Exhibit 10.9
THIRD
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is made
effective as of December 22, 2008 (the “Effective Date”) by and between PINNACLE
ENTERTAINMENT, INC., a Delaware corporation (the “Company”), and DANIEL R. LEE,
an individual (“Executive”), with respect to the following facts and
circumstances:
RECITALS
The Company and Executive entered into an Employment Agreement effective as of
April 10, 2002 (the “Original Agreement”) pursuant to which Executive serves as
Chief Executive Officer of the Company and as a member and Chairman of the
Company’s Board of Directors. The Original Agreement was amended and restated
pursuant to an Amended and Restated Employment Agreement effective as of May 1,
2005, and further amended and restated pursuant to a Second Amended and Restated
Employment Agreement dated as of October 31, 2006 (the “2006 Agreement”). The
Company and Executive desire to further amend and restate the 2006 Agreement to
comply with the provisions of Internal Revenue Code Section 409A and to address
certain technical matters, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, the parties hereto agree as follows:
ARTICLE 1.
EMPLOYMENT AND TERM
1.1 Employment. The Company agrees to engage Executive in the capacity as Chief
Executive Officer of the Company, and Executive hereby accepts such engagement
by the Company upon the terms and conditions specified below. The Company
further agrees to cause Executive to be elected as a Director and, subject to
the provisions of Section 6.3 hereof, Chairman of the Board of Directors, and
Executive agrees to serve in such capacities without additional compensation.
1.2 Term. The term of this Agreement shall commence on the Effective Date, and,
unless earlier terminated under Article 6 below, shall continue in force until
April 30, 2009, provided that commencing on May 1, 2009 and as of May 1 of each
year thereafter (a “Renewal Date”), this Agreement shall automatically renew for
additional one-year periods (each, a “Renewal Period”), unless either party
gives notice of non-renewal at least ninety (90) days prior to the next Renewal
Date. The term of this Agreement, including any Renewal Periods, is referred to
as the “Term.”

 

 

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ARTICLE 2.
DUTIES OF EXECUTIVE
2.1 Duties. Executive shall perform all the duties and obligations generally
associated with the positions of Chairman and Chief Executive Officer, subject
to the control and supervision of the Board of Directors, and such other
executive duties consistent with the foregoing as may be assigned to him from
time to time by the Board of Directors of the Company. Executive shall perform
the services contemplated herein faithfully, diligently, to the best of his
ability and in the best interests of the Company. Executive shall devote all his
business time and efforts to the rendition of such services. Executive shall, at
all times perform such services in compliance with, and to the extent of his
authority, shall to the best of his ability cause the Company to be in
compliance with, any and all laws, rules and regulations applicable to the
Company of which Executive is aware. Executive may rely on the Company’s inside
counsel and outside lawyers in connection with such matters. Executive shall, at
all times during the Term, in all material respects adhere to and obey any and
all written internal rules and regulations governing the conduct of the
Company’s employees, as established or modified from time to time; provided,
however, in the event of any conflict between the provisions of this Agreement
and any such rules or regulations, the provisions of this Agreement shall
control.
2.2 Location of Services. Executive’s principal place of employment shall be at
the Company’s headquarters at such location as Executive and the Board of
Directors shall agree upon. Executive understands he will be required to travel
to the Company’s various operations as part of his employment.
2.3 Exclusive Service. Except as otherwise expressly provided herein, Executive
shall devote his entire business time, attention, energies, skills, learning and
best efforts to the business of the Company. Executive may participate in
social, civic, charitable, religious, business, educational or professional
associations and serve on the boards of directors of companies, including Lynch
Interactive, so long as such participation does not materially interfere with
the duties and obligations of Executive hereunder. This Section 2.3, however,
shall not be construed to prevent Executive from making passive outside
investments so long as such investments do not require material time of
Executive or otherwise interfere with the performance of Executive’s duties and
obligations hereunder. Executive shall not make any investment in an enterprise
that competes with the Company without the prior written approval of the Company
after full disclosure of the facts and circumstances; provided, however, that
this sentence shall not preclude Executive from owning up to one percent (1%) of
the securities of a publicly traded entity (a “Permissible Investment”). During
the Term, Executive shall not directly or indirectly work for or provide
services to or, except as permitted above, own an equity interest in any person,
firm or entity engaged in the casino gaming, card club or horse racing business.
In this regard, and for purposes of this section only, Executive acknowledges
that the gaming industry is national in scope and that accordingly this covenant
shall apply throughout the United States.

 

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ARTICLE 3.
COMPENSATION
3.1 Salary. In consideration for Executive’s services hereunder, the Company
shall pay Executive an annual salary, effective as of the Effective Date at the
rate of not less than $1,000,000 per year during each of the years of the Term,
payable in accordance with the Company’s regular payroll schedule from time to
time (less any deductions required for Social Security, state, federal and local
withholding taxes, and any other authorized or mandated similar withholdings).
The annual salary shall be reviewed by the Compensation Committee of the Board
(the “Committee”) no less frequently than annually and may be increased (but not
decreased) at the discretion of the Board. If Executive’s annual salary is
increased, the increased amount shall not be reduced for the remainder of the
Term.
3.2 Bonus. Executive shall be entitled to earn bonuses with respect to each year
of the Term during which Executive is employed under this Agreement up to one
hundred fifty percent (150%) of Executive’s annual salary with a targeted bonus
of seventy-five percent (75%) of Executive’s annual salary for such year based
upon meeting performance targets with respect to the Company’s earnings before
interest, taxes, depreciation and amortization that shall be established
annually by the Committee in consultation with Executive. Any such bonus earned
by Executive shall be paid annually within ninety (90) days after the conclusion
of the Company’s fiscal year and certification by the Committee that the targets
have been met, except for any portion of the bonus which is subject to required
deferral by the Company and except for any portion of the bonus which Executive
shall elect to defer. Bonuses relative to partial years shall be prorated based
on Executive’s target bonus, except as otherwise provided herein. It is the
contemplation of the parties that the setting of the targets and goals and the
payment of bonuses will be done in such a manner as to qualify such bonuses as
“performance based” compensation under § 162(m) of the Internal Revenue Code.
Executive may also receive special bonuses in additional to his annual bonus
eligibility at the discretion of the Board.
3.3 Stock Options. As an additional element of compensation to Executive, in
consideration of the services to be rendered hereunder, on May 3, 2005 (the
“Option Grant Date”) the Company granted to Executive an option to purchase
600,000 shares of the Company’s common stock which has an exercise price equal
to the fair market value of such stock on the Option Grant Date and a term of
ten (10) years. Such option was granted under the Company’s Stock Option Plans
(the “Plans”) and shall constitute incentive stock options under the Internal
Revenue Code of 1986, as amended (the “Code”) to the maximum extent possible.
The remaining options shall be non-qualified options under the Code. The terms
and conditions of such option shall be governed by a stock option agreement
reflecting such grant. Such option shall vest in five (5) equal annual
installments beginning on the first anniversary of the Option Grant Date and
shall be subject to accelerated vesting as provided in Sections 6.5.2 and 6.5.3.
In addition, before the 2008 Renewal Date and at appropriate times thereafter
(no less frequently then within forty (40) months of the prior review), the
Committee shall review Executive’s long-term compensation and, in consultation
with Executive, shall consider granting additional stock options and/or other
long term incentive compensation to Executive.

 

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ARTICLE 4.
EXECUTIVE BENEFITS
4.1 Vacation. In accordance with the general policies of the Company applicable
generally to other senior executives of the Company pursuant to the Company’s
personnel policies from time to time, Executive shall be entitled to not less
than four (4) weeks vacation each calendar year, without reduction in
compensation.
4.2 The Company Employee Benefits. Executive shall receive all group insurance
and pension plan benefits and any other benefits on the same basis as they are
available generally to other senior executives of the Company under the Company
personnel policies in effect from time to time.
4.3 Benefits. Executive shall receive all other such fringe benefits as the
Company may offer to other senior executives of the Company generally under the
Company personnel policies in effect from time to time, such as health and
disability insurance coverage and paid sick leave. In the event that the
Company’s group health plan does not cover the annual physical examination of
Executive and Executive’s wife, or any pregnancy of Executive’s wife, the
Company shall bear the cost of such examinations or the medical costs of such
pregnancy.
4.4 Indemnification. Executive shall have the benefit of indemnification to the
fullest extent permitted by applicable law, which indemnification shall continue
after the termination of this Agreement for such period as may be necessary to
continue to indemnify Executive for his acts during the term hereof and shall be
covered by the Company’s directors and officers indemnity trust. In addition,
the Company shall cause Executive to be covered by the current policies of
directors and officers liability insurance covering directors and officers of
the Company, copies of which have been provided to Executive, in accordance with
their terms, to the maximum extent of the coverage available for any director or
officer of the Company. The Company shall use commercially reasonable efforts to
cause the current policies of directors and officers liability insurance
covering directors and officers of the Company to be maintained throughout the
term of Executive’s employment with the Company and for such period thereafter
as may be necessary to continue to cover acts of Executive during the term of
his employment (provided that the Company may substitute therefor, or allow to
be substituted therefor, policies of at least the same coverage and amounts
containing terms and conditions which are, in the aggregate, no less
advantageous to the insured in any material respect). In the event of any merger
or other acquisition of the Company, the Company shall no later than immediately
prior to consummation of such transaction purchase the longest applicable “tail”
coverage available under the directors and officers liability insurance in
effect at the time of such merger or acquisition.

 

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ARTICLE 5.
REIMBURSEMENT FOR EXPENSES
5.1 Executive shall be reimbursed by the Company for all ordinary and necessary
expenses incurred by Executive in the performance of his duties or otherwise in
furtherance of the business of the Company in accordance with the policies of
the Company in effect from time to time. Executive shall keep accurate and
complete records of all such expenses, including but not limited to, proof of
payment and purpose. Executive shall account fully for all such expenses to the
Company. No reimbursement will be made later than the close of the calendar year
following the calendar year in which the expense was incurred. Expenses eligible
for reimbursement in any one taxable year shall not affect the amount of
expenses eligible for reimbursement in any other taxable year, and the right to
expense reimbursement shall not be subject to liquidation or exchange for any
other benefit.
ARTICLE 6.
TERMINATION
6.1 Termination for Cause. Without limiting the generality of Section 6.2, the
Company shall have the right to terminate Executive’s employment, without
further obligation or liability to Executive, upon the occurrence of any one or
more of the following events, which events shall be deemed termination for cause
(“Cause”).
6.1.1 Failure to Perform Duties. If Executive neglects to perform the material
duties of his employment under this Agreement in a professional and businesslike
manner, other than due to his disability (except due to substance or alcohol
abuse), after having received written notice specifying such failure to perform
and a reasonable opportunity to perform.
6.1.2 Willful Breach. If Executive willfully commits a material breach of this
Agreement and fails to cure such breach within thirty (30) days of written
notice thereof or a material willful breach of his fiduciary duty to the
Company.
6.1.3 Wrongful Acts. If Executive is convicted of a felony involving acts of
moral turpitude or commits fraud, misrepresentation, embezzlement or other acts
of material misconduct against the Company (including violating or condoning the
violation of any material rules or regulations of gaming authorities which could
have a material adverse effect on the Company) that would make the continuance
of his employment by the Company materially detrimental to the Company.
6.1.4 Failure To Be Licensed. If Executive fails to be licensed in all
jurisdictions in which the Company or its subsidiaries has gaming facilities
within the date required by any jurisdiction, or if any of such licenses shall
be revoked or suspended at any time during the Term, then the Company may by
written notice to Executive terminate the Agreement for Cause. Executive agrees
to promptly submit to the licensing requirements of all jurisdictions in which
the Company or its subsidiaries does business. The Company shall bear all
expenses incurred in connection with such licenses.

 

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6.2 Termination Without Cause. Notwithstanding anything to the contrary herein,
the Company shall have the right to terminate Executive’s employment under this
Agreement at any time without Cause by giving notice of such termination to
Executive. Failure by the Company to extend the Term for any Renewal Period
shall not be a termination of this Agreement without cause.
6.3 Termination by Executive for Good Reason. Executive may terminate his
employment under this Agreement on thirty (30) days prior notice to the Company
for good reason (“Good Reason”). For purposes of this Agreement, “Good Reason”
shall mean and be limited to (a) a material breach of this Agreement by the
Company (including without limitation any material reduction in the authority or
duties of Executive (other than cessation of his being Chairman of the Board due
to the requirements of any state regulation or applicable rules or regulations
of the SEC or any Exchange on which the Company’s stock is listed or admitted
for trading), or any relocation of his or its principal place of business
outside the greater Las Vegas metropolitan area (without Executive’s consent),
or (b) a change of control with respect to the Company (a “Change of Control”).
Except in the case set forth in clause (b) of the preceding sentence, however,
“Good Reason” shall not exist unless Executive gives notice of proposed
termination within thirty (30) days following the breach or condition giving
rise to Good Reason, and there is a failure of the Company to remedy the breach
or condition giving rise to Good Reason within thirty (30) days after such
notice (or as soon thereafter as practicable so long as it commences
effectuation of such remedy within such time period and diligently pursues such
remedy to completion as soon as practicable). For purposes of this Agreement, a
“Change of Control” shall mean the occurrence of any of the following:
(i) The direct or indirect acquisition by an unrelated “Person” or “Group” of
“Beneficial Ownership” (as such terms are defined below) of more than 50% of the
voting power of the Company’s issued and outstanding voting securities in a
single transaction or a series of related transactions;
(ii) The direct or indirect sale or transfer by the Company of substantially all
of its assets to one or more unrelated Persons or Groups in a single transaction
or a series of related transactions;
(iii) The merger, consolidation or reorganization of the Company with or into
another corporation or other entity in which the Beneficial Owners of more than
50% of the voting power of the Company’s issued and outstanding voting
securities immediately before such merger or consolidation do not own more than
50% of the voting power of the issued and outstanding voting securities of the
surviving corporation or other entity immediately after such merger,
consolidation or reorganization; or
(iv) During any consecutive 12-month period, individuals who at the beginning of
such period constituted the Board of the Company (together with any new
Directors whose election to such Board or whose nomination for election by the
stockholders of the Company was approved by a vote of a majority of the
Directors of the Company then still in office who were either Directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of the Company then in office.

 

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None of the foregoing events, however, shall constitute a Change of Control if
such event is not a “Change in Control Event” under Treasury Regulations
Section 1.409A-3(i)(5) or successor IRS guidance. For purposes of determining
whether a Change of Control has occurred, the following Persons and Groups shall
not be deemed to be “unrelated”: (A) such Person or Group directly or indirectly
has Beneficial Ownership of more than 50% of the issued and outstanding voting
power of the Company’s voting securities immediately before the transaction in
question, (B) the Company has Beneficial Ownership of more than 50% of the
voting power of the issued and outstanding voting securities of such Person or
Group, or (C) more than 50% of the voting power of the issued and outstanding
voting securities of such Person or Group are owned, directly or indirectly, by
Beneficial Owners of more than 50% of the issued and outstanding voting power of
the Company’s voting securities immediately before the transaction in question.
The terms “Person,” “Group,” “Beneficial Owner,” and “Beneficial Ownership”
shall have the meanings used in the Securities Exchange Act of 1934, as amended.
Notwithstanding the foregoing, (I) Persons will not be considered to be acting
as a “Group” solely because they purchase or own stock of the Company at the
same time, or as a result of the same public offering, (II) however, Persons
will be considered to be acting as a “Group” if they are owners of a corporation
that enters into a merger, consolidation, purchase or acquisition of stock, or
similar business transaction, with the Company, and (III) if a Person, including
an entity, owns stock both in the Company and in a corporation that enters into
a merger, consolidation, purchase or acquisition of stock, or similar
transaction, with the Company, such shareholders shall be considered to be
acting as a Group with other shareholders only with respect to the ownership in
the corporation before the transaction.
6.4 Death or Disability. This Agreement shall terminate on the death or
“Disability” of Executive. Executive will be deemed to have a “Disability” when
he is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than 12 months, or begins receiving income replacement benefits for a period of
not less than three months under an accident and health plan of the Company or
an affiliate by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months. If there should be a dispute
between the Company and Executive as to Executive’s physical or mental
Disability for purposes of this Agreement, the question shall be settled by the
opinion of an impartial reputable physician or psychiatrist agreed upon by the
parties or their representatives, or if the parties cannot agree within ten
(10) days after a request for designation of such party, then a physician or
psychiatrist designed by the Clark County Medical Association or a similar body.
The certification of such physician or psychiatrist as to the questioned dispute
shall be final and binding upon the parties hereto.

 

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6.5 Effect of Termination.
6.5.1 Payment of Salary and Expenses Upon Termination. Any termination under
this Section 6 shall be effective upon receipt of notice by Executive or the
Company, as the case may be, of such termination or upon such other later date
as may be provided herein or specified by the Company or Executive in the notice
(the “Termination Date”), except as otherwise provided in this Section 6. If
this Agreement is terminated, all benefits provided to Executive by the Company
hereunder shall thereupon cease and the Company shall pay or cause to be paid to
Executive all accrued but unpaid salary and vacation benefits, and any
compensation previously voluntarily deferred by Executive, payable in accordance
with the provisions of the applicable deferred compensation plan and in
accordance with Executive’s elections under such deferred compensation plan In
addition, promptly upon submission by Executive of his unpaid expenses incurred
prior to the Termination Date and owing to Executive pursuant to Article 5,
reimbursement for such expenses shall be made. If the Agreement is terminated by
the Company for “Cause,” or by Executive without “Good Reason,” Executive shall
not be entitled to receive any payments other than as specified in this
Section 6.5.1 and other any benefit plan or policy of the Company, and provided
that Executive may exercise any vested options.
6.5.2 Termination Due to Death or Disability. If this Agreement is terminated
due to death or Disability, the following shall apply:

  (a)   Executive shall be entitled to receive a lump sum amount equal to a sum
of not less than (i) Executive’s annual salary as in effect on the date of
termination; plus (ii) the greater of the amount of Executive’s bonus (including
all deferred amounts) in the year prior to such termination or the average of
the annual bonuses (including all deferred amounts) paid to Executive in the
three consecutive years prior to the year of termination (the “Bonus Amount”);
times (iii) the balance of the Term but in no event less than 150% of the sum of
(i) and (ii) above (the “Death or Disability Severance Benefit”); provided that
in the event of death, the amount of such Death Severance Benefit shall be
reduced by the amount of any life insurance provided by the Company; and,
provided further, that the amount of such Disability Severance Benefit shall be
reduced under the circumstances specified in this Section 6.5.2. In addition,
Executive shall be entitled to receive any amounts payable under Section 6.5.1
above, a pro rata annual bonus for the year of death or Disability (which bonus
shall be calculated by taking the Bonus Amount and multiplying it by a fraction,
the numerator of which is the number of days in the year in which Executive was
employed before his death or Disability and the denominator of which is 365) and
a continuation of health and disability insurance coverage as specified in
Section 6.5.2(c). The Disability Severance Benefit and the pro rata annual bonus
for the year of death or Disability shall be payable to Executive in a lump sum
within thirty (30) days after Executive’s death or Disability.

 

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  (b)   Executive shall be entitled to accelerated vesting of his outstanding
stock options, based on the following schedule: (i) if his death or Disability
shall occur on or before the first anniversary of the date of grant of such
options, one-third (1/3) of such options shall be vested and exercisable as of
the date of death or Disability, (ii) if his death or Disability shall occur
after the first anniversary and on or before the second anniversary of the date
of grant of such options, two-thirds (2/3) of such options shall be vested and
exercisable as of the date of death or Disability, and (iii) if his death or
Disability shall occur after the second anniversary of the date of grant of such
options, all of such options shall be vested and exercisable as of the date of
death or Disability.

  (c)   Executive shall also be entitled to receive health benefits coverage for
Executive and his dependents, and disability insurance coverage for Executive,
under the same plan(s) or arrangement(s) under which Executive was were covered
immediately before his death or Disability or plan(s) established or
arrangement(s) provided by the Company or any of its Subsidiaries thereafter for
the benefit of senior executives (“Health and Disability Coverage
Continuation”). Such health benefits and disability coverage shall be paid for
by the Company to the same extent as if Executive were still employed by the
Company, and Executive, or his Dependents in the event of his death, will be
required to make such payments as Executive would be required to make if
Executive were still employed by the Company. The benefits provided under this
Section 6.5.2(c) shall continue until the earliest of (a) five (5) years;
(b) the date on which Executive ceases to be Disabled during the five (5) year
period; and (c) the date Executive becomes covered under any other group health
plan or group disability plan (as the case may be) not maintained by the Company
or any of its Subsidiaries; provided, however, that if such other group health
plan excludes any pre-existing condition that Executive or Executive’s
dependents may have when coverage under such group health plan would otherwise
begin, coverage under this Section 6.5.2(c) shall continue (but not beyond the
period described in clause (a) of this sentence) with respect to such
pre-existing condition until such exclusion under such other group health plan
lapses or expires. In the event Executive is required to make an election under
Sections 601 through 607 of the Employee Retirement Income Security Act of 1974,
as amended (commonly known as COBRA) to qualify for the benefits described in
this Section 6.5.2(c), the obligations of the Company and its Subsidiaries under
this Section 6.5.2(c) shall be conditioned upon Executive’s timely making such
an election. Any payment or reimbursement of benefits under this
Section 6.5.2(c) that is taxable to Executive or his dependents shall be made by
December 31 of the calendar year following the calendar year in which Executive
or his dependent incurred the expense. Expenses eligible for reimbursement in
any one taxable year shall not affect the amount of expenses eligible for
reimbursement in any other taxable year, and the right to expense reimbursement
shall not be subject to liquidation or exchange for any other benefit.

 

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  (d)   The “Covenant Not to Compete” set forth in Section 7.4 below shall not
apply in any respect to Executive and the term of the “No Hire Away Policy” in
Section 7.5 shall be limited to six months from the date of Executive’s death or
Disability.

6.5.3 Termination Without Cause or Termination by Executive for Good Reason
Prior to or After Twenty-Four (24) Months Following a Change of Control. If the
Company terminates Executive without Cause or Executive terminates for Good
Reason prior to, or after twenty-four months following, a Change of Control, the
following shall apply:

  (a)   Executive shall be entitled to receive an amount equal to a sum not less
than (i) Executive’s annual salary as in effect on the date of termination; plus
(ii) the greater of (A) the amount of Executive’s actual bonus for the year
before the year of the termination (including all deferred amounts), but not to
exceed Executive’s target bonus for the year of termination, or (B) the average
of the actual annual bonuses paid to Executive in the three consecutive years
prior to the year of termination (including all deferred amounts); times
(iii) the number of years (including fractional years) of the balance of the
Term but in no event less than 150% of the sum of (i) and (ii) above (the
“Pre-Change of Control Severance Benefit”). The salary component of the
Pre-Change of Control Severance Benefit shall be paid to Executive in equal
installments over eighteen (18) months immediately following the date of
termination in accordance with the Company’s regular salary payment schedule
from time to time. Fifty percent (50%) of the bonus component of the Pre-Change
of Control Severance Benefit shall be paid within thirty (30) days after
termination of employment, and fifty percent (50%) of the bonus component of the
Pre-Change of Control Severance Benefit shall be paid in three annual
installments on the anniversaries of the termination of employment. In addition,
Executive shall be entitled to receive any amounts payable under Section 6.5.1
above, a pro rata annual bonus for the year of termination calculated and
payable as provided in Section 6.5.2(a), payable within thirty (30) days after
termination of employment. The payments contemplated herein shall not be subject
to any duty of mitigation by Executive nor to offset for any income earned by
Executive following termination.

 

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  (b)   Executive shall be entitled to accelerated vesting of his outstanding
stock options, as provided in Section 6.5.2(b).

  (c)   Executive shall also be entitled to receive health benefits coverage for
Executive and his dependents, and disability insurance coverage for Executive,
under the same plan(s) or arrangement(s) under which Executive was were covered
immediately before his termination of employment or plan(s) established or
arrangement(s) provided by the Company or any of its Subsidiaries thereafter for
the benefit of senior executives. Such health benefits and disability coverage
shall be paid for by the Company to the same extent as if Executive were still
employed by the Company, and Executive will be required to make such payments as
Executive would be required to make if Executive were still employed by the
Company. The benefits provided under this Section 6.5.3(c) shall continue until
the earlier of (a) the balance of the Term but in no event less than one and
one-half (1-1/2) years following Executive’s termination of employment with the
Company and all of its Subsidiaries; or (b) the date Executive becomes covered
under any other group health plan or group disability plan (as the case may be)
not maintained by the Company or any of its Subsidiaries; provided, however,
that if such other group health plan excludes any pre-existing condition that
Executive or Executive’s dependents may have when coverage under such group
health plan would otherwise begin, coverage under this Section 6.5.3(c) shall
continue (but not beyond the period described in clause (a) of this sentence)
with respect to such pre-existing condition until such exclusion under such
other group health plan lapses or expires. In the event Executive is required to
make an election under Sections 601 through 607 of the Employee Retirement
Income Security Act of 1974, as amended (commonly known as COBRA) to qualify for
the benefits described in this Section 6.5.3(c), the obligations of the Company
and its Subsidiaries under this Section 6.5.3(c) shall be conditioned upon
Executive’s timely making such an election. Any payment or reimbursement of
benefits under this Section 6.5.3(c) that is taxable to Executive or his
dependents shall be made by December 31 of the calendar year following the
calendar year in which Executive or his dependent incurred the expense. Expenses
eligible for reimbursement in any one taxable year shall not affect the amount
of expenses eligible for reimbursement in any other taxable year, and the right
to expense reimbursement shall not be subject to liquidation or exchange for any
other benefit.

 

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  (d)   The “Covenant Not to Compete” set forth in Section 7.4 below shall not
apply in any respect to Executive and the term of the “No Hire Away Policy” in
Section 7.5 shall be limited to six months from the date of termination.

6.5.4 Termination Without Cause or Termination by Executive for Good Reason
Within the Twenty-Four (24) Months After a Change of Control. If the Company
terminates Executive without Cause or Executive terminates for Good Reason
within twenty-four (24) months after a Change of Control, the following shall
apply:

  (a)   The Company shall pay to Executive in lieu of the Base Severance
Benefit, in a lump sum as soon as practicable, but in no event later than thirty
(30) days after the termination of Executive’s employment, (i) an amount (the
“Change of Control Severance Benefit”) equal to two and one-half (2-1/2) times
Executive’s annual base salary in effect on the date of termination, plus two
and one-half (2-1/2) times the largest annual bonus (including all deferred
amounts) that was paid to Executive during the three (3) years preceding the
Change of Control; plus (ii) a pro rated bonus for the year of termination
(which bonus shall be calculated by taking the Bonus Amount and multiplying it
as provided in section 6.5.2(a), plus (iii) any amounts payable under
Section 6.5.1. Executive shall also be entitled to receive a continuation of
health and disability insurance coverage as specified in Section 6.5.2(c). In
addition to those already vested, all unvested stock options held by Executive
shall be immediately and fully vested and exercisable by Executive.

  (b)   The “Covenant Not to Compete” set forth in Section 7.4 below shall not
apply in any respect to Executive and the term of the “No Hire Away Policy” in
Section 7.5 shall be limited to six months from the date of termination.

6.5.5 Occurrence of a Change of Control With Six Months After Termination
Without Cause or by Executive for Good Reason. If a Change of Control occurs
within six months after the date of termination of Executive by the Company
without Cause or the date of termination by Executive with Good Reason, the
following shall apply:

  (a)   Executive shall receive (i) the Change of Control Severance Benefit set
forth in Section 6.5.4(a)(i), less the amount of any Pre-Change of Control
Severance Benefit payments Executive has already received under the first
sentence of Section 6.5.3(a), and (ii) continuation of health and disability
coverage as specified in Section 6.5.2(c).

 

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  (b)   The “Covenant Not to Compete” set forth in Section 7.4 below shall not
apply in any respect to Executive (and Executive’s compliance therewith shall
not be a condition to the Company’s obligations hereunder), and the term of the
“No Hire Away Policy” in Section 7.5 shall be limited to six (6) months from the
date of termination.

6.5.6 Additional Payments. In the event that any payments that Executive may
receive under this Agreement or otherwise shall constitute a change in control
payments under Section 280G of the Code which would subject Executive to an
excise tax under Section 4999 of the Code, Executive shall be entitled to
receive additional tax gross-up payments from the Company as set forth in
Appendix A hereto. Notwithstanding the foregoing provisions of this
Section 6.5.6, if it shall be determined that Executive is entitled to the Gross
Up Payment, but that the Payments do not exceed 105% of the greatest amount that
could be paid to Executive such that the receipt of the Payments would not give
rise to any Excise Tax (the “Reduced Amount”), then no Gross Up Payment shall be
made to Executive and the Payments, in the aggregate, shall be reduced to the
Reduced Amount. If the Company elects to provide coverage under
Section 6.5.2(c), 6.5.3(c), 6.5.4(a) or 6.5.5(a) under self-insured insurance
plans rather than under insurance policies, the Company shall indemnify
Executive for any tax liability he incurs on payment of claims under the
insurance plans that he would not have incurred if the claims had been paid
under insurance policies. Any such tax indemnification amounts shall be paid to
or for the benefit the Executive by December 31 of the calendar year following
the calendar year in which the additional tax is remitted, or, if no additional
tax is remitted, by December 31 of the calendar year following the calendar year
in which there is a final and non-appealable settlement or other resolution of
an audit or litigation relating to such additional tax. The Company shall pay to
Executive a payment (the “Gross Up Payment”) in an amount such that, after
payment by Executive of all income taxes and the excise tax imposed by Internal
Revenue Code Section 4999, or any similar provision of state or local tax law
(the “Excise Tax”) imposed on benefits under this agreement, on all other
payments from the Company to Executive in the nature of compensation, and on the
Gross Up Payment itself, and any interest or penalties (other than interest and
penalties imposed by reason of Executive’s failure to file timely tax returns or
to pay taxes shown due on such returns and any tax liability, including interest
and penalties, unrelated to the Excise Tax or the Gross Up Amount), Executive
shall be placed in the same tax position with respect to benefits under this
Agreement and all other payments from the Company to Executive in the nature of
compensation as Executive would have been if the Excise Tax had never been
enacted.

 

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6.5.7 I.R.C. Section 409A. In the event that any compensation with respect to
Executive’s separation from service is “deferred compensation” within the
meaning of Section 409A of the Code and the regulations thereunder
(“Section 409A”), the stock of the Company or any affiliate is publicly traded
on an established securities market or otherwise, and Executive is determined to
be a “specified employee,” as defined in Section 409A(a)(2)(B)(i) of the Code,
payment of such compensation shall be delayed as required by Section 409A. Such
delay shall last six months from the date of Executive’s separation from
service, except in the even of Executive’s death. Within thirty (30) days
following the end of such six-month period, or, if earlier, Executive’s death,
the Company will make a catch-up payment to Executive equal to the total amount
of such payments that would have been made during the six-month period but for
this Section 6.5.7. The catch-up payment amount shall accrue simple interest at
the prime rate of interest as published by the Bank of America as of the
beginning of the deferral period, which such interest shall be paid with the
catch-up payment. The Company will place an amount in a “rabbi trust” with an
independent trustee reasonably acceptable to Executive equal to the catch-up
payment plus the interest that will accrue thereon. Wherever payments under this
Agreement are to be made in installments, each such installment shall be deemed
to be a separate payment for purposes of Section 409A. Payments of compensation
or benefits on Executive’s termination of employment (other than accrued salary
and vacation pay, other accrued amounts that must be paid under applicable law,
and “welfare benefits” specified in Treasury Regulations Section 1.409A-1(a)(5))
shall be paid only if and when the termination of employment constitutes a
“separation from service” under Treasury Regulation Section 1.409A-1(h).
6.5.8 Suspension. In lieu of terminating Executive’s employment hereunder for
Cause under Section 6.1, the Company shall have the right, at its sole election,
to suspend the performance of duties by Executive under this Agreement during
the continuance of events or circumstances under Section 6.1 for an aggregate of
not more than thirty (30) days during the Term (the “Default Period”) by giving
Executive written notice of the Company’s election to do so at any time during
the Default Period. The Company shall have the right to extend the Term beyond
its normal expiration date by the period(s) of any suspension(s). The Company’s
exercise of its right to suspend the operation of this Agreement shall not
preclude the Company from subsequently terminating Executive’s employment
hereunder. Executive shall not render services to any other person, firm or
corporation in the casino business during any period of suspension. Executive
shall be entitled to continued compensation and benefits pursuant to the
provisions of this Agreement during the Default Period.
6.6 Exercisability of Options. Except with respect to options granted prior to
the date hereof, all vested options will terminate on the earlier of (a) the
expiration of the ten (10) year term of such options, or (b) one (1) year after
the termination of Executive’s employment with the Company, regardless of the
cause of such termination, except that, in the event of a termination for
“Cause” or Executive’s termination without Good Reason, all vested options will
terminate on the earlier of (I) the expiration of the ten (10) year term of such
options, or (II) ninety (90) days after the termination. As provided in the
stock option agreements, unvested options will terminate on the termination of
Executive’s employment with the Company, except to the extent that such options
become vested as a result of such termination under the terms of the governing
stock option agreement or this Agreement. With respect to options granted prior
to the date hereof, any option exercise extension shall be limited to the
maximum amount permitted which would not trigger a modification under
Section 409A.

 

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6.7 No-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit
Executive’s continuing or future participation in any plan, program, policy or
practice provided by the Company or its subsidiaries and for which the Executive
may quality, nor shall anything herein limit or otherwise affect such rights as
Executive may have under any other contract or agreement with the Company or its
subsidiaries at or subsequent to the Date of Termination (“Other Benefits”)
shall be payable in accordance with such plan, policy, practice or program or
contract or agreement, except as explicitly modified by this Agreement.
Notwithstanding the foregoing, if Executive receives payments and benefits
pursuant to Article VI of this Agreement, Executive shall not be entitled to any
severance pay or benefits under any severance plan, program or policy of the
Company and its subsidiaries, unless otherwise specifically provided therein in
a specific reference in or to this Agreement.
6.8 Full Settlement. The Company’s obligation to make the payments provided for
in this Agreement and otherwise to perform its obligations hereunder shall not
be affected by any setoff, counterclaim, recoupment, defense, or other claim,
right or action that the Company may have against the Executive or others,
except to the extent of the mitigation and setoff provisions provided for in
this Agreement. Except as expressly provided for herein, in no event shall
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to Executive under any of the provisions of
this Agreement and such amounts shall not be reduced whether or not Executive
obtains other employment. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses that the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company, Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by Executive about the amount of
any payment pursuant to this Agreement), plus, in each case, interest on any
delayed payment at the applicable federal rate provided for in
Section 7872(f)(2)(A) of the Code.
6.9 Release. It shall be a condition for Executive’s right to receive any
severance benefits hereunder that he execute a general release in favor of the
Company and its affiliates in the form attached hereto as Appendix B and
covering such additional matters as may be reasonably requested by the Company,
which release shall not encompass the payments contemplated hereby. The timing
of payments under this Agreement upon the execution of the general release shall
be governed by the following provisions:
(a) The Company must deliver the release to Executive for execution no later
than fourteen (14) days after Executive’s termination of employment. If the
Company fails to deliver the release to Executive within such 14 day period,
Executive will be deemed to have satisfied the release requirement and will
receive payments conditioned on execution of the release as though Executive had
executed the release and all revocation rights had lapsed at the end of such
fourteen (14) day period.

 

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(b) Executive must execute the release within forty-five (45) days from its
delivery to him.
(c) If Executive has revocation rights, Executive shall exercise such rights, if
at all, not later than seven (7) days after executing the release.
(d) In any case in which the release (and the expiration of any revocation
rights) could only become effective in a particular tax year of Executive,
payments conditioned on execution of the release shall begin within thirty
(30) days after the release becomes effective and revocation rights have lapsed.
(e) In any case in which the release (and the expiration of any revocation
rights) could become effective in one of two taxable years of Executive
depending on when Executive executes the release, payments conditioned on
execution of the release shall not begin before the first business day of the
later of such tax years.
ARTICLE 7.
CONFIDENTIALITY
7.1 Nondisclosure of Confidential Material. In the performance of his duties,
Executive may have access to confidential records, including, but not limited
to, development, marketing, organizational, financial, managerial,
administrative and sales information, data, specifications and processes
presently owned or at any time hereafter developed or used by the Company or its
agents or consultants that is not otherwise part of the public domain
(collectively, the “Confidential Material”). All such Confidential Material is
considered secret and is disclosed to Executive in confidence. Executive
acknowledges that the Confidential Material constitutes proprietary information
of the Company which draws independent economic value, actual or potential, from
not being generally known to the public or to other persons who could obtain
economic value from its disclosure or use, and that the Company has taken
efforts reasonable under the circumstances, of which this Section 7.1 is an
example, to maintain its secrecy. Except in the performance of his duties to the
Company or as required by a court order or any gaming regulator or as required
for his personal tax or legal advisors to advise him, Executive shall not,
directly or indirectly for any reason whatsoever, disclose, divulge,
communicate, use or otherwise disclose any such Confidential Material, unless
such Confidential Material ceases to be confidential because it has become part
of the public domain (not due to a breach by Executive of his obligations
hereunder). Executive shall also take all reasonable actions appropriate to
maintain the secrecy of all Confidential Information. All records, lists,
memoranda, correspondence, reports, manuals, files, drawings, documents,
equipment, and other tangible items (including computer software), wherever
located, incorporating the Confidential Material, which Executive shall prepare,
use or encounter, shall be and remain the Company’s sole and exclusive property
and shall be included in the Confidential Material. Upon termination of this
Agreement, or whenever requested by the Company, Executive shall promptly
deliver to the Company any and all of the Confidential Material, not previously
delivered to the Company, that is in the possession or under the control of
Executive.

 

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7.2 Assignment of Intellectual Property Rights. Any ideas, processes, know-how,
copyrightable works, maskworks, trade or service marks, trade secrets,
inventions, developments, discoveries, improvements and other matters that may
be protected by intellectual property rights, that relate to the Company’s
business and are the results of Executive’s efforts during the Term
(collectively, the “Executive Work Product”), whether conceived or developed
alone or with others, and whether or not conceived during the regular working
hours of the Company, shall be deemed works made for hire and are the property
of the Company. In the event that for whatever reason such Executive Work
Product shall not be deemed a work made for hire, Executive agrees that such
Executive Work Product shall become the sole and exclusive property of the
Company, and Executive hereby assigns to the Company his entire right, title and
interest in and to each and every patent, copyright, trade or service mark
(including any attendant goodwill), trade secret or other intellectual property
right embodied in Executive Work Product. The Company shall also have the right,
in its sole discretion to keep any and all of Executive Work Product as the
Company’s Confidential Material. The foregoing work made for hire and assignment
provisions are and shall be in consideration of this agreement of employment by
the Company, and no further consideration is or shall be provided to Executive
by the Company with respect to these provisions. Executive agrees to execute any
assignment documents the Company may require confirming the Company’s ownership
of any Executive Work Product. Executive also waives any and all moral rights
with respect to any such works, including without limitation any and all rights
of identification of authorship and/or rights of approval, restriction or
limitation on use or subsequent modifications. Executive promptly will disclose
to the Company any Executive Work Product.
7.3 No Unfair Competition After Termination of Agreement. Executive hereby
acknowledges that the sale or unauthorized use or disclosure of any of the
Company’s Confidential Material obtained by Executive by any means whatsoever,
at any time before, during or after the Term shall constitute unfair
competition. Executive shall not engage in any unfair competition with the
Company either during the Term or at any time thereafter.
7.4 Covenant Not to Compete. In the event this Agreement is terminated by the
Company for “Cause” under Section 6.1 above, or by Executive, for a reason other
than one specified in Section 6.3 above, then for a period of one year after the
effective date of such termination, Executive shall not, directly or indirectly,
work for or provide services to or own an equity interest (except for a
Permissible Investment) in any person, firm or entity engaged in the casino
gaming, card club or horseracing business which competes against the Company in
any “market” in which the Company owns or operates a casino, card club or
horseracing facility. For purposes of this Agreement, “market” shall be defined
as the area within a 100 mile radius of any casino, card club or horseracing
facility owned or operated by the Company.
7.5 No Hire Away Policy. In the event this Agreement is terminated prior to the
normal expiration of the Term, either by the Company for cause under Section 6.1
above, or by Executive, for a reason other than one specified in Section 6.3
above, then for a period of one year after the effective date of such
termination, Executive shall not, directly or indirectly, for himself or on
behalf of any entity with which he is affiliated or employed, hire any person
known to Executive to be an employee of the Company or any of its subsidiaries
(or any person known to Executive to have been such an employee within six
months prior to such occurrence). Executive shall not be deemed to hire any such
person so long as he did not directly or indirectly engage in or encourage such
hiring.

 

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7.6 No Solicitation. During the Term and for a period of one year thereafter, or
for a period of one year after earlier termination of this Agreement prior to
expiration of the Term, and regardless of the reason for such termination
(whether by the Company or Executive), Executive shall not directly or
indirectly, for himself or on behalf of any entity with which he is affiliated
or employed, solicit any employee of the Company or any of its subsidiaries (or
any person who was such an employee within six months prior to such occurrence)
or encourage any such employee to leave the employment of the Company or any of
its subsidiaries.
7.7 Non-Solicitation of Customers. During the Term and for a period of one year
thereafter, or for a period of one year after the earlier termination of this
Agreement prior to the expiration of the Term, and regardless of the reason for
such termination (whether by the Company or Executive), Executive shall not use
customer lists or Confidential Material to solicit any customers of the Company
or its subsidiaries or any of their respective casinos or card clubs, or
knowingly encourage any such customers to leave the Company’s casinos or card
clubs or knowingly encourage any such customers to use the facilities or
services of any competitor of the Company or its subsidiaries.
7.8 Irreparable Injury. The promised service of Executive under this Agreement
and the other promises of this Article 7 are of special, unique, unusual,
extraordinary, or intellectual character, which gives them peculiar value, the
loss of which cannot be reasonably or adequately compensated in damages in an
action at law.
7.9 Remedies for Breach. Executive agrees that money damages will not be a
sufficient remedy for any breach of the obligations under this Article 7 and
Article 2 hereof and that the Company shall be entitled to injunctive relief
(which shall include, but not be limited to, restraining Executive from directly
or indirectly working for or having an ownership interest (except for a
Permissible Investment) in any person engaged in the casino, gaming or
horseracing businesses in any market which the Company or its affiliates owns or
operates any such business, using or disclosing the Confidential Material) and
to specific performance as remedies for any such breach. Executive agrees that
the Company shall be entitled to such relief, including temporary restraining
orders, preliminary injunctions and permanent injunctions, without the necessity
of proving actual damages and without the necessity of posting a bond or making
any undertaking in connection therewith. Any such requirement of a bond or
undertaking is hereby waived by Executive and Executive acknowledges that in the
absence of such a waiver, a bond or undertaking might otherwise be required by
the court. Such remedies shall not be deemed to be the exclusive remedies for
any breach of the obligations in this Article 7, but shall be in addition to all
other remedies available at law or in equity.

 

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ARTICLE 8.
ARBITRATION
8.1 General. Except for a claim for injunctive relief under Section 7.9, any
controversy, dispute, or claim between the parties to this Agreement, including
any claim arising out of, in connection with, or in relation to the formation,
interpretation, performance or breach of this Agreement shall be settled
exclusively by arbitration, before a single arbitrator, in accordance with this
Article 8 and the then most applicable rules of the American Arbitration
Association. Judgment upon any award rendered by the arbitrator may be entered
by any state or federal court having jurisdiction thereof. Such arbitration
shall be administered by the American Arbitration Association. Arbitration shall
be the exclusive remedy for determining any such dispute, regardless of its
nature. Notwithstanding the foregoing, either party may in an appropriate matter
apply to a court for provisional relief, including a temporary restraining order
or a preliminary injunction, on the ground that the award to which the applicant
may be entitled in arbitration may be rendered ineffectual without provisional
relief. Unless mutually agreed by the parties otherwise, any arbitration shall
take place in Las Vegas, Nevada.
8.2 Selection of Arbitrator. In the event the parties are unable to agree upon
an arbitrator, the parties shall select a single arbitrator from a list of nine
arbitrators drawn by the parties at random from the “Independent” (or “Gold
Card”) list of retired judges or, at the option of Executive, from a list of
nine persons (which shall be retired judges or corporate or litigation attorneys
experienced in executive employment agreements) provided by the office of the
American Arbitration Association having jurisdiction over Las Vegas, Nevada. If
the parties are unable to agree upon an arbitrator from the list so drawn, then
the parties shall each strike names alternately from the list, with the first to
strike being determined by lot. After each party has used four strikes, the
remaining name on the list shall be the arbitrator. If such person is unable to
serve for any reason, the parties shall repeat this process until an arbitrator
is selected.
8.3 Applicability of Arbitration; Remedial Authority. This agreement to resolve
any disputes by binding arbitration shall extend to claims against any parent,
subsidiary or affiliate of each party, and, when acting within such capacity,
any officer, director, stockholder, employee or agent of each party, or of any
of the above, and shall apply as well to claims arising out of state and federal
statutes and local ordinances as well as to claims arising under the common law.
In the event of a dispute subject to this paragraph the parties shall be
entitled to reasonable discovery subject to the discretion of the arbitrator.
The remedial authority of the arbitrator (which shall include the right to grant
injunctive or other equitable relief) shall be the same as, but no greater than,
would be the remedial power of a court having jurisdiction over the parties and
their dispute. The arbitrator shall, upon an appropriate motion, dismiss any
claim without an evidentiary hearing if the party bringing the motion
establishes that he or it would be entitled to summary judgment if the matter
had been pursued in court litigation. In the event of a conflict between the
applicable rules of the American Arbitration Association and these procedures,
the provisions of these procedures shall govern.

 

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8.4 Fees and Costs. Any filing or administrative fees shall be borne initially
by the party requesting arbitration. The Company shall be responsible for the
costs and fees of the arbitration, unless Executive wishes to contribute (up to
50%) of the costs and fees of the arbitration. Notwithstanding the foregoing,
the prevailing party in such arbitration, as determined by the arbitrator, and
in any enforcement or other court proceedings, shall be entitled, to the extent
permitted by law, to reimbursement from the other party for all of the
prevailing party’s costs (including but not limited to the arbitrator’s
compensation), expenses, and attorneys’ fees.
8.5 Award Final and Binding. The arbitrator shall render an award and written
opinion, and the award shall be final and binding upon the parties. If any of
the provisions of this paragraph, or of this Agreement, are determined to be
unlawful or otherwise unenforceable, in whole or in part, such determination
shall not affect the validity of the remainder of this Agreement, and this
Agreement shall be reformed to the extent necessary to carry out its provisions
to the greatest extent possible and to insure that the resolution of all
conflicts between the parties, including those arising out of statutory claims,
shall be resolved by neutral, binding arbitration. If a court should find that
the arbitration provisions of this Agreement are not absolutely binding, then
the parties intend any arbitration decision and award to be fully admissible in
evidence in any subsequent action, given great weight by any finder of fact, and
treated as determinative to the maximum extent permitted by law.
ARTICLE 9.
MISCELLANEOUS
9.1 Amendments. The provisions of this Agreement may not be waived, altered,
amended or repealed in whole or in part except by the signed written consent of
the parties sought to be bound by such waiver, alteration, amendment or repeal.
9.2 Entire Agreement. This Agreement and the stock option agreements between the
Company and Executive constitute the total and complete agreement of the parties
and supersedes all prior and contemporaneous understandings and agreements
heretofore made, including the Original Agreement and the 2006 Agreement, and
there are no other representations, understandings or agreements.
9.3 Counterparts. This Agreement may be executed in one of more counterparts,
each of which shall be deemed and original, but all of which shall together
constitute one and the same instrument. The exchange of copies of this Agreement
and of signature pages by facsimile transmission or by e-mail shall constitute
effective execution and delivery of this Agreement as to the parties and may be
used in lieu of the original Agreement for all purposes. Signatures of the
parties transmitted by facsimile or by e-mail shall be deemed to be their
original signatures for any purpose whatsoever.
9.4 Severability. Each term, covenant, condition or provision of this Agreement
shall be viewed as separate and distinct, and in the event that any such term,
covenant, condition or provision shall be deemed by an arbitrator or a court of
competent jurisdiction to be invalid or unenforceable, the court or arbitrator
finding such invalidity or unenforceability shall modify or reform this
Agreement to give as much effect as possible to the terms and provisions of this
Agreement. Any term or provision which cannot be so modified or reformed shall
be deleted and the remaining terms and provisions shall continue in full force
and effect.

 

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9.5 Waiver or Delay. The failure or delay on the part of the Company, or
Executive to exercise any right or remedy, power or privilege hereunder shall
not operate as a waiver thereof. A waiver, to be effective, must be in writing
and signed by the party making the waiver. A written waiver of default shall not
operate as a waiver of any other default or of the same type of default on a
future occasion.
9.6 Successors and Assigns. This Agreement shall be binding on and shall inure
to the benefit of the parties to it and their respective heirs, legal
representatives, successors and assigns, except as otherwise provided herein.
Except as provided in this Section 9.6, without the prior written consent of
Executive, this Agreement shall not be assignable by the Company. The Company
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 the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform if no such succession had taken place. “Company” means the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid that assumes and agrees to perform this Agreement by operation of law
or otherwise.
9.7 No Assignment or Transfer by Executive. Neither this Agreement nor any of
the rights, benefits, obligations or duties hereunder may be assigned or
transferred by Executive. Any purported assignment or transfer by Executive
shall be void.
9.8 Necessary Acts. Each party to this Agreement shall perform any further acts
and execute and deliver any additional agreements, assignments or documents that
may be reasonably necessary to carry out the provisions or to effectuate the
purpose of this Agreement.
9.9 Governing Law. This Agreement and all subsequent agreements between the
parties shall be governed by and interpreted, construed and enforced in
accordance with the laws of the State of Nevada.
9.10 Notices. All notices, requests, demands and other communications to be
given under this Agreement shall be in writing and shall be deemed to have been
duly given on the date of service, if personally served on the party to whom
notice is to be given, or 48 hours after mailing, if mailed to the party to whom
notice is to be given by certified or registered mail, return receipt requested,
postage prepaid, and properly addressed to the party at his address set forth as
follows or any other address that any party may designate by written notice to
the other parties:

     
To Executive:
  Dan Lee
 
  3800 Howard Hughes Parkway
 
  Las Vegas, NV 89169
 
  Telephone: 702 784-7777
 
  Facsimile: 702 784-7701

 

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with copy to:
  Latham & Watkins LLP
 
  633 West Fifth Street
 
  Los Angeles, CA 90071-2007
 
  Attn: James D. C. Barrall
 
  Telephone: 213 485 1234
 
  Facsimile: 213 891 8763
 
   
To the Company:
  Pinnacle Entertainment, Inc.
 
  3800 Howard Hughes Parkway
 
  Las Vegas, NV 89169
 
  Attn: John A. Godfrey, Executive Vice President,
 
  General Counsel and Secretary
 
  Telephone: 702 784-7777
 
  Facsimile: 702 784-7701
 
   
with copy to:
  Irell & Manella LLP
 
  1800 Avenue of the Stars, Suite 900
 
  Los Angeles, CA 90067-4276
 
  Attn: Al Segel
 
  Telephone: 310 277 1010
 
  Facsimile: 310 284 3052

9.11 Headings and Captions. The headings and captions used herein are solely for
the purpose of reference only and are not to be considered as construing or
interpreting the provisions of this Agreement.
9.12 Construction. All terms and definitions contained herein shall be construed
in such a manner that shall give effect to the fullest extent possible to the
express or implied intent of the parties hereby.
9.13 Counsel. Executive has been advised by the Company that he should consider
seeking the advice of counsel in connection with the execution of this Agreement
and Executive has had an opportunity to do so. Executive has read and
understands this Agreement, and has sought the advice of counsel to the extent
he has determined appropriate. The Company shall reimburse Executive for the
reasonable fees and expenses of Executive’s counsel in connection with this
Agreement.
9.14 Withholding of Compensation. Executive hereby agrees that the Company may
deduct and withhold from the compensation or other amounts payable to Executive
hereunder or otherwise in connection with Executive’s employment any amounts
required to be deducted and withheld by the Company under the provisions of any
applicable Federal, state and local statute, law, regulation, ordinance or
order.

 

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9.15 References to Sections of the Code. All references in this Agreement and
Appendix A hereto to sections of the Code shall be to such sections and to any
successor or substantially comparable sections of the Code or to any successor
thereto.
9.16 Effect of Delay. Executive’s or the Company’s failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right Executive or the Company may have hereunder, including without limitation
the right of Executive to terminate employment for Good Reason pursuant to
Section 6.5, shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Agreement.
[SIGNATURES TO APPEAR ON FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the date first written above.

                  EXECUTIVE       THE COMPANY    
 
                        PINNACLE ENTERTAINMENT, INC.    
 
               
/s/ Daniel R. Lee
 
Daniel R. Lee
      By:   /s/ John A. Godfrey
 
John A. Godfrey,    
 
          Executive Vice President,
General Counsel and Secretary    

 

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Appendix A
Tax Grossup Payments
(a) Anything in this Agreement to the contrary notwithstanding and except as set
forth below, in the event it shall be determined that any Payment would be
subject to the Excise Tax, then Executive shall be entitled to receive an
additional payment (a “Gross-Up Payment”) in an amount such that after payment
by Executive of all taxes (excluding any interest, additions, increases or
penalties imposed with respect to such taxes except for interest, additions,
increases or penalties with respect to the Excise Tax), including, without
limitation, any income taxes (except for any interest, additions, increases and
penalties imposed with respect thereto) and the Excise Tax imposed upon the
Payment and the Gross-Up Payment, Executive is placed in the same tax position
with respect to the Payment as Executive would have been in if the Excise Tax
had never been enacted.
(b) Subject to the provisions of Section (c), all determinations required to be
made under this appendix, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by the Company’s
independent accounting firm or such other nationally recognized certified public
accounting firm as may be designated by Executive (the “Accounting Firm”) which
shall provide detailed supporting calculations both to the Company and Executive
within fifteen (15) business days of the receipt of notice from Executive that
there has been a Payment, or such earlier time as is requested by the Company.
All fees and expenses of the Accounting Firm shall be borne solely by the
Company. Subject to Section e) below, any Gross-Up Payment, as determined
pursuant to this appendix shall be paid by the Company to Executive within five
(5) days of the receipt of the Accounting Firm’s determination. Any
determination by the Accounting Firm shall be binding upon the Company and
Executive. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made (“Underpayment”), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section (c) and Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Executive.
(c) Executive shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company of
the Gross-Up Payment. Such notification shall be given as soon as practicable
but no later than ten (10) business days after Executive is informed in writing
of such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. Executive shall not pay such
claim prior to the expiration of the 30-day period following the date on which
it gives such notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the Company
notifies Executive in writing prior to the expiration of such period that it
desires to contest such claim, Executive shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company,

 

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(iii) cooperate with the Company in good faith in order effectively to contest
such claim, and
(iv) permit the Company to participate in any proceedings relating to such
claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section (c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim; provided, that any extension of the statute
of limitations relating to payment of taxes for the taxable year of Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company’s control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Executive shall be entitled to settle or contest,
as the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(d) If Executive becomes entitled to receive any refund with respect to the
Gross-Up Payment or the Excise Tax, Executive shall promptly pay to the Company
the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If Executive would have received a refund of
all or any portion of the Gross-Up Payment or the Excise Tax, except that a
taxing authority offset the amount of such refund against other tax liabilities,
interest, or penalties , Executive shall pay the amount of such offset over to
the Company, together with the amount of interest Executive would have received
from the taxing authority if such offset had been an actual refund, promptly
after receipt of notice from the taxing authority of such offset.
(e) Notwithstanding any other provision of this appendix, the Company may
withhold and pay over to the Internal Revenue Service for the benefit of
Executive all or any portion of the Gross-Up Payment that it determines in good
faith that it is or may be in the future required to withhold, and Executive
hereby consents to such withholding.
(f) Subject to the foregoing provisions of this Appendix that may require
earlier payment, any Gross-Up Payment shall be paid to or for the benefit the
Executive by December 31 of the calendar year following the calendar year in
which the Excise Tax is remitted, or, if no Excise Tax is remitted, by
December 31 of the calendar year following the calendar year in which there is a
final and non-appealable settlement or other resolution of an audit or
litigation relating to the Excise Tax.
(g) Definitions. The following terms shall have the following meanings for
purposes of this appendix.
(i) “Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code,
together with any interest or penalties imposed with respect to such excise tax.
(ii) A “Payment” shall mean any payment or distribution in the nature of
compensation (within the meaning of Section 280G(b)(2) of the Code) to or for
the benefit of Executive, whether paid or payable pursuant to this Agreement or
otherwise.

 

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APPENDIX B
RELEASE and RESIGNATION
For valuable consideration, receipt of which is hereby acknowledged, the
undersigned                                          (“Executive”), for himself
and his spouse, heirs, estate, administrators and executors, hereby fully and
forever releases and discharges Pinnacle Entertainment, Inc., a Delaware
corporation (the “Company”), and each of its subsidiaries and the officers,
directors, employees, attorneys and agents of the Company and each such
subsidiary, of and from any and all claims, demands, causes of action of any
kind or nature, in law, equity or otherwise, whether known or unknown, which
Executive has had, may have had, or now has, or may have, arising out of or in
connection with Executive’s employment with the Company and/or its subsidiaries
or the termination of such employment; provided, however, that nothing contained
herein is intended to nor shall constitute a release of the Company from any
obligations it may have to Executive under any written employment agreement
between Executive and the Company in effect as of the date hereof, or any
deferred compensation, medical coverage or retirement plan or arrangement in
which Executive participates or any rights of indemnification under the
Company’s Articles, Bylaws, Indemnity Trust Agreement or the like, or coverage
under Director and Officer Insurance, nor shall it prevent Executive from
exercising his rights, if any, under any such employment agreement or under any
stock option, restricted stock or similar agreement in effect as of the date
hereof in accordance with their terms.
Executive represents and warrants that he has not assigned or in any way
conveyed, transferred or encumbered all or any portion of the claims or rights
covered by this release.
Executive hereby resigns from all positions as an officer, director or employee
of the Company and each of its subsidiaries or affiliates effective the date
hereof and further agrees to execute such further evidence of such resignations
as may be necessary or appropriate to effectuate the foregoing.
Executed this            day of                     , 20        .

                             
 
 
 
Executive    

 

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