 8,075,169 8,108,482
Earnings Per Common Share
(Note 2): Basic Diluted Basic Diluted Basic Diluted
Continuing Operations $ .12 $ .11 $ .22 $ .20 $ .28 $ .25
Discontinued Operations ($ .12) ($ .12) $ .01 $ .01 $ - $ -
(Loss) on Abandoned
Intangibles ($ .04) ($ .04) $ - $ - $ - $ -
Net ($ .04) ($ .04) $ .23 $ .21 $ .28 $ .25
See Notes to Consolidated Financial Statements.
-4-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended November 30,
1999 1998 1997
Net (Loss) Income ($ 291,099) $ 1,667,974 $ 2,031,494
Other Comprehensive Income
Unrealized holding (loss)
gain on investments ( 132,511) ( 15,606) 3,616
(Benefit) Provision for Taxes ( 50,166) ( 6,559) 1,371
Other Comprehensive (Loss)
Income - Net ( 82,345) ( 9,047) 2,245
Comprehensive (Loss)
Income ($ 373,444) $1,658,927 $2,033,739
Earnings Per Share:
Basic ($.05) $.23 $.28
Diluted ($.05) $.20 $.25
See Notes to Consolidated Financial Statements.
-5-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
Unrealized
Additional Gain (Loss) on
Common Stock Paid-In Retained Marketable Treasury
Shares Amount Capital Earnings Securities Stock
Balance - December 1, 1996 7,167,551 $71,676 $4,455,223 $7,546,834 ($ 6,353) ($ 12,500)
Issuance of common stock 46,000 460 ( 460) - - -
Net income for the year - - - 2,031,494 - -
Unrealized gain on marketable
securities - - - - 3,616 -
Purchase of 2,500 shares of
treasury stock - - - - - ( 5,469)
Balance - December 1, 1997 7,213,551 72,136 4,454,763 9,578,328 ( 2,737) ( 17,969)
Issuance of common stock 53,530 535 ( 535) - - -
Net income for the year - - - 1,667,974 - -
Unrealized (loss) on marketable
securities - - - - ( 15,606) -
Purchase of 82,019 shares of
treasury stock - - - - - ( 137,640)
Balance - December 1, 1998 7,267,081 72,671 4,454,228 11,246,302 ( 18,343) ( 155,609)
Issuance of common stock 75,000 750 ( 750) - - -
Net (loss) for the year - - - ( 291,099) - -
Unrealized (loss) on marketable
securities - - - - ( 132,511) -
Purchase of 6,477 shares of
treasury stock - - - - - ( 9,557)
Balance - November 30, 1999 7,342,081 $73,421 $4,453,478 $10,955,203 ($150,854) ($ 165,166)
See Notes to Consolidated Financial Statements.
-6-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED NOVEMBER 30,
1999 1998 1997
Cash Flows from Operating Activities:
Net (loss) income ($ 291,099) $1,667,974 $2,031,494
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization 344,198 342,131 376,381
Amortization of bond discount 1,884 1,884 1,948
(Gain) loss on sale of securities ( 10,914) 7,635 -
(Increase) decrease in deferred
income taxes ( 118,366) ( 291,878) 71,932
Loss on abandonment of intangibles 418,612 - 1,009
Decrease (increase) decrease in
accounts receivable 506,468 ( 3,946,727) 86,227
Decrease (increase) in inventory 2,137,022 ( 3,044,784) ( 138,930)
(Increase) decrease in prepaid
expenses and sundry receivables ( 505,698) ( 141,278) 355,399
(Increase) in prepaid income taxes
and refunds due ( 642,322) - -
(Decrease) increase in accounts
payable and accrued liabilities ( 1,331,062) 1,206,302 258,800
(Decrease) increase in income taxes
payable ( 600,720) 514,616 148,150
(Increase) decrease in miscellaneous
assets ( 100) ( 2,277) 1,605
Decrease in net assets from
discontinued operations 752,729 - -
Net Cash Provided by (Used in)
Operating Activities 660,632 (3,686,402) 3,194,015
Cash Flows from Investing Activities:
Acquisition of property and
equipment ( 157,047)( 699,349) ( 168,520)
Proceeds from sale of property - - 40,960
Acquisition of intangible assets ( 468,274)( 105,652) ( 20,448)
Purchase of available for sale
securities ( 1,744,204)( 2,298,993) (3,269,674)
Proceeds from sale of available for
sales securities 2,126,189 2,268,851 2,657,227
Proceeds of money due from
officers 7,332 1,500 2,400
Loan to officers - - ( 40,000)
Net Cash (Used in) Provided by
Investing Activities ( 236,004) ( 833,643) ( 798,055)
Cash Flows from Financing Activities:
Proceeds from borrowings 4,050,000 1,950,000 -
Payment on debt ( 4,200,000) ( 400,000) ( 163,500)
Purchase of treasury stock ( 9,557) ( 137,640) ( 5,469)
Proceeds from issuance of stock - 200 -
Net Cash (Used in) Provided by
Financing Activities ( 159,557) 1,412,560 ( 168,969)
Net Increase (Decrease) In Cash 265,071 ( 3,107,485) 2,226,991
Cash at Beginning of Year 542,289 3,649,774 1,422,783
Cash at End of Year $ 807,360 $ 542,289 $3,649,774
See Notes to Consolidated Financial Statements
-7-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED NOVEMBER 30,
1999 1998 1997
Supplemental Disclosures of Cash
Flow Information:
Cash paid during the year for:
Interest $ 119,664 $ 14,589 $ 7,025
Income taxes 1,152,883 1,013,975 1,052,850
See Notes to Consolidated Financial Statements.
-8-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
CCA Industries, Inc. ("CCA") was incorporated in the State of Delaware
on March 25, 1983.
CCA manufactures and distributes health and beauty aid products.
CCA has several wholly-owned subsidiaries (CCA Cosmetics, Inc., CCA
Labs, Inc., Berdell, Inc., Nutra Care Corporation, and CCA Online
Industries, Inc.), all of which are currently inactive.
In March of 1998 CCA acquired 80% of the newly organized Fragrance
Corporation of America, Ltd. which manufactures and distributes perfume
products. In 1999, the Company adopted a formal plan to discontinue the
operations of the subsidiary.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of CCA and
its majority-owned subsidiaries (collectively the "Company"). The
minority interest in consolidated subsidiaries is reflected in the
financial statements. All significant inter-company accounts and
transactions have been eliminated.
Use of Estimates:
The consolidated financial statements include the use of estimates,
which management believes are reasonable. The process of preparing
financial statements in conformity with generally accepted accounting
principles requires the use of estimates and assumptions regarding
certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of
the date of the financial statements. Accordingly, upon settlement,
actual results may differ from estimated amounts.
Short-Term Investments and Marketable Securities:
Short-term investments and marketable securities consist of corporate
and government bonds and equity securities. The Company has classified
its investments as Available-for-Sale securities. Accordingly, such
investments are reported at fair market value, with the resultant
unrealized gains and losses reported as a separate component of
shareholders' equity.
Statements of Cash Flows Disclosure:
For purposes of the statement of cash flows, the Company considers all
highly liquid instruments purchased with an original maturity of less
than three months to be cash equivalents.
During fiscal 1997,1998 and 1999, two officers/shareholders exercised in
the aggregate 60,000, 70,000 and 100,000 options, respectively, in
exchange for previously issued common stock of 14,000, 16,470 and
25,000, respectively. The common shares were put into treasury and were
subsequently cancelled.
-9-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or
market.
Product returns are recorded in inventory when they are received at the
lower of their original cost or market, as appropriate. Obsolete
inventory is written off and its value is removed from inventory at the
time its obsolescence is determined.
Property and Equipment and Depreciation and Amortization
Property and equipment are stated at cost. The Company charges to
expense repairs and maintenance items, while major improvements and
betterments are capitalized. When the Company sells or otherwise
disposes of property and equipment items, the cost and related
accumulated depreciation are removed from the respective accounts and
any gain or loss is included in earnings.
Depreciation and amortization are provided on the straight-line method
over the following estimated useful lives or lease terms of the assets:
Machinery and equipment 7-10 Years
Furniture and fixtures 5-7 Years
Tools, dies and masters 2-7 Years
Transportation equipment 7 Years
Leasehold improvements 7-10 Years or life
of lease, whichever is
shorter
Intangible Assets:
Intangible assets are stated at cost. Patents and trademarks are
amortized on the straight-line method over a period of 17 years.
Goodwill represents the excess of the cost over the fair value of the
net assets acquired and is amortized over 60 months.
Financial Instruments:
The carrying value of assets and liabilities considered financial
instruments approximate their respective fair value.
Income Taxes:
Income tax expense includes federal and state taxes currently payable
and deferred taxes arising from temporary differences between income for
financial reporting and income tax purposes.
Tax Credits:
Tax credits, when present, are accounted for using the flow-through
method as a reduction of income taxes in the years utilized.
-10-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings Per Common Share:
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings Per Share" in 1998. Basic earnings per share is
calculated using the average number of shares of common stock
outstanding during the year. Diluted earnings per share is computed on
the basis of the average number of common shares outstanding plus the
effect of outstanding stock options using the "treasury stock method"
and convertible debentures using the "if-converted" method. Common
stock equivalents consist of stock options.
Recently Issued Accounting Standards:
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts and for
hedging activities. The statement requires that an entity recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. SFAS
No. 133 is effective for the Company in 1999. Implementation of SFAS
No. 133 is required for the Company by the first quarter of 2000.
Revenue Recognition:
The Company recognizes sales at the time delivery occurs. Although no
legal right of return exists between the customer and the Company, it
is an industry-wide practice to accept returns from customers. The
Company, therefore, records a reserve for returns equal to its gross
profit on its historical percentage of returns on its last five months
sales.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 1999
presentation.
Advertising Costs:
The Company's policy for fiscal financial reporting is to charge
advertising cost to operations as incurred.
-11-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - INVENTORIES
At November 30, 1999 and 1998, inventories consist of the following:
1999 1998
Raw materials $3,509,103 $5,265,248
Finished goods 2,726,167 3,107,044
$6,235,270 $8,372,292
At November 30, 1999 and 1998, the Company had a reserve for obsolete
inventory of $1,056,789 and $748,866, respectively.
NOTE 4 - PROPERTY AND EQUIPMENT
At November 30, 1999 and 1998, property and equipment consisted of the
following:
1999 1998
Machinery and equipment $ 299,528 $ 297,615
Furniture and equipment 742,547 721,296
Transportation equipment 10,918 10,918
Tools, dies, and masters 1,914,684 1,819,974
Leasehold improvements 147,647 108,474
3,115,324 2,958,277
Less: Accumulated depreciation
and amortization 2,375,596 2,091,614
Property and Equipment - Net $ 739,728 $ 866,663
Depreciation and amortization expense for the years ended November 30,
1999, 1998 and 1997 amounted to $283,982, $318,715 and $364,536,
respectively.
NOTE 5 - INTANGIBLE ASSETS
Intangible assets consist of the following at November 30, 1999 and
1998:
1999 1998
Patents and trademarks $241,596 $241,596
Less: Accumulated amortization 71,840 61,286
Intangible Assets - Net $169,756 $180,310
Amortization expense for the years ended November 30, 1999, 1998 and
1997 amounted to $60,216 ($49,662 from discontinued operations), $23,417
($10,087 from discontinued operations) and $11,845, respectively.
-12-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES
Short-term investments and marketable securities, which consist of stock
and various corporate and government obligations, are stated at market
value. The Company has classified its investments as Available-for-Sale
securities and considers as current assets those investments which will
mature or are likely to be sold in the next fiscal year. The remaining
investments are considered non-current assets. The cost and market
values of the investments at November 30, 1999 and 1998 were as follows:
1999 1998
Current: COST MARKET COST MARKET
Corporate obligations $ 745,044 $ 748,894 $ 780,776 $ 786,233
Government obligations
(including mortgage
backed securities) 743,777 741,575 841,067 847,219
Total 1,488,821 1,490,469 1,621,843 1,633,452
Non-Current:
Corporate obligations 536,000 532,891 1,030,044 1,038,450
Government obli-
gations 399,534 390,517 298,600 298,931
Preferred stock 612,561 571,535 512,561 511,500
Other equity
investments 414,177 314,827 361,000 323,372
Total 1,962,272 1,809,770 2,202,205 2,172,253
Total $3,451,093 $3,300,239 $3,824,048 $3,805,705
The market value at November 30, 1999 was $3,300,239 as compared to
$3,805,705 at November 30, 1998. The gross unrealized gains and losses as
at November 30, 1999 and 1998 were $7,779 and ($158,633) for 1999 and
$25,844 and ($44,187) for 1998, respectively. The cost and market values
of the investments at November 30, 1999 were as follows:
-13-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
COL. A COL. B COL. C COL.D COL.E
Amount at Which
Each Portfolio
Number of Market Of Equity Security
Units-Principal Value of Issues and Each
Amount of Each Issue Other Security
Name of Issuer and Maturity Interest Bonds and Cost of at Balance Issue Is Carried in
Title of Each Issue Date Rate Notes Each Issue Sheet Date Balance Sheet
CORPORATE OBLIGATIONS:
GMAC 2/22/00 5.450 $200,000 $ 199,226 $ 199,852 $ 199,852
GTE Southwest Deb 12/01/99 5.820% 100,000 99,851 100,000 100,000
Florida Power & Light 4/01/00 5.375% 200,000 199,850 199,464 199,464
Virginia Electric & Power 4/01/00 5.875% 250,000 246,117 249,578 249,578
GMAC Smartnotes 10/15/01 5.950% 536,000 536,000 532,891 532,891
1,281,044 1,281,785 1,281,785
-14-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
COL. A COL. B COL. C COL.D COL.E
Amount at Which
Each Portfolio
Number of Market Of Equity Security
Units-Principal Value of Issues and Each
Amount of Each Issue Other Security
Name of Issuer and Maturity Interest Bonds and Cost of at Balance Issue Is Carried in
Title of Each Issue Date Rate Notes Each Issue Sheet Date Balance Sheet
CORPORATE OBLIGATIONS:
GOVERNMENT OBLIGATIONS:
FHLMC 1628-N 12/15/2023 6.500 50,000 $ 32,498 $ 31,334 $ 31,334
FNMA 93-224-D 11/25/2023 6.500 104,000 91,182 85,168 85,168
FNMA 92-2-N 1/25/2024 6.500 52,000 27,963 28,000 28,000
US Treasury Note 11/30/00 4.625 100,000 100,190 98,781 98,781
US Treasury Note 1/31/01 4.500 250,000 247,891 246,015 246,015
US Treasury Note 9/30/00 5.183 300,000 300,924 296,625 296,625
US Treasury Note 3/16/00 5.183 250,000 243,835 246,195 246,195
US Treasury Bill 12/2/99 4.875 100,000 98,828 99,974 99,974
1,143,311 1,132,092 1,132,092
-15-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
COL. A COL. B COL. C COL. D COL. E
Amount at Which
Each Portfolio
Market Of Equity Security
Value of Issues and Each
Next Stock Other Security
Name of Issuer and Call Dividend Number of Cost of at Balance Issue Is Carried in
Title of Each Issue Date Rate Shares Stock Sheet Date Balance Sheet
EQUITY:
Preferred Stock:
First Australia Prime Series I Auct. Variable 100,000 $100,000 $ 100,000 $ 100,000
Tennessee Valley Authority
(QIDS) Qtrly Income Debt
Secs - Matures 3/31/2045 3/31/00 8.00% 13,600 362,561 339,157 339,157
Merrill Lynch Trust 9/30/08 7.28% 6,000 150,000 132,378 132,378
Other Equity Investments:
Dreyfus Premier Limited
Term High Income CL B 136,227 114,877 114,877
Dreyfus High Yield
Strategies Fund 277,950 199,950 199,950
1,026,738 886,362 886,362
$3,451,093 $3,300,239 $3,300,239
-16-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (Continued)
During the years ended November 30, 1999, 1998 and 1997, available-for-
sale securities were liquidated and proceeds amounting to $2,129,957,
$2,268,851 and $2,657,227 were received, with resultant realized gains
(losses) totaling $10,914, 7,635 and ($1,009), respectively. Cost of
available-for-sale securities includes unamortized premium or discount.
NOTE 7 - NOTES PAYABLE
The Company has an available line of credit of $7,000,000. Interest is
calculated on the outstanding balance at prime minus 1% or Libor plus 150
basis points. The line of credit is collateralized by all the Company's
assets. As of November 30, 1999, the Company was utilizing $1,400,000
of its available line.
NOTE 8 - INCOME TAXES
CCA and its subsidiaries file a consolidated federal income tax return.
No returns have been examined by the Internal Revenue Service.
At November 30, 1999 and 1998, respectively, the Company has temporary
differences arising from the following:
November 30, 1999
Classified As
Deferred Short- Long-
Type Amount Tax Term Term
Asset (Liability)
Depreciation $ 105,625 $ 42,031 $ - $42,031
Reserve for bad debts 327,920 128,802 128,802 -
Reserve for returns 855,846 333,481 333,481 -
Reserve for obsolete
inventory 972,537 387,001 387,001 -
Section 263A costs 252,609 100,405 100,405 -
Deferred tax benefit
from discontinued
operations 1,167,883 105,109 105,109 -
Charitable contributions 310,895 123,715 123,715 -
Net deferred income
tax $1,220,544 $1,178,513 $42,031
-17-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - INCOME TAXES (Continued)
November 30, 1998
Classified As
Deferred Short- Long-
Type Amount Tax Term Term
Asset (Liability)
Depreciation $ 318,619 $ 127,256 $ - $127,256
Reserve for bad debts 273,982 109,429 109,429 -
Reserve for returns 1,044,203 417,054 417,054 -
Reserve for obsolete
inventory 836,805 334,220 334,220 -
Section 263A costs 285,977 114,219 114,219 -
Net deferred income
tax $1,102,178 $974,922 $127,256
Income tax expense (benefit) is made up of the following components:
November 30, 1999
State &
Federal Local Total
Current tax expense $605,755 $181,809 $787,564
Deferred tax expense ( 237,345) ( 31,413) ( 268,758)
$368,410 $150,396 $518,806
-18-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - INCOME TAXES (Continued)
November 30, 1998
State &
Federal Local Total
Current tax expense $1,100,101 $333,183 $1,433,284
Tax credits ( 28,730) - ( 28,730)
Deferred tax expense ( 228,328) ( 63,550) ( 291,878)
$ 843,043 $269,633 $1,112,676
November 30, 1997
State &
Federal Local Total
Current tax expense $967,319 $244,553 $1,211,872
Tax credits ( 42,475) - ( 42,475)
Deferred tax benefit 56,827 15,105 71,932
$981,671 $259,658 $1,241,329
Income taxes payable are made up of the following components:
State &
Federal Local Total
November 30, 1999 $ - $ - $ -
November 30, 1998 $532,272 $68,448 $600,720
-19-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - INCOME TAXES (Continued)
A reconciliation of income tax expense computed at the statutory rate to income tax expense at the
effective rate for each of the three years ended November 30, 1999 is as follows:
1999 1998 1997
Percent Percent Percent
Of Pretax of Pretax of Pretax
Amount Income Amount Income Amount Income
Income tax expense at
statutory rate $465,932 34.00% $ 924,487 34.00% $1,112,760 34.00%
Increases (decreases) in taxes
resulting from:
State income taxes, net of federal
income tax benefit 79,461 5.80 165,995 6.11 155,378 4.75
Non-deductible expenses and
other adjustments ( 26,587) ( 1.94 ) 50,924 1.87 15,666 .48
Utilization of tax credits - - ( 28,730) (1.06 ) ( 42,475) ( 1.30 )
Income tax expense at
effective rate $518,806 37.86% $1,112,676 40.92% $1,241,329 37.93%
-20-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - STOCK OPTIONS
On November 15, 1984, the Company authorized the granting of incentive
stock options as well as non-qualified options. The plan was amended in
1986 and again in 1994. The following summarizes the stock options
outstanding under these plans as of November 30, 1999:
Number Per Share
Of Option
Date Granted Shares Price Expiration
December 1987 17,000 .50 2002
January 1988 342,500 .55 2002
January 1990 200,000 .63 2000
June 1995 50,000 4.50 2000
August 1997 375,000 *1.50 2007
March 1999** 200,000 .75 2004
1,184,500
*These stock options were repriced from $2.50 on November 3, 1998.
**These options were originally scheduled to expire March 1999 but were
extended for an additional five years.
The following summarizes the activity of shares under option for the two
years ended November 30, 1999:
Number Per Share
Of Option
Shares Price Value
Balance - November 30,
1997 1,529,500 $.50 - $4.50 $1,908,250
Granted - - -
Repriced - - ( 375,000)
Exercised ( 70,000) .50 ( 35,000)
Expired ( 75,000) .50 ( 37,500)
Cancelled ( 100,000) 1.50 ( 150,000)
Balance - November 30,
1998 1,284,500 .50 - 4.50 1,310,750
Granted - - -
Repriced - - -
Exercised ( 100,000) .50 - 4.50 ( 51,375)
Expired - - -
Cancelled - - -
Balance - November 30,
1999 1,184,500 $.50 - $4.50 $1,259,375
In 1998 and 1999, two shareholders/officers exercised 70,000 and 100,000
stock options to purchase an equal number of shares of stock,
respectively. The exercise of the options were paid for by the return
of 16,470 and 25,000 shares of the Company's stock, respectively.
-21-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - STOCK OPTIONS (Continued)
Pro Forma Disclosure
The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock Based Compensation", issued in October 1995. Accordingly, compensation
cost has been recorded based on the intrinsic value of the option only. The Company recognized no
compensation cost in 1999 and 1998, respectively, for stock-based employee compensation awards. The
pro forma compensation cost for stock-based employee compensation awards was $1 million, $1.2 million,
and $1.2 million in 1999, 1998 and 1997, respectively. If the Company had elected to recognize
compensation cost based on the fair value of the options granted at grant date as prescribed by SFAS
No. 123, net income and earnings per share would have been changed to the pro forma amounts indicated
in the table below:
1999 1998 1997
As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma
Net income ($291,099) ($1,332,650) $1,660,375 $471,352 $2,031,494 $832,424
Diluted earnings
per share ($.04) ($.19) $.21 $.06 $.25 $.10
The above pro forma amounts, for purposes of SFAS No. 123, reflect the portion of the estimated fair
value of awards earned in 1998 and 1997. For purposes of pro forma disclosures, the estimated fair
value of the options is amortized over the options' vesting period (for stock options). The effects
on pro forma disclosures of applying SFAS 123 are not likely to be representative of the effects on
pro forma disclosures of future years. Because SFAS 123 is applicable only to options granted
subsequent to August 31, 1995, the effect will not be fully reflected until 2000.
-22-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - STOCK OPTIONS
The Company used the Black-Scholes model to value stock options for pro
forma presentation. The assumptions used to estimate the value of the
options included in the pro forma amounts and the weighted average
estimated fair value of options granted are as follows:
Stock Option Plan Shares
1999 1998 1997
Average expected life (years) 3.78 4.64 5.40
Expected volatility 216.51% 214.39% 213.78%
Risk-free interest rate
(zero coupon U.S. Treasury
note) 5.6% 5.6% 6.2%
Weighted average fair value
at grant - Exercise price
equal to market price $1.20 $1.29 $2.19
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, the Black-Scholes
model requires the input of highly subjective assumptions, including the
expected stock price volatility and option life. Because the Company's
stock options granted to employees have characteristics significantly
different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value
estimate, in management's opinion, existing models do not necessarily
provide a reliable measure of the fair value of its stock options
granted to employees. For purposes of this model, no dividends have
been assumed.
-23-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - ACCRUED EXPENSES AND OTHER ACCOUNTS PAYABLE
The following items which exceeded 5% of total current liabilities are
included in accounts payable and accrued liabilities as of:
November 30,
1999 1998
(In Thousands)
Media advertising $ 560 $ 820
Coop advertising * 494
Accrued returns 630 1,107
$1,190 $2,421
All other liabilities were for trade payables or individually did not
exceed 5% of total current liabilities.
* under 5%
NOTE 11 - OTHER INCOME
Other income was comprised of the following:
November 30,
1999 1998 1997
Interest income $213,335 $286,805 $272,677
Dividend income 50,657 16,963 15,131
Realized gain on sale of
available-for-sale securities 11,211 7,635 5,692
Realized (loss) on sale of
available-for-sale
securities ( 297) - -
Realized (loss) on
disposal of assets - - ( 6,701)
Miscellaneous 10,563 6,893 7,154
$285,469 $318,296 $293,953
-24-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Leases
The Company leases approximately 62,500 square feet of office and
warehouse space at an annual rental of $259,284. This lease on the
Company's premises expires March 31, 2001, but has a renewal option for
an additional five years. The Company leases an additional 45,000
square feet of warehouse space in Paterson, NJ on a net lease basis at
a rental of $13,088 per month. This lease expires on May 31, 2000.
The Company has entered into various operating leases with expiration
dates ranging through December 2001.
Rent expense for the years ended November 30, 1999, 1998 and 1997 was
$449,051, $588,083 and $458,706, respectively.
Future commitments under noncancellable operating lease agreements for
each of the next five (5) years and in the aggregate are as follows:
Year Ending
November 30,
2000 $382,261
2001 111,508
2002 -
2003 -
2004 -
Total $493,769
Royalty Agreements
On March 3, 1986, the Company entered into a License Agreement (the
"Agreement") with Alleghany Pharmacal Corporation ("Alleghany") under
the terms of which the Company was granted the exclusive right to use
the licensed products and trademarks for the manufacture and
distribution of the products subject to the license. Under the terms
of the Agreement, on July 5, 1986, the Company paid to Alleghany a non-
refundable advance payment of $1,015,000. The license runs for an
indeterminate period. An additional $525,000 non-refundable advance
payment was paid to Alleghany on July 5, 1987.
-25-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - COMMITMENTS AND CONTINGENCIES (Continued)
From the period March 3, 1986 to June 3, 1986, the Company was required
to pay a 7% royalty on all net sales. Thereafter, it is required to pay
a 6% royalty on net sales but no less than $360,000 per annum to
maintain its license. After the sum of $9,000,000 in royalties has been
paid to Alleghany, the royalty is reduced to 1% of net sales. The
Company has expanded the lines licensed from Alleghany and pays only 1%
royalty on various new products created by the Company. As of November
30, 1999, $6,824,511 of royalties have been paid or accrued and only
$2,175,489 still remains until the $9,000,000 level is reached.
In March 1998, the Company entered into a License Agreement with Shiara
Holdings, Inc., pursuant to which the Company acquired exclusive license
to use the trademark names used by Fragrance Corporation of America,
Ltd. The Shiara-Holdings, Inc. license requires the Company to pay
royalties of 5% per annum on net sales of all products sold under the
"Cherry Vanilla", "Mandarin Vanilla", and "Cloud Dance" trademarks until
royalties totaling $2,000,000 are paid, and royalties of one-half of 1%
thereafter. (No royalties are payable in respect of sales of products
under these Shiara license trademarks: "Vision", Sunset Cafe", and
"Amber Musk".) A minimum of $100,000 is required to be paid for the
period from commencement (April 1998) through June 1999, and a minimum
of $150,000 for each subsequent twelve-month period, in order to retain
the exclusive license-rights.
"Cloud Dance" accounted for approximately one-half of the sales revenues
from products subject to the Shiara license, and Fragrance Corporation
of America, Ltd. operations. Total sales of Fragrance Corporation of
America, Ltd. products accounted for approximately 9% of the Company's
sales.
In May of 1998, the Company entered into a License Agreement with Solar
Sense, Inc. for the marketing of sun care products under trademark
names. The Company's License Agreement with Solar Sense, Inc. is for
the exclusive use of the trademark names "Solar Sense" and "Kids Sense",
in connection with the commercial exploitation of sun care products that
the Company only recently commenced marketing. The Company will pay a
5% royalty. If minimum royalties of $100,000 do not result, the license
may be terminated unless the Company chooses to pay the "difference"
between realized royalties and $100,000.
All of the products sold under licensed names, including Fragrance
Corporation of America, Ltd.'s perfumes, and all of the Company's
"wholly-owned" products, are sold to major drug and food chains, mass
merchandisers, and wholesale beauty-aids distributors throughout the
United States and Canada.
The Company's total net sales revenue for the years ended November 30,
1999 and 1998 were approximately $37 million each. Foreign sales
accounted for approximately 5% of sales in each year.
-26-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - COMMITMENTS AND CONTINGENCIES (Continued)
The Company has entered into various other License Agreements, none of
which materially affect the Company's sales, financial results,
financial condition, or should materially affect its future results of
operations.
Employment Contracts
During fiscal 1994, the Board of Directors approved 10-year employment
contracts for two officers/shareholders. Pursuant thereto, each was
provided a base salary of $300,000 in fiscal 1994, with a year-to-year
CPI or 6% increment, and each is paid 2 1/2% of the Company's pre-tax
income, less depreciation and amortization, plus 20% of the base salary,
as bonus. During 1998 the contracts were amended, commencing in fiscal
1999, to limit the amount of advertising expense charged against pre-tax
income for purposes of the 2 1/2% calculation to $8,000,000.
Collective Bargaining Agreement
On December 1, 1998, the Company signed a collective bargaining
agreement with Local 734, L.I.U. of N.A., AFL-CIO. Other than standard
wage, holiday, vacation and sick day provisions, the agreement calls for
CCA to provide certain medical and dental benefits and to contribute
to the Local 734 Educational Fund $.01 per hour for each hour the
employees are paid. The agreement expires on November 30, 2001.
Litigation
There are various matters in litigation that arose out of the normal
operations of the Company which, in the opinion of management, will not
have a material adverse effect on the financial condition of the
Company.
NOTE 13 - PENSION PLANS
The Company has adopted a 401(K) Profit Sharing Plan that covers most
of their non-union employees with over one year of service and attained
Age 21. Employees may make salary reduction contributions up to twenty-
five percent of compensation not to exceed $10,000 and may make
additional discretionary contributions. The Plan provides for partial
vesting after two years and full vesting after six years of service for
all earnings and losses. The Company is not obligated to, nor has it
matched any of the employees' contributions.
NOTE 14 - RELATED PARTY TRANSACTIONS
The Company has retained the law firm of Berman & Murray as its general
counsel. Ira W. Berman, a former member of the firm, is the Secretary,
Chairman of the Board and a principal shareholder of the Company.
The Company has outstanding loans of $23,438 and $34,483 from its Vice
President in charge of Sales and Vice President in charge of
Manufacturing, respectively; which were made to aid them in obtaining
a first mortgage on their homes. The loans are secured by a second
mortgage and carry an interest rate at 1% over prime. Interest is
payable semi-annually. Both Vice Presidents are the sons of Mr. David
Edell, the President of the Company.
-27-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - CONCENTRATION OF RISK
During the years ended November 30, 1999, 1998 and 1997, certain
customers each accounted for more than 5% of the Company's net sales,
as follows:
Customer 1999 1998 1997
A 27% 29% 24%
B 11 9 12
C 8 7 6
D 6 6 7
E 5 5 7
F 5 7 6
G 5 5 *
Foreign Sales 4.50% 5.00% 5.34%
* Under 5%
The loss of any one of these customers could have a material adverse
affect on the Company's earnings and financial position.
During the years November 30, 1999, 1998 and 1997, certain products
accounted for more than 10% of the Company's net sales as follows:
Product 1999 1998 1997
Plus+White 38% 24% 32%
Sudden Change 21 19 21
Hair-Off 11 10 *
NutraNail 11 * *
* under 10%
The Company maintains cash balances at several banks. Accounts at each
institution are insured by the Federal Deposit Insurance Corporation up
to $100,000. In addition, the Company maintains accounts with several
brokerage firms. The accounts contain cash and securities. Balances
are insured up to $500,000 (with a limit of $100,000 for cash) by the
Securities Investor Protection Corporation.
-28-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 - EARNINGS PER SHARE
Basic earnings per share is calculated using the average number of common shares outstanding. Diluted
earnings per share is computed on the basis of the average number of common shares outstanding plus
the effect of outstanding stock options using the "treasury stock method".
Year Ended November 30,
1999 1998 1997
Net (loss) income available for common
shareholders, basic and diluted ($291,099) $1,660,375 $2,031,494
Weighted average common stock
outstanding- Basic 7,174,203 7,243,956 7,205,904
Net effect of dilutive stock options 486,593 831,213 902,578
Weighted average common stock and
common stock equivalents - Diluted 7,660,796 8,075,169 8,108,482
Basic earnings per share ($.04) $ .23 $ .28
Diluted earnings per share ($.04) $ .21 $ .25
-29-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 - DISCONTINUED OPERATIONS
On March 19, 1998, the Company formed a majority-owned subsidiary,
Fragrance Corporation of America, Ltd. (FCA). FCA is primarily engaged
in the manufacture and distribution of perfume products. The results
of operations of FCA is included in the accompanying financial
statements since the date of inception.
CCA advanced FCA approximately $3,000,000 during fiscal 1998 for
working capital and the initial purchase of the existing inventory of
Shiara, Inc. in the amount of $1,141,711. In conjunction with the
purchase of inventory, FCA entered into a license agreement with Shiara
Holdings, Inc. for the right to sell the products acquired. Former
accounts of Shiara have attempted to offset obligations due to FCA as
a result of Shiara's obligations which FCA did not assume. FCA is
attempting to collect these off-sets. An agreement was entered into in
February 1999 between Shiara Holdings, Inc. and FCA whereby all
royalties due as of February 1, 1999 were deemed off-set by these
contingent holdbacks.
Net sales of perfume products were approximately $3,700,000 during
fiscal 1998, but decreased to $2,100,000 in fiscal 1999. In February
of 1999, employment agreements with FCA's minority shareholders
(included in the 1998 Shareholders Agreement) were replaced by short-
term consulting agreements, which were terminated in October of 1999.
Contemporaneously, the Company formalized a plan to discontinue the
operations of FCA, terminated all FCA employees, closed its Chicago
facility, abandoned the majority of its inventory, and discontinued the
marketing of all of its products except "Cherry Vanilla" and "Cloud
Dance." (See "License Agreement-Shiara") The marketing of those
perfumes has been assumed by CCA.
In 1999, the Company credited FCA with the tax benefit to be received
from the loss incurred by it. This resulted in reducing the
intercompany advances from approximately $3 million to approximately
$2.15 million. Since the net realizable value of FCA's assets at
November 30, 1999 was estimated to be approximately $1 million, a
resultant loss from the discontinued operations of approximately $1.15
million is reflected accordingly in the statement of income. (See
Item 7, Management's Discussion And Analysis of Financial Condition And
Results of Operations, and the Financial Statements and Notes included
in Item 14.)
The 1998 balance sheet has been reclassified to reflect the "net assets
from discontinued operations".
-30-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
VALUATION ACCOUNTS
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
COL. A COL. B COL. C COL. D COL. E
Additions
Balance at Charged To Balance
Beginning Costs and At End
Description Of Year Expenses Deductions Of Year
Year ended November 30, 1999:
Allowance for doubtful accounts$ 273,982 $ 135,949 $ 82,012 $ 327,919
Reserve for returns $1,044,203 $4,866,293 $5,054,839 $ 855,657
Reserve for inventory
obsolescence $ 836,805 $ 380,454 $ 160,470 $ 1,056,789
Year ended November 30, 1998:
Allowance for doubtful accounts$ 120,131 $ 201,630 $ 47,779 $ 273,982
Reserve for returns $ 544,194 $3,455,118 $2,955,109 $ 1,044,203
Reserve for inventory
obsolescence $ 860,417 $ 61,113 $ 172,664 $ 748,866
Year ended November 30, 1997:
Allowance for doubtful accounts$ 143,647 ($ 17,779) $ 5,739 $ 120,131
Reserve for returns $ 922,902 $3,465,866 $3,844,574 $ 544,194
Reserve for inventory
obsolescence $ 679,675 $ 486,742 $ 300,000 $ 860,417
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended February 29, 2000
Commission File Number 2-85538
CCA INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-2795439
(State or other jurisdiction of I.R.S. Employer
Incorporation or organization) Identification Number)
200 Murray Hill Parkway
East Rutherford, NJ 07073
(Address of principal executive offices) (Zip Code)
(201) 330-1400
Registrant's telephone number, including area code
Not applicable
Former name, former address and former fiscal year, if changed
since last report.
Indicate by check mark whether the Registrant: (1) has
filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was re-
quired to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date.
Common Stock, $.01 Par Value - $6,225,155 shares of as February
29, 2000
Class A Common Stock, $.01 Par Value - $1,020,930 shares as of
February 29, 2000
CCA INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I FINANCIAL INFORMATION:
Consolidated Balance Sheets as of
February 29, 2000 and November 30, 1999 1-2
Consolidated Statements of Operations
for the three months ended February 29, 2000
and February 28, 1999 3
Consolidated Statements of Comprehensive Income
for the three months ended February 29, 2000
and February 28, 1999 4
Consolidated Statements of Cash Flows for
the three months ended February 29, 2000
and February 28, 1999 5
Notes to Consolidated Financial Statements 6-14
Management Discussion and Analysis of
Results of Operations and Financial
Condition 15-16
PART II OTHER INFORMATION 17-18
SIGNATURES 19
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
February 29, November 30,
2000 1999
Current Assets
Cash and cash equivalents $ 296,022 $ 807,360
Short-term investments and marketable
securities (Notes 3 and 10) 1,439,498 1,490,469
Accounts receivable, net of allowances of
$930,596 and $1,183,576, respectively 9,460,869 7,371,532
Inventories 6,201,272 6,235,270
Prepaid expenses and sundry receivables 417,374 822,816
Deferred income taxes 1,197,797 1,178,513
Prepaid income taxes and refunds due 805,420 714,835
Deferred advertising 1,684,810 -
Total Current Assets 21,503,062 18,620,795
Property and Equipment, net of accumulated
depreciation and amortization 839,375 739,728
Intangible Assets, net of accumulated
amortization of $75,090 at February 29,
2000 and $71,840 at November 30, 1999 166,506 169,756
Other Assets
Marketable securities 1,826,522 1,809,770
Due from officers - Non-current 48,302 57,918
Deferred income taxes 58,531 42,031
Other 54,989 54,989
Total Other Assets 1,988,344 1,964,708
Total Assets $24,497,287 $21,494,987
See Notes Consolidated to Financial Statements.
-1-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
February 29, November 30,
2000 1999
Current Liabilities
Notes payable - Current portion $ 1,600,000 $ 1,400,000
Accounts payable and accrued liabilities 7,965,672 4,928,905
Total Current Liabilities 9,565,672 6,328,905
Shareholders' Equity
Common stock, $.01 par; authorized
15,000,000 shares; issued and
outstanding 6,321,151 and 6,321,151
shares, respectively 63,212 63,212
Class A common stock, $.01 par; authorized
5,000,000 shares; issued and outstanding
1,020,930 and 1,020,930 shares,
respectively 10,209 10,209
Additional paid-in capital 4,453,478 4,453,478
Retained earnings 10,749,081 10,955,203
Accumulated other comprehensive income ( 179,199) ( 150,854)
15,096,781 15,331,248
Less: Treasury Stock (95,996 and 95,996
shares at February 29, 2000 and
November 30, 1999, respectively) 165,166 165,166
Total Shareholders' Equity 14,931,615 15,166,082
Total Liabilities and Shareholders'
Equity $24,497,287 $21,494,987
See Notes to Consolidated Financial Statements.
-2-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Three Months
Ended Ended
February 29, February 28,
2000 1999
(Restated)
Net sales of health and beauty products $8,573,919 $ 8,657,183
Other income 62,201 40,978
8,636,120 8,698,161
Costs and Expenses
Costs of sales 3,704,031 3,539,119
Selling, general and administrative
expenses 3,201,487 2,919,575
Advertising, cooperative and promotions 1,836,251 2,020,117
Research and development 125,020 129,766
Provision for doubtful accounts 67,127 43,708
Interest expense 5,424 -
8,939,340 8,652,285
Income (Loss) before Income Taxes ( 303,220) 45,876
Provision (Benefit) for Income Taxes ( 107,173) 35,947
Net Income (Loss) Before From
Discontinued Operations ( 196,047) 9,929
Income (Loss) from Discontinued
Operations ( 10,075) 61,732
Net Income (Loss) ($ 206,122) $ 71,661
Earnings per Share:
Basic ($.03) $.01
Diluted ($.03) $.01
See Notes to Consolidated Financial Statements.
-3-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Three Months
Ended Ended
February 29, February 28,
2000 1999
(Restated)
Net Income (Loss) ($206,122) $71,661
Other Comprehensive Income
Unrealized holding gains (loss)
on investments ( 44,845) ( 13,580)
Provision (Benefit) for Taxes ( 16,500) ( 5,500)
Other Comprehensive Income - Net ( 28,345) ( 8,080)
Comprehensive Income (Loss) ($234,467) $63,581
Earnings Per Share:
Basic ($.03) $.01
Diluted ($.03) $.01
See Notes to Consolidated Financial Statements.
-4-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three Months Three Months
Ended Ended
February 29, February 28,
2000 1999
(Restated)
Cash Flows from Operating Activities:
Net income ($ 206,122) $ 71,661
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation and amortization 99,464 97,959
Amortization of bond premium - 471
(Loss) gain on sale of securities ( 923) 6,043
Decrease (increase) in deferred income
taxes ( 35,784) 32,347
(Increase) in accounts receivable ( 2,089,337) 330,653
Decrease (increase) in inventory 33,998 ( 1,133,147)
(Increase) in prepaid expenses 415,058 ( 943)
(Increase) in deferred advertising ( 1,684,810) ( 437,146)
Increase in accounts payable 3,036,767 209,763
(Increase) decrease in prepaid income
taxes ( 90,585) ( 702,636)
Net Cash (Used in) Provided by
Operating Activities ( 522,274) ( 1,524,975)
Cash Flows from Investing Activities:
Acquisition of property, plant and
equipment ( 195,861) ( 35,816)
Acquisitions of intangible assets - ( 175,000)
Purchase of short-term investments ( 408,529) ( 110,841)
Proceeds from sale and maturity of
investments 415,326 451,500
Net Cash (Used in) Provided by
Investing Activities ( 189,064) 129,843
Cash Flows from Financing Activities:
Proceeds from borrowings 200,000 1,150,000
Purchase of treasury stock - ( 9,557)
Net Cash Provided by (Used in)
Financing Activities 200,000 1,140,443
Net (Decrease) in Cash ( 511,338) ( 254,689)
Cash and Cash Equivalents at Beginning
of Period 807,360 542,289
Cash and Cash Equivalents at End
of Period $ 296,022 $ 287,600
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest $ 16,663 $ 30,963
Income taxes 600 660,804
See Notes to Consolidated Financial Statements.
-5-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated finan
cial statements have been prepared in accordance with
generally accepted accounting principles for interim
financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes re
quired by generally accepted accounting principles for
complete financial statements. In the opinion of manage
ment, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation
have been included. Operating results for the three
month period ended February 29, 2000 are not necessarily
indicative of the results that may be expected for the
year ended November 30, 2000. For further information,
refer to the consolidated financial statements and foot
notes thereto included in the Company's annual report on
Form 10-K for the year ended November 30, 1999.
NOTE 2 - ORGANIZATION AND DESCRIPTION OF BUSINESS
CCA Industries, Inc. ("CCA") was incorporated in the State
of Delaware on March 25, 1983.
CCA manufactures and distributes health and beauty aid
products.
CCA has several wholly-owned subsidiaries (CCA Cosmetics,
Inc., CCA Labs, Inc., Berdell, Inc., and Nutra Care Corpora
tion), all of which are currently inactive.
In March of 1998 CCA acquired 80% of the newly organized
Fragrance Corporation of America, Ltd. which manufactures
and distributes perfume products. In 1999, the Company
adopted a formal plan to discontinue the operations of the
subsidiary. The 1999 financial statements have been
restated to give effect for discontinued operations.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts
of CCA and its wholly-owned subsidiaries (collectively the
"Company"). All significant inter-company accounts and
transactions have been eliminated.
-6-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates:
The consolidated financial statements include the use of
estimates, which management believes are reasonable. The
process of preparing financial statements in conformity with
generally accepted accounting principles requires the use
of estimates and assumptions regarding certain types of
assets, liabilities, revenues, and expenses. Such estimates
primarily relate to unsettled transactions and events as of
the date of the financial statements. Accordingly, upon
settlement, actual results may differ from estimated
amounts.
Short-Term Investments and Marketable Securities:
Short-term investments and marketable securities consist of
corporate and government bonds and equity securities. The
Company has classified its investments as Available-for-Sale
securities. Accordingly, such investments are reported at
fair market value, with the resultant unrealized gains and
losses reported as a separate component of shareholders'
equity.
Statements of Cash Flows Disclosure:
For purposes of the statement of cash flows, the Company
considers all highly liquid instruments purchased with an
original maturity of less than three months to be cash
equivalents.
During fiscal 1999, two officers/shareholders exercised in
the aggregate 100,000 options in exchange for 25,000 shares
previously issued common stock. The common shares were put
into treasury and were subsequently cancelled.
Inventories:
Inventories are stated at the lower of cost (first-in,
first-out) or market.
Product returns are recorded in inventory when they are
received at the lower of their original cost or market, as
appropriate. Obsolete inventory is written off and its
value is removed from inventory at the time its obsolescence
is determined.
-7-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment and Depreciation and Amortization
Property and equipment are stated at cost. The Company
charges to expense repairs and maintenance items, while
major improvements and betterments are capitalized. When
the Company sells or otherwise disposes of property and
equipment items, the cost and related accumulated deprecia
tion are removed from the respective accounts and any gain
or loss is included in earnings.
Depreciation and amortization are provided on the straight-
line method over the following estimated useful lives or
lease terms of the assets:
Machinery and equipment 7-10 Years
Furniture and fixtures 5-7 Years
Tools, dies and masters 2-7 Years
Transportation equipment 7 Years
Leasehold improvements 7-10 Years or life
of lease, whichever is
shorter
Intangible Assets:
Intangible assets are stated at cost. Patents and trade
marks are amortized on the straight-line method over a
period of 17 years. Goodwill represents the excess of the
cost over the fair value of the net assets acquired and is
amortized over 60 months.
Financial Instruments:
The carrying value of assets and liabilities considered
financial instruments approximate their respective fair
value.
Income Taxes:
Income tax expense includes federal and state taxes
currently payable and deferred taxes arising from temporary
differences between income for financial reporting and
income tax purposes.
Tax Credits:
Tax credits, when present, are accounted for using the
flow-through method as a reduction of income taxes in the
years utilized.
-8-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings Per Common Share:
The Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share" in 1998.
Basic earnings per share is calculated using the average
number of shares of common stock outstanding during the
year. Diluted earnings per share is computed on the basis
of the average number of common shares outstanding plus the
effect of outstanding stock options using the "treasury
stock method" and convertible debentures using the "if-
converted" method. Common stock equivalents consist of
stock options.
Revenue Recognition:
The Company recognizes sales at the time delivery occurs.
Although no legal right of return exists between the
customer and the Company, it is an industry-wide practice
to accept returns from customers. The Company, therefore,
records a reserve for returns equal to its gross profit on
its historical percentage of returns on its last five
months sales.
Comprehensive Income:
The Company adopted SFAS #130, Comprehensive Income, which
considers the Company's financial performance in that it
includes all changes in equity during the period from
transactions and events from non-owner sources.
Reclassifications
Certain prior year amounts have been reclassified to
conform to the 2000 presentation.
NOTE 4 - INVENTORIES
The components of inventory consist of the following:
February 29, November 30,
2000 1999
Raw materials $3,668,952 $3,509,103
Finished goods 2,532,320 2,726,167
$6,201,272 $6,235,270
At February 29, 2000 and November 30, 1999, the Company had
a reserve for obsolescence of $880,958 and $1,056,789,
respectively.
NOTE 5 - PROPERTY AND EQUIPMENT
The components of property and equipment consisted of the
following:
February 29, November 30,
2000 1999
Machinery and equipment $ 299,528 $ 299,528
Furniture and equipment 892,499 742,547
Transportation equipment 10,918 10,918
Tools, dies, and masters 1,941,420 1,914,684
Leasehold improvements 166,820 147,647
3,211,185 3,115,324
Less: Accumulated
depreciation
and amortization 2,471,810 2,375,596
Property and Equipment
- Net $ 839,375 $ 739,728
-9-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - PROPERTY AND EQUIPMENT (Continued)
Depreciation and amortization expense for the three months
ended February 29, 2000 and February 28, 1999 amounted to
$96,214 and $82,989, respectively.
NOTE 6 - INTANGIBLE ASSETS
Intangible assets consist of the following:
Februaryy 29, November 30,
2000 1999
Patents and trademarks $241,596 $241,596
Less: Accumulated amortization 75,090 71,840
Intangible Assets - Net $166,506 $169,756
Amortization expense for the three months ended February
29, 2000 and February 28, 1999 $3,250 and $16,434, respec
tively.
NOTE 7 - DEFERRED ADVERTISING
In accordance with APB 28 Interim Financial Reporting the
Company expenses its advertising and related costs propor
tionately over the interim periods based on its total
expected costs per its various advertising programs.
Consequently a deferral of $1,684,810 is accordingly
reflected in the balance sheet for the interim period.
This deferral is the result of the Company's $5,000,000
media budget for the year which contemplates lower spending
in the 4th quarter than in the other three quarters; as
well as the Company's Co-op advertising commitments which
also anticipates a lower expenditure in the 4th quarter.
The table below sets forth the calculation:
February February
2000 1999
(In Millions) (In Millions)
Media advertising budget for the
fiscal year $5.00 $5.00
Pro-rata portion for three months $1.25 $1.25
Media advertising spent 2.68 1.41
Accrual (deferral) ($1.43) ($ .16)
Anticipated Co-op advertising
commitments $2.35 $3.00
Pro-rata portion for three months $ .59 $ .75
Co-op advertising spent .84 1.03
Accrual (deferral) ($ .25) ($ .28)
NOTE 8 -ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The following items which exceeded 5% of total current
liabilities are included in accounts payable and accrued
liabilities as of:
February 29, November 30,
2000 1999
(In Thousands) (In Thousands)
a) Media advertising $2,364 $ 560
b) Coop advertising 545 *
c) Accrued returns 622 630
$3,531 $1,190
-10-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Continued)
All other liabilities were for trade payables or individu
ally did not exceed 5% of total current liabilities.
* Under 5%
NOTE 9 -OTHER INCOME
Other income consists of the following at February 29:
2000 1999
Interest income $51,983 $32,800
Dividend income 9,295 6,692
Miscellaneous 923 1,486
$62,201 $40,978
NOTE 10 -SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES
Short-term investments and marketable securities, which
consist of stock and various corporate and government
obligations, are stated at market value. The Company has
classified its investments as Available-for-Sale securities
and considers as current assets those investments which will
mature or are likely to be sold in the next fiscal year. The
remaining investments are considered non-current assets.
The cost and market values of the investments at February
28, 2000 and November 30, 1999 were as follows:
February 29, November 30,
2000 1999
Current: COST MARKET COST MARKET
Corporate obliga-
tions $ 445,967 $ 449,693 $ 745,044 $ 748,894
Government obliga-
tions(including
mortgage
backed securities) 991,344 989,805 743,777 741,575
Total 1,437,311 1,439,498 1,488,821 1,490,469
Non-Current:
Corporate obliga-
tions 536,000 529,187 536,000 532,891
Government obli-
gations 453,805 439,122 399,534 390,517
Preferred stock 612,561 556,350 612,561 571,535
Other equity
investments 422,040 301,863 414,177 314,827
Total 2,024,406 1,826,522 1,962,272 1,809,770
Total $3,461,717$3,266,020 $3,451,093 $3,300,239
-11-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 -SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
The market value at February 29, 2000 was $3,266,020 as compared to $3,300,239 at
November 30, 1999. The cost and market values of the investments at February 29, 2000
were as follows:
COL. A COL. B COL. C COL.D COL.E
Amount at Which
Each Portfolio
Number of Market Of Equity Security
Units-Principal Value of Issues and Each
Amount of Each Issue Other Security
Name of Issuer and Maturity Interest Bonds and Cost of at Balance Issue Carried in
Title of Each Issue Date Rate Notes Each Issue Sheet Date Balance Sheet
CORPORATE OBLIGATIONS:
Virginia Electric &
Power 4/01/00 5.875% 250,000 $ 246,117 $ 249,855 $ 249,855
GMAC Smartnotes 10/15/01 5.950% 536,000 536,000 529,187 529,187
Florida Power &
Light 4/01/00 5.375% 200,000 199,850 199,838 199,838
981,967 978,880 978,880
-12-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
COL. A COL. B COL. C COL. D COL. E
Amount at Which
Each Portfolio
Number of Market Of Equity Security
Units-Principal Value of Issues and Each
Amount of Each Issue Other Security
Name of Issuer and Maturity Interest Bonds and Cost of at Balance Issue Carried in
Title of Each Issue Date Rate Notes Each Issue Sheet Date Balance Sheet
GOVERNMENT OBLIGATIONS:
FHLMC 1628-N 12/15/2023 6.500 50,000 $ 32,498 $ 30,962 $ 30,962
FNMA 93-224-D 11/25/2023 6.500 104,000 91,182 83,949 83,949
FNMA 92-2-N 1/25/2024 6.500 52,000 27,860 27,242 27,242
US Treasury Note 11/30/2001 4.625 100,000 100,190 98,781 98,781
US Treasury Note 1/31/2001 4.500 250,000 247,891 245,860 245,860
US Treasury Note 9/30/2000 4.500 300,000 300,924 297,000 297,000
US Treasury Note 3/16/2000 5.183 250,000 243,835 249,383 249,383
US Treasury Note 11/30/2000 4.625 200,000 198,694 197,562 197,562
US Treasury Note 5/15/2001 5.625 200,000 202,075 198,188 198,188
1,445,149 1,428,927 1,428,927
-13-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
MARKETABLE SECURITIES - OTHER INVESTMENTS
NOTE 10 -SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES (CONTINUED)
COL. A COL. B COL. C COL.D COL.E
Amount at Which
Each Portfolio
Number of Market Of Equity Security
Units-Principal Value of Issues and Each
Amount of Each Issue Other Security
Name of Issuer and Maturity Interest Bonds and Cost of at Balance Issue Carried in
Title of Each Issue Date Rate Notes Each Issue Sheet Date Balance Sheet
EQUITY:
Preferred Stock:
Tennessee Valley Authority
(QIDS) Qtrly Income Debt
Secs - Matures 3/31/2045 3/31/00 8.00% 13,600 $ 362,561 $ 328,100 $ 328,100
Merrill Lynch Trust 9/30/08 7.28 6,000 150,000 128,250 128,250
Other Equity Investments:
First Australia Prime 100,000 100,000 100,000
Dreyfus Premier Limited
Term High Income CL B 3.8* 11,443 139,193 116,614 116,614
Dreyfus High Yield
Strategies Fund 10.5* 20,121 282,847 185,249 185,249
1,034,601 858,213 858,213
$3,461,717 $3,266,020 $3,266,020
* Estimated
-14-
CCA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
For the three month period ended February 29, 2000, the Company
had revenues of $8,636,120 and a net loss of ($206,122). In the
prior year's period, the Company had revenues of $8,698,161 and a
net income of $9,929 (excluding sales from discontinued operations
of $1,088,577 and income of $61,732). Sales for the three month
period were substantially the same as the prior period except the
reduction of sales of Nutra Enamel of ($85,000) as a result of the
commencement of the discontinuance of Color Line. Sales returns ran
approximately 6% of gross sales. Sales returns were 8% for the
prior year's period. Other income was $62,000 compared to $41,000.
Gross margins of 57% were down from 59%, this was primarily due to
a reduction in the margins with a major account which were offset
by reductions in cooperative expenses with that account; and a
slight increase in inflationary costs.
Advertising, cooperative and promotional allowance expenditures
were $1,836,251 as compared to $2,020,117. The reduction was offset
by the 1.3% reduction in gross profit margins of approximately
$120,000. Advertising expenditures were 21.4% of sales compared to
23.3%. Since both co-op advertising and promotions have a material
effect on the Company's operations, the Company attempts to
anticipate its advertising and promotional commitments as a percent
of gross sales in order to control its effect on its net income.
In accordance with APB Interim Financial Reporting, the Company
expenses its advertising and related costs proportionately over the
interim periods based on its total expected costs per its various
advertising programs. Consequently, a deferral of $1,430,000 of
media expense and $250,000 of co-op expenses is reflected in the
balance sheet. The Company deferred $437,146 in the prior year.
This deferral is the result of the Company's $5 million media budget
for the entire year which is predicated on substantially lower
spending in the third and fourth quarters. Co-op expenditures are
budgeted at $2,350,000 for the year. Specifically, the Company
spent $2.68 million for media advertising in the three months and
$840,000 in co-op advertising. The difference is deferred over the
subsequent nine month period and by the end of the year will be
fully expensed.
Selling, general and administrative expenses ("SG&A") increased
from $2,919,575 to $3,201,487. The increase was primarily due to
the additional freight costs incurred due to the increase in oil
prices and their effect on shipping charges as well as the necessity
to resort to special deliveries to the Company's accounts caused by
inadvertent delays from the Company's suppliers; and the additional
pack-out labor expenditures incurred due to special displays packed
and shipped for promotional sales offers.
Research and development expenses for the three months were
substantially the same as the prior year's period.
Bad debt expense for the period increased due to the substantial
increase in the Company's accounts receivable. Actual write-offs
were approximately $30,000 as compared to $4,000 in 1999.
-15-
CCA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
The Company's interest expense increased to $5,429 (net of the
interest attributed to the discontinued operations of $17,053) as
compared to none (net of the $34,645 attributable to discontinued
operations in 1999).
The Company's sales were primarily to drugstore chains, food
chains and mass merchandisers.
The Company's financial position as at February 29, 2000
consists of current assets of $21,503,062 and current liabilities
of $9,565,672. The Company's cash position decreased due to the
significant increase in its accounts receivable primarily as a
result of the sales in the latter month of the quarter. The
Company's accounts payable increased due to the change in the
increased expenditures for media during the latter part of the
month.
During the three months, the Company used approximately $522,000
in operations, generated $200,000 from new borrowings, and used
approximately $189,000 to purchase assets and investments. These
factors resulted in a net decrease in the Company's cash of about
$511,000.
-16-
CCA INDUSTRIES, INC.
PART II OTHER INFORMATION
All information pertaining to Part II is omitted pursuant to the
instructions pertaining to that part.
The Company did not file any reports on Form 8-K during the
three months ended February 29, 2000.
-17-
PART II, ITEM 6. (Continued)
EXHIBIT 11
CCA INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
Three Months Three Months
Ended Ended
February 28, February 28,
2000 1999
Item 6.
Weighted average shares outstanding -
Basic 7,246,085 7,111,472
Net effect of dilutive stock
options--based on the
treasury stock method
using average market
price * 478,827
Weighted average shares outstanding -
Diluted 7,246,085 7,590,299
Net income ($ 206,122) $ 71,661
Per share amount
Basic ($.03) $.01
Diluted ($.03) $.01
* Antidilutive
-18-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CCA INDUSTRIES, INC.
By:/s David Edell
David Edell, President
By:/s Ira W. Berman
Ira W. Berman, Secretary
-19-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
PROFORMA CONSOLIDATED BALANCE SHEET
A S S E T S
November 30,
1999
Current Assets
Cash and cash equivalents $ 207,360
Short-term investments and marketable
securities 1,490,469
Accounts receivable, net of allowances of
$1,183,576 7,371,532
Inventories 6,235,270
Prepaid expenses and sundry receivables 822,816
Prepaid income taxes and refunds due 714,835
Deferred income taxes 1,178,513
Net assets from discontinued operations -
Total Current Assets 18,020,795
Property and Equipment, net of accumulated
depreciation and amortization 739,728
Intangible Assets, net of accumulated
amortization 169,756
Other Assets
Marketable securities 1,809,770
Due from officers - Non-current 57,918
Deferred income taxes 42,031
Other 54,989
Total Other Assets 1,964,708
Total Assets $20,894,987
See Note.
-1-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
PROFORMA CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
November 30,
1999
Current Liabilities
Notes payable $ 1,400,000
Accounts payable and accrued
liabilities 4,928,905
Income taxes payable -
Total Current Liabilities 6,328,905
6% Subordinated Debentures 5,000,000
Commitments and Contingencies
Shareholders' Equity
Common stock, $.01 par; authorized
15,000,000 shares; issued and
outstanding 6,321,151 63,212
Class A common stock, $.01 par; authorized
5,000,000 shares; issued and outstanding
1,020,930 shares 10,209
Additional paid-in capital 4,453,478
Retained earnings 10,355,203
Accumulated other comprehensive income
( 150,854)
14,731,248
Less: Treasury Stock (2,595,996 shares at November 30,
1999) 5,165,166
Total Shareholders' Equity 9,566,082
Total Liabilities and Shareholders' Equity $20,894,987
See Note.
-2-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
PROFORMA CONSOLIDATED STATEMENT OF INCOME (LOSS)
Year Ended November 30,1999
Revenues
Sales of health and beauty
aid products, net $36,926,287
Other income 285,469
37,211,756
Costs and Expenses
Cost of sales 13,910,401
Selling, general and
administrative expenses 12,302,919
Advertising, cooperative and
promotions 8,910,758
Research and development 581,340
Provision for doubtful accounts 135,949
Interest expense 300,000
36,141,367
Income before Provision
for Income Taxes 1,070,389
Provision for Income Tax 405,226
Net Income from
Continuing Operations 665,163
Discontinued Operations:
Income (loss) from operations of
Fragrance Corp. of America
(net of income taxes (benefit)
of ($549,205) in 1999 ( 841,573)
(Loss) on abandonment of
intangibles (net of income
taxes (benefit) of
($183,068) in 1999) ( 301,109)
(Loss) Income from Discontinued
Operations ( 1,142,682)
Net (Loss) Income ($ 477,519)
Weighted Average Shares
Outstanding
Basic 4,674,203
Diluted 5,160,796
Earnings Per Common Share
(Note 2): Basic Diluted
Continuing Operations $ .14 $ .13
Discontinued Operations ($ .18) ($ .18)
(Loss) on Abandoned
Intangibles ($ .06) ($ .06)
Net ($ .10) ($ .10)
See Note.
-3-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
PROFORMA CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
Year Ended November 30, 1999
Net (Loss) Income ($ 477,519)
Other Comprehensive Income
Unrealized holding (loss)
gain on investments ( 132,511)
(Benefit) Provision for Taxes ( 50,166)
Other Comprehensive (Loss)
Income - Net ( 82,345)
Comprehensive (Loss)
Income ($ 559,864)
Earnings Per Share:
Basic ($.12)
Diluted ($.12)
See Note.
-4-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
PROFORMA CONSOLIDATED BALANCE SHEET
A S S E T S
February 29,
2000
Current Assets
Cash and cash equivalents $ 296,022
Short-term investments and marketable
securities 1,439,498
Accounts receivable, net of allowances of
$930,596 9,460,869
Inventories 6,201,272
Prepaid expenses and sundry receivables 417,374
Deferred income taxes 1,197,797
Prepaid income taxes and refunds due 805,420
Deferred advertising 1,684,810
Total Current Assets 21,503,062
Property and Equipment, net of accumulated
depreciation and amortization 839,375
Intangible Assets, net of accumulated
amortization of $75,090 166,506
Other Assets
Marketable securities 1,826,522
Due from officers - Non-current 48,302
Deferred income taxes 58,531
Other 54,989
Total Other Assets 1,988,344
Total Assets $24,497,287
See Note.
-1-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
PROFORMA CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
February 29,
2000
Current Liabilities
Notes payable - Current portion $ 1,600,000
Accounts payable and accrued liabilities 7,965,672
Total Current Liabilities 9,565,672
6% Subordinated Debentures 5,000,000
Shareholders' Equity
Common stock, $.01 par; authorized
15,000,000 shares; issued and
outstanding 6,321,151 63,212
Class A common stock, $.01 par; authorized
5,000,000 shares; issued and outstanding
1,020,930 10,209
Additional paid-in capital 4,453,478
Retained earnings 10,749,081
Accumulated other comprehensive income ( 179,199)
15,096,781
Less: Treasury Stock (2,595,996 shares at
February 29, 2000) 5,165,166
Total Shareholders' Equity 9,931,615
Total Liabilities and Shareholders' Equity $24,497,287
See Note.
-2-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months
Ended
February 29,
2000
Net sales of health and beauty products $8,573,919
Other income 62,201
8,636,120
Costs and Expenses
Costs of sales 3,704,031
Selling, general and administrative
expenses 3,201,487
Advertising, cooperative and promotions 1,836,251
Research and development 125,020
Provision for doubtful accounts 67,127
Interest expense 80,424
9,014,340
Income (Loss) before Income Taxes ( 378,220)
Provision (Benefit) for Income Taxes ( 133,678)
Net Income (Loss) Before From
Discontinued Operations ( 244,542)
Income (Loss) from Discontinued
Operations ( 10,075)
Net Income (Loss) ($ 254,617)
Earnings per Share:
Basic ($.05)
Diluted ($.05)
See Note.
-3-
CCA INDUSTRIES, INC. AND SUBSIDIARIES
PROFORMA CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
(UNAUDITED)
Three Months
Ended
February 29,
2000
Net Income (Loss) ($ 254,617)
Other Comprehensive Income
Unrealized holding gains (loss)
on investments ( 44,845)
Provision (Benefit) for Taxes ( 16,500)
Other Comprehensive Income - Net ( 28,345)
Comprehensive Income (Loss) ($282,962)
Earnings Per Share:
Basic ($.06)
Diluted ($.06)
See Note.
-4-
CCA Industries, Inc.
Note to Financial Information
Regulation M-A
The accompanying pro-forma balance sheets, statements of income and
earnings per share, and other pro-forma schedules and information have been
prepared to reflect the effects of the tender offer as if the transaction took
place on the first day of the period reflected in the case of the statements
of income and earnings per share and related schedules; and as of the balance
sheet date in the case of the balance sheets and related schedules (including
the book value calculation).
Exhibit (a)(2)
INSTRUCTIONS FOR LETTER OF TRANSMITTAL
1. Guarantee of signatures. Signatures on all Letters of Transmittal
must be guaranteed by a financial institution that is a member of a Securities
Transfer Association approved medallion program such as STAMP, SEMP; or MSP (an
"Eligible Institution"), except in cases where securities are surrendered (i)
by a registered holder of the securities who has not completed either the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible institution. See Instruction 4.
2. Delivery of Letter of Transmittal and Certificates. The Letter of
Transmittal, properly completed and duly executed, together with the
certificates(s) for the securities described should be delivered to the address
set forth below. A return envelope addressed to American Stock Transfer &
Trust company ("AST") is enclosed for convenience.
THE METHOD OF DELIVERY OF CERTIFICATE(S) AND ALL OTHER REQUIRED DOCUMENTS IS AT
THE ELECTION AND RISK OF THE OWNER, BUT IF SENT BY MAIL, IT IS RECOMMENDED THAT
THEY, BE SENT BY REGISTERED MAIL WITH RETURN RECEIPT REQUEST.
3. Inadequate Space. If the space provided on the Letter of Transmittal
is inadequate, the certificate numbers and the number of securities should be
listed on a separate, schedule to be attached thereto.
4. Signatures of Letter of Transmittal, Stock Powers and Endorsements.
When the Letter bf Transmittal is signed by the registered owner(s) of the
certificate(s) listed and surrendered thereby, no endorsements of. certificates
or separate stock powers are required.
If the certificate(s) surrendered is (ate) owned of record by two or more
joint owners S all such. owners must sign the Letter of Transmittal.
If any surrendered certificates are registered in different names, it will
be necessary to complete sign and submit as many separate Letters of Transmit-
tal as there are different registrations of certificates.
If the Letter of Transmittal is signed by a person other than the
registered owner of certificate(s) listed, such certificate(s) must be endorsed
or accompanied by appropriate stock powers, in either case signed exactly as
the name or names of the registered owner or owners appear on the certifi-
cate(s). Signatures on such certificates or stock powers must be guaranteed by
an Eligible Institution.
If the Letter of Transmittal or any certificate or stock power is signed
by trustees, executors, administrators, guardians, attorneys-in-tact, officers
or corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing and proper evidence, satisfactory
to AST, of their authority to do so must be submitted.
5. Stock Transfer Taxes. If payment for securities is to be made to any
person other than the registered holder, or if surrendered certificates are
registered in the name of any person, other than the person(s) signing the
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered holder or such person) payable as a result of the transfer
to such person will be deducted from the payment for such securities if satis-
factory evidence of the payment of such taxes or exemption therefrom, is not
submitted.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in the Letter of
Transmittal.
6. Special issuance and Delivery Instructions. Indicate the name and
address to whit payment for the securities is to be sent if different from the
name arid address of the person(s) signing the Letter of Transmittal.
7. Substitute Form W-9. Enter your social security or taxpayer
identification number complete, sign and data the substitute W-9 certification.
8. Additional Copies. Additional copies of the Letter of Transmittal
may be obtained from AST at the address listed below.
9. Lost, Stolen or Destroyed Certificates. Any securityholder who has
lost certificates should make arrangements (which may include the posting of a
bond or other satisfactory indemnification and an affidavit of loss) to replace
lost certificates. Such arrangements should be made with AST.
All questions as to the validity, form and eligibility of any surrender of
certificates will be determined by AST and the Issuer and such determination
shall be final and binding. AST and the Issuer reserve the right to waive any
irregularities or defects in the surrender of any certificates. A surrender
will not be deemed to have been made until all irregularities have been cured
or waived.
DELIVER BY MAIL TO: AMERICAN STOCK TRANSFER DELIVER IN PERSON TO:
AMERICAN STOCK TRANSFER AND TRUST COMPANY AMERICAN STOCK TRANSFER
AND TRUST COMPANY AND TRUST COMPANY
40 WALL STREET- 46th FLOOR LETTER OF TRANSMITTAL 40 WALL STREET - 46TH FLOOR
NEW YORK, NY 10005 NEW YORK, NY 10005
ACCOUNT NUMBER
NUMBER OF SHARES
CUSIP NUMBER
LIST ALL CERTIFICATES SUBMITTED
CERTIFICATE NUMBER SHARES CERTIFICATE NUMBER SHARES
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. SIGN
ON THE REVERSE SIDE AND COMPLETE THE W-9 FORM BELOW
REGISTRATION
IF CERTIFICATES AND/OR CHECKS ARE TO BE ISSUED IN A NAME OTHER THAN THAT
SHOWN AT THE TOP OF THIS FORM OR ARE TO BE SENT TO AN ADDRESS OTHER THAN
THAT SHOWN AT THE TOP OF THIS FORM,PLEASE CHECK THE BOX AT THE RIGHT AND
COMPLETE THE INFORMATION ON THE REVERSE SIDE OF THIS FORM.
LOST CERTIFICATES
IF YOUR SECURITIES HAVE BEEN EITHER LOST OR DESTROYED, PLEASE GIVE WRITTEN
NOTIFICATION TO AMERICAN STOCK TRANSFER AND TRUST COMPANY, 40 WALL STREET,
NEW YORK, NY 10005, ATTENTION: LOST SECURITIES DEPARTMENT.
SUBSTITUTE FORM W-9 REQUEST FOR TAXPAYER IDENTIFICATION NUMBER AND
CERTIFICATION
(PLEASE REFER TO ACCOMPANYING GUIDELINES)
PART 1 - PLEASE ENTER YOUR SOCIAL SECURITY NUMBER OR
EMPLOYER IDENTIFICATION NUMBER
PART 2 - CERTIFICATION - Under Penalties of Perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me and
(2) I am not subject to backup withholding either because have not been
notified by the Internal Revenue Service ("IRS") that I am subject to backup
withholding as a result of failure to report all interest or dividends, or
the IRS has notified me that I am no longer subject to backup withholding.
CERTIFICATE INSTRUCTIONS - You may cross out item (2) in Part 2 above if you
have been notified by the IRS that you are subject to backup withholding
because of underreporting interest or dividends on your tax return. However,
if after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS stating that you are no longer
r subject to backup withholding, do not cross out Item (2).
SIGNATURE DATE
PART 3 - CERTIFICATION FOR FOREIGN RECORD HOLDERS
Under penalties of perjury, I certify that I am not United States citizen or
resident (or I am signing for a foreign corporation, partnership, estate or
trust).
SIGNATURE DATE
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU.
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions)
To be completed ONLY if certificate(s)
are to be issued in the name of someone
other than the registered holder(s)
NAME
ADDRESS
EMPLOYER IDENTIFICATION
OR SOCIAL SECURITY NUMBER
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS)
To be completed ONLY if certificate(s)
are to be mailed to someone other than
the registered holder(s), or to such
registered holder(s) at an address other
than shown on the reverse side of this
form.
NAME
ADDRESS
SIGN HERE
SIGNATURE(S) OF
STOCKHOLDER(S)
DATED
Must be signed by registered holder(s) exactly as name(s) appear(s) on the
Certificate(s) or a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by a trustee, executor, administrator, guardian, attorney-In-
fact, officer of a corporation or other person action in a fiduciary or repre-
sentative capacity, please set forth the following information and see Instruc-
tions.
NAME(S)
CAPACITY (FULL TITLE)
ADDRESS
AREA CODE AND TELEPHONE NO.
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS)
NAME OF FIRM
ADDRESS
AUTHORIZED SIGNATURE
NAME
AREA CODE AND TELEPHONE NO.
Exhibit (a)(3)
OFFER TO PURCHASE 2,500,000
SHARES OF COMMON STOCK
OF
CCA INDUSTRIES, INC.
IN EXCHANGE FOR A
$2.00 SUBORDINATED DEBENTURE
CCA INDUSTRIES, INC.
To Our Clients:
The Offer and Withdrawal Rights Will Expire at 12:00 Midnight,
New York City Time, on Monday July 31 20000, Unless The Offer is Extended.
Enclosed for your consideration is an Offer to Purchase dated May 30,
2000 (as amended or supplemented from time to time, the "Offer to Purchase"),
and the related Letter of Transmittal (the "Letter of Transmittal," which,
together with the Offer to Purchase, as each may be amended or supplemented
from time to time, collectively constitute the "Offer') relating to the Offer
by CCA Industries, Inc., a Delaware corporation (the "Company"), to purchase
2,500,000 shares of its Common Stock, par value $0.01 per share (the "Shares"),
in exchange for a $2.00 subordinated debenture, maturing August 1, 2005, with
interest at 6%, payable semi-annually.
THIS MATERIAL IS BEING SENT TO YOU AS THE BENEFICIAL OWNER OF SHARES HELD
BY US FOR YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. WE ARE (OR OUR NOMINEE
IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF
SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR
INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
We request instructions as to whether you wish us to tender on your
behalf any or all the Shares held by us for your account, pursuant to the terms
and conditions set forth in the Offer.
Your attention is directed to the following:
1. Any stock transfer taxes applicable to a sale of Shares to the
Purchaser will be borne by the Purchaser, except as otherwise
provided in Instruction 5 of the Letter of Transmittal.
2. Tendering shareholders will not be charged brokerage fees or
commissions by the Depositary or, except as set forth in
Instruction 5 of the Letter of Transmittal, transfer taxes on the
purchase of Shares by the Company pursuant to the Offer. However,
federal income tax backup withholding at a rate of 31% may be
required, unless an exemption is provided or unless the required
taxpayer identification information is provided. See Instruction
7 of the Letter of Transmittal.
Your instructions to us should be forwarded promptly to permit us to
submit a tender on your behalf prior to the Expiration Date.
If you wish to have us tender on your behalf any or all of the Shares
held by us for your account, please so instruct us by completing, executing,
detaching and returning to us the instruction form contained in this letter.
An envelope in which to return your instructions to us is enclosed. If you
authorize tender of your Shares, all such Shares will be tendered unless
otherwise indicated in such instruction form. Your instructions should be
forwarded to us in ample time to permit us to submit a tender on your behalf
prior to the Expiration Date.
In all cases, payment for Shares accepted for payment pursuant to the
Offer will be made only after timely receipt by American Stock Transfer & Trust
Company (the "Depositary") of (a) certificates for such Shares, (b) a Letter
of Transmittal (or a manually signed facsimile thereof), properly completed and
duly executed, with any required signature guarantees, and (c) any other
documents required by the Letter of Transmittal. Accordingly, tendering
shareholders may be "paid" at different times depending upon when certificates
for Shares are actually received by the Depositary.
The Offer is not being made to, nor will tenders be accepted from, or on
behalf of, holders of Shares in any jurisdiction in which the making or
acceptance of the Offer would not be in compliance with the laws of such
jurisdiction.
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
2,500,000 OF THE OUTSTANDING SHARES OF COMMON STOCK
OF
CCA INDUSTRIES, INC.
The undersigned acknowledge(s) receipt of your letter, the Offer to
Purchase dated May 30, 2000 (as amended or supplemented from time to time, the
"Offer to Purchase"), and the related Letter of Transmittal (the "Letter of
Transmittal," which, together with the Offer to Purchase, as each may be
amended or supplemented from time to time, collectively constitute the "Offer")
relating to the Offer by CCA Industries, Inc., a Delaware corporation, to
purchase, for a $2.00 subordinated debenture, 2,500,000 of its outstanding
shares of Common Stock, par value $0.01 per share (the "Shares").
This will instruct you to tender to CCA Industries, Inc. the number of
Shares indicated below held by you for the account of the undersigned, on the
terms and subject to the conditions set forth in the Offer to Purchase and the
related Letter of Transmittal.
Number of Shares to be Tendered:* SIGN HERE:
Shares
Account Number:
Signature(s)
Daytime Area Code and Telephone No.
Taxpayer Identification No. or Social Security No.
Dated: , 2000
(Please print name(s) and address(es))
* Unless otherwise indicated, it will be assumed that all your Shares held
by us for your account are to be tendered.
Exhibit (b)(1)
CCA INDUSTRIES, INC.
AND
AMERICAN STOCK TRANSFER & TRUST CO.
as Trustee
__________
INDENTURE
Dated as of July 31, 2000
__________
$5,000,000
6% Subordinated Debentures,
Due 2005
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions
SECTION 1.2 Other Definitions
SECTION 1.3 Incorporation by Reference of Trust
Indenture Act
SECTION l.4 Rules of Construction
ARTICLE 2
THE SECURITIES
SECTION 2.1 Form and Dating
SECTION 2.2 Execution arid Authentication
SECTION 2.3 Registrar and Paying Agent
SECTION 2.4 Paying Agent to Hold Money in Trust
SECTION 2.5 Securityholder Lists
SECTION 2.6 Registration of Transfer and Exchange
SECTION 2.7 Replacement Securities
SECTION 2.8 Outstanding Securities
SECTION 2.9 Treasury Securities
SECTION 2.10 Temporary Securities
SECTION 2.11 Cancellation
SECTION 2.12 CUSIP Numbers
SECTION 2.13 Defaulted Interest
ARTICLE 3
REDEMPTION
SECTION 3.1 Notice to Trustee
SECTION 3.2 Selection of Securities to Be Redeemed
SECTION 3.3 Notice of Redemption
SECTION 3.4 Effect of Notice of Redemption
SECTION 3.5 Deposit of Redemption Price
SECTION 3.6 Securities Redeemed in Part
SECTION 3.7 Repurchase of Securities
ARTICLE 4
COVENANTS
SECTION 4.1 Payment of Securities
SECTION 4.2 Maintenance of Office or Agency
SECTION 4.3 Corporate Existence
SECTION 4.4 Intentionally Omitted
SECTION 4.5 Compliance Certificate
-i-
SECTION 4.6 SEC Reports
SECTION 4.7 Waiver of Stay, Extension or Usury Laws
SECTION 4.8 No Violation or Contravention
ARTICLE 5
MERGER, ETC.
SECTION 5.1 When Company May Merge, etc
SECTION 5.2 Successor Corporation Substituted
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1 Events of Default
SECTION 6.2 Acceleration
SECTION 6.3 Other Remedies
SECTION 6.4 Waiver of Past Defaults
SECTION 6.5 Control by Majority
SECTION 6.6 Limitation on Suits
SECTION 6.7 Rights of Holders to Receive Payment
SECTION 6.8 Collection Suit by Trustee
SECTION 6.9 Trustee May File Proofs of Claim
SECTION 6.10 Priorities
SECTION 6.11 Undertaking for Costs
ARTICLE 7
TRUSTEE
SECTION 7.1 Duties of Trustee
SECTION 7.2 Rights of Trustee
SECTION 7.3 Individual Rights of Trustee
SECTION 7.4 Trustee's Disclaimer
SECTION 7.5 Notice of Defaults
SECTION 7.6 Reports by Trustee to Holders
SECTION 7.7 Compensation and Indemnity
SECTION 7.8 Replacement of Trustee
SECTION 7.9 Successor Trustee or Agent by Merger, etc.
SECTION 7.10 Eligibility; Disqualification
SECTION 7.11 Preferential Collection of Claims
Against the Company
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.1 Termination of Company's Obligations
SECTION 8.2 Application of Trust Money
-ii-
SECTION 8.3 Repayment to Company
SECTION 8.4 Reinstatement
ARTICLE 9
AMENDMENTS
SECTION 9.1 Without Consent of Holders
SECTION 9.2 With Consent of Holders
SECTION 9.3 Compliance with Trust Indenture Act
SECTION 9.4 Revocation and Effect of Consents
SECTION 9.5 Notation on or Exchange of Securities
SECTION 9.6 Trustee to Sign Amendments, etc.
ARTICLE 10
SUBORDINATION
SECTION 10.1 Securities Subordinated to Senior
Indebtedness
SECTION 10.2 Priority and Payment Over of
Proceeds in Certain Events
SECTION 10.3 Payments May be Paid Prior to Dissolution
SECTION 1O.4 Rights of Holders of Senior
Indebtedness Not to be Impaired
SECTION 10.5 Authorization to Trustee to Take Action
to Effectuate Subordination
SECTION 10.6 Subrogation
SECTION 10.7 Obligations of Company Unconditional
SECTION 10.8 Trustee Entitled to Assume Payments
Not Prohibited in Absence of Notices
SECTION 10.9 Right of Trustee to Hold Senior
Indebtedness
ARTICLE 11
[INTENTIONALLY OMITTED]
ARTICLE 12
MISCELLANEOUS
SECTION 12.1 Trust Indenture Act Controls
SECTION 12.2 Notices
SECTION 12.3 Communication by Holders with
Other Holders
SECTION 12.4 Certificate and Opinion as to
Conditions Precedent
SECTION 12.5 Statements Required in Certificate
or Opinion
SECTION 12.6 Rules by Trustee and Agents
SECTION 12.7 Legal Holidays
-iii-
SECTION 12.8 Governing Law
SECTION 12.9 No Adverse Interpretation of Other
Agreements
SECTION 12.10 Successors
SECTION 12.11 Severability
SECTION 12.12 No Recourse Against Others
SECTION 12.12 Table of Contents, Headings, etc
SECTION 12.13 Counterpart Originals
-iv-
INDENTURE, dated as of July 31, 2000 between CCA INDUSTRIES,
INC., a Delaware corporation (the "Company"), and American Stock
Transfer & Trust Co., a New York corporation, as trustee
("Trustee").
The Company agrees as follows with the Trustee for the equal
and ratable benefit of the Holders of the Company's 6% Subordinated
Debentures due 2005 (the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions.
"Accountants' Certificate" means a certificate from Sheft Kahn
& Company or other independent certified public accountants of
national standing.
"Acquired Indebtedness" means Indebtedness of a Person
existing at the time such Person becomes a Subsidiary or assumed in
connection with the acquisition of assets from such Person and not
incurred in connection with, or in contemplation of, such Person
becoming a Subsidiary or such acquisition.
"Affiliate" means, when used with reference to the Company or
another Person, any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the
Company or such other Person, as the case may be. For the purposes
of this definition, "control" when used with respect to any
specified Person means the power to direct or cause the direction
of management or policies of such Person, directly or indirectly,
whether through the ownership of Voting Stock, by contract or
otherwise; and the terms "controlling" and "controlled" have
meanings correlative of the foregoing.
"Agent" means any Registrar, Paying Agent, co-registrar or
agent for service of notices and demands. "Bank Affiliate" means
any Person chartered as a bank or savings and loan association
under the laws of the United States, any state thereof or the
District of Columbia which is a Subsidiary of the Company.
"Board of Directors" means the Board of Directors of any
Person or any duly authorized committee of such Board of Directors.
"Business Day" means a day that is not a Legal Holiday as
defined in Section 12.7.
"Capital Stock" means any and all shares, interests,
participation rights or other equivalents (however designated) of
corporate stock.
"Common Stock" means the class of stock, which, at the date of
this Indenture, is designated as the Common Stock, $.O1 par value,
of the Company and stock of any class or classes into which such
Common Stock may thereafter be changed or reclassified.
"Company" means the party named as such in the first paragraph
of this Indenture until a successor replaces it pursuant to this
Indenture and thereafter means the successor.
"Consolidated" or "consolidated" means, when used with
reference to any amount, such amount determined on a consolidated
basis in accordance with generally accepted accounting principles
consistently applied, after the elimination of intercompany items.
"Corporate Trust Office" means the address of the Trustee
specified in Section 12.2 or such other address as the Trustee may
give by notice to the Company.
"Default" means any event which is, or after notice or lapse
of time or both, would be, an Event of Default.
"Event of Default" shall have the meaning provided in Section
6.1.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Indebtedness" means (a) all outstanding indebtedness and
Obligations of the Company and its Subsidiaries except for the
indebtedness for the Securities, (b) any indebtedness of others
that the Company has guaranteed or for which it is otherwise liable
or that is secured by a Lien on any asset of the Company, and (c)
any amendment, renewal, extension, deferral, modification,
restructuring or refunding of any such Indebtedness, Obligation or
guarantee.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Interest Payment Date" means the interest payment dates
specified in of the form of Security annexed hereto as Exhibit A.
"Lien" means any lien, security interest, charge or
encumbrance of any kind (including any conditional sale or other
title retention agreement), any lease in the nature thereof, and
any agreement to give any security interest.
"Obligations" means, with respect to any Indebtedness, any
principal, premium, interest, penalties, fees and other liabilities
payable from time to time and obligations performable under the
documentation governing such Indebtedness.
2
"Officer" of any Person means the Chairman of the Board, the
President, any Senior or Executive Vice-President, any Vice-
President, the Treasurer, the Secretary or the Controller of such
person.
"Officers' Certificate" means a certificate signed by two
officers or by an Officer and an Assistant Treasurer, Assistant
Secretary or Assistant Controller of any Person conforming to the
requirements set forth in Sections 12.4 and 12.5.
"Opinion of Counsel" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee conforming to
the requirements set forth in Sections 12.4 and 12.5. The counsel
may be an employee of or counsel to the Company. For the purpose of
rendering an opinion, such counsel may rely as to factual matters
upon certificates or other documents furnished by Officers and
directors of the Company and upon such other documents as such
counsel deems appropriate as a basis of their opinion, copies of
which shall be delivered with such opinion.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Principal" of a debt security means the principal of the
security plus the premium, if any, payable on such security upon
redemption of such security.
"Record Date" means, with respect to any Interest Payment
Date, the 15th day of the month preceding the Interest Payment
Date.
"Redemption Date" means, with respect to any Security to be
redeemed, the date fixed for such redemption pursuant to this
Indenture.
"Redemption Price" means, when used with respect to any
Security to be redeemed, the price fixed for such redemption
pursuant to this Indenture as set forth in paragraph 5 of the form
of Security annexed hereto as Exhibit A.
"SEC" means the Securities and Exchange Commission.
"Securities" means the 6% Subordinated Debentures due 2005 of
the Company issued pursuant to this Indenture.
"Senior Indebtedness" means any and all Indebtedness of the
Company except for indebtedness for the Securities.
"Significant Subsidiary or Subsidiaries" means any subsidiary
which singly, or one or more Subsidiaries which in the aggregate,
would be a "significant subsidiary" as defined in Rule 1.02 of
3
Regulation S-X under the Securities Act of 1933 and the Securities
Exchange Act of 1934 as in effect on the date hereof.
"Subsidiary" means, with respect to the Company, any
corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, officers or trustees thereof is
at the time owned in the aggregate, directly or indirectly, by the
Company and its Subsidiaries.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
77aaa-7bbbb), as in effect on the date of this Indenture.
"Trustee" means the party named as such above until a
successor replaces it pursuant to this Indenture and thereafter
means the successor.
"Trust Officer," when used with respect to the Trustee, means
any officer assigned by the Trustee to administer the corporate
trust business of the Trustee, including without limitation any
vice president, any assistant vice president, any assistant
secretary or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above
designated officers, who shall, in any case, be responsible for the
administration of this document or have familiarity with it, and
also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Voting Stock" means Capital Stock which ordinarily has voting
power for the election of directors, whether at all times or only
so long as no senior class of Capital Stock has such voting power
by reason of any contingency.
SECTION 1.2 Other Definitions.
Term Defined in Section
"Bankruptcy Law" 6.1
"Custodian" 6.1
"Legal Holiday" 12.7
"Paying Agent" 2.3
"Purchaser" 5.1
"Registrar" 2.3
"U.S. Government Obligations" 8.1
4
SECTION 1.3 Incorporation by Reference
of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder or a
Securityholder;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the Securities means the Company.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC
rule under the TIA and not otherwise defined herein have the
meaning so assigned to them.
SECTION 1.4 Rules of Construction.
Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted
accounting principles;
(iii) references to "generally accepted accounting principles"
shall mean generally accepted accounting principles in
effect in the United States as of the time and for the
period as to which such accounting principles are to be
applied;
(iv) "or" is not exclusive;
(v) words in the singular include the plural, and in the
plural include the singular; and
(vi) provisions apply to successive events and transactions.
5
ARTICLE 2
THE SECURITIES
SECTION 2.1 Form and Dating.
The Securities and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A, which is part of
this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage, which
shall be provided in writing by the Company to the Trustee. Each
Security shall be dated the date of its authentication.
The terms and provisions contained in each of the Securities,
annexed hereto as Exhibit A, shall constitute, and are hereby
expressly made, a part of this Indenture. To the extent applicable,
the Company and the Trustee, by their execution and delivery of
this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
SECTION 2.2 Execution and Authentication.
Two Officers of the Company shall sign the Securities for the
Company by manual or facsimile signature. The Company's seal shall
be reproduced on the Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds
that office at the time the Security is authenticated, the Security
shall nevertheless be valid.
A Security shall not be valid until executed on behalf of the
Company and authenticated by the manual signature of the Trustee.
The signature of the Trustee or an authenticating agent shall be
conclusive evidence that the Security has been authenticated under
this Indenture.
The Trustee shall authenticate Securities for original issue
in the aggregate principal amount of not more than $5,000,000
pursuant to a written order of the Company signed by two Officers
of the Company. The order shall specify the amount of Securities
to be authenticated and the date upon which the original issue of
Securities is to be authenticated. The aggregate principal amount
of Securities outstanding at any time may not exceed $5,000,000,
except as provided in Section 2.7.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Securities. Unless limited by the terms
of such appointment, an authenticating agent may authenticate
Securities whenever the Trustee may do so. An authenticating agent
may authenticate Securities on behalf of the Trustee except upon
original issuance and pursuant to Section 2.7. Each reference in
6
this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same
rights as an Agent to deal with the Company, a Subsidiary or an
Affiliate of the Company.
SECTION 2.3 Registrar and Paying Agent.
The Company shall maintain an office or agency where
Securities may be presented for registration of transfer, exchange
or conversion ("Registrar"), an office or agency where securities
may be presented for payment ("Paying Agent") and an office or
agency where notices or demands to or upon the Company m respect of
the Securities and the Indenture may be served. The Registrar shall
keep a register of the Securities and of their transfer, exchange
and conversion. The Company may appoint one or more co-registrars
and one or more additional paying agents. The term "Paying Agent"
includes any additional Paying Agent. The Company may change any
Paying Agent, Registrar or co-registrar without notice to any
Securityholder.
The Company may enter into an appropriate agency agreement
with any Agent not a party to this Indenture. The agreement shall
implement the provisions of this Indenture that relate to such
Agent. The Company shall give prompt written notice to the Trustee
of the name and address of any Agent who is not a party to this
Indenture. If the Company fails to appoint or maintain another
entity as Registrar or Paying Agent, the Trustee shall act as such.
The Company, any Subsidiary or any of their Affiliates may act as
Paying Agent, Registrar or co-registrar.
The Company initially appoints the Trustee as Registrar and
Paying Agent and agent for service of notices and demands.
SECTION 2.4 Paying Agent to Hold Money in Trust
On or prior to the due date of principal of, premium if any,
and interest on any Securities, the Company shall deposit with the
Paying Agent money sufficient to pay such principal, premium, if
any, and interest so becoming due. The Company shall require each
Paying Agent other than the Trustee to agree in writing that the
Paying Agent shall hold in trust for the benefit of Securityholders
or the Trustee all money held by the Paying Agent for the payment
of principal of, premium, if any, and interest on the Securities
(whether such money has been paid to it by the Company or any other
obligor on the Securities) and shall notify the Trustee in writing
of any failure by the Company (or an other obligor on the
Securities) in making any such payment. While any such failure
continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee and to account for any fluids disbursed.
The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee. Upon payment over to the Trustee, the
Paying Agent (if other than the Company) shall have no further
7
liability for the money so paid over to the Trustee. if the Company
acts as Paying Agent, it shall segregate and hold in a trust fluid
for the benefit of the Securityholders all money held by it as
Paying Agent.
SECTION 2.5 Securityholder Lists.
The Registrar shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the
names and addresses of Securityholders. if the Trustee is not the
Registrar, the Company shall furnish to the Trustee seven days
prior to each interest payment date for the Securities and at such
other times as the Trustee may request in writing, a list in such
form and as of such date as the Trustee may reasonably require,
containing all of the information in the possession or control of
the Registrar, the Company or any of its Paying Agents other than
the Trustee, as to the names and addresses of Securityholders and
the Company shall otherwise comply with TIA 312(a).
SECTION 2.6 Registration of Transfer and Exchange.
When Securities are presented to the Registrar or a co-
registrar with a request to register their transfer or to exchange
them for an equal principal amount of Securities of other
authorized denominations, the Registrar or co-registrar, as the
case may be, shall register the transfer or make the exchange if
its requirements for such transaction are met; provided that a
Security presented or surrendered for registration of transfer or
exchange shall be duly endorsed or accompanied by a written
instrument or transfer in form satisfactory to the Registrar or
such co-registrar duly executed by the Holder thereof or his
attorney duly authorized in writing. The registration of any
Security upon transfer or exchange shall be effective only after
the surrender of the Security and the issuance by the Company and
authentication by the Trustee of a replacement Security. To permit
registrations of transfer and exchanges, the Company shall issue
and the Trustee shall authenticate Securities at the Registrar's
request. The Company will not make any service charge for any
registration of transfer or exchange but may require payment by the
party requesting such registration of transfer or exchange of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith. The Company shall not be required to and,
without the prior written consent of the Company, the Registrar
shall not be required to, register the transfer or exchange of (i)
any Security selected for redemption in whole or in part, except
the redeemed portion of any Security being redeemed in part, or
(ii) any security for a period of 15 days before a selection of
Securities to be redeemed.
SECTION 2.7 Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if
8
the Holder of a Security claims that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the
Trustee, at the Company's request, shall authenticate a replacement
Security if the requirements of the Trustee and the Company are
met, provided that the Trustee shall not be required to
authenticate or replace any such Security which has been called for
redemption in accordance with the terms thereof. if required by the
Trustee or the Company, an indemnity bond must be sufficient in the
judgment of each of the foregoing to protect the Company, the
Trustee, any Agent or any authenticating agent from any loss which
any of them may suffer if a Security is replaced. The Company may
charge the Securityholder who has lost a Security for its expenses
in replacing a Security.
Every replacement Security is an additional obligation of the
Company and shall be entitled to the benefits of this Indenture.
SECTION 2.8 Outstanding Securities.
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those canceled by it, those
delivered to it for cancellation and those described in this
Section as not outstanding.
If a Security is replaced pursuant to Section 2.7, it ceases
to be outstanding and interest ceases to accrue unless the Trustee
receives proof satisfactory to it that the replaced Security is
held by a bona fide purchaser.
If all principal of, premium, if any, and any interest on any
of the Securities are considered paid under Section 4.1, such
Securities shall cease to be outstanding and interest on them shall
cease to accrue.
A Security does not cease to be outstanding because the
Company, a Subsidiary or an Affiliate holds such Security, provided
that such Security shall not be outstanding for purposes of
determining the aggregate principal amount of Securities which
consented to an amendment or waiver of the Indenture pursuant to
Section 9.2.
SECTION 2.9 Treasury Securities.
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction, waiver or
consent, Securities owned by the Company, a Subsidiary or an
Affiliate of the Company shall be considered as though they are not
outstanding, except that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction,
waiver or consent, only Securities which the Trustee knows are so
owned shall be so disregarded. Securities owned by the Company, a
Subsidiary or an Affiliate of the Company which have been pledged
9
in good faith may be regarded as outstanding if the Trustee
receives an Officer's Certificate stating that said securities have
been so pledged, that the pledgee is entitled to vote with respect
to such Securities and the pledgee is not the Company or any other
obligor on the Securities, a Subsidiary or an Affiliate of the
Company, a Subsidiary or such other obligor.
SECTION 2.10 Temporary Securities.
Until definitive Securities are ready for delivery, the
Company may prepare and execute and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that
the Company considers appropriate for temporary Securities. Without
unreasonable delay, the Company shall prepare and the Trustee upon
receipt of a written order of the Company signed by two officers,
shall authenticate definitive Securities in exchange for temporary
Securities. Until such exchange, temporary Securities shall be
entitled to the same rights, benefits and privileges as definitive
Securities.
SECTION 2.11 Cancellation.
The Company at any time may deliver Securities to the Trustee
for cancellation. The Registrar and Paying Agent shall forward to
the Trustee any Securities surrendered to them for redemption,
registration of transfer, exchange or payment. The Trustee shall
cancel all Securities surrendered for redemption, registration of
transfer, exchange, payment, replacement or cancellation and shall
destroy canceled Securities. The Company may not issue new
Securities to replace Securities that it has paid or that have been
delivered to the Trustee for cancellation. All canceled Securities
held by the Trustee shall be destroyed and certification of their
destruction delivered to the Company.
SECTION 2.12 CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers
(if then generally in use), and the Trustee shall use CUSIP numbers
(if such have been obtained) in notices of redemption or exchange
as a convenience to Holders; provided that any such notice shall
state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any
notice of redemption or exchange and that reliance may be placed
only on the other identification numbers printed on the Securities.
SECTION 2.13 Defaulted Interest.
If the Company fails to make a payment of interest on the
Securities, it shall pay such interest plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are
Securityholders on a subsequent special record date. The Company
10
shall fix the special record date and payment date in a manner
reasonably satisfactory to the Trustee. The payment date shall be
no less than 15 days after such record date. At least 15 days
before the special record date, the Company shall mail to
Securityholders a notice that states the special record date,
payment date and amount of such interest to be paid.
ARTICLE 3
REDEMPTION
SECTION 3.1 Notice to Trustee.
Subject to the terms of the form of Security attached as
Exhibit A hereto, the Company may, at its option, redeem at any
time or from time to time all or any portion of the Securities;
provided, however, that Securities may not be redeemed prior to
August 1, 2001.
SECTION 3.2 Selection of Securities to Be Redeemed.
If less than all of the Securities are to be redeemed, the
Trustee shall select the Securities to be redeemed pro rata or by
lot or by a method that complies with the requirements of any
exchange on which the Securities are listed and that the Trustee
considers fair and appropriate. The Trustee shall make the
selection not less than 30 nor more than 60 days prior to the
Redemption Date from Securities outstanding not previously called
for redemption The Trustee may select for redemption portions of
the principal of Securities. Provisions of this Indenture that
apply to Securities called for redemption also apply to portions of
Securities called for redemption. The Trustee shall notify the
Company promptly of the Securities or portions of Securities to be
called for redemption.
SECTION 3.3 Notice of Redemption.
(a) At least 30 days but not more than 60 days before the
Redemption Date, the Company shall mail a notice of redemption by
first-class mall to each Holder whose Securities are to be
redeemed. The notice shall identify the Securities to be redeemed
and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) if any Security is being redeemed in part, the
portion of the principal amount of such Security to be redeemed and
that, on or after the Redemption Date, upon surrender of such
11
Security, a new Security or Securities in principal amount equal to
the unredeemed portion shall be issued;
(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price
plus accrued interest to the Redemption Date;
(6) that, unless the Company defaults in making payment
of the Redemption Price and accrued interest to the Redemption
Date, interest on Securities called for redemption ceases to accrue
on and after the Redemption Date and the only remaining right of
the Holders is to receive payment of the Redemption Price plus
accrued interest to the Redemption Date upon surrender of the
Securities to the Paying Agent; and
(7) the Security's CUSIP number (subject to the provision
in Section 2.12).
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided,
however, that the Company shall deliver to the Trustee, at least 40
days prior to the Redemption Date, an Officers' Certificate
requesting that the Trustee give such notice and setting forth the
information to be stated in such notice as provided in the
preceding paragraph. Concurrently with the giving of any such
notice by the Company to the Securityholders the Company shall
deliver to the Trustee an Officers' Certificate stating that such
notice has been given. The notice mailed in the manner herein
provided shall be conclusively presumed to have been duly given
whether or not the Holder receives such notice. In any case,
failure to give such notice by mall or any defect in the notice to
the Holder of any Security shall not affect the validity of the
proceeding for the redemption of any other Security.
SECTION 3.4 Effect of Notice of Redemption
Once notice of redemption is mailed, Securities called for
redemption become due and payable on the Redemption Date at the
Redemption Price plus accrued interest to the Redemption Date. Upon
surrender to the Paying Agent, such securities shall be paid at the
Redemption Price plus accrued interest to the Redemption Date.
SECTION 3.5 Deposit of Redemption Price.
On or prior to the Redemption Date, the Company shall deposit
with the Trustee or with the Paying Agent (or if the Company is
acting as its own Paying Agent, the Company shall segregate and
hold in trust) money sufficient to pay the Redemption Price of, and
accrued interest to the Redemption Date on, all Securities to be
redeemed on that date.
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If any Security called for Redemption shall not be so paid (in
the manner provided in Section 4.1) on the applicable Redemption
Date, interest shall be paid, from the Redemption Date until such
Redemption Price and accrued interest is paid, on the unpaid
principal of, premium, if any, and, to the extent lawful, on any
interest not paid on such unpaid principal, in each case at the
rate and in the manner provided in the Securities. Prior to the
date such Redemption Price and accrued interest is paid, the
Company shall deposit with the Trustee or the Paying Agent (or if
the Company is acting as its own Paying Agent, the Company shall
segregate or hold in trust) money to pay the additional interest
contemplated by the previous sentence.
SECTION 3.6 Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the
Company shall issue, and the Trustee shall authenticate for the
Holder at the expense of the Company, a new Security in an
authorized denomination equal in principal amount to the unredeemed
portion of the Security surrendered.
SECTION 3.7 Repurchase of Securities.
Nothing herein shall prohibit the Company from repurchasing
from time to time all or any portion of the Securities in the open
market or in privately negotiated transactions.
ARTICLE 4
COVENANTS
SECTION 4.1 Payment of Securities.
The Company shall pay the principal of, premium, if any, and
interest on the Securities on the dates and in the manner provided
in the Securities and in this Indenture. An installment of
principal, plus premium, if any, (including any redemption of
Securities pursuant to paragraph 5 of the Securities) or interest
shall be considered paid on the date it is due if the Trustee or
Paying Agent (other than the Company, a Subsidiary or an Affiliate)
holds on that date money designated for and sufficient to pay the
installment if payment thereof is not prohibited by Article 10.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law to the extent
that such interest is an allowed claim enforceable against the
debtor in a bankruptcy case under Title 11 of the U.S. Code) on
overdue principal at the rate then borne by the Securities; it
shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law to the extent that such
13
interest is an allowed claim enforceable against the debtor in a
bankruptcy case under Title 11 of the U.S. Code) on overdue
installments of interest at the same rate to the extent legally
permitted.
SECTION 4.2 Maintenance of Office or Agency.
The Company shall designate in the State of New York, an
office or agency (which may be an office of the Trustee, Registrar
or co-registrar) where at all times the Securities may be
surrendered for registration of transfer or exchange and where at
all times the notices and demands to or upon the Company in respect
of the Securities and this Indenture may be served. The Company
shall give prompt written notice to the Trustee of the location,
and any change in the location, of such office or agency. If at any
time the Company shall fall to so designate any such required
office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and
demands may be made or served at the address of the Trustee set
forth in Section 12.2.
The Company may also designate from time to time one or more
other offices or agencies where the Securities may be presented or
surrendered for any or all such purposes and may from time to time
rescind such designations; provided that no such designation or
rescission shall be in any manner relieve the Company of its
obligation to so designate as aforesaid an office or agency in the
State of New York, for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or
agency.
The Company hereby designates the Trustee's Corporate Trust
Office in the State of New York, as one such office or agency of
the Company in accordance with Section 2.3.
SECTION 4.3 Corporate Existence.
Subject to Article 5, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect
its corporate existence and that of each Subsidiary and the rights
(charter and statutory) and corporate franchises of the Company and
its Subsidiaries; provided that the Company shall not be required
to preserve any such existence (except of the Company), right or
franchise if the Board of Directors of the Company, or of the
Subsidiary concerned, shall determine that the preservation thereof
is no longer desirable or necessary in the conduct of the business
of the Company or such Subsidiary and that the loss thereof is not
adverse in any material respect to the Holders or to the business,
financial prospects, results of operations or condition (financial
or otherwise) of the Company and its Subsidiaries take as a whole.
14
SECTION 4.4 [Intentionally Omitted].
SECTION 4.5 Compliance Certificate.
The Company shall deliver to the Trustee, within 105 days
after the end of each fiscal year of the Company, an Officers
Certificate, which shall comply with Section 12.5, stating whether
or not the signers know of any Default or Event of Default, and, if
they do know of such a Default or Event of Default, the certificate
shall describe the Default or Event of Default, its status and the
action that the Company is taking or proposes to take with respect
thereto.
The Company shall deliver to the Trustee, within 105 days
after the end of each fiscal year of the Company, an Accountant's
Certificate stating; (a) that their audit examination has included
a review of the terms of this Indenture and the Securities as they
relate to accounting matters, and (b) whether, during the course of
their audit examination, any Default has come to their attention
and, if such a Default has come to their attention and, if such a
Default has come to their attention, specifying the nature and
period of existence thereof; provided that the independent
certified public accountants delivering such Accountants'
Certificate shall not be liable in respect of such statement by
reason of any failure to obtain knowledge of any Default that would
not be disclosed in the course of an audit examination conducted in
accordance with generally accepted auditing standards.
Promptly after any officer of the Company obtains knowledge of
any Default, and in any event within 10 Business Days thereafter,
the Company shall deliver an Officer's Certificate to the Trustee
describing such Default, its status and the action that the Company
is taking or proposes to take with respect thereto.
SECTION 4.6 SEC Reports.
The Company shall file with the Trustee, within 15 days after
it files them with the SEC, copies of the annual reports and
quarterly reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as the
SEC may be rules and regulations prescribe), if any, which the
Company is required to file with the SEC pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934. The Company also
shall comply with the other provisions of TIA 314(a).
SECTION 4.7 Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, or plead, or in any
manner whatsoever claim, and shall reasonably resist any and all
efforts to be compelled to take the benefit or advantage of, any
stay or extension law or any usury law or other law which would
15
prohibit or forgive the Company from paying all or any portion of
the principal of and/or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereinafter in force,
or which may affect the covenants or the performance of this
Indenture; and (to the extent that it may lawfully do so) the
Company hereby expressly waives all benefit or advantage of any
such law and covenants that it shall not hinder, delay, or impede
the execution of any power herein granted to the Trustee but shall
suffer and permit the execution of every such power as though no
such law has been enacted. Nothing contained herein shall be
construed to cause the Company to violate any law, rule, stay or
order of any kind whatsoever.
SECTION 4.8 No Violation or Contravention.
The execution and delivery by the Company of this Indenture,
the issuance, sale and delivery of the Securities and the
performance by the Company of its obligations hereunder and under
the Securities, and the consummation of the transactions
contemplated hereby and under the Securities have been duly
authorized by all necessary corporate action on the part of the
Company and do not and will not violate any provision of the
charter documents of the Company or of any of its Subsidiaries, and
do not and will not and will not violate, or conflict with, or
constitute a default under, or permit the termination of, or result
in the creation of any lien, claim or encumbrance upon any property
of the Company or any of its Subsidiaries under, (i) any statute or
law or any judgment, decree, order, regulation or rule of any court
or governmental authority, domestic or foreign, to which the
Company or any of its Subsidiaries or any of their respective
properties may be subject, or (ii) any material contract,
indenture, mortgage, loan agreement, note, lease or other material
agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any of them may be bound, or to
which any of their respective properties may be subject, which
conflict, default, termination or lien, claim or encumbrance would
have a material adverse effect upon the operations, business,
prospects, assets, properties or condition (financial or other) of
the Company and its Subsidiaries taken as a whole.
ARTICLE 5
MERGER, ETC.
SECTION 5.1 When Company May Merge, etc.
The Company shall not consolidate or merge with or into or
sell, assign, transfer or lease all or substantially all of its
assets to any Person unless:
16
(1) the Person formed by or surviving any such consolidation
or merger (if other than the Company), or to which such sale,
assignment, transfer or lease or conveyance shall have been made
(the "Purchaser"), is a corporation or other entity organized and
existing under the laws of the United States, any state thereof or
the District of Columbia;
(2) the Purchaser assumes by supplemental indenture all the
Obligations of the Company under the Securities and this Indenture;
and
(3) immediately before and immediately after such transaction,
and giving effect thereto, no Default or Event of Default shall
have occurred and be continuing.
The Company shall deliver to the Trustee prior to the proposed
transaction an Officer's Certificate, an Opinion of Counsel and an
Accountants Certificate each stating that the proposed transaction
and such supplemental indenture comply with this Indenture.
SECTION 5.2 Successor Corporation Substituted.
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets, of the Company in accordance with
Section 5.1, the Purchaser shall succeed to, and be substituted
for, and may exercise every right and power and will assume all
obligations and covenants of, the Company under this Indenture to
the same effect as if such Purchaser had been named as the Company
herein and thereafter the Company (which term shall for this
purpose mean the person named as the "Company" in the first
paragraph of this Indenture or any Purchaser which previously shall
have become liable in the manner prescribed in this Article 5)
shall be relieved of all obligations and covenants and shall no
longer exercise any rights or powers under this Indenture and the
Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1 Events of Default.
An "Event of Default" occurs if:
(i) the Company defaults in the payment of interest on any
Security when the same becomes due and the default continues for a
period of 30 days, whether or not such payments shall be prohibited
by the provisions of Article 10 hereof;
(ii) the Company defaults in the payment of the principal of
17
(or premium, if any, on) any Security when the same becomes due and
payable at maturity, upon acceleration, redemption or otherwise,
whether or not such payment shall be prohibited by the provisions
of Article 10 hereof;
(iii) the Company fails to comply with any of its other
agreements or covenants in, or provisions of, the Securities or
this Indenture, and the Default continues for the period and after
the notice specified below;
(iv) a final judgment or final judgments for the payment of
money are entered by a court or courts of competent jurisdiction
against the Company or any Subsidiary which remain undischarged and
unbonded for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all
such judgments (to the extent not paid or covered by insurance)
exceeds $2,500,000;
(v) the Company or any Significant Subsidiary or
Subsidiaries, pursuant to or within the meaning of any Bankruptcy
Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief against it
in an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it or for
all substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors, or
(E) generally is not paying its debts as the same become due
unless such debts are the subject of a bona fide dispute;
or
(vi) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary or Subsidiaries in an involuntary case or
proceeding,
(B) appoints a Custodian of the Company or any Significant
Subsidiary or Subsidiaries or for all or substantially
all of its property; or
(C) orders the liquidation of the Company or any Significant
Subsidiary or Subsidiaries; and in each case the order or
decree remains unstayed and in effect for 60 days.
18
The term "Bankruptcy Law" means Title 11, U.S. Code or any
similar Federal or state law for the relief of debtors, and any
applicable Federal or state banking law which governs the
operation, disposition and liquidation of failing or failed
financial institutions. The term "Custodian" means any receiver,
trustee, assignee, liquidator, sequestrator or similar official
under any Bankruptcy Law.
A Default under clause (iii) of this Section 6.1 is not an
Event of Default until the Trustee notifies the Company in writing,
or the Holders of at least 25% in principal amount of the
Securities then outstanding notify the Company and the Trustee in
writing, of the Default, and the Company does not cure the Default
within 30 days after receipt of the notice. The notice must specify
the Default, demand that it be remedied and state that the notice
is a "Notice of Default". Such notice shall be given by the Trustee
if so requested in writing by the Holders of at least 25% in
principal amount of the Securities then outstanding. Any notice
required to be delivered by the Trustee to the Company hereunder
shall be given promptly after the Trustee becomes aware of such
Default or is requested by the Holders to deliver such notice.
SECTION 6.2 Acceleration.
If an Event of Default occurs and is continuing the Trustee or
the Holders of at least 25% of the principal amount of the
Securities then outstanding, by written notice to the Company (and
to the Trustee if such notice is given by the Holders) may, and the
Trustee at the written request of such Holders shall, declare all
unpaid principal of, premium, if any, and accrued interest on all
the Securities to be due and payable as specified below. The
Holders of at least a majority in principal amount of the
Securities then outstanding by written notice to the Trustee may
rescind an acceleration and its consequences if (i) all existing
Events of Default, other than the non-payment of principal of or
interest on the Securities which have become due solely because of
the acceleration, have been cured or waived and (ii) the recission
would not conflict with any judgment or decree of a court of
competent jurisdiction.
SECTION 6.3 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity
to collect the payment of principal of, premium, if any, or
interest on the Securities or to enforce the performance of any
provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in
the proceeding. A delay or omission by the Trustee or any Security
holder in exercising any right or remedy accruing upon an Event of
19
Default shall not impair the right or remedy or constitute a waiver
of or acquiescence in the Event of Default. No remedy is exclusive
of any other remedy. All remedies are cumulative to the extent
permitted by law.
SECTION 6.4 Waiver of Past Defaults.
Subject to Section 6.2, 6.7 and 9.2, the Holders of at least
a majority in principal amount of Securities then outstanding by
notice to the Trustee may waive an existing Default or Event of
Default and its consequences, except a Default in the payment of
the principal of, premium, if any, or interest on any Security as
specified in clauses (I) or (ii) of Section 6.1. Upon any such
waiver, such Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
SECTION 6.5 Control by Majority.
The Holders of at least a majority in principal amount of the
Securities then outstanding may direct the time, method and place
of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on it. However,
the Trustee may refuse to follow any direction that conflicts with
law or this Indenture, that the Trustee determines may be unduly
prejudicial to the right of other Security holders or that may
involve the Trustee in personal liability.
SECTION 6.6 Limitation on Suits.
A Security holder may not pursue a remedy with respect to this
Indenture or the Securities unless:
(i) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(ii) the Holders of at least a majority in principal amount of
the Securities then outstanding make a written request to
the Trustee to pursue the remedy;
(iii) such Holder or Holders offer the Trustee indemnity
satisfactory to the Trustee against any loss, liability,
cost or expense;
(iv) the Trustee does not comply with the request within 60
days after the receipt of the request and the offer of
indemnity; and
(v) during such 60-day period the Holders of at least a
majority in principal amount of the Securities then
outstanding do not give the Trustee a direction
20
inconsistent with the request.
A Security holder may not use this Indenture to prejudice the
rights of another Security holder or to obtain a preference or
priority over another Security holder.
SECTION 6.7 Rights of Holders to Receive Payment.
Notwithstanding any other provision in this Indenture, except
for the provisions of Article 10, the right of any Holder of a
Security to receive payment of principal of, premium, if any, or
interest on the Security on or after the respective due dates
expressed in the Security, or to bring suit for the enforcement of
any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the Holder.
SECTION 6.8 Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(I) and (li)
occurs and is continuing, the Trustee may recover judgment in its
own name or as trustee of a express trust, institute any action or
proceeding at law or in equity against the Company or any other
obligor on the Securities for the whole amount of principal,
premium, if any, and accrued interest remaining unpaid on the
Securities, together with interest on overdue principal and, to the
extent that payment of such interest is lawful, interest in overdue
installments of interest, in each case at the rate borne by the
Securities, and such further amount as shall be sufficient to cover
the costs and expenses of collection including the reasonable
compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.9 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents that may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel) and the Security holders allowed in any
judicial proceedings relative to the Company (or any other obligor
upon the Securities), its creditors or its property and shall be
entitled and empowered to collect and receive any monies or other
property payable and deliverable on any such claims and to
distribute the same, and any custodian in any such judicial
proceeding is hereby authorized by each Security holder to make
such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the
Security holders, to pay to the Trustee any amount due to it for
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.7. Nothing herein contained shall be
deemed to authorize the Trustee to authorize consent to or accept
21
or adopt on behalf of any Security holder any plan of
reorganization, arrangement, adjustment or composition affecting
the Securities or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Security holder
in any such proceeding.
SECTION 6.10 Priorities.
If the Trustee collects any money pursuant to this Article 6,
it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.7;
Second: to the holders of any Senior Indebtedness, to the
extent required by Article 10 hereof;
Third: to Security holders for amounts due and unpaid on
the Securities for principal, premium, if any, and interest ratably
without preference or priority of any kind, according to the
amounts due and payable on the Securities for principal and
interest, respectively; and
Fourth: to the Company or any other obligors on the
Securities, as their interests may appear, or as a court of
competent jurisdiction may direct.
The Trustees, upon prior written notice to the Company, may
fix a record date and payment date for any payment to Security
holders pursuant to this Section 6.10.
SECTION 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action
taken or omitted by it as a Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable
attorneys fees, against any party litigant in the suit having due
regard to the merits and good faith of the claims and defenses made
by the party litigant. This Section 6.11 does not apply to a suit
by the Trustee, a suit by a Holder pursuant to Section 6.7, or a
suit by Holders of more that 10% in principal amount of the
Securities then outstanding.
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ARTICLE 7
TRUSTEE
SECTION 7.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in
their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture or (to the extent
applicable) the TIA and no others, and no implied covenants or
obligations shall be read into this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions delivered to the Trustee by the Company pursuant to this
Indenture and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture but need not confirm the accuracy of mathematical
computations.
(c) Notwithstanding anything to the contrary herein
contained, the Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act, or its own
willful misconduct, except that
(1) This paragraph does not limit the effect of paragraph
(b) of this Section 7.1.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts.
(3) Except as otherwise provided in Section 7.1(a), the
Trustee shall not be liable with respect to any action it takes or
omits to take in good faith in accordance with a direction received
by it pursuant to Section 6.5.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee
is subject to paragraphs (a), (b), (c) and (e) of this Section 7.1.
(e) No provision of the Indenture shall require the Trustee
23
to expend or risk its own funds or incur any liability. The Trustee
may refuse to perform any duty or exercise any right or power
unless it receives indemnity satisfactory to it against any loss,
liability, cost or expense.
(f) The Trustee shall not be obligated to pay interest on any
money received by it unless otherwise agreed in writing with the
Company. Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law. The Trustee
has no obligation to invest monies held by it hereunder except
pursuant to written instructions received by the Trustee and signed
by the two officers of the Company.
SECTION 7.2 Rights of Trustee.
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person.
The Trustee need not investigate any fact or matter stated in any
such document.
(b) Before the Trustee acts or refrains from acting, it may,
to the extent reasonable, require an Officers' Certificate or an
Opinion of Counsel or both. The Trustee shall not be liable for any
action it takes or omits to take in good faith and without
negligence in reliance on the Officers' Certificate or Opinion of
Counsel.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed
and retained with due care.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith and without negligence which it
reasonably believes to be authorized or within the right of powers
conferred upon it by this Indenture.
(e) The Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel as to matters of
law shall be full and complete authorization and protection in
respect of any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such
counsel.
(f) Unless otherwise specifically provided in the Indenture,
any demand, request, direction or notice from the Company shall be
sufficient if signed by an Officer of the Company.
SECTION 7.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or the pledgee of Securities and may otherwise deal with
the Company or an Affiliate with the same rights it would have if
24
it were not a Trustee. Any Agent may do the same with like rights.
However, the Trustee is subject to Sections 7.10 and 7.11.
SECTION 7.4 Trustee's Disclaimer.
The Trustee makes no representations as to the validity or
adequacy of this Indenture or the Securities; it shall not be
accountable for the Company's use of the proceeds from the
Securities; it shall not be accountable for any money paid to the
Company or upon the Company's directions, if made under and in
accordance with any provision of this Indenture; it shall not be
responsible for the use or application of any money received by any
Paying Agent other than the Trustee; and it shall not be
responsible for any statement of the Company in this Indenture or
any statement in the Securities other than its certificate of
authentication.
SECTION 7.5 Notice of Defaults.
If a Default or an Event of Default occurs and is continuing
and if it is known to the Trustee, the Trustee shall mail to
Security holders a notice of the Default or Event of Default within
90 days alter the occurrence thereof. Except in the case of a
Default or Event of Default in payments of any Security the Trustee
may withhold the notice if and so long as the board of directors,
executive committee or a trust committee or directors and/or
responsible officers of the Trustee in good faith determines that
withholding the notice is in the interest of Security holders.
SECTION 7.6 Reports by Trustee to Holders.
This Section 7.6 shall not be operative as part of this
Indenture unless and until this Indenture is qualified under the
TIA and, until such qualification, this Indenture shall be
construed as if this Section 7.6 were not contained herein. The
Company shall provide the Trustee with written notice as promptly
as practical, but in any event no later than 30 days before the
date (if any) on which this Indenture is expected to be qualified
under the TIA.
Each calendar year the Trustee, if required by the provisions
of TIA 313(a), shall mail to Security holders a brief report dated
as of such reporting date that complies with TIA 313(a). The
Trustee also shall comply with TIA 313(b)(2). The Trustee shall
also transmit reports required by TIA 313 by mail as required by
TIA 313(c) and TIA 313(d).
The Company shall notify the Trustee in writing when the
Securities are listed on any securities exchange.
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SECTION 7.7 Compensation and Indemnity.
The Company shall pay to the Trustee from time to time
reasonable compensation for its services. The Trustee's
compensation shall not be limited by any law on compensation of a
trustee of an express trust The Company shall reimburse the Trustee
upon request for all reasonable disbursements, advances and
expenses incurred by it in connection with the performance of its
duties under this Indenture including reasonable compensation,
disbursements and expenses of the Trustees' agents and counsel.
The Company shall indemnify the Trustee against any loss,
liability, cost or expense incurred by it arising out of or in
connection with the performance of its duties under this Indenture,
except as set forth in the next paragraph. The Trustee shall notify
the Company promptly of any claim for which it may seek indemnity.
The Company shall defend such claim and the Trustee shall cooperate
m such defense. The Trustee may have separate counsel at its own
expense, provided that the Company shall pay the reasonable fees
and expenses of such counsel if there is a conflict of interest
between the Company and the Trustee in defending such claim.
The Company need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee through
negligence, willful misconduct or bad faith. The Company need not
pay for any settlement made by the Trustee without the Company's
consent. The Company will only withhold consent where in good faith
the Company believes there are reasonable grounds for withholding
consent.
The obligation of the Company under Section 7.7 to compensate
the Trustee and to pay and reimburse the Trustee for such expenses,
disbursements and advances shall constitute additional
Indebtedness.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Securities on all money
or property held or collected by the Trustee, except that held in
trust to pay the principal of and interest on particular
Securities. Such obligations shall survive the satisfaction and
discharge of the Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in clause (v) and (vi) of Section 6.1
occurs, the expenses and the compensation for the services are
intended to constitute expenses of administration under any
Bankruptcy Law.
SECTION 7.8 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor
26
Trustee's acceptance of appointment as provided in this Section.
Subject to TIA 310(b), the Trustee may resign and be
discharged from the trust hereby created by so notifying the
Company in writing, such resignation and discharge to become
effective as provided in the last paragraph of this Section. The
Holders of a majority in principal amount of the then outstanding
Securities may remove the Trustee by so notifying the Trustee and
the Company. The Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(iii) a Custodian or public officer takes charge of the Trustee
or its property; or
(iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly
appoint a successor Trustee. The Trustee shall be entitled to
payment of its fees and reimbursement of its expenses while acting
as Trustee.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring
Trustee, the Company or the Holders of at least 10% in principal
amount of the then outstanding Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request by any Security holder
who has been a Security holder for at least six months, fails to
comply with Section 7.10, any Security holder may petition any
court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon
the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights,
powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Security
holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, subject to the Lien
provided for in Section 7.7. Notwithstanding replacement of the
Trustee pursuant to this Section 7.8, the Company's obligation
under Section 7.7 shall continue for the benefits of the retiring
Trustee.
27
SECTION 7.9 Successor Trustee or Agent by Merger, etc.
If the Trustee or any Agent consolidates, merges or converts
into, or transfers all or substantially all of its corporate trust
business to, another corporation, the successor corporation without
any further act shall be the successor Trustee or any Agent,
subject, inter alia to the provisions of Section 7.10.
SECTION 7.10 Eligibility; Disqualification.
There shall at all times be a Trustee hereunder which shall be
a corporation organized and doing business under the laws of the
United States of America or of any state thereof authorized under
such laws to exercise corporate trust powers, shall be subject to
supervision or examination by Federal or State authority and shall
have a combined capital and surplus of at least $10,000,000 as set
forth in its most recent published annual report of condition.
This Indenture shall always have a trustee who satisfies the
requirements of TIA 310(a)(1). The Trustee is subject to and will
comply at all times with TIA 310(b) whether or not this Indenture
is qualified under the TIA.
SECTION 7.11 Preferential Collection of Claims Against
the Company.
The Trustee shall be subject to, and the Trustee shall at all
times comply with, TIA 311(a), excluding any creditor relationship
listed in TIA 311(b), whether or not this Indenture is qualified
under the TIA. A Trustee who has resigned or been removed shall be
subject to TIA 311(a) to the extent indicated therein, whether or
not this Indenture is qualified under the TIA.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.1 Termination of Company's Obligations.
This Indenture shall cease to be of further effect (except
that the Company's Obligations under Section 7.7 and the Trustee's
and Paying Agent's obligations under Section 8.3 shall survive)
when all outstanding Securities theretofore authenticated and
issued have been delivered (other than destroyed, lost or stolen
Securities which have not been replaced or paid) to the Trustee for
cancellation in accordance with the terms of such Securities and
this Indenture. In addition, the Company may terminate all of its
obligations under this Indenture other than its obligations under
those Sections specifically noted below, at any time within one
year of the stated maturity of the Securities if:
28
(1) (a) the Company irrevocably deposits in trust with the
Trustee money or U.S. Government Obligations sufficient (in an
opinion set forth in an Accountant's Certificate delivered by the
Company to the Trustee) to pay, or which at maturity will be
sufficient to pay, principal premium, if any, and interest on the
Securities to and at maturity, and to pay all other sums payable by
it hereunder, provided that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S.
Government Obligations to the payment of said principal and
interest with respect to the Securities; (b) provided such deposit
shall not cause the Trustee to have conflicting interest for
purposes of the TIA whether or not the Indenture shall then be
qualified under the TIA; and (c) the Company has delivered to the
Trustee (i) either (x) a ruling directed to the Trustee received
from the Internal Revenue Service to the effect that the Holders of
the Securities will not recognize income, gain or loss for Federal
income tax purposes as a result of the Company's exercise of its
option under this Section 8.1 and will be subject to Federal income
tax in the same manner and at the same times as would have been the
case if such option had not been exercised or (y) an Opinion of
Counsel to the same effect as the ruling described in clause (x)
accompanied by a ruling to that effect published by the Internal
Revenue Service and (ii) an Opinion of Counsel to the effect that
(x) the trust funds will not be subject to any rights of holders of
Senior Indebtedness including, without limitation, those arising
under Article 10 of this Indenture, and (y) after the passage of
123 days following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights
generally; and
(2) the Company delivers to the Trustee an Officers'
Certificate stating that all of the provisions of this Section 8.1
have been complied with' and an Opinion of Counsel, reasonably
satisfactory to the Trustee, to the same effect; and
(3) no Event of Default or Default with respect to the
Securities shall have occurred and be continuing on the date of
such deposit.
Then, in such event, the obligations of the Company under this
Indenture shall cease to be of further effect (except as provided
in this paragraph) and the Trustee, on demand of the Company, shall
execute proper instruments acknowledging confirmation of an
discharge under this Indenture. The Company may make the deposit
only if Article 10 does not prohibit such payment. However, the
Company's obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 4.1,
4.2, 7.7, 7.8, 8.1, 8.2 and 8.4 and the Trustee's and Paying
Agent's obligations hereunder, including under Section 8.3, shall
survive until the Securities are no longer outstanding. Thereafter,
only the Company's and Trustee's obligations in Section 7.7 and the
Trustee's and Paying Agent's obligations in Section 8.3 shall
29
survive. After such irrevocable deposit made pursuant to this
Section 8.1 and satisfaction of the other conditions set forth in
this Section 8.1, the Trustee upon the written request signed by
two Officers of the Company shall acknowledge in writing the
discharge of the Company's obligations under this Indenture except
for those surviving obligations specified above.
"U.S. Government Obligations" means direct or indirect
obligations of the United States of America or an agency of the
United States of America for the payment of which the full faith
and credit of the United States of America is pledged.
In order to have money available on a payment date to pay
principal or interest on the Securities, the U.S. Government
Obligations shall be payable as to principal or interest on or
before such payment date in such amounts as will provide the
necessary money. U.S. Government Obligations shall not be callable
or payable at the issuer's option.
SECTION 8.2 Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.1. It shall
apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal and interest on the
Securities. Money and U.S. Government Obligations held in trust are
not subject to Article 10.
SECTION 8.3 Repayment to Company.
The Trustee and the Paying Agent shall promptly pay to the
Company upon written request any excess money or Securities held by
them at any time. The Trustee and the Paying Agent shall pay to
the Company upon written request any money held by them for the
payment of principal, premium, if any, or interest that remains
unclaimed for two years after the date upon which such payment
shall have become due; provided that the Company shall have first
caused notice of such payment to be mailed to each Security holder
entitled thereto no less than 30 days prior to such repayment.
After payment to the Company, Security holders entitled to the
money must look to the Company for payment as general creditors
unless an applicable abandoned property law designates another
person, and all liability of the Trustee and such Paying Agent with
respect to such money shall cease.
SECTION 8.4 Reinstatement.
If the Trustee or Paying Agent is unable to apply any money in
accordance with Section 8.2 by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such
30
application, the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit has
occurred pursuant to Section 82 until such time as the Trustee or
Paying Agent is permitted to apply all such money in accordance
with Section 82; provided that, if the Company has made any payment
of principal, premium, if any, or interest on any Securities
because of the reinstatement of its obligations, the Company shall
be surrogate to the rights of the Holders of such Securities to
receive such payment from the money held by the Trustee or the
Paying Agent.
ARTICLE 9
AMENDMENTS
SECTION 9.1 Without Consent of Holders.
The Company and the Trustee may amend this Indenture or the
Securities without the consent of any Securityholder:
(i) to cure any ambiguity, defect or inconsistency;
(ii) to comply with Section 5.1;
(iii)to provide for uncertificated Securities in addition to
or in place of certificated Securities; or
(iv) to make any change that does not adversely affect the
rights hereunder of any Securityholder, except changes that
adversely affect the rights of any holders of Senior Indebtedness
under Article 10, unless the holders of such Senior Indebtedness
consent to the change. After an amendment or waiver under this
Section 9.1 becomes effective, the Company shall mail to Security
holders a notice briefly describing the amendment or waiver.
SECTION 9.2 With Consent of Holders.
Except as provided below and subject to Sections 2.8 and 2.9,
the Company and the Trustee may amend this Indenture or the
Securities with the written consent of the Holders of at least 66
& 2/3% in aggregate principal amount of the then outstanding
Securities. Upon the written request of the Company signed by two
officers, accompanied by a resolution of the Board of Directors of
the Company authorizing the execution of a supplemental indenture
detailing such amendment, and upon the filing with the Trustee of
evidence of the consent to of the Securityholder as aforesaid, the
Trustee, subject to Section 9.6, shall join with the Company in the
execution of such supplemental indenture.
It shall not be necessary for the consent of the Holders under
31
this Section to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof. An amendment under this Section may
not make any change that adversely affects the rights of any
holders of Senior Indebtedness under Article 10 or Sections 6.1,
6.2, or 6.9 unless the holders of such Senior Indebtedness consent
to the change.
After an amendment or waiver under this Section 9.2 becomes
effective, the Company shall mail to the Holder of each Security
affected thereby a notice briefly describing the amendment or
waiver. Any failure of the Company to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the
validity of any such supplemental indenture. Other than as set
forth in Article 6, the Holders of at least 66-2/3% in aggregate
principal amount of the Securities then outstanding may waive
compliance in a particular instance by the Company with any
provisions of this Indenture or the Securities.
Nothing contained herein to the contrary, without the consent
of each Securityholder affected, an amendment under this Section
may not:
(i) reduce the amount of Securities whose Holders must
consent to an amendment or waiver:
(ii) reduce the rate of or change the time for payment of
interest, including default interest, on any Security;
(iii) reduce the principal of or change the fixed maturity of
any Security or alter the redemption or conversion provisions with
respect thereto;
(iv) make any Security payable in money other than that stated
in the Security;
(v) make any change in Section 6.4, 6.7 or the first or
fourth paragraphs of this Section 9.2;
(vi) make any change in Article 10 that adversely affects in
any manner the rights of any Security holder.
SECTION 9.3 Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities shall be
set forth in a supplemental indenture that complies with the TIA
as then in effect whether or not this Indenture is then qualified
under the TIA. The Trustee shall be entitled to receive and rely
upon an opinion of counsel as to whether any such supplemental
indenture complies with the TIA and complies with and is authorized
by the provisions of this Indenture.
32
SECTION 9.4 Revocation and Effect of Consents.
(a) Until an amendment or waiver becomes effective, a consent
to it by a Holder of a Security is a continuing consent by the
Holder and every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's
Security, even if notation of the consent is not made on any
Security. However, any such Holder or subsequent Holder may revoke
the consent as to his Security or portion of a Security if the
Trustee receives written notice of revocation before the date on
which the Trustee receives an Officer's Certificate certifying that
the Holders of the requisite principal amount of Securities have
consented to such amendments or waiver. An amendment or waiver
becomes effective upon receipt by the Trustee of such Officer's
Certificate and the written consents from the Holders of the
requisite percentage in principal amount of Securities.
(b) The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled to
consent to any amendment or waiver. If a record date is fixed, then
notwithstanding the second and third sentence of paragraph (a) of
this Section 9.4, those persons who were Holders at such record
date (or their duly designated proxies), and only those persons,
shall be entitled to consent to such amendment or waiver or to
revoke any consent previously given, whether or not such persons
continue to be Holders after such record date. No such consent
shall be valid or effective for more than 120 days after such
record date.
(c) After an amendment or waiver becomes effective, it shall
bind every Security holder.
SECTION 9.5 Notation on or Exchange of Securities.
Upon the Company's written request, the Trustee shall place an
appropriate notation provided by the Company about an amendment or
waiver on any Security thereafter authenticated. The Company, in
exchange for all Securities, may issue, and the Trustee shall
authenticate, new Securities that reflect the amendment or waiver.
SECTION 9.6 Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of
the Trustee. If it does, the Trustee may, but need not, sign it. In
signing or refusing to sign such amendment or supplemental
indenture, the Trustee shall be entitled to receive and shall be
fully protected in relying upon an Officers' Certificate and an
Opinion of Counsel as conclusive evidence that such amendment or
supplemental indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, and that it will
33
be valid and binding upon the Company in accordance with its terms.
The Company may not sign an amendment or supplemental indenture
until the Board of Directors approves it.
ARTICLE 10
SUBORDINATION
SECTION 10.1 Securities Subordinated to Senior
Indebtedness.
The Company covenants and agrees, and the Trustee and each
Holder of the Securities by his acceptance thereof likewise
covenants and agrees, that all payments of the principal of,
premium, if any, and interest on, the Securities by the Company
shall be subordinated in accordance with the provisions of this
Article 10 to the prior payment in full, in cash or cash
equivalents, of all amounts payable under any Senior Indebtedness.
SECTION 10.2 Priority and Payment Over of Proceeds in
Certain Events.
(a) Upon any payment or distribution of assets or securities
of the Company, as the case may be, of any kind or character
whether in cash, property or securities, upon any dissolution or
winding up or total or partial liquidation or reorganization of the
Company, whether voluntary or involuntary or in bankruptcy,
insolvency, receivership or other proceedings, all amounts payable
under Senior Indebtedness shall first be paid in full in cash, or
payment provided for in cash or cash equivalents before the Holders
or the Trustee on behalf of the Holders shall be entitled to
receive any payment of principal of, premium, if any, or interest
on the Securities or distribution of any assets or securities.
Before any payment may be made by the Company of the principal of,
premium, if any, or interest on the Securities and upon any such
dissolution or winding up or liquidation or reorganization, any
payment or distribution of assets or securities of the Company of
any kind or character, whether in cash, property or securities, to
which the Holders or the Trustee on their behalf would be entitled,
except for the provisions of this Article 10, shall be made by the
Company or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other Person making such payment or distribution,
directly to the holders of the Senior Indebtedness or their
representatives to the extent necessary to pay all such Senior
Indebtedness in full after giving effect to any concurrent payment
or distribution to the holders of such Senior Indebtedness.
(b) No direct or indirect payment by or on behalf of the
Company of principal of, premium, if any, or interest on the
Securities whether pursuant to the terms of the Securities or upon
34
acceleration or otherwise shall be made and no Securities may be
acquired by the Company for cash or property if at the time of such
payment or acquisition there exists a default in the payment of all
or any portion of principal of, premium, if any, or interest on
anySenior Indebtedness when due and payable, and such default shall
not have been cured or waived or the benefits of this sentence
waived by or on behalf of the holders of such Senior Indebtedness.
(c) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, the Trustee or any Holder
shall have received any payment on account of the principal of,
premium, if any, or interest on the Securities (other than as
permitted by paragraphs (a) and (b) of the Section 10.2) at a time
when such payment is prohibited by this Section 10.2 and before the
principal of, premium, if any, and interest on Senior Indebtedness
is paid in full, then and in such event (subject to the provisions
of Section 10.8) such payment or distribution shall be received and
held in trust for the holders of Senior Indebtedness and, upon
written notice to the Trustee from the representative of the
holders of the Senior Indebtedness and pursuant to the directions
of such representatives, shall be paid over or delivered to the
holders of the Senior Indebtedness remaining unpaid to the extent
necessary to pay in full in cash or cash equivalents the principal
of, premium, if any, and interest on such Senior Indebtedness in
accordance with its terms after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness.
Nothing contained in this Article 10 shall limit the right of
the Trustee or the Holders of Securities to take any action to
accelerate the maturity of the Securities pursuant to Section 6.2
or to pursue any rights or remedies hereunder; provided that all
Senior Indebtedness then or thereafter due or declared to be due
shall first be paid in full before the Holders or the Trustee are
entitled to receive any payment from the Company of principal of,
premium, if any, or interest on the Securities.
Upon any payment or distribution of assets or securities
referred to in this Article 10, the Trustee and the Holders shall
be entitled to rely upon any order or decree of a court of
competent jurisdiction in which such dissolution, winding up,
liquidation or reorganization proceedings are pending and upon a
certificate of the receiver, trustee in bankruptcy, liquidating
trustee, agent or other person (excluding the Company) making any
such payment or distribution, delivered to the Trustee for the
purpose of ascertaining the persons entitled to participate in such
distribution, the holders of Senior Indebtedness and other
Indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article10.
SECTION 10.3 Payments May be Paid Prior to Dissolution.
35
Nothing contained in this Article 10 or elsewhere in this
Indenture shall prevent (i) the Company, except under the
conditions described in Section 10.2, from making at any time
payments of principal, premium, if any, and interest on the
Securities in accordance with the provisions of this Indenture and
the Securities, or from depositing with the Trustee any moneys for
such payments, or (ii) the application by the Trustee (subject to
the conditions contained in Section 10.2) of any moneys deposited
with it for the purpose of making such payments of principal of,
premium, if any, and interest on the Securities, to the Holders
entitled thereto unless at least two Business Days prior to the
date upon which such payment would otherwise (except for the
prohibitions contained in Section 10.2) become due and payable, the
Trustee shall have received the written notice provided for in
Section 10.2(c) or in Section 10.8. The Company shall give prompt
written notice to the Trustee of any dissolution, winding up,
liquidation or reorganization of the Company.
SECTION 10.4 Rights of Holders of Senior
Indebtedness Not to be Impaired.
No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at
any time in any way be prejudiced or impaired by any act or failure
to act in good faith by any such holder, or by any noncompliance by
the Company, with the terms and provisions and covenants herein
regardless of any knowledge thereof any such holder may have or
otherwise be charged with.
The provisions of this Article 10 are intended to be for the
benefit of, and shall be enforceable directly by, the holders of
the Senior Indebtedness, without any act or notice of acceptance
hereof or reliance hereon.
SECTION 10.5 Authorization to Trustee to Take
Action to Effectuate Subordination.
Each Holder of Securities by his acceptance thereof authorizes
and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate, as between the holders of
Senior Indebtedness and the Holders, the subordination as provided
in this Article 10 and appoints the Trustee his attorney-in-fact
for any and all such purposes.
SECTION 10.6 Subrogation.
Upon the payment in full of all amounts payable under or in
respect of the Senior Indebtedness, the Holders shall be subrogated
to the rights of the holders of such Senior Indebtedness to receive
payments or distributions of assets of the Company made on such
Senior Indebtedness until the Securities shall be paid in full; and
for the purposes of such subrogation, no payments or distributions
to holders of such Senior Indebtedness of any cash' property or
securities to which Holders of the Securities would be entitled
except for the provisions of this Article 10, and no payment over
36
pursuant to the provisions of this Article 10 to holders of such
Senior Indebtedness by the Holders, shall, as between the Company,
its creditors other than holders of such Senior Indebtedness and
the Holders, be deemed to be a payment by the Company to or on
account of such Senior Indebtedness, it being understood that the
provisions of this Article 10 are solely for the purpose of
defining the relative rights of the holders of such Senior
Indebtedness, on the one hand, and the Holders, on the other hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article
10 shall have been applied, pursuant to the provisions of this
Article 10, to the payment of all amounts payable under the Senior
Indebtedness, then and in such case, the Holders shall be entitled
to receive from the holders of such Senior Indebtedness at the time
outstanding any payments or distributions received by such holders
of Senior Indebtedness in excess of the amount sufficient to pay
all amounts payable under or in respect of the Senior Indebtedness
in full.
SECTION 10.7 Obligations of Company Unconditional.
Nothing contained in this Article 10 or elsewhere in this
Indenture or in any Security is intended to or shall impair, as
between the Company and the Holders, the obligations of the
Company, which are absolute and unconditional, to pay to the
Holders the principal of, premium, if any, and interest on the
Securities as and when the same shall become due and payable in
accordance with their terms or is intended to or shall affect the
relative rights of the Holders and creditors of the Company other
than the holders of the Senior Indebtedness, nor shall anything
herein or therein prevent the Trustee or any Holder from exercising
all remedies otherwise permitted by applicable law upon Default
under this Indenture, subject to the rights, if any, under this
Article 10 of the holders of such Senior Indebtedness in respect of
cash, property or securities of the Company received upon the
exercise of any such remedy.
The failure to make a payment on account of principal of,
premium, if any, or interest on the Securities by reason of any
provisions of this Article 10 shall not be construed as preventing
the occurrence or an Event of Default under Section 6.1.
SECTION 10.8 Trustee Entitled to Assume Payments
Not Prohibited in Absence of Notice.
Neither the Trustee nor the Paying Agent shall at any time be
charged with the knowledge of the existence of any facts which
would prohibit the making of any payment to or by the Trustee or
the Paying Agent, unless and until the Trustee or Paying Agent
shall have received written notice thereof from the Company or one
or more holders of Senior Indebtedness or from any trustee or agent
therefor; and, prior to the receipt of any such written notice, the
Trustee or Paying Agent shall be entitled to assume conclusively
that no such facts exist. Unless at least two Business Days prior
37
to the date on which by the terms of this Indenture any moneys are
to be deposited by the Company with the Trustee or any Paying Agent
(whether or not in trust for any purpose (including, without
limitation, the payment of the principal, premium, if any, or the
interest on any Security), the Trustee or Paying Agent shall have
received with respect to such moneys the written notice provided
for in the preceding sentence, the Trustee or Paying Agent shall
have full power and authority to receive such moneys and to apply
the same to the purpose for which they were received and shall not
be affected by any notice to the contrary which may be received by
it on or after such date. Nothing contained in this Section 10.8
shall limit the right of the holders of Senior Indebtedness to
recover payments as contemplated by Section 10.2. The Trustee shall
be entitled to rely on the delivery to it of a written notice by a
Person representing himself or itself to be a holder of Senior
Indebtedness (or a trustee on behalf of, or other representative of
such holder) to establish that such notice has been given by a
holder of such Senior Indebtedness or a trustee on behalf of any
such holder.
SECTION 10.9 Right of Trustee to Hold Senior
Indebtedness.
Subject to TIA 310(b) and 311, the Trustee and any Agent
shall be entitled to all of the rights set forth in this Article 10
in respect of any Senior Indebtedness at any time held by it to the
same extent as any other holder of such Senior Indebtedness and
nothing in this Indenture shall be construed to deprive the Trustee
or any Agent of any of its rights as such holder.
ARTICLE 11
[INTENTIONALLY OMITTED]
ARTICLE 12
MISCELLANEOUS
SECTION 12.1 Trust Indenture Act Controls.
Notwithstanding any other provision of this Indenture, if any
provision of this Indenture limits, qualifies or conflicts with
another provision which would be deemed to be included in this
Indenture by the TIA if this Indenture were or shall become a
qualified Indenture under the TIA, the required provision of the
TIA shall control whether or not this Indenture is then so
qualified.
38
SECTION 12.2 Notices.
Any notice or communication to the Company, the Trustee or the
Paying Agent is duly given if in writing and delivered in person or
transmitted by first-class mall (registered or certified, return
receipt requested) or by telecopier (confirmed by first-class mall)
or overnight air courier guaranteeing next day delivery to the
address set forth below:
If to the Company: CCA Industries, Inc.
200 Murray Hill Parkway
East Rutherford, New Jersey 07073
Attention: Ira W. Berman
Telecopy No.: 201-935-0675
If to the Trustee: American Stock Transfer & Trust Co.
40 Wall Street
New York, NY 10005
Attention: Executive Vice President
Telecopy No.: 718-2364588
The Company, the Trustee or the Paying Agent by notice to the
others may designate additional or different addresses for
subsequent notices or communications.
Any notice or communication to a Security holder shall be
mailed by first-class mail to his address shown on the register
kept by the Registrar. Failure to mail a notice or communication to
a Security holder or any defect in such notice or communication
shall not affect its sufficiency with respect to other Security
holders.
If a notice or communication is mailed or sent in the manner
provided above within the time prescribed, it is duly given,
whether or not the addressee receives it, except that notice to the
Trustee or the Company shall only be effective upon receipt thereof
by the Trustee or the Company.
If the Company mails a notice or communication to Security
holders, it shall mail a copy to the Trustee and each Agent at the
same time.
SECTION 12.3 Communication by Holders
with Other Holders.
Security holders may communicate pursuant to TIA 312(b) with
other Security holders with respect to their rights under this
Indenture or the Securities. The Company, the Trustee, the
Registrar and anyone else shall have the protection of 312(c),
whether or not this Indenture is qualified under the TIA.
39
SECTION 12.4 Certificate and Opinion
as to Conditions Precedent.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall deliver
to the Trustee:
(i) an Officer's Certificate (which shall include the
statements set forth in Section 12.5) stating that, in the opinion
of all the signers, all conditions precedent and covenants,
compliance with which constitute a condition precedent, if any,
provided for in this Indenture relating to the proposed action or
inaction have been complied with; and
(ii) an Opinion of Counsel reasonably satisfactory to the
Trustee (which shall include the statements set forth in Section
12.5) stating that, in the opinion of such counsel, all such
conditions precedent and covenants, compliance with which
constitute a condition precedent, if any, provided for in this
Indenture relating to the proposed action or inaction have been
complied with.
SECTION 12.5 Statements Required in
Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of such Person, he has
made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
SECTION 12.6 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by, or a
meeting of, Security holders. The Registrar or Paying Agent may
make reasonable rules and set reasonable requirements for its
functions.
40
SECTION 12.7 Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday or a day on which
banking institutions in the State of New York or New Jersey are
authorized or obligated by law, regulation or executive order to
remain closed. If a payment date is a Legal Holiday, payment may be
made on the next Business Day, and no interest shall accrue for the
intervening period.
SECTION 12.8 Governing Law.
This Indenture and the Securities shall be governed by the
laws of the State of New Jersey applicable to contracts to be
performed wholly in the State of New Jersey, without giving effect
to the conflicts of laws rules thereof.
SECTION 12.9 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or any Subsidiary. Any such
indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 12.10 Successors.
All agreements of the Company in this Indenture and the
Securities shall bind its successor. All agreements of the Trustee
in this Indenture shall bind its successor.
SECTION 12.11 Severability.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
SECTION 12.12 No Recourse Against Others.
No director, officer, employee, stockholder, Subsidiary or
Affiliate, as such, of the Company shall have any liability for any
obligations of the Company under the Securities or this Indenture
or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Security holder by accepting a
Security waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the
Securities.
SECTION 12.13 Table of Contents, Headings, etc.
The Table of Contents and Headings of the Articles and
Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in
41
no way modify or restrict any of the terms or provisions hereof.
SECTION 12.14 Counterpart Originals.
This Indenture may be signed in two or more counterparts. Each
signed copy shall be an original, but all of them together
represent the same agreement.
SIGNATURES
Dated: As of July 31, 2000 CCA INDUSTRIES, INC.
By: s/ IRA W. BERMAN
Name: Ira W. Berman
Title: Secretary
Dated: As of July 31, 2000 AMERICAN STOCK TRANSFER
& TRUST COMPANY
By: s/ HERBERT LEMMBER
Name: Herbert Lemmer
Title: Vice President
42
EXHIBIT A
CUSIP NO.
NO.
[Form Face of Security]
$5,000,000
CCA INDUSTRIES, INC.
6% SUBORDINATED DEBENTURE
DUE 2005
CCA INDUSTRIES, INC., a corporation organized and existing
under the laws of the State of Delaware, promises to pay to Cede &
Co. or its registered assigns, the principal sum of Six Million
Dollars on August 1, 2005.
Interest Payment Dates: August 1 and February 1
beginning February 1, 2001
Record Dates: July 15 and January 15
Additional terms of this Security are continued on the reverse side
hereof and the provisions set forth on such reverse side shall have
the same effect as if set forth here.
CCA INDUSTRIES, INC.
By:
Dated:
Secretary
43
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-
mentioned Indenture.
AMERICAN STOCK TRANSFER & TRUST CO.
By:
Authorized Signature
Dated:
44
[Back of Security]
CCA INDUSTRIES, INC.
6% Subordinated Debenture due 2005
1. Interest. CCA INDUSTRIES, INC., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount
of this Security at the interest rate per annum shown above. The
Company shall pay interest semi-annually on August 1 and February
1 of each year (each an "Interest Payment Date"), commencing
February 1, 2001. Interest on the Securities shall accrue from the
most recent date to which interest has been paid or, if no interest
has been paid, from the date of original issuance of Securities.
The Company shall pay interest on overdue principal and premium, if
any, at the rate than borne by the Securities; it shall pay
interest to the extent permitted by law (including post-petition
interest in any proceeding under any Bankruptcy Law), on overdue
installments of interest at the rate then borne by the Securities.
Interest shall be computed on the basis of a 360 day year of twelve
30-day months.
2. Method of Payment The Company shall pay interest on this
Security (except defaulted interest) to the person who is the
registered holder of this Security at the close of business on the
Record Date next preceding the Interest Payment Date. Unless
earlier redeemed, the Company shall pay the principal amount of
this Security on August 1, 2005. The holder must surrender this
Security to a Paying Agent to collect payments of principal and
premium. Payments of interest may be mailed to the holder's
registered address. The Company shall pay principal, premium, if
any, and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts.
The Company, however, may pay principal, premium, if any, and
interest by its check payable in such money. If a payment date is
a Legal Holiday at a place of payment, payment may be made at that
place on the next succeeding day that is not a Legal Holiday, and
no interest on the amount payable on such payment dates shall
accrue for the intervening period.
3. Paying Agent and Registrar. Initially, the Trustee shall
act as Paying Agent and Registrar. The Company may change any
Paying Agent, Registrar or co-registrar without notice to any
Security holder. The Company or any of its Subsidiaries or
Affiliates may act in any such capacity.
4. Indenture. This Security is one of the Securities issued
by the Company under an Indenture dated as of July , 2000 (the
"Indenture") between the Company and American Stock Transfer &
Trust Co. (the "Trustee"). The terms of this Security include those
stated in the Indenture and those made part of the Indenture by
45
reference to the Trust Indenture Act of 1939 (15 U.S.C. 77aaa-
771bbb) (the "TIA") as in effect on the date of the Indenture. The
Securities are subject to all such terms, and Security holder are
referred to the Indenture and the TIA for a statement of such
terms. The Securities are general unsecured obligations of the
Company and limited to $5,000,000 in aggregate principal amount.
Capitalized terms used in this security and not defined in this
Security shall have the meanings set forth in the Indenture.
5. Optional Redemption. The Company may redeem, at its
option, the Securities in whole or in part at any time or from time
to time after August 1, 2001 at the redemption prices (expressed in
percentages of principal amount) set forth below plus accrued
interest, if any, to the Redemption Date, if redeemed during the
12-month period beginning August 1, of the years indicated below.
Year Percentage
2001 106%
2002 105
2003 104
2004 and thereafter 103
Nothing set forth above to the contrary, the Securities may
not be redeemed prior to August 1, 2001.
If the Redemption Date is subsequent to a Record Date with
respect to any Interest Payment Date and on or prior to such
Interest Payment Date, the Holder of such Security transfers the
Security then such accrued interest, if any, shall be paid to the
person who surrenders the Security for redemption (and not the
Holder as of the Record Date with respect to such Interest Payment
Date), and no other interest shall be payable thereon.
6. Notices of Redemption. Notice of redemption shall be
mailed at least 30 days but not more than 60 days before the
Redemption Date to each holder of Securities to be redeemed at his
registered address. On and after the Redemption Date interest
ceases to accrue on Securities or portions of them called for
redemption.
7. Denominations, Transfer, Exchange. The Securities are in
registered form without coupons. The transfer of Securities may be
registered and Securities may be exchanged as provided in the
Indenture. The Registrar may require a holder, among other things,
to furnish appropriate endorsements and transfer documents and to
pay any taxes and fees required by law or permitted by the
Indenture. The Company shall not be required to, and without the
prior written consent of the Company, the Registrar shall not be
required to register the transfer or exchange of any Security for
46
a period of 15 days before a selection of Securities to be
redeemed.
8. Persons Deemed Owners. The registered holder of a
Security may be treated as its owner for all purposes.
9. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the
Paying Agent shall pay the money back to the Company at its
request. After that, Security holders entitled to the money must
look to the Company for payment unless an abandoned property law
designates another person and all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity. If within one
year of the stated maturity of the Securities the Company deposits
with the Trustee money or U.S. Government Obligations sufficient
(in an opinion set forth in an Accountants Certificate delivered by
the Company to the Trustee) to pay principal of, premium, if any,
and accrued interest on the Securities to redemption or maturity,
and any other amounts payable under the Indenture, the Company
shall be discharged from the Indenture and the Securities, except
for certain sections thereof, including Section 7 hereof.
11. Amendments and Waivers. Subject to certain exceptions,
the Indenture or the Securities may be amended with the consent of
the holders of at least 66-2/3% in aggregate principal amount of
the then outstanding Securities, and any existing default may be
waived with the consent of the holders of a majority in aggregate
principal amount of the then outstanding Securities. Without the
consent of any Security holder, the Indenture or the Securities may
be amended to cure any ambiguity, defect or inconsistency, to
provide for the assumption of the obligations of the Company under
the Indenture by a successor corporation, to provide for
uncertificated Securities in addition to certificated Securities or
to make any change that does not adversely affect the rights of any
Security holder, except certain changes that adversely affect
rights of any holders of Senior Indebtedness.
12. Subordination. The Securities are subordinated in right
of payment, in the manner and to the extent set forth in the
Indenture, to the prior payment in full of all Senior Indebtedness
(as defined in the Indenture) of the Company whether outstanding on
the date of the Indenture or thereafter created, incurred, assumed
or guaranteed. Each Security holder by his acceptance hereof agrees
to be bound by such provisions and authorizes and expressly directs
the Trustee, on his behalf, to take such action as may be necessary
or appropriate to effectuate the subordination provided for in the
Indenture and appoints the Trustee his attorney-in-fact for such
purpose.
13. Defaults and Remedies. An Event of Default is: default
47
for 30 days in payment of interest on the Securities, default in
payment of principal or premium, if any, on the Securities at
maturity, upon acceleration, redemption or otherwise; failure by
the Company for the period specified in the Indenture after notice
to it to perform certain covenants and to comply with any of its
other agreements in the Indenture or the Securities; certain final
judgments which remain undischarged; certain events of bankruptcy
or insolvency; and certain other events. If an Event of Default due
to certain events of bankruptcy or insolvency as described in the
Indenture occurs and is continuing, the Trustee or the holders of
at least 25% in principal amount of the then outstanding Securities
may declare all the Securities to be due and payable immediately.
Security holders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or
the Securities. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding Securities may
direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Security holders notice of any continuing
default (except a default in payment of principal or interest) if
it determines that withholding notice is in their interests. The
Company must furnish an annual compliance certificate to the
Trustee.
14. Trustee Dealings with Company. The Trustee, in its
individual or any other capacity, may become the owner or pledgee
of Securities and may otherwise deal with the Company, its
Subsidiaries or its Affiliates, as if it were not Trustee.
15. No Recourse Against Others. A director, officer, employee
or shareholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities
or the Indenture or for any claim based on' in respect of or by
reason of such obligations or their creation. Each Security holder
by accepting a Security waives and releases all such liability. The
waiver and release are part of the consideration for the issue of
the Securities.
16. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an
authenticating agent.
17. Abbreviation. Customary abbreviations may be used in the
name of a Security holder or an assignee, such as:
TEN COM (tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and
not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
18. CUSIP Numbers. Pursuant to a recommendation promulgated
by the Committee on Uniform Security Identification Procedures, the
48
Company has caused CUSIP numbers to be printed on the Securities as
a convenience to the holders of such Securities. No representation
is made as to the accuracy of such numbers as printed on the
Securities, and reliance may be placed only on the other
identification numbers printed thereon.
THE COMPANY WILL FURNISH TO ANY HOLDER OF A SECURITY UPON WRITTEN
REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY
BE MADE TO CCA INDUSTRIES, INC., 200 MURRAY HILL PARKWAY, EAST
RUTHERFORD, NEW JERSEY 07073, CHIEF FINANCIAL CORPORATION.
THIS SECURITY IS NOT A DEPOSIT ACCOUNT, IS NOT FEDERALLY INSURED,
AND IS NOT GUARANTEED BY THE FEDERAL GOVERNMENT OR ANY AGENCY
THEREOF.
49
ASSIGNMENT FORM
To assign this Debenture, fill in the form below and have your
signature guaranteed:
For value received, I or we assign and transfer this Debenture to
(Insert assignee's social security or tax I.D. No.
(Print or type assignee's name, address and zip code) and
irrevocably appoint [ ] agent to transfer this
Debenture on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature:
(Sign exactly as your name appears on the
Debenture)
Signature Guaranteed:
50