Exhibit 10.3
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PINNACLE ENTERTAINMENT, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement") is made and entered into as
of the 10th day of April, 2002 by and between Pinnacle Entertainment, Inc., a
Delaware corporation (the "Company"), and Xxxxxx X. Xxx ("Optionee").
A. The Board of Directors of the Company has determined that it is to the
advantage and best interest of the Company to grant to Optionee a nonqualified
stock option (the "Option") to purchase 250,801 shares of the common stock of
the Company (the "Common Stock") in order to more closely align Optionee's
interests with those of other stockholders of the Company, and has approved the
execution of this Agreement between the Company and Optionee.
B. The Option granted hereby is not intended to qualify as an "incentive
stock option" under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
Optionee and the Company hereby agree as follows:
1. Grant and Terms of Stock Option.
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1.1 Grant of Option. The Company hereby grants to Optionee the right and
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option to purchase, subject to the terms and conditions set forth in this
Agreement, all or any part of an aggregate of 250,801 shares of Common Stock at
a purchase price per share equal to $8.45.
1.2 Vesting and Exercisability. Subject to the other provisions of this
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Agreement, this Option shall vest and become exercisable with respect to 25% of
the shares of Common Stock subject to this Option on the first anniversary of
the date hereof and, on each subsequent anniversary of the date hereof, shall
vest and become exercisable with respect to an additional 25% of the shares
subject hereto so that this Option shall be vested and exercisable with respect
to 100% of the shares subject hereto on the fourth anniversary of the date
hereof. Notwithstanding the foregoing:
1.2.1 If, before the fourth anniversary of the date hereof, Optionee
dies or Optionee's employment with the Company is terminated on account of
Optionee's disability under Section 6.1.4 of Optionee's employment
agreement with the Company of even date herewith (the "Employment
Agreement"), this Option shall vest as of the date of death or disability
(in addition to any vesting that previously occurred) with respect to a
percentage of the shares subject to this Option determined by multiplying
25% by a fraction, the numerator of which is the number of days from the
first day of the year in which such death or disability occurs until the
date of such death or disability, and the denominator of which is 365;
1.2.2 This Option shall vest and become fully exercisable prior to the
scheduled dates above if Optionee's employment with the Company pursuant to
the Employment Agreement is terminated prior to the expiration of the term
thereof by
the Company without cause (as such term is used in the Employment
Agreement) or by Optionee for good reason pursuant to Section 6.3 of the
Employment Agreement.
1.3 Term of Option. No portion of this Option may be exercised more than
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ten years from the date of this Agreement. In the event of termination of
Optionee's employment by or cessation of Optionee's services to the Company or
any of its subsidiaries for any reason, with or without cause, including as a
result of death or disability within the meaning of Section 6.1.4 of the
Employment Agreement, the portion of this Option that is not vested and
exercisable as of the date of termination or cessation, and that does not become
vested by reason of such termination or cessation, shall be immediately
cancelled and terminated. In addition, the portion of this Option that is vested
and exercisable as of the date of termination of Optionee's employment by or
cessation of Optionee's services to the Company or any of its subsidiaries shall
terminate and be cancelled on the earlier of (i) the expiration of the ten year
period set forth in the first sentence of this Section 1.3, or (ii) 12 months
after termination of Optionee's employment or cessation of Optionee's services,
regardless of the cause of such termination or cessation; provided, however,
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that if Optionee's employment is terminated by the Company for cause or by
Optionee without good reason (in each case within the meaning of the Employment
Agreement), such portion of this Option shall terminate and be cancelled on the
earlier of (i) the expiration of the ten year period set forth in the first
sentence of this Section 1.3, or (ii) 90 days after such termination.
2. Method of Exercise.
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2.1 Delivery of Notice of Exercise. This Option shall be exercisable by
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written notice in the form attached hereto as Exhibit A which shall state the
election to exercise this Option, the number of shares of Common Stock in
respect of which this Option is being exercised, and such other representations
and agreements with respect to such shares as may be required by the Company
pursuant to the provisions of this Agreement. Such written notice shall be
signed by Optionee (or by Optionee's beneficiary or other person entitled to
exercise this Option in the event of Optionee's death pursuant to Section 3
hereof) and shall be delivered in person or by certified mail to the Secretary
of the Company. The written notice shall be accompanied by payment of the
exercise price. This Option shall not be deemed exercised until the Company
receives such written notice accompanied by the exercise price and any other
applicable terms and conditions of this Agreement are satisfied. This Option may
not be exercised for a fraction of a share.
2.2 Restrictions on Exercise. No shares of Common Stock will be issued
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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 other laws (including, without limitation, state corporations
laws, state securities laws and federal and state tax laws) and of any
regulatory bodies having jurisdiction over such issuance. As a condition to the
exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be necessary or appropriate,
in the judgment of the Board of Directors (or
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the Compensation Committee thereof (the "Committee")), to comply with any
applicable laws.
2.3 Method of Payment. Payment of the exercise price and, if applicable,
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any required withholding taxes (as contemplated by Section 6 hereof) shall be
made in full at the time of exercise in cash or by check payable to the order of
the Company, or, subject in each case to the advance approval of the Board of
Directors (or the Committee) in its sole discretion, by delivery of shares of
Common Stock already owned by Optionee, by delivery of a full recourse
promissory note made by Optionee in favor of the Company or by any combination
of the foregoing. Shares of Common Stock used to satisfy the exercise price of
this Option shall be valued at their Fair Market Value (as defined in Section
7.3 hereof) determined on the date of exercise (or if such date is not a
business day, as of the close of the business day immediately preceding such
date). In addition, the Board of Directors (or 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, including without limitation a requirement that the shares of Common
Stock delivered have been held by Optionee for a specified period of time. Any
promissory note delivered pursuant to this Section 2.3 shall have terms and
provisions (including, without limitation, those relating to the maturity date,
payment schedule and interest rate) as determined by the Board of the Directors
(or the Committee) in its sole discretion, shall be secured by the shares
acquired and shall comply with all applicable laws (including, without
limitation, state and federal margin requirements)
2.4 No Rights as a Stockholder. Until the stock certificate evidencing
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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.
3. Non-Transferability of Option. This Option may not be transferred in any
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manner otherwise than by will or by the laws of descent or distribution or to a
beneficiary designated by written designation, and may be exercised during the
lifetime of Optionee only by Optionee. 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, estate or
other person who acquired the right to exercise this Option by bequest or
inheritance. Notwithstanding the first sentence of this Section 3, (i) this
Option may be assigned pursuant to a qualified domestic relations order as
defined by the Code, and exercised by the spouse of Optionee who obtained such
Option pursuant to such qualified domestic relations order, and (ii) this Option
may be assigned, in connection with Optionee's estate plan, in whole or in part,
during Optionee's lifetime to one or more members of Optionee's immediate family
or to a trust established exclusively for one or more of such immediate family
members. 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 Board of Directors (or
the Committee) deems
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appropriate. For purposes of this Section 3, the term "immediate family" means
an individual's spouse, children, stepchildren, grandchildren and parents.
4. Restrictions; Restrictive Legends. Ownership and transfer of shares issued
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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.
5. Adjustments Upon Changes in Capitalization, Etc.
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5.1 Changes in Capitalization. Subject to any required action by the
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stockholders of the Company, if the outstanding shares of Common Stock are
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities of the Company or a successor entity, or for other
property (including without limitation, cash), through reorganization,
recapitalization, reclassification, stock combination, stock dividend, stock
split, reverse stock split, spin off or other similar transaction, an
appropriate and proportionate adjustment will be made in the maximum number and
kind of shares or securities receivable upon exercise of this Option. Any such
adjustment will be made without change in the aggregate purchase price
applicable to the unexercised portion of this Option but with a corresponding
adjustment in the price for each share or other unit of any security covered by
this Option. Such adjustment will be made by the Board of Directors (or the
Committee), whose determination in that respect will be final, binding, and
conclusive.
5.2 Dissolution or Liquidation. In the event of the proposed dissolution or
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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 Company may, in
the exercise of its sole discretion, declare that this Option will terminate as
of a date fixed by the Company and give Optionee the right to exercise this
Option as to all or any part of the optioned stock, including shares as to which
this Option would not otherwise be exercisable.
5.3 Corporate Transaction. Upon the happening of a "change in control" of
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the Company (within the meaning of the Employment Agreement), the Company may,
in its sole discretion, do one or more of the following: (i) shorten the period
during which this Option is exercisable (provided that it remains exercisable
for at least 30 days after the date notice of such shortening is given to
Optionee); (ii) accelerate the vesting of this Option; (iii) arrange to have the
surviving or successor entity or any parent entity thereof assume this Option or
grant a replacement option with appropriate adjustments in the option prices and
adjustments in the number and kind of securities issuable upon exercise or
adjustments so that this Option or its replacement represents the right to
purchase the shares of stock, securities or other property (including cash) as
may be issuable or payable as a result of such transaction with respect to or in
exchange for the number of shares of Common Stock purchasable and receivable
upon exercise of this Option had such exercise occurred in full prior to such
transaction; or (iv) (A) to the extent this Option is vested (including, if
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applicable, any acceleration of vesting as contemplated in clause (ii) above),
cancel this Option upon payment to Optionee in cash of an amount that is the
equivalent of the excess of the Fair Market Value of the Common Stock (at the
effective time of the change in control) over the exercise price of this Option,
and (B) to the extent this Option is not vested, either cancel this Option upon
a cash payment to Optionee in the manner set forth in clause (iv)(A) of this
sentence, or arrange for the assumption of this Option in the manner set forth
in clause (iii) of this sentence, in the sole discretion of the Company.
6. Withholding Taxes. The Company will have the right to take whatever steps the
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Board of Directors (or the Committee) 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
Optionee, or to require 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 Board of
Directors (or the Committee) in its discretion may authorize 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. General.
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7.1 Governing Law. This Agreement shall be governed by and construed under
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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 Notices. Any notice required or permitted under this Agreement shall be
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given in writing by express courier or by postage prepaid, United States
registered or certified mail, return receipt requested, to the address set forth
below or to such other address for a party as that party may designate by 10
days advance written notice to the other parties. Notice shall be effective upon
the earlier of receipt or 3 days after the mailing of such notice.
If to the Company: Pinnacle Entertainment, Inc.
000 X. Xxxxx Xxxx., Xxxxx 0000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: President
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If to Optionee: Xxx Xxx
0000 Xxxxx Xxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxx Xxx
7.3 Determination of Fair Market Value. "Fair Market Value" means, as of
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any date, the value of Common Stock determined as follows:
7.3.1 If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation, the National
Market System of NASDAQ, the Fair Market Value of a share of Common Stock
will be the closing sales price for such stock (or the closing bid, if no
sales are reported) as quoted on that system or exchange (or the system or
exchange with the greatest volume of trading in Common Stock) on the last
market trading day prior to the day of determination, as reported in the
Wall Street Journal or any other source the Board of Directors (or the
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Committee) considers reliable.
7.3.2 If the Common Stock is quoted on the NASDAQ System (but not on
the NASDAQ National Market System) or is regularly quoted by recognized
securities dealers but selling prices are not reported, the Fair Market
Value of a share of Common Stock will be the mean between the high bid and
low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in the Wall Street Journal or any
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other source the Board of Directors (or the Committee) considers reliable.
7.3.3 If the Common Stock is not traded as set forth above, the Fair
Market Value will be determined in good faith by the Board of Directors (or
the Committee) with reference to the earnings history, book value and
prospects of the Company in light of market conditions generally, and any
other factors the Board of Directors (or the Committee) considers
appropriate, such determination by the Board of Directors (or the
Committee) to be final, conclusive and binding.
7.4 Community Property. Without prejudice to the actual rights of the
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spouses as between each other, for all purposes of this Agreement, 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 Optionee was the sole owner of this Option. This
appointment is coupled with an interest and is irrevocable.
7.5 No Employment Rights. Nothing herein contained shall be construed as an
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agreement by the Company or any of its subsidiaries, express or implied, to
employ Optionee or contract for Optionee's services, to restrict the Company's
or such subsidiary's right to discharge Optionee or cease contracting for
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 Optionee and the Company or any of its subsidiaries.
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7.6 Modifications. This Agreement may be amended, altered or modified only
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by a writing signed by each of the parties hereto.
7.7 Application to Other Stock. In the event any capital stock of the
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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.
7.8 Additional Documents. Each party agrees to execute any and all further
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documents and writings, and to perform such other actions, which may be or
become reasonably necessary or expedient to be made effective and carry out this
Agreement.
7.9 No Third-Party Benefits. Except as otherwise expressly provided in
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this Agreement, none of the provisions of this Agreement shall be for the
benefit of, or enforceable by, any third-party beneficiary.
7.10 Successors and Assigns. Except as provided herein to the contrary,
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this Agreement shall be binding upon and inure to the benefit of the parties,
their respective successors and permitted assigns.
7.11 No Assignment. Except as otherwise provided in this Agreement,
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Optionee may not assign any of his 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.
7.12 Severability. The validity, legality or enforceability of the
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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.
7.13 Equitable Relief. Optionee acknowledges that, in the event of a
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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, 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.
7.14 Arbitration.
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7.14.1 General. Any controversy, dispute, or claim between the
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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 7.14 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
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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 Los Angeles,
California.
7.14.2 Selection of Arbitrator. In the event the parties are unable to
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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 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 Los
Angeles, California. 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.
7.14.3 Applicability of Arbitration; Remedial Authority. This
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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.
7.14.4 Fees and Costs. Any filing or administrative fees shall be
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borne initially by the party requesting arbitration. The Company shall be
responsible for the costs and fees of the arbitration, unless 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.
7.14.5 Award Final and Binding. The arbitrator shall render an award
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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
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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.
7.15 Headings. The section headings in this Agreement are inserted only as
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a matter of convenience, and in no way define, limit, extend or interpret the
scope of this Agreement or of any particular section.
7.16 Number and Gender. Throughout this Agreement, as the context may
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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.
7.17 Counterparts. This Agreement may be executed simultaneously in two or
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more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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7.18 Complete Agreement. This Agreement and the Employment Agreement
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constitute the total and complete agreement of the parties and supersede all
prior and contemporaneous understandings and agreements heretofore made, and
there are no other representations, understandings or agreements.
PINNACLE ENTERTAINMENT, INC.
By: /s/ Xxxxx X. Oatrow
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Its:___________________________________
XXXXXX X. XXX
/s/ Xxxxxx X. Xxx
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Name:
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SPOUSAL CONSENT
By his or her signature below, the spouse of Optionee agrees to be bound by
all of the terms and conditions of the foregoing Option Agreement.
OPTIONEE'S SPOUSE
/s/ Xxxxxxx Xxx
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Signature
Xxxxxxx Xxx
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Print Name
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EXHIBIT A
NOTICE OF EXERCISE OF NONQUALIFIED STOCK OPTION
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Pinnacle Entertainment, Inc.
000 X. Xxxxx Xxxx., Xxxxx 0000
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: President
Ladies and Gentlemen:
The undersigned hereby elects to exercise the option indicated below:
Option Grant Date: ____________________
Number of Shares as to which Option is Being Exercised: ____________
Exercise Price Per Share: _________________
Total Exercise Price: $_____________
Method of Payment: ______________
Enclosed herewith is payment in full of the total exercise price and a copy
of the Grant Notice.
My exact name, current address and social security number for purposes of
the stock certificate to be issued and the stockholder list of the Company are:
Name:__________________________________
Address:_______________________________
_______________________________
Social Security Number:________________
Sincerely,
Dated:_________________ ______________________________
(Optionee's Signature)
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