Document:

exv10w4w5

 

EXHIBIT 10.4(5)

AMENDMENT NO. 1 TO

AMENDED AND RESTATED JOINT VENTURE AGREEMENT

     THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED JOINT VENTURE AGREEMENT (this
“Amendment”) is made and entered into as of April 25, 2005, by and among Nevada
Landing Partnership, an Illinois general partnership (“Nevada Group”), and RBG, L.P., an
Illinois limited partnership (“Illinois Group”).

W I T N
E S S E T H:

     WHEREAS, the Nevada Group and the Illinois Group are the Partners of Elgin Riverboat
Resort-Riverboat Casino, an Illinois general partnership (the “Joint Venture”), each with a
fifty (50%) percent Partnership Interest;

     WHEREAS, the Joint Venture is governed by that certain Amended and Restated Joint
Venture Agreement, made and entered into as of June 25, 2002 (the “JV Agreement”);

     WHEREAS, the Nevada Group is an indirect wholly-owned subsidiary of Mandalay Resort Group, a
Nevada corporation, which has agreed to merge with and into a wholly-owned subsidiary of MGM
MIRAGE, a Delaware corporation (the “Merger”);

     WHEREAS, in connection with, and to facilitate the completion of the Merger, the Nevada Group
desires to deposit with and J.P. Morgan Trust Company, National Association, as escrow agent (the
“Escrow Agent”), and the Escrow Agent is willing to accept and receive into escrow, all of
the Nevada Group’s Partnership Interest in the Joint Venture, effective immediately prior to the
Merger (the “Escrow”), all as more fully described in and pursuant to the terms and
conditions of a certain escrow agreement of even date herewith a copy of which is attached hereto
as Annex 1 (the “Escrow Agreement”);

     WHEREAS, pursuant to Section 11.10 of the JV Agreement, the JV Agreement may be amended in a
document duly executed by each Partner; and

     WHEREAS, the Partners desire to amend the JV Agreement to provide for, among other things, the
rights and obligations of the Partners during the pendency of the Escrow.

     NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the parties hereto agree as follows:

     1. Definitions. Capitalized terms used but not defined herein shall have the
respective meanings given to such terms in the JV Agreement.

     2. Amendments to Definitions. Article I of the JV Agreement is hereby amended to
replace the word “Hotel” with “Joint Venture’s assets” in the definition of “Sale” and to add the
following defined terms in alphabetical order to Article I to read as follows:

          “Amendment” shall mean that certain Amendment No. 1 to Amended and Restated
Joint Venture Agreement, entered into as of April ___, 2005.

 

 

          “Deposits” shall have the meaning set forth in the Escrow Agreement.

          “Escrow Agent” shall mean J.P. Morgan Trust Company, National Association, in
its capacity as escrow agent pursuant to the Escrow Agreement, or any permitted successor
thereto.

          “Escrow Agreement” shall mean that certain Escrow Agreement, dated as of April
___, 2005, by and between the Nevada Group and the Escrow Agent a copy of which is attached
to this Agreement as Exhibit A.

          “Escrowed Interest” shall mean the Nevada Group’s right, title and interest in
and to its Partnership Interest in the Joint Venture deposited with the Escrow Agent,
including all Deposits and Permitted Investments.

          “Independent Accountants” shall mean Deloitte & Touche LLP, or such other
national accounting firm as selected by the Nevada Group and Illinois Group.

          “Interim Period” shall mean the period of time beginning on the date the
Escrowed Interest is deposited into escrow pursuant to the Escrow Agreement and ending on
the assignment of the Escrowed Interest out of escrow pursuant to the Escrow Agreement
following approval thereof by the Illinois Gaming Board or as otherwise directed by the
Illinois Gaming Board.

          “Merger” shall mean the merger of Mandalay Resort Group, a Nevada corporation,
into a wholly-owned subsidiary of MGM MIRAGE, a Delaware corporation.

          “Permitted Investments” shall have the meaning set forth in the Escrow Agreement.

          “Subject Interest” shall mean the Partnership Interest of the Nevada Group,
including the Escrowed Interest.

          “Subject Transactions” shall mean the Merger, the deposit of the Escrowed
Interest into escrow pursuant to the Escrow Agreement and/or any of the transactions
associated therewith or contemplated thereby; provided, however, that the term Subject
Transactions shall not include actions by the Managing Joint Venture Partner in connection
with the operation of the Joint Venture’s business or the provisions in this Agreement
relating to the Preferred Distribution.

          “Tax Loss” shall mean the amount as determined by the Independent Accountants
calculated as the difference between:

          (x) the sum of (1) the increased amount of state and federal income taxes owed
by a Tax Termination Indemnitee (as defined in Section 9.4 of

2

 

the Agreement, as amended by this Amendment) as a result of a final
determination, after all available appeals have been exhausted) that a sale or other
transfer of a Partnership Interest has caused a tax termination of the Joint Venture
for federal income tax purposes pursuant to Section 708(b) of the Code (including
interest and penalties assessed) using such Tax Termination Indemnitee’s marginal
income tax rates applicable to the income resulting from the adjusted allocation
from the Joint Venture and the payment of the Tax Loss; and (2) the amount of
increased state and federal income tax owed by such Tax Termination Indemnitee with
respect to taxable years after the taxable years at issue in the final determination
described above using the same marginal income tax rates used for clause (1) of this
definition discounted to the date of payment of the Tax Loss at a rate equal to six
percent (6%); and

          (y) the amount of decreased state and federal income taxes owed by such Tax
Termination Indemnitee with respect to taxable years after the taxable years at
issue in the final determination described above using the same marginal income tax
rates used for clause (1) of this definition discounted to the date of payment at a
rate equal to six percent (6%).

     3. Amendment related to Escrow. Article XI of the JV Agreement is hereby amended to
add a new Section 11.14 to Article XI to read as follows:

          “11.14 Escrow-Related Matters. During the Interim Period and notwithstanding anything
in this Agreement to the contrary, neither the Nevada Group nor the Escrow Agent shall be
deemed to have any power or authority of a Partner hereunder and the Escrow Agent shall not
be a substitute Partner; provided that (i) in accordance with the terms and conditions of
the Escrow Agreement and applicable law, the Escrow Agent shall be entitled to receive and
hold in escrow the Nevada Group’s share of the profits and the Nevada Group shall bear its
share of losses as a Partner and (ii) the Nevada Group and, the Escrow Agent to the extent
of the Deposits and Permitted Investments, shall be liable for 50% of the liabilities of the
Joint Venture. In furtherance and not in limitation of the forgoing, the following
provisions shall apply during the pendency of the Interim Period:

          (a) The Nevada Group hereby irrevocably authorizes and directs the Joint
Venture to deposit with the Escrow Agent all cash and/or other distributions with
respect to the Nevada Group’s Partnership Interest.

          (b) Neither the Nevada Group nor the Escrow Agent shall have any right to
designate or elect any member of the Committee.

          (c) The members of the Committee appointed by the Nevada Group who serve on the
Committee immediately prior to the commencement of the Interim Period are hereby
removed from such positions by the Nevada Group

3

 

effective on the date hereof and the three (3) positions on the Committee to
which the Nevada Group is entitled to appoint members shall remain vacant during the
Interim Period. Any action taken by the remaining members of the Committee in
conformity with this Agreement and applicable law shall be fully binding on all
Partners (including, for this purpose, the Nevada Group and the Escrow Agent).

          (d) Any action that may be taken by a Partner pursuant to the terms of this
Agreement may only be taken by the Managing Joint Venture Partner in conformity with
this Agreement and applicable law; provided, that, unless required by the
Illinois Gaming Board or the staff of the Illinois Gaming Board, the Managing Joint
Venture Partner shall not have the authority to:

          (i) sell all or substantially all of the assets of the Joint Venture;

          (ii) re-brand the Joint Venture assets; or

          (iii) make calls for additional capital contributions to fund
expenditures which are not in the ordinary course of business and which are
not required for the operation of the Joint Venture assets as they are
presently operated or proposed to be operated (as of the date hereof);
provided, that the foregoing provisions of this sub-clause (iii)
shall not limit the ability of the Managing Joint Venture Partner to make
calls for additional capital contributions to the extent such additional
capital contributions are: (A) reasonably necessary in the event of an
emergency for the continued operation of the Joint Venture and its assets as
they are operated immediately prior to the event giving rise to the
emergency (but taking into account the nature and impact of the emergency);
(B) consistent with past practice of the Nevada Group (in its capacity as
Managing Joint Venture Partner); (C) reasonably necessary to maintain the
competitive position of the Joint Venture and its assets so long as such
expenditures are not of such disproportionate size or nature as to
unreasonably change the nature of the Joint Venture and/or its assets; (D)
used to fund the acquisition of additional gaming positions to the extent
allowed by Illinois law, together with any additional expenditures
reasonably necessary to support such additional gaming positions; (E)
required by the Illinois Gaming Board in connection with re-licensing or
otherwise; or (F) consistent with the most recent capital expenditure budget
approved by the Committee.

          (e) Except as provided by the terms and provisions of the Escrow Agreement or
as contemplated in this Agreement, the Nevada Group will

4

 

not, and will not cause the Escrow Agent to, sell, transfer, convey or assign
or attempt to sell, transfer, convey or assign the Subject Interest.

          (f) The Escrow Agent, to the extent of the Deposits and the Permitted
Investments, shall advance to the Joint Venture the Nevada Group’s pro rata share of
any required additional capital contributions pursuant to Section 4.2 of this
Agreement; provided, that the Nevada Group or its Affiliates shall be
allowed to fund such capital calls to the extent that the Nevada Group or its
Affiliates are permitted to do so by applicable law and the Illinois Gaming Board.
Any amounts funded pursuant to this Section 11.4(f) shall be credited to the Nevada
Group’s capital account.

          (g) The Committee shall continue to operate the Joint Venture in the ordinary
course, consistent with past practice; provided that the foregoing shall not
limit the ability of the Committee to take or authorize actions: (i) otherwise
expressly contemplated by this Agreement, (ii) reasonably necessary in the event of
an emergency for the continued operation of the Joint Venture and its assets as they
are operated immediately prior to the event giving rise to the emergency (but taking
into account the nature and impact of the emergency); (iii) reasonably necessary to
maintain the competitive position of the Joint Venture and its assets so long as
such expenditures are not of such disproportionate size or nature as to unreasonably
change the nature of the Joint Venture and/or its assets; (iv) in connection with
the acquisition of additional gaming positions to the extent allowed by Illinois
law, together with any actions reasonably necessary to support such additional
gaming positions; or (v) required by the Illinois Gaming Board.

          (h) Without limiting anything contained in this Agreement, the Managing Joint
Venture Partner shall not have the unilateral right to effect any further amendments
to this Agreement except to the extent required by applicable law or the Illinois
Gaming Board.

            The Nevada Group and MGM MIRAGE, a Delaware corporation, shall jointly and severally
indemnify, defend and hold the Joint Venture and the Illinois Group, and each officer,
director, stockholder, partner, employee, agent, affiliate, subsidiary or assign of the
Joint Venture or the Illinois Group (the “Escrow-Related Indemnitees”) free and
harmless of, and from and against any expenses, losses, claims, costs, damages and
liabilities, including without limitation, judgments, fines, amounts paid in settlement and
expenses (including without limitation, attorneys fees and expenses, court costs,
investigation costs and litigation costs) incurred by any Escrow-Related Indemnitee arising
out of or in connection with (i) any claim, allegation or determination that the
transactions contemplated by the Amendment, including, without limitation, the Subject
Transactions, are prohibited by law or result or could result in a Loss of License, whether

5

 

before the Illinois Gaming Board or otherwise, (ii) any claim, allegation or
determination that the transactions contemplated by the Amendment, including, without
limitation, the Subject Transactions, result in a termination of the Joint Venture for
federal or state income tax purposes, which indemnity shall be in accordance with Section
9.4 of this Agreement, as amended by the Amendment, and (iii) any action or omission of the
Nevada Group or any equity holder, affiliate, subsidiary or assign of the Nevada Group in
respect of the Joint Venture or the Illinois Group during the Interim Period, including any
breach of this Joint Venture Agreement. Neither the Escrow Agent, Nevada Group nor any
officer, director, stockholder, partner, employee, agent, affiliate, subsidiary or assign of
the Nevada Group shall be entitled to indemnification from the Joint Venture (pursuant to
Section 7.7 or otherwise) with respect to the matters specified in the immediately
proceeding sentence. Notwithstanding the foregoing, the foregoing indemnification is not
intended to apply to actions taken by the Managing Joint Venture Partner in connection with
the operation of the Joint Venture’s business, which shall be governed solely by Section
7.7.

     If the Interim Period has not terminated within twelve (12) months from the date
hereof, then the Illinois Group shall have the right to initiate and conduct, with the
reasonable participation of the Nevada Group, an auction for the sale of all Partnership
Interests in the Joint Venture and/or all or substantially all of the assets of the Joint
Venture to a third party through a nationally recognized “bulge bracket” investment banking
firm reasonably acceptable to the Nevada Group (the “Investment Bank”), and to cause
the Nevada Group to sell its Partnership Interest in the Joint Venture in such a transaction
or sell all or substantially all of the assets of the Joint Venture for the highest and best
price obtained in the auction process concurrently with the sale of the Illinois Group’s
Partnership Interest or the sale of all or substantially all of the assets of the Joint
Venture. The Nevada Group agrees to cooperate (to the extent permitted by law) in the
auction process in good faith and accept terms and conditions of the sale which are no less
favorable to it than those to which the Illinois Group is subject.

     Immediately upon termination of the Interim Period, subject to the terms of this
Agreement and applicable law, the Nevada Group or its transferee pursuant to the Escrow
Agreement (subject to the other terms and conditions of this Agreement and the approval of
the Illinois Gaming Board and any other applicable governmental authority) shall be restored
in all of the power and authority of a Partner hereunder, including without limitation, its
right to appoint three (3) members of the Committee pursuant to Section 7.1 of the
Agreement.”

6

 

     4. Amendments related to Managing Joint Venture Partner.

          (i) Section 7.1 of the JV Agreement is hereby amended to replace the fifth full paragraph of
Section 7.1 (which, for the avoidance of doubt, begins with the words “The Managing Joint Venture
Partner will not receive any fees but will receive ...”) with the following:

          “The Managing Joint Venture Partner shall be entitled to receive one percent (1%) of
Adjusted Gross Receipts (as defined in the Illinois Riverboat Gambling Act) as a preferred
distribution (the “Preferred Distribution”) (which shall be a guaranteed payment under
Section 707(c) of the Code), to be made prior to any distributions in accordance with
Partnership Percentages, for the exercise of its responsibilities as the Managing Joint
Venture Partner. In addition, the Managing Joint Venture Partner shall be entitled to
reimbursements for costs and expenses pursuant to Section 7.3 of this Agreement;
provided that during the Interim Period, neither the Committee nor the Managing
Joint Venture Partner shall have the right to approve the payment by or allocation to the
Joint Venture of any salaries, fees, commissions or other compensation whatsoever of any
Affiliate of the Managing Joint Venture Partner except to the extent such payment or
allocation is consistent with the past practice of the Nevada Group (in its capacity as
Managing Joint Venture Partner) and is otherwise on an arms’ length basis.”

          (ii) Section 7.1 of the JV Agreement is hereby amended to replace the sixth full paragraph of
Section 7.1 (which, for the avoidance of doubt, begins with the words “In the event that Michael S.
Ensign should cease to be either the Chief Operating Officer ...”) with the following:

          “Subject to the terms of this Agreement and applicable law, the Managing Joint Venture
Partner shall have the right and authority to cause the Joint Venture to finance or
refinance its assets with a third party lender or lenders that are not an Affiliate of
either Partner on such commercially reasonable terms as determined in conjunction with an
internationally recognized “bulge bracket” investment banking firm selected by the Managing
Joint Venture Partner; provided, that any net proceeds of such financing or
refinancing available for distribution shall be distributed to the Partners in accordance
with the terms of this Agreement.”

     5. Amendments related to Transfers Causing Tax Termination.

          (i) Section 9.4 of the JV Agreement is hereby amended to delete clause (iv) of Section 9.4 in
its entirety and to re-number the succeeding clauses of Section 9.4 accordingly.

          (ii) Section 9.4 of the JV Agreement is hereby amended to add a new sentence to the end of
Section 9.4 to read as follows:

7

 

          “In connection with any sale or other transfer of a Partnership Interest, the selling
or transferring Partner shall indemnify, defend and hold the Joint Venture and each of the
other Partners (including, for this purpose, the Nevada Group), and each officer, director,
stockholder, partner, employee, agent, affiliate, subsidiary or assign of the Joint Venture
or such other Partner (the “Tax Termination Indemnitees”) free and harmless of, from
and against any Tax Loss incurred by any Tax Termination Indemnitee arising out of or in
connection with any claim, allegation or determination that such sale or other transfer
results in a termination of the Joint Venture for federal or state income tax purposes.”

     6. Amendments related to Buy-Out Provisions.

          (i) Section 8.3 of the JV Agreement is hereby amended to replace the second sentence of
Section 8.3 with the following:

          “The closing shall take place at the offices of the Joint Venture on the later of (x)
the thirtieth (30th) day after delivery of the Buy-Out Notice or (y) the third
(3rd) day after all consents, approvals and authorizations of any governmental
authority (including the Illinois Gaming Board) necessary to complete the buy out shall have
been obtained and any applicable waiting period under applicable antitrust laws shall have
expired or been terminated.”

          (ii) Section 8.3 of the JV Agreement is hereby amended to add a new sentence after the third
sentence of Section 8.3 to read as follows:

          “The Responsible Partner shall be required to make the following representations and
warranties to the Non-Responsible Partner at the closing: (i) good title to the Partnership
Interest being sold, (ii) the absence of liens or other encumbrances with respect to the
Partnership Interest, (iii) the Responsible Partner’s valid existence and good standing,
(iv) the authority for, and validity and binding effect of (as against the Responsible
Partner), any agreement entered into by the Responsible Partner’s in connection with such
sale, and (v) all required material consents to the Responsible Partner’s sale and material
governmental approvals having been obtained (excluding any securities laws).”

     7. Amendments Relating to Transfers. Section 9.5 of the JV Agreement is hereby
amended by:

          (i) deleting the last sentence of the first paragraph thereof;

          (ii) deleting the clause “and upon admission of the transferee as a new partner” in the third
paragraph thereof; and

          (iii) adding the following sentence at the end of Section 9.5:

8

 

          “Notwithstanding the foregoing, each Partner owning at least a fifty percent (50%)
Partnership Interest shall be entitled to elect three (3) members of the Committee.”

     8. Amendments to Exhibits. The JV Agreement is hereby amended to add an Annex 1 to
the JV Agreement to read as Annex 1 attached hereto.

     9. Matters related to Escrow Agreement. Without the prior written consent of the
Illinois Group, neither the Nevada Group nor the Escrow Agent shall modify, amend or terminate, or
waive or release any of its rights under, the Escrow Agreement, unless required by the Illinois
Gaming Board. Any successor to the original Escrow Agent shall be subject to the prior written
approval of the Illinois Group, which approval shall not be unreasonably withheld or delayed. The
Illinois Group, the Nevada Group and the Escrow Agent agree that the terms of the JV Agreement, as
amended, shall govern and control the rights and obligations associated with Partnership Interests
and the operations of the Joint Venture.

     10. No Other Amendments. Except as specifically amended hereby, the JV Agreement
shall continue in full force and effect as written.

     11. Governing Law. This Amendment is made pursuant to and shall be governed by and
construed in accordance with the laws of the State of Illinois.

     12. Captions. All article and section headings or captions contained in this
Amendment are inserted only as a matter of convenience and for reference and in no way define,
limit, extend or describe the scope of this Amendment or the intent of any provision hereof.

     13. Severability. If any provision of this Amendment or application to any party or
circumstances shall be determined by any court of competent jurisdiction to be invalid or
unenforceable to any extent, the remainder of this Amendment or the application of such provision
to such person or circumstances, other than as to which it is so determined invalid or
unenforceable shall not be affected thereby, and each provision shall be valid and shall be
enforced to the fullest extent permitted by law.

     14. Entire Agreement. The JV Agreement, as amended hereby, contains the entire
understanding and agreement of the parties hereto with respect to the subject matter hereof and all
prior agreements relative hereto which are not contained herein are terminated. All references in
the JV Agreement to “this Agreement”, “hereof”, “hereby” and words of similar import shall refer to
the JV Agreement as amended hereby.

     15. Counterparts. This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which, when taken together, shall be deemed one
agreement, but no counterpart shall be binding unless an identical counterpart shall have been
executed and delivered by each of the other parties hereto.

9

 

     16. Further Assurances. The parties hereto shall do and perform or cause to be done
and performed all such further acts and things and shall execute and deliver all such other
agreements, certificates, instruments or documents as any other party may reasonably request in
order to carry out the intent and purposes of this Amendment.

     17. Illinois Gaming Laws. All of the provisions of this Amendment are subject to the
Illinois Riverboat Gambling Act and the rules and regulations of the Illinois Gaming Board.

     18. Principal Stockholders. The parties acknowledge that neither Tracinda Corporation
nor Kirk Kerkorian, individually or collectively, is a party to this Amendment, the JV Agreement or
any exhibit or agreement provided for herein or therein. Accordingly, the parties hereby agree
that in the event (i) there is any alleged breach or default by any party under this Amendment, the
JV Agreement or any exhibit or agreement provided for herein or therein, or (ii) any party has any
claim arising from or relating to any such agreement, no party, nor any party claiming through it
(to the extent permitted by applicable law), shall commence any proceedings or otherwise seek to
impose any liability whatsoever against Tracinda Corporation or Kirk Kerkorian by reason of such
alleged breach, default or claim.

[SIGNATURE PAGE FOLLOWS]

10

 

     IN WITNESS WHEREOF, the parties hereto have duly caused this Amendment to be duly executed as
of the day and year first written above.

	 	 	 	 	 	 	 
	 	 	PARTNERS:  
	 
	 	 	 	 	 	 
	 	 	ILLINOIS GROUP
	 
	 	 	 	 	 	 
	 	 	RBG, L.P., an Illinois limited partnership
	 
	 	 	 	 	 	 
	 

	 	By:
	 	HCCA CORPORATION, its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Peter M. Liguori	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Peter M. Liguori	 	 
	 

	 	 	 	Its: President	 	 
	 
	 	 	 	 	 	 
	 	 	NEVADA GROUP
	 
	 	 	 	 	 	 
	 	 	NEVADA LANDING PARTNERSHIP, an
	 	 	Illinois general partnership
	 
	 	 	 	 	 	 
	 

	 	By:
	 	M.S.E. INVESTMENTS, INCORPORATED,
a general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Michael S. Ensign	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Michael S. Ensign	 	 
	 

	 	 	 	Its:	 	 

 

 

LIMITED JOINDER

     WHEREAS, Nevada Landing Partnership, an Illinois general partnership (“Nevada Group”), and
RBG, L.P., an Illinois limited partnership (“Illinois Group”), are the Partners of Elgin Riverboat
Resort-Riverboat Casino, an Illinois general partnership (the “Joint Venture”):

     WHEREAS, the Joint Venture is governed by that certain Amended and Restated Joint
Venture Agreement, made and entered into as of June 25, 2002 (the “JV Agreement”);

     WHEREAS, to induce the Illinois Group to enter into that certain Amendment No. 1 to Amended
and Restated Joint Venture Agreement (the “Amendment”), dated as of the date hereof, the
undersigned desires to join in the execution and delivery of the JV Agreement, as amended by the
Amendment, solely with respect to the provisions set forth in Sections 11.3, 11.5, 11.6, 11.7,
11.8, 11.9, 11.11, 11.13 and 11.14 thereof (the “Applicable Sections”);

     NOW, THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the undersigned hereby joins in the execution and delivery of the JV Agreement, as
amended by this Amendment, solely with respect to the provisions set forth in the Applicable
Sections and agrees to be bound in all respects by the Applicable Sections as if the undersigned
were a signatory thereto.

	 	 	 	 	 	 	 	 	 
	Dated: April 25, 2005	 	MGM MIRAGE, a Delaware corporation  
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Bryan L. Wright	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Bryan L. Wright	 	 
	 

	 	 	 	Its:
	 	Senior Vice President, Assistant

General Counsel	 	 

 

 

ANNEX 1

Escrow Agreement

[See Attached]exv10w12

 

Exhibit 10.12

March ___, 2006

CHANGE OF CONTROL AGREEMENT

Dear ___:

     The Board of Directors believes that it is in the best interests of Matrixx Initiatives,
Inc. (“Matrixx”), and its shareholders to take appropriate steps to allay any concerns you may have
about your future employment opportunities with Matrixx and its subsidiaries (Matrixx and its
subsidiaries are collectively referred to as the “Company”). As a result, the Board has decided to
offer to you the benefits described below.

     Please bear in mind that these benefits are being offered only to a few, selected employees
and we ask you to refrain from discussing this program with others. Also, please note that the
benefits described below will only be effective if you sign the extra copy of this Change of
Control Agreement (the “Agreement”) and return it to me on or before ___, 2006.

     1. TERM OF AGREEMENT.

     This Agreement is effective immediately and will continue in effect as long as you are
actively employed by Matrixx, unless you and Matrixx agree in writing to its termination.

     2. SEVERANCE PAYMENT.

     If your employment with the Company is terminated without “Cause” (as defined in Section
6) at any time within one (1) year following a “Change of Control” (as defined in Section 4), you
will receive the “Severance Payment” described below. You will also receive the Severance Payment
if you terminate your employment for “Good Reason” (as defined in Section 5) at any time within one
(1) year following a Change of Control.

     The Severance Payment equals one times the sum of (a) your Base Salary in effect for the
fiscal year immediately prior to the fiscal year in which termination of employment occurs, plus
(b) the average of the annual incentive bonuses paid to you for the two fiscal years immediately
preceding the fiscal year in which the Change of Control occurs (or, if less than two, the amount
of your single annual incentive bonus, if any).

     The Severance Payment will be paid to you in one lump sum on the first day of the seventh
month following your termination of employment; provided that if you die before you receive the
above payment, the Company will distribute the benefits to your beneficiary as soon as
administratively feasible following the date of your death.

     You are not entitled to receive the Severance Payment if your employment is terminated for
Cause, if you terminate your employment without Good Reason, or if
your employment is terminated by reason of your “Disability” (as defined in Section 7) or your death. In
addition, you are not entitled to receive the Severance Payment if your employment is terminated by
you or the Company for any or no reason before a Change of Control occurs or more than one (1) year
after a Change of Control has occurred.

 

 

     You will receive the Severance Payment only if you execute a release agreement reasonably
requested by the Company.

     The Severance Payment will be paid to you without regard to whether you look for or obtain
alternative employment following your termination of employment with the Company.

     3. BENEFITS CONTINUATION.

     If you timely elect to receive (and you are otherwise eligible to receive) continuation
of the Company’s group health plan coverage under the COBRA, the Company will pay the portion of
the employer’s share of the cost of your premium for 18 months of the COBRA coverage period (in
accordance with any premium cost-sharing arrangement in effect as of the date of termination).

     The benefits you are entitled to receive under this Section 3 will be reduced or eliminated
if, and to the extent that, you receive comparable benefits from any other source (for example,
another employer); provided, however, you have no obligation to seek, solicit, or accept employment
from another employer to receive these benefits.

     4. CHANGE OF CONTROL DEFINED .

     For purposes of this Agreement, the term Change of Control means and will be deemed to
have occurred if:

          (a) any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), or any successor provision thereto) becomes
the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act or any successor
provision thereto) directly or indirectly of securities of the Company representing 15% or more of
the combined voting power of the Company’s then outstanding securities ordinarily having the right
to vote at an election of directors; provided, however, that, for this purpose, “person” excludes
the Company, any person acquiring such securities directly from the Company, any employee benefit
plan sponsored by the Company or from you or any stockholder beneficially owning more than 15% or
more of the combined voting power of the Company’s outstanding securities as of the date of this
Agreement; or

          (b) any stockholder of the Company beneficially owning 15% or more of the combined voting
power of the Company’s outstanding securities as of the date of this Agreement shall becomes the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) directly or indirectly
of securities of the Company (other than through the acquisition of securities directly from the
Company or from you) representing 20% or more of the combined voting power of the Company’s then
outstanding securities ordinarily having the right to vote at an election of directors; or

2

 

          (c) individuals who, as of the date of this Agreement, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least 80% of the Board, provided however, that any
person becoming a member of the Board subsequent to the date of this Agreement whose election, or
nomination for election by the Company’s stockholders, was approved by a vote of at least 80% of
the members then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or threatened
election contest relating to the election of directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A under the Exchange Act or any successor provisions thereto) shall be,
for purposes of this Agreement, considered as though such person were a member of the Incumbent
Board; or

          (d) approval by the stockholders of the Company and consummation of a reorganization, merger,
consolidation, or sale or other disposition of all or substantially all of the assets of the
Company, in each case, with or to a corporation or other person or entity of which persons who were
the stockholders of the Company immediately prior to such transaction do not, immediately
thereafter, own more than 80% of the combined voting power of the outstanding voting securities
entitled to vote generally in the election of directors of the reorganized, merged, consolidated or
purchasing corporation (or in the case of a non-corporate person or entity, functionally equivalent
voting power) and 80% of the members of the Board of which corporation (or functional equivalent in
the case of a non-corporate person or entity) were not members of the Incumbent Board at the time
of the execution of the initial agreement providing for such reorganization, merger, consolidation
or sale.

     5. GOOD REASON DEFINED.

     For purposes of this Agreement, the term “Good Reason” means the occurrence of any of the
following: (a) your compensation is reduced by the Company; (b) your function, duties and/or
responsibilities are significantly reduced so as to cause your position with the Company to become
of materially less dignity, responsibility and/or importance than those associated with your
functions, duties and/or responsibilities immediately before the Change of Control; or (c) if more
than once during the term of this Agreement, you are required by the Company permanently to
relocate your residence or the Company’s principal business office is relocated more than 60 miles
away from its then current location.

     6. CAUSE DEFINED.

     For purposes of this Agreement, the term “Cause” means the occurrence of any of the
following: (a) your gross and willful misconduct which results in material injury to the Company;
(b) your engaging in fraudulent conduct with respect to the Company’s or any of its affiliates’
business or in conduct of a criminal nature that may have an adverse impact on the Company’s or any
of its affiliates’ standing and reputation; (c) the material failure or refusal by you to perform
the duties required of you by the Board of Directors, which inappropriate failure or refusal is not
be cured within 30 days following receipt by you of written notice from the Board specifying the
factors or events constituting such failure or refusal; (d) your use of drugs and/or alcohol in
violation of then current Company policies; or (e) the material breach of your obligation to devote
substantially all of your business time, attention, skill, and
efforts to the faithful performance of your duties, which is not be cured within 30 days after written notice
to you from the Board.

3

 

     At the Board’s sole discretion, you may be placed on a paid or unpaid administrative leave of
absence for a reasonable period of time if it is necessary to confirm that reasonable grounds exist
for a termination for Cause, for example, pending the outcome of any dispute resolution procedure
or any criminal charges. During this leave, the Board may bar your access to the Company’s offices
or facilities or may provide you with access subject to terms and conditions as the Board chooses
to impose. In any event, you or the Board may utilize the dispute resolution procedures contained
in Section 15 to challenge or confirm, as the case may be, a termination for Cause.

     7. DISABILITY DEFINED.

     For purposes of this Agreement, your suffering from a “Disability” means that you are
physically or mentally incapacitated so as to render you incapable of performing the essential
functions of your position with the Company for a period of more than ninety (90) consecutive days
or one hundred twenty (120) aggregate days in any twelve (12)-month period, with or without
reasonable accommodation by the Company. Your receipt of disability benefits under any long-term
disability plan of the Company or receipt of other long-term disability benefits shall be deemed
conclusive evidence of your having a Disability for purposes of this Agreement; provided, however,
that in the absence of your receipt of any such long-term disability benefits, the Company may, in
its reasonable discretion (but based upon appropriate medical evidence), determine that you have a
Disability.

     8. TERMINATION NOTICE AND PROCEDURE.

     Any termination by the Company or you of your employment shall be communicated by written
Notice of Termination to you if such Notice of Termination is delivered by the Company and to the
Company if such Notice of Termination is delivered by you, all in accordance with the following
procedures:

          (a) The Notice of Termination shall indicate the specific termination provision of this
Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of your employment under the provision so indicated; and

          (b) Any Notice of Termination by the Company shall be in writing signed by an executive
officer of Matrixx (or an executive officer of any parent or successor company or successor to the
business of Matrixx following a Change of Control) specifying in detail the basis for such
termination.

     9. SUCCESSORS.

     Matrixx will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of Matrixx or
any of its subsidiaries to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Matrixx or any subsidiary would be required to perform it
if no such succession had taken place.

4

 

     10. BINDING AGREEMENT.

     This Agreement shall inure to the benefit of and be enforceable by you and your personal
or legal representatives, executors, administrators, successors, heirs, distributees, devisees and
legatees. If you die while any amount is payable to you hereunder had you continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to your devisee, legatee or other designee or, if there is no such designee, to your
estate.

     11. NOTICE.

     For purposes of this Agreement, notices and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed
by United States certified or registered mail, return receipt requested, postage prepaid, addressed
to the respective addresses set forth on the first page of this Agreement, provided that all
notices to Matrixx shall be directed to the attention of the Chief Executive Officer of Matrixx
with a copy to the Secretary of Matrixx, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of change in address
shall be effective only upon receipt.

     12. MISCELLANEOUS.

     No provision of this Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by you and the Chief Executive Officer
of Matrixx. No waiver by either party hereto at any time of any breach by the other party hereto
of, or compliance with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreement or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either party which are not
expressly set forth in this Agreement. The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of Arizona without regard to its
conflicts of law principles. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law. The obligations of Matrixx that
arise prior to the expiration of this Agreement shall survive the expiration of the term of this
Agreement.

     13. VALIDITY.

     The invalidity or unenforceability of any provision of this Agreement shall not affect
the validity or enforceability of any other provision of this Agreement, which shall remain in full
force and effect.

5

 

     14. COUNTERPARTS.

     This Agreement may be executed in several counterparts, each of which shall he deemed to
be an original but all of which together will constitute one and the same instrument.

     15. ALTERNATIVE DISPUTE RESOLUTION.

     If there is a dispute between the Company and you concerning the terms of this Agreement,
the dispute will be resolved by binding arbitration in accordance with the National Rules for the
Resolution of Labor Disputes (“Rules”) administered by the American Arbitration Association
(“AAA”). This arbitration will be held in the AAA office located nearest the Company’s
headquarters. The provisions of the Rules are incorporated as a part of this Agreement; provided,
however, that (i) the Company or you must initiate arbitration within one year from the date any
claim accrues; and (ii) either party may seek injunctive relief in court to avoid irreparable
injury during the pendency or arbitration proceedings. IT IS EXPRESSELY UNDERSTOOD THAT BY SIGNING
THIS AGREEMENT, WHICH INCORPORATES BINDING ARBITRATION, THE COMPANY AND YOU AGREE, EXCEPT AS
OTHERWISE PROVIDED ABOVE, TO WAIVE COURT OR JURY TRIAL TO THE FULLEST EXTENT PERMITTED BY LAW AND
TO WAIVE PUNITIVE, STATUTORY, CONSEQUENTIAL, AND ANY DAMAGES, OTHER THAN COMPENSATORY DAMAGES.

     16. ENTIRE AGREEMENT.

     This Agreement set forth the entire agreement between you and the Company concerning the
subject matter discussed in this Agreement and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations, or warranties, whether written or oral,
by any officer, employee or representative of the Company. Any prior agreements or understandings
with respect to the subject matter set forth in this Agreement are hereby terminated and canceled.

     17. PARTIES.

     This Agreement is an agreement between you and Matrixx. In certain cases, though,
obligations imposed upon Matrixx may be satisfied by a subsidiary of Matrixx. Any payment made or
action taken by a subsidiary of Matrixx shall be considered to be a payment made or action taken by
Matrixx for purposes of determining whether Matrixx has satisfied its obligations under this
Agreement.

     18. SECTION 409A OF THE CODE.

     If any payments under this Agreement are subject to the provisions of Section 409A of the
Code, both you and the Company agree that this Agreement will comply fully with and meet all the
requirements of Section 409A of the Code.

6

 

     If you would like to participate in this special benefits program, please sign and return the
extra copy of this Agreement.

	 	 	 	 	 
	 	Sincerely,

MATRIXX INITIATIVES, INC.

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Its:  	 	 
	 

Enclosure

ACCEPTANCE

     I hereby accept the offer to participate in this special benefits program and I agree to be
bound by all of the provisions noted above.

	 	 	 	 	 
	Dated:
	 	 	 	 
	 	 

	 	 	 
	 	 

	 	Signature	 
	 	 
	 	 	 
	 	 

	 	 	 
	 	 

	 	Name	 

7

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00099-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00099-of-00352.parquet"}]]