SEPARATION AGREEMENT AND GENERAL
RELEASE
This Separation Agreement (the “Separation
Agreement”) is made as of this 3 rd day of March, 2011 by and among Pinnacle
Entertainment, Inc. (the “Company”) and Stephen H. Capp
(“Executive,” and together with the Company, the
“Parties”).
WHEREAS, Executive has been employed by the
Company under terms set forth in the Amended and Restated
Employment Agreement dated as of December 22, 2008 as amended
by the First Amendment to Amended and Restated Employment Agreement
dated December 18, 2009 and the Amendment to Stock Option
Agreements and Employment Agreement dated December 22, 2009 by
and between Executive and the Company (collectively, the
“Employment Agreement”);
WHEREAS, Executive’s employment with the
Company will end by Executive’s separation of employment (the
“Separation”) on March 31, 2011 (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 will occur 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 (other than
with respect to surviving provisions of the Employment Agreement as
set forth below). In addition, notwithstanding anything to the
contrary, the Parties acknowledge and agree that all provisions of
the Employment Agreement will terminate effective as of the
Separation Date (including specifically, but not limited to,
Appendix A relating to tax gross-up payments), with the
exception of the provisions of Sections 4.4, 7.1, 7.2, 7.3,
7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 9.7, 9.8., 9.14, 9.15 and
Article 8 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, regardless of
the reason for this termination of employment. The post-separation
provisions of the Employment Agreement, including specifically
Sections 7.3, 7.4, 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
Bonus . The Company shall pay or cause to be paid to Executive
all accrued but unpaid base salary. 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 receive an
annual bonus for the year 2010 in the amount of Seven Hundred
Thirty Thousand Dollars ($730,000) payable along with other
management bonuses no later than March 15, 2011. Executive
shall not be eligible for any bonus for the year 2011 or any
subsequent year.
(b) Severance . The severance to be
paid to Executive shall be Executive’s annual base salary of
Five Hundred Thousand Dollars ($500,000), payable in equal
semi-monthly installments over twelve (12) months immediately
following the Separation Date in accordance with the
Company’s regular salary payment schedule from time to
time.
(c) Stock Options, Restricted Stock and
Restricted Stock Units . All of Executive’s vested stock
options as of the Separation Date shall survive the Separation Date
until the earlier of (i) June 29, 2012 or (ii) the
expiration of the original ten-year term of the vested stock
options (the “Exercise Period”). During the Exercise
Period, Executive may exercise such vested stock options and any of
such stock options which remain unexercised shall expire thereafter
and be cancelled and terminated. All unvested stock options,
unvested restricted stock and unvested restricted stock units on
the Separation Date are hereby cancelled and terminated.
(d) Other Stock Unit Awards .
Effective March 1, 2010, Executive was granted Other Stock
Unit Awards covering 37,500 Shares under the Company’s 2005
Equity and Performance Incentive Plan (the “Plan”) to
vest in two annual equal installments on the first and second
anniversaries on the date of the grant (the “2010
Grant”). Fifty-percent (50%) of the Other Stock Unit Awards
have vested as of March 1, 2011 and the 18,750 Shares
corresponding to such vested portion of the 2010 Grant shall be
issued to Executive within ninety (90) days of the second
anniversary of the grant date, subject to the provisions of the
2010 Grant and the Plan. The remaining portion of the 2010 Grant
that would otherwise vest on March 1, 2012 if Executive were
still employed is hereby cancelled and terminated.
(e) 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
twelve (12) months from the Separation Date, conditioned upon
Executive’s timely election of COBRA coverage. Executive
shall promptly advise the Company if he becomes covered under other
insurance plans. 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.
(f) 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 and Executive shall be
responsible for all taxes on amounts received under or related to
this Separation Agreement.
(g) 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; Cooperation
.
(a) Consulting . For a period of
twelve (12) months beginning on the Separation Date (the
“Consulting Period”), the Company will retain Executive
to act on a part-time basis as an independent consultant (for no
additional compensation), as reasonably directed by the Company, in
assisting the Company as determined in the discretion of the Chief
Executive Officer, including, but not limited to the
Company’s Baton Rouge project. If Executive takes another
executive position during the Consulting Period (subject to his
non-competition restrictions as set forth in Section 7.4 of
his employment agreement), 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 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 $10,000
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 his 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
he 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, 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.
(c) Cooperation . Executive also
agrees to cooperate with the Company and its attorneys in any
current or future litigation or claims involving the Company or any
of its subsidiaries in which Executive might be a witness or for
which Executive may have material information including, but not
limited to, any and all meetings, depositions, arbitrations,
mediations, trials, etc. This cooperation obligation shall be
limited to forty (40) hours per year and it shall expire on
March 31, 2014.
5. Confidential Information;
Prohibitions on Certain Actions by Executive; Cooperation
.
(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 executive
and 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; (ii) the Company and Executive
may provide this Separation Agreement to and share such information
with applicable gaming regulatory authorities; and (iii) 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. The Company acknowledges that Executive may
disclose the existence of this Separation Agreement and any details
related thereto to the extent that such information has been filed
by the Company with the SEC or if the Company has otherwise
released such information to the public.
(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 andmarketing 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, 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, and excluding
personal, passive investments by Executive in the Company’s
securities from time to time),
(3) any tender or exchange offer, merger or
other business combination involving the Company or any of its
subsidiaries, or
(4) any recapitalization, restructuring,
liquidation, dissolution or other extraordinary transaction with
respect to the Company or any of its subsidiaries; or
(ii) form, join or participate in a
partnership, limited partnership, limited liability company,
syndicate, person or other group, including without limitation a
group as defined under Section 13(d) of the Exchange Act (as
defined below), with respect to the Common Stock, or otherwise
assist, support or participate in any effort by any person with
respect to the matters set forth in subparagraph (i) above, or
deposit any shares of Common Stock in a voting trust or subject any
shares of Common Stock to any voting agreement;
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