THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT
(the “Agreement”) is made this 22
nd day of December 2008 (the “Effective
Date”), by and between PINNACLE ENTERTAINMENT, INC., a
Delaware corporation (the “Company”), and JOHN A.
GODFREY , an individual (“Executive”), with respect
to the following facts and circumstances:
The Company and Executive entered into an
Employment Agreement effective as of August 13, 2002 (the
“Original Agreement”) pursuant to which Executive
serves as Executive Vice President, General Counsel and Secretary
of the Company. The Board of Directors of the Company (the
“Board”) determined that it was in the best interests
of the Company and its stockholders to assure that the Executive
continued to serve in such capacities beyond the term provided for
in the Original Agreement and, further, to assure that the Company
will have the continued dedication of Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as
defined herein). The Board believed it was imperative to diminish
the inevitable distraction of Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change
of Control and to encourage Executive’s full attention and
dedication to the Company, particularly in the event of any
threatened or pending Change of Control, and to provide Executive
with compensation and benefits arrangements upon a Change of
Control that ensure that the compensation and benefits expectations
of Executive will be satisfied and that are competitive with those
of other corporations. Therefore, in order to accomplish these
objectives, the Board caused the Company to supersede the Original
Agreement by entering into an amended Employment Agreement
effective as of June 13, 2006 (the “2006
Agreement”). The Board has determined that it is in the best
interest of the Company and of Executive to amend and restate the
2006 Agreement to comply with the provisions of Internal Revenue
Code Section 409A and to address certain technical
matters.
NOW, THEREFORE, in consideration of the mutual
promises, covenants and agreements set forth herein, the parties
hereto agree as follows:
1.1 Employment . The Company agrees to
engage Executive in the capacity as Executive Vice President,
General Counsel and Secretary of the Company, and Executive hereby
accepts such engagement by the Company upon the terms and
conditions specified below.
1.2 Term . The term of this Agreement
shall commence as of the Effective Date and, unless earlier
terminated under Article 6 below, shall continue in force
until June 13, 2009, provided that commencing on June 13,
2008 and as of June 13 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.”
2.1 Duties . Executive shall perform all
the duties and obligations generally associated with the positions
of Executive Vice President, General Counsel and Secretary subject
to the control and supervision of the Company’s Chief
Executive Officer (the “Chief Executive Officer”), and
such other executive duties consistent with the foregoing as may be
assigned to him from time to time by the Chief Executive Officer.
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 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 in Las Vegas, Nevada, or at such other
location as Executive and the Chief Executive Officer 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 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-half percent (0.5%) 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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3.1 Base Salary . In consideration for
Executive’s services hereunder, the Company shall pay
Executive an annual base salary, effective as of June 13,
2006, at the rate of not less than Four Hundred Twenty-Five
Thousand Dollars ($425,000) 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).
Executive’s annual base salary shall be reviewed by the Chief
Executive Officer and, if appropriate, the Compensation Committee
of the Board (the “Committee”) at least annually
beginning no more than twelve (12) months from the date hereof
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 Annual and Other Bonuses . Executive
shall be entitled to earn bonuses with respect to each year of the
Term during which Executive is employed under this Agreement in the
discretion of the Chief Executive Officer and, if appropriate, the
Committee. Any such bonus earned by Executive shall be paid
annually by March 15th following the conclusion of the
Company’s fiscal year, 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 (or a termination caused by death
or disability) shall be prorated. Executive may also receive
special bonuses in addition to his annual bonus eligibility at the
discretion of the Chief Executive Officer and, if appropriate, the
Committee.
3.3 Stock Options . Prior to
June 13, 2008 and at appropriate times thereafter (no less
frequently than within forty (40) months of the prior review),
the Committee shall review Executive’s long-term compensation
and, in consultation with the Chief Executive Officer, shall
consider granting additional stock options and/or other long term
incentive compensation.
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 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.
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4.3 Benefits . Executive shall receive
all other such benefits as the Company may offer to other senior
executives of the Company generally under the Company personnel
plans, practices, policies and programs 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 spouse, if any, or any pregnancy of
Executive’s spouse, if any, 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 while an officer of
the Company. In addition, the Company shall cause Executive to be
covered by the current policies of directors and officers liability
insurance 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 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.
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.
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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.
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.
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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, duties or responsibilities of Executive, 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”) followed by
(i) any diminution of Executive’s authority, duties or
responsibilities as set forth in Section 2.1; or
(ii) during the first twelve (12) months following a
Change of Control, the failure of the Company to award Executive an
annual bonus equal to at least seventy-five percent (75%) of the
average amount of the annualized bonus paid to Executive for the
last two (2) full years; or (iii) Executive’s
termination by the Company other than at the end of the Term of
this Agreement; or (iv) termination of his employment by
Executive in his sole and absolute discretion at any time during
the twelve (12) months immediately following the first
anniversary date of the Change of Control. Except in the cases set
forth in clauses (b)(iii) and (b)(iv) of the preceding sentence,
however, “Good Reason” shall not exist unless Executive
gives notice of proposed termination within 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 similar body. The certification of
such physician or psychiatrist as to the questioned dispute shall
be final and binding upon the parties hereto.
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, except as provided in this
Section 6.5, and the Company shall pay or cause to be paid to
Executive all accrued but unpaid base salary, 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, and vacation benefits. 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
provided that Executive may exercise any vested options.
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6.5.2 Termination Due to Death or
Disability . If this Agreement is terminated due to death or
Disability, the following shall apply:
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(a)
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Executive shall be entitled to an
amount equal to the sum of (i) Executive’s annual base
salary 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 (3) consecutive years prior to the
year of termination (the “Bonus Amount”) times
(iii) one hundred fifty percent (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 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 death or Disability and the
denominator of which is 365); such pro rata bonus shall be payable
within thirty (30) days after death or Disability. The base
salary component of the Death or Disability Severance Benefit shall
be payable to Executive or his estate monthly in equal installments
over a period of eighteen (18) months after the termination of
Executive’s employment (the “Death or Disability
Severance Benefit Period”) and seventy five percent (75%) of
the bonus component shall be paid within thirty (30) days
after death or Disability, and twenty five percent (25%) of the
bonus component shall be payable in three annual installments on
the anniversaries of death or Disability; provided that if during
such period a Change of Control shall occur, the full amount of any
unpaid Death or Disability Severance Benefit shall be paid to
Executive or his estate in a lump sum. If, during the Disability
Severance Benefit Period Executive is able to work in capacities
similar to those for which he is employed hereunder, he shall have
a duty to seek employment and to advise the Company of all
compensation paid or payable to him from such employment. Such
amounts shall reduce the amount of Disability Severance Benefits
payable by the Company hereunder.
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(b)
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Any
outstanding unvested stock options at the date of death or
Disability which would otherwise vest during the eighteen
(18) months following death or Disability shall immediately
become vested and may be exercised in accordance with their terms.
The remaining unvested options shall immediately
terminate.
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(c)
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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 (and
in the case of his dependents, the dependents) becomes covered or
eligible for coverage 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)
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The
provisions of Sections 7.4, 7.5, 7.6 and 7.7 shall apply both
during and after the termination of the Disability Severance
Benefit Period.
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6.5.3 Termination Without Cause or
Termination by Executive for Good Reason Other than in Connection
with a Change of Control . If the Company terminates Executive
without Cause or Executive terminates for Good Reason other than in
connection with a Change of Control as contemplated by
Section 6.5.4, the following shall apply:
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(a)
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Executive shall be entitled to
receive an amount equal to one hundred fifty percent (150%) times
(i) Executive’s annual base salary (the “Base
Severance Benefit”) in effect on the date of termination;
plus (ii) the Bonus Amount, excluding any deferred bonus which
was at the Company’s election rather than Executive’s.
The Base Severance Benefit shall be paid to Executive in equal
monthly 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.
Seventy five percent (75%) of the Bonus Amount shall be paid within
thirty (30) days after the termination of employment, and
twenty five percent (25%) of the Bonus Amount shall be payable 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 and a pro rata
annual bonus for the year of termination calculated and payable as
provided in Section 6.5.2(a), including any deferred bonus
which was at the Company’s election rather than
Executive’s; such pro rata annual bonus shall be 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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