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EXHIBIT 10.8
AUGUST 3, 2000
James J. Rafferty
P.O. Box 518
Glenbrook, NV 89413-0518
EXECUTIVE RETENTION AWARD
Dear Jim:
We are pleased to inform you that you have been selected to participate
in the executive retention program (the "Retention Program") recently
approved by the Board of Directors of Harveys Casino Resort, a Nevada
Corporation (together with any successor thereto, the "Company"). All
capitalized terms used herein shall have the meaning assigned to them in
Annex A, unless otherwise indicated.
As you know, the Company, by and through subsidiaries, has entered into
merger agreements (as the same may be amended, supplemented or superseded
from time to time, the "Merger Agreement") pursuant to which the Company
expects to purchase 100% of the equity of Pinnacle Entertainment, Inc.,
subject to obtaining all required regulatory approvals and other consents
(the "Transaction"). The Retention Program has been implemented to provide
you with additional incentives to assist the Company in consummating the
Transaction and to otherwise perform the duties of your employment during
this period of transition. The Retention Program is also designed to provide
you with certain enhanced benefits in the event of certain terminations of
your employment, as described herein. Pursuant to the Retention Program, you
will be entitled to the following payments and benefits, on and subject to
the terms and conditions set forth below
(1) RETENTION BONUS. You will be entitled to a special retention bonus
of $83,333.00 in addition to any other bonuses to which you are entitled
under the Company's regular incentive plans if (a) the Transaction is
consummated in accordance with the Merger Agreement and (b) you remain
continuously employed by the Company until the date the Transaction is
consummated ("Acquisition Effective Date"). The special retention bonus will
be payable to you in one lump sum cash payment as soon as reasonably
practicable, but not more than ten (10) business days following the
Acquisition Effective Date. In addition, if (a) the Transaction is
consummated in accordance
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with the Merger Agreement and (b) you are terminated by the Company without
Cause (other than any such termination due to your disability) at any time
after the date hereof and prior to the Acquisition Effective Date, you will
also be entitled to the same bonus. In addition, notwithstanding any
provision of the Management Incentive Plan (MIP), you shall be entitled to
receive, as soon as reasonably practicable, in no event more than ten (10)
business days following the date you are terminated by the Company without
Cause (other than any such termination due to your disability), any Annual
Bonus accrued under the MIP but unpaid for any fiscal year of employer ending
on or prior to the date of your termination, notwithstanding Paragraph 9 of
the Plan requiring employment on the day of the actual payment of the MIP
Annual Bonus.
(2) ACCELERATION OF EQUITY AWARDS. All of your outstanding Stock Awards
and Option Awards except your Incentive Stock Grant Shares will become fully
vested and will be cancelled in exchange for the cash payment described below
if (a) the Transaction is consummated in accordance with the Merger Agreement
and (b) your employment with the Company is terminated by the Company without
Cause (other than termination due to your disability) at any time after the
date hereof and prior to the one (1) year anniversary of the Acquisition
Effective Date. The amount of such cash payment shall equal the sum of the
amounts described in subparagraphs (A) and (B) and, if applicable, (C), (D)
and (E) below, to be paid as set forth below:
(A) an amount equal to the product of (i) the Transaction Share Price
multiplied by (ii) the number of shares of Class A Common Stock and
Class B Common Stock subject to each cancelled Stock Award;
(B) an amount equal to the product of (i) (x) the excess of the
Transaction Share Price over (y) the exercise price per share of Class
A Common Stock or Class B Common Stock, as applicable, applicable
under each cancelled Stock Option multiplied by (B) the number of
shares of Class A Common Stock or Class B Common Stock, as applicable,
subject to such cancelled Stock Options immediately prior to the
cancellation thereof;
(C) solely in the event your termination of employment occurs prior to the
Acquisition Effective Date, an amount equal to the product of (i) the
Transaction Share Price multiplied by (ii) the number of shares of
Class A Common Stock and Class B Common Stock that were subject to
those Stock Awards that were forfeited by you as of the date of such
termination of your employment in accordance with your Award
Agreement;
(D) solely in the event your termination of employment occurs prior to the
Acquisition Effective Date, an amount equal to the product of (i)(x)
the excess of the Transaction Share Price over (y) the exercise price
per share of Class A Common Stock or Class B Common Stock, as
applicable, subject to each Option Award that was forfeited by you as
of the date of such termination of your employment in accordance with
your Award Agreement
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multiplied by (ii) the number of shares of Class A Common Stock or
Class B Common Stock, as applicable, subject to such terminated Option
Award immediately prior to the termination thereof; and
(E) solely in the event your termination of employment occurs prior to the
Acquisition Effective Date, an amount equal to the product of (i) (x)
the excess of the Transaction Share Price over (y) the exercise price
per share of Class A Common Stock or Class B Common Stock, as
applicable, subject to each Option Award that remained outstanding
following the date of such termination of your employment but expired
prior to the Acquisition Effective Date without having been exercised
multiplied by (ii) the number of shares of Class A Common Stock or
Class B Common Stock, as applicable, subject to such expired Option
Award immediately prior to the expiration thereof.
Such payment shall be made in five installments, with the first such
installment payable as soon as reasonably practicable, but no more than ten
(10) business days, after the Acquisition Effective Date, and equal to the
greater of (i) twenty percent (20%) of the full amount of such payment and
(ii) the aggregate income taxes payable by you with respect to the
accelerated vesting of the Stock Award pursuant to this letter. The balance
of the amount payable to you pursuant to this letter shall be paid in four
(4) equal installments, with interest at an annual rate of twelve percent
(12%) on each of the first four (4) Anniversaries of the Acquisition
Effective Date.
Each Incentive Stock Grant Share that has been awarded to you, with
respect to the Bluffs Run Casino Acquisition Project shall remain outstanding
following your Termination Date until the expiration of the performance
period governing the accelerated vesting of such Incentive Stock Grant Share.
If all objectives of such Incentive Stock Grant Share are achieved so that
there is no longer a risk of forfeiture on or prior to the end of such
performance period, the Company shall cancel such Incentive Stock Grant Share
in exchange for a cash payment equal to the product of the number of
Incentive Stock Grant Shares so canceled, and the Transaction Share Price.
Such payment shall be made to you in installments, with the first such
installment payable as soon as reasonably practicable, but no more than ten
(10) business days, after delivery to the Board of the Financial Statements
necessary to determine if the performance objectives have been achieved and
equal to the greater of (i) the Applicable Percentage (as defined below) of
the full amount of such payment; and (ii) the aggregate income taxes payable
by you with respect to the accelerated vesting of such Incentive Stock Grant
Shares. The balance of the amount payable to you in respect of the
cancellation of such Incentive Stock Grant Shares shall be paid in equal
installments, with interest at the annual rate of twelve percent (12%), on
each anniversary of the Termination Date thereafter, such that the total
amount so payable shall be paid in full as of the fourth anniversary of the
Termination Date. If (i) any of the objectives for accelerated vesting of
such Incentive Stock Grant Share are not achieved as of the end of such
performance period, or (ii) your employment shall have been terminated prior
to the Acquisition Effective Date by the Company without Cause, or due to
your Death or Disability and thereafter the Merger is canceled or not
consummated, all of your rights
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with respect to such non-vested Incentive Stock Grant Shares shall be
forfeited and canceled immediately without payment or other consideration to
you. The term "Applicable Percentage" shall mean the quotient expressed as a
percentage of (i) the number of days from the Termination Date is the last
day of the applicable performance period divided by (ii) One Thousand Four
Hundred Sixty (1,460). The Company's obligation to make payments under this
Paragraph (2) shall be delayed to the extent that the Company is restricted
in making such payments under its financing arrangements. Any delayed
payments shall accrue interest at an annual rate of twelve percent (12%)
during the period of delay.
(3) SEVERANCE BENEFITS. If (a) the Transaction is consummated in
accordance with the Merger Agreement and (b) your employment with the
Company is terminated by the Company without Cause (other than any such
termination due to your disability) at any time after the date hereof and
prior to the one year anniversary of the Acquisition Effective Date, you
will be entitled to severance benefits consisting of continued payments of
your base salary at the rate in effect at the date of your termination for
one year and continued medical, dental and vision coverage for one year on
substantially the same terms and conditions (including requirements
concerning co-payments, deductibles, etc.) as immediately prior to such
termination. The severance benefits payable under this Paragraph 3 shall be
reduced by the amount of any severance benefits payable to you under any
other severance or employment arrangement or agreement applicable to you.
You hereby covenant and agree that, in consideration of the payments and
benefits described herein, during your employment with the Company and for
the one year period following the date of your termination of employment at
any time prior to the first anniversary of the Acquisition Effective Date and
for any or no reason, you shall not at any time in the Lake Tahoe Geographic
Area or for or in respect of any entity which, directly or indirectly,
including through affiliates, has operations in the Lake Tahoe Geographic
Area directly or indirectly, (i) engage in any business for your own account
that is competitive with the business of the Company, or its subsidiaries,
affiliates, or assigns, of owning, operating, managing and/or developing
hotel/casinos (the "Business"); (ii) enter the employ of, or render any
consulting services to, any entity that competes with the Company, or its
subsidiaries, affiliates, successors, or assigns, in the Business; or (iii)
become interested in any such entity in any capacity, including, without
limitation, as an individual, partner, shareholder, officer, director,
principal, agent, trustee or consultant; PROVIDED, HOWEVER, you may (A) own,
directly or indirectly, solely as a passive investment, securities of any
entity traded on any national securities exchange or market if you are not a
controlling person of, or a member of a group which controls, such entity and
does not, directly or indirectly, own 5% or more of any class of securities
of such entity, and (B) be employed by an entity which has a hotel/casino or
casino in the Lake Tahoe Geographic Area provided (i) you use no
confidential, proprietary or competitive information of the Company, and (ii)
you are not employed at or have direct supervisory responsibilities over
operations at said facility.
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You hereby further covenant and agree that, in consideration of the
payments and benefits described herein, during your employment with the
Company and thereafter, you shall not, publicly or privately, disparage or
otherwise make any derogatory statement (whether written or oral) in respect
of the Company or any of its subsidiaries or affiliates, including, without
limitation, Colony Capital, Inc., its employees, owners and affiliates, or
the conduct of any of their respective business or professional activities,
except to the extent required (i) by an order of a court having jurisdiction
or under subpoena from an appropriate government agency, in which event, you
shall use use best efforts to consult with the Board of Directors of the
Company prior to responding to any such order or subpoena, and (ii) to
litigate any claim against the Company for failure to pay any amount due to
you under the terms of this letter agreement, your employment agreement or
other agreement with the Company or a Company benefit plan in which you are a
participant.
Your entitlement to receive any of payments or benefits under this
letter agreement is conditioned upon (i) your signing and returning to the
Company a general release of claims in form and substance substantially as
set forth on Annex B attached hereto and incorporated herein by reference, in
the case of the payments and benefits described in Paragraphs (2) and (3),
and (ii) your compliance with your covenants and agreements hereunder. In the
event of your breach of any such covenants or agreements, the Company shall
be entitled to obtain injunctive relief (without requirement of posting a
bond) in addition to any other relief to which it may be entitled.
The Company will require any successor (by purchase, merger,
consolidation or otherwise) to all or substantially all of its business
and/or assets to assume and agree to perform this letter 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. During the effective period
of this letter agreement, the geographic area and other portions of your then
existing covenant not to compete will be superseded. Your confidentiality
agreement and the remaining terms of your employment agreement shall not be
superseded. This letter agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof, and all
promises, representations, understandings, arrangements and prior
arrangements relating to such subject matter are merged herein and superseded
hereby.
This letter agreement shall be binding on and inure to the benefit of
the Company and its successors and permitted assigns. This letter agreement
shall also be binding on and inure to the benefit of you and your heirs,
executors, administrators and legal representatives.
This letter agreement shall be governed by and construed in accordance
with the laws of the State of Nevada without reference to principles of
conflicts of laws which would require the application of the laws of another
jurisdiction.
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If you are in agreement with the terms and conditions set forth herein,
please indicate your agreement to be bound hereby by executing this letter
agreement in the space provided below and returning the fully executed letter
agreement by facsimile and U.S. Mail to: to Ron Alling, Scarpello & Alling,
Ltd., P.O. Box 3390, Stateline, NV 89449-3390 Fax (775) 588-4970.
HARVEYS CASINO RESORTS,
a Nevada corporation.
By: /s/ Charles W. Scharer
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CHARLES W. SCHARER
President/Chief Executive Officer
Accepted and agreed this 29th day of August, 2000.
/s/ James J. Rafferty
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JAMES J. RAFFERTY
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ANNEX A
For the purposes of this letter agreement and the Retention Program, the
following terms shall have the following meanings:
"Award Agreement" shall mean the Management Stock Option and Restricted
Stock Agreement, dated as of February 2, 1999, between you and the Company.
"Cause" shall mean (A) gross negligence or willful malfeasance in the
performance of your duties to the Company (B) conviction of any felony or
conviction of a crime involving moral turpitude; (C) dishonesty with
respect to the Company (including, without limitation, fraud); (D) use or
imparting of any confidential or propriety information of the Company or
any subsidiary or affiliate in violation of the Company's policy regarding
confidentiality or any confidentiality or proprietary agreement to which
you are party, which act or actions have a material adverse affect on the
Company; or (E) failure to obtain or retain any permits, licenses, or
approvals which may be required by any state or local authorities in order
to permit you to continue your employment with the Company.
"Class A Common Stock" shall mean the Class A common stock, par value $.01
per share the Company.
"Class B Common Stock" shall mean the Class B common stock, par value $.01
per share the Company.
"Stock Award" shall mean the restricted stock granted to you by the Company
pursuant to the Award Agreement.
"Option Award" shall mean the options to purchase shares of Class A and
Class B Common Stock granted to you by the Company pursuant to the Award
Agreement.
"Transaction Share Price" shall mean (i) for purposes of calculating a
payment under clause (A) or (B) of Paragraph 2 of the letter agreement,
$43.45 and (ii) for purposes of calculating a payment under clause (C), (D)
or (E) of Paragraph 2 of the letter agreement, $54.12 (i.e., the per share
value of the Class A and Class B Common Stock prior to the increase in the
capitalization of the Company in connection with the Transaction).
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ANNEX B
CONFIDENTIAL RELEASE AGREEMENT
WHEREAS, James J. Rafferty (the "Executive") is party to an Employment
Agreement, dated as of ____________________ and a Retention Agreement dated
as of ___________________, both with Harveys Casino Resorts, a Nevada
corporation (the "Company") (said Employment Agreement and the Retention
Agreement, as each may be amended from time to time, are collectively
referred to herein as the "Agreements"); and
WHEREAS, the Executive's employment with the Company has been terminated
and, in connection therewith, the Executive is entitled to receive certain
payments and benefits pursuant to the Agreements (such payments and benefits
referred to herein as the "Termination Benefits"); and
WHEREAS, it is a condition to the obligation of the Company to pay the
Termination Benefits to the Executive that the Executive execute and deliver
to the Company this Confidential Release Agreement (the "Release Agreement");
NOW, THEREFORE, in consideration of the payment to the Executive of the
Termination Benefits, each of the Executive and the Company hereby agree as
follows:
1. CERTAIN DEFINED TERMS. Capitalized terms used herein without
definition shall have meanings assigned thereto in the Agreements, as
applicable.
2. EXECUTIVE'S RESIGNATION. The Executive's employment with the Company
is terminated [STATE TYPE OF TERMINATION] and Executive hereby resigns from
each of his
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employment positions with the Company or any of its Affiliates, effective on
___________________ (the "Date of Termination"). The Executive shall execute
and deliver such documents evidencing his resignation hereunder as the
Company may reasonably request.
(3) EXECUTIVE'S GENERAL RELEASE AND WAIVER.
(a) THE EXECUTIVE, ON HIS OWN BEHALF AND ON BEHALF OF HIS AGENTS,
REPRESENTATIVES, ASSIGNS, HEIRS, EXECUTORS AND ADMINISTRATORS (COLLECTIVELY,
THE "EXECUTIVE RELEASORS") HEREBY RELEASES, REMISES AND ACQUITS THE COMPANY,
EACH OF ITS AFFILIATES AND EACH OF ITS AND THEIR RESPECTIVE OFFICERS,
DIRECTORS, SHAREHOLDERS, MEMBERS, AGENTS, EMPLOYEES, CONSULTANTS, INDEPENDENT
CONTRACTORS, ATTORNEYS, ADVISERS, SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE
"COMPANY RELEASEES"), JOINTLY AND SEVERALLY, FROM ANY AND ALL CLAIMS, CAUSES
OF ACTION, CHARGES, COMPLAINTS, DEMANDS, COSTS, RIGHTS, LOSSES, DAMAGES AND
OTHER LIABILITY WHATSOEVER, KNOWN OR UNKNOWN (COLLECTIVELY, THE "CLAIMS"),
WHICH THE EXECUTIVE HAS OR MAY HAVE AGAINST ANY COMPANY RELEASEE ARISING ON
OR PRIOR TO THE DATE OF THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO, CLAIMS
IN RESPECT OF DISMISSAL, REDUNDANCY, BREACH OF CONTRACT, DISABILITY,
DISCRIMINATION, UNLAWFUL DEDUCTION FROM WAGES, BREACH OF RIGHTS OF
ENTITLEMENTS UNDER THE UNITED
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STATES AGE DISCRIMINATION IN EMPLOYMENT ACT, THE UNITED STATES AMERICANS WITH
DISABILITIES ACT OF 1990, THE UNITED STATES FAMILY AND MEDICAL LEAVE ACT OF
1993, TITLE VII OF THE UNITED STATES CIVIL RIGHTS ACT OF 1964,42 U.S.C.
SECTION 1981, THE LAWS OF THE STATE OF NEVADA AND ANY WORKERS COMPENSATION OR
DISABILITY CLAIMS OR ANY OTHER FEDERAL, STATE, OR LOCAL LAW, OTHER THAN THE
EXCLUDED CLAIMS (AS DEFINED BELOW). THE EXECUTIVE FURTHER AGREES THAT THE
EXECUTIVE WILL NOT FILE OR PERMIT TO BE FILED ON THE EXECUTIVE'S BEHALF ANY
SUCH CLAIM. NOTWITHSTANDING THE PRECEDING SENTENCE OR ANY OTHER PROVISION OF
THIS RELEASE AGREEMENT, THIS RELEASE IS FOR ANY RELIEF, NO MATTER HOW
DENOMINATED, INCLUDING, BUT NOT LIMITED TO, INJUNCTIVE RELIEF, WAGES, BACK
PAY, FRONT PAY, COMPENSATORY DAMAGES, AND PUNITIVE DAMAGES. NOTWITHSTANDING
ANYTHING HEREIN TO THE CONTRARY, THIS RELEASE SHALL NOT APPLY TO ANY EXCLUDED
CLAIM.
(b) THE EXECUTIVE ACKNOWLEDGES THAT THE TERMINATION BENEFITS THE
EXECUTIVE IS RECEIVING IN CONNECTION WITH THE FOREGOING RELEASE ARE IN
ADDITION TO ANYTHING OF VALUE TO WHICH THE EXECUTIVE IS ALREADY ENTITLED FROM
THE COMPANY OR ANY OF ITS AFFILIATES OR ANY COMPANY RELEASEE.
(c) For purposes of this Agreement, the term "Excluded Claims" means
claims
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to enforce any of the Executive's rights under or pursuant to this Release
Agreement, the Agreements, the Amended Award Agreement dated the ___ day of
______________, the Incentive Stock Grant Plan dated the ____ day of
_________________, the Amended Deferred Compensation Agreement dated the ____
day of __________________, the Supplemental Executive Retirement Plan or
[the Company's D&O indemnification arrangements].
4. KNOWING AND VOLUNTARY WAIVER BY THE EXECUTIVE. The Executive acknowledges
that, by his free and voluntary act of signing below, the Executive agrees to
all of the terms of this Release Agreement and intends to be legally bound
thereby.
5. ACKNOWLEDGMENT BY THE EXECUTIVE OF HIS RIGHT TO CONSIDER AND REVOKE THIS
RELEASE; EFFECTIVE DATE OF THIS AGREEMENT.
(a) The Executive understands, agrees and acknowledges that:
A. He has been advised and encouraged by the Company to have this
Release Agreement reviewed by legal counsel of the Executive's own choosing
and that he has been given ample time to do so prior to his signing this
Release Agreement;
B. He has been provided at least twenty-one (21) days to consider
this Release Agreement and to decide whether to agree to the terms contained
herein;
C. He will have the right to revoke this Release Agreement during
the seven (7) day period following the date the Executive signs this Release
Agreement by giving written notice of his revocation to ________ of the
Company at [DELIVERY ADDRESS] on or prior to the seventh day after the date
the Executive signs this Release
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Agreement and if the Executive exercises his right to revoke this Release
Agreement, he will forfeit his right to receive any of the Termination
Benefits;
D. The Termination Benefits provided herein will not be paid to the
Executive until at least eight (8) days after the Executive signs this
Release Agreement and will be paid only if the Executive does not revoke this
Release Agreement pursuant to C above; and
E. By signing this Release Agreement, the Executive represents that
he fully understands the terms and conditions of this Release Agreement and
intends to be legally bound by them.
(b) This Release Agreement will become effective, enforceable and
irrevocable seven (7) days after the date on which it is executed by the
Executive and provided it is not revoked by the Executive during such seven
(7) day period (the "Effective Date").
6. GOVERNING LAW. This Release Agreement shall be governed by and construed
in accordance with the laws of the State of Nevada without reference to
principles of conflicts of laws.
7. SEVERABILITY. The parties hereto intend that the validity and
enforceability of any provision of this Release Agreement shall not affect or
render invalid any other provision hereof.
8. BINDING AGREEMENT. This Release Agreement shall be binding on and shall
inure to the benefit of the parties hereto and their respective heirs,
administrators, representatives, executors, successors and assigns.
IN WITNESS WHEREOF, each of the Executive and the Company, by its duly
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authorized representative, has caused this Release Agreement to be executed
as of this _______ day of ________________________, 2000.
HARVEYS CASINO RESORTS, a Nevada corporation
By:
-------------------------------
Title:
-----------------------------
EMPLOYEE
-----------------------------------
James J. Rafferty
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