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EXHIBIT 10.2
May 15, 2000
Gary Armentrout
310 Bryn Wyck Place
St. Louis, MO 63141
EXECUTIVE RETENTION AWARD
Dear Gary:
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merger agreements (as the same may be amended, supplemented, or superseded from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 (collectively 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
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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 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 reasonable 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 of 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 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 0forfeited 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
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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 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
than (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
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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 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 to 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 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.
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 covenant not to
compete dated June 30, 2000 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.
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: Ron Alling, Scarpello & Alling, Ltd.,
P.O. Box 3390, Stateline, NV 89449-3390 Fax (775) 588-4970.
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HARVEYS CASINO RESORT, a Nevada
corporation.
By: /s/ Charles W. Scharer
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CHARLES W. SCHARER
President/CEO
Accepted and agreed this ____ day of May, 2000.
/s/ Gary Armentrout
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Gary Armentrout
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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, Gary Armentrout (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 employment positions with the Company or any of its Affiliates, effective on
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___________________ (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
to enforce any of the Executive's rights under or pursuant to this Release
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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
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[DELIVERY ADDRESS] on or prior to the seventh day after the date the
Executive signs this Release 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.
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IN WITNESS WHEREOF, each of the Executive and the Company, by its duly
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
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Gary Armentrout
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