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Exhibit 10(jj)
MIDWAY GAMES INC.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
September 24, 2001
WMS Industries Inc.
000 X. Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Gentlemen:
This letter shall serve to memorialize our agreements with respect to a
matter that WMS and Midway have discussed. As used in this letter, "Midway"
shall mean Midway Games Inc. and, where appropriate, its subsidiaries; "WMS"
shall mean WMS Industries Inc. and, where appropriate, its subsidiaries.
Stock option tax benefit. WMS acknowledges that Midway has previously
paid $2,814,985 to WMS under Section 5 of the Tax Separation Agreement ("the
Option Tax Payments") relating to tax deductions claimed by Midway for fiscal
1998 and 1999 attributable to the exercise of WMS stock options or WMS stock
options adjustments by or for certain Midway employees ("the Option Tax
Deductions"). WMS further acknowledges that Midway had a net operating loss
(computed without regard to the fiscal 2000 Option Tax Deductions) in the fiscal
year ended June 30, 2000, which will be carried back to offset the taxable
income for the fiscal years ended June 30, 1998 and June 30, 1999 (computed for
both years without regard to the Option Tax Deductions), with the result that
Midway will have effectively received no tax benefit from the Option Tax
Deductions. WMS shall repay to Midway an amount equal to the Option Tax
Payments, at such time that Midway receives refunds from the various federal and
state tax authorities relating to the carryback of the fiscal 2000 net operating
loss and demonstrates to WMS the benefit not realized by Midway as a result of
the Option Tax Deductions.
At any time after WMS has repaid any portion of the Option Tax Payment
to Midway, if Midway has earnings that enable Midway to utilize the Option Tax
Deductions, then Midway will pay to WMS within thirty (30) days after the end of
any fiscal quarter in which such utilization is made the tax benefit received by
Midway from utilization of the Option Tax Deduction.
In addition, in the event of a change in control of Midway at any time
after WMS has repaid any portion of the Option Tax Payment to Midway, Midway
shall repay to WMS the entire amount of such Option Tax Payment (or portion
thereof) not theretofore repaid to WMS by Midway. For purposes of the previous
sentence, a change of control shall mean any of the following events: (i) any
person or group becomes the beneficial
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owner directly or indirectly of more than 50% of Midway's outstanding voting
stock; (ii) the current members of Midway's Board of Directors cease to
constitute the majority of the Board, other than by normal retirement or
resignation; (iii) Midway consolidates with or merges with or into another
person or entity such that former Midway stockholders own less than 50% of the
surviving entity; or (iv) Midway conveys, transfers, leases or otherwise
disposes of all or substantially all of Midway's assets to any person or entity.
Finally, Section 5 of the Tax Separation Agreement is hereby amended by
inserting the following before the last sentence thereof:
For purposes of this Agreement, "effective tax rate for the relevant
period" shall be determined after all other items of income or
deduction (including any net operating loss carryover or carryback) for
the period and shall include the period in which a net operating loss
carryover which includes such deduction is utilized. In the event that
a net operating loss carryback eliminates the tax benefit of such
deduction, WMS will repay to Midway the amount of the prior payment.
Please indicate your agreement to the foregoing by signing this letter
in the place provided below.
Very truly yours,
MIDWAY GAMES INC.
By: /s/ Xxxxxx X. Xxxx, Xx.
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Executive Vice President -
Chief Financial Officer
Accepted and Agreed to:
WMS INDUSTRIES INC.
By: /s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
President & Chief Executive Officer
