SEPARATION AGREEMENT
Exhibit 10.1
This Separation Agreement (the “Separation Agreement”) is made as of this 7th day of November
2009 by and among Pinnacle Entertainment, Inc. (the “Company”) and Xxxxxx X. Xxx (“Executive,” and
together with the Company, the “Parties”).
WHEREAS, Executive has been employed by the Company under terms set forth in the Third Amended
and Restated Employment Agreement dated as of December 22, 2008 by and between Executive and the
Company (the “Employment Agreement”);
WHEREAS, Executive’s employment with the Company has ended by Executive’s resignation (the
“Separation”) on November 7, 2009 (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 pursuant to Section 6.2 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, 6.5.2(b), 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 5 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 and subject to the provisions of subsection (g) hereunder, 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 bonus for the 2009 year in the amount
of $395,000, payable six (6) months and one (1) day after the Separation Date.
(b) Severance. Subject to the last sentence of this clause, 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 Two Million Eight Hundred Twenty Two Thousand Dollars ($2,822,000), which is
equal to the sum of (i) 150% of Executive’s annual base salary ($1,000,000) on his last day of
employment (the 150% of such annual salary is referred to herein as the “Base Severance Benefit”)
plus (ii) average of the annual bonus paid to Executive in 2006, 2007, and 2008. Such amount is
$881,670 (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 10 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. One half of the Bonus Severance Benefit shall be paid to
Executive on the date the first Base Severance Benefit is paid and the balance in three (3) annual
installments of $220,330 on the anniversary dates of the Separation Date.
(c) Accelerated Vesting — Stock Options. On the date of this Separation Agreement,
the Company will cause certain of Executive’s outstanding stock options to become fully vested and
exercisable as of the Separation Date as and to the extent provided in Section 6.5.2(b) of the
Employment Agreement and any of Executive’s remaining unvested stock options shall immediately
terminate. The Parties agree that, with respect to Executive’s stock options that survive the
Separation, 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. 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.
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(e) [Reserved.]
(f) Gaming Regulatory Authorities. If any federal, state, or local gaming or liquor
regulatory authority with jurisdiction over the gaming operations of the Company and its affiliates
(“Gaming Authority”) notifies the Company that any payment to Executive hereunder (i) is prohibited
or restricted, (ii) would subject the Company or its affiliates to disciplinary action, or (iii)
would otherwise have an adverse effect on any registration, license, finding of suitability,
permit, or approval (a “License”) held by the Company or its affiliates, or any application for a
License (such notification referred to hereinafter as a “Regulatory Notice”), Company’s obligations
to make the payments to Executive hereunder which are the subject of the Regulatory Notice shall
cease, subject to the last sentence of this subsection. Company shall promptly notify Executive of
any such Regulatory Notice. Company shall have no obligation to dispute, contest, or petition for
relief from a Regulatory Notice or any action or proceeding commenced by a Gaming Authority
pursuant to a Regulatory Notice. Executive shall have the right to challenge or contest a
Regulatory Notice at his expense (subject to Executives indemnification rights, if any) and if the
Gaming Authority determines that payments to Executive are permitted and so notifies the Company,
then Company’s obligations to make payments hereunder shall continue.
(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. Prohibitions on Certain Actions by Executive.
(a) 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, 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,
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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 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;
(iii) otherwise act, alone or in concert with others, to seek to control or influence the
management, Board of Directors or policies of the Company;
(iv) publicly announce any intention to take any action, or take any action which might force
the Company to make a public announcement, in either case, regarding any of the types of matters
set forth in subparagraph (i) above; or
(v) enter into any discussions or arrangements with any person with respect to any of the
foregoing (including the matters set forth in subparagraph (i) above).
Executive also agrees, on behalf of itself and its Affiliates, Associates and representatives, not
to request the Company (or its directors, officers, employees or agents), directly or indirectly,
to amend or waive any provision of this Section 8 (including this sentence).
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(b) For purposes of this Agreement: the terms “Affiliate” and “Associate” shall have the
respective meanings set forth in Rule 12b-2 promulgated by the SEC under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”) (except that the 10% threshold in the definition of
“Associate” shall be replaced with 1% and beneficial ownership under such definition shall include
the right to acquire securities whether such right is exercisable immediately or only after the
passage of time or only after satisfaction of conditions); and the terms “person” or “persons”
shall mean any individual, corporation (including not-for-profit), general or limited partnership,
limited liability or unlimited liability company, joint venture, estate, trust, association,
organization or other entity of any kind or nature.
5. Executive Release and Waiver.
(a) Executive Release. Executive, for and on behalf of himself and each of his heirs,
executors, administrators, personal representatives, successors and assigns (the “Releasors”), to
the maximum extent permitted by law, hereby fully and forever releases, acquits and discharges the
Company, together with its subsidiaries, parents and affiliates, and each of their past and present
direct and indirect stockholders, directors, members, partners, officers, employees, attorneys,
agents and representatives, and their heirs, executors, administrators, personal representatives,
successors and assigns (collectively, the “Releasees”), from any and all claims, demands, suits,
causes of action, liabilities, obligations, judgments, orders, debts, liens, contracts, agreements,
covenants and causes of action of every kind and nature, whether known or unknown, suspected or
unsuspected, concealed or hidden, vested or contingent, in law or equity, existing by statute,
common law, contract or otherwise, which have existed, may exist or do exist, through and including
the execution and delivery by Executive of this Separation Agreement, including, without
limitation, any of the foregoing arising out of or in any way related to or based upon:
(i) Executive’s application for and employment with the Company, his being an officer,
director or employee of the Company or any of its subsidiaries, or the Employment Agreement or the
Separation;
(ii) any and all claims in tort or contract, and any and all claims alleging breach of an
express or implied, or oral or written, contract, policy manual or employee handbook;
(iii) any alleged misrepresentation, defamation, interference with contract, intentional or
negligent infliction of emotional distress, sexual harassment, negligence or wrongful discharge; or
(iv) any federal, state or local statute, ordinance or regulation, including but not limited
to the Age Discrimination in Employment Act of 1967, as amended, Title VII of the Civil Rights Act
of 1964, as amended; the Civil Rights Act and Women’s Equity Act of 1991; Sections 1981 through
1988 of Title 42 of the United States Code; the Equal Pay Act of 1963, as amended; the Occupational
Safety and Health Act of 1970; the Americans with Disabilities Act of 1990; the Family and Medical
Leave Act of 1993; the Consolidated Omnibus Budget Reconciliation Act of 1985; the Vocational
Rehabilitation Act of 1973; the Worker Adjustment Retraining and Notification Act of 1988; the Employee Retirement Income Security Act of 1974; the Fair Labor Standards Act and the
National Labor Relations Act, as amended, and the Older Workers Benefit Protection Act.
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(b) Exceptions to Executive Release. Notwithstanding any other provision of this
Separation Agreement to the contrary, the release by the Executive does not: (i) limit in any way
the Executive’s rights under this Separation Agreement and under the Surviving Employment Agreement
Provisions, (ii) release any rights under applicable law which cannot be waived or released
pursuant to any agreement, (iii) release any rights Executive may have to indemnification under the
bylaws, the Employment Agreement, or governing documents of the Company or any of its subsidiaries
or under applicable law, or (iv) release any rights Executive may have as a direct insured under
the Company’s directors’ and officers’ liability insurance policies.
(c) Current or Pending Claims of any Kind and No Relief for Released Claims. Executive
and Releasors have not and as of the date of this Separation Agreement will not have filed any
civil action, suit, arbitration, administrative charge or legal proceeding against any Releasee,
nor has the Executive or any Releasor assigned, pledged or hypothecated any claim as of the
Separation Date to any person and no other person has any interest in the claims that Executive or
any Releasor is releasing herein. Executive agrees that should any person or entity file or cause
to be filed any civil action, suit, arbitration or other legal proceedings seeking equitable or
monetary relief concerning any claim released by Executive, neither Executive nor any Releasor will
seek or accept any personal relief from or as the result of any action, suit or arbitration or
other legal proceeding.
(d) Effect of Executive Release and Waiver. Executive understands and intends that
this Section 5 constitutes a general release of all claims except as otherwise provided in Section
5(b), above, and that no reference therein to a specific form of claim, statute or type of relief
is intended to limit the scope of such general release and waiver.
(e) Executive Waiver of Unknown Claims. Executive or any Releasor may hereafter
discover claims or facts in addition to or different than those which he now knows or believes to
exist with respect to the subject matter of this Separation Agreement and which, if known or
suspected at the time of entering into this Separation Agreement, may have materially affected this
Separation Agreement and his decision to enter into it; nevertheless, Executive hereby waives any
right, claim or cause of action that might arise as a result of such different or additional claims
or facts.
(f) ADEA Release. Executive agrees and expressly acknowledges that this Separation
Agreement includes a waiver and release of all claims which Executive has or may have under the Age
Discrimination in Employment Act of 1967, as amended, 29 U.S.C. § 621, et seq.
(“ADEA”). The following terms and conditions apply to and are part of the waiver and release of
ADEA claims under this Separation Agreement:
(i) The waiver and release of claims under the ADEA contained in this Agreement do not cover
rights or claims that may arise after the date on which Executive executes and delivers this
Separation Agreement to the Company.
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(ii) This Separation Agreement involves consideration in addition to anything of value to
which Executive is already entitled.
(iii) Executive is advised to consult an attorney before signing this Separation Agreement.
If Executive executes this Separation Agreement prior to the expiration of the period specified in
Section 6(f)(iv) below, Executive does so voluntarily and after having had the opportunity to
consult with an attorney.
(iv) Executive is granted twenty-one (21) days after Executive is presented with this
Agreement to decide whether or not to sign this Separation Agreement.
(v) Executive will have the right to revoke the waiver and release of claims under the ADEA
within seven (7) days after Executive’s employment with the Company and all of its Affiliates has
terminated and Executive has reaffirmed this Agreement. This Section 6(f) shall not become
effective or enforceable until that revocation period has expired. Executive understands and
agrees that Executive shall refund any consideration that has been previously paid to Executive,
and shall receive no further consideration, if Executive revokes the waiver and release of ADEA
claims.
6. Return of Corporate Property. Executive hereby covenants and agrees to immediately
return all Company files, records and other property in Executive’s possession, including such
Company property located at Executive’s home offices in Nevada and Wyoming.
7. Remedies.
(a) The Parties hereby acknowledge and affirm that in the event of any breach by Executive or
the Company of any of the covenants, agreements, and obligations hereunder, monetary damages would
be inadequate to compensate the Parties. Accordingly, in addition to other remedies which may be
available to the Parties hereunder or otherwise at law or in equity, the Parties shall be entitled
to specifically enforce such covenants, obligations and restrictions through injunctive and/or
equitable relief, in each case without the posting of any bond or other security with respect
thereto. Should any provision hereof be adjudged to any extent invalid by any court or tribunal of
competent jurisdiction, each provision shall be deemed modified to the minimum extent necessary to
render it enforceable.
(b) Executive hereby acknowledges and affirms that, in the event of a breach by Executive of
any of Executive’s covenants, agreements, and obligations under this Agreement, in addition to any
other remedies which may be available to the Company hereunder or otherwise at law or in equity,
the Company shall have the right to terminate any payments due hereunder and to recover of any
payments previously made and rights previously granted hereunder.
8. Acknowledgment of Voluntary Agreement. Executive acknowledges that he has entered
into this Separation Agreement freely and without coercion, that he has been advised by the Company
to consult with counsel of his choice, that he has had adequate opportunity to so consult, and that
he has been given all time periods required by law to consider this Separation Agreement, including but not limited to the 21-day period required by the
ADEA.
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9. Complete Agreement; Inconsistencies. This Separation Agreement, including the
Surviving Employment Agreement Provisions and any other documents referenced herein, constitute the
complete and entire agreement and understanding of the Parties with respect to the subject matter
hereof, and supersedes in its entirety any and all prior understandings, commitments, obligations
and/or agreements, whether written or oral, with respect thereto; it being understood and agreed
that this Separation Agreement and including the mutual covenants, agreements, acknowledgments and
affirmations contained herein, is intended to constitute a complete settlement and resolution of
all matters set forth in Sections 5 and 6 hereof.
10. 409A Additional Tax. In the event that any compensation with respect to the
Executive’s termination is “deferred compensation” within the meaning of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”) and the regulations thereunder (“Section
409A”), payment of such compensation shall be delayed as required by Section 409A. Such delay
shall last six months from the Separation Date, except in the event of the Executive’s death.
Within 30 days following the end of such six-month period, or, if earlier, the Executive’s death,
the Company will make a catch-up payment to the Executive equal to the total amount of such
payments that would have been made during the six-month period but for this Section 10. Wherever
payments under this Agreement are to be made in installments, each such installment shall be deemed
to be a separate payment for purposes of Section 409A. Any deferred amounts will be placed in a
“rabbi trust” with an independent trustee reasonably acceptable to Executive. Such trust will
expressly provide that in the event of a Regulatory Notice under Section 3(f), the Company may
notify the trustee of such notice and the trustee shall forthwith pay to the Company the full
amount of the deferred compensation in the trust that is the subject of such notice.
11. Arbitration. Except for a claim for injunctive relief, any controversy, dispute,
or claim between the Parties arising out of this Separation Agreement shall be settled exclusively
by arbitration pursuant to the provisions of Article 8 of the Employment Agreement, and such
provision is incorporated herein by this reference.
12. Governing Law. All issues and questions concerning the construction, validity,
enforcement and interpretation of this Separation Agreement shall be governed by, and construed in
accordance with, the laws of the State of Nevada, without giving effect to any choice of law or
conflict of law rules or provisions that would cause the application hereto of the laws of any
jurisdiction other than the State of Nevada. In furtherance of the foregoing, the internal law of
the State of Nevada shall control the interpretation and construction of this Separation Agreement,
even though under any other jurisdiction’s choice of law or conflict of law analysis the
substantive law of some other jurisdiction may ordinarily apply.
13. Severability. The invalidity or unenforceability of any provision of this
Separation Agreement shall not affect the validity or enforceability of any other provision of this
Separation Agreement, which shall otherwise remain in full force and effect.
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14. Counterparts. This Separation Agreement may be executed in separate counterparts,
each of which shall be deemed to be an original and all of which taken together shall constitute
one and the same agreement.
15. Successors and Assigns. The Parties’ obligations hereunder shall be binding upon
their successors and permitted assigns. The Parties’ rights and the rights of the other Releasees
shall inure to the benefit of, and be enforceable by, any of the Parties’ and Releasees’ respective
successors and permitted assigns. Executive may not assign any of his rights and obligations under
this Separation Agreement, except as may be agreed to in writing by the Company. The Company may
assign all rights and obligations of this Separation Agreement to any successor in interest to the
assets of the Company. In the event that the Company is dissolved, all obligations of the Company
under this Agreement shall be provided for in accordance with applicable law.
16. Amendments and Waivers. No amendment to or waiver of this Separation Agreement or
any of its terms shall be binding upon any Party unless consented to in writing by such Party.
17. Headings. The headings of the sections and subsections hereof are for purposes of
convenience only, and shall not be deemed to amend, modify, expand, limit or in any way affect the
meaning of any of the provisions hereof.
18. Attorneys’ Fees. In the event a Party commences an action to enforce the terms of
this Separation Agreement, or for damages for a breach arising out of or relating to this
Separation Agreement, the prevailing Party shall be entitled to an award of reasonable attorneys’
fees.
19. Community Property. Without prejudice to the actual rights of the spouses as
between each other, for all purposes of this Separation Agreement, the Executive shall be treated
as agent and attorney-in-fact for that interest held or claimed by his spouse with respect to this
Agreement. This appointment is coupled with an interest and is irrevocable.
[signature page follows]
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IN WITNESS WHEREOF, the Parties have executed this Separation Agreement effective as of the
date of the first signature affixed below or as otherwise provided in this Separation Agreement.
DATED: November 7, 2009
PINNACLE ENTERTAINMENT, INC.
| By: | /s/ Xxxx X. Xxxxxxx Xxxx X. Xxxxxxx Executive Vice President, General Counsel and Secretary |
READ CAREFULLY BEFORE SIGNING
I have read this Separation Agreement and have had the opportunity to consult legal counsel and my
own tax advisors prior to my signing of this Separation Agreement. I understand that by executing
this Separation Agreement, I will relinquish any right or demand I may have against the Releasees
or any of them, unless otherwise provided in this Separation Agreement and/or my Employment
Agreement.
DATED: November 7, 2009
| By: | /s/ Xxxxxx X. Xxx XXXXXX X. XXX |
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SPOUSAL CONSENT
By her signature below, the spouse of Xxxxxx X. Xxx agrees to be bound by all of the items and
conditions of the foregoing Separation Agreement (including those relating to the appointment of
Xxxxxx X. Xxx as her attorney-in-fact).
DATED: November 7, 2009
| By: | /s/ Xxxxxxx Xxx XXXXXXX XXX |
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