July 18, 2005
Leslie Overton
Patricia Armalin
Nathan Chaney
Division of Cooperative Finance
US Securities and Exchange Commission
450 Fifth Street
Washington, DC 20549
Dear Leslie, Patricia and Nathan:
1. Thank you very for your patience in working with us to
resolve our conundrum. As you had graciously advised us, we
would like to proceed with our estimate method of accounting of
advertisement expense in our interim reports to the next level at
the Commission. Thank you for arranging our appointment to
present our position to Carol Stacey this afternoon. We are
faxing this to you so that perhaps you can have the Chattem 10Q
presented to Carol Stacey before our conversation. We will EDGAR
this response today.
We EDGARed our 10Q on Thursday, July 14, 2005 and the news
release attached was released Friday, July 15, 2005.
We are also enclosing for your review, an extract (page 11,
section 7) from the 10Q filed by Chattem, Inc (CHTT) for the
quarter ended February 28, 2005. Their accounting method of
reporting advertising expense is also based on assumptions
by each dollar of sales. They accrue the actual expense at
the end of the year.
2. We decided to file an 8K to acknowledge that the Company had
entered into a contingent agreement with a member of the New York
Stock Exchange to help enhance shareholder value. Both the
member firm and their counsel advised that the agreement was not
a materially definitive agreement that had to be filed under form
8K. We had previously entered into a similar agreement with PNC
Bank. When that agreement expired, we entered into a similar
agreement with Navigant Consulting. We did not file either
agreement. The compensation set forth in all of the agreements
was contingent upon the consummation of a successful transaction.
There were no retainer costs paid by the Company. The member
firm requested that their name not be disclosed to the general
public.
During the recent discussions with regard to the compliance
with the Sarbanes Oxley Act, and the expenses a company
incurs as a result of the Act, we have frequently been asked
as to whether we would consider the possibility of being
acquired and going private. We have always responded that
the Company will do whatever it could to enhance
shareholders' value by being acquired, buying a trademark or
merging with another Company. To make the industry aware
that we were meeting our responsibilities to our
shareholders by engaging a member of the stock exchange to
use its best efforts to help enhance shareholders' value, we
decided to make a formal statement about our efforts by
filing an 8K to disclose the Company's diligence on behalf
of its shareholders. From legal point of view, we do not
believe that the agreement was "material," but nevertheless
felt that the relationship with the member firm should be
disclosed and chose Section 8 to make the disclosure.
We will be EDGARing the attached New York Stock Exchange
member firm's agreement as an exhibit to this response.
Very truly yours,
Ira W. Berman
Chairman of the Board of Directors
Very truly yours,
John Bingman
Chief Financial Officer
/js
Attachments
EXHIBIT A
Page 11 of 48
(1) Because their effects are anti-dilutive, excludes shares issuable
under stock option plans and restricted stock issuance whose grant
price was greater than the average market price of common shares
outstanding as follows: 0 and 62 shares for the three months ended
February 28, 2005 and February 29, 2004, respectively.
7. ADVERTISING EXPENSES
We incur significant. expenditures on television, radio and print
advertising to support our nationally branded over-the-counter ("OTC")
health care products and toiletries. Customers purchase products from us
with the understanding that the brands will be supported by our extensive
media advertising. This advertising supports the retailers'sales effort
and maintains the important brand franchise with the consuming public.
Accordingly, we consider our advertising program to be clearly implicit in
our sales arrangements with our customers. Therefore, we believe it is
appropriate to allocate a percentage of the necessary supporting
advertising expenses to each dollar of sales by charging a percentage of
sales on an interim basis based upon anticipated annual sales and
advertising expenditures (in accordance with Accounting Principles Board
Opinion No. 28, "Interim Financial. Reporting") and adjusting that accrual
to the actual expenses incurred at the end of the year.
8. SHIPPING AND HANDLING
Shipping and handling costs of $1,857 and $1,434 are included in
selling expenses for the three months ended February 28, 2005 and February
29, 2004, respectively.
9. PATENT, TRADEMARKS AND OTHER PURCHASED PRODUCT RIGHTS
The carrying value of trademarks, which are not subject to
amortization under the provisions of 'SFAS No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"), was $221,654 and $224,797 as of February
28, 2005 and November 30, 2004, respectively. The gross carrying amount of
intangible assets subject to amortization at February 28, 2005 and November
30, 2004, which consist primarily of non-compete agreements, was $2,139 and
$2,400, respectively. The related accumulated amortization of intangible
assets at February 28, 2005 and November 30, 2004 was $1,557 and $1,637,
respectively. Amortization of our intangible assets subject to amortization
under the provisions of SFAS 142 for the three months ended February 28,
2005 and February 29, 2004 was $73 and $77, respectively. Estimated annual
amortization expense for these assets for the years ended November 30,
2006, 2007, 2008, 2009 and 2010 is $290, $123, $40, $20 and $0
respectively.
9
On February 28, 2005, we entered into an agreement to sell the
trademark and product rights of our SELSUN business in certain countries om
Africa and Asia. As a result of the sale, $3,143 of indefinite-lived assets
and $108 of intangible assets subject to amortization were retired, which
resulted in an insignficant loss.
10. INVENTORIES
EXHIBIT B
Company Contact:
Ira W. Berman
Chairman
800 524-2720
FOR IMMEDIATE RELEASE
CCA INDUSTRIES, INC. ANNOUNCES SECOND QUARTER RESULTS
East Rutherford, NJ, July 15, 2005: CCA Industries, Inc. (AMEX - CAW)
announced today that second quarter revenues were $18,616,053, net profits
after taxes were $1,750,653, and earnings per share fully diluted were $0.24
compared to revenues of $18,339,247 and net profits after taxes of $2,798,203,
and earnings per share fully diluted were $0.36 for the prior year's second
quarter.
"Because of the intense competition from major competitors in some of
our categories, we have increased our advertising budget by $1 million of which
$500,000 was accrued as an expense in the second quarter. All of this
advertising however, will run in the third and fourth quarters. General and
administrative expenses increased which included among other inflationary
increases, our increased freight expense. To be conservative, we have increased
our reserve against possible returns to avoid any possible subsequent
adjustments because of the current uncertainty in the industry," stated David
Edell, chief executive officer.
For the six month period ended May 31, 2005 revenues were $33,430,241,
net income after taxes was $2,695,485, earnings per share fully diluted
were $0.37 compared to revenues of $31,426,735, net income after taxes of
$3,634,345, earnings per share fully diluted of $0.47 for the prior six month
period.
"As we advised in our previous press release, the board of directors is
exploring possible strategic alternatives to enhance shareholder value.
Although we are giving this matter our utmost attention, there can be no
assurance that a transaction will occur, or if undertaken, the terms and timing
thereof," stated David Edell. "We are pleased with the inclusion of our Company
in the New Russell Micro Cap Index which debuted on July 1, 2005."
The Company is in discussions with the SEC regarding the best way to
report its advertising expense during the interim periods. While the outcome
will have no effect at all on the Company's year end financial statements which
have always been in accordance with GAAP, it expensed all of the advertising
costs expended during a fiscal year in the year they were incurred; the
financial results of the individual quarters within each year will be affected.
APB 28 Interim Financial Reporting states "Advertising costs may be
deferred within a fiscal year if the benefits of expenditure made clearly
extend beyond the interim period in which the expenditure is made."
This requires an estimate to be made by the Company as to how much
benefit of incurred advertising will be realized in subsequent quarters. As
stated in the previously filed 10Q's over the past years, the Company has
consistently reported its advertising expense according to its interpretation
of APB 28 Interim Financial Reporting by expensing its annualized budgeted
advertising expense equally over the four quarters. The Company
feels that its budgeted advertising expense for any year affects its sales
for the entire year regardless of when the advertisement actually runs. The
strategy adopted by the Company to get the most value for its advertising
dollars is to saturate the market during the first two quarters of each fiscal
year so that an impression can be made on the consumer. The benefit of that
advertising is then reflected in the brand recognition achieved, which
carries over into the last two quarters of the year. By the beginning of the
next fiscal year the Company believes it must, once again, saturate the
market to rekindle the interest in its products.
"We do not believe that the advertising spent in a particular quarter
relates solely to the sales in that quarter, especially since the
advertising might generate sales at the retailer it doesn't affect the
Company until the retailer reorders to replace the sold inventory. Depending
on the retailer this could be weeks, months, or quarters later," stated
David Edell.
The SEC interpretations of APB 28 is that there is no clear benefit to
the advertising dollars spent in the subsequent quarters and therefore, they
have suggested that the Company expense its advertising during its interim
periods as the costs are incurred. The company's position is that because it
expends approximately 75% of its media budget in the first half of the fiscal
year, its method of consolidating and saturating its product advertising is
such that it will not have to advertise heavily in the second half of the year.
Therefore, under its current presentation, it spreads out its advertising
expense equally over each quarter as it believes sales results in the second
half are a direct result and clear benefit of its heavy advertising in the
first half.
No matter which accounting methods is used to expense advertising, the
year end results will be exactly the same as all advertising expenses will have
been expended by year end.
The SEC suggestions would have the result of substantially reducing
earnings in the first half, but substantially increasing earnings in the
second half, especially in the fourth quarter when the Company usually does
not advertise to any extent.
Had the Company reported its advertising expense according to the SEC's
suggestion in the current and previous two years the Pro-forma Net income and
diluted EPS would have been as follows:
Fiscal First Second Third Fourth Year
Year Quarter Quarter Quarter Quarter End
(000) (000) (000) (000) (000)
2005 -Pro-Forma
Revenues $14,814 $18,616
Advertising $ 5,323 $ 4,285
NI ($ 435) $ 1,337
EPS ($.06) $ .18
2004 -Pro-Forma
Revenues $13,087 $18,339 $16,696 $13,395 $61,518
Advertising $ 6,547 $ 4,633 $ 551 $ 1,387 $13,119
NI ($ 1,462) $ 1,902 $ 3,584 $ 1,772 $ 5,797
EPS ($ .20) $ .25 $ .47 $ .24 $ .75
2003 -Pro-Forma
Revenues $12,515 $17,611 $12,853 $11,758 $54,737
Advertising $ 4,036 $ 3,893 $ 1,085 $ 1,314 $10,329
NI ($ 218) $ 1,897 $ 2,052 $ 1,521 $ 5,252
EPS ($ .03) $ .25 $ .28 $ .20 $ .68
This reporting change would have had no effect on the year end financials
whatsoever. It simply would have skewed the quarterly earnings to reflect
significantly less earnings in the first two quarters when we typically spend
the bulk of our advertising dollars and significantly more income in the third
and fourth quarters when we reap the rewards of our advertising but
significantly reduce our current spending.
For comparison purposes, the historical numbers we did report are shown below:
2005
Revenues $14,814 $18,616
Advertising $ 3,098 $ 3,655
NI $ 945 $ 1,751
EPS $ .13 $ .24
2004
Revenues $13,087 $18,339 $16,696 $13,395 $61,518
Advertising $ 2,824 $ 3,064 $ 3,932 $ 3,299 $13,119
NI $ 836 $ 2,798 $ 1,457 $ 705 $ 5,797
EPS $.11 $.36 $.19 $.09 $.75
2003
Revenues $12,515 $17,611 $12,853 $11,758 $54,737
Advertising $ 2,723 $ 2,634 $ 2,405 $ 2,568 $10,329
NI $ 574 $ 2,584 $ 1,287 $ 807 $ 5,252
EPS $ .08 $ .34 S .17 $ .11 $ .68
As shown the year end numbers are exactly the same, the change simply
reallocates when our advertising dollars are expensed.
If our final discussion with the SEC causes us to change our method of
estimating the benefits derived from our advertising dollars, we will restate
the current quarter to reflect the change in estimate and will utilize the
new method in all future filings. The effect of the restatement on the 2nd
quarter 2005 financials will be to decrease the earnings from $1,751,000,
$.24 EPS, to ($122,000), ($.02) EPS. This is due to the fact that since this
is a "change in an estimate", accounting guidelines require us to account for
the entire effect in the most recent quarter rather than restate each of the
prior quarters. Therefore, the entire effect of the current quarter's deferral
is reflected in the second quarter earnings as opposed to being reflected in
both the first and second quarters as shown in the pro forma table above. As
stated above, although the change makes our 2nd quarter earnings look
significantly lower, its affects will be reversed in the third and fourth
quarters when very little advertising is budgeted to be expended.
CCA Industries, Inc. manufactures and markets health and beauty aids,
each under its individual brand name. The products include, principally,
"Plus+White" toothpastes and teeth whiteners, "Sudden Change" anti-aging skin
care products and "Scar Zone," "Nutra Nail" nail growth treatments, "Mega"
Green Tea diet aids, "Hair Off" hair removal and depilatories, "Bikini Zone"
medicated creme and gel for the bikini area, "Solar Sense" sun protection
products, "Cherry Vanilla" Perfume and the Denise Austin "Skin Fit for Life"
green tea anti-oxidant skin care line.
Statements contained in the news release that are not historical facts are
forward looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject
to risks and uncertainties, which would cause actual results to differ
materially from estimated results. Such risks and uncertainties are detailed
in the Company's filings with the Securities and Exchange Commission.
CCA Industries, Inc. & Subsidiaries
Second Quarter Ended
May 31, 2005
News Release
Quarter Ended May 31, 2005 May 31, 2004
Revenues $18,616,053 $18,339,247
Net Income $ 1,750,653 $ 2,798,203
Per Share Earnings
Basic $0.25 $0.38
Diluted $0.24 $0.36
Weighted Average
Shares Outstanding
Basic 7,139,056 7,314,491
Diluted 7,335,087 7,677,661
Six Months Ended
Revenues $33,430,241 $31,426,735
Net Income $ 2,695,485 $ 3,634,345
Per Share Earnings
Basic $0.38 $0.50
Diluted $0.37 $0.47
Weighted Average
Shares Outstanding
Basic 7,116,651 7,301,942
Diluted 7,317,103 7,665,029
EXHIBIT C
May 2, 2005
CCA Industries, Inc.
200 Murray Hill Parkway
East Rutherford, NJ 07073
Gentlemen:
This is to confirm the engagement of William Blair & Company, L.L.C. ("Blair")
by CCA Industries, Inc. (the "Company") to render certain investment banking
services in connection with the Company's analysis of its strategic options
including a possible corporate restructuring of the Company or similar
restructuring or a possible business combination (through tender offer,
merger, sale or exchange of 50% or more of the outstanding capital stock of
the Company, or sale of all or substantially all of its assets or otherwise)
of the Company with another party (the "Possible Transaction").
1. Services to Be Rendered. Blair will perform such of the following
services in connection with the Possible Transaction as the Company
may reasonably request:
a. Blair will familiarize itself to the extent it deems appropriate
with the business, operations, financial condition and prospects
of the Company;
b. Blair will work with the Company and its Board of Directors in
designing alternative Possible Transactions and will analyze the
financial impact of such alternatives in such form as it will
consider appropriate;
c. Blair will assist the Company's management in (i) developing a
strategy for pursuing a Possible Transaction involving the Company
and a list of possible participants in the Possible Transaction (it
being understood that such participants may include parties to whom
Blair has rendered or is now rendering investment banking
services), (ii) preparing a descriptive memorandum that describes
the Company's operations and financial condition and includes
current financial data and other appropriate information furnished
by the Company (as amended and supplemented from time to time, the
"Descriptive Memorandum") and (iii) contacting and eliciting
interest from those possible participants expressly approved by the
Company;
d. Blair will participate with the Company and its counsel in
negotiations relating to the Possible Transaction; and
e. Blair will participate in meetings of the Board of Directors of
the Company (such participation to be in person or by telephone,
as appropriate) at which the Possible Transaction is to be
considered and, as appropriate, will report to the Board of
Directors with respect thereto.
In connection with Blair's activities on the Company's behalf, the
Company agrees to cooperate with Blair and will furnish to, or cause
to be furnished to, Blair all information and data concerning the
CCA Industries, Inc. -2- May 2, 2005
Company, any Possible Transaction and any possible participant (the
"Information") which Blair reasonably deems appropriate and will
provide Blair with access to the Company's officers, directors,
employees and advisors. The Company represents and warrants that all
Information made available to Blair by the Company with respect to a
Possible Transaction will be complete and correct and that any
projections, forecasts or other Information provided by the Company
to Blair or to ally possible participant, any other party to a
Possible Transaction, or contained in the Descriptive Memorandum
will have been prepared in good faith and will be based upon
reasonable assumptions. The Company agrees to promptly notify Blair
if the Company believes that any Information which was previously
provided to Blair or to any possible participant has become materially
misleading. The Company acknowledges and agrees that, in rendering its
services hereunder, including, without limitation, assisting the
Company's management in the preparation of the Descriptive Memorandum,
Blair will be using and relying on the Information (and information
available from public sources and other sources deemed reliable by
Blair) without independent verification thereof or independent
appraisal of any of the Company's assets or those of any possible
participant. Furthermore, in evaluating each possible participant,
Blair will he using information contained in public reports and
possibly other information furnished to Blair by such possible
participant. Blair does not assume responsibility for the accuracy or
completeness of the Information or any other information regarding the
Company, any possible participant or any Possible Transaction. If all
or any portion of the business of the Company or any possible
participant is engaged in through subsidiaries or other affiliates, the
references in this letter agreement to the Company or the possible
participant will, when appropriate, be deemed also to include such
subsidiaries or other affiliates.
In order to coordinate most effectively our efforts together to effect
a Possible Transaction satisfactory to the Company, the Company and
its management will promptly inform us of any inquiry they may receive
concerning the availability of all or a portion of the stock or assets
of the Company for purchase. Also, during the period of our engagement,
neither the Company nor its management will initiate any discussions
looking toward the sale of all or a portion of the stock or assets of
the Company without informing Blair.
The Company and Blair will each have the right to approve the
Descriptive Memorandum and, to the extent relevant to or otherwise
affecting Blair's services to he provided hereunder, other written
communication from the Company or any person acting on its behalf in
connection with the Possible Transaction.
It is further understood that any advice rendered by Blair pursuant
to its engagement hereunder, including any advice rendered during the
course of participating in negotiations and meetings of the Board of
Directors of the Company, as well as any written materials provided
by Blair, will be solely for the benefit and confidential use of the
Board of Directors and will not be reproduced, summarized, described
or referred to or given to any other person for any purpose without
Blair's prior written consent.
2. Merger Fees. There shall be no upfront retainer fee payable by the
Company to Blair.
CCA Industries, Inc. -3- May 2, 2005
In the event that the Possible Transaction is consummated, the
Company will pay or cause to be paid to Blair a fee equal to the
amount shown in the table set forth below with such fee based on
the total consideration received by the Company and its stockholders
as a result of such consummation (the "Transaction Consideration").
Fee Calculation Table
Transaction
Consideration
(in millions) Fee
$0 to $100 2% of Transaction Consideration
Greater than $100 $2.0 million plus 4% on amounts over $100 million
For purposes of this letter agreement, the term "Transaction
Consideration" will mean the total amount of cash and the fair market
value of all securities or other property paid or payable directly or
indirectly (including payments into escrows) to the Company or any of
its security holders in connection with a Possible Transaction
(including amounts which are to be reinvested in the Company subsequent
to the Possible Transaction) which is consummated, including, without
limitation, (i) amounts paid (A) pursuant to covenants not to compete,
employment contracts, employee benefit plans or other similar arrange-
ments (B) to holders of any warrants or convertible securities of the
Company and (C) to holders of any options or stock appreciation rights
issued by the Company, whether or not vested; (ii) the total amount of
indebtedness for borrowed money or similar non-trade liabilities or
obligations (including pension liabilities, guarantees, capitalized
or operating leases and the like) of the Company repaid, retired,
extinguished or assumed in connection with the Possible Transaction,
or which otherwise remains outstanding with the Company or any
affiliate thereof as of the closing of a Possible Transaction or which
is assumed by the acquiror or an affiliate thereof; and (iii) in the
case of a sale of substantially all the Company's assets, the total
consideration paid for such assets plus the net value of any current
assets not sold by the Company. Transaction Consideration also will
include the aggregate amount of any dividends or other distributions
declared by the Company with respect to its stock after the date
hereof, other than normal recurring cash dividends in amounts not
materially greater than currently paid. Transaction Consideration
shall include the value of cash currently held by the Company.
The fee payable to Blair upon consummation of a transaction involving
a tender offer or other purchase or sale of stock will become payable
by the Company when the Beard of Directors of the Company has approved
such transaction and control of 50% or more of the Company's
outstanding common stock is acquired by an entity other than a current
stockholder. In that event, such Transaction Consideration will be
calculated under the above definition of aggregate Transaction
Consideration as though 100% of the outstanding common stock on a
fully diluted basis had been acquired for the highest per share
amount paid in the transaction in which control is acquired.
Nevertheless, our services pursuant to this letter agreement will
continue after control is obtained to assist you with a second step
merger, if any, or similar transaction.
CCA Industries, Inc. -4- May 2, 2005
If any portion of the Transaction Consideration is paid in the form
of securities for which a public trading market existed prior to
consummation of the Possible Transaction, the value of such securities,
for purposes of calculating the Transaction Consideration, will be
determined by the closing or last sales price for such securities on
the last trading day prior to the consummation or effectiveness of
the Possible Transaction. If such securities do not have an existing
public trading market, the value of the securities will be the mutually
agreed upon fair market value on the day prior to the consummation of
the Possible Transaction; provided that promissory notes or other debt
obligations will be valued at the face amount thereof.
The fee payable to Blair upon consummation of the Possible Transaction
will be payable in full, in cash, upon the closing of the Possible
Transaction or such earlier date as set forth above.
In the event that the Possible Transaction results in a sale or private
placement of less than 50% of the outstanding capital stock of the
Company and/or a minority recapitalization involving less than 50% of
the outstanding capital stock of the Company, then the Company and
Blair shall reasonably agree on an appropriate success fee to be paid
to Blair, consistent with market rates for the issuance or placement
of equity or debt, in similarly sized situations, in the event that
such transaction is consummated.
3. Expenses. The Company will reimburse Blair for all out-of-pocket
expenses (including fees and expenses of its counsel and any other
independent experts that have been retained by Blair with the
Company's prior consent, which shall not be unreasonably withheld)
reasonably incurred by it in connection with its engagement hereunder.
Such reimbursement will be payable promptly upon submission by Blair
of statements to the Company.
4. Staple Financing Debt Placement Services. In connection with Blair's
engagement on the Possible Transaction, Blair agrees to arrange,
negotiate and place on a best efforts basis the senior and junior debt
(collectively the "Debt Capital") required in the Possible Transaction.
With respect to its engagement, Blair shall perform such of the
following Debt Placement Services as the Company may reasonably
request: (i) assist and advise the Company with respect to its capital
structure and the form and structure of the Debt Capital to be offered;
(ii) assist in preparing and distributing the confidential offering
materials; (iii) identify, contact and negotiate with prospective
institutional lenders that are acceptable to the Company; (iv)
assist the Company in evaluating proposals received from such lenders;
(v) assist the Company in selecting the staple financing provider
(the "Staple Lender") and coordinating the due diligence process
undertaken by such provider; (vi) assist in structuring and negotiating
the terms of the staple financing commitment to be offered to potential
equity investors; (vii) assist in documenting and closing the
transaction; and (viii) provide such other related services as the
Company may reasonably request in connection with the financing.
There shall be no upfront retainer fee payable to Blair in connection
with the Debt Capital raise. In the event that the Possible
Transaction is completed, Blair shall be paid a debt placement fee at
closing equal to: (a) 1.0% of the commitment amount of the Debt
Capital secured from the Staple Lender and/or other lenders that Blair
had approached in connection with its engagement; and (b) 0.33% of the
commitment amount of Debt Capital secured from all other lenders,
CCA Industries, Inc. -5- May 2, 2005
subject to an over minimum debt placement fee of $250,000.
5. Indemnification. Blair and the Company have entered into a separate
indemnity agreement, dated the date hereof (the "Indemnity Agreement"),
providing among other things for the indemnification of Blair by the
Company in connection with Losses and Expenses (as defined in the
Indemnity Agreement) in connection with Blair's engagement hereunder.
The terms of the Indemnity Agreement are incorporated by reference
into this letter agreement.
6. Termination. Blair's engagement hereunder may be terminated by either
the Company or Blair after six months, with or without cause, upon
written notice to the other party; provided, however, that (a) no
such termination will affect Blair's right to expense reimbursement
under Section 3, the payment of any accrued and unpaid fees pursuant
to Section 2, the indemnification contemplated by Section 5 or the
Indemnity Agreement and (b) if the Company, directly or indirectly,
executes a definitive agreement related to a Possible Transaction
within twelve months following such termination with any party (i)
which Blair has identified, (ii) in respect of which Blair has
rendered advice, or (iii) with which the Company has directly or
indirectly held discussions prior to such termination, then Blair
will be entitled to the full amount of the fee contemplated by
Section 2.
7. Governing Law; Jurisdiction; Waiver of Jury Trial. This letter
agreement and the Indemnity Agreement will be deemed made in New York
and will be governed by the laws of the State of New York. The
Company irrevocably submits to the jurisdiction of any court of the
State of New York or the United States District Court of the Southern
District of New York for the purpose of any suit, action or other
proceeding arising out of this letter agreement or the Indemnity
Agreement, or any of the agreements or transactions contemplated
hereby, which is brought by or against the Company. Each of the
Company (and, to the extent permitted by law, on behalf of the
Company's equity holders and creditors) and Blair hereby knowingly,
voluntarily and irrevocably waives any right it may have to a trial
by jury in respect of any claim based upon, arising out of or in
connection with the Indemnity Agreement, this letter agreement and
the transactions contemplated hereby (including, without limitation,
any Possible Transaction).
8. No Rights in Equityholders, Creditors. This letter agreement does not
create, and will not be construed as creating, rights enforceable by
any person or entity not a party hereto, except those entitled thereto
by virtue of the Indemnity Agreement. The Company acknowledges and
agrees that (i) Blair will act as an independent contractor and is
being retained solely to assist the Company in its efforts to effect
a Possible Transaction and that, Blair is not being retained to advise
the Company on, or to express any opinion as to, the wisdom,
desirability or prudence of consummating a Possible Transaction,
(ii) Blair is not and will not be construed as a fiduciary of the
Company or any affiliate thereof and will have no duties or
liabilities to the equityholders or creditors of the Company, any
affiliate of the Company or any other person by virtue of this letter
agreement and the retention of Blair hereunder, all of which duties
and liabilities are hereby expressly waived and (iii) any advice
rendered by Blair does not constitute a recommendation to any equity-
holder that such equityholder might or should take in connection with
the Possible Transaction. Neither equityholders nor creditors of
the Company are intended beneficiaries hereunder.
CCA Industries, Inc. -6- May 2, 2005
9. Blair; Other Advisors. It is understood and agreed that Blair may,
from time to time, make a market in, have a long or short position,
buy and sell or otherwise effect transactions for customer accounts
and for their own accounts in the securities of, or perform investment
banking or other services for, the Company and other entities which are
or may be the subject of the engagement contemplated by this letter
agreement. The Company confirms that it will rely on its own counsel,
accountants and other similar expert advisors for legal, accounting,
tax and other similar advice.
10. Other. The Company agrees that it will not enter into an agreement
with respect to a Possible Transaction involving a sale of all or
substantially all of the Company's assets or operations, unless such
agreement expressly provides for the unconditional assumption of the
Company's obligations to Blair under this letter agreement and the
Indemnity Agreement. This letter agreement may not be modified or
amended except in writing executed by the parties hereto. This
letter agreement, and any modification or amendment thereto, may be
executed in counterparts, each of which will be deemed an original
and all of which will constitute one and the same instrument.
If the foregoing correctly sets forth our agreement, please so indicate by
signing below and returning an executed copy to us. We look forward to working
with you.
Very truly yours,
WILLIAM BLAIR & COMPANY, L.L.C.
By:
ACCEPTED AND AGREED AS OF
THE DATE FIRST ABOVE WRITTEN
CCA INDUSTRIES, INC.
By: