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Exhibit
10.1
SEPARATION AGREEMENT AND
GENERAL RELEASE
This Separation Agreement
(the “Separation Agreement”) is made as of this 5th day
of June 2008 by and among Pinnacle Entertainment, Inc. (the
“Company”) and Wade W. Hundley
(“Executive,” and together with the Company, the
“Parties”).
WHEREAS, Executive has been
employed by the Company under terms set forth in the Employment
Agreement dated as of October 6, 2006 by and between Executive
and the Company (the “Employment
Agreement”);
WHEREAS, Executive’s
employment with the Company has ended by Executive’s
separation of employment (the “Separation”) on
June 5, 2008 (the “Separation Date”);
and
WHEREAS, the Parties desire
to enter into this Separation Agreement in order to set forth the
definitive rights and obligations of the Parties in connection with
the Separation.
NOW, THEREFORE, in
consideration of the mutual covenants, commitments and agreements
contained herein, and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the
Parties intending to be legally bound hereby agree as
follows:
1. Acknowledgment of
Separation . The Parties acknowledge and agree that the
Separation occurred on the Separation Date and that the Separation
shall be treated as a termination without cause other than in
connection with a change of control for all purposes under the
Employment Agreement. In addition, notwithstanding anything to the
contrary, the Parties acknowledge and agree that all provisions of
the Employment Agreement terminated effective as of the Separation
Date, with the exception of the provisions of Sections 4.4, 6.5.5,
6.5.6, 7.1, 7.2, 7.3, 7.5, 7.6, 7.7, 7.8, and 7.9, Articles 8 and 9
and Appendix A of the Employment Agreement (collectively, the
“Surviving Employment Agreement Provisions”), which
shall survive the Separation and the effectiveness of this
Separation Agreement and will remain in full force and effect after
the Separation Date in accordance with their terms. The
post-separation provisions of the Employment Agreement, including
specifically Sections 7.3, 7.5, 7.6 and 7.7, with respect to
periods after the “Term” (as such term is used in the
Employment Agreement) shall be considered effective as of and shall
run from the Separation Date. Upon the Separation, Executive shall
be treated as having resigned from all positions Executive held
with the Company and its subsidiaries, whether as a director,
officer, manager or any other position.
2. Executive’s
Acknowledgment of Consideration . Executive specifically
acknowledges that the obligations and payments set forth in
Section 3(a) below were agreed to by the Parties upon entering
into the Employment Agreement, and the other obligations and
payments of the Company set forth in Section 3 hereof and the
release of the Company granted in Section 6 hereof are being
provided by the Company in consideration for the release granted by
Executive in Section 6 hereof.
3. Payments and Benefits
Upon and After the Separation .
(a) Accrued Salary,
Expenses and Prorated Bonus . As described in
Section 6.5.1 of the Employment Agreement, the Company shall
pay or cause to be paid to Executive all accrued but unpaid base
salary and vacation benefits. In addition, promptly upon submission
by Executive of his unpaid expenses incurred prior to the
Separation Date as described in Article 5 of the Employment
Agreement, reimbursement for such expenses shall be made. The
Company shall pay these amounts within ten (10) days of the
Separation Date. In addition, Executive shall be entitled to
receive a pro rata annual bonus for the 2008 year calculated as
described in Section 6.5.2(a) of the Employment Agreement,
which amount shall be $215,068.49 and shall be payable on
January 9, 2009.
(b) Severance . The
severance to be paid to Executive, computed in the manner described
in Section 6.5.3(a) of the Employment Agreement, shall be a
total of One Million Three Hundred Eighty-Seven Thousand Five
Hundred Dollars ($1,387,500), which is equal to the sum of
(i) 150% of Executive’s annual base salary ($550,000) on
his last day of employment (the 150% of such annual salary is
referred to herein as the “Base Severance Benefit”)
plus (ii) 150% of the “Bonus Amount” (as such term
is defined in the Employment
Agreement) (excluding amounts deferred
at the election of the Company) of $375,000 (the 150% of such Bonus
Amount is referred to herein as “Bonus Severance
Benefit”). The Base Severance Benefit shall be paid to
Executive in equal monthly installments over eighteen
(18) months immediately following the Separation Date in
accordance with the Company’s regular salary payment schedule
from time to time; provided, however, that, in accordance with
Section 13 of this Separation Agreement, the Base Severance
Benefit that would otherwise be paid within six (6) months of
the date of Separation shall be accumulated and paid in one lump
sum six (6) months and one (1) day after the date of
Separation. The Bonus Severance Benefit shall be paid to Executive
on January 9, 2009.
(c) Accelerated Vesting
– Stock Options and Restricted Stock . On the date of
this Separation Agreement, the Company will cause (i) all of
Executive’s outstanding stock options which would have vested
in the eighteen (18) months following the Separation Date to
be fully vested and exercisable as of the Separation Date and any
of Executive’s remaining unvested stock options shall
immediately terminate, and (ii) Executive’s remaining
unvested 2006 restricted stock grants which would have vested in
the eighteen (18) months following the Separation Date to be
fully vested as of the Separation Date and any of Executive’s
remaining unvested restricted stock grants shall immediately
terminate. The Parties agree that, with respect to
Executive’s stock options that survive the Separation,
(i) in the case of stock options granted prior to the date of
the Employment Agreement, Executive shall have nine (9) months
from the Separation Date to exercise such stock options and any of
such stock options which remain unexercised shall expire thereafter
and (ii) in the case of stock options granted on or after the
date of the Employment Agreement, Executive shall have one
(1) year from the Separation Date to exercise such stock
options and any of such stock options which remain unexercised
shall expire thereafter.
(d) Other Benefits
Payments . The Company shall pay or make available to Executive
all benefits described under Section 6.5.3(c) of the
Employment Agreement with respect to “Health and Disability
Coverage Continuation” described therein for a maximum period
of eighteen (18) months from the Separation Date. Any
reimbursement that is taxable to the Executive shall be made not
later than December 31 of the calendar year following the
calendar year in which Executive or family member incurred the
expense.
(e) Executive Deferred
Compensation Plan . Executive acknowledges that the balance in
his account under the Company’s Executive Deferred
Compensation Plan as of May 31, 2008 is $372,973.68, and that
he has elected under the Executive Deferred Compensation Plan to
receive the balance in his account in the event of his termination
of employment in five annual installments. Subject to the
provisions of Section 13 of this Separation Agreement,
Executive’s account balance in the Company’s Executive
Deferred Compensation Plan shall be paid in accordance with
Executive’s election under such Plan.
(f) Deferred Bonuses .
The Company decided to defer portions of the annual bonuses awarded
to Executive for years 2006 and 2007. The remaining deferred
amounts of such bonuses are $80,000 for the year 2006 and $125,000
for the year 2007. Subject to the provisions of Section 13 of
this Separation Agreement, the Company shall pay these amounts to
Executive within six (6) months and one (1) day after the
date of Separation.
(g) Tax Withholding .
The Company shall be entitled to withhold from any amounts
otherwise payable hereunder to Executive any amounts required to be
withheld in respect of federal, state or local taxes.
(h) No Duty to
Mitigate . 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 Separation.
4. Consulting Services
.
(a) Consulting on Baton
Rouge Entitlement Process . For a period of twelve
(12) months beginning on the Separation Date
(“Consulting Period”), the Company will retain
Executive to act on a part-time basis as an independent consultant,
as reasonably directed by the Company, in assisting the Company in
obtaining all of the necessary zoning and entitlements in
connection with its development project in Baton Rouge, Louisiana
(the “Baton Rouge Entitlement Process”). The Company
shall have the right to terminate Executive’s consulting
services with respect to the Baton Rouge Entitlement Process at any
time upon written notice to
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Executive. If Executive takes another
executive position during the Consulting Period, Executive shall
have the right to terminate his obligation to provide consulting
services upon written notice to the Company. Executive shall make
himself reasonably available during the Consulting Period, but the
parties agree that said commitment shall not exceed twenty-five
(25) hours per month. The Company expressly agrees that
Executive’s shall only be liable for breach of
Executive’s obligations under this Section 4(a) to the
extent Executive engages in gross negligence or willful misconduct
with respect to those services and, in such event, the Company
expressly agrees that it shall not be entitled to seek money
damages in excess of $500,000 for all such breaches.
(b) Reimbursement of
Expenses; Independent Contractor Status. The Company agrees to
reimburse Executive for all reasonable out-of-pocket costs and
expenses incurred in connection with the consulting services
provided under this Section upon presentation of appropriate
documentation thereof. In connection with the Executive’s
activities on behalf of the Company as an independent consultant
pursuant to this Section, Executive acknowledges and agrees that he
is acting as an independent contractor, engaged in the conduct of
its own separate business and is not a partner, joint venturer, an
agent or employee of the Company for any purpose. Executive also
acknowledges and agrees that Executive has no right or authority or
ability to enter into any contracts or assume any obligations or
give any warranties or make any representations on behalf of the
Company or to bind the Company in any way, and Executive will not
convey or represent that it has any such authority. Executive
agrees that, other than the consulting services described in this
Section, Executive will not otherwise hold himself out as acting
for or on behalf of the Company. The Company shall indemnify and
hold Executive harmless from any claim or liability arising from
actions taken by Executive in good faith in performing the services
required under this Section 4 in assisting in the Baton Rouge
Entitlement Process, including any costs of defense or
attorney’s fees; provided that (1) the Company shall
have the right, at its expense, to assume or participate in the
defense of any claim or action covered by such indemnity,
(2) the Company shall not be liable for any settlement or
compromise of any claim or action covered by such indemnity unless
the Company has consented in writing to such settlement or
compromise (which consent shall not be unreasonably withheld) and
(3) the Company shall not be liable under this indemnity to
the extent that it is determined in a final judgment by a court of
competent jurisdiction or final arbitration proceeding that such
claim or liability resulted from any acts or failures to act
undertaken or omitted to be taken by Executive through his gross
negligence or willful misconduct.
5. Confidential
Information; Prohibitions on Certain Actions by Executive
.
(a) Disclosure of
Separation Agreement . In addition to and without limiting the
provisions of Section 7.1 of the Employment Agreement, the
Executive shall, and the Company agrees to cause each of the Chief
Executive Officer, Chief Financial Officer, General Counsel and any
senior vice president of the Company (the “Designated Company
Executives”) to, keep this Separation Agreement, and the
terms and subject matter hereof, strictly confidential, and no
disclosure or public announcement will be made by any of them
(except as required by applicable law, including but not limited to
any securities laws and the rules and regulations of the U.S.
Securities and Exchange Commission (the “SEC”)) with
respect to this Separation Agreement (including the existence
thereof, or the terms or subject matter hereof) without the prior
agreement of the other Party; provided, however, that (i) the
Company may issue a mutually agreed upon press release announcing
Executive’s departure and from time to time may comment on,
or make public disclosures regarding, the Separation in a manner
consistent with such press release and (ii) the Company and
Executive may share such information with their legal, tax and
accounting advisors. Executive agrees to direct all inquiries
concerning Executive’s employment with the Company to the
Company’s Chief Executive Officer or General Counsel, who
will represent that Executive resigned to pursue other
opportunities. Executive acknowledges that the Company intends to
file this Separation Agreement with the SEC as an exhibit to its
periodic reports filed with the SEC and to describe its terms in
its SEC filings.
(b) Prohibition on Certain
Actions by Executive . Executive acknowledges that, given
Executive’s position with the Company prior to the
Separation, Executive possesses substantial non-public information
and other confidential information regarding the Company which has
substantial economic value to the Company, including without
limitation information relating to the Company’s development
plans, prospects, and financial, organizational, managerial,
administrative, customer, marketing information regarding the
Company, much of which the Company considers highly sensitive
information. Executive has agreed, pursuant to Section 7.1 of
the Employment Agreement, to, among other things, not directly or
indirectly disclose, divulge,
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communicate, use or otherwise disclose
any such information. In order to better ensure that such
information is not used inappropriately by Executive, in addition
to Executive’s obligations under Section 7.1 of the
Employment Agreement, which survives the Separation and the
effectiveness of this Separation Agreement, for a period of three
(3) years from the Separation Date, Executive shall not, nor
shall it permit any Affiliate or Associate (as such terms are
hereinafter defined) or representative of Executive (such
Affiliates, Associates and representatives, collectively and
individually, the “Executive Affiliates”) to, directly
or indirectly:
(i) effect or seek, offer or
propose (whether publicly or otherwise) to effect, or cause or
participate in or in any way assist any other person to effect or
seek, offer or propose (whether publicly or otherwise) to effect or
participate in:
(1) any solicitation of
proxies or written consents of stockholders, or conduct any other
type of referendum (binding or non-binding) with respect to, or
from the holders of, the common stock of the Company (the
“Common Stock”) (other than by voting his or its shares
of Common Stock in a way that does not violate this Separation
Agreement), or become a participant in any contested solicitation
with respect to the Company, including without limitation relating
to the removal or the election of directors of the Company or seek
representation on the Company’s Board of Directors or a
change in the composition or size of the Company’s Board of
Directors;
(2) any acquisition of any
securities (or beneficial ownership thereof) or assets of the
Company or any of its subsidiaries (other than the exercise by
Executive of stock options held by Executive as of the Separation
Date),
(3) any tender or exchange
offer, merger or other business combination involving the Company
or an
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