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EXHIBIT (C)(3)
[Letterhead of Stonebridge Associates, LLC]
April 4, 1997
The Board of Directors
Jillian's Entertainment Corporation
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxx
Gentlemen:
This letter agreement (the "Agreement") is to confirm the engagement
of Stonebridge Associates, LLC ("Stonebridge") as financial advisor to the
Board of Directors (the "Board") of Xxxxxxx's Entertainment Corporation (the
"Company") and to Xxxx X. Xxxxx in his capacity as the outside director of the
Company who has been designated (the "Designated Director") to perform the
functions of a special committee of the Board. You have advised us that the
Company proposes to enter into an agreement and plan of merger pursuant to
which a wholly-owned subsidiary of a newly formed corporation to be controlled
by X.X. Childs Equity Partners, L.P. and its affiliates, would be merged into
the Company and all of the holders of outstanding shares of the common stock of
the Company, except certain specified management and other large shares (the
"Specified Shareholders"), would receive cash consideration for their shares
(the "Proposed Transaction"). In connection with the Proposed Transaction, the
Designated Director and the Board request that Stonebridge undertake an
analysis to determine the fairness, from a financial point of view, of the cash
consideration to be offered to the Company's shareholders, other than the
Specified Shareholders, and render a written opinion to the Designated Director
and the Board as to such fairness (the "Opinion"). The terms and conditions of
Stonebridge providing such financial advisory services are presented below.
1. Xxxxxxxxxxx, immediately upon engagement, will commence, for
the Designated Director and the Board, a review and evaluation of the Company,
its management, operations, business, financial characteristics and future
prospects which will provide the basis for its Opinion. Stonebridge will
generally review the industry in which the Company competes and develop
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The Board of Directors
Xxxxxxx's Entertainment Corporation
April 4, 1997
Page 2 of 4
comparative information related to operating and financial characteristics.
Stonebridge will review the historic market trading in the Company's Common
Stock and perform other such analyses which Stonebridge deems relevant. The
Opinion shall, in any event, be limited to the fairness, from a financial point
of view, of the consideration offered to the Company's shareholders, other than
the Specified Shareholders, in the Proposed Transaction and shall not address
the Company's underlying business decision to effect the Proposed Transaction.
Stonebridge will not, in preparing its Opinion, solicit additional offers for
the acquisition of the shares owned by shareholders other than the Specified
Shareholders.
The form of the Opinion shall be such as Stonebridge may consider
appropriate (provided that the form of the Opinion is reasonably acceptable to
the Designated Director and the Board) and may state, in substance, among other
things, that it assumes and is given in reliance on the accuracy and
completeness of the information concerning the Company furnished to Stonebridge
by the Company. It is understood that the Opinion may be included in its
entirety in any public filing (including a proxy statement) or release made by
the Company or other submission by the Company to any state or federal
securities regulatory authority, the National Association of Securities Dealers
or as may be required by any judicial proceeding. However, no summary of or
excerpt from the Opinion may be made, except with Xxxxxxxxxxx's approval, which
will not be unreasonably withheld.
2. As compensation for the services described above, Xxxxxxxxxxx will
be entitled to the following compensation:
(i) Upon commencement of this engagement $25,000
(ii) Upon Xxxxxxxxxxx's offer to deliver its Opinion $55,000
(iii) Upon Stonebridge's offer to delivery any requested update The lessor of $10,000 and
to any previously delivered Opinion an amount determined by
the daily billable rates
outlined in Exhibit A
Stonebridge will be entitled to these fees regardless of whether the Proposed
Transaction occurs.
3. In addition to any fees that may be payable to Stonebridge hereunder
(and regardless of whether the Proposed Transaction occurs), the Company hereby
agrees, from time to time upon request, to reimburse Stonebridge promptly for
travel and other out-of-pocket expenses incurred in performing its services
hereunder, including the reasonable fees and expenses of its legal counsel when
consulted in connection with actions taken pursuant to this Agreement.
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The Board of Directors
Xxxxxxx's Entertainment Corporation
April 4, 1997
Page 3 of 4
4. The Company agrees to indemnify Stonebridge and related persons in
accordance with the Standard Form of Indemnification Agreement attached hereto
as Exhibit B, the provisions of which are incorporated herein by this
reference.
5. The Company agrees that Stonebridge shall be entitled to rely upon
all reports of the Company and/or information supplied to Stonebridge by or on
behalf of the Company (whether written or oral), and Stonebridge shall not in
any respect be responsible for the accuracy or completeness of such report or
information or have any obligation to verify the same.
6. Except for provisions regarding disclosure of the Opinion contained
in Paragraph 1 above, or as otherwise required by law, Stonebridge may not be
quoted or referred to in any document, release or written communication
prepared, issued or transmitted by the Company or any entity controlled by the
Company, or any director, officer, employee, or agent thereof, without
Xxxxxxxxxxx's prior written authorization. The Company agrees that, subsequent
to the closing of any transaction, Xxxxxxxxxxx has the right at its own expense
to place customary advertisements in financial and other newspapers and
journals and to make mailings to its current, former or prospective clients
describing its services to the Company hereunder.
7. The Company agrees that any information or advice rendered by
Stonebridge or its representatives in connection with this engagement is for
the confidential use of the Designated Director and the Board and, except as
otherwise required by law, the Company will not and will not permit any third
party to disclose or otherwise refer to such advice or information in any
manner without Xxxxxxxxxxx's prior written consent.
8. The term of Xxxxxxxxxxx's engagement as financial advisor to the
Designated Director and the Board shall commence on this date hereof and shall
continue until terminated upon ten days prior written notice by the Designated
Director and the Board provided, however, that no termination shall affect the
indemnification, contribution and confidentiality obligations of the Company or
the right of Stonebridge to receive any unpaid amounts due hereunder as of the
date of termination. If the engagement is terminated prior to Xxxxxxxxxxx's
offer to deliver its Opinion, Stonebridge will not be required to refund any
portion of the $25,000 paid at the commencement of this engagement.
9. The Company's sole recourse with respect to this Agreement for any
matter relating to this Agreement shall be to Stonebridge and in no event shall
the Company have any recourse or assert any claim against or seek recovery from
any other Indemnified Party as defined in the Standard Form of Indemnification
Agreement.
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The Board of Directors
Xxxxxxx's Entertainment Corporation
April 4, 1997
Page 4 of 4
10. In the event of administrative proceedings or litigation in
connection with the services provided by Stonebridge, Xxxxxxxxxxx agrees that
its representation will testify at the request of the Company or its counsel.
Subject to the provisions of the Standard Form of Indemnification Agreement,
the Company will reimburse Stonebridge for all out-of-pocket expenses
reasonably incurred by Stonebridge including the reasonable fees and
disbursements of its legal counsel, and the Company will pay Stonebridge
reasonable and customary additional compensation as agreed upon by Stonebridge
and the Company to cover preparation for and the expenses of testifying at such
litigation or proceeding.
11. This agreement a) shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts without regard to conflicts
of law principles, b) incorporates the entire understanding of the parties with
respect to the subject matter hereof and supersedes all previous agreements
should they exist with respect thereto, c) may not be amended or modified
except in writing executed by the Company and Stonebridge and d) shall be
binding upon and inure to the benefit of the Company, Stonebridge, any
indemnified parties and their respective heirs, personal representatives,
successors and assigns. Except as otherwise contemplated by Exhibit B hereto,
nothing in this agreement is intended to confer upon any other person other
than the parties hereto any rights or remedies hereunder or by reason hereof.
This agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement. Please confirm that the foregoing is in accordance with
your understanding by signing and returning to us a copy of this letter.
Very truly yours,
STONEBRIDGE ASSOCIATES, LLC
Xxxxxxx X. Xxxxxx, Xx.
President
Accepted and agreed to as of
the date set forth above:
JILLIAN'S ENTERTAINMENT CORPORATION
By: _________________________
Xxxx X. Xxxxx
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EXHIBIT A
STONEBRIDGE ASSOCIATES, LLC
DAILY BILLABLE RATES
Work performed by Stonebridge professional staff in preparing an
updated Opinion shall be billed to the Company at the following daily rates:
Managing Director or equivalent $3,500 per day
Vice President 2,500 per day
Associate 1,750 per day
Financial Analyst 1,250 per day
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EXHIBIT B
STONEBRIDGE ASSOCIATES, LLC
STANDARD FORM OF INDEMNIFICATION AGREEMENT
In connection with the services Stonebridge Associates, LLC has agreed to
render to the Company, the Company agrees to indemnify and hold harmless
Stonebridge Associates, LLC, its officers, directors, employees, agents,
managers, members, affiliates and persons deemed to be in control of
Stonebridge Associates, LLC within the meaning of either Section 15 of the
Securities Act of 1933, as amended, or Section 20 of the Securities Exchange
Act of 1934, as amended (collectively, the "Indemnified Parties"), from and
against any losses, claims, damages and liabilities, joint or several, related
to or arising in any manner out of any transaction, proposal or any other
matter (collectively, the "Matters") contemplated by the engagement of
Stonebridge Associates, LLC hereunder. The Company also will promptly reimburse
the Indemnified Parties for any expenses (including reasonable fees and
expenses of legal counsel) as incurred in connection with the investigation of,
preparation for or defense of any pending or threatened claim related to or
arising in any manner out of any Matter contemplated by the engagement of
Stonebridge Associates, LLC hereunder, or any action proceeding arising
therefrom, whether or not resulting in liability (collectively, "Proceedings").
Notwithstanding the foregoing, the Company shall not be liable in respect of
any losses, claims, damages, liabilities or expenses that a court or competent
jurisdiction shall have determined by final judgment resulted solely from the
gross negligence or willful misconduct of any Indemnified Party. Promptly after
receipt by an Indemnified Party of notice of any claim or the commencement of
any action or proceeding in respect of which indemnity may be sought against
the Company, such Indemnified Party will notify the Company in writing or the
receipt of commencement thereof, and the Company shall assume the defense of
such action or proceeding (including the employment of counsel satisfactory to
the Indemnified Party and the payment of reasonable fees and expenses of such
counsel), but the failure so to notify the Company will not relieve the Company
from any liability which it may have to any Indemnified Party except to the
extent of the Company's actual damages arising from the failure to so notify
the Company. Notwithstanding the preceding sentence, the Indemnified Party will
be entitled to employ its own counsel in such action if the Indemnified Party
reasonably determines that a conflict of interest exists which makes
representation by counsel chosen by the Company not advisable. In such event,
the reasonable fees and disbursements of such separate counsel will be paid by
the Company.
If for any reason the foregoing indemnity it unavailable to Stonebridge
Associates, LLC or insufficient to hold Stonebridge Associates, LLC harmless,
then the Company shall contribute to the amount paid or payable by Stonebridge
Associates, LLC as a result of such claims, liabilities, losses, damages or
expenses in such proportion as is appropriate to reflect not only the relative
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benefits received by the Company on the one hand and Stonebridge Associates,
LLC on the other but also the relative fault of the Company and Stonebridge
Associates, LLC, as well as any relevant equitable consideration.
Notwithstanding the provisions of this agreement, the aggregate contribution of
Stonebridge Associates, LLC to all claims, liabilities, losses, damages and
expenses shall not exceed the amount of fees actually received by Stonebridge
Associates, LLC pursuant to its engagement by the Company. It is hereby further
agreed that the relative benefits to the Company on the one hand and
Stonebridge Associates, LLC on the other hand with respect to the transactions
contemplated in this engagement letter shall be deemed to be in the same
proportion as (i) the total value of the transaction bears to (ii) the fees
paid to Stonebridge Associates, LLC with respect to such transaction.
The indemnity, contribution and expense reimbursement agreements and
obligations set forth herein shall apply whether or not an Indemnified Party is
a formal party to any Proceeding, shall be in addition to any other rights,
remedies or indemnification which any Indemnified Party may have or be entitled
to at common law or otherwise, and shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Indemnified
Party or any withdrawal, termination or consummation of or failure to initiate
or consummate any Matter or any termination or completion or expiration of this
letter or Stonebridge Associates, LLC's engagement.
