Exhibit 10.4

SETTLEMENT AGREEMENT AND MUTUAL RELEASE

This Settlement Agreement and Mutual Release (“Agreement”) is made by and
between Pinnacle Entertainment, Inc. (“Pinnacle”) on the one hand, and Allianz
Global Risks US Insurance Company (“Allianz”) on the other hand. Pinnacle and
Allianz shall be referred to herein individually as a “Party” and collectively
as the “Parties.” The “Effective Date” of this Agreement is May 5, 2008.

RECITALS

WHEREAS, Allianz issued to Pinnacle a policy of excess insurance CLP30005890
(the “Allianz Policy”) which insured Pinnacle for the period from April 1, 2005
to April 1, 2006. The Allianz Policy had a limit of $50 million excess of $100
million; and

WHEREAS, on or about August 29, 2005, Hurricane Katrina made landfall in an area
between eastern Louisiana and western Mississippi, causing damage to Pinnacle’s
Casino Magic hotel and casino, which was located in Biloxi, Mississippi (“Casino
Magic”), as well as to certain other Pinnacle properties in Biloxi and to its
Boomtown Casino location in Harvey, Louisiana (“Boomtown”); and

WHEREAS, Pinnacle sought coverage under the Allianz Policy and other policies in
its first-party property insurance program for the 2005-2006 policy period for
the losses it sustained that related to or arose out of damage to

 

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Casino Magic, Boomtown, and other properties, caused by Hurricane Katrina,
including for property damage and business income loss (the “Insurance Claim”);
and

WHEREAS, on or about August 1, 2006, Pinnacle filed a lawsuit in the United
States District Court for the District of Nevada (the “Court”), entitled
Pinnacle Entertainment, Inc. v. Allianz Global Risks US Insurance Company, et
al., Case No. 2:06-cv-00935-BES-PAL, alleging, inter alia, breach of contract,
bad faith, and breach of statutory duties in violation of Nevada Revised
Statutes Section 686A.310, and seeking declaratory relief against Allianz, Arch
Specialty Insurance Company (“Arch”) and RSUI Indemnity Company (“RSUI”) (the
“Coverage Action”); and

WHEREAS, on or about February 22, 2007, Allianz paid to Pinnacle a $5 million
advance under the Allianz Policy for the Insurance Claim (the “February 22, 2007
Payment”); and

WHEREAS, Pinnacle and Allianz desire to settle any and all disputes between them
which they now have or may later have regarding the Coverage Action and the
Insurance Claim, including any claim, demand, or cause of action related to the
loss caused by Hurricane Katrina that was made or could have been made in the
Coverage Action and/or the Insurance Claim;

NOW, THEREFORE, in consideration of the mutual promises, covenants, obligations,
agreements, and other undertakings set forth herein,

 

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and for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Parties agree by and among themselves, each with the
other, as follows:

AGREEMENT

1. PAYMENT.

1.1. Payment By Allianz. Within thirty (30) days of the execution of this
Agreement, Allianz shall wire Forty-Eight Million Dollars ($48,000,000.00) to
Pinnacle pursuant to the wire instructions attached hereto as Exhibit 1. The
foregoing payment shall be referred to herein as the “Settlement Payment.” None
of the Settlement Payment is for bad faith damages claimed by Pinnacle.

1.2. Allocation. The first fifty million dollars ($50,000,000) of the combined
February 22, 2007 Payment and the Settlement Payment shall be allocated to pay
for covered loss sought by Pinnacle under the Allianz Policy for the Insurance
Claim. The remaining three million dollars ($3,000,000) of the combined
February 22, 2007 Payment and the Settlement Payment shall be applied as a
disputed interest payment on the Insurance Claim. Allianz and Pinnacle hereby
stipulate and agree that the February 22, 2007 Payment and the Settlement
Payment exhaust the limit of liability under the Allianz Policy applicable to
the Insurance Claim.

 

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2. RELEASES.

2.1. Release by Pinnacle. Upon Pinnacle’s receipt and successful deposit of the
Settlement Payment, but subject to the Court’s entry of the stipulated dismissal
referenced in Section 3.1, Pinnacle and each of its parents, subsidiaries,
predecessors, successors and assigns (the “Pinnacle Releasors”), do forever
release Allianz, and each of its past, present and future businesses,
affiliates, parents, subsidiaries, joint venturers, assigns, trustees, owners,
principals, officers, directors, shareholders, agents, employees, independent
contractors, suppliers, reinsurers (but only to the extent such reinsurer is a
reinsurer of Allianz), attorneys, and representatives, and each of them
(collectively, the “Allianz Releasees”), of and from any and all liabilities,
claims, defenses, causes of action, obligations, duties, penalties, attorneys’
fees, costs, damages, or injuries of any nature whatsoever, whether based on
contract, tort, statute or other legal or equitable theory of recovery,
including any claim for contribution, indemnity or subrogation, whether
contingent or liquidated, which the Pinnacle Releasors have relating to or
arising out of: (a) the Insurance Claim; (b) the Coverage Action, including,
without limitation, any claims for breach of the Allianz Policy, breach of any
implied covenant of good faith and fair dealing, bad faith, violations of Nevada
Revised Statutes Section 686A.310, and/or punitive, exemplary and/or
extra-contractual damages or penalties; and/or (c) the February 22, 2007
Payment.

 

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Notwithstanding anything else in this Agreement, the Pinnacle Releasors are not
releasing the Allianz Releasees, or any of them, from any duties or obligations
under this Agreement. Further, the Pinnacle Releasors are not releasing any
other insurer or reinsurer, including without limitation, RSUI. The Pinnacle
Releasors do not release Willis of Nevada, Inc. or any of its respective former
or present affiliate companies, their parents, subsidiaries, divisions and
merged or acquired companies (collectively, “Willis”). Notwithstanding anything
else in this Agreement, the Pinnacle Releasors do not release any of Allianz’s
joint venturers, assigns, trustees, owners, principals, officers, directors,
shareholders, agents, employees, independent contractors, suppliers, reinsurers,
attorneys, or representatives, or any of them, for liability arising out of
their actions on behalf of any person or entity other than Allianz.

2.2. Release by Allianz. In exchange for the foregoing release and other
valuable consideration, Allianz, and each of its parents, subsidiaries,
predecessors, successors and assigns (the “Allianz Releasors”), upon Pinnacle’s
receipt and successful deposit of the Settlement Payment, but subject to the
Court’s entry of the stipulated dismissal referenced in Section 3.1, do forever
release Pinnacle and each of its past, present and future businesses,
affiliates, parents, subsidiaries, joint venturers, assigns, trustees, owners,
principals, officers, directors, shareholders, agents, employees,

 

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independent contractors, suppliers, insurers, reinsurers (except to the extent
such reinsurer is also a reinsurer of Allianz on the Allianz Policy), attorneys,
and representatives, and each of them (collectively, the “Pinnacle Releasees”),
of and from any and all liabilities, claims, defenses, causes of action,
obligations, duties, penalties, attorneys’ fees, costs, damages, or injuries of
any nature whatsoever, whether based on contract, tort, statute or other legal
or equitable theory of recovery, including any claim for contribution, indemnity
or subrogation, whether contingent or liquidated, which the Allianz Releasors
have relating to or arising out of: (a) the Insurance Claim; (b) the Coverage
Action, including, without limitation, any claims for breach of the Allianz
Policy, breach of any implied covenant of good faith and fair dealing, bad faith
and/or any claims relating to the tender or investigation of the Insurance
Claim; (c) the February 22, 2007 Payment; and/or (d) the Settlement Payment.
Notwithstanding anything else in this Agreement, the Allianz Releasors are not
releasing the Pinnacle Releasees, or any of them, from any duties or obligations
under this Agreement.

2.3. All Claims Included. With respect to the claims specifically released in
Sections 2.1 and 2.2 above, the Parties agree that this Agreement includes all
claims of every kind and nature relating to the Settlement Payment, the
February 22, 2007 Payment, the Insurance Claim, or the Coverage Action. As it
pertains to such released claims, the Parties hereby expressly waive any

 

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and all rights and benefits conferred upon them by the provisions of
Section 1542 of the California Civil Code and all similar provisions of the laws
of any other State, Territory or other jurisdiction. Section 1542 reads in
pertinent part:

“A general release does not extend to claims that the creditor does not know or
suspect to exist in his or her favor at the time of executing the release, which
if known by him or her must have materially affected his or her settlement with
the debtor.”

The Parties each hereby acknowledge that the foregoing waiver of the provisions
of Section 1542 of the California Civil Code and all similar provisions of the
laws of any other State, Territory or other jurisdiction was separately
bargained for and that they would not enter into this Agreement unless it
included a broad release of all unknown claims relating to the Settlement
Payment, the February 22, 2007 Payment, the Insurance Claim and/or the Coverage
Action. This release does not include any claims of fraud and/or
misrepresentation in the inducement of this Agreement. The Parties each
expressly agree that all release provisions in this Agreement shall be given
full force and effect in accordance with each and all of their express terms and
provisions, including those terms and provisions relating to unknown,
unsuspected and/or future claims, demands and causes of action. The Parties each
assume for themselves the risk of the subsequent discovery or

 

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understanding of any matter, fact or law, that if now known or understood, would
in any respect have affected his, her or its entering into this Agreement.

3. COVENANTS.

3.1. Stipulated Dismissal With Prejudice And Withdrawal Of Motions. Pinnacle
covenants that within three (3) business days of its receipt and successful
deposit of the Settlement Payment, it will deliver to counsel for Allianz a
stipulated dismissal with prejudice of the Coverage Action (as to Allianz only),
and without costs, sanctions, or attorneys’ fees against any of the Parties, in
substantially the same form as Exhibit 2 hereto. Allianz covenants that it
shall, in turn, execute and file such stipulated dismissal in the United States
District Court for the District of Nevada. Each of the Parties further covenant
that upon this Agreement being fully executed, they shall both move the Court to
withdraw all pending motions filed against each other in the Coverage Action.

3.2. Acknowledgment Of Covered Value. Allianz hereby acknowledges that Pinnacle
asserts that the covered amount of the Insurance Claim, in accordance with the
terms and conditions of the Allianz Policy, exceeds the limits of the Allianz
Policy. Allianz agrees that it shall not dispute this assertion or take any
position contrary thereto in the Coverage Action or in any proceeding related to
or arising out of the Insurance Claim or the Coverage

 

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Action, except that nothing herein shall prevent or preclude Allianz from
providing truthful testimony, in response to legal process, about what it
considers to be the nature, extent, and/or measurable value of the Insurance
Claim and the Coverage Action. The Parties agree that it is in their best
interests to enter into this Agreement, and that the Agreement reflects a
negotiated resolution of the dispute between Pinnacle and Allianz.
Notwithstanding the foregoing or anything else in this Agreement, it is a
material term of this Agreement that nothing in this Agreement shall: (1) limit
or reduce Pinnacle’s Insurance Claim against RSUI; or (2) limit or reduce RSUI’s
liability to Pinnacle. Pinnacle does not admit by way of this Agreement or
otherwise, and expressly denies, that its claim for damages caused by Hurricane
Katrina is limited to $150,000,000.

3.3. Confidentiality. From and after the date of the execution this Agreement,
its terms, conditions, the information contained herein, all of the negotiations
leading to it, all of the communications pursuant to it, and the implementation
thereof, shall be kept strictly confidential and shall not be disclosed to any
person, corporation or other entity not a party to this Agreement except: (i) in
response to a judicial order compelling disclosure or as may otherwise be
necessary to defend or assert claims by or against any Party hereto in a
judicial proceeding; (ii) to any subsidiary, affiliated, associated or parent
company of the Parties; (iii) to insurers providing Pinnacle

 

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with coverage excess to Allianz; (iv) to counsel for each of the Parties; (v) to
Pinnacle’s consultants or experts, provided that prior to such disclosure, such
consultants and experts provide to Pinnacle a written agreement to maintain the
confidentiality of this Agreement on the same terms set forth in this
Section 3.3; (vi) to Allianz’s reinsurers or retrocessionaires pursuant to a
stipulation of confidentiality; (vii) as required in the ordinary course of
business for the Parties for such purposes as audits or accountings, or to
supply information necessary to provide a loss history for Pinnacle for purposes
of obtaining insurance coverage; or (viii) as may otherwise be required by law.
The parties may, however, state that the claim was settled to their mutual
satisfaction. The Parties shall cooperate to protect the confidential nature of
this Agreement from disclosure. The Parties hereto may waive this provision only
if the Parties hereto consent in writing, which consent shall not unreasonably
be withheld. Notwithstanding any of the foregoing, Pinnacle may disclose to any
person or entity the fact that it has settled with Allianz.

4. REPRESENTATIONS AND WARRANTIES.

4.1. Prudence. The Parties, and each of them, represent and warrant that in
executing this Agreement they rely solely upon their own judgment, belief and
knowledge, and the advice and recommendations of their own independently
selected counsel, concerning the nature, extent and duration of their rights and
claims hereunder and regarding all matters which relate in any

 

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way to the subject matter hereof, and that, except as provided herein, they have
not been influenced to any extent whatsoever in executing this Agreement by any
representations, statements or omissions pertaining to any of the foregoing
matters by any party or by any person representing any party to this Agreement.
The Parties, and each of them, further represent and warrant to each other that
he, she or it has made such investigation of the facts pertaining to the
settlement, this Agreement and all of the matters pertaining thereto, as he, she
or it deems necessary. Each Party assumes the risk of mistake as to facts or
law.

4.2. Authority to Extinguish Claims. The Parties hereby represent and warrant
that the person executing this Agreement on their behalf has taken all necessary
action to approve the making and performance of this Agreement, that he or she
is competent to execute this instrument and that he or she is duly authorized,
and has the full right and authority, to execute this Agreement on such Party’s
behalf.

4.3. No Assignment or Transfer of Claims. The Parties, and each of them, warrant
and represent to each other that they retain the sole right to and ownership of
all rights, title and interest in and to every claim they release herein and
that they have not assigned, committed, or permitted, or agreed to any sale,
encumbrance, hypothecation or transfer, whether by operation of law

 

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or otherwise, or otherwise transferred any interest in any of the claims they
release herein to any other person or entity.

5. MISCELLANEOUS.

5.1. Headings. Section headings are for convenience only and shall not be
construed to change or affect the text of this Agreement.

5.2. Integration. Except for the Allianz Policy, this Agreement and the
attachments incorporated herein contain the entire agreement between and among
the Parties relating to the Insurance Claim and the Coverage Action, and all
prior or contemporaneous agreements, understandings, representations and
statements, oral or written, relating to those matters are merged into this
Agreement.

5.3. Governing Law. This Agreement is governed by Nevada law, without regard to
Nevada’s conflict of law principles.

5.4. Survival of Representations and Warranties. All representations and
warranties set forth in this Agreement shall be deemed continuing and shall
survive the Effective Date of this Agreement.

5.5. Further Assurances. The Parties agree to execute such other documents and
take such actions as may reasonably be necessary to further the purpose of this
Agreement.

 

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5.6. No Benefit to Non-Settling Parties. Except as expressly provided herein,
this Agreement shall not confer any right or benefit upon, or release from
liability any person or entity who is not a Party to this Agreement.

5.7. Counterpart Originals. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which shall
constitute one agreement. Facsimile signatures shall be considered the same as
originals.

5.8. Binding Effect. This Agreement binds and inures to the benefit of the
Parties, their assigns, heirs, administrators, executors, representatives,
beneficiaries and successors, and each of them.

5.9. Modification. This Agreement cannot be modified or amended except by
written agreement signed on behalf of each of the Parties.

5.10. Waiver. No provision of this Agreement may be waived except by written
instrument signed by the Party waiving that provision. A waiver of one provision
is not a waiver of any other. Failure to enforce any provision of this Agreement
shall not waive that provision or any other.

5.11. Construction. Any rule of construction to the effect that ambiguities in a
writing are to be construed against the drafting party does not apply in the
interpretation of this Agreement, or any portion hereof, which has actively been
negotiated and drafted by counsel for each of the Parties, and all of them.

 

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5.12. Severability. Except for Sections 1.2, 2.1, 3.2 and 3.3 which shall not be
severable and are material, provided the remainder of this document does not
frustrate the purpose and intent of the law and the Parties in entering into
this Agreement, in the event that any portion of this Agreement shall be
judicially determined to be invalid or unenforceable to any extent, the same
shall to that extent be deemed severable from this Agreement and the invalidity
or unenforceability thereof shall not affect the validity and enforceability of
the remaining portion of this Agreement.

6. DECLARATIONS.

BY SIGNING THIS AGREEMENT, EACH PARTY ACKNOWLEDGES AND DECLARES: (A) THAT THE
PARTY HAS FULLY AND CAREFULLY READ THE AGREEMENT; (B) THAT THE PARTY CLEARLY
UNDERSTANDS THAT THE AGREEMENT IS A COMPLETE AND FINAL SETTLEMENT; (C) THAT THE
PARTY CLEARLY UNDERSTANDS THE MEANING, PURPOSE, AND INTENT OF EACH PROVISION OF
THE AGREEMENT, AND THAT EACH PROVISION IS CLEAR AND DEFINITE; (D) THAT PINNACLE
ON THE ONE HAND, AND ALLIANZ ON THE OTHER, HAVE NOT RELIED UPON ANY
REPRESENTATION OF THE OTHER IN AGREEING TO THE TERMS OF THIS AGREEMENT; AND
(E) THAT THE PARTY HAS BEEN REPRESENTED BY COMPETENT LEGAL COUNSEL WITH RESPECT

 

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TO NEGOTIATING, EXPLAINING, AND ENTERING INTO THIS AGREEMENT.

IN WITNESS WHEREOF, the Parties, and each of them, hereby execute this
Settlement Agreement and Mutual Release in consideration of the mutual promises
made herein, as of the dates indicated below.

 

 

APPROVED AND AGREED TO:

 

PINNACLE ENTERTAINMENT, INC.

Dated: May 9, 2008

  By:  

/s/ Daniel R. Lee

  Its:   Chairman and CEO   ALLIANZ GLOBAL RISKS US INSURANCE COMPANY

Dated: May 9, 2008

  By:  

/s/ Stephen Kovach

  Its:   Vice President

 

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