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EXHIBIT 10.7
May 15, 2000
EXECUTIVE RETENTION AWARD
Verne Welch
General Manager
HARVEYS CASINO HOTEL
1 Harveys Boulevard
Council Bluffs, IA 51501
Dear Verne:
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merger agreements (as the same may be amended, supplemented, or superseded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.
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(1) RETENTION BONUS. You will be entitled to a special retention
bonus equal to One Hundred Percent (100%) of your annual base salary rate,
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
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 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 exercisable as of the Acquisition Effective Date 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. In the event your termination of employment
occurs prior to the Acquisition Effective Date, any Stock Awards and Stock
Options that would be forfeited by you as of the date of such termination
of your employment in accordance with your Award Agreement (such awards the
"Unvested Awards"), shall remain outstanding but shall only be exercisable
by you during the 90 day period immediately following the Acquisition
Effective Date if the Transaction is consummated in accordance with the
Merger Agreement. All Stock Awards and Option Awards shall continue to be
subject to the Company's call right under the Award Agreement.
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, 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 Shares. If all objectives
of such Incentive Stock Grant Share are achieved so there is no longer a
risk of forfeiture on or prior to the end of such performance period, your
shares will become fully vested.
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(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 Council Bluffs Metropolitan Area; or
for or in respect of any entity which, directly or indirectly, including through
affiliates, has operations in the Council Bluffs Metropolitan 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 Council Bluffs Metropolitan 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.
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)
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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 August 17, 1999 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.
HARVEYS CASINO RESORT, a Nevada
Corporation.
By /s/ Charles W. Scharer
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CHARLES W. SCHARER
President/CEO
Accepted and agreed this
26th day of May, 2000.
/s/ Verne Welch
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Verne Welch
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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.
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ANNEX B
CONFIDENTIAL RELEASE AGREEMENT
WHEREAS, Verne Welch (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");
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 _________________ (the "Date of Termination"). The Executive
shall execute and deliver such documents evidencing his resignation hereunder
as the Company may reasonably request.
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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 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
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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 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.
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(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 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").
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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
authorized representative, has caused this Release Agreement to be executed
as of this _______ day of ________________________, 2000.
HARVEYS CASINO RESORTS, a Nevada corporation
By:
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Title:
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EMPLOYEE
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Verne Welch
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