Document:

EXHIBIT 10.1

Exhibit 10.1

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 RSUI Indemnity Company (“RSUI”) on the other
hand. Pinnacle and RSUI shall be referred to herein individually as a “Party” and collectively as
the “Parties.” The “Effective Date” of this Agreement is February 3, 2010.

RECITALS

WHEREAS, RSUI provided excess commercial property insurance to Pinnacle under policy NHD411008
(effective April 1, 2005 to April 1, 2006) with a limit of $50 million, part of $100 million excess
of $150 million (the “Fourth Excess Layer Participation”) and policy NHD 411018 (effective April 1,
2005 to April 1, 2006) with a limit of $150 million, excess of $250 million (the “Fifth Excess
Layer Participation”) (collectively, the “RSUI Policies”) that insured Pinnacle against, inter
alia, loss resulting from property damage and business interruption to, among other locations, the
Casino Magic hotel and casino and certain other Pinnacle properties formerly located in Biloxi,
Mississippi (“Casino Magic”), and the Boomtown Casino in Harvey, Louisiana (“Boomtown”), subject to
such policies’ terms and conditions; and

WHEREAS, on or about August 29, 2005, Hurricane Katrina made landfall in an area between
eastern Louisiana and western Mississippi, causing catastrophic damage to Casino Magic and
Boomtown; and

 

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WHEREAS, Pinnacle sought coverage under the RSUI Policies 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 Casino Magic, Boomtown, and other properties, caused by
Hurricane Katrina, including for property damage to Pinnacle’s covered property and resultant
business interruption 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-RCJ-LRL, 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 RSUI, Allianz Global
Risks US Insurance Company (“Allianz”) and Arch Specialty Insurance Company (“Arch”) (the “Coverage
Action”); and

WHEREAS, on or about April 30, 2008, RSUI paid to Pinnacle $2,017,908.32 which RSUI contended
represented payment of its undisputed portion of the Insurance Claim (the “April 30, 2008
Payment”); and

WHEREAS, Pinnacle and RSUI desire to settle any 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;

 

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NOW, THEREFORE, in consideration of the mutual promises, covenants, obligations, agreements,
and other undertakings set forth herein, 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 RSUI. Within ten (10) calendar days of the Effective Date, RSUI shall pay via
wire transfer (at Pinnacle’s direction) the amount of Twenty-Three Million Four Hundred
Thousand Dollars ($23,400,000.00) to Pinnacle Entertainment, Inc. 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.

 

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2. RELEASES.

2.1. Release by Pinnacle. Upon Pinnacle’s successful receipt 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 RSUI, 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 RSUI on the RSUI Policies), attorneys, and
representatives, and each of them (collectively, the “RSUI Releasees”), of and from any and all
liabilities, claims, defenses, causes of action, appeals, 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 RSUI Policies, 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; (c) the April 30, 2008
Payment; and/or (d) the Settlement Payment. Notwithstanding anything else in this Agreement, the
Pinnacle Releasors are not releasing the RSUI Releasees, or any of them, from any duties or
obligations under this Agreement.

 

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2.2. Release by RSUI. In exchange for the foregoing release and other valuable consideration,
RSUI, and each of its parents, subsidiaries, predecessors, successors and assigns (the “RSUI
Releasors”), upon Pinnacle’s
successful receipt 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, independent
contractors, suppliers, insurers (including, without limitation, Allianz and Arch) , reinsurers
(but only to the extent such reinsurer is not a reinsurer of RSUI on the RSUI Policies), attorneys,
and representatives, and each of them (collectively, the “Pinnacle Releasees”), of and from any and
all liabilities, claims, defenses, causes of action, appeals, 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 RSUI 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 RSUI Policies, 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 April 30, 2008 Payment; and/or (d) the Settlement Payment.
Notwithstanding anything else in this Agreement, the RSUI Releasors are not releasing the Pinnacle
Releasees, or any of them, from any duties or obligations under this Agreement.

 

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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 April 30, 2008 Payment, the Insurance Claim, or the
Coverage Action. As it pertains to such released claims, the Parties hereby expressly waive any
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 which 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 April 30, 2008 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 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.

 

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3. COVENANTS.

3.1. Stipulated Dismissal With Prejudice And Withdrawal Of Motions. Pinnacle covenants that
within five (5) business days of its successful receipt of the Settlement Payment, it will deliver
to counsel for RSUI a stipulated dismissal with prejudice of the Coverage Action, and without
costs, sanctions, or attorneys’ fees against any of the Parties, in substantially the same form as
Exhibit 1 hereto. RSUI 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.

 

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

 

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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 RSUI Policies, this Agreement and the attachments
incorporated herein contain the entire agreement between and among the Parties relating to the
Settlement Payment, the April 30, 2008 Payment, the Insurance Claim and the Coverage Action, and
all prior or contemporaneous agreements, understandings, representations and statements, oral or
written, relating to those matters, including, without limitation, the February 3, 2010 Memorandum
of Understanding, are merged into this Agreement.

5.3. Governing Law And Jurisdiction. This Agreement is governed by Nevada law, without regard
to Nevada’s conflict of law principles. The United States District Court for the District of
Nevada shall retain exclusive jurisdiction to resolve any disputes that may arise as to the
validity, enforceability, performance, interpretation, administration or enforcement of this
Agreement.

 

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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.

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.

 

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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.

5.12. No Admissions. None of the Parties have made, nor shall they be deemed to have made,
any admission of any kind by their negotiation of or entry into this Agreement. Neither this
Agreement nor any provision contained herein shall be construed by any person as an admission by
any of the Parties of any liability for, related to or arising out of any of the claims released
herein or any other claims of any other nature. The Parties are entering into this Agreement for
the purpose of resolving disputed issues between them and to avoid the costs and risks of
litigation with respect to such resolved issues. This Agreement shall have no precedential value
in any future claims between Pinnacle and RSUI or any other party.

5.13. Severability. 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.

 

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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 RSUI 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 TO NEGOTIATING, EXPLAINING, AND ENTERING INTO THIS AGREEMENT.

 

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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: February 4, 2010 	By:  	/s/ John A. Godfrey
 	 
	 	 	John A. Godfrey 	 
	 	 	Its: Executive Vice President, 
       General Counsel and
Secretary 	 
	 
	 	RSUI INDEMNITY COMPANY

 	 
	Dated: February 8, 2010 	By:  	/s/ Michael Koski
 	 
	 	 	Its: VP, Claims 	 
	 	 	 	 
	 

 

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Exhibit 1

BROWNSTEIN HYATT FARBER SCHRECK LLP

James J. Pisanelli (NV SBN 4027)

300 South Fourth Street, Suite 1200

Las Vegas, Nevada 89101

Telephone: (702) 382-2101

IRELL & MANELLA LLP

Marc S. Maister (CA SBN 155980)

Harry J. Schulz, III (CA SBN 205625)

840 Newport Center Drive, Suite 400

Newport Beach, California 92660-6324

Telephone: (949) 760-0991

Attorneys for Plaintiff

Pinnacle Entertainment, Inc.

UNITED STATES DISTRICT COURT

DISTRICT OF NEVADA

	 	 	 	 	 	 	 
	PINNACLE ENTERTAINMENT,

	 	 	)	 	 	Case No. 2:06-cv-00935-RCJ-LRL
	INC., a Delaware corporation,

	 	 	)	 	 	 
	
          

        	 	 	)	 	 	JOINT STIPULATION AND 
	
          
            Plaintiff, 

          

        	 	 	)	 	 	REQUEST FOR DISMISSAL
	
          

        	 	 	)	 	 	PURSUANT TO FEDERAL RULE
	
          vs. 

        	 	 	)	 	 	41(a); [PROPOSED] ORDER
          
	
          

        	 	 	)	 	 	THEREON
	
          ALLIANZ GLOBAL RISKS
            US 

        	 	 	)	 	 	 
	
          INSURANCE COMPANY, a
            California 

        	 	 	)	 	 	 
	
          corporation, ARCH SPECIALTY
          

        	 	 	)	 	 	 
	
          INSURANCE COMPANY, a
          

        	 	 	)	 	 	 
	
            Wisconsin corporation,
            and RSUI 

        	 	 	)	 	 	 
	
            INDEMNITY COMPANY,
            a New

        	 	 	)	 	 	 
	
            Hampshire corporation,

        	 	 	)	 	 	 
	 

	 	 	)	 	 	 
	
          Defendants.

        	 	 	)	 	 	 
	 

	 	 	)	 	 	 
	 

	 	 	)	 	 	 

			
	 	 	 
	 
	 	STIPULATED REQUEST FOR DISMISSAL PURSUANT

TO FEDERAL RULE 41(a) AND ORDER THEREON

 

 

 

IT IS HEREBY STIPULATED AND AGREED TO by Plaintiff Pinnacle Entertainment, Inc. (“Pinnacle”)
and Defendant RSUI Indemnity Company (“RSUI”), through their designated counsel, that pursuant to
FRCP 41(a)(2), the above-captioned matter be, and hereby is, dismissed with prejudice. These two
parties have entered into a settlement agreement resolving all issues, claims and disputes with
respect to this matter. Each party is to bear its own attorneys’ fees, costs and expert
fees/costs. Since there are no more parties or claims in the case, this case should be dismissed
in its entirety.

	 	 	 	 	 
	Dated:  February __, 2010 	CLAUSEN MILLER PC

 	 
	 	By:  	
 	 
	 	 	Andrew Jacobson 	 
	 	 	Attorneys for Defendant
RSUI Indemnity Company 	 
	 
	Dated:  February __, 2010 	IRELL & MANELLA LLP

 	 
	 	By:  	
 	 
	 	 	Harry J. Schulz, III 	 
	 	 	Attorneys for Plaintiff

Pinnacle Entertainment, Inc. 	 
	 
	 	 	 	IT IS SO ORDERED:

 	 
	 	 	 	
 	 
	 	 	 	UNITED STATES DISTRICT JUDGE 	 
	 
	 	 	 	DATED: 	 

			
	 	 	 
	 	-1-	STIPULATED REQUEST FOR DISMISSAL PURSUANT

TO FEDERAL RULE 41(a) AND ORDER THEREONEXHIBIT 10.2

EXHIBIT 10.2

PINNACLE ENTERTAINMENT, INC.

DIRECTOR STOCK OPTION GRANT NOTICE

(2005 Equity and Performance Incentive Plan)

Pinnacle Entertainment, Inc. (the “Company”), pursuant to its 2005 Equity and Performance Incentive
Plan (the “Plan”), hereby grants to Optionee the option to purchase the number of Shares of the
Company set forth below (the “Option”). This Option is subject to all of the terms and conditions
as set forth in this Grant Notice and the attached Director Stock Option Agreement (the “Option
Agreement”) and the Plan (a copy of which has been made available to you), all of which are
incorporated herein in their entirety.

	 	 	 	 	 
	Optionee:
	 	 	 	 
	Date of Grant:

	 	 

	 	 
	Number of Shares of Common Stock:

	 	 

	 	 
	Exercise Price Per Share:

	 	 

	 	 
	Term of Option:

	 	 

	 	 
	Vesting Date:

	 	 

	 	 
	Type of Option (Enter an X in one box)

	 	 

[  ] ISO [  ] NQSO
	 	 

Vesting Schedule: This Option shall vest and become exercisable with respect to all of the Shares
subject to this Option on the Vesting Date.

Additional Terms/Acknowledgements: The undersigned Optionee acknowledges receipt of, and has read
and understands and agrees to, the Option Agreement. Optionee further acknowledges that as of the
Date of Grant, the Option Agreement, and the Plan set forth the entire understanding between
Optionee and the Company regarding the grant by the Company of the Option referred to in this Grant
Notice. Optionee hereby agrees to accept as binding, conclusive and final all decisions or
interpretations of the Board of Directors or the Compensation Committee upon any questions arising
under the Plan. Defined terms not otherwise defined herein have the meanings ascribed to them in
the Option Agreement and if not therein, then in the Plan.

	 	 	 	 	 	 	 	 	 	 	 
	PINNACLE ENTERTAINMENT, INC.	 	 	 	OPTIONEE:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title:

	 	 	 	 	 	Date:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	Date:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 

ATTACHMENTS:           Option Agreement

SPOUSE OF OPTIONEE:

Spouse has read and understands the Option Agreement and is executing this Grant Notice to evidence
Spouse’s consent and agreement to be bound by all of the terms and conditions of the Option
Agreement and the Plan (including those relating to the appointment of the Optionee as agent for
any interest that Spouse may have in the Option Shares). A copy of the Plan has been made
available to Spouse.

	 	 	 	 	 
	 

Signature

	 	 

Date
	 	 

	 	 	 	 	 
	Optionee Address:	 	 	 	 
	 	 	 	 

 

 

 

PINNACLE ENTERTAINMENT, INC.

DIRECTOR STOCK OPTION AGREEMENT

THIS DIRECTOR STOCK OPTION AGREEMENT (together with the attached grant notice (the “Grant
Notice”), the “Agreement”) is made and entered into as of the date set forth on the Grant Notice by
and between Pinnacle Entertainment, Inc., a Delaware corporation (the “Company”), and the
individual (the “Optionee”) set forth on the Grant Notice.

A. Pursuant to the Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive Plan
(the “Plan”), the Compensation Committee (the “Committee”) has determined that it is to the
advantage and best interest of the Company to grant to the Optionee an option (the “Option”) to
purchase the number of shares of the Common Stock of the Company (the “Shares” or the “Option
Shares”) set forth on the Grant Notice, at the exercise price determined as provided herein, and in
all respects subject to the terms, definitions and provisions of the Plan, which is incorporated
herein by reference.

B. Unless otherwise defined herein, capitalized terms used in this Agreement shall have the
meanings set forth in the Plan.

NOW, THEREFORE, in consideration of the mutual agreements contained herein, the Optionee and
the Company hereby agree as follows:

1. Grant and Terms of Stock Option.

1.1 Grant of Option. Pursuant to the Grant Notice, the Company has granted to the
Optionee the right and option to purchase, subject to the terms and conditions set forth in the
Plan and this Agreement, all or any part of the number of Shares set forth on the Grant Notice at a
purchase price per Share equal to the exercise price per Share set forth on the Grant Notice. If
the Grant Notice indicates (under “Type of Option”) that this Option is an “ISO,” then this Option
is intended by the Company and the Optionee to be an Incentive Stock Option. However, if the Grant
Notice indicates that this Option is a “NQSO,” then this Option is not intended to be an Incentive
Stock Option and is instead intended to be a Nonqualified Stock Option.

1.2 Vesting. Subject to the provisions of the Plan and the other provisions of this
Agreement, this Option shall vest and become exercisable in accordance with the schedule set forth
in the Grant Notice. Notwithstanding the foregoing and except as otherwise provided (including,
without limitation, any additional vesting provisions) in a written employment agreement between
the Company and the Optionee, in the event of termination of the Optionee’s Continuous Status as an
Employee, Director or Consultant because of termination due to Cause, then this entire Option shall
be cancelled and terminated as of the date of such termination and shall no longer be exercisable
as to any Shares, whether or not previously vested.

1.3 Term of Option. The “Term” of this Option shall begin on the Date of Grant set
forth in the Grant Notice and end on the expiration of the Term specified in the Grant Notice. No
portion of this Option may be exercised after the expiration of the Term.

1.3.1 Except as otherwise provided in a written employment agreement between the
Company and the Optionee, the portion of this Option that is vested and exercisable as of
the date of termination shall terminate and be cancelled on the earlier of (i) the
expiration of the Term, or (ii) one year after termination of Optionee’s Continuous Status
as an Employee, Director or Consultant.

1.3.2 Except as otherwise provided in a written employment agreement between the
Company and the Optionee, the portion of this Option that is vested and exercisable as of
the date of termination shall terminate and be cancelled on the earlier of (i) the
expiration of the Term, or (ii) one year after termination of Optionee’s Continuous Status
as an Employee, Director or Consultant by death or Disability.

 

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1.3.3 If Optionee’s Continuous Status as an Employee, Director or Consultant is
terminated for Cause, or if, after the termination of Optionee’s Continuous Status as an
Employee, Director or Consultant, the Committee determines that Cause existed before such
termination, except as otherwise provided in a written employment agreement between the
Company and the Optionee, this entire Option shall be cancelled and terminated as of the
date of such termination and shall no longer be exercisable as to any Shares, whether or
not previously vested.

2. Method of Exercise.

2.1 Delivery of Notice of Exercise. This Option shall be exercisable by written
notice in the form attached hereto as Exhibit A which shall state the election to exercise this
Option, the number of Shares in respect of which this Option is being exercised, and such other
representations and agreements with respect to such Shares as may be required by the Company
pursuant to the provisions of this Agreement and the Plan. Such written notice shall be signed by
the Optionee (or by the Optionee’s executors, administrators, guardian, beneficiary or legal
representative, Family Members or any other person entitled to exercise this Option under the Plan)
and shall be delivered in person or by certified mail to the Secretary of the Company. The written
notice shall be accompanied by payment of the exercise price. This Option shall not be deemed
exercised until the Company receives such written notice accompanied by payment of the exercise
price and any other applicable terms and conditions of this Agreement are satisfied. This Option
may not be exercised for a fraction of a Share.

2.2 Restrictions on Exercise. No Shares will be issued pursuant to the exercise of
this Option unless and until there shall have been full compliance with all applicable requirements
of the Securities Act of 1933, as amended (whether by registration or satisfaction of exemption
conditions), all applicable listing requirements of any national securities exchange or other
market system on which the Common Stock is then listed and all applicable requirements of any
Applicable Laws and of any regulatory bodies having jurisdiction over such issuance. As a
condition to the exercise of this Option, the Company may require the Optionee to make any
representation and warranty to the Company as may be necessary or appropriate, in the judgment of
the Committee, to comply with any Applicable Law.

2.3 Method of Payment. Payment of the exercise price shall be made in full at the
time of exercise (a) in cash or by certified check or bank check or wire transfer of immediately
available funds, (b) by tendering previously acquired Shares (either actually or by attestation,
valued at their then Fair Market Value) that have been owned for a period of at least six months
(or such other period to avoid accounting charges against the Company’s earnings), (c) by delivery
of a properly executed exercise notice together with any other documentation as the Committee and
the Optionee’s broker, if applicable, require to effect an exercise of the Option and delivery to
the Company of the sale or other proceeds (as permitted by Applicable Law) required to pay the
exercise price, or (d) any combination of any of the foregoing. In addition, the Committee may
impose such other conditions in connection with the delivery of shares of Common Stock in
satisfaction of the exercise price as it deems appropriate in its sole discretion.

2.4 Notice of Disqualifying Disposition of Incentive Stock Option. If this Option is
an Incentive Stock Option and the Optionee sells or otherwise disposes of any of the Shares
acquired upon exercise of this Option on or before the later of (i) two years after the date of
grant, or (ii) one year after the date such Shares were acquired, the Optionee shall immediately
notify the Company in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the taxable income recognized as a result of
such disposition and that the Optionee shall be required to satisfy such withholding obligations
either by making a payment to the Company in cash or by withholding from current earnings of the
Optionee.

2.5 No Rights as a Stockholder. Until the stock certificate evidencing shares of
Common Stock issued upon exercise of this Option is issued (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a stockholder will exist with respect to the
Shares, notwithstanding the exercise of the Option.

 

3

 

3. Non-Transferability of Option. This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution or to a beneficiary designated
pursuant to the Plan, and may be exercised during the lifetime of Optionee only by Optionee or the
Optionee’s guardian or legal representative. Subject to all of the other terms and conditions of
this Agreement, following the death of Optionee, this Option may, to the extent it is vested and
exercisable by Optionee in accordance with its terms on the date of death, be exercised by
Optionee’s beneficiary or other person entitled to exercise this Option in the event of Optionee’s
death under the Plan. Notwithstanding the first sentence of this Section 3, if this Option is a
Nonqualified Stock Option, this Option may be assigned, in connection with the Optionee’s estate
plan, in whole or in part, during the Optionee’s lifetime to one or more Family Members of the
Optionee. Rights under the assigned portion may be exercised by the person or persons who acquire
a proprietary interest in such Option pursuant to the assignment. The terms applicable to the
assigned portion shall be the same as those in effect for the Option immediately before such
assignment and shall be set forth in such documents issued to the assignee as the Committee deems
appropriate.

4. Restrictions; Restrictive Legends. Ownership and transfer of Shares issued pursuant to
the exercise of this Option will be subject to the provisions of, including ownership and transfer
restrictions (including, without limitation, ownership and transfer restrictions imposed by
applicable gaming laws) contained in, the Company’s Certificate of Incorporation, as amended from
time to time, restrictions imposed by Applicable Laws and restrictions set forth or referenced in
legends imprinted on certificates representing such Shares.

5. Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of
the Company, to the extent that this Option had not been previously exercised, it will terminate
immediately prior to the consummation of such proposed dissolution or liquidation. In such
instance, the Committee may, in the exercise of its sole discretion, declare that this Option will
terminate as of a date fixed by the Committee and give the Optionee the right to exercise this
Option prior to such date as to all or any part of the optioned stock, including shares as to which
this Option would not otherwise be exercisable.

6. General.

6.1 Governing Law. This Agreement shall be governed by and construed under the laws
of the State of Delaware applicable to agreements made and to be performed entirely in Delaware,
without regard to the conflicts of law provisions of Delaware or any other jurisdiction.

6.2 Notices. Any notice required or permitted under this Agreement shall be given in
writing by express courier or by postage prepaid, United States registered or certified mail,
return receipt requested, to the address set forth below or to such other address for a party as
that party may designate by 10 days advance written notice to the other parties. Notice shall be
effective upon the earlier of receipt or 3 days after the mailing of such notice.

	 	 	 
	If to the Company:

	 	Pinnacle Entertainment, Inc.
	 

	 	3800 Howard Hughes Parkway
	 

	 	Las Vegas, Nevada 89169
	 

	 	Attention: General Counsel

If to the Optionee, at the address set forth on the Grant Notice.

6.3 Community Property. Without prejudice to the actual rights of the spouses as
between each other, for all purposes of this Agreement, the Optionee shall be treated as agent and
attorney-in-fact for that interest held or claimed by his or her spouse with respect to this Option
and the parties hereto shall act in all matters as if the Optionee was the sole owner of this
Option. This appointment is coupled with an interest and is irrevocable.

6.4 No Employment Rights. Nothing herein contained shall be construed as an agreement
by the Company or any of its subsidiaries, express or implied, to employ the Optionee or contract
for the Optionee’s services, to restrict the Company’s or such subsidiary’s right to discharge the
Optionee or cease contracting for the Optionee’s services or to modify, extend or otherwise affect
in any manner whatsoever the terms of any
employment agreement or contract for services which may exist between the Optionee and the
Company or any of its subsidiaries.

 

4

 

6.5 Modifications. This Agreement may be amended, altered or modified only by a
writing signed by each of the parties hereto.

6.6 Application to Other Stock. In the event any capital stock of the Company or any
other corporation shall be distributed on, with respect to, or in exchange for shares of Common
Stock as a stock dividend, stock split, reclassification or recapitalization in connection with any
merger or reorganization or otherwise, all restrictions, rights and obligations set forth in this
Agreement shall apply with respect to such other capital stock to the same extent as they are, or
would have been applicable, to the Option Shares on or with respect to which such other capital
stock was distributed.

6.7 Additional Documents. Each party agrees to execute any and all further documents
and writings, and to perform such other actions, which may be or become reasonably necessary or
expedient to be made effective and carry out this Agreement.

6.8 No Third-Party Benefits. Except as otherwise expressly provided in this
Agreement, none of the provisions of this Agreement shall be for the benefit of, or enforceable by,
any third-party beneficiary.

6.9 Successors and Assigns. Except as provided herein to the contrary, this Agreement
shall be binding upon and inure to the benefit of the parties, their respective successors and
permitted assigns.

6.10 No Assignment. Except as otherwise provided in this Agreement, the Optionee may
not assign any of his, her or its rights under this Agreement without the prior written consent of
the Company, which consent may be withheld in its sole discretion. The Company shall be permitted
to assign its rights or obligations under this Agreement, but no such assignment shall release the
Company of any obligations pursuant to this Agreement.

6.11 Severability. The validity, legality or enforceability of the remainder of this
Agreement shall not be affected even if one or more of the provisions of this Agreement shall be
held to be invalid, illegal or unenforceable in any respect.

6.12 Equitable Relief. The Optionee acknowledges that, in the event of a threatened
or actual breach of any of the provisions of this Agreement, damages alone will be an inadequate
remedy, and such breach will cause the Company great, immediate and irreparable injury and damage.
Accordingly, the Optionee agrees that the Company shall be entitled to injunctive and other
equitable relief, and that such relief shall be in addition to, and not in lieu of, any remedies it
may have at law or under this Agreement.

6.13 Arbitration.

6.13.1 General. 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 Section 6.13 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 the City of Las Vegas, Nevada.

6.13.2 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 the Optionee, from a
list of nine persons (which shall be retired judges or corporate or litigation attorneys
experienced in stock options and buy-sell 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.

 

5

 

6.13.3 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 judgement 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.

6.13.4 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 the Optionee 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.

6.13.5 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.

6.14 Withholding Taxes. The Company has the right to take whatever steps the Company
deems necessary or appropriate to comply with all applicable federal, state, local, and employment
tax withholding requirements, and the Company’s obligations to deliver shares of Common Stock upon
the exercise of this Option will be conditioned upon compliance with all such withholding tax
requirements. Without limiting the generality of the foregoing, upon the exercise of this Option,
the Company will have the right to withhold taxes from any other compensation or other amounts
which it may owe to the Optionee, or to require the Optionee to pay to the Company the amount of
any taxes which the Company may be required to withhold with respect to the shares issued on such
exercise. Without limiting the generality of the foregoing, the Committee in its discretion may
authorize the Optionee to satisfy all or part of any withholding tax liability by (a) having the
Company withhold from the shares of Common Stock which would otherwise be issued on the exercise of
an Option that number of shares having a Fair Market Value, as of the date the withholding tax
liability arises, equal to or less than the amount of the Company’s withholding tax liability, or
(b) by delivering to the Company previously-owned and unencumbered shares of the Common Stock
having a Fair Market Value, as of the date the withholding tax liability arises, equal to or less
than the amount of the Company’s withholding tax liability.

 

6

 

6.15 Headings. The section headings in this Agreement are inserted only as a matter
of convenience, and in no way define, limit, extend or interpret the scope of this Agreement or of
any particular section.

6.16 Number and Gender. Throughout this Agreement, as the context may require, (a)
the masculine gender includes the feminine and the neuter gender includes the masculine and the
feminine; (b) the singular tense and number includes the plural, and the plural tense and number
includes the singular; (c) the past tense includes the present, and the present tense includes the
past; (d) references to parties, sections, paragraphs and exhibits mean the parties, sections,
paragraphs and exhibits of and to this Agreement; and (e) periods of days, weeks or months mean
calendar days, weeks or months.

6.17 Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

6.18 Complete Agreement. The Grant Notice, this Agreement and the Plan constitute the
parties’ entire agreement with respect to the subject matter hereof and supersede all agreements,
representations, warranties, statements, promises and understandings, whether oral or written, with
respect to the subject matter hereof.

6.19 Waiver of Jury Trial. TO THE EXTENT EITHER PARTY INITIATES LITIGATION INVOLVING
THIS AGREEMENT OR ANY ASPECT OF THE RELATIONSHIP BETWEEN US (EVEN IF OTHER PARTIES OR OTHER CLAIMS
ARE INCLUDED IN SUCH LITIGATION), ALL OF THE PARTIES WAIVE THEIR RIGHT TO A TRIAL BY JURY. THIS
WAIVER WILL APPLY TO ALL CAUSES OF ACTION THAT ARE OR MIGHT BE INCLUDED IN SUCH ACTION, INCLUDING
CLAIMS RELATED TO THE ENFORCEMENT OR INTERPRETATION OF THIS AGREEMENT, ALLEGATIONS OF STATE OR
FEDERAL STATUTORY VIOLATIONS, FRAUD, MISREPRESENTATION, OR SIMILAR CAUSES OF ACTION, AND IN
CONNECTION WITH ANY LEGAL ACTION INITIATED FOR THE RECOVERY OF DAMAGES BETWEEN OR AMONG US OR
BETWEEN OR AMONG ANY OF OUR OWNERS, AFFILIATES, OFFICERS, EMPLOYEES OR AGENTS.

[SIGNATURES TO APPEAR ON FOLLOWING PAGE]

 

7

 

	 	 	 	 	 
	 	 	PINNACLE ENTERTAINMENT, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	OPTIONEE
	 
	 	 	 	 
	 	 	 
	 

	 	Name:	 	 

 

8

 

SPOUSAL CONSENT

By his or her signature below, the spouse of the Optionee agrees to be bound by all of the
terms and conditions of the foregoing Director Stock Option Agreement (including those relating to
the appointment of the Optionee as agent for any interest that Spouse may have in the Option
Shares).

	 	 	 	 	 
	 

	 	OPTIONEE’S SPOUSE	 	 
	 
	 	 	 	 
	 

	 	 

Signature
	 	 
	 
	 	 	 	 
	 

	 	 

Print Name
	 	 

 

9

 

EXHIBIT A

NOTICE OF EXERCISE OF STOCK OPTION

Pinnacle Entertainment, Inc.

3800 Howard Hughes Parkway

Las Vegas, Nevada 89169

Attn: General Counsel

Ladies and Gentlemen:

The undersigned hereby elects to exercise the option indicated below:

Option Grant Date:                                         

Type of Option: Incentive Stock Option / Nonqualified Stock Option

Number of Shares Being Exercised:                                         

Exercise Price Per Share:                                         

Total Exercise Price: $                                        

Method of Payment:                                         

Enclosed herewith is payment in full of the total exercise price and a copy of the Grant
Notice.

My exact name, current address and social security number for purposes of the stock
certificates to be issued and the stockholder list of the Company are:

	 	 	 	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Address:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Social Security Number:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Sincerely,	 	 

	 	 	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 

(Optionee’s Signature)

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