Download PINNACLE ENTERTAINMENT INC. (Form: 10-K/A

Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011
or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 001-13641
PINNACLE ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
95-3667491
(I.R.S. Employer Identification No.)
8918 Spanish Ridge Avenue
Las Vegas, Nevada 89148
(Address of principal executive offices) (Zip Code)
(702) 541-7777
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $.10 par value per share
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES  NO 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES  NO 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES  NO 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). YES  NO 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the
definitions of “large accelerated filer,” “accelerated filer,” and “small reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer 
Accelerated filer 
Non-accelerated filer 
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES  NO 
Smaller reporting company 
The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2011 was $917 million based on a closing price of
$14.90 per share of common stock as reported on the New York Stock Exchange.
The number of outstanding shares of the registrant's common stock as of the close of business on February 24, 2012 was 62,149,308 .
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive 2012 proxy statement, anticipated to be filed with the Securities and Exchange Commission within 120 days after the
end of the registrant's fiscal year, are incorporated by reference into Part III of this Form 10-K.
Table of Contents
EXPLANATORY NOTE
This Amendment No. 1 to the Annual Report on Form 10-K (the “Amendment No. 1”) of Pinnacle Entertainment, Inc. (the “Company”)
for the fiscal year ended December 31, 2011, originally filed with the Securities and Exchange Commission (the “SEC”) on February 29, 2012
(the “Form 10-K”), is being filed to correct clerical errors in the certifications which were included in Exhibit 32 to the Form 10-K pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. As a result, the Company has included new certifications as reflected in Exhibits 31.1, 31.2
and 32. In addition, the Company has included a new consent from the Company's independent registered public accounting firm, Ernst &
Young LLP, as reflected in Exhibit 23.1, which is being filed solely to incorporate by reference Registration Statement No. 333-179890 on
Form S-3 filed with the SEC on March 5, 2012. No other changes have been made to the Form 10-K.
Except as set forth above, this Amendment No. 1 does not modify or update any disclosures in the Form 10-K. While the Company is
filing this Amendment No. 1 only to include new certifications in Exhibits 31.1., 31.2 and 32 and a new consent from the Company's
independent registered public accounting firm in Exhibit 23.1, for convenience and ease of reference, the Company is filing the entire Form
10-K, including all exhibits. Accordingly, this Amendment No. 1 should be read in conjunction with the Company's other filings made with the
SEC subsequent to the filing of the Form 10-K, including any amendments made to those filings, as information in such filings may update or
supersede certain information contained in those filings as well as this Amendment No. 1 and the Form 10-K .
PINNACLE ENTERTAINMENT, INC.
TABLE OF CONTENTS
PART I
Item 1. Business
1
Operating Properties
2
New Properties Under Construction and/or Development
3
Other Assets
3
Assets to be Sold or Held for Sale
3
Competition
4
Government Regulation and Gaming Issues
4
Employees
5
Executive Officers of the Registrant
5
Directors of the Registrant
5
Other
5
Available Information
5
Item 1A. Risk Factors
6
Item 1B. Unresolved Staff Comments
20
Item 2. Properties
21
Item 3. Legal Proceedings
22
Item 4. Mine Safety Disclosures
22
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
23
Stock Performance Graph
24
Item 6. Selected Financial Data
25
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
27
Executive Overview
27
Results of Operations
28
Liquidity and Capital Resources
37
Contractual Obligations and Other Commitments
41
Critical Accounting Estimates
42
Recently Issued and Adopted Accounting Standards
44
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
45
Item 8. Financial Statements and Supplementary Data
46
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
81
Item 9A. Controls and Procedures
81
Item 9B. Other Information
83
PINNACLE ENTERTAINMENT, INC.
TABLE OF CONTENTS
(Continued)
PART III
Item 10. Directors, Executive Officers and Corporate Governance
83
Item 11. Executive Compensation
83
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
83
Item 13. Certain Relationships and Related Transactions, and Director Independence
83
Item 14. Principal Accountant Fees and Services
83
PART IV
Item 15. Exhibits, Financial Statement Schedules
Signatures
Exhibit 4.21
Exhibit 4.22
Exhibit 4.23
Exhibit 4.24
Exhibit 4.25
Exhibit 4.26
Exhibit 10.26
Exhibit 10.27
Exhibit 10.28
Exhibit 10.29
Exhibit 10.30
Exhibit 10.66
Exhibit 10.67
Exhibit 10.68
Exhibit 11
Exhibit 12
Exhibit 21
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32
Exhibit 99.1
EX101 Instance Document
EX101 Schema Document
EX101 Calculation Linkbase Document
EX101 Definition Linkbase Document
EX101 Label Linkbase Document
EX101 Presentation Linkbase Document
84
Table of Contents
PART I
Item 1. Business
Pinnacle Entertainment, Inc. (“Pinnacle”) is an owner, operator and developer of casinos and related hospitality and entertainment facilities.
We operate casinos located in Lake Charles, New Orleans and Bossier City, Louisiana (L’Auberge Lake Charles, Boomtown New Orleans and
Boomtown Bossier City), St. Louis, Missouri (River City Casino and Lumière Place Casino and Hotels), and southeastern Indiana (Belterra
Casino Resort). In addition, we own and operate a racetrack facility in Cincinnati, Ohio (River Downs). We have a casino project under
construction in Baton Rouge, Louisiana, which is expected to open by Labor Day 2012. We also own a 26% stake in Asian Coast Development
(Canada), Ltd ("ACDL"), a British Columbia corporation that is developing Vietnam's first integrated resort near Ho Chi Minh City.
References to “Pinnacle,” the “Company,” “we,” “our” or “us” refer to Pinnacle Entertainment, Inc. and its subsidiaries, except where stated or
the context otherwise indicates.
Our mission is to increase stockholder value. We seek to increase revenues through enhancing the guest experience by providing our
guests with their favorite games, restaurants, hotel accommodations, entertainment and other amenities in attractive surroundings with
high-quality guest service and guest rewards programs. We seek to improve margins by focusing on operational excellence and efficiency
while meeting our guests' expectations of value. Our long-term strategy includes disciplined capital expenditures to improve and maintain our
existing properties, while growing the number and quality of our facilities by pursuing gaming entertainment opportunities we can improve or
develop. We intend to diversify our guest demographics and revenue sources by growing our portfolio of operating properties both domestic
and foreign, while remaining gaming and entertainment centric. We intend to implement these strategies either alone or with third parties when
we believe it benefits our stockholders to do so. In making decisions, we consider our stockholders, guests, team members and other
constituents in the communities in which we operate.
Highlights of 2011 include the following:
•
Completed the purchase of River Downs racetrack, located in southeast Cincinnati, Ohio for approximately $45.2 million in January
2011;
•
Re-launched our my choice Customer Loyalty Program in April 2011 to provide our players with more reasons to play at our
facilities, thereby consolidating play within our markets;
•
Acquired a 26% equity interest in Asian Coast Development (Canada), Ltd. for $95 million and entered into a long-term management
contract to operate a future integrated casino resort near Ho Chi Minh City in Vietnam in August 2011;
•
Entered into a $410 million amended and restated credit agreement in August 2011, which is due August 2016; and
•
Entered into a definitive agreement in November 2011 to sell our Boomtown Reno resort in Verdi, Nevada for an anticipated sales
price of $12.9 million, with the potential for an additional $3.8 million if an option granted to the buyer is exercised to purchase our
membership interest in PNK (Reno), LLC and additional land adjacent to Boomtown Reno. We will operate Boomtown Reno until
the transaction closes, which is expected to occur in 2012.
1
Table of Contents
Operating Properties
Our largest property is L’Auberge Lake Charles in Lake Charles, Louisiana opened in May 2005 and offers one of the closest full-scale
casino-hotel facilities to Houston, Texas (the sixth-largest metropolitan statistical area in the United States), as well as the Austin, Texas and
San Antonio, Texas metropolitan areas. Our property is approximately 140 miles from Houston and approximately 300 miles and 335 miles
from Austin and San Antonio, respectively.
L’Auberge Lake Charles offers a single-level casino floor with 1,587 slot machines, 74 table games and a hotel with 995 guestrooms,
villas and suites. The facility also offers several restaurants, approximately 26,000 square feet of meeting space, retail shops, a golf course, a
full-service spa and other amenities. The hotel at L’Auberge Lake Charles is the largest in Louisiana outside of New Orleans.
L’Auberge Lake Charles competes with other full-service regional and destination resort casinos, including those in New Orleans,
Louisiana, Biloxi, Mississippi, and Las Vegas, Nevada. It also competes with another casino-hotel in Lake Charles; a land-based Native
American casino, which is approximately 43 miles northeast of Lake Charles; a racetrack slot operation located approximately 25 miles to the
west; and numerous truck stops with slot machines in many parishes of Louisiana. In February 2011, the Louisiana Gaming Control Board
granted a conditional license for a new gaming facility in Lake Charles, which is to be adjacent to L'Auberge Lake Charles and, if completed,
will compete directly with L'Auberge Lake Charles.
Lumière Place , which fully opened in early 2008, is located in downtown St. Louis, Missouri. The Lumière Place complex includes the
Lumière Place Casino with 1,940 slot machines and 68 table games, the 200-guestroom luxury Four Seasons Hotel St. Louis, the 294 all-suites
HoteLumière, seven restaurants, banquet facilities, retail shops and more than 22,000 square feet of convention/meeting space, including a
7,300-square-foot ballroom. Lumière Place is located across from the Edward Jones Dome and America's Center convention center and just
north of the Gateway Arch. A pedestrian tunnel connects Lumière Place to the America's Center convention center, the Edward Jones Dome
and the city's central business district.
The Lumière Place Casino competes with four other casinos in the St. Louis metropolitan area (two of which are in Illinois), in addition to
our River City Casino.
In March 2010, we opened River City Casino in the south St. Louis community of Lemay, Missouri. Our facility includes a single-level,
90,000 square-foot casino with 2,010 slot machines, 59 table games, including poker, and parking for more than 2,900 vehicles. The facility
also features several restaurants, bars and retail shopping. River City is located on approximately 56 acres just south of the confluence of the
Mississippi River and the River des Peres.
In September 2011, we announced an $82 million expansion of River City to add a 200-guestroom hotel, a multi-purpose event center and
a covered parking structure. Construction on the expansion project is scheduled to begin in the first quarter of 2012, with an expected
completion in the second half of 2013.
Our Boomtown New Orleans property, which opened in 1994, is the only casino in the West Bank area, across the Mississippi River from
downtown New Orleans, Louisiana. It features a dockside riverboat casino with 1,415 slot machines and 40 table games, several restaurants, a
350-seat nightclub, 4,600 square feet of meeting space, an arcade and approximately 1,700 parking spaces. Boomtown New Orleans competes
with a large land-based casino in downtown New Orleans, one other riverboat casino, a racetrack with slot machines and numerous truck stop
casinos with video poker machines, as well as casinos in the Gulf Coast region.
Our southern Indiana property, Belterra Casino Resort , opened in October 2000 and is located along the Ohio River near Vevay,
Indiana, approximately 50 minutes from downtown Cincinnati, Ohio, 70 minutes from Louisville, Kentucky and 90 minutes from Lexington,
Kentucky. Belterra is also approximately two and a half hours from Indianapolis, Indiana.
Belterra attracts customers by offering resort amenities that are generally superior to those at competing regional properties, several of
which are closer to the population centers than Belterra. Belterra features a dockside riverboat casino with 1,475 slot machines and 55 table
games and a 608 -guestroom hotel, six restaurants, 33,000 square feet of meeting and conference space, a 1,553-seat entertainment showroom,
retail shops, a swimming pool, a golf course and a full-service spa. The resort provides approximately 2,250 parking spaces, most of which are
in a multi-level parking structure.
Belterra currently competes with four dockside riverboat casinos; a casino-resort in French Lick, Indiana, approximately 100 miles west of
Belterra; and two racetrack casinos in the Indianapolis, Indiana metropolitan area, each with approximately 2,000 slot machines. In November
2009, Ohio voters passed a constitutional amendment that allows one casino to be developed in each of Cincinnati, Columbus, Cleveland and
Toledo. Casinos are expected to begin opening in 2012 and will
2
Table of Contents
likely provide additional competition to Belterra. In addition, Belterra may gain additional competition if video lottery terminals become
operational at Ohio's racetracks, including our River Downs racetrack, which is discussed below.
Our Boomtown Bossier City property in Bossier City, Louisiana, features a hotel adjoining a dockside riverboat casino. The property
opened in October 1996 and is located on a site directly adjacent to, and easily visible from, Interstate 20. The Bossier City/Shreveport region
is a three-hour drive from the Dallas/Fort Worth metropolitan area along Interstate 20. The property includes 1,014 slot machines and 25 table
games, 187 guestrooms, four restaurants and approximately 1,860 parking spaces.
Boomtown Bossier City competes with four dockside riverboat casino-hotels, a racetrack slot operation and large Native American casinos
in southern Oklahoma. Such Native American facilities are approximately 60 miles north of Dallas.
In January 2011, we purchased River Downs Racetrack , located in Cincinnati, Ohio. River Downs is situated on approximately 160
acres of land, 40 of which are undeveloped, and offers live thoroughbred horse racing from April through Labor Day, as well as simulcast
wagering throughout the year, broadcast on more than 500 monitors throughout the facility. River Downs features a Grandstand with open-air
seating, the Pavilion which includes seating for 50 to up to 300 guests, as well as a private bar and grill, and the Turf Terrace in the upper
Clubhouse. The State of Ohio has recently made moves to allow video lottery terminals ("VLTs") at Ohio's racetracks, including River Downs.
These changes have yet to become operational and are subject to legal challenges. If VLTs become operational, we plan to move quickly to
invest in and revitalize River Downs to develop a new gaming, racing and entertainment destination facility for the Cincinnati and surrounding
markets. River Downs Racetrack competes with other racing facilities in Ohio, Kentucky and Indiana. If VLTs become operational, River
Downs is likely to face additional competition from casinos currently being built in Ohio, as well as our Belterra property, discussed above, and
other racetracks in Ohio with VLTs.
Financial information about segments and geographic areas is incorporated by reference from Note 13 to our Consolidated Financial
Statements included in this Annual Report on Form 10-K.
New Properties Under Construction and/or Development
We are developing L'Auberge Baton Rouge in Baton Rouge, Louisiana. The new facility will feature a single-level gaming floor; 1,450
slot machines; 57 table games, including a poker room; a hotel with 206 guestrooms and a rooftop pool; three dining outlets; 2,373 total
parking spaces, including a parking garage; event lawn; and a multi-purpose event center. The project will be located on a portion of the 576
acres of land that we own approximately ten miles southeast of downtown Baton Rouge, Louisiana. We plan to open the facility by Labor Day
2012. The ultimate opening date is dependent upon the progress of construction and obtaining regulatory approvals, among other factors.
L'Auberge Baton Rouge will compete directly with two casinos in the Baton Rouge area and other resort facilities regionally in New Orleans
and Biloxi, Mississippi.
Other Assets
In August 2011, we acquired a 26% equity interest in Asian Coast Development (Canada), Ltd . ("ACDL") for a total purchase price of
$95.0 million. We also have a management agreement to manage the second integrated resort at the Ho Tram Strip through the year 2058, with
a potential 20-year extension. Entities affiliated with Harbinger Capital Partners are the majority shareholders of ACDL. ACDL is the owner
and developer of the Ho Tram Strip beachfront complex of destination integrated resorts and residential developments in southern Vietnam.
The Ho Tram Strip project is located approximately 80 miles southeast of Ho Chi Minh City, Vietnam's largest city. The first phase of the Ho
Tram Strip, MGM Grand Ho Tram, is currently under construction with a planned opening by the end of the first quarter of 2013, and will be
managed by MGM Hospitality. It will feature 541 luxury guest-rooms and suites, a full spectrum of world-class restaurants and amenities, VIP
accommodations, a conference center, and an entertainment area featuring 90 live table games and 500 electronic games. The second integrated
resort of the Ho Tram Strip, for which we have secured a management agreement, will be jointly developed by ACDL and us, and owned by
ACDL. We expect the second integrated resort, which will be branded as a distinct and premium resort, will be similar in project scope to the
MGM Grand Ho Tram resort currently under construction. The Ho Tram Strip project will compete with slot parlors located in various 5-star
hotels in Vietnam, as well as other destination casinos located throughout Southeast Asia, including Macau and Singapore.
Assets to be Sold or Held for Sale
In November 2011, we entered into a definitive agreement to sell our Boomtown Reno operations. We have reflected the business as
discontinued operations and the related assets and liabilities as held for sale.
We own approximately 19 contiguous acres in the heart of Atlantic City, New Jersey , with extensive frontage along The
3
Table of Contents
Boardwalk, Pacific Avenue and Brighton Park. We have reflected our Atlantic City operations as discontinued operations and the related assets
and liabilities as held for sale.
In June 2010, we closed the President Casino , and have reflected the entity in discontinued operations. In October 2010, we sold The
Admiral Riverboat, on which the President Casino formerly operated.
In June 2010, we completed the sale of our Argentina operations for approximately $40.0 million. We expect no continuing costs from
this operation.
The Casino at Emerald Bay in The Bahamas was closed during the first quarter of 2009. We have no remaining assets, and expect no
continuing costs associated with this operation.
Competition
We face significant competition in each of the jurisdictions in which we operate. Such competition may intensify in some of these
jurisdictions if new gaming operations open in these markets or existing competitors expand their operations. Our properties compete directly
with other gaming properties in each state in which we operate, as well as in adjacent states. We also compete for customers with other casino
operators in other markets, including casinos located on Native American reservations, and other forms of gaming, such as lotteries and
Internet gaming. Many of our competitors are larger and have substantially greater name recognition and marketing and financial resources. In
some instances, particularly with Native American casinos, our competitors pay substantially lower taxes or no taxes at all, as compared to us.
We believe that increased legalized gaming in other states, particularly in areas close to our existing gaming properties such as Texas, Ohio,
Illinois, Indiana, Kentucky, Oklahoma or California, the development or expansion of Native American gaming in or near the states in which
we operate, the expansion of additional developments or destination resorts in Vietnam or in southeast Asia, and the potential legalization of
Internet gaming, could create additional competition for us and could adversely affect our operations or proposed development projects.
Government Regulation and Gaming Issues
The gaming industry is highly regulated, and we must maintain our licenses and pay gaming taxes to continue our operations. Each of our
casinos is subject to extensive regulation under the laws, rules and regulations of the jurisdiction where it is located. These laws, rules and
regulations generally concern the responsibility, financial stability and character of the owners, managers, and persons with financial interests
in the gaming operations. Violations of laws in one jurisdiction could result in disciplinary action in other jurisdictions. For a more detailed
description of the statutes and regulations to which we are subject, please see Exhibit 99.1 to this Annual Report on Form 10-K, “ Government
Regulation and Gaming Issues ”, which is incorporated herein by reference.
Our businesses are subject to various federal, state and local laws and regulations in addition to gaming regulations. These laws and
regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages, environmental matters, employees,
currency transactions, taxation, zoning and building codes, and marketing and advertising. Such laws and regulations could change or could be
interpreted differently in the future, or new laws and regulations could be enacted. Material changes, new laws or regulations, or material
differences in interpretations by courts or governmental authorities could adversely affect our operating results.
Compliance with federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the
environment or otherwise relating to the protection of the environment have not had a material effect upon our capital expenditures, earnings or
the competitive positions of our properties. From time to time, certain of our development projects may require substantial costs for
environmental remediation due to prior use of our development sites. Our River City project site, for example, was previously used for heavy
industrial purposes, necessitating remediation of the site by us as part of the overall project. Our project budgets typically include amounts
expected to cover the remediation work required.
4
Table of Contents
Employees
The following is a summary of our work force by segment at January 31, 2012, some of which are part-time employees. We view each
property as an operating segment, with the exception of our properties located in St. Louis, Missouri, which are aggregated into the “St. Louis”
reporting segment.
Approximate
Number of
Employees
2,033
2,274
724
1,062
661
116
593
7,463
Property
L’Auberge Lake Charles
St. Louis
Boomtown New Orleans
Belterra Casino Resort
Boomtown Bossier City
River Downs
Corporate and other (a)
Total
(a) Corporate and other includes certain development project employees, as well as employees of Boomtown Reno, which is considered
discontinued operations.
Executive Officers of the Registrant
The persons serving as our executive officers as of May 15, 2012 , and their positions with us are as follows:
NAME
Anthony M. Sanfilippo
Carlos A. Ruisanchez
John A. Godfrey
Virginia E. Shanks
Daniel P. Boudreaux
POSITION WITH THE COMPANY
President, Chief Executive Officer and Director
Executive Vice President and Chief Financial Officer
Executive Vice President, Secretary and General Counsel
Executive Vice President and Chief Marketing Officer
Senior Vice President and Chief Accounting Officer
Directors of the Registrant
The following table lists our directors, their principal occupations and principal employers as of May 15, 2012 :
NAME
Anthony M. Sanfilippo
Stephen C. Comer
John V. Giovenco
Richard J. Goeglein
Bruce A. Leslie
James L. Martineau
Lynn P. Reitnouer
PRINCIPAL OCCUPATION & EMPLOYER
President and Chief Executive Officer of Pinnacle Entertainment, Inc.
Retired Accounting Firm Managing Partner
Retired Gaming Executive
Non-executive Chairman of the Board of Pinnacle Entertainment, Inc.,
Owner, Evening Star Holdings, LLC (Business Consulting Firm), and
Former Gaming Executive
Partner, Armstrong Teasdale LLP (law firm)
Business Advisor and Private Investor
Partner, Crowell, Weedon & Co. (Stock Brokerage Firm)
Other
Pinnacle Entertainment, Inc., a Delaware corporation, is the successor to the Hollywood Park Turf Club, which was organized in 1938. It
was incorporated in 1981 under the name Hollywood Park Realty Enterprises, Inc. In 1992, we changed our name to Hollywood Park, Inc. and
in February 2000, we became Pinnacle Entertainment, Inc.
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports are
available free of charge as soon as reasonably practicable after they are filed with or furnished to the Securities and Exchange Commission
(“SEC”) through our internet website, www.pnkinc.com. Our filings are also available through a database maintained by the SEC at
www.sec.gov.
5
Table of Contents
Item 1A. Risk Factors
An investment in our securities is subject to risks inherent to our business. We have described below what we currently believe to be the
material risks and uncertainties in our business. Before making an investment decision, you should carefully consider the risks and
uncertainties described below, together with all of the other information included or incorporated by reference in this Annual Report on Form
10-K.
We also face other risks and uncertainties beyond what is described below. This Annual Report on Form 10-K is qualified in its entirety by
these risk factors. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and
adversely affected. If this were to happen, the value of securities, including our common stock, could decline significantly. You could lose all
or part of your investment.
Our business is particularly sensitive to reductions in consumers' discretionary spending as a result of downturns in the economy or
other changes we cannot accurately predict.
Demand for entertainment and leisure activities is sensitive to consumers' disposable incomes, and thus demand can be affected by changes
in the economy that we cannot predict. Perceived or actual unfavorable changes in general economic conditions, including recession, economic
slowdown, continued high unemployment levels, the current housing and credit crises, the potential for bank failures, higher fuel or other
transportation costs, and changes in consumer confidence, may reduce disposable income of our customers or result in fewer patrons visiting
our casinos. As a result, we cannot ensure that demand for entertainment and leisure activities will not be adversely affected. Continued adverse
developments affecting economies throughout the world, including a general tightening of the availability of credit, potentially rising interest
rates, increasing energy costs, rising prices, inflation, acts of war or terrorism, natural disasters, declining consumer confidence or significant
declines in the stock market could lead to a reduction in discretionary spending on entertainment and leisure activities, which could adversely
affect our business, financial condition and results of operations. Deterioration in operating results could affect our ability to comply with
financial covenant ratios, other covenants and requirements in our amended and restated credit facility and covenants and requirements under
the bond indentures discussed in other risk factors below.
The global financial crisis and recession has affected our business and financial condition, and may continue to affect us in ways that
we currently cannot accurately predict.
The continued credit crisis, recession and related turmoil in the global financial system have had and may continue to have an effect on our
business and financial condition. We do not know the duration or severity of the current economic downturn. If a significant percentage of our
lenders under our amended and restated credit facility were to file for bankruptcy or otherwise default on their obligations to us, we may not
have the liquidity to fund our current or future projects. There is no certainty that our lenders will continue to remain solvent or fund their
respective obligations under our amended and restated credit facility.
The significant distress recently experienced by financial institutions has had and may continue to have far reaching adverse consequences
across many industries, including the gaming industry. The recent credit and liquidity crisis greatly restricted the availability of capital and
caused the cost of capital (if available) to be much higher than it had traditionally been. Volatility in the capital markets is perceived to be high.
The need to access the capital markets could increase the costs of our projects, which could have an impact on our flexibility to react to
changing economic and business conditions and our ability or willingness to fund our development projects. All of these effects could have a
material adverse effect on our business, financial condition and results of operations.
Our substantial development plans for capital-intensive projects will require us to borrow significant amounts under our amended and
restated credit facility and, depending on which projects are pursued to completion, may cause us to incur substantial additional
indebtedness.
Currently, we are in the process of constructing L'Auberge Baton Rouge, our casino hotel project in Baton Rouge, Louisiana, which is
currently expected to open by Labor Day 2012. The budget for the project is currently $368 million (exclusive of land costs and capitalized
interest). Due to construction disruption and previously unanticipated site preparation work, the construction budget has increased by
approximately 3.0% to $368 million from the previous budget of $357 million. As of December 31, 2011, we have spent approximately $155.5
million and we expect to fund the remaining $212.5 million of the overall project budget with cash on-hand, expected cash flow from existing
operations, and our $410 million credit facility.
In addition, we recently purchased River Downs racetrack in Ohio in January 2011. In June 2011, the Governor of Ohio announced that it
is his intention that each of Ohio's racetrack owners be permitted to apply for a 10-year license to operate a video lottery terminal facility at a
cost of $50 million. He further stated that video lottery terminal licensees would be required
6
Table of Contents
to invest at least $150 million in their facilities. We cannot predict whether the Governor's plan will be implemented on its terms or at all. There
is currently a legal challenge to the implementation of the Governor's plan, the outcome of which is uncertain. If video lottery terminals are
ultimately approved for use at Ohio's racetracks and become operational, we plan to move quickly to revitalize River Downs and develop a new
gaming, racing and entertainment destination facility for the Cincinnati, Ohio market.
In the event that our future cash flows from operations do not match the levels we currently anticipate, whether due to downturns in the
economy or otherwise, we may need to amend the terms of our credit facility or obtain waivers from our lenders in order to continue with our
current, or implement future, development plans. We may not be able to obtain such an amendment or waiver from our lenders. In such event,
we may need to raise funds through the capital markets and may not be able to do so on favorable terms or on terms acceptable to us.
Our present indebtedness and projected future borrowings could adversely affect our financial health; future cash flows may not be
sufficient to meet our obligations, and we may have difficulty obtaining additional financing; and we may experience adverse effects of
interest rate fluctuations .
As of December 31, 2011, we had indebtedness of approximately $1.2 billion . Our amended and restated credit facility consists of a
$410 million revolving credit facility, of which $56.0 million was drawn as of December 31, 2011. Letters of credit of $11.1 million were
outstanding as of December 31, 2011 under our amended and restated credit facility.
There can be no assurance in the future whether we will generate sufficient cash flow from operations or through asset sales to meet our
long-term debt service obligations. Our present indebtedness and projected future borrowings could have important adverse consequences to
us, such as:
•
making it more difficult for us to satisfy our obligations with respect to our existing indebtedness;
•
limiting our ability to obtain additional financing without restructuring the covenants in our existing indebtedness to permit the
incurrence of such financing;
•
requiring a substantial portion of our cash flow to be used for payments on the debt and related interest, thereby reducing our ability to
use cash flow to fund working capital, capital expenditures and general corporate requirements;
•
limiting our ability to respond to changing business, industry and economic conditions and to withstand competitive pressures, which
may affect our financial condition;
•
causing us to incur higher interest expense in the event of increases in interest rates on our borrowings that have variable interest rates
or in the event of refinancing existing debt at higher interest rates;
•
limiting our ability to make investments, dispose of assets, pay cash dividends or repurchase stock;
•
increasing our vulnerability to downturns in our business, our industry or the general economy and restricting us from making
improvements or acquisitions or exploring business opportunities;
•
placing us at a competitive disadvantage to competitors with less debt or greater resources; and
•
subjecting us to financial and other restrictive covenants in our indebtedness, the non-compliance with which could result in an event
of default.
We cannot assure you that our business will generate sufficient cash flow from operations, that our anticipated revenue growth will be
realized, or that future borrowings will be available to us under our amended and restated credit facility in amounts sufficient to enable us to
pay our indebtedness or to fund our other liquidity needs. In addition, as we undertake substantial new developments or facility renovations or
if we consummate significant acquisitions in the future, our cash requirements and our debt service requirements may increase significantly.
If we fail to generate sufficient cash flow from future operations to meet our debt service obligations, we may need to refinance all or a
portion of our debt on or before maturity. We cannot assure you that we will be able to refinance any of our debt, including our amended and
restated credit facility, the senior notes and the senior subordinated notes, on attractive terms, commercially reasonable terms or at all,
particularly because of our anticipated high levels of debt and the debt incurrence restrictions imposed by the agreements governing our debt.
Our amended and restated revolving credit facility matures in
7
Table of Contents
August 2016; provided that the maturity date of our credit facility will be accelerated to December 15, 2014, if any portion of our 7.50% senior
subordinated notes due 2015 are outstanding on December 15, 2014. Our future operating performance and our ability to service, extend or
refinance our indebtedness will be subject to future economic conditions and to financial, business and other factors, many of which are beyond
our control.
Our borrowings under our revolving amended and restated credit facility are at variable rates of interest, and to the extent not protected
with interest rate hedges, could expose us to market risk from adverse changes in interest rates. We currently have no such interest rate hedges.
If interest rates increase, our debt service obligations on the variable-rate indebtedness could increase significantly even though the amount
borrowed would remain the same.
Our indebtedness imposes restrictive covenants on us .
Our amended and restated credit facility and the indentures governing our senior notes and senior subordinated notes impose various
customary covenants on us and our subsidiaries. The restrictions that are imposed under these debt instruments include, among other
obligations, limitations on our and our subsidiaries' ability to:
•
incur additional debt;
•
make payments on subordinated obligations;
•
make dividends or distributions and repurchase stock;
•
make investments;
•
grant liens on our property to secure debt;
•
enter into certain transactions with affiliates;
•
sell assets or enter into mergers or consolidations;
•
sell equity interests in our subsidiaries;
•
create dividend and other payment restrictions affecting our subsidiaries;
•
change the nature of our lines of business;
•
make capital expenditures;
•
designate restricted and unrestricted subsidiaries; and
•
amend or modify our subordinated indebtedness without obtaining consents from the holders of our senior indebtedness.
Our amended and restated credit facility imposes various customary affirmative covenants on us and our restricted subsidiaries, including,
among others, reporting covenants, covenants to maintain insurance, comply with laws and maintain properties and other covenants customary
in senior credit financings of this type. In addition, our amended and restated credit facility requires that we comply with various restrictive
maintenance financial covenants, including an interest coverage ratio, a debt to annualized Adjusted EBITDA (as defined) ratio, and capital
spending limits.
Our ability to comply with the covenants contained in the instruments governing our indebtedness may be affected by general economic
conditions, industry conditions, and other events beyond our control, including delay in the completion of new projects under construction. As
a result, we cannot assure you that we will be able to comply with these covenants. Our failure to comply with the covenants contained in the
instruments governing our indebtedness, including our amended and restated credit facility and the indentures governing our senior notes and
senior subordinated notes, including failure to comply as a result of events beyond our control, could result in an event of default, which could
materially and adversely affect our operating results and our financial condition and our ability to comply with the conditions of the Louisiana
Gaming Control Board (the "LGCB") in connection with our L'Auberge Baton Rouge project discussed in another risk factor below.
If there were an event of default under one of our debt instruments, the holders of the defaulted debt could cause all
8
Table of Contents
amounts outstanding with respect to that debt to be due and payable, subject to applicable grace periods. This could trigger cross-defaults under
our other debt instruments. We cannot assure you that our assets or cash flow would be sufficient to repay borrowings under our outstanding
debt instruments if accelerated upon an event of default, or that we would be able to repay, refinance or restructure the payments on any of
those debt instruments.
The gaming industry is very competitive and increased competition, including through legislative legalization or expansion of gaming
by states such as Texas, Kentucky, Ohio and Illinois or through Native American gaming facilities and internet gaming, could adversely
affect our financial results.
We face significant competition in all of the markets in which we operate. With fewer new markets opening for development in recent
years, this competition will intensify if new gaming operations enter our markets or existing competitors expand their operations. Increased
competitive pressures may adversely affect our ability to continue to attract customers or require us to offer a larger number of, or more costly,
promotions to compete more efficiently. We have entered into a number of strategic partnerships to compete with other competitors. The loss
of one of these strategic partnerships may adversely affect our business.
Further, several of our properties are located in jurisdictions that restrict gaming to certain areas and/or are adjacent to states that currently
prohibit or restrict gaming operations. Economic difficulties faced by state governments could lead to intensified political pressures for the
legalization of gaming in jurisdictions where it is currently prohibited. The legalization of gaming in such jurisdictions could be an expansion
opportunity for us, or a significant threat to us, depending on where the legalization occurs and our ability to capitalize on it. In particular, our
ability to attract customers to our existing casinos would be significantly and adversely affected by the legalization or expansion of gaming in
any of our existing markets and Texas, Ohio, Illinois, Kentucky, Oklahoma, and California and the development or expansion of Native
American casinos in our markets. The value of our site in Atlantic City has been adversely affected and may be further affected by the
legislation or expansion of casino gaming in Delaware, Maryland, Pennsylvania, West Virginia, New York, northern New Jersey and
Connecticut. In 2008 and 2009, we recorded impairments to the value of our land in Atlantic City totaling approximately $357 million. In
Vietnam, the Company has invested $95.0 million in ACDL whose Vietnamese subsidiary is developing a complex of integrated resorts in
southern Vietnam which, when complete, will compete with slot parlors located in various 5-star hotels in the market, as well as other
destination casinos located throughout southeast Asia, including in Macau and Singapore.
In the past, legislation to legalize or expand gaming has been introduced in some of these jurisdictions, and federal law favors the
expansion of Native American gaming. In 2009, legislation to approve up to 12 resort casinos, slot machines at racetracks and Native American
gaming in Texas was rejected during the state's 2009 legislative session. Numerous gaming bills were introduced in the Texas Legislature
during its 2010-11 regular session, none of which passed. We expect similar proposals to legalize or expand gaming will be made in the future
in various states, and it is uncertain whether such proposals will be successful. Further, because the global economic recession has reduced the
revenues of state governments from traditional tax sources, voters and state legislatures may be more sympathetic to proposals authorizing or
expanding gaming in those jurisdictions.
In June 2011, the Illinois legislature passed an omnibus gaming bill that would allow, among other items, five new casinos in the state,
including a 4,000-position property in downtown Chicago and riverboats in Rockford, Park City, Danville and one of six south Cook County
suburbs, pending local approvals, and slots at six racetracks in the state, five in Chicago and one near St. Louis. The Governor of Illinois never
signed the bill. If gaming operations expanded in Illinois, it would adversely affect our business, particularly our St. Louis properties.
In February 2012, a bill was introduced in the Kentucky legislature which would authorize a statewide vote to amend the state's
constitution to allow expanded gaming at up to seven locations in Kentucky. This bill subsequently died on the Kentucky Senate floor. If
gaming was legalized in Kentucky, it would have an adverse effect on our Belterra and River Downs facilities.
Even in gaming markets where the state governments do not choose to increase the maximum number of gaming licenses available, we
face the risk that existing casino licensees will expand their operations and the risk that Native American gaming will continue to grow.
Furthermore, Native American gaming facilities frequently operate under regulatory requirements and tax environments that are less stringent
than those imposed on state-licensed casinos, which could provide such Native American gaming facilities with a competitive advantage in our
markets.
In April 2010, we canceled our Sugarcane Bay casino development in Lake Charles, Louisiana and we surrendered the related gaming
license to the LGCB. In February 2011, the LGCB granted a license for a new gaming facility in Lake Charles, which would be adjacent to our
L'Auberge Lake Charles casino. A new casino in Lake Charles would compete directly with
9
Table of Contents
L'Auberge Lake Charles and may reduce such property's revenues significantly. In February 2012, the LGCB approved the construction of a
new gaming facility in Bossier City, Louisiana. This new casino will compete directly with our Boomtown Bossier City casino and may reduce
such property's revenues significantly. During 2011, we derived 32.9% of our revenues from our L'Auberge Lake Charles property.
In Ohio, there are four casinos, which are being developed and located in each of Cincinnati, Cleveland, Toledo, and Columbus. Our
Belterra and River Downs facilities will face competition from these casinos in Ohio and from existing riverboats in Indiana and may face
competition from racetracks in Ohio with video lottery terminals.
From time to time, our competitors refurbish, rebrand or expand their casino offerings in the markets in which we operate, which could
function to increase competition in those markets. For example, a large competitor of our Belterra property reopened a rebranded and
refurbished riverboat casino in Lawrenceburg, Indiana replacing a smaller facility.
We face competition from racetracks that offer slot machines. In the event that video lottery terminals become operational at racetracks in
Ohio, our Belterra property will face competition from these racetracks (including from River Downs) and racinos in Indiana. We also compete
with other forms of legalized gaming and entertainment such as bingo, pull-tab games, card parlors, sports books, pari-mutuel or telephonic
betting on horse and dog racing, state-sponsored lotteries, video lottery terminals, video poker terminals and, in the future, we may compete
with gaming at other venues. Furthermore, competition from internet lotteries and other internet wagering gaming services, which allow their
customers to wager on a wide variety of sporting events and play Las Vegas-style casino games from home, could divert customers from our
properties and thus adversely affect our business. Such internet wagering services are often illegal under federal law but operate from overseas
locations, and are nevertheless sometimes accessible to domestic gamblers. There are also proposals that would specifically legalize internet
gaming under federal law.
Subsequent phases to certain of our existing projects and potential enhancements at our properties may require us to raise additional
capital.
We may need to access the capital markets or otherwise obtain additional funds to complete subsequent phases of our existing projects in
downtown St. Louis and in St. Louis County, and to fund potential enhancements we may undertake at our facilities there and elsewhere. We
do not know when or if the capital markets will permit us to raise additional funds for such phases and enhancements in a timely manner, or on
acceptable terms, or at all. Inability to access the capital markets, or the availability of capital only on less-than-favorable terms, may force us
to delay, reduce or cancel our subsequent phases and enhancement projects. Delay, reduction or cancellation of the subsequent phases of our
projects could subject us to financial penalties, and the possibility of such penalties could require us to obtain additional financing on
unfavorable terms.
Our ability to obtain bank financing or to access the capital markets for future debt or equity offerings may also be limited by our financial
condition, results of operations or other factors, such as our credit rating or outlook at the time of any such financing or offering and the
covenants in our existing debt agreements, as well as by general economic conditions and contingencies and uncertainties that are beyond our
control. As we seek additional financing, we will be subject to the risks of rising interest rates and other factors affecting the financial markets.
We may not meet the conditions for the maintenance of the license that we plan to utilize for L'Auberge Baton Rouge .
The LGCB has established numerous conditions for use of the license for our L'Auberge Baton Rouge project, which, if not satisfied,
could result in forfeiture of such license. One such condition is that we deposit $25 million in an escrow account to be maintained until the
commencement of gaming operations, which amount was deposited and would be paid to the State of Louisiana in the event that we surrender
the license due to withdrawal or cancellation of the L'Auberge Baton Rouge project or upon revocation of the license by the LGCB.
Another of the conditions to the license for L'Auberge Baton Rouge is that construction of the project must be substantially complete by
July 31, 2012. During construction, we have faced unusually high volatility of the Mississippi River's water levels in Baton Rouge. In 2011,
unusually low river levels prevented construction progress on the wet side of the flood levee. Subsequently, unusually high water levels on the
dry side of the flood levee delayed construction progress on the hotel until the river level receded. During the third quarter of 2011, we fully
resumed construction of the foundations for the hotel. In May 2011, we entered into an amendment to the guaranteed maximum price
agreement for L'Auberge Baton Rouge, which currently provides that the guaranteed date of completion for the project is May 31, 2012 and
which we anticipate amending to a later date. Management currently expects L'Auberge Baton Rouge to open by Labor Day 2012.
We will have to obtain an extension from the LGCB for L'Auberge Baton Rouge to permit a date later than July 31, 2012
10
Table of Contents
for the substantial completion of construction. There can be no assurance that the LGCB will approve an extension to permit such later date, if
required. Thus, the ultimate opening date is dependent upon receiving any required extension from the LGCB, among other factors.
While we intend to fulfill all of the other conditions set by the LGCB, it is uncertain whether we will be able to do so or that the LGCB
would agree to make any amendments to the conditions that might be necessary. Forfeiture of the license for L'Auberge Baton Rouge could
adversely affect our expansion plans for the Louisiana gaming market.
Insufficient or lower-than-expected results generated from our new developments and acquired properties may negatively affect the
market for our securities; our new properties may compete with our existing properties.
We cannot assure you that the revenues generated from our new developments and acquired properties will be sufficient to pay related
expenses if and when these developments are completed; or, even if revenues are sufficient to pay expenses, that the new developments and
acquired properties will yield an adequate return or any return on our significant investments. Our projects, if completed, may take significantly
longer than we expect to generate returns, if any. Moreover, lower-than-expected results from the opening of a new facility may negatively
affect us and the market for our securities and may make it more difficult to raise capital, even as the shortfall increases the need to raise
capital. We are currently developing a new facility in Baton Rouge, Louisiana.
As our new properties open, they may compete with our existing properties. For example, our River City Casino in St. Louis County,
Missouri, which opened on March 4, 2010, is located approximately 12 miles from our Lumière Place facility in St. Louis, Missouri and has
diverted business away from such location. In addition, if video lottery terminals become operational at River Downs in Ohio, River Downs
will compete with our Belterra Casino Resort in Indiana.
Rising operating costs at our gaming properties could have a negative impact on our business.
The operating expenses associated with our gaming properties could increase due to, among other reasons, the following factors:
•
changes in the foreign, federal, state or local tax or regulations, including state gaming regulations or taxes, could impose additional
restrictions or increase our operating costs;
•
aggressive marketing and promotional campaigns by our competitors for an extended period of time could force us to increase our
expenditures for marketing and promotional campaigns in order to maintain our existing customer base and attract new customers;
•
as our properties age, we may need to increase our expenditures for repairs, maintenance, and to replace equipment necessary to
operate our business in amounts greater than what we have spent historically;
•
an increase in the cost of health care benefits for our employees could have a negative impact on our financial results;
•
our reliance on slot play revenues and the concentration of relatively few slot play vendors could impose additional costs on us;
•
availability and cost of the many products and services we provide our customers, including food, beverages, retail items,
entertainment, hotel rooms, spa and golf services;
•
availability and costs associated with insurance;
•
increases in costs of labor, including due to potential unionization of our employees;
•
our properties use significant amounts of electricity, natural gas and other forms of energy, and energy price increases may adversely
affect our cost structure; and
•
our properties use significant amounts of water, and a water shortage may adversely affect our operations.
If our operating expenses increase without any offsetting increase in our revenues, our results of operations would suffer.
11
Table of Contents
We are engaged from time to time in one or more construction and development projects, and many factors could prevent us from
completing them as planned, including the escalation of construction costs beyond increments anticipated in our construction budgets.
Construction of major buildings has certain inherent risks, including the risks of fire, structural collapse, human error and electrical,
mechanical and plumbing malfunction. In addition, projects entail additional risks related to structural heights and the required use of cranes.
Our development and expansion projects also entail significant risks, including:
•
shortages of materials;
•
shortages of skilled labor or work stoppages;
•
unforeseen construction scheduling, engineering, excavation, environmental or geological problems;
•
natural disasters, hurricanes, weather interference, changes in river levels, floods, fires, earthquakes or other casualty losses or delays;
•
unanticipated cost increases or delays in completing the projects;
•
delays in obtaining or inability to obtain or maintain necessary licenses or permits;
•
changes to plans or specifications;
•
performance by contractors and subcontractors;
•
disputes with contractors;
•
disruption of our operations caused by diversion of management's attention to new development projects and construction at our
existing properties;
•
remediation of environmental contamination at some of our proposed construction sites, which may prove more difficult or expensive
than anticipated in our construction budgets;
•
failure to obtain and maintain necessary gaming regulatory approvals and licenses, or failure to obtain such approvals and licenses on
a timely basis;
•
requirements or government-established “goals” concerning union labor or requiring that a portion of the project expenditures be
through companies controlled by specific ethnic or gender groups, goals that may not be obtainable, or may only be obtainable at
additional project cost; and
•
increases in the cost of raw materials for construction, driven by worldwide demand, higher labor and construction costs and other
factors, may cause price increases beyond those anticipated in the budgets for our development projects.
Escalating construction costs may cause us to modify the design and scope of projects from those initially contemplated or cause the
budgets for those projects to be increased. We generally carry insurance to cover certain liabilities related to construction, but not all risks are
covered, and it is uncertain whether such insurance will provide sufficient payment in a timely fashion even for those risks that are insured and
material to us.
It is uncertain whether any of our projects will be completed on time or within established budgets. In May 2011, we entered into an
amendment to the guaranteed maximum price agreement for our L'Auberge Baton Rouge project, which provides that the guaranteed date of
completion for the project is May 31, 2012 and which we anticipate amending to a later date. Management currently expects L'Auberge Baton
Rouge to open by Labor Day 2012. However, the ultimate opening date is dependent upon obtaining regulatory and other governmental
approvals. Significant delays or cost overruns related to our construction projects could significantly reduce any return on our investment in
these projects and adversely affect our earnings and financial resources. There are also certain tax incentives for project construction in
hurricane-damaged areas and for economic-oriented reasons that require completion of new facilities by certain dates. There is no certainty that
such dates will be met. Construction of our development projects exposes us to risks of cost overruns due to typical construction uncertainties
associated with any project or changes in the designs, plans or concepts of such projects. For these and other reasons,
12
Table of Contents
construction costs may exceed the estimated cost of completion, notwithstanding the existence of any guaranteed maximum price construction
contracts.
We derived 52% of our revenues in 2011 from our casinos located in Louisiana and are especially subject to certain risks, including
economic and competitive risks, associated with the conditions in that area and in the states from which we draw patrons.
Three out of our seven gaming properties are located in Louisiana. During 2011, we derived 52% of our revenues from these three casinos
and 32.9% from one of them, L'Auberge Lake Charles in Lake Charles, Louisiana. In addition, we are building a casino hotel in Baton Rouge,
Louisiana. Because we derive a significant percentage of our revenues from a small number of properties concentrated in a relatively small
area, we are subject to greater risks from local conditions than a gaming company with operating properties in several different markets. A
decrease in revenues from or increase in costs for one of these locations is likely to have a proportionally higher impact on our business and
operations than it would for a gaming company with more geographically diverse operating properties. Risks from local conditions include the
following:
•
local economic conditions;
•
local competitive conditions, including legalization or expansion of gaming in Louisiana or in neighboring states, including Texas;
•
reduced land and air travel due to increasing fuel costs or transportation disruptions;
•
inaccessibility of the area due to inclement weather, road construction or closure of primary access routes;
•
the outbreak of public health threats at any of our properties, or in the areas in which they are located, or the perception that such
threats exist; and
•
a decline in the number of visitors to Lake Charles, New Orleans or Bossier City, Louisiana.
In February 2011, the LGCB granted a license for a new gaming facility in Lake Charles, which would be adjacent to our L'Auberge Lake
Charles casino. A new casino in Lake Charles would compete directly with L'Auberge Lake Charles and may reduce such property's revenues
significantly. In addition, in February 2012, the LGCB approved the construction of a new gaming facility in Bossier City, Louisiana. This new
casino will compete directly with our Boomtown Bossier City casino and may reduce such property's revenues significantly.
Some of our casinos are located on leased property. If we default on one or more leases, the applicable lessors could terminate the
affected leases and we could lose possession of the affected casino.
We lease certain parcels of land on which L'Auberge Lake Charles, River City, and Belterra Casino Resort are located. As a ground lessee,
we have the right to use the leased land; however, we do not retain fee ownership in the underlying land. Accordingly, with respect to the
leased land, we will have no interest in the land or improvements thereon at the expiration of the ground leases. Moreover, since we do not
completely control the land underlying the property, a landowner could take certain actions to disrupt our rights in the land leased under the
long-term leases which are beyond our control. If the entity owning any leased land chose to disrupt our use either permanently or for a
significant period of time, then the value of our assets could be impaired and our business and operations could be adversely affected. If we
were to default on any one or more of these leases, the applicable lessors could terminate the affected leases and we could lose possession of
the affected land and any improvements on the land, including the hotels and casinos. This would have a significant adverse effect on our
business, financial condition and results of operations as we would then be unable to operate all or portions of the affected facilities and may
result in the default under our amended and restated credit agreement.
Our operations are largely dependent on the skill and experience of our management and key personnel. The loss of management and
other key personnel could significantly harm our business, and we may not be able to effectively replace members of management who have
left the company.
Our continued success and our ability to maintain our competitive position is largely dependent upon, among other things, the efforts and
skills of our senior executives and management team. Although we have entered into employment agreements with certain of our senior
executives and key personnel, we cannot guarantee that these individuals will remain with us. If we lose the services of any members of our
management team or other key personnel, our business may be significantly impaired. We cannot assure you that we will be able to retain our
existing senior executive and management personnel or attract
13
Table of Contents
additional qualified senior executive and management personnel.
In addition, our officers, directors and key employees also are required to file applications with the gaming authorities in each of the
jurisdictions in which we operate and are required to be licensed or found suitable by these gaming authorities. If the gaming authorities were
to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with us, we would have to
sever all relationships with that person. Furthermore, the gaming authorities may require us to terminate the employment of any person who
refuses to file appropriate applications. Either result could significantly impair our operations.
Our industry is highly regulated, which makes us dependent on obtaining and maintaining gaming licenses and subjects us to
potentially significant fines and penalties.
The ownership, management and operation of gaming facilities are subject to extensive state and local regulation. The statutes, rules and
regulations of the states and local jurisdictions in which we and our subsidiaries conduct gaming operations require us to hold various licenses,
registrations, permits and approvals and to obtain findings of suitability. The various regulatory authorities, including the Indiana Gaming
Commission, the Louisiana Gaming Control Board, the Missouri Gaming Commission, the Nevada State Gaming Control Board, the Nevada
Gaming Commission, the Ohio State Racing Commission and the Ohio Lottery Commission, may, among other things, limit, condition,
suspend, revoke or fail to renew a license to conduct gaming operations or prevent us from owning the securities of any of our gaming
subsidiaries for any cause deemed reasonable by such licensing authorities. Substantial fines or forfeitures of assets for violations of gaming
laws or regulations may be levied against us, our subsidiaries and the persons involved, including, but not limited to, our management,
employees and holders of 5% or more of the Company's securities. In addition, many of the Company's key vendors must be licensed and
found suitable by regulatory authorities and there can be no assurance that such vendors will be able to be licensed and found suitable.
To date, we have obtained all governmental licenses, findings of suitability, registrations, permits and approvals necessary for the
operation of our existing gaming facilities. It is uncertain, however, whether we will be able to obtain any new licenses, registrations, permits,
approvals and findings of suitability that may be required in the future or that existing ones will be renewed or will not be suspended or
revoked. Any expansion of our gaming operations in our existing jurisdictions or into new jurisdictions may require various additional licenses,
findings of suitability, registrations, permits and approvals of the gaming authorities. The approval process can be time consuming and costly,
and there can be no assurance of success.
We are also subject to a variety of other rules and regulations, including, but not limited to, laws and regulations governing payment card
information and the serving of alcoholic beverages at our operating properties. If we are not in compliance with these laws, it could adversely
affect our business.
Potential changes in the regulatory environment could harm our business.
Changes in regulations affecting the casino business can affect our existing or proposed operations. In addition, legislators and
special-interest groups have proposed legislation from time to time that would restrict or prevent gaming operations. Moreover, various
jurisdictions such as Illinois, Delaware and New Jersey have restricted smoking on the casino floor and jurisdictions such as Missouri, Indiana
and Louisiana have considered implementing similar restrictions. Such restrictions resulted in decreases in gaming revenues. Other regulatory
restrictions or prohibitions on our current or future gaming operations could curtail our operations and could result in decreases in revenues.
We are subject to extensive governmental regulations that impose restrictions on the ownership and transfer of our securities.
We are subject to extensive governmental regulations that relate to our current or future gaming operations and that impose certain
restriction on the ownership and transfer of our securities. Ownership and transfer of our securities could be subjected at any time to additional
or more restrictive regulations, including regulation in applicable jurisdictions where there are no current restrictions on the ownership and
transfer of our securities or in new jurisdictions where we may conduct our operations in the future. A detailed description of such regulations,
including the requirements under gaming laws of the jurisdictions in which we operate, can be found in the Exhibit 99.1 to this Form 10-K and
is incorporated herein by reference.
We operate in a highly taxed industry and it may be subject to higher taxes in the future. If the jurisdictions in which we operate
increase gaming taxes and fees, our operating results could be adversely affected.
In gaming jurisdictions in which we operate, state and local governments raise considerable revenues from taxes based on
14
Table of Contents
casino revenues and operations. We also pay property taxes, admission taxes, occupancy taxes, sales and use taxes, payroll taxes, franchise
taxes and income taxes.
Our profitability depends on generating enough revenues to pay gaming taxes and other largely variable expenses, such as payroll and
marketing, as well as largely fixed expenses, such as property taxes and interest expense. From time to time, state and local governments have
increased gaming taxes and such increases can significantly impact the profitability of gaming operations.
We cannot assure you that governments in jurisdictions in which we operate, or the federal government, will not enact legislation that
increases gaming tax rates. The global economic recession has reduced the revenues of state governments from traditional tax sources, which
may cause state legislatures or the federal government to be more inclined to increase gaming tax rates.
We face many risks associated with our investment in a privately held company that is developing a complex of integrated resorts in
Vietnam, two of which are expected to include gaming operations; our involvement in Vietnam could expose us to risks associated with
violations of the Foreign Corrupt Practices Act or applicable anti-money laundering regulations, which could have a negative impact on us.
PNK Development 18, LLC, ("PNK 18"), one of our wholly owned unrestricted subsidiaries, owns 26% of Asian Coast Development
(Canada) Ltd., a British Columbia corporation ("ACDL"). Entities affiliated with Harbinger Capital Partners (collectively, “Harbinger”) are the
majority shareholders of ACDL. ACDL is the owner and developer of the Ho Tram Strip beachfront complex of destination integrated resorts
and residential developments in southern Vietnam. As a minority shareholder of ACDL, our ability to control the management, record keeping,
operations and decision-making of ACDL is limited.
ACDL is currently constructing and developing the first phase of the first integrated resort of the planned resort complex in the Ho Tram
Strip. We cannot predict whether construction will progress as scheduled or as budgeted, or if additional monies will be needed. ACDL also
needs to obtain a working capital credit facility for such first phase. ACDL has obtained funding solely for the first phase of the first integrated
resort. ACDL is relying on various agreements with both Vietnamese financial institutions and Harbinger (collectively, the “ACDL Lenders”)
to provide funding for construction of the first phase of the first integrated resort, which will require ACDL to comply with certain covenants
and conditions. ACDL's ability to comply with the conditions and covenants contained in the credit agreement may be affected by general
economic conditions, industry conditions, and other events beyond the control of ACDL. As a result, we cannot assure you that ACDL will be
able to comply with these covenants. In addition, there can be no assurance that the ACDL Lenders will continue to have the financial capacity
to comply with such obligations to fund their respective obligations. In the event that the ACDL Lenders do not fund their financial obligations,
there can be no assurance that ACDL will be able to replace the ACDL Lenders in a timely manner, or at all, or on terms that are acceptable to
ACDL and its shareholders.
In the future, we expect ACDL will need to obtain funding for subsequent phases of the planned resort complex. There can be no assurance
that ACDL will be able to obtain this funding or funds in a timely manner, or on acceptable terms, or at all, particularly if the current debt
market environment does not improve.
If ACDL is unable to build the resort complex as planned, it will have a negative impact on our ownership stake in ACDL. There can be no
assurance that the second integrated resort of the Ho Tram Strip, of which we would have the right to manage, will be developed. Further, the
resorts in the Ho Tram Strip will be new developments with no history of operations. We cannot assure you that ACDL will be able to attract a
sufficient number of hotel guests, gaming customers and other visitors to the Ho Tram Strip to make its operations profitable.
ACDL's operations will be subject to the significant business, economic, regulatory and competitive uncertainties and contingencies
frequently encountered by new businesses in new gaming jurisdictions and other risks associated with this investment, many of which are
beyond ACDL's or our control. The gaming elements of the businesses will be subject to regulation by the government of Vietnam and
uncertainty exists as to how such regulation will affect ACDL's gaming operations. Because ACDL has no operating history, it may be more
difficult for ACDL to prepare for and respond to these types of risks than for a company with an established business and operating cash flow.
If ACDL is not able to manage these risks successfully, it could negatively impact our investment. These and other risks could result in the
failure to recover our investment in ACDL or to realize any gains in respect thereof.
ACDL will have operations outside the United States, which will expose us to complex foreign and U.S. regulations inherent in doing
business in Vietnam. We are subject to regulations imposed by the Foreign Corrupt Practices Act, (the
15
Table of Contents
"FCPA"), and other anti-corruption laws that generally prohibit U.S. companies and their intermediaries from offering, promising, authorizing
or making improper payments to foreign government officials for the purpose of obtaining or retaining business. Violations of the FCPA and
other anti-corruption laws may result in severe criminal and civil sanctions as well as other penalties. The SEC and U.S. Department of Justice
have increased their enforcement activities with respect to the FCPA.
Internal control policies and procedures and the compliance program that ACDL has implemented to deter prohibited practices may not be
effective in prohibiting its employees, contractors or agents from violating or circumventing our policies and the law. Even though our
investment in ACDL is through an unrestricted subsidiary, if ACDL's or our employees or agents fail to comply with applicable laws or
company policies governing ACDL's international operations, we and our subsidiaries may face investigations, prosecutions and other legal
and regulatory proceedings and actions which could result in civil penalties, administrative remedies and criminal sanctions which could, in
turn, serve as the basis for the initiation of like proceedings by gaming regulators in one or more of the states wherein we and our subsidiaries
hold gaming licenses. Any determination that we have violated the FCPA could have a material adverse effect on our financial condition and
on the gaming licenses and approvals held by us and our subsidiaries. Compliance with international and U.S. laws and regulations that apply
to ACDL's international operations increases the cost of doing business in foreign jurisdictions. ACDL will also deal with significant amounts
of cash in its operations and we will be subject to various reporting and anti-money laundering regulations. Any violation of anti-money
laundering laws or regulations by ACDL could have a negative effect on our results of operations.
Adverse weather conditions, road construction, gasoline shortages and other factors affecting our facilities and the areas in which we
operate could make it more difficult for potential customers to travel to our properties and deter customers from visiting our properties.
We believe that the vast majority of our customers drive to our properties. Our continued success depends upon our ability to draw
customers from each of the geographic markets in which we operate. Adverse weather conditions or road construction can deter our customers
from traveling to our facilities or make it difficult for them to frequent our properties. In addition, gasoline shortages or fuel price increases in
regions that constitute a significant source of customers for our properties could make it more difficult for potential customers to travel to our
properties and deter customers from visiting. Our dockside gaming facilities in Indiana and Louisiana, as well as any additional riverboat or
dockside casino properties that might be developed or acquired, are also subject to risks, in addition to those associated with land-based
casinos, which could disrupt our operations. Although none of our vessels leave their moorings in normal operations, there are risks associated
with the movement or mooring of vessels on waterways, including risks of casualty due to river turbulence, flooding, collisions with other
vessels and severe weather conditions.
Our results of operations and financial condition could be materially adversely affected by the occurrence of natural disasters, such as
hurricanes, or other catastrophic events, including war and terrorism.
Natural disasters, such as major hurricanes, typhoons, floods, fires and earthquakes, could adversely affect our business and operating
results. Hurricanes are common in the areas in which our Louisiana properties are located, and the severity of such natural disasters is
unpredictable. Our Lumière Place and River City facilities are located near the Madrid Fault Line and are subject to earthquakes. In addition,
our River City casino is located in St. Louis, Missouri in an area along the Mississippi River that has historically experienced flooding.
Although its foundation is built up to be above historical flooding levels, there is no certainty that this will be sufficient in future floods. In
2005, Hurricanes Katrina and Rita caused significant damage in the Gulf Coast region. Hurricane Katrina destroyed our former Biloxi,
Mississippi facility. Our Boomtown New Orleans casino was forced to close for 34 days as a result of Hurricane Katrina. Hurricane Rita caused
significant damage in the Lake Charles, Louisiana area and forced our L'Auberge Lake Charles facility to close for 16 days, in addition to
causing physical damage. In the third quarter of 2008, Hurricanes Gustav and Ike, which struck during two key weekends, affected our
Louisiana operations and our Texas customer base. Hurricane Ike also caused flooding in St. Louis, necessitating the temporary closure of the
President Casino, and caused a power outage over the course of two days at our Belterra Casino Resort in Indiana. In March 2011, our River
Downs racetrack was forced to delay the opening of live racing due to flooding from the Ohio River. In addition, the Ho Tram Strip project is
located on the coast of the Eastern Sea and in a location where natural disasters are unpredictable including typhoons.
Catastrophic events, such as terrorist and war activities in the United States and elsewhere, have had a negative effect on travel and leisure
expenditures, including lodging, gaming (in some jurisdictions) and tourism. We cannot accurately predict the extent to which such events may
affect us, directly or indirectly, in the future. We also cannot assure you that we will be able to obtain or choose to purchase any insurance
coverage with respect to occurrences of terrorist acts and any losses that could result from these acts. If there is a prolonged disruption at our
properties due to natural disasters, terrorist attacks or other catastrophic events, our results of operations and financial condition would be
materially adversely affected.
16
Table of Contents
Natural disasters have made it more challenging for us to obtain similar levels of Weather Catastrophe Occurrence/Named Windstorm,
Flood and Earthquake insurance coverage for our properties compared to the levels before the 2005 hurricanes.
Because of significant loss experience caused by hurricanes and other natural disasters over the last several years, a number of insurance
companies have stopped writing insurance in Class 1 hurricane areas, including Louisiana. Others have significantly limited the amount of
coverage they will write in these markets and have dramatically increased the premiums charged for this coverage. As a result, our policy limits
for Weather Catastrophe Occurrences/Named Windstorms, as well as other losses, are significantly less than the policy limits we had during the
2005 hurricane season. During that period, our aggregate Weather Catastrophe Occurrence coverage was $400 million per occurrence. Our
coverage for a Named Windstorm today is $200 million per occurrence, with a deductible of 5% of stated values (up to a maximum $20 million
deductible). In addition, as a result of the worldwide economic conditions, there has been uncertainty as to the viability of certain insurance
companies. While we believe that the insurance companies from which we have purchased insurance policies will remain solvent, there is no
certainty that this will be the case.
We may incur property and other losses that are not adequately covered by insurance, which may harm our results of operations.
Although we maintain insurance that our management believes is customary and appropriate for our business, we cannot assure you that
insurance will be available or adequate to cover all loss and damage to which our business or our assets might be subjected. The lack of
adequate insurance for certain types or levels of risk could expose us to significant losses in the event that a catastrophe occurred for which we
are uninsured or underinsured. Any losses we incur that are not adequately covered by insurance may decrease our future operating income,
require us to find replacements or repairs for destroyed property and reduce the funds available for payments of our obligations.
Our gaming operations rely heavily on technology services and an uninterrupted supply of electrical power. Our security systems and
all of our slot machines are controlled by computers and reliant on electrical power to operate.
The absence of sufficient electrical power or a failure of the technology services needed to run our computers may cause us to be unable to
run all or parts of gaming operations. Any unscheduled interruption in our technology services or interruption in the supply of electrical power
is likely to result in an immediate, and possibly substantial, loss of revenues due to a shutdown of our gaming operations, cloud computing and
lottery systems for River Downs, in the event video lottery terminals becoming operational at River Downs. Such interruptions may occur as a
result of, for example, catastrophic events or rolling blackouts. Our systems are also vulnerable to damage or interruption from earthquakes,
floods, fires, telecommunication failures, terrorist attacks, computer viruses, computer denial-of-service attacks and similar events.
Climate change, climate change regulations and greenhouse effects may adversely impact our operations and markets.
There is a growing political and scientific consensus that emission of greenhouse gases, also referred to herein as “GHGs” continue to alter
the composition of the global atmosphere in ways that are affecting and are expected to continue affecting the global climate. Climate change,
including the impact of global warming, creates physical and financial risk. Physical risks from climate change include an increase in sea level
and changes in weather conditions, such as an increase in changes in precipitation and extreme weather events. Climate change could have a
material adverse effect on our results of operations, financial condition, and liquidity. We have described the risks to us associated with
extreme weather events in the risk factors above.
We may become subject to legislation and regulation regarding climate change, and compliance with any new rules could be difficult and
costly. Concerned parties, such as legislators and regulators, stockholders and non-governmental organizations, as well as companies in many
business sectors, are considering ways to reduce GHG emissions. Many states have announced or adopted programs to stabilize and reduce
GHG emissions and in the past federal legislation have been proposed in Congress. If such legislation is enacted, we could incur increased
energy, environmental and other costs and capital expenditures to comply with the limitations. Unless and until legislation is enacted and its
terms are known, we cannot reasonably or reliably estimate its impact on our financial condition, operating performance or ability to compete.
Further, regulation of GHG emissions may limit our customers' ability to travel to our properties as a result of increased fuel costs or
restrictions on transport related emissions.
We could face increased costs related to defending and resolving legal claims and other litigation related to climate change and the alleged
impact of our operations on climate change.
17
Table of Contents
Work stoppages, organizing drives and other labor problems could negatively impact our future profits.
We are currently a party to two collective bargaining agreements at our River Downs facility. We are currently negotiating two collective
bargaining agreements with certain employees of Lumière Place Casino and Hotels that are union-represented. In addition, other unions have
approached our employees. A lengthy strike or other work stoppages at any of our casino properties or construction projects could have an
adverse effect on our business and results of operations. Labor unions are making a concerted effort to recruit more employees in the gaming
industry. In addition, organized labor may benefit from new legislation or legal interpretations by the current presidential administration. We
cannot provide any assurance that we will not experience additional and more aggressive union activity in the future.
We are subject to litigation which, if adversely determined, could cause us to incur substantial losses.
From time to time during the normal course of operating our businesses, we are subject to various litigation claims and legal disputes.
Some of the litigation claims may not be covered under our insurance policies, or our insurance carriers may seek to deny coverage. As a result,
we might also be required to incur significant legal fees, which may have a material adverse effect on our financial position. In addition,
because we cannot accurately predict the outcome of any action, it is possible that, as a result of current and/or future litigation, we will be
subject to adverse judgments or settlements that could significantly reduce our earnings or result in losses.
We face environmental and archaeological regulation of our real estate.
Our business is subject to a variety of federal, state and local governmental statutes and regulations relating to activities or operations that
may have adverse environmental effects, such as discharges to air and water and use, storage, discharge, emission and disposal of hazardous
materials and concentrated animal feeding operations. These laws and regulations are complex, and subject to change, and failure to comply
with such laws could result in the imposition of severe penalties or restrictions on our operations by government agencies or courts of law or
the incurrence of significant costs of remediation of spills, disposals or other releases of hazardous or toxic substances or wastes. Under certain
of these laws and regulations, a current or previous owner or operator of property may be liable for the costs of remediating contamination on
its property, without regard to whether the owner or operator knew of, or caused, the presence of the contaminants, and regardless of whether
the practices that resulted in the contamination were legal at the time that they occurred. We endeavor to maintain compliance with
environmental laws, but from time to time, current or historical operations on, or adjacent to, our property may have resulted or may result in
noncompliance with environmental laws or liability for cleanup pursuant to environmental laws. A material fine or penalty, severe operational
or development restriction, or imposition of material remediation costs could adversely affect our business. In addition, the locations of our
current or future developments may coincide with sites containing archaeologically significant artifacts, such as Native American remains and
artifacts. Federal, state and local governmental regulations relating to the protection of such sites may require us to modify, delay or cancel
construction projects at significant cost to us.
Our reputation and business may be harmed from cyber security risk and we may be subject to legal claims if there is loss, disclosure or
misappropriation of or access to our customers' or our business partners' or our own information or other breaches of our information
security.
We make extensive use of online services and centralized data processing, including through third party service providers. The secure
maintenance and transmission of customer information is a critical element of our operations. Our information technology and other systems
that maintain and transmit customer information, or those of service providers, business partners, or employee information may be
compromised by a malicious third party penetration of our network security, or that of a third party service provider or business partner, or
impacted by advertent or inadvertent actions or inactions by our employees, or those of a third party service provider or business partner. As a
result, our customers' information may be lost, disclosed, accessed or taken without our customers' consent.
In addition, Pinnacle, third party service providers and other business partners process and maintain proprietary business information and
data related to our business−to−business customers, suppliers and other business partners. Our information technology and other systems that
maintain and transmit this information, or those of service providers or business partners, may also be compromised by a malicious third party
penetration of our network security or that of a third party service provider or business partner, or impacted by advertent or inadvertent actions
or inactions by our employees or those of a third party service provider or business partner. As a result, our business information, customer,
supplier, and other business partner data may be lost, disclosed, accessed or taken without their consent.
Any such loss, disclosure or misappropriation of, or access to, customers' or business partners' information or other breach
18
Table of Contents
of our information security can result in legal claims or legal proceedings, including regulatory investigations and actions, may have a serious
impact on our reputation and may adversely affect our businesses, operating results and financial condition. Furthermore, the loss, disclosure or
misappropriation of our business information may adversely affect our businesses, operating results and financial condition.
We face risks associated with growth and acquisitions.
We regularly evaluate opportunities for growth through development of gaming operations in existing or new markets, through acquiring
other gaming entertainment facilities or through redeveloping our existing facilities. The expansion of our operations, whether through
acquisitions, development or internal growth, could divert management's attention and could also cause us to incur substantial costs, including
legal, professional and consulting fees. It is uncertain that we will be able to identify, acquire, develop or profitably manage additional
companies or operations or successfully integrate such companies or operations into our existing operations without substantial costs, delays or
other problems. Additionally, it is uncertain that we will receive gaming or other necessary licenses or governmental approvals for our new
projects or in jurisdictions that we have not operated in the past or that gaming will be approved in jurisdictions where it is not currently
approved. Further, we may not have adequate financing for such opportunities on acceptable terms.
For example, on January 28, 2011, we acquired the River Downs racetrack in Cincinnati, Ohio for approximately $45.2 million with the
expectation that video lottery terminals will become operational in Ohio. Before our acquisition of the River Downs racetrack, it had been
operating at a loss and may continue doing so in the future. If the video lottery terminals do not become operational in Ohio, we will likely
incur further losses in connection with the River Downs racetrack. In addition, in 2011 we acquired 26% equity interest in ACDL, as noted
above this investment introduced new risks to our company. As we enter into new acquisitions or new investments, we may add additional risks
to our business.
The market price for our common stock may be volatile, and you may not be able to sell our stock at a favorable price or at all.
Many factors could cause the market price of our common stock to rise and fall, including:
•
actual or anticipated variations in our quarterly results of operations;
•
changes in market valuations of companies in our industry;
•
changes in expectations of future financial performance;
•
fluctuations in stock market prices and volumes;
•
issuances of common stock or other securities in the future;
•
the addition or departure of key personnel; and
•
announcements by us or our competitors of acquisitions, investments, dispositions, joint ventures or other significant business
decisions.
In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or
disproportionate to companies' operating performance. Broad market and industry factors may materially harm the market price of our common
stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company's securities,
shareholder derivative lawsuits and/or securities class action litigation has often been instituted against that company. Such litigation, if
instituted against us, could result in substantial costs and a diversion of management's attention and resources.
19
Table of Contents
Private Securities Litigation Reform Act
The Private Securities Litigation Reform Act of 1995 (the “Act”) provides certain “safe harbor” provisions for forward-looking statements.
Except for the historical information contained herein, the matters addressed in this Annual Report on Form 10-K, as well as in other reports
filed with or furnished to the SEC or statements made by us, may constitute “forward-looking statements” within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. From time to time, we may
provide oral or written forward-looking statements in our other periodic reports on Form 10-Q, Form 8-K, press releases and other materials
released to the public. All forward-looking statements made in this Annual Report on Form 10-K and any documents we incorporate by
reference are made pursuant to the Act. Words such as, but not limited to, “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,”
“could,” “may,” “will,” “should,” and similar expressions are intended to identify forward-looking statements. Such forward-looking
statements, which may include, without limitation, statements regarding expected results of operations and future operating performance and
future growth, adequacy of resources to fund development and expansion projects, liquidity, financing options, including the state of the capital
markets and our ability to access the capital markets, the state of the credit markets, the state of the economy, anticipated completion and
opening schedule of our Baton Rouge project, anticipated results for our Baton Rouge project, expansion plans and construction schedules of
the Company's various projects, the facilities, features and amenities of the Company's projects, the possibility of video lottery terminals
becoming operational at Ohio racetracks, the ability of the Company to develop a new gaming and entertainment facility at River Downs, the
ability to sell or otherwise dispose of discontinued operations, the projected opening date for MGM Grand Ho Tram, our investment in ACDL,
cash needs, cash reserves, operating and capital expenses, expense reductions, the sufficiency of insurance coverage, anticipated marketing
costs at various projects, the ability to successfully implement marketing and branding programs, the future outlook of Pinnacle and the gaming
industry and pending regulatory and legal matters, are all subject to a variety of risks and uncertainties that could cause actual results to differ
materially from those anticipated by us. This can occur as a result of inaccurate assumptions or as a consequence of known or unknown risks
and uncertainties. Factors that may cause our actual performance to differ materially from that contemplated by such forward-looking
statements include, among others, the various risk factors discussed above, in addition to general domestic and international economic and
political conditions as well as market conditions in our industry. For more information on the potential factors that could affect our operating
results and financial condition in addition to the risk factors described above, review our other filings (other than any portion of such filings
that are furnished under applicable SEC Rules rather than filed) with the SEC.
All forward-looking statements included in this Annual Report on Form 10-K are made only as of the date of this Form 10-K. We
undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
Item 1B. Unresolved Staff Comments
None.
20
Table of Contents
Item 2.
Properties
The following table provides a brief description of our properties as of December 31, 2011 . We view each property as an operating
segment, with the exception of our properties located in St. Louis, Missouri, which are aggregated into the “St. Louis” reporting segment. See
Item 1 of this Form 10-K for a further description of our properties, and see Note 13 to our audited Consolidated Financial Statements for more
information regarding our segment information.
Approximate Number of
Locations
Type of Casino
Operating Properties:
L’Auberge Lake Charles, LA
Boat-in-moat
Lumière Place, MO
Boat-in-moat
River City, MO
Boomtown New Orleans, LA
Belterra Casino Resort, IN
Boat-in-moat
Dockside
Dockside
Boomtown Bossier City, LA
River Downs, OH
Dockside
Racetrack
facility
Principal Markets
Houston, Beaumont, San
Antonio, Austin, Southwest
Louisiana and local patrons
Local patrons, Kansas City
and Chicago
Local patrons
Local patrons
Cincinnati, Louisville,
Northern Kentucky and local
patrons
Local patrons
Cincinnati, Ohio
New Properties Under Construction and/or Development:
Local patrons and regional
L'Auberge Baton Rouge, LA
Dockside
tourists
Slot
Machines
Table
Games
Guest
rooms
1,587
74
995
1,940
68
494
2,010
1,415
1,475
59
40
55
—
—
608
1,014
—
25
—
187
—
9,441
321
2,284
1,450
57
206
The following describes the real estate and leases associated with our properties:
L’Auberge Lake Charles: We lease 227 acres from the Lake Charles Harbor and Terminal District upon which our L’Auberge Lake
Charles casino-hotel resort is located. The lease has an initial term of 10 years, which commenced in May 2005, with six renewal options of
10 years each. The annual base rent for the lease is approximately $955,000 per year, which amount adjusts annually for changes in the
consumer price index. We own the facilities and associated improvements at the property, including the casino facility.
Lumière Place: We own approximately 16 acres of contiguous land in St. Louis for the Lumière Place complex. We own all of the
improvements and facilities at the property, including the casino, hotels and various amenities.
River City: We lease 56 acres in south St. Louis County located approximately 12 miles south of downtown St. Louis, where we have built
our River City casino. We built an approximately one-mile-long, four-lane public road to connect River City to the nearby interstate highway.
The lease has a term of 99 years, which commenced in September 2005. The annual rent for the lease is the greater of $4.0 million or 2.5% of
annual adjusted gross receipts, as defined in the lease agreement.
Boomtown New Orleans: We own approximately 54 acres in Harvey, Louisiana that are utilized by Boomtown New Orleans. We also own
the facilities and associated improvements at the property, including the dockside riverboat casino.
Belterra Casino Resort: We lease approximately 148 acres of the 315 acres that our Belterra Casino Resort occupies in southern Indiana.
The current lease term is through September 2015 and has seven remaining consecutive five-year automatic renewal periods. The lease
currently provides for minimum annual rental payments of approximately $1.4 million, plus 1.5% of gross gaming win (as defined in the lease
agreement) in excess of $100 million. We also have the option to purchase the land on or after October 2020 for $30 million, subject to
adjustments as defined in the lease agreement. In addition, we own the facilities and associated improvements at the property, including the
dockside riverboat casino. We also own a 54-guestroom hotel on six acres approximately 10 miles from Belterra.
Boomtown Bossier City : We own 23 acres on the banks of the Red River in Bossier City, Louisiana. We also own the facilities and
associated improvements at the property, including the dockside riverboat casino. We lease approximately one
21
Table of Contents
acre of water bottoms from the State of Louisiana. The current lease term expires in September 2016. We have options to extend the lease for
seven additional five-year periods.
L'Auberge Baton Rouge: We own approximately 575 acres of land located approximately 10 miles south of downtown Baton Rouge,
Louisiana, on which we are currently developing a casino-hotel.
Boomtown Reno : We own approximately 890 acres in Reno, Nevada, approximately 60 acres of which are utilized by the casino, hotel and
other amenities and another 490 acres most of which is developable. The remaining 340 acres is remote and difficult to develop. We own all of
the improvements and facilities at the property, including the casino, hotel, recreational vehicle park and service station, along with substantial
related water and development rights. In November 2011, we entered into a definitive agreement to sell our Boomtown Reno resort, with an
option granted to the buyer to purchase 100% of our membership interest in PNK (Reno), LLC and additional land adjacent to Boomtown
Reno. We will operate Boomtown Reno until the transaction closes, which is expected to be in 2012. We are currently marketing all remaining
excess land not used in our operations as for sale and have included the land in assets held for sale.
Atlantic City, New Jersey: We own approximately 19 contiguous acres of land in the heart of the Boardwalk in Atlantic City, New Jersey.
We have demolished the former casino-hotel, as well as certain other structures on the site. We are currently marketing this property as
for-sale. We have included in discontinued operations, and the related assets and liabilities as held for sale.
Central City, Colorado: We own approximately one and one-half acres of gaming-zoned land in Central City, Colorado.
River Downs: In January 2011, we completed the purchase of the River Downs racetrack, which includes approximately 160 acres in
southeast Cincinnati, 40 of which are currently undeveloped. We also own all of the improvements and facilities on the property.
Virtually all of our real property interests collateralize our obligations under our amended and restated credit facility, except for the real
estate owned in Atlantic City.
Item 3.
Legal Proceedings
We are a party to a number of other pending legal proceedings. Management does not expect that the outcome of such proceedings,
either individually or in the aggregate, will have a material effect on our financial position, cash flows or results of operations.
Item 4.
Mine Safety Disclosures
Not applicable.
22
Table of Contents
PART II
Item 5.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is quoted on the New York Stock Exchange under the symbol “PNK”. The table below sets forth the high and low sales
prices of our common stock as reported on the New York Stock Exchange:
Price Range
High
Low
2011
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2010
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
$
12.43
15.50
15.08
15.57
$
8.06
9.03
12.46
11.81
$
14.25
11.58
14.57
10.04
$
11.01
8.59
9.38
7.08
As of February 24, 2012 , there were 2,148 stockholders of record of our common stock.
Dividends: We did not pay any dividends in 2011 or 2010 . Our indentures governing our 8.625% senior notes due 2017, 8.75% senior
subordinated notes due 2020, and 7.50% senior subordinated notes due 2015 and our credit facility limit the amount of dividends that we are
permitted to pay. We do not anticipate paying any cash dividends on our common stock in the foreseeable future, as our financial resources are
being reinvested into the expansion of our business.
Share Repurchase: During the fourth quarter ended December 31, 2011 , we did not make any purchases of the Company’s equity
securities.
Sales of Unregistered Equity Securities: During the years ended December 31, 2011 , 2010 and 2009, we did not issue or sell any
unregistered equity securities other than as previously disclosed in our Current Report on Form 8-K filed on March 18, 2010 with the SEC.
23
Table of Contents
Stock Performance Graph
The stock performance graph and related information presented below is not deemed to be “soliciting material” or to be “filed” with the
Securities and Exchange Commission or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 (the "Exchange Act") or
to the liabilities of Section 18 of the Exchange Act, and will not be deemed to be incorporated by reference into any filing under the Securities
Act of 1933 or the Exchange Act, except to the extent we specifically incorporate it by reference into such a filing.
Set forth below is a graph comparing the cumulative total stockholder return for Pinnacle’s common stock with the cumulative total returns
for the New York Stock Exchange Composite Index (the “NYSE Composite Index”) and the Dow Jones US Gambling Index. The total
cumulative return calculations are for the period commencing December 31, 2006 and ending December 31, 2011 , and include the
reinvestment of dividends. The stock price performance shown in this graph is neither necessarily indicative of, nor intended to suggest, future
stock price performance.
12/31/2006
12/31/2007
12/31/2008
12/31/2009
12/31/2010
12/31/2011
Pinnacle Entertainment,
Inc.
$
100.00
$
71.09
$
23.17
$
27.10
$
42.31
$
30.66
NYSE Composite Index
$
100.00
$
108.87
$
66.13
$
84.83
$
96.19
$
92.50
Dow Jones US Gambling
Index
$
100.00
$
114.80
$
30.87
$
48.08
$
83.23
$
77.37
_____________________
•
Assumes $100 invested on December 31, 2006 in Pinnacle’s common stock, the NYSE Composite Index and the Dow Jones US
Gambling Index. Total return assumes reinvestment of dividends. Values are as of December 31st of each year.
24
Table of Contents
Item 6.
Selected Financial Data
The following selected financial information for the years 2007 through 2011 was derived from our audited Consolidated Financial
Statements. The information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” the audited Consolidated Financial Statements and related notes thereto.
For the year ended December 31,
2010(b)
2009(c)
2008(d)
(in millions, except per share data)
2011(a)
Results of Operations:
Revenues
Operating income (loss)
Income (loss) from continuing operations, net of
income taxes
Income (loss) from discontinued operations, net
of income taxes
Income (loss) from continuing operations per
common share:
Basic
Diluted
Other Data:
Capital expenditures
Ratio of Earnings to Fixed Charges (f)
Cash flows provided by (used in):
Operating activities
Investing activities
Financing activities
Balance Sheet Data—December 31:
Cash, restricted cash and equivalents
Total assets
Long-term debt
Stockholders’ equity
$
1,141.2
128.6
$
1,058.6
52.2
$
948.6
3.4
$
933.1
(74.1)
2007(e)
$
759.2
28.5
30.2
(40.8 )
(63.1 )
(205.9)
7.0
(32.7 )
17.4
(195.3 )
(116.7)
(8.4)
$
$
0.49
0.48
$
$
(0.67 )
(0.67 )
$
$
(1.05 )
(1.05 )
$
$
(3.43 )
(3.43 )
$
$
0.12
0.12
$
153.5
1.2x
$
157.5
—
$
226.4
—
$
306.1
—
$
545.6
—
$
131.8
(293.4 )
46.5
$
88.7
(130.7 )
108.2
$
120.2
(202.4 )
96.6
$
129.3
(306.1)
101.9
$
153.4
(566.2)
414.6
$
85.0
1,950.6
1,223.9
519.4
$
201.4
1,883.8
1,176.6
507.4
$
130.6
1,843.9
1,063.3
494.4
$
116.3
1,919.2
939.0
739.4
$
178.0
2,193.5
836.6
1,052.4
(a)
The financial results for 2011 include a full year of operations at River City Casino, and the purchase of River Downs racetrack
for approximately $45.2 million in January 2011, as well as our $95.0 million investment in ACDL in August 2011, which results
have been included from the time of close. The purchase price of these entities has been excluded from the capital expenditures
shown for 2011.
(b)
The financial results for 2010 reflect impairment charges totaling $35.5 million related to indefinite-lived intangible assets, land
and development costs and buildings and equipment. In addition, the 2010 results reflect the March 2010 opening of River City
Casino and income from discontinued operations related to the recovery of insurance proceeds from our former Casino Magic
Biloxi property.
(c)
The financial results for 2009 reflect impairment charges totaling $207 million related to indefinite-lived intangible assets, real
estate, buildings and equipment and previously capitalized costs associated with certain development projects.
(d)
The financial results for 2008 included a full year of operations at Lumière Place and also reflect impairment charges totaling
$318 million related to goodwill, indefinite-lived intangible assets, undeveloped real estate and previously capitalized costs
associated with certain development projects. Income from discontinued operations reflects a gain of $54.9 million, net of income
taxes, related to insurance proceeds received related to our former Casino Magic Biloxi operations.
25
Table of Contents
(e)
The financial results for 2007 include the opening of the casino at Lumière Place in mid-December 2007 and a majority of
L’Auberge Lake Charles’s new 252 guestrooms in late December 2007.
(f)
In computing the ratio of earnings to fixed charges: (x) earnings were the income from continuing operations before income taxes
and fixed charges, excluding capitalized interest; and (y) fixed charges were the sum of interest expense, amortization of debt
issuance costs, capitalized interest and the estimated interest component included in rental expense. Due principally to our large
non-cash charges deducted to compute such earnings, earnings so calculated were less than fixed charges by $56.5 million,
$77.1 million, $178.3 million and $12.0 million for the fiscal years ended December 31, 2010, 2009, 2008 and 2007,
respectively.
26
Table of Contents
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of financial condition, results of operations, liquidity and capital resources should be read in
conjunction with, and is qualified in its entirety by, our audited Consolidated Financial Statements and the notes thereto, included in this
Annual Report on Form 10-K, and other filings with the Securities and Exchange Commission.
EXECUTIVE OVERVIEW
Pinnacle Entertainment, Inc. is an owner, operator and developer of casinos and related hospitality and entertainment facilities. We operate
L'Auberge Lake Charles in Lake Charles, Louisiana; River City Casino and Lumière Place in St. Louis, Missouri; Boomtown New Orleans in
New Orleans, Louisiana; Belterra Casino Resort in Vevay, Indiana; and Boomtown Bossier City in Bossier City, Louisiana. In addition, we
own and operate a racetrack facility, River Downs, in Cincinnati, Ohio, which was purchased in January 2011. Our Boomtown Reno property
is considered held for sale and the related results of operations have been reclassified as discontinued operations.
We are also developing L'Auberge Baton Rouge in Baton Rouge, Louisiana, which we expect will open by Labor Day 2012. During
construction, we experienced high volatility of the Mississippi River's water levels in Baton Rouge. In 2011, unusually low river levels
prevented construction progress on the wet side of the flood levee. Subsequently, unusually high river levels delayed construction progress on
the hotel on the dry side of the levee until the river level receded. During the third quarter, we fully resumed construction of the foundations for
the hotel and continue to make progress towards our opening schedule. However, the ultimate opening date is dependent upon the progress of
construction and obtaining regulatory approvals, among other factors.
In 2011, we acquired a 26% equity interest in Asian Coast Development (Canada) Ltd, a British Columbia corporation (“ACDL”), for a
total purchase price of $95 million. ACDL is the owner and operator of the Ho Tram Strip beachfront complex of integrated resorts and
residential developments in southern Vietnam. We also have a management agreement to manage the second integrated resort at the Ho Tram
Strip through the year 2058, with a potential 20-year extension.
We operate casino properties, all of which include gaming and dining facilities, and some of which include hotel, retail and other
amenities. In addition, we operate one racetrack. Our operating results are highly dependent on the volume of customers at our properties,
which, in turn, affects the price we can charge for our hotel rooms and other amenities. While we do provide casino credit in several gaming
jurisdictions, most of our revenue is cash-based, with customers wagering with cash or paying for non-gaming services with cash or credit
cards. Our properties generate significant operating cash flow. Our industry is capital-intensive, and we rely on the ability of our properties to
generate operating cash flow to pay interest, repay debt costs and fund maintenance capital expenditures.
Our mission is to increase stockholder value. We seek to increase revenues through enhancing the guest experience by providing them with
their favorite games, restaurants, hotel accommodations, entertainment and other amenities in attractive surroundings with high-quality guest
service and guest rewards programs. We seek to improve margins by focusing on operational excellence and efficiency while meeting our
guests' expectations of value. Our long-term strategy includes disciplined capital expenditures to improve and maintain our existing properties,
while growing the number and quality of our facilities by pursuing gaming entertainment opportunities we can improve or develop. We intend
to diversify our guest demographics and revenue sources by growing our portfolio of operating properties both domestic and foreign, while
remaining gaming and entertainment centric. We intend to implement these strategies either alone or with third parties when we believe it
benefits our stockholders to do so. In making decisions, we consider our stockholders, guests, team members and other constituents in the
communities in which we operate.
27
Table of Contents
RESULTS OF OPERATIONS
The following table highlights our results of operations for the three years ended December 31, 2011 , 2010 and 2009 . As discussed in
Note 13 to our Consolidated Financial Statements, we report segment operating results based on revenues and Adjusted EBITDA. Such
segment reporting is on a basis consistent with how we measure our business and allocate resources internally. See Note 13 to our Consolidated
Financial Statements for more information regarding our segment information and a reconciliation of Consolidated Adjusted EBITDA (defined
below) to income (loss) from continuing operations in accordance with U.S. GAAP.
For the year ended December 31,
2011
2010
2009
(in millions)
Revenues:
L’Auberge Lake Charles
St. Louis (a)
Boomtown New Orleans
Belterra Casino Resort
Boomtown Bossier City
River Downs
Other
Total revenues
$
Operating income
Adjusted EBITDA (b):
L’Auberge Lake Charles
St. Louis (a)
Boomtown New Orleans
Belterra Casino Resort
Boomtown Bossier City
River Downs
$
$
375.4
382.0
133.6
154.8
85.0
10.3
0.1
1,141.2
$
$
Corporate expenses
$
Consolidated Adjusted EBITDA (b)
Other income (expense):
Depreciation and amortization
Pre-opening and development costs
Non-cash share-based compensation
Impairment of indefinite-lived intangible assets
Impairment of land and development costs
Impairment of buildings, riverboats and equipment
Write-downs, reserves and recoveries, net
Interest expense, net of capitalized interest
Gain on sale of equity securities
Loss from equity method investment
Loss on early extinguishment of debt
Other non-operating income
Income tax benefit (expense)
$
$
Income (loss) from continuing operations
28
$
$
342.0
337.1
139.1
152.1
87.9
—
0.4
1,058.6
$
339.0
219.0
137.7
161.9
90.9
—
0.1
948.6
128.6
$
52.2
$
3.4
103.9
86.5
44.9
28.6
18.8
(2.2)
280.5
(28.4)
252.1
$
92.9
62.3
43.9
30.0
20.2
—
249.3
(35.7)
213.6
$
79.2
42.0
37.6
26.5
19.2
—
204.5
(41.3 )
163.2
(103.9 )
(8.8)
(6.6)
—
—
—
(4.2)
(95.7)
—
(0.6)
(0.2)
0.4
(2.3)
30.2
$
(109.7 )
(13.6)
(6.1)
(11.5)
(23.7)
(0.4)
3.7
(103.1)
—
—
(1.9)
0.2
11.7
(40.8 )
$
$
$
$
$
(95.4 )
(16.6 )
(13.5 )
—
(24.1 )
(9.1 )
(1.2 )
(70.3 )
12.9
—
(9.5 )
0.2
0.3
(63.1 )
Table of Contents
(a) Our St. Louis segment consists of Lumière Place (which includes the Lumière Place Casino, the Pinnacle-owned Four Seasons Hotel
St. Louis and HoteLumière) and River City.
(b) We define Consolidated Adjusted EBITDA as earnings before depreciation, amortization, pre-opening and development expenses,
non-cash share-based compensation, asset impairment costs, write-downs, reserves, recoveries, gain (loss) on sale of certain assets,
interest income and expense, income (loss) from equity method investments, loss on early extinguishment of debt, loss on sale of
discontinued operations, discontinued operations and income taxes. We define Adjusted EBITDA for each segment as earnings before
depreciation, amortization, pre-opening and development expenses, non-cash share-based compensation, asset impairment costs,
write-downs, reserves, recoveries, gain (loss) on sale of certain assets, interest income and expense and income taxes. We use
Consolidated Adjusted EBITDA and Adjusted EBITDA for each segment to compare operating results among our properties and
between accounting periods. Consolidated Adjusted EBITDA and Adjusted EBITDA have economic substance because they are used
by management as a performance measure to analyze the performance of our business, and is especially relevant in evaluating large,
long-lived casino-hotel projects because it provides a perspective on the current effects of operating decisions separated from the
substantial non-operational depreciation charges and financing costs of such projects. We eliminate the results from discontinued
operations as they are discontinued. We also review pre-opening and development expenses separately; as such expenses are also
included in total project costs when assessing budgets and project returns, and because such costs relate to anticipated future revenues
and income. We believe that Consolidated Adjusted EBITDA and Adjusted EBITDA are useful measures for investors because it is
an indicator of the strength and performance of ongoing business operations, including our ability to service debt and fund capital
expenditures, acquisitions and operations. These calculations are commonly used as a basis for investors, analysts and credit rating
agencies to evaluate and compare operating performance and value of companies within our industry. In addition, our credit
agreement and bond indentures require compliance with financial measures similar to Consolidated Adjusted EBITDA. Consolidated
Adjusted EBITDA should not be considered as an alternative to operating income as an indicator of performance, as an alternative to
cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure provided in accordance with
GAAP. Our calculation of Consolidated Adjusted EBITDA may be different from the calculation methods used by other companies
and, therefore, comparability may be limited.
29
Table of Contents
Each segment’s contribution to the operating results was as follows:
L’Auberge Lake Charles
Gaming revenues
Total revenues
Operating income
Adjusted EBITDA
$
For the year ended December 31,
2011
2010
2009
(in millions)
330.0
$
301.4
$
298.6
375.4
342.0
339.0
84.2
67.2
50.0
103.9
92.9
79.2
% Increase/(Decrease)
2011 vs. 2010
2010 vs. 2009
9.5%
9.8%
25.3%
11.8%
0.9%
0.9%
34.4%
17.3%
L'Auberge Lake Charles, our largest property, saw a significant increase in revenues and Adjusted EBTIDA in 2011 as compared to the
prior-year period, as a result of the growth of the Lake Charles gaming market, the evolution of our marketing programs and a continued focus
on the efficiency of the operation and proper utilization of assets. The re-launch of our my choice customer loyalty program in April 2011
contributed to our strong results and is achieving our goal of driving profitable revenue growth. Operating efficiencies have been achieved
through consolidating tasks through a shared services arrangement across our Louisiana properties.
L'Auberge Lake Charles achieved meaningful increases to Adjusted EBITDA despite static revenues for the year ended December 31,
2010 as compared to the year ended December 31, 2009. This reflects the initial benefits of a heightened focus on operating efficiencies and
effective marketing spend.
St. Louis
Gaming revenues
Total revenues
Operating income (loss)
Adjusted EBITDA
NM — Not Meaningful
$
For the year ended December 31,
2011
2010
2009
(in millions)
327.7
$
285.9
$
179.2
382.0
337.1
219.0
30.6
(2.1)
5.1
86.5
62.3
42.0
% Increase/(Decrease)
2011 vs. 2010
2010 vs. 2009
14.6%
13.3%
NM
38.8%
59.5%
53.9%
NM
48.3%
The St. Louis segment consists of Lumière Place (which includes the Lumière Place Casino, the Pinnacle-owned Four Seasons Hotel St.
Louis and HoteLumière) and River City. The increase in revenues in 2011 is due to the continued ramp-up of River City, which opened in
March 2010. Our combined monthly market share for our St. Louis properties increased over the prior-year period, reflecting the improvements
in operations for River City. Adjusted EBITDA reflects the benefits of a heightened focus on operating efficiencies primarily realized through
our shared services arrangement in this market. In April 2011, we relaunched our my choice customer loyalty program, which contributed to
the strong results by increasing customer spend and driving profitable revenue growth.
Significant revenue and Adjusted EBITDA growth in 2010, as compared to 2009, was due to the opening of River City Casino, which
generated positive Adjusted EBITDA in its first year of operations. Consistent with most property openings, River City experienced higher
operating expenses in its first year of operations than are expected in the long-term.
30
Table of Contents
Boomtown New Orleans
Gaming revenues
Total revenues
Operating income
Adjusted EBITDA
$
For the year ended December 31,
2011
2010
2009
(in millions)
128.5
$
133.4
$
131.8
133.6
139.1
137.7
38.2
36.3
29.9
44.9
43.9
37.6
% Increase/(Decrease)
2011 vs. 2010
2010 vs. 2009
(3.7)%
(4.0)%
5.2 %
2.3 %
1.2%
1.0%
21.4%
16.8%
Revenues and Adjusted EBITDA for Boomtown New Orleans were negatively impacted during 2011 due to the property's closure for
several days over Labor Day weekend due to Tropical Storm Lee and subsequent flooding disruption. In addition, the 2010 period was
positively impacted by elevated local economic conditions created by an oil spill cleanup and recovery efforts late last year. Despite these
changes, Boomtown New Orleans' saw Adjusted EBITDA increase due to improved operational efficiencies. In 2012, we expect to settle an
outstanding claim related to the construction of the nearby flood wall and receive proceeds of approximately $3.5 million.
The 2010 results increased significantly versus the prior-year period despite modest revenue growth as the result of a heightened focus on
operating efficiencies, as well as improved marketing programs.
Belterra Casino Resort
Gaming revenues
Total revenues
Operating income
Adjusted EBITDA
$
For the year ended December 31,
2011
2010
2009
(in millions)
132.1
$
129.8
$
139.5
154.8
152.1
161.9
15.7
15.6
12.7
28.6
30.0
26.5
% Increase/(Decrease)
2011 vs. 2010
2010 vs. 2009
1.8 %
1.8 %
0.6 %
(4.7)%
(7.0)%
(6.1)%
22.8 %
13.2 %
During 2011, revenues and Adjusted EBITDA were consistent with the prior-year period despite difficulties resulting from soft general
economic conditions. Adjusted EBITDA for Belterra Casino was negatively impacted during 2011 by increased marketing expenses, as well as
increased medical expenses.
Belterra achieved meaningful increases to Adjusted EBITDA despite lower revenues for the year ended December 31, 2010 as compared
to the prior-year period. This reflects the benefits of cost cutting, a focus on operating improvements and more focused marketing efforts. In
addition, Belterra's Adjusted EBITDA for 2010 included a one-time benefit of $0.8 million due to the resolution of a tax matter. Revenues have
declined due to soft general economic conditions, increased competition in the market area, as well as heavy snowfall during both the first and
fourth quarters of 2010.
31
Table of Contents
Boomtown Bossier City
Gaming revenues
Total revenues
Operating income
Adjusted EBITDA
$
For the year ended December 31,
2011
2010
2009
(in millions)
79.3
$
82.4
$
85.7
85.0
87.9
90.9
12.8
13.8
12.6
18.8
20.2
19.2
% Increase/(Decrease)
2011 vs. 2010
2010 vs. 2009
(3.8)%
(3.3)%
(7.2)%
(6.9)%
(3.9)%
(3.3)%
9.5 %
5.2 %
Boomtown Bossier City revenues and Adjusted EBITDA declined in 2011 at a slower pace than the overall Bossier City/Shreveport
gaming market, which has been negatively impacted by expanded Native American gaming facilities in Oklahoma, many of which are located
closer to the Dallas/Fort Worth, Texas feeder market. Revenue increases in this market have been difficult to achieve in recent years due to the
state of competition and regional economic conditions. We have attempted to offset the additional competition through a refinement of the
property's marketing efforts and certain cost-cutting measures related to non-value added processes that do not impact the guest experience.
Boomtown Bossier City improved Adjusted EBITDA for the year ended December 31, 2010 compared to the 2009 period despite the
competitive Bossier City/Shreveport gaming market, through cost-cutting measures.
River Downs
Gaming revenues
Total revenues
Operating income
Adjusted EBITDA
NM — Not Meaningful
$
For the year ended December 31,
2011
2010
2009
(in millions)
—
$
—
$
10.3
—
(2.9)
—
(2.2)
—
% Increase/(Decrease)
2011 vs. 2010
2010 vs. 2009
—
—
—
—
NM
NM
NM
NM
NM
NM
NM
NM
In January 2011, we completed the purchase of River Downs racetrack, located in Cincinnati, Ohio for approximately $45.2 million. River
Downs is situated on approximately 160 acres of land, 40 of which are undeveloped, and offers live thoroughbred horse racing from mid-April
through Labor Day, as well as simulcast wagering throughout the year, broadcast on more than 500 monitors throughout the facility. In June
2011, the Governor of Ohio announced that it is his intention that each of Ohio's racetrack owners be permitted to apply for a 10-year license to
operate a video lottery terminal facility. If video lottery terminals are ultimately approved for use at Ohio's racetracks and become operational,
we plan to move quickly to revitalize River Downs and develop a new gaming, racing and entertainment destination facility for the Cincinnati,
Ohio market.
32
Table of Contents
Other factors affecting income (loss) from continuing operations
For the year ended December 31,
2011
2010
2009
(in millions)
Other benefits (costs):
Corporate expenses
Depreciation and amortization expense
Pre-opening and development costs
Non-cash share-based compensation
Impairment of indefinite-lived intangible assets
Impairment of land and development costs
Impairment of buildings, riverboats and
equipment
Write-downs, reserves and recoveries, net
Other non-operating income
Interest expense, net of capitalized interest
Gain on sale of equity securities
Loss from equity method investment
Loss on early extinguishment of debt
Income tax benefit (expense)
NM — Not Meaningful
$
(28.4 )
(103.9)
(8.8)
(6.6)
—
—
$
—
(4.2)
0.4
(95.7)
—
(0.6)
(0.2)
(2.3)
(35.7 )
(109.7)
(13.6)
(6.1)
(11.5)
(23.7)
$
(0.4)
3.7
0.2
(103.1)
—
—
(1.9)
11.7
% Increase/(Decrease)
2011 vs. 2010
2010 vs. 2009
(41.3 )
(95.4)
(16.6)
(13.5)
—
(24.1)
(20.4)%
(5.3)%
(35.3)%
8.2 %
NM
NM
(13.6)%
15.0 %
(18.1)%
(54.8)%
NM
(1.7)%
(9.1)
(1.2)
0.2
(70.3)
12.9
—
(9.5)
0.3
NM
(213.5)%
100.0 %
(7.2)%
NM
NM
(89.5)%
(119.7)%
(95.6)%
NM
NM
46.7 %
NM
NM
(80.0)%
NM
Corporate expenses represent unallocated payroll, professional service fees, rent, travel expenses and other general and administrative
expenses not directly incurred by our casino and hotel operations. Such expenses decreased during 2011 compared to 2010 due to reduced
headcount, the elimination of our aviation department upon the sale of our corporate jet in April 2010, the consolidation of all corporate offices
to one location and a focus on cost-cutting measures.
Depreciation and amortization expense decreased during 2011 compared to 2010 due to the maturation of our property assets.
Depreciation and amortization increased in 2010 compared to 2009 due to the opening of River City Casino.
Pre-opening and development costs for the fiscal years ended December 31, 2011 , 2010 and 2009 consist of the following:
River City
L'Auberge Baton Rouge
Sugarcane Bay
Other
Total pre-opening and development costs
$
For the year ended December 31,
2011
2010
2009
(in millions)
0.2
$
9.9
$
8.0
4.3
1.2
5.8
0.3
1.5
2.0
4.0
1.0
0.8
8.8
$
13.6
$
16.6
$
For the year ended December 31,
2010
2009
2008
(in millions)
6.6
$
6.1
$
13.5
$
Non-cash share-based compensation consists of the following:
Non-cash share-based compensation expense
Non-cash share-based compensation expense relates to the theoretical value of options on the date of issuance and is not related to actual
stock price performance. The number of options granted under our equity incentive compensation plans was 1,406,108 in 2011, 2,356,100 in
2010, and 559,800 in 2009. The expense recognition in 2009 was inflated by the acceleration and cancellation of options in connection with the
resignation of our former Chief Executive Officer during the fourth quarter
33
Table of Contents
of 2009, as well as the acceleration of vesting of stock options held by our board members during the second quarter of 2009, resulting in no
ongoing expense for these options.
Impairment of indefinite-lived intangible assets. Indefinite-lived intangible assets include gaming licenses and are reviewed for
impairment annually during the fourth quarter, or more frequently if events or circumstances indicate that the carrying value may not be
recoverable. We recorded no impairments during the years ended December 31, 2011 or December 31, 2009 for continuing operations. As a
result of the cancellation of our planned Sugarcane Bay project in Lake Charles, Louisiana, we surrendered the related gaming license to the
Louisiana Gaming Control Board in April 2010. In connection with this decision, we fully impaired our gaming license by $11.5 million during
the year ended December 31, 2010.
Impairment of land and development costs. We review our long-term assets for impairment whenever events or circumstances indicate
that the carrying value may not be recoverable. During the year ended December 31, 2011, we incurred no impairment charges related to land
and development costs from continuing operations.
During the year ended December 31, 2010, we recorded impairment charges totaling $23.7 million, related to our Sugarcane Bay and
Baton Rouge projects. In April 2010, we canceled our planned Sugarcane Bay project in Lake Charles, Louisiana and surrendered the related
gaming license to the Louisiana Gaming Control Board. In connection with this decision, we recorded impairment charges of $19.1 million,
which includes all previously capitalized construction in progress and costs to terminate the construction contract with the general contractor.
In September 2010, we expanded the scope and budget for our casino and hotel development currently under construction in Baton Rouge,
Louisiana, and as a result, we incurred an impairment charge for certain of the previously capitalized design components of the project, totaling
$4.6 million.
During 2009, we recorded impairment charges totaling $24.1 million, primarily related to our Sugarcane Bay and Baton Rouge projects.
The location, size, amenities, and other items of our Sugarcane Bay project were reduced in scope, which resulted in an impairment charge of
$20.9 million. The orientation and structure of the Baton Rouge hotel were changed in 2009, resulting in an impairment charge of $0.7 million
of previously capitalized design costs. In addition, we impaired certain land holdings and other development costs for a total charge of $2.5
million.
Impairment of buildings, riverboats and equipment. We review our long-term assets for impairment whenever events or circumstances
indicate that the carrying value may not be recoverable. During the year ended December 31, 2011, we incurred no impairment charges related
to buildings, riverboats and equipment used in continuing operations.
During 2010, we incurred asset impairment charges related to the value of obsolete gaming equipment in the normal course of business
totaling $0.4 million.
During the fourth quarter of 2009, we listed our corporate jet for sale. We incurred an impairment charge of $8.7 million as the carrying
amount exceeded the fair value. In addition, we also incurred impairment charges related to the value of obsolete gaming equipment in the
normal course of business.
Write-downs, reserves and recoveries, net consist of the following:
Loss on disposal of assets, net
Impairment of assets
Legal settlement expense (recoveries)
Write-downs, reserves and recoveries, net
$
$
For the year ended December 31,
2011
2010
2009
(in millions)
3.4
$
2.6
$
1.2
0.4
0.2
—
0.4
(6.5)
—
4.2
$
(3.7 )
$
1.2
Loss on disposal of assets, net: In October 2011, we entered into an agreement with the Port of Lake Charles whereby we exchanged land
parcels and will also receive $2.5 million of rent credits on our L'Auberge Lake Charles lease payments. We recorded an overall gain of $3.2
million related to this agreement. In April 2011, we recorded a loss of $5.7 million equal to the carrying value of land donated to the City of
Lake Charles. In addition, we realized a gain on the sale of a warehouse and the sale of unused houses. The remainder of the loss on disposal of
assets for 2011 relates to the disposal of slot machines and other equipment in the normal course of business. During 2010, we sold our
corporate jet, two seaplanes, a warehouse, and disposed of various slot equipment at our properties for a net loss of $2.6 million. During 2009,
we sold and disposed of slot machines and equipment at our properties for a loss of $1.2 million.
34
Table of Contents
Impairment of assets: In 2011, we incurred an impairment charge related to previously capitalized costs associated with projects that will
not be pursued. In 2010, we recorded an impairment charge of $0.2 million related to sales tax incremental bonds. In April 2010, we purchased
$5.3 million face amount of these bonds for $5.0 million. In 2011, there were no events or circumstances that indicated that the carrying value
may not be recoverable.
Legal settlement expense (recoveries): In 2011, we paid $0.4 million in regards to a legal settlement. In 2010, we received a $6.5 million
legal settlement related to the recovery of legal fees.
Other non-operating income consists primarily of interest income, which has increased slightly during the year ended December 31, 2011
compared to the prior-year period as a result of different investment strategies. We utilize conservative investment options, resulting in low
levels of interest income relative to surplus cash.
Interest expense, net of capitalized interest was as follows:
Interest expense before capitalization of interest
Less capitalized interest
Interest expense, net of capitalized interest
$
$
For the year ended December 31,
2011
2010
2009
(in millions)
106.0
$
107.1
$
84.0
(10.3 )
(4.0)
(13.7)
95.7
$
103.1
$
70.3
Capitalized interest increased in 2011 as compared to 2010 due to our Baton Rouge project and our investment in ACDL. We began
capitalizing interest on our Baton Rouge project during the fourth quarter of 2010. In addition, we have capitalized interest on our investment in
ACDL, as ACDL has not begun its principal operations, which consists of the Ho Tram Strip beachfront complex of integrated resorts and
residential developments in southern Vietnam. ACDL currently has activities in progress to commence these planned operations, and is using
all funds to acquire assets for the future operations. Once ACDL opens phase one of this development, which is expected to occur in 2013, the
investment will no longer qualify for capitalization of interest. The decrease in capitalized interest in 2010 as compared to 2009 was due to the
opening of our River City Casino in March 2010.
Gain on sale of equity securities. During 2009, we sold all 1.2 million shares of common stock that we held in Ameristar Casinos, Inc. for
cash proceeds of $23.7 million and realized a gain of $12.9 million.
Loss on equity method investment. We have invested $95.0 million in ACDL in exchange for a 26% ownership interest, which is
accounted for under the equity method. Under the equity method, the carrying value is adjusted for our share of ACDL's earnings and losses, as
well as capital contributions to and distributions from ACDL. During the year ended December 31, 2011, our proportional share of ACDL's
losses totaled $0.6 million, which under our accounting policy reflects the loss of ACDL on a one quarter lag.
Loss on early extinguishment of debt. During 2011, we made open market purchases, at par and from cash on hand, of $10.0 million of
our outstanding 7.50% senior subordinated notes due 2015. The notes have been extinguished from an accounting perspective, although they
remain outstanding from a legal perspective, since they are held by a subsidiary considered unrestricted under our credit facility and indentures.
We do not intend to re-sell these notes. We recorded a $0.2 million loss on early extinguishment of debt, related to the ratable write-off of
unamortized deferred financing fees and original debt issuance discounts.
During 2010, we incurred a loss on early extinguishment of debt of $1.9 million for the write off of unamortized debt issuance costs related
to the modification of our credit facility and the early retirement of our 8.25% senior subordinated notes due 2012.
During 2009, we issued $450 million aggregate principal amount of 8.625% senior notes due 2017, and used much of the net proceeds to
retire early other outstanding indebtedness. Such early retirements resulted in a write-off of $9.5 million in call or tender premiums,
unamortized debt issuance and other costs.
Income taxes. Our income tax expense for continuing operations was $2.3 million for the year ended December 31, 2011 compared to an
income tax benefit of $11.7 million the prior year period. For 2011 and 2010, the effective tax rates were 7.2% and (22.3)%, respectively. Our
effective tax rate is lower than the expected statutory tax rate primarily as a result of the tax impact of our valuation allowances.
During 2011, the Louisiana Department of Revenue completed its examination of our state income tax returns for the years
35
Table of Contents
ended December 31, 2007, 2008, and 2009 with no adjustment. Our appeal of the proposed assessment issued by Indiana upon examination of
our income tax returns for the years 2005 to 2007 is still pending resolution as of December 31, 2011. In addition, the statute of limitations for
making an assessment expired for certain prior-year state income tax return. As a result, we reevaluated our unrecognized tax benefits
(“UTBs”) and recognized a net $0.5 million of previous UTBs in the current period. These UTBs affected our effective tax rate of 7.2% for the
year ended December 31, 2011.
Due to net operating loss carryforwards, we do not have any current income tax liability except for certain state and local tax jurisdictions.
We accrued an estimated $4.0 million current income tax liability for these jurisdictions in 2011.
Discontinued operations. Discontinued operations as of December 31, 2011 consist of our Boomtown Reno operations, our Atlantic City
operations, our former President Casino operations, our former Casino Magic Argentina operations, our former Casino Magic Biloxi operations
and the former operations at The Casino at Emerald Bay in The Bahamas.
Boomtown Reno: In November 2011, we entered into a definitive agreement to sell our Boomtown Reno operations, which is expected to
close in 2012. The estimated proceeds from the transaction are expected to be approximately $12.9 million, with the potential for an additional
$3.8 million if an option granted to the buyer is exercised to purchase 100% of our membership interest in PNK (Reno), LLC and additional
land adjacent to Boomtown Reno. We will operate Boomtown Reno until the transaction closes, which is expected to be in 2012. In addition,
we are currently marketing the additional excess land adjacent to our property as for sale. We have reflected the business as discontinued
operations and the related assets and liabilities as held for sale. A disposal group classified as held for sale should be measured at the lower of
its carrying value or the fair value less cost to sell. As the carrying value of Boomtown Reno exceeded the fair value, less cost to sell, we
recognized an impairment charge of $11.9 million during 2011.
Atlantic City : In the first quarter of 2010, we made the decision to sell our Atlantic City operations. Since that time, we have actively
marketed our operations; however, events and circumstances beyond our control have extended the period to complete the sale of these
operations beyond one year. We have continued to reflect the business as discontinued operations and the related assets and liabilities as held
for sale.
During the second quarter of 2011, we determined a triggering event had occurred due to the extended time frame in which our operation
has been listed for sale and the market conditions in Atlantic City. We reviewed the carrying value of both our land and our New Jersey Casino
Reinvestment Development Authority investments, and recorded impairment charges of $4.9 million and $9.4 million, respectively.
In the fourth quarter of 2011, we settled our litigation related to the Madison House, and settled all obligations under the existing lease. In
addition, in December 2011, we reached a settlement on property tax appeals with the City of Atlantic City. As part of the settlement, the
assessed value of our land in Atlantic City has been reduced on a go forward basis and we were awarded a property tax refund of $8.2 million ,
for which we recorded a gain and an associated receivable as of December 31, 2011. We collected the refund in February 2012.
President Casino : We closed the President Casino on June 24, 2010, and, in October 2010, we sold the Admiral Riverboat, on which the
President Casino formerly operated. Other than minimal costs associated with former employee obligations, we expect no continuing costs
from this operation.
Casino Magic Argentina : In June 2010, we completed the sale of our Argentina operations for approximately $40.0 million and
recognized a loss on disposal of approximately $0.2 million. We expect no material continuing costs from this operation.
Casino Magic Biloxi : Casino Magic Biloxi closed after significant damage from Hurricane Katrina in 2005. In February 2010, we settled
all remaining insurance claims in exchange for a final payment of approximately $23.4 million. We received payments totaling approximately
$215 million from our insurers related to this asset. Prior insurance advances that exceeded the book value of destroyed assets and certain
insured expenses were recorded as a deferred gain of $18.3 million. As a result of this final settlement, we recognized this deferred gain in
February 2010 in addition to the gain associated with the proceeds.
The Casino at Emerald Bay : The Casino at Emerald Bay in The Bahamas was closed during the first quarter of 2009. In February 2011,
we completed the sale of the final asset, resulting in a gain of $0.1 million. We expect no continuing costs from this operation.
36
Table of Contents
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2011 , we held $ 78.6 million of cash and cash equivalents, not including $6.5 million of restricted cash. We estimate
that approximately $65.0 million is needed to fund our casino cages, slot machines and day-to-day operating and corporate accounts. In
addition,we have a deposit in escrow with the Louisiana Gaming Control Board of $25.0 million related to the construction of our Baton Rouge
project, which is held in "Other Assets, net" on the Consolidated Balance Sheets. In August 2011, we entered into a $410 million amended and
restated credit facility ("Credit Facility"), which matures in August 2016. As of December 31, 2011, there was outstanding $56.0 million in
borrowings and $11.1 million was committed under various letters of credit under the Credit Facility. We anticipate drawing on the Credit
Facility in the future to fund development and expansion projects and other general corporate needs.
We generally produce significant positive cash flows from operations, though this is not always reflected in our reported net income due to
large non-cash charges such as depreciation. However, our ongoing liquidity will depend on a number of factors, including available cash
resources, cash flow from operations, funding of construction of our development projects and our compliance with covenants contained in the
Credit Facility and the indentures governing our senior subordinated notes and senior notes.
Net cash provided by operating activities
Net cash used in investing activities
Net cash providing by financing activities
$
$
$
For the year ended December 31,
2011
2010
2009
(in millions)
131.8
$
88.7
$
120.2
(293.4 )
$
(130.7 )
$
(202.4 )
46.5
$
108.2
$
96.6
% Increase/(Decrease)
2011 vs. 2010
2010 vs. 2009
48.6 %
124.5 %
(57.0)%
(26.2)%
(35.4)%
12.0 %
Operating Cash Flow
Our cash provided by operating activities for the year ended December 31, 2011 increased as compared to the prior-year period. This
increase is due to improved operating results, which include a full year of operations of our River City property. Our decrease in cash provided
by operating activities in 2010 from 2009 is primarily due to slightly weaker operating results and cash payments for previously accrued
accounts payable related to the opening of River City.
Investing Cash Flow
The following is a summary of our capital expenditures for the years ended December 31, 2011 , 2010 and 2009 by property or
development project. This excludes our investments of approximately $45.2 million to purchase River Downs, and $95.0 million to purchase a
26% equity interest in ACDL, both of which are discussed in further detail below this table.
L'Auberge Baton Rouge
L’Auberge Lake Charles
Lumière Place
River City
Boomtown New Orleans
Belterra Casino Resort
Boomtown Bossier City
Sugarcane Bay (a)
River Downs
Other
Total capital expenditures
$
$
(a) This project was canceled in April 2010.
37
For the year ended December 31,
2011
2010
2009
(in millions)
96.9
$
32.0
$
2.1
20.0
10.7
5.4
9.3
3.5
9.7
4.5
74.4
169.2
4.9
3.4
5.7
3.2
8.6
7.0
2.9
3.5
4.2
0.3
15.8
14.3
0.1
—
—
11.4
5.6
8.8
153.5
$
157.5
$
226.4
Table of Contents
In 2011 and for the next few years, our material capital expenditures include the following:
•
We are in the process of constructing L'Auberge Baton Rouge in Baton Rouge, Louisiana. As of December 31, 2011, we have spent
approximately $155.5 million of the total budget of approximately $368 million, excluding land costs and capitalized interest. Due to
construction disruption and previously unanticipated site preparation work, the construction budget has increased approximately 3.0%
from the prior budget of $357 million. We expect L'Auberge Baton Rouge to open by Labor Day 2012.
•
In connection with our River City project, we entered into a lease and development agreement with the St. Louis County Port
Authority. Pursuant to the terms of the lease and development agreement, the project is to be developed in two phases. We are
required to invest $375 million in the first phase, which we have completed, and $75 million in the second phase. The second phase
must be completed by October 31, 2013. In September 2011, we announced a planned $82 million expansion of River City to add a
200-guestroom hotel, a multi-purpose event center and a covered parking structure. Construction on the expansion project is
scheduled to begin in the first quarter of 2012, with an expected completion in the second half of 2013.
•
In connection with our Lumière Place project, we have a redevelopment agreement with the City of St. Louis, which, among other
things, commits us to oversee the investment of $50 million in residential housing, retail or mixed use developments in the City of St.
Louis within five years after the opening of the casino and hotel. The total cost of such projects must be at least $50 million; however,
our investment in such projects can be substantially less, as such projects may be developed in partnership with others. If we and our
development partners collectively fail to invest $50 million in residential housing, retail or mixed use developments, within five years
after the opening of the casino and hotel, we would be obligated to pay a fee of $1.0 million in the first year, and $2.0 million
annually thereafter, adjusted by the change in the consumer price index. To date, we have invested or committed in partnership with
other parties certain projects that provide us with approximately $13 million of credit towards investments under the redevelopment
agreement.
•
In January 2011, we completed the purchase of all of the assets of River Downs racetrack in Cincinnati, Ohio for approximately $45.2
million. The Ohio Lottery Commission recently adopted emergency rules authorizing the application process and setting forth the
requirements and procedures for licensing video lottery terminal operators at Ohio racetracks. We are currently devising a master plan
to re-develop River Downs into a premier gaming, racing and entertainment destination facility catering to the Cincinnati and
surrounding markets. At this time, management does not have a scope, budget or timetable for completing such facilities.
•
In August 2011, we purchased a 26% equity interest in Asian Coast Development, Ltd ("ACDL") for a total purchase price of $95
million. ACDL is the owner and operator of the Ho Tram Strip beachfront complex of destination integrated resorts and residential
development located approximately 80 miles southeast of Ho Chi Minh City in southern Vietnam. Upon closing this transaction, we
also entered into a management agreement through 2058 (with the potential for a 20-year extension) for the second integrated resort
of the multi-phase Ho Tram Strip project, Vietnam's first destination integrated resort and gaming complex. The first phase of the Ho
Tram Strip, MGM Grand Ho Tram, is expected to open to the public in 2013.
•
We intend to invest approximately $50 million to $70 million on capital expenditures on existing properties and corporate initiatives
in 2012. The total spend is dependent upon the evaluation and pursuit of hotel room remodeling programs and the renovation of
certain food and beverage outlets company-wide.
Our intention is to use existing cash resources, expected cash flows from operations and funds available under our Credit Facility to fund
operations, maintain existing properties, make necessary debt service payments, fund the development of our Baton Rouge project, and explore
other growth opportunities. In the event that our future cash flows from operations do not match the levels we currently anticipate, whether due
to downturns in the economy or otherwise, we may need to raise funds through the capital markets, if possible.
Our ability to borrow under our Credit Facility is contingent upon, among other things, meeting customary financial and other covenants.
If we are unable to borrow under our Credit Facility, or if our operating results are adversely affected because of a reduction in consumer
spending, or for any other reason, our ability to maintain our existing properties or complete our on-going projects may be affected unless we
sell assets, enter into leasing arrangements, or take other measures to find additional financial resources. There is no certainty that we will be
able to do so on terms that are favorable to the Company or at all.
We may face significant challenges if conditions in the economy and financial markets worsen. The credit crisis has adversely affected
overall consumer demand, which has had a negative effect on our revenues. Furthermore, the effects of
38
Table of Contents
disruption to the overall economy could adversely affect consumer confidence and the willingness of consumers to spend money on leisure
activities. Because of the current economic environment, certain of our customers may curtail the frequency of their visits to our casinos and
may reduce the amounts they wager and spend when compared to similar statistics in better economic times. All of these effects could have a
material adverse effect on our liquidity.
Financing Cash Flow
Credit Facility
In August 2011, we entered into the Fourth Amended and Restated Credit Agreement ("Credit Facility"). We increased the revolving credit
commitment to $410 million from $375 million, and extended the maturity from March 2014 to August 2016. As of December 31, 2011 , we
had $56 million outstanding borrowings and had $11.1 million committed under various letters of credit under our Credit Facility.
The Credit Facility permits us, in the future, to increase the commitments under the Credit Facility and to obtain term loan commitments,
in each case from existing or new lenders that are willing to commit to such an increase, so long as we are in pro-forma compliance with the
Credit Facility's financial and other covenants, including a consolidated senior secured debt ratio and a consolidated total leverage ratio.
The proceeds of the Credit Facility may be used for general corporate purposes, including the payment of certain expenditures associated
with the construction and development of L'Auberge Baton Rouge and River Downs.
The Credit Facility matures on August 2, 2016. The date will be accelerated to December 15, 2014 if any portion of our 7.50% senior
subordinated notes due 2015 ("7.50% Notes") are outstanding on December 15, 2014. Currently, $385 million of aggregate principal amount of
our 7.50% Notes are outstanding. The Credit Facility does not have any debt repayment obligations prior to maturity. We are obligated to make
mandatory prepayments of indebtedness under the Credit Facility from the net proceeds of certain debt offerings, certain asset sales and
dispositions and certain casualty events, subject in certain cases to our right to reinvest proceeds. In addition, we will be required to prepay
borrowings under the Credit Facility with a percentage of our “excess cash flow” (as defined in the Credit Facility, and reduced for cash flow
applied to permitted capital spending). We do not believe such payments will be required in the next few years. We have the option to prepay
all or any portion of the indebtedness under the Credit Facility at any time without premium or penalty.
The interest rate margins for revolving credit loans under the Credit Facility depend on our performance, measured by a consolidated total
leverage ratio, which, in general, is the ratio of consolidated total debt (less excess cash, as defined in the Credit Facility) to annualized
adjusted EBITDA, as defined in the Credit Facility. The Credit Facility bears interest, at our option, at either a LIBOR rate plus a margin
ranging from 1.75% to 3.50% or at a base rate plus a margin ranging from 0.25% to 2.00%, in either case based on our consolidated total
leverage ratio. The undrawn revolver facility bears a commitment fee for unborrowed amounts of 0.25% to 0.75% per annum based on our
consolidated total leverage ratio.
The Credit Facility has, among other things, financial covenants and other affirmative and negative covenants. As of December 31, 2011,
the Credit Facility requires compliance with the following ratios: (1) maximum consolidated total leverage ratio of 7.25 to 1.00; (2) minimum
consolidated interest coverage ratio of 1.50 to 1.00; and (3) maximum consolidated senior secured debt ratio of 2.75 to 1.00. In addition, the
Credit Facility has covenants that limit the amount of senior unsecured debt we may incur to $1.5 billion, unless our maximum consolidated
total leverage ratio is less than 6.00 to 1.00. As of December 31, 2011, we were in compliance with each of these ratios, and compliance with
these ratios does not have a material impact on our financial flexibility, including our ability to incur new indebtedness.
The obligations under the Credit Facility are secured by most of our assets and the assets of our domestic restricted subsidiaries, including
a pledge of the equity interests in our domestic subsidiaries (except where such pledge is prohibited by gaming regulations) and, if and when
formed or acquired, by a pledge of up to 66% of the then-outstanding equity interests of our foreign restricted subsidiaries. Our obligations
under the Credit Facility are also guaranteed by our existing and future domestic restricted subsidiaries and are required to be guaranteed by our
foreign restricted subsidiaries, if and when such foreign restricted subsidiaries are formed or acquired, unless such guarantee causes material
adverse tax, foreign gaming or foreign law consequences. Subsidiaries that own approximately $15.0 million in cash and cash equivalents as of
December 31, 2011, our subsidiary that holds our investment in ACDL, our subsidiary that holds $10.0 million in 7.50% Notes, our Atlantic
City subsidiaries and each of our foreign subsidiaries are currently unrestricted subsidiaries for purposes of the Credit Facility.
The Credit Facility provides for customary events of default with corresponding grace periods, in most cases, including payment defaults,
cross defaults with certain other indebtedness to third parties, breaches of covenants and bankruptcy events.
39
Table of Contents
In the case of a continuing default, the lenders may, among other remedies, accelerate payment of all obligations due from the borrowers to the
lenders, charge the borrowers a default rate of interest on all then-outstanding or thereafter incurred obligations, and terminate the lenders'
commitments to make any further loans or issue any further letters of credit. In the event of certain defaults, the commitments of the lenders
will be automatically terminated and all outstanding obligations of the borrowers will automatically become due. In addition, the lenders may
take possession of, and enforce the borrowers' rights with respect to, the borrowers' collateral, including selling the collateral.
Senior and Senior Subordinated Indebtedness
As of December 31, 2011 , we had outstanding $450 million aggregate principal amount of 8.625% senior notes due 2017 (“8.625%
Notes”), $385 million aggregate principal amount of 7.50% Notes and $350 million aggregate principal amount of 8.75% senior subordinated
notes due 2020 (“8.75% Notes”). During the third quarter of 2011, we made open market purchases at par and from cash on hand, of $10.0
million of our outstanding 7.50% Notes, which are held by our wholly-owned unrestricted subsidiary. These notes have been extinguished from
an accounting perspective, although they remain outstanding from a legal perspective. We do not intend to re-sell these notes.
The 8.625% Notes are senior unsecured obligations and rank equally in right of payment with all of our existing and future senior debt,
including debt under our Credit Facility. The 8.625% Notes are, however, effectively subordinated to our Credit Facility, which is secured by a
first priority lien, as well as any other secured debt which may be issued in the future. The 8.625% Notes are guaranteed on a senior basis by
certain of our current and future domestic restricted subsidiaries. The 8.625% Notes rank senior to our existing 7.50% Notes and 8.75% Notes.
The 7.50% Notes and 8.75% Notes are unsecured senior subordinated obligations and rank subordinate in right of payment to all of our
and our subsidiary guarantors' existing and future indebtedness, except indebtedness that expressly provides that it ranks equal or subordinate
in right of payment to the 7.50% Notes and 8.75% Notes. The 7.50% Notes and 8.75% Notes are guaranteed on a senior subordinated basis by
certain of our current and future domestic restricted subsidiaries. The 7.50% Notes and the 8.75% Notes are subordinated to our 8.625% Notes
and to our Credit Facility.
Under the indenture governing the 8.625% Notes, among other debt baskets, we are permitted to incur the greater of $750 million or 3.5x
Consolidated EBITDA (as defined in the indenture) in senior indebtedness and secured indebtedness, which debt basket excludes the 8.625%
Notes. Under the indentures governing the 7.50% Notes and 8.75% Notes, we are permitted to incur the greater of $1.5 billion or 2.5x
Consolidated EBITDA (as defined in the indentures) in senior indebtedness. Under these senior secured indebtedness baskets, we are permitted
in certain circumstances to incur senior unsecured indebtedness. In addition, the indentures governing the 8.625% Notes, the 7.50% Notes and
the 8.75% Notes include other debt incurrence baskets, including a permitted refinancing basket and a general debt basket, the most restrictive
of which permits the greater of $250 million or 5% of Consolidated Total Assets (as defined in the indentures). Under all three indentures, we
may also incur additional indebtedness if, after giving effect to the indebtedness proposed to be incurred, our Consolidated Coverage Ratio
(essentially, a ratio of adjusted EBITDA to interest) for a trailing four-quarter period on a pro forma basis (as defined in the indentures) would
be at least 2.0 to 1.0. Our Consolidated Coverage Ratio (as defined in the indentures) under all three indentures was above 2.0 to 1.0 as of
December 31, 2011 .
The 7.50% Notes became callable at a premium over their face amount on June 15, 2011. The 8.625% Notes and 8.75% Notes become
callable at a premium over their face amount on August 1, 2013 and May 15, 2015, respectively. Such premiums decline periodically as the
notes progress towards their respective maturities. All of our notes are redeemable prior to their first call dates at a price that reflects a yield to
the first call that is equivalent to the applicable Treasury bond yield plus 0.5 percentage points.
40
Table of Contents
CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
The following table summarizes our contractual obligations and other commitments as of December 31, 2011 :
Contractual Obligations
Long-term debt obligations (a)
Operating lease obligations (b)
Purchase obligations: (c)
Construction contractual obligations (d)
Other (e)
Other long-term liabilities reflected on the
registrant’s balance sheet under GAAP (f)
Total
Total
$
1,824.9
535.7
Less than
1 year
$
99.3
8.7
214.5
32.7
$
11.0
2,618.8
1-3 years
3-5 years
(in millions)
$
195.5
$
584.1
17.1
16.2
125.1
18.5
7.1
258.7
$
—
315.6
$
—
0.6
89.4
13.6
$
More than
5 years
$
—
600.9
946.0
493.7
Other
$
—
—
$
—
1,439.7
—
—
—
—
$
3.9
3.9
(a) Includes interest obligations through the debt maturity dates associated with the debt obligations outstanding as of December 31, 2011
.
(b) For those lease obligations in which annual rent includes both a minimum lease payment and a percentage of future revenue, the table
reflects only the known minimum lease obligation. In addition, the table reflects all renewal options for those lease obligations that
have multiple renewal periods.
(c) Purchase obligations represent agreements to purchase goods or services that are enforceable and legally binding.
(d) Includes obligations under our construction projects, including Baton Rouge, as well as the remaining $75.0 million in phase two
under our lease and development agreement with the St. Louis County Port Authority, which must be completed within three years
after the opening of River City on March 4, 2010. In September 2011, we announced a planned $82 million expansion of River City
to add a 200-guestroom hotel, a multi-purpose event center and a covered parking structure. Construction on the expansion project is
scheduled to begin in the first quarter of 2012, with an expected completion in the second half of 2013.
(e) Includes open purchase orders, employment agreements, deferred bonus obligations and the estimated withdrawal liability associated
with a union-sponsored multi-employer pension benefit plan.
(f) Includes executive deferred compensation, director’s post-retirement plan and uncertain tax position payments. The amount included
in the “Other” column includes uncertain tax position liabilities for which we are unable to make a reliable estimate of the period of
cash settlement with the taxing authority.
The table above excludes certain commitments as of December 31, 2011 , for which the timing of expenditures associated with such
commitments is unknown, or contractual agreements have not been executed, or the guaranteed maximum price for such contractual
agreements has not been agreed upon. Excluded commitments include the remaining portion of the $50 million commitment for residential
housing, retail, or mixed-use development stipulated by our City of St. Louis redevelopment agreement, which must be completed within five
years after the opening of the Lumière Place casino and hotel; and the funding, in certain circumstances, of an additional $5.0 million into an
indemnification trust we created in 2005.
41
Table of Contents
CRITICAL ACCOUNTING ESTIMATES
The Consolidated Financial Statements were prepared in conformity with accounting principles generally accepted in the United States.
Certain of the accounting policies require management to apply significant judgment in defining the estimates and assumptions for calculating
financial estimates. These judgments are subject to an inherent degree of uncertainty. Management’s judgments are based on our historical
experience, terms of various past and present agreements and contracts, industry trends, and information available from other sources, as
appropriate. There can be no assurance that actual results will not differ from those estimates. Changes in these estimates could adversely affect
our financial position or our results of operations.
We have determined that the following accounting policies and related estimates are critical to the preparation of our Consolidated
Financial Statements:
Land, buildings, riverboats, equipment and other long-lived assets: We have a significant investment in long-lived property and
equipment, which represents approximately 78% of our total assets. Judgments are made in determining the estimated useful lives of assets, the
salvage values to be assigned to assets and if or when an asset has been impaired. The accuracy of these estimates affect the amount of
depreciation expense recognized in the financial results and whether to record a gain or loss on disposition of an asset.
We review the carrying value of our property and equipment used in our operations whenever events or circumstances indicate that the
carrying value of an asset may not be recoverable from estimated future undiscounted cash flows expected to result from its use and eventual
disposition. Adverse industry or economic trends, lower projections of profitability, or a sustained decline in our market capitalization, among
other items, may be indications of potential impairment issues, which are triggering events requiring the testing of an asset’s carrying value for
recoverability. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not
exceed the carrying value, then an impairment is recorded based on the fair value of the asset.
There are three generally accepted approaches available in developing an opinion of value, the cost approach, which is the price a prudent
investor would pay to produce or construct a similar new item, the sales comparison approach, which is typically used for land valuations by
analyzing recent sales transactions of similar sites, and the income approach, which is based on a discounted cash flow model using the
estimated future results of the relevant reporting unit discounted using our weighted-average cost of capital and market indicators of terminal
year free cash flow multiples. If necessary, we solicit third-party valuation expertise to assist in the valuation of our assets. We apply the most
indicative approach to the overall fair valuation, or in some cases, a weighted analysis of any or all of these methods. The determination of fair
value uses accounting judgments and estimates, including market conditions, and the reliability is dependent upon the availability and
comparability of the market data uncovered, as well as the decision making criteria used by marketing participants when evaluating a property.
Changes in estimates or application of alternative assumptions could produce significantly different results.
During the year ended December 31, 2011 , we recorded impairment charges of $26.2 million related to our Boomtown Reno and Atlantic
City operations, which are included in discontinued operations. For further details regarding impairments related to our discontinued
operations, see Note 8, Discontinued Operations, to the Consolidated Financial Statements. For further detail regarding impairments of land,
buildings, riverboats and equipment, see Note 2, Land, Buildings, Riverboats and Equipment, to the Consolidated Financial Statements.
Valuation of Indefinite-lived Intangible Assets: Our indefinite-lived intangible assets include gaming licenses, which are not subject to
amortization, but instead are reviewed annually for impairment during the fourth quarter of each fiscal year, or more frequently if events or
circumstances indicate the carrying value may not be recoverable. If the fair value of an indefinite-lived intangible asset is less than its carrying
value, an impairment charge is recognized equal to the difference. Fair value is calculated using a discounted cash flows approach, using the
estimated future results of the relevant reporting unit discounted using our weighted-average cost of capital and market indicators of terminal
year free cash flow multiples. If necessary, we may solicit third-party valuation expertise to assist in the valuation of our indefinite-lived
intangible assets. Significant estimates include, among other factors, forecasts of future operating results, revenue growth, EBITDA margin, tax
rates, capital expenditures, depreciation, working capital, weighted average cost of capital, long-term growth rates, risk premiums, and changes
in estimates or the application of alternative assumptions produce significantly different results. During the year ended December 31, 2011 , we
recorded no impairments to indefinite-lived intangible assets.
Self-insurance Reserves: We are self-insured up to certain limits for costs associated with general liability, workers’ compensation and
employee medical coverage. Self-insurance reserves include accruals of estimated settlements for known claims, (“Case Reserves”), as well as
accruals of estimates for claims incurred but not yet reported (“IBNR”). Case Reserves represent estimated liability for unpaid loss, based on a
claims administrator's estimates of future payments on individual
42
Table of Contents
reported claims, including Loss Adjustment Expenses (“LAE”). Generally, LAE includes claims settlement costs directly assigned to specific
claims, such as legal fees. We estimate Case Reserves and LAE on a combined basis, but do not include claim administration costs in our
estimated ultimate loss reserves. IBNR includes the provision for unreported claims, changes in case reserves, and future payments on reopened
claims.
Key variables and assumptions include (but are not limited to) loss development factors, trend factors and the expected loss rates/ratios
used. These loss development factors and trend factors are developed using our actual historical losses. It is possible that reasonable alternative
selections would produce materially different reserve estimates. We believe the estimates of future liability are reasonable based upon this
methodology; however, changes in key variables and assumptions, or generally in health care costs, accident frequency and severity could
materially affect the estimate for these reserves.
Income Tax Assets and Liabilities: We utilize estimates related to cash flow projections for the realization of deferred income tax assets.
The estimates are based upon recent operating results and budgets for future operating results. We consider the scheduled reversal of deferred
tax liabilities, projected future taxable income and tax planning strategies in this assessment.
We assess tax positions using a two-step process. A tax position is recognized if it meets a “more likely than not” threshold, and is
measured at the largest amount of benefit that is greater than 50 percent likely of being realized. We review uncertain tax positions at each
balance sheet date. Liabilities we record as a result of this analysis are recorded separately from any current or deferred income tax accounts,
and are classified as current (“Other accrued liabilities”) or long-term (“Other long-term liabilities”) based on the time until expected payment.
We assess the tax uncertainties on a quarterly basis and maintain the required tax reserves until the underlying issue is effectively settled or
upon the expiration of the statute of limitations. Our estimate of the potential outcome of any uncertain tax issue is highly subjective; however,
we believe we have adequately provided for any reasonable and foreseeable outcomes related to uncertain tax matters.
Goodwill: We perform an annual review for impairment in the fourth quarter of each fiscal year, or more frequently if events or
circumstances indicate that the carrying value may not be recoverable. Adverse industry or economic trends, lower projections of profitability,
or a sustained decline in our market capitalization, among other items, may be indications of potential impairment issues, which are triggering
events requiring the testing of an asset’s carrying value for recoverability.
Goodwill must be tested using a two-step impairment test. However, new guidance, we adopted early in the current year, now allows us to
assess qualitative factors to determine whether it is necessary to complete the two-step impairment test using a more likely than not criteria. If
an entity believes it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, including goodwill, the
two-step test can be bypassed. Qualitative factors include macroeconomic conditions, industry and market conditions, cost factors, overall
financial performance, among others. These factors require significant judgment and estimates, and application of alternative assumptions
could produce significantly different results. Evaluations of possible impairment utilizing the two-step approach require us to estimate, among
other factors, forecasts of future operating results, revenue growth, EBITDA margin, tax rates, capital expenditures, depreciation, working
capital, weighted average cost of capital, long-term growth rates, risk premiums, terminal values and fair market values of our reporting units
and assets. Changes in estimates or the application of alternative assumptions could produce significantly different results. There were no
impairments to goodwill for the year ended December 31, 2011 .
Share-based Compensation: Share-based payment expense is measured at the grant date based on the fair value of the award and is
recognized over the requisite service period. Determination of the fair values of share-based payment awards at the grant date requires
judgment; including estimating the expected term of the relevant share-based awards and the expected volatility of our stock. Additionally, we
must estimate the amount of share-based awards that are expected to be forfeited. The expected term of share-based awards represents the
period of time that the share-based awards are expected to be outstanding and was determined based on historical experience of similar awards,
giving consideration to the contractual terms of the awards, vesting schedules and expectation of future employee behavior. Any changes in
these highly subjective assumptions may significantly impact the stock-based compensation expense for the future.
Customer Loyalty Program: Our customer loyalty program, my choice , offers incentives to customers who gamble at certain of our
casinos. Customers earn points based on their level of play that may be redeemed for benefits such as cash back, shopping, dining, hotel stays,
or free credit that can be replayed in the slot machine or at table games. The reward credit balance will be forfeited if the customer does not
earn any reward credits over the prior six-month period. In addition, based on their level of play, customers can earn additional benefits without
redeeming points, such as a car lease, trip to Las Vegas, cruise or airfare reimbursement. We accrue a liability for the estimated cost of
providing these benefits as the benefits are earned. Estimates and assumptions are made regarding cost of providing the benefits, breakage
rates, and the mix of goods and services customers will choose. We use historical data to assist in the determination of these estimated accruals.
Changes in
43
Table of Contents
estimates or customer redemption habits could produce significantly different results.
Equity Method Investments: We apply equity method accounting for investments in the stock of corporations when we do not control the
investee, but have the ability to exercise significant influence over its operating and finance policies. Equity method investments are recorded at
cost, with the allocable portion of the investee's income or loss reported in earnings. During the year ended December 31, 2011 , we invested in
Asian Coast Development, Ltd. ("ACDL"), which investment will be accounted for as an equity method investment. Because the financial
statements of ACDL are not available in time to incorporate with our financial statements in the applicable time period, we record our allocable
share of income or loss on a one quarter lag.
We evaluate our investment in unconsolidated affiliates for impairment whenever events or changes in circumstances indicate that the
carrying value of our investment may have experienced an "other-than-temporary" decline in value. If such conditions exist, we would compare
the estimated fair value of the investment to its carrying value to determine if an impairment is indicated. In addition, we would determine if
the impairment is "other-than-temporary" based on our assessment of all relevant factors, including consideration of our intent and ability to
retain the investment. To estimate fair value, we would use a discounted cash flow analysis based on estimated future results of the investee
and market indicators of terminal year capitalization rates.
RECENTLY ISSUED AND ADOPTED ACCOUNTING STANDARDS
In April 2010, the Financial Accounting Standards Board ("FASB") issued authoritative accounting guidance for companies that generate
revenue from gaming activities that involve base jackpots, which guidance requires companies to accrue for a liability at the time the company
has the obligation to pay the jackpot and record such obligation as a reduction of gaming revenue accordingly. The guidance is effective for
interim and annual reporting periods beginning on or after December 15, 2010. We adopted this guidance effective January 1, 2011 and
reduced our progressive jackpot liability by approximately $4.0 million and recorded a corresponding credit to our beginning retained earnings
account.
In June 2011, the FASB issued authoritative guidance regarding comprehensive income. An entity has the option to present the total of
comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous
statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each
component of net income along with total net income, each component of other comprehensive income along with a total of other
comprehensive income, and a total amount for comprehensive income. This update eliminates the option to present the components of other
comprehensive income as part of the statement of shareholder's equity. The amendments in this new guidance do not change the items that
must be reported in comprehensive income or when an item of other comprehensive income must be reclassified to net income. This guidance
is effective for fiscal years and interim periods within those years beginning after December 15, 2011 with retrospective application. We intend
to adopt this guidance for the quarterly period ended March 31, 2012. The adoption is not expected to have a material impact on our
Consolidated Financial Statements.
In September 2011, the FASB issued authoritative guidance regarding annual goodwill impairment tests. This guidance will allow an
entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An
entity would be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is
more likely than not that its fair value is less than its carrying amount. This guidance is effective for annual and interim goodwill impairment
tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. We adopted this guidance during the fourth
quarter of 2011, and the adoption did not have a material impact on our Consolidated Financial Statements.
In September 2011, the FASB issued authoritative guidance regarding disclosures about an employer's participation in a multiemployer
plan. This amendment requires additional disclosures regarding the commitments that an employer has made to a multiemployer pension plan
and the potential future cash flow implications of an employer's participation in the plan. This guidance is effective for annual periods ending
after December 15, 2011. We adopted this guidance, and the adoption did not have a material impact on our Consolidated Financial Statements.
A variety of proposed or otherwise potential accounting standards are currently under review and study by standard-setting organizations
and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the
effect, if any, that the implementation of any such proposed or revised standards would have on our Consolidated Financial Statements.
44
Table of Contents
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
At times, we are exposed to market risk from adverse changes in interest rates with respect to the short-term floating interest rate on
borrowings under our Credit Facility. Under our Credit Facility, any borrowings outstanding accrue interest at LIBOR plus a margin
determined by our current consolidated leverage ratio, which margin was 2.5% as of December 31, 2011 . As of December 31, 2011 , we had
$56 million outstanding under the credit facility, and $11.1 million committed under various letters of credit. As of December 31, 2011 , if
LIBOR rates were to increase or decrease by one percentage point, our interest expense would increase or decrease by approximately $0.6
million, assuming constant debt levels and constant leverage under our credit agreement covenants.
The table below provides the principal cash flows and related weighted average interest rates by contractual maturity dates for our debt
obligations at December 31, 2011 . At December 31, 2011 , we did not hold any material investments in market-risk-sensitive instruments of
the type described in Item 305 of Regulation S-K.
Liabilities
Credit Facility
Rate
7.50% Notes (a)
Fixed rate
8.625% Notes
Fixed rate
8.75% Notes
Fixed rate
All Other
Avg. Interest rate
2012
$
$
$
$
$
—
2.80%
—
7.50%
—
8.625%
—
8.75%
111
3.57%
2013
$
$
$
$
$
—
2.80%
—
7.50%
—
8.625%
—
8.75%
115
3.57%
2014
$
$
$
$
$
—
2.80%
—
7.50%
—
8.625%
—
8.75%
120
3.57%
$
$
$
$
$
2015
2016
(in thousands)
—
$ 56,000
2.80%
2.80 %
375,000
$
—
7.50%
7.50 %
—
$
—
8.625%
8.625 %
—
$
—
8.75%
8.75 %
124
$
129
3.57%
3.57 %
Thereafter
$
$
$
$
$
—
2.80 %
—
7.50 %
450,000
8.625 %
350,000
8.75 %
54
3.57 %
$
$
$
$
$
Total
Fair Value
56,000
2.80 %
375,000
7.50 %
450,000
8.625 %
350,000
8.75 %
653
3.57 %
$
55,440
$
369,375
$
475,875
$
342,125
$
653
(a) Does not include $10.0 million in principal amount of our 7.50% Notes that we purchased in the open market in 2011. The notes have
been extinguished from an accounting perspective, although they remain outstanding from a legal perspective, and are held by a
subsidiary considered unrestricted under our Credit Facility and our bond indentures. We do not intend to re-sell the notes.
45
Table of Contents
Item 8.
Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of
Pinnacle Entertainment, Inc. and subsidiaries:
We have audited the accompanying consolidated balance sheets of Pinnacle Entertainment, Inc. and subsidiaries as of December 31, 2011 and
2010, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for each of the three years in the
period ended December 31, 2011. Our audits also included the financial statement schedule listed in the index at Item 15(a)2. These financial
statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Pinnacle
Entertainment, Inc. and subsidiaries at December 31, 2011 and 2010, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Pinnacle
Entertainment, Inc. and subsidiaries' internal control over financial reporting as of December 31, 2011, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
February 29, 2012 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Las Vegas, Nevada
February 29, 2012
46
Table of Contents
PINNACLE ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
For the year ended December 31,
2011
2010
2009
Revenues:
Gaming
Food and beverage
Lodging
Retail, entertainment and other
Total revenues
Expenses and other costs:
Gaming
Food and beverage
Lodging
Retail, entertainment and other
General and administrative
Depreciation and amortization
Pre-opening and development costs
Impairment of indefinite-lived intangible assets
Impairment of land and development costs
Impairment of buildings, riverboats and equipment
Write-downs, reserves and recoveries, net
Total expenses and other costs
$
Operating income
Interest expense, net of capitalized interest
Gain on sale of equity securities
Loss on early extinguishment of debt
Loss from equity method investment
Other non-operating income
Income (loss) from continuing operations before income taxes
Income tax benefit (expense)
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of income taxes
Net loss
$
Net loss per common share—basic
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of income taxes
Net loss per common share—basic
$
$
Net loss per common share—diluted
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of income taxes
Net loss per common share—diluted
$
$
Number of shares—basic
Number of shares—diluted
997,613
69,383
37,993
36,209
1,141,198
563,889
69,646
20,982
21,099
220,129
103,863
8,817
—
—
—
4,163
1,012,588
128,610
(95,705)
—
(183)
(588)
397
32,531
(2,335)
30,196
(32,735)
(2,539 )
$
0.49
(0.53)
(0.04 )
$
0.48
(0.52)
(0.04 )
$
61,989
62,467
See accompanying notes to the consolidated financial statements.
47
$
$
$
932,894
64,414
36,322
24,938
1,058,568
530,841
65,286
21,668
10,762
222,605
109,745
13,649
11,500
23,662
366
(3,701 )
1,006,383
52,185
(103,093 )
—
(1,852 )
—
226
(52,534 )
11,693
(40,841 )
17,422
(23,419 )
$
$
(0.67 )
0.29
(0.38 )
$
(0.67 )
0.29
(0.38 )
$
60,872
60,872
$
$
834,857
55,152
34,562
24,055
948,626
497,530
53,789
22,184
10,830
214,543
95,376
16,608
—
24,093
9,095
1,211
945,259
3,367
(70,327)
12,914
(9,467)
—
178
(63,335)
284
(63,051)
(195,251)
(258,302 )
(1.05 )
(3.25)
(4.30 )
(1.05 )
(3.25)
(4.30 )
60,056
60,056
Table of Contents
PINNACLE ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
December 31,
2011
2010
ASSETS
Current Assets:
Cash and cash equivalents
Accounts receivable, net of allowance for doubtful accounts of $4,718 and $2,777
Inventories
Prepaid expenses and other assets
Assets of discontinued operations held for sale
Total current assets
Restricted cash
Land, buildings, riverboats and equipment
Land and land improvements
Buildings, riverboats and improvements
Furniture, fixtures and equipment
Construction in progress
Land, building, riverboats and equipment, gross
Less: accumulated depreciation
Land, building, riverboats and equipment, net
Goodwill
Equity method investment
Intangible assets, net
Other assets, net
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable
Accrued interest
Accrued compensation
Accrued taxes
Other accrued liabilities
Deferred income taxes
Current portion of long-term debt
Liabilities of discontinued operations held for sale
Total current liabilities
Long-term debt less current portion
Other long-term liabilities
Deferred income taxes
Total liabilities
Commitments and contingencies (Note 11)
Stockholders’ Equity:
Preferred stock—$1.00 par value, 250,000 shares authorized, none issued or outstanding
Common stock—$0.10 par value, 100,000,000 authorized, 62,143,572 and 61,592,135 shares
outstanding, net of treasury shares
Additional paid-in capital
Retained deficit
Accumulated other comprehensive income
Treasury stock, at cost, for both periods 2,008,986 of treasury shares
Total stockholders’ equity
$
$
$
78,597
19,565
7,083
11,758
73,871
190,874
6,451
234,574
1,263,054
453,701
173,303
2,124,632
(609,603 )
1,515,029
52,562
97,795
18,516
69,392
1,950,619
46,135
21,270
39,801
18,769
50,544
2,426
111
2,923
181,979
1,223,874
21,944
3,430
1,431,227
—
6,416
1,043,358
(510,374 )
82
(20,090 )
519,392
$
$
$
194,925
18,638
6,364
16,484
97,071
333,482
6,452
236,680
1,243,085
435,645
46,910
1,962,320
(522,799 )
1,439,521
16,742
—
18,516
69,081
1,883,794
27,469
21,290
47,164
17,360
50,452
3,287
95
6,928
174,045
1,176,622
22,204
3,553
1,376,424
—
6,360
1,032,548
(511,798 )
350
(20,090 )
507,370
Total liabilities and stockholders' equity
$
See accompanying notes to the consolidated financial statements.
48
1,950,619
$
1,883,794
Table of Contents
PINNACLE ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(amounts in thousands)
Additional
Paid-In
Capital
Common
Stock
Balance as of January 1, 2009
$
6,199
$
999,419
Retained
Deficit
$
(230,077 )
Net loss
—
—
Foreign currency translation loss
—
—
—
Post-retirement benefit obligations
Total comprehensive loss
—
336
—
Share-based compensation
—
13,934
Common stock option exercises
10
544
Balance as of December 31, 2009
$
6,209
$
1,014,233
Net loss
—
Foreign currency translation loss
—
—
Post-retirement benefit obligations
Total comprehensive loss
—
226
Share-based compensation
—
Common stock option exercises
Common stock issuance
Balance as of December 31, 2010
$
$
—
(20,090 )
$
739,346
(258,302)
(2,294)
835
—
1,171
(259,425)
—
—
—
13,934
—
—
—
554
(2,294 )
$
(17,564 )
$
(20,090 )
$
494,409
—
—
(23,419)
—
17,079
—
17,079
—
835
—
1,061
(5,279)
6,306
—
—
—
6,306
139
10,715
—
—
—
10,854
12
1,068
—
—
—
1,080
6,360
(511,798)
—
(2,539)
Post-retirement benefit obligations
Total comprehensive loss
Adoption of jackpot liability
guidance (Note 1)
—
135
—
—
—
Share-based compensation
—
6,700
Common stock option exercises
50
6
6,416
$
(23,419)
1,032,548
$
$
—
(488,379 )
—
(16,105 )
Total
Stockholders'
Equity
Treasury
Stock
—
—
Balance as of December 31, 2011
$
(258,302)
Net loss
Common stock issuance
Accumulated
Other
Comprehensive
Income (Loss)
$
$
350
$
(20,090 )
$
507,370
—
—
(2,539)
(268 )
—
(133)
(2,672)
3,963
—
—
3,963
—
—
—
6,700
3,668
—
—
—
3,718
307
—
—
—
313
1,043,358
$
(510,374 )
$
82
See accompanying notes to the consolidated financial statements.
49
$
(20,090 )
$
519,392
Table of Contents
PINNACLE ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
2011
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash provided by operating activities:
$
Depreciation and amortization
For the year ended December 31,
2010
(2,539 )
$
105,499
Loss (gain) on disposal of assets
(23,419 )
$
114,083
2,892
2009
(258,302 )
105,157
(992)
1,735
Loss from equity method investment
588
—
—
Loss on early extinguishment of debt
183
1,852
9,467
Impairment of indefinite-lived intangible assets
Impairment of buildings, riverboats and equipment
Impairment of land and development costs
—
11,500
1,850
8,903
366
16,492
17,853
23,662
188,409
Amortization of debt issuance costs and debt discounts
5,238
6,695
6,533
Share-based compensation expense
6,700
6,306
13,934
Change in income taxes
(840)
(7,477)
5,925
Other operating activities
446
5,304
(58 )
—
—
(12,914 )
Gain on sale of equity securities
Changes in operating assets and liabilities:
Receivables, net
Prepaid expenses, inventories and other
Accounts payable, accrued expenses and other
Net cash provided by operating activities
Cash flows from investing activities:
Capital expenditures and land additions
(8,606)
(4,031)
3,700
9,276
(5,015)
2,617
(13,784)
(40,151)
35,690
131,809
88,683
120,235
(153,452)
(157,537)
(226,445 )
Equity method investment, inclusive of capitalized interest
(98,383)
Purchase of River Downs racetrack
(45,216)
—
—
—
—
3,675
14,901
428
Other investing activities
—
1,508
Proceeds from sale of equity securities
—
—
L'Auberge Baton Rouge escrow deposit
—
Proceeds from sale of property and equipment
(67 )
23,674
—
(25,000)
—
(293,376)
35,477
(130,651)
—
(202,410 )
Proceeds from Credit Facility
Repayments under Credit Facility
99,000
(43,000)
165,379
(202,298)
117,219
(232,066 )
Proceeds from issuance of long-term debt
Repayment of long-term debt
—
(10,104)
350,000
(200,008)
443,687
(215,979 )
3,717
10,854
—
(3,139)
1,080
(16,849)
—
(16,787 )
46,474
108,158
96,628
Net proceeds from sale of discontinued operations
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from common stock options exercised
Proceeds from issuance of common stock
Debt issuance and other financing costs
Net cash provided by financing activities
—
Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
554
(379)
(589 )
(115,093)
65,811
13,864
195,387
129,576
115,712
$
80,294
$
195,387
$
129,576
$
90,513
$
95,876
$
53,471
Supplemental Cash Flow Information:
Cash paid for interest, net of amounts capitalized
Cash payments (refunds) related to income taxes, net
(1,802)
7,305
Increase (decrease) in construction related deposits and liabilities
25,757
(30,032)
See accompanying notes to the consolidated financial statements.
127
14,935
50
Table of Contents
PINNACLE ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1—Summary of Significant Accounting Policies
Basis of Presentation and Organization. Pinnacle Entertainment, Inc. (“Pinnacle”) is an owner, operator and developer of casinos and
related hospitality and entertainment facilities. We operate casinos located Lake Charles, New Orleans and Bossier City, Louisiana (L’Auberge
Lake Charles, Boomtown New Orleans and Boomtown Bossier City), St. Louis, Missouri (River City Casino and Lumière Place Casino and
Hotels), and southeastern Indiana (Belterra Casino Resort). In addition, we own and operate a racetrack facility in Cincinnati, Ohio (River
Downs), which was purchased in January 2011 for approximately $ 45.2 million . We view each property as an operating segment, with the
exception of our properties located in St. Louis, Missouri, which are aggregated into the “St. Louis” reporting segment. References in these
footnotes to “Pinnacle,” the “Company,” “we,” “our” or “us” refer to Pinnacle Entertainment, Inc. and its subsidiaries, except where stated or
the context otherwise indicates.
We have classified certain of our assets and liabilities as held for sale in our Consolidated Balance Sheets and include the related results of
operations in discontinued operations. For further information, see Note 8, Discontinued Operations. Our Consolidated Statements of Cash
Flows have not been adjusted for discontinued operations.
We are also developing L'Auberge Baton Rouge in Baton Rouge, Louisiana, which we currently expect will open by Labor Day 2012.
However, the ultimate opening date is dependent upon the Mississippi River water levels and obtaining regulatory approvals, among other
factors.
On August 8, 2011, we closed on our agreement to acquire a 26% equity interest in Asian Coast Development (Canada) Ltd, a British
Columbia corporation for a total purchase price of $ 95 million . We also have a management agreement to manage a resort to be built in
Vietnam. For further details, see Note 7, Equity Method Investments.
Principles of Consolidation. The accompanying Consolidated Financial Statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") in the United States and the rules and regulations of the Securities and Exchange Commission
(“SEC”). The results for the periods reflect all adjustments that management considers necessary for a fair presentation of operating results.
The Consolidated Financial Statements include the accounts of Pinnacle Entertainment, Inc. and its subsidiaries. Investments in unconsolidated
affiliates which are 50% or less owned are accounted for under the equity method. All significant intercompany accounts and transactions have
been eliminated in consolidation.
Use of Estimates. The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make
estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at
the date of the consolidated financial statements, and (iii) the reported amounts of revenues and expenses during the reporting period. Estimates
used by us include, among other things, the estimated useful lives for depreciable and amortizable assets, the estimated allowance for doubtful
accounts receivable, estimated income tax provisions, the evaluation of the future realization of deferred tax assets, determining the adequacy
of reserves for self-insured liabilities and our my choice customer loyalty program, estimated cash flows in assessing the recoverability of
long-lived assets, asset impairments, goodwill and intangible assets, contingencies and litigation, and estimates of the forfeiture rate and
expected life of share-based awards and stock price volatility when computing share-based compensation expense. Actual results may differ
from those estimates.
Fair Value. Fair value measurements affect our accounting and impairment assessments of our long-lived assets, investments in
unconsolidated affiliates, assets acquired in an acquisition, goodwill, and other intangible assets. Fair value measurements also affect our
accounting for certain financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date and is measured according to a hierarchy that includes:
"Level 1" inputs, such as quoted prices in an active market for identical assets or liabilities; "Level 2" inputs, which are observable inputs for
similar assets; or "Level 3" inputs, which are unobservable inputs.
We measure our liability for deferred compensation on a recurring basis. As of December 31, 2011 , our liability for deferred
compensation had a balance and fair value of $1.3 million and was valued using Level 1 inputs.
During 2011, certain of our assets related to our Boomtown Reno operations and our Atlantic City operations, included in assets of
discontinued operations held for sale, were measured on a non-recurring basis in connection with our impairment analysis, which is further
discussed in Note 8, Discontinued Operations.
51
Table of Contents
Cash and Cash Equivalents. Cash and cash equivalents totaled approximately $ 78.6 million and $ 194.9 million at December 31, 2011
and 2010 , respectively. Cash equivalents are highly liquid investments with an original maturity of less than three months and are stated at the
lower of cost or market value and are valued using Level 1 inputs.
Accounts Receivable. Accounts receivable consist primarily of casino, hotel and other receivables. We extend casino credit to approved
customers in states where it is permitted following background checks and investigations of creditworthiness. Accounts receivable are
non-interest bearing and are initially recorded at cost. We have estimated an allowance for doubtful accounts of $ 4.7 million and $ 2.8 million
as of December 31, 2011 and 2010 , respectively, to reduce receivables to their carrying amount, which approximates fair value. The allowance
for doubtful accounts is estimated based upon, among other things, collection experience, customer credit evaluations and the age of the
receivables. Bad debt expense totaled $2.9 million , $1.1 million , and $2.2 million for the years ended December 31, 2011, 2010, and 2009,
respectively.
Inventories. Inventories, which consist primarily of food, beverage and operating supplies, are stated at the lower of cost or market value.
Costs are determined using the first-in, first-out and the weighted average methods.
Restricted Cash. Long-term restricted cash of $6.5 million as of December 31, 2011 and 2010 consists primarily of an indemnification
trust deposit of approximately $ 5.7 million , among other items.
Land, Buildings, Riverboats and Equipment. Land, buildings, riverboats and equipment are stated at cost. Land includes land not
currently being used in our operations, which totaled $ 30.3 million at December 31, 2011 and $ 34.9 million at December 31, 2010 . We
capitalize the costs of improvements that extend the life of the asset. Construction in progress at December 31, 2011 relates primarily to our
L'Auberge Baton Rouge project.
Depreciation expense
$
For the year ended December 31,
2011
2010
2009
(in millions)
103.7
$
109.6
$
95.2
We expense maintenance and repairs costs as incurred. Gains or losses on the dispositions of land, buildings, riverboats or equipment are
included in the determination of income. We depreciate our land improvements, buildings, riverboats and equipment using the straight-line
method over the shorter of the estimated useful life of the asset or the related lease term, as follows:
Years
5 to 35
15 to 35
10 to 25
3 to 20
Land improvements
Buildings and improvements
Vessels
Furniture, fixtures and equipment
We review the carrying value of land, buildings, riverboats and equipment for impairment whenever events and circumstances indicate that
the carrying value of an asset may not be recoverable from estimated future undiscounted cash flows expected to result from its use and
eventual disposition. In cases where the carrying value exceeds fair value, an impairment charge is recognized equal to an amount by which the
carrying value exceeds the fair value of the asset. The factors considered by management in performing this assessment include current
operating results, trends and prospects, as well as the effect of obsolescence, demand, competition and other economic factors. In estimating
expected future cash flows for determining whether an asset is impaired, assets are grouped at the reporting unit level, which for most of our
assets is the individual casino. If a long-lived asset is to be sold, the asset is reported at the lower of carrying value or fair value. See Note 2,
Land, Buildings, Riverboats and Equipment, for further explanation.
Goodwill and Indefinite-lived Intangible Assets. Goodwill and other indefinite-lived intangible assets are subject to an annual assessment
for impairment during the fourth quarter, or more frequently if there are indications of possible impairment, by applying a fair-value-based test.
Goodwill consists of the excess of the acquisition cost over the fair value of the net assets acquired in business combinations. In January
2011, we recorded goodwill totaling $35.8 million related to the purchase of River Downs. There were no impairments to goodwill in 2011 ,
2010 or 2009.
Indefinite-lived intangible assets consist of gaming licenses. We recorded an impairment to indefinite-lived intangible assets of $11.5
million for the year ended December 31, 2010 . See Note 9, Goodwill and Indefinite-Lived Intangible Assets.
52
Table of Contents
Debt Issuance Costs and Debt Discounts. Debt issuance costs include costs incurred in connection with the issuance of debt and are
capitalized and amortized to interest expense using the effective interest method. Unamortized debt issuance costs were $31.2 million and
$32.1 million at December 31, 2011 and 2010 , respectively, and are included in “Other assets, net” on our Consolidated Balance Sheets.
Debt discounts incurred in connection with the issuance of debt have been capitalized and are being amortized to interest expense using the
effective interest method. Amortization of debt issuance costs and debt discounts included in interest expense was $5.2 million , $6.7
million and $6.5 million for the years ended December 31, 2011 , 2010 and 2009 , respectively.
Self-Insurance Accruals. We are self-insured up to certain limits for costs associated with general liability, workers’ compensation and
employee health coverage. Insurance claims and reserves include accruals of estimated settlements for known claims, legal costs related to
settling such claims and accruals of actuarial estimates of incurred but not reported claims. At December 31, 2011 and 2010 , we had total
self-insurance accruals of $14.8 million and $16.9 million , respectively, which are included in “Other accrued liabilities” in our Consolidated
Balance Sheets. In estimating these accruals, we consider historical loss experience and make judgments about the expected level of costs per
claim. We believe the estimates of future liability are reasonable based upon our methodology; however, changes in health care costs, accident
frequency and severity could materially affect the estimate for these liabilities.
The mychoice Customer Loyalty Program. Our customer loyalty program, my choice , offers incentives to customers who gamble at
certain of our casinos. Customers earn points based on their level of play that may be redeemed for benefits such as cash back, shopping,
dining, hotel stays, or free credit that can be replayed in the slot machines or at table games. The reward credit balance will be forfeited if the
customer does not earn any reward credits over the prior six-month period. In addition, based on their level of play, customers can earn
additional benefits without redeeming points, such as a car lease, trip to Las Vegas, cruise or airfare reimbursement. We accrue a liability for
the estimated cost of providing these benefits as the benefits are earned. Estimates and assumptions are made regarding cost of providing the
benefits, breakage rates, and the mix of goods and services customers will choose. We use historical data to assist in the determination of
estimated accruals. Changes in estimates or customer redemption habits could produce significantly different results. At December 31, 2011
and 2010, we had accrued $10.8 million and $9.5 million , respectively, for the estimated cost of providing these benefits. Such amounts are
included in "Other accrued liabilities" in our Consolidated Balance Sheets.
Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included
the enactment date. Valuation allowances are provided against deferred tax assets when it is deemed more likely than not that some portion or
all of the deferred tax asset will not be realized within a reasonable time period. We assess tax positions using a two step process. A tax
position is recognized if it meets a "more likely than not" threshold, and is measured at the largest amount of benefit that is greater than 50
percent of being realized. Uncertain tax positions are reviewed each balance sheet date. Liabilities recorded as a result of this analysis are
classified as current or long-term based on the timing of expected payment. See Note 4, Income Taxes, for additional information.
Revenue Recognition. Gaming revenues consist of the net win from gaming activities, which is the difference between amounts wagered
and amounts paid to winning patrons, with liabilities recognized for funds deposited by customers before gaming play occurs and for chips in
the customers’ possession. Gaming revenues are reduced by the cash value of my choice points and coin coupon offerings. Food and beverage,
lodging, retail, entertainment, and other operating revenues are recognized as products are delivered or services are performed.
The retail value of food and beverage, lodging and other services furnished to guests on a complimentary basis is included in gross
revenues and then deducted as promotional allowances. The estimated cost of providing such promotional allowances is primarily included in
casino expenses. Complimentary revenues that have been excluded from the accompanying Consolidated Statements of Operations for the
years ended December 31, 2011 , 2010 and 2009 , and the cost to provide such benefits were as follows:
Complimentary revenues
Promotional allowance costs
$
$
53
For the year ended December 31,
2011
2010
2009
(in millions)
105.6
$
101.2
$
96.4
70.0
$
68.0
$
68.5
Table of Contents
Gaming Taxes. We are subject to taxes based on gross gaming revenues in the jurisdictions in which we operate, subject to applicable
jurisdictional adjustments. These gaming taxes are an assessment of our gaming revenues and are recorded as a gaming department expense in
the Consolidated Statements of Operations. These taxes for the years ended December 31, 2011 , 2010 and 2009 were as follows:
Gaming taxes
$
For the year ended December 31,
2011
2010
2009
(in millions)
297.6
$
281.5
$
255.6
Advertising Costs. We expense advertising costs the first time the advertising takes place. These costs are included in gaming expenses in
the accompanying Consolidated Statements of Operations. In addition, advertising costs associated with development projects are included in
pre-opening and development costs until the project is completed. These costs for the years ended December 31, 2011 , 2010 and 2009 consist
of the following:
Advertising costs in gaming expenses
Advertising costs in pre-opening and development costs
$
$
For the year ended December 31,
2011
2010
2009
(in millions)
22.6
$
21.6
$
22.1
0.6
$
3.0
$
1.3
Pre-opening and Development Costs. Pre-opening costs consist of payroll costs to hire, employ and train the workforce prior to opening
an operating facility; marketing campaigns prior to and commensurate with opening; legal and professional fees related to the project but not
otherwise attributable to depreciable assets; lease payments; real-estate taxes and similar costs prior to opening. Development costs include
master planning, conceptual design fees and general and administrative costs related to our projects. Pre-opening and development costs are
expensed as incurred and for the fiscal years ended December 31, 2011 , 2010 and 2009 consist of the following:
L'Auberge Baton Rouge
Sugarcane Bay
River City
Other
Total pre-opening and development costs
$
$
For the year ended December 31,
2011
2010
2009
(in millions)
4.3
$
1.2
$
5.8
0.3
1.5
2.0
0.2
9.9
8.0
4.0
1.0
0.8
8.8
$
13.6
$
16.6
Comprehensive Loss. Comprehensive loss is the sum of the net loss and other comprehensive loss, which includes translation adjustments,
unrealized loss on marketable securities available for sale and post-retirement plan benefit obligations.
Net loss
Foreign currency translation gain (loss) (a)
Post-retirement benefit obligations, net of income taxes (b)
Comprehensive loss
$
$
For the year ended December 31,
2011
2010
2009
(in millions)
(2.5 )
$
(23.4 )
$
(258.3 )
—
17.1
(2.3 )
(0.1)
1.1
1.2
(2.6 )
$
(5.2 )
$
(259.4 )
(a) Foreign currency translation gain (loss) relates to our Argentina operations, which were sold during the year ended December 31,
2010.
(b) Included in the balance are benefit obligations related to both the executive deferred compensation plan and directors’ health and
medical plan, both of which are discussed in Note 6, Employee Benefit Plans.
54
Table of Contents
Share-based Compensation: We measure the cost of awards of equity instruments to employees based on the grant-date fair value of the
award. The grant-date fair value is determined using the Black-Scholes model. The fair value, net of estimated forfeitures, is amortized as
compensation cost on a straight-line basis over the vesting period. See Note 6, Employee Benefit Plans.
Earnings per Share. Diluted earnings per share reflects the addition of potentially dilutive securities, which include in-the money stock
options, restricted stock units and phantom stock units. We calculate the effect of dilutive securities using the treasury stock method. A total of
4,116,600 , 4,853,914 , and 5,186,910 out-of-money stock options were excluded from the calculation of diluted earnings per share for the
years ended December 31, 2011, 2010 and 2009, respectively, because including them would have been anti-dilutive.
For the years ended December 31, 2010 and 2009 , we recorded a net loss from continuing operations. Accordingly, the potential dilution
from the assumed exercise of stock options is anti-dilutive. As a result, basic earnings per share is equal to diluted earnings per share for such
years and options and securities that could potentially dilute basic earnings per share in the future that were not included in the computation of
diluted earnings per share were 620,556 and 1,126,340 , respectively.
Reclassifications. Certain reclassifications of prior year amounts have been made to conform to the December 31, 2011 presentation,
including discontinued operations. These reclassifications had no effect on our net income (loss) as previously reported.
Recently Issued Accounting Pronouncements
In April 2010, the Financial Accounting Standards Board ("FASB") issued authoritative accounting guidance for companies that generate
revenue from gaming activities that involve base jackpots, which guidance requires companies to accrue for a liability at the time the company
has the obligation to pay the jackpot and record such obligation as a reduction of gaming revenue accordingly. The guidance is effective for
interim and annual reporting periods beginning on or after December 15, 2010. We adopted this guidance effective January 1, 2011 and
reduced our progressive jackpot liability by approximately $4.0 million and recorded a corresponding credit to beginning retained earnings.
In June 2011, the FASB issued authoritative guidance regarding comprehensive income. An entity has the option to present the total of
comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous
statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each
component of net income along with total net income, each component of other comprehensive income along with a total of other
comprehensive income, and a total amount for comprehensive income. This update eliminates the option to present the components of other
comprehensive income as part of the statement of shareholder's equity. The amendments in this new guidance do not change the items that
must be reported in comprehensive income or when an item of other comprehensive income must be reclassified to net income. This guidance
is effective for fiscal years and interim periods within those years, beginning after December 15, 2011, with retrospective application. We
intend to adopt this guidance for the quarterly period ended March 31, 2012. The adoption is not expected to have a material impact on our
Consolidated Financial Statements.
In September 2011, the FASB issued authoritative guidance regarding annual goodwill impairment tests. This guidance will allow an
entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An
entity would be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is
more likely than not that its fair value is less than its carrying amount. This guidance is effective for annual and interim goodwill impairment
tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. We adopted this guidance during the fourth
quarter of 2011, and the adoption did not have a material impact on our Consolidated Financial Statements.
In September 2011, the FASB issued authoritative guidance regarding disclosures about an employer's participation in a multiemployer
plan. This amendment requires additional disclosures regarding the commitments that an employer has made to a multiemployer pension plan
and the potential future cash flow implications of an employer's participation in the plan. This guidance is effective for annual periods ending
after December 15, 2011. We adopted this guidance, and the adoption did not have a material impact on our Consolidated Financial Statements.
A variety of proposed or otherwise potential accounting standards are currently under review and study by standard-setting organizations
and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the
effect, if any, that the implementation of any such proposed or revised standards would have on our Consolidated Financial Statements.
55
Table of Contents
Note 2—Land, Buildings, Riverboats and Equipment
Impairment of land and development costs: We review our long-term assets for impairment whenever events or circumstances indicate that
the carrying value may not be recoverable. During the year ended December 31, 2011, we recorded no impairment charges related to land and
development costs in continuing operations.
During the year ended December 31, 2010, we recorded impairment charges related to our Sugarcane Bay and our Baton Rouge projects.
In April 2010, we canceled our planned Sugarcane Bay project in Lake Charles, Louisiana and surrendered the related gaming license to the
Louisiana Gaming Control Board. In connection with this decision, we recorded impairment charges of $19.1 million , which includes all
previously capitalized construction in progress and costs to terminate the construction contract with the general contractor. In September 2010,
we expanded the scope and budget for our casino and hotel development currently under construction in Baton Rouge, Louisiana, and as a
result, we incurred an impairment charge for certain of the previously capitalized design components of the project, totaling $4.6 million .
During 2009, we re-evaluated the scope and design of our Sugarcane Bay and Baton Rouge projects. As a result of these changes,
previously capitalized development costs of $20.9 million associated with the prior Sugarcane Bay design were fully impaired and certain of
the capitalized design components of the Baton Rouge project totaling $0.7 million were impaired.
In 2009, we determined a triggering event had occurred for excess land held in St. Louis, Missouri. As a result, we tested the land for
recoverability using a sales comparison approach. As a result of these tests, we recorded impairment charges of $2.1 million .
Impairment of buildings, riverboats and equipment: We review our long-term assets for impairment whenever events or circumstances
indicate that the carrying value may not be recoverable. During the year ended December 31, 2011, we recorded no impairment charges related
to buildings, riverboats and equipment in continuing operations.
During 2010, we incurred asset impairment charges related to the value of obsolete gaming equipment in the normal course of business
totaling $0.4 million .
During 2009, we listed our corporate jet for sale. We incurred an impairment charge of $8.7 million as the carrying amount exceeded the
fair value. The jet was subsequently sold.
Note 3—Long-Term Debt
Long-term debt at December 31, 2011 and 2010 consisted of the following:
December 31,
2011
Senior Secured Credit Facility
8.75% Senior Subordinated Notes due 2020
8.625% Senior Notes due 2017
7.50% Senior Subordinated Notes due 2015
Other secured and unsecured notes payable
$
Less current maturities
$
(in millions)
56.0
$
350.0
445.1
372.2
0.7
1,224.0
(0.1 )
1,223.9
$
2010
—
350.0
444.5
381.5
0.7
1,176.7
(0.1 )
1,176.6
Senior Secured Credit Facility: On August 2, 2011, we entered into the Fourth Amended and Restated Credit
Agreement ("Credit Facility"), which matures in August 2016. We increased the revolving credit commitment to $410 million
from $375 million . As of December 31, 2011 , we had $56 million in borrowings outstanding under the Credit Facility, and had
$11.1 million committed under letters of credit.
The Credit Facility matures on August 2, 2016. The date will be accelerated to December 15, 2014 if any portion of our 7.50% senior
subordinated notes due 2015 ("7.50% Notes") are outstanding on December 15, 2014. Currently, $385.0 million of aggregate principal amount
of our 7.50% Notes are outstanding; however, one of our wholly-owned unrestricted subsidiaries purchased $10.0 million of the 7.50% Notes
in the open market during 2011. The Credit Facility does not have any debt
56
Table of Contents
repayment obligations prior to maturity. We are obligated to make mandatory prepayments of indebtedness under the Credit Facility from the
net proceeds of certain debt offerings, certain asset sales and dispositions and certain casualty events, subject in certain cases to our right to
reinvest proceeds. In addition, we will be required to prepay borrowings under the Credit Facility with a percentage of our “excess cash flow”
(as defined in the Credit Facility, and reduced for cash flow applied to permitted capital spending). We do not believe such payments will be
required in the foreseeable future. We have the option to prepay all or any portion of the indebtedness under the Credit Facility at any time
without premium or penalty.
The interest rate margins for revolving credit loans under the Credit Facility depend on our performance, measured by a consolidated total
leverage ratio, which, in general, is the ratio of consolidated total debt (less excess cash, as defined in the Credit Facility) to annualized
adjusted EBITDA, as defined in the Credit Facility. The Credit Facility bears interest, at our option, at either a LIBOR rate plus a margin
ranging from 1.75% to 3.50% or at a base rate plus a margin ranging from 0.25% to 2.00% , in either case based on our consolidated total
leverage ratio. The undrawn revolver facility bears a commitment fee for unborrowed amounts of 0.25% to 0.75% per annum based on our
consolidated total leverage ratio.
The Credit Facility has, among other things, financial covenants and other affirmative and negative covenants. As of December 31, 2011,
the Credit Facility requires compliance with the following ratios: (1) maximum consolidated total leverage ratio of 7.25 to 1.00 ; (2) minimum
consolidated interest coverage ratio of 1.50 to 1.00 ; and (3) maximum consolidated senior secured debt ratio of 2.75 to 1.00 . In addition, the
Credit Facility has covenants that limit the amount of senior unsecured debt we may incur to $1.5 billion , unless our maximum consolidated
total leverage ratio is less than 6.00 to 1.00 . As of December 31, 2011, we are in compliance with each of these ratios, and compliance with
these ratios does not have a material impact on our financial flexibility, including our ability to incur new indebtedness.
The obligations under the Credit Facility are secured by most of our assets and the assets of our domestic restricted subsidiaries, including
a pledge of the equity interests in our domestic subsidiaries (except where such pledge is prohibited by gaming regulations) and, if and when
formed or acquired, by a pledge of up to 66% of the then-outstanding equity interests of our foreign restricted subsidiaries. Our obligations
under the Credit Facility are also guaranteed by our existing and future domestic restricted subsidiaries and are required to be guaranteed by our
foreign restricted subsidiaries, if and when such foreign restricted subsidiaries are formed or acquired, unless such guarantee causes material
adverse tax, foreign gaming or foreign law consequences. Subsidiaries that own approximately $15.0 million in cash and cash equivalents as of
December 31, 2011, our subsidiary that holds our investment in ACDL, our subsidiary that owns the $10.0 million in 7.50% Notes, our
Atlantic City subsidiaries and each of our foreign subsidiaries are currently unrestricted subsidiaries for purposes of the Credit Facility.
The Credit Facility provides for customary events of default with corresponding grace periods, in most cases, including payment defaults,
cross defaults with certain other indebtedness to third parties, breaches of covenants and bankruptcy events. In the case of a continuing default,
the lenders may, among other remedies, accelerate payment of all obligations due from the borrowers to the lenders, charge the borrowers a
default rate of interest on all then-outstanding or thereafter incurred obligations, and terminate the lenders' commitments to make any further
loans or issue any further letters of credit. In the event of certain defaults, the commitments of the lenders will be automatically terminated and
all outstanding obligations of the borrowers will automatically become due. In addition, the lenders may take possession of, and enforce the
borrowers' rights with respect to, the borrowers' collateral, including selling the collateral.
8.75% Senior Subordinated Notes due 2020: In May 2010, we issued $350 million in aggregate principal amount of 8.75% senior subordinated
notes due 2020 (“8.75% Notes”). The 8.75% Notes were issued at a price equal to par with interest payable on May 15th and November 15th.
Net of the initial purchasers' fees and various costs and expenses, proceeds from the offering were approximately $341.5 million .
8.625% Senior Notes due 2017: In August 2009, we issued $450 million in aggregate principal amount of 8.625% senior unsecured notes
due 2017 (“8.625% Notes”). The 8.625% Notes were issued at a price of 98.597% of par, to yield 8.875% to maturity, with interest payable on
August 1st and February 1st. Net of the original issue discount, initial purchasers’ fees and various costs and expenses, net proceeds from the
offering were approximately $434 million .
The 8.625% Notes are senior unsecured obligations and rank equally in right of payment with all of our existing and future senior debt,
including debt under our Credit Facility. The 8.625% Notes are, however, effectively subordinated to our Credit Facility, which is secured by a
first priority lien, as well as any other secured debt which may be issued in the future. The 8.625% Notes are guaranteed on a senior basis by
certain of our current and future domestic restricted subsidiaries. The 8.625% Notes rank senior to our existing 7.50% senior subordinated
notes due 2015 (“7.50% Notes”) and to our 8.75% Notes.
7.50% Senior Subordinated Notes due 2015: In June 2007, we issued $385 million in aggregate principal amount of 7.50% Notes, which
notes were issued at 98.525% of par, with interest payable on June 15th and December 15th. During 2011, a
57
Table of Contents
wholly-owned unrestricted subsidiary made open market purchases, at par and from cash on hand, of $10.0 million of our outstanding 7.50%
Notes. The $10.0 million in principal amount of notes has been extinguished from an accounting perspective, and remain outstanding from a
legal perspective. We do not intend to re-sell these notes. As of December 31, 2011 , the aggregate principal amount of 7.50% Notes
outstanding is $385 million .
The 7.50% Notes and 8.75% Notes are unsecured senior subordinated obligations and rank subordinate in right of payment to all of our
and our subsidiary guarantors' existing and future indebtedness, except indebtedness that expressly provides that it ranks equal or subordinate
in right of payment to the 7.50% Notes and 8.75% Notes. The 7.50% Notes and 8.75% Notes are guaranteed on a senior subordinated basis by
certain of our current and future domestic restricted subsidiaries. The 7.50% Notes and the 8.75% Notes are subordinated to our 8.625% Notes
and to our Credit Facility.
Under the indenture governing the 8.625% Notes, among other debt baskets, we are permitted to incur the greater of $750.0 million or 3.5x
Consolidated EBITDA (as defined in the indenture) in senior indebtedness and secured indebtedness, which debt basket excludes the 8.625%
Notes. Under the indentures governing the 7.50% Notes and 8.75% Notes, we are permitted to incur the greater of $1.5 billion or 2.5x
Consolidated EBITDA (as defined in the indentures) in senior indebtedness. Under these senior secured indebtedness baskets, we are permitted
in certain circumstances to incur senior unsecured indebtedness. In addition, the indentures governing the 8.625% Notes, the 7.50% Notes and
the 8.75% Notes include other debt incurrence baskets, including a permitted refinancing basket and a general debt basket, the most restrictive
of which permits the greater of $250.0 million or 5% of Consolidated Total Assets (as defined in the indentures). Under all three indentures, we
may also incur additional indebtedness if, after giving effect to the indebtedness proposed to be incurred, our Consolidated Coverage Ratio
(essentially, a ratio of adjusted EBITDA to interest) for a trailing four-quarter period on a pro forma basis (as defined in the indentures) would
be at least 2.0 to 1.0. Our Consolidated Coverage Ratio (as defined in the indentures) under all three indentures was above 2.0 to 1.0 as of
December 31, 2011 .
The 8.625% Notes, the 8.75% Notes, and the 7.50% Notes are redeemable, at our option, in whole or in part, on the following dates, at the
following redemption prices (expressed as percentages of par value). All of our notes are redeemable prior to such times at a price that reflects
a yield to the first call that is equivalent to the applicable Treasury bond yield plus 0.5 percentage points.
8.75% Notes Redeemable
On or after
At a % of
May 15,
par equal to
2015
104.375%
2016
102.917%
2017
101.458%
2018 and thereafter
100.000%
8.625% Notes Redeemable
On or after
At a % of
August 1,
par equal to
2013
104.313%
2014
102.156%
2015 and thereafter
100.000%
7.50% Notes Redeemable
On or after
At a % of
June 15,
par equal to
2011
103.750%
2012
101.875%
2013 and thereafter
100.000%
Our indentures governing our Credit Facility, our 8.75% Notes, 8.625% Notes, and 7.50% Notes limit the amount of dividends we are
permitted to pay.
Interest expense, net of capitalized interest was as follows:
Interest expense before capitalization of interest
Less capitalized interest
Interest expense, net of capitalized interest
$
$
For the year ended December 31,
2011
2010
2009
(in millions)
106.0
$
107.1
$
84.0
(10.3)
(4.0)
(13.7)
95.7
$
103.1
$
70.3
Interest expense is capitalized on internally constructed assets at our overall weighted average cost of borrowing. Capitalized interest
increased in 2011 as compared to 2010 due to our Baton Rouge project and our investment in Asian Coast Development, Ltd ("ACDL"). We
began capitalizing interest on our Baton Rouge project during the fourth quarter of 2010. In addition, we have capitalized interest on our
investment in ACDL, as ACDL has not begun its principal operations, which consists of the Ho Tram Strip beachfront complex of integrated
resorts and residential developments in southern Vietnam. ACDL currently has activities in progress to commence these planned operations,
and is using all funds to acquire assets for the future operations. Once ACDL opens Phase 1 of this development, which is expected to occur in
2013, the investment will no longer qualify for capitalization of interest. The decrease in capitalized interest in 2010 as compared to 2009 was
due to the opening of our River City Casino in March 2010.
58
Table of Contents
Loss on early extinguishment of debt was as follows:
Loss on early extinguishment of debt
$
For the year ended December 31,
2011
2010
2009
(in millions)
0.2
$
1.9
$
9.5
During 2011, we recorded a loss on early extinguishment of debt related to the ratable write-off of unamortized deferred financing fees and
original debt issuance costs associated with our open market purchases of our 7.50% Notes, discussed above.
During 2010, we incurred a loss on early extinguishment of debt related to the write off of unamortized debt issuance costs related to the
modification of our then-existing credit facility and the early retirement of our 8.25% senior subordinated notes due 2012, which were
redeemed with the proceeds of our 8.75% Notes.
During 2009, we issued our 8.625% Notes, discussed above, and used much of the net proceeds to retire early other outstanding
indebtedness. We incurred a loss on early extinguishment of debt related to call or tender premiums, unamortized debt issuance costs and other
costs associated with the retired debt.
Fair Value of Financial Instruments: The estimated fair value of our senior notes and senior subordinated notes was based on Level 2
inputs using quoted market prices on or about December 31, 2011 and December 31, 2010 , and the fair value of our credit facility was based
on Level 2 inputs using estimated fair values of comparable debt instruments on or about December 31, 2011 . The estimated fair value versus
book value of our long-term debt is as follows:
For the year ended December 31,
2011
2010
(in millions)
$
1,243.5
$
1,239.2
$
1,231.7
$
1,185.7
Fair value of long term debt
Book value of long term debt
Scheduled Maturities of Long-term debt: As of December 31, 2011 , annual maturities of secured and unsecured notes payable are as
follows (amounts shown in millions):
Year ending December 31:
2012
2013
2014
2015
2016
Thereafter
$
Less unamortized debt discounts
Long-term debt, including current portion
$
59
0.1
0.1
0.1
375.1
56.1
800.1
1,231.6
(7.7 )
1,223.9
Table of Contents
Note 4—Income Taxes
The composition of our income tax expense (benefit) from continuing operations for the years ended December 31, 2011 , 2010 and 2009
was as follows:
Current
Year ended December 31, 2011:
U.S. Federal
State
$
$
Year ended December 31, 2010:
U.S. Federal
State
$
$
Year ended December 31, 2009:
U.S. Federal
State
$
$
Deferred
(in millions)
—
3.5
3.5
$
(21.2 )
(2.3)
(23.5 )
$
3.2
6.9
10.1
$
$
$
$
Total
(1.5 )
0.3
(1.2 )
$
14.9
(3.1)
11.8
$
(9.4 )
(1.0)
(10.4 )
$
(1.5 )
3.8
2.3
$
(6.3 )
(5.4 )
(11.7 )
$
(6.2 )
5.9
(0.3 )
$
The following table reconciles our effective income tax rate from continuing operations to the federal statutory tax rate of 35% :
2011
Percent
Federal income tax benefit at the statutory
rate
State income taxes, net of federal tax benefits
Non-deductible expenses and other
Forfeiture of equity compensation
Non-deductible donation of land
Dividend income from foreign subsidiary
Reversal of reserves for unrecognized tax
benefits
Credits
Change in valuation allowance/reserve of
deferred tax assets
Income tax (benefit) expense from continuing
operations
35.0 %
14.9 %
2.7 %
3.7 %
3.5 %
—%
Amount
11.4
4.8
0.8
1.2
1.2
—
(35.0)%
(5.8)%
1.4 %
—%
—%
3.5 %
(1.7)%
(3.7)%
(0.5)
(1.2)
(47.2)%
7.2 %
$
2010
Percent
Amount
(dollars in millions)
$
Amount
(18.4 )
(3.0)
0.7
—
—
1.8
(35.0)%
4.6 %
2.6 %
—%
—%
—%
(4.1)%
(13.7)%
(2.1)
(7.2)
1.9 %
(3.1)%
1.2
(2.0)
(15.4)
31.4 %
16.5
28.6 %
18.1
2.3
(22.3)%
(11.7 )
(0.4)%
60
$
2009
Percent
$
$
$
(22.1 )
2.9
1.6
—
—
—
(0.3 )
Table of Contents
The following table shows the allocation of income tax (expense) benefit between continuing operations, discontinued operations and
equity:
Income (loss) from continuing operations before income taxes
Income tax benefit (expense) allocated to continuing operations
Income (loss) from continuing operations
Income (loss) from discontinued operations before income taxes
Income tax benefit (expense) allocated to discontinued operations
Income (loss) from discontinued operations
Net loss
$
Income tax benefit allocated to additional paid in capital
Income tax benefit (expense) allocated to other comprehensive income
$
$
$
61
For the year ended December 31,
2011
2010
2009
(in millions)
32.5
$
(52.5 )
$
(63.4 )
(2.3 )
11.7
0.3
30.2
(40.8 )
(63.1)
(32.9 )
27.1
(192.3)
0.2
(9.7 )
(3.0)
(32.7 )
17.4
(195.3)
(2.5 )
$
(23.4 )
$
(258.3 )
—
0.2
$
$
—
—
$
$
—
—
Table of Contents
At December 31, 2011 and 2010 , the tax effects of temporary differences that gave rise to significant portions of the deferred tax assets
and deferred tax liabilities were:
December 31,
2011
2010
(in millions)
Deferred tax assets—current:
Workers’ compensation insurance reserve
Allowance for doubtful accounts
Legal and merger costs
Other
Less valuation allowance
Total deferred tax assets—current
Deferred tax liabilities—current:
Prepaid expenses
Other
Total deferred tax liabilities—current
Net current deferred tax liabilities
$
$
Deferred tax assets—non-current:
Federal tax credit carry-forwards
Federal net operating loss carry-forwards
State net operating loss carry-forwards
Capital loss carry-forward
Los Angeles Revitalization Zone tax credits
Deferred compensation
Pre-opening expenses capitalized for tax purposes
Unrealized loss on equity securities
Share-based compensation expense—book cost
Land, building, riverboats and equipment, net
Other
Less valuation allowance
Total deferred tax assets—non-current
Deferred tax liabilities—non-current:
Intangible assets
Total deferred tax liabilities—non-current:
Net non-current deferred tax liabilities
$
$
2.6
3.0
2.7
7.5
(15.1)
0.7
(3.2)
—
(3.2)
(2.5 )
28.3
77.3
11.7
6.4
—
2.9
10.9
(0.4)
12.1
31.6
11.2
(190.3)
1.7
(5.1)
(5.1)
(3.4 )
$
3.8
2.2
4.5
6.9
(17.2)
0.2
(3.2)
(0.2)
(3.4)
(3.2 )
$
$
21.2
71.7
9.9
6.5
4.3
4.6
10.1
(0.3)
16.5
45.8
6.5
(196.3)
0.5
(4.1)
(4.1)
(3.6 )
$
The following table summarizes the total deferred tax assets and total deferred tax liabilities provided in the previous table:
December 31,
2011
Total deferred tax assets
Less valuation allowances
Less total deferred tax liabilities
Net deferred tax liabilities
$
$
(in millions)
207.7
$
(205.4 )
(8.2 )
(5.9 )
$
2010
214.2
(213.4)
(7.6)
(6.8 )
As of December 31, 2011, we provided a full valuation allowance against deferred tax assets for all jurisdictions except for certain states
that are more likely than not to be realized. In evaluating the need for a valuation allowance, we consider all sources of taxable income
available to realize the deferred tax asset, including the future reversal of existing temporary differences, forecasts of future taxable income,
and tax planning strategies. Authoritative guidance provides that “forming a conclusion that a valuation allowance is not needed is difficult
when there is negative evidence such as cumulative losses in recent years,” and places considerably more weight on historical results and less
weight on future projections. We have a
62
Table of Contents
cumulative U.S. pretax accounting loss for the years 2009 through 2011. Considering all available evidence both positive and negative, and in
light of the cumulative losses in recent years, we determined that a full valuation allowance was appropriate.
As of December 31, 2011 , our tax filings reflected available Alternative Minimum Tax (“AMT”) credit carry-forwards of $3.1 million ,
General Business Credit (“GBC”) carry-forwards of $14.7 million and Foreign Tax Credit (“FTC”) carry-forwards of $10.4 million . The FTC
and GBC carry-forwards will begin to expire in 2020 through 2030, while the AMT credits can be carried forward indefinitely to reduce future
regular tax liabilities. As of December 31, 2011 , we had $230 million of federal net operating losses, which can be carried forward 20 years
and will expire in 2028. We also have $241.2 million of state net operating loss carry-forwards, predominantly in Louisiana and New Jersey,
which expire on various dates beginning in 2012. Our net operating loss carry-forwards include an $ 8.9 million excess tax benefit from stock
option deductions, which have not been recognized for financial statement purposes. The excess tax benefit will be credited to additional
paid-in capital when the net operating loss is utilized and reduces current-year income tax payable.
We file income tax returns in federal and state jurisdictions and are no longer subject to federal income tax examinations for tax years prior
to 2009 and state income tax examinations for tax years prior to 2000. In 2010, our federal tax return was examined by the Internal Revenue
Service for the years 2006 through 2008, and the audit was concluded with no adjustment. In 2008, the Indiana Department of Revenue
commenced an income tax examination of our Indiana income tax filings for the 2005 to 2007 period. See Note 11, Commitments and
Contingencies.
As of December 31, 2011 , we had $3.0 million of uncertain tax benefits that, if recognized, would impact the effective tax rate.
Authoritative guidance requires companies to accrue interest and related penalties, if applicable, on all tax positions for which reserves have
been established consistent with jurisdictional tax laws. We recognize accrued interest and penalties related to uncertain tax benefits as a
component of income tax expense. During 2011 , we accrued approximately $0.1 million of interest related to unrecognized tax benefits which
consists of current year accrual for uncertain tax benefits offset by the write-offs of previously accrued interest for uncertain tax benefits that
were recognized in 2011. We had $0.7 million of cumulative interest accrued as of the end of the year. No penalties were accrued for in any
years. It is reasonably possible that the total amounts of unrecognized tax benefits may increase from zero to approximately $4.0 million during
the next twelve months.
The following table summarizes the activity related to uncertain tax benefits for 2011 and 2010 , excluding any interest or penalties:
2011
Balance at January 1
Gross increases - tax positions in prior periods
Gross decreases - tax positions in prior periods
Gross increases (decreases) - tax positions in current period
Statute of limitation expirations
Balance as of December 31
$
$
63
2010
(in millions)
8.2
$
1.0
(0.1 )
0.2
(1.6 )
7.7
$
19.5
—
(8.3 )
(0.6 )
(2.4 )
8.2
Table of Contents
Note 5—Lease Obligations
We have certain long-term operating lease obligations, including corporate office space, land at various locations, water bottom leases in
Louisiana, and office and gaming equipment. Minimum lease payments required under operating leases that have initial terms in excess of one
year as of December 31, 2011 are as follows (amounts are reflected in millions):
Period:
2012
2013
2014
2015
2016
Thereafter
$
$
8.7
8.8
8.3
8.0
8.2
493.7
535.7
Total rent expense for these long-term lease obligations for the years ended December 31, 2011 , 2010 and 2009 was $9.9 million , $11.9
million and $11.7 million , respectively.
We lease approximately 148 of the 315 acres that our Belterra Casino Resort occupies in southern Indiana. The lease period is 50 years
total, including an initial five-year lease term with nine consecutive five-year automatic renewal periods. The current lease term is through
September 2015 and has seven remaining renewal periods. The lease currently provides for minimum annual rental payments of approximately
$1.4 million , plus 1.5% of gross gaming win (as defined in the lease agreement) in excess of $100 million . We also have the option to
purchase the land on or after October 2020 for $30 million , subject to adjustments as defined in the lease agreement.
We lease the 242 acres underlying our L’Auberge Lake Charles property. The lease has an initial term of 10 years, which commenced in
May 2005, with six renewal options of 10 years each. The annual base rent for the lease is approximately $955,000 per year, which amount
adjusts annually for changes in the consumer price index.
We lease the 56 acres that our River City Casino occupies in St. Louis, Missouri. The lease has a term of 99 years, which commenced in
September 2005. The annual rent for the lease is the greater of $4.0 million or 2.5% of annual adjusted gross receipts, as defined in the lease
agreement.
We lease approximately 41,000 square feet of corporate office space in Las Vegas, Nevada at a base rent of approximately $1.3 million per
year. The lease is for 10 years beginning October 2006, subject to one renewal term of 60 additional months. The annual rent increases based
on increases in the consumer price index. Additionally, we also lease approximately 9,900 square feet of corporate office space in Las Vegas,
Nevada at a base rent of approximately $0.5 million per year. The lease expires in June 2014. We abandoned this office space in 2010 and
accrued $0.7 million as of December 31, 2010 as the fair value of the future costs expected to be incurred without economic benefit.
We are a party to a number of cancellable slot participation and some table game participation arrangements at our various casinos that are
customary for casino operations. The slot arrangements generally consist of either a fixed-rent agreement on a per-day basis or a percentage of
each slot machine’s gaming revenue, generally payable at month-end. Slot and table game participation expense included in Gaming Expense
on the Consolidated Statements of Operation was as follows:
Slot and table game participation expenses
$
64
For the year ended December 31,
2011
2010
2009
(in millions)
19.6
$
22.2
$
17.9
Table of Contents
Note 6—Employee Benefit Plans
Share-based Compensation: Our 2005 Equity and Performance Incentive Plan (the “2005 Plan”) allows us to grant stock options, stock
appreciation rights, restricted stock, restricted stock units and other performance awards to officers, employees and consultants. The 2005 Plan
permits the issuance of up to 5.9 million shares of the Company’s common stock. Grants of stock options or stock appreciation rights are
counted against the 5.9 million share limit as one share for every one share granted. All other awards under the 2005 Plan are counted against
the share limit as 1.4 shares for every one share granted.
In addition to the 2005 Plan, we have three prior stock option plans ("Prior Plans") which provided for the issuance of up to approximately
4.4 million shares of the Company’s common stock. In addition, in 2008 and 2010, in order to recruit our executive officers, we granted options
outside of the 2005 Plan and the Prior Plans for the purchase of 850,000 common shares, all of which remained outstanding as of December 31,
2011 . Pursuant to our 2011 Annual Incentive Plan, as adopted under the 2005 Plan, 25% of our executive officers' bonuses are payable in
restricted stock units, and such executive officers may elect to receive an additional 25% of their bonus in restricted stock units.
As of December 31, 2011 , we have approximately 5.3 million share-based award outstanding, approximately 0.2 million of which are
restricted stock units and other share-based awards. There were approximately 2.0 million share-based awards available for grant under the
various plans as of December 31, 2011 .
Stock options : Options are granted at the current market price at the date of grant. The following table summarizes information related to
our common stock options under the Stock Option Plans:
Number of Stock
Options
Options outstanding at January 1, 2011
Granted
Exercised
Canceled / Forfeited
Options outstanding at December 31, 2011
Vested or expected to vest at December 31, 2011
Options exercisable at December 31, 2011
5,604,916
1,406,108
(462,369)
(1,211,726)
5,336,929
2,202,681
2,553,822
Weighted Average
Exercise Price
$
$
$
$
$
$
$
13.69
13.12
8.18
9.56
12.84
11.55
14.30
Weighted Average
Remaining Contractual
Term
(in years)
6.23
7.13
5.23
Aggregate Intrinsic
Value
(in millions)
$
$
$
2.3
1.0
1.1
The following information is provided for our stock options:
Weighted-average grant date fair value
Intrinsic value of stock options exercised
Net cash proceeds from exercise of stock options
$
$
$
For the year ended December 31,
2011
2010
2009
(in millions, except grant date fair value)
6.65
$
5.73
$
6.77
3.0
$
7.2
$
0.1
3.7
$
10.9
$
0.6
Unamortized compensation costs not yet expensed related to stock options granted totaled approximately $14.3 million at December 31,
2011 and the weighted average period over which the costs are expected to be recognized is approximately three years.
65
Table of Contents
Non-vested Shares: The status of our non-vested shares, which include restricted stock units and other share based awards, as of
December 31, 2011 was as follows:
Number of Shares
Non-vested shares at January 1, 2011
Granted
Vested
Canceled / Forfeited
Non-vested shares at December 31, 2011
320,325
124,726
(175,281)
(44,800)
224,970
Weighted Average
Fair Value
$
$
$
$
$
10.40
13.30
11.35
9.18
11.51
Unamortized compensation costs not yet expensed related to non-vested shares totaled approximately $2.0 million at December 31, 2011
and the weighted average period over which the costs are expected to be recognized is approximately three years.
Compensation cost: We use the Black-Scholes option-pricing model in order to calculate the compensation costs of employee
share-based compensation. Such model requires the use of subjective assumptions, including the expected life of the option, the expected
volatility of the underlying stock, and the expected dividend on the stock.
In computing the share-based compensation, the following is a weighted average of the assumptions used:
Risk-Free
Interest Rate
Options granted in the following periods:
2011
2010
2009
Expected Life
at Issuance
1.8%
2.8%
3.0%
5.14 years
6.6 years
6.7 years
Expected
Volatility
56.7%
58.4%
60.3%
Expected
Dividends
None
None
None
The expected volatility was derived from an analysis of both the historic actual volatility of our common stock and the implied volatilities
of traded options in our common stock. Future volatility may be substantially less or greater than the expected volatility. We do not currently
pay dividends, and we do not anticipate that dividends will be paid within the average expected life of existing options. U.S. Treasury rates
with similar maturities are used as the proxy for the risk-free rate. Market disruptions over the past year have caused U.S. Treasuries to trade at
historically low rates, augmenting the values calculated using the Black-Scholes model. The expected life at issuance is based on our
experience as to the average historical term of option grants that were exercised, canceled or forfeited. The total compensation costs recognized
were as follows:
Share-based compensation expense
$
For the year ended December 31,
2011
2010
2009
(in millions)
6.6
$
6.1
$
13.5
401(k)Plan: We maintain the Pinnacle Entertainment, Inc. 401(k) Investment Plan (the “401(k) Plan”). The 401(k) Plan is an employee
benefit plan subject to the provisions of the Employee Retirement Income Security Act of 1974, and is intended to be a qualified plan under
Section 401(a) of the Internal Revenue Code of 1986. Participants of the 401(k) Plan may contribute up to 100% of pretax income, subject to
the legal limitation of $16,500 for 2011 . In addition, participants who are age 50 or older may make an additional contribution to the 401(k)
Plan, commonly referred to as a “catch-up” contribution, equal to $5,500 for 2011 . We offer discretionary matching contributions under the
401(k) Plan, which vest ratably over five years, of a 25% discretionary match, up to 5% of eligible compensation. For the years ended
December 31, 2011 , 2010 and 2009 , matching contributions to the 401(k) Plan totaled $1.5 million , $1.4 million ,and $1.4 million ,
respectively.
Director Phantom Stock Units: As part of their 2009 annual retainer, each director received $10,000 worth of phantom stock units on the
date of the annual meeting of stockholders. Each phantom stock unit is the economic equivalent of one share of our common stock. Units of
phantom stock are payable in common stock following the director’s cessation of service as a director for any reason. In addition, any director
can elect to receive phantom stock units in lieu of payment of an annual retainer and board fees under the Company's Directors Deferred
Compensation Plan. Phantom stock units are fully expensed when granted.
66
Table of Contents
Executive Deferred Compensation Plan: We maintain an Executive Deferred Compensation Plan (the “Executive Plan”), which allows
certain highly compensated employees to defer, on a pre-tax basis, a portion of their annual base salary and bonus. Participation in the
Executive Plan is limited. A participant is at all times fully vested in his or her contributions, as well as any attributable appreciation or
depreciation thereof. We do not make matching contributions to the Executive Plan for the benefit of participating employees and the payment
of benefits under the plan is an unsecured obligation. The total obligation under the Executive Plan and the cash surrender value of insurance
policies are as follow:
December 31,
2011
Total obligation under Executive Plan (a)
Cash surrender value of insurance policies (b)
(a)
Recorded in "Other Long-Term Liabilities" in the Consolidated Balance Sheets.
(b)
Recorded in "Other assets, net" in the Consolidated Balance Sheets.
$
$
2010
(in millions)
7.5
$
(2.2 )
$
9.3
(2.2 )
Director's Medical Plan: In February 2007, the Board of Directors approved a directors’ health and medical plan designed to provide
health and medical insurance benefits comparable to those provided to corporate executives (the “Directors’ Medical Plan”). To the extent that
a covered individual has other insurance or Medicare coverage, the benefits under the Company’s coverage would be supplemental to those
otherwise provided. The Directors’ Medical Plan covers directors and their dependents while the director is in office and provides benefits for
those directors who leave the board after age 70 and their dependents and for directors in office at the time of a change in control and their
dependents for a period of five years. At present, four members of the Board of Directors are over age 70. The benefit obligation is
approximately $0.4 million and $0.3 million for years ended December 31, 2011 and 2010 , respectively, and is recorded in “Other Long-Term
Liabilities” in the Consolidated Balance Sheets.
Note 7— Equity Method Investments
We apply equity method accounting for investments in the stock of corporations when we do not control the investee, but have the ability
to exercise significant influence over its operating and finance policies. Equity method investments are recorded at cost, with the allocable
portion of the investee's income or loss reported in earnings, and adjusted for capital contributions to and distributions from the investee.
Distributions in excess of equity method earnings, if any, are recognized as a return of investment and recorded as investing cash flows in the
Consolidated Statement of Cash Flows.
During the year ended December 31, 2011 , we invested $95.0 million in Asian Coast Development, Ltd. ("ACDL"), in exchange for a
26% ownership interest, which will be accounted for under the equity method. Because the financial statements of ACDL are not available in
time to incorporate with our financial statements in the applicable time period, we record our allocable share of income or loss on a one quarter
lag. During the year ended December 31, 2011, our proportional share of ACDL's losses totaled $0.6 million . As such, summarized financial
information of ACDL is not contained within these Consolidated Financial Statements.
Our purchase price of $95.0 million exceeds the underlying equity in the net book assets of ACDL, as the fair value of the gaming license
and the potential future growth of ACDL exceeds their current book value. The portion of this difference attributable to the fair value of the
gaming license will be amortized over the term of the gaming license, or 50 years, which amortization will be included in our determination of
income or loss from equity method investments. The portion of this difference attributable to equity method goodwill will not be amortized.
We review our investment for impairment whenever events or changes in circumstances indicate that the carrying value of our investment may
have experienced an "other-than-temporary" decline in value. If such conditions exist, we would compare the estimated fair value of the
investment to its carrying value to determine if an impairment is indicated. In addition, we would determine if the impairment is
"other-than-temporary" based on our assessment of all relevant factors, including consideration of our intent and ability to retain the
investment. To estimate fair value, we would use a discounted cash flow analysis based on estimated future results of the investee and market
indicators of terminal year capitalization rates.
ACDL is the owner and developer of the Ho Tram Strip beachfront complex of destination integrated resorts and residential developments
in southern Vietnam. The first phase of the Ho Tram Strip, MGM Grand Ho Tram, is currently under construction with a planned opening in
2013. The second integrated resort of the Ho Tram Strip, for which we secured a management agreement in conjunction with our investment,
will be jointly developed by Pinnacle and ACDL, and owned by ACDL. We expect the second integrated resort will be similar in project scope
to the MGM Grand Ho Tram resort currently
67
Table of Contents
under construction.
We have capitalized interest on our investment in ACDL, as ACDL has not begun its principal operations. ACDL currently has activities
in progress to commence these planned operations, and is using all funds to acquire assets for the future operations. Once ACDL opens the first
phase of this operation, the investment will no longer qualify for capitalization of interest. Capitalized interest on this investment was $3.4
million for the year ended December 31, 2011.
Note 8—Discontinued Operations
Discontinued operations for December 31, 2011 , 2010 and 2009 consist of our Boomtown Reno operations, our Atlantic City operations,
our former President Casino operations, our former Casino Magic Argentina operations, our former Casino Magic Biloxi operations and the
former operations at The Casino at Emerald Bay in The Bahamas.
Boomtown Reno: In November 2011, we entered into a definitive agreement to sell our Boomtown Reno operations, which sale is expected to
close in 2012. The proceeds from the transaction are expected to be approximately $12.9 million , with the potential for an additional $3.8
million if an option granted to the buyer is exercised to purchase our membership interest in PNK (Reno), LLC and additional land adjacent to
Boomtown Reno. We will operate Boomtown Reno until the transaction closes. We expect no significant on-going costs with this operation
after the transaction closes. In addition, we are currently marketing the additional excess land adjacent to our property as for sale. We have
reflected the business as discontinued operations and the related assets and liabilities as held for sale. A disposal group classified as held for
sale should be measured at the lower of its carrying value or the fair value less cost to sell. The fair value of the assets to be sold was
determined using a market approach using Level 3 inputs, as defined in Note 1, Summary of Significant Accounting Policies. As the carrying
value of Boomtown Reno exceeded the fair value, less costs to sell, we recognized an impairment charge of $11.9 million in 2011.
Atlantic City : In the first quarter of 2010, we made the decision to sell our Atlantic City operation. Since that time, we have actively
marketed our operation, however, events and circumstances beyond our control have extended the period to complete the sale of this operation
beyond one year. We have continued to reflect the business as discontinued operations and the related assets and liabilities as held for sale.
During the second quarter of 2011, we determined a triggering event had occurred due to the extended time frame in which our operation
has been listed for sale and the market conditions in Atlantic City. We reviewed the carrying value of both our land and our New Jersey Casino
Reinvestment Development Authority ("CRDA") investments. We tested the carrying value of our land holdings for recoverability using a
sales comparison approach and Level 3 inputs, and based on these tests, recorded an impairment charge of $4.9 million during 2011. We tested
the recoverability of our CRDA investments using an income approach and both Level 2 and Level 3 inputs, and based on these tests, recorded
an impairment charge of $9.4 million in 2011.
In the fourth quarter of 2011, we settled our litigation related to the Madison House, and settled all obligations under the existing lease. In
addition, in December 2011, we reached a settlement on property tax appeals with the City of Atlantic City. As part of the settlement, the
assessed value of our land in Atlantic City has been reduced on a go forward basis and we were awarded a property tax refund of $8.2 million ,
for which we recorded a gain and an associated receivable as of December 31, 2011. We collected the refund in February 2012.
During 2009, we determined that a triggering event had occurred for our land held in Atlantic City due to the continuing economic
downturn of the gaming market in Atlantic City. We tested the carrying value of our land holdings for recoverability using a sales comparison
approach, and based on the results of these tests recorded impairment charges of $160.0 million during 2009.
President Casino : We closed the President Casino on June 24, 2010, and in October 2010, we sold the Admiral Riverboat, on which the
President Casino formerly operated. Other than minimal costs associated with former employee obligations, we expect no continuing costs
from this operation.
During 2009, due to poor historical performance and prospective financial outlook, we determined there was a triggering event requiring
review of the President Casino assets. Using a combination of the market and cost approach, we determined certain land holdings were
impaired and recorded impairment charges of $1.4 million during the fourth quarter of 2009. In addition, as result of our 2009 annual review of
indefinite-lived intangible assets, we fully impaired the gaming license related to the President Casino, which resulted in an impairment charge
of $1.9 million for the year ended December 31, 2009.
Casino Magic Argentina : In June 2010, we completed the sale of our Argentina operations for approximately $40 million
68
Table of Contents
and recognized a loss on disposal of approximately $0.2 million . We expect no material continuing costs from this operation.
Casino Magic Biloxi : Casino Magic Biloxi closed after experiencing significant damage from Hurricane Katrina in 2005. In February
2010, we settled all remaining insurance claims in exchange for a final payment of approximately $23.4 million . We have received payments
totaling approximately $215 million from our insurers related to this asset. Prior insurance advances that exceeded the book value of destroyed
assets and certain insured expenses were recorded as a deferred gain of $18.3 million . As a result of this final settlement, we recognized this
deferred gain in February 2010 in addition to the gain associated with the proceeds. We have no further outstanding insurance claims related to
Hurricane Katrina.
The Casino at Emerald Bay : The Casino at Emerald Bay in The Bahamas was closed during the first quarter of 2009. In February 2011,
we completed the sale of the final asset, resulting in a gain of $0.1 million . We expect no continuing costs from this entity.
Revenue, expense and net income for entities and operations included in discontinued operations are summarized as follows:
Revenues
Operating loss
Other non-operating income, including interest income
Interest expense
Income (loss) before income taxes
Income tax expense
Income (loss) from discontinued operations
$
$
For the year ended December 31,
2011
2010
2009
(in millions)
39.6
$
69.2
$
97.5
(33.0)
(14.5)
(192.2)
0.1
41.6
0.2
—
(0.1)
(0.2)
(32.9)
27.1
(192.3)
0.2
(9.7)
(3.0)
(32.7 )
$
17.4
$
(195.3 )
Net assets for entities and operations included in discontinued operations are summarized as follows:
December 31,
2011
2010
(in millions)
Assets:
Property and equipment, net
Other assets, net
Total assets
$
Liabilities:
Total liabilities
Net Assets
69
$
$
54.4
19.5
73.9
$
72.1
25.0
97.1
$
$
2.9
71.0
$
$
6.9
90.2
Table of Contents
Note 9—Goodwill and Indefinite-lived Intangible Assets
Goodwill. Goodwill consists of the excess of the acquisition cost over the fair value of the net assets acquired in business combinations.
Goodwill is subject to an annual assessment for impairment during the fourth quarter, or more frequently if there are indications of possible
impairment. In 2011, we early adopted new guidance that allows us to first assess qualitative factors to determine whether it is more likely than
not that the fair value is less than carrying value. If we determine it is more likely than not that the fair value is less than carrying value, we
utilize the two-step impairment test to identify any potential goodwill impairments and measure the amount of goodwill impairment to be
recognized, if any.
There were no impairments to goodwill for the years ended December 31, 2011 , 2010 or 2009. In January 2011, we recorded goodwill
totaling $35.8 million related to the purchase of River Downs.
Our goodwill balance includes the following:
Boomtown New
Orleans
Original value
Accumulated impairment charges
Net book value at December 31, 2011
$
$
16.8
—
16.8
River Downs
(in millions)
$
35.8
—
$
35.8
Total
$
52.6
—
52.6
$
Indefinite-Lived Intangible Assets. Indefinite-lived intangible assets include gaming licenses, which are reviewed for impairment annually
during the fourth quarter, or more frequently if events or circumstances indicate that the carrying value may not be recoverable. As the result of
the cancellation of our planned Sugarcane Bay project, we surrendered the related gaming license to the Louisiana Gaming Control Board. In
connection with this decision, we fully impaired our gaming license by $11.5 million during the second quarter of 2010, which amount
comprises impairment of indefinite-lived intangible assets in the Consolidated Statements of Operations for the year ended December 31, 2010.
During the fourth quarter of 2009, we fully impaired the gaming license related to our President Casino, which resulted in an impairment
charge of $1.9 million for the year ended December 31, 2009, which amount is included in discontinued operations.
Our indefinite-lived intangible assets include the following:
Boomtown
Bossier City
Original value
Accumulated impairment charges
Net book value at December 31, 2011
$
$
10.0
—
10.0
L'Auberge Baton
Rouge
$
8.5
—
8.5
$
Sugarcane Bay
(a)
(in millions)
$
11.5
(11.5 )
$
—
(a) Project was canceled and gaming license returned to the Louisiana Gaming Control Board.
(b) Entity is included in discontinued operations.
70
President Casino
(b)
$
$
1.9
(1.9 )
—
Total
$
$
31.9
(13.4 )
18.5
Table of Contents
Note 10—Write-downs, reserves and recoveries, net
Write-downs, reserves and recoveries consist of the following :
Loss on disposal of assets, net
Impairment of assets
Legal settlement expense (recoveries)
Write-downs, reserves and recoveries, net
$
$
For the year ended December 31,
2011
2010
2009
(in millions)
3.4
$
2.6
$
1.2
0.4
0.2
—
0.4
(6.5)
—
4.2
$
(3.7 )
$
1.2
Loss on disposal of assets, net: In October 2011, we entered into an agreement with the Port of Lake Charles in relation to the
cancellation of the lease for our canceled project, Sugarcane Bay. We exchanged land parcels and received a parcel of land that exceeded the
value of the land we gave up. In addition, we will receive $2.5 million of rent credits on our future L'Auberge Lake Charles lease payments.
We recorded a gain of $3.2 million as a result of these transactions in 2011. In April 2011, we donated land with a book value of $5.7 million to
the City of Lake Charles, Louisiana, and recognized a loss accordingly. In addition, we realized a gain on the sale of a warehouse and the sale
of unused houses. The remainder of the loss on disposal of assets for the year ended December 31, 2011 relates to the disposal of slot machines
and other equipment in the normal course of business. During 2010, we sold our corporate jet, two seaplanes and a warehouse and disposed of
various slot equipment at our properties for a net loss of $2.6 million . During 2009, we sold and disposed of slot machines and equipment at
our properties for losses of $1.2 million .
Impairment of assets: In 2011, we incurred an impairment charge related to previously capitalized costs associated with projects that will not be
pursued. In 2010, we incurred an impairment loss related to sales tax incremental bonds. In April 2010, we purchased $5.3 million face amount
of these bonds for $5.0 million . During the second quarter of 2010, we recorded an impairment of $0.2 million related to these bonds. In 2011,
there were no events or circumstances that indicated that the carrying value may not be recoverable.
Legal settlement expense (recoveries): In 2011, we paid $0.4 million in regards to a legal settlement. In 2010, we received a $6.5 million
legal settlement related to the recovery of legal fees.
Note 11—Commitments and Contingencies
Guaranteed Maximum Price Agreement for L'Auberge Baton Rouge: On April 5, 2010, we entered into an Agreement for Guaranteed
Maximum Price Construction Services with a general contractor for the construction of L'Auberge Baton Rouge. In May 2011, we entered into
an amendment to the agreement, which, among other things, provides that the contractor will complete the construction of the casino for the
total guaranteed maximum price of approximately $229 million , and currently provides for a guaranteed date of substantial completion of May
31, 2012, which we expect to amend for a later date. We expect L'Auberge Baton Rouge to open by Labor Day 2012. The guaranteed
maximum price set by the amendment to the agreement is a portion of the total budget for the project. Due to construction disruption and
previously unanticipated site preparation work, we expect the construction budget to increase by up to 3.0% to $368 million from the prior
budget of $357 million .
Redevelopment Agreement: In connection with our Lumière Place Casino and Hotel ("Lumière Place"), we have a redevelopment
agreement which, among other things, commits us to oversee the investment of $50.0 million in residential housing, retail or mixed-use
developments in the City of St. Louis within five years of the opening of Lumière Place. Such investment can be made with partners and
partner contributions and project debt financing, all of which count toward the $50.0 million investment commitment. To date, we have
invested or committed in partnership with other parties certain projects the provide us with approximately $13 million in credits toward
investments under the redevelopment agreement. The redevelopment agreement also contains certain contingent payments in the event of
certain defaults. If we and any development partners collectively fail to invest $50.0 million in residential housing, retail, or mixed-use
developments within five years of the opening of the casino and hotels, we would be obligated to pay a service fee of $1.0 million , less
applicable credits, in year six and $2.0 million annually thereafter, adjusted by the change in the consumer price index. In addition, we are also
obligated to pay an annual fee of $1.0 million to the City of St. Louis, which obligation began after our River City Casino opened in March
2010.
Lease and Development Agreement for River City Casino : In connection with our River City Casino, we have a lease and development
agreement with the St. Louis County Port Authority, which, among other things, commits us to lease 56 acres for
71
Table of Contents
99 years (subject to certain termination provisions). We have invested the minimum requirement of $375 million , pursuant to the agreement.
From April 1, 2010 through the expiration of the term of the lease and development agreement, we are required to pay to St. Louis County as
annual rent the greater of (a) $4.0 million , or (b) 2.5% of annual adjusted gross receipts, as that term is defined in the lease and development
agreement. We are also required to invest an additional $75 million in the second phase of the project to construct: (a) a hotel with a minimum
of 200 guestrooms, (b) a meeting room/event space with at least 10,000 square feet, and (c) a parking garage with a minimum of 1,600 parking
spaces. We are required to achieve substantial completion of the second phase by October 31, 2013. In the event the second phase is not
substantially complete by October 31, 2013, we are required to pay liquidated damages of $2.0 million beginning on November 1, 2013. In
each subsequent year that the second phase is not opened, the amount of liquidated damages increases by $1.0 million , hence, $3.0 million in
2014, $4.0 million in 2015, $5.0 million in 2016 and $6.0 million in 2017. As a result, the maximum amount of liquidated damages that we
would have to pay if the second phase is not completed is $20.0 million .
Self-Insurance: We self-insure various levels of general liability and workers' compensation at all of our properties and medical coverage at
most of our properties. Insurance reserves include accruals for estimated settlements for known claims, as well as accruals for estimates of
claims not yet made. At December 31, 2011 and 2010 , we had total self-insurance accruals of $14.8 million and $16.9 million , respectively,
which are included in “Other accrued liabilities” in our Consolidated Balance Sheets.
Indiana Tax Dispute : In 2008, the Indiana Department of Revenue (“IDR”) commenced an income tax examination of the Company's
Indiana income tax filings for the 2005 to 2007 period. In February 2010, the Company received a notice of proposed adjustment from the field
agent in the amount of $7.3 million , excluding interest and penalties of $2.3 million , challenging the treatment of income and gain from
certain asset sales outside of Indiana, which we reported on our Indiana state tax returns for the years 2000 through 2007. In March 2010, the
Company timely filed a protest with the IDR requesting abatement of all tax, interest and penalties. In September 2010, a hearing was held with
the IDR where the Company restated significant facts and positions which the Company believed the field agent had not taken into
consideration in issuing the assessment. On March 30, 2011, the IDR issued a letter of finding which denied all issues protested in the hearing,
but sustained the Company's request to waive penalties. On April 28, 2011, the Company timely filed a rehearing request of which the IDR
promptly granted. A rehearing was conducted on June 22, 2011, with the Company presenting additional clarifying facts and technical support
for our tax positions. The IDR has 60 days to review the additional data presented and will issue its supplemental findings. As of the date of
these financial statements, the Company is still awaiting the issuance of the supplemental findings.
Redemption of Securities Owned By an Unsuitable Person: Our certificate of incorporation grants us the power to redeem our securities or
the securities of our affiliated companies from a person who owns or controls these securities if: (a) that person is determined by a
governmental gaming authority to be unsuitable to own or control these securities, or (b) that person causes us or any of our affiliated
companies to lose or be threatened with the loss of any gaming license or, in the sole discretion of our Board of Directors, that person is
deemed likely to jeopardize our right to conduct gaming activities in any of the jurisdictions in which we conduct gaming activities.
Under the foregoing circumstances, we may redeem, and may be required by the applicable gaming authority, to redeem, that person's
securities to the extent required by the gaming authority or deemed necessary or advisable by us. The redemption price will be determined by
the gaming authority or otherwise will be a price deemed reasonable by us, which in our discretion could be the original purchase price or the
then current trading price of the securities. Furthermore, we may pay the redemption price in cash, by promissory note, or both, as required by
the gaming authority or otherwise as we elect.
Other: We are a party to a number of pending legal proceedings. Management does not expect that the outcome of such proceedings,
either individually or in the aggregate, will have a material effect on our financial position, cash flows or results of operations.
72
Table of Contents
Note 12—Consolidating Condensed Financial Information
Our subsidiaries (excluding a subsidiary that owns 26.0% of the equity in ACDL; a subsidiary with approximately $10.5 million in cash and
cash equivalents as of December 31, 2011; a subsidiary with approximately $4.5 million in cash and cash
equivalents as of December 31, 2011 ; a subsidiary that owns $10.0 million in principal amount of 7.50% Notes; and certain non-material
subsidiaries) have fully, unconditionally, jointly and severally guaranteed the payment of all obligations under our senior and senior
subordinated notes, as well as our Credit Facility. Our Atlantic City subsidiaries do not guarantee our Credit Facility. Separate financial
statements and other disclosures regarding the subsidiary guarantors are not included herein because management has determined that such
information is not material to investors. In lieu thereof, we include the following:
Pinnacle
Entertainment,
Inc.
100% Owned
NonGuarantor
Subsidiaries(b)
(in millions)
100% Owned
Guarantor
Subsidiaries(a)
Consolidating
and
Eliminating
Entries
Pinnacle
Entertainment,
Inc.
Consolidated
Statements of Operations
For the year ended
December 31, 2011
Revenues:
Gaming
$
—
Food and beverage
—
Other
$
997.6
$
—
$
—
$
997.6
69.4
—
—
0.1
74.1
—
—
74.2
0.1
1,141.1
—
—
1,141.2
Gaming
—
563.9
—
—
563.9
Food and beverage
General and administrative
and other
Depreciation and
amortization
Write downs, reserves,
recoveries, and impairments
—
69.6
—
—
69.6
37.4
233.6
—
—
271.0
3.4
100.5
—
—
103.9
0.7
3.5
—
—
4.2
69.4
Expenses:
41.5
971.1
—
—
1,012.6
Operating income (loss)
(41.4)
170.0
—
—
128.6
Equity earnings of subsidiaries
Interest (expense) and
non-operating income, net
Loss on early extinguishment of
debt
Loss from equity method
investment
Income (loss) from continuing
operations before inter-company
activity and income taxes
Management fee and
inter-company interest
127.8
—
—
(105.7)
7.0
3.4
—
(95.3)
(0.2)
—
—
—
(0.2)
—
—
(0.6 )
—
(0.6)
Income tax expense
Income (loss) from continuing
operations
Income (loss) from discontinued
operations, net of taxes
Net income (loss)
$
—
(127.8 )
(19.5)
177.0
2.8
19.3
(15.9)
(3.4 )
—
—
—
—
(2.3)
(2.3)
—
(2.5)
161.1
(0.6 )
—
(32.9)
0.2
(2.5 )
$
128.2
$
73
(0.4 )
(127.8 )
32.5
(127.8 )
30.2
—
$
(127.8 )
(32.7)
$
(2.5 )
Table of Contents
Pinnacle
Entertainment,
Inc.
100% Owned
NonGuarantor
Subsidiaries(b)
(in millions)
100% Owned
Guarantor
Subsidiaries(a)
Consolidating
and
Eliminating
Entries
Pinnacle
Entertainment,
Inc.
Consolidated
For the year ended
December 31, 2010
Revenues:
Gaming
$
—
$
932.9
$
—
$
—
$
932.9
Food and beverage
—
64.4
—
—
64.4
Other
0.4
60.9
—
—
61.3
0.4
1,058.2
—
—
1,058.6
Gaming
—
530.8
—
—
530.8
Food and beverage
General and administrative
and other
Depreciation and
amortization
Write downs, reserves,
recoveries and impairments
—
65.3
—
—
65.3
42.8
226.6
(0.6 )
—
268.8
5.3
104.4
0.1
—
109.7
(5.9)
38.1
(0.5 )
—
31.8
42.2
965.2
(1.0 )
—
1,006.4
(41.8)
93.0
1.0
—
52.2
99.6
2.1
—
(1.9)
—
—
—
(1.9)
(105.6)
2.8
—
—
(102.8)
(49.7)
97.9
1.0
14.6
(14.6 )
—
—
—
—
—
—
11.7
83.3
1.0
15.8
1.6
Expenses:
Operating income (loss)
Equity earnings of subsidiaries
Loss on early extinguishment of
debt
Interest (expense) and
non-operating income, net
Income (loss) from continuing
operations before inter-company
activity and income taxes
Management fee and
inter-company interest
Income tax benefit
Income (loss) from continuing
operations
Income from discontinued
operations, net of taxes
Net income (loss)
11.7
(23.4)
—
$
(23.4 )
$
99.1
$
74
2.6
—
(101.7 )
(101.7 )
(52.5)
(101.7 )
(40.8)
—
$
(101.7 )
17.4
$
(23.4 )
Table of Contents
Pinnacle
Entertainment,
Inc.
100% Owned
NonGuarantor
Subsidiaries(b)
(in millions)
100% Owned
Guarantor
Subsidiaries(a)
Consolidating
and
Eliminating
Entries
Pinnacle
Entertainment,
Inc.
Consolidated
For the year ended
December 31, 2009
Revenues:
Gaming
$
—
Food and beverage
—
Other
$
834.9
$
—
$
—
$
834.9
55.2
—
—
0.1
58.5
—
—
58.6
0.1
948.6
—
—
948.7
Gaming
—
497.5
—
—
497.5
Food and beverage
General and administrative
and other
Depreciation and
amortization
Write downs, reserves,
recoveries and impairments
—
53.8
—
—
53.8
56.5
210.2
(2.4)
—
264.3
5.4
88.8
1.2
—
95.4
—
25.6
8.7
—
34.3
55.2
Expenses:
Operating income (loss)
Equity earnings of subsidiaries
Loss on early extinguishment of
debt
Gain on sale of equity securities
Interest (expense) and
non-operating income, net
Income (loss) from continuing
operations before inter-company
activity and income taxes
Management fee and
inter-company interest
Income tax benefit
Income (loss) from continuing
operations
Income (loss) from discontinued
operations, net of taxes
Net income (loss)
61.9
875.9
7.5
—
945.3
(61.8 )
72.7
(7.5)
—
3.4
(126.4 )
(2.7)
—
129.1
—
(9.5 )
—
—
—
(9.5 )
6.0
—
6.9
—
12.9
(83.9 )
13.7
—
—
(70.2 )
(275.6 )
83.7
(0.6)
129.1
(63.4 )
17.0
(17.0)
—
—
—
—
—
0.3
—
0.3
(258.3 )
—
$
(258.3 )
$
66.7
(0.6)
(197.9)
2.7
(131.2 )
75
$
2.1
$
129.1
(63.1 )
—
(195.2 )
129.1
$
(258.3 )
Table of Contents
Pinnacle
Entertainment,
Inc.
Balance Sheets
As of December 31, 2011
Current assets, excluding
discontinued operations
$
23.2
100% Owned
NonGuarantor
Subsidiaries(b)
(in millions)
100% Owned
Guarantor
Subsidiaries(a)
$
78.6
$
15.2
Consolidating
and
Eliminating
Entries
$
—
Pinnacle
Entertainment,
Inc.
Consolidated
$
117.0
Property and equipment, net
20.3
1,494.2
0.5
—
1,515.0
Other non-current assets
58.5
88.4
—
—
146.9
1,692.9
—
—
Equity method investment
Assets of discontinued operations
held for sale
—
—
97.8
—
74.5
Inter-company
1.2
—
Investment in subsidiaries
Current liabilities, excluding
discontinued operations
97.8
—
(0.6)
73.9
—
(1.2)
—
1,796.1
$
1,735.7
$
113.5
$
$
38.8
$
140.0
$
0.3
$
Other non-current liabilities
Liabilities of discontinued
operations held for sale
Inter-company
Equity
As of December 31, 2010
Current assets, excluding
discontinued operations
—
$
Notes payable, long term
—
(1,692.9)
(1,694.7 )
—
$
1,950.6
$
179.1
1,223.3
0.5
—
—
1,223.8
14.6
10.8
—
—
25.4
—
2.9
—
—
2.9
—
—
1.2
(1.2)
—
519.4
1,581.5
112.0
(1,693.5)
$
1,796.1
$
1,735.7
$
113.5
$
$
84.0
$
75.2
$
77.2
$
(1,694.7 )
—
519.4
$
1,950.6
$
236.4
Property and equipment, net
13.0
1,426.0
0.5
—
1,439.5
Other non-current assets
59.3
51.5
—
—
110.8
1,585.3
—
—
(1,585.3)
—
—
97.4
0.3
(0.6)
97.1
1.2
—
—
(1.2)
—
Investment in subsidiaries
Assets of discontinued operations
held for sale
Inter-company
$
Current liabilities, excluding
discontinued operations
$
Notes payable, long term
Other non-current liabilities
Liabilities of discontinued
operations held for sale
Inter-company
Equity
$
1,742.8
$
1,650.1
$
78.0
$
45.1
$
121.9
$
0.1
$
(1,587.1 )
—
$
$
1,883.8
167.1
1,176.0
0.7
—
—
1,176.7
14.3
11.4
—
—
25.7
—
6.9
—
—
6.9
—
—
1.2
(1.2)
—
507.4
1,509.2
76.7
(1,585.9)
507.4
1,742.8
$
1,650.1
76
$
78.0
$
(1,587.1 )
$
1,883.8
Table of Contents
Pinnacle
Entertainment,
Inc.
Statements of Cash Flows
For the year ended
December 31, 2011
Cash provided by (used in)
operating activities
100% Owned
NonGuarantor
Subsidiaries(b)
(in millions)
100% Owned
Guarantor
Subsidiaries(a)
$
190.4
$
(0.1 )
Consolidating
and
Eliminating
Entries
$
36.5
Pinnacle
Entertainment,
Inc.
Consolidated
$
(95.0 )
Capital expenditures and other
Cash provided by (used in)
investing activities
Change in notes payable and
other
Cash provided by financing
activities
Increase (decrease) in cash and
cash equivalents
Cash and cash equivalents,
beginning of period
Cash and cash equivalents,
$
end of period
(11.1 )
(184.0 )
(98.2 )
—
$
(293.3)
131.8
(11.1 )
(184.0 )
(98.2 )
—
(293.3)
46.4
—
36.5
(36.5 )
46.4
46.4
—
36.5
(36.5 )
46.4
(59.7 )
6.4
(61.8 )
—
(115.1)
77.0
41.6
76.8
—
195.4
17.3
$
48.0
$
15.0
$
—
$
80.3
$
(32.0 )
$
160.7
$
(40.1 )
$
—
$
88.6
Capital expenditures and other
Cash provided by (used) in
investing activities
Change in notes payable and
other
Cash provided by (used in)
financing activities
Effect of exchange rate changes
on cash
Increase (decrease) in cash and
cash equivalents
Cash and cash equivalents,
beginning of period
Cash and cash equivalents,
$
end of period
(0.7 )
(175.8 )
45.9
—
(130.6)
(0.7 )
(175.8 )
45.9
—
(130.6)
For the year ended
December 31, 2010
Cash provided by (used in)
operating activities
For the year ended
December 31, 2009
Cash provided by (used in)
operating activities
Capital expenditures and other
Proceeds from sale of equity
securities and other
Cash used in investing
activities
Change in notes payable and
other
Cash provided by (used in)
financing activities
Effect of exchange rate changes
on cash
Increase (decrease) in cash and
cash equivalents
$
108.2
—
—
—
108.2
108.2
—
—
—
108.2
—
—
(0.4 )
—
(0.4)
75.5
(15.1 )
5.4
—
65.8
1.5
56.7
71.4
—
129.6
77.0
$
41.6
$
76.8
$
—
$
195.4
(108.1 )
$
226.8
$
1.5
$
—
$
120.2
(3.8 )
10.1
6.3
(221.4 )
0.3
(221.1 )
(1.2 )
—
(226.4)
13.6
—
24.0
12.4
—
(202.4)
96.6
—
—
—
96.6
96.6
—
—
—
96.6
—
—
(0.6 )
—
(0.6)
(5.2 )
5.7
13.3
—
13.8
Cash and cash equivalents,
beginning of period
Cash and cash equivalents,
end of period
(a)
(b)
6.7
$
1.5
51.0
$
—
58.1
56.7
$
71.4
$
—
115.8
$
129.6
The following material subsidiaries are identified as guarantors of our senior and senior subordinated notes: ACE Gaming, LLC; AREP Boardwalk Properties LLC;
Belterra Resort Indiana, LLC; Biloxi Casino Corp.; Boomtown, LLC; Casino Magic Corp.; Casino One Corporation; Louisiana-I Gaming; PNK (Baton Rouge)
Partnership; PNK (BOSSIER CITY), Inc.; PNK Development 7, LLC; PNK Development 8, LLC; PNK Development 9, LLC; PNK Development 13, LLC; PNK
(ES), LLC; PNK (LAKE CHARLES), L.L.C.; PNK (Ohio), LLC; PNK (Ohio) II, LLC; PNK (Ohio) III, LLC; PNK (RENO), LLC; PNK (River City), LLC; PNK
(STLH), LLC; and PNK (ST. LOUIS RE), LLC. In addition, certain other immaterial subsidiaries are also guarantors of our senior and senior subordinated notes.
PNK Development 11, LLC, which, as of December 31, 2011 , held approximately $4.5 million in cash and cash equivalents, is our only material non-guarantor of our
senior and senior subordinated notes. Other non-guarantor subsidiaries include, but are not limited to, a subsidiary with $10.5 million in cash and cash equivalents as of
December 31, 2011, a subsidiary that owns 26% of the equity interest of ACDL, and a subsidiary that owns $10.0 million in aggregate principal amount of our 7.50%
Notes .
77
Table of Contents
Note 13—Segment Information
We use Consolidated Adjusted EBITDA and Adjusted EBITDA for each segment (as defined below) to compare operating results among
our segments and allocate resources. The following table highlights our Adjusted EBITDA for each segment and reconciles Consolidated
Adjusted EBITDA to income (loss) from continuing operations for the years ended December 31, 2011 , 2010 and 2009 . Prior year amounts
have been updated for discontinued operations.
For the year ended December 31,
2011
2010
2009
(in millions)
Revenues:
L’Auberge Lake Charles
St. Louis (a)
Boomtown New Orleans
Belterra Casino Resort
Boomtown Bossier City
River Downs
Other
Total Revenue
Adjusted EBITDA: (b)
L’Auberge Lake Charles
St. Louis (a)
Boomtown New Orleans
Belterra Casino Resort
Boomtown Bossier City
River Downs
$
$
$
375.4
382.0
133.6
154.8
85.0
10.3
0.1
1,141.2
Consolidated Adjusted EBITDA (b)
Other income (expense):
Depreciation and amortization
Pre-opening and development costs
Non-cash share-based compensation
Impairment of indefinite-lived intangible assets
Impairment of land and development costs
Impairment of buildings, riverboats and equipment
Write-downs, reserves and recoveries, net
Interest expense, net of capitalized interest
Gain on sale of equity securities
Loss from equity method investment
Loss on early extinguishment of debt
Other non-operating income
Income tax benefit (expense)
$
103.9
86.5
44.9
28.6
18.8
(2.2)
280.5
(28.4)
252.1
Income (loss) from continuing operations
$
(103.9)
(8.8)
(6.6)
—
—
—
(4.2)
(95.7)
—
(0.6)
(0.2)
0.4
(2.3)
30.2
Corporate expenses (c)
Capital expenditures
L’Auberge Lake Charles
St. Louis (a)
Boomtown New Orleans
Belterra Casino Resort
Boomtown Bossier City
River Downs (d)
Corporate and other, including development projects (e)
$
20.0
13.8
4.9
3.2
2.9
0.1
108.6
$
$
$
342.0
337.1
139.1
152.1
87.9
—
0.4
1,058.6
$
92.9
62.3
43.9
30.0
20.2
—
249.3
(35.7)
213.6
$
(109.7)
(13.6)
(6.1)
(11.5)
(23.7)
(0.4)
3.7
(103.1)
—
—
(1.9)
0.2
11.7
(40.8 )
$
10.7
77.9
3.4
8.6
3.5
—
53.4
$
$
$
339.0
219.0
137.7
161.9
90.9
—
0.1
948.6
$
79.2
42.0
37.6
26.5
19.2
—
204.5
(41.3 )
163.2
$
(95.4 )
(16.6 )
(13.5 )
—
(24.1 )
(9.1 )
(1.2 )
(70.3 )
12.9
—
(9.5 )
0.2
0.3
(63.1 )
$
5.4
178.9
5.7
7.0
4.2
—
25.2
$
78
153.5
$
157.5
$
226.4
Table of Contents
2011
Assets:
L’Auberge Lake Charles
St. Louis (a)
Boomtown New Orleans
Belterra Casino Resort
Boomtown Bossier City
River Downs
Corporate and other, including development projects and discontinued operations
$
$
317.3
752.0
62.4
180.0
86.1
45.5
507.3
1,950.6
December 31,
2010
(in millions)
$
$
314.8
790.0
64.0
188.6
88.9
—
437.5
1,883.8
2009
$
$
331.0
507.9
74.3
193.6
92.1
—
645.0
1,843.9
(a) Our St. Louis segment consists of Lumière Place (which includes the Lumière Place Casino, the Pinnacle-owned Four Seasons Hotel
St. Louis and HoteLumière) and River City.
(b) We define Consolidated Adjusted EBITDA as earnings before depreciation, amortization, pre-opening and development expenses,
non-cash share-based compensation, asset impairment costs, write-downs, reserves, recoveries, gain (loss) on sale of certain assets,
interest income and expense, income (loss) from equity method investments, loss on early extinguishment of debt, loss on sale of
discontinued operations, discontinued operations and income taxes. We define Adjusted EBITDA for each segment as earnings before
depreciation, amortization, pre-opening and development expenses, non-cash share-based compensation, asset impairment costs,
write-downs, reserves, recoveries, gain (loss) on sale of certain assets, interest income and expense and income taxes. We use
Consolidated Adjusted EBITDA and Adjusted EBITDA for each segment to compare operating results among our properties and
between accounting periods. Consolidated Adjusted EBITDA and Adjusted EBITDA have economic substance because they are used
by management as a performance measure to analyze the performance of our business, and is especially relevant in evaluating large,
long-lived casino-hotel projects because it provides a perspective on the current effects of operating decisions separated from the
substantial non-operational depreciation charges and financing costs of such projects. We eliminate the results from discontinued
operations as they are discontinued. We also review pre-opening and development expenses separately; as such expenses are also
included in total project costs when assessing budgets and project returns, and because such costs relate to anticipated future revenues
and income. We believe that Consolidated Adjusted EBITDA and Adjusted EBITDA are useful measures for investors because it is
an indicator of the strength and performance of ongoing business operations, including our ability to service debt and fund capital
expenditures, acquisitions and operations. These calculations are commonly used as a basis for investors, analysts and credit rating
agencies to evaluate and compare operating performance and value of companies within our industry. In addition, our credit
agreement and bond indentures require compliance with financial measures similar to Consolidated Adjusted EBITDA. Consolidated
Adjusted EBITDA should not be considered as an alternative to operating income as an indicator of performance, as an alternative to
cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure provided in accordance with
GAAP. Our calculation of Consolidated Adjusted EBITDA may be different from the calculation methods used by other companies
and, therefore, comparability may be limited.
(c) Corporate expenses represent unallocated payroll, professional fees, travel expenses and other general and administrative expenses
not directly related to our casino and hotel operations.
(d) Capital expenditures for our River Downs segment includes items purchased since the initial acquisition of the racetrack in January
2011 and exclude the initial purchase price.
(e) Includes capital expenditures for our various development projects not yet reflected as operating segments, including the following:
L’Auberge Baton Rouge
Sugarcane Bay
$
$
79
For the year ended December 31,
2011
2010
2009
(in millions)
96.9
$
32.0
$
2.1
0.3
$
15.8
$
14.3
Table of Contents
Note 14—Quarterly Financial Information (Unaudited)
The following is a summary of unaudited quarterly financial data for the years ended December 31, 2011 and 2010 :
Dec. 31,
Revenues
Operating income
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income (loss)
Per Share Data—Basic (a)
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income (loss)—basic
Per Share Data—Diluted (a)
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income (loss)—diluted
$
$
$
$
$
$
275.8
37.1
17.7
7.3
25.0
0.28
0.12
0.40
$
0.28
0.12
0.40
$
Dec. 31,
Revenues
Operating income (loss)
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income (loss)
Per Share Data—Basic (a)
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income (loss)—basic
Per Share Data—Diluted (a)
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income (loss)—diluted
(a)
$
$
$
$
$
$
2011
Sept. 30,
Jun. 30,
(in millions, except per share data)
$
295.9
$
289.4
37.5
22.0
11.8
(5.2)
(12.6)
(23.9)
$
(0.8 )
$
(29.1 )
265.7
18.7
(3.6)
(6.5)
(10.1 )
$
$
0.19
(0.20)
(0.01 )
$
0.19
(0.20)
(0.01 )
$
$
$
$
(0.05 )
(0.11)
(0.16 )
$
$
$
0.02
(0.03)
(0.01 )
$
0.02
(0.03)
(0.01 )
$
$
$
$
$
(0.08 )
(0.39)
(0.47 )
$
(0.08 )
(0.39)
(0.47 )
$
2010
Sept. 30,
Jun. 30,
(in millions, except per share data)
$
275.9
$
263.2
23.5
(15.6 )
0.9
(40.7 )
(1.7)
(8.6 )
$
(0.8 )
$
(49.3 )
(0.05 )
(0.11)
(0.16 )
Mar. 31,
$
$
280.1
32.1
5.9
(3.5)
2.4
0.10
(0.06)
0.04
0.10
(0.06)
0.04
Mar. 31,
$
$
(0.67 )
(0.14 )
(0.81 )
$
(0.67 )
(0.14 )
(0.81 )
$
$
$
253.7
25.6
2.5
34.2
36.7
0.04
0.57
0.61
0.04
0.56
0.60
Net income (loss) per share calculations for each quarter is based on the weighted average number of shares outstanding during the
respective periods; accordingly, the sum of the quarters may not equal the full-year income (loss) per share.
80
Table of Contents
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
(a) Management’s Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Disclosure Controls and Procedures: The Company’s management, with the participation of the Chief Executive Officer (the “CEO”) and
Chief Financial Officer (the “CFO”), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2011 . Based on this evaluation, the Company’s management,
including the CEO and the CFO, concluded that, as of December 31, 2011 the Company’s disclosure controls and procedures were effective, in
that they provide a reasonable level of assurance that information required to be disclosed by the Company in the reports filed or submitted by
it under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.
The Company’s disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by
the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management,
including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting: As further discussed in our Quarterly Report on Form 10-Q/A filed on November
2, 2011, in October 2011, management, including our CEO and CFO, and with the concurrence of the Audit Committee, identified a material
weakness in our internal control over financial reporting for the expenses related to our my choice customer loyalty program. Our processes,
procedures and controls related to financial reporting were not effective to ensure that the proper accounting treatment of the my choice
customer loyalty program expenses was used. Specifically, our processes and procedures did not provide for sufficient accounting analysis and
communications about the details of our my choice customer loyalty program to ensure proper accounting treatment under U.S. GAAP. This
material weakness resulted in the restatement for a material error in the expenses related to the my choice customer loyalty program in our
condensed consolidated financial statements for the quarter ended June 30, 2011.
To remediate this material weakness, we performed a review of all of the details of the my choice customer loyalty program and have
concluded we have expensed all appropriate costs of the my choice customer loyalty program benefits in accordance with U.S. GAAP for the
year ended December 31, 2011. As part of our Sarbanes-Oxley compliance, we enhanced our internal control over financial reporting
surrounding the accounting for our my choice customer loyalty program, which includes an analysis by our accounting and internal audit
personnel each quarter of the accounting implications of the costs associated with the my choice customer loyalty program benefits. The Audit
Committee has reviewed these remediation measures and monitored the implementation thereof. We believe these actions have remediated the
material weakness identified and have strengthened our internal control over financial reporting.
Except as noted above, no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) occurred during the fiscal quarter ended December 31, 2011 that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.
(b) Management’s Annual Report on Internal Control over Financial Reporting
Internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) refers to the process
designed by, or under the supervision of, the Company’s CEO and CFO, and effected by the Company’s board of directors, management and
other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. Management is responsible for establishing and maintaining
adequate internal control over the Company’s financial reporting.
The Company’s management, with the participation of the Company’s CEO and CFO, evaluated the effectiveness of the Company’s
internal control over financial reporting as of December 31, 2011 . This evaluation was performed using the internal control evaluation
framework developed by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such evaluation, management
has concluded that, as of such date, the Company’s internal control over financial reporting was effective.
Ernst & Young LLP has issued an attestation report on the effectiveness of our internal control over financial reporting. This report follows
in Item 9A(c).
81
Table of Contents
(c) Attestation report of the independent registered public accounting firm.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of
Pinnacle Entertainment, Inc. and subsidiaries:
We have audited Pinnacle Entertainment, Inc. and subsidiaries' internal control over financial reporting as of December 31, 2011, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). Pinnacle Entertainment Inc. and subsidiaries' management is responsible for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for
our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Pinnacle Entertainment Inc. and subsidiaries maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2011, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated
balance sheets of Pinnacle Entertainment, Inc. and subsidiaries as of December 31, 2011 and 2010, and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2011 of Pinnacle
Entertainment, Inc. and subsidiaries and our report dated February 29, 2012 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Las Vegas, Nevada
February 29, 2012
82
Table of Contents
Item 9B. Other Information
None.
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
The information required under this item will be contained in our definitive Proxy Statement for our 2012 Annual Meeting of Stockholders
to be filed with the Securities and Exchange Commission within 120 days after December 31, 2011 under the captions “Election of
Directors—General,” “Election of Directors—Information Regarding the Director Nominees,” “Election of Directors—Executive Officers,”
“Election of Directors—Section 16(a) Beneficial Ownership Reporting Compliance,” “Election of Directors—Code of Ethical Business
Conduct,” and the information regarding our audit committee and our audit committee financial expert in “Election of Directors—Board
Meetings and Board Committees” and is incorporated herein by reference.
Item 11.
Executive Compensation
The information required under this item will be contained in our definitive Proxy Statement for our 2012 Annual Meeting of Stockholders
to be filed with the Securities and Exchange Commission within 120 days after December 31, 2011 under the captions “Election of
Directors—Director Compensation”, “Election of Directors—Compensation Committee Interlocks and Insider Participation,” “Executive
Compensation—Compensation Committee Report” and “Executive Compensation” and is incorporated herein by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required under this item will be contained in our definitive Proxy Statement for our 2012 Annual Meeting of Stockholders
to be filed with the Securities and Exchange Commission within 120 days after December 31, 2011 under the captions “Election of
Directors—Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation—Equity Compensation Plan
Information at Fiscal Year-End” and is incorporated herein by reference.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required under this item will be contained in our definitive Proxy Statement for our 2012 Annual Meeting of Stockholders
to be filed with the Securities and Exchange Commission within 120 days after December 31, 2011 under the captions “Election of
Directors—Transactions with Related Persons, Promoters and Certain Control Persons” and “Election of Directors—Director Independence”
and is incorporated herein by reference.
Item 14.
Principal Accountant Fees and Services
The information required under this item will be contained in our definitive Proxy Statement for our 2012 Annual Meeting of Stockholders
to be filed with the Securities and Exchange Commission within 120 days after December 31, 2011 under the caption “Ratification of
Appointment of Independent Auditors—Audit and Related Fees” and is incorporated herein by reference.
83
Table of Contents
PART IV
Item 15.
Exhibits, Financial Statement Schedules
(a) Documents filed as a part of this report.
1. Consolidated Financial Statements and Supplementary Data: The following financial statements are included herein under Item 8 of
Part II of this report, “Financial Statements and Supplementary Data”:
Page
Number
46
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the years ended December 31, 2011, 2010 and 2009
47
Consolidated Balance Sheets at December 31, 2011 and 2010
48
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2011, 2010 and 2009
49
Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009
50
Notes to Consolidated Financial Statements
51
Quarterly Data
2.
80
Financial Statement Schedule
Page
Number
96
Schedule II — Valuation and Qualifying Accounts
All other schedules have been omitted for the reason that the required information is presented in the financial statements or notes thereto,
the amounts involved are not significant or the schedules are not applicable.
84
Table of Contents
3.
Exhibits
Exhibit
Number
3.1
Description of Exhibit
Restated Certificate of Incorporation of Pinnacle Entertainment, Inc., as amended, is hereby incorporated by reference to
Exhibit 3.3 to the Company's Current Report on Form 8-K filed on May 9, 2005. (SEC File No. 001-13641).
3.2
Restated Bylaws of Pinnacle Entertainment, Inc., as of May 24, 2011, are hereby incorporated by reference to Exhibit 3.2 to
the Company's Current Report on Form 8-K filed on May 26, 2011. (SEC File No. 001-13641).
4.1†
Pinnacle Entertainment, Inc. 2001 Stock Option Plan is hereby incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-8 filed on June 6, 2001. (SEC File No. 333-62378).
4.2†
First Amendment to Pinnacle Entertainment, Inc. 2001 Stock Option Plan is hereby incorporated by reference to Exhibit 4.4 to
the Company's Current Report on Form 8-K filed on January 30, 2004. (SEC File No. 001-13641).
4.3†
Form of Stock Option Agreement for Pinnacle Entertainment, Inc. 2001 Stock Option Plan is hereby incorporated by reference
to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004. (SEC File No.
001-13641).
4.4†
Pinnacle Entertainment, Inc. 2002 Stock Option Plan is hereby incorporated by reference to Exhibit 4.4 to the Company's
Registration Statement on Form S-8 filed on July 16, 2003. (SEC File No. 333-107081).
4.5†
First Amendment to Pinnacle Entertainment, Inc. 2002 Stock Option Plan is hereby incorporated by reference to Exhibit 4.5 to
the Company's Registration Statement on Form S-8 filed on July 16, 2003. (SEC File No. 333-107081).
4.6†
Second Amendment to Pinnacle Entertainment, Inc. 2002 Stock Option Plan is hereby incorporated by reference to Exhibit 4.6
to the Company's Registration Statement on Form S-8 filed on July 16, 2003. (SEC File No. 333-107081).
4.7†
Form of Stock Option Agreement for Pinnacle Entertainment, Inc. 2002 Stock Option Plan is hereby incorporated by reference
to Exhibit 4.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004. (SEC File No.
001-13641).
4.8†
Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive Plan, As Amended, is hereby incorporated by reference
to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 26, 2011. (SEC File No. 001-13641).
4.9†
Form of Restricted Stock Agreement and Form of Restricted Stock Grant Notice for Pinnacle Entertainment, Inc. 2005 Equity
and Performance Incentive Plan is hereby incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form
8-K filed on November 6, 2006. (SEC File No. 001-13641).
4.10†
Form of Stock Option Grant Notice and Form of Stock Option Agreement for the Pinnacle Entertainment, Inc. 2005 Equity
and Performance Incentive Plan, As Amended is hereby incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed on December 15, 2008. (SEC File No. 001-13641).
4.11†
Form of Stock Option Grant Notice and Form of Stock Option Agreement for the Pinnacle Entertainment, Inc. 2005 Equity
and Performance Incentive Plan, As Amended is hereby incorporated by reference to Exhibit 10.3 to the Company's Current
Report on Form 8-K filed on March 1, 2010. (SEC File No. 001-13641).
4.12†
Form of Grant of Other Stock Unit Awards for the Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive Plan,
As Amended is hereby incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on
December 15, 2008. (SEC File No. 001-13641).
4.13†
Form of Grant of Other Stock Unit Awards for the Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive Plan,
As Amended is hereby incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on
March 1, 2010. (SEC File No. 001-13641).
85
Table of Contents
Exhibit
Number
4.14†
Description of Exhibit
Form of Director Stock Option Grant Notice and Form of Director Stock Option Agreement for the Pinnacle Entertainment,
Inc. 2005 Equity and Performance Incentive Plan, As Amended is hereby incorporated by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K filed on February 10, 2010. (SEC File No. 001-13641).
4.15†
Nonqualified Stock Option Agreement dated as of March 14, 2010 by and between Pinnacle Entertainment, Inc. and Anthony
M. Sanfilippo is hereby incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on
March 18, 2010. (SEC File No. 001-13641).
4.16†
Nonqualified Stock Option Agreement dated as of August 1, 2008 by and between Pinnacle Entertainment, Inc. and Carlos
Ruisanchez is hereby incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2008. (SEC File No. 001-13641).
4.17†
Form of Stock Option Grant Notice and Form of Stock Option Agreement for the Pinnacle Entertainment, Inc. 2005 Equity
and Performance Incentive Plan, As Amended, is hereby incorporated by reference to Exhibit 4.6 to the Company's
Registration Statement on Form S-8 filed on November 23, 2010. (SEC File No. 333-170796).
4.18†
Form of Grant of Other Stock Unit Awards for the Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive Plan,
As Amended, is hereby incorporated by reference to Exhibit 4.7 to the Company's Registration Statement on Form S-8 filed on
November 23, 2010. (SEC File No. 333-170796).
4.19†
Form of Director Other Stock Unit Awards for the Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive Plan,
As Amended, is hereby incorporated by reference to Exhibit 4.8 to the Company's Registration Statement on Form S-8 filed on
November 23, 2010. (SEC File No. 333-170796).
4.20†
Form of Grant of Other Stock Unit Awards for the Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive Plan,
As Amended, is incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on March 7,
2011. (SEC File No. 001-13641).
4.21*†
Form of Online Stock Option Grant Notice and Award Agreement for the Pinnacle Entertainment, Inc. 2005 Equity and
Performance Incentive Plan, As Amended.
4.22*†
Form of Online Other Stock Unit Award Grant Notice and Award Agreement for the Pinnacle Entertainment, Inc. 2005 Equity
and Performance Incentive Plan, As Amended.
4.23*†
Form of Online Director Stock Option Grant Notice and Option Agreement for the Pinnacle Entertainment, Inc. 2005 Equity
and Performance Incentive Plan, As Amended.
4.24*†
Form of Online Director Other Stock Unit Award Grant Notice and Award Agreement for the Pinnacle Entertainment, Inc.
2005 Equity and Performance Incentive Plan, As Amended.
4.25*†
Form of Online Other Stock Unit Award Grant Notice and Award Agreement for the Pinnacle Entertainment, Inc. 2005 Equity
and Performance Incentive Plan, As Amended, and Annual Incentive Plan (Automatic Grant).
4.26*†
Form of Online Other Stock Unit Award Grant Notice and Award Agreement for the Pinnacle Entertainment, Inc. 2005 Equity
and Performance Incentive Plan, As Amended, and Annual Incentive Plan (Elected Grant).
4.27†
Form of Amendment to Stock Option Agreements for Directors is hereby incorporated by reference to Exhibit 10.54 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009. (SEC File No. 001-13641).
4.28†
Form of Amendment to Stock Option Agreements and Employment Agreements for Executive Officers is hereby incorporated
by reference to Exhibit 10.55 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
(SEC File No. 001-13641).
86
Table of Contents
Exhibit
Number
4.29
Description of Exhibit
Indenture dated as of June 8, 2007, governing the 7.50% Senior Subordinated Notes due 2015, by and among Pinnacle
Entertainment, Inc., the guarantors identified therein and The Bank of New York Trust Company, N.A. is hereby incorporated
by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on June 11, 2007. (SEC File No. 001-13641).
4.30
First Supplemental Indenture, dated as of July 16, 2009, governing the 7.50% Senior Subordinated Notes due 2015, by and
among Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company,
N.A., is hereby incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2009. (SEC File No. 001-13641).
4.31
Second Supplemental Indenture, dated as of February 5, 2010, governing the 7.50% Senior Subordinated Notes due 2015, by
and among Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company,
N.A., is hereby incorporated by reference to Exhibit 4.30 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2009. (SEC File No. 001-13641).
4.32
Third Supplemental Indenture, dated as of January 26, 2011, governing the 7.50% Senior Subordinated Notes due 2015, by
and among Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company,
N.A. is incorporated by reference to Exhibit 4.21 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2010. (SEC File No. 001-13641).
4.33
Fourth Supplemental Indenture, dated as of January 28, 2011, governing the 7.50% Senior Subordinated Notes due 2015, by
and among Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company,
N.A. is incorporated by reference to Exhibit 4.22 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2010. (SEC File No. 001-13641).
4.34
Fifth Supplemental Indenture, dated as of January 28, 2011, governing the 7.50% Senior Subordinated Notes due 2015, by and
among Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company,
N.A. is incorporated by reference to Exhibit 4.23 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2010. (SEC File No. 001-13641).
4.35
Form of 7.50% Senior Subordinated Note due 2015 is hereby incorporated by reference to Exhibit A contained in Exhibit 4.1
to the Company's Current Report on Form 8-K filed on June 11, 2007. (SEC File No. 001-13641).
4.36
Indenture dated as of August 10, 2009, governing the 8.625% Senior Notes due 2017, by and among the Company, the
guarantors identified therein and The Bank of New York Mellon Trust Company, N.A. is hereby incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K filed on August 13, 2009. (SEC File No. 001-13641).
4.37
First Supplemental Indenture, dated as of February 5, 2010, governing the 8.625% Senior Notes due 2017, by and among
Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company, N.A., is
hereby incorporated by reference to Exhibit 4.33 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2009. (SEC File No. 001-13641).
4.38
Second Supplemental Indenture, dated as of January 26, 2011, governing the 8.625% Senior Notes due 2017, by and among
Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company, N.A. is
incorporated by reference to Exhibit 4.27 to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2010. (SEC File No. 001-13641).
4.39
Third Supplemental Indenture, dated as of January 28, 2011, governing the 8.625% Senior Notes due 2017, by and among
Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company, N.A. is
incorporated by reference to Exhibit 4.28 to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2010. (SEC File No. 001-13641).
4.40
Fourth Supplemental Indenture, dated as of January 28, 2011, governing the 8.625% Senior Notes due 2017, by and among
Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company, N.A. is
incorporated by reference to Exhibit 4.29 to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2010. (SEC File No. 001-13641).
87
Table of Contents
Exhibit
Number
4.41
Description of Exhibit
Form of 8.625% Senior Note due 2017 is hereby incorporated by reference to Exhibit A contained in Exhibit 4.1 to the
Company's Current Report on Form 8-K filed on August 13, 2009. (SEC File No. 001-13641).
4.42
Registration Rights Agreement, dated as of August 10, 2009, among the Company, the guarantors identified therein and J.P.
Morgan Securities Inc., Banc of America Securities LLC, Barclays Capital Inc., Deutsche Bank Securities Inc. as
representatives of the several initial purchasers is hereby incorporated by reference to Exhibit 4.3 to the Company's Current
Report on Form 8-K filed on August 13, 2009. (SEC File No. 001-13641).
4.43
Indenture dated as of May 6, 2010, governing the 8.75% Senior Subordinated Notes due 2020, by and among the Company,
the guarantors identified therein and The Bank of New York Mellon Trust Company, N.A. is hereby incorporated by reference
to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on May 12, 2010. (SEC File No. 001-13641).
4.44
First Supplemental Indenture, dated as of January 26, 2011, governing the 8.75% Senior Subordinated Notes due 2020, by and
among Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company,
N.A. is incorporated by reference to Exhibit 4.33 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2010. (SEC File No. 001-13641).
4.45
Second Supplemental Indenture, dated as of January 28, 2011, governing the 8.75% Senior Subordinated Notes due 2020, by
and among Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company,
N.A. is incorporated by reference to Exhibit 4.34 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2010. (SEC File No. 001-13641).
4.46
Third Supplemental Indenture, dated as of January 28, 2011, governing the 8.75% Senior Subordinated Notes due 2020, by
and among Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company,
N.A. is incorporated by reference to Exhibit 4.35 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2010. (SEC File No. 001-13641).
4.47
Form of 8.75% Senior Subordinated Note due 2020 is hereby incorporated by reference to Exhibit A contained in Exhibit 4.2
to the Company's Current Report on Form 8-K filed on May 12, 2010. (SEC File No. 001-13641).
4.48
Registration Rights Agreement, dated as of May 6, 2010, among the Company, the guarantors identified therein and J.P.
Morgan Securities Inc., Banc of America Securities LLC, Barclays Capital Inc., Credit Agricole Securities (USA) Inc.,
Deutsche Bank Securities Inc. and UBS Securities LLC as representatives of the several initial purchasers is hereby
incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed on May 12, 2010. (SEC File
No. 001-13641).
10.1
Third Amended and Restated Credit Agreement, dated as of February 5, 2010, among Pinnacle Entertainment, Inc., the
Lenders referred to therein, Banc of America Securities LLC and JPMorgan Securities Inc., as Joint Lead Arrangers and Joint
Book Runners, Bank of America, N.A., JPMorgan Chase Bank, N.A., Calyon New York Branch, Deutsche Bank Trust
Company Americas and UBS Securities LLC, as Syndication Agents, Capital One National Association, as the Documentation
Agent, and Barclays Bank PLC as the Administrative Agent is hereby incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K filed on February 8, 2010. (SEC File No. 001-13641).
10.2
First Amendment to Third Amended and Restated Credit Agreement, dated as of April 28, 2010, by and between Pinnacle
Entertainment, Inc., Barclays Bank PLC, as the administrative agent, and the Required Lenders is hereby incorporated by
reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 29, 2010. (SEC File No. 001-13641).
10.3
Second Amendment to Third Amended and Restated Credit Agreement, dated as of October 28, 2010, by and between
Pinnacle Entertainment, Inc., Barclays Bank PLC, as the administrative agent, and the Required Lenders is hereby
incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on November 1, 2010. (SEC
File No. 001-13641).
88
Table of Contents
Exhibit
Number
10.4
Description of Exhibit
Fourth Amended and Restated Credit Agreement, dated as of August 2, 2011, among Pinnacle Entertainment, Inc., the Lenders
referred to therein, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P.Morgan Securities LLC as Joint Lead
Arrangers and Joint Book Runners, Bank of America, N.A., JPMorgan Chase Bank, N.A., Credit Agricole Corporate and
Investment Bank, Deutsche Bank Securities Inc. and Wells Fargo Bank, N.A., as the Syndication Agents, UBS Securities LLC
and Capital One National Association as the Senior Managing Agents, and Barclays Bank PLC, as the Administrative Agent is
incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on August 4, 2011. (SEC File
No. 001-13641).
10.5
Waiver to Fourth Amended and Restated Credit Agreement, dated as of November 1, 2011, between Pinnacle Entertainment,
Inc., Barclays Bank, PLC, as Administrative Agent, and the Required Lenders thereto is incorporated by reference to Exhibit
10.1 to the Company's Current Report on Form 8-K filed on November 2, 2011. (SEC File No. 001-13641).
10.6†
Third Amended and Restated Employment Agreement, dated December 22, 2008, between Pinnacle Entertainment, Inc. and
Daniel R. Lee is hereby incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2008. (SEC File No. 001-13641).
10.7†
Separation Agreement dated as of November 7, 2009 between Pinnacle Entertainment, Inc. and Daniel R. Lee is hereby
incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on November 12, 2009. (SEC
File No. 001-13641).
10.8†
Amendment to Separation Agreement, effective February 11, 2010, between Pinnacle Entertainment, Inc. and Daniel R. Lee is
hereby incorporated by reference to Exhibit 10.56 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2009. (SEC File No. 001-13641).
10.9†
Employment Agreement, entered into on March 13, 2010 and effective as of March 14, 2010, by and between Pinnacle
Entertainment, Inc. and Anthony M. Sanfilippo is hereby incorporated by reference to Exhibit 10.2 to the Company's Current
Report on Form 8-K filed on March 18, 2010. (SEC File No. 001-13641).
10.10†
Amended and Restated Employment Agreement, dated March 1, 2011, by and between Pinnacle Entertainment, Inc. and
Anthony M. Sanfilippo is incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on
March 7, 2011. (SEC File No. 001-13641).
10.11†
First Amendment to Amended and Restated Employment Agreement, dated December 14, 2011, effective as of January 1,
2012, by and between Pinnacle Entertainment, Inc. and Anthony M. Sanfilippo is incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K filed on December 15, 2011. (SEC File No. 001-13641).
10.12†
Amended and Restated Employment Agreement dated December 22, 2008 between Pinnacle Entertainment, Inc. and
Stephen H. Capp is hereby incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2008. (SEC File No. 001-13641).
10.13†
Separation Agreement and General Release, dated March 3, 2011, between Pinnacle Entertainment, Inc. and Stephen H. Capp
is incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 4, 2011. (SEC File
No. 001-13641).
10.14†
Amended and Restated Employment Agreement dated December 22, 2008 between Pinnacle Entertainment, Inc. and John A.
Godfrey is hereby incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2008. (SEC File No. 001-13641).
10.15†
First Amendment to Amended and Restated Employment Agreement, dated September 23, 2010, between Pinnacle
Entertainment, Inc. and John A. Godfrey is hereby incorporated by reference to Exhibit 10.1 to the Company's Current Report
on Form 8-K filed on September 24, 2010. (SEC File No. 001-13641).
10.16†
Amended and Restated Employment Agreement dated December 22, 2008 between Pinnacle Entertainment, Inc. and Carlos
Ruisanchez is hereby incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2008. (SEC File No. 001-13641).
89
Table of Contents
Exhibit
Number
10.17†
Description of Exhibit
First Amendment to Amended and Restated Employment Agreement, dated September 23, 2010, between Pinnacle
Entertainment, Inc. and John A. Godfrey is hereby incorporated by reference to Exhibit 10.1 to the Company's Current Report
on Form 8-K filed on September 24, 2010. (SEC File No. 001-13641).
10.18†
Employment Agreement, dated March 28, 2011, between Pinnacle Entertainment, Inc. and Carlos Ruisanchez is incorporated
by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 29, 2011. (SEC File No.
001-13641).
10.19†
First Amendment to Employment Agreement, dated December 14, 2011, effective as of January 1, 2012, by and between
Pinnacle Entertainment, Inc. and Carlos A. Ruisanchez is incorporated by reference to Exhibit 10.2 to the Company's Current
Report on Form 8-K filed on December 15, 2011. (SEC File No. 001-13641).
10.20†
Amended and Restated Employment Agreement dated December 22, 2008 between Pinnacle Entertainment, Inc. and Alain
Uboldi is hereby incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2008. (SEC File No. 001-13641).
10.21†
First Amendment to Amended and Restated Employment Agreement, dated as of April 15, 2010, between Pinnacle
Entertainment, Inc. and Alain Uboldi is hereby incorporated by reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K filed on April 19, 2010. (SEC File No. 001-13641).
10.22†
Separation Agreement and General Release, dated December 8, 2010 between Pinnacle Entertainment, Inc. and Alain Uboldi
is hereby incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December 9, 2010.
(SEC File No. 001-13641).
10.23†
Amended and Restated Employment Agreement dated December 22, 2008 between Pinnacle Entertainment, Inc. and Clifford
D. Kortman is hereby incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2009. (SEC File No. 001-13641).
10.24†
First Amendment to Amended and Restated Employment Agreement dated December 18, 2009 between Pinnacle
Entertainment, Inc. and Clifford D. Kortman is hereby incorporated by reference to Exhibit 10.17 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2009. (SEC File No. 001-13641).
10.25†
Separation Agreement and General Release, dated March 3, 2011, between Pinnacle Entertainment, Inc. and Clifford D.
Kortman is hereby incorporated by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2011. (SEC File No. 001-13641).
10.26*†
Employment Agreement, dated November 29, 2011, effective November 15, 2011, between Pinnacle Entertainment, Inc. and
Daniel P. Boudreaux.
10.27*†
First Amendment to Employment Agreement, dated December 14, 2011, effective as of January 1, 2012, by and between
Pinnacle Entertainment, Inc. and Daniel P. Boudreaux.
10.28*†
Employment Agreement, dated November 29, 2011, effective November 15, 2011, between Pinnacle Entertainment, Inc. and
Virginia E. Shanks.
10.29*†
First Amendment to Employment Agreement, dated December 14, 2011, effective as of January 1, 2012, by and between
Pinnacle Entertainment, Inc. and Virginia E. Shanks.
10.30*†
Summary of Director Compensation.
10.31†
Pinnacle Entertainment, Inc. Director Health and Medical Insurance Plan is hereby incorporated by reference to Exhibit 10.7 to
the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011. (SEC File No. 001-13641).
10.32†
2008 Amended and Restated Pinnacle Entertainment, Inc. Directors Deferred Compensation Plan is hereby incorporated by
reference to Exhibit 10.48 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008. (SEC
File No. 001-13641).
90
Table of Contents
Exhibit
Number
10.33†
Description of Exhibit
Pinnacle Entertainment, Inc. Executive Deferred Compensation Plan, as amended and restated effective January 1, 2011 is
incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on March 7, 2011. (SEC File
No. 001-13641).
10.34
Form of Lease by and between the Webster Family Limited Partnership, the Diuguid Family Limited Partnership and Pinnacle
Gaming Development Corp. (executed by the parties on December 11, 1998 and subsequently assigned by Pinnacle Gaming
Development Corp. to Belterra Resort Indiana, LLC), is hereby incorporated by reference to Exhibit B contained in Exhibit
10.47 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998. (SEC File No.
001-13641).
10.35
Form of Lease by and between Daniel Webster, Marsha S. Webster, William G. Diuguid, Sara T. Diuguid, J.R. Showers, III
and Carol A. Showers, and Pinnacle Gaming Development Corp. (executed by the parties on December 11, 1998 and
subsequently assigned by Pinnacle Gaming Development Corp. to Belterra Resort Indiana, LLC), is hereby incorporated by
reference to Exhibit B contained in Exhibit 10.51 to the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1998. (SEC File No. 001-13641).
10.36
Commercial Lease dated September 9, 1996 by and between State of Louisiana, State Land Office and PNK (Bossier City),
Inc. (f/k/a Casino Magic of Louisiana, Corp.), is hereby incorporated by reference to Exhibit 10.4 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2003. (SEC File No. 001-13641).
10.37
Ground Lease Agreement executed as of August 21, 2003, effective as of August 19, 2002, by and between PNK (LAKE
CHARLES), L.L.C., and Lake Charles Harbor & Terminal District, is hereby incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K filed on September 19, 2003. (SEC File No. 001-13641).
10.38
Addendum Number One dated as of July 5, 2005 to Memorandum of Lease dated August 21, 2003, by and between PNK
(LAKE CHARLES) L.L.C. and Lake Charles Harbor & Terminal District is hereby incorporated by reference to Exhibit 10.3
to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2005. (SEC File No.
001-013641).
10.39
Exercising of Option to Lease Immovable Property situated in Calcasieu Parish, Louisiana and Exercise of Option to Lease
Additional Property is hereby incorporated by reference to Exhibit 10.64 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2006. (SEC File No. 001-13641).
10.40
Redevelopment Agreement dated as of April 22, 2004 by and between the Land Clearance for Redevelopment Authority of the
City of St. Louis and Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.43 to the Company's
Amendment No. 1 to Registration Statement on Form S-4 filed on June 7, 2004. (SEC File No. 333-115557).
10.41
First Amendment to Redevelopment Agreement and First Amendment to Option For Ground Lease dated as of December 23,
2004 by and between the Land Clearance for Redevelopment Authority of the City of St. Louis and Pinnacle Entertainment,
Inc. is hereby incorporated by reference to Exhibit 10.51 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2005. (SEC File No. 001-13641).
10.42
Second Amendment to Redevelopment Agreement dated as of July 21, 2005 by and between the Land Clearance for
Redevelopment Authority of the City of St. Louis and Pinnacle Entertainment, Inc. is hereby incorporated by reference to
Exhibit 10.52 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2005. (SEC File No.
001-13641).
10.43
Third Amendment to the Redevelopment Agreement dated August 21, 2006 by and between Land Clearance for
Redevelopment Authority of the City of St. Louis and Pinnacle Entertainment, Inc. is hereby incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K filed on August 24, 2006. (SEC File No. 001-13641).
10.44
Fourth Amendment to the Redevelopment Agreement dated March 28, 2008 by and between Land Clearance for
Redevelopment Authority of the City of St. Louis and Pinnacle Entertainment, Inc. is hereby incorporated by reference to
Exhibit 10.61 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010. (SEC File
No. 001-13641).
91
Table of Contents
Exhibit
Number
10.45
Description of Exhibit
Fifth Amendment to the Redevelopment Agreement dated February 23, 2011 by and between Land Clearance for
Redevelopment Authority of the City of St. Louis and Pinnacle Entertainment, Inc. is hereby incorporated by reference to
Exhibit 10.62 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010. (SEC File
No. 001-13641).
10.46
Lease and Development Agreement dated as of August 12, 2004 by and between the St. Louis County Port Authority and
Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 2004. (SEC File No. 001-13641).
10.47
Letter Agreement dated as of August 12, 2004 by and between the St. Louis County Port Authority and Pinnacle
Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.54 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2005. (SEC File No. 001-13641).
10.48
Second Amendment to Lease and Development Agreement dated as of October 7, 2005 by and between St. Louis County Port
Authority and Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.55 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2005. (SEC File No. 001-13641).
10.49
Third Amendment to Lease and Development Agreement dated as of August 11, 2006 by and between the St. Louis County
Port Authority and Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006. (SEC File No. 001-13641).
10.50
Fourth Amendment to Lease and Development Agreement dated as of January 18, 2007 by and between the St. Louis County
Port Authority and Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.38 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2006. (SEC File No. 001-13641).
10.51
Fifth Amendment to Lease and Development Agreement dated as of March 30, 2007 by and between St. Louis County Port
Authority and Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.3 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2007. (SEC File No. 001-13641).
10.52
Sixth Amendment to Lease and Development Agreement dated November 26, 2007 by and between the St. Louis County Port
Authority and Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed on November 30, 2007. (SEC File No. 001-13641).
10.53
Seventh Amendment to Lease and Development Agreement dated February 19, 2010 by and between the St. Louis County
Port Authority and Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed on February 22, 2010. (SEC File No. 001-13641).
10.54
Eighth Amendment to Lease and Development Agreement, dated September 15, 2011, by and between the St. Louis County
Port Authority and Pinnacle Entertainment, Inc. is incorporated by reference to Exhibit 10.1 to the Company's Current Report
on Form 8-K filed on September 16, 2011. (SEC File No. 001-13641).
10.55
Indemnification Trust Agreement dated as of August 16, 2005 by and between Pinnacle Entertainment, Inc. and Wilmington
Trust Company and, as an additional party, Bruce Leslie, as Beneficiaries' Representative, is hereby incorporated by reference
to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2005. (SEC
File No. 001-13641).
10.56
Settlement Agreement and Mutual Release, effective February 3, 2010, between Pinnacle Entertainment, Inc. and RSUI
Indemnity Company is hereby incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed
on February 10, 2010. (SEC File No. 001-13641).
10.57
Memorandum of Understanding, effective February 3, 2010, between Pinnacle Entertainment, Inc. and RSUI Indemnity
Company is hereby incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on
February 8, 2010. (SEC File No. 001-13641).
92
Table of Contents
Exhibit
Number
10.58
Description of Exhibit
Agreement for Guaranteed Maximum Price Construction Services, effective as of March 30, 2010, by and between PNK
(Baton Rouge) Partnership and Manhattan Construction Company is hereby incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K filed on April 5, 2010. (SEC File No. 001-13641).
10.59
First Amendment to the Agreement for Guaranteed Maximum Price Construction Services, dated as of May 26, 2011, between
PNK (Baton Rouge) Partnership and Manhattan Construction Company is incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K filed on June 1, 2011. (SEC File No. 001-13641).
10.60
Second Amendment to the Agreement for Guaranteed Maximum Price Construction Services, dated as of May 26, 2011,
between PNK (Baton Rouge) Partnership and Manhattan Construction Company is incorporated by reference to Exhibit 10.2
to the Company's Current Report on Form 8-K filed on June 1, 2011. (SEC File No. 001-13641).
10.61
Asset Purchase Agreement, dated November 24, 2010, between Pinnacle Entertainment, Inc., PNK (Ohio), LLC, River Downs
Investment Company, River Downs Jockey Club, Incorporated, River Downs Turf Club, Incorporated, and Ohio Valley
Concessions, Inc. is hereby incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on
November 26, 2010. (SEC File No. 001-13641).
10.62
Sale and Purchase Agreement, dated April 29, 2010, between Casino Magic Corp., Casino Magic Management Services Corp.,
Casino Club S.A., Da Silvano S.A., Compañía Gerenciadora de Inversiones S.A. and Correon S.A. is hereby incorporated by
reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on July 7, 2010. (SEC File No. 001-13641).
10.63
Agent Agreement, dated as of July 29, 2011, between Wunderlich Securities Inc. and Pinnacle Entertainment, Inc. is
incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on August 4, 2011. (SEC File
No. 001-13641).
10.64
Subscription Agreement, dated as of May 25, 2011, between PNK Development 18, LLC and Asian Coast Development
(CANADA) LTD. is hereby incorporated by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 2011. (SEC File No. 001-13641).
10.65
Shareholders Agreement, dated August 8, 2011, between PNK Development 18, LLC, Harbinger II S.a.r.l, Blue Line ACDL,
Inc., Credit Distressed Blue Line Master Fund, Ltd., Global Opportunities Breakaway Ltd., and Breakaway ACDL, Inc. and
Asian Coast Development (Canada) Ltd. is incorporated by reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K/A filed on November 8, 2011. (SEC File No. 001-13641).
10.66*
Resort Management Agreement, effective August 8, 2011, between Ho Tram Project Company Limited and PNK (VN), Inc.
10.67*
Sixth Amendment to the Redevelopment Agreement dated January 30, 2012 by and between Land Clearance for
Redevelopment Authority of the City of St. Louis and Pinnacle Entertainment, Inc.
10.68*†
Stock Option Grant Notice and Stock Option Agreement (Stock Option Exchange Program), dated September 14, 2011, by and
between Pinnacle Entertainment, Inc. and Daniel Boudreaux.
11*
Statement re: Computation of Per Share Earnings.
12*
Computation of Ratio of Earnings to Fixed Charges.
21*
Subsidiaries of Pinnacle Entertainment, Inc.
23.1*
Consent of Ernst & Young LLP.
31.1*
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2*
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
93
Table of Contents
Exhibit
Number
32**
Description of Exhibit
Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer.
99.1*
Government Regulations and Gaming Issues.
99.2
Form of Power of Attorney for the Designation and Appointment of a Trustee For the Purposes of Conducting Casino
Gambling Operations as required by the Indiana Gaming Commission is hereby incorporated by reference to Exhibit 99.4 to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009. (SEC File No. 001-13641).
101**
Financial statements from Pinnacle's Entertainment, Inc.'s Annual Report on Form 10-K for the annual period ended December
31, 2011, formatted in XBRL (eXtensible Business Reporting Language):
(i) Consolidated Balance Sheets,
(ii) Consolidated Statements of Operations,
(iii) Consolidated Statements of Changes in Stockholders' Equity,
(iv) Consolidated Statements of Cash Flows; and
(v) Notes to the Consolidated Financial Statements .
*
**
†
Filed herewith.
Furnished herewith.
Management contract or compensatory plan or arrangement.
94
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized .
PINNACLE ENTERTAINMENT, INC.
(Registrant)
Dated:
May 15, 2012
By:
/s/ Carlos A. Ruisanchez
Carlos A. Ruisanchez
Executive Vice President and Chief Financial Officer
(Authorized Officer, Principal Financial Officer and
Principal Accounting Officer)
95
Table of Contents
PINNACLE ENTERTAINMENT, INC.
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 2009 , 2010 and 2011
(amounts in thousands)
As of
Description
Allowance
for doubtful
accounts
2009
1/1/2009
$ 5,552
Additions
$
2,230
As of
Deductions
$ (3,429 )
2010
12/31/2009
$
4,353
Additions
$
1,144
96
As of
Deductions
$ (2,720 )
2011
12/31/2010
$
2,777
Additions
$
2,908
As of
Deductions
$
(967 )
12/31/2011
$
4,718
Table of Contents
PINNACLE ENTERTAINMENT, INC.
EXHIBIT INDEX
Exhibit
Number
3.1
Description of Exhibit
Restated Certificate of Incorporation of Pinnacle Entertainment, Inc., as amended, is hereby incorporated by reference to
Exhibit 3.3 to the Company's Current Report on Form 8-K filed on May 9, 2005. (SEC File No. 001-13641).
3.2
Restated Bylaws of Pinnacle Entertainment, Inc., as of May 24, 2011, are hereby incorporated by reference to Exhibit 3.2 to
the Company's Current Report on Form 8-K filed on May 26, 2011. (SEC File No. 001-13641).
4.1†
Pinnacle Entertainment, Inc. 2001 Stock Option Plan is hereby incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-8 filed on June 6, 2001. (SEC File No. 333-62378).
4.2†
First Amendment to Pinnacle Entertainment, Inc. 2001 Stock Option Plan is hereby incorporated by reference to Exhibit 4.4
to the Company's Current Report on Form 8-K filed on January 30, 2004. (SEC File No. 001-13641).
4.3†
Form of Stock Option Agreement for Pinnacle Entertainment, Inc. 2001 Stock Option Plan is hereby incorporated by
reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004. (SEC
File No. 001-13641).
4.4†
Pinnacle Entertainment, Inc. 2002 Stock Option Plan is hereby incorporated by reference to Exhibit 4.4 to the Company's
Registration Statement on Form S-8 filed on July 16, 2003. (SEC File No. 333-107081).
4.5†
First Amendment to Pinnacle Entertainment, Inc. 2002 Stock Option Plan is hereby incorporated by reference to Exhibit 4.5
to the Company's Registration Statement on Form S-8 filed on July 16, 2003. (SEC File No. 333-107081).
4.6†
Second Amendment to Pinnacle Entertainment, Inc. 2002 Stock Option Plan is hereby incorporated by reference to Exhibit
4.6 to the Company's Registration Statement on Form S-8 filed on July 16, 2003. (SEC File No. 333-107081).
4.7†
Form of Stock Option Agreement for Pinnacle Entertainment, Inc. 2002 Stock Option Plan is hereby incorporated by
reference to Exhibit 4.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004. (SEC File
No. 001-13641).
4.8†
Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive Plan, As Amended, is hereby incorporated by reference
to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 26, 2011. (SEC File No. 001-13641).
4.9†
Form of Restricted Stock Agreement and Form of Restricted Stock Grant Notice for Pinnacle Entertainment, Inc. 2005
Equity and Performance Incentive Plan is hereby incorporated by reference to Exhibit 10.1 to the Company's Current Report
on Form 8-K filed on November 6, 2006. (SEC File No. 001-13641).
4.10†
Form of Stock Option Grant Notice and Form of Stock Option Agreement for the Pinnacle Entertainment, Inc. 2005 Equity
and Performance Incentive Plan, As Amended is hereby incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed on December 15, 2008. (SEC File No. 001-13641).
4.11†
Form of Stock Option Grant Notice and Form of Stock Option Agreement for the Pinnacle Entertainment, Inc. 2005 Equity
and Performance Incentive Plan, As Amended is hereby incorporated by reference to Exhibit 10.3 to the Company's Current
Report on Form 8-K filed on March 1, 2010. (SEC File No. 001-13641).
4.12†
Form of Grant of Other Stock Unit Awards for the Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive
Plan, As Amended is hereby incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed
on December 15, 2008. (SEC File No. 001-13641).
4.13†
Form of Grant of Other Stock Unit Awards for the Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive
Plan, As Amended is hereby incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed
on March 1, 2010. (SEC File No. 001-13641).
97
Table of Contents
Exhibit
Number
4.14†
Description of Exhibit
Form of Director Stock Option Grant Notice and Form of Director Stock Option Agreement for the Pinnacle Entertainment,
Inc. 2005 Equity and Performance Incentive Plan, As Amended is hereby incorporated by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K filed on February 10, 2010. (SEC File No. 001-13641).
4.15†
Nonqualified Stock Option Agreement dated as of March 14, 2010 by and between Pinnacle Entertainment, Inc. and
Anthony M. Sanfilippo is hereby incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K
filed on March 18, 2010. (SEC File No. 001-13641).
4.16†
Nonqualified Stock Option Agreement dated as of August 1, 2008 by and between Pinnacle Entertainment, Inc. and Carlos
Ruisanchez is hereby incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2008. (SEC File No. 001-13641).
4.17†
Form of Stock Option Grant Notice and Form of Stock Option Agreement for the Pinnacle Entertainment, Inc. 2005 Equity
and Performance Incentive Plan, As Amended, is hereby incorporated by reference to Exhibit 4.6 to the Company's
Registration Statement on Form S-8 filed on November 23, 2010. (SEC File No. 333-170796).
4.18†
Form of Grant of Other Stock Unit Awards for the Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive
Plan, As Amended, is hereby incorporated by reference to Exhibit 4.7 to the Company's Registration Statement on Form S-8
filed on November 23, 2010. (SEC File No. 333-170796).
4.19†
Form of Director Other Stock Unit Awards for the Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive
Plan, As Amended, is hereby incorporated by reference to Exhibit 4.8 to the Company's Registration Statement on Form S-8
filed on November 23, 2010. (SEC File No. 333-170796).
4.20†
Form of Grant of Other Stock Unit Awards for the Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive
Plan, As Amended, is incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on
March 7, 2011. (SEC File No. 001-13641).
4.21*†
Form of Online Stock Option Grant Notice and Award Agreement for the Pinnacle Entertainment, Inc. 2005 Equity and
Performance Incentive Plan, As Amended.
4.22*†
Form of Online Other Stock Unit Award Grant Notice and Award Agreement for the Pinnacle Entertainment, Inc. 2005
Equity and Performance Incentive Plan, As Amended.
4.23*†
Form of Online Director Stock Option Grant Notice and Option Agreement for the Pinnacle Entertainment, Inc. 2005 Equity
and Performance Incentive Plan, As Amended.
4.24*†
Form of Online Director Other Stock Unit Award Grant Notice and Award Agreement for the Pinnacle Entertainment, Inc.
2005 Equity and Performance Incentive Plan, As Amended.
4.25*†
Form of Online Other Stock Unit Award Grant Notice and Award Agreement for the Pinnacle Entertainment, Inc. 2005
Equity and Performance Incentive Plan, As Amended, and Annual Incentive Plan (Automatic Grant).
4.26*†
Form of Online Other Stock Unit Award Grant Notice and Award Agreement for the Pinnacle Entertainment, Inc. 2005
Equity and Performance Incentive Plan, As Amended, and Annual Incentive Plan (Elected Grant).
4.27†
Form of Amendment to Stock Option Agreements for Directors is hereby incorporated by reference to Exhibit 10.54 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009. (SEC File No. 001-13641).
4.28†
Form of Amendment to Stock Option Agreements and Employment Agreements for Executive Officers is hereby
incorporated by reference to Exhibit 10.55 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2009. (SEC File No. 001-13641).
98
Table of Contents
Exhibit
Number
4.29
Description of Exhibit
Indenture dated as of June 8, 2007, governing the 7.50% Senior Subordinated Notes due 2015, by and among Pinnacle
Entertainment, Inc., the guarantors identified therein and The Bank of New York Trust Company, N.A. is hereby
incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on June 11, 2007. (SEC File
No. 001-13641).
4.30
First Supplemental Indenture, dated as of July 16, 2009, governing the 7.50% Senior Subordinated Notes due 2015, by and
among Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company,
N.A., is hereby incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2009. (SEC File No. 001-13641).
4.31
Second Supplemental Indenture, dated as of February 5, 2010, governing the 7.50% Senior Subordinated Notes due 2015, by
and among Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust
Company, N.A., is hereby incorporated by reference to Exhibit 4.30 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2009. (SEC File No. 001-13641).
4.32
Third Supplemental Indenture, dated as of January 26, 2011, governing the 7.50% Senior Subordinated Notes due 2015, by
and among Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust
Company, N.A. is incorporated by reference to Exhibit 4.21 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2010. (SEC File No. 001-13641).
4.33
Fourth Supplemental Indenture, dated as of January 28, 2011, governing the 7.50% Senior Subordinated Notes due 2015, by
and among Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust
Company, N.A. is incorporated by reference to Exhibit 4.22 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2010. (SEC File No. 001-13641).
4.34
Fifth Supplemental Indenture, dated as of January 28, 2011, governing the 7.50% Senior Subordinated Notes due 2015, by
and among Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust
Company, N.A. is incorporated by reference to Exhibit 4.23 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2010. (SEC File No. 001-13641).
4.35
Form of 7.50% Senior Subordinated Note due 2015 is hereby incorporated by reference to Exhibit A contained in Exhibit
4.1 to the Company's Current Report on Form 8-K filed on June 11, 2007. (SEC File No. 001-13641).
4.36
Indenture dated as of August 10, 2009, governing the 8.625% Senior Notes due 2017, by and among the Company, the
guarantors identified therein and The Bank of New York Mellon Trust Company, N.A. is hereby incorporated by reference
to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on August 13, 2009. (SEC File No. 001-13641).
4.37
First Supplemental Indenture, dated as of February 5, 2010, governing the 8.625% Senior Notes due 2017, by and among
Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company, N.A., is
hereby incorporated by reference to Exhibit 4.33 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2009. (SEC File No. 001-13641).
4.38
Second Supplemental Indenture, dated as of January 26, 2011, governing the 8.625% Senior Notes due 2017, by and among
Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company, N.A. is
incorporated by reference to Exhibit 4.27 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2010. (SEC File No. 001-13641).
4.39
Third Supplemental Indenture, dated as of January 28, 2011, governing the 8.625% Senior Notes due 2017, by and among
Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company, N.A. is
incorporated by reference to Exhibit 4.28 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2010. (SEC File No. 001-13641).
4.40
Fourth Supplemental Indenture, dated as of January 28, 2011, governing the 8.625% Senior Notes due 2017, by and among
Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company, N.A. is
incorporated by reference to Exhibit 4.29 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2010. (SEC File No. 001-13641).
99
Table of Contents
Exhibit
Number
4.41
Description of Exhibit
Form of 8.625% Senior Note due 2017 is hereby incorporated by reference to Exhibit A contained in Exhibit 4.1 to the
Company's Current Report on Form 8-K filed on August 13, 2009. (SEC File No. 001-13641).
4.42
Registration Rights Agreement, dated as of August 10, 2009, among the Company, the guarantors identified therein and J.P.
Morgan Securities Inc., Banc of America Securities LLC, Barclays Capital Inc., Deutsche Bank Securities Inc. as
representatives of the several initial purchasers is hereby incorporated by reference to Exhibit 4.3 to the Company's Current
Report on Form 8-K filed on August 13, 2009. (SEC File No. 001-13641).
4.43
Indenture dated as of May 6, 2010, governing the 8.75% Senior Subordinated Notes due 2020, by and among the Company,
the guarantors identified therein and The Bank of New York Mellon Trust Company, N.A. is hereby incorporated by
reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on May 12, 2010. (SEC File No. 001-13641).
4.44
First Supplemental Indenture, dated as of January 26, 2011, governing the 8.75% Senior Subordinated Notes due 2020, by
and among Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust
Company, N.A. is incorporated by reference to Exhibit 4.33 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2010. (SEC File No. 001-13641).
4.45
Second Supplemental Indenture, dated as of January 28, 2011, governing the 8.75% Senior Subordinated Notes due 2020, by
and among Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust
Company, N.A. is incorporated by reference to Exhibit 4.34 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2010. (SEC File No. 001-13641).
4.46
Third Supplemental Indenture, dated as of January 28, 2011, governing the 8.75% Senior Subordinated Notes due 2020, by
and among Pinnacle Entertainment, Inc., the guarantors identified therein and The Bank of New York Mellon Trust
Company, N.A. is incorporated by reference to Exhibit 4.35 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2010. (SEC File No. 001-13641).
4.47
Form of 8.75% Senior Subordinated Note due 2020 is hereby incorporated by reference to Exhibit A contained in
Exhibit 4.2 to the Company's Current Report on Form 8-K filed on May 12, 2010. (SEC File No. 001-13641).
4.48
Registration Rights Agreement, dated as of May 6, 2010, among the Company, the guarantors identified therein and J.P.
Morgan Securities Inc., Banc of America Securities LLC, Barclays Capital Inc., Credit Agricole Securities (USA) Inc.,
Deutsche Bank Securities Inc. and UBS Securities LLC as representatives of the several initial purchasers is hereby
incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed on May 12, 2010. (SEC File
No. 001-13641).
10.1
Third Amended and Restated Credit Agreement, dated as of February 5, 2010, among Pinnacle Entertainment, Inc., the
Lenders referred to therein, Banc of America Securities LLC and JPMorgan Securities Inc., as Joint Lead Arrangers and
Joint Book Runners, Bank of America, N.A., JPMorgan Chase Bank, N.A., Calyon New York Branch, Deutsche Bank Trust
Company Americas and UBS Securities LLC, as Syndication Agents, Capital One National Association, as the
Documentation Agent, and Barclays Bank PLC as the Administrative Agent is hereby incorporated by reference to Exhibit
10.1 to the Company's Current Report on Form 8-K filed on February 8, 2010. (SEC File No. 001-13641).
10.2
First Amendment to Third Amended and Restated Credit Agreement, dated as of April 28, 2010, by and between Pinnacle
Entertainment, Inc., Barclays Bank PLC, as the administrative agent, and the Required Lenders is hereby incorporated by
reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 29, 2010. (SEC File No. 001-13641).
10.3
Second Amendment to Third Amended and Restated Credit Agreement, dated as of October 28, 2010, by and between
Pinnacle Entertainment, Inc., Barclays Bank PLC, as the administrative agent, and the Required Lenders is hereby
incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on November 1, 2010. (SEC
File No. 001-13641).
100
Table of Contents
Exhibit
Number
10.4
Description of Exhibit
Fourth Amended and Restated Credit Agreement, dated as of August 2, 2011, among Pinnacle Entertainment, Inc., the
Lenders referred to therein, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P.Morgan Securities LLC as Joint
Lead Arrangers and Joint Book Runners, Bank of America, N.A., JPMorgan Chase Bank, N.A., Credit Agricole Corporate
and Investment Bank, Deutsche Bank Securities Inc. and Wells Fargo Bank, N.A., as the Syndication Agents, UBS
Securities LLC and Capital One National Association as the Senior Managing Agents, and Barclays Bank PLC, as the
Administrative Agent is incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on
August 4, 2011. (SEC File No. 001-13641).
10.5
Waiver to Fourth Amended and Restated Credit Agreement, dated as of November 1, 2011, between Pinnacle
Entertainment, Inc., Barclays Bank, PLC, as Administrative Agent, and the Required Lenders thereto is incorporated by
reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on November 2, 2011. (SEC File No.
001-13641).
10.6†
Third Amended and Restated Employment Agreement, dated December 22, 2008, between Pinnacle Entertainment, Inc. and
Daniel R. Lee is hereby incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2008. (SEC File No. 001-13641).
10.7†
Separation Agreement dated as of November 7, 2009 between Pinnacle Entertainment, Inc. and Daniel R. Lee is hereby
incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on November 12, 2009. (SEC
File No. 001-13641).
10.8†
Amendment to Separation Agreement, effective February 11, 2010, between Pinnacle Entertainment, Inc. and Daniel R. Lee
is hereby incorporated by reference to Exhibit 10.56 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2009. (SEC File No. 001-13641).
10.9†
Employment Agreement, entered into on March 13, 2010 and effective as of March 14, 2010, by and between Pinnacle
Entertainment, Inc. and Anthony M. Sanfilippo is hereby incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K filed on March 18, 2010. (SEC File No. 001-13641).
10.10†
Amended and Restated Employment Agreement, dated March 1, 2011, by and between Pinnacle Entertainment, Inc. and
Anthony M. Sanfilippo is incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on
March 7, 2011. (SEC File No. 001-13641).
10.11†
First Amendment to Amended and Restated Employment Agreement, dated December 14, 2011, effective as of January 1,
2012, by and between Pinnacle Entertainment, Inc. and Anthony M. Sanfilippo is incorporated by reference to Exhibit 10.1
to the Company's Current Report on Form 8-K filed on December 15, 2011. (SEC File No. 001-13641).
10.12†
Amended and Restated Employment Agreement dated December 22, 2008 between Pinnacle Entertainment, Inc. and
Stephen H. Capp is hereby incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2008. (SEC File No. 001-13641).
10.13†
Separation Agreement and General Release, dated March 3, 2011, between Pinnacle Entertainment, Inc. and Stephen H.
Capp is incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 4, 2011.
(SEC File No. 001-13641).
10.14†
Amended and Restated Employment Agreement dated December 22, 2008 between Pinnacle Entertainment, Inc. and
John A. Godfrey is hereby incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2008. (SEC File No. 001-13641).
10.15†
First Amendment to Amended and Restated Employment Agreement, dated September 23, 2010, between Pinnacle
Entertainment, Inc. and John A. Godfrey is hereby incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed on September 24, 2010. (SEC File No. 001-13641).
10.16†
Amended and Restated Employment Agreement dated December 22, 2008 between Pinnacle Entertainment, Inc. and Carlos
Ruisanchez is hereby incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2008. (SEC File No. 001-13641).
101
Table of Contents
Exhibit
Number
10.17†
Description of Exhibit
First Amendment to Amended and Restated Employment Agreement, dated September 23, 2010, between Pinnacle
Entertainment, Inc. and John A. Godfrey is hereby incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed on September 24, 2010. (SEC File No. 001-13641).
10.18†
Employment Agreement, dated March 28, 2011, between Pinnacle Entertainment, Inc. and Carlos Ruisanchez is
incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 29, 2011. (SEC File
No. 001-13641).
10.19†
First Amendment to Employment Agreement, dated December 14, 2011, effective as of January 1, 2012, by and between
Pinnacle Entertainment, Inc. and Carlos A. Ruisanchez is incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K filed on December 15, 2011. (SEC File No. 001-13641).
10.20†
Amended and Restated Employment Agreement dated December 22, 2008 between Pinnacle Entertainment, Inc. and Alain
Uboldi is hereby incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2008. (SEC File No. 001-13641).
10.21†
First Amendment to Amended and Restated Employment Agreement, dated as of April 15, 2010, between Pinnacle
Entertainment, Inc. and Alain Uboldi is hereby incorporated by reference to Exhibit 10.1 to the Company's Current Report
on Form 8-K filed on April 19, 2010. (SEC File No. 001-13641).
10.22†
Separation Agreement and General Release, dated December 8, 2010 between Pinnacle Entertainment, Inc. and Alain
Uboldi is hereby incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December
9, 2010. (SEC File No. 001-13641).
10.23†
Amended and Restated Employment Agreement dated December 22, 2008 between Pinnacle Entertainment, Inc. and
Clifford D. Kortman is hereby incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2009. (SEC File No. 001-13641).
10.24†
First Amendment to Amended and Restated Employment Agreement dated December 18, 2009 between Pinnacle
Entertainment, Inc. and Clifford D. Kortman is hereby incorporated by reference to Exhibit 10.17 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2009. (SEC File No. 001-13641).
10.25†
Separation Agreement and General Release, dated March 3, 2011, between Pinnacle Entertainment, Inc. and Clifford D.
Kortman is hereby incorporated by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2011. (SEC File No. 001-13641).
10.26*†
Employment Agreement, dated November 29, 2011, effective November 15, 2011, between Pinnacle Entertainment, Inc.
and Daniel P. Boudreaux.
10.27*†
First Amendment to Employment Agreement, dated December 14, 2011, effective as of January 1, 2012, by and between
Pinnacle Entertainment, Inc. and Daniel P. Boudreaux.
10.28*†
Employment Agreement, dated November 29, 2011, effective November 15, 2011, between Pinnacle Entertainment, Inc.
and Virginia E. Shanks.
10.29*†
First Amendment to Employment Agreement, dated December 14, 2011, effective as of January 1, 2012, by and between
Pinnacle Entertainment, Inc. and Virginia E. Shanks.
10.30*†
Summary of Director Compensation.
10.31†
Pinnacle Entertainment, Inc. Director Health and Medical Insurance Plan is hereby incorporated by reference to Exhibit 10.7
to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011. (SEC File
No. 001-13641).
10.32†
2008 Amended and Restated Pinnacle Entertainment, Inc. Directors Deferred Compensation Plan is hereby incorporated by
reference to Exhibit 10.48 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
(SEC File No. 001-13641).
102
Table of Contents
Exhibit
Number
10.33†
Description of Exhibit
Pinnacle Entertainment, Inc. Executive Deferred Compensation Plan, as amended and restated effective January 1, 2011 is
incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on March 7, 2011. (SEC File
No. 001-13641).
10.34
Form of Lease by and between the Webster Family Limited Partnership, the Diuguid Family Limited Partnership and
Pinnacle Gaming Development Corp. (executed by the parties on December 11, 1998 and subsequently assigned by Pinnacle
Gaming Development Corp. to Belterra Resort Indiana, LLC), is hereby incorporated by reference to Exhibit B contained in
Exhibit 10.47 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998. (SEC File No.
001-13641).
10.35
Form of Lease by and between Daniel Webster, Marsha S. Webster, William G. Diuguid, Sara T. Diuguid, J.R. Showers, III
and Carol A. Showers, and Pinnacle Gaming Development Corp. (executed by the parties on December 11, 1998 and
subsequently assigned by Pinnacle Gaming Development Corp. to Belterra Resort Indiana, LLC), is hereby incorporated by
reference to Exhibit B contained in Exhibit 10.51 to the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1998. (SEC File No. 001-13641).
10.36
Commercial Lease dated September 9, 1996 by and between State of Louisiana, State Land Office and PNK (Bossier City),
Inc. (f/k/a Casino Magic of Louisiana, Corp.), is hereby incorporated by reference to Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003. (SEC File No. 001-13641).
10.37
Ground Lease Agreement executed as of August 21, 2003, effective as of August 19, 2002, by and between PNK (LAKE
CHARLES), L.L.C., and Lake Charles Harbor & Terminal District, is hereby incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K filed on September 19, 2003. (SEC File No. 001-13641).
10.38
Addendum Number One dated as of July 5, 2005 to Memorandum of Lease dated August 21, 2003, by and between PNK
(LAKE CHARLES) L.L.C. and Lake Charles Harbor & Terminal District is hereby incorporated by reference to Exhibit
10.3 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2005. (SEC File No.
001-013641).
10.39
Exercising of Option to Lease Immovable Property situated in Calcasieu Parish, Louisiana and Exercise of Option to Lease
Additional Property is hereby incorporated by reference to Exhibit 10.64 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2006. (SEC File No. 001-13641).
10.40
Redevelopment Agreement dated as of April 22, 2004 by and between the Land Clearance for Redevelopment Authority of
the City of St. Louis and Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.43 to the Company's
Amendment No. 1 to Registration Statement on Form S-4 filed on June 7, 2004. (SEC File No. 333-115557).
10.41
First Amendment to Redevelopment Agreement and First Amendment to Option For Ground Lease dated as of
December 23, 2004 by and between the Land Clearance for Redevelopment Authority of the City of St. Louis and Pinnacle
Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.51 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2005. (SEC File No. 001-13641).
10.42
Second Amendment to Redevelopment Agreement dated as of July 21, 2005 by and between the Land Clearance for
Redevelopment Authority of the City of St. Louis and Pinnacle Entertainment, Inc. is hereby incorporated by reference to
Exhibit 10.52 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2005. (SEC File No.
001-13641).
10.43
Third Amendment to the Redevelopment Agreement dated August 21, 2006 by and between Land Clearance for
Redevelopment Authority of the City of St. Louis and Pinnacle Entertainment, Inc. is hereby incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K filed on August 24, 2006. (SEC File No. 001-13641).
10.44
Fourth Amendment to the Redevelopment Agreement dated March 28, 2008 by and between Land Clearance for
Redevelopment Authority of the City of St. Louis and Pinnacle Entertainment, Inc. is hereby incorporated by reference to
Exhibit 10.61 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010. (SEC File
No. 001-13641).
103
Table of Contents
Exhibit
Number
10.45
Description of Exhibit
Fifth Amendment to the Redevelopment Agreement dated February 23, 2011 by and between Land Clearance for
Redevelopment Authority of the City of St. Louis and Pinnacle Entertainment, Inc. is hereby incorporated by reference to
Exhibit 10.62 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010. (SEC File
No. 001-13641).
10.46
Lease and Development Agreement dated as of August 12, 2004 by and between the St. Louis County Port Authority and
Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 2004. (SEC File No. 001-13641).
10.47
Letter Agreement dated as of August 12, 2004 by and between the St. Louis County Port Authority and Pinnacle
Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.54 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2005. (SEC File No. 001-13641).
10.48
Second Amendment to Lease and Development Agreement dated as of October 7, 2005 by and between St. Louis County
Port Authority and Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.55 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2005. (SEC File No. 001-13641).
10.49
Third Amendment to Lease and Development Agreement dated as of August 11, 2006 by and between the St. Louis County
Port Authority and Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006. (SEC File No. 001-13641).
10.50
Fourth Amendment to Lease and Development Agreement dated as of January 18, 2007 by and between the St. Louis
County Port Authority and Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.38 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2006. (SEC File No. 001-13641).
10.51
Fifth Amendment to Lease and Development Agreement dated as of March 30, 2007 by and between St. Louis County Port
Authority and Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.3 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2007. (SEC File No. 001-13641).
10.52
Sixth Amendment to Lease and Development Agreement dated November 26, 2007 by and between the St. Louis County
Port Authority and Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K filed on November 30, 2007. (SEC File No. 001-13641).
10.53
Seventh Amendment to Lease and Development Agreement dated February 19, 2010 by and between the St. Louis County
Port Authority and Pinnacle Entertainment, Inc. is hereby incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K filed on February 22, 2010. (SEC File No. 001-13641).
10.54
Eighth Amendment to Lease and Development Agreement, dated September 15, 2011, by and between the St. Louis County
Port Authority and Pinnacle Entertainment, Inc. is incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed on September 16, 2011. (SEC File No. 001-13641).
10.55
Indemnification Trust Agreement dated as of August 16, 2005 by and between Pinnacle Entertainment, Inc. and Wilmington
Trust Company and, as an additional party, Bruce Leslie, as Beneficiaries' Representative, is hereby incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30,
2005. (SEC File No. 001-13641).
10.56
Settlement Agreement and Mutual Release, effective February 3, 2010, between Pinnacle Entertainment, Inc. and RSUI
Indemnity Company is hereby incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed
on February 10, 2010. (SEC File No. 001-13641).
10.57
Memorandum of Understanding, effective February 3, 2010, between Pinnacle Entertainment, Inc. and RSUI Indemnity
Company is hereby incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on
February 8, 2010. (SEC File No. 001-13641).
104
Table of Contents
Exhibit
Number
10.58
Description of Exhibit
Agreement for Guaranteed Maximum Price Construction Services, effective as of March 30, 2010, by and between PNK
(Baton Rouge) Partnership and Manhattan Construction Company is hereby incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K filed on April 5, 2010. (SEC File No. 001-13641).
10.59
First Amendment to the Agreement for Guaranteed Maximum Price Construction Services, dated as of May 26, 2011,
between PNK (Baton Rouge) Partnership and Manhattan Construction Company is incorporated by reference to Exhibit 10.1
to the Company's Current Report on Form 8-K filed on June 1, 2011. (SEC File No. 001-13641).
10.60
Second Amendment to the Agreement for Guaranteed Maximum Price Construction Services, dated as of May 26, 2011,
between PNK (Baton Rouge) Partnership and Manhattan Construction Company is incorporated by reference to Exhibit 10.2
to the Company's Current Report on Form 8-K filed on June 1, 2011. (SEC File No. 001-13641).
10.61
Asset Purchase Agreement, dated November 24, 2010, between Pinnacle Entertainment, Inc., PNK (Ohio), LLC, River
Downs Investment Company, River Downs Jockey Club, Incorporated, River Downs Turf Club, Incorporated, and Ohio
Valley Concessions, Inc. is hereby incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K
filed on November 26, 2010. (SEC File No. 001-13641).
10.62
Sale and Purchase Agreement, dated April 29, 2010, between Casino Magic Corp., Casino Magic Management Services
Corp., Casino Club S.A., Da Silvano S.A., Compañía Gerenciadora de Inversiones S.A. and Correon S.A. is hereby
incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on July 7, 2010. (SEC File
No. 001-13641).
10.63
Agent Agreement, dated as of July 29, 2011, between Wunderlich Securities Inc. and Pinnacle Entertainment, Inc. is
incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on August 4, 2011. (SEC File
No. 001-13641).
10.64
Subscription Agreement, dated as of May 25, 2011, between PNK Development 18, LLC and Asian Coast Development
(CANADA) LTD. is hereby incorporated by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 2011. (SEC File No. 001-13641).
10.65
Shareholders Agreement, dated August 8, 2011, between PNK Development 18, LLC, Harbinger II S.a.r.l, Blue Line
ACDL, Inc., Credit Distressed Blue Line Master Fund, Ltd., Global Opportunities Breakaway Ltd., and Breakaway ACDL,
Inc. and Asian Coast Development (Canada) Ltd. is incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K/A filed on November 8, 2011. (SEC File No. 001-13641).
10.66*
Resort Management Agreement, effective August 8, 2011, between Ho Tram Project Company Limited and PNK (VN), Inc.
10.67*
Sixth Amendment to the Redevelopment Agreement dated January 30, 2012 by and between Land Clearance for
Redevelopment Authority of the City of St. Louis and Pinnacle Entertainment, Inc.
10.68*†
Stock Option Grant Notice and Stock Option Agreement (Stock Option Exchange Program), dated September 14, 2011, by
and between Pinnacle Entertainment, Inc. and Daniel Boudreaux.
11*
Statement re: Computation of Per Share Earnings.
12*
Computation of Ratio of Earnings to Fixed Charges.
21*
Subsidiaries of Pinnacle Entertainment, Inc.
23.1*
Consent of Ernst & Young LLP.
31.1*
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2*
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
105
Table of Contents
Exhibit
Number
32**
Description of Exhibit
Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer.
99.1*
Government Regulations and Gaming Issues.
99.2
Form of Power of Attorney for the Designation and Appointment of a Trustee For the Purposes of Conducting Casino
Gambling Operations as required by the Indiana Gaming Commission is hereby incorporated by reference to Exhibit 99.4 to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009. (SEC File No. 001-13641).
101**
Financial statements from Pinnacle's Entertainment, Inc.'s Annual Report on Form 10-K for the annual period ended
December 31, 2011, formatted in XBRL (eXtensible Business Reporting Language):
(i) Consolidated Balance Sheets,
(ii) Consolidated Statements of Operations,
(iii) Consolidated Statements of Changes in Stockholders' Equity,
(iv) Consolidated Statements of Cash Flows; and
(v) Notes to the Consolidated Financial Statements .
*
**
†
Filed herewith.
Furnished herewith.
Management contract or compensatory plan or arrangement.
106
Exhibit 4.21
EXECUTIVE STOCK OPTION GRANT NOTICE AND AWARD AGREEMENT
Congratulations! As a key leader in our business, you are in a position to have significant influence on the outcomes that affect
our guests and Pinnacle Entertainment, Inc. (the “Company” or “Pinnacle” ). I am pleased to inform you that, in recognition of the
role you play in our collective success, you have been issued an option to purchase shares of the Company’s common stock. This
award is subject to the terms and conditions of the 2005 Equity and Performance Incentive Plan and the following Stock Option
Agreement, which are in all events the governing documents for your award. The details of this award are indicated below.
Optionee:
Date of Grant:
Number of Shares of Common Stock:
Exercise Price Per Share:
Term of Option:
Vesting Commencement Date:
Type of Option:
Stock options can be a great opportunity for individual wealth creation. As our Company becomes more valuable through
management running the business better and through growth opportunities, the value or price of a share of the Company’s common
stock should increase. Through your efforts and the efforts of your colleagues, you have the ability to help increase the value of our
Company for all shareholders.
Thank you for all you do each and every day as a leader and owner of the Company. Our focus on driving profitable revenues,
eliminating non-value added expense and investing our capital prudently is collectively building a much stronger Pinnacle. We are
establishing a balanced portfolio of properties as we continue to grow nationally and internationally, and are well on our way to
becoming the BEST CASINO ENTERTAINMENT COMPANY IN THE WORLD.
It is an exciting time to be part of Pinnacle Entertainment!
Anthony Sanfilippo
President & CEO
THIS STOCK OPTION AGREEMENT (together with the above grant notice (the “Grant Notice” ), the “Agreement” ) is
made and entered into as of the date set forth on the Grant Notice by and between Pinnacle Entertainment, Inc., a Delaware
corporation (the “ Company ”), and the individual (the “Optionee” ) set forth on the Grant Notice.
A. Pursuant to the Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive Plan (the “Plan” ), the Compensation
Committee (the “Committee” ) has determined that it is to the advantage and best interest of the Company to grant to the Optionee an
option (the “Option” ) to purchase the number of shares of the Common Stock of the Company (the “Shares” or the “Option
Shares” ) set forth on the Grant Notice, at the exercise price determined as provided herein, and in all respects subject to the terms,
definitions and provisions of the Plan, which is incorporated herein by reference.
B. Unless otherwise defined herein, capitalized terms used in this Agreement shall have the meanings set forth in the Plan.
NOW, THEREFORE, in consideration of the mutual agreements contained herein, the Optionee and the Company hereby agree
as follows:
1. Acceptance of Agreement . Optionee has reviewed the Plan and this Agreement, and all provisions of the Plan and Agreement. By
electronically accepting this Option according to the instructions provided by the Company’s designated broker, Optionee agrees that
this electronic contract contains Optionee’s electronic signature, which Optionee has executed with the intent to sign this Agreement,
and that this Option is granted under and governed by the terms and conditions of the Plan and this Agreement. Optionee hereby
agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee on questions relating to the Plan and
this Agreement.
2. Grant and Terms of Stock Option .
2.1 Grant of Option . Pursuant to the Grant Notice, the Company has granted to the Optionee the right and option to purchase,
subject to the terms and conditions set forth in the Plan and this Agreement, all or any part of the number of Shares set forth on the
Grant Notice at a purchase price per Share equal to the exercise price per Share set forth on the Grant Notice. If the Grant Notice
indicates (under “Type of Option”) that this Option is an “ISO” , then this Option is intended by the Company and the Optionee to be
an Incentive Stock Option. However, if the Grant Notice indicates that this Option is a “NQSO” , then this Option is not intended to
be an Incentive Stock Option and is instead intended to be a Nonqualified Stock Option.
2.2 Vesting . Subject to the provisions of the Plan and the other provisions of this Agreement, this Option shall vest and become
exercisable in four equal annual installments on first, second, third and fourth anniversaries of the Vesting Commencement Date (each
a “Vesting Date” ). Notwithstanding the foregoing and except as otherwise provided (including, without limitation, any additional
vesting provisions) in a written employment agreement between the Company and the Optionee, (a) in the event of termination of the
Optionee’s Continuous Status as an Employee, Director or Consultant for any reason (other than because of termination due to Cause),
this Option shall immediately cease vesting; and (b) in the event of termination of the Optionee’s Continuous Status as an Employee,
Director or Consultant because of termination due to Cause, then this entire Option shall be cancelled and terminated as of the date of
such termination and shall no longer be exercisable as to any Shares, whether or not previously vested.
2.3 Term of Option . The “ Term” of this Option shall begin on the Date of Grant set forth in the Grant Notice and end on the
expiration of the Term specified in the Grant Notice. No portion of this Option may be exercised after the expiration of the Term.
2.3.1 In the event of termination of Optionee’s Continuous Status as an Employee, Director or Consultant for any reason
other than death, Disability, or Cause, except as otherwise provided in a written employment agreement between the Company and the
Optionee, the portion of this Option that is not vested and exercisable as of the date of termination shall be immediately cancelled and
terminated. In addition, except as otherwise provided in a written employment agreement between the Company and the Optionee, the
portion of this Option that is vested and exercisable as of the date of termination shall terminate and be cancelled on the earlier of
(i) the expiration of the Term, or (ii) one year after termination of Optionee’s Continuous Status as an Employee, Director or
Consultant.
-22.3.2 In the event of termination of Optionee’s Continuous Status as an Employee, Director or Consultant by death or
Disability, except as otherwise provided in a written employment agreement between the Company and the Optionee, the portion of
this Option that is not vested and exercisable as of the date of termination shall be immediately cancelled and terminated. In addition,
except as otherwise provided in a written employment agreement between the Company and the Optionee, the portion of this Option
that is vested and exercisable as of the date of termination shall terminate and be cancelled on the earlier of (i) the expiration of the
Term, or (ii) one year after termination of Optionee’s Continuous Status as an Employee, Director or Consultant by death or
Disability.
2.3.3 If Optionee’s Continuous Status as an Employee, Director or Consultant is terminated for Cause, or if, after the
termination of Optionee’s Continuous Status as an Employee, Director or Consultant, the Committee determines that Cause existed
before such termination, except as otherwise provided in a written employment agreement between the Company and the Optionee,
this entire Option shall be cancelled and terminated as of the date of such termination and shall no longer be exercisable as to any
Shares, whether or not previously vested.
3. Method of Exercise.
3.1 Delivery of Notice of Exercise . This Option shall be exercisable by delivery of instructions, which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is being exercised, and such other representations and
agreements as may be required by the Company pursuant to the provisions of the Plan. Exercise of the shares shall be performed by
online execution of exercise through the designated broker’s internet tool, or delivery of verbal instruction to the designated broker’s
customer service agent if so permitted by the designated broker, together with such information as the broker shall require to complete
the transaction; or a combination thereof. The Option shall be deemed to be exercised no earlier than receipt by the designated broker
of such exercise instructions accompanied by the aggregate exercise price. This Option may not be exercised for a fraction of a Share.
3.2 Restrictions on Exercise . No Shares will be issued pursuant to the exercise of this Option unless and until there shall have
been full compliance with all applicable requirements of the Securities Act of 1933, as amended (whether by registration or
satisfaction of exemption conditions), all applicable listing requirements of any national securities exchange or other market system on
which the Common Stock is then listed and all applicable requirements of any Applicable Laws and of any regulatory bodies having
jurisdiction over such issuance. As a condition to the exercise of this Option, the Company may require the Optionee to make any
representation and warranty to the Company as may be necessary or appropriate, in the judgment of the Committee, to comply with
any Applicable Law.
3.3 Method of Payment . Payment of the exercise price shall be made in full at the time of exercise (a) in cash or by certified
check or bank check or wire transfer of immediately available funds, (b) by tendering previously acquired Shares (either actually or by
attestation, valued at their then Fair Market Value) that have been owned for a period of at least six months (or such other period to
avoid accounting charges against the Company’s earnings), (c) by delivery of the exercise instructions together with any other
documentation as the designated broker (and Optionee’s broker, if applicable) require(s) to effect an exercise of the Option and
delivery to the Company of the sale or other proceeds (as permitted by Applicable Law) required to pay the exercise price, or (d) any
combination of any of the foregoing. In addition, the Committee may impose such other conditions in connection with the delivery of
shares of Common Stock in satisfaction of the exercise price as it deems appropriate in its sole discretion.
3.4 Notice of Disqualifying Disposition of Incentive Stock Option . If this Option is an Incentive Stock Option and the Optionee
sells or otherwise disposes of any of the Shares acquired upon exercise of this Option on or before the later of (i) two years after the
date of grant, or (ii) one year after the date such Shares were acquired, the Optionee shall immediately notify the Company in writing
of such disposition. The Optionee agrees that he or she may be subject to income tax withholding by the Company on the taxable
income recognized as a result of such disposition and that the Optionee shall be required to satisfy such withholding obligations either
by making a payment to the Company in cash or by withholding from current earnings of the Optionee.
-33.5 No Rights as a Stockholder . Until the stock certificate evidencing shares of Common Stock issued upon exercise of this
Option is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares,
notwithstanding the exercise of the Option.
4. Non-Transferability of Option . This Option may not be transferred in any manner otherwise than by will or by the laws of descent
or distribution or to a beneficiary designated pursuant to the Plan, and may be exercised during the lifetime of Optionee only by
Optionee or the Optionee’s guardian or legal representative. Subject to all of the other terms and conditions of this Agreement,
following the death of Optionee, this Option may, to the extent it is vested and exercisable by Optionee in accordance with its terms on
the date of death, be exercised by Optionee’s beneficiary or other person entitled to exercise this Option in the event of Optionee’s
death under the Plan. Notwithstanding the first sentence of this Section 4, if this Option is a Nonqualified Stock Option, this Option
may be assigned, in connection with the Optionee’s estate plan, in whole or in part, during the Optionee’s lifetime to one or more
Family Members of the Optionee. Rights under the assigned portion may be exercised by the person or persons who acquire a
proprietary interest in such Option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those
in effect for the Option immediately before such assignment and shall be set forth in such documents issued to the assignee as the
Committee deems appropriate.
5. Restrictions; Restrictive Legends . Ownership and transfer of Shares issued pursuant to the exercise of this Option will be subject
to the provisions of, including ownership and transfer restrictions (including, without limitation, ownership and transfer restrictions
imposed by applicable gaming laws) contained in, the Company’s Certificate of Incorporation, as amended from time to time,
restrictions imposed by Applicable Laws and restrictions set forth or referenced in legends imprinted on certificates representing such
Shares.
6. Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, to the extent that this Option
had not been previously exercised, it will terminate immediately prior to the consummation of such proposed dissolution or
liquidation. In such instance, the Committee may, in the exercise of its sole discretion, declare that this Option will terminate as of a
date fixed by the Committee and give the Optionee the right to exercise this Option prior to such date as to all or any part of the
optioned stock, including shares as to which this Option would not otherwise be exercisable.
7. General .
7.1 Governing Law . This Agreement shall be governed by and construed under the laws of the State of Delaware applicable to
agreements made and to be performed entirely in Delaware, without regard to the conflicts of law provisions of Delaware or any other
jurisdiction.
7.2 Community Property . Without prejudice to the actual rights of the spouses as between each other, for all purposes of this
Agreement, the Optionee shall be treated as agent and attorney-in-fact for that interest held or claimed by his or her spouse with
respect to this Option and the parties hereto shall act in all matters as if the Optionee was the sole owner of this Option. This
appointment is coupled with an interest and is irrevocable.
7.3 No Employment Rights . Nothing herein contained shall be construed as an agreement by the Company or any of its
subsidiaries, express or implied, to employ the Optionee or contract for the Optionee’s services, to restrict the Company’s or such
subsidiary’s right to discharge the Optionee or cease contracting for the Optionee’s services or to modify, extend or otherwise affect in
any manner whatsoever the terms of any employment agreement or contract for services which may exist between the Optionee and
the Company or any of its subsidiaries.
7.4 Application to Other Stock . In the event any capital stock of the Company or any other corporation shall be distributed on,
with respect to, or in exchange for shares of Common Stock as a stock dividend, stock split, reclassification or recapitalization in
connection with any merger or reorganization or otherwise, all restrictions, rights and obligations set forth in this Agreement shall
apply with respect to such other capital stock to the same extent as they are, or would have been applicable, to the Option Shares on or
with respect to which such other capital stock was distributed.
-47.5 No Third-Party Benefits . Except as otherwise expressly provided in this Agreement, none of the provisions of this
Agreement shall be for the benefit of, or enforceable by, any third-party beneficiary.
7.6 Successors and Assigns . Except as provided herein to the contrary, this Agreement shall be binding upon and inure to the
benefit of the parties, their respective successors and permitted assigns.
7.7 No Assignment . Except as otherwise provided in this Agreement, the Optionee may not assign any of his, her or its rights
under this Agreement without the prior written consent of the Company, which consent may be withheld in its sole discretion. The
Company shall be permitted to assign its rights or obligations under this Agreement, but no such assignment shall release the
Company of any obligations pursuant to this Agreement.
7.8 Severability . The validity, legality or enforceability of the remainder of this Agreement shall not be affected even if one or
more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable in any respect.
7.9 Equitable Relief . The Optionee acknowledges that, in the event of a threatened or actual breach of any of the provisions of
this Agreement, damages alone will be an inadequate remedy, and such breach will cause the Company great, immediate and
irreparable injury and damage. Accordingly, the Optionee agrees that the Company shall be entitled to injunctive and other equitable
relief, and that such relief shall be in addition to, and not in lieu of, any remedies it may have at law or under this Agreement.
7.10 Arbitration .
7.10.1 General . Any controversy, dispute, or claim between the parties to this Agreement, including any claim arising out
of, in connection with, or in relation to the formation, interpretation, performance or breach of this Agreement shall be settled
exclusively by arbitration, before a single arbitrator, in accordance with this Section 7.10 and the then most applicable rules of the
American Arbitration Association. Judgment upon any award rendered by the arbitrator may be entered by any state or federal court
having jurisdiction thereof. Such arbitration shall be administered by the American Arbitration Association. Arbitration shall be the
exclusive remedy for determining any such dispute, regardless of its nature. Notwithstanding the foregoing, either party may in an
appropriate matter apply to a court for provisional relief, including a temporary restraining order or a preliminary injunction, on the
ground that the award to which the applicant may be entitled in arbitration may be rendered ineffectual without provisional relief.
Unless mutually agreed by the parties otherwise, any arbitration shall take place in the City of Las Vegas, Nevada.
7.10.2 Selection of Arbitrator . In the event the parties are unable to agree upon an arbitrator, the parties shall select a single
arbitrator from a list of nine arbitrators drawn by the parties at random from the “Independent” (or “Gold Card”) list of retired judges
or, at the option of the Optionee, from a list of nine persons (which shall be retired judges or corporate or litigation attorneys
experienced in stock options and buy-sell agreements) provided by the office of the American Arbitration Association having
jurisdiction over Las Vegas, Nevada. If the parties are unable to agree upon an arbitrator from the list so drawn, then the parties shall
each strike names alternately from the list, with the first to strike being determined by lot. After each party has used four strikes, the
remaining name on the list shall be the arbitrator. If such person is unable to serve for any reason, the parties shall repeat this process
until an arbitrator is selected.
7.10.3 Applicability of Arbitration; Remedial Authority . This agreement to resolve any disputes by binding arbitration
shall extend to claims against any parent, subsidiary or affiliate of each party, and, when acting within such capacity, any officer,
director, stockholder, employee or agent of each party, or of any of the above, and shall apply as well to claims arising out of state and
federal statutes and local ordinances as well as to claims arising under the common law. In the event of a dispute subject to this
paragraph the parties shall be entitled to reasonable discovery subject to the discretion of the arbitrator. The remedial authority of the
arbitrator (which shall include the right to grant injunctive or other equitable relief) shall be the same as, but no greater than, would be
the remedial power of a court having jurisdiction over the parties and their dispute. The arbitrator shall, upon an appropriate motion,
dismiss any claim without an evidentiary hearing if the party bringing the motion establishes that he or it would be entitled to
summary judgement if the matter had been pursued in court litigation. In the event of a conflict between the applicable rules of the
American Arbitration Association and these procedures, the provisions of these procedures shall govern.
-5-
7.10.4 Fees and Costs . Any filing or administrative fees shall be borne initially by the party requesting arbitration. The
Company shall be responsible for the costs and fees of the arbitration, unless the Optionee wishes to contribute (up to 50%) of the
costs and fees of the arbitration. Notwithstanding the foregoing, the prevailing party in such arbitration, as determined by the
arbitrator, and in any enforcement or other court proceedings, shall be entitled, to the extent permitted by law, to reimbursement from
the other party for all of the prevailing party’s costs (including but not limited to the arbitrator’s compensation), expenses, and
attorneys’ fees.
7.10.5 Award Final and Binding . The arbitrator shall render an award and written opinion, and the award shall be final and
binding upon the parties. If any of the provisions of this paragraph, or of this Agreement, are determined to be unlawful or otherwise
unenforceable, in whole or in part, such determination shall not affect the validity of the remainder of this Agreement, and this
Agreement shall be reformed to the extent necessary to carry out its provisions to the greatest extent possible and to insure that the
resolution of all conflicts between the parties, including those arising out of statutory claims, shall be resolved by neutral, binding
arbitration. If a court should find that the arbitration provisions of this Agreement are not absolutely binding, then the parties intend
any arbitration decision and award to be fully admissible in evidence in any subsequent action, given great weight by any finder of
fact, and treated as determinative to the maximum extent permitted by law.
7.11 Withholding Taxes . The Company has the right to take whatever steps the Company deems necessary or appropriate to
comply with all applicable federal, state, local, and employment tax withholding requirements, and the Company’s obligations to
deliver shares of Common Stock upon the exercise of this Option will be conditioned upon compliance with all such withholding tax
requirements. Without limiting the generality of the foregoing, upon the exercise of this Option, the Company will have the right to
withhold taxes from any other compensation or other amounts which it may owe to the Optionee, or to require the Optionee to pay to
the Company the amount of any taxes which the Company may be required to withhold with respect to the shares issued on such
exercise. Without limiting the generality of the foregoing, the Committee in its discretion may authorize the Optionee to satisfy all or
part of any withholding tax liability by (a) having the Company withhold from the shares of Common Stock which would otherwise be
issued on the exercise of an Option that number of shares having a Fair Market Value, as of the date the withholding tax liability
arises, equal to or less than the amount of the Company’s withholding tax liability, or (b) by delivering to the Company
previously-owned and unencumbered shares of the Common Stock having a Fair Market Value, as of the date the withholding tax
liability arises, equal to or less than the amount of the Company’s withholding tax liability.
7.12 Headings . The section headings in this Agreement are inserted only as a matter of convenience, and in no way define, limit,
extend or interpret the scope of this Agreement or of any particular section.
7.13 Number and Gender . Throughout this Agreement, as the context may require, (a) the masculine gender includes the
feminine and the neuter gender includes the masculine and the feminine; (b) the singular tense and number includes the plural, and the
plural tense and number includes the singular; (c) the past tense includes the present, and the present tense includes the past;
(d) references to parties, sections, paragraphs and exhibits mean the parties, sections, paragraphs and exhibits of and to this
Agreement; and (e) periods of days, weeks or months mean calendar days, weeks or months.
7.14 Electronic Delivery and Disclosure . The Company may, in its sole discretion, decide to deliver or disclose, as applicable,
any documents related to this Option granted under the Plan, future options that may be granted under the Plan, the prospectus related
to the Plan, the Company’s annual reports or proxy statements by electronic means or to request Optionee’s consent to participate in
the Plan by electronic means. Optionee hereby consents to receive such documents delivered electronically or to retrieve such
documents furnished electronically, as applicable, and agrees to participate in the Plan through any online or electronic system
established and maintained by the Company or another third party designated by the Company.
-67.15 Data Privacy . Optionee agrees that all of Optionee’s information that is described or referenced in this Agreement and the
Plan may be used by the Company, its affiliates and the designated broker and its affiliates to administer and manage Optionee’s
participation in the Plan.
7.16 Acknowledgments of Optionee . Optionee has reviewed the Plan and this Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Agreement, fully understands all provisions of the Plan and
Agreement and, by accepting the Notice of Grant, acknowledges and agrees to all of the provisions of the Plan and this Agreement.
7.17 Complete Agreement . The Grant Notice, this Agreement and the Plan constitute the parties’ entire agreement with respect
to the subject matter hereof and supersede all agreements, representations, warranties, statements, promises and understandings,
whether oral or written, with respect to the subject matter hereof.
7.18 Waiver of Jury Trial . TO THE EXTENT EITHER PARTY INITIATES LITIGATION INVOLVING THIS AGREEMENT
OR ANY ASPECT OF THE RELATIONSHIP BETWEEN US (EVEN IF OTHER PARTIES OR OTHER CLAIMS ARE
INCLUDED IN SUCH LITIGATION), ALL OF THE PARTIES WAIVE THEIR RIGHT TO A TRIAL BY JURY. THIS WAIVER
WILL APPLY TO ALL CAUSES OF ACTION THAT ARE OR MIGHT BE INCLUDED IN SUCH ACTION, INCLUDING
CLAIMS RELATED TO THE ENFORCEMENT OR INTERPRETATION OF THIS AGREEMENT, ALLEGATIONS OF STATE
OR FEDERAL STATUTORY VIOLATIONS, FRAUD, MISREPRESENTATION, OR SIMILAR CAUSES OF ACTION, AND IN
CONNECTION WITH ANY LEGAL ACTION INITIATED FOR THE RECOVERY OF DAMAGES BETWEEN OR AMONG US
OR BETWEEN OR AMONG ANY OF OUR OWNERS, AFFILIATES, OFFICERS, EMPLOYEES OR AGENTS.
-7-
Exhibit 4.22
TEAM MEMBER OTHER STOCK UNIT AWARD GRANT NOTICE AND AWARD AGREEMENT
Congratulations! As a key leader in our business, you are in a position to have significant influence on the outcomes that affect
our guests and Pinnacle Entertainment, Inc. (the “Company” or “Pinnacle” ). I am pleased to inform you that, in recognition of the
role you play in our collective success, you have been granted a restricted stock unit award (or “Other Stock Unit Award” ). This
award is subject to the terms and conditions of the 2005 Equity and Performance Incentive Plan and the following Other Stock Unit
Award Agreement, which are in all events the governing documents for your award. The details of this award are indicated below.
Grantee:
Date of Grant:
Covered Shares of Common Stock:
Vesting Commencement Date:
Restricted stock units can be a great opportunity for individual wealth creation. As our Company becomes more valuable through
management running the business better and through growth opportunities, the value or price of a share of the Company’s common
stock should increase. Through your efforts and the efforts of your colleagues, you have the ability to help increase the value of our
Company for all shareholders.
Thank you for all you do each and every day as a leader and owner of the Company. Our focus on driving profitable revenues,
eliminating non-value added expense and investing our capital prudently is collectively building a much stronger Pinnacle. We are
establishing a balanced portfolio of properties as we continue to grow nationally and internationally, and are well on our way to
becoming the BEST CASINO ENTERTAINMENT COMPANY IN THE WORLD.
It is an exciting time to be part of Pinnacle Entertainment!
Anthony Sanfilippo
President & CEO
THIS OTHER STOCK UNIT AWARD AGREEMENT (together with the above grant notice (the “Grant Notice” ), the
“Agreement” ) is made and entered into as of the date set forth on the Grant Notice by and between the Company, and the individual
(the “Grantee” ) set forth on the Grant Notice.
A. Pursuant to the Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive Plan (the “Plan” ), the Compensation
Committee (the “Committee” ) has determined that it is to the advantage and best interest of the Company to grant to the Grantee this
Award of Other Stock Units (the “Award” ) covering the number of shares of the Common Stock of the Company (the “Shares” ) set
forth on the Grant Notice and in all respects subject to the terms, definitions and provisions of the Plan, which is incorporated herein
by reference.
B. Unless otherwise defined herein, capitalized terms used in this Agreement shall have the meanings set forth in the Plan.
NOW, THEREFORE, in consideration of the mutual agreements contained herein, the Grantee and the Company hereby agree as
follows:
1. Acceptance of Agreement . Grantee has reviewed the Plan and this Agreement, and all provisions of the Plan and Agreement. By
electronically accepting this Award according to the instructions provided by the Company’s designated broker, Grantee agrees that
this electronic contract contains Grantee’s electronic signature, which Grantee has executed with the intent to sign this Agreement, and
that this Award is granted under and governed by the terms and conditions of the Plan and this Agreement. Grantee hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the Committee on questions relating to the Plan and this
Agreement.
2. Grant of Award . The Other Stock Unit Awards granted hereunder shall be subject to the terms and provisions of the Plan, and all
capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Plan. The Other Stock Unit Awards shall
not be entitled to Dividend Equivalents under Section 12.5 of the Plan, but shall be subject to adjustment in accordance with
Section 12.2 of the Plan.
3. Vesting . The Other Stock Unit Award shall vest in ______ annual installment(s) on the ______ anniversary or anniversaries of the
Vesting Commencement Date (each a “Vesting Date” ); provided, however, that if the employment of the Grantee is terminated for
Cause before the transfer of the Shares to the Grantee as provided in Section 4, the Other Stock Units shall never vest, but shall be
forfeited in full. The Grantee’s Continuous Status as an Employee, Director or Consultant on each Vesting Date shall be the sole
consideration for the Other Stock Unit Awards.
4. Settlement and Transfer of Shares . This Award shall be settled by the Company by the issuance of Shares on the Vesting Dates
(each a “Settlement Date” ), and delivery of such Shares on the following business day; provided, however, that if the Grantee’s
Continuous Status as an Employee, Director or Consultant terminates for any reason prior to the Settlement Date so as to constitute a
“separation from service” within the meaning of Treasury Regulations Section 1.409A-1(h), the Award shall be settled on the 90 th
day following such separation from service. Notwithstanding the foregoing, in the event that (i) the Grantee is subject to the
Company’s policy permitting officers and directors to sell shares only during certain window periods, in effect from time to time or
you are otherwise prohibited from selling shares of the Company’s Common Stock in the public market and any shares covered by this
Award are scheduled to be issued on a day (the “Original Distribution Date” ) that does not occur during an open window period
applicable to the Grantee, as determined by the Company in accordance with such policy, or does not occur on a date when the
Grantee is otherwise permitted to sell Shares in the open market, and (ii) the shares covered by this Award are not covered by a
contract, instruction or plan that complies with Rule 10b5-1 of the Exchange Act, then such shares shall not be issued and delivered on
such Original Distribution Date and shall instead be issued and delivered on the first business day of the next occurring open window
period applicable to the Grantee pursuant to such policy (regardless of whether the Grantee is still providing continuous services at
such time) or the next business day when the Grantee is not prohibited from selling Shares in the open market, but in no event later
than the December 31 of the calendar year in which the Original Distribution Date occurs.
-2Any issuance of Shares shall be made only in whole Shares, and any fractional shares shall be distributed in an equivalent cash
amount. Such distributed Shares shall be registered in the name of the Grantee (or if applicable, the Beneficiaries of the Grantee) and
distributed to the Grantee (or if applicable, the Beneficiaries of the Grantee) on the distribution date(s) described above.
5. General.
5.1. Governing Law . This Agreement shall be governed by and construed under the laws of the State of Delaware applicable to
agreements made and to be performed entirely in Delaware, without regard to the conflicts of law provisions of Delaware or any other
jurisdiction.
5.2. Community Property . Without prejudice to the actual rights of the spouses as between each other, for all purposes of this
Agreement, the Grantee shall be treated as agent and attorney-in-fact for that interest held or claimed by his or her spouse with respect
to this Award and the parties hereto shall act in all matters as if the Grantee was the sole owner of this Award. This appointment is
coupled with an interest and is irrevocable.
5.3. No Employment Rights . Nothing herein contained shall be construed as an agreement by the Company or any of its
subsidiaries, express or implied, to employ the Grantee or contract for the Grantee’s services, to restrict the Company’s or such
subsidiary’s right to discharge the Grantee or cease contracting for the Grantee’s services or to modify, extend or otherwise affect in
any manner whatsoever the terms of any employment agreement or contract for services which may exist between the Grantee and the
Company or any of its subsidiaries.
5.4. Application to Other Stock . In the event any capital stock of the Company or any other corporation shall be distributed on,
with respect to, or in exchange for shares of Common Stock as a stock dividend, stock split, reclassification or recapitalization in
connection with any merger or reorganization or otherwise, all restrictions, rights and obligations set forth in this Agreement shall
apply with respect to such other capital stock to the same extent as they are, or would have been applicable, to the Shares on or with
respect to which such other capital stock was distributed.
5.5. No Third-Party Benefits . Except as otherwise expressly provided in this Agreement, none of the provisions of this
Agreement shall be for the benefit of, or enforceable by, any third-party beneficiary.
5.6. Successors and Assigns . Except as provided herein to the contrary, this Agreement shall be binding upon and inure to the
benefit of the parties, their respective successors and permitted assigns.
5.7. No Assignment . Except as otherwise provided in this Agreement, the Grantee may not assign any of his, her or its rights
under this Agreement without the prior written consent of the Company, which consent may be withheld in its sole discretion. The
Company shall be permitted to assign its rights or obligations under this Agreement, but no such assignment shall release the
Company of any obligations pursuant to this Agreement.
5.8. Severability . The validity, legality or enforceability of the remainder of this Agreement shall not be affected even if one or
more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable in any respect.
5.9. Equitable Relief . The Grantee acknowledges that, in the event of a threatened or actual breach of any of the provisions of
this Agreement, damages alone will be an inadequate remedy, and such breach will cause the Company great, immediate and
irreparable injury and damage. Accordingly, the Grantee agrees that the Company shall be entitled to injunctive and other equitable
relief, and that such relief shall be in addition to, and not in lieu of, any remedies it may have at law or under this Agreement.
5.10. Arbitration .
5.10.1. General . Any controversy, dispute, or claim between the parties to this Agreement, including any claim arising out
of, in connection with, or in relation to the formation, interpretation, performance or breach of this Agreement shall be settled
exclusively by arbitration, before a single arbitrator, in accordance with this Section 5.10 and the then most applicable rules of the
American Arbitration Association. Judgment upon any award rendered by the arbitrator may be entered by any state or federal court
having jurisdiction thereof. Such arbitration shall be administered by the American Arbitration Association. Arbitration shall be the
exclusive remedy for determining any such dispute, regardless of its nature. Notwithstanding the foregoing, either party may in an
appropriate matter apply to a court for provisional relief, including a temporary restraining order or a preliminary injunction, on the
ground that the award to which the applicant may be entitled in arbitration may be rendered ineffectual without provisional relief.
Unless mutually agreed by the parties otherwise, any arbitration shall take place in the City of Las Vegas, Nevada.
-35.10.2. Selection of Arbitrator . In the event the parties are unable to agree upon an arbitrator, the parties shall select a
single arbitrator from a list of nine arbitrators drawn by the parties at random from the “Independent” (or “Gold Card”) list of retired
judges or, at the option of the Grantee, from a list of nine persons (which shall be retired judges or corporate or litigation attorneys
experienced in stock incentives and buy-sell agreements) provided by the office of the American Arbitration Association having
jurisdiction over Las Vegas, Nevada. If the parties are unable to agree upon an arbitrator from the list so drawn, then the parties shall
each strike names alternately from the list, with the first to strike being determined by lot. After each party has used four strikes, the
remaining name on the list shall be the arbitrator. If such person is unable to serve for any reason, the parties shall repeat this process
until an arbitrator is selected.
5.10.3. Applicability of Arbitration; Remedial Authority . This agreement to resolve any disputes by binding arbitration
shall extend to claims against any parent, subsidiary or affiliate of each party, and, when acting within such capacity, any officer,
director, stockholder, employee or agent of each party, or of any of the above, and shall apply as well to claims arising out of state and
federal statutes and local ordinances as well as to claims arising under the common law. In the event of a dispute subject to this
paragraph the parties shall be entitled to reasonable discovery subject to the discretion of the arbitrator. The remedial authority of the
arbitrator (which shall include the right to grant injunctive or other equitable relief) shall be the same as, but no greater than, would be
the remedial power of a court having jurisdiction over the parties and their dispute. The arbitrator shall, upon an appropriate motion,
dismiss any claim without an evidentiary hearing if the party bringing the motion establishes that he or it would be entitled to
summary judgment if the matter had been pursued in court litigation. In the event of a conflict between the applicable rules of the
American Arbitration Association and these procedures, the provisions of these procedures shall govern.
5.10.4. Fees and Costs . Any filing or administrative fees shall be borne initially by the party requesting arbitration. The
Company shall be responsible for the costs and fees of the arbitration, unless the Grantee wishes to contribute (up to 50%) of the costs
and fees of the arbitration. Notwithstanding the foregoing, the prevailing party in such arbitration, as determined by the arbitrator, and
in any enforcement or other court proceedings, shall be entitled, to the extent permitted by law, to reimbursement from the other party
for all of the prevailing party’s costs (including but not limited to the arbitrator’s compensation), expenses, and attorneys’ fees.
5.10.5. Award Final and Binding . The arbitrator shall render an award and written opinion, and the award shall be final and
binding upon the parties. If any of the provisions of this paragraph, or of this Agreement, are determined to be unlawful or otherwise
unenforceable, in whole or in part, such determination shall not affect the validity of the remainder of this Agreement, and this
Agreement shall be reformed to the extent necessary to carry out its provisions to the greatest extent possible and to insure that the
resolution of all conflicts between the parties, including those arising out of statutory claims, shall be resolved by neutral, binding
arbitration. If a court should find that the arbitration provisions of this Agreement are not absolutely binding, then the parties intend
any arbitration decision and award to be fully admissible in evidence in any subsequent action, given great weight by any finder of
fact, and treated as determinative to the maximum extent permitted by law.
5.11. Section 409A . The Plan and this Grant of Other Stock Unit Awards shall be interpreted in compliance with Section 409A
of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (“Section 409A”). In the event that any
compensation with respect to the Grantee’s separation from service is “deferred compensation” within the meaning of Section 409A,
the stock of the Company or any affiliate is publicly traded on an established securities market or otherwise, and the Grantee is
determined to be a “specified employee,” as defined in Section 409A(a)(2)(B)(i) of the Code, transfer of the Shares covered by vested
Other Stock Unit Awards shall be delayed as required by Section 409A. Such delay shall last six months from the date of the
Grantee’s separation from service, except in the event of Executive’s death. For all purposes of the Award, references herein to
“termination” of Continuous Status as an Employee, Director or Consultant or other terms of similar import shall in each case mean
and require a “separation from service” within the meaning of Section 409A. Grantee shall have no right directly or indirectly to
designate the taxable year of payment. Until the transfer of Shares under Section 4 hereof, the Other Stock Unit Awards shall represent
only an unsecured and unfunded promise to deliver the Shares in the future, and the rights of the Grantee against the Company shall be
only those of an unsecured creditor.
-45.12. Withholding Taxes . The Company has the right to take whatever steps the Company deems necessary or appropriate to
comply with all applicable federal, state, local, and employment tax withholding requirements, and the Company’s obligations to
deliver shares of Common Stock upon the settlement of this Award will be conditioned upon compliance with all such withholding tax
requirements. Without limiting the generality of the foregoing, upon the settlement of this Award, the Company will have the right to
withhold taxes from any other compensation or other amounts which it may owe to the Grantee, or to require the Grantee to pay to the
Company the amount of any taxes which the Company may be required to withhold with respect to the shares issued on such exercise.
Without limiting the generality of the foregoing, the Committee in its discretion may authorize the Grantee to satisfy all or part of any
withholding tax liability by (a) having the Company withhold from the shares of Common Stock which would otherwise be issued on
the settlement of an Award that number of shares having a Fair Market Value, as of the date the withholding tax liability arises, equal
to or less than the amount of the Company’s withholding tax liability, or (b) by delivering to the Company previously-owned and
unencumbered shares of the Common Stock having a Fair Market Value, as of the date the withholding tax liability arises, equal to or
less than the amount of the Company’s withholding tax liability.
5.13. Headings . The section headings in this Agreement are inserted only as a matter of convenience, and in no way define,
limit, extend or interpret the scope of this Agreement or of any particular section.
5.14. Number and Gender . Throughout this Agreement, as the context may require, (a) the masculine gender includes the
feminine and the neuter gender includes the masculine and the feminine; (b) the singular tense and number includes the plural, and the
plural tense and number includes the singular; (c) the past tense includes the present, and the present tense includes the past;
(d) references to parties, sections, paragraphs and exhibits mean the parties, sections, paragraphs and exhibits of and to this
Agreement; and (e) periods of days, weeks or months mean calendar days, weeks or months.
5.15. Electronic Delivery and Disclosure . The Company may, in its sole discretion, decide to deliver or disclose, as applicable,
any documents related to this Award granted under the Plan, future awards that may be granted under the Plan, the prospectus related
to the Plan, the Company’s annual reports or proxy statements by electronic means or to request Grantee’s consent to participate in the
Plan by electronic means. Grantee hereby consents to receive such documents delivered electronically or to retrieve such documents
furnished electronically, as applicable, and agrees to participate in the Plan through any online or electronic system established and
maintained by the Company or another third party designated by the Company.
5.16. Data Privacy . Grantee agrees that all of Grantee’s information that is described or referenced in this Agreement and the
Plan may be used by the Company, its affiliates and the designated broker and its affiliates to administer and manage Grantee’s
participation in the Plan.
5.17. Acknowledgments of Grantee . Grantee has reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement, fully understands all provisions of the Plan and Agreement and, by
accepting the Notice of Grant, acknowledges and agrees to all of the provisions of the Plan and this Agreement.
-55.18. Complete Agreement . The Grant Notice, this Agreement and the Plan constitute the parties’ entire agreement with respect
to the subject matter hereof and supersede all agreements, representations, warranties, statements, promises and understandings,
whether oral or written, with respect to the subject matter hereof.
5.19. Waiver of Jury Trial . TO THE EXTENT EITHER PARTY INITIATES LITIGATION INVOLVING THIS
AGREEMENT OR ANY ASPECT OF THE RELATIONSHIP BETWEEN US (EVEN IF OTHER PARTIES OR OTHER CLAIMS
ARE INCLUDED IN SUCH LITIGATION), ALL OF THE PARTIES WAIVE THEIR RIGHT TO A TRIAL BY JURY. THIS
WAIVER WILL APPLY TO ALL CAUSES OF ACTION THAT ARE OR MIGHT BE INCLUDED IN SUCH ACTION,
INCLUDING CLAIMS RELATED TO THE ENFORCEMENT OR INTERPRETATION OF THIS AGREEMENT,
ALLEGATIONS OF STATE OR FEDERAL STATUTORY VIOLATIONS, FRAUD, MISREPRESENTATION, OR SIMILAR
CAUSES OF ACTION, AND IN CONNECTION WITH ANY LEGAL ACTION INITIATED FOR THE RECOVERY OF
DAMAGES BETWEEN OR AMONG US OR BETWEEN OR AMONG ANY OF OUR OWNERS, AFFILIATES, OFFICERS,
EMPLOYEES OR AGENTS.
-6-
Exhibit 4.23
DIRECTOR STOCK OPTION GRANT NOTICE AND OPTION AGREEMENT
As a member of the Board of Directors of Pinnacle Entertainment, Inc. (the “Company” ), you have been granted an option to
purchase shares of the Company’s common stock. This award is subject to the terms and conditions of the 2005 Equity and
Performance Incentive Plan and the following Stock Option Agreement, which are in all events the governing documents for your
award. The details of this award are indicated below.
Optionee:
Date of Grant:
Number of Shares of Common Stock:
Exercise Price Per Share:
Term of Option:
Vesting Date:
Type of Option:
THIS STOCK OPTION AGREEMENT (together with the above grant notice (the “Grant Notice” ), the “Agreement” ) is
made and entered into as of the date set forth on the Grant Notice by and between Pinnacle Entertainment, Inc., a Delaware
corporation (the “Company” ), and the individual (the “Optionee” ) set forth on the Grant Notice.
A. Pursuant to the Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive Plan (the “Plan” ), the Compensation
Committee (the “Committee” ) has determined that it is to the advantage and best interest of the Company to grant to the Optionee an
option (the “Option” ) to purchase the number of shares of the Common Stock of the Company (the “Shares” or the “Option
Shares” ) set forth on the Grant Notice, at the exercise price determined as provided herein, and in all respects subject to the terms,
definitions and provisions of the Plan, which is incorporated herein by reference.
B. Unless otherwise defined herein, capitalized terms used in this Agreement shall have the meanings set forth in the Plan.
NOW, THEREFORE, in consideration of the mutual agreements contained herein, the Optionee and the Company hereby agree
as follows:
1. Acceptance of Agreement . Optionee has reviewed the Plan and this Agreement, and all provisions of the Plan and Agreement. By
electronically accepting this Option according to the instructions provided by the Company’s designated broker, Optionee agrees that
this electronic contract contains Optionee’s electronic signature, which Optionee has executed with the intent to sign this Agreement,
and that this Option is granted under and governed by the terms and conditions of the Plan and this Agreement. Optionee hereby
agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee on questions relating to the Plan and
this Agreement.
2. Grant and Terms of Stock Option .
2.1 Grant of Option . Pursuant to the Grant Notice, the Company has granted to the Optionee the right and option to purchase,
subject to the terms and conditions set forth in the Plan and this Agreement, all or any part of the number of Shares set forth on the
Grant Notice at a purchase price per Share equal to the exercise price per Share set forth on the Grant Notice.
2.2 Vesting . The Option is fully vested as of the date of grant provided, however, that if the Optionee’s Continuous Status as an
Employee, Director or Consultant is terminated for Cause before exercise of the Option, then this entire Option shall be cancelled and
terminated as of the date of such termination and shall no longer be exercisable as to any Shares, whether or not previously vested.
2.3 Term of Option . The “ Term” of this Option shall begin on the Date of Grant set forth in the Grant Notice and end on the
expiration of the Term specified in the Grant Notice. No portion of this Option may be exercised after the expiration of the Term.
2.3.1 Except as otherwise provided in a written employment agreement between the Company and the Optionee, the portion
of this Option that is vested and exercisable as of the date of termination shall terminate and be cancelled on the earlier of (i) the
expiration of the Term, or (ii) one year after termination of Optionee’s Continuous Status as an Employee, Director or Consultant.
2.3.2 Except as otherwise provided in a written employment agreement between the Company and the Optionee, the portion
of this Option that is vested and exercisable as of the date of termination shall terminate and be cancelled on the earlier of (i) the
expiration of the Term, or (ii) one year after termination of Optionee’s Continuous Status as an Employee, Director or Consultant by
death or Disability.
-22.3.3 If Optionee’s Continuous Status as an Employee, Director or Consultant is terminated for Cause, or if, after the
termination of Optionee’s Continuous Status as an Employee, Director or Consultant, the Committee determines that Cause existed
before such termination, except as otherwise provided in a written employment agreement between the Company and the Optionee,
this entire Option shall be cancelled and terminated as of the date of such termination and shall no longer be exercisable as to any
Shares, whether or not previously vested.
3. Method of Exercise.
3.1 Delivery of Notice of Exercise . This Option shall be exercisable by delivery of instructions, which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is being exercised, and such other representations and
agreements as may be required by the Company pursuant to the provisions of the Plan. Exercise of the shares shall be performed by
online execution of exercise through the designated broker’s internet tool, or delivery of verbal instruction to the designated broker’s
customer service agent if so permitted by the designated broker, together with such information as the broker shall require to complete
the transaction; or a combination thereof. The Option shall be deemed to be exercised no earlier than receipt by the designated broker
of such exercise instructions accompanied by the aggregate exercise price. This Option may not be exercised for a fraction of a Share.
3.2 Restrictions on Exercise . No Shares will be issued pursuant to the exercise of this Option unless and until there shall have
been full compliance with all applicable requirements of the Securities Act of 1933, as amended (whether by registration or
satisfaction of exemption conditions), all applicable listing requirements of any national securities exchange or other market system on
which the Common Stock is then listed and all applicable requirements of any Applicable Laws and of any regulatory bodies having
jurisdiction over such issuance. As a condition to the exercise of this Option, the Company may require the Optionee to make any
representation and warranty to the Company as may be necessary or appropriate, in the judgment of the Committee, to comply with
any Applicable Law.
3.3 Method of Payment . Payment of the exercise price shall be made in full at the time of exercise (a) in cash or by certified
check or bank check or wire transfer of immediately available funds, (b) by tendering previously acquired Shares (either actually or by
attestation, valued at their then Fair Market Value) that have been owned for a period of at least six months (or such other period to
avoid accounting charges against the Company’s earnings), (c) by delivery of the exercise instructions together with any other
documentation as the designated broker (and Optionee’s broker, if applicable) require(s) to effect an exercise of the Option and
delivery to the Company of the sale or other proceeds (as permitted by Applicable Law) required to pay the exercise price, or (d) any
combination of any of the foregoing. In addition, the Committee may impose such other conditions in connection with the delivery of
shares of Common Stock in satisfaction of the exercise price as it deems appropriate in its sole discretion.
3.4 No Rights as a Stockholder . Until the stock certificate evidencing shares of Common Stock issued upon exercise of this
Option is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares,
notwithstanding the exercise of the Option.
4. Non-Transferability of Option . This Option may not be transferred in any manner otherwise than by will or by the laws of descent
or distribution or to a beneficiary designated pursuant to the Plan, and may be exercised during the lifetime of Optionee only by
Optionee or the Optionee’s guardian or legal representative. Subject to all of the other terms and conditions of this Agreement,
following the death of Optionee, this Option may, to the extent it is vested and exercisable by Optionee in accordance with its terms on
the date of death, be exercised by Optionee’s beneficiary or other person entitled to exercise this Option in the event of Optionee’s
death under the Plan. This Option may be assigned, in connection with the Optionee’s estate plan, in whole or in part, during the
Optionee’s lifetime to one or more Family Members of the Optionee. Rights under the assigned portion may be exercised by the
person or persons who acquire a proprietary interest in such Option pursuant to the assignment. The terms applicable to the assigned
portion shall be the same as those in effect for the Option immediately before such assignment and shall be set forth in such
documents issued to the assignee as the Committee deems appropriate.
-35. Restrictions; Restrictive Legends . Ownership and transfer of Shares issued pursuant to the exercise of this Option will be subject
to the provisions of, including ownership and transfer restrictions (including, without limitation, ownership and transfer restrictions
imposed by applicable gaming laws) contained in, the Company’s Certificate of Incorporation, as amended from time to time,
restrictions imposed by Applicable Laws and restrictions set forth or referenced in legends imprinted on certificates representing such
Shares.
6. Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, to the extent that this Option
had not been previously exercised, it will terminate immediately prior to the consummation of such proposed dissolution or
liquidation. In such instance, the Committee may, in the exercise of its sole discretion, declare that this Option will terminate as of a
date fixed by the Committee and give the Optionee the right to exercise this Option prior to such date as to all or any part of the
optioned stock, including shares as to which this Option would not otherwise be exercisable.
7. General .
7.1 Governing Law . This Agreement shall be governed by and construed under the laws of the State of Delaware applicable to
agreements made and to be performed entirely in Delaware, without regard to the conflicts of law provisions of Delaware or any other
jurisdiction.
7.2 Community Property . Without prejudice to the actual rights of the spouses as between each other, for all purposes of this
Agreement, the Optionee shall be treated as agent and attorney-in-fact for that interest held or claimed by his or her spouse with
respect to this Option and the parties hereto shall act in all matters as if the Optionee was the sole owner of this Option. This
appointment is coupled with an interest and is irrevocable.
7.3 Service as Director . Optionee acknowledges and agrees that the vesting of this Option is earned only by his or her continuing
services as a director of the Company (not through the act of being appointed as a director, being granted this Option or acquiring
shares hereunder). Optionee further acknowledges and agrees that nothing in this Agreement, nor in the Plan which is incorporated
herein by reference, shall confer upon Optionee any right with respect to continuation of his or her services as a director or
employment by the Company, nor shall it interfere in any way with the right to terminate his or her services as a director of the
Company at any time, with or without cause.
7.4 Application to Other Stock . In the event any capital stock of the Company or any other corporation shall be distributed on,
with respect to, or in exchange for shares of Common Stock as a stock dividend, stock split, reclassification or recapitalization in
connection with any merger or reorganization or otherwise, all restrictions, rights and obligations set forth in this Agreement shall
apply with respect to such other capital stock to the same extent as they are, or would have been applicable, to the Option Shares on or
with respect to which such other capital stock was distributed.
7.5 No Third-Party Benefits . Except as otherwise expressly provided in this Agreement, none of the provisions of this
Agreement shall be for the benefit of, or enforceable by, any third-party beneficiary.
7.6 Successors and Assigns . Except as provided herein to the contrary, this Agreement shall be binding upon and inure to the
benefit of the parties, their respective successors and permitted assigns.
7.7 No Assignment . Except as otherwise provided in this Agreement, the Optionee may not assign any of his, her or its rights
under this Agreement without the prior written consent of the Company, which consent may be withheld in its sole discretion. The
Company shall be permitted to assign its rights or obligations under this Agreement, but no such assignment shall release the
Company of any obligations pursuant to this Agreement.
7.8 Severability . The validity, legality or enforceability of the remainder of this Agreement shall not be affected even if one or
more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable in any respect.
-47.9 Equitable Relief . The Optionee acknowledges that, in the event of a threatened or actual breach of any of the provisions of
this Agreement, damages alone will be an inadequate remedy, and such breach will cause the Company great, immediate and
irreparable injury and damage. Accordingly, the Optionee agrees that the Company shall be entitled to injunctive and other equitable
relief, and that such relief shall be in addition to, and not in lieu of, any remedies it may have at law or under this Agreement.
7.10 Arbitration .
7.10.1 General . Any controversy, dispute, or claim between the parties to this Agreement, including any claim arising out
of, in connection with, or in relation to the formation, interpretation, performance or breach of this Agreement shall be settled
exclusively by arbitration, before a single arbitrator, in accordance with this Section 7.10 and the then most applicable rules of the
American Arbitration Association. Judgment upon any award rendered by the arbitrator may be entered by any state or federal court
having jurisdiction thereof. Such arbitration shall be administered by the American Arbitration Association. Arbitration shall be the
exclusive remedy for determining any such dispute, regardless of its nature. Notwithstanding the foregoing, either party may in an
appropriate matter apply to a court for provisional relief, including a temporary restraining order or a preliminary injunction, on the
ground that the award to which the applicant may be entitled in arbitration may be rendered ineffectual without provisional relief.
Unless mutually agreed by the parties otherwise, any arbitration shall take place in the City of Las Vegas, Nevada.
7.10.2 Selection of Arbitrator . In the event the parties are unable to agree upon an arbitrator, the parties shall select a single
arbitrator from a list of nine arbitrators drawn by the parties at random from the “Independent” (or “Gold Card”) list of retired judges
or, at the option of the Optionee, from a list of nine persons (which shall be retired judges or corporate or litigation attorneys
experienced in stock options and buy-sell agreements) provided by the office of the American Arbitration Association having
jurisdiction over Las Vegas, Nevada. If the parties are unable to agree upon an arbitrator from the list so drawn, then the parties shall
each strike names alternately from the list, with the first to strike being determined by lot. After each party has used four strikes, the
remaining name on the list shall be the arbitrator. If such person is unable to serve for any reason, the parties shall repeat this process
until an arbitrator is selected.
7.10.3 Applicability of Arbitration; Remedial Authority . This agreement to resolve any disputes by binding arbitration
shall extend to claims against any parent, subsidiary or affiliate of each party, and, when acting within such capacity, any officer,
director, stockholder, employee or agent of each party, or of any of the above, and shall apply as well to claims arising out of state and
federal statutes and local ordinances as well as to claims arising under the common law. In the event of a dispute subject to this
paragraph the parties shall be entitled to reasonable discovery subject to the discretion of the arbitrator. The remedial authority of the
arbitrator (which shall include the right to grant injunctive or other equitable relief) shall be the same as, but no greater than, would be
the remedial power of a court having jurisdiction over the parties and their dispute. The arbitrator shall, upon an appropriate motion,
dismiss any claim without an evidentiary hearing if the party bringing the motion establishes that he or it would be entitled to
summary judgment if the matter had been pursued in court litigation. In the event of a conflict between the applicable rules of the
American Arbitration Association and these procedures, the provisions of these procedures shall govern.
7.10.4 Fees and Costs . Any filing or administrative fees shall be borne initially by the party requesting arbitration. The
Company shall be responsible for the costs and fees of the arbitration, unless the Optionee wishes to contribute (up to 50%) of the
costs and fees of the arbitration. Notwithstanding the foregoing, the prevailing party in such arbitration, as determined by the
arbitrator, and in any enforcement or other court proceedings, shall be entitled, to the extent permitted by law, to reimbursement from
the other party for all of the prevailing party’s costs (including but not limited to the arbitrator’s compensation), expenses, and
attorneys’ fees.
7.10.5 Award Final and Binding . The arbitrator shall render an award and written opinion, and the award shall be final and
binding upon the parties. If any of the provisions of this paragraph, or of this Agreement, are determined to be unlawful or otherwise
unenforceable, in whole or in part, such determination shall not affect the validity of the remainder of this Agreement, and this
Agreement shall be reformed to the extent necessary to carry out its provisions to the greatest extent possible and to insure that the
resolution of all conflicts between the parties, including those arising out of statutory claims, shall be resolved by neutral, binding
arbitration. If a court should find that the arbitration provisions of this Agreement are not absolutely binding, then the parties intend
any arbitration decision and award to be fully admissible in evidence in any subsequent action, given great weight by any finder of
fact, and treated as determinative to the maximum extent permitted by law.
-57.11 Withholding Taxes . The Company has the right to take whatever steps the Company deems necessary or appropriate to
comply with all applicable federal, state, local, and employment tax withholding requirements, and the Company’s obligations to
deliver shares of Common Stock upon the exercise of this Option will be conditioned upon compliance with all such withholding tax
requirements. Without limiting the generality of the foregoing, upon the exercise of this Option, the Company will have the right to
withhold taxes from any other compensation or other amounts which it may owe to the Optionee, or to require the Optionee to pay to
the Company the amount of any taxes which the Company may be required to withhold with respect to the shares issued on such
exercise. Without limiting the generality of the foregoing, the Committee in its discretion may authorize the Optionee to satisfy all or
part of any withholding tax liability by (a) having the Company withhold from the shares of Common Stock which would otherwise be
issued on the exercise of an Option that number of shares having a Fair Market Value, as of the date the withholding tax liability
arises, equal to or less than the amount of the Company’s withholding tax liability, or (b) by delivering to the Company
previously-owned and unencumbered shares of the Common Stock having a Fair Market Value, as of the date the withholding tax
liability arises, equal to or less than the amount of the Company’s withholding tax liability.
7.12 Headings . The section headings in this Agreement are inserted only as a matter of convenience, and in no way define, limit,
extend or interpret the scope of this Agreement or of any particular section.
7.13 Number and Gender . Throughout this Agreement, as the context may require, (a) the masculine gender includes the
feminine and the neuter gender includes the masculine and the feminine; (b) the singular tense and number includes the plural, and the
plural tense and number includes the singular; (c) the past tense includes the present, and the present tense includes the past;
(d) references to parties, sections, paragraphs and exhibits mean the parties, sections, paragraphs and exhibits of and to this
Agreement; and (e) periods of days, weeks or months mean calendar days, weeks or months.
7.14 Electronic Delivery and Disclosure . The Company may, in its sole discretion, decide to deliver or disclose, as applicable,
any documents related to this Option granted under the Plan, future options that may be granted under the Plan, the prospectus related
to the Plan, the Company’s annual reports or proxy statements by electronic means or to request Optionee’s consent to participate in
the Plan by electronic means. Optionee hereby consents to receive such documents delivered electronically or to retrieve such
documents furnished electronically, as applicable, and agrees to participate in the Plan through any online or electronic system
established and maintained by the Company or another third party designated by the Company.
7.15 Data Privacy . Optionee agrees that all of Optionee’s information that is described or referenced in this Agreement and the
Plan may be used by the Company, its affiliates and the designated broker and its affiliates to administer and manage Optionee’s
participation in the Plan.
7.16 Acknowledgments of Optionee . Optionee has reviewed the Plan and this Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Agreement, fully understands all provisions of the Plan and
Agreement and, by accepting the Notice of Grant, acknowledges and agrees to all of the provisions of the Plan and this Agreement.
-67.17 Complete Agreement . The Grant Notice, this Agreement and the Plan constitute the parties’ entire agreement with respect
to the subject matter hereof and supersede all agreements, representations, warranties, statements, promises and understandings,
whether oral or written, with respect to the subject matter hereof.
7.18 Waiver of Jury Trial . TO THE EXTENT EITHER PARTY INITIATES LITIGATION INVOLVING THIS AGREEMENT
OR ANY ASPECT OF THE RELATIONSHIP BETWEEN US (EVEN IF OTHER PARTIES OR OTHER CLAIMS ARE
INCLUDED IN SUCH LITIGATION), ALL OF THE PARTIES WAIVE THEIR RIGHT TO A TRIAL BY JURY. THIS WAIVER
WILL APPLY TO ALL CAUSES OF ACTION THAT ARE OR MIGHT BE INCLUDED IN SUCH ACTION, INCLUDING
CLAIMS RELATED TO THE ENFORCEMENT OR INTERPRETATION OF THIS AGREEMENT, ALLEGATIONS OF STATE
OR FEDERAL STATUTORY VIOLATIONS, FRAUD, MISREPRESENTATION, OR SIMILAR CAUSES OF ACTION, AND IN
CONNECTION WITH ANY LEGAL ACTION INITIATED FOR THE RECOVERY OF DAMAGES BETWEEN OR AMONG US
OR BETWEEN OR AMONG ANY OF OUR OWNERS, AFFILIATES, OFFICERS, EMPLOYEES OR AGENTS.
-7-
Exhibit 4.24
DIRECTOR OTHER STOCK UNIT AWARD GRANT NOTICE AND AWARD AGREEMENT
As a member of the Board of Directors of Pinnacle Entertainment, Inc., you have been granted a restricted stock unit award (or
“Other Stock Unit Award” ). The Award is subject to the terms and conditions of the 2005 Equity and Performance Incentive Plan
and the following Other Stock Unit Award Agreement, which are in all events the governing documents for your award. The details of
this award are indicated below.
Grantee:
Date of Grant:
Covered Shares of Common Stock:
Vesting Date:
Date of Grant
THIS OTHER STOCK UNIT AWARD AGREEMENT (together with the above grant notice (the “Grant Notice” ), the
“Agreement” ) is made and entered into as of the date set forth on the Grant Notice by and between Pinnacle Entertainment, Inc. (the
“Company” ) and the individual (the “Grantee” ) set forth on the Grant Notice.
A. Pursuant to the Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive Plan (the “Plan” ), the Compensation
Committee (the “Committee” ) has determined that it is to the advantage and best interest of the Company to grant to the Grantee an
Other Stock Unit Award (the “Award” ) covering the number of shares of the Common Stock of the Company (the “Shares” ) set
forth on the Grant Notice and in all respects subject to the terms, definitions and provisions of the Plan, which is incorporated herein
by reference.
B. Unless otherwise defined herein, capitalized terms used in this Agreement shall have the meanings set forth in the Plan.
NOW, THEREFORE, in consideration of the mutual agreements contained herein, the Grantee and the Company hereby agree as
follows:
1. Acceptance of Agreement . Grantee has reviewed the Plan and this Agreement, and all provisions of the Plan and Agreement. By
electronically accepting this Award according to the instructions provided by the Company’s designated broker, Grantee agrees that
this electronic contract contains Grantee’s electronic signature, which Grantee has executed with the intent to sign this Agreement, and
that this Award is granted under and governed by the terms and conditions of the Plan and this Agreement. Grantee hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the Committee on questions relating to the Plan and this
Agreement.
2. Grant of Award . The Other Stock Unit Awards granted hereunder shall be subject to the terms and provisions of the Plan, and all
capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Plan.
3. Vesting . The Other Stock Unit Award is fully vested as of the date of grant. The Grantee’s service as a director is the sole
consideration for the Other Stock Unit Awards provided, however, that if the service of the Grantee is terminated for Cause before the
transfer of the Shares to the Grantee as provided in Section 4, the Other Stock Units shall be forfeited in full. The Other Stock Unit
Awards shall not be entitled to Dividend Equivalents under Section 12.5 of the Plan, but shall be subject to adjustment in accordance
with Section 12.2 of the Plan.
4. Settlement and Transfer of Shares . This Award shall be settled by the Company by the issuance of Shares on the date of
termination of the Grantee’s Continuous Status as an Employee, Director or Consultant (the “Settlement Date” ), and delivery of such
Shares on the following business day; provided that such termination of the Grantee’s Continuous Status as an Employee, Director or
Consultant constitutes a “separation from service” within the meaning of Treasury Regulations Section 1.409A-1(h).
Notwithstanding the foregoing, in the event that (i) the Grantee is subject to the Company’s policy permitting officers and directors to
sell shares only during certain window periods, in effect from time to time or you are otherwise prohibited from selling shares of the
Company’s Common Stock in the public market and any shares covered by this Award are scheduled to be issued on a day (the
“Original Distribution Date” ) that does not occur during an open window period applicable to the Grantee, as determined by the
Company in accordance with such policy, or does not occur on a date when the Grantee is otherwise permitted to sell Shares in the
open market, and (ii) the shares covered by this Award are not covered by a contract, instruction or plan that complies with
Rule 10b5-1 of the Exchange Act, then such shares shall not be issued and delivered on such Original Distribution Date and shall
instead be issued and delivered on the first business day of the next occurring open window period applicable to the Grantee pursuant
to such policy (regardless of whether the Grantee is still providing continuous services at such time) or the next business day when the
Grantee is not prohibited from selling Shares in the open market, but in no event later than the December 31 of the calendar year in
which the Original Distribution Date occurs.
-25. General.
5.1. Governing Law . This Agreement shall be governed by and construed under the laws of the State of Delaware applicable to
agreements made and to be performed entirely in Delaware, without regard to the conflicts of law provisions of Delaware or any other
jurisdiction.
5.2. Community Property . Without prejudice to the actual rights of the spouses as between each other, for all purposes of this
Agreement, the Grantee shall be treated as agent and attorney-in-fact for that interest held or claimed by his or her spouse with respect
to this Award and the parties hereto shall act in all matters as if the Grantee was the sole owner of this Award. This appointment is
coupled with an interest and is irrevocable.
5.3. Service as Director . Grantee acknowledges and agrees that the vesting of this Award is earned only by his or her continuing
services as a director of the Company (not through the act of being appointed as a director, being granted this Award or acquiring
shares hereunder). Grantee further acknowledges and agrees that nothing in this Agreement, nor in the Plan which is incorporated
herein by reference, shall confer upon Grantee any right with respect to continuation of his or her services as a director or employment
by the Company, nor shall it interfere in any way with the right to terminate his or her services as a director of the Company at any
time, with or without cause.
5.4. Application to Other Stock . In the event any capital stock of the Company or any other corporation shall be distributed on,
with respect to, or in exchange for shares of Common Stock as a stock dividend, stock split, reclassification or recapitalization in
connection with any merger or reorganization or otherwise, all restrictions, rights and obligations set forth in this Agreement shall
apply with respect to such other capital stock to the same extent as they are, or would have been applicable, to the Shares on or with
respect to which such other capital stock was distributed.
5.5. No Third-Party Benefits . Except as otherwise expressly provided in this Agreement, none of the provisions of this
Agreement shall be for the benefit of, or enforceable by, any third-party beneficiary.
5.6. Successors and Assigns . Except as provided herein to the contrary, this Agreement shall be binding upon and inure to the
benefit of the parties, their respective successors and permitted assigns.
5.7. No Assignment . Except as otherwise provided in this Agreement, the Grantee may not assign any of his, her or its rights
under this Agreement without the prior written consent of the Company, which consent may be withheld in its sole discretion. The
Company shall be permitted to assign its rights or obligations under this Agreement, but no such assignment shall release the
Company of any obligations pursuant to this Agreement.
5.8. Severability . The validity, legality or enforceability of the remainder of this Agreement shall not be affected even if one or
more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable in any respect.
5.9. Equitable Relief . The Grantee acknowledges that, in the event of a threatened or actual breach of any of the provisions of
this Agreement, damages alone will be an inadequate remedy, and such breach will cause the Company great, immediate and
irreparable injury and damage. Accordingly, the Grantee agrees that the Company shall be entitled to injunctive and other equitable
relief, and that such relief shall be in addition to, and not in lieu of, any remedies it may have at law or under this Agreement.
5.10. Section 409A . The Plan and this Grant of Other Stock Unit Awards shall be interpreted in compliance with Section 409A
of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (“Section 409A”). In the event that any
compensation with respect to the Grantee’s separation from service is “deferred compensation” within the meaning of Section 409A,
the stock of the Company or any affiliate is publicly traded on an established securities market or otherwise, and the Grantee is
determined to be a “specified employee” , as defined in Section 409A(a)(2)(B)(i) of the Code, transfer of the Shares covered by
vested Other Stock Unit Awards shall be delayed as required by Section 409A. Such delay shall last six months from the date of the
Grantee’s separation from service, except in the event of Executive’s death. Grantee shall have no right directly or indirectly to
designate the taxable year of payment. Until the transfer of Shares under Section 4 hereof, the Other Stock Unit Awards shall represent
only an unsecured and unfunded promise to deliver the Shares in the future, and the rights of the Grantee against the Company shall be
only those of an unsecured creditor.
-35.11. Arbitration .
5.11.1. General . Any controversy, dispute, or claim between the parties to this Agreement, including any claim arising out
of, in connection with, or in relation to the formation, interpretation, performance or breach of this Agreement shall be settled
exclusively by arbitration, before a single arbitrator, in accordance with this Section 5.11 and the then most applicable rules of the
American Arbitration Association. Judgment upon any award rendered by the arbitrator may be entered by any state or federal court
having jurisdiction thereof. Such arbitration shall be administered by the American Arbitration Association. Arbitration shall be the
exclusive remedy for determining any such dispute, regardless of its nature. Notwithstanding the foregoing, either party may in an
appropriate matter apply to a court for provisional relief, including a temporary restraining order or a preliminary injunction, on the
ground that the award to which the applicant may be entitled in arbitration may be rendered ineffectual without provisional relief.
Unless mutually agreed by the parties otherwise, any arbitration shall take place in the City of Las Vegas, Nevada.
5.11.2. Selection of Arbitrator . In the event the parties are unable to agree upon an arbitrator, the parties shall select a
single arbitrator from a list of nine arbitrators drawn by the parties at random from the “Independent” (or “Gold Card”) list of retired
judges or, at the option of the Grantee, from a list of nine persons (which shall be retired judges or corporate or litigation attorneys
experienced in stock incentives and buy-sell agreements) provided by the office of the American Arbitration Association having
jurisdiction over Las Vegas, Nevada. If the parties are unable to agree upon an arbitrator from the list so drawn, then the parties shall
each strike names alternately from the list, with the first to strike being determined by lot. After each party has used four strikes, the
remaining name on the list shall be the arbitrator. If such person is unable to serve for any reason, the parties shall repeat this process
until an arbitrator is selected.
5.11.3. Applicability of Arbitration; Remedial Authority . This agreement to resolve any disputes by binding arbitration
shall extend to claims against any parent, subsidiary or affiliate of each party, and, when acting within such capacity, any officer,
director, stockholder, employee or agent of each party, or of any of the above, and shall apply as well to claims arising out of state and
federal statutes and local ordinances as well as to claims arising under the common law. In the event of a dispute subject to this
paragraph the parties shall be entitled to reasonable discovery subject to the discretion of the arbitrator. The remedial authority of the
arbitrator (which shall include the right to grant injunctive or other equitable relief) shall be the same as, but no greater than, would be
the remedial power of a court having jurisdiction over the parties and their dispute. The arbitrator shall, upon an appropriate motion,
dismiss any claim without an evidentiary hearing if the party bringing the motion establishes that he or it would be entitled to
summary judgment if the matter had been pursued in court litigation. In the event of a conflict between the applicable rules of the
American Arbitration Association and these procedures, the provisions of these procedures shall govern.
5.11.4. Fees and Costs . Any filing or administrative fees shall be borne initially by the party requesting arbitration. The
Company shall be responsible for the costs and fees of the arbitration, unless the Grantee wishes to contribute (up to 50%) of the costs
and fees of the arbitration. Notwithstanding the foregoing, the prevailing party in such arbitration, as determined by the arbitrator, and
in any enforcement or other court proceedings, shall be entitled, to the extent permitted by law, to reimbursement from the other party
for all of the prevailing party’s costs (including but not limited to the arbitrator’s compensation), expenses, and attorneys’ fees.
5.11.5. Award Final and Binding . The arbitrator shall render an award and written opinion, and the award shall be final and
binding upon the parties. If any of the provisions of this paragraph, or of this Agreement, are determined to be unlawful or otherwise
unenforceable, in whole or in part, such determination shall not affect the validity of the remainder of this Agreement, and this
Agreement shall be reformed to the extent necessary to carry out its provisions to the greatest extent possible and to insure that the
resolution of all conflicts between the parties, including those arising out of statutory claims, shall be resolved by neutral, binding
arbitration. If a court should find that the arbitration provisions of this Agreement are not absolutely binding, then the parties intend
any arbitration decision and award to be fully admissible in evidence in any subsequent action, given great weight by any finder of
fact, and treated as determinative to the maximum extent permitted by law.
-45.12. Withholding Taxes . The Company has the right to take whatever steps the Company deems necessary or appropriate to
comply with all applicable federal, state, local, and employment tax withholding requirements, and the Company’s obligations to
deliver shares of Common Stock upon the settlement of this Award will be conditioned upon compliance with all such withholding tax
requirements. Without limiting the generality of the foregoing, upon the settlement of this Award, the Company will have the right to
withhold taxes from any other compensation or other amounts which it may owe to the Grantee, or to require the Grantee to pay to the
Company the amount of any taxes which the Company may be required to withhold with respect to the shares issued on such exercise.
Without limiting the generality of the foregoing, the Committee in its discretion may authorize the Grantee to satisfy all or part of any
withholding tax liability by (a) having the Company withhold from the shares of Common Stock which would otherwise be issued on
the settlement of an Award that number of shares having a Fair Market Value, as of the date the withholding tax liability arises, equal
to or less than the amount of the Company’s withholding tax liability, or (b) by delivering to the Company previously-owned and
unencumbered shares of the Common Stock having a Fair Market Value, as of the date the withholding tax liability arises, equal to or
less than the amount of the Company’s withholding tax liability.
5.13. Headings . The section headings in this Agreement are inserted only as a matter of convenience, and in no way define,
limit, extend or interpret the scope of this Agreement or of any particular section.
5.14. Number and Gender . Throughout this Agreement, as the context may require, (a) the masculine gender includes the
feminine and the neuter gender includes the masculine and the feminine; (b) the singular tense and number includes the plural, and the
plural tense and number includes the singular; (c) the past tense includes the present, and the present tense includes the past;
(d) references to parties, sections, paragraphs and exhibits mean the parties, sections, paragraphs and exhibits of and to this
Agreement; and (e) periods of days, weeks or months mean calendar days, weeks or months.
5.15. Electronic Delivery and Disclosure . The Company may, in its sole discretion, decide to deliver or disclose, as applicable,
any documents related to this Award granted under the Plan, future awards that may be granted under the Plan, the prospectus related
to the Plan, the Company’s annual reports or proxy statements by electronic means or to request Grantee’s consent to participate in the
Plan by electronic means. Grantee hereby consents to receive such documents delivered electronically or to retrieve such documents
furnished electronically, as applicable, and agrees to participate in the Plan through any online or electronic system established and
maintained by the Company or another third party designated by the Company.
5.16. Data Privacy . Grantee agrees that all of Grantee’s information that is described or referenced in this Agreement and the
Plan may be used by the Company, its affiliates and the designated broker and its affiliates to administer and manage Grantee’s
participation in the Plan.
5.17. Acknowledgments of Grantee . Grantee has reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement, fully understands all provisions of the Plan and Agreement and, by
accepting the Notice of Grant, acknowledges and agrees to all of the provisions of the Plan and this Agreement.
5.18. Complete Agreement . The Grant Notice, this Agreement and the Plan constitute the parties’ entire agreement with respect
to the subject matter hereof and supersede all agreements, representations, warranties, statements, promises and understandings,
whether oral or written, with respect to the subject matter hereof.
5.19. Waiver of Jury Trial . TO THE EXTENT EITHER PARTY INITIATES LITIGATION INVOLVING THIS
AGREEMENT OR ANY ASPECT OF THE RELATIONSHIP BETWEEN US (EVEN IF OTHER PARTIES OR OTHER CLAIMS
ARE INCLUDED IN SUCH LITIGATION), ALL OF THE PARTIES WAIVE THEIR RIGHT TO A TRIAL BY JURY. THIS
WAIVER WILL APPLY TO ALL CAUSES OF ACTION THAT ARE OR MIGHT BE INCLUDED IN SUCH ACTION,
INCLUDING CLAIMS RELATED TO THE ENFORCEMENT OR INTERPRETATION OF THIS AGREEMENT,
ALLEGATIONS OF STATE OR FEDERAL STATUTORY VIOLATIONS, FRAUD, MISREPRESENTATION, OR SIMILAR
CAUSES OF ACTION, AND IN CONNECTION WITH ANY LEGAL ACTION INITIATED FOR THE RECOVERY OF
DAMAGES BETWEEN OR AMONG US OR BETWEEN OR AMONG ANY OF OUR OWNERS, AFFILIATES, OFFICERS,
EMPLOYEES OR AGENTS.
-5-
Exhibit 4.25
Annual Incentive Program — Automatic Grant
TEAM MEMBER AIP OTHER STOCK UNIT AWARD GRANT NOTICE AND AWARD AGREEMENT
Congratulations! As a key leader in our business, you have been in a position to have significant influence on the outcomes that
affect our guests and Pinnacle Entertainment, Inc. (the “Company” or “Pinnacle” ). I am pleased to inform you that, in recognition of
the role you play in our collective success, and the results attained under the Annual Incentive Plan, you have been granted a restricted
stock unit award (or “Other Stock Unit Award” ). This award is subject to the terms and conditions of the 2005 Equity and
Performance Incentive Plan and the following Other Stock Unit Award Agreement, which are in all events the governing documents
for your award. The details of this award are indicated below.
Grantee:
Date of Grant:
Covered Shares of Common Stock:
Performance Period:
Vesting Date:
Settlement Date:
Calendar Year prior to Date of Grant
December 31 that is the one year anniversary of the end date of the
performance period
January 1 following the second anniversary of the Vesting Date
Restricted stock units can be a great opportunity for individual wealth creation. As our Company becomes more valuable through
management running the business better and through growth opportunities, the value or price of a share of the Company’s common
stock should increase. Through your efforts and the efforts of your colleagues, you have the ability to help increase the value of our
Company for all shareholders.
Thank you for all you do each and every day as a leader and owner of the Company. Our focus on driving profitable revenues,
eliminating non-value added expense and investing our capital prudently is collectively building a much stronger Pinnacle. We are
establishing a balanced portfolio of properties as we continue to grow nationally and internationally, and are well on our way to
becoming the BEST CASINO ENTERTAINMENT COMPANY IN THE WORLD.
It is an exciting time to be part of Pinnacle Entertainment, Inc!
Anthony Sanfilippo
President & CEO
THIS OTHER STOCK UNIT AWARD AGREEMENT (together with the above grant notice (the “Grant Notice” ), the
“Agreement” ) is made and entered into as of the date set forth on the Grant Notice by and between Pinnacle Entertainment, Inc., a
Delaware corporation (the “Company” ), and the individual (the “Grantee” ) set forth on the Grant Notice.
A. Pursuant to the Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive Plan (the “Plan” ), and the Annual
Incentive Plan, the Compensation Committee (the “Committee” ) has determined that it is to the advantage and best interest of the
Company to grant to the Grantee this Award of Other Stock Unit Awards (the “Award” ) covering the number of shares of the
Common Stock of the Company (the “Shares” ) set forth on the Grant Notice, at the per Share value as provided herein, and in all
respects subject to the terms, definitions and provisions of the Plan, which is incorporated herein by reference.
B. Unless otherwise defined herein, capitalized terms used in this Agreement shall have the meanings set forth in the Plan.
NOW, THEREFORE, in consideration of the mutual agreements contained herein, the Grantee and the Company hereby agree as
follows:
1. Acceptance of Agreement . Grantee has reviewed the Plan and this Agreement, and all provisions of the Plan and Agreement. By
electronically accepting this Award according to the instructions provided by the Company’s designated broker, Grantee agrees that
this electronic contract contains Grantee’s electronic signature, which Grantee has executed with the intent to sign this Agreement, and
that this Award is granted under and governed by the terms and conditions of the Plan and this Agreement. Grantee hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the Committee on questions relating to the Plan and this
Agreement.
2. Grant of Award . The Company hereby grants to Grantee an Other Stock Unit Award in the form of a Restricted Stock Unit with
the number of shares such Award represents determined by the average of the closing sale price of the Company’s Common Stock
during the Performance Period, subject to the terms and conditions set forth in this Agreement, the Plan and the Annual Incentive
Plan. The Company shall maintain an account ( “Stock Unit Account” ) on its books in the name of the Grantee which shall reflect
the number of Other Stock Unit Awards awarded to the Grantee that the Grantee is eligible to receive in distribution pursuant to this
Agreement. The Other Stock Unit Awards granted hereunder shall be subject to the terms and provisions of the Plan, and all
capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Plan. The Other Stock Unit Awards shall
not be entitled to Dividend Equivalents under Section 12.5 of the Plan, but shall be subject to adjustment in accordance with
Section 12.2 of the Plan.
3. Vesting and Forfeiture . This Award shall become fully vested on the vesting date set forth in the Grant Notice (the “Vesting
Date” ), subject to the following conditions:
3.1. If, before the Vesting Date, the Grantee voluntarily terminates his or her Continuous Status as an Employee, Director or
Consultant for any reason other than “good reason” (as defined in the Grantee’s employment agreement with the Company, if
applicable), this Award shall never vest, but shall be forfeited in full and revert to the Company; provided, however, that the Chief
Executive Officer shall have the discretion to recommend to the Committee, and the Committee shall have the discretion to approve,
the full and immediate acceleration of vesting of the Award and settlement in accordance with Section 4.
3.2. If, before the Vesting Date, the Grantee’s employment with the Company is terminated by the Company for Cause, this
Award shall never vest, but shall be forfeited in full and revert to the Company.
3.3. If, before the Vesting Date, the Grantee terminates employment with the Company for “good reason” (as defined in the
Grantee’s employment agreement with the Company, if applicable) or the Grantee’s employment with the Company is terminated by
the Company without Cause, this Award shall vest fully and immediately and be settled in accordance with Section 4.
-23.4. If, after the Vesting Date but before the settlement date set forth in the Grant Notice (the “Settlement Date” ), the Grantee’s
employment with the Company is terminated by the Company for Cause, this Award shall be forfeited in full and revert to the
Company.
4. Settlement Date and Transfer of Shares . This Award (to the extent vested) shall be settled by the Company by the issuance of
Shares on the settlement date set forth in the Grant Notice (the “Settlement Date” ), and delivery of such Shares on the following
business day; provided, however, that if the Grantee’s Continuous Status as an Employee, Director or Consultant terminates for any
reason (other than Cause) before the July 1 immediately preceding the Settlement Date, the Award (to the extent vested) shall be
settled on account of the Grantee’s termination of Continuous Status as an Employee, Director or Consultant on the first business day
that is six months after such termination. Notwithstanding the foregoing, in the event that (i) the Grantee is subject to the Company’s
policy permitting officers and directors to sell shares only during certain window periods, in effect from time to time or you are
otherwise prohibited from selling shares of the Company’s Common Stock in the public market and any shares covered by this Award
are scheduled to be issued on a day (the “Original Distribution Date” ) that does not occur during an open window period applicable
to the Grantee, as determined by the Company in accordance with such policy, or does not occur on a date when the Grantee is
otherwise permitted to sell Shares in the open market, and (ii) the shares covered by this Award are not covered by a contract,
instruction or plan that complies with Rule 10b5-1 of the Exchange Act, then such shares shall not be issued and delivered on such
Original Distribution Date and shall instead be issued and delivered on the first business day of the next occurring open window
period applicable to the Grantee pursuant to such policy (regardless of whether the Grantee is still providing continuous services at
such time) or the next business day when the Grantee is not prohibited from selling Shares in the open market, but in no event later
than the December 31 of the calendar year in which the Original Distribution Date occurs.
Any issuance of Shares shall be made only in whole Shares, and any fractional shares shall be distributed in an equivalent cash
amount. Such distributed Shares shall be registered in the name of the Grantee (or if applicable, the Beneficiaries of the Grantee) and
distributed to the Grantee (or if applicable, the Beneficiaries of the Grantee) on the distribution date(s) described above.
5. General.
5.1. Governing Law . This Agreement shall be governed by and construed under the laws of the State of Delaware applicable to
agreements made and to be performed entirely in Delaware, without regard to the conflicts of law provisions of Delaware or any other
jurisdiction.
5.2. Community Property . Without prejudice to the actual rights of the spouses as between each other, for all purposes of this
Agreement, the Grantee shall be treated as agent and attorney-in-fact for that interest held or claimed by his or her spouse with respect
to this Award and the parties hereto shall act in all matters as if the Grantee was the sole owner of this Award. This appointment is
coupled with an interest and is irrevocable.
5.3. No Employment Rights . Nothing herein contained shall be construed as an agreement by the Company or any of its
subsidiaries, express or implied, to employ the Grantee or contract for the Grantee’s services, to restrict the Company’s or such
subsidiary’s right to discharge the Grantee or cease contracting for the Grantee’s services or to modify, extend or otherwise affect in
any manner whatsoever the terms of any employment agreement or contract for services which may exist between the Grantee and the
Company or any of its subsidiaries.
5.4. Application to Other Stock . In the event any capital stock of the Company or any other corporation shall be distributed on,
with respect to, or in exchange for shares of Common Stock as a stock dividend, stock split, reclassification or recapitalization in
connection with any merger or reorganization or otherwise, all restrictions, rights and obligations set forth in this Agreement shall
apply with respect to such other capital stock to the same extent as they are, or would have been applicable, to the Shares on or with
respect to which such other capital stock was distributed.
5.5. No Third-Party Benefits . Except as otherwise expressly provided in this Agreement, none of the provisions of this
Agreement shall be for the benefit of, or enforceable by, any third-party beneficiary.
-35.6. Successors and Assigns . Except as provided herein to the contrary, this Agreement shall be binding upon and inure to the
benefit of the parties, their respective successors and permitted assigns.
5.7. No Assignment . Except as otherwise provided in this Agreement, the Grantee may not assign any of his, her or its rights
under this Agreement without the prior written consent of the Company, which consent may be withheld in its sole discretion. The
Company shall be permitted to assign its rights or obligations under this Agreement, but no such assignment shall release the
Company of any obligations pursuant to this Agreement.
5.8. Severability . The validity, legality or enforceability of the remainder of this Agreement shall not be affected even if one or
more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable in any respect.
5.9. Equitable Relief . The Grantee acknowledges that, in the event of a threatened or actual breach of any of the provisions of
this Agreement, damages alone will be an inadequate remedy, and such breach will cause the Company great, immediate and
irreparable injury and damage. Accordingly, the Grantee agrees that the Company shall be entitled to injunctive and other equitable
relief, and that such relief shall be in addition to, and not in lieu of, any remedies it may have at law or under this Agreement.
5.10. Arbitration .
5.10.1. General . Any controversy, dispute, or claim between the parties to this Agreement, including any claim arising out
of, in connection with, or in relation to the formation, interpretation, performance or breach of this Agreement shall be settled
exclusively by arbitration, before a single arbitrator, in accordance with this Section 5.10 and the then most applicable rules of the
American Arbitration Association. Judgment upon any award rendered by the arbitrator may be entered by any state or federal court
having jurisdiction thereof. Such arbitration shall be administered by the American Arbitration Association. Arbitration shall be the
exclusive remedy for determining any such dispute, regardless of its nature. Notwithstanding the foregoing, either party may in an
appropriate matter apply to a court for provisional relief, including a temporary restraining order or a preliminary injunction, on the
ground that the award to which the applicant may be entitled in arbitration may be rendered ineffectual without provisional relief.
Unless mutually agreed by the parties otherwise, any arbitration shall take place in the City of Las Vegas, Nevada.
5.10.2. Selection of Arbitrator . In the event the parties are unable to agree upon an arbitrator, the parties shall select a
single arbitrator from a list of nine arbitrators drawn by the parties at random from the “Independent” (or “Gold Card”) list of retired
judges or, at the option of the Grantee, from a list of nine persons (which shall be retired judges or corporate or litigation attorneys
experienced in stock incentives and buy-sell agreements) provided by the office of the American Arbitration Association having
jurisdiction over Las Vegas, Nevada. If the parties are unable to agree upon an arbitrator from the list so drawn, then the parties shall
each strike names alternately from the list, with the first to strike being determined by lot. After each party has used four strikes, the
remaining name on the list shall be the arbitrator. If such person is unable to serve for any reason, the parties shall repeat this process
until an arbitrator is selected.
5.10.3. Applicability of Arbitration; Remedial Authority . This agreement to resolve any disputes by binding arbitration
shall extend to claims against any parent, subsidiary or affiliate of each party, and, when acting within such capacity, any officer,
director, stockholder, employee or agent of each party, or of any of the above, and shall apply as well to claims arising out of state and
federal statutes and local ordinances as well as to claims arising under the common law. In the event of a dispute subject to this
paragraph the parties shall be entitled to reasonable discovery subject to the discretion of the arbitrator. The remedial authority of the
arbitrator (which shall include the right to grant injunctive or other equitable relief) shall be the same as, but no greater than, would be
the remedial power of a court having jurisdiction over the parties and their dispute. The arbitrator shall, upon an appropriate motion,
dismiss any claim without an evidentiary hearing if the party bringing the motion establishes that he or it would be entitled to
summary judgment if the matter had been pursued in court litigation. In the event of a conflict between the applicable rules of the
American Arbitration Association and these procedures, the provisions of these procedures shall govern.
-45.10.4. Fees and Costs . Any filing or administrative fees shall be borne initially by the party requesting arbitration. The
Company shall be responsible for the costs and fees of the arbitration, unless the Grantee wishes to contribute (up to 50%) of the costs
and fees of the arbitration. Notwithstanding the foregoing, the prevailing party in such arbitration, as determined by the arbitrator, and
in any enforcement or other court proceedings, shall be entitled, to the extent permitted by law, to reimbursement from the other party
for all of the prevailing party’s costs (including but not limited to the arbitrator’s compensation), expenses, and attorneys’ fees.
5.10.5. Award Final and Binding . The arbitrator shall render an award and written opinion, and the award shall be final and
binding upon the parties. If any of the provisions of this paragraph, or of this Agreement, are determined to be unlawful or otherwise
unenforceable, in whole or in part, such determination shall not affect the validity of the remainder of this Agreement, and this
Agreement shall be reformed to the extent necessary to carry out its provisions to the greatest extent possible and to insure that the
resolution of all conflicts between the parties, including those arising out of statutory claims, shall be resolved by neutral, binding
arbitration. If a court should find that the arbitration provisions of this Agreement are not absolutely binding, then the parties intend
any arbitration decision and award to be fully admissible in evidence in any subsequent action, given great weight by any finder of
fact, and treated as determinative to the maximum extent permitted by law.
5.11. Section 409A . The Plan and this Grant of Other Stock Unit Awards shall be interpreted in compliance with Section 409A
of the Internal Revenue Code of 1986, as amended, and the regulations thereunder ( “Section 409A” ). In the event that any
compensation with respect to the Grantee’s separation from service is “deferred compensation” within the meaning of Section 409A,
the stock of the Company or any affiliate is publicly traded on an established securities market or otherwise, and the Grantee is
determined to be a “specified employee ”, as defined in Section 409A(a)(2)(B)(i) of the Code, transfer of the Shares covered by
vested Other Stock Unit Awards shall be delayed as required by Section 409A. Such delay shall last six months from the date of the
Grantee’s separation from service, except in the event of Executive’s death. For all purposes of the Award, references herein to
“termination” of Continuous Status as an Employee, Director or Consultant or other terms of similar import shall in each case mean
and require a “separation from service” within the meaning of Section 409A. Grantee shall have no right directly or indirectly to
designate the taxable year of payment. Until the transfer of Shares under Section 4 hereof, the Other Stock Unit Awards shall represent
only an unsecured and unfunded promise to deliver the Shares in the future, and the rights of the Grantee against the Company shall be
only those of an unsecured creditor.
5.12. Withholding Taxes . The Company has the right to take whatever steps the Company deems necessary or appropriate to
comply with all applicable federal, state, local, and employment tax withholding requirements, and the Company’s obligations to
deliver shares of Common Stock upon the settlement of this Award will be conditioned upon compliance with all such withholding tax
requirements. Without limiting the generality of the foregoing, upon the settlement of this Award, the Company will have the right to
withhold taxes from any other compensation or other amounts which it may owe to the Grantee, or to require the Grantee to pay to the
Company the amount of any taxes which the Company may be required to withhold with respect to the shares issued on such exercise.
Without limiting the generality of the foregoing, the Committee in its discretion may authorize the Grantee to satisfy all or part of any
withholding tax liability by (a) having the Company withhold from the shares of Common Stock which would otherwise be issued on
the settlement of an Award that number of shares having a Fair Market Value, as of the date the withholding tax liability arises, equal
to or less than the amount of the Company’s withholding tax liability, or (b) by delivering to the Company previously-owned and
unencumbered shares of the Common Stock having a Fair Market Value, as of the date the withholding tax liability arises, equal to or
less than the amount of the Company’s withholding tax liability.
5.13. Headings . The section headings in this Agreement are inserted only as a matter of convenience, and in no way define,
limit, extend or interpret the scope of this Agreement or of any particular section.
5.14. Number and Gender . Throughout this Agreement, as the context may require, (a) the masculine gender includes the
feminine and the neuter gender includes the masculine and the feminine; (b) the singular tense and number includes the plural, and the
plural tense and number includes the singular; (c) the past tense includes the present, and the present tense includes the past;
(d) references to parties, sections, paragraphs and exhibits mean the parties, sections, paragraphs and exhibits of and to this
Agreement; and (e) periods of days, weeks or months mean calendar days, weeks or months.
-55.15. Electronic Delivery and Disclosure . The Company may, in its sole discretion, decide to deliver or disclose, as applicable,
any documents related to this Award granted under the Plan, future awards that may be granted under the Plan, the prospectus related
to the Plan, the Company’s annual reports or proxy statements by electronic means or to request Grantee’s consent to participate in the
Plan by electronic means. Grantee hereby consents to receive such documents delivered electronically or to retrieve such documents
furnished electronically, as applicable, and agrees to participate in the Plan through any online or electronic system established and
maintained by the Company or another third party designated by the Company.
5.16. Data Privacy . Grantee agrees that all of Grantee’s information that is described or referenced in this Agreement and the
Plan may be used by the Company, its affiliates and the designated broker and its affiliates to administer and manage Grantee’s
participation in the Plan.
5.17. Acknowledgments of Grantee . Grantee has reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement, fully understands all provisions of the Plan and Agreement and, by
accepting the Notice of Grant, acknowledges and agrees to all of the provisions of the Plan and this Agreement.
5.18. Complete Agreement . The Grant Notice, this Agreement and the Plan constitute the parties’ entire agreement with respect
to the subject matter hereof and supersede all agreements, representations, warranties, statements, promises and understandings,
whether oral or written, with respect to the subject matter hereof.
5.19. Waiver of Jury Trial . TO THE EXTENT EITHER PARTY INITIATES LITIGATION INVOLVING THIS
AGREEMENT OR ANY ASPECT OF THE RELATIONSHIP BETWEEN US (EVEN IF OTHER PARTIES OR OTHER CLAIMS
ARE INCLUDED IN SUCH LITIGATION), ALL OF THE PARTIES WAIVE THEIR RIGHT TO A TRIAL BY JURY. THIS
WAIVER WILL APPLY TO ALL CAUSES OF ACTION THAT ARE OR MIGHT BE INCLUDED IN SUCH ACTION,
INCLUDING CLAIMS RELATED TO THE ENFORCEMENT OR INTERPRETATION OF THIS AGREEMENT,
ALLEGATIONS OF STATE OR FEDERAL STATUTORY VIOLATIONS, FRAUD, MISREPRESENTATION, OR SIMILAR
CAUSES OF ACTION, AND IN CONNECTION WITH ANY LEGAL ACTION INITIATED FOR THE RECOVERY OF
DAMAGES BETWEEN OR AMONG US OR BETWEEN OR AMONG ANY OF OUR OWNERS, AFFILIATES, OFFICERS,
EMPLOYEES OR AGENTS.
-6-
Exhibit 4.26
Annual Incentive Program — Elected Grant
TEAM MEMBER AIP OTHER STOCK UNIT AWARD GRANT NOTICE AND AWARD AGREEMENT
Congratulations! As a key leader in our business, you have been in a position to have significant influence on the outcomes that
affect our guests and Pinnacle Entertainment, Inc. (the “Company” or “Pinnacle” ). In recognition of the results attained under the
Annual Incentive Plan and the elections you have made under the Deferred Compensation Plan, you have been granted a restricted
stock unit award (or “Other Stock Unit Award” ). This award is subject to the terms and conditions of the 2005 Equity and
Performance Incentive Plan and the following Other Stock Unit Award Agreement, which are in all events the governing documents
for your award. The details of this award are indicated below.
Grantee:
Date of Grant:
Covered Shares of Common Stock:
Performance Period:
Vesting Date:
Calendar Year prior to Date of Grant
Date of Grant
Restricted stock units can be a great opportunity for individual wealth creation. As our Company becomes more valuable through
management running the business better and through growth opportunities, the value or price of a share of the Company’s common
stock should increase. Through your efforts and the efforts of your colleagues, you have the ability to help increase the value of the
Company for all shareholders.
Thank you for all you do each and every day as a leader and owner of the Company. Our focus on driving profitable revenues,
eliminating non-value added expense and investing our capital prudently is collectively building a much stronger Pinnacle. We are
establishing a balanced portfolio of properties as we continue to grow nationally and internationally, and are well on our way to
becoming the BEST CASINO ENTERTAINMENT COMPANY IN THE WORLD.
It is an exciting time to be part of Pinnacle Entertainment!
Anthony Sanfilippo
President & CEO
THIS OTHER STOCK UNIT AWARD AGREEMENT (together with the above grant notice (the “Grant Notice” ), the
“Agreement” ) is made and entered into as of the date set forth on the Grant Notice by and between Pinnacle Entertainment, Inc., a
Delaware corporation (the “Company” ), and the individual (the “Grantee” ) set forth on the Grant Notice.
A. Pursuant to the Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive Plan (the “Plan” ), and the Annual
Incentive Plan, the Compensation Committee (the “Committee” ) has determined that it is to the advantage and best interest of the
Company to grant to the Grantee this Award of Other Stock Unit Awards (the “Award” ) covering the number of shares of the
Common Stock of the Company (the “Shares” ) set forth on the Grant Notice and in all respects subject to the terms, definitions and
provisions of the Plan, which is incorporated herein by reference.
B. Unless otherwise defined herein, capitalized terms used in this Agreement shall have the meanings set forth in the Plan.
NOW, THEREFORE, in consideration of the mutual agreements contained herein, the Grantee and the Company hereby agree as
follows:
1. Acceptance of Agreement . Grantee has reviewed the Plan and this Agreement, and all provisions of the Plan and Agreement. By
electronically accepting this Award according to the instructions provided by the Company’s designated broker, Grantee agrees that
this electronic contract contains Grantee’s electronic signature, which Grantee has executed with the intent to sign this Agreement, and
that this Award is granted under and governed by the terms and conditions of the Plan and this Agreement. Grantee hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the Committee on questions relating to the Plan and this
Agreement.
2. Grant of Award . The Company hereby grants to Grantee Other Stock Unit Awards in the form of a Restricted Stock Unit, with the
number of shares such Award represents determined by the average of the closing sale price of the Company’s Common Stock during
the performance period, subject to the terms and conditions set forth in this Agreement and in the Plan. Grantee has elect, in
compliance with Section 409A of the Code, this Award, and the Company shall maintain an account ( “Stock Unit Account” ) on its
books in the name of the Grantee which shall reflect the number of Other Stock Unit Awards awarded to the Grantee that the Grantee
is eligible to receive in distribution pursuant to this Agreement. The Other Stock Unit Awards granted hereunder shall be subject to the
terms and provisions of the Plan, and all capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the
Plan. The Other Stock Unit Awards shall not be entitled to Dividend Equivalents under Section 12.5 of the Plan, but shall be subject to
adjustment in accordance with Section 12.2 of the Plan.
3. Vesting and Forfeiture . This Award is fully vested as of the date of grant.
4. Settlement Date . This Award shall be settled by the Company by the issuance of Shares on the date elected by the Grantee
pursuant to Section 5 (the “Settlement Date” ), and delivery of such Shares on the following business day; provided, however, that if
the Grantee’s Continuous Status as an Employee, Director or Consultant terminates for any reason prior to the Settlement Date so as to
constitute a “separation from service” within the meaning of Treasury Regulations Section 1.409A-1(h), the Award shall be settled
on the date of such separation from service. Notwithstanding the foregoing, in the event that (i) the Grantee is subject to the
Company’s policy permitting officers and directors to sell shares only during certain window periods, in effect from time to time or
you are otherwise prohibited from selling shares of the Company’s Common Stock in the public market and any shares covered by this
Award are scheduled to be issued on a day (the “Original Distribution Date” ) that does not occur during an open window period
applicable to the Grantee, as determined by the Company in accordance with such policy, or does not occur on a date when the
Grantee is otherwise permitted to sell Shares in the open market, and (ii) the shares covered by this Award are not covered by a
contract, instruction or plan that complies with Rule 10b5-1 of the Exchange Act, then such shares shall not be issued and delivered on
such Original Distribution Date and shall instead be issued and delivered on the first business day of the next occurring open window
period applicable to the Grantee pursuant to such policy (regardless of whether the Grantee is still providing continuous services at
such time) or the next business day when the Grantee is not prohibited from selling Shares in the open market, but in no event later
than the December 31 of the calendar year in which the Original Distribution Date occurs.
2
Any issuance of Shares shall be made only in whole Shares, and any fractional shares shall be distributed in an equivalent cash
amount to the extent permissible without penalty to the Grantee under Section 409A of the Code. Such distributed Shares shall be
registered in the name of the Grantee (or if applicable, the Beneficiaries of the Grantee) and distributed to the Grantee (or if
applicable, the Beneficiaries of the Grantee) on the distribution date(s) described above.
5. Deferral of Award .
5.1. Subject to applicable law, settlement of the Other Stock Unit Awards shall be deferred until the date elected by the Grantee
under the Pinnacle Entertainment, Inc. Executive Deferred Compensation Plan (the “Deferred Compensation Plan” ), which deferral
election shall be made in accordance with the Deferred Compensation Plan and at a time and in a manner that complies with
Section 409A of the Code. Any portion of this Award that is deferred shall be adjusted as described in the Deferred Compensation
Plan.
5.2. In the event this Award is made pursuant to an annual incentive program, the Grantee’s election to defer receipt of the
payment of all or any portion of the Stock Units granted hereunder or Shares issued in accordance therewith shall be effective if it was
made and submitted pursuant to the election procedures established by the Committee no later than the last day of the calendar year
preceding the calendar year in which the performance period begins, or if applicable, the date by which an election to defer
performance-based compensation must be made for such performance period. Such election, if made, became irrevocable upon such
due date and shall remain in effect for grants of restricted stock units for subsequent performance periods, until timely modified or
revoked by the Grantee by the completion and delivery to the Committee of a new election provided by the Committee for such
purpose, setting out such modification or revocation; any such modification or revocation shall be effective only for Other Stock Unit
Awards granted to the Grantee for services performed in calendar years beginning after the calendar year in which such modification
or revocation is completed and delivered to the Committee and shall have no effect on this Award.
5.3. Deferred stock units in the Stock Unit Account under the Deferred Compensation Plan shall be paid in accordance with the
Deferred Compensation Plan and any effective deferral election made under the Deferred Compensation Plan.
6. General.
6.1. Governing Law . This Agreement shall be governed by and construed under the laws of the State of Delaware applicable to
agreements made and to be performed entirely in Delaware, without regard to the conflicts of law provisions of Delaware or any other
jurisdiction.
6.2. Community Property . Without prejudice to the actual rights of the spouses as between each other, for all purposes of this
Agreement, the Grantee shall be treated as agent and attorney-in-fact for that interest held or claimed by his or her spouse with respect
to this Award and the parties hereto shall act in all matters as if the Grantee was the sole owner of this Award. This appointment is
coupled with an interest and is irrevocable.
6.3. No Employment Rights . Nothing herein contained shall be construed as an agreement by the Company or any of its
subsidiaries, express or implied, to employ the Grantee or contract for the Grantee’s services, to restrict the Company’s or such
subsidiary’s right to discharge the Grantee or cease contracting for the Grantee’s services or to modify, extend or otherwise affect in
any manner whatsoever the terms of any employment agreement or contract for services which may exist between the Grantee and the
Company or any of its subsidiaries.
6.4. Application to Other Stock . In the event any capital stock of the Company or any other corporation shall be distributed on,
with respect to, or in exchange for shares of Common Stock as a stock dividend, stock split, reclassification or recapitalization in
connection with any merger or reorganization or otherwise, all restrictions, rights and obligations set forth in this Agreement shall
apply with respect to such other capital stock to the same extent as they are, or would have been applicable, to the Shares on or with
respect to which such other capital stock was distributed.
3
6.5. No Third-Party Benefits . Except as otherwise expressly provided in this Agreement, none of the provisions of this
Agreement shall be for the benefit of, or enforceable by, any third-party beneficiary.
6.6. Successors and Assigns . Except as provided herein to the contrary, this Agreement shall be binding upon and inure to the
benefit of the parties, their respective successors and permitted assigns.
6.7. No Assignment . Except as otherwise provided in this Agreement, the Grantee may not assign any of his, her or its rights
under this Agreement without the prior written consent of the Company, which consent may be withheld in its sole discretion. The
Company shall be permitted to assign its rights or obligations under this Agreement, but no such assignment shall release the
Company of any obligations pursuant to this Agreement.
6.8. Severability . The validity, legality or enforceability of the remainder of this Agreement shall not be affected even if one or
more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable in any respect.
6.9. Equitable Relief . The Grantee acknowledges that, in the event of a threatened or actual breach of any of the provisions of
this Agreement, damages alone will be an inadequate remedy, and such breach will cause the Company great, immediate and
irreparable injury and damage. Accordingly, the Grantee agrees that the Company shall be entitled to injunctive and other equitable
relief, and that such relief shall be in addition to, and not in lieu of, any remedies it may have at law or under this Agreement.
6.10. Arbitration .
6.10.1. General . Any controversy, dispute, or claim between the parties to this Agreement, including any claim arising out
of, in connection with, or in relation to the formation, interpretation, performance or breach of this Agreement shall be settled
exclusively by arbitration, before a single arbitrator, in accordance with this Section 6.10 and the then most applicable rules of the
American Arbitration Association. Judgment upon any award rendered by the arbitrator may be entered by any state or federal court
having jurisdiction thereof. Such arbitration shall be administered by the American Arbitration Association. Arbitration shall be the
exclusive remedy for determining any such dispute, regardless of its nature. Notwithstanding the foregoing, either party may in an
appropriate matter apply to a court for provisional relief, including a temporary restraining order or a preliminary injunction, on the
ground that the award to which the applicant may be entitled in arbitration may be rendered ineffectual without provisional relief.
Unless mutually agreed by the parties otherwise, any arbitration shall take place in the City of Las Vegas, Nevada.
6.10.2. Selection of Arbitrator . In the event the parties are unable to agree upon an arbitrator, the parties shall select a
single arbitrator from a list of nine arbitrators drawn by the parties at random from the “Independent” (or “Gold Card”) list of retired
judges or, at the option of the Grantee, from a list of nine persons (which shall be retired judges or corporate or litigation attorneys
experienced in stock options and buy-sell agreements) provided by the office of the American Arbitration Association having
jurisdiction over Las Vegas, Nevada. If the parties are unable to agree upon an arbitrator from the list so drawn, then the parties shall
each strike names alternately from the list, with the first to strike being determined by lot. After each party has used four strikes, the
remaining name on the list shall be the arbitrator. If such person is unable to serve for any reason, the parties shall repeat this process
until an arbitrator is selected.
6.10.3. Applicability of Arbitration; Remedial Authority . This agreement to resolve any disputes by binding arbitration
shall extend to claims against any parent, subsidiary or affiliate of each party, and, when acting within such capacity, any officer,
director, stockholder, employee or agent of each party, or of any of the above, and shall apply as well to claims arising out of state and
federal statutes and local ordinances as well as to claims arising under the common law. In the event of a dispute subject to this
paragraph the parties shall be entitled to reasonable discovery subject to the discretion of the arbitrator. The remedial authority of the
arbitrator (which shall include the right to grant injunctive or other equitable relief) shall be the same as, but no greater than, would be
the remedial power of a court having jurisdiction over the parties and their dispute. The arbitrator shall, upon an appropriate motion,
dismiss any claim without an evidentiary hearing if the party bringing the motion establishes that he or it would be entitled to
summary judgment if the matter had been pursued in court litigation. In the event of a conflict between the applicable rules of the
American Arbitration Association and these procedures, the provisions of these procedures shall govern.
4
6.10.4. Fees and Costs . Any filing or administrative fees shall be borne initially by the party requesting arbitration. The
Company shall be responsible for the costs and fees of the arbitration, unless the Grantee wishes to contribute (up to 50%) of the costs
and fees of the arbitration. Notwithstanding the foregoing, the prevailing party in such arbitration, as determined by the arbitrator, and
in any enforcement or other court proceedings, shall be entitled, to the extent permitted by law, to reimbursement from the other party
for all of the prevailing party’s costs (including but not limited to the arbitrator’s compensation), expenses, and attorneys’ fees.
6.10.5. Award Final and Binding . The arbitrator shall render an award and written opinion, and the award shall be final and
binding upon the parties. If any of the provisions of this paragraph, or of this Agreement, are determined to be unlawful or otherwise
unenforceable, in whole or in part, such determination shall not affect the validity of the remainder of this Agreement, and this
Agreement shall be reformed to the extent necessary to carry out its provisions to the greatest extent possible and to insure that the
resolution of all conflicts between the parties, including those arising out of statutory claims, shall be resolved by neutral, binding
arbitration. If a court should find that the arbitration provisions of this Agreement are not absolutely binding, then the parties intend
any arbitration decision and award to be fully admissible in evidence in any subsequent action, given great weight by any finder of
fact, and treated as determinative to the maximum extent permitted by law.
6.11. Section 409A . The Plan and this Grant of Other Stock Unit Awards shall be interpreted in compliance with Section 409A
of the Internal Revenue Code of 1986, as amended, and the regulations thereunder ( “Section 409A” ). In the event that any
compensation with respect to the Grantee’s separation from service is “deferred compensation” within the meaning of Section 409A,
the stock of the Company or any affiliate is publicly traded on an established securities market or otherwise, and the Grantee is
determined to be a “specified employee ”, as defined in Section 409A(a)(2)(B)(i) of the Code, transfer of the Shares covered by
vested Other Stock Unit Awards shall be delayed as required by Section 409A. Such delay shall last six months from the date of the
Grantee’s separation from service, except in the event of Executive’s death. For all purposes of the Award, references herein to
“termination” of Continuous Status as an Employee, Director or Consultant or other terms of similar import shall in each case mean
and require a “separation from service” within the meaning of Section 409A. Grantee shall have no right directly or indirectly to
designate the taxable year of payment excepted as elected pursuant to Section 5. Until the transfer of Shares under Section 4 hereof,
the Other Stock Unit Awards shall represent only an unsecured and unfunded promise to deliver the Shares in the future, and the rights
of the Grantee against the Company shall be only those of an unsecured creditor.
6.12. Withholding Taxes . The Company has the right to take whatever steps the Company deems necessary or appropriate to
comply with all applicable federal, state, local, and employment tax withholding requirements, and the Company’s obligations to
deliver shares of Common Stock upon the settlement of this Award will be conditioned upon compliance with all such withholding tax
requirements. Without limiting the generality of the foregoing, upon the settlement of this Award, the Company will have the right to
withhold taxes from any other compensation or other amounts which it may owe to the Grantee, or to require the Grantee to pay to the
Company the amount of any taxes which the Company may be required to withhold with respect to the shares issued on such exercise.
Without limiting the generality of the foregoing, the Committee in its discretion may authorize the Grantee to satisfy all or part of any
withholding tax liability by (a) having the Company withhold from the shares of Common Stock which would otherwise be issued on
the settlement of an Award that number of shares having a Fair Market Value, as of the date the withholding tax liability arises, equal
to or less than the amount of the Company’s withholding tax liability, or (b) by delivering to the Company previously-owned and
unencumbered shares of the Common Stock having a Fair Market Value, as of the date the withholding tax liability arises, equal to or
less than the amount of the Company’s withholding tax liability.
6.13. Headings . The section headings in this Agreement are inserted only as a matter of convenience, and in no way define,
limit, extend or interpret the scope of this Agreement or of any particular section.
5
6.14. Number and Gender . Throughout this Agreement, as the context may require, (a) the masculine gender includes the
feminine and the neuter gender includes the masculine and the feminine; (b) the singular tense and number includes the plural, and the
plural tense and number includes the singular; (c) the past tense includes the present, and the present tense includes the past;
(d) references to parties, sections, paragraphs and exhibits mean the parties, sections, paragraphs and exhibits of and to this
Agreement; and (e) periods of days, weeks or months mean calendar days, weeks or months.
6.15. Electronic Delivery . The Company may, in its sole discretion, decide to deliver any documents related to this Award
granted under the Plan or future options that may be granted under the Plan by electronic means or to request Grantee’s consent to
participate in the Plan by electronic means. Grantee hereby consents to receive such documents by electronic delivery and, if
requested, to accept this Award or any future options granted under the Plan through an on-line or electronic system established and
maintained by the Company or another third party designated by the Company.
6.16. Data Privacy . All of Grantee’s information that is described or referenced in this Agreement and the Plan may be used by
the Company and affiliates to administer and manage Grantee’s participation in the Plan. Grantee understands that he or she may
contact the Company’s international privacy officer if Grantee needs to update or correct any of the information. The Company will
transfer this information to, and store this information in one or several of its U.S. offices. In addition, if necessary to administer and
manage Grantee’s participation in the Plan, the Company may transfer to, or share this information with its Subsidiaries and affiliates
and any third party agents acting on the Company’s behalf to provide services to Grantee, or any other third parties or governmental
agencies, as required or permitted by law or the safe harbor framework established by the U.S. Department of Commerce. In
particular, without limitation, the Company has engaged the designated broker and any entity controlled by, controlling, or under
common control with the designated broker (the “broker’s affiliates”, and together with the designated broker, collectively the
“designated broker”) to provide brokerage services and to help administer the Company’s stock plans. The designated broker is acting
primarily as a data processing agent under the Company’s instructions and directions, but the designated broker reserved the right to
share Grantee’s information with the designated broker’s affiliates. Except as provided in this Section or as required or permitted by
law or the Safe Harbor framework established by the U.S. Department of Commerce, the Company will not disclose Grantee’s
information outside the Company without Grantee’s consent.
Unless Grantee notifies Company within 30 days of the grant of the Award, the Company may use and transfer Grantee’s
personal information as described in this section, particularly as it concerns transfers to the designated broker. Grantee understands
that participation in the Plan is entirely voluntary and that his or her denial of consent does not have any adverse effects other than
exclusion from the Plan.
6.17. Acknowledgments of Grantee . Grantee has reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement, fully understands all provisions of the Plan and Agreement and, by
signing the Notice of Grant, acknowledges and agrees to all of the provisions of the Plan and this Agreement.
6.18. Waiver of Jury Trial . TO THE EXTENT EITHER PARTY INITIATES LITIGATION INVOLVING THIS
AGREEMENT OR ANY ASPECT OF THE RELATIONSHIP BETWEEN US (EVEN IF OTHER PARTIES OR OTHER CLAIMS
ARE INCLUDED IN SUCH LITIGATION), ALL OF THE PARTIES WAIVE THEIR RIGHT TO A TRIAL BY JURY. THIS
WAIVER WILL APPLY TO ALL CAUSES OF ACTION THAT ARE OR MIGHT BE INCLUDED IN SUCH ACTION,
INCLUDING CLAIMS RELATED TO THE ENFORCEMENT OR INTERPRETATION OF THIS AGREEMENT,
ALLEGATIONS OF STATE OR FEDERAL STATUTORY VIOLATIONS, FRAUD, MISREPRESENTATION, OR SIMILAR
CAUSES OF ACTION, AND IN CONNECTION WITH ANY LEGAL ACTION INITIATED FOR THE RECOVERY OF
DAMAGES BETWEEN OR AMONG US OR BETWEEN OR AMONG ANY OF OUR OWNERS, AFFILIATES, OFFICERS,
EMPLOYEES OR AGENTS.
6
Exhibit 10.26
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the “Agreement”) is made effective this 15th day of November, 2011, (the “Effective Date”), by and
between Pinnacle Entertainment, Inc., a Delaware corporation (the “Company”), and Daniel Boudreaux, an individual (“Executive”),
with respect to the following facts and circumstances:
RECITALS
The Company wishes to continue to employ Executive as its Senior Vice President and Chief Accounting Officer pursuant to the
terms and conditions of this Agreement and Executive desires to be so employed.
NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements set forth herein, the parties hereto
agree as follows:
ARTICLE 1.
EMPLOYMENT AND SEVERANCE
1.1 Employment . The Company agrees to continue to engage Executive in the capacity as Senior Vice President and Chief
Accounting Officer, and Executive hereby accepts such engagement by the Company upon the terms and conditions specified below.
Executive agrees to resign from all positions with the Company immediately upon the termination of employment for any reason.
1.2 Term . The term of this Agreement shall commence on the Effective Date and, unless earlier terminated under Article 6
below, shall continue in force until November 14, 2014 (the “Term”).
1.3 Failure to Renew Agreement . In the event this Agreement is not renewed, Executive agrees that all of the terms, conditions
and provisions contained herein, and the Agreement itself, terminate at the end of the Term. If Executive continues to perform the
same or similar services for the Company following the failure to renew this Agreement, Executive shall be considered to be an at-will
employee, and no term, condition or provision of this Agreement shall govern any continued employer/employee relationship.
ARTICLE 2.
DUTIES OF EXECUTIVE
2.1 Duties . Executive shall perform all the duties and obligations generally associated with the position of Senior Vice President
and Chief Accounting Officer subject to the control and supervision of the Company’s President and Chief Executive Officer, and
such other executive duties consistent with the foregoing as may be assigned to Executive from time to time by the Company.
Executive shall perform the services contemplated herein faithfully, diligently, to the best of Executive’s 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 Executive’s
authority, shall to the best of Executive’s 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 shall, at all times and 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 facility in Las Vegas, Nevada, or
at such other location as designated by the Company. Executive understands Executive will be required to travel to the Company’s
various operations as part of Executive’s employment.
2.3 Exclusive Service . Except as otherwise expressly provided herein, Executive shall devote Executive’s 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”). While employed by the Company or one of its subsidiaries, 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, or actively seeking to be engaged in, the casino gaming, card club horse racing or pari-mutuel wagering business (collectively, the
“Gaming Business”). In this regard, and for purposes of this section only, Executive acknowledges that the gaming industry is national
and international in scope, and accordingly, this covenant shall apply throughout the United States, and to the extent the Company
secures a presence or ownership internationally, this covenant shall apply internationally as well.
-2ARTICLE 3.
COMPENSATION
3.1 Base Salary . In consideration for Executive’s services hereunder, the Company shall pay Executive an annual base salary at
the rate of Three Hundred Twenty-Four Thousand Dollars ($324,000.00) 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).
3.2 Annual and Other Bonuses . In its sole and absolute discretion and subject to the following, each year the Company may
develop an annual bonus program that is approved by the Company’s Board of Directors. Executive shall be eligible to participate in
the annual bonus program provided that Executive is actively employed with the Company before October 1 of the applicable calendar
year. In the event Executive commences active employment with the Company before October 1 of the applicable calendar year but is
employed less than a full calendar year, Executive shall be eligible for a prorated annual bonus. Executive is not eligible to participate
in the annual bonus program if Executive commences active employment with the Company on or after October 1 of the applicable
calendar year. Any such bonus shall be structured to comply with Section 162(m) (4) (C) of the Internal Revenue Code of 1986, as
amended (the “Code”), and Treasury Regulation Section 1.162-27(e) unless otherwise determined by the Company. Any such bonus
earned by Executive shall be paid annually within ninety (90) days after the conclusion of the Company’s fiscal year. Unless otherwise
approved in the sole and absolute discretion of the Company, Executive is not eligible to participate in the annual bonus program and
shall not receive an annual bonus if Executive’s employment with the Company is terminated by the Company or Executive for any
reason prior to the date on which the Company pays its annual bonus. Executive shall at all times be subject to the Company’s policy
on recovery of incentive compensation as it may be amended from time to time.
ARTICLE 4.
EXECUTIVE BENEFITS
4.1 Vacation . Executive shall be entitled to vacation (paid time off) each year, without reduction in compensation, in accordance
with the general policies of the Company applicable generally to other similarly situated executives of the Company pursuant to the
Company’s personnel policies from time to time.
4.2 Benefits . Executive shall receive all other such benefits as the Company may offer to other similarly situated 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, paid sick leave and fully eligible participation in deferred compensation plans.
ARTICLE 5.
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 Executive’s 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.
-3ARTICLE 6.
TERMINATION
6.1 Termination for Cause . Without limiting the generality of Section 6.3, 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 Executive’s employment under this
Agreement in a professional and businesslike manner, other than due to Executive’s Disability (unless such Disability is due to
substance or alcohol abuse), after having received thirty (30) days 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 Executive’s fiduciary duty to the Company.
6.1.3 Wrongful Acts . If Executive is convicted of a felony or misdemeanor 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 rules or regulations of gaming authorities that could have a material adverse effect on the Company) that would
make the continuance of Executive’s employment by the Company detrimental to the Company as determined in good faith by the
Company.
6.1.4 Failure To Be Licensed or Approved by the Company’s Compliance Committee . Executive shall promptly,
accurately and truthfully complete all forms provided by the Company’s Compliance Committee and shall fully cooperate in any
background investigation conducted pursuant to the Company’s Compliance Program. Executive shall also apply for all applicable
gaming licenses, if required, within ninety (90) days of the Effective Date of this Agreement or such shorter period required by law, to
the extent Executive is not already licensed or on file as of the date hereof. If Executive fails to be recommended for approval and
retention by the Compliance Committee or 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, or if the Company is directed to cease business with Executive by any governmental authority; or if the Company
determines in its reasonable judgment that Executive was or might be involved in, or is about to be involved in, any activity,
relationship(s) or circumstance that could or does jeopardize the Company’s business, reputation or any of such licenses; or any of the
Company’s licenses is threatened to be, or is, denied, curtailed, suspended or revoked as a result of Executive’s employment by the
Company or as a result of Executive’s actions, 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.
-46.2 Death or Disability . This Agreement (and Executive’s employment with the Company) shall terminate on the death or
“Disability” of Executive. Executive will be deemed to have a “Disability” when Executive is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can
be expected to last for a substantially continuous period of not less than six (6) months, or begins receiving income replacement
benefits for a period of not less than three (3) months under an accident and health plan of the Company or an affiliate by reason of
any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a
continuous period of not less than six (6) 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 designated by the Clark County Medical Society or similar body.
The certification of such a physician or psychiatrist as to the questioned dispute shall be final and binding upon the parties hereto.
6.3 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 Initial Term or any Renewal Period, if applicable, shall not be a termination of this Agreement Without
Cause.
6.4 Termination by Executive for Good Reason . Executive may terminate Executive’s 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: (i) a material breach of this Agreement by the Company (including without limitation the assignment to
Executive of duties materially inconsistent with Executive’s status in the Company, or any material reduction in the authority, duties
or responsibilities of Executive); (ii) a material reduction by the Company in Executive’s then Base Salary, a material reduction in
other benefits (except as such benefits may be changed or reduced for other similar executives), or the failure by the Company to pay
Executive any material portion of Executive’s current compensation when due; or (iii) following a Change in Control, the failure of
any acquiring or successor company, or, if the acquiring or successor company is a subsidiary of another company, the failure of the
highest-level parent of the acquiring or successor company, to enter into an agreement (A) naming Executive to at least the same or
equivalent position contained in this Agreement and (B) containing at a minimum the same material terms and conditions as set forth
in this Agreement. Notwithstanding the foregoing, Executive’s resignation shall not be treated as a resignation for Good Reason unless
(iv) Executive notifies the Company (including any acquiring and/or successor company) in writing of a condition constituting Good
Reason within thirty (30) days following Executive’s becoming aware of such condition; (v) the Company fails to remedy such
condition within thirty (30) days following such written notice (the “Remedy Period”); and (vi) Executive resigns within thirty
(30) days following the expiration of the Remedy Period. Further, in the event that Executive resigns for Good Reason and within two
(2) years from such date accepts employment with the Company, any acquirer or successor to the Company’s business or any affiliate,
parent, or subsidiary of either the Company or its successor, then Executive will forfeit any right to severance payments hereunder and
will reimburse the Company for the full amount of such payments received by Executive within thirty (30) days of accepting such
employment.
-56.5 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 election under such plan. In addition, promptly upon submission by Executive
of Executive’s 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 for “Cause,” or due to Executive’s death or Disability or by the
Executive without “Good Reason”, Executive shall not be entitled to receive any payments other than as specified in this
Section 6.5.1. Termination by the Company for Cause shall be in addition to and without prejudice to any other right or remedy that
the Company may be entitled to at law, in equity, or under this Agreement.
6.5.2 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 6.5.3, the following shall apply:
(a)
Executive shall be entitled to receive severance compensation as set forth in Appendix A attached hereto.
6.5.3 Termination Without Cause or Termination by Executive for Good Reason on or Within the Eighteen (18) Months
After a Change of Control . If the Company terminates Executive without Cause or Executive terminates for Good Reason within
eighteen (18) months:
(a)
Executive shall be entitled to receive severance compensation as set forth in Appendix A attached hereto.
(b)
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” or “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;
-6-
(ii)
(iii)
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; or
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.
None of the foregoing events, however, shall constitute a Change of Control if such event is not a “Change in Control
Event” under Treasury Regulation 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 fifty percent (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 fifty percent
(50%) of the voting power of the issued and outstanding voting securities of such Person or Group, or (C) more than fifty percent
(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 fifty percent (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 shall 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 “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.
6.5.4 Code Section 409A . Notwithstanding any other provision herein, the parties hereto intend that payments and benefits
under this Agreement comply with or be exempt from Section 409A of the Internal Revenue Code of 1986, as amended, and the
regulations and guidance promulgated thereunder (collectively, “Section 409A”) and, accordingly, to the maximum extent permitted,
this Agreement shall be interpreted to be in compliance therewith or exempt therefrom, and the Company may adopt such
amendments to the Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive
-7effect), or take any other actions, that the Company determines are necessary or appropriate to exempt any payment hereunder from
Section 409A and/or preserve the intended tax treatment of any payment provided hereunder, or comply with the requirements of
Section 409A and thereby avoid the application of any penalty taxes under Section 409A; provided that, in no event whatsoever shall
the Company be liable for any additional tax, interest or penalty that may be imposed on the Executive by Section 409A or damages
for failing to comply with Section 409A. In the event that any compensation with respect to Executive’s separation from service is
“nonqualified deferred compensation” within the meaning of Section 409A, the stock of the Company or any affiliate is publicly
traded on an established securities market or otherwise, and Executive is determined to be a “specified employee,” as defined in
Section 409A(a)(2)(B)(i) of the Code, payment of such compensation shall be delayed as required by Section 409A. Such delay shall
last six (6) months from the date of Executive’s separation from service, except in the event of Executive’s death. Within thirty
(30) days following the end of such six-month period, or, if earlier, Executive’s death, the Company will make a catch-up payment to
Executive equal to the total amount of such payments that would have been made during the six-month period but for this
Section 6.5.4. Whenever 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. Payments of compensation or benefits on Executive’s termination of employment
(other than accrued salary and other accrued amounts that must be paid under applicable law, and “welfare benefits” specified in
Treasury Regulation Section 1.409A-1(a)(5)) shall be paid only if and when the termination of employment constitutes a “separation
from service” under Treasury Regulation Section 1.409A-1(h). In no event shall any payment under this Agreement that constitutes
“nonqualified deferred compensation” subject to Section 409A be subject to offset unless otherwise permitted by Section 409A. To the
extent that reimbursements or other in-kind benefits under this Agreement constitute “nonqualified deferred compensation” for
purposes of Section 409A, (i) all expenses or other reimbursements hereunder shall be made on or prior to the last day of the taxable
year following the taxable year in which such expenses were incurred by the Employee, (ii) any right to reimbursement or in-kind
benefits shall not be subject to liquidation or exchange for another benefit, and (iii) no such reimbursement, expenses eligible for
reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or
in-kind benefits to be provided, in any other taxable year. Any payments made in accordance with the Company’s customary payroll
practices shall be made within 30 days of each payroll date pursuant to the payroll schedule in effect on the Effective Date of this
Agreement.
6.5.5 Suspension . In lieu of terminating Executive’s employment hereunder for Cause under Section 6.1, the Company
shall have the right, at its sole election, to suspend the performance of duties by Executive under this Agreement during the
continuance of events or circumstances under Section 6.1 for an aggregate of not more than thirty (30) days during the Term (the
“Default Period”) by giving Executive written notice of the Company’s election to do so at any time during the Default Period. The
Company shall have the right to extend the Term beyond its normal expiration date by the period(s) of any suspension(s). The
Company’s exercise of its right to suspend the operation of this Agreement shall not preclude the Company from subsequently
terminating Executive’s employment hereunder; provided nothing herein shall eliminate the Company’s obligation to provide required
written notice, or prevent Executive from having the opportunity to cure any defect raised in such notice, to the extent applicable
under the relevant subsection of Section 6.1. Executive shall not render services to any other person, firm or corporation engaged in, or
actively seeking to become engaged in the Gaming Business during any period of suspension. Executive shall be entitled to continued
compensation and benefits pursuant to the provisions of this Agreement during the Default Period.
-86.6 Exercisability of Equity Grants . All equity grants, if any, shall be governed by the terms and conditions of the governing
equity grant agreement(s) and any related stock option plan or other equity plan.
6.7 No Exclusivity of Rights . Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in
any plan, program, policy or practice provided by the Company or its subsidiaries and for which the Executive may qualify, nor shall
anything herein limit or otherwise affect such rights as Executive may have under any other contract or agreement with the Company
or its subsidiaries at or subsequent to the Date of Termination (“Other Benefits”), which such Other Benefits shall be payable in
accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Agreement.
Notwithstanding the foregoing, if Executive receives payments and benefits pursuant to Article 6 of this Agreement, Executive shall
not be entitled to any severance pay or benefits under any severance plan, program or policy of the Company and its subsidiaries,
unless otherwise specifically provided therein in a specific reference in or to this Agreement.
6.8 Full Settlement . The provisions of this Agreement constitute the sole and complete understanding and resolution of the
parties regarding rights upon termination.
6.9 Release . It shall be a condition for Executive’s right to receive any severance benefits hereunder that Executive execute a
general release in favor of the Company and its affiliates in the form as attached hereto and Appendix B or as presented to Executive
by the Company, in the Company’s sole discretion, and covering such additional matters as may be reasonably requested by the
Company, which release shall not encompass the payments contemplated hereby. The timing of payments under this Agreement upon
the execution of the general release shall be governed by the following provisions:
(a)
The Company must deliver the release to Executive for execution no later than fourteen (14) days after
Executive’s termination of employment. If the Company fails to deliver the release to Executive within such
fourteen (14) day period, Executive will be deemed to have satisfied the release requirement and will receive
payments conditioned on execution of the release as though Executive had executed the release and all
revocation rights had lapsed at the end of such fourteen (14) day period.
(b)
Executive must execute the release within forty-five (45) days from its delivery to Executive.
(c)
If Executive has revocation rights, Executive shall exercise such rights, if at all, not later than seven (7) days
after executing the release.
-9-
(d)
In any case in which the release (and the expiration of any revocation rights) could only become effective in a
particular tax year of Executive, payments conditioned on execution of the release shall begin within thirty
(30) days after the release becomes effective and revocation rights have lapsed.
(e)
In any case in which the release (and the expiration of any revocation rights) could become effective in one of
two (2) taxable years of Executive depending on when Executive executes the release, payments conditioned on
execution of the release shall not begin before the first business day of the later of such tax years.
6.10 Excise Tax Limitation.
6.10.1 Notwithstanding anything contained in this Agreement to the contrary, (i) in the event that any “parachute payment”
(within the meaning of Section 280G(b)(2) of the Code) to be paid or made payable to Executive or for Executive’s benefit pursuant to
the terms of this Agreement or otherwise in connection with, or arising out of, Executive’s employment with the Company or any of
its Subsidiaries on a change in the ownership or effective control of the Company or its assets (a “Change of Control”) within the
meaning of Section 280G of the Code (a “Payment” or “Payments”) would be subject to the excise tax imposed by Section 4999 of the
Code (the “Excise Tax”), and (ii) (A) the net amount of the Payments Executive would retain after payment of the Excise Tax and
federal and state income taxes on the Payments would be less than (B) the net amount of the Payments Executive would retain, after
payment of the Excise Tax and federal and state income taxes on the Payments, if the Payments were reduced to the extent necessary
that no portion of the Payments would be subject to the Excise Tax (the “Section 4999 Limit”), then the Payments shall be reduced
(but not below zero) to the Section 4999 Limit. Unless Executive shall have given prior written notice specifying a different order to
the Company to effectuate the limitations described in the preceding sentence, the Company shall reduce or eliminate the Payments by
first reducing or eliminating those Payments or benefits which are not payable in cash and then by reducing or eliminating cash
Payments, in each case in reverse order beginning with payments or benefits that are to be paid the farthest in time from the
Determination (as hereinafter defined) ; provided, however, that any such reduction will be made first to any Payments that are not
subject to Section 409A, and if further reduction is required, will then be made to Payments subject to Section 409A. Any notice given
by Executive pursuant to the preceding sentence shall take precedence over the provisions of any other Agreement, arrangement or
agreement governing Executive’s rights and entitlements to any benefits or compensation. For purposes of the calculations described
above, it shall be assumed that Executive’s tax rate will be the maximum marginal federal and state income tax rate on earned income.
6.10.2 All determinations required to be made under this Section 6.10 (each, a “Determination”) shall be made, at the
Company’s expense, by the accounting firm which is the Company’s accounting firm prior to a “Change of Control” (within the
meaning of Section 280G of the Code) or another nationally recognized accounting firm designated by the Board (or a committee
thereof) prior to the Change of Control (the “Accounting Firm”). The Accounting Firm shall provide its calculations, together with
detailed supporting documentation, both to the Company and to Executive before payment of Executive’s Severance Payment
- 10 hereunder (if requested at that time by the Company or Executive) or such other time as requested by the Company or Executive (in
either case provided that the Company or Executive believes in good faith that any of the Payments may be subject to the Excise Tax).
Within ten (10) calendar days of the delivery of the Determination to Executive, Executive shall have the right to dispute the
Determination (the “Dispute”). The existence of any Dispute shall not in any way affect Executive’s right to receive the Payments in
accordance with the Determination. If there is no Dispute, the Determination by the Accounting Firm shall be final, binding and
conclusive upon the Company and Executive, subject to the application of Section 6.10.3.
6.10.3 As a result of the uncertainty in the application of Sections 4999 and 280G of the Code, it is possible that the
Payments either will have been made or will not have been made by the Company, in either case in a manner inconsistent with the
limitations provided in Section 6.10.1 (an “Excess Payment” or “Underpayment”, respectively). If it is established pursuant to (i) a
final determination of a court for which all appeals have been taken and finally resolved or the time for all appeals has expired, or
(ii) an Internal Revenue Service (the “IRS”) proceeding that has been finally and conclusively resolved, that an Excess Payment has
been made, such Excess Payment shall be deemed for all purposes to be a loan to Executive made on the date Executive received the
Excess Payment and Executive shall repay the Excess Payment to the Company on demand, together with interest on the Excess
Payment at one hundred twenty percent (120%) of the applicable federal rate (as defined in Section 1274(d) of the Code) compounded
semi-annually from the date of Executive’s receipt of such Excess Payment until the date of such repayment. If it is determined (i) by
the Accounting Firm, the Company (which shall include the position taken by the Company, together with its consolidated group, on
its federal income tax return) or the IRS, (ii) pursuant to a determination by a court, or (iii) upon the resolution to Executive’s
satisfaction of the Dispute, that an Underpayment has occurred, the Company shall pay an amount equal to the Underpayment to
Executive within ten (10) calendar days of such determination or resolution, together with interest on such amount at one hundred
twenty percent (120%) of the applicable federal rate compounded semi-annually from the date such amount should have been paid to
Executive pursuant to the terms of this Agreement or otherwise, but for the operation of this Section 6.10.3, until the date of payment.
ARTICLE 7.
CONFIDENTIALITY
7.1 Nondisclosure of Confidential Material . In the performance of Executive’s duties, Executive may have access to confidential
records, including, but not limited to, development, marketing, organizational, financial, managerial, administrative and sales
information, data, specifications and processes presently owned or at any time hereafter developed or used by the Company or its
agents or consultants that is not otherwise part of the public domain (collectively, the “Confidential Material”). All such Confidential
Material is considered secret and is disclosed to Executive in confidence. Executive acknowledges that the Confidential Material
constitutes proprietary information of the Company that draws independent economic value, actual or potential, from not being
generally known to the public or to other persons who could obtain economic value from its disclosure or use, and that the Company
has taken efforts reasonable under the circumstances, of which this Section 7.1 is an example, to maintain its secrecy. Except in the
performance of Executive’s duties to the Company or as required by a court order or any gaming regulator or as required for
- 11 Executive’s personal tax or legal advisors to advise Executive, Executive shall not, directly or indirectly for any reason whatsoever,
disclose, divulge, communicate, use or otherwise disclose any such Confidential Material, unless such Confidential Material ceases to
be confidential because it has become part of the public domain (not due to a breach by Executive of Executive’s obligations
hereunder). Executive shall also take all reasonable actions appropriate to maintain the secrecy of all Confidential Information. All
records, lists, memoranda, correspondence, reports, manuals, files, drawings, documents, equipment, and other tangible items
(including computer software), wherever located, incorporating the Confidential Material, which Executive shall prepare, use or
encounter, shall be and remain the Company’s sole and exclusive property and shall be included in the Confidential Material. Upon
termination of this Agreement, or whenever requested by the Company, Executive shall promptly deliver to the Company any and all
of the Confidential Material, not previously delivered to the Company, that is in the possession or under the control of Executive.
7.2 Assignment of Intellectual Property Rights . Any ideas, processes, know-how, copyrightable works, maskworks, trade or
service marks, trade secrets, inventions, developments, discoveries, improvements and other matters that may be protected by
intellectual property rights, that relate to the Company’s business and are the results of Executive’s efforts during the Term
(collectively, the “Executive Work Product”), whether conceived or developed alone or with others, and whether or not conceived
during the regular working hours of the Company, shall be deemed works made for hire and are the property of the Company. In the
event that for whatever reason such Executive Work Product shall not be deemed a work made for hire, Executive agrees that such
Executive Work Product shall become the sole and exclusive property of the Company, and Executive hereby assigns to the Company
Executive’s entire right, title and interest in and to each and every patent, copyright, trade or service mark (including any attendant
goodwill), trade secret or other intellectual property right embodied in Executive Work Product. The Company shall also have the
right, in its sole discretion to keep any and all of Executive Work Product as the Company’s Confidential Material. The foregoing
work made for hire and assignment provisions are and shall be in consideration of this agreement of employment by the Company,
and no further consideration is or shall be provided to Executive by the Company with respect to these provisions. Executive agrees to
execute any assignment documents the Company may require confirming the Company’s ownership of any Executive Work Product.
Executive also waives any and all moral rights with respect to any such works, including without limitation any and all rights of
identification of authorship and/or rights of approval, restriction or limitation on use or subsequent modifications. Executive promptly
will disclose to the Company any Executive Work Product.
7.3 No Unfair Competition After Termination of Agreement . Executive hereby acknowledges that the sale or unauthorized use
or disclosure of any of the Company’s Confidential Material obtained by Executive by any means whatsoever, at any time before,
during or after the Term shall constitute unfair competition. Executive shall not engage in any unfair competition with the Company
either during the Term or at any time thereafter.
- 12 7.4 Covenant Not to Compete . In the event this Agreement is terminated by the Company or by Executive, for a reason other
than one specified in Section 6.2 or the expiration of the Term without this Agreement being renewed, then for a period of twelve
(12) months (but only six (6) months in the case of an entity whose only competitive relationship with the Company is in the market in
which the Company has its principal place of business but does not also own or manage a casino), Executive shall not, directly or
indirectly, work for or provide services to or own an equity interest (except for a Permissible Investment) in any person, firm or entity
engaged (directly or indirectly or through an investment in another entity) in the casino gaming, card club, video lottery terminal
(“VLT”) or horseracing business that competes against the Company in any “market” in which the Company owns (in whole or in
part, directly or through an investment in another entity) or operates a casino, card club, VLT or horseracing facility. For purposes of
this Agreement, “market” shall be defined as the area within a 100 mile radius of any casino, card club, VLT or horseracing facility
owned (directly or indirectly or through an investment in another entity) or operated or under construction by the Company.
7.5 No Hire Away Policy . In the event this Agreement is terminated either by the Company or by Executive for any reason, then
for a period of one (1) year after the effective date of such termination or the period of severance compensation set forth in
Appendix A, whichever is longer, Executive shall not, directly or indirectly, for him or herself or on behalf of any entity with which
Executive is affiliated or employed, hire any person known to Executive to be an employee of the Company or any of its subsidiaries
(or any person known to Executive to have been such an employee within six (6) months prior to such occurrence). Executive shall not
be deemed to hire any such person so long as Executive did not directly or indirectly engage in or encourage such hiring.
7.6 No Solicitation . In the event this Agreement is terminated either by the Company or by Executive for any reason, for a
period of one (1) year after the effective date of such termination or the period of severance compensation set forth in Appendix A,
whichever is longer, Executive shall not directly or indirectly, for him or herself or on behalf of any entity with which Executive is
affiliated or employed, solicit any employee of the Company or any of its subsidiaries (or any person who was such an employee
within six (6) months prior to such occurrence) or encourage any such employee to leave the employment of the Company or any of
its subsidiaries.
7.7 Non-Solicitation of Customers . In the event this Agreement is terminated either by the Company or by Executive for any
reason, for a period of one (1) year after the effective date of such termination or the period of severance compensation set forth in
Appendix A, whichever is longer, Executive shall not solicit any customers of the Company or its subsidiaries or any of their
respective casinos, card clubs, VLT facilities or horseracing facilities or knowingly encourage any such customers to leave the
Company’s casinos, card clubs, VLT facilities or horseracing facilities or knowingly encourage any such customers to use the
facilities or services of any competitor of the Company or its subsidiaries. Executive shall at no time use proprietary customer lists or
Confidential Material to solicit customers.
7.8 Irreparable Injury . The promised service of Executive under this Agreement and the other promises of this Article 7 are of
special, unique, unusual, extraordinary, or intellectual character, which gives them peculiar value, the loss of which cannot be
reasonably or adequately compensated in damages in an action at law.
- 13 7.9 Remedies for Breach . Executive agrees that money damages will not be a sufficient remedy for any breach of the obligations
under this Article 7 and Article 2 hereof and that the Company shall be entitled to injunctive relief (which shall include, but not be
limited to, restraining Executive from directly or indirectly working for or having an ownership interest (except for a Permissible
Investment) in any person engaged in the casino, card club, VLT or horseracing businesses in any market that the Company or its
affiliates owns or operates any such business, using or disclosing the Confidential Material) and to specific performance as remedies
for any such breach. Executive agrees that the Company shall be entitled to such relief, including temporary restraining orders,
preliminary injunctions and permanent injunctions, without the necessity of proving actual damages and without the necessity of
posting a bond or making any undertaking in connection therewith. Any such requirement of a bond or undertaking is hereby waived
by Executive and Executive acknowledges that in the absence of such a waiver, a bond or undertaking might otherwise be required by
the court. Such remedies shall not be deemed to be the exclusive remedies for any breach of the obligations in this Article 7, but shall
be in addition to all other remedies available at law or in equity.
7.10 Non-disparagement . In the event this Agreement is terminated either by the Company or by Executive for any reason:
(i) Executive agrees that Executive will not disparage (or induce or encourage others to disparage) the Company, any of its affiliates or
any of its or their officers, directors, executives, employees or shareholders. As used herein, the term “disparage” includes, without
limitation, comments or written or oral statements to the press, the financial community, other gaming companies, any of the
Company’s or its affiliates’ officers, directors, executives, employees or shareholders or any person with whom the Company or any
of its affiliates has a business relationship, or any other person: (A) that is designed to or would reasonably be expected to adversely
affect in any manner the conduct of any of the Company’s or any of its affiliates’ business or the business or personal reputations of
the Company, its affiliates or any of the Company’s or its affiliates’ officers, directors, executives, employees or shareholders; or
(B) that negatively reflects upon, in any manner whatsoever, the Company, its affiliates or any of the Company’s or its affiliates’
officers, directors, executives, employees or shareholders; and (ii) the Company agrees that the Company will not disparage (or induce
or encourage others to disparage) Executive. As used herein, the term “disparage” includes, without limitation, comments or written or
oral statements to the press, the financial community, other gaming companies, any of the Company’s or its affiliates’ officers,
directors, executives, employees or shareholders or any person with whom Executive has a business relationship, or any other person:
(A) that is designed to or would reasonably be expected to adversely affect in any manner the conduct of any of Executive’s business
or the business or personal reputation of Executive; or (B) that negatively reflects upon, in any manner whatsoever, Executive.
- 14 ARTICLE 8.
ARBITRATION
8.1 General . Except for a claim for injunctive relief under Section 7.9, any controversy, dispute, or claim between the parties to
this Agreement, including any claim arising out of, in connection with, or in relation to the formation, interpretation, performance or
breach of this Agreement shall be settled exclusively by arbitration, before a single arbitrator, in accordance with this Article 8 and the
then most applicable rules of the American Arbitration Association. Judgment upon any award rendered by the arbitrator may be
entered by any state or federal court having jurisdiction thereof. Such arbitration shall be administered by the American Arbitration
Association. Arbitration shall be the exclusive remedy for determining any such dispute, regardless of its nature. Notwithstanding the
foregoing, either party may in an appropriate matter apply to a court for provisional relief, including a temporary restraining order or a
preliminary injunction, on the ground that the award to which the applicant may be entitled in arbitration may be rendered ineffectual
without provisional relief. Unless mutually agreed by the parties otherwise, any arbitration shall take place in Las Vegas, Nevada.
8.2 Selection of Arbitrator . In the event the parties are unable to agree upon an arbitrator, the parties shall select a single
arbitrator from a list of nine arbitrators drawn by the parties at random from the “Independent” (or “Gold Card”) list of retired judges
or, at the option of Executive, from a list of nine persons (which shall be retired judges or corporate or litigation attorneys experienced
in executive employment agreements) provided by the office of the American Arbitration Association having jurisdiction over Las
Vegas, Nevada. If the parties are unable to agree upon an arbitrator from the list so drawn, then the parties shall each strike names
alternately from the list, with the first to strike being determined by lot. After each party has used four strikes, the remaining name on
the list shall be the arbitrator. If such person is unable to serve for any reason, the parties shall repeat this process until an arbitrator is
selected.
8.3 Applicability of Arbitration; Remedial Authority . This Agreement to resolve any disputes by binding arbitration shall extend
to claims against any parent, subsidiary or affiliate of each party, and, when acting within such capacity, any officer, director,
stockholder, employee or agent of each party, or of any of the above, and shall apply as well to claims arising out of state and federal
statutes and local ordinances as well as to claims arising under the common law. In the event of a dispute subject to this paragraph the
parties shall be entitled to reasonable discovery subject to the discretion of the arbitrator. The remedial authority of the arbitrator
(which shall include the right to grant injunctive or other equitable relief) shall be the same as, but no greater than, would be the
remedial power of a court having jurisdiction over the parties and their dispute. The arbitrator shall, upon an appropriate motion,
dismiss any claim without an evidentiary hearing if the party bringing the motion establishes that Executive or it would be entitled to
summary judgment if the matter had been pursued in court litigation. In the event of a conflict between the applicable rules of the
American Arbitration Association and these procedures, the provisions of these procedures shall govern.
8.4 Fees and Costs . Any filing or administrative fees shall be borne initially by the party requesting arbitration. The Company
shall be responsible for the costs and arbitrator fees of the arbitration, unless Executive wishes to contribute (up to 50%) of the costs
and fees of the arbitration. Notwithstanding the foregoing, the prevailing party in such arbitration, as determined by the arbitrator, and
in any enforcement or other court proceedings, shall be entitled, to the extent permitted by law, to reimbursement from the other party
for all of the prevailing party’s costs (including but not limited to the arbitrator’s compensation), expenses, and attorneys’ fees.
- 15 8.5 Award Final and Binding . The arbitrator shall render an award and written opinion, and the award shall be final and binding
upon the parties. If any of the provisions of this paragraph, or of this Agreement, are determined to be unlawful or otherwise
unenforceable, in whole or in part, such determination shall not affect the validity of the remainder of this Agreement, and this
Agreement shall be reformed to the extent necessary to carry out its provisions to the greatest extent possible and to ensure that the
resolution of all conflicts between the parties, including those arising out of statutory claims, shall be resolved by neutral, binding
arbitration. If a court should find that the arbitration provisions of this Agreement are not absolutely binding, then the parties intend
any arbitration decision and award to be fully admissible in evidence in any subsequent action, given great weight by any finder of
fact, and treated as determinative to the maximum extent permitted by law.
ARTICLE 9.
MISCELLANEOUS
9.1 Amendments . The provisions of this Agreement may not be waived, altered, amended or repealed in whole or in part except
by the signed written consent of the parties sought to be bound by such waiver, alteration, amendment or repeal.
9.2 Entire Agreement . This Agreement and the stock option agreements between the Company and Executive constitute the total
and complete agreement of the parties and supersede all prior and contemporaneous understandings and agreements heretofore made,
including the Original Agreement, and there are no other representations, understandings or agreements.
9.3 Counterparts . This Agreement may be executed in one of more counterparts, each of which shall be deemed an original, but
all of which shall together constitute one and the same instrument.
9.4 Severability . Each term, covenant, condition or provision of this Agreement shall be viewed as separate and distinct, and in
the event that any such term, covenant, condition or provision shall be deemed by an arbitrator or a court of competent jurisdiction to
be invalid or unenforceable, the court or arbitrator finding such invalidity or unenforceability shall modify or reform this Agreement to
give as much effect as possible to the terms and provisions of this Agreement. Any term or provision that cannot be so modified or
reformed shall be deleted and the remaining terms and provisions shall continue in full force and effect.
9.5 Waiver or Delay . The failure or delay on the part of the Company, or Executive to exercise any right or remedy, power or
privilege hereunder shall not operate as a waiver thereof. A waiver, to be effective, must be in writing and signed by the party making
the waiver. A written waiver of default shall not operate as a waiver of any other default or of the same type of default on a future
occasion.
9.6 Successors and Assigns . This Agreement shall be binding on and shall inure to the benefit of the parties to it and their
respective heirs, legal representatives, successors and assigns, except as otherwise provided herein. Except as provided in this
Section 9.6, without the prior written consent of Executive, this Agreement shall not be assignable by the Company. The Company
will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place. “Company” means the Company as
hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by
operation of law or otherwise.
- 16 9.7 No Assignment or Transfer by Executive . Neither this Agreement nor any of the rights, benefits, obligations or duties
hereunder may be assigned or transferred by Executive. Any purported assignment or transfer by Executive shall be void.
9.8 Necessary Acts . Each party to this Agreement shall perform any further acts and execute and deliver any additional
agreements, assignments or documents that may be reasonably necessary to carry out the provisions or to effectuate the purpose of this
Agreement.
9.9 Governing Law . This Agreement and all subsequent agreements between the parties shall be governed by and interpreted,
construed and enforced in accordance with the laws of the State of Nevada.
9.10 Notices . All notices, requests, demands and other communications to be given under this Agreement shall be in writing and
shall be deemed to have been duly given on the date of service, if personally served on the party to whom notice is to be given, or
forty-eight (48) hours after mailing, if mailed to the party to whom notice is to be given by certified or registered mail, return receipt
requested, postage prepaid, and properly addressed to the party at Executive’s address set forth as follows or any other address that
any party may designate by written notice to the other parties:
To Executive:
Daniel Boudreaux
8545 Killians Greens Drive
Las Vegas, NV 89113
To the Company:
Pinnacle Entertainment, Inc.
8918 Spanish Ridge Avenue
Las Vegas, NV 89148
Attn: General Counsel
Telephone: (702) 541-7777
Facsimile: (702) 541-7773
9.11 Headings and Captions . The headings and captions used herein are solely for the purpose of reference only and are not to
be considered as construing or interpreting the provisions of this Agreement.
9.12 Construction . All terms and definitions contained herein shall be construed in such a manner that shall give effect to the
fullest extent possible to the express or implied intent of the parties hereby.
9.13 Counsel . Executive has been advised by the Company that Executive should consider seeking the advice of counsel in
connection with the execution of this Agreement and Executive has had an opportunity to do so. Executive has read and understands
this Agreement, and has sought the advice of counsel to the extent he has determined appropriate.
- 17 9.14 Withholding of Compensation . Executive hereby agrees that the Company may deduct and withhold from the
compensation or other amounts payable to Executive hereunder or otherwise in connection with Executive’s employment any amounts
required to be deducted and withheld by the Company under the provisions of any applicable Federal, state and local statute, law,
regulation, ordinance or order.
9.15 References to Sections of the Code . All references in this Agreement and any Appendix hereto to sections of the Code shall
be to such sections and to any successor or substantially comparable sections of the Code or to any successor thereto.
9.16 Effect of Delay . Executive’s or the Company’s failure to insist upon strict compliance with any provision of this
Agreement or the failure to assert any right Executive or the Company may have hereunder, including without limitation the right of
Executive to terminate employment for Good Reason pursuant to Section 6.5, shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed this 29 th day of November, 2011,
and effective as of the Effective Date.
EXECUTIVE
THE COMPANY
PINNACLE ENTERTAINMENT, INC.
/s/ Daniel Boudreaux
/s/ Anthony M. Sanfilippo
By:
Its:
Anthony M. Sanfilippo
President & Chief Executive Officer
- 18 -
APPENDIX A
Daniel Boudreaux
1.
Severance Compensation under Section 6.5.2 of the Agreement : Upon termination of Executive’s employment by the Company
without Cause or by Executive for Good Reason other than in connection with a Change of Control pursuant to Section 6.5.2 of
the Agreement, and for so long as Executive does not compete with the Company or its Subsidiaries in the Gaming Business
following the date of termination of Executive’s employment for the period as set forth in Section 7.4 of the Agreement,
Executive shall be entitled to receive Executive’s then current salary for eighteen (18) months following the date of termination
of Executive’s employment (the “Base Severance Benefit”) payable in accordance with the Company’s regular salary payment
schedule from time to time. Executive shall have an affirmative obligation to mitigate the Base Severance Benefit and should
Executive compete with the Company or its Subsidiaries prior to the end of the Base Severance Benefit period, Executive shall
not be entitled to receive any additional payments from the Company or Company benefits described below with respect to
periods after the commencement of any such competitive activity or otherwise, and all such obligations shall be extinguished.
2.
Severance Compensation under Section 6.5.3 of the Agreement : Upon termination of Executive’s employment by the Company
without Cause or by Executive for Good Reason on or within eighteen (18) months after a Change of Control pursuant to
Section 6.5.3 of the Agreement, and provided that Executive does not compete with the Company or its Subsidiaries in the
Gaming Business for the period as set forth in Section 7.4 of the Agreement, Executive shall be entitled to receive Executive’s
then current salary for eighteen (18) months following the date of termination of Executive’s employment (the “Base Severance
Benefit”) payable in accordance with the Company’s regular salary payment schedule from time to time. Executive shall have
an affirmative obligation to mitigate the Base Severance Benefit and should Executive compete with the Company or its
Subsidiaries prior to the end of the Base Severance Benefit period, Executive shall not be entitled to receive any additional
payments from the Company or Company benefits described below with respect to periods after the commencement of any such
competitive activity or otherwise, and all such obligations shall be extinguished. In addition, all unvested Equity Grants,
including any unvested replacement Equity Grants that may have been granted to Executive to replace unvested Equity Grants
that expired by their terms in connection with a Change of Control, shall immediately become vested and may be exercised in
accordance with their terms and Section 6.6 hereof. To the extent that any unvested Equity Grants terminate by their terms at the
time of or in connection with a Change of Control and replacement Equity Grants of at least equivalent value are not granted to
Executive, the Executive shall receive as additional cash severance at the time of termination the consideration paid for the
securities underlying the unvested expired Equity Grants at the time of the Change of Control less, to the extent applicable,
(a) the exercise price or other consideration payable by Executive for the Equity Grants; and (b) the value of any replacement
Equity Grants realized by Executive through or as a result of such termination.
- 19 -
3.
Additional Severance Benefits Upon Termination by the Company Without Cause or by Executive For Good Reason under
Sections 6.5.2 or 6.5.3 of the Agreement : Provided that Executive does not compete with the Company or its Subsidiaries in the
Gaming Business for the period set forth in Section 7.4 of the Agreement, Executive shall also be entitled to receive health
benefits coverage for Executive and Executive’s dependents under the same plan(s) or arrangement(s) under which Executive
and Executive’s dependents were covered immediately before Executive’s termination (unless said plan(s) or arrangement(s) are
modified for all similarly situated executives) or plan(s) established or arrangement(s) provided by the Company or any of its
Subsidiaries thereafter for the benefit of similar executives (the “Health Coverage Continuation”) until the earlier of (i) the
period of time to which Executive is entitled to severance compensation (the Base Severance Benefit period set forth above in
paragraphs 1 or 2, as applicable); or (ii) the date Executive (and in the case of Executive’s dependents, the dependents) becomes
covered or eligible for coverage under any other group health plan 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 this paragraph shall continue (but not beyond the periods described in clauses (i)
and (ii) of this sentence) with respect to such pre-existing condition until such exclusion under such other group health plan
lapses or expires. Executive is required to make a timely 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 paragraph,
and the obligations of the Company and its Subsidiaries under this paragraph shall be conditioned upon Executive timely
making such an election. To effectuate Executive’s Health Coverage Continuation, the Company shall pay Executive’s COBRA
premiums until the earlier of: (i) the period of time to which Executive is entitled to severance compensation (the Base
Severance Benefit period set forth in paragraph 1 or 2 above, as applicable); or (ii) the date Executive (and in the case of
Executive’s dependents, the dependents) becomes covered or eligible for coverage under any other group health plan not
maintained by the Company or any of its Subsidiaries. Any payment or reimbursement of benefits under this paragraph that is
taxable to Executive or Executive’s dependents shall be made by December 31 of the calendar year following the calendar year
in which Executive or Executive’s 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.
- 20 APPENDIX B
RELEASE and RESIGNATION
For valuable consideration, receipt of which is hereby acknowledged, the undersigned Daniel Boudreaux (“Executive”), for
Executive and Executive’s spouse, heirs, estate, administrators and executors, hereby fully and forever releases and discharges
Pinnacle Entertainment, Inc., a Delaware corporation (the “Company”), and each of its subsidiaries and the officers, directors,
employees, attorneys and agents of the Company and each such subsidiary, of and from any and all claims, demands, causes of action
of any kind or nature, in law, equity or otherwise, whether known or unknown, which Executive has had, may have had, or now has,
or may have, arising out of or in connection with Executive’s employment with the Company and/or its subsidiaries or the termination
of such employment; provided, however, that nothing contained herein is intended to nor shall constitute a release of the Company
from any obligations it may have to Executive under any written employment agreement between Executive and the Company in
effect as of the date hereof, or any deferred compensation plan or arrangement in which Executive participates or any rights of
indemnification under the Company’s Articles, Bylaws, Indemnity Trust Agreement or the like, or coverage under Director and
Officer Insurance, nor shall it prevent Executive from exercising Executive’s rights, if any, under any such employment agreement or
under any stock option, restricted stock or similar agreement in effect as of the date hereof in accordance with their terms.
Executive represents and warrants that Executive has not assigned or in any way conveyed, transferred or encumbered all or any
portion of the claims or rights covered by this release.
Executive hereby resigns from all positions as an officer, director or employee of the Company and each of its subsidiaries or
affiliates effective the date hereof and further agrees to execute such further evidence of such resignations as may be necessary or
appropriate to effectuate the foregoing.
Executed this _____ day of _____, 20__.
Executive
Exhibit 10.27
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (“Amendment”) is made this 14 th day of December, 2011,
effective as of the January 1, 2012, by and between PINNACLE ENTERTAINMENT, INC. , a Delaware corporation (the
“Company”), and Daniel P. Boudreaux , an individual (“Executive”), with respect to the following facts and circumstances:
RECITALS
The Company and Executive entered into an Employment Agreement on November 29, 2011, effective November 15, 2011 (the
“Agreement”) with Executive having a base salary of Three Hundred Twenty-Four Thousand Dollars ($324,000) per year.
On December 9, 2011, the Compensation Committee of the Board of Directors of the Company increased the Executive’s base
salary to Three Hundred Forty-Eight Thousand Dollars ($348,000) per year, effective January 1, 2012.
The Company and Executive desire to amend the Agreement to reflect Executive’s new salary.
NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements set forth herein, the parties hereto
agree as follows:
AMENDMENT
1. Article 3, Section 3.1 of the Agreement (Compensation) is hereby deleted in its entirety and replaced with the following new
Article 3, Section 3.1:
“3.1 Base Salary . In consideration for Executive’s services hereunder, the Company shall pay Executive an annual base salary at
the rate of Three Hundred Forty-Eight Thousand Dollars ($348,000.00) 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).”
2. Except as modified herein, all other terms of the Agreement shall remain in full force and effect. In the event of a conflict
between the terms of the Agreement and this Amendment, the terms of this Amendment shall apply. No modification may be made to
the Agreement or this Amendment except in writing and signed by both the Company and Executive.
-1IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed this 14 th day of December, 2011
and effective as of January 1, 2012.
EXECUTIVE
PINNACLE ENTERTAINMENT, INC.
/s/ Daniel P. Boudreaux
By:
Daniel P. Boudreaux
/s/ John A. Godfrey
John A. Godfrey, Executive Vice President,
General Counsel and Secretary
-2-
Exhibit 10.28
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made effective this 15th day of November, 2011, by and between
PINNACLE ENTERTAINMENT, INC., a Delaware corporation (the “Company”), and VIRGINIA E. SHANKS, an individual
(“Executive”), with respect to the following facts and circumstances:
RECITALS
The Company is currently employing Executive as its Executive Vice President and Chief Marketing Officer.
The Company wishes to continue to employ Executive as Executive Vice President and Chief Marketing Officer of the Company
and Executive is willing to assume such position, in each case on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements set forth herein, the Company and
Executive agree as follows:
ARTICLE 1.
EMPLOYMENT AND TERM
1.1 Employment . The Company agrees to continue to engage Executive in the capacity as Executive Vice President and Chief
Marketing Officer 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 on November 15, 2011 and, unless earlier terminated under Article 6
below, shall continue in force until November 14, 2014 (the “Initial Term”); provided that commencing on July 13, 2014 and as of
July 13 of each year hereafter (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 one hundred twenty (120) days prior to the next Renewal
Date. The Term of this Agreement, including any Renewal Periods, is referred to as the “Term.”
ARTICLE 2.
DUTIES OF EXECUTIVE
2.1 Duties . Executive shall perform all the duties and obligations generally associated with the position of Executive Vice
President and Chief Marketing Officer subject to the control and supervision of the Company’s Chief Executive Officer, and such
other executive duties consistent with the foregoing as may be assigned to her from time to time by the Company. Executive shall
perform the services contemplated herein faithfully, diligently, to the best of her 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 her authority, shall to the best of her 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 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 she will be
required to travel to the Company’s various operations as part of her employment.
2.3 Exclusive Service . Except as otherwise expressly provided herein, Executive shall devote her 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 international in scope and that
accordingly this covenant shall apply throughout the United States and in Asia. With the prior approval of the Board of Directors
(which approval may subsequently be revoked by the Board in its discretion) Executive may serve on boards of charitable and not for
profit organizations so long as such activities, individually or in the aggregate do not materially interfere with Executive’s duties
hereunder.
ARTICLE 3.
COMPENSATION
3.1 Base Salary . In consideration for Executive’s services hereunder, the Company shall pay Executive an annual base salary at
the rate of Four Hundred Fifty Thousand Dollars ($450,000.00) 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).
-23.2 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, with a targeted bonus of Eighty Percent (80%) of Executive’s base salary, determined
under the Company’s Annual Performance Based Plan for Executive Officers, or any successor Plan (the “Bonus Plan”). Any such
Bonus shall be structured to comply with Section 162(m) of the Internal Revenue Code unless otherwise determined by the
Compensation Committee and shall be based on performance criteria developed by the Compensation Committee. Any such bonus
shall be subject to (i) the Executive being employed by the Company on the day after the end of the Company’s fiscal year or such
later date as the Bonus Plan shall specify; and (ii) the Company’s Policy on Recovery of Incentive Compensation in Event of Financial
Restatement attached as Appendix A hereto and any other similar policies. Bonuses relative to partial years shall be prorated.
Executive may also receive special bonuses in addition to her annual bonus eligibility at the discretion of the Board of Directors or the
Compensation Committee; it being understood that there is no entitlement thereto hereunder. Any bonuses paid hereunder shall be
paid, in the Company’s discretion, in cash and/or restricted stock; provided, however, that Executive’s allocation of cash and restricted
stock shall be the same as that of other senior executive officers for the year.
3.3 Equity Awards . The Company may grant to Executive options or other equity compensation pursuant to, and subject to the
terms and conditions of, the then current equity compensation plan of the Company. The Company’s Compensation Committee shall
set the amount and terms of such options or other equity compensation.
ARTICLE 4.
EXECUTIVE BENEFITS
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 (4) weeks
vacation each calendar year, without reduction in compensation. Vacation expense will not accrue and unused vacation time will not
accrue for severance purposes.
4.2 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, paid sick leave and fully eligible participation in deferred compensation plans. The Company shall
provide Executive coverage for those benefit items made generally available to its senior level executive employees that are not
currently covered under Executive’s plan through her previous employer (e.g. short and long-term disability and so forth) on the same
terms provided to its other senior level executive employees.
4.3 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 her acts while an officer of the Company. In addition, the Company shall cause Executive to be covered by the
Company’s policies of directors and officers liability insurance in effect from time to time in accordance with their terms, to the
maximum extent of the coverage available for any officer of the Company. 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 “tail” coverage under
the officers liability insurance in effect at the time of such merger or acquisition.
-3-
ARTICLE 5.
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 her 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.
ARTICLE 6.
TERMINATION
6.1 Termination for Cause . Without limiting the generality of Section 6.3, 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 her employment under this
Agreement in a professional and businesslike manner, other than due to her Disability (unless such Disability is due to substance or
alcohol abuse), after having received thirty (30) days 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 her fiduciary duty to the Company.
6.1.3 Wrongful Acts . If Executive is convicted of a felony or misdemeanor 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 her employment by the Company materially detrimental to the Company.
-46.1.4 Failure To Be Licensed or Approved by the Company’s Compliance Committee . Executive shall promptly,
accurately and truthfully complete all forms provided by the Company’s Compliance Committee and shall fully cooperate in any
background investigation conducted pursuant to the Company’s Compliance Program. Executive shall also promptly apply for all
applicable gaming licenses, if required, to the extent Executive is not already licensed or on file as of the date hereof. If Executive fails
to be recommended for approval and retention by the Compliance Committee or 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, or if the Company is directed to cease business with Executive by any
governmental authority; or if the Company determines in its reasonable judgment that Executive was or might be involved in, or is
about to be involved in, any activity, relationship(s) or circumstance which could or does jeopardize the Company’s business,
reputation or any of such licenses; or any of the Company’s licenses is threatened to be, or is, denied, curtailed, suspended or revoked
as a result of Executive’s employment by the Company or as a result of her actions, then the Company may by thirty (30) days 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 Death or Disability . This Agreement shall terminate on the death or “Disability” of Executive. Executive will be deemed to
have a “Disability” when she 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 substantially continuous period of not
less than 180 days, 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 six (6) 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 designated by the Clark County Medical Association or similar body. The certification of such a physician or psychiatrist
as to the questioned dispute shall be final and binding upon the parties hereto.
6.3 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 thirty (30) days written 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.
-56.4 Termination by Executive for Good Reason . Executive may terminate her 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 (i) a material breach of this Agreement by the Company (including without limitation the assignment to Executive of
duties materially inconsistent with her status as Chief Marketing Officer of the Company), or any material reduction in the authority,
duties or responsibilities of Executive; (ii) any relocation of her or its principal place of business outside the greater Las Vegas
metropolitan area (without Executive’s consent); (iii) a material reduction by the Company in Executive’s then Base Salary or Bonus
targets, a material reduction in other benefits (except as such benefits may be changed or reduced for other senior executives), or the
failure by the Company to pay Executive any material portion of her current compensation when due; or (iv) following a Change in
Control, (A) the failure of any acquiring or successor company, or, if the acquiring or successor company is a subsidiary of another
company, the failure of the highest-level parent of the acquiring or successor company, to enter into an agreement naming Executive
as the Chief Marketing Officer of the acquiring or successor company, or of the highest-level parent, as the case may be; or
(B) Executive’s termination for Good Reason from the Company and any parent entity or termination without cause by the Company
and any parent entity within eighteen (18) months of a Change in Control. Notwithstanding the foregoing, except with respect to a
termination by Executive following a Change in Control, Executive’s resignation shall not be treated as a resignation for Good Reason
unless (a) Executive notifies the Company (including any acquiring and/or successor company) in writing of a condition constituting
Good Reason within thirty (30) days following Executive’s becoming aware of such condition; (b) the Company fails to remedy such
condition within thirty (30) days following such written notice (the “ Remedy Period ”); and (c) Executive resigns within thirty
(30) days following the expiration of the Remedy Period. Further, in the event that Executive resigns for Good Reason and within two
years from such date accepts employment with the Company, any acquirer or successor to the Company’s business or any affiliate,
parent, or subsidiary of either the Company or its successor, then Executive will forfeit any right to severance payments hereunder and
will reimburse the Company for the full amount of such payments received by Executive within thirty (30) days of accepting such
employment.
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 election under such plan, and, except in the case of Termination for Cause, as
additional severance and notwithstanding the provisions of Section 3.2 hereof, a prorated bonus for the year of termination. Such
prorated bonus shall be determined and paid as follows: (a) First, the performance criteria shall be applied to the entire year of
termination to determine the bonus that Executive would have received for the entire year if her employment had not terminated,
(b) Second, amount determined under clause (a) of this sentence shall be multiplied by a fraction, the numerator of which is the
number of days in the year before the date of the termination of Executive’s employment and the denominator of which is three
hundred sixty five (365), to determine the amount of the prorated bonus, and (c) Third, the prorated bonus shall be paid at the times
-6and in the form specified when the Compensation Committee determined the performance criteria for the year, or, if no such time was
then specified, within ninety (90) days after the end of the year in which the termination of employment occurred. If at the
Termination Date, Executive shall have satisfied all the requirements to earn an annual bonus relative to the calendar year immediately
preceding the Termination Date but such bonus has not yet been paid, then except in the case of a Termination for Cause, such bonus
shall be paid to Executive at the same time such bonus was otherwise scheduled to have been paid. In addition, promptly upon
submission by Executive of her 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 for “Cause,” or by the Executive without “Good
Reason”, Executive shall not be entitled to receive any payments other than as specified in this Section 6.5.1. Termination by the
Company for Cause shall be in addition to and without prejudice to any other right or remedy that the Company may be entitled to at
law, in equity, or under this Agreement.
6.5.2 Termination Without Cause or Termination by Executive for Good Reason Other than in Connection with a Change
of Control or due to Death or Disability . 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 6.5.3, or due to death or disability, the
following shall apply (but, except as provided in Section 9.2 hereof, only clause (b) hereof in the case of death or disability):
(a)
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 (as hereinafter defined). The Bonus Amount shall equal the average annual bonus paid to Executive in
the three years prior to termination (or such shorter period, during which Executive is employed); provided,
however, for purposes of calculating the Bonus Amount, any bonus paid to Executive for any period less than a
full calendar year shall be annualized. 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. The Bonus Amount shall be paid in two equal
annual installments on the first and second anniversaries of the termination of employment. In addition,
Executive shall be entitled to receive any amounts payable under Section 6.5.1 above. 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.
-7-
(b)
Executive shall also be entitled to receive health benefits coverage for Executive and her dependents, and
disability insurance coverage for Executive, under the same plan(s) or arrangement(s) under which Executive
and her dependents were covered immediately before her 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 (the “Health and Disability Coverage Continuation”) until the earliest of (i) eighteen (18) months;
and (ii) the date Executive (and in the case of her 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 this
Section 6.5.2 shall continue (but not beyond the period described in clause (i) of this sentence) with respect to
such pre-existing condition until such exclusion under such other group health plan lapses or expires. Executive
or her dependents, as the case may be, shall pay any applicable premiums or other required payments for their
health coverage on the same basis as other senior executives of the Company. 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, the
obligations of the Company and its Subsidiaries under this Section 6.5.2 shall be conditioned upon Executive’s
timely making such an election. Nothing contained herein shall prevent Executive or her dependents from
securing continued coverage under COBRA at their own expense to the extent permitted by COBRA or
otherwise applicable law. Any payment or reimbursement of benefits under this Section 6.5.2 that is taxable to
Executive or her dependents shall be made by December 31 of the calendar year following the calendar year in
which Executive or her 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.
(c)
Any outstanding unvested stock options, restricted stock or restricted stock units (collectively “Equity Grants”)
at the date of termination which would otherwise vest during the twelve (12) months following termination
shall immediately become vested and may be exercised in accordance with their terms for the period provided
in Section 6.6. The remaining unvested Equity Grants shall immediately terminate.
-8-
6.5.3 Termination Without Cause or Termination by Executive for Good Reason in Connection With or Within the
Eighteen (18) Months After a Change of Control. If the Company terminates Executive without Cause or Executive terminates for
Good Reason in connection with or within eighteen (18) months after a Change of Control, the following shall apply:
(a)
The Company shall pay to Executive in lieu of the Base Severance Benefit, in a lump sum as soon as
practicable, but in no event later than thirty (30) days after the termination of Executive’s employment, (i) an
amount (the “Change of Control Severance Benefit”) equal to one hundred fifty percent (150%) of the sum of
Executive’s annual base salary in effect on the date of termination and the Bonus Amount, plus (ii) any amounts
payable under Section 6.5.1. In addition, Executive shall also be entitled to receive continuation of health and
disability insurance coverage as specified in Section 6.5.2(b) and all unvested Equity Grants, including any
unvested replacement Equity Grants that may have been granted to Executive to replace unvested Equity Grants
that expired by their terms in connection with a Change of Control, shall immediately become vested and may
be exercised in accordance with their terms and Section 6.6 hereof. To the extent that any unvested Equity
Grants terminate by their terms at the time of or in connection with a Change of Control and replacement
Equity Grants of at least equivalent value are not granted to Executive, the Executive shall receive as additional
cash severance at the time of termination the consideration paid for the securities underlying the unvested
expired Equity Grants at the time of the Change of Control less, to the extent applicable, (a) the exercise price
or other consideration payable by Executive for the Equity Grants; and (b) the value of any replacement Equity
Grants realized by Executive through or as a result of such termination.
(b)
For purposes of this Agreement, a “Change of Control” shall mean the occurrence of any of the following:
(i)
(ii)
(iii)
The direct or indirect acquisition by an unrelated “Person” or “Group” or “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;
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;
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
-9-
(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.
None of the foregoing events, however, shall constitute a Change of Control if such event is not a “Change in Control Event”
under Treasury Regulation 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 shall 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 “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.
6.5.4 I.R.C. Section 409A . (a) The compensation arrangements under this Agreement are intended to comply with, or be
exempt from, Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated
thereunder (collectively “Code Section 409A”), and will be interpreted in a manner intended to comply with, or be exempt from, Code
Section 409A. If any payment of money or other benefits due to the Executive hereunder could cause the application of an accelerated
or additional tax under Code Section 409A (a “409A Tax”), the Company, in its sole discretion, may decide such payments or other
benefits shall be restructured, to the extent possible, in a manner, determined by the Company, that does not cause such 409A Tax;
provided, however, neither the Company, nor its respective officers, employees and/or representatives, shall have any liability to the
- 10 Executive with respect to any such determination, or any such taxes, interest or penalties, or liability for any other alleged damages
related thereto. (b) In the event that any compensation with respect to Executive’s separation from service is “deferred compensation”
within the meaning of Code Section 409A, the stock of the Company or any affiliate is publicly traded on an established securities
market or otherwise, and Executive is determined to be a “specified employee,” as defined in Section 409A(a)(2)(B)(i) of the Code,
payment of such compensation shall be delayed as required by Code Section 409A. Such delay shall last six (6) months from the date
of Executive’s separation from service, except in the event of Executive’s death. Within thirty (30) days following the end of such
six-month period, or, if earlier, Executive’s death, the Company will make a catch-up payment to Executive equal to the total amount
of such payments that would have been made during the six-month period but for this Section 6.5.4. Whenever 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. Payments of compensation or benefits on Executive’s termination of employment (other than accrued salary and other
accrued amounts that must be paid under applicable law, and “welfare benefits” specified in Treasury Regulations Section
1.409A-1(a)(5)) shall be paid only if and when the termination of employment constitutes a “separation from service” under Treasury
Regulation Section 1.409A-1(h).
6.5.5 Suspension . In lieu of terminating Executive’s employment hereunder for Cause under Section 6.1, the Company
shall have the right, at its sole election, to suspend the performance of duties by Executive under this Agreement during the
continuance of events or circumstances under Section 6.1 for an aggregate of not more than thirty (30) days during the Term (the
“Default Period”) by giving Executive written notice of the Company’s election to do so at any time during the Default Period. The
Company shall have the right to extend the Term beyond its normal expiration date by the period(s) of any suspension(s). The
Company’s exercise of its right to suspend the operation of this Agreement shall not preclude the Company from subsequently
terminating Executive’s employment hereunder; provided nothing herein shall eliminate the Company’s obligation to provide required
written notice, or prevent Executive from having the opportunity to cure any defect raised in such notice, to the extent applicable
under the relevant subsection of Section 6.1. Executive shall not render services to any other person, firm or corporation in the casino
business during any period of suspension. Executive shall be entitled to continued compensation and benefits pursuant to the
provisions of this Agreement during the Default Period.
6.6 Exercisability of Equity Grants . All vested Equity Grants will terminate on the earlier of (a) the expiration of their stated
terms or (b) one (1) year after the termination of Executive’s employment with the Company, regardless of the cause of such
termination, except that, in the event of a termination for “Cause” or Executive’s termination without Good Reason, all vested Equity
Grants will terminate on the earlier of (I) the expiration of the stated term, or (II) thirty (30) days after the termination. As provided in
the Equity Grant agreements, unvested Equity Grants will terminate on the termination of Executive’s continuous status as an
employee, director, or consultant with the Company, except to the extent that such Equity Grants become vested as a result of such
termination under the terms of the governing Equity Grant agreement or this Agreement.
- 11 6.7 No-Exclusivity of Rights . Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in
any plan, program, policy or practice provided by the Company or its subsidiaries and for which the Executive may qualify, nor shall
anything herein limit or otherwise affect such rights as Executive may have under any other contract or agreement with the Company
or its subsidiaries at or subsequent to the Date of Termination (“Other Benefits”), which such Other Benefits shall be payable in
accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Agreement.
Notwithstanding the foregoing, if Executive receives payments and benefits pursuant to Article VI of this Agreement, Executive shall
not be entitled to any severance pay or benefits under any severance plan, program or policy of the Company and its subsidiaries,
unless otherwise specifically provided therein in a specific reference in or to this Agreement.
6.8 Full Settlement . Except as expressly provided for herein, in no event shall Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not Executive obtains other employment.
6.9 Release . It shall be a condition for Executive’s right to receive any severance benefits hereunder that she execute a general
release in favor of the Company and its affiliates in the form as attached hereto as Appendix B and covering such additional matters as
may be reasonably requested by the Company, which release shall not encompass the payments contemplated hereby. The timing of
payments under this Agreement upon the execution of the general release shall be governed by the following provisions:
(a)
The Company must deliver the release to Executive for execution no later than fourteen (14) days after
Executive’s termination of employment. If the Company fails to deliver the release to Executive within such
fourteen (14) day period, Executive will be deemed to have satisfied the release requirement and will receive
payments conditioned on execution of the release as though Executive had executed the release and all
revocation rights had lapsed at the end of such fourteen (14) day period.
(b)
Executive must execute the release within forty-five (45) days from its delivery to her.
(c)
If Executive has revocation rights, Executive shall exercise such rights, if at all, not later than seven (7) days
after executing the release.
(d)
In any case in which the release (and the expiration of any revocation rights) could only become effective in a
particular tax year of Executive, payments conditioned on execution of the release shall begin within twenty
(20) days after the release becomes effective and revocation rights have lapsed.
(e)
In any case in which the release (and the expiration of any revocation rights) could become effective in one of
two taxable years of Executive depending on when Executive executes the release, payments conditioned on
execution of the release shall not begin before the first business day of the later of such tax years.
- 12 -
6.10 Excise Tax Limitation.
6.10.1 Notwithstanding anything contained in this Agreement to the contrary, (i) in the event that any payment or benefit
(within the meaning of Section 280G(b)(2) of the Code) to be paid or made payable to Executive or for Executive’s benefit pursuant to
the terms of this Agreement or otherwise in connection with, or arising out of, Executive’s employment with the Company or any of
its Subsidiaries on a “change of control” within the meaning of Section 280G of the Code (a “Payment” or “Payments”) would be
subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), and (ii) (A) the net amount of the Payments
Executive would retain after payment of the Excise Tax and federal and state income taxes on the Payments would be less than (B) the
net amount of the Payments Executive would retain, after payment of the Excise Tax and federal and state income taxes on the
Payments, if the Payments were reduced to the extent necessary that no portion of the Payments would be subject to the Excise Tax
(the “Section 4999 Limit”), then the Payments shall be reduced (but not below zero) to the Section 4999 Limit. Unless Executive shall
have given prior written notice specifying a different order to the Company to effectuate the limitations described in the preceding
sentence, the Company shall reduce or eliminate the Payments by first reducing or eliminating those Payments or benefits which are
not payable in cash and then by reducing or eliminating cash Payments, in each case in reverse order beginning with payments or
benefits which are to be paid the farthest in time from the Determination (as hereinafter defined). Any notice given by Executive
pursuant to the preceding sentence shall take precedence over the provisions of any other Agreement, arrangement or agreement
governing Executive’s rights and entitlements to any benefits or compensation. For purposes of the calculations described above, it
shall be assumed that Executive’s tax rate will be the maximum marginal federal and state income tax rate on earned income.
6.10.2 All determinations required to be made under this Section 6.10 (each, a “Determination”) shall be made, at the
Company’s expense, by the accounting firm which is the Company’s accounting firm prior to a “change of control” (within the
meaning of Section 280G of the Code) or another nationally recognized accounting firm designated by the Board (or a committee
thereof) prior to the change of control (the “Accounting Firm”). The Accounting Firm shall provide its calculations, together with
detailed supporting documentation, both to the Company and to Executive before payment of Executive’s Severance Payment
hereunder (if requested at that time by the Company or Executive) or such other time as requested by the Company or Executive (in
either case provided that the Company or Executive believes in good faith that any of the Payments may be subject to the Excise Tax).
Within ten (10) calendar days of the delivery of the Determination to Executive, Executive shall have the right to dispute the
Determination (the “Dispute”). The existence of any Dispute shall not in any way affect Executive’s right to receive the Payments in
accordance with the Determination. If there is no Dispute, the Determination by the Accounting Firm shall be final, binding and
conclusive upon the Company and Executive, subject to the application of Section 6.10.3.
- 13 6.10.3 As a result of the uncertainty in the application of Sections 4999 and 280G of the Code, it is possible that the
Payments either will have been made or will not have been made by the Company, in either case in a manner inconsistent with the
limitations provided in Section 6.10.1 (an “Excess Payment” or “Underpayment”, respectively). If it is established pursuant to (i) a
final determination of a court for which all appeals have been taken and finally resolved or the time for all appeals has expired, or
(ii) an Internal Revenue Service (the “IRS”) proceeding which has been finally and conclusively resolved, that an Excess Payment has
been made, such Excess Payment shall be deemed for all purposes to be a loan to Executive made on the date Executive received the
Excess Payment and Executive shall repay the Excess Payment to the Company on demand, together with interest on the Excess
Payment at one hundred twenty percent (120%) of the applicable federal rate (as defined in Section 1274(d) of the Code) compounded
semi-annually from the date of Executive’s receipt of such Excess Payment until the date of such repayment. If it is determined (i) by
the Accounting Firm, the Company (which shall include the position taken by the Company, together with its consolidated group, on
its federal income tax return) or the IRS, (ii) pursuant to a determination by a court, or (iii) upon the resolution to Executive’s
satisfaction of the Dispute, that an Underpayment has occurred, the Company shall pay an amount equal to the Underpayment to
Executive within ten (10) calendar days of such determination or resolution, together with interest on such amount at one hundred
twenty percent (120%) of the applicable federal rate compounded semi-annually from the date such amount should have been paid to
Executive pursuant to the terms of this Agreement or otherwise, but for the operation of this Section 6.10.3, until the date of payment.
ARTICLE 7.
CONFIDENTIALITY
7.1 Nondisclosure of Confidential Material . In the performance of her duties, Executive may have access to confidential records,
including, but not limited to, development, marketing, organizational, financial, managerial, administrative and sales information,
data, specifications and processes presently owned or at any time hereafter developed or used by the Company or its agents or
consultants that is not otherwise part of the public domain (collectively, the “Confidential Material”). All such Confidential Material is
considered secret and is disclosed to Executive in confidence. Executive acknowledges that the Confidential Material constitutes
proprietary information of the Company which draws independent economic value, actual or potential, from not being generally
known to the public or to other persons who could obtain economic value from its disclosure or use, and that the Company has taken
efforts reasonable under the circumstances, of which this Section 7.1 is an example, to maintain its secrecy. Except in the performance
of her duties to the Company or as required by a court order or any gaming regulator or as required for her personal tax or legal
advisors to advise her, Executive shall not, directly or indirectly for any reason whatsoever, disclose, divulge, communicate, use or
otherwise disclose any such Confidential Material, unless such Confidential Material ceases to be confidential because it has become
part of the public domain (not due to a breach by Executive of her obligations hereunder). Executive shall also take all reasonable
actions appropriate to maintain the secrecy of all Confidential Information. All records, lists, memoranda, correspondence, reports,
manuals, files, drawings, documents, equipment, and other tangible items (including computer software), wherever located,
incorporating the Confidential Material, which Executive shall prepare, use or encounter, shall be and remain the Company’s sole and
exclusive property and shall be included in the Confidential Material. Upon termination of this Agreement, or whenever requested by
the Company, Executive shall promptly deliver to the Company any and all of the Confidential Material, not previously delivered to
the Company, that is in the possession or under the control of Executive.
- 14 7.2 Assignment of Intellectual Property Rights . Any ideas, processes, know-how, copyrightable works, maskworks, trade or
service marks, trade secrets, inventions, developments, discoveries, improvements and other matters that may be protected by
intellectual property rights, that relate to the Company’s business and are the results of Executive’s efforts during the Term
(collectively, the “Executive Work Product”), whether conceived or developed alone or with others, and whether or not conceived
during the regular working hours of the Company, shall be deemed works made for hire and are the property of the Company. In the
event that for whatever reason such Executive Work Product shall not be deemed a work made for hire, Executive agrees that such
Executive Work Product shall become the sole and exclusive property of the Company, and Executive hereby assigns to the Company
her entire right, title and interest in and to each and every patent, copyright, trade or service mark (including any attendant goodwill),
trade secret or other intellectual property right embodied in Executive Work Product. The Company shall also have the right, in its
sole discretion to keep any and all of Executive Work Product as the Company’s Confidential Material. The foregoing work made for
hire and assignment provisions are and shall be in consideration of this agreement of employment by the Company, and no further
consideration is or shall be provided to Executive by the Company with respect to these provisions. Executive agrees to execute any
assignment documents the Company may require confirming the Company’s ownership of any of Executive Work Product. Executive
also waives any and all moral rights with respect to any such works, including without limitation any and all rights of identification of
authorship and/or rights of approval, restriction or limitation on use or subsequent modifications. Executive promptly will disclose to
the Company any Executive Work Product.
7.3 No Unfair Competition After Termination of Agreement . Executive hereby acknowledges that the sale or unauthorized use
or disclosure of any of the Company’s Confidential Material obtained by Executive by any means whatsoever, at any time before,
during or after the Term shall constitute unfair competition. Executive shall not engage in any unfair competition with the Company
either during the Term or at any time thereafter.
7.4 Covenant Not to Compete . In the event this Agreement is terminated by the Company or by Executive, for a reason other
than one specified in Section 6.2 above or the expiration of the Initial Term or any Renewal Term without this Agreement being
renewed, then for a period of one year after the effective date of such termination (but only six (6) months in the case of an entity
whose only competitive relationship with the Company is in the market in which the Company has its principal place of business but
does not also own or manage a casino), Executive shall not, directly or indirectly, work for or provide services to or own an equity
interest (except for a Permissible Investment) in any person, firm or entity engaged (directly or indirectly or through an investment in
another entity) in the casino, gaming, card club or horseracing business which competes against the Company in any “market” in
which the Company has its principal place of business or in which the Company owns (in whole or in part, directly or through an
investment in another entity) or operates a casino, card club or horseracing facility. For purposes of this Agreement, “market” shall be
defined as the area within a 100 mile radius of the Company’s principal place of business or of any casino, card club or horseracing
facility owned (in whole or in part, directly or through an investment in another entity) or operated or under construction by the
Company.
- 15 7.5 No Hire Away Policy . In the event this Agreement is terminated prior to the normal expiration of the Term, either by the
Company, or by Executive, for any reason, then for a period of one (1) year after the effective date of such termination, Executive
shall not, directly or indirectly, for herself or on behalf of any entity with which she is affiliated or employed, hire any person known
to Executive to be an employee of the Company or any of its subsidiaries (or any person known to Executive to have been such an
employee within six (6) months prior to such occurrence). Executive shall not be deemed to hire any such person so long as she did
not directly or indirectly engage in or encourage such hiring.
7.6 No Solicitation . During the Term and for a period of one (1) year thereafter, or, if sooner, for a period of one (1) year after
earlier termination of this Agreement prior to expiration of the Term, and regardless of the reason for such termination (whether by the
Company or Executive), Executive shall not directly or indirectly, for herself or on behalf of any entity with which she is affiliated or
employed, solicit any employee of the Company or any of its subsidiaries (or any person who was such an employee within six
(6) months prior to such occurrence) or encourage any such employee to leave the employment of the Company or any of its
subsidiaries.
7.7 Non-Solicitation of Customers . During the Term and for a period of one (1) year thereafter, or, if sooner, for a period of one
(1) year after the earlier termination of this Agreement prior to the expiration of the Term, and regardless of the reason for such
termination (whether by the Company or Executive), Executive shall not solicit any customers of the Company or its subsidiaries or
any of their respective casinos or card clubs, or knowingly encourage any such customers to leave the Company’s casinos or card
clubs or knowingly encourage any such customers to use the facilities or services of any competitor of the Company or its
subsidiaries. Executive shall at no times use proprietary customer lists or Confidential Material to solicit customers.
7.8 Irreparable Injury . The promised service of Executive under this Agreement and the other promises of this Article 7 are of
special, unique, unusual, extraordinary, or intellectual character, which gives them peculiar value, the loss of which cannot be
reasonably or adequately compensated in damages in an action at law.
7.9 Remedies for Breach . Executive agrees that money damages will not be a sufficient remedy for any breach of the obligations
under this Article 7 and Article 2 hereof and that the Company shall be entitled to injunctive relief (which shall include, but not be
limited to, restraining Executive from directly or indirectly working for or having an ownership interest (except for a Permissible
Investment) in any person engaged in the casino, gaming or horseracing businesses in any market which the Company or its affiliates
owns or operates any such business, using or disclosing the Confidential Material) and to specific performance as remedies for any
such breach. Executive agrees that the Company shall be entitled to such relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions, without the necessity of proving actual damages and without the necessity of posting a bond or
making any undertaking in connection therewith. Any such requirement of a bond or undertaking is hereby waived by Executive and
Executive acknowledges that in the absence of such a waiver, a bond or undertaking might otherwise be required by the court. Such
remedies shall not be deemed to be the exclusive remedies for any breach of the obligations in this Article 7, but shall be in addition to
all other remedies available at law or in equity.
- 16 ARTICLE 8.
ARBITRATION
8.1 General . Except for a claim for injunctive relief under Section 7.9, any controversy, dispute, or claim between the parties to
this Agreement, including any claim arising out of, in connection with, or in relation to the formation, interpretation, performance or
breach of this Agreement shall be settled exclusively by arbitration, before a single arbitrator, in accordance with this Article 8 and the
then most applicable rules of the American Arbitration Association. Judgment upon any award rendered by the arbitrator may be
entered by any state or federal court having jurisdiction thereof. Such arbitration shall be administered by the American Arbitration
Association. Arbitration shall be the exclusive remedy for determining any such dispute, regardless of its nature. Notwithstanding the
foregoing, either party may in an appropriate matter apply to a court for provisional relief, including a temporary restraining order or a
preliminary injunction, on the ground that the award to which the applicant may be entitled in arbitration may be rendered ineffectual
without provisional relief. Unless mutually agreed by the parties otherwise, any arbitration shall take place in Las Vegas, Nevada.
8.2 Selection of Arbitrator . In the event the parties are unable to agree upon an arbitrator, the parties shall select a single
arbitrator from a list of nine arbitrators drawn by the parties at random from the “Independent” (or “Gold Card”) list of retired judges
or, at the option of Executive, from a list of nine persons (which shall be retired judges or corporate or litigation attorneys experienced
in executive employment agreements) provided by the office of the American Arbitration Association having jurisdiction over Las
Vegas, Nevada. If the parties are unable to agree upon an arbitrator from the list so drawn, then the parties shall each strike names
alternately from the list, with the first to strike being determined by lot. After each party has used four strikes, the remaining name on
the list shall be the arbitrator. If such person is unable to serve for any reason, the parties shall repeat this process until an arbitrator is
selected.
8.3 Applicability of Arbitration; Remedial Authority . This agreement to resolve any disputes by binding arbitration shall extend
to claims against any parent, subsidiary or affiliate of each party, and, when acting within such capacity, any officer, director,
stockholder, employee or agent of each party, or of any of the above, and shall apply as well to claims arising out of state and federal
statutes and local ordinances as well as to claims arising under the common law. In the event of a dispute subject to this paragraph the
parties shall be entitled to reasonable discovery subject to the discretion of the arbitrator. The remedial authority of the arbitrator
(which shall include the right to grant injunctive or other equitable relief) shall be the same as, but no greater than, would be the
remedial power of a court having jurisdiction over the parties and their dispute. The arbitrator shall, upon an appropriate motion,
dismiss any claim without an evidentiary hearing if the party bringing the motion establishes that he or it would be entitled to
summary judgment if the matter had been pursued in court litigation. In the event of a conflict between the applicable rules of the
American Arbitration Association and these procedures, the provisions of these procedures shall govern.
- 17 8.4 Fees and Costs . Any filing or administrative fees shall be borne initially by the party requesting arbitration. The Company
shall be responsible for the costs and fees of the arbitration, unless Executive wishes to contribute (up to 50%) of the costs and fees of
the arbitration. Notwithstanding the foregoing, the prevailing party in such arbitration, as determined by the arbitrator, and in any
enforcement or other court proceedings, shall be entitled, to the extent permitted by law, to reimbursement from the other party for all
of the prevailing party’s costs (including but not limited to the arbitrator’s compensation), expenses, and attorneys’ fees.
8.5 Award Final and Binding . The arbitrator shall render an award and written opinion, and the award shall be final and binding
upon the parties. If any of the provisions of this paragraph, or of this Agreement, are determined to be unlawful or otherwise
unenforceable, in whole or in part, such determination shall not affect the validity of the remainder of this Agreement, and this
Agreement shall be reformed to the extent necessary to carry out its provisions to the greatest extent possible and to insure that the
resolution of all conflicts between the parties, including those arising out of statutory claims, shall be resolved by neutral, binding
arbitration. If a court should find that the arbitration provisions of this Agreement are not absolutely binding, then the parties intend
any arbitration decision and award to be fully admissible in evidence in any subsequent action, given great weight by any finder of
fact, and treated as determinative to the maximum extent permitted by law.
ARTICLE 9.
MISCELLANEOUS
9.1 Amendments . The provisions of this Agreement may not be waived, altered, amended or repealed in whole or in part except
by the signed written consent of the parties sought to be bound by such waiver, alteration, amendment or repeal.
9.2 Entire Agreement . This Agreement and the stock option and other equity grant agreements between the Company and
Executive constitute the total and complete agreement of the parties and, except as provided below, supersedes all prior and
contemporaneous understandings and agreements heretofore made, including the Employment Agreement, and there are no other
representations, understandings or agreements.
9.3 Counterparts . This Agreement may be executed in one of more counterparts, each of which shall be deemed an original, but
all of which shall together constitute one and the same instrument.
9.4 Severability . Each term, covenant, condition or provision of this Agreement shall be viewed as separate and distinct, and in
the event that any such term, covenant, condition or provision shall be deemed by an arbitrator or a court of competent jurisdiction to
be invalid or unenforceable, the court or arbitrator finding such invalidity or unenforceability shall modify or reform this Agreement to
give as much effect as possible to the terms and provisions of this Agreement. Any term or provision which cannot be so modified or
reformed shall be deleted and the remaining terms and provisions shall continue in full force and effect.
- 18 -
9.5 Waiver or Delay . The failure or delay on the part of the Company, or Executive to exercise any right or remedy, power or
privilege hereunder shall not operate as a waiver thereof. A waiver, to be effective, must be in writing and signed by the party making
the waiver. A written waiver of default shall not operate as a waiver of any other default or of the same type of default on a future
occasion.
9.6 Successors and Assigns . This Agreement shall be binding on and shall inure to the benefit of the parties to it and their
respective heirs, legal representatives, successors and assigns, except as otherwise provided herein. Except as provided in this
Section 9.6, without the prior written consent of Executive, this Agreement shall not be assignable by the Company. The Company
will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place. “Company” means the Company as
hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by
operation of law or otherwise.
9.7 No Assignment or Transfer by Executive . Neither this Agreement nor any of the rights, benefits, obligations or duties
hereunder may be assigned or transferred by Executive. Any purported assignment or transfer by Executive shall be void.
9.8 Necessary Acts . Each party to this Agreement shall perform any further acts and execute and deliver any additional
agreements, assignments or documents that may be reasonably necessary to carry out the provisions or to effectuate the purpose of this
Agreement.
9.9 Governing Law . This Agreement and all subsequent agreements between the parties shall be governed by and interpreted,
construed and enforced in accordance with the laws of the State of Nevada.
9.10 Notices . All notices, requests, demands and other communications to be given under this Agreement shall be in writing and
shall be deemed to have been duly given on the date of service, if personally served on the party to whom notice is to be given, or 48
hours after mailing, if mailed to the party to whom notice is to be given by certified or registered mail, return receipt requested,
postage prepaid, and properly addressed to the party at her address set forth as follows or any other address that any party may
designate by written notice to the other parties:
To Executive:
Virginia E. Shanks
4170 Caughlin Parkway
Reno, NV 89519
Telephone: 775-746-2820
Facsimile: 702-541-7778
- 19 -
To the Company:
Pinnacle Entertainment, Inc.
8918 Spanish Ridge Avenue
Las Vegas, NV 89148
Attn: General Counsel
Telephone: 702 541-7777
Facsimile: 702 541-7773
9.11 Headings and Captions . The headings and captions used herein are solely for the purpose of reference only and are not to
be considered as construing or interpreting the provisions of this Agreement.
9.12 Construction . All terms and definitions contained herein shall be construed in such a manner that shall give effect to the
fullest extent possible to the express or implied intent of the parties hereby.
9.13 Counsel . Executive has been advised by the Company that she should consider seeking the advice of counsel in connection
with the execution of this Agreement and Executive has had an opportunity to do so. Executive has read and understands this
Agreement, and has sought the advice of counsel to the extent she has determined appropriate. The Company shall reimburse
Executive for the reasonable fees and expenses of Executive’s counsel in connection with this Agreement not to exceed $10,000.
9.14 Withholding of Compensation . Executive hereby agrees that the Company may deduct and withhold from the
compensation or other amounts payable to Executive hereunder or otherwise in connection with Executive’s employment any amounts
required to be deducted and withheld by the Company under the provisions of any applicable Federal, state and local statute, law,
regulation, ordinance or order.
9.15 References to Sections of the Code . All references in this Agreement and Appendix A hereto to sections of the Code shall
be to such sections and to any successor or substantially comparable sections of the Code or to any successor thereto.
9.16 Effect of Delay . Executive’s or the Company’s failure to insist upon strict compliance with any provision of this
Agreement or the failure to assert any right Executive or the Company may have hereunder, including without limitation the right of
Executive to terminate employment for Good Reason pursuant to Section 6.5, shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
///
///
///
///
///
- 20 IN WITNESS WHEREOF, the parties hereto have caused this Employment Agreement to be duly executed effective this 29 th
day of November, 2011.
THE COMPANY
EXECUTIVE
PINNACLE ENTERTAINMENT, INC.
By:
/s/ Anthony M. Sanfilippo
Its:
President & CEO
VIRGINIA E. SHANKS
/s/ Virginia E. Shanks
- 21 APPENDIX A
POLICY ON RECOVERY OF INCENTIVE COMPENSATION
IN EVENT OF FINANCIAL RESTATEMENT
The following rules shall apply if (1) there is a restatement of the Company’s financial statements for the fiscal year for which a
bonus is paid, other than a restatement due to changes in accounting principles or applicable law, and (2) the Compensation
Committee determines that a participant has received an “excess bonus” for the relevant fiscal year.
1.
The amount of the excess bonus shall be equal to the difference between the bonus paid to the participant and the payment
or grant that would have been made based on the restated financial results.
2.
The requirement to repay all or a portion of the excess bonus as determined by the Compensation Committee shall only
exist if the Audit Committee has taken steps to consider restating the financials prior to the end of the third year following
the year in question.
3.
The Compensation Committee may take such action in its discretion that it determines appropriate to recover all or a
portion of the excess bonus if it deems such action appropriate under the facts and circumstances. Such actions may
include recovery of all or a portion of such amount from the participant from any of the following sources: prior incentive
compensation payments, future payments of incentive compensation, cancellation of outstanding equity awards, future
equity awards, gains realized on the exercise of stock options, and direct repayment by the participant. Participant’s receipt
of the bonus constitutes her agreement that, if requested by the Compensation Committee, she shall repay to the Company
the excess bonus (or that portion thereof specified by the Committee) within 90 days of the time that she is notified by the
Committee of the overpayment. Application of this policy does not preclude the Company from taking any other action to
enforce a participant’s obligations to the Company, including termination of employment or institution of civil or criminal
proceedings.
This Policy shall be applicable to all incentive compensation paid subsequent to the adoption of the Policy.
This Policy is in addition to the requirements of Section 304 of the Sarbanes-Oxley Act of 2002 that are applicable to the
Company’s Chief Executive Officer and Chief Financial Officer.
-1APPENDIX B
RELEASE and RESIGNATION
For valuable consideration, receipt of which is hereby acknowledged, the undersigned Virginia E. Shanks (“Executive”), for
herself and her spouse, heirs, estate, administrators and executors, hereby fully and forever releases and discharges Pinnacle
Entertainment, Inc., a Delaware corporation (the “Company”), and each of its subsidiaries and the officers, directors, employees,
attorneys and agents of the Company and each such subsidiary, of and from any and all claims, demands, causes of action of any kind
or nature, in law, equity or otherwise, whether known or unknown, which Executive has had, may have had, or now has, or may have,
arising out of or in connection with Executive’s employment with the Company and/or its subsidiaries or the termination of such
employment; provided, however, that nothing contained herein is intended to nor shall constitute a release of the Company from any
obligations it may have to Executive under any written employment agreement between Executive and the Company in effect as of the
date hereof, or any deferred compensation plan or arrangement in which Executive participates or any rights of indemnification under
the Company’s Articles, Bylaws, Indemnity Trust Agreement or the like, or coverage under Director and Officer Insurance, nor shall it
prevent Executive from exercising her rights, if any, under any such employment agreement or under any stock option, restricted stock
or similar agreement in effect as of the date hereof in accordance with their terms.
Executive represents and warrants that she has not assigned or in any way conveyed, transferred or encumbered all or any portion
of the claims or rights covered by this release.
Executive hereby resigns from all positions as an officer, director or employee of the Company and each of its subsidiaries or
affiliates effective the date hereof and further agrees to execute such further evidence of such resignations as may be necessary or
appropriate to effectuate the foregoing.
Executed this _____ day of _____, 20_.
Executive
-1-
Exhibit 10.29
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is made this 14 th day of December, 2011,
effective as of the January 1, 2012, by and between PINNACLE ENTERTAINMENT, INC. , a Delaware corporation (the
"Company"), and Virginia E. Shanks , an individual ("Executive"), with respect to the following facts and circumstances:
RECITALS
The Company and Executive entered into an Employment Agreement on November 29, 2011, effective November 15, 2011 (the
"Agreement") with Executive having a base salary of Four Hundred Fifty Thousand Dollars ($450,000) per year.
On December 9, 2011, the Compensation Committee of the Board of Directors of the Company increased the Executive's base
salary to Four Hundred Sixty-Five Thousand Dollars ($465,000) per year, effective January 1, 2012.
The Company and Executive desire to amend the Agreement to reflect Executive's new salary.
NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements set forth herein, the parties hereto
agree as follows:
AMENDMENT
1. Article 3, Section 3.1 of the Agreement (Compensation) is hereby deleted in its entirety and replaced with the following new
Article 3, Section 3.1:
"3.1 Base Salary . In consideration for Executive's services hereunder, the Company shall pay Executive an annual base salary at
the rate of Four Hundred Sixty-Five Thousand Dollars ($465,000.00) 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)."
2. Except as modified herein, all other terms of the Agreement shall remain in full force and effect. In the event of a conflict
between the terms of the Agreement and this Amendment, the terms of this Amendment shall apply. No modification may be made to
the Agreement or this Amendment except in writing and signed by both the Company and Executive.
-1IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed this 14 th day of December, 2011
and effective as of January 1, 2012.
EXECUTIVE
PINNACLE ENTERTAINMENT, INC.
/s/ Virginia E. Shanks
By:
Virginia E. Shanks
/s/ Anthony Sanfilippo
Anthony Sanfilippo, President and
Chief Executive Officer
-2-
Exhibit 10.30
Summary of Director Compensation
Director Fees
The compensation of the Company's non-employee directors is paid in the form of an annual retainer, meeting and chair
fees and stock-based awards. The fees that each non-employee director (other than the Chairman of the Board) or committee chair,
received for his service during 2011 are the following:
• An annual retainer of $60,000;
• An additional $20,000 retainer for the Chair of the Audit Committee;
• An additional $20,000 retainer for the Chair of the Compensation Committee;
• An additional $20,000 retainer for the Chair of the Corporate Governance and Nominating Committee as of May 24,
2011; prior to that date the Chair of the Corporate Governance and Nominating Committee received a $10,000
retainer;
• An additional $7,500 retainer for the Chair of the Risk Management Committee prior to May 24, 2011. On May 24,
2011, the Risk Management Committee was dissolved by the Board of Directors;
• An attendance fee of $1,500 for each regularly scheduled Board or committee meeting, other than meetings of the
Audit Committee which had a meeting fee of $2,000 per meeting and the Advisory Committee (which was formed in
January 2011 and disbanded in May 2011) which had a fee of $2,000 per meeting or per day of service; and
• An attendance fee of $500 for each telephonic special meeting of the Board of Directors.
Director Fees Paid to the Chairman of the Board
The Chairman of the Board receives an annual retainer of $185,000. The annual retainer paid to the Chairman of the
Board was in lieu of the fees described above except that the Chairman of the Board receives fees for attending meetings of the
Compliance Committee (which are $1,500 per meeting). In addition, the Chairman of the Board served on the Advisory
Committee and received $2,000 per meeting or per day of service.
Equity Grants
In 2011, Pinnacle granted to each non-employee director who was then serving 10,000 options, which were granted on the
date of the 2011 Annual Meeting of Stockholders. The exercise price for each option was the closing price of Pinnacle Common
Stock on the date of grant. All of the options vested immediately upon the date of grant. In addition, Pinnacle granted to each
non-employee director who was then serving 6,000 restricted stock units, which were granted and vested on the date of the 2011
Annual Meeting of Stockholders.
Exhibit 10.66
RESORT MANAGEMENT AGREEMENT
BETWEEN
HO TRAM PROJECT COMPANY LIMITED
AND
PNK (VN), INC.
AUGUST 2011
EXECUTION VERSION
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS AND INTERPRETATION
1.1 Definitions
2
2
ARTICLE 2 TERM
30
ARTICLE 3 GRANT OF AUTHORITY
3.1 Grant of Authority
3.2 Limitations on Grant of Authority
30
30
34
ARTICLE 4 FEES AND EXPENSES
4.1 Management Fees
4.2 Interest
4.3 Payment of Fees and Expenses
4.4 Taxes
4.5 Currency Conversion
4.6 Restrictions on Payment in US Dollars
36
36
37
37
37
37
38
ARTICLE 5 CONSTRUCTION OF THE MANAGED FACILITIES
5.1 Construction Financing
5.2 Construction Completion
5.3 Manager Suspension or Termination
38
38
39
39
ARTICLE 6 OPERATION OF THE MANAGED FACILITIES
6.1 Business Plan
6.2 Maintenance and Repair and Capital Improvements
6.3 Personnel
6.4 Bank Accounts
6.5 Funds for Operation of the Managed Facilities
6.6 Parking
6.7 Use of Affiliates by Manager
6.8 Limitation on Manager’s Obligations
6.9 Third Party Operated Areas
6.10 Shared Expenses
39
39
45
47
49
51
52
52
53
53
54
ARTICLE 7 BOOKS AND RECORDS
7.1 Maintenance of Books and Records
7.2 Financial Reports
7.3 Audit
7.4 Consultation with Senior Executive Personnel
7.5 Affiliate Transactions
54
54
55
55
56
56
i
Page
ARTICLE 8 PROPRIETARY RIGHTS
8.1 Acknowledgment of Manager’s Rights
8.2 Infringement of Manager Proprietary Rights
8.3 Acknowledgment of Owner’s Rights
8.4 Infringement of Owner Proprietary Rights
8.5 Improvements to System
8.6 Use of Confidential Information
57
57
57
58
58
58
58
ARTICLE 9 MANAGED FACILITIES BRANDING STANDARDS
9.1 Modifications to Standards
9.2 Managed Facilities Signage
59
59
59
ARTICLE 10 PRE-OPENING SERVICES
10.1 Pre-Opening Business Plan
10.2 Managed Facilities Opening Date
10.3 Pre-Opening Services
59
59
61
61
ARTICLE 11 TRANSFERS
11.1 Transfers by Manager
11.2 Transfers by Owner
11.3 Regulatory Termination Transfer
11.4 Effect of Permitted Transfer
11.5 Transfer to a Competitor
11.6 Compliance with Applicable Law
63
63
64
65
65
65
66
ARTICLE 12 INSURANCE POLICIES
12.1 Coverage
12.2 Business Interruption
12.3 RELEASE FROM LIABILITY FOR INSURED CLAIMS
12.4 WAIVER OF SUBROGATION
66
66
67
67
68
ARTICLE 13 INDEMNIFICATION
13.1 Indemnification by Owner
13.2 Indemnification by Manager
13.3 Insurance Coverage
13.4 Indemnification Procedures
13.5 Dispute Regarding Manager’s Conduct
13.6 Survival
68
68
68
69
69
70
70
ARTICLE 14 MORTGAGES, FINANCING AND GROUND LEASES
14.1 Authority to Mortgage Managed Facilities
14.2 Information
14.3 Nondisturbance
70
70
71
71
ii
Page
ARTICLE 15 DAMAGE AND DESTRUCTION TO THE MANAGED FACILITIES; CONDEMNATION
15.1 Casualty and Restoration of Managed Facilities
15.2 Condemnation
15.3 Owner Termination Right
72
72
73
73
ARTICLE 16 DEFAULTS AND TERMINATION
16.1 Owner Event of Default
16.2 Special Termination Rights
16.3 Manager Event of Default
16.4 Performance Test
16.5 Termination of Collaboration Agreement
16.6 Actions To Be Taken on Termination
16.7 Notice of Termination to Employees
74
74
77
81
84
85
85
87
ARTICLE 17 DISPUTE RESOLUTION
17.1 Operating Committee Review
17.2 Arbitration
17.3 Miscellaneous
17.4 Waivers
17.5 Survival
87
87
88
89
91
92
ARTICLE 18 REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS
18.1 Manager’s Representations and Warranties
18.2 Owner’s Representations and Warranties
18.3 Owner’s Covenants
18.4 Manager’s Covenants
18.5 Acknowledgements
92
92
93
95
97
99
ARTICLE 19 GENERAL PROVISIONS
19.1 Governing Law
19.2 Construction of this Agreement
19.3 Waivers
19.4 Notices
19.5 Further Assurances
19.6 Relationship of the Parties
19.7 Extraordinary Event
19.8 Confidentiality Covenant
19.8.1 Other Permitted Disclosure
19.8.2 Remedies
19.9 Privileged Licenses
19.10 Foreign Corrupt Practices Act
19.11 Expenses for Assistance Regarding Certain Instruments
19.12 Execution of Agreement
100
100
100
101
102
102
103
104
104
104
105
106
106
106
106
iii
Page
19.13 Language
19.14 Approvals
19.15 Limitation of Liability
106
107
107
ARTICLE 20 CONFLICTS OF INTEREST: TRADE AREA RESTRICTION
20.1 Conflicts of Interest
20.2 Trade Area Restriction
20.3 Guaranty of Manager
20.4 Guaranty of Owner
107
107
107
108
108
ARTICLE 21 OTHER SITE COMPONENTS AND OTHER RESORTS
21.1 Other Site Components and Other Resorts
21.2 Junket Procedures
21.3 Project Advertising
21.4 Restrictions on Development of Other Site Components
21.5 Other Site Components
108
108
108
109
109
109
iv
RESORT MANAGEMENT AGREEMENT
This Resort and Casino Management Agreement (this “ Agreement ”) is entered into as of the Effective Date, between Ho Tram
Project Company Limited, a Vietnamese limited liability company (“ Owner ”), and PNK (VN), Inc., a Cayman Islands corporation (“
Manager ”), whose financial performance hereunder is guaranteed by PINNACLE DEVELOPMENT 18, LLC, a Delaware limited
liability company (“ Guarantor ”). Owner and Manager are sometimes referred to collectively in this Agreement as the “ Parties ” and
individually as a “ Party .” Capitalized terms used in this Agreement will have the meanings ascribed at their reference or in
Section 1.1 hereof.
RECITALS
A. Pursuant to People’s Committee of Ba Ria-Vung Tau Province, Investment Certificate No. 491043000085, First Certificate,
dated 12 March 2008, and attached hereto as Exhibit A , as it may be amended or supplemented from time to time (the “ Investment
Certificate ”), Owner has a leasehold interest (the “ Ho Tram Lands ”) and the right to develop thereon the Project (as hereinafter
defined), which will consist of five (5) premium five-star luxury hotel resorts, including two casino resorts and related sports,
entertainment and retail facilities, included in the foregoing, and which shall also include, inter alia , a resort comprised of the Hotel
and Casino; and,
B. Owner is an Affiliate of ASIAN COAST DEVELOPMENT (CANADA) LTD. (“ ACDL ”); and,
C. Manager together with its Affiliates, is knowledgeable and experienced in operating, managing, directing and supervising
destination resorts, hotels, casinos and other related facilities; and,
D. Owner and Guarantor have entered into a Collaboration and Assistance Agreement as of the date hereof (the “ Collaboration
Agreement” ), pursuant to which Owner has agreed to engage Guarantor, and Guarantor has agreed to provide to Owner, certain
services in connection with the design, development and construction of the Managed Facilities; and,
E. ACDL, Owner and Manager have entered into a Brand Development and Licensing Agreement (the “ Brand Agreement ”),
pursuant to which they have agreed to jointly pursue the development, promotion and use of a facility and product brand (the “ Brand
”) for use at the Managed Facilities; and,
1
F. Owner desires to engage Manager to manage the Enterprise operated within the Managed Facilities under the Brand, and
Manager desires to Operate the Managed Facilities under the Brand.
NOW THEREFORE in consideration of the recitals, covenants and other provisions set forth in this Agreement, and other good
and valuable consideration, the receipt and sufficiency of which are acknowledged by the Parties, the Parties agree:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions . The following terms when used in this Agreement shall have the meanings set forth in this Section 1.1.
“ Affiliate ” shall mean any Person that, directly or indirectly, controls, is controlled by, or is under common control with, the
referenced Party or other Person. As used herein, the term “ control ” shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of any Person, or the power to veto major policy decisions of any Person,
whether through the ownership of voting securities, by agreement, or otherwise.
“ Affiliate Investment Event ” shall mean any transaction or event pursuant to which the Manager or an Affiliate of Manager
shall no longer have an Ownership Interest in ACDL of at least seven and one-half percent (7.5%) on a fully diluted basis.
“ Aggregate Compensation ” means the Base Fees and the Incentive Fees payable hereunder for a Fiscal Year.
“ Agreement ” shall mean this Management Agreement between Owner and Manager, including all Exhibits hereto, and all
written amendments and modifications entered into between Owner and Manager from time to time.
“ Annual Operating Statement ” shall have the meaning set forth in Section 7.2.
“ Anticipated Opening Date ” shall mean the proposed Managed Facilities Opening Date which date shall be provided by Owner
to Manager, and reasonably approved by Manager, at least three hundred sixty five days (365) days prior to the proposed Managed
Facilities Opening Date.
2
“ Applicable Law ” shall mean (a) statutes, laws, rules, regulations, ordinances, codes, treaties, legally binding decrees, legally
binding directives, legally binding guidelines or other legal requirements (including, without limitation, any anti-money laundering
and anti-corruption laws) of any Governmental Authority, board of fire underwriters and similar quasi-Governmental Authority,
including, any legal requirements under any Approvals, and (b) judgments, injunctions, orders or other similar requirements of any
court, administrative agency or other legal adjudicatory authority, in effect at the time in question and in each case to the extent the
Managed Facilities or other assets or Person in question is subject to the same.
“ Approvals ” shall mean all licenses, permits, approvals, certificates and other authorizations granted or issued by any
Governmental Authority for the matter or item in question.
“ Arbitration Tribunal ” shall have the meaning set forth in Section 17.2.1.
“ Assignment ” shall mean any assignment, conveyance, delegation or other transfer, in whole or in part, of this Agreement or
any rights, remedies, duties or obligations under this Agreement.
“ Authorized Recipients ” shall mean, with respect to any Person, the shareholders, partners, members, trustees, beneficiaries,
directors, officers, employees, agents, representatives, legal counsel, accountants and lenders of such Person or its Affiliates.
“ Bank Accounts ” shall have the meaning set forth in Section 6.4.1.
“ Bankroll ” shall mean the amount of cash necessary to fund the Gaming Activities and to open the Casino in the greater of the
amount prescribed by Applicable Law or the Pre-Opening Business Plan.
“ Bad Debts ” shall mean provisions made for doubtful accounts receivable consistent with normal industry practice based on
Generally Accepted Accounting Principles.
“ Base Fees ” shall mean collectively, the Hotel Base Fee and the Casino Base Fee.
“ Brand ” shall have the meaning set forth in Recital F.
“ Brand Agreement ” shall have the meaning set forth in Recital F.
3
“ Business Day ” shall mean a day (other than a Saturday or Sunday) on which banks generally are open in Hong Kong.
“ Business Interruption Insurance ” shall mean insurance coverage against “Business Interruption and Extra Expense” (as that
phrase is used within the United States insurance industry for application to transient lodging or gaming facilities) provided in
conjunction with a property or terrorism insurance policy.
“ Business Plan ” shall have the meaning set forth in Section 6.1. Unless specified as the Pre-Opening Business Plan, the
Business Plan shall mean the Business Plan as approved in accordance with Section 6.1.2.
“ Casino ” shall mean any facility located on the Managed Facilities Lands as determined in accordance with the Collaboration
Agreement, in which Gaming Activities are conducted and shall include any Managed Facilities Amenities within the Casino as same
may be expanded from time to time.
“ Casino Base Fee ” shall mean two percent (2%) of Casino Gross Operating Revenues.
“ Casino Gaming Tax ” shall mean any and all taxes on any Gaming Activities, including but not limited to, charges on Casino
Gross Operating Revenue; Special Sales Tax, sales taxes, value added taxes or similar charges on Gaming Activities; charges per
device; levies, license fees and/or other contributions required to be made to any Vietnamese Gaming Authorities or other Vietnamese
Government Authorities.
“ Casino Gross Operating Profit ” shall mean, with respect to any period of time, the amount by which Casino Gross Operating
Revenue exceeds Casino Operating Expenses for such period.
“ Casino Gross Operating Revenue ” shall mean, with respect to any period of time, the sum of all receipts, revenue and income
of any kind derived directly or indirectly from the Operation of the Gaming Activities, and all departments and parts thereof, and
properly attributable to such period (including rental payments, revenue shares, license fees or other payments arising from leases,
licenses, concessions and other agreements related to operation by others of Managed Facilities Amenities, but not the gross receipts
of such operations), computed on an accrual basis in accordance with Generally Accepted Accounting Principles, and shall include
(a) Casino Win; (b) amounts recovered in any legal action or proceeding or settlement thereof (less all costs and expenses incurred in
recovering such amount) which arose out of the Gaming Activities; and, (c) receipts representing accounts receivable previously
deducted as actual Bad Debts. For the avoidance of doubt, the following shall be excluded from the definition of Casino Gross
Operating Revenue for the purpose of calculating the Casino Base Fee:
(i) Taxes imposed by a Governmental Authority and collected directly from patrons or guests, or as a part of the sales price of
any goods, services, or displays (other than Casino Gaming Tax), including gross receipts, admission, cabaret and similar Taxes;
4
(ii) receipts from the financing, sale or other disposition of capital assets and other items not in the ordinary course of the
Casino’s operations and income derived from securities and other property acquired and held for investment;
(iii) any Condemnation Award;
(iv) proceeds of any insurance (other than proceeds from Business Interruption Insurance or other loss of income insurance
excluding the portion thereof that is received by Manager on account of Base Fees and Incentive Fees);
(v) tips and gratuities paid to Casino Personnel (including gratuities added to Casino patron billings);
(vi) interest or other investment income on amounts held in the Casino Operating Account and Reserve Fund;
(vii) investment tax credits or other income tax benefits;
(viii) revenues from activities that are not Gaming Activities, which revenues will otherwise be classified as a Hotel Gross
Operating Revenue;
(ix) discounts or credits for any goods or services provided by Manager; and,
(x) the amount by which any revenue transaction is reduced by any charge card or credit card fees or commissions.
“ Casino Incentive Fee ” shall mean six percent (6%) of Casino Gross Operating Profits, if any, for each Fiscal Year.
“ Casino Management Fees ” shall mean collectively, the Casino Base Fee and Casino Incentive Fee.
“ Casino Operating Account ” shall have the meaning set forth in Section 6.4.1.
“ Casino Operating Expenses ” shall mean, with respect to any period, all ordinary and necessary expenses incurred in the
Operation of the Gaming Activities in accordance with this Agreement, computed on an accrual basis in accordance with Generally
Accepted Accounting Principles, including all (a) Casino Personnel Costs; (b) cost of all Supplies; (c) expenses for Maintenance and
Repair for the Casino; (d) costs of all goods, merchandise or services sold at or from the Casino and the costs of all consumable items
used in the Casino (including chips, dice, cards); (e) costs and expenses incurred in the hiring of performers, entertainers, musicians,
and speakers, and in the rental of music program services and loudspeaker systems for the Casino; (f) any expenditures intended to
increase the security of the Casino and its patrons, occupants; (g) expenses for Casino utilities; (h) administrative expenses, including
5
all costs and expenses relating to the Bank Accounts for the Casino and Annual Operating Statement; (i) costs and expenses for
marketing, advertising and promotion of the Casino (except for gaming incentive adjustments that are included as a reduction of
Casino Win); (j) customary and permitted commissions and allowances to junket promoters excluding the Customer Rebates; (k) any
Casino Unallocated Expenses, and Reimbursable Expenses or Centralized Service Charges with respect to the Operation of the Casino
to the extent approved in the Business Plan; (l) Casino Gaming Tax; (m) Complimentaries; (n) payments under all service,
maintenance, management or other contracts for the Casino; (o) fees and costs for professional services, including the fees and
expenses of attorneys, accountants, auditors and appraisers incurred only in connection with any category of expense that is a Casino
Operating Expenses; (p) costs for the rental of real or personal property only if used in the Operation of the Casino; (q) insurance
premiums paid for any insurance policies maintained with respect to the Operation of the Casino; (r) the Casino Base Fee; provided,
however , that Casino Base Fee shall be paid in the order of priority set forth in Section 6.4.4; and, (s) Owner’s general overhead costs
to the extent that they relate to expenses incurred in the Operation of the Casino and are provided for in the Business Plan. The
following shall be excluded from the Casino Operating Expenses: (A) Taxes (other than Casino Gaming Tax); (B) any Reserve Fund
Contribution and any expenditures for Routine Capital Improvements or Major Capital Improvements; (C) any depreciation and
amortization of capital assets; (D) Owner’s general overhead costs to the extent not provided for in the Business Plan; (E) Casino
Incentive Fee; (F) for the purpose of calculating the Casino Incentive Fee, the amount by which any revenue transaction is reduced by
any charge card or credit card fees or commissions; and (G) any Owner Disbursement.
“ Casino Payroll Account ” shall have the meaning set forth in Section 6.4.1.
“ Casino Personnel ” shall mean all Individuals performing services in the name of the Casino at the Casino during the Operating
Term (or in connection with the Pre-Opening Services prior to the Operating Term), whether such Individuals are employed by
Manager or an Affiliate of Manager, Owner, or a contractor providing labor to the Casino, including the Senior Executive Personnel or
Corporate Personnel. Manager shall have the right in accordance with the Business Plan to allocate the services and time of any
Personnel between the Hotel and the Casino and the compensation and other costs of such Personnel shall be allocated on a fair and
consistent basis.
“ Casino Personnel Costs ” shall mean all costs and expenses associated with the employment or termination of Casino
Personnel, including recruitment expenses, the costs of moving executive level Senior Executive Personnel, their families and their
belongings to the area in which the Casino is located at the commencement of their employment at the Casino, compensation and
benefits (including bonuses (exclusive of costs associated with any equity based compensation which is the sole expense of Manager
and not an Operating Expense, unless otherwise agreed to by Parties in the Business Plan), training costs, employment taxes and
severance payments, all in accordance with Applicable Laws and the Business Plan and such other policies as may be established by
mutual consent of the Manager and Owner pursuant to this Agreement.
6
“ Casino Unallocated Expenses ” shall mean a pro rata portion allocated to the Casino of the expenses of the Managed Facilities
that practicably can not attributable to either the Hotel or the Casino (such as certain general and administrative expenses), as and to
the extent agreed upon by Owner and Manager as part of the annual Business Plan.
“ Casino Win ” shall mean, with respect to any period, the net win from Gaming Activities conducted at or from the Casino, to
be recorded on an accrual basis, and defined as the difference between Casino gaming wins and losses before deduction of any Casino
Operating Expenses, reduced by jackpot accruals, Bad Debts, Customer Discounts, Customer Rebates, accruals for certain loyalty
program costs, and certain other gaming incentive adjustments (such as match play coupons, promotional chips or other gaming
promotions). All such adjustments shall be in accordance with the requirements of Generally Accepted Accounting Principles and the
American Institute of Certified Public Accountant’s then-current version of the Audit and Accounting Guide for Casinos.
“ Casualty ” shall mean any fire, flood or other act of God or casualty resulting in damage or destruction to the Managed
Facilities or any significant portion thereof.
“ Casualty Termination Fee ” shall mean, if the termination occurs at any time during the Operating Term, three (3) times the
Aggregate Compensation to which Manager would have been entitled in respect of the Fiscal Year immediately preceding the date of
the termination notice or such shorter prorated amount if the termination occurs with less than three (3) years left in the Operating
Term.
“ Centralized Service Charges ” shall mean the actual cost or expense of goods or services incurred by the Manager and used by
the Managed Facilities during an applicable period, without commission or other mark-up, where such goods or services were
acquired through cost-sharing arrangements established by Manager pursuant to which the Managed Facilities and other resorts
Operated by Manager or its Affiliates jointly contract for goods or services for the purposes of achieving cost savings for the benefit of
Owner that can be substantiated by Owner, including shared administrative functions, centralized purchasing programs or service
agreements with vendors, all to the extent such Centralized Service Charges are approved by the Owner in the Business Plan.
“ Collaboration Agreement ” shall have the meaning set forth in Recital E.
“ Commencement of Construction ” shall mean the commencement of building the foundation of the Managed Facilities.
7
“ Competitor ” shall mean any person or entity engaged in the business of owning and operating Gaming Operations that (i) have
a global combined ten thousand (10,000) electronic games and two hundred fifty (250) table games; and, (ii) include Gaming
Operations conducted in Asia, Australia or New Zealand.
“ Compliance Systems ” shall mean requirements for and systems or procedures implemented for oversight of compliance with
Gaming Laws and other Applicable Laws governing the Owner, Manager and the Managed Facilities, including the Gaming
Compliance Review and Reporting Plan established by Manager for the Managed Facilities, as well as policies and programs of the
Manager providing a code of business conduct and ethics; financial integrity and accounting policies; and any other policies or
programs adopted and published by the Manager are of a legal or ethical compliance nature.
“ Complimentaries ” shall mean the Retail Value of any goods or services provided to customers free of charge, other than any
gaming incentive (such as match play coupons, promotional chips or other gaming promotions). Such free goods or services may
include, for example, free hotel accommodations, free food and beverage, free spa services, free merchandise and free entertainment.
Complimentaries may be provided to customers pursuant to a discretionary incentive program, targeted to either past, current, or
potential customers and may or may not be related to the customer’s level of past play. Conversely, Complimentaries may be provided
to customers pursuant to a nondiscretionary incentive program, such as a loyalty program, whereby the customer has earned the
Complimentaries based on the customer’s level of past play .
“ Condemnation ” shall mean a taking, expropriation, compulsory acquisition, seizure or similar proceeding with respect to all or
any portion of the Managed Facilities or the Project by any Governmental Authority by condemnation or power of eminent domain for
any purpose whatsoever, and a conveyance by Owner to any Vietnamese Governmental Authority in lieu or under threat of such
taking.
“ Condemnation Award ” shall have the meaning set forth in Section 15.2.2.
“ Corporate Personnel ” shall mean any personnel from the corporate or divisional offices of Manager or any of its Affiliates who
perform activities at or on behalf of the Managed Facilities in connection with the services provided by Manager under this
Agreement.
“ Cure Right ” shall have the meaning set forth in Section 16.4.1.
8
“ Customer Data ” shall mean all guest, customer or Casino patrons’ profiles, contact information (e.g., addresses, phone
numbers, facsimile numbers and email and SMS addresses), histories, preferences, theoretical win profile, average visits per year,
average bet, type of game played and duration of play, and any other information regarding guests, customers or Casino patrons in any
database of Owner, Manager or its Affiliates, whether obtained or derived by Owner, Manager or its Affiliates from guests, customers
or Casino patrons of any hotel, casino or resort owned, leased, operated, licensed or franchised by Owner, Manager or its Affiliates, or
any facility associated such hotels, casinos or resorts or other properties (including restaurants, golf courses and spas), other than the
Managed Facilities.
“ Customer Discounts ” shall mean any discount given directly to a Casino patron based on play at the Casino.
“ Customer Rebates ” shall mean indirect customer discounts paid through junket promoters and reflected as a percentage of the
fees paid to junket promoters. Customer Rebates shall be calculated as average Customer Discount percentage divided by the average
percentage offered as junket commission for the immediate preceding year. If, however, in-house premium players account for ten
percent (10%) or less of the total rolling volume, then Owner and Manager shall meet and attempt to determine the percentage for
Customer Rebates based on the industry standard in the market in which the Casino competes.
“ Designated Accountant ” shall mean the accounting firm licensed to operate in Vietnam and selected by agreement of the
Owner and Manager; provided, however , subject to such licensing condition Owner’s approval shall been deemed given if the
accounting firm is Deloitte Touche Tohmatsu, Pricewaterhouse Coopers, Ernst &Young or KPMG.
“ Effective Date ” shall mean the date Manager countersigns this Agreement, as set forth next to its signature line at the end of
this Agreement.
“ Enterprise ” shall mean the commercial activities of the Owner on the Managed Facilities Lands authorized by Investment
Certificate No. 491043000085 as same may be amended from time-to-time and as determined pursuant to the Collaboration
Agreement, which Manager shall Operate in accordance with the terms and conditions of this Agreement, including the Gaming
Activities, the hospitality, transient lodging activities of the Hotel, Managed Facilities Amenities and any other lawful commercial
activity allowed at the Managed Facilities with the mutual agreement of the Parties. Enterprise shall not mean any commercial
activities conducted by the Owner within the Other Site Components.
“ Entity ” shall mean a partnership, corporation, limited liability company, joint stock company, Governmental Authority, trust,
unincorporated organization (including, without limitation, a representative office or branch) or any other legal entity of any kind.
9
“ Equity Owners ” shall mean, with respect to any Entity, the Individuals holding all the Ownership Interests in such Entity;
provided, however , to the extent such Entity is a publicly traded company, this term shall only refer to such Individuals holding
Ownership Interests that exceed the percentage of Ownership Interests for which any transfers are required to be reported to any
applicable Governmental Authority that regulates such publicly traded company.
“ Executive Committee ” shall have the meaning (i) set forth in the Shareholder Agreement during the term of such agreement;
or, (ii) shall be any such committee created by the Board of ACDL after the Shareholder’s Agreement is terminated and if there is no
such committee created, then the Board of ACDL.
“ Expert ” shall mean a Qualified Person selected in accordance with Section 6.1.3.1.1.
“ Extraordinary Event ” shall mean any of the following events, regardless of where it occurs or its duration: acts of nature
without the interference of any human agency (including hurricanes, typhoons, tornadoes, cyclones, tsunamis, tidal waves, other
severe storms, winds, lightning, floods, earthquakes, volcanic eruptions, fires, explosions, disease, or epidemics); fires and explosions
caused wholly or in part by human agency; acts of war or armed conflict; riots or other civil commotion; terrorism (including
hijacking, sabotage, chemical or biological events, nuclear events, disease-related events, bombing, murder, assault and kidnapping),
or the threat thereof; strikes or similar labor disturbances or other industrial disturbances; embargoes or blockades; shortage of critical
materials or supplies that make it materially and economically unreasonable to Operate the Managed Facilities; transportation issues
(e.g., road blocks or road destruction) that have a significant impact on the access to the Managed Facilities; actions or inactions of
Vietnamese Governmental Authorities that have a significant and material adverse impact on Operations (including the imposition of
restrictions on room rates, Gaming Activities or wages or other material aspects of Operation and make it economically unreasonable
to Operate the Managed Facilities; restrictions on financial, transportation or information distribution systems that have a significant
and material adverse impact on Operations and make it economically unreasonable to Operate the Managed Facilities; or the
revocation or refusal to grant licenses or permits, where such revocation or refusal is not due to the fault of the Party whose
performance is to be excused for reasons of the Extraordinary Event).
“ Event of Default ” shall mean an Owner Event of Default or a Manager Event of Default.
“ FF&E ” shall mean furniture, furnishings, fixtures and equipment (including Gaming Equipment), interior and exterior signs, as
well as other improvements and personal property used in the Operation of the Managed Facilities that are not Supplies.
10
“ Financing ” shall mean any debt financing secured (in whole or in part) by a Mortgage or Security Interest, which shall be
incurred in accordance with Article 14.
“ Financing Documents ” shall mean all loan agreements, promissory notes, mortgages, deeds of trust, security agreements,
guarantees, evidence of registration of security, and other documents and instruments (including all amendments, modifications, side
letter and similar ancillary agreements) relating to any Financing.
“ Fiscal Year ” shall mean each calendar year during the Operating Term, except that the first Fiscal Year (if not commenced on
January 1) shall be a partial year beginning on the Managed Facilities Opening Date, and ending on the following December 31, and if
the termination of this Agreement is effective on a date other than December 31 in any year, then the last Fiscal Year shall also be a
partial year commencing on January 1 of the year in which such expiration or termination occurs and ending on the effective date of
expiration or termination.
“ Full Fiscal Year ” shall mean any Fiscal Year commencing on January 1 and ending on December 31.
“ Funds Request ” shall mean a written request from Manager to Owner for Owner to provide funding for (i) capital
improvements at the Managed Facilities, which request shall contain detailed plans, specifications, scheduling and cost estimates for
the proposed capital improvements if such information was not included in the then approved Business Plan; (ii) Working Capital; or,
(iii) Bankroll.
“ Gaming Activities ” shall mean all gaming activities authorized by the Gaming Laws that take place on the Site.
“ Gaming Authorities ” shall mean all agencies, boards, authorities and instrumentalities of any state, nation, or other
governmental entity, or any subdivision thereof, regulating the conduct of Gaming Activities in (i) Vietnam, (ii) the United States,
(iii) any other jurisdiction in which Manager or any of its Affiliates conducts business as of the Effective Date, and (iv) any other
jurisdiction in which Manager or any of its Affiliates conducts business or proposes to conduct business at any time following the
Effective Date that meets or exceeds the standards of the Nevada Gaming Control Act and the Regulations adopted therein.
“ Gaming Equipment ” shall mean all furniture, furnishings and equipment required for the Operation of the Casino in
accordance with the Standards, including: (i) cashier, money sorting and money counting equipment, surveillance and communication
equipment, and security equipment, including all equipment required pursuant to any Gaming Authority; (ii) slot machines,
ticket-in/ticket-out, server based gaming, video games of chance, table games, keno equipment and other equipment relating to
Gaming Activities; and (iii) office furnishings and equipment for administrative offices dedicated to Casino operations.
11
“ Gaming Laws ” shall mean any Applicable Law regulating or otherwise pertaining to casinos, legal gaming, gambling or the
conduct of Gaming Activities.
“ Gaming Operations ” means (a) a facility, in which transient occupancy occurs (including, but not limited to, a hotel, resort,
condo hotel or branded residential development that operates as a rental program) that has integrated gaming operations (i.e., gaming
operations that are more than merely an amenity for the guests and are aimed at a wider market than just the guests), and/or (b) any
facility(ies), other than those in which transient occupancy occurs, at which gaming is offered (i.e., stand alone gaming facilities).
“ Generally Accepted Accounting Principles ” shall mean those conventions, rules, procedures, and practices, consistently
applied, affecting all aspects of recording and reporting financial transactions which are generally accepted by major independent
accounting firms in the United States. The application of Generally Accepted Accounting Principles as provided or permitted in this
Agreement shall in any event be subject to compliance with all Applicable Law and the VAS.
“ Governing Documents ” shall mean any declaration of covenants, conditions and restrictions, reciprocal easement agreement,
rules, regulations, annexes, schedules or similar documents governing the development, construction, ownership, maintenance, use or
operation of the Project or any portion or component thereof (including the Managed Facilities).
“ Governmental Authority ” shall mean any government, whether federal, provincial, state, county, municipal, local or other, any
court, ministry, department, agency, board, authority or instrumentality, whether administrative or regulatory, or other body relating
thereto, any board of fire underwriters or any other body which may exercise similar functions, including any Gaming Authority.
“ Gross Negligence or Willful Misconduct ” shall mean any conscious, voluntary act or omission lacking diligence or care or in
reckless disregard of a legal duty and of the consequences to another party, or voluntary or intentional misconduct, misappropriation
of funds, or fraud committed by Manager or its Affiliates, in the performance of Manager’s duties under this Agreement or by Owner
or its Affiliates, as applicable; provided, however , that the acts or omissions of Hotel Personnel and Casino Personnel shall not be
imputed to Owner, Manager or its Affiliates, or otherwise deemed to constitute Owner’s or Manager’s Gross Negligence or Willful
Misconduct, except as to the Manager from and after (a) an Affiliate Investment Event; and, (b) such acts or omissions resulted from
the Negligence of the Manager in hiring, training or supervising such Hotel Personnel or Casino Personnel. No settlement by either
Party in good faith of any Third Party Claims (including Third Party Claims by Hotel Personnel and Casino Personnel) shall be
deemed to create any presumption that the acts or omissions giving rise to such Third Party Claims constitute any grounds for a
Party’s liability.
12
“ Gross Operating Profits ” shall mean, collectively, the Casino Gross Operating Profits and the Hotel Gross Operating Profits.
“ Gross Operating Revenues ” shall mean collectively, Casino Gross Operating Revenue and Hotel Gross Operating Revenue.
“ Guarantor ” shall mean PNK Development 18, LLC.
“ Guest Data ” shall mean all guest, customer or Casino patrons’ profiles, contact information (e.g., addresses, phone numbers,
facsimile numbers and email and SMS addresses), histories, preferences, theoretical win profile, average visits per year, average bet,
type of game played and duration of play, and any other information regarding guests, customers or Casino patrons in any database of
Owner, Manager or its Affiliates and obtained or derived by Owner, Manager or its Affiliates from guests, customers or Casino
patrons of the Managed Facilities or any facility associated with the Managed Facilities (including restaurants, golf courses and spas).
“ Guest Room ” shall mean each rentable unit in the hotel in question consisting of a room or suite of rooms generally used for
overnight guest accommodations, entrance to which is controlled by one key (including adjacent rooms with connecting doors that can
be locked and rented as separate units, which shall be deemed to be separate Guest Rooms).
“ Hardware ” shall mean all computer and telecommunications equipment, including routers, servers, circuits, portals and
networks, used in the Operation of the Hotel.
“ Hotel ” shall mean the hotel and related facilities located on the Managed Facilities Lands as determined in accordance with the
Collaboration Agreement, as same may be modified from time to time and will include any Managed Facilities Amenities within the
Hotel.
“ Hotel Base Fee ” shall mean two percent (2%) of Hotel Gross Operating Revenues.
“ Hotel Gross Operating Profit ” shall mean, with respect to any period of time, the amount by which Hotel Gross Operating
Revenue exceeds Hotel Operating Expenses for such period.
13
“ Hotel Gross Operating Revenue ” shall mean, with respect to any period of time, the sum of all receipts, revenue and income of
any kind derived directly or indirectly from the Operation of the Hotel, and all departments and parts thereof, and properly attributable
to such period (including rental payments, revenue shares, license fees or other payments arising from leases, licenses, concessions
and other agreements related to operation by others of Managed Facilities Amenities, but not the gross receipts of such operations),
determined in accordance with the Uniform System, less Bad Debts. Hotel Gross Operating Revenue shall include (a) rental of Hotel
Guest Rooms and the operation of all banquet, catering and room service functions at the Hotel; (b) revenues from Hotel retail sales,
including Hotel gift shops and arcades; (c) revenues from admission fees, membership fees or similar fees charged by the Hotel;
(d) revenues from Hotel Amenities; (e) vending machines (subject to sub-section (x) below), health club membership fees and food
and beverage sales (including off-site sales); (f) any telephone charges; (g) the Retail Value of any Complimentaries ; (h) receipts
representing accounts receivable previously deducted as actual bad debts; (i) security and other deposits not refunded; (j) proceeds, if
any, from Business Interruption Insurance or other loss of income insurance; and, (k) amounts recovered in any legal action or
proceeding or settlement thereof relating to revenues generated from the activities in the foregoing clauses (a) through (j). For the
purpose of calculating the Hotel Base Fee, Hotel Gross Operating Revenue shall expressly exclude the following, as applicable:
(A) Taxes imposed by a Governmental Authority and collected directly from patrons or guests, or as a part of the sales price of
any goods, services, or displays, including gross receipts, admission, cabaret and similar Taxes;
(B) Receipts from the financing, sale or other disposition of capital assets and other items not in the ordinary course of the
Hotel’s operations and income derived from securities and other property acquired and held for investment;
(C) Any Condemnation Award;
(D) Proceeds of any insurance (other than proceeds from Business Interruption Insurance or other loss of income insurance);
(E) Tips and gratuities paid to Hotel Personnel;
(F) Interest or other investment income on amounts held in the Hotel Operating Account, Reserve Fund or any other Bank
Account;
(H) Investment tax credits or other income tax benefits;
(I) Receipts from vending and coin operated machines to the extent such receipts are paid over to Persons owning or providing
such machines;
(J) Discounts or credits for any goods or services provided by Manager; and,
(K) The amount by which any revenue transaction is reduced by any charge card or credit card fees or commissions.
“ Hotel Guest Rooms ” shall mean all Guest Rooms located in the Hotel.
“ Hotel Incentive Fee ” shall mean five percent (5%) of Hotel Gross Operating Profits, if any, for each Fiscal Year.
14
“ Hotel Management Fees ” shall mean collectively, the Hotel Base Fee and Hotel Incentive Fee.
“ Hotel Operating Account ” shall have the meaning set forth in Section 6.4.1.
“ Hotel Operating Expenses ” shall mean, with respect to any period, all ordinary and necessary expenses incurred in the
Operation of the Hotel in accordance with this Agreement, and as determined in accordance with the Uniform System, including all
(a) Hotel Personnel Costs; (b) expenses for Maintenance and Repair for the Hotel; (c) expenses for Hotel utilities; (d) costs of all
goods, merchandise or services sold at or from the Hotel; (e) costs and expenses incurred in the hiring of performers, entertainers,
musicians, speakers, and in the rental of music program services and loudspeaker systems for the Hotel; (f) any expenditures intended
to increase the security of the Hotel and its guests, occupants and invitees; (g) administrative expenses, including all costs and
expenses relating to the Bank Accounts, Operating Statements and the Annual Operating Statement; (h) costs and expenses for
marketing, advertising and promotion of the Hotel; (i) all Hotel Unallocated Expenses, and Reimbursable Expenses or Centralized
Service Charges with respect to the Operation of the Casino to the extent approved in the Business Plan; (j) cost of Supplies;
(k) insurance premiums paid for any insurance policies maintained with respect to the Hotel (other than property insurance premiums);
(l) costs and expenses relating to any service, maintenance, management or other contracts for the Hotel; (m) fees and costs for
professional services, including the fees and expenses of attorneys and accountants to the extent relating to operational issues (rather
than the business of Owner); (n) all license and permit fees for the Hotel; (o) insurance premiums paid for any property insurance
policies maintained with respect to the Hotel; (p) Hotel Base Fee; provided, however , that Hotel Base Fee shall be paid in the order of
priority set forth in Section 6.4.4; and, (q) Owner’s general overhead costs to the extent that they relate to expenses incurred in the
Operation of the Hotel and are provided for in the Business Plan. The following are expressly excluded from the Hotel Operating
Expenses: (A) Taxes (other than employment taxes included in Hotel Personnel Costs); (B) any Reserve Fund Contributions and any
expenditures for Routine Capital Improvements or Major Capital Improvements; (C) costs for the rental of real or personal property
(except, with respect to personal property, rentals incurred directly in connection with revenue generating activities); (D) any
depreciation and amortization of capital assets; (E) Owner’s general overhead costs to the extent not provided for in the Business Plan;
(F) for the purpose of calculating the Casino Incentive Fee, the amount by which any revenue transaction is reduced by any charge
card or credit card fees or commissions; (G) fees and costs for professional services, including the fees and expenses of attorneys,
accountants and appraisers, incurred directly or indirectly in connection with any category of expense that is not itself a Hotel
Operating Expense; (H) any Owner Disbursement; and, (I) the Hotel Incentive Fee.
“ Hotel Payroll Account ” shall have the meaning set forth in Section 6.4.1.
“ Hotel Personnel ” shall mean all Individuals performing services in the name of the Hotel at the Hotel during the Operating
Term (or in connection with the Pre-Opening Services prior to the Operating Term), whether such Individuals are employed by
Manager or an Affiliate of Manager, Owner, or a contractor providing labor to the Hotel, including the Senior Executive Personnel or
Corporate Personnel.
15
“ Hotel Personnel Costs ” shall mean all costs and expenses associated with the employment or termination of Hotel Personnel,
including recruitment expenses, the costs of moving Senior Executive Personnel, their families and their belongings to the area in
which the Hotel is located at the commencement of their employment at the Hotel, compensation and benefits, bonuses, training costs,
employment taxes and severance payments, all in accordance with Applicable Laws and such other policies as may be established
pursuant to this Agreement. Manager shall have the right to allocate the services and time of any Personnel between the Hotel and the
Casino and the compensation and other costs of such Personnel shall be allocated on a fair and consistent basis.
“ Hotel Unallocated Expenses ” shall mean a pro rata portion allocated to the Hotel of the expenses of the Managed Facilities
that practicably can not attributable to either the Hotel or the Casino (such as certain general and administrative expenses), as and to
the extent agreed upon by Owner and Manager as part of the annual Business Plan.
“ Ho Tram Lands ” shall have the meaning set forth in Recital A.
“ Impact Period ” shall mean any period during which all or portions of the Hotel Guest Rooms or other Managed Facilities are
unavailable to the general public for rental or use, or during which services at the Managed Facilities cannot be performed, supplied or
made available to the general public because of an Extraordinary Event or Casualty.
“ Incentive Fees ” shall mean collectively, the Hotel Incentive Fee and the Casino Incentive Fee.
“ Indemnified Party ” shall mean any Owner Indemnified Parties or Manager Indemnified Parties who are entitled to receive
indemnification pursuant to this Agreement.
“ Indemnifying Party ” shall mean any Party obligated to indemnify an Indemnified Party pursuant to this Agreement.
“ Index ” shall mean the Consumer Price Index for All Urban Consumers, All Items, for U.S. city average, as published by the
Bureau of Labor Statistics of the United States Department of Labor, using the years 1982-84 as a base of 100, or if such index is
discontinued, the most comparable index published by any governmental agency, as acceptable to Owner and Manager.
16
“ Individual ” shall mean a natural person, whether acting for himself or herself, or in a representative capacity.
“ Initial Term ” shall have the meaning set forth in Article 2.
“ Intellectual Property Rights ” shall mean any rights available under patent, copyright, trademark, service mark, trade name,
product configuration, industrial design or trade secret law or any other statutory provision or common law doctrine with respect to
designs, formulas, algorithms, procedures, methods, techniques, ideas, know-how, programs, subroutines, tools, inventions, creations,
improvements, works of authorship, other similar materials, and all recordings, graphs, drawings, reports, analyses, other writings, and
any other embodiment of the foregoing, in any form whether or not specifically listed herein, which may subsist in any part of the
world, for the full term of such rights, including any extension to the terms of such rights.
“ Interest Rate ” shall mean two percent (2%) per annum above the prime lending rate announced, from time to time, by
JPMorgan Chase Bank, N.A. in New York City or, in the event that JPMorgan Chase Bank, N.A. shall no longer announce its prime
or base lending rate as aforesaid, two percent (2%) per annum above the prime rate from time to time published in the “Money Rates”
section of The Wall Street Journal as being the “Prime Rate” unless such rate exceeds the highest rate then permitted by Applicable
Law, in which case such rate permitted by Applicable Law shall apply.
“ Investment Certificate ” shall have the meaning set forth in Recital A.
“ Jurisdictional Conflict ” shall have the meaning set forth in Section 11.5.
“ Key Executive Personnel ” shall mean the Individuals employed from time to time as the General Manager, Casino Manager,
Hotel Manager, Director of Human Resources, Director of Finance, Chief Legal and Compliance Officer and Director of Marketing,
or serve in such function or capacity, regardless of the specific titles given to such Individuals.
“ Lender ” shall mean the Person providing any Financing.
17
“ Maintenance and Repair ” shall mean all ordinary maintenance and repair work to the Managed Facilities or any part thereof
that is characterized as an ordinary expense (and not capitalized).
“ Major Capital Improvements ” shall mean (i) all repairs (to the extent such repairs are capitalized and depreciated as real
property); and, (ii) alterations, improvements, renewals, replacements or additions of or to any building comprising the Managed
Facilities that are capitalized and depreciated as real property, including to the structure, roof coverings, the exterior facade and all of
the mechanical, electrical, heating, ventilating, air conditioning, sanitation, sewage treatment and disposal, plumbing or vertical
transportation elements of such building, but expressly excluding Routine Capital Improvements. Any disputes regarding the
characterization of expenditures as either a Major Capital Improvement or a Routine Capital Improvement shall be referred to the
Operating Committee for determination in accordance with Section 17.1.1.
“ Managed Facilities ” shall mean the Casino, Hotel and Managed Facilities Amenities, located on the Managed Facilities Lands.
“ Managed Facilities Amenities ” shall mean the restaurants, lounges, nightclubs, bars, entertainment facilities, meeting and
banquet space, parking facilities, spas, health clubs, pools, beach club, retail shops, and other facilities and amenities associated with
the Hotel and Casino within the Managed Facilities Lands.
“ Managed Facilities Lands ” shall mean those lands on which the Managed Facilities are located as determined in accordance
with the Collaboration Agreement.
“ Managed Facilities Name ” shall meaning as determined in accordance with the Brand Agreement.
“ Managed Facilities Opening Date ” shall mean the date all components of the Managed Facilities (i) open for business to the
general public as a resort; and, (ii) are fully equipped, licensed and operational, all in accordance with this Agreement, as confirmed in
writing by Owner and Manager.
“ Management Fees ” shall mean collectively, the Casino Management Fee and the Hotel Management Fee.
“ Manager ” shall have the meaning set forth in the introduction to this Agreement, and shall include its successors and permitted
assigns.
18
“ Manager Confidential Information ” shall mean information relating to Manager’s business that derives value, actual or
potential, from not being generally known to others, including all Manager Proprietary Software, Customer Data, Manuals and any
documents and information specifically designated by Manager orally or in writing as confidential or which, by its nature, would
reasonably be understood to be confidential or proprietary.
“ Manager Proprietary Rights ” shall mean all rights of Manager and its Affiliates in and to the Customer Data, Manager
Proprietary Software, Manager Trademarks and Manuals, and all Intellectual Property Rights related thereto, and the rights of the
Manager to use in connection with Operating the Managed Facilities the Brand, the Brand Identification Materials (as defined in the
Brand Agreement) and the Owner’s Proprietary Rights. Manager Proprietary Rights will include the Manager’s right to the exclusive
use by the Manager and its Affiliates (and not for transfer or resale to a Third Party) of the Guest Data during the Term and to retain a
single machine readable copy of the Guest Data in an electronic format mutually acceptable to the Parties effective on the termination
of the Agreement for use (and not for sale, licensing or other disposition to any third party) in the Manager’s business outside of Asia,
Australia and New Zealand.
“ Manager Event of Default ” shall have the meaning set forth in Section Error! Reference source not found. .
“ Manager Indemnified Parties ” shall have the meaning set forth in Section 13.1.
“ Manager Proprietary Software ” shall mean proprietary applications and interface software specifically acquired, developed or
modified in whole or in part by or for Manager or its Affiliates and used in the Operation of the Managed Facilities, including (a) all
software used in connection with the technology systems; (b) all source and object code versions of Manager Proprietary Software
used or accessed by, supplied to or installed at, the Managed Facilities; (c) all related documentation, flow charts, diagrams, user
manuals, listings and service/operator manuals; and (d) all updates, enhancements, modifications, improvements and substitutions of
Manager Proprietary Software and such related items.
“ Manager Trademarks ” shall mean all current and future trademarks, trade names, service marks, designs, logos, symbols,
product configuration, industrial design, trade dress, slogans and other indicia of origin of the Manager or its Affiliates unrelated to the
Brand that may be used pursuant to the terms of this Agreement or otherwise with the prior written agreement of the Parties in
connection with marketing or promoting the Managed Facilities.
19
“ Manuals ” shall mean all written, digitized, computerized or electronically formatted manuals and other documents and
materials prepared and used by Manager or its Affiliates in operation of properties similar to the Managed Facilities and unrelated to
the Brand. Any Manuals translated into Vietnamese for the exclusive use in the Enterprise shall be separately copyrighted by Manager
as an Operating Expense and at least one copy of such Manual will be maintained at the Managed Facilities and remain the property of
the Owner.
“ Marker Policy ” shall mean the policies established from time to time by Manager regarding the extension and collection of
markers and similar negotiable instruments and evidence of indebtedness to and from gaming patrons of the Casino, which policies
shall be prepared by Manager based on (i) the target markets of the Casino; (ii) prudent business judgment; and, (iii) such changes and
refinements as Manager deems necessary or advisable to comply and conform in all respects with any Applicable Laws.
“ Moody’s ” shall mean Moody’s Investors Service Inc.
“ Mortgage ” shall mean any mortgage, deed of trust or similar document or instrument (whether in the form of a lien or transfer
of title) that encumbers any assets relating to the Managed Facilities or the Site (including any leasehold interest) or any portion
thereof or interest therein that constitute a real property interest.
“ Negligence ” shall mean an act or omission committed by Manager or its Affiliates of that care an ordinary prudent person
would exercise in the same or similar situation, in the performance of Manager’s duties under this Agreement (the Parties
acknowledge that Negligence is included within Gross Negligence or Willful Misconduct); provided, however , that the acts or
omissions of Hotel Personnel and Casino Personnel shall not be imputed to Manager or its Affiliates, or otherwise deemed to
constitute Manager’s Negligence, except from and after (a) an Affiliate Investment Event; and, (b) such acts or omissions resulted
from the Negligence of the Manager in hiring, training or supervising such Hotel Personnel or Casino Personnel. No settlement by
either Party in good faith of any Third Party Claims (including Third Party Claims by Hotel Personnel and Casino Personnel) shall be
deemed to create any presumption that the acts or omissions giving rise to such Third Party Claims constitute any grounds for a
Manager’s liability.
“ Operate ” shall mean to manage, operate, maintain, market, promote, and provide other management or operations services,
and the terms “ Operating ” and “ Operation ” shall be construed accordingly.
“ Operating Accounts ” shall mean collectively, the Hotel Operating Account and the Casino Operating Account.
20
“ Operating Committee ” (i) shall have the meaning set forth in the Shareholder’s Agreement during the term of such agreement;
or, (ii) shall be any such committee created by the Board of ACDL after the Shareholder’s Agreement is terminated and if there is no
such committee created, then the Board of ACDL.
“ Operating Expenses ” shall mean collectively, the Hotel Operating Expenses and the Casino Operating Expenses. In the event a
Governmental Authority of Vietnam imposes an obligation upon any Affiliate of Manager to obtain or maintain any Approval or
comply with any other Applicable Law by reason of such Affiliates ownership and control of the Manager, all costs and expenses
related thereto shall not be an Operating Expense or Reimbursable Expense.
“ Operating Guidelines ” shall mean the written policies and procedures developed and adopted by Manager with the approval of
the Owner to govern all operating processes and programs at the Managed Facilities.
“ Operating Reports ” shall have the meaning set forth in Section 7.2.
“ Operating Term ” shall mean the period from the Managed Facilities Opening Date until the expiration or termination of this
Agreement.
“ Other Site Components ” shall mean any structure or commercial activity conducted by the Owner on the Site not located
within the Managed Facilities Lands and includes any structure constructed and maintained by the Owner that facilitates ingress,
egress and use between and among such Other Site Components on the one hand and Managed Facilities on the other hand.
“ Other Resorts ” shall mean any of the four (4) other hotel and casino resort projects (with related facilities and amenities) as
contemplated by the Investment Certificate that, together with the Managed Facilities, comprise the Project.
“ Outside Commencement Date ” shall mean June 30, 2013, as may be modified by amendments to the Investment Certificate.
“ Outside Opening Date ” shall mean May 31, 2017, as may be modified by amendments to the Investment Certificate.
“ Owner ” shall have the meaning set forth in the introduction to this Agreement, and shall include its successors and permitted
assigns.
21
“ Owner Confidential Information ” shall mean information relating to Owner’s business that derives value, actual or potential,
from not being generally known to others, including all Owner Proprietary Software, Guest Data and any documents and information
specifically designated by Owner orally or in writing as confidential or which, by its nature, would reasonably be understood to be
confidential or proprietary; provided, however , that such Owner Confidential Information shall not include any Manager Confidential
Information.
“ Owner Event of Default ” shall have the meaning set forth in Section 16.1.
“ Owner Indemnified Parties ” shall have the meaning set forth in Section 13.2.
“ Owner Information ” shall have the meaning set forth in Section 11.2.
“ Owner Proprietary Rights ” shall mean all rights of Owner and its Affiliates, including the Brand and Brand Identification
Materials as defined and governed by the Brand Agreement, Guest Data, Owner Trademarks, Owner Proprietary Software and all
Intellectual Property Rights related thereto.
“ Owner Proprietary Software ” shall mean proprietary applications and interface software specifically acquired, developed or
modified in whole or in part by or for Owner or its Affiliates, including (a) all software used in connection with the technology
systems; (b) all related documentation, flow charts, diagrams, user manuals, listings and service/operator manuals; and (c) all updates,
enhancements, modifications, improvements and substitutions of Owner Proprietary Software and such related items.
“ Owner Trademarks ” shall mean all current and future trademarks, trade names, service marks, designs, logos, symbols,
product configuration, industrial design, trade dress, slogans and other indicia of origin of the Owner or its Affiliates related to the
Brand that may be used pursuant to the terms of any agreement between the Owner and the owner of the Brand or otherwise with the
prior written agreement between the Owner and the owner of the Brand in connection with marketing or promoting the Managed
Facilities.
“ Ownership Interests ” shall mean all forms of ownership interests in an Entity, whether legal or beneficial, voting or
non-voting, including stock, partnership interests and limited liability company memberships, and all options, warrants and
instruments convertible into such other interests.
22
“ Parent Company ” shall mean an Entity that holds fifty-one percent (51%) or more of the Ownership Interests of another
Entity, whether directly or indirectly through an Ownership Interest in one or more other Entities holding an Ownership Interest in
such Entity.
“ Party ” or “ Parties ” shall have the meaning set forth in the introduction of this Agreement.
“ Performance Test ” shall have the meaning set forth in Section 16.4.
“ Permitted Investments ” shall mean collectively, the following short term liquid investments: (i) any United States Treasury
obligation; (ii) any obligation of a United States federal agency; (iii) a money market mutual fund that invests solely in other Permitted
Investments; (iv) any certificate of deposit up to US$100,000.00 (as such amount shall be increased annually by the Index on January
1 of each year following the Effective Date) issued by, or a savings or other interest-bearing account with any of the fifty (50) United
States federally-chartered banks with the greatest total assets; (v) any commercial paper issued by an issuer rated “Prime-1” by
Moody’s or “A-1” by S&P; and (vii) any other investment proposed by Owner and approved by Manager. All Permitted Investments
shall be subject to the requirements of the Applicable Law of Vietnam and the Owner’s prior contractual commitments.
“ Person ” shall mean an Individual or Entity (as the case may be).
“ Personnel ” shall mean collectively, the Hotel Personnel and the Casino Personnel.
“ Personnel Costs ” shall mean collectively, the Hotel Personnel Costs and the Casino Personnel Costs.
“ Planning and Budgeting Procedures ” shall have the meaning set forth in Section 6.1.1.
“ Pre-Opening Business Plan ” shall have the meaning set forth in Section 10.1.
“ Pre-Opening Services ” shall have the meaning set forth in 10.3.
23
“ Prohibited Person ” shall mean any Person who (a) is generally recognized in the community as being a Person of ill repute or
bad moral character or is in any other manner a Person with whom a prudent business person would not wish to associate in a
commercial venture; (b) has been convicted of a Serious Crime, or is in control of or controlled by Persons who have been convicted
of a Serious Crime; or, (c) is otherwise unsuitable or unsavory and by reason thereof could (i) jeopardize the Hotel’s or Casino’s
Investment Certificate, liquor license or any other Approvals required to Operate the Hotel or Casino; (ii) jeopardize any Approvals
held or proposed to be held by Owner or Manager or any of their Affiliates that may be granted by any of the Gaming Authorities;
(iii) cause Owner, Manager or any of their Affiliates to violate any Applicable Laws enacted by any of the Gaming Authorities or any
Sanction Laws; or, (iv) cause any of Owner’s, Manager’s or any of their Affiliate’s assets or interests to be subject to any fines,
penalties, sanctions, confiscation or similar liability or action under any Sanction Laws. Any disputes regarding a Prohibited Person
shall be referred to the Operating Committee for determination in accordance with Section 17.1.
“ Project ” shall mean the approximately 169-hectare, 9,000-room luxury hotel resort and casino project comprised of the
Managed Facilities, Other Site Components and the Other Resorts, including retail, conference, entertainment and other facilities, to
be located on the Ho Tram Strip in the Ba Ria-Vung Tau province in southern Vietnam and expected to be completed in several
phases as required by the Investment Certificate.
“ Qualified Person ” shall mean an independent, neutral and impartial Individual having not less than ten (10) years hospitality
and/or gaming industry experience in the area of Operating expertise on which the dispute is based. An Individual shall be excluded as
a Qualified Person if, currently or within the three (3) years prior to the date of selection of such Individual as an arbitrator under
Article 17, the Individual: (i) is, or has been, an employee of Manager or Owner, or any of their respective Affiliates; (ii) is, or has
served as, a consultant to either Manager or Owner, or any of their respective Affiliates; and/or (iii) is, or has been, the owner of any
debt or equity position in the Managed Facilities, Manager or Owner, or any of their respective Affiliates, excluding an Individual who
owns as a passive investment not more than US$25,000.00 (or foreign equivalent), as such amount shall be increased annually by the
Index on January 1 of each year following the Effective Date, of the outstanding capital stock of a corporation, in the aggregate, if
such capital stock is a security which is actively traded on an established national or international securities exchange.
“ Related Contracts ” shall have the meaning set forth in Section 18.3.13.
“ Reimbursable Expenses ” shall mean expenses and out-of-pocket costs (with no mark up or profit to Manager) incurred by
Manager or its Affiliates in performing Manager’s services in relation to the Managed Facilities in accordance with the Business Plan
or as otherwise approved in writing by the Owner.
“ Renewal Term ” shall have the meaning set forth in Article 2.
24
“ Reserve Fund Contribution ” shall be calculated as follows:
One percent (1%) of Gross Operating Revenues from the Managed Facilities Opening Date through the end of the first (1 st ) Full
Fiscal Year of the Operating Term;
Two percent (2%) of Gross Operating Revenues from the commencement of the second (2 nd ) Full Fiscal Year through the end
of the second (2 nd ) Full Fiscal Year of the Operating Term;
Three percent (3%) of Gross Operating Revenues from the commencement of the third (3 rd ) Full Fiscal Year through the end of
the third (3 rd ) Full Fiscal Year of the Operating Term;
Four percent (4%) of Gross Operating Revenues from the commencement of the fourth (4 th ) Full Fiscal Year through the end of
the fourth (4 th ) Full Fiscal Year of the Operating Term; and
For all Fiscal Years thereafter of the Operating Term, such other amount as determined in an approved Business Plan, provided,
however, that the Reserve Fund in any year shall be capped at an amount equal to the total of the amounts paid into the Reserve
Fund in the previous 3 years plus the amount required to be paid into the Reserve Fund in the current year; and provided further
that the Parties may declare an amount in the Reserve Fund as excess and distribute such declared excess as provided in
Section 6.4.4 of this Agreement.
“ Reserve Fund ” shall have the meaning set forth in Section 6.4.1.
“ Restoration ” shall mean the repair, restoration, replacement or rebuilding of the Managed Facilities, in accordance with the
Standards as approved by Manager.
“ Retail Value ” shall mean the price for any goods or services provided to customers free of charge, other than any gaming
incentive. For greater certainty, the Retail Value will not necessarily be the full value that would be charged to a paying customer for
the service. At the time of Owner’s review of the Business Plan, Manager shall provide Owner with the policies that Manager
proposes with respect to establishing the pricing for each category of goods or services that may be provided to customers free of
charge. Manager and Owner shall review and determine such policies. Any disputes as to the reasonableness of such policies shall be
referred to the Operating Committee for determination in accordance with Section 17.1.
25
“ Routine Capital Improvements ” shall mean all maintenance, repairs, alterations, improvements, replacements, renewals and
additions to the Managed Facilities or any part thereof (including replacements, renewals and additions of FF&E, exterior and interior
painting, resurfacing of walls and floors, resurfacing parking areas and replacing folding walls) that are capitalized as real property
and not depreciated as real property. For avoidance of doubt, Routine Capital Improvements expressly exclude Maintenance and
Repair and Major Capital Improvements.
“ Rules ” shall have the meaning set forth in Section 17.1.1.
“ S&P ” shall mean Standard & Poor’s Corporation.
“ Sanction Laws ” shall mean all present and future Applicable Laws of (i) the United States of America, (ii) any Governmental
Authority having jurisdiction over Manager or any of its Affiliates as of the Effective Date, or (iii) any Governmental Authority
having jurisdiction over Manager or any of its Affiliates that meets the standards of the Nevada Gaming Authorities, that prohibit or
restrict Manager or an Affiliate from entering into this Agreement or performing any of its obligations hereunder, with respect to the
Person in question, including (a) The United and Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act, (b) The Trading with the Enemies Act, (c) all rules and regulations issued by the U.S. State Department or
U.S. Treasury Department’s Office of Foreign Assets Control, and (d) Executive Orders 13224 issued by the President of the United
States, and similar executive orders.
“ SEC ” shall have the meaning set forth in Section 19.8.1.
“ Security Interest ” shall mean any security interest, collateral assignment, pledge or similar document or instrument that
encumbers any assets relating to the Managed Facilities (or any portion thereof or interest therein) that constitutes a personal property
interest (including all Supplies located at or used in the Operation of the Managed Facilities, any charter capital or accounts
receivable, the Bank Accounts and Owner’s rights under this Agreement).
“ Senior Executive Personnel ” shall mean the Individuals employed from time to time as the General Manager, Casino Manager,
Hotel Manager, Director of Marketing, Director of Human Resources, Director of Finance, Director of Engineering, Director of
Operations, Chief of Security, Chief Legal and Compliance Officer and Executive Chef, or serving such functions, regardless of the
specific titles given to such Individuals.
“ Serious Crime ” shall mean a crime punishable (i) as a felony in the United States, an indictable offense in Canada or any
equivalent thereof in any other applicable jurisdiction; (ii) a crime of moral turpitude; and/or (iii) payment of a fine or penalty in an
amount equal to or more than US$100,000.00 (or foreign equivalent), as such amount shall be increased annually by the Index on
January 1 of each year following the Effective Date.
26
“ Shareholder Agreement ” shall be that certain Shareholder Agreement dated May _____ , 2011, by and among ACDL,
Harbinger II S.a.r.l., Blue Line ACDL, Inc., and Breakaway ACDL, Inc., and PNK Development 18, LLC.
“ Shared Expenses ” shall have the meaning set forth in Section 6.10.
“ SIAC ” shall mean the Singapore International Arbitration Centre.
“ Site ” shall mean the Zone on the Ho Tram Lands upon which the Managed Facilities are located.
“ Software ” shall mean all Manager Proprietary Software and any third party software used in the Operation of the Managed
Facilities.
“ Standard Change ” shall mean any change made to the Standards.
“ Standards ” shall mean the standards established initially pursuant to the Collaboration Agreement and the Brand Agreement as
same may be amended from time to time by the owner of the Brand.
“ Subordination Agreement ” shall have the meaning set forth in Section 14.1.2.
“ Supplies ” shall mean all operating supplies used in the Operation of the Managed Facilities.
“ System Improvements ” shall have the meaning set forth in Section 8.5.
“ Taxes ” shall mean all taxes imposed by any Governmental Authority, including income, profits, real property, personal
property, goods and services, gross receipts or occupancy, sales, use, transfer, purchase, franchise, stamp, ad valorem, value added,
capital stock or surplus, occupation, excise, payroll, unemployment, disability, employees’ income withholding, social security,
Casino Gaming Tax or withholding taxes.
27
“ Term ” shall have the meaning set forth in Article 2.
“ Termination Fee ” shall mean the sum of Ten Million Dollars ($10,000,000.00).
“ Testing Period ” shall have the meaning set forth in Section 16.4.
“ Third Party Claims ” shall mean all claims, demands, suits, criminal or civil actions or similar proceedings that are alleged by a
third party (including enforcement proceedings by any Governmental Authority) against any Indemnified Party, and all liabilities,
damages, fines, penalties, costs or expenses (including reasonable attorneys fees and expenses and other reasonable costs for defense,
settlement and appeal) that any Indemnified Party might incur, become responsible for, or pay out for any reason, related to this
Agreement, the development, construction, possession, ownership or Operation of the Managed Facilities.
“ Third Party Operated Areas ” shall have the meaning set forth in Section 6.9.1.
“ Third Party Operating Agreements ” shall have the meaning set forth in Section 6.9.1.
“ Third Party Operators ” shall have the meaning set forth in Section 6.9.1.
“ Transfer ” shall mean as to Owner or Manager as applicable any:
(a) a disposition alone of any interest in this Agreement;
(b) a sale or lease (other than a lease of space in the Managed Facilities in the ordinary course of business) of all (and not less
than all) of the Managed Facilities, together with all of the rights of the Owner to use and access common infrastructure and other
portions of the Project as necessary for the Operation of the Managed Facilities;
(c) sale, assignment or other transfer, in whole or in part, of any Ownership Interests;
(d) merger, consolidation, reorganization or other restructuring of Ownership Interests; or,
(e) issuance of additional Ownership Interests; and,
(f) in each of paragraphs (c) through (e) above, the Transfer involves a disposition of more than fifty percent (50%) of
Ownership Interests in the Owner or Manager, as applicable, which in a single transaction or occurrence or related or unrelated series
of transactions or occurrences, results in a change of control, whether voluntary, involuntary or by operation of law.
“ Uniform System ” shall mean the Uniform System of Accounts for the Lodging Industry that is published by the Hotel
Association of New York City, Inc. and approved by the American Hotel & Motel Association, in effect at the time in question
(currently, the 10th Revised Edition, 2006).
28
“ US$ ” or “ US Dollars ” shall mean the lawful currency of the United States of America.
“ VAS ” shall mean the then applicable version of the Vietnam Accounting Standards.
“ Vietnam ” shall mean the Socialist Republic of Vietnam.
“ VND ” shall mean the lawful currency of Vietnam.
“ Working Capital ” shall mean funds made available for operation of the Managed Facilities excluding the Bankroll of the
Casino in the amount prescribed in the Pre-Opening Business Plan and thereafter annually in the approved Business Plan for each
Fiscal Year.
1.2 Interpretation . In this Agreement, save and except as otherwise expressly provided:
(a) all words and personal pronouns relating thereto shall be read and construed as the number and gender of the
party or parties required and the verb shall be read and construed as agreeing with the required word and pronoun;
(b) the division of this Agreement into Articles and Sections and the use of headings is for convenience of
reference only and shall not modify or affect the interpretation or construction of this Agreement or any of its provisions;
(c) when calculating the period of time within which or following which any act is to be done or step taken
pursuant to this Agreement, the date which is the reference day in calculating such period shall be excluded. The words “day” and
“days” refer to calendar days unless otherwise stated. The words “month” and “months” refer to calendar months unless otherwise
stated. If the last day of such period is not a Business Day, the period in question shall end on the next Business Day;
(d) unless specified otherwise, all references to Article, Section and clause numbers and letters refer to Articles,
Sections and clauses of this Agreement, all references to Recitals are to the Recitals of this Agreement and all references to Exhibits
refer to the Exhibits attached hereto;
(e) the words “herein,” “hereof,” “hereunder,” “hereto” and words of similar import refer to this Agreement as a
whole and not to any particular Article or Section hereof; and
29
(f) the use of the words “include,” “includes,” and “including” followed by one or more examples is intended to
be illustrative and is not a limitation on the scope of the description or term for which the examples are provided.
Exhibits. The following exhibits are attached hereto and are incorporated in and are deemed to be an integral part of this Agreement:
Exhibit A-
Investment Certificate
Exhibit B-
Financing
Exhibit C-
Section 19.10 Legal Compliance Requirements
ARTICLE 2
TERM
The “ Term ” of this Agreement shall consist of an Initial Term and the Renewal Term. The “ Initial Term ” shall begin on the
Effective Date and shall continue until 11:59 p.m. (local time at the Managed Facilities) on the fiftieth (50 th ) anniversary from the
date of issuance of the Investment Certificate. Thereafter, this Agreement shall automatically, and with no further action required by
Owner or Manager, be renewed on the same terms and conditions for an additional successive twenty (20) year term (the “ Renewal
Term ”) if, and only if, Owner is able to extend the original fifty (50) year term of the Investment Certificate for an additional twenty
year period.
ARTICLE 3
GRANT OF AUTHORITY
3.1 Grant of Authority .
3.1.1 Engagement of Manager . Subject to the terms of this Agreement, Owner hereby engages Manager, and Manager
hereby accepts such engagement, to manage all aspects of the Enterprise, including the day-to-day Operations of the Managed
Facilities, for and on behalf of Owner and as the exclusive operator of the Managed Facilities during the Operating Term.
30
3.1.2 General Grant of Authority . Subject to the terms of this Agreement, Owner hereby grants to Manager, and
Manager hereby accepts, the right, authority and obligation to take all such actions for and on behalf of Owner that Manager
reasonably deems necessary or advisable to Operate the Managed Facilities in accordance with the Standards, the Investment
Certificate, Applicable Law and the terms of this Agreement. Manager covenants that, at all times during the Term, Manager shall use
commercially reasonable efforts to Operate the Managed Facilities (i) in the best interest of the Owner, Managed Facilities and
competitively with any other operations of Manager and/or Manager’s Affiliates; (ii) in a manner that maximizes the long-term
profitability of the Managed Facilities; (iii) in accordance with the reasonable requirements of any carrier of insurance on the Managed
Facilities or any part thereof; (iv) in compliance with applicable Business Plans, Operating Guidelines, Compliance Systems; and, (v)
subject to the limitations prescribed in Section 3.2 hereof. The items listed in Paragraphs (i) through (iv) of this Section 3.1.2 are
collectively referred to herein as the “ Operating Goals. ”
3.1.3 Specific Actions Authorized by Owner . Without limiting the generality of Sections 3.1.1 and 3.1.2 or any other
authority granted to Manager under this Agreement, Owner’s general grant of authority under Section 3.1.1 shall specifically include
the right, authority and obligation of Manager, except as otherwise provided and subject to the provisions of this Agreement and any
power of attorney required by Applicable Law in order to accomplish the Owner’s delegation of authority to Manager as set forth in
this Agreement, including the Operating Goals, to take such actions as it deems reasonably necessary to:
(a) Establish, implement and monitor (i) rates and charges for the usage of all Guest Rooms and other Hotel
facilities and services; (ii) policies with respect to discounted and complimentary room, food and beverage and other services at the
Hotel; and, (iii) billing policies (including entering into agreements with credit card organizations);
(b) Establish, implement and monitor gaming systems, management information systems, surveillance and other
monitoring activities, floor and entrance security, cage operations, casino accounting and the management of Gaming Activities and
the day-to-day Operation and financial affairs of the Casino;
(c) Make all decisions regarding granting of Complimentaries and extensions of credit and collections, and
establish a Marker Policy with regard thereto;
(d) Use commercially reasonable efforts, in the name and on behalf of Owner, to collect all revenue from the
Operation of the Managed Facilities, and, where appropriate, issue receipts with respect to any funds received;
31
(e) Establish an accounting system, internal controls and reporting systems that are (i) consistent in all material
respects with customary policies and procedures used by Manager or its Affiliates engaged in such businesses; and, (ii) in compliance
with the Applicable Law, including all Gaming Laws;
(f) Use commercially reasonable efforts, in the name and on behalf of Owner, to collect and remit to
Governmental Authorities all sales, occupancy, value added, use, excise, gaming and similar Taxes to be collected by the Managed
Facilities directly from guests or customers;
(g) Once established by the Owner, administer in the name of and on behalf of the Owner, all Bank Accounts as
more specifically set forth herein;
(h) Manage the Managed Facilities’ Personnel, payroll systems, and human resources systems and policies, as
more specifically set forth herein;
(i) Perform or cause to be performed, in the name and on behalf of Owner, all Maintenance and Repair for the
Managed Facilities, and all capital improvements with respect to the Managed Facilities, as more specifically set forth herein;
(j) Select and specify from time to time Individuals, manufacturers, wholesalers, vendors, suppliers, companies
or businesses, including Affiliates of Manager, to furnish Supplies, FF&E, Gaming Equipment, services and other needs of the
Managed Facilities businesses and operations;
(k) Purchase or lease, in the name and on behalf of Owner, all FF&E for the Operation of the Managed Facilities;
(l) Purchase, lease or license, in the name and on behalf of Owner, all Software, Hardware, and
telecommunications connections required for the Operation of the Managed Facilities;
(m) Negotiate, enter into, administer, amend and terminate, in the name and on behalf of Owner, all
(i) agreements, purchase orders and similar arrangements for the purchase of all Supplies and services; and, (ii) licenses for the right to
use any third party proprietary property for the Operation of the Managed Facilities;
(n) Negotiate, enter into, administer, amend and terminate, in the name and on behalf of the Owner, all contracts
for the use of Hotel Guest Rooms, banquet, meeting and other Managed Facilities and services;
32
(o) Except as otherwise provided in this Agreement, select tenants and operators, and negotiate, execute and
administer leases, licenses and concessions and other agreements for Managed Facilities Amenities;
(p) Appoint counsel, commence, prosecute, defend, control and settle, in the name and on behalf of Owner, the
Manager and the Managed Facilities, as the circumstances require, all legal actions and proceedings (i) to collect charges, rent or other
revenue from the Operation of the Managed Facilities; (ii) to evict or remove guests, tenants or other Persons occupying the Managed
Facilities; (iii) to terminate any lease, license or concession agreement for default thereunder by a tenant, licensee or concessionaire;
(iv) to enforce all rights under any agreements entered into by Manager, in the name and on behalf of Owner, pursuant to this
Agreement; and, (v) with respect to any Third Party Claim by or against any Personnel;
(q) Appoint counsel, commence, prosecute, defend and settle and control all legal actions and proceedings (i) in
which any Manager Indemnified Party is a named party (unless Owner has agreed to indemnify such Manager Indemnified Party, in
which case Owner shall control such legal action or proceeding); and, (ii) that relate to policies, procedures or business practices of
Manager or its Affiliates (regardless of whether such Manager Indemnified Party has requested or is receiving indemnification in a
matter in which Owner shall not be responsible for any portion (allocated or otherwise) of the costs and expenses with respect thereto);
further provided, however , that Owner shall be entitled to engage separate counsel on Owner’s behalf of Owner’s sole cost and
expense;
(r) Execute credit obligations, in the name and on behalf of Owner, in connection with trade payables for goods
and services incurred in the ordinary course of business in the Operation of the Managed Facilities and as otherwise permitted under
this Agreement;
(s) Take such actions within Manager’s reasonable control as Manager deems necessary or advisable to comply
with all Applicable Laws with respect to the Operation of the Managed Facilities, the Investment Certificate (to the extent it relates to
the Managed Facilities and is within Manager’s reasonable ability to cause compliance) and the terms of all insurance policies
provided to Manager, or to contest, with the Owner’s cooperation as reasonably necessary, the validity or application of any such laws
or requirements, including any such laws or requirements that could affect in any manner any gaming license or other Approval of
Owner or Manager. The Owner shall notify the Manager in writing of any action which the Owner reasonably believes must be taken
to ensure that the Managed Facilities are operated in accordance all Applicable Laws.
33
(t) Establish and maintain a plan and program to market the Managed Facilities, including identification of target
markets advertising, promotions, joint and cross marketing, sponsorships, engagement of advertising agencies for the promotion of the
Managed Facilities, preparation of marketing materials, and direction of all public relations events and efforts for the Managed
Facilities and in connection with the Project, which plan and program Manager shall be obligated to implement in accordance with the
approved Business Plan;
(u) Establish amusements and entertainment policies (including pricing);
(v) Operate and manage the Managed Facilities under the Brand;
(w) Subject to Applicable Law, arrange and direct junkets, Complimentaries, Marker Policies, win payments and
similar arrangements; and
(x) Take such actions as Manager deems necessary or advisable to maintain the Standards, and perform all other
duties and obligations required or permitted to be performed by Manager under this Agreement.
3.2 Limitations on Grant of Authority . Notwithstanding the grant of authority given to Manager in Section 3.1, and
without limiting any of the other circumstances under which Owner’s approval is specifically required under this Agreement, except
as provided in a Business Plan approved by Owner, no act shall be taken, sum expended, or obligation incurred for or on behalf of
Owner and the Owner shall have the exclusive and final authority in its sole discretion to approve on a case-by-case basis, all matters
with respect to:
(a) Formation of any business organization, association or other entity in connection with the operation of any
aspect of the Managed Facilities;
(b) Appointing or engaging counsel, commencing, prosecuting, defending, controlling and settling, in the name
and on behalf of Owner, the Manager and the Managed Facilities, as the circumstances require, all legal actions and proceedings,
including the prosecution or defense of any Third Party Claim arising out of the Operation of the Managed Facilities, which involves
(i) a claim of fraud, misrepresentation, any act of dishonesty or moral turpitude or a violation of any employment or regulatory law; or
(ii) (A) estimated legal fees, costs and expenses exceeding the amount as determined in the approved Business Plan, but in no event
less than FIFTY THOUSAND DOLLARS (US$50,000.00); and, (B) a recovery by or liability of the Owner exceeding the amount as
determined in the approved Business Plan, but in no event less than ONE HUNDRED THOUSAND DOLLARS (US$100,000.00)
(the amounts set forth herein as shall be increased annually by the Index on January 1 of each year following), that is not fully covered
(other than deductible amounts) by insurance or as to which the insurance company denies coverage or “reserves rights” as to
coverage, except with respect to Manager’s rights of defense provided for in Section 3.1.3(o) and (q); provided, however, Manager
shall be obligated to administer all such claims unless otherwise directed by Owner request;
34
(c) The execution of any equipment lease (or series of leases relating to the same or similar equipment) or other
contract (or series of contracts relating to the same or similar goods or services) that requires aggregate annual payments in excess of
US$50,000.00 (as such amount shall be increased annually by the increase in the Index on January 1 of each year following the
Effective Date) or that has a term of more than two (2) years and cannot be cancelled on thirty (30) days’ notice without the payment
of any premium, fee or penalty, other than contracts for Supplies; provided, however, the amount specified in this clause (c) shall be
increased on January 1 of each Fiscal Year by the percentage increase in the Index since January 1 of the prior Fiscal Year;
(d) The borrowing of any money or execution of any credit obligation in the name and on behalf of Owner as
obligor and/or guarantor (as to which Owner’s approval may be given or withheld in Owner’s sole discretion); provided, however ,
that, the foregoing shall not be deemed to restrict Manager from issuing markers and similar negotiable instruments and evidence of
indebtedness or incurring trade payables for goods and services incurred in the Operation of the Managed Facilities in accordance with
Section 3.1.3(r); and,
(e) Select tenants and operators, and negotiate, execute and administer leases, licenses and concessions and other
agreements for any Third Party Operated Areas;
(f) After reasonable notice to the Manager; Manager’s refusal or failure to act; a determination of the Executive
Committee sustaining Owner’s position if Manager disputes such action or correction; and, Manager’s continued refusal to or failure
to act, implementing any action or correcting any omission as necessary to avoid a violation of the Investment Certificate, any Gaming
Law or any other Applicable Law that may have a material adverse impact on the Operations of the Casino or Hotel, or to the
Managed Facilities; and,
(g) Any action required to promptly address the failure of the Manager to diligently act in accordance with the
provisions of Section 6.1.5 of this Agreement in the case of fiscal exigencies. The Owner shall give the Manager as much notice of the
actions it proposes Manager to take as is reasonable in the circumstances. The Owner shall only take action itself if the Manager
refuses to do so after the Executive Committee has sustained Owner’s position; or
35
(h) The necessity in the absence of a contingency plan in the then approved Business Plan, of any action required
to promptly address a failure of the Manager to diligently act to deal with an imminent risk of loss to the Managed Facilities caused by
an Extraordinary Event. The Owner shall give the Manager as much notice of the actions it proposes Manager to take as is reasonable
in the circumstances. The Owner shall only take action itself if the Manager refuses to do so after the Executive Committee has
sustained Owner’s position.
3.3 Owner Approval Procedures. The Parties agree to formulate and document procedures which Manager and a
designated representative of Owner will follow if Owner’s approval and signature is required for: (i) any matter in Section 3.1.3
requiring the approval and signature of Owner in accordance with the Applicable Law of Vietnam; and, (ii) any matter requiring
Owner’s approval, including but not limited to those identified in Section 3.2. The Parties agree to use their best efforts to efficiently
prepare, submit, review and process matters identified for Owner approval in accordance with this Section 3.3. The procedures
provided for in this Section 3.3 shall be in accordance with the Applicable Law of Vietnam. From time to time, either Party may
suggest changes to such procedures, to expedite matters, however the changes to the procedures will only implemented after the
Parties have agreed to adopt those changes.
ARTICLE 4
FEES AND EXPENSES
4.1 Management Fees . During the Operating Term, Owner shall pay the Hotel Base Fee monthly in arrears based on the
Hotel Gross Operating Revenue for the immediately preceding month and the Casino Base Fee monthly in arrears based on the Casino
Gross Operating Revenue for the immediately preceding month. Owner shall pay, in accordance with the payment provisions set forth
in Section 6.4.4, the Hotel Incentive Fee and the Casino Incentive Fee monthly in arrears based on the cumulative year-to-date Casino
Gross Operating Profits or Hotel Gross Operating Profits, as applicable, accrued from the beginning of the applicable Fiscal Year
through the end of the immediately preceding month, after taking into account prior Incentive Fee payments for such Fiscal Year. All
Management Fees shall be set forth in the Operating Reports. Within thirty (30) days after Owner receives the Annual Operating
Statement for any Fiscal Year, Manager shall provide to Owner a reconciliation statement showing the calculation and payment of the
total Management Fees for such Fiscal Year based upon the Annual Operating Statement for such Fiscal Year, and appropriate
adjustments shall be made for any overpayment or underpayment of the Management Fees actually paid during such Fiscal Year. The
Party owing money as a result of such adjustment shall pay such amount to the other Party within thirty (30) days after such
reconciliation statement has been provided to Owner. Any disputes between the Parties regarding the calculation and payment of
Management Fees shall be referred to the Operating Committee for determination in accordance with Section 17.1.1.
36
4.2 Interest . If any fee or other amount due under this Agreement is not paid within thirty (30) days after such payment is
due, in addition to the amount due, interest for each day the amount is past due and compounded monthly, at the Interest Rate.
4.3 Payment of Fees and Expenses . The Management Fees and all other amounts payable hereunder shall be due upon
delivery of an invoice and shall be paid in immediately available funds, at the location(s) specified in the invoice. Manager shall
provide Owner with all appropriate and reasonable supporting documentation (including, where applicable, contracts, VAT receipts
and other documentation required under Applicable Law in Vietnam) to enable Owner to deduct the cost or expense in question or the
remittance of funds outside of Vietnam in compliance with all applicable currency exchange controls; provided, however, nothing
contained herein shall require Manager to disclose any Confidential Information. Manager may pay such fees and other amounts owed
to Manager or its Affiliates directly from the Operating Accounts and if sufficient funds are not then available in Operating Accounts,
Manager shall have the right to, upon thirty (30) days prior written notice to Owner, pay such amounts from the Reserve Fund, in
which case Owner shall replenish the Reserve Fund in the amount of such withdrawal by Manager within sixty (60) days after said
notice. The Manager may require that any such payments be effected through electronic debit/credit transfer of funds programs
specified by Manager from time to time, provided Manager shall pay such fees and costs and do such things as Manager deems
necessary or advisable to comply with Applicable Law.
4.4 Taxes . The Management Fees and all other costs, fees, expenses and charges payable or reimbursable pursuant to this
Agreement shall be payable net of all applicable sales taxes, value added taxes, excise taxes, goods and services taxes and other
similar taxes, if any, assessed by any Vietnamese Governmental Authority. To the extent applicable, Manager shall be responsible for
paying all taxes imposed by the Vietnamese Governmental Authorities on the income it earns under this Agreement (including,
without limitation, the Enterprise Income Tax or any similar Tax). No later than thirty (30) days after the date any payments or
reimbursements are due to Manager under this Agreement, Owner shall provide to Manager a valid receipt accurately reflecting the
amount and nature of any taxes that are withheld by Owner from these payments or reimbursements.
4.5 Currency Conversion . Unless expressly stated to the contrary, all amounts referenced in this Agreement (whether
using the dollar ($) symbol or otherwise) shall refer to United States Dollars, except if an amount referenced in this Agreement is
expressly denoted in terms of the applicable local currency. All amounts payable to Manager under this Agreement shall be payable in
US Dollars or another currency designated by Manager from time to time (provided, that, such other currency shall not have a
detrimental economic effect on Owner) and calculated and converted from VND to US Dollars (to the extent necessary) using the
selling exchange rate for VND as reported by the State Bank of Vietnam on the date such payment is due.
37
4.6 Restrictions on Payment in US Dollars . If at any time any legal restrictions are imposed upon the purchase of US
Dollars or the transfer of US Dollars from Vietnam, or the transfer or credit of US Dollars by Owner to Manager, Owner shall
promptly notify Manager, in which case Manager shall direct Owner to make payment to Manager in such other freely convertible
currency, as reasonably selected by Manager, and in such other country or jurisdiction as permitted under Applicable Laws; provided,
however, that such payment does not affect the economic interest of Manager under this Agreement and can be consummated on a
timely basis. If Manager directs Owner to make payments in another currency, then any payments shall be calculated and converted
(to the extent necessary) according to the exchange rate as reported by an authorized foreign exchange bank designated by Manager
and approved by Owner on the applicable date provided in Section 4.5. The acceptance by Manager of payment in a currency other
than US Dollars in a particular instance shall not release Owner from its obligations to make future payments in US Dollars to the
extent permitted by Applicable Law. Notwithstanding the foregoing, Owner shall use all reasonably available means to obtain any
consents or authorizations necessary to effect payment in US Dollars after receipt from Manager of all appropriate supporting
documentation necessary to allow Owner to pursue such consent or authorization, and if within six (6) months from the date Owner
receives such documentation, Owner is unable to obtain consent or authorization of a method and manner of payment reasonably
acceptable to Manager and Manager and Owner cannot agree upon another freely convertible currency which currency will not
adversely affect the economic interest of Manager under this Agreement, then Manager and Owner shall renegotiate the Incentive Fees
under this Agreement to address any actual and quantifiable financial loss to Manager from such currency exchange conversion or
other payment limitations. Any disputes between the Parties relating to the calculation and payment of Management Fees or otherwise
pursuant to this Section 4.6 shall be referred to the Operating Committee for determination in accordance with Section 17.1.
ARTICLE 5
CONSTRUCTION OF THE MANAGED FACILITIES
5.1 Construction Financing . Owner shall use commercially reasonable efforts to provide or obtain all financial and other
resources necessary to complete the development and construction of the Managed Facilities and to fund the requirements for
Working Capital and Bankroll to commence Operations in accordance with this Agreement and the Collaboration Agreement.
Manager shall not be required to provide any funds for the construction and Operation of the Managed Facilities or the Other Site
Components.
38
5.2 Construction Completion . Owner shall use commercially reasonable efforts to (a) perform all work necessary to
cause the Commencement of Construction to occur prior to the Outside Commencement Date; and, (b) perform all work necessary to
cause the Managed Facilities Opening Date to occur before the Outside Opening Date, with time being of the essence in the case of
items (a) and (b) hereof, all subject to delay caused by Manager or due to the occurrence of an Extraordinary Event; provided,
however , that (i) such delay relating to an Extraordinary Event shall not exceed one hundred eighty (180) days; and, (ii) with respect
to any delay caused by Manager, the Outside Commencement Date and Outside Opening Date shall each be extended by one day for
each day that Manager fails to timely (A) provide Owner with any approvals or information that Manager is required to provide to
Owner; or, (B) complete any task or action for Owner, each pursuant to the terms of this Agreement or the Collaboration Agreement.
5.3 Manager Suspension or Termination . Notwithstanding anything herein to the contrary, Manager shall have the right
to:
(a) Suspend performance of its obligations under this Agreement in the event any act or omission by Owner
results in the Managed Facilities Opening Date not occurring before the Outside Opening Date, such suspension being permitted for a
period that terminates thirty (30) days following notice from the Owner of a revised Outside Opening Date that Manager agrees to
accept; or,
(b) Terminate this Agreement without the payment of any termination fees (and Manager shall not be entitled to
exercise any rights and remedies that may be available to Manager in law or equity including, without limitation, the right to
damages), if, in Manager’s reasonable judgment, as of the date of termination, the Managed Facilities will not be completed to
Manager’s reasonable satisfaction and in accordance with this Agreement on before the original or any revised Outside Opening Date;
provided, however, Manager shall only be permitted to exercise such termination right no more than twelve (12) months prior to the
Outside Opening Date and no less than ten (10) months prior to the Outside Opening Date. Owner shall provide such reasonable
documents, materials and other information requested by Manager to evidence Owner’s compliance with its obligations within the
time periods set forth in Section 5.2.
ARTICLE 6
OPERATION OF THE MANAGED FACILITIES
6.1 Business Plan.
6.1.1 Proposed Business Plan . On or before sixty (60) days prior the start of each Fiscal Year, Manager shall prepare
and deliver to Owner an operating budget and plan (the “ Business Plan ”) for the next Fiscal Year, prepared in accordance with an
enterprise performance management planning and budgeting system (the “ Planning and Budgeting Procedures ”) selected by Manager
and made available to Owner, and through the application of commercially reasonable efforts and exercise of prudent business
judgment, which shall include annualized and monthly projections (as to the financial requirements) and narrative explanations of the
following items:
(a) Estimates of (i) results of Operations of the Hotel, including estimated Hotel Gross Operating Revenue, Hotel
Operating Expenses and Hotel Gross Operating Profit; (ii) average room rates; (iii) Revenue Per Available Room; (iv) total labor
costs; (v) Hotel Management Fees; and, (vi) other amounts payable under this Agreement in connection with the Operation of the
Hotel;
39
(b) Estimates of results of Operations of the Gaming Activities, including estimated Casino Gross Operating
Revenue, Casino Operating Expenses and Casino Gross Operating Profit, together with the following supporting data: (i) estimates of
total labor costs, including both fixed and variable labor; (ii) estimates of the Casino Win; (iii) estimates of Casino Management Fees;
and, (iv) projections of other amounts payable under this Agreement in connection with the Operation of the Casino;
(c) A description of proposed Routine Capital Improvements and Major Capital Improvements to be made
during such Fiscal Year and itemized estimated capital expenditures related thereto, including capitalized lease expenses and a
contingency line item, as well as, on each fifth (5 th ) anniversary of the Managed Facilities Opening Date a review and analysis of
necessary and appropriate revisions to the amount to be retained in the Reserve Fund and of the annual Reserved Fund Contribution;
(d) A statement of estimated cash flow, including a schedule of any anticipated requirements for funding by
Owner;
(e) The employment and hiring plans, a compensation plan for all Personnel by department and/or category of
employee, including a schedule of base salaries, the methodology and financial ranges for compensation incentives (e.g. bonuses) and
the employment agreements and severance arrangements applicable to Senior Executive Personnel;
(f) A description of the current status of pending suits, actions, or proceedings in which the amount of
controversy is equal to or exceeds ONE HUNDRED THOUSAND DOLLARS (US$100,000.00), and that is not fully covered (other
than deductible amounts) by insurance, or in which a party is a governmental agency, and any inquiries or investigations concerning
the Managed Facilities;
(g) A marketing, promotions and advertising plan and program;
40
(h) A summary of strategic plans and initiatives for the Managed Facilities, including anticipated costs and
benefits associated with such plans and initiatives;
(i) The Manager’s detailed responses to any specific topics concerning operations of the Managed Facilities
submitted by the Owner at least One Hundred Twenty (120) days prior to the start of the applicable Fiscal Year; and,
(j) To the extent not otherwise required pursuant to the foregoing, a description of projected expenses associated
with any anticipated Standard Changes. Notwithstanding the foregoing, except as provided in an approved Business Plan Owner shall
not be obligated to implement or fund a Standard Change if such Standard Change exceeds the Reserve Fund; provided , however , the
foregoing limitation shall not apply to any Standard Change that is required for compliance with Applicable Law or fire, health and
life safety standards.
The Parties acknowledge and agree that the Business Plan will include a contingency line item for miscellaneous
expenditures, which line item shall be subject to Owner’s approval in accordance with Section 6.1.2. Notwithstanding anything herein
to the contrary, the Business Plan for the first Fiscal Year shall be delivered to Owner on or before two hundred seventy (270) days
prior the start of the first Fiscal Year.
6.1.2 Approval of Business Plan . Owner shall review the proposed Business Plan and shall provide Manager with any
objections to such proposed Business Plan in writing, in reasonable detail, within thirty (30) days after receipt of the proposed
Business Plan from Manager. Owner shall be deemed to have approved that portion of any proposed Business Plan to which Owner
has not objected in writing within such time period. If Owner objects to any portion of the proposed Business Plan in accordance with
this Section 6.1.2, Owner and Manager shall meet and confer regarding such objections within fourteen (14) days after Manager’s
receipt of Owner’s objections, and then Manager shall submit the agreed upon written revisions to the proposed Business Plan
thereafter. Owner and Manager shall use reasonable good faith efforts to reach an agreement on the Business Plan prior to January 1 of
the applicable Fiscal Year; provided, however , with respect to the Business Plan applicable to the first Fiscal Year, Owner shall have
forty-five (45) days after receipt thereof to provide Manager with any objections and Owner and Manager shall use good faith
negotiations to agree upon the Business Plan prior to one hundred eighty (180) days in advance of the Managed Facilities Opening
Date. The proposed Business Plan, as modified to reflect the revisions either agreed to by Owner and Manager or determined by
resolution pursuant to Section 6.1.3, shall become the Business Plan for the next Fiscal Year. Owner shall act reasonably and exercise
prudent business judgment in approving, or objecting to, all or any portion of the Business Plan (including capital projects); provided ,
however , Owner shall not have approval rights over the following: (i) any expenditures that are specifically required to be made under
the terms of this Agreement and Management Fees; (ii) any expenditures mandated by Applicable Laws; and, (iii) costs and expenses
that are not within the control of Owner and/or Manager (e.g., increases in real estate and personal property Taxes, costs of utilities
and insurance premiums).
41
6.1.3 Resolution of Disputes for Business Plan . If the Parties, despite their reasonable good faith efforts, are unable to
reach final agreement on the Business Plan for any Fiscal Year by January 1 of such Fiscal Year, those portions of such Business Plan
that are not in dispute shall become effective on January 1 of such Fiscal Year and the Parties shall submit the matter(s) in dispute
(i) involving an amount in controversy of THREE HUNDRED SEVENTY-FIVE THOUSAND DOLLARS (US$375,000.00) ( as
shall be increased annually by the Index on January 1 of each year following) or less to the Operating Committee for determination in
accordance with Section 17.1; or, (ii) involving an amount in controversy of greater than THREE HUNDRED SEVENTY-FIVE
THOUSAND DOLLARS (US$375,000.00)(as shall be increased annually by the Index on January 1 of each year following) to the
Expert for determination in accordance with Sections 6.1.3.1. If such disagreement relates to a Fiscal Year after the first Fiscal Year,
the prior year’s Business Plan shall govern the items in dispute pending the resolution of such dispute, except that the budgeted
expenses provided for such item(s) in the prior year’s Business Plan (or, if earlier, the last Business Plan in which the budgeted
expenses for such disputed item(s) were approved) shall be increased by the percentage increase in the Index from January 1 of the
prior Fiscal Year (or, if applicable, each additional Fiscal Year between the prior Fiscal Year and the Fiscal Year in which there
became effective the last Business Plan in which the budgeted expenses for such disputed item(s) were approved). Upon the resolution
of any such dispute in accordance with this Agreement, such resolution shall control as to such item(s).
6.1.3.1 Expert Resolution of Business Plan Disputes . All decisions of such arbitration by Expert, absent
fraud, shall be final and binding on the Parties hereto (without appeal or review) and shall be enforceable in any court of competent
jurisdiction.
6.1.3.1.1 Selection of Expert . The complaining Party shall give written notice to the other Party that a
dispute exists. Within twenty (20) days following delivery of such notice, the Parties shall use commercially reasonable efforts to
agree upon a person to act as the Expert for the dispute in question. If the Parties are unable to agree upon a person to act as the Expert
during such twenty (20)-day period, each Party shall have ten (10) days to select a person. The two persons so selected by each Party
shall then have twenty (20) days to select a third person to be the sole Expert. If either Party fails to make its respective selection of a
person within the ten (10)-day period described above, then the other Party’s selection shall be appointed to act as the Expert. If the
two (2) persons so selected shall fail to select a third person to act as the Expert within the twenty (20)-day period described above,
then the dispute shall be resolved by an Arbitration Tribunal in accordance with Section 17.2 hereof.
42
6.1.3.1.2 Expert Resolution Process . Following selection of the Expert, each Party shall be entitled to
make written submissions to the Expert. If a Party makes any submission to the Expert, such Party shall also provide a copy of its
submission to the other Party and the other Party shall have the right to respond in writing to such submission. The Parties shall make
available to the Expert all books and records relating to the issue in dispute and shall render to the Expert any assistance requested of
the Parties. The Expert shall (i) establish a timetable for the making of such submissions and replies; and, (ii) determine the location at
which any proceeding shall be conducted.
6.1.3.1.3 Decision of Expert . The Expert shall notify the Parties in writing of his/her decision within
thirty (30) days from the date on which the Expert has been selected, or such other period as the Parties and the Expert may agree.
6.1.4 Operation in Accordance with Business Plan . Manager shall use commercially reasonable efforts and exercise
prudent business judgment to Operate the Managed Facilities in accordance with the Business Plan for the applicable Fiscal Year. If,
during the year, Manager becomes aware of any material deviation in actual results or Operations of the Managed Facilities relative to
that represented in the Business Plan, Manager shall promptly notify Owner and Manager and Owner shall use commercially
reasonable efforts to amend or modify the Business Plan as necessary to address the impact on Operations from such deviations.
Notwithstanding anything herein to the contrary, the Parties agree that Manager may with prior written notice to Owner vary from any
Business Plan as follows:
(a) Manager may apply the cost savings in one line item of the Business Plan to offset any costs increases in
another item in the Business Plan;
(b) The expenses provided for in the Business Plan for any Fiscal Year that vary based on the occupancy and use
of the Managed Facilities shall be increased accordingly to the extent that occupancy and/or use of the Managed Facilities for any
Fiscal Year exceeds the occupancy and use projected in the Business Plan for such Fiscal Year;
(c) Manager may pay all expenses that are not within the ability of Manager to control (including real estate and
personal property Taxes, utilities and insurance premiums), without reference to the amounts provided for in the Business Plan for
such Fiscal Year;
(d) Manager may make any expenditures that are reasonably required to avoid potential injury to persons or
damage to the Managed Facilities or related property, whether or not provided for, or within the amounts provided for, in the Business
Plan for such Fiscal Year; and
43
(e) To the extent not governed by the provisions of Section 3.2 of this Agreement, during a Fiscal Year the
Manager may make any expenditures in an aggregate amount in any given year not exceeding ONE HUNDRED THOUSAND
DOLLARS (US$100,000.00), that are reasonably required to comply with, or cure or prevent any violation of, any Applicable Law,
the Investment Certificate, fire and life safety standards, or to prevent or remedy any threatened or actual material breach of any
agreement affecting the Managed Facilities, whether or not provided for or within the amounts provided for in the Business Plan for
such Fiscal Year. Manager may make any other expenditures in an aggregate amount in any given year not exceeding TWO
HUNDRED FIFTY THOUSAND DOLLARS (US$250,000.00) that are reasonably required to prevent or remedy any threatened or
actual Extraordinary Event that would have a material adverse impact on the Managed Facilities or its Operations.
If there is a dispute between the Parties as to materiality of an amount under this Section 6.1.4, such dispute shall be referred to the
Operating Committee for determination in accordance with Section 17.1.
6.1.5 Amendments to Business Plan . Unless a contingency plan is included in the then approved Business Plan, the
Manager shall prepare and submit within twenty (20) days following the next calendar quarter to Owner any amendments to an
approved Business Plan necessary by reason of (i) fiscal exigencies in which the Gross Operating Profits of the entire Managed
Facilities after the first twelve months of operations have or reasonably may be expected to decline in any two consecutive calendar
quarters by an aggregate thirty percent (30%) or more from the projections in the approved Business Plan; (ii) the occurrence of any
Extraordinary Event; or, (iii) any other cause warranted in the prudent business judgment of the Manager. A proposed amendment to a
Business Plan shall be subject to review and approval by the Owner in accordance with the procedures of Article 6 of this Agreement.
6.1.6 Projections in Business Plan . Except as provided in Section 16.4, (i) neither Manager nor its Affiliates shall
have any liability whatsoever to Owner or any other Person for any divergence between such budgets and projections and actual
operating results achieved, (ii) the failure of the Managed Facilities to achieve any Business Plan for any Fiscal Year shall not
constitute a default by Manager or give Owner the right to terminate this Agreement; and, (iii) if Owner provides any such budgets or
projections to a third party (subject to the confidentiality provisions in Section 19.8), Owner shall advise such third party in writing of
the substance of the limitation on liability set forth in this Section 6.1.5. Notwithstanding anything herein to the contrary, in no event
shall this Section 6.1.5 limit Owner’s right to bring a claim against Manager for breach of this Agreement.
44
6.2 Maintenance and Repair and Capital Improvements .
6.2.1 Maintenance and Repair . Manager shall perform or cause to be performed all Maintenance and Repair in
accordance with this Agreement (including as provided in any approved Business Plan) or as otherwise approved by Owner to (i) keep
the Managed Facilities in good working order and condition and in compliance with the Standards as provided in the Business Plan;
or, (ii) comply with, and cure or prevent the violation of, any Applicable Laws or the Investment Certificate; provided, however , if
any such Maintenance and Repairs shall be made necessary by any condition against the occurrence of which Owner has received or is
entitled to the benefit of the guarantee or warranty, then Manager shall use commercially reasonable efforts to invoke such guarantees
or warranties in Owner’s or Manager’s name and Owner will cooperate fully with Manager in the enforcement thereof. Manager shall
use funds from the Operating Accounts for such Maintenance and Repair.
6.2.2 Routine Capital Improvements . Manager shall cause to be performed all Routine Capital Improvements in
accordance with the approved Business Plan for the applicable Fiscal Year and as otherwise specifically required by this Agreement,
or as otherwise approved by Owner to (i) keep the Managed Facilities in good working order and condition and in compliance with the
Standards as provided for in the Business Plan; or, (ii) comply with, and cure or prevent the violation of, any Applicable Laws or the
Investment Certificate. In order to facilitate the funding of Routine Capital Improvements, Manager shall set aside on a monthly basis
an amount equal to a pro rata share of the Reserve Fund Contribution by transferring funds from the Operating Accounts to the
Reserve Funds. All interest earned in the Reserve Funds shall be added to the Reserve Funds and shall be credited against amounts
required to be deposited in the Reserve Funds. At the end of each Fiscal Year, all amounts not expended from the Reserve Funds shall
be carried forward to the next Fiscal Year. Once the Reserve Funds so deposited are in an amount provided in the approved Business
Plan, any additional Reserve Fund Contribution is abated until the total amount of the Reserve Fund shall be less than seventy-five
percent (75%) of such amount unless otherwise provided in such Business Plan. In the event the required amount of funds in the
Reserve Fund does not provide sufficient funds to meet the Routine Capital Improvements requirements of the Business Plan for the
applicable Fiscal Year or as otherwise specifically required by this Agreement, the Manager may submit to the Owner a Funds
Request and the Owner is responsible to provide additional funds to augment the Reserve Fund to such extent within sixty (60) days.
If any such Routine Capital Improvements shall be made necessary by any condition against the occurrence of which Owner has
received or is entitled to the benefit of the guarantee or warranty, then Manager shall use its commercially reasonable efforts to invoke
such guarantees or warranties in Owner’s or Manager’s name and Owner will cooperate fully with Manager in the enforcement
thereof. The Parties shall submit any matter in dispute regarding (a) the Reserve Fund and its administration; or, (b) a Funds Request
for funds not previously approved in a Business Plan to the Operating Committee for determination in accordance with Section 17.1.
45
6.2.3 Major Capital Improvements . Subject to Section 6.2.5, Manager shall cause to be performed all Major Capital
Improvements in accordance with the approved Business Plan for the applicable Fiscal Year and as otherwise specifically required by
this Agreement, or as otherwise approved by Owner to (i) keep the Managed Facilities in compliance with the Standards as provided
for in the Business Plan; or, (ii) comply with, and cure or prevent the violation of, any Applicable Laws or the Investment Certificate.
Subject to the terms of an approved Business Plan or Owner’s prior written approval, Manager shall have the right to contract with any
Affiliate of Manager to perform the work related to any Major Capital Improvement. Except in accordance with the approved
Business Plan for the applicable Fiscal Year, no Major Capital Improvements will be performed by Manager or its affiliates unless
approved in writing by the Owner, which approval may be given or withheld in Owner’s reasonable discretion. All Major Capital
Improvements shall be performed at Owner’s expense, and not from funds in the Operating Accounts or the Reserve Funds; provided ,
however, if any such Major Capital Improvements shall be made necessary by any condition against the occurrence of which Owner
has received or is entitled to the benefit of the guarantee or warranty, then Manager shall use its reasonable efforts to invoke such
guarantees or warranties in Owner’s or Manager’s name and Owner will cooperate fully with Manager in the enforcement thereof.
6.2.4 Remediation of Design or Construction Issues . If the design or construction of the Managed Facilities presents a
risk of injury to persons or damage to the Managed Facilities, or results in non-compliance with the Applicable Law or the Investment
Certificate, then Owner shall use commercially reasonable efforts to perform all work necessary to remedy such design or construction
issue in the Managed Facilities as expeditiously as possible. Such work shall be performed at Owner’s expense, and not from funds in
the Operating Accounts or the Reserve Funds; provided, however, funds may be used from the Reserve Funds where (i) such expense
does not exceed ten percent (10%) of the balance of the Reserve Funds; and, (ii) otherwise there are and will be adequate Reserve
Funds to complete the Routine Capital Improvements in accordance with the Business Plan for the then current Fiscal Year. Owner
and Manager shall use best efforts to coordinate any work performed pursuant to this Section 6.2.4 to minimize any disruption to the
Operations of the Managed Facilities.
6.2.5 Management of Managed Facilities Renovation and Construction Projects . Owner shall have the right, but not
the obligation, to administer any Managed Facilities renovation or construction project that exceeds a total budget cost of ONE
MILLION DOLLARS (US$1,000,000.00) (as such amount shall be increased annually by the Index on January 1 of each year
following the Effective Date); provided, however , that (i) any Affiliate of Manager shall be allowed to bid on all such projects but
shall only be awarded the right to work on the project with Owner’s prior written approval (either in an approved Business Plan or
independently), which approval may be given or withheld in Owner’s sole and absolute discretion; (ii) prior to commencement of such
project, Owner shall submit to Manager, for its approval, which may not be unreasonably withheld, all project plans, drawings and
46
specifications solely for Manager to confirm compliance with the Standards and shall ensure that the final plans, drawings and
specifications pursuant to which such project is undertaken conform to those approved by Manager; (iii) all materials used in, and the
quality of installation and finish with respect to, such project shall be equal to or better than those required by the Standards; (iv) the
contractors, architects and other consultants utilized by Owner with respect to such project shall be fully insured and bonded, to the
extent available under the Applicable Law of Vietnam and to the extent that obtaining such insurance and bonding is commercially
reasonable, and, to the extent that it impacts Operations, subject to the reasonable approval of Manager (based on reputation and
experience); (v) such project shall be completed in accordance with the Standards; and, (vi) Owner shall (A) work cooperatively with
Manager to minimize interruption to Operations of the Managed Facilities, and to the experience of the Managed Facilities’ guests,
patrons and customers from such project; and, (B) coordinate with Manager prior to undertaking any activity with respect to such
project that could materially and adversely affect guest, patron or customer experience at the Managed Facilities or Manager’s
Operation of the Managed Facilities. The Parties shall submit any matter in dispute regarding any Managed Facilities renovation or
construction project that exceeds a total budget cost of ONE MILLION DOLLARS (US$1,000,000.00) (as such amount shall be
increased annually by the Index on January 1 of each year following the Effective Date) to the Operating Committee for determination
in accordance with Section 17.1.
6.3 Personnel .
6.3.1 Employment of Personnel . All Personnel, other than Senior Executive Personnel and Corporate Personnel, shall
be employees of Owner. Subject to Section 3.3 and other provisions of this Agreement, Manager shall have the right to hire and
employ contract employees on behalf of and in the name of Owner in connection with the Operation of the Managed Facilities. All
Personnel Costs (including Personnel Costs of Senior Executive Personnel and of any contract employee) incurred in accordance with
this Agreement shall be Operating Expenses. Owner shall indemnify Manager in respect of any Third Party Claim by Personnel (other
than any Senior Executive Personnel who are employees of Manager) alleging that Manager is the employer of such Personnel
(subject to the provisions of Article 13). All Senior Executive Personnel shall be employed by Manager in compliance with the
Applicable Law of Vietnam. If, at any time during the Operating Term, Owner is displeased with the performance of any Senior
Executive Personnel, Owner shall notify Manager and Manager shall reasonably consider Owner’s concerns with respect thereto and
take appropriate actions (including, without limitation, the transfer or termination of such Senior Executive Personnel) as reasonably
determined by Manager, to address Owner’s concerns; provided, however, the continuing employment of Personnel, including Senior
Executive Personnel, shall be determined by the Manager subject to the terms of this Agreement.
47
6.3.2 Selection of Personnel . Subject to Applicable Law in Vietnam, Manager shall recruit, screen, appoint, hire, pay,
train, supervise, instruct and direct the Managed Facilities’ general manager and department heads, and they, or other Personnel to
whom they may delegate such authority, shall recruit, screen, appoint, hire, pay, train, supervise, instruct and direct all other Personnel
necessary or advisable for the Operation of the Managed Facilities, and discipline, transfer, relocate, replace, terminate and dismiss
any Personnel. Notwithstanding the foregoing, Owner shall have the right to interview and approve the candidates selected by
Manager as Key Executive Personnel prior to their appointment. In connection with selecting Key Executive Personnel, Manager shall
prepare a written statement of the job description, required qualifications and criteria for each position, including educational and
professional experience, and salary range (including bonuses, benefits and other compensation (e.g. relocation costs), which will be
submitted to Owner. Owner and Manager shall meet and confer within thirty (30) days of Owner’s receipt of such written statement
and thereafter the Owner and Manager shall mutually agree on such written statement for each Key Executive Personnel position.
Owner shall be provided the opportunity to interview at the Managed Facilities or another mutually acceptable location each Key
Executive Personnel candidate identified by Manager and selected based on the written position statements adopted by the Owner and
Manager. Approval by Owner of each such candidate proposed by Manager having the requisite qualifications approved by the Parties
for the proposed position will not be unreasonably delayed or denied. Owner will be deemed to have approved any Key Executive
Personnel if the Owner (i) does not interview any such candidate within thirty (30) days after Manager’s notice of a proposed
appointment; or, (ii) fails to deliver notice of disapproval of such appointment within fifteen (15) Business Days after any such
interview of the candidate.
6.3.3 Terms of Employment . Owner’s right to review and approve the remuneration of Personnel shall be exercised in
connection with the Business Plan review process and with reasonable consideration of the qualifications of Personnel and market
conditions for employees of resorts comparable to the Managed Facilities. Subject to the Applicable Law in Vietnam, Manager shall,
except as described otherwise herein, have discretion (consistent with the approved Business Plan) with respect to all Personnel,
including decisions regarding hiring, promoting, transferring, compensating, supervising, terminating, directing and training all
Personnel, and, generally, establishing and maintaining all policies relating to employment, including (a) the terms of employment,
including recruiting, screening, appointment, hiring, compensation, bonuses, severance, pension plans and other employee benefits,
training, supervision, instruction, direction, discipline, transfer, relocation, replacement, termination and dismissal of Personnel; and,
(b) the exercise of any rights or remedies under any Applicable Laws relating to labor matters in relation to the Managed Facilities and
the Personnel, including union organization, recognition and withdrawal of recognition, union elections, contract negotiation on a
single-employer or multi-employer basis (including the right to negotiate and execute collective bargaining or similar agreements),
grievances, unfair labor practice charges, strikes and lockouts. Manager shall process the payroll and benefits for Personnel.
Notwithstanding anything to the contrary contained herein, Manager must make all employment decisions so as not to violate any
Applicable Laws in Vietnam and in the exercise of prudent business judgment. Manager shall indemnify Owner in respect of any
Third Party Claim (i) by Personnel alleging that Manager violated any Applicable Laws relating to such Personnel’s employment;
(ii) related to the continued employment of Senior Executive Personnel after notice of an objection thereto by Owner pursuant to
Section 6.3.1; or (iii) based on allegations of Manager’s Negligence in the selection, training or supervision of any Personnel, each
subject to the provisions of Article 13).
48
6.3.4 Shared Personnel . The Manager may charge as an Operating Expense of the Managed Facilities the costs
associated with the services and time of Corporate Personnel allocated to support multiple operations of the Manager or its Affiliates
for the business purposes and at the rates prescribed in the approved Business Plan.
6.3.5 Solicitation of Personnel . Without the prior written approval of the Manager, Owner, on behalf of itself, and its
Affiliates and its and their successors, hereby agrees not to solicit the employment of any Senior Executive Personnel at any time
during the Term or within one (1) year following the expiration or termination of this Agreement.
6.4 Bank Accounts .
6.4.1 Administration of Bank Accounts . Owner shall establish and Manager shall administer on Owner’s behalf the
bank accounts listed in this Section 6.4 (the “ Bank Accounts ”) at an internationally recognized bank or banks selected by Manager
and reasonably approved by Owner. All Bank Accounts shall be established in the name of Owner, doing business as the Managed
Facilities Name; provided , however , Manager shall have, during the Term the exclusive and, absent Gross Negligence or Willful
Misconduct, irrevocable control, over the Bank Accounts solely for the purpose of performing its duties as set forth in this Agreement.
The Bank Accounts may include but are not limited to (a) account(s) for the purposes of depositing all funds received in the Operation
of the Hotel and paying all Hotel Operating Expenses and all other amounts due to Manager or its Affiliates in connection with the
Hotel (the “ Hotel Operating Account ”); (b) account(s) for the purposes of depositing all funds received in the Operation of the
Gaming Facilities and paying all Casino Operating Expenses and all other amounts due to Manager or its Affiliates in connection with
the Casino (the “ Casino Operating Account ”); (c) account(s) into which amounts sufficient to cover all Hotel Personnel Costs shall
be deposited from time to time by Manager, by transfer of funds from the Hotel Operating Account (the “ Hotel Payroll Account ”);
(d) account(s) into which amounts sufficient to cover all Casino Personnel Costs shall be deposited from time to time by Manager, by
transfer of funds from the Casino Operating Account (the “ Casino Payroll Account ”); (e) an interest-bearing account into which the
Reserve Fund Contributions shall be deposited from time to time by Manager, by transfer of funds from the Operating Accounts in
accordance with Section 6.2.2; and, (f) such other accounts as Manager and Owner deem reasonably necessary or desirable. Manager
shall not have the right to transfer funds between the Bank Accounts established for the Hotel and those established for the Casino
without Owner’s prior written approval or except as provided in an approved Business Plan.
49
6.4.2 Authorized Signatories . Manager designees shall be the only Persons authorized to make deposits and withdraw
funds from the Bank Accounts. All deposits and withdrawals shall be made in accordance with this Agreement and Manager’s
standard accounting policies and practices. Manager shall establish sufficient controls to ensure accurate reporting of all transactions
and against risk of loss by acts of Personnel involving the Bank Accounts.
6.4.3 Liability for Loss in Bank Accounts . Manager shall invest any funds that are in the Bank Accounts in Permitted
Investments selected by Owner and as directed by Owner (provided that such selections and directions do not materially and adversely
impact the ability of Manager to Operate the Managed Facilities in accordance with the Agreement). If Owner fails to direct Manager
pursuant to the preceding sentence, then Manager shall have the right, in its reasonable discretion, to invest or cause to be invested any
funds that are in the Bank Accounts in Permitted Investments. Owner shall bear all losses suffered in any Bank Account, or in any
investment of funds in any Bank Account, and neither Manager nor its Affiliates shall have any liability or responsibility for such
losses, except from and after an Affiliate Investment Event to the extent of uninsured losses caused by Manager’s Negligence in the
selection, training and supervision of any Personnel or otherwise caused by Manager’s Gross Negligence or Willful Misconduct.
Manager shall arrange for Owner to receive monthly statements in sufficient detail to permit Owner to monitor Manager’s
administration of the Bank Accounts pursuant to this Agreement, and Owner shall otherwise be responsible to monitor the financial
institutions in which the Bank Accounts are held, and shall bear the risk of insolvency of any such financial institution.
6.4.4 Disbursement of Funds to Owner . On or about the twenty-fifth (25 th ) day of each calendar month, Manager
shall disburse to Owner, as directed by Owner, any funds remaining in the Operating Accounts at the end of the immediately
preceding month after payment or disbursement of the following in the following order of priority:
(a) Payment of all Operating Expenses and other amounts payable from the Operating Accounts in accordance
with this Agreement;
(b) Payment by Manager of all accrued but unpaid Base Management Fee and for any unpaid advances made by
Manager pursuant to the terms of Section 6.5.3;
(c) Deposit of the Reserve Fund Contributions due for such month in the Reserve Funds;
50
(d) Retention of funds in the Operating Accounts in the amounts necessary for any operating reserve account as
approved in the Business Plan to pay any recurring major Operating Expenses (e.g. property taxes) that will be due and payable in the
ordinary course of business within thirty (30) days;
(e) Payment of Manager Incentive Fees, which will be classified as an Operating Expense except for the limited
purpose of their calculation; and,
(f) Such other amounts as may be agreed to by Owner and Manager in accordance with the Business Plan (any
such disbursement, an “ Owner Disbursement ”).
6.5 Funds for Operation of the Managed Facilities .
6.5.1 Operating Funds . Owner shall use commercially reasonable efforts to provide at all times the funds as necessary
to provide the Working Capital and the Bankroll in the amounts determined in accordance with the then applicable approved Business
Plan. At Owner’s sole discretion, funds provided to the Operating Accounts by the Owner may be deposited to and disbursed from the
Owner’s capital accounts.
6.5.2 Additional Funds . If Manager reasonably determines at any time during the Operating Term that (a) there has
been an operating loss (i.e., negative Gross Operating Profits) for any month during the Operating Term; or, (b) the available funds in
the Operating Accounts are insufficient to allow for the uninterrupted and practicable Operation of the Managed Facilities in
accordance with this Agreement, then Manager shall notify Owner of the anticipated or actual amount of the deficiency in Working
Capital or Bankroll and submit a Funds Request to Owner. Owner shall review and act on the Funds Request within ten (10) Business
Days after the delivery of such request. Any dispute relating to denial of all or part of a Funds Request pursuant to this Section 6.5.2
shall be referred to the Operating Committee for determination in accordance with Section 17.1.
6.5.3 Manager Operating Funds Advances . In the event Owner is unable to provide all or any portion of the amount
requested in a Funds Request and a dispute is not pending before the Operating Committee under Section 6.5.2, Manager shall have
the right (but not the obligation), to advance such funds on Owner’s behalf. Owner shall reimburse Manager for any such advance
within thirty (30) days of demand by Manager, together with interest thereon as provided in Section 4.2. If the Owner does not
reimburse the Manager within the thirty-day period herein, Manager shall have the right to reimburse itself from any available funds
from the Operating Accounts or the Reserve Fund prior to any distributions from the Operating Accounts to Owner, for all amounts
advanced by Manager, together with interest thereon as provided in Section 4.2. Owner shall reimburse the Reserved Fund for any
amount disbursed to Manager pursuant to this Section 6.5.3 within sixty (60) days written notice of such disbursement from Manager.
51
6.5.4 Failure to Provide Funds . If Owner fails to deposit all or any portion of the amount requested in a Funds
Request (as determined by the Operating Committee in the event of a dispute), Manager shall have the right (but not the obligation), to
(a) withdraw funds from the Reserve Fund, in which case Manager shall notify Owner as promptly as reasonably possible of the
making of any such withdrawal from the Reserve Funds, and Owner shall replenish the Reserve Funds in the amount of such
withdrawal within thirty (30) days after such notice from Manager to Owner; (b) advance such funds on Owner’s behalf; or, (c) use its
credit to incur, on Owner’s behalf, (i) any Operating Expenses and (ii) expenditures for Routine Capital Improvements or Major
Capital Improvements then provided for in the Business Plan or otherwise approved by Owner or authorized under this Agreement, in
which case Owner shall pay for such goods or services when such payment is due. If Owner fails to pay for such goods or services
when such payment is due, then Manager shall have the right (but not the obligation), without affecting Manager’s other remedies
under this Agreement, to pay for such goods or services. In the event of any advance by Manager, or Manager’s payment for such
goods or services, Owner shall reimburse Manager within thirty (30) days of demand by Manager, together with interest thereon as
provided in Section 4.2, and Manager shall have the right to reimburse itself from any available funds from the Operation of the
Managed Facilities (including the Operating Accounts and the Reserve Funds), prior to any distributions to Owner, for all amounts
advanced by Manager, together with interest thereon as provided in Section 4.2.
6.6 Parking . Owner shall make available for the Managed Facilities’ exclusive use, at no incremental cost to the Managed
Facilities, parking facilities as determined in accordance with the Collaboration Agreement. The parking facilities are a component of
the Managed Facilities.
6.7 Use of Affiliates by Manager . Manager may use the services of one or more of its Affiliates in performing its
obligations under this Agreement; provided, however , that any services performed by such Affiliates shall be subject to the same
terms applicable to Manager under this Agreement, and Manager shall be responsible for its Affiliate’s performance. In addition,
Manager shall defend, indemnify, and hold harmless all Owner Indemnified Parties for, from and against any and all Third Party
Claims that any Owner Indemnified Parties incur to the extent caused by Manager’s use of one of its Affiliates and the acts or
omission of such Affiliates in performing their obligations pursuant to this Section 6.7, but only to the extent that Manager would
otherwise be liable to Owner hereunder.
52
6.8 Limitation on Manager’s Obligations .
6.8.1 Availability of Funds . Except as otherwise provided in this Agreement, including without limitation
Section 6.5.1 and 6.5.2, Manager’s obligations under this Agreement are subject in all respects to the availability of sufficient funds
from the Operation of the Managed Facilities, or which are otherwise provided by Owner.
6.8.2 Pre-Existing Conditions and External Events on the Managed Facilities . Notwithstanding anything to the
contrary in this Agreement, Manager shall have no responsibility whatsoever for the remediation, abatement, correction, cure or
administration of any environmental, construction, personnel, real property or other problems that arise on the Managed Facilities
during the Operating Term that (a) relate to the Operation or condition of the Managed Facilities, or activities undertaken at the
Managed Facilities or on the Project, prior to the Operating Term; or, (b) are caused by or arise from sources outside of the Managed
Facilities, and Owner shall retain full managerial and financial responsibility and liability for and control over the remediation,
abatement, correction, cure and administration of such problems, and shall take such actions in a timely manner with as little
disturbance or interruption of the use of the Managed Facilities. Notwithstanding the foregoing, Manager shall have the right, but not
the obligation, to take appropriate steps, at Owner’s expense, to (i) comply with, or cure or prevent the violation of, any Applicable
Laws as provided in this Agreement; (ii) avoid or minimize any actual or potential injury to persons or damage to the Managed
Facilities or other property; and, (iii) avoid or minimize any risk of criminal or civil liability to Manager, Owner and their Affiliates.
6.8.3 Pre-Existing Conditions and External Events on the Other Site Components . Notwithstanding anything to the
contrary in this Agreement, Manager shall have no responsibility whatsoever for the remediation, abatement, correction, cure or
administration of any environmental, construction, personnel, real property or other conditions that arise on or in connection with the
Other Site Components.
6.8.4 Pre-Opening Period . Notwithstanding anything to the contrary in this Agreement, Manager shall have no
obligation to provide any services for the Operation of the Managed Facilities other than the Pre-Opening Services prior to the
commencement of the Operating Term.
6.9 Third Party Operated Areas .
6.9.1 Selection of Third Party Operators . The Parties acknowledge that the Other Site Components and other related
facilities (“ Third Party Operated Areas ”) may be operated by third parties (the “ Third Party Operators ”) under a lease, operating or
similar agreements (“ Third Party Operating Agreements ”). Subject to Section 6.9.2 below, the selection of a Third Party Operator for
each Third Party Operated Area shall not be subject to approval or control of Manager; provided , however , that, such Third Party
Operator satisfies the requirements of the Investment Certificate.
53
6.9.2 Third Party Operating Agreements . Owner shall negotiate, enter into and administer any Third Party Operating
Agreements; provided, however , Owner hereby covenants and agrees that such Third Party Operating Agreements shall not have a
negative impact on (a) Manager or the Brand; (b) Manager’s ability to perform its obligations under this Agreement (or any related
agreement disclosed to Owner); or, (c) the Managed Facilities. In addition, no Third Party Operating Agreement will permit any other
Person to use any of the Managed Facilities without Manager’s prior written consent.
6.9.3 Standards . All Third Party Operators shall be required to operate the Third Party Operated Areas in accordance
with the Investment Certificate and in a manner that will not have a negative impact on (a) Manager or the Brand; (b) Manager’s
ability to perform its obligations under this Agreement (or any related agreement); or, (c) the Managed Facilities.
6.10 Shared Expenses . Owner and Manager acknowledge that some or all of the Managed Facilities may share common
areas, facilities and services with Other Site Components or other portions of the Project, and in light of the integrated nature of the
Project, and as contemplated by the Governing Documents, certain of the costs of management, operation, and maintenance of the
Managed Facilities and such common areas, facilities may properly be allocable to two or more of the components of the Project,
including the Managed Facilities (the “ Shared Expenses ”). Such Shared Expenses shall be fairly and equitably allocated between the
various components of the Managed Facilities and the Project (including the Other Site Components) and in no event shall the
Managed Facilities be unduly burdened. Owner shall provide Manager with its allocation methodology (and all appropriate supporting
documentation) and shall be required to revise such allocation methodology to the extent that such Shared Expenses are not fairly and
equitably allocated. Owner shall reasonably consider Manager’s concerns, if any, regarding such allocation. Owner shall not, directly
or indirectly, cause or consent to any allocation of Shared Expenses to the Managed Facilities other than in accordance with the
methodology provided to Manager, except to the extent required to satisfy Applicable Law. All financial records and other relevant
information relating to the Shared Expenses shall be made available to Manager at all reasonable times for examination, audit,
inspection and copying. Any dispute concerning the fairness of the allocation shall be referred to the Operating Committee for
determination in accordance with Section 17.1.
ARTICLE 7
BOOKS AND RECORDS
7.1 Maintenance of Books and Records . Manager shall keep books of account and other records relating to or reflecting
the results of (i) the Operation of the Hotel, the Casino and the other Managed Facilities in all material respects in accordance with the
Uniform System and in accordance with the Applicable Law of Vietnam; and, (ii) the Operation of the Gaming Activities in all
material respects in accordance with Generally Accepted Accounting Principles and in accordance with the Applicable Law of
Vietnam, in each case consistent with the then existing policies and standards as may be jointly established by Owner and Manager.
All books of account and other financial records of the Managed Facilities shall be made available to Owner at all reasonable times for
examination, audit, inspection and copying. All of the financial books and records of the Managed Facilities (other than any Manager
Proprietary Rights included therein) shall be the property of Owner.
54
7.2 Financial Reports . Manager shall cause to be prepared reasonably detailed monthly operating reports, based on
information available to Manager, that reflect the financial results of the Operation of the Managed Facilities for each month of each
Fiscal Year, in a format (which may be modified from time to time) generally recognized in hospitality and gaming industry
accounting practices (the “ Operating Reports ”). Manager shall deliver each Operating Report to Owner on or before the twentieth (20
th ) calendar day of the month following the month (or partial month) to which such Operating Report relates. Within sixty (60) days
after the close of each Fiscal Year, Manager shall deliver to Owner an annual operating statement in reasonable detail summarizing the
Managed Facilities’ Operations for the immediately prior Fiscal Year, in a format (which may be modified from time to time)
generally recognized in hospitality and gaming industry accounting practices (the “ Annual Operating Statement ”). Manager shall
have the right, at its option, to provide Owner with automated delivery, in electronic format, the data required. Owner and Manager
shall cooperate reasonably with each other in order to adapt to new technologies that may be available with respect to the transmission
of such data.
7.3 Audit .
7.3.1 Regulatory Required Audits . Manager shall cause to be prepared by the Designated Accountant any and all
audited financial reports required by Applicable Law or any Governmental Authority in connection with the Operations of the
Managed Facilities, or in the absence of any such requirement an annual audit by the Designated Accountant of the Annual Operating
Statement. Manager shall cooperate, assist and support the Designated Accountant in preparing any and all audited financial reports
required of Owner by Applicable law or any Governmental Authority in connection with the Operations of the Managed Facilities.
The costs incurred in connection with any regulatory required audit pursuant to this Section 7.3.1 shall be an Operating Expense.
7.3.2 Owner Required Audits . If Owner desires, at its own expense (and not as an Operating Expense), to audit,
examine, or review the Annual Operating Statement, Owner shall notify Manager in writing within one hundred twenty (120) days
after receipt of such Annual Operating Statement of its intention to audit and begin such audit no sooner than thirty (30) days and no
later than sixty (60) days after Manager’s receipt of such notice. Owner shall complete such audit within ninety (90) days after
commencement thereof. The foregoing shall not restrict any audit that is required in connection with an audit of Owner or any of its
55
Parent Companies in accordance with the Applicable Law of Vietnam; provided, however that, if such audit relates solely to the
Managed Facilities, the cost and expense of such audit shall be an Operating Expense and if such audit relates to any other business of
Owner or its Parent Companies (in addition to the Managed Facilities), the cost of and expense of such audit shall be borne by Owner
or its Affiliates and shall not be an Operating Expense. If any audit by Owner discloses an understatement of any amounts due Owner,
Manager shall promptly pay Owner such amounts found to be due, plus interest thereon at the Interest Rate from the date such
amounts should originally have been paid. If any audit discloses that Manager has not received any amounts due it, Owner shall pay
Manager such amounts, plus interest thereon at the Interest Rate from the date such amounts should originally have been paid. Any
dispute concerning the accuracy of an audit shall be referred to the Operating Committee for determination in accordance with
Section 17.1. In the event such determination results in a variation in favor of Owner of five percent (5%) or more between the total
amount originally reported by Manager and the total amount adjusted pursuant to such determination, Manager shall pay all
reasonable costs of the accounting firm retained by Owner in performing the audit. In all other cases, where the variation in favor of
the Owner exceeds TWO HUNDRED FIFTY THOUSAND DOLLARS (US$250,000.00), such costs shall be paid as an Operating
Expense. In any other case, the Owner will be responsible for the costs of the accounting firm. All information regarding the
Operation of the Managed Facilities which is obtained by Owner through an audit shall be considered either Owner Confidential
Information or Manager Confidential Information and the Parties agree not to disclose such information except to the Operating
Committee and as necessary to their respective advisors, attorneys and consultants participating in the audit process, who shall
likewise be informed of the confidential nature of the information and of the duty not to disclose such information to third parties,
except as required by Applicable Laws.
7.4 Consultation with Senior Executive Personnel . Upon Owner’s reasonable request, and in any event once each
calendar quarter, Manager shall cause the Managed Facilities’ Senior Executive Personnel to consult with and advise Owner or
Owner’s designees regarding the Operation of the Managed Facilities, including to review the performance of the Managed Facilities
in relation to the Business Plan.
7.5 Affiliate Transactions . Within sixty (60) days after the end of each Fiscal Year, Manager shall deliver to Owner a
statement of transactions relating to the Managed Facilities between Manager or any of its Affiliates for such Fiscal Year, certified by
a financial officer of Manager. With respect to any Affiliate transactions other than those specifically contemplated herein, Manager
shall obtain Owner’s prior written approval before entering into such transactions.
56
ARTICLE 8
PROPRIETARY RIGHTS
8.1 Acknowledgment of Manager’s Rights . Owner acknowledges the rights of Manager and its Affiliates in and to the
Manager Proprietary Rights and agrees that (a) Owner has not acquired, and Owner will not represent in any manner that Owner has
acquired, in any manner, any ownership rights in Manager Proprietary Rights; (b) Manager may use and grant to others the right to use
any Manager Proprietary Right, except as expressly provided otherwise in this Agreement; and, (c) the restrictions and limitations
with respect to Owner’s use of Manager Proprietary Rights under this Agreement apply to all forms and formats, including print,
video, electronic and other media (including identifiers) whether now known or hereinafter existing, and all other identifications and
elements used in commerce. Owner shall not use any of Manager Proprietary Rights in any manner for any purpose whatsoever in
(i) its legal name or any other trade or assumed name under which Owner does business, (ii) any publications, identifiers or other
materials or information disseminated to the general public, or (iii) any prospectus, offering circular, financing document or marketing
materials, in each case without Manager’s prior consent, and if consented to by Manager, then only as expressly permitted in (and
subject to such restrictions as may be set forth in) such consent. Owner acknowledges and agrees that no default by Manager under
this Agreement, or the expiration or termination of this Agreement, shall confer on Owner or any Person claiming by or through
Owner, any right or remedy to use any of Manager Proprietary Rights in the Operation of the Managed Facilities or otherwise.
8.2 Infringement of Manager Proprietary Rights . Owner agrees that, during the Term and thereafter, Owner shall not,
directly or indirectly, (a) apply for any rights or interests in Manager Proprietary Rights in any jurisdiction; (b) infringe Manager’s
rights in Manager Proprietary Rights in any way; (c) contest or aid others in contesting the validity, ownership or right to use Manager
Proprietary Rights; or, (d) take any other action in derogation of Manager Proprietary Rights. Owner promptly shall notify Manager of
any unauthorized attempt to use any of Manager Proprietary Rights or any legal action instituted against Owner with respect to any
Manager Proprietary Rights. Owner shall assist Manager and its Affiliates in taking such action as Manager may request to stop such
activities, but shall take no action nor incur any expenses on Manager’s behalf without Manager’s prior written approval. Manager
shall have the right to select legal counsel and control all litigation with respect to any action brought against Owner or Manager by a
third party with respect to Manager Proprietary Rights. If Manager undertakes the defense or prosecution of any litigation relating to
Manager Proprietary Rights, Owner shall execute any and all documents and take or not take such other actions as may, in the opinion
of Manager’s legal counsel, be reasonably necessary to carry out such defense or prosecution, and Manager shall reimburse Owner for
its expenses in taking any such actions. This Section 8.2 shall survive the expiration or termination of this Agreement.
57
8.3 Acknowledgment of Owner’s Rights . Manager acknowledges the rights of Owner and its Affiliates in and to the
Owner Proprietary Rights and agrees that (a) Manager has not acquired, and Manager will not represent in any manner that Manager
has acquired, in any manner, any ownership rights in Owner Proprietary Rights; (b) Owner may use and grant to others the right to use
any Owner Proprietary Right, except as expressly provided otherwise in this Agreement; and, (c) the restrictions and limitations with
respect to Manager’s use of Owner Proprietary Rights under this Agreement apply to all forms and formats, including print, video,
electronic and other media (including identifiers) whether now known or hereinafter existing, and all other identifications and
elements used in commerce. Except to the extent necessary to perform its obligations under this Agreement, Manager shall not use any
of Owner Proprietary Rights in any manner for any purpose whatsoever in (i) its legal name or any other trade or assumed name under
which Manager does business; (ii) any publications, identifiers or other materials or information disseminated to the general public; or,
(iii) any prospectus, offering circular, financing document or marketing materials, in each case without Owner’s prior consent, and if
consented to by Owner, then only as expressly permitted in (and subject to such restrictions as may be set forth in) such consent.
Manager acknowledges and agrees that no default by Owner under this Agreement, or the expiration or termination of this Agreement,
shall confer on Manager or any Person claiming by or through Manager, any right or remedy to use any of Owner’s Proprietary Rights
in the Operation of the Managed Facilities or otherwise.
8.4 Infringement of Owner Proprietary Rights . Except to the extent necessary to perform its obligations under this
Agreement, Manager agrees that, during the Term and thereafter, Manager shall not, directly or indirectly, (a) apply for any rights or
interests in Owner Proprietary Rights in any jurisdiction, (b) infringe Owner’s rights in Owner Proprietary Rights in any way,
(c) contest or aid others in contesting the validity, ownership or right to use Owner Proprietary Rights, or (d) take any other action in
derogation of Owner Proprietary Rights. Manager promptly shall notify Owner of any unauthorized attempt to use any of Owner
Proprietary Rights or any legal action instituted against Manager with respect to any Owner Proprietary Rights. Manager shall assist
Owner and its Affiliates in taking such action as Owner may request to stop such activities, but shall take no action nor incur any
expenses on Owner’s behalf without Owner’s prior written approval. Owner shall have the right to select legal counsel and control all
litigation with respect to any action brought against Manager or Owner by a third party with respect to Owner Proprietary Rights. If
Owner undertakes the defense or prosecution of any litigation relating to Owner Proprietary Rights, Manager shall execute any and all
documents and take or not take such other actions as may, in the opinion of Owner’s legal counsel, be reasonably necessary to carry
out such defense or prosecution, and Owner shall reimburse Manager for its expenses in taking any such actions. This Section 8.4
shall survive the expiration or termination of this Agreement.
8.5 Improvements to System . Except as provided in the Brand Agreement, all intellectual property rights to the
improvements in any system used exclusively at or in connection with the Managed Facilities (including improvements to any
technology systems) developed or suggested by either party or any of their Affiliates (the “ System Improvements ”) are hereby
irrevocably assigned by Manager to Owner and upon creation shall be and become the exclusive property of Owner; provided,
however, Manager and any of its Affiliates shall have the right to use without fee or charge any System Improvements in connection
with the Operation of the Managed Facilities.
8.6 Use of Confidential Information . Manager shall use all Manager Confidential Information and Owner Confidential
Information, including, but not limited to, Customer Data and Guest Data, in compliance with the Applicable Law of Vietnam.
58
ARTICLE 9
MANAGED FACILITIES BRANDING STANDARDS
9.1 Modifications to Standards . The Manager and Owner shall review, update and revise the Standards as necessary
following the Managed Facilities Opening Date in accordance with the terms of this Agreement and subject to the approval of the
Operating Committee. The Owner or the Manager may submit to the Operating Committee a request to revise the Standards.
9.2 Managed Facilities Signage . To support Manager’s marketing program for the Managed Facilities, from time to time
during the term hereof, Owner agrees to erect and install, in accordance with local codes and regulations, all signage Owner and
Manager deem necessary in, on or about the Managed Facility, including, but not limited to, signage bearing the Brand Identification
Materials as defined in the Brand Agreement. The costs of purchasing, leasing, transporting, constructing, maintaining and installing
the required signage and any related systems shall be either a capital expenditure or Operating Expenses as appropriate and as set forth
in the approved Business Plan.
ARTICLE 10
PRE-OPENING SERVICES
10.1 Pre-Opening Business Plan .
10.1.1 Pre-Opening Budget . Within one hundred eighty (180) days following the Effective Date, Manager shall
prepare and deliver to Owner an operating budget and plan (including anticipated capital projects) (the “ Pre-Opening Business Plan ”)
for Pre-Opening Services, prepared in accordance with the Planning and Budgeting Procedures, which shall set forth in reasonable
detail plans and expenses proposed to be incurred for:
(a) The staffing of the Managed Facilities prior to the Managed Facilities Opening Date, including the training of
the staff (together with an organizational chart of personnel required to staff the Managed Facilities prior to the Managed Facilities
Opening Date), a schedule of anticipated dates for the commencement of full time service by such Personnel, a schedule of the
compensation to be paid to such Personnel (including the cost of any relocation assistance to be provided to such Personnel) and any
other information related to such Personnel;
(b) The marketing plan and program, including promotion of the Managed Facilities prior to the Managed
Facilities Opening Date, proposed sales, marketing and advertising programs, printed material, travel and business entertainment
programs;
59
(c) The organization of the Managed Facilities’ Operations prior to the Managed Facilities Opening Date and
services, including those to be operated by tenants, subtenants, licensees or concessionaires;
(d) The partial Operation of the Managed Facilities prior to the Managed Facilities Opening Date for the purpose
of staff training and operational and promotional development; and,
(e) The specialized training of all Casino Personnel.
The Parties acknowledge and agree that the Pre-Opening Business Plan will include a contingency line item for miscellaneous
expenditures; which line item shall be subject to Owner’s approval in accordance with Section 10.1.2.
Manager may submit the Pre-Opening Business Plan for the Managed Facilities to Owner in portions from time to time as each
portion is completed; provided, that, each portion thereof so submitted shall be cumulative in nature, and shall reflect any changes in
portions thereof previously submitted until a complete and overall version of the applicable Pre-Opening Business Plan has been
submitted.
10.1.2 Approval of Pre-Opening Business Plan . Owner shall review the proposed Pre-Opening Business Plan and
shall provide Manager with any objections to such proposed Pre-Opening Business Plan in writing, in reasonable detail, within sixty
(60) days after receipt of the proposed Pre-Opening Business Plan from Manager. Owner shall be deemed to have approved that
portion of any proposed Pre-Opening Business Plan to which Owner has not objected in writing within such time period. If Owner
objects to any portion of the proposed Pre-Opening Business Plan in accordance with this Section 6.1.2, the Parties shall meet within
fourteen (14) Business Days after Manager’s receipt of Owner’s objections and discuss such objections, and then Manager shall
submit written revisions to the proposed Pre-Opening Business Plan after such discussion. Owner and Manager shall use reasonable
good faith efforts to reach an agreement on the Pre-Opening Business Plan. If Owner and Manager are not able, after good faith
negotiations, to agree upon all or any portion of the Pre-Opening Business Plan prior to the date which is one hundred eighty
(180) days after Manager’s delivery of the Pre-Opening Business Plan to Owner, any dispute relating to a portion or all of the
Pre-Opening Business Plan shall be resolved pursuant to an Owner Directive. The proposed Pre-Opening Business Plan, as modified
to reflect the revisions agreed to by Owner and Manager or the determination by an Owner Directive, shall become the Pre-Opening
Business Plan. Owner shall act reasonably and exercise prudent business judgment in approving, or objecting to, all or any portion of
the Pre-Opening Business Plan (including capital projects); provided, however , Owner shall not have the right to eliminate from the
60
Pre-Opening Business Plan (i) any expenditures that are specifically required to be made in accordance with the Standards, Applicable
Laws or this Agreement (subject to the limitations on Standard Changes); or, (ii) costs and expenses that are not within the control of
Owner and/or Manager (e.g., increases in real estate and personal property Taxes, costs of utilities and insurance premiums). Upon
approval by Owner of the Pre-Opening Business Plan, Manager shall carry out the activities contemplated in the applicable
Pre-Opening Business Plan or any portion thereof which has been approved or deemed approved. Manager may, from time to time,
submit revisions to the Pre-Opening Business Plan to Owner for Owner’s review and approval (which approval shall be deemed to
have been given if no objection is made by Owner within fifteen (15) Business Days after receipt by Owner of the revisions) and any
revisions so approved or deemed approved for all purposes shall constitute part of the Pre-Opening Business Plan.
10.2 Managed Facilities Opening Date . The Managed Facilities Opening Date shall occur on or before the Anticipated
Opening Date; provided, however , that in the event that the Managed Facilities Opening Date does not occur on or prior to the
Anticipated Opening Date the failure to open the Managed Facilities on or before the Anticipated Opening Date shall not be an Event
of Default provided that the Managed Facilities Opening Date occurs on or before the Outside Opening Date, as such date may be
extended due to delays caused by Manager or for any Extraordinary Event in accordance with and subject to Section 5.2, provided,
that, (i) such date shall not extend beyond 270 days due to an Extraordinary Event; and, (ii) with respect to any delay caused by
Manager, the Outside Opening Date shall each be extended by one day for each day that Manager fails to timely provide Owner with
any approvals or information that Manager is required to provide Owner pursuant to the terms of this Agreement or the Collaboration
and Assistance Agreement. Notwithstanding anything herein to the contrary, in no event shall Manager be required to operate either
the Hotel or Casino prior to the Managed Facilities Opening Date. Without prejudice to any other rights of Manager hereunder, if
Manager determines that the Managed Facilities Opening Date may be other than the Anticipated Opening Date contemplated in the
Pre-Opening Business Plan, Manager shall submit to Owner for its approval a revision of the Pre-Opening Business Plan, which shall
reflect any additional expense or saving, as the case may be, attributable to such rescheduled Anticipated Opening Date.
10.3 Pre-Opening Services . Prior to the Operating Term, Manager shall, subject to the provisions of this Agreement and
the Collaboration Agreement, take such actions as it deems reasonably necessary to provide the following services in accordance with
the Pre-Opening Business Plan (collectively, the “ Pre-Opening Services ”):
10.3.1 Establish, implement and monitor the pre-operating accounting, security, human resources, marketing and
Compliance Systems;
10.3.2 Recruit, select and hire Personnel and implement necessary procedures, techniques and training programs to
obtain and evaluate qualified applicants;
61
10.3.3 Assist Owner in working with Vietnamese Governmental Authorities and other interested parties, as
appropriate, in developing an appropriate national gaming regulatory framework, as well as secondary regulation;
10.3.4 Assist Owner in working with Vietnamese Governmental Authorities, as appropriate, in developing an
appropriate national gaming fiscal framework, as well as secondary regulation;
10.3.5 Conduct, or assist with, relevant background checks relating to suitability standards and other matters, for
potential Personnel;
10.3.6 Assist in the development of marketing and operation plans, including junkets and similar arrangements, in
conjunction with key employees and independent agents;
10.3.7 In consultation with Owner, negotiate leases, licenses and concession agreements for stores, shops and other
concessions constituting part of the Managed Facilities;
10.3.8 Meet with potential investors/financiers at management presentations by Owner and respond to reasonable due
diligence enquiries from potential investors/financiers (for the avoidance of doubt, it is solely Owner’s responsibility to obtain the
necessary financing for the Managed Facilities);
10.3.9 Assist Owner in procuring all licenses and permits that Owner is required to obtain for the Operation of the
Managed Facilities and its related facilities, including gaming, liquor and restaurant licenses; and
10.3.10 Do all other things necessary for the proper opening of the Managed Facilities called for by the Pre-Opening
Business Plan.
62
ARTICLE 11
TRANSFERS
11.1 Transfers by Manager .
(a) Except as provided in Section 11.1(c), Manager shall not cause, permit or suffer any Transfer without the prior
written consent of Owner, which may be withheld in Owner’s sole and absolute discretion; provided, however , Manager may effect a
Transfer of all and not less than all of its Ownership Interest in Manager or this Agreement with the prior written consent of Owner,
which consent may not be unreasonably withheld and will not be unreasonably delayed after Owner’s receipt from Manager of
complete information regarding the proposed Transfer and the transferee (i) on and after the eighth (8 th ) anniversary of the Managed
Facilities Opening Date; or, (ii) prior to the eighth (8 th ) anniversary of the Managed Facilities Opening Date in the event of a
Transfer made necessary in connection with a termination by the Manager pursuant to Sections 16.2.1 or 16.2.3 of this Agreement in
which instance Manager shall pay to Owner a premature transfer fee in an amount equal to fifty (50%) of the consideration exceeding
Ninety-Five Million Dollars (US$95,000,000.00) received by Manager from the transferee. For the purpose of clarity and without
limiting the generality of the foregoing, the Owner’s denial of consent of any proposed Transfer shall be considered to be reasonable if
the proposed Transfer is (i) to a Competitor of Owner; (ii) to a Person or its Affiliate who is a party to a management agreement or
other arrangement with Owner or its Affiliates for operation of another resort within the Project; (iii) to a Person or its Parent
Company which lacks sufficient operating experience or the financial capability to Operate the Managed Facilities in accordance with
this Agreement, the Standards and the Brand; (iv) in violation of the applicable Financing Documents (and, after using good faith
efforts, the Parties are unable to resolve such violation to the satisfaction of the lender); or (v) to a Person, its Parent Company or any
Equity Owner thereof who is a Prohibited Person; provided, however, that, Manager shall have the right to cure such default (i.e.,
Transfer to a Prohibited Person) within thirty (30) days from receipt of Owner’s termination notice (or such longer period provided in
Owner’s termination notice), which shall be extended if Manager commences to cure the default within such period and thereafter
proceeds with reasonable diligence to complete such cure; provided, further however , that in no event shall such cure period exceed
the period established by any Gaming Authority or ninety (90) days if no such period is established by any Gaming Authority).
(b) A Transfer by the Manager in violation of Section 11.1(a) shall entitle the Owner to (i) terminate this Agreement
without any recourse by Manager (including receipt of the Termination Fee and any claim or cause of action in law or equity
including, without limitation, the right to damages related to such termination, but excluding any claim or cause of action in law or
equity including, without limitation, the right to damages otherwise unrelated to such termination ) ; and, (ii) recover actual damages
incurred by Owner by reason of the termination caused by Manager’s unconsented Transfer.
(c) The Manager shall have the right, without Owner’s consent, to effect a Transfer, in whole or in part, to (i) any
Affiliate of Manager; or, (ii) any Person that acquires, whether by purchase of stock or assets, merger, consolidation, reorganization or
other corporate-level transaction, all or substantially all of the business and assets of Manager’s ultimate parent company.
63
(d) Notwithstanding the foregoing provisions of Section 11.1(c), the Owner shall have the right to terminate this
Agreement (without the payment of the Termination Fee and neither Party shall be entitled to exercise any rights and remedies that
may be available to either Party in law or equity including, without limitation, the right to damages) upon no less than thirty (30) days’
written notice if a Transfer by Manager pursuant to Section 11.1(c) is (i) in violation of the applicable Financing Documents (and,
after using good faith efforts, the Parties are unable to resolve such violation to the satisfaction of the lender); (ii) to a Person or its
Parent Company who lacks sufficient operating experience or the financial capability to Operate the Managed Facilities in accordance
with this Agreement, the Standards and the Brand; or (iii) to a Person, its Parent Company or any Equity Owner thereof who is a
Prohibited Person; provided, however, that, Manager shall have the right to cure such default (i.e., Transfer to a Prohibited Person)
within thirty (30) days from receipt of Owner’s termination notice (or such longer period provided in Owner’s termination notice),
which shall be extended if Manager commences to cure the default within such period and thereafter proceeds with reasonable
diligence to complete such cure; provided, further however , that in no event shall such cure period exceed the period established by
any Gaming Authority or ninety (90) days if no such period is established by any Gaming Authority).
11.2 Transfers by Owner . Owner shall not cause, permit or suffer a Transfer without the prior written consent of
Manager, which may be withheld in Manager’s sole and absolute discretion, provided, however , Owner shall have the right, subject to
compliance with Section 11.4 (to the extent applicable), to effect any Transfer upon satisfaction of the following conditions:
(a) Owner provides notice to Manager at least thirty (30) days prior to the Transfer, specifying in reasonable detail the
nature of the Transfer, showing the Parent Companies and Equity Owners, if any, both prior to and after such proposed Transfer and
the nature and extent of their respective Ownership Interests, and such additional information as reasonably requested by Manager;
(b) The Transfer complies with all Applicable Laws, including Gaming Laws, and all of the requirements of
Vietnamese Gaming Authorities and the Investment Certificate;
(c) Neither the transferee nor any of its Parent Companies or Equity Owners is a Prohibited Person;
(d) The Owner has made provisions for the transferee to lawfully Operate the Managed Facilities under the Brand;
(e) The transferee agrees to allow the Manager to Operate the Managed Facilities under the Brand;
(f) In the case of a Transfer described in paragraph a or paragraph (b) of the definition of Transfer, as applicable:
(i) The Transfer involves a sale of all (and not less than all) of the Managed Facilities and the transferee is a
Person that can fulfill its financial obligations under this Agreement (any disputes regarding a Person’s ability to fulfill its financial
obligations under this Agreement shall be referred to the Expert for determination in accordance with Section 6.1.3.1); and
64
(ii) To the extent permitted under the Investment Certificate, as a pre-condition to any transfer, Owner’s entire
interest in this Agreement is transferred to the transferee, and the transferee assumes all obligations of Owner under this Agreement,
the Collaboration and Assistance Agreement and any other agreement with Manager or any of its Affiliates relating to the
management of the Enterprise, in writing (whether arising prior or after the Transfer, including all obligations and liabilities including
vacation, sick leave, severance and other benefits based on length of service accrued for all Personnel as of the effective date of the
Transfer), and Owner provides Manager with a copy of such written assignment and assumption agreement, together with copies of all
other documents effecting such Managed Facilities Transfer, within ten (10) days following the date of the Transfer.
11.3 Regulatory Termination Transfer . Notwithstanding the foregoing, with respect to any Transfer, either Party shall
have the right to terminate this Agreement and receive the Termination Fees (which is the exclusive remedy without any other rights
and remedies that may be available in law or equity including, without limitation, the right to damages), upon no less than ninety
(90) days’ written notice or such lesser period imposed by any Gaming Authority, if the proposed transferee or assignee or its Parent
Company or any Equity Owner is a Prohibited Person, provided, however , that the non-terminating Party shall have the right to cure
such default within thirty (30) days from the receipt of the termination notice (or such longer period provided in the termination
notice), which shall be extended if the non-terminating Party commences to cure the default within such period and thereafter
proceeds with reasonable diligence to complete such cure, provided further, however , that in no event shall such cure period exceed
the period established by any Gaming Authority or ninety (90) days if no such period is established by any Gaming Authority.
11.4 Effect of Permitted Transfer . A consent to any particular Transfer shall not be deemed to be a consent to any other
Transfer or a waiver of the requirement that consent be obtained in the case of any other Transfer. Upon any Transfer by Owner or
Manager (whether permitted under this Section 11.4 or consented to by the other Party), the transferor shall be relieved of all liabilities
and obligations under this Agreement accruing from and after the effective date of such Transfer. No such Transfer shall relieve the
transferor from its liabilities or obligations under this Agreement accruing prior to the effective date of the Transfer.
11.5 Transfer to a Competitor . Notwithstanding anything herein to the contrary, if there is a Transfer by Owner to a
Person who is or at a time during the Term becomes a Competitor, then Owner shall provide written notice to Manager within thirty
(30) days of such Transfer and Manager may, but shall not be required, to terminate this Agreement upon written notice to Owner. If
Manager elects to terminate this Agreement in accordance with this Section 11.5, Manager shall provide Owner with written notice of
such election not later than one hundred eighty (180) days prior to the termination date; provided, however , if Manager exercises its
option to terminate pursuant to this Section 11.5 such termination shall be effective, subject to the forgoing notice period, as of the
date stated in the Manager’s notice of termination and without any recourse by Manager (including receipt of the Termination Fee and
any claim or cause of action in law or equity including, without limitation, the right to damages related to such termination, but
excluding any claim or cause of action in law or equity including, without limitation, the right to damages otherwise unrelated to such
termination).
65
11.6 Compliance with Applicable Law . To the extent required by Applicable Law, the Parties agree to enter a novation of
any Agreement that is the subject of a valid Transfer under this Article 11. The transferor Party shall be responsible for all expenses
associated with such a novation.
ARTICLE 12
INSURANCE POLICIES
12.1 Coverage .
12.1.1 Insurance Policies . Owner, as an Operating Expense, shall initially obtain and maintain such insurance policies
as the Parties shall mutually agree are reasonable and prudent for the protection of the Parties interests naming Owner and Manager
along with the Affiliates, trustees, beneficiaries, shareholders, directors, officers, employees and agents, and the successors and assigns
of each as named insured as determined. In connection with preparing and approving the Business Plan pursuant to Section 6.1, the
Manager and the Owner shall annually review and evaluate the insurance policies related to the Managed Facilities and revise or
supplement such policies as reasonably necessary.
12.1.2 Evidence of Insurance . Owner shall provide Manager with insurance certificates evidencing that the insurance
policies comply with the insurance requirements under this Agreement. The insurance certificates shall be provided as soon as
practicable prior to (a) the effective date of coverage for a new insurance policy; or, (b) the date of renewal for an existing insurance
policy. In addition, upon the Manager’s request, the Owner shall provide to the Manager a schedule of insurance, listing the insurance
policy numbers, the names of the insurers, the names of the Persons insured, the amounts of coverage, the expiration dates and the
risks covered thereunder. If Owner does not provide evidence of insurance for any one or more insurance policies required under such
insurance requirements then Manager shall have the right to obtain such insurance and cause the premiums for any insurance required
to be maintained under this Section 12.1 to be paid using funds from the Operating Account or the Reserve Fund, in which case Owner
shall replenish the Operating Account or Reserve Fund in the amount of such withdrawal by Manager within thirty (30) days after
notice to Owner.
66
12.1.3 Incidents Covered by Insurance . Manager promptly shall (a) cause to be investigated all loss, damage to or
destruction of the Managed Facilities or any part thereof, as it becomes known to Manager, and report to Owner any such incident that
is material, together with the estimated cost of repair of such loss, damage or destruction; (b) at the request of Owner, prepare or cause
to be prepared all reports required by any insurance company regarding the event resulting in such loss, damage or destruction, acting
as sole representative for all other named insureds, additional insureds, and loss payees; and, (c) retain on behalf of Owner, at Owner’s
expense, all consultants and experts, including architects, engineers, qualified and reputable third party fire and life safety consultants,
accountants and attorneys, as Manager deems necessary or advisable, in analyzing any loss, damage or destruction, determining the
nature and cost of the repair and presenting any proofs of loss or claims to any insurers.
12.2 Business Interruption .
12.2.1 Business Interruption Event . If the Managed Facilities suffer damage or loss that results in an interruption in
the Operations of the Hotel or Casino, or both, Manager shall be entitled to the Business Interruption Insurance proceeds, if any,
specifically allocated to the Management Fees to the extent recoverable. In the event of such a business interruption where no policy
allocation is made for Manager’s Management Fees, the calculation of payments for Management Fees shall be a pro rata share of the
Business Interruption Insurance proceeds available for distribution with calculation of the Manager’s Management Fees determined as
follows: (i) for any loss during the first six (6) months of a Fiscal Year, by the projections set forth in the Business Plan for the Fiscal
Year in which the business interruption occurred; or, (ii) for any loss occurring on or after the commencement of the seventh month of
such Fiscal Year, by annualization of the actual Management Fees earned by the Manager during the first six (6) months of such Fiscal
Year prior to the business interruption event. In addition, Owner shall deposit to the Reserve Funds the amounts which would have
been deposited therein, for the period of the business interruption, to the extent the Business Interruption Insurance proceeds received
by Owner, if any, are allocable to such Reserve Funds.
12.2.2 Deposit into Bank Accounts . If the business of the Managed Facilities or any part thereof is interrupted by any
event or peril covered by Business Interruption Insurance, the proceeds of any such Business Interruption Insurance, except for any
portion thereof allocated to the Management Fees and paid to Manager as provided in Section 12.2.1, shall be deposited in the
Operating Accounts and utilized by Manager in the same manner as funds generated from the Operation of the Managed Facilities are
utilized by it in accordance with the terms of this Agreement, including payment of Operating Expenses and Reserve Fund
Contributions.
12.3 RELEASE FROM LIABILITY FOR INSURED CLAIMS . EACH PARTY HEREBY RELEASES THE OTHER
PARTY, AND ITS AFFILIATES, AND THEIR PARTNERS, MEMBERS, TRUSTEES, BENEFICIARIES, DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS, AND THE SUCCESSORS AND ASSIGNS OF EACH OF FOREGOING, FROM ANY
AND ALL LIABILITY, DAMAGE, LOSS, COST OR EXPENSE INCURRED BY THE RELEASING PARTY (WHETHER OR
NOT DUE TO THE NEGLIGENCE OR OTHER ACTS OR OMISSIONS OF THE PERSONS SO RELEASED) TO THE EXTENT
SUCH LIABILITY, DAMAGE, LOSS, COST OR EXPENSE IS PAID TO THE RELEASING PARTY UNDER THE
APPLICABLE INSURANCE POLICY.
67
12.4 WAIVER OF SUBROGATION . EACH PARTY HEREBY WAIVES ANY CLAIM, RIGHT OR REMEDY IT
MAY ACQUIRE HEREUNDER AS TO ANY OTHER PARTY, AND ITS AFFILIATES, AND THEIR PARTNERS, MEMBERS,
TRUSTEES, BENEFICIARIES, DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS, AND THE SUCCESSORS AND
ASSIGNS OF EACH OF FOREGOING, INCLUDING, WITHOUT LIMITATION, ANY RIGHT OF SUBROGATION,
REIMBURSEMENT, EXONERATION, CONTRIBUTION, INDEMNIFICATION OR PARTICIPATION IN ANY SUCH CLAIM,
RIGHT OR REMEDY TO THE EXTENT SUCH LIABILITY, DAMAGE, LOSS, COST OR EXPENSE IS PAID TO THE
RELEASING PARTY UNDER THE APPLICABLE INSURANCE POLICY.
ARTICLE 13
INDEMNIFICATION
13.1 Indemnification by Owner . Subject to Sections 13.3 and 13.4, Owner shall defend, indemnify, and hold harmless
Manager and its Affiliates, and their respective trustees, beneficiaries, directors, officers, employees and agents, and the successors
and assigns of each of the foregoing (collectively, the “ Manager Indemnified Parties ”) for, from and against any and all Third Party
Claims brought against Manager Indemnified Parties, except to the extent such Third Party Claims are caused by (i) Manager
Indemnified Parties’ Gross Negligence or Willful Misconduct, or Negligence where applicable under the terms of this Agreement;
(ii) the acts or omissions of Manager Indemnified Parties in a transaction with any Manager Indemnified Parties; or, (iii) the taking of
any action by Manager Indemnified Parties that violates this Agreement or exceeds the scope of authority granted Manager
Indemnified Parties in this Agreement.
13.2 Indemnification by Manager . Subject to Sections 13.3 and 13.4, Manager shall defend, indemnify, and hold
harmless Owner and its Affiliates, and their respective trustees, beneficiaries, directors, officers, employees and agents, and the
successors and assigns of each of the foregoing (collectively, the “ Owner Indemnified Parties ”) for, from and against any and all
Third Party Claims brought against Owner Indemnified Parties, to the extent such Third Party Claims are caused by (i) Manager
Indemnified Parties’ Gross Negligence or Willful Misconduct, or Negligence where applicable under the terms of this Agreement;
(ii) the acts or omissions of Manager Indemnified Parties in a transaction with any Manager Indemnified Parties; or, (iii) the taking of
any action by Manager Indemnified Parties that violates this Agreement or exceeds the scope of authority granted Manager
Indemnified Parties in this Agreement.
68
13.3 Insurance Coverage . Notwithstanding anything to the contrary in this Section 13.3, Owner and Manager shall first
tender to the insurer under the insurance policies covering such Third Party Claim. If such insurance policies are subject to a
deductible or self-insured retention, the Indemnified Party may request indemnification up to the amount of the deductible or
self-insurance retention. If the insurance company denies coverage or reserves rights as to coverage, then the Indemnified Parties shall
have the right to indemnification in accordance with this Section 13.3. Nothing in this Section 13.3 shall affect the releases set forth in
Section 12.3.
13.4 Indemnification Procedures . Subject to Section 13.5, an Indemnified Party shall be entitled, upon notice to the
Indemnifying Party, to the timely appointment of counsel by the Indemnifying Party for the defense of any Third Party Claim, which
counsel shall be subject to the approval of the Indemnified Party. If, in the Indemnified Party’s judgment, a conflict of interest exists
between the Indemnified Party and the Indemnifying Party at any time during the defense of the Indemnified Party (and such conflict
would be deemed to exist with respect to any dispute as to whether a Third Party Claim arises from Manager’s Negligence, or Gross
Negligence or Willful Misconduct, as applicable to the matter in dispute, the Indemnified Party may appoint, at the Indemnifying
Party’s expense, independent counsel of its choice for the defense of the Indemnified Party as to such Third Party Claim. In addition,
regardless of whether the Indemnified Party has appointed counsel or selects independent counsel (a) the Indemnified Party shall have
the right to participate in the defense of any Third Party Claim and approve any proposed settlement of such Third Party Claim; (b) all
reasonable costs and expenses (including attorneys’ fees and expenses, and costs incurred in connection with discovery requests) of
the Indemnified Party shall be paid by the Indemnifying Party; and, (c) the Indemnified Party shall not admit liability voluntarily,
make any payment, assume any obligation or incur any expense with respect to any Third Party Claim without the Indemnifying
Party’s written consent. If the Indemnifying Party fails to timely pay such costs and expenses (including attorneys’ fees and costs), the
Indemnified Party shall have the right, but not the obligation, to pay such amounts and be reimbursed by the Indemnifying Party for
the same, together with interest thereon in accordance with Section 4.2 until paid in full. The Parties hereby acknowledge that it shall
not be a defense to a demand for indemnity that less than all Third Party Claims asserted against the Indemnified Party are subject to
indemnification; provided, however , that if not all of the Third Party Claims are subject to indemnification, then the Parties shall
allocate the costs and expenses of such claim between the claims covered by the indemnification and those that are not covered by the
indemnification on a fair basis. Any dispute relating to the foregoing allocation shall be referred to the Operating Committee for
determination in accordance with Section 17.1. Nothing in this Section 13.4 shall diminish (i) Manager’s right to appoint counsel and
control certain legal actions and proceedings pursuant to Section 3.1.3; or, (ii) Owner’s obligations to defend and indemnify Manager
and its Affiliates in such legal actions and proceedings.
69
13.5 Dispute Regarding Manager’s Conduct . In the event of a dispute between Owner and Manager as to whether
conduct constitutes Manager’s (i) Negligence; or (ii) Gross Negligence or Willful Misconduct, such dispute will be resolved by
arbitration pursuant to Section 18.2. Pending resolution, Manager will defend the Third Party Claim and expenses so incurred,
including any expense incurred to settle the case or satisfy a judgment, will constitute an Operating Expense of the Managed Facilities
(subject to Manager’s obligation to reimburse these expenses in the event that it is determined that the conduct, depending on the
matter in dispute, constituted Manager’s Negligence, or Gross Negligence or Willful Misconduct).
13.6 Survival . This Article 13 shall survive the expiration or termination of this Agreement.
ARTICLE 14
MORTGAGES, FINANCING AND GROUND LEASES
14.1 Authority to Mortgage Managed Facilities .
14.1.1 Owner shall have the right to grant a Mortgage and/or Security Interest to a Lender for any Financing;
provided, however , that Owner shall use commercially reasonable efforts to ensure that this Agreement shall remain in effect
throughout the Term, free from interference by any Lender.
14.1.2 In furtherance of such obligation, Owner agrees that in any Financing (including any re-Financing), Owner
shall use commercially reasonable efforts to obtain, and Manager shall promptly execute and deliver, a subordination, non-disturbance
and attornment agreement (a “ Subordination Agreement ”) from the Lender which is in form and content reasonably acceptable to
Manager and shall, if possible, be recordable in the jurisdiction where the Managed Facilities are located, which Subordination
Agreement shall, among other things, provide, to the extent acceptable to Lender, that (a) the interest of Manager to Operate the
Managed Facilities pursuant to this Agreement shall be subject to and subordinate to the lien of the Mortgage; and, (b) if there is a
foreclosure of such Mortgage, this Agreement shall not be terminated, Lender and all subsequent owners shall recognize Manager’s
rights under this Agreement, and Manager shall not be named as a party in any foreclosure action or proceeding except to the extent
required by Applicable Law. Owner shall exercise its best efforts to the extent commercially reasonable to refrain in connection with
any Financing granting a Lender (i) a Security Interest in any Bank Accounts unless the Lender expressly recognizes in writing the
70
rights of Manager to use all funds in such accounts for the purposes contemplated by this Agreement; (ii) a Security Interest of any
type in the Payroll Account; or (iii) a Security Interest in, name a Lender as insured with respect to, or assign to a Lender before or
after a loss, any Business Interruption Insurance proceeds to be made available to Manager under this Agreement. To the extent the
Financing is solely related to the Managed Facilities, Owner shall employ best efforts to arrange for the principal amount of all debt
Financing in the aggregate (including all senior and secondary, unaffiliated mezzanine financing and convertible preferred equity
financing) in connection with the Managed Facilities not to exceed eighty percent (80%) of the loan to value for the Managed
Facilities (as such value is determined pursuant to the appraisal process used by Lender in making the Financing and performed at the
time the financing is obtained ); provided, however , that such loan to value requirement shall not apply to any Financing that
previously related to the entire Project when made and that is subsequently restructured to encumber individual portions of the Project
(such as the Managed Facilities or the Other Resorts) but which remains cross-collateralized with other portions of the Project
(provided, that, Owner shall use commercially reasonable efforts to ensure that such other portions of the Project are operational or to
comply with such loan to value requirement.
14.1.3 Owner shall provide to Manager a true and complete copy of all Financing Documents upon execution of such
Financing Documents and any revisions to such Financing Documents; and the foregoing shall be applicable both to original
Financing (as well as any increase in the original principal amount thereof) and to any new or additional financings or any refinancing,
and the Parties shall use commercially reasonable efforts to cause the Lender to agree that this Agreement shall in any and all events
survive the foreclosure of any such Mortgage, or the granting of a deed in lieu thereof, and shall be binding upon the purchaser at any
such foreclosure, or the grantee of a deed in lieu thereof, and their respective successors and assigns.
14.2 Information . In the event Manager receives any reasonable request for information on the Managed Facilities from
the holder of any Mortgage, Owner agrees that Manager is hereby authorized to provide or distribute such information directly to such
Lender. Notwithstanding anything herein to the contrary, Manager shall not be required to release any information to any Mortgagee
or other Lender in connection with any proposed Transfer that is Manager Confidential Information unless such Mortgagee or other
Lender enters into a non-disclosure agreement relating to the disclosure of the Manager Confidential Information that is reasonably
acceptable to Manager; and provided further that Owner shall within ten (10) Business Days following receipt of any written request,
reimburse Manager for any expenses incurred by Manager, excluding legal fees, in connection with such cooperation when such
expense is not otherwise paid or reimbursed under this Agreement.
14.3 Nondisturbance . Owner shall use commercially reasonable efforts to ensure that this Agreement shall remain in
effect throughout the Term free from interference by any ground lessor (other than any Governmental Authority); provided, however,
nothing in this Section 14.3 shall be interpreted or applied to limit or restrict Owner from developing facilities or amenities of the
Project outside the Managed Facilities.
71
ARTICLE 15
DAMAGE AND DESTRUCTION TO THE MANAGED FACILITIES; CONDEMNATION
15.1 Casualty and Restoration of Managed Facilities . If the Managed Facilities or any portion thereof is damaged or
destroyed by a Casualty, Owner, at its expense, shall undertake and complete the Restoration of the Managed Facilities as soon as
reasonably practicable and with due diligence.
15.1.1 Major Casualty Termination . Notwithstanding the foregoing, if, at any time during the Operating Term, (a)(i)
the Managed Facilities are damaged or destroyed by a Casualty to such an extent that it is commercially unreasonable to Operate;
(ii) the cost of restoring the damage of such Casualty will exceed the proceeds of insurance payable in connection with such Casualty
(or that would have been payable if all insurance required under this Agreement had been maintained); or, (iii) Lender requires that
any portion of the insurance proceeds (other than those payable for lost business income) received on account of the Casualty be
applied to the Financing; and, (b) Owner decides either to demolish the Managed Facilities in its entirety or cease using the building as
a hotel and casino, then Owner may terminate this Agreement by providing notice to Manager within ninety (90) days after such
Casualty. In addition, if (A) the Managed Facilities are damaged or destroyed by a Casualty to such an extent that it is commercially
unreasonable to Operate; or, (B) Owner reasonably estimates the Restoration will take longer than three hundred sixty-five (365) days
after such Casualty to complete, Owner shall notify Manager of such fact within ninety (90) days after such Casualty, and Manager
shall have the right to (I) terminate this Agreement without the payment of any Termination Fee (and Manager shall not be entitled to
exercise any rights and remedies that may be available to Manager in law or equity against Owner including, without limitation, the
right to damages), by written notice to Owner given within thirty (30) days after Manager’s receipt of such notice from Owner; or
(II) suspend performance of its obligations under this Agreement during the Restoration, such suspension being permitted for a period
that terminates sixty (60) days following notice from the Owner of date upon which Restoration shall be complete.
72
15.1.2 Major Casualty Restoration . If neither Party provides the termination notice pursuant to Section 15.1.1 of this
Agreement within the applicable time period, this Agreement shall remain in full force and effect and Owner shall be obligated to use
commercially reasonable efforts to perform the Restoration as soon as reasonably practicable and with due diligence during which
period of time Manager’s obligations to Operate the Managed Facilities under the Agreement are suspended. In addition, Manager
shall have the right to recover any proceeds as a named insured, additional insured, loss payee or otherwise for its personal property or
under any policy maintained by Manager at its sole cost and expense under any applicable insurance policy providing coverage for
such Casualty, and Manager shall have the right to deal directly with any insurer to pursue its claim under such insurance policy. In
the event of a termination by Owner pursuant to this Section 15.1.1, Manager shall be entitled to the proceeds of the Business
Interruption Insurance allocable to such Casualty Termination Fee; provided, however , in no event shall Owner be required to pay
anything in excess of the Business Interruption Insurance received by Owner and allocable to the Casualty Termination Fee, if any;
further provided, however , for the avoidance of doubt, Manager shall only be entitled to the proceeds of the Business Interruption
Insurance allocable to such Casualty Termination Fee in the event of a termination by Owner pursuant to Section 15.1.1. In addition,
Owner shall pay to Manager any amounts due and owing as of the date of termination under this Agreement and any other definitive
agreements entered into between the Parties and their Affiliates relating to the Managed Facilities or the Other Site Components as of
such date (including all reimbursements due hereunder and thereunder).
15.2 Condemnation .
15.2.1 Restoration of Managed Facilities . If a Condemnation results in the loss of (a) the entire Managed Facilities or
Project; or, (b) a portion of the Managed Facilities or the Project that makes it commercially impractical to Operate the remaining
portion of the Managed Facilities in accordance with the Standards, then either Party may terminate this Agreement upon ninety
(90) days’ written notice to the other Party, without incurring any further liability or obligation to each other, except for those
liabilities and obligations that survive the termination of this Agreement. If a Condemnation affects only a part of the Managed
Facilities or the Project that does not make it commercially impractical to Operate the remainder of the Managed Facilities or the
Project in accordance with the Standards, this Agreement shall not terminate, and Owner, at its expense, shall undertake and complete
the Restoration of the Managed Facilities as soon as reasonable practicable.
15.2.2 Condemnation Award . In the event the Manager terminates this Agreement pursuant to the provisions of
Section 15.2.1, the Owner shall be entitled to the entire amount of any award for such Condemnation (a “ Condemnation Award ”). In
all other instances, the Condemnation Award shall first be applied to the expenses and costs associated with the Restoration of the
Managed Facilities and any remaining amount of the award thereafter shall be paid eighty-five percent (85%) to Owner and fifteen
percent (15%) to Manager.
15.3 Owner Termination Right . Notwithstanding anything to the contrary contained in this Agreement, at any time after
the Effective Date, Owner may terminate this Agreement upon sixty (60) days’ written notice to Manager if Manager fails to resume
performing its obligations under this Agreement within thirty (30) days following the termination of an Impact Period.
73
ARTICLE 16
DEFAULTS AND TERMINATION
16.1 Owner Event of Default . The following actions or events shall constitute an “ Owner Event of Default ” under this
Agreement:
(a) A failure by Owner to deposit in the Operating Accounts, Reserve Accounts or other Bank Accounts any
funds requested by Manager in accordance with a Funds Request (accepted by Owner, as directed by the Operating Committee
pursuant to Section 17.1, or as otherwise required by this Agreement), and after receipt of a written notice of default from the Manager
(which except as otherwise specifically provided in this Agreement must be delivered to Owner at least thirty (30) days prior to the
date requested for performance), such failure by Owner shall continue for more than sixty (60) days;
(b) A material breach by Owner of any representation or warranty expressly set forth in this Agreement that has
a materially adverse effect on the Operation of the Managed Facilities or the rights and obligations of Manager and that is not cured
within thirty (30) days after delivery of notice of such default by Manager to Owner; provided, however , (i) if the default is not
susceptible of cure within a thirty (30) day period; and, (ii) failure to cure the default within thirty (30) days would not expose
Manager to an imminent and material risk of criminal liability, or expose Manager to significant financial loss, the thirty (30) day cure
period shall be extended if Owner commences to cure the default within such thirty (30) day period and thereafter proceeds with
reasonable diligence to complete such cure; provided, however , that in no event shall such cure period exceed ninety (90) days in the
aggregate;
(c) A Transfer by Owner in violation of Article 11;
(d) From and after the Effective Date, if at any time during the Term, Owner, its Parent Companies or any Equity
Owner of such Parent Company becomes a Prohibited Person; provided, however , Owner shall have the right to cure such default
within thirty (30) days after delivery of notice of such default, which shall be extended if Owner commences to cure the default within
such thirty (30) day period and thereafter proceeds with reasonable diligence to complete such cure; provided, however , that in no
event shall such cure period exceed the period established by any Gaming Authority or ninety (90) days if no such period is
established by any Gaming Authority;
74
(e) (i) The admitted insolvency of Owner, or Owner’s failure generally to pay its debts as such debts become
due; (ii) a general assignment or similar arrangement by Owner for the benefit of its creditors; (iii) the filing by Owner of a petition for
relief under applicable bankruptcy, insolvency, or similar debtor relief laws; (iv) the filing of a petition for relief under applicable
bankruptcy, insolvency or similar debtor relief laws by any Person against Owner which is consented to by Owner or if not consent to
by Owner, Owner’s failure to vacate any order approving an involuntary petition within ninety (90) days from the date of entry
thereof; (v) the appointment or petition for appointment of a receiver, custodian, trustee or liquidator to oversee all or any substantial
part of Owner’s assets or the conduct of its business; (vi) any action by Owner for dissolution of its operations; or, (vii) any other
similar proceedings in any relevant jurisdiction affecting Owner;
(f) The foreclosure of a mortgage, deed in lieu of foreclosure, appointment of a receiver for, or surrender to a
landlord (whether by expiration or termination of the underlying ground lease), of any material portion of the Managed Facilities
except to the extent otherwise provided in any Subordination Agreement;
(g) A failure by Owner to perform any of the other covenants, duties or obligations set forth in this Agreement
that has, or if left uncured will have, a material adverse effect on the Operation of the Managed Facilities or the rights and obligations
of Manager and that is not cured within thirty (30) days after delivery of notice of such default by Manager to Owner; provided,
however , if (i) the default is not susceptible of cure within a thirty (30)-day period, and (ii) failure to cure the default within thirty
(30) days would not expose Manager to an imminent and material risk of criminal liability, or expose Manager to significant financial
loss, the thirty (30) day cure period shall be extended if Owner commences to cure the default within such thirty (30) day period and
thereafter proceeds with reasonable diligence to complete such cure; provided, however , that in no event shall such cure period
exceed ninety (90) days in the aggregate;
(h) Except to the extent such compliance is a part of the Manager’s obligations under this Agreement a failure by
Owner to comply with all Applicable Laws that has, or if left uncured will have, a material adverse effect on the Operation of the
Managed Facilities or the rights and obligations of Manager, including the Investment Certificate (excluding the timely payment of
capital contributions which is dealt with below) and that is not cured within the lesser of (i) one hundred eighty (180) days; and,
(ii) any cure period established by the applicable Governmental Authority;
(i) A failure by Owner to make the timely payment of capital contributions required under the Investment
Certificate as modified or extended from time to time that is not cured within (i) one hundred eighty (180) days or (ii) any cure period
established by the applicable Governmental Authority;
75
(j) The entry of a final non-appealable judgment in favor of a Lender resulting from a proceeding instituted by
Lender to enforce the rights or remedies afforded to Lender under the Financing Documents that has a material adverse impact on the
Operations of the Managed Facilities and the failure of Owner to cause Lender to vacate such judgment within ninety (90) days of the
date the judgment is entered;
(k) If Owner infringes on any Intellectual Property Rights of Manager and fails to remedy such infringement to
the satisfaction of Manager within thirty (30) days of notice thereof; or
(l) If Owner fails to obtain, loses or is unable to renew the Investment Certificate, any gaming license necessary
to operate the Casino during the term of this Agreement (excluding any such failure, loss or non-renewal that is caused by Manager) or
Owner’s non-compliance with or breach of any term of this Agreement that results in any such failure, loss or non-renewal and such
Approval is not reinstated within twenty (20) days.
Notwithstanding anything to the contrary contained in this Section 16.1, the occurrence of any of the events set forth in Section 16.2
shall not be deemed to be an Owner Event of Default and Manager’s sole remedy shall be to terminate this Agreement in accordance
with Section 16.2 without the payment of any termination fees and without the right to seek damages at law or in equity.
16.1.1 Remedies for Owner Event of Default . If any Owner Event of Default occurs, Manager shall have the right to
exercise against Owner any rights and remedies available to Manager under this Agreement or (subject to the provisions of this
Agreement) at law or in equity; provided, however , Manager shall not have the right to terminate this Agreement by reason of the
occurrence of an Owner Event of Default, unless the Owner Event of Default (i) has a material adverse effect on the Operation of the
Managed Facilities; or, (ii) constitutes Gross Negligence or Willful Misconduct. If Owner disputes Manager’s right to terminate this
Agreement under this Section 16.1.1, Manager’s termination of the Agreement shall be suspended while such dispute shall be resolved
by the Arbitration Tribunal in accordance with Article 17. If termination of this Agreement is an available remedy, such remedy may
be exercised by Manager only by irrevocable and unconditional notice to Owner, in which case this Agreement shall terminate on
either the date specified in this Agreement, or if not specified in this Agreement, the date specified by Manager in the termination
notice, which date shall in no event be sooner than thirty (30) days nor later than sixty (60) days, after the delivery of such notice.
Notwithstanding anything herein to the contrary, the termination of this Agreement shall be in addition to any and all other rights and
remedies that may be available to Manager in law or equity including, without limitation, Manager’s right to claim damages and
attorneys’ fees.
76
16.2 Special Termination Rights . The Parties shall have the following additional rights to terminate this Agreement, as
applicable:
16.2.1 Adverse Effect on Gaming Licenses . Each Party acknowledges that the other Party, its Parent Companies
and/or their respective Affiliates are engaged in businesses that are or may be subject to, and exist because of, privileged licenses
issued by Governmental Authorities, including under Gaming Laws. If one Party, its Parent Companies or any of their respective
Affiliates is noticed in writing by any Gaming Authority that to continue doing business with the other Party would subject it to an
action for sanctions by any such authority due to unsuitability of such other Party or otherwise, then the Party so noticed may
terminate this Agreement without liability to either Party except for such liabilities that expressly survive termination. To exercise its
right of termination under this Section 16.2.1, the Party electing to terminate this Agreement must deliver written notice (together with
true and complete copies of all written directives from any Gaming Authority) of such Party’s election to terminate to the
non-terminating Party no later than thirty (30) days from the date the terminating Party obtains knowledge of the occurrence of the
event that gives rise to the terminating Party’s right to terminate.
16.2.2 Exchange Control . Either Party may terminate this Agreement upon thirty (30) days’ notice by providing
written notice to the other Party, with no liability to the terminating Party whatsoever as a result of such termination, if there is a
material and significant change in exchange control laws or regulations in Vietnam restricting or hindering repatriation of dividends or
fees generated by business entities in Vietnam which adversely impacts the terminating Party; provided, however , the Parties shall, as
promptly as possible within such thirty (30) day period use good faith efforts to remedy the situation to the satisfaction of the
terminating Party, provided, however , such remedy shall be deemed satisfactory to the terminating Party if the economic impact (i.e.,
the amount each such Party earns) on the terminating Party under this Agreement is less than twenty percent (20%). To exercise its
right of termination under this Section 16.2.2, the Party electing to terminate this Agreement must deliver written notice of such
Party’s election to terminate to the non-terminating Party no later than thirty (30) days from the date the terminating Party obtains
knowledge of the occurrence of the event that gives rise to the terminating Party’s right to terminate.
77
16.2.3 Violation of Sanctions Laws . Either Party may terminate this Agreement upon thirty (30) days’ notice by
providing written notice to the other Party, with no liability (including any claim for damages) to the terminating Party whatsoever as
a result of such termination, if the continued Operation of the Managed Facilities would cause the terminating Party to be in violation
of any Sanction Law. Notwithstanding anything to the contrary contained in this Agreement, if the terminating Party, in its reasonable
good faith judgment, determines that this Agreement should be immediately terminated to avoid violation of any Sanction Laws, or
subjecting the terminating Party or any Affiliates, or any of its assets or interest, to any fines, penalties, sanctions, confiscation or
similar liability or action under any Sanction Laws, the terminating Party shall be entitled to terminate upon notice to the Owner. To
exercise its right of termination under this Section 16.2.3, the Party electing to terminate this Agreement must deliver written notice of
such Party’s election to terminate to the non-terminating Party no later than thirty (30) days from the date the terminating Party obtains
knowledge of the occurrence of the event that gives rise to the terminating Party’s right to terminate.
16.2.4 Other Events . Manager may terminate this Agreement in accordance with Section 16.2.8, if, at any time during
the Operating Term (unless another date is otherwise specified):
(a) There is a change in the terms and/or conditions of the Investment Certificate or any other license/concession
or lease related to the Project (or cancellation, revocation or termination of any of the foregoing) and compliance with the revised
terms and/or conditions would be unlawful or materially onerous or burdensome on Manager or its rights and obligations under this
Agreement;
(b) There is any change in Applicable Law inside or outside Vietnam that results or would result in the carrying
on of Manager’s business in Vietnam being unlawful or materially onerous or burdensome;
(c) On or before the date which is seven (7) years after the Managed Facilities Opening Date, a gaming facility
that is of similar size or scope to the Casino is opened in Ho Chi Minh City or Vung Tau City, Vietnam;
(d) Owner is in breach of Article 5;
(e) If a regulatory framework (including, without limitation, anti-money laundering laws) is not in place one
hundred and eighty (180) days prior to the Anticipated Opening Date or if Manager does not have the ability to implement a
self-regulatory framework (i) enabling the Managed Facilities to be commercially viable consistent with its budget and profit
projections as set forth in the Business Plans; and, (ii) enabling Manager and/or its Affiliates to obtain and/or maintain all operating
licenses and suitability determinations for its or their businesses in Vietnam, the United States, any other jurisdiction in which
Manager or any of its Affiliates conducts business as of the Effective Date;
78
(f) Owner has not obtained by the Outside Opening Date (as such date may be extended due to delays caused by
Manager or for any Extraordinary Event in accordance with and subject to Section 5.2, provided, that, (i) such date shall not extend
beyond 180 days due to an Extraordinary Event; and, (ii) with respect to any delay caused by Manager, the Outside Opening Date
shall each be extended by the period equal to the delay caused by that Manager’s failure to timely provide Owner with any approvals
or information that Manager is required to provide Owner pursuant to the terms of this Agreement or the Collaboration Agreement),
all Approvals of Vietnamese Gaming Authorities required for the (a) execution, delivery and performance of this Agreement; (b) the
appointment of Manager pursuant to this Agreement; and, (c) the ownership and Operation of the Managed Facilities;
(g) After the Commencement of Construction, construction work on the construction of the Managed Facilities is
materially delayed or ceases for at least one hundred twenty (120) consecutive days (as such date may be extended for any
Extraordinary Event in accordance with and subject to Section 5.2 provided, that, such date shall not extend beyond 180 days);
(h) The applicable Governmental Authority in Vietnam has not provided a tax and fiscal regime reasonably
acceptable to Manager at least one hundred and eighty days (180) days prior to the Anticipated Opening Date;
(i) Owner is in default of its obligations under Sections 6.2.2, 6.2.3, 6.5.1 or 6.5.2 and such default has not been
cured on or before thirty (30) days prior to the Managed Facilities Opening Date; or,
(j) The Managed Facilities Opening Date has not occurred by the Outside Opening Date (as such date may be
extended due to delays caused by Manager or for any Extraordinary Event in accordance with and subject to Section 5.2, provided,
that, (i) such date shall not extend beyond 180 days due to an Extraordinary Event; and, (ii) with respect to any delay caused by
Manager, the Managed Facilities Opening Date shall each be extended by the period equal to the delay caused by Manager’s failure to
timely provide Owner with any approvals or information that Manager is required to provide Owner pursuant to the terms of this
Agreement or the Collaboration Agreement).
16.2.5 Loss of License; Unsuitability . In the event that Owner, or an officer, director, partner or member of Owner, is
denied a license or other Approval (or such license or Approval is revoked) by any Gaming Authority in any applicable jurisdiction
with respect to the Casino, or Owner is otherwise found unsuitable by any such Gaming Authority to own or engage in the Gaming
Activity contemplated in this Agreement, notwithstanding any other remedial rights Manager may have under this Agreement,
Manager shall have the right to continue to Operate the Managed Facilities to the extent allowed by the Gaming Authority. In the
event that the denial or revocation of such license or approval requires the Operation of the Gaming Activity to cease, Manager and
Owner shall determine in good faith revised Hotel Management Fees, and Manager shall have the right, on terms at least as favorable
as set forth in this Agreement, to recommence Operation of the Casino if Gaming Activities if permitted to resume by the Gaming
Authority.
79
16.2.6 Effect of Termination . Except as set out in section 16.2.7 the occurrence of any of the events set forth in any
provision within the entirety of Section 16.2 shall not entitle the terminating Party to exercise any rights and remedies that may be
available to the terminating Party in law or equity including, without limitation, the terminating Party’s right to claim the Termination
Fee, any other fee, damages and attorneys’ fees unless such event was caused as a result of the willful and deliberate actions by the
non-terminating Party.
16.2.7 Termination by Manager for Jurisdictional Conflict. From and after the Effective Date should Manager begin to
conduct business in a jurisdiction that it knows or absent Gross Negligence or Willful Misconduct should have known could or would
find its doing business in Vietnam unsuitable or impermissible, then the Manager shall be obligated to pay to Owner the Termination
Fee if Manager elects to terminate this Agreement pursuant to Section 16.2.1 or otherwise.
16.2.8 Exercise of Termination Right . If Manager seeks to terminate this Agreement pursuant to Section 16.2.4,
Manager may exercise its right to terminate only by an irrevocable and unconditional notice to Owner, which notice shall be delivered
within thirty (30) days following the date on which Manager obtains knowledge of the event giving rise to Manager’s right of
termination, in which case this Agreement shall terminate on either the date specified in this Agreement, or if not specified in this
Agreement, the date specified by Manager in the termination notice, which date shall in no event be sooner than thirty (30) days or
later than ninety (90) days after the delivery of such notice. Manager’s failure to timely provide a notice of termination shall be
deemed a waiver of Manager’s right to terminate for the event giving rise to the right to exercise such right of termination.
16.2.9 Dispute of Termination Right . If the non-terminating Party disputes the terminating Party’s right to terminate
this Agreement under this Section 17.3, such dispute shall be resolved by the Arbitration Tribunal in accordance with Article 17.
80
16.3 Manager Event of Default . The following actions or events shall constitute a “ Manager Event of Default ” under
this Agreement:
(a) Manager fails to make when due any monetary payment required by this Agreement to be made by Manager,
unless the failure to make such payment is caused by the failure of Owner to make funding available to Manager as required under this
Agreement or to reimburse Manager as provided in the Collaboration Agreement, and such failure by Manager shall continue for more
than sixty (60) days after Manager receives notice of such payment default from Owner , which notice shall be delivered to Manager
at least thirty (30) days prior to the date requested for performance;
(b) A material failure of Manager to comply with the requirements of Section 6.4.4 of this Agreement and fails
to remedy same within thirty (30) days;
(c) A material breach by Manager of any representation or warranty expressly set forth in this Agreement that
has a materially adverse effect on the Operation of the Managed Facilities or the rights and obligations of Manager and that is not
cured with thirty (30) days after delivery of notice of such default by Manager to Owner; provided, however , (i) if the default is not
susceptible of cure within a thirty (30) day period; and, (ii) failure to cure the default within thirty (30) days would not expose Owner
to an imminent and material risk of criminal liability or significant financial loss, the thirty (30) day cure period shall be extended if
Manager commences to cure the default within such thirty (30) day period and thereafter proceeds with reasonable diligence to
complete such cure; provided, however , that in no event shall such cure period exceed ninety (90) days in the aggregate;
(d) A Transfer by Manager in violation of Article 11;
(e) (i) The admitted insolvency of Manager, or Manager’s failure generally to pay its debts as such debts become
due; (ii) a general assignment or similar arrangement by Manager for the benefit of its creditors; (iii) the filing by Manager of a
petition for relief under applicable bankruptcy, insolvency, or similar debtor relief laws; (iv) the filing of a petition for relief under
applicable bankruptcy, insolvency or similar debtor relief laws by any Person against Manager which is consented to by Manager or if
not consent to by Manager, Manager’s failure to vacate any order approving an involuntary petition within ninety (90) days from the
date of entry thereof; (v) the appointment or petition for appointment of a receiver, custodian, trustee or liquidator to oversee all or any
substantial part of Manager’s assets or the conduct of its business; (vi) any action by Manager for dissolution of its operations; or,
(vii) any other similar proceedings in any relevant jurisdiction affecting Manager;
(f) A failure by Manager to perform any of the other covenants, duties or obligations set forth in this Agreement
that has, or if left uncured will have, a material adverse effect on the Operation of the Managed Facilities or the rights and obligations
of Owner and that is not cured within thirty (30) days after delivery of notice of such default by Owner to Manager; provided, however
, if failure to cure the default within thirty (30) days would not expose Owner to an imminent and material risk of criminal liability or
significant financial loss, the thirty (30) day cure period shall be extended if Manager commences to cure the default within such thirty
(30) day period and thereafter proceeds with reasonable diligence to complete such cure but in no event shall such cure period exceed
ninety (90) days in the aggregate;
81
(g) If Manager fails to obtain, loses or is unable to renew any gaming license or any other Approval required to
operate the Casino during the term of this Agreement (excluding any such failure, loss or non-renewal that is caused by Owner) or
Manager’s non-compliance with or breach of any term of this Agreement that results in any such failure, loss or non-renewal and such
Approval is not reinstated within thirty (30) days;
(h) From and after the Effective Date, if at any time during the Term, Manager, its Parent Companies or any
Equity Owner of such Parent Companies becomes a Prohibited Person; provided, however , Manager shall have the right to cure such
default within thirty (30) days after delivery of notice of such default, which shall be extended if Manager commences to cure the
default within such thirty (30) day period and thereafter proceeds with reasonable diligence to complete such cure; provided, however ,
that in no event shall such cure period exceed the period established by any Gaming Authority or ninety (90) days if no such period is
established by any Gaming Authority;
(i) If Manager infringes on any Intellectual Property Right of Owner and fails to remedy such infringement to the
satisfaction of Owner within thirty (30) days of notice thereof;
(j) A failure by Manager to comply with all Applicable Laws that has, or if left uncured will have, a material
adverse effect on the Operation of the Managed Facilities or the rights and obligations of Owner, including the Investment Certificate,
and that is not cured within the lesser of (i) one hundred eighty (180) days; and, (ii) any cure period established by the applicable
Governmental Authority; or
(k) A violation by Manager or its Affiliate of Section 20.2 of this Agreement
EXCEPT AS EXPRESSLY PROVIDED IN SECTION 16.4, IN NO EVENT SHALL MANAGER BE DEEMED IN DEFAULT OF
ITS OBLIGATIONS UNDER THIS AGREEMENT OR APPLICABLE LAW SOLELY BY REASON OF (I) THE FAILURE OF
THE FINANCIAL PERFORMANCE OF THE MANAGED FACILITIES TO MEET OWNER’S EXPECTATIONS, INCOME
PROJECTIONS OR OTHER MATTERS INCLUDED IN THE BUSINESS PLAN); (II) THE ACTS OR OMISSIONS OF
PERSONNEL, UNLESS SUCH ACTS OR OMISSIONS RESULTED FROM GROSS NEGLIGENCE, OR WILLFUL
MISCONDUCT COMMITTED BY MANAGER OR ITS AFFILIATES; (III) THE INSTITUTION OF LITIGATION OR THE
ENTRY OF JUDGMENTS AGAINST OWNER OR THE MANAGED FACILITIES WITH RESPECT TO THE MANAGED
FACILITIES’ OPERATIONS; OR, (IV) ANY OTHER ACTS OR OMISSIONS NOT OTHERWISE CONSTITUTING A
DEFAULT OF MANAGER’S OBLIGATIONS UNDER THIS AGREEMENT.
82
16.3.1 Remedies for Manager Event of Default . If any Manager Event of Default occurs, Owner shall have the right
to exercise against Manager any rights and remedies available to Owner under this Agreement or (subject to the provisions of this
Agreement) at law or in equity; provided, however , Owner shall not have the right to terminate this Agreement by reason of the
occurrence of a Manager Event of Default, unless the Manager Event of Default (i) has a material adverse effect on the Operation of
the Managed Facilities; (ii) constitutes Gross Negligence or Willful Misconduct; or (iii) demonstrates repeated Manager Events of
Default of a similar nature by Manager. If Manager disputes Owner’s right to terminate this Agreement under this Section 16.3.1,
Owner’s termination of the Agreement shall be suspended while such dispute shall be resolved by the Arbitration Tribunal in
accordance with Article 17. If termination of this Agreement is an available remedy, such remedy may be exercised by Owner only by
irrevocable and unconditional notice to Manager, in which case this Agreement shall terminate on either the date specified in this
Agreement, or if not specified in this Agreement, the date specified by Owner in the termination notice, which date shall in no event
be sooner than thirty (30) days nor later than ninety (90) days, after the delivery of such notice. Notwithstanding anything herein to the
contrary, the termination of this Agreement shall be in addition to any and all other rights and remedies that may be available to
Owner in law or equity including, without limitation, Owner’s right to claim damages and attorneys’ fees.
16.3.2 Owner’s Step-In Rights . In addition to any other remedies available to Owner, if sufficient Owner funds are
available, and Manager fails to pay when due any amount which it is Manager’s responsibility to pay from such Owner funds pursuant
to this Agreement and the failure to pay such funds will have a material adverse effect on Owner’s financial interests or cause Owner
to be in violation of the Investment Certificate or subject Owner to material liability or losses, upon ten (10) Business Days’ written
notice to Manager, and if Manager fails to make the payment at issue, Owner shall pay such amounts (including fines, penalty interest
and late payment fees) and take all such action as may be necessary in respect thereof. Manager shall, following such payments by
Owner, reimburse Owner for the amount of such payment that would have been due if timely paid from the appropriate Bank Account
within five (5) days of demand together with interest at the Interest Rate. In addition, if as a result of Manager’s Gross Negligence or
Willful Misconduct the failure to make such payments has resulted in fines, penalty interest or late payment fees being assessed and
Owner has made such payments, then Manager shall immediately disburse to Owner from the Bank Accounts such amounts as may be
necessary to reimburse Owner for payments of fines, penalty interest or late payment fees assessed as a consequence of Manager’s
failure to pay and Manager shall within five (5) Business Days of such disbursement deposit into the appropriate Bank Accounts, from
Manager’s own funds, the full amount of any such fines, penalty interest or late payment fees plus interest at the Interest Rate. If
Manager fails to take any action which is Manager’s responsibility under this Agreement which action causes Owner to be in violation
of the Investment Certificate or other Approvals, and if Manager fails to take the appropriate action upon thirty (30) days’ written
notice to Manager (except in any emergency in which case Owner shall give Manager such notice, if any, as is reasonable under the
circumstances), Owner may (but shall not be required to) take such actions as may be necessary to protect Owner from such liability.
83
16.4 Performance Test .
(a) Owner shall have the right to terminate this Agreement, without payment of any termination fee, but subject
to Manager’s Cure Right and the other conditions for termination in this Section 16.4, if for any two (2) consecutive Fiscal Years
beginning after the third Full Fiscal Year (i.e., commencing with the fourth and fifth Full Fiscal Years) (each such two-year period, a “
Testing Period ”) the Managed Facilities do not achieve seventy (70%) of forecasted Gross Operating Profits set forth in the Business
Plan for each such Fiscal Year (collectively, the “ Performance Test ”). If the Performance Test is not achieved for any Testing Period,
then Owner may exercise its right to terminate this Agreement by delivering a notice of termination to Manager given within sixty
(60) days after receipt by Owner of the Annual Operating Statement for the third Fiscal Year in such Testing Period, specifying a
termination date not less than sixty (60) nor more than ninety (90) days after the delivery of such notice.
(b) Notwithstanding the foregoing, Owner’s right of termination under this Section 16.4 shall not be exercisable
if the Performance Test is failed due to: (i) an Extraordinary Event; (ii) a breach by Owner of its obligations under this Agreement
(including a failure of Owner to provide sufficient funds as required under this Agreement or to maintain the Managed Facilities in
accordance with the Standards); (iii) any major renovation of the Managed Facilities performed at Owner’s request and not included in
the Business Plan (due to the timeliness of Owner’s request); (iv) a reduction in available room nights resulting from a capital
improvement program performed at Owner’s request and not included in the Business Plan (due to the timeliness of Owner’s request);
(v) a Casualty; (vi) a Condemnation; or, (vii) a lower inventory of Hotel Guest Rooms or lower quantity of Gaming Activities than the
inventory or quantity projected in the applicable Business Plan if such reduction is caused by the action of any applicable
Governmental Authority and not at Owner’s request. Owner expressly acknowledges that Manager’s failure to achieve the
Performance Test itself shall not constitute an Event of Default or otherwise result in any liability to Manager or any Affiliate.
16.4.1 Cure Right . Notwithstanding anything to the contrary in Section 16.4, if Owner provides a notice of
termination pursuant to the Performance Test, Manager shall have the right (the “ Cure Right ”), but not the obligation, to pay to
Owner, but not more than three (3) times during the Initial Term or one (1) time during the Renewal Term, within sixty (60) days after
receipt by Manager of such termination notice, an amount equal to the difference between (a) seventy (70%) of the forecasted Gross
Operating Profits set forth in the Business Plan for the second of the two (2) consecutive Fiscal Years giving rise to Owner’s right to
terminate; and, (b) the actual Gross Operating Profits for such Fiscal Year. If Manager elects to make such payment Owner’s notice of
termination shall be deemed withdrawn and the next Testing Period shall commence with the next Fiscal Year and applied on an
annual basis for each of the two (2) years of the next Testing Period following any cured period.
84
16.5 Termination of Collaboration Agreement . In the Event Manager terminates the Collaboration Agreement prior to
the Managed Facilities Opening Date, Manager shall have no right to terminate this Agreement without payment of the Termination
Fee on the grounds that the Managed Facilities are not completed to the Manager’s reasonable satisfactions, the provisions of
Section 5.3(b) hereof to the contrary notwithstanding.
16.6 Actions To Be Taken on Termination . The Parties shall take the following actions upon the expiration or
termination of this Agreement:
16.6.1 Payment of Expenses for Termination . Owner shall be responsible for all expenses arising as a result of such
expiration or termination, unless such termination was a result of (i) a Manager Event of Default; or, (ii) Owner’s exercise of its right
to terminate pursuant to Sections 11.1 or 16.4. Manager shall be responsible for all expenses arising as a result of a termination to the
extent Owner is not responsible therefore. The Party responsible for the payment of such expenses shall reimburse the other Party and
its Affiliates within thirty (30) days of receipt of any invoice from the non-responsible Party or its Affiliates for any reasonable
expenses incurred by the non-responsible Party or its Affiliates in the course of effecting the termination of this Agreement, including
those arising in connection with severing the employment of any Personnel (with severance benefits calculated in accordance with
Manager’s severance policies).
16.6.2 Payment of Amounts Due to Manager . All Management Fees, Personnel Costs and other amounts due
Manager or its Affiliates under this Agreement through the effective date of expiration or termination shall be paid to Manager and its
Affiliates in accordance with the payment provisions set forth in Section 4.3.1. Owner shall not have or exercise any rights of setoff,
except to the extent of any outstanding and undisputed payments owed to Owner by Manager under this Agreement.
16.6.3 Assignment and Transfers to Owner . Manager shall assign and transfer to Owner: (a) all leases and contracts
with respect to the Managed Facilities entered into by Manager or its Affiliates (if any) in connection with the Operation of the
Managed Facilities in accordance with the terms of this Agreement, and Owner (or the successor manager) shall assume all liabilities
and obligations in writing, in form and substance reasonably satisfactory to Manager; (b) all right, title and interest in and to all
Approvals, including liquor licenses held by Manager or its Affiliates (if any) in connection with the Operation of the Managed
Facilities, to the extent such assignment or transfer is permitted under Applicable Law; and, (c) all books and records of the Managed
Facilities (but excluding any Manager Proprietary Rights); provided, however , that Owner shall retain all such books and records and
85
make them available to Manager at the Managed Facilities at all reasonable times for inspection, audit, examination and photocopying,
at Manager’s expense, for at least five (5) years after the date of such expiration or termination and transfer such accounts to Owner.
Manager shall remove its signatories from the Bank Accounts as of the effective date of such expiration or termination. In addition,
Manager may make and retain copies of all financial books and records pertaining to the Managed Facilities. Prior to transferring any
Hardware or Software to Owner or any successor operator, Manager may, upon thirty (30) days notice to Owner, destroy historic and
extraneous personally identifiable information, credit card information and other sensitive information in such Hardware or Software
as specifically required under Applicable Laws regarding data privacy. Manager shall comply with any Applicable Laws of Vietnam
prior to transferring any Hardware, Software or books and records to Owner or any successor operator.
16.6.4 Bank Accounts . Any amounts remaining in the Bank Accounts on the expiration or termination of this
Agreement shall be disbursed to Owner; provided, however , that Manager may deduct and retain prior to such disbursement all
amounts owed by Owner to Manager and its Affiliates under this Agreement that are not in dispute, unless this Agreement was
terminated due to a Manager Event of Default.
16.6.5 Final Accounting . Within thirty (30) days following the expiration or termination of this Agreement, Manager
shall render a full accounting to Owner (including all statements and reports in the forms herein required) for the final month ending
on the date of expiration or termination. Within sixty (60) days following the expiration or termination of this Agreement, Manager
shall cause to be prepared and delivered to Owner, as an Operating Expense, Annual Operating Statement for the final Fiscal Year,
containing the reports and other items and prepared on the same basis as under Section 7.2. The final Annual Operating Statement
delivered pursuant to this Section 16.6.5, and all information contained therein, shall be binding and conclusive on Owner and
Manager unless, within one hundred and twenty (120) days following the delivery thereof, either Party shall deliver to the other Party
written notice of its objection thereto setting forth in reasonable detail the nature of such objection. If Owner and Manager are unable
thereafter to resolve any disputes between them with respect to the matters set forth in the final Annual Operating Statement within
sixty (60) days after delivery by either Party of the aforesaid written notice, either Party shall have the right to cause such dispute to be
resolved by an Arbitration Tribunal in accordance with the provisions of Section 17.1.
16.6.6 Orderly Transition . In connection with the expiration or termination of this Agreement, Owner and Manager
shall meet and confer to prepare a mutually acceptable written transition plan and program that permits an orderly transition of the
Operations of the Managed Facilities to the Owner (or the successor manager) and provides for compliance with all Applicable Law.
Manager shall make all Senior Executive Personnel and Corporate Personnel available to Owner for a period of up to one hundred
twenty (120) days at Owner’s expense (but at Manager’s actual expense without mark up or commissions) to ensure an orderly and
uninterrupted transition of the management of the Managed Facilities.
86
16.6.7 Survival . This Section 16.6 shall survive the expiration or termination of this Agreement and any dispute
arising hereunder shall be submitted for resolution by the Operating Committee in accordance with Section 17.1 of this Agreement.
16.7 Notice of Termination to Employees . Owner acknowledges that Manager or its Affiliates may have an obligation
under Applicable Law and/or employment agreements, collective bargaining agreements, or other similar agreements with Personnel
or labor organizations that represent Personnel to give advance notice to Personnel of any termination of employment in connection
with the expiration or termination of this Agreement, and that failure to comply with such notification obligation might give rise to
certain liabilities under Applicable Law or such agreements. Accordingly, notwithstanding anything to the contrary in this Agreement,
the effective date of termination shall be extended to permit Manager to comply with all time periods under Applicable Law and/or
such agreements if any, unless Owner agrees in writing to defend, indemnify and hold harmless Manager and its Affiliates in
accordance with Section 13.1 from and against all Third Party Claims (including lost compensation, fines, penalties and attorneys fees
and expenses) incurred by Manager or its Affiliates, arising thereunder as a result of such termination.
ARTICLE 17
DISPUTE RESOLUTION
17.1 Operating Committee Review . Notwithstanding anything contained in this Agreement to the contrary, whenever
(a) a provision of this Agreement expressly provides for submission of a dispute to the Operating Committee for determination; or
(b) there is a dispute, claim or issue between the Owner and the Manager arising under this Agreement that is not subject to
determination by an Expert under Section 6.1.3.1 or the arbitration provisions of Section 17.2 hereof, such dispute shall be resolved by
the Operating Committee in accordance with this Section 17.1. All decisions of the Operating Committee involving a dispute in which
the amount in controversy is less than TWO HUNDRED FIFTY THOUSAND DOLLARS (US$250,000.00), absent fraud, shall be
final and binding on the Parties hereto without further appeal, review or recourse. Any other decision of the Operating Committee
involving issues other than money or in which the amount of money in controversy exceeds TWO HUNDRED FIFTY THOUSAND
(US$250,000.00) may be reviewed pursuant to the arbitration provisions of Section 17.2.
17.1.1 Notice of Dispute to Operating Committee . In the event of a dispute under this Agreement which requires
resolution by an Operating Committee, the complaining Party shall give written notice to the other Party that a dispute exists. Such
notice shall also indicate that the dispute requires resolution by Operating Committee under the terms of this Agreement.
87
17.1.2 Operating Committee Resolution Process . Within ten (10) Business Days following delivery of the notice
required by Section 17.1.1, the Parties shall meet and confer with the Operating Committee to review their respective positions
regarding the dispute. Each Party shall be entitled to make written submissions to the Operating Committee. If a Party makes any
submission to the Operating Committee, such Party shall also provide a copy of its submission to the other Party and the other Party
shall have the right to respond in writing to such submission. The Parties shall make available to the Operating Committee all books
and records relating to the issue in dispute and shall render to the Operating Committee any assistance requested of the Parties. The
Operating Committee shall establish a timetable for the making of such submissions and replies.
17.1.3 Decision of Operating Committee . The Operating Committee shall notify the Parties in writing of its decision
within twenty (20) Business Days from the date on which the Parties submitted a dispute to the Operating Committee, or such other
period as the Parties and the Operating Committee may agree.
17.2 Arbitration .
17.2.1 Arbitration Required . Except for (i) those disputes wherein the resolution by an Operating Committee is final
and, (ii) those matters set forth in Section 17.3.6 below, the Parties shall resolve all disputes that may arise in connection with this
Agreement through final and binding arbitration (without appeal or review), administered by an independent arbitration tribunal
comprised of three (3) Qualified Persons selected in accordance with Section 17.2.2 below (the “ Arbitration Tribunal ”).
17.2.2 Selection of Arbitration Tribunal . In the event of a dispute under this Agreement which requires resolution by
arbitration, the complaining Party shall give written notice to the other Party that a Dispute exists. Such notice shall also indicate that
the Dispute requires resolution by an Arbitration Tribunal under the terms of this Agreement. Within twenty (20) days following
delivery of such notice, each Party shall have twenty (20) days to appoint a Qualified Person to act as an arbitrator. The two
(2) arbitrators so selected by each Party shall then have twenty (20) days to jointly select a third Qualified Person to act as an
arbitrator. The three (3) arbitrators shall comprise the Arbitration Tribunal, and the third jointly selected arbitrator shall be appointed
as the chairperson of the Arbitration Tribunal. If either Party fails to make its respective selection of a Qualified Person to act as an
arbitrator within the twenty (20) day period provided above (or if the two (2) selected arbitrators fail to jointly appoint a third
Qualified Person to act as an arbitrator within the twenty (20) day period provided above), then either Party (or its selected arbitrator)
shall apply to SIAC, or its successors, to appoint a Qualified Person or Qualified Persons from its qualified panel of arbitrators to act
as the remaining arbitrators comprising the Arbitration Tribunal. Notwithstanding anything to the contrary contained herein, either
Party, in its sole discretion, my waive any of the Qualified Person requirements and permit an Individual proposed by the other Party
who does not meet some or all of the Qualified Person requirements to serve as an arbitrator under this Section 17.2.
88
17.2.3 Arbitration Rules . To the extent not inconsistent with this Section 17.2, the Rules shall apply to any arbitration
proceedings.
(a) In any arbitration proceeding, each Party shall submit or file any claim that would constitute a counterclaim
within the same proceeding as the claim to which it relates. Any such claim that is not submitted or filed in such proceeding shall be
released.
(b) The arbitration proceedings shall be conducted on an individual basis, and not on a multi-plaintiff,
consolidated, collective or class-wide basis.
(c) If more than one issue shall be submitted to the same Arbitration Tribunal for resolution, to the extent
possible, each such issue shall be deemed a separate arbitration for all purposes hereof, such issues to be identified separately by the
Parties in their submission to arbitration, and each such issue shall to the extent possible, be subject to a separate decision by the
Arbitration Tribunal.
(d) The Parties shall be entitled to limited discovery, including document exchanges as ordered by the
Arbitration Tribunal. In addition, the Arbitration Tribunal may, but is not required to, allow depositions.
(e) The Parties acknowledge that the subpoena power of the Arbitration Tribunal is not subject to geographic
limitations.
17.2.4 Decision of Arbitration Tribunal . The Arbitration Tribunal shall notify the Parties in writing of their decision
within forty-five (45) days from the date on which the third arbitrator has been selected, or such other period as both of the Parties and
the Arbitration Tribunal may all collectively agree in writing.
17.3 Miscellaneous .
17.3.1 Location . The location of any Operating Committee resolution proceedings shall be determined by the
Operating Committee and arbitration proceedings shall be conducted in Singapore unless otherwise agreed by the Parties.
17.3.2 Language . The language used in any Operating Committee resolution or arbitration proceedings shall be
English.
89
17.3.3 Fees and Expenses . The prevailing Party in any arbitration, litigation or other legal action or proceeding
arising out of or relating to this Agreement shall be entitled to recover from the losing Party all reasonable fees, costs and expenses for
attorneys, experts and other third parties (including its share of the fees and costs of the Arbitration Tribunal) incurred by the
prevailing Party in connection with such arbitration, litigation or other legal action or proceeding (including any appeals and actions to
enforce any arbitration awards and court judgments). If a Party prevails on some, but not all, of its claims, such Party shall be entitled
to recover an equitable amount of such fees, costs and expenses, as determined by the applicable Arbitration Tribunal or court.
17.3.4 Alternate Dispute Resolution Required . Subject to Section 17.3.6, the Parties agree for themselves, and each of
their respective Equity Owners, Parent Companies and respective Affiliates, and each of the shareholders, trustees, beneficiaries,
directors, officers, employees or agents of any of the foregoing, that all controversies, disputes, or claims between the Parties arising
from or relating to this Agreement shall be subject to, and resolved in accordance with, this Article 17.
17.3.5 Time Period for Claim . Except as otherwise prohibited or limited by Applicable Law, any failure, neglect or
delay of a Party to assert any breach or violation of any legal or equitable right arising from or in connection with this Agreement shall
constitute a waiver of such right and shall preclude the exercise or enforcement of any legal or equitable remedy arising from such
breach or violation, unless written notice specifying such breach or violation is provided to the other Party within twenty-four
(24) months after the later of: (a) the date of such breach or violation; or (b) the date of discovery of the facts (or the date the facts
could have been discovered, using commercially reasonable diligence) giving rise to such breach or violation. Such written notice
shall not toll any applicable statute of limitations.
17.3.6 Legal Proceedings . Notwithstanding anything in this Article 17 to the contrary, the Parties shall have the right
to commence litigation or other legal actions or proceedings with respect to any claims solely relating to: (i) preserving or protecting
either Party or their respective Affiliates’ Intellectual Property Rights, (ii) emergency or injunctive relief, or (iii) enforcement of the
dispute resolution provisions of this Agreement, or (iv) enforcement of the decision and/or award by any Expert, Operating Committee
or Arbitration Tribunal hereunder. Each Party irrevocably submits to the jurisdiction of the Nevada courts in any such litigation or
other legal action or proceeding with respect to clauses (i) through (iv), and each Party irrevocably agrees that all claims in respect of
any such litigation or other legal action or proceeding must be brought and/or defended in the Nevada courts. Each Party agrees that
service of process for purposes of any such litigation or legal action or proceeding need not be personally served, but may be served
with the same effect as by certified mail or any other means permitted by Applicable Law addressed to such Party at its address set
forth in Section 19.4. Nothing in this Section 17.3 shall affect Manager’s rights to pursue any litigation or other legal action or
proceeding in any other appropriate jurisdiction, including any litigation, action or proceeding brought by Manager to enforce any
judgment against Owner entered by a State or Federal court.
90
17.3.7 Employment . Each Party agrees that they shall not employ or enter into a consulting agreement with any
Individual utilized as an Expert or as an arbitrator under this Article 17 for a period of twenty-four (24) months following the
completion of such Individual’s engagement as an Expert or an arbitrator, without the prior written consent of the other Party, which
consent may be withheld in such Party’s sole and absolute discretion. The engagement contract with any such Individual shall contain
an affirmative representation by such Individual that such Individual will not accept employment from either Party or its Affiliates for
a period of twenty-four (24) months following the completion of such Individual’s engagement as an arbitrator hereunder.
17.4 Waivers .
17.4.1 JURISDICTION AND VENUE . OWNER AND MANAGER WAIVE, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ALL DEFENSES BASED ON LACK OF JURISDICTION OR INCONVENIENT VENUE
OR FORUM FOR ANY ARBITRATION, LITIGATION OR OTHER LEGAL ACTION OR PROCEEDING PURSUED BY
MANAGER OR OWNER IN THE JURISDICTION AND VENUE SPECIFIED IN THIS ARTICLE 17.
17.4.2 TRIAL BY JURY . EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, TRIAL BY JURY OF ALL CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT.
17.4.3 PUNITIVE DAMAGES . NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT OR UNDER APPLICABLE LAW, IN ANY ARBITRATION, LAWSUIT, LEGAL ACTION OR PROCEEDING
BETWEEN THE PARTIES ARISING FROM OR RELATING TO THIS AGREEMENT, THE PARTIES UNCONDITIONALLY
AND IRREVOCABLY WAIVE AND DISCLAIM FOR THEMSELVES, AND EACH OF THEIR RESPECTIVE PARENT
COMPANIES AND EQUITY OWNERS, AND EACH THEIR RESPECTIVE AFFILIATES, AND EACH OF THE
SHAREHOLDERS, TRUSTEES, BENEFICIARIES, DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS OF ANY OF THE
FOREGOING, TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW ALL RIGHTS TO ANY
CONSEQUENTIAL, PUNITIVE, EXEMPLARY, STATUTORY OR TREBLE DAMAGES (OTHER THAN PARTIES’
STATUTORY RIGHTS AND REMEDIES RELATING TO SUCH PARTIES’ (OR SUCH PARTIES AFFILIATES’)
TRADEMARKS, COPYRIGHTS, TRADE SECRETS AND OTHER INTELLECTUAL PROPERTY) AND ACKNOWLEDGE
AND AGREE THAT THE RIGHTS AND REMEDIES IN THIS AGREEMENT, AND ALL OTHER RIGHTS AND REMEDIES
AT LAW AND IN EQUITY, WILL BE ADEQUATE IN ALL CIRCUMSTANCES FOR ANY CLAIMS THE PARTIES MIGHT
HAVE WITH RESPECT THERETO. NOTWITHSTANDING THE FOREGOING, WITH RESPECT TO ANY EVENT OF
DEFAULT BY THE OTHER PARTY, THE NON-DEFAULTING PARTY MAY SEEK (BUT SHALL NOT BE
AUTOMATICALLY ENTITLED TO) CONSEQUENTIAL DAMAGES FOR LOST PROFITS IN AN AMOUNT THAT SHALL
NOT, IN ANY EVENT, EXCEED US$10,000,000.00
91
17.5 Survival . This Article 17 shall survive the expiration or termination of this Agreement.
ARTICLE 18
REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS
18.1 Manager’s Representations and Warranties . As of the Effective Date, Manager represents and warrants to Owner
that:
18.1.1 Organization and Authority . Manager is duly organized, validly existing, and in good standing under the laws
of the jurisdiction of its organization, is duly qualified to do business in the jurisdiction in which the Managed Facilities is located (to
the extent required by Applicable Law), and has full power, authority, and legal right to execute and deliver this Agreement, and
perform all of Manager’s covenants and obligations under this Agreement. Manager’s execution, delivery, and performance of this
Agreement have been duly authorized by all necessary action on the part of Manager.
18.1.2 Enforceability . This Agreement constitutes a valid and binding obligation of Manager and does not violate or
conflict with the organizational and governing documents of Manager or, to the best of Manager’s knowledge, any Applicable Law to
which Manager is subject or by which it or any substantial portion of its assets is bound or affected.
18.1.3 Third Party Approvals . No approval of any third party is required for Manager’s execution and performance of
this Agreement that has not been obtained prior to the execution of this Agreement. This Agreement and the performance of
Manager’s obligations hereunder will not violate, conflict with or constitute a breach of or default under any agreement to which
Manager or any of its Affiliates is a party, or any of their respective properties or assets is bound or affected.
18.1.4 Litigation. There is no litigation, proceeding or governmental investigation pending or, to the best of Manager’s
knowledge, threatened against Manager or any Affiliate, Parent Company or Equity Owner of Manager that could adversely affect the
validity of this Agreement or the ability of Manager to comply with its obligations under this Agreement.
92
18.1.5 Gaming Laws and Sanction Laws . To the best of Manager’s knowledge, neither Manager, nor any Parent
Company or Equity Owner, nor any of their respective Affiliates, (a) is in violation of any Gaming Laws or Sanction Laws, or
otherwise have assets or interests that are subject to restrictions under any Gaming Laws or Sanction Laws, or (b) would cause Owner
or any of its Affiliates to be in violation of any Gaming Laws or Sanction Laws, or subject any of its assets or interests to any fines,
penalties, sanction, confiscation or similar liability or action under any Gaming Laws or Sanctions Laws.
18.1.6 Approvals . Manager holds (or will hold prior to the Opening Date), all Approvals required to be held by
Manager that are necessary to permit the Operation of the Managed Facilities in accordance with the Standards, Applicable Law and
the other terms and conditions of this Agreement.
18.1.7 Development Compliance . The development and construction of the Managed Facilities shall be in accordance
with this Agreement and the Collaboration Agreement.
18.2 Owner’s Representations and Warranties
18.2.1. As of the Effective Date, Owner represents and warrants to Manager that:
18.2.2 Leasehold Interest . Owner has a leasehold interest in the Site.
18.2.3 Organization and Authority . Owner is duly organized, validly existing, and in good standing under the laws of
the jurisdiction of its organization, is duly qualified to do business in the jurisdiction in which the Managed Facilities is located, and
has full power, authority and legal right to execute and deliver this Agreement, and perform all of Owner’s covenants and obligations
under this Agreement. Owner’s execution, delivery and performance of this Agreement have been duly authorized by all necessary
action on the part of Owner.
18.2.4 Enforceability . This Agreement constitutes a valid and binding obligation of Owner and does not and will not
violate or conflict with any of the organizational or governing documents of Owner or, to the best of Owner’s knowledge, any
Applicable Law to which Owner is subject, or the Managed Facilities or any substantial portion of Owner’s assets is bound or
affected, including, but not limited to the Law of Vietnam.
93
18.2.5 Third Party Approvals and Contracts . No approval of any third party (including any Lender or ground lessor)
is required for Owner’s execution of this Agreement that has not been obtained prior to the execution of this Agreement. Neither
Owner nor any of its Affiliates is a party to any agreement for the development, construction, management, franchise or operation of
the Managed Facilities or any portion thereof that would conflict with this Agreement. This Agreement and the performance of
Owner’s obligations hereunder will not violate, conflict with or constitute a breach of or default under any agreement to which Owner
or any of its Affiliates is a party, or by which the Managed Facilities, any of the properties or assets of Owner or its Affiliates is bound
or affected. No Person holds any rights of claims against Owner, or arising from its relationship with Owner, that would make it a
third party beneficiary under this Agreement.
18.2.6 Litigation . There is no litigation, proceeding or governmental investigation pending or, to the best of Owner’s
knowledge, threatened against Owner that could adversely affect the validity of this Agreement or the ability of Owner to comply with
its obligations under this Agreement.
18.2.7 Financial Statements . To the best of Owner’s knowledge, the financial statements and other documents
submitted by Owner to Manager prior to the execution of this Agreement (a) are accurate and complete as of the Effective Date; and,
(b) do not omit the statement of any material fact necessary to make them not misleading.
18.2.8 Ownership of Managed Facilities and Owner . As of the Effective Date the Owner is the sole lessee of the Site
and the sole owner of the Managed Facilities.
18.2.9 Financing . Exhibit B lists all Mortgages and Security Interests and all debt financing as of the Effective Date,
and Owner has provided Manager with true and complete copies of all Financing Documents in effect as of the Effective Date.
18.2.10 Gaming Laws and Sanction Laws . To the best of Owner’s knowledge, neither Owner, nor any Parent
Company or Equity Owner, nor any of their respective Affiliates, (a) is in violation of any Gaming Laws or Sanction Laws, or
otherwise have assets or interests that are subject to restrictions under any Gaming Laws or Sanction Laws, or (b) would cause
Manager or any of its Affiliates to be in violation of any Gaming Laws or Sanction Laws, or subject any of its assets or interests to any
fines, penalties, sanction, confiscation or similar liability or action under any Gaming Laws or Sanctions Laws.
94
18.3 Owner’s Covenants .
18.3.1 Good Standing of Owner . Owner shall take all actions as may be necessary to ensure that Owner remains in
good standing in the jurisdiction of its organization, and duly qualified to do business in the jurisdiction in which the Hotel is located.
18.3.2 Litigation . If Owner receives or becomes aware of any notice regarding any litigation, proceeding or
governmental investigation pending or threatened against Owner or any Affiliate, Parent Company or Equity Owner of Owner that
could adversely affect the validity of this Agreement or the ability of Owner to comply with Owner’s obligations hereunder, Owner
shall promptly provide Manager with a copy of such notice if such notice is in writing, or shall promptly relate to Manager the full
particulars of such notice if it is not in writing.
18.3.3 Compliance with Laws . Owner shall take all actions as may be reasonably necessary to ensure that the
representations regarding Compliance with Laws, Gaming Laws and Sanctions Laws in Section 18.2 and through this Agreement
remain true at all times during the Term. Without limiting the foregoing, Owner shall obtain and maintain at all times during the Term
all licenses and governmental approvals necessary or required by any Governmental Authority to fulfill Owner’s duties and
obligations under this Agreement.
18.3.4 Ownership of Managed Facilities . Except as provide in Section 11.2, at all times during the Term, Owner shall
be, and shall take all actions as may be necessary to remain, the sole lessee of the Site and the sole owner of the Managed Facilities,
free and clear of any encumbrance that would have a materially adverse effect on the ability of Manager to Operate the Managed
Facilities in accordance with this Agreement.
18.3.5 Construction . If Owner receives or becomes aware of any notice regarding any defects in the construction,
state of repair or state of completion of the Managed Facilities or ordering or directing that any alteration, repair, improvement or
other work be done, or relating to non-compliance with any Approval or Applicable Law, or relating to any threatened or impending
Condemnation from any Lender or Governmental Authority having jurisdiction over Owner, Owner shall promptly provide Manager
with a copy of such notice if such notice is in writing, or shall promptly relate to Manager the full particulars of such notice if it is not
in writing.
18.3.6 Approvals . Owner holds (or will hold prior to the Managed Facilities Opening Date) and shall maintain
throughout the Operating Term all Approvals required to be held by Owner that are necessary to permit the ownership and Operation
of the Managed Facilities in accordance with the Standards, Applicable Law and the other terms and conditions of this Agreement.
95
18.3.7 Documentation . If necessary to carry out the intent of this Agreement, Owner agrees to execute and provide to
Manager, on or after the date hereof, any and all instruments, documents and agreements necessary to make this Agreement fully and
legally effective, binding and enforceable between the Parties hereto and as against third parties.
18.3.8 Communications . Owner shall provide Manager with copies of any communications directed to Owner or any
Affiliate of Owner relating to any actual, alleged, suspected or threatened violation of any Applicable Laws, including Gaming Laws,
that relate to the Casino, Gaming Activities the Hotel, the Casino Amenities, the Hotel Amenities or the Project, within five (5) days
of receipt of such communication; provided, however, the provisions of this Section 18.3.8 do not apply to any communication
between the Owner and its legal counsel that is subject to an applicable privilege.
18.3.9 Change in Gaming Allotment .
(a) In accordance with the current terms of the Investment Certificate or if due to a change in Applicable Laws or
other change to Owner’s Investment Certificate, Owner is required to reduce the number of gaming tables, slots and/or other Gaming
Activities below the currently proposed allotment, and if it is within Owner’s authority to do so, the reduction shall be made to the
Managed Facilities and all Other Resorts on a pro-rata basis (after each of the Other Resorts has been allocated ninety (90) gaming
tables and one thousand (1,000) electronic gaming machines).
(b) If due to a change in Applicable Laws or other change to Owner’s Investment Certificate, Owner is permitted
to increase the number of gaming tables, slots and/or other Gaming Activities above the currently proposed allotment, and if it is
within Owner’s authority to do so, then, after each of the Other Resorts has been allocated ninety (90) gaming tables and one thousand
(1,000) electronic gaming machines, the increases shall be made to the Managed Facilities and all Other Resorts on a pro-rata basis
(i.e., divided evenly between each of the five resorts); provided, however, that in no instance will such reallocation result in any
reduction to the ninety (90) gaming tables and one thousand (1,000) electronic gaming machines at the Managed Facilities.
96
18.3.10 Investment Certificate and Exhibits . Unless required by a Governmental Authority with competent
jurisdiction over the Project, Owner shall not make or seek to make any material changes or amendments to the Investment Certificate
or the Exhibits that will have a material adverse effect on the Managed Facilities; provided, however, Owner may amend the
Investment Certificate in any manner that is not restricted by the preceding sentence, including, without limitation, seek approval
rights for gaming tables and electronic games for Zones C, D and E in the Investment Certificate
18.3.11 Manager’s Priority to Project Facilities . Except as provided by any agreement entered prior into the Effective
Date, Owner will not grant or allocate guest, customer and patron priority to use facilities or amenities of the Managed Facilities
without the consent of the Manager, which consent will not be unreasonably withheld; provided, however , that such use priorities are
allocated on a fair and equitable basis among the Managed Facilities and the Other Resorts.
18.3.12 Related Contracts. Owner shall advise Manager with respect to any agreements or contractual arrangements
between Owner and any Person that relate to the Casino or Gaming Activities at the Casino (the “ Related Contracts ”). All Related
Contracts shall be subject to review by Manager to determine potential licensing problems and shall include provisions reasonably
necessary to protect Owner’s and Manager’s and their Affiliates’ respective officers’ and directors’ ability to obtain and maintain
gaming licenses in any jurisdiction. Owner and Manager shall consult prior to execution of any Related Contracts entered into after the
date hereof regarding any possible material impact the Related Contracts might have on the management and operation of the Casino
and Manager shall have the right to approve or consent to any such Related Contracts. In the event Owner enters into any Related
Contracts, Owner shall provide copies of such Related Contracts to Manager in a timely manner. Thereafter, Manager shall operate the
Casino in compliance with the Related Contracts. In the event that Manager’s actions or failure to act shall cause a default under a
Related Contract that has been expressly approved in advance in writing by Manager, such default shall not be an Event of Default
under this Agreement until the cure period for such default provided in the Related Contract, if any, has expired.
18.3.13 Gaming Disclosure . Owner agrees to provide the information known to Owner as required by Nevada
Revised Statute 463.710 regarding any changes in the Ownership Interests of Owner and its Parent Companies and their respective
Equity Owners at least twenty (20) days before the end of each calendar quarter.
18.4 Manager’s Covenants .
18.4.1 Good Standing of Manager . Manager shall take all actions as may be necessary to ensure that Manager and its
Affiliates remain in good standing in the jurisdiction of its organization, and duly qualified to do business in the jurisdiction in which
the Managed Facilities are located.
97
18.4.2 Compliance with Laws . Manager shall take all actions as may be reasonably necessary to ensure that the
representations regarding Compliance with Laws, Gaming Laws and Sanctions Laws in Section 18.2 and through this Agreement
remain true at all times during the Term. Without limiting the foregoing, Manager shall obtain and maintain at all times during the
Term all licenses and governmental approvals necessary or required by any Governmental Authority to fulfill Manager’s duties and
obligations under this Agreement.
18.4.3 Documentation . If necessary to carry out the intent of this Agreement, Manager agrees to execute and provide
to Owner, on or after the date hereof, any and all instruments, documents and agreements necessary to make this Agreement fully and
legally effective, binding and enforceable between the Parties hereto and as against third parties.
18.4.4 Communications . Manager shall provide Owner with copies of any communications directed to Manager or
any Affiliate of Manager relating to any actual, alleged, suspected or threatened violation of any Applicable Laws, including Gaming
Laws, that relate to the Casino, Gaming Activities the Hotel, the Casino Amenities, the Hotel Amenities or the Project, within five
(5) Business Days of receipt of such communication.
18.4.5 Approvals . Manager holds (or will hold prior to the Managed Facilities Opening Date) and shall maintain
throughout the Operating Term all Approvals required to be held by Manager that are necessary to permit the ownership and
Operation of the Managed Facilities in accordance with the Standards, Applicable Law and the other terms and conditions of this
Agreement.
18.4.6 Non-Interference . Except joint or concurrent marketing programs for hotels, casinos and resorts owned or
operated by Manager or its Affiliates as permitted by an approved Business Plan, Manager shall not (i) direct, (ii) instruct,
(iii) recommend or (iv) make any suggestions (either expressly or implicitly), to any Personnel (including, without limitation, Senior
Executive Personnel) to act or omit to act in a manner that will benefit another hotel, resort or casino that is owned or operated by any
other Affiliate of Manager.
18.4.7 Independent Operations and Best Efforts . Except joint or concurrent marketing programs for hotels, casinos
and resorts owned or operated by Manager or its Affiliates as permitted by an approved Business Plan, Manager covenants that
Manager shall not act in a manner that will benefit another hotel, resort or casino that is owned or operated by any other Affiliate of
Manager.
98
18.4.8 Casino Operation . Subject to Applicable Law, at all times during the Operating Term, Manager shall keep the
Casino open for Gaming Activities on a twenty-four (24) hour-a-day, seven (7) day-a-week basis (including all holidays); provided,
however , Manager shall not be required to do so (i) if in Manager’s reasonable judgment, it would not be commercially reasonable, or
(ii) during an Extraordinary Event , renovation and/or construction activities that make the continuing Operation of the Gaming
Activities impracticable or commercially unreasonable.
18.4.9 Gaming Disclosure . Manager agrees to provide the information provided to the Gaming Authorities having
jurisdiction over Manager or its Affiliates regarding any changes in the Ownership Interests of Manager and its Parent Companies and
their respective Equity Owners at least twenty (20) days before the end of each calendar quarter.
18.4.10 Guarantor’s Net Worth . Manager covenants that at any time Guarantor’s net worth shall be less than
FIFTEEN MILLION DOLLARS (US$15,000,000.00) for a period exceeding ten (10) days, Manager shall deliver to Owner written
notice of same and proof satisfactory to Owner that in connection with the guaranty provided by Section 20.3 hereof, Guarantor has
established a letter of credit in favor of Owner or such other security reasonably satisfactory to Owner in the amount by which the
Guarantor’s net worth is deficient under this representation and warranty.
18.5 Acknowledgements . OWNER AND MANAGER EACH ACKNOWLEDGE AND CONFIRM TO THE OTHER
THAT:
18.5.1 NO ADDITIONAL REPRESENTATIONS OR WARRANTIES . NEITHER PARTY HAS MADE ANY
PROMISES, REPRESENTATIONS, WARRANTIES OR GUARANTIES OF ANY KIND WHATSOEVER TO THE OTHER
PARTY, EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, AND NO PERSON IS AUTHORIZED TO MAKE
ANY PROMISES, REPRESENTATIONS, WARRANTIES OR GUARANTIES ON BEHALF OF EITHER PARTY, EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT.
18.5.2 NO RELIANCE . NEITHER PARTY HAS RELIED UPON ANY STATEMENTS OR PROJECTIONS OF
REVENUE, SALES, EXPENSES, INCOME, RATES, AVERAGE DAILY RATE, OCCUPANCY, REVENUE PER AVAILABLE
ROOM, RESERVATION SYSTEM CONTRIBUTION, PROFITABILITY, VALUE OF THE MANAGED FACILITIES OR
SIMILAR INFORMATION PROVIDED BY THE OTHER PARTY BUT HAS INDEPENDENTLY CONFIRMED THE
ACCURACY AND RELIABILITY OF ANY SUCH INFORMATION AND IS SATISFIED WITH THE RESULTS OF SUCH
INDEPENDENT CONFIRMATION.
18.5.3 IRREVOCABILITY OF CONTRACT . IN ORDER TO REALIZE THE FULL BENEFITS
CONTEMPLATED BY THE PARTIES, THE PARTIES INTEND THAT THIS AGREEMENT SHALL BE NON-TERMINABLE,
EXCEPT FOR AN EVENT OF DEFAULT AND THE SPECIFIC TERMINATION RIGHTS IN FAVOR OF A PARTY SET
FORTH IN THIS AGREEMENT. ACCORDINGLY, NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, THE PARTIES HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVE AND DISCLAIM ALL RIGHTS TO TERMINATE THIS AGREEMENT
AT LAW OR IN EQUITY, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT.
99
ARTICLE 19
GENERAL PROVISIONS
19.1 Governing Law . This Agreement shall be construed under the laws of Nevada, without regard to any conflict of law
principles and subject to the mandatory requirements of the Applicable Law of Vietnam, except that the interpretation and
enforceability of Section 17.2 shall be governed by the Rules in effect at the time of applying for arbitration. In the event that any
provision of this Agreement violates or is otherwise inconsistent with the Applicable Law of Vietnam, the Parties shall have a sixty
(60) day period in which to negotiate in good faith to modify the terms, structure, domicile and/or jurisdiction of the Parties as may be
necessary to comply with the Applicable Law of Vietnam. If the Parties are unable to agree on the foregoing modifications within
such sixty (60) day period, then either Party shall have the right to terminate this Agreement prior to the expiration of such sixty
(60) day period upon no less than sixty (60) day’s and no more than ninety (90) day’s notice to the other without the payment of any
termination fees and no Party shall be entitled to exercise any other rights and remedies that may be available to a Party in law or in
equity including, without limitation, the right to damages.
19.2 Construction of this Agreement . The following principles shall be applied in interpreting this Agreement:
19.2.1 Claims Limited to Contract . Neither Party shall assert against the other Party any contractual claim arising
from this Agreement, unless the claim is based upon the express terms of this Agreement and does not seek to vary, and is not in
conflict with, those express terms.
19.2.2 Severability . If any term or provision of this Agreement is held invalid, illegal or unenforceable by a court of
competent jurisdiction or any Arbitrator(s) for any reason, the remainder of this Agreement shall in no way be affected and shall
remain valid and enforceable for all purposes.
100
19.2.3 Headings . The table of contents, headings and captions in this Agreement are for the purposes of convenience
and reference only and are not to be construed as a part of this Agreement.
19.2.4 Entire Agreement . This Agreement (including the attached Exhibits), together with the Collaboration
Agreement, constitutes the entire agreement between the Parties with respect to the subject matter contemplated herein and supersedes
all prior agreements and understandings, whether written or oral.
19.2.5 Third Party Beneficiary . No third party shall be a beneficiary of Owner’s or Manager’s rights or benefits under
this Agreement.
19.2.6 Time of the Essence . Time is of the essence for all purposes of this Agreement.
19.2.7 Remedies Cumulative . Except as otherwise expressly provided in this Agreement, the remedies provided in
this Agreement are cumulative and not exclusive of the remedies provided by Applicable Law or under this Agreement, and a Party’s
exercise of any one or more remedies for any default shall not preclude the Party from exercising any other remedies at any other time
for the same default.
19.2.8 Amendments . Neither this Agreement nor any of its terms or provisions may be amended, modified, changed,
waived or discharged, except in writing signed by the Party against whom the enforcement of the amendment, modification, change,
waiver or discharge is sought.
19.2.9 Survival . The expiration or termination of this Agreement shall not terminate or otherwise affect any rights or
obligations of a Party that either expressly or by their nature survive the expiration or termination of this Agreement.
19.2.10 Waiver of Liability Regarding Capital Improvements . Each Party irrevocably waives any claim, cause of
action, right or remedy against the other Party for any loss or damage incurred by either Party Manager as a result of any Capital
Improvement to the Managed Facilities completed in accordance with this Agreement.
19.3 Waivers . Subject to Section 17.3.5, no failure or delay by a Party to insist upon the strict performance of any term or
provision of this Agreement, or to exercise any right or remedy available to a Party for a breach, shall constitute a waiver of such
breach or any subsequent breach of such term or provision. No waiver of any default shall affect or alter this Agreement, but each and
every term of this Agreement shall continue in full force and effect with respect to any other then existing or subsequent breach. No
provision in this Agreement, and no breach thereof, shall be waived, altered or modified except by written instrument.
101
19.4 Notices . All notices, consents, determinations, requests, approvals, demands, reports, objections, directions and other
communications required or permitted to be given under this Agreement shall be in writing and shall be delivered by (a) personal
delivery, (b) overnight DHL, FedEx, UPS or other similar courier service addressed to the recipient Party at the addresses specified
below, or at such other address as a Party may designate in accordance with this Section 19.4, and shall be deemed to have been
received by the Party to whom such notice or other communication is sent upon (i) delivery to the address of the recipient Party,
provided, that, such delivery is made prior to 5:00 p.m. (local time for the recipient Party) on a business day, otherwise the following
business day, or (ii) the attempted delivery of such Notice if such recipient Party refuses delivery, or such recipient Party is no longer
at such address number, and failed to provide the sending Party with its current address in accordance with this Section 19.4.
Owner’s Notice Address
With a copy to :
Ho Tram Project Company Limited
666 Burrard Street — Suite 2348
Vancouver, British Columbia
Canada V6C 2X8
Heenan Blaikie LLP
#2200 — 1055 West Hastings Street
Vancouver, British Columbia
Canada V6E 2E9
Attn:
Attn:
General Director
John Legge
Manager’s Notice Address
With a copy to :
PNK (VN), Inc.
c/o Reid Services Limited
Clifton House
75 Fort Street
PO Box 1350
Grand Cayman KY1-1108
Cayman Islands
PNK Development 18, LLC
8918 Spanish Ridge Avenue
Las Vegas, Nevada 89148
Attn:
Attn:
Corporate Secretary
John A. Godfrey
Executive Vice President & General Counsel
19.5 Further Assurances . The Parties shall do and cause to be done all such acts, matters and things and shall execute and
deliver all such documents and instruments as shall be required to enable the Parties to perform their respective obligations under, and
to give effect to the transactions contemplated by, this Agreement.
102
19.6 Relationship of the Parties . The Parties acknowledge and agree that (a) the relationship between them shall be that
of principal (in the case of Owner) and contractor (in the case of Manager); (b) they are not joint venturers, partners or joint owners
with respect to the Managed Facilities; and (c) nothing in this Agreement or the Collaboration Agreement shall be construed as
creating (i) a partnership, joint venture or similar relationship between the Parties; or (ii) fiduciary duties between the Manager to the
Owner. Nothing in this Agreement or the Collaboration Agreement shall be interpreted to eliminate, waive, disclaim or vary any
fiduciary duties that exist between Affiliates of the Manager and the Owner pursuant to the Shareholder Agreement or any other
agreements between such Affiliates.
WITHOUT MODIFYING OR AFFECTING THE EXTENT OF FIDUCIARY DUTIES THAT EXIST AS A RESULT OF THE
RELATIONSHIP OF THE PARTIES OR THEIR AFFILIATES UNDER ANY OTHER AGREEMENT OR ARRANGEMENT, THE
PARTIES ACKNOWLEDGE AND AGREE THEIR RELATIONSHIP UNDER THIS AGREEMENT SHALL BE INTERPRETED
IN ACCORDANCE WITH GENERAL PRINCIPLES OF CONTRACT INTERPRETATION WITHOUT REGARD TO THE
COMMON LAW PRINCIPLES OF AGENCY (OTHER THAN THE DUTY OF GOOD FAITH AND FAIR DEALING IMPLIED
UNDER GENERAL CONTRACT PRINCIPLES, INDEPENDENT OF THE COMMON LAW PRINCIPLES OF AGENCY) AND
THIS AGREEMENT WILL NOT HAVE THE EFFECT OF EXPANDING, MODIFYING, LIMITING OR RESTRICTING ANY OF
THE TERMS OF THIS AGREEMENT, AND ANY LIABILITY OF THE PARTIES SHALL BE BASED SOLELY ON
PRINCIPLES OF CONTRACT LAW AND THE EXPRESS TERMS OF THIS AGREEMENT. ACCORDINGLY, TO THE
FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, THE PARTIES HEREBY UNCONDITIONALLY AND
IRREVOCABLY WAIVE AND DISCLAIM ANY FIDUCIARY OR OTHER SIMILAR COMMON LAW RIGHTS THAT ARE
NOT EXPRESSLY IDENTIFIED, DESCRIBED AND SET FORTH IN THIS AGREEMENT, AND THUS UNCONDITIONALLY
AND IRREVOCABLY WAIVE AND DISCLAIM ANY RIGHT TO RECOVER OR OBTAIN ANY MONETARY, EQUITABLE
OR OTHER RELIEF OR REMEDIES FOR ANY ALLEGED BREACH OR VIOLATION OF ANY ALLEGED FIDUCIARY OR
OTHER SIMILAR COMMON LAW RIGHT OR OBLIGATIONS. OWNER ACKNOWLEDGES AND AGREES THAT ITS
CONSENT TO THE TRANSACTIONS AND CONDUCT BY MANAGER DESCRIBED IN THIS AGREEMENT AND ITS
WAIVER OF ANY FIDUCIARY OR OTHER SIMILAR COMMON LAW RIGHTS OTHERWISE OWED BY MANAGER:
(I) HAS BEEN OBTAINED BY MANAGER IN GOOD FAITH; (II) IS MADE KNOWINGLY BY OWNER BASED ON ITS
ADEQUATE INFORMED JUDGMENT AS A SOPHISTICATED PARTY AFTER SEEKING THE ADVICE OF COMPETENT
AND INFORMED COUNSEL; AND (III) ARISES FROM OWNER’S KNOWLEDGE AND UNDERSTANDING OF THE
SPECIFIC TRANSACTIONS AND ACTIONS OR INACTIONS OF OPERATORS THAT ARE NORMAL, CUSTOMARY, AND
REASONABLY EXPECTED IN THE HOTEL, HOSPITALITY AND GAMING INDUSTRIES GENERALLY FOR THE
WORLD-CLASS INTERNATIONAL/ LUXURY SEGMENT OF SUCH INDUSTRIES. NOTWITHSTANDING ANYTHING
HEREIN TO THE CONTRARY; MANAGER AGREES TO CONDUCT ITS OBLIGATIONS UNDER THIS AGREEMENT WITH
COMMERCIAL PRUDENCE AND IN GOOD FAITH AND IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT.
103
19.7 Extraordinary Event . In the event of an Extraordinary Event, the obligations of the Parties and the time period for
the performance of such obligations (other than an obligation to pay any amount hereunder) shall be extended for each day that such
Party is prevented, hindered or delayed in such performance during the period of such Extraordinary Event, except as expressly
provided otherwise in this Agreement. Upon the occurrence of an Extraordinary Event, the affected Party shall give prompt notice of
such Extraordinary Event to the other Party. If Manager is unable to perform its obligations under this Agreement due to an
Extraordinary Event, or Manager deems it necessary to close and cease the Operation of all or any portion of the Managed Facilities
due to an Extraordinary Event in order to protect the Managed Facilities or the health, safety or welfare of its guests, patrons,
customers or Personnel, then Manager may close or cease Operation of all or a portion of the Managed Facilities for such time and in
such manner as Manager reasonably deems necessary as a result of such Extraordinary Event, and Manager shall reopen or
recommence the Operation of the Managed Facilities when Owner and Manager reasonably believe that Manager again is able to
perform its obligations under this Agreement, and determines that there is no unreasonable risk to the Managed Facilities for health,
safety or welfare of its guests, patrons, customers or any Personnel.
19.8 Confidentiality Covenant . Except as required by Applicable Law, each of the Parties hereby covenants and agrees
that it shall not, without the consent of the other, directly or indirectly, communicate or disclose to any Person, or use for any purpose
other than the furtherance of the business or the purposes and objectives of this Agreement by such Party, any Confidential
Information acquired by such Party, nor shall it utilize or make available any such Confidential Information, directly or indirectly, in
connection with the subject matter or performance under this Agreement. Nothing in this Agreement shall prevent disclosure of
Confidential Information to a Party’s directors, officers, employees or agents or its financial, legal, accounting or other advisors
provided such advisors are informed in advance as to the confidential nature of the communication and agree to keep such information
confidential.
19.8.1 Other Permitted Disclosure
(a) Each of the Owner and Manager may also disclose Confidential Information to any potential purchaser of its or its
Affiliates Securities any relevant information, except for trade secrets, with respect to the Owner and its Subsidiaries, in order to allow
such a potential purchaser to determine whether to acquire such Securities, provided that said shareholder shall first obtain from any
Person to whom information is to be disclosed, a confidentiality agreement as to such information.
(b) The Parties and their Affiliates may make disclosures to third Persons (including, but not limited to, disclosures to
security analysts or made during earnings calls) regarding Confidential Information or such other information about the Enterprise so
long as the disclosure of any such information is mutually agreed to in writing from time to time by the Parties. As a result of such
pre-approval with respect to such information, the disclosing Party and its Affiliates shall not be required to seek the approval of the
other Party to each subsequent disclosure of such pre-approved information.
104
(c) Notwithstanding anything in this Agreement to the contrary, the Parties acknowledge that the other Party and its
Affiliates shall be entitled to make such disclosures regarding a Party and its Affiliates and their affairs (including, without limitation,
financial information) as they deem necessary or appropriate in connection with (a) a Party’s and its Affiliates’ reporting or disclosure
obligations under United States securities laws, rules and regulations and rules and regulations of stock exchanges and stock markets
where their securities are listed or traded, whether in connection with documents filed with or information supplied to the SEC, stock
exchanges or other stock markets on which its securities may be listed or traded (which for purposes hereof shall include earnings
releases filed by the Parties or any of their Affiliates with the SEC), (b) disclosures to Governmental Authorities (including, without
limitation, Gaming Authorities), and (c) corporate transactions, including without limitation public or private securities transactions,
loans and other financing transactions, proxy solicitations and merger and acquisition transactions, including, without limitation,
merger and acquisition transactions involving the disclosing Party or any of its Affiliates.
19.8.2 Remedies . Each of the Parties agrees that the restrictions contained in this Agreement are necessary and
fundamental to the protection of the Owner’s and Manager’s business and that all such restrictions are reasonable and valid and all
defenses to the strict enforcement thereof are hereby waived. Each of the Parties acknowledges that a breach or threatened breach of
any provision of this Article 19.8 will result in the Owner and Manager suffering irreparable harm not compensated by damages alone.
Accordingly, the Parties agree that the Owner and Manager shall be entitled to interim and permanent injunctive relief, specific
performance and other equitable remedies, in addition to any other relief to which such Person may be entitled under Applicable Law.
19.8.3 Public Statements . Except as provided for in Article 19.8.1 Owner and Manager shall consult with each other on
all press releases and other public statements relating to the Managed Facilities and neither Party shall issue any press release or other
public statement relating to the Managed Facilities except as provided in Sections 19.8 and 19.8.1 without the prior written approval of
the other Party, except for any public statement required under Applicable Law (including reporting requirements applicable to public
companies).
105
19.9 Privileged Licenses . The Parties hereby (a) acknowledges that the other Party or its Affiliates hold or will hold one or
more licenses under Gaming Laws; (b) agrees to use commercially reasonable efforts to take, or to refrain from taking, any actions
that are necessary to prevent, or that would be reasonably likely to cause, the gaming license of the other Party or its Affiliates to
expire, terminate or not be renewed; and, (c) agrees to cooperate with the other Party, as reasonably requested on a confidential basis,
and at no out-of-pocket cost or expense to the cooperating Party, to provide information reasonably necessary to enable the other Party
and its Affiliates to respond to any requests for information in connection with preservation of such gaming licenses and compliance
with any gaming regulations applicable to the other Party or its Affiliates and the other Party’s internal compliance policies of general
applicability relating thereto (including information required in connection with any necessary background checks or other
investigations regarding credit standing, character and personal qualifications).
19.10 Foreign Corrupt Practices Act . Neither Party nor any Person for or on behalf of such Party, shall make, and each
Party acknowledges that the other Party will not make any expenditure in violation of any Applicable Law including, without
limitation, the Foreign Corrupt Practices Act (to the extent that it is applicable), and Vietnamese anti-corruption legislation, as
amended from time to time, in the performance of its obligations under this Agreement and in connection with its activities in relation
thereto. The Parties agree to comply with the legal compliance requirements set forth in Exhibit C to this Agreement.
19.11 Expenses for Assistance Regarding Certain Instruments . Each Party, to the extent requested by the other Party or
its Lender, agree to pay to the other Party at its own expense and not as an Operating Expense for all its costs and expenses (including
reasonable and customary attorney’s fees and any necessary document translations) exceeding TWO THOUSAND FIVE HUNDRED
DOLLARS (US$2,500.00) annually, except as may be otherwise expressly provided in this Agreement, incurred by such Party in
connection with the negotiation, preparation, execution, delivery and administration of documents, such as any estopple certificate,
subordination and non-disturbance agreements, or similar instruments for the other Party.
19.12 Execution of Agreement . This Agreement may be executed in counterparts, each of which when executed and
delivered shall be deemed an original, and such counterparts together shall constitute one and the same instrument. Such executed
counterparts may be delivered by facsimile or electronic mail (via portable data format (pdf)) which, upon transmission to the other
Party, shall have the same force and effect as delivery of the original signed counterpart.
19.13 Language . Owner and Manager acknowledge and agree that this Agreement has been negotiated, concluded, and
executed in the English language. In the event a translation is prepared of this Agreement in whole or in part at any time for any
purpose, Owner and Manager agree that the English language version shall control and be determinative as to the purpose and intent
of any provision of this Agreement.
106
19.14 Approvals . Unless inconsistent with the express terms of this Agreement, in any case under this Agreement where:
(i) One Party has requested in writing the consent or approval of the other Party in accordance with this Agreement, such consent
or approval shall be deemed to have been given if not expressly refused in writing within thirty (30) days after the date of its request.
(ii) The consent or approval of Owner or Manager is required, unless otherwise specifically provided herein, such consent or
approval shall not be unreasonably withheld, conditioned or delayed.
(iii) Once any document, proposed action or other matter is approved, no change or amendment thereof may be effected without
the prior written consent of both Parties.
19.15 Limitation of Liability . If Owner shall fail to perform any covenant, term or condition of this Agreement upon
Owner’s part to be performed and, as a consequence of such failure and after the expiration of all applicable grace, notice and cure
periods, Manager shall recover a money judgment against Owner, such judgment shall be satisfied only out of the proceeds of sale
received upon the execution of such judgment and levy thereon against the right, title and interest of Owner in the Managed Facilities
and out of other income from the Managed Facilities receivable by Owner or out of the consideration received by Owner from the sale
or other disposition of all or any part of Owner’s right, title and interest in the Managed Facilities. Neither Owner nor any of the
partners, beneficiaries, officers, directors, venturers, shareholders or Affiliates of Owner shall be personally liable for any deficiency.
ARTICLE 20
CONFLICTS OF INTEREST: TRADE AREA RESTRICTION
20.1 Conflicts of Interest . Owner acknowledges that in certain respects all casinos and hotels compete on an international,
national, regional and local basis with other casinos and hotels and that conflicts may, from time to time, arise between the Managed
Facilities and other casinos and hotels owned or operated by Manager and its Affiliates. Owner consents to the operation by Manager
(or its Affiliates) of casinos and hotels and/or any other lodging product and to the addition by Manager (or its Affiliates) of other
casinos and hotels and/or any other lodging product wherever located (including the operation or addition of other casinos and hotels
and/or any other lodging product that may otherwise be deemed competitive with the Managed Facilities), except as otherwise
provided in Sections 18.4.6, 18.4.7 and 20.2 of this Agreement and as provided in the Brand Agreement.
20.2 Trade Area Restriction . Neither Manager nor any of its Affiliates shall open for business or operate a hotel, resort or
Gaming Operation anywhere within Vietnam or within twenty (20) kilometers of the common borders of Vietnam and Cambodia,
Laos, or within the city of Phnom Pinh, Cambodia without the prior written consent of the Owner. Notwithstanding any provision of
this Agreement to the contrary, the restrictions under this Section 20.2 shall terminate if this Agreement expires or terminates for any
reason, other than a Manager Event of Default, in which case, the restrictions shall continue until the second anniversary of such
Manager Event of Default.
107
20.3 Guaranty of Manager . Guarantor hereby irrevocably and unconditionally guarantees to Owner and its successors
and assigns that Guarantor will ensure that Manager has the financial capitalization such that Manager can perform or retain a third
party to perform any and all obligations, performances, indemnities, liabilities and undertakings as and when the same shall be
required to be performed, discharged or become due or payable by or on behalf of Manager or any Affiliate of Manager in accordance
with the terms of this Agreement. Guarantor and Owner acknowledge and agree that this guaranty constitutes a material and
continuing inducement of Owner to enter in this Agreement and such guaranty shall continue so long as the Manager or any Affiliate
of Manager are an Affiliate of Guarantor. In addition, this guaranty may be assigned by Manager upon the sale, assignment, transfer or
other disposition of Manager pursuant to Section 11.1; provided , however, that, such assignee has sufficient assets to fulfill its
obligations under this Agreement in its capacity as Guarantor.
20.4 Guaranty of Owner . To the extent that the Investment Certificate is amended and Owner elects to Transfer its
interest in the Managed Facilities to an Affiliate of Owner (in accordance with the terms of this Agreement) as a condition to such
Transfer, ACDL or any successor to such entity under the Investment Certificate, shall execute a guaranty, in a form reasonably
acceptable to Manager, which guaranty shall provide that the guarantor irrevocably and unconditionally guarantees to Manager the
performance of any and all obligations, performances, indemnities, liabilities and undertakings as and when the same shall be required
to be performed, discharged or become due or payable by or on behalf of Owner in accordance with the terms of this Agreement.
ARTICLE 21
OTHER SITE COMPONENTS AND OTHER RESORTS
21.1 Other Site Components and Other Resorts . Owner covenants and agrees that the design and development of the
Other Site Components and the Other Resorts shall comply with the Investment Certificate and Standards. In addition, Owner shall not
enter into agreements with the owners or operators of the Other Site Components and Other Resorts which agreements materially and
adversely affect the Managed Facilities or permit others to use the Managed Facilities.
21.2 Junket Procedures . Owner shall use good faith efforts to obtain consensus from Manager, Owner and operators of
the Other Resorts for a uniform policy and minimum criteria and procedures for junkets and junket operators throughout the Project
including the maximum commission to be paid to junket operators (the “ Junket Procedures ”). If Owner is unable to obtain such
consensus after good faith negotiations, then Owner shall determine the Junket Standards and (i) Manager and Owner shall abide by
the Junket Standards and (ii) Owner shall include a provision in its agreements with the operators of the Other Resorts to cause such
parties to abide by the Junket Standards.
108
21.3 Project Advertising . Owner and Manager shall use their best efforts to design and implement a program to advertise
the Project and secure the cooperation and support of the operators of the Other Resorts for such program.
21.4 Restrictions on Development of Other Site Components . The Owner shall not (i) except as provided for in
Section 21.5, develop on the Site outside of the Managed Facilities Lands either a Gaming Operation or a nonresidential transient
lodging facility; and, (ii) unreasonably disrupt Manager’s Operation of the Managed Facilities in connection with otherwise
developing the Site outside the Managed Facilities Lands; provided, however, any dispute between the Parties regarding a claimed
Site development-related disruption under this paragraph (ii), shall be resolved by the Operating Committee in accordance with
Section 17.1 and all decisions of the Operating Committee related to such dispute, absent fraud, shall be final and binding on the
Parties hereto without further appeal, review or recourse.
21.5 Other Site Components . Owner shall have the right to develop within the Site outside of the Managed Facilities
Lands, either alone or in conjunction with other third parties:
(a) A nonresidential transient lodging facility provided such facility: (i) shall not commence construction before
the eighth (8th) anniversary of the Managed Facilities Opening Date; (ii) shall consists of no more that 400 rooms; (iii) shall only
include a Gaming Operation if such operation is managed by Manager pursuant to this Agreement (but which will not result in such
facility being deemed part of the Managed Facilities or within the Managed facilities Lands); (iv) is designed, developed, constructed
and maintained at or above the Standard for the Hotel within the Managed Facilities; and (v) is part of a comprehensive development
plan determined in accordance with the Collaboration Agreement; and,
(b) Other Site Components that may include ancillary Gaming Activities that are incidental to primary business
or commercial purpose of such Other Site Components; provided, however, such Gaming Activities shall be managed by Manager
pursuant to this Agreement (but will not result in such Other Site Components being deemed part of the Managed Facilities or within
the Managed facilities Lands).
[Signatures on the following page.]
109
Resort Management Agreement - Execution Page
IN WITNESS WHEREOF , the Parties hereto have duly executed this Management Agreement as of the Effective Date.
OWNER:
HO TRAM PROJECT COMPANY LIMITED
August 8, 2011
By:
/s/ Colin Michael Pine
Name:
Title:
Colin Michael Pine
General Director
[Attest:]
(date signed by Owner)
MANAGER:
PNK (VN), INC.
By:
/s/ Scott Aiken
Name:
Title:
Scott Aiken
Executive Vice President
August 8, 2011
[Attest:]
(date signed by Manager, constituting the “
Effective Date ”)
GUARANTOR:
PNK DEVELOPMENT 18, LLC
August 8, 2011
By:
/s/ Anthony M. Sanfilippo
Name:
Title:
Anthony M. Sanfilippo
Chairman of the Board and CEO
[Attest:]
William L. Buffalo
(date signed by Guarantor, constituting the
“ Effective Date ”)
EXHIBIT A
INVESTMENT CERTIFICATE
-See attached
[Unofficial English translation]
THE PEOPLE’S COMMITTEE OF
BA RIA — VUNG TAU PROVINCE
NUMBER
DATE OF ISSUANCE
[Unofficial English translation]
THE PEOPLE’S COMMITTEE OF
BA RIA — VUNG TAU PROVINCE
SOCIALIST REPUBLIC OF VIETNAM
Independence — Freedom —
Happiness
INVESTMENT CERTIFICATE
No.: 491043000085
First Certification: 12 March 2008
Pursuant to the Law on the Organization of the People’s Councils and the People’s Committees, dated 26 November 2003;
Pursuant to the Investment Law dated 29 November 2005;
Pursuant to the Enterprise Law dated 29 November 2005;
Pursuant to Decree No. 108/2006/ND-CP, dated 22 September 2006, of the Government, Setting Forth Detailed Regulations and
Guidance for Implementing a Number of Articles of the Investment Law;
Pursuant to Decision No. 32/2003/QD-TTg dated 27 February 2003, of the Prime Minister of the Government, Promulgating the
Regulations on the Conducting Business Operations in Prized Electronic Games Reserved for Foreigners;
Pursuant to the opinions of the Prime Minister of the Government as set forth in Official Letter No. 956/VPCP-QHQT, dated 15
February 2008, of the Office of the Government, Regarding the Policy for Considering Investment Projects Proposed by ADCL Group
(Canada);
Pursuant to Official Letter No. 1126/BKH-TM&DV, dated 22 February 2008, Regarding the Policy for Investment in Ho Tram
Ecological and Entertainment Tourist Complex in Xuyen Moc District, Ba Ria — Vung Tau Province, and Official Letter
No. 1566/BKH-TM&DV, dated 11 March 2008, of the Ministry of Planning and Investment;
On the basis of the Request seeking the issuance of an Investment License and the dossiers attached thereto as submitted by
Asian Coast Development (Canada) Ltd. on 15 January 2007; and the supplemental explanatory dossiers of Asian Coast Development
(Canada) Ltd., as filed on 1 March 2007 and subsequently on 25 May 2007 and 3 March 2008;
Having reviewed Submission No. 565/TTr-SKHDT, dated 11 March 2008, of the Department of Planning and Investment;
1
[Unofficial English translation]
THE PEOPLE’S COMMITTEE OF BA RIA — VUNG TAU PROVINCE,
Hereby certifies that:
ASIAN COAST DEVELOPMENT (CANADA) LTD.
Holding Business Registration No. 659975-3 issued by Industry Canada on 18 July 2006
Having its head office at: 70 York Street, suite 1103, Toronto, Ontario M5J 1S9, Canada
Telephone: (416) 306-9832
Fax: (416) 306-0768
Represented by: Mr. David Subotic
Nationality: Canadian
Date of birth: 22 February 1975
Passport number: JK594266, issued on 8 June 2004 in Toronto, Canada
Place of registered permanent household: 1 Palace Pier Court, Suite 2801, Toronto, Ontario, Canada M8V 3W9
Has registered to establish an enterprise and implement an investment project with the following particulars:
Article 1: Particulars of Business Registration
1.
Name of the Enterprise: CÔNG TY TRÁCH NHIỆM HỮU HẠN DỰ ÁN HỒ TRÀM
Business name in English:
Abbreviated name:
HO TRAM PROJECT COMPANY LIMITED
HTP
The Enterprise has the status of a juridical person, has its own chop, and must open an account at a Bank in accordance with the
provisions of the laws of Vietnam.
2.
Form of enterprise: A Single Member Limited Liability Company.
3.
Address of the head office: Phuoc Thuan Village, Xuyen Moc District, Ba Ria — Vung Tau Province.
4.
Lines of business:
Construct and do business in Ho Tram resort, entertainment tourism and international conference center complex in Phuoc Thuan
Village, Xuyen Moc District, Ba Ria — Vung Tau Province, consisting of 5 zones, and the primary facilities in which include the
following: five-star hotels providing 9,000 rooms in total, commercial and service area, performance and play theatre area,
international conference center, entertainment and amusement facilities, luxurious apartments and villas for lease, golf course,
prized entertainment and amusement area reserved for foreigners, and other related service facilities.
5.
The Enterprise’s capital:
a.
The Enterprise’s registered investment capital:
•
b.
The Enterprise’s total registered investment capital is US$4,230,000,000 (four billion and two hundred thirty million
United States dollars).
The Enterprise’s charter capital:
•
The Enterprise’s charter capital is US$795,000,000 (seven hundred ninety five million United States dollars).
2
[Unofficial English translation]
6.
The Enterprise’s representative at law:
•
Mr. David Subotic
•
Nationality: Canadian
•
Date of birth: 22 February 1975
•
Passport number: JK594266, issued on 8 June 2004 in Toronto, Canada
•
Position: General Director
•
Place of registered permanent household: 1 Palace Pier Court, Suite 2801, Toronto, Ontario, Canada M8V 3W9
•
Current place of stay: 1 Palace Pier Court, Suite 2801, Toronto, Ontario, Canada M8V 3W9
Article 2: Particulars of the Investment Project:
1.
Name of the investment project: HO TRAM PROJECT
2.
Objectives and scale of the project:
Construct and do business in Ho Tram resort, entertainment tourism and international conference center complex in Phuoc Thuan
Village, Xuyen Moc District, Ba Ria — Vung Tau Province, consisting of 5 zones:
2.1
Zone A contains the following facilities:
a.
A five-star hotel having 1,100 rooms;
b.
An international conference area;
c.
A system of apartments;
d.
A golf course;
e.
A commercial and service area;
f.
Facilities to service tourism, sports, gaming, amusement and entertainment services such as: ocean park, tennis-match
area, swimming pool, spa, restaurant and gym;
g.
A bus terminal to transfer guests to and from the areas of the project;
h.
An area of luxurious villas for lease;
i.
A resting, training and residential housing area for the employees;
j.
A performance and musical theatre area;
k.
A prized game and entertainment area reserved for foreigners, providing games played by means of prized electronic
machines and games in the form of playing cards at serviced tables reserved for foreigners.
2.2
Zone B contains the following facilities:
a.
A five-star hotel with 1,200 rooms;
b.
An international conference center area;
c.
A central square;
d.
A system of apartments;
e.
A commercial and service area;
f.
A performance and musical theatre area;
g.
Eight cinema theatres;
h.
A system of amusement, entertainment, sports, and tourist service facilities;
i.
An area of luxurious villas for lease;
j.
A resting, training and residential housing area for the employees;
k.
A helicopter landing area (in accordance with the regulations of the Ministry of Defense);
l.
A prized game and entertainment area reserved for foreigners, providing games played by means of prized electronic
machines and games in the form of playing cards at serviced tables reserved for foreigners.
3
[Unofficial English translation]
2.3
2.4
Zone C contains the following facilities:
a.
A five-star hotel with 1,200 rooms;
b.
An international conference center;
c.
A system of apartments;
d.
A commercial and service center;
e.
A system of amusement, entertainment, sports, and tourist service facilities;
f.
A performance and musical theatre area;
g.
An area of luxurious villas for lease;
h.
A resting, training and residential housing area for the employees.
Zone D contains the following facilities:
a.
A five-star hotel having 2,500 rooms;
b.
An international conference area;
c.
A system of apartments;
2.5
d.
A commercial and service area;
e.
A area for exhibition and performance of artistic and cultural activities;
f.
A performance and musical theatre area;
g.
Spaces for organizing indoor and outdoor sport matches;
h.
A system of amusement, entertainment, sports and tourism services facilities;
i.
A resting, training and residential housing area for the employees.
Zone E contains the following facilities:
a.
A five-star hotel having 3,000 rooms;
b.
An international conference area;
c.
A system of apartments;
d.
A area for exhibition and performance of artistic and cultural activities;
e.
A commercial and service area;
f.
A performance and musical theatre area;
g.
A system of amusement, entertainment, sports and tourism services facilities;
h.
A resting, training and residential housing area for the employees.
4
[Unofficial English translation]
3.
Location where the project is implemented: Phuoc Thuan Village, Xuyen Moc District, Ba Ria — Vung Tau Province. The land
use area is approximately 157 hectares.
4.
Total investment capital: US$4,230,000,000 (four billion and two hundred thirty million United States dollars).
Of which, the capital to be contributed for implementing the project is US$795,000,000 (seven hundred ninety five million
United States dollars) to cover for five (5) zones, and the specific capital contribution schedule for implementing the project is as
follows:
•
•
•
Zone A: US$100,000,000 (one hundred million United States dollars)
•
US$30,000,000 (thirty million United States dollars), within 30 days from the date of establishment;
•
US$70,000,000 (seventy million United States dollars), in December 2008.
Zone B: US$105,000,000 (one hundred and five million United States dollars)
•
US$32,000,000 (thirty two million United States dollars), in August 2009;
•
US$73,000,000 (seventy three million United States dollars), in April 2010.
Zone C: US$135,000,000 (one hundred and thirty five million United States dollars)
•
US$40,000,000 (forty million United States dollars), in August 2011;
•
US$95,000,000 (ninety five million United States dollars), in April 2012.
•
•
Zone D: US$180,000,000 (one hundred and eighty million United States dollars)
•
US$55,000,000 (fifty five million United States dollars), in February 2010;
•
US$125,000,000 (one hundred and twenty five million United States dollars), in October 2011.
Zone E: US$275,000,000 (two hundred and seventy five million United States dollars)
•
US$82,000,000 (eighty two million United States dollars), in April 2012;
•
US$193,000,000 (one hundred and ninety three million United States dollars), in December 2012.
5.
The term of operation of the project is 50 (fifty) years as from the date of issuance of the Investment Certificate.
6.
Project implementation schedule:
The project implementation schedule is divided for five zones:
•
Zone A:
+ Commencement of construction: September 2008;
+ Completion: December 2010;
•
Zone B:
+ Commencement of construction: September 2009;
+ Completion: December 2011;
5
[Unofficial English translation]
•
Zone C:
+ Commencement of construction: September 2011;
+ Completion: December 2014;
•
Zone D:
+ Commencement of construction: March 2010;
+ Completion: December 2013;
•
Zone E:
+ Commencement of construction: June 2012;
+ Completion: December 2014.
7.
Preferential treatment for the project:
HO TRAM PROJECT COMPANY LIMITED is entitled to receive preferential treatment with respect to “HO TRAM
PROJECT” investment project as follows:
a.
Annual enterprise income tax rate equal to twenty per cent (20%) for ten (10) years as from when the investment project
commences the business activities.
The project is granted a tax exemption for two (2) years starting from when [it] has taxable income, and reduction of fifty
per cent (50%) of the payable tax amount for the three (3) subsequent years.
The above preferential treatment is only applicable to a business establishment that has implemented properly the
accounting, invoicing and documenting regimes, and has registered for tax payment as declared. A business establishment
shall identify, by itself, the conditions for entitlement of preferential tax treatment, amount of tax exemption, and amount of
losses deductible against taxable income, and submit written notification to the tax authority at the time of filing the
declaration of annual enterprise income tax payment.
The financial obligations with respect to business activities in prized electronic games reserved for foreigners and serviced
card-playing tables reserved for foreigners will follow Decision No. 91/2005/QD-BTC, dated 8 December 2005, of the
Ministry of Finance, Promulgating the Regulations on Administration of Finances With Respect to Business Activities in
Prized Games.
Other taxes under the regulations in force at the time of annual payment of tax.
b.
The Enterprise is exempt from import duty with respect to goods that are imported in accordance with the provisions of
Article 16 of the Law on Import and Export Duties, dated 14 June 2005, and Article 16 Decree No. 149/2005/ND-CP,
dated 6 December 2005, of the Government, Setting Forth Detailed Regulations for Implementing the Law on Import and
Export Duties.
Equipment, machinery and means of transportation imported by the Enterprise must be new products.
6
[Unofficial English translation]
8.
Other provisions:
a.
During the course of operation, the Enterprise must comply with the laws of Vietnam, the stipulations of the Investment
Certificate, the terms of the Enterprise’s Charter and supplemental explanations set forth in the documents dated 1
March 2007, 25 May 2007 and 3 March 2008.
All provisions of the Charter of the Enterprise that are inconsistent with the contents of this Investment Certificate and the
laws of Vietnam must be construed in accordance with the stipulations of the Investment Certificate and the laws of
Vietnam.
b.
During the course of implementation of the project, the Enterprise must carry out properly the requirements of the
authority in charge of zoning and architectural administration without causing any affect to the national defense
deployment master plan already approved by the Prime Minister of the Minister under Decision No. 107/2002/QD-TTg
dated 12 August 2002. The Enterprise must coordinate closely with the national defense authorities in order to resolve
matters relating to national defense and security within the project development areas.
c.
The Enterprise will only be handed over the land at the actual site after the detailed plan for the overall project site has
been completed and approved by the People’s Committee of Ba Ria — Vung Tau Province.
The Enterprise must develop the project and make contributions to the charter capital in strict accordance with the
committed schedule stated in the supplemental explanatory dossiers dated 1 March 2007, 25 May 2007 and 3 March 2008,
and complete the investments in all items of work of the project by 2014, as committed in the Dossier Applying for the
Issuance of a Investment Certificate. Land areas that have been handed over at the actual site but have not been used within
a period of twelve (12) consecutive months, or where the land use schedule is delayed for more than twenty-four
(24) months as compared with the committed schedule, will be taken back in accordance with the provisions of the laws
concerning land.
d.
During the course of implementation of the project, the Enterprise must comply with the currently effective regulations
concerning land, construction and environment, Vietnam’s WTO commitments, and the provisions of other relevant laws,
and is subject to supervision and inspection by Vietnamese competent authorities.
e.
The Enterprise may only implement its business activities in the Prized Game Area reserved for foreigners in Zone A, at
the scale of 1,000 prized electronic gaming machines, in accordance with Decision No. 32/2003/QD-TTg dated 27
February 2003, of the Prime Minister of the Government and Decision No. 91/2005/QD-BTC dated 8 December 2005, of
the Ministry of Finance Promulgating the Regulations on Administration of Finances With Respect to Prized Gaming
Activities, and 90 card-playing serviced tables reserved for foreigners after having completed the construction of the 5-star
hotel in this area and commissioned it into stable business operation. When the Enterprise has completed the construction
of a 5-star hotel and other constructed facilities and commissioned them into business operation in Zone B, the Enterprise
will be entitled to bring in for use an additional quantity of 1,000 prized electronic gaming machines in Zone B and 90
card-playing serviced tables reserved for foreigners.
During December 2014, the Investment Certificate issuing authority will check into the implementation of the project
schedule. If, at that point in time, the number of hotel rooms already constructed and commissioned into operation is in
reality less than 9,000 rooms, then the number of card-playing tables will be reduced accordingly in accordance with the
proportion of not exceeding 2 tables per 100 hotel rooms.
7
[Unofficial English translation]
The Enterprise must formulate the Operating Regulations for the Prized Game and Entertainment Area reserved for
foreigners and to submit such Regulations to the competent Sate authority for approval prior to commissioning the Game
and Entertainment Area into business operation.
f.
The Enterprise must comply with the currently effective regulations of the State of Vietnam concerning foreign exchange
control.
g.
The Enterprise must make an Environmental Impact Assessment Report and submit it to the environmental protection
State authority for consideration and approval in accordance with the provisions of law, and carry out all measures for
waste treatment, environmental and ecological protection, fire and explosion prevention and fighting, and labor safety in
accordance with the regulations of the State of Vietnam.
h.
With respect to the objective of doing business in the musical theatres, cinema theatres and artistic performance
operations, the Enterprise may only invest in the construction of physical facilities such as stages, halls, fittings and
equipment for lease by domestic and foreign enterprises, or for cooperation with Vietnamese enterprises that are entitled to
do business lawfully in the specialized industries in Vietnam for joint business operations.
The organization of the activities relating to medical, cultural and educational fields within the perimeters of the areas of
the Project must comply with the provisions of the laws of Vietnam and must have the approvals from the competent
authorities administering these fields.
i.
If, after one (1) year from the dated of issuance of this Investment Certificate, the investor fails to contribute capital for
developing the project or fails to implement properly the stipulations set forth in the Investment Certificate [or] other
provisions of the laws of Vietnam, the competent State authority of Vietnam will consider a revocation of this Investment
Certificate.
Article 3 : This Investment Certificate is made into two (2) original copies, one is issued to the Enterprise and the other one is filed at
the People’s Committee of Ba Ria — Vung Tau Province.
P.P. THE PEOPLE’S COMMITTEE OF
BA RIA — VUNG TAU PROVINCE
CHAIRMAN
[Signed and sealed by]
Mr. Tran Minh Sanh
8
CNDT 491043000085/1
THE PEOPLE’S COMMITTEE OF
BA RIA — VUNG TAU PROVINCE
[Unofficial English translation]
SOCIALIST REPUBLIC OF VIETNAM
Independence — Freedom — Happiness
AMENDED INVESTMENT CERTIFICATE
No.: 491043000085
First Certification: 12 March 2008
First Amendment Certification: 14 November 2008
Pursuant to the Law on the Organization of the People’s Councils and the People’s Committees, dated 26 November 2003;
Pursuant to the Investment Law dated 29 November 2005;
Pursuant to the Enterprise Law dated 29 November 2005;
Pursuant to Decree No. 108/2006/ND-CP, dated 22 September 2006, of the Government, Setting Forth Detailed Regulations and
Guidance for Implementing a Number of Articles of the Investment Law;
Pursuant to Investment Certificate No. 491043000085 dated 12 March 2008 issued by the People’s Committee of Ba Ria — Vung Tau
province;
Upon reviewing the Application for Amendment of Investment Certificate and enclosures of Ho Tram Project Company Limited
which were submitted on 25 September 2008;
Upon reviewing the Statement No. 2752/TTr-SKHDT dated 2 October 2008 of the Department of Planning and Investment,
THE PEOPLE’S COMMITTEE OF BA RIA — VUNG TAU PROVINCE
Hereby certifies that:
ASIAN COAST DEVELOPMENT (CANADA) LTD.
[Holding] Business Registration No. 659975-3 issued by Industry Canada on 18 July 2006.
[Having its] head office located at: 70 York Street, Suite 1102, Toronto, Ontario M5J 1S9, Canada
Telephone: (416) 3069832
Fax: (416) 3060768
Represented by: Mr. David Subotic
Nationality: Canadian
Date of birth: 22 February 1975
Passport No.: WP016868; Date of issue: 25 September 2007; Place of issue: Toronto, Canada
CNDT 491043000085/2
[Unofficial English translation]
Place of registered permanent household: 1 Palace Pier Court, Suite 2801, Toronto, Ontario, Canada M8V 3W9
Has amended its Investment Certificate No. 491043000085 which was first certified on 12 March 2008 by the People’s
Committee of Ho Chi Minh City, with the following contents:
Article 1: The following provisions of Investment Certificate No. 491043000085 which was first certified on 12 March 2008 are
amended as follows:
Article 1: Particulars of Business Registration:
3. Address of the head office: Phuoc Thuan Village, Xuyen Moc District, Ba Ria — Vung Tau Province.
Representative office: 34 Le Duan Street, District 1, Ho Chi Minh City (Diamond Plaza Building).
6. The Enterprise’s representative at law:
• Mr. David Subotic
• Nationality: Canadian
• Date of birth: 22 February 1975
• Passport No.: WP016868; Date of issue: 25 September 2007; Place of issue: Toronto, Canada
• Position: General Director
•
Place of registered permanent household: 1 Palace Pier Court, Suite 2801, Toronto, Ontario, Canada M8V 3W9.
• Current residence: Number 2, Street Number 57, Thao Dien Ward, District 2, Ho Chi Minh City.
Article 2: All other provisions of Investment Certificate No. 491043000085 which was first certified on 12 March 2008 remain
valid.
Article 3: This amended Investment Certificate is made into 02 (two) originals; one is issued to the Enterprise and one is filed at
the People’s Committee of Ba Ria — Vung Tau province.
PP. THE PEOPLE’S COMMITTEE
CHAIRMAN
[Signed and sealed]
Tran Minh Sanh
CNDT 491043000085/1
THE PEOPLE’S COMMITTEE OF
BA RIA — VUNG TAU PROVINCE
[Unofficial English translation]
SOCIALIST REPUBLIC OF VIETNAM
Independence — Freedom — Happiness
AMENDED INVESTMENT CERTIFICATE
No.: 491043000085
First Certification: 12 March 2008
First Amendment Certification: 14 November 2008
Second Amendment Certification: 9 September 2010
Pursuant to the Law on the Organization of the People’s Councils and the People’s Committees dated 26 November 2003;
Pursuant to the Investment Law dated 29 November 2005;
Pursuant to the Enterprise Law dated 29 November 2005;
Pursuant to Decree No. 108/2006/ND-CP, dated 22 September 2006, of the Government, Setting Forth Detailed Regulations and
Guidance for Implementing a Number of Articles of the Investment Law;
Pursuant to Investment Certificate No. 491043000085 which was first certified on 12 March 2008 and certified for the first
amendment on 14 November 2008 by the People’s Committee of Ba Ria — Vung Tau province;
Upon reviewing the Application for Amendment to Investment Certificate and enclosures of Ho Tram Project Company Limited
which were submitted on 11 August 2010;
Upon reviewing the Statement No. 1579/TTr-SKHDT, dated 31 August 2010, of the Department of Planning and Investment,
THE PEOPLE’S COMMITTEE OF BA RIA — VUNG TAU PROVINCE
Hereby certifies that:
ASIAN COAST DEVELOPMENT (CANADA) LTD.
[Holding] Business Registration No. 659975-3 issued by Industry Canada on 18 July 2006.
[Having its] head office located at: 70 York Street, Suite 1102, Toronto, Ontario M5J 1S9, Canada
Telephone: (416) 3069832
Fax: (416) 3060768
Represented by: Mr. Lloyd Charles Nathan
Date of birth: 25 April 1965
Nationality: British
CNDT 491043000085/2
[Unofficial English translation]
Passport No.: 761273674; Date of issue: 28 May 2009; Place of issue: United Kingdom of Great Britain and Northern Ireland
Permanent residence address: 19 Belsize Square, London NW3 4HT, England.
Current address: 41 Greene Street, Sixth Floor, New York, NY 10013, USA
Has amended its Investment Certificate No. 491043000085 which was first certified on 12 March 2008 and certified for the first
amendment on 14 November 2008 by the People’s Committee of Ba Ria — Vung Tau province, with the following contents:
Article 1: The following provisions of Investment Certificate No. 491043000085 which was first certified on 12 March 2008 and
certified for the first amendment on 14 November 2008 are amended as follows:
Article 1: Particulars of Business Registration:
6. The Enterprise’s representative at law:
• Mr. Johannes Eksteen Forrer
• Date of birth: 26 June 1950
• Nationality: South African
•
Africa
Passport No.: M00001902; Date of issue: 8 June 2009; Place of issue: Department of Home Affairs of the Republic of South
• Position: General Director
• Place of registered permanent household: 41 Esmaralda Cresent, Randburg 2194, South Africa.
• Current residence: Villa 37 Orchid, An Phu Compound, 36 Thao Dien Street, Thao Dien Ward, District 2, Ho Chi Minh City,
Vietnam.
Article 2: All other provisions of Investment Certificate No. 491043000085 which was first certified on 12 March 2008 and
certified for the first amendment on 14 November 2008 by the People’s Committee of Ba Ria — Vung Tau province remain valid.
Article 3: This amended Investment Certificate is made into 02 (two) originals; one is issued to the Enterprise and one is filed at
the People’s Committee of Ba Ria — Vung Tau province.
PP. THE PEOPLE’S COMMITTEE
CHAIRMAN
[Signed and sealed]
Tran Minh Sanh
CNDT 491043000085/1
THE PEOPLE’S COMMITTEE OF
BA RIA — VUNG TAU PROVINCE
[Unofficial English translation]
SOCIALIST REPUBLIC OF VIETNAM
Independence — Freedom — Happiness
AMENDED INVESTMENT CERTIFICATE
No.: 491043000085
First Certification: 12 March 2008
First Change Certification: 14 November 2008
Second Change Certification: 9 September 2010
Third Change Certification: 10 December 2010
Pursuant to the Law on the Organization of the People’s Councils and the People’s Committees dated 26 November 2003;
Pursuant to the Investment Law dated 29 November 2005;
Pursuant to the Enterprise Law dated 29 November 2005;
Pursuant to Decree No. 108/2006/ND-CP, dated 22 September 2006, of the Government, Setting Forth Detailed Regulations and
Guidance for Implementing a Number of Articles of the Investment Law;
Pursuant to Investment Certificate No. 491043000085, and the first certification dated 12 March 2008, the first change certification
dated 14 November 2008 and the second change certification dated 9 September 2010, of the People’s Committee of Ba Ria — Vung
Tau province;
Considering the Registration Dossier for the Investment Certificate Amendment submitted by Ho Tram Project Company Limited on
23 November 2010;
Considering Presentation No. 117/TTr-SKHDT, dated 30 November 2010, of the Department of Planning and Investment,
THE PEOPLE’S COMMITTEE OF BA RIA — VUNG TAU PROVINCE
Hereby certifies that:
ASIAN COAST DEVELOPMENT (CANADA) LTD.
Business Registration No. 659975-3, issued by Industry Canada on 18 July 2006.
Head office located at: 666 Burrard St., Unit 2348, Vancouver, BC, Canada, V6C 2X8
Telephone: (1-604) 669-2499 Fax: (1-778) 329-0439
Represented by: Mr. Lloyd Charles Nathan
Date of birth: 25 April 1965
CNDT 491043000085/2
[Unofficial English translation]
Nationality: British
Passport No.: 761273674; Date of issue: 28 May 2009;
Place of issue: United Kingdom of Great Britain and Northern Ireland
Permanent residence address: 19 Belsize Square, London NW3 4HT, England.
Current place of stay: 41 Greene Street, Sixth Floor, New York, NY 10013, USA
Has amended its Investment Certificate No. 491043000085, and the first certification dated 12 March 2008, the first change
certification dated 14 November 2008, and the second change certification dated 9 September 2010, of the People’s Committee of Ba
Ria — Vung Tau province, with the following particulars:
Article 1: The following provisions of Investment Certificate No. 491043000085, and the first certification dated 12
March 2008, the first change certification dated 14 November 2008, and the second change certification dated 9 September 2010, are
amended as follows:
Article 1: Particulars of Business Registration:
6. The Enterprise’s representative at law:
•
Mr. Colin Michael Pine
•
Date of birth: 20 March 1975
•
Nationality: American
•
Passport No.: 712144060; Date of issue: 24 February 2005; Place of issue: The American Embassy in Hanoi
•
Position: General Director
•
Place of registered permanent household: 45702 Purcell Drive, Plymouth, MI 48170-3639, USA
•
Current place of stay: Suite 1303, Unit 3, 15-17 Ngoc Khanh, Ba Dinh District, Hanoi City, Vietnam.
Article 2: The legal validity of other provisions of Investment Certificate No. 491043000085, and the first certification dated 12
March 2008, the first change certification dated 14 November 2008, and the second change certification dated 9 September 2010, of
the People’s Committee of Ba Ria — Vung Tau Province, remains unchanged.
Article 3: This Investment Certificate replaces Investment Certificate No. 491043000085 as amended for the second time on 9
September 2010 by the People’s Committee of Ba Ria — Vung Tau Province.
Article 4: This amended Investment Certificate is made into 02 (two) originals; one is issued to the Enterprise and one is filed at
the People’s Committee of Ba Ria — Vung Tau province.
PP. THE PEOPLE’S COMMITTEE
CHAIRMAN
[Signed and sealed by]
Tran Minh Sanh
[Unofficial English Translation]
THE PEOPLE’S COMMITTEE OF
HO CHI MINH CITY
SOCIALIST REPUBLIC OF VIETNAM
Independence — Freedom — Happiness
CERTIFICATE OF REGISTRATION OF
OPERATION OF A REPRESENTATIVE OFFICE
No.: 4124000027
First Registration: 5 August 2008
Registration of the Second Change: 5 July 2011
1. Name of the Representative Office : VĂN PHÒNG ÐẠI DIỆN CÔNG TY TNHH DỰ ÁN HỒ TRÀM TẠI THÀNH PHỐ
HỒ CHÍ MINH.
2. Address of the Representative Office : No. 39, Le Duan Street, District 1, Ho Chi Minh City (Kumho Asiana Plaza
Building).
3. Particulars and scope of operation of the Representative Office : transacting and marketing.
4. Full name of the head of the Representative Office : Mr. COLIN MICHAEL PINE; nationality: American; date of birth: 20
March 1975; passport number: 712144060 issued on 24 February 2005 by the American Embassy in Hanoi; permanent residence
address: 45702 Purcell Drive, Plymouth, MI 48170-3639, U.S.A.; current place of stay: Suite 1303, Unit 3, 15-17 Ngoc Khanh, Ba
Dinh District, Hanoi City.
5. To operate under the authorization of the [following] enterprise :
Name of the enterprise: CÔNG TY TNHH DỰ ÁN HỒ TRÀM.
Investment Certificate number: 491043000085 issue by the People’s Committee of Ba Ria — Vung Tau Province on 12
March 2008 with the Third Change dated 10 December 2010.
Address of the head office: Phuoc Thuan Village, Xuyen Moc District, Ba Ria — Vung Tau Province.
The Representative Office of CÔNG TY TNHH DỰ ÀN HỒ TRÀM in Ho Chi Minh City has its own chop, and has the
obligations to follow strictly the Certificate of Registration of Operation of a Representative Office and comply with the provisions of
law in force and the regulations of the People’s Committee of Ho Chi Minh City and competent State administration authorities.
The Representative Office of CÔNG TY TNHH DỰ ÀN HỒ TRÀM in Ho Chi Minh City must have a plan to arrange and
deploy a reasonable parking lot for its employees and for guests coming to it for business purposes, and must not appropriate the road
and its pavements causing a traffic jam in its operating location; and has the responsibility of complying with the provisions of the
Overland Transportation Law concerning the assurance of overland transportation safety, and the relevant statutory instruments
concerning the assurance of overland transportation safety.
[Unofficial English Translation]
This Certificate of Registration of Operation takes effect from the date it is signed and replace Certificate of Representative
Office Operation Registration No. 4124000027 issued by the People’s Committee of Ho Chi Minh on 9 December 2010 (First
Change) and Official Letter No. 9385/SKHDT-DKDT issued by the People’s Committee of Ho Chi Minh City on 17 December 2010.
This Certificate of Registration of Operation is made into three (3) original copies; one of which is issued to CÔNG TY
TNHH DỰ ÁN HỒ TRÀM , one is registered at the People’s Committee of Ho Chi Minh City, and one is forwarded to the
Department of Planning and Investment of Ho Chi Minh City.
cc:
• PP of BR-VT Province;
• Tax Department of HCM City;
• Statistical Department of HCM City;
• Police Department of HCM City;
• PP of District 1.
ON BEHALF OF THE PEOPLE’S COMMITTEE
P.P. THE CHAIRMAN
COMMISSIONER
[Signed and sealed by]
Thai Van Re
EXHIBIT B
FINANCINGS
-Credit Agreement dated March 22, 2011 among HO TRAM PROJECT COMPANY LIMITED , as Borrower, BANK FOR INVESTMENT AND
DEVELOPMENT OF VIETNAM — NAM KY KHOI NGHIA BRANCH, as Lead Arranger, Facility Agent, Security Agent and Bank, and
HOUSING DEVELOPMENT COMMERCIAL JOINT STOCK BANK — HANOI BRANCH, as Bank, and related Security Documents (as defined
therein) as follows:
(i)
the Mortgage Agreement for Equity Interests;
(ii)
the Mortgage Agreement for Land Use Right and Immovable Assets;
(iii)
the Mortgage Agreement for Movable Assets and Property Rights; and
(iv)
the Mortgage Supplements.
EXHIBIT C
SECTION 19.10 LEGAL COMPLIANCE REQUIREMENTS
(a)
The Parties and each of their Subsidiaries: (i) are familiar with, have fully complied at all times with and are currently in full
compliance with the U.S. Foreign Corrupt Practices Act, as amended, and the Canadian Corruption of Foreign Public Officials
Act, and (ii) have complied and are currently in compliance in all material respects with all other applicable domestic and
foreign anti-bribery or anti-corruption laws and other Applicable Laws that prohibit payments to improperly influence foreign
or domestic government officials;
(b)
neither Party nor any of their Subsidiaries, nor, to the knowledge of the Parties or any of their Subsidiaries, any director, officer,
employee, agent, distributor, consultant, Affiliate, or other person acting on behalf of the Parties or their Subsidiaries, has taken
any action, either directly or indirectly, that would result in a violation of the Anti - Corruption Laws, including, without
limitation, making, offering, authorizing, or promising any payment, contribution, gift, entertainment, bribe, rebate, kickback, or
any other thing of value, regardless of form or amount, to any (i) foreign or domestic government official or employee,
(ii) employee of a foreign or domestic government-owned entity, (iii) foreign or domestic political party, political official, or
candidate for political office, or (iv) any officer or employee of a public international organization, to obtain a competitive
advantage, or to receive favorable treatment in obtaining or retaining business;
(c)
neither Party nor any of their Subsidiaries, nor, to the knowledge of the Parties or any of their Subsidiaries, any director, officer,
employee, agent, distributor, consultant, Affiliate, or other person acting on behalf of either or their Subsidiaries, is, or has been,
under administrative, civil, or criminal investigation, indictment, suspension, debarment, or audit (other than a routine contract
audit) in connection with alleged or possible violations of the Anti Corruption Laws;
(d)
neither Party nor any of their Subsidiaries, nor, to the knowledge of either or any of their Subsidiaries, any director, officer,
employee, agent, distributor, consultant, Affiliate, or other person acting on behalf of ACDL or its Subsidiaries, has received
notice from, or made a voluntary disclosure to, the U.S. Department of Justice or the U.S. Securities and Exchange Commission
regarding alleged or possible violations of the Anti-Corruption Laws;
(e)
The Parties, their Subsidiaries, and, to the knowledge of each and any of their Subsidiaries, any director, officer, employee,
agent, distributor, consultant, Affiliate, or other person acting on behalf of either of the Parties or their Subsidiaries have at all
times fully complied with, and are currently in full compliance with, the Export Control and Economic Sanctions Laws;
(f)
neither Party nor any of their Subsidiaries, nor, to the knowledge of either Party or any of their Subsidiaries, any director,
officer, employee, agent, distributor, consultant, Affiliate, other person acting on behalf of either of the Parties or their
Subsidiaries, or customer of either Party or their Subsidiaries, is (1) listed on (i) the List of Specially Designated Nationals and
Blocked Persons (“SDNs”) maintained by OFAC or any other list of known or suspected terrorists, terrorist organizations, or
other prohibited persons provided to either Party or any of their Subsidiaries by any agency of the government of the United
States or any jurisdiction in which either Party or any of their Subsidiaries are doing business; (ii) the Bureau of Industry and
Security of the United States Department of Commerce “Denied Persons List,” “Entity List,” or “Unverified List”; (iii) the
Office of Defense Trade Controls of the United States Department of State “List of Debarred Parties”; or (iv) any lists of
restricted persons or entities maintained by any other U.S. government authority in relation to compliance with the Export
Control and Economic Sanctions laws (collectively, “Government Lists”); or (2) a person who has been determined by
competent authority to be subject to the prohibitions contained in Executive Order 13224, 66 Fed. Reg. 49,079 (Sep. 25, 2001)
(Executive Order Blocking Property and Prohibiting Transactions with Persons who Commit, Threaten to Commit, or Support
Terrorism), Executive Order 13382, 70 Fed. Reg. 38,567 (Jul. 1, 2005) (Executive Order Blocking Property of Weapons of
Mass Destruction Proliferators and Their Supporters), or any other similar prohibitions contained in the laws administered by,
and regulations of, OFAC or in any enabling legislation or other Executive Orders in respect thereof;
(g)
neither Party nor any of their Subsidiaries, nor, to the knowledge of either or any of their Subsidiaries, any director, officer,
employee, agent, distributor, consultant, Affiliate, or other person acting on behalf of ACDL or its Subsidiaries has made a
voluntary disclosure to governmental regulatory authorities reporting violations of laws or regulations relating to the export or
re-export of products, technology, software, services or other information from the United States or any other jurisdiction;
(h)
neither of the Parties nor any of their Subsidiaries, nor, to the knowledge of either or any of their Subsidiaries, any director,
officer, employee, agent, distributor, consultant, Affiliate, or other person acting on behalf of either or their Subsidiaries, has
participated or are currently participating in, or have cooperated or are currently cooperating with, an unsanctioned international
boycott within the meaning of Section 999 of the Internal Revenue Code of 1986, as amended;
(i)
neither of the Parties nor any of their Subsidiaries, nor, to the knowledge of either or any of their Subsidiaries, any owner,
director, officer, employee, agent, distributor, consultant, Affiliate, or other person acting on behalf of either or their
Subsidiaries, has engaged in, or is currently engaged in, a transaction, investment, undertaking, or activity in violation of the
Anti-Money Laundering Laws and all such persons have complied and are in compliance with the Anti-Money Laundering
Laws;
(j)
except for the BIDV Credit Agreement, no debt or equity interest or other security of ACDL or any of its Subsidiaries is held,
directly or indirectly, beneficially or otherwise by: (i) an executive, official, employee or agent of a governmental department,
agency or instrumentality; (ii) a director, officer, employee or agent of a wholly or partially government-owned or controlled
company or business; (iii) a political party or official thereof, or candidate for political office; or (iv) an executive, official,
employee or agent of a public international organization (e.g., the International Monetary Fund or the World Bank);
neither Party nor any of its Subsidiaries, nor, to the knowledge of ACDL or any of their Subsidiaries, any owner, director, officer,
employee, agent, distributor, consultant, Affiliate, or other person acting on behalf of ACDL or its Subsidiaries, (i) is under
investigation by any governmental authority for, or has been charged with, or convicted of, money laundering or any crimes which in
the United States would be predicate crimes or specified unlawful activities to money laundering under the U.S. Anti-Money
Laundering Laws and would be punishable by a sentence of more than one year in prison, or any violation of any of the Anti-Money
Laundering Laws; (ii) has been assessed civil or criminal penalties under any of the Anti-Money Laundering Laws; or (iii) has had any
of its funds seized or forfeited in any action under any of the Anti-Money Laundering Laws or other criminal or civil forfeiture laws.
Exhibit 10.67
SIXTH AMENDMENT TO REDEVELOPMENT AGREEMENT
THIS SIXTH AMENDMENT TO THE REDEVELOPMENT AGREEMENT (“Agreement”) is made and entered into effective this 30 th
day of January, 2012, by and between LAND CLEARANCE FOR REDEVELOPMENT AUTHORITY OF THE CITY OF ST. LOUIS
(“LCRA”), a public body corporate and politic established pursuant to the Land Clearance for Redevelopment Authority Law of the State of
Missouri and PINNACLE ENTERTAINMENT, INC. (“Redeveloper”).
RECITALS
A. On April 22, 2004, LCRA and Redeveloper entered into that certain Redevelopment Agreement which governs among other things the
development of certain real property described in the Redevelopment Agreement in the City of St. Louis, Missouri, which agreement has been
amended five