EXHIBIT 10.1
STOCK AGREEMENT
This Stock Agreement ("AGREEMENT") is entered into as of this 1st day of
July 2003, by and between PINNACLE ENTERTAINMENT, INC., a Delaware corporation
(together with its parents and subsidiaries, the "COMPANY"), and ▇.▇. ▇▇▇▇▇▇▇,
an individual (referred to as "▇▇▇▇▇▇▇,"):
For good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, the Company and ▇▇▇▇▇▇▇ agree as follows:
1. PURCHASE RIGHT
(a) ▇▇▇▇▇▇▇ represents and warrants that (i) he is the sole
beneficial owner of 1,790,996 shares of the common stock of the Company (the
"▇▇▇▇▇▇▇ SHARES"), (ii) the ▇.▇. ▇▇▇▇▇▇▇ Foundation (the "FOUNDATION SHARES")
holds an additional 249,990 shares of common stock of the Company, and (iii) the
▇▇▇▇▇▇▇ Shares are subject to a voting trust, the trustee of which is ▇▇▇▇▇
Fargo Bank. ▇▇▇▇▇▇▇ represents and warrants that neither he nor any affiliate
(as defined in the Securities Act of 1933, as amended) of his currently owns or
has the right to acquire any shares of common stock of the Company, other than
the ▇▇▇▇▇▇▇ Shares, the Foundation Shares (to the extent the ▇.▇. ▇▇▇▇▇▇▇
Foundation is deemed an affiliate of ▇▇▇▇▇▇▇) and options to acquire an
aggregate of 322,000 shares of common stock (the "OPTION SHARES") upon exercise
of options to purchase common stock of the Company granted to ▇▇▇▇▇▇▇ by the
Company (the "OPTIONS").
(b) ▇▇▇▇▇▇▇ hereby grants the Company or its assignee(s) the right
to purchase some or all of the ▇▇▇▇▇▇▇ Shares (the "PURCHASE RIGHT") as provided
herein. The Purchase Right may be exercised on one occasion to purchase no less
than five hundred thousand (500,000) ▇▇▇▇▇▇▇ Shares at a purchase price equal to
(i) ten dollars ($10) times the number of ▇▇▇▇▇▇▇ Shares purchased, if the
Purchase Right is exercised on or before July 1, 2004, or (ii) fifteen dollars
($15) times the number of ▇▇▇▇▇▇▇ Shares purchased, if the Purchase Right is
exercised after July 1, 2004 but on or prior to July 1, 2005. The Purchase Right
shall be exercisable at the Company's or its assignees' election at any time
from the Approval Date until July 1, 2005 (such period, the "PURCHASE RIGHT
PERIOD"). The number of ▇▇▇▇▇▇▇ Shares subject to the Purchase Right shall be
reduced on a share-by-share basis to the extent that ▇▇▇▇▇▇▇ sells ▇▇▇▇▇▇▇
Shares as permitted by SECTION 2 below; PROVIDED, HOWEVER, that ▇▇▇▇▇▇▇ must
have at least five hundred thousand (500,000) ▇▇▇▇▇▇▇ Shares free of any liens,
claims, pledges or encumbrances (other than those under this Agreement)
available for purchase at all times through and including the date of the
exercise of the Purchase Right.
(c) The Purchase Right may be exercised by the Company or its
assignee(s) at any time during the Purchase Right Period by delivering written
notice of exercise (the "EXERCISE NOTICE") to ▇▇▇▇▇▇▇ in the manner provided in
SECTION 11 below. The Exercise Notice shall specify the number of ▇▇▇▇▇▇▇ Shares
being purchased pursuant thereto (which shall be at least five hundred thousand
(500,000) ▇▇▇▇▇▇▇ Shares) and the aggregate purchase price for such ▇▇▇▇▇▇▇
Shares based on the purchase prices specified in SUBPARAGRAPH (B) above. Any
purchase of the ▇▇▇▇▇▇▇ Shares pursuant to the Purchase Right shall occur on the
date
specified in the Exercise Notice; PROVIDED, HOWEVER, that the purchase date may
not be later than ten (10) business days after the date of the Exercise Notice.
On the specified purchase date, ▇▇▇▇▇▇▇ shall deliver to the Company or its
assignee(s), as the case may be, certificates representing the ▇▇▇▇▇▇▇ Shares
being purchased, together with duly executed stock powers separate from
certificate with signatures guaranteed or other instruments of transfer
necessary or reasonably requested by the Company to validly and indefeasibly
effectuate the transfer of the ▇▇▇▇▇▇▇ Shares to the Company or its assignee(s),
as the case may be, and the purchaser(s) of the ▇▇▇▇▇▇▇ Shares shall pay to
▇▇▇▇▇▇▇ concurrently with the transfer of the designated ▇▇▇▇▇▇▇ Shares the
purchase price for the ▇▇▇▇▇▇▇ Shares (determined as aforesaid), against
delivery of such securities, by certified check or wire transfer in accordance
with the instructions given by ▇▇▇▇▇▇▇.
(d) The parties acknowledge and agree that the Company is authorized
and entitled to sell, assign, transfer or otherwise convey the Purchase Right or
the Company's rights under SECTIONS 2 and 3 hereof to any party or parties in
its sole discretion (a "PURCHASE RIGHT TRANSFER"); PROVIDED, HOWEVER, that to
the extent that the Company makes a Purchase Right Transfer to more than one
party, such parties must coordinate their purchases such that they only exercise
the Purchase Right on one single occasion. Any such purchaser, assignee,
transferee or other recipient of the Purchase Right and such related rights (or
any other Company rights hereunder subject to sale, transfer, assignment or
conveyance by the Company) is referred to herein as the Company's "assignee." If
the Company receives cash or cash-equivalent consideration in connection with
any Purchase Right Transfer, the Company hereby agrees to pay to ▇▇▇▇▇▇▇
one-half of the net amount of such cash or cash-equivalent consideration (i.e.
the consideration paid, net of all fees, costs and expenses of the Purchase
Right Transfer). ▇▇▇▇▇▇▇ hereby covenants and agrees to execute and deliver such
documents and instruments, and to take such further actions, as are reasonably
necessary to accomplish any Purchase Right Transfer to the extent requested by
the Company.
(e) Notwithstanding any provision of this Agreement to the contrary,
▇▇▇▇▇▇▇ may sell or otherwise transfer all but not less than all of the ▇▇▇▇▇▇▇
Shares then owned by him completely free of (a) the Purchase Right in this
SECTION 1, (b) the limitations on sale in SECTION 2 and (c) the rights of first
refusal in SECTION 3, as follows: if, in connection with a proposed transaction
which, if completed, would result in a Change of Control (as defined below), (i)
the holders of at least 51% of the voting equity of the Company (not including
for this purpose any ▇▇▇▇▇▇▇ Shares or common stock of the Company held by
Company affiliates) have either indicated their approval of such transaction by
delivery of valid proxies to be voted at a meeting called to consider such
proposed transaction or validly tendered their shares into such proposed
transaction, or (ii) a majority of the independent directors of the Company have
approved such proposed transaction, then in any such case ▇▇▇▇▇▇▇ may sell or
otherwise transfer all of the ▇▇▇▇▇▇▇ Shares then owned by him in connection
with the consummation of such transaction. Subject to the requirements set forth
in the preceding CLAUSES (I) and (II), "CHANGE OF CONTROL" for this purpose
means the sale of 50% or more of the Company's outstanding capital stock,
however effected, the sale of all or substantially all of the Company's business
or assets, directly or indirectly, a merger in which the Company or a
wholly-owned subsidiary of the Company is not the survivor (other than a merger
for the purpose of changing the Company's jurisdiction of incorporation or after
which a majority of the members of the Company's board of directors
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continue as the majority of the members of the board of directors of the
surviving corporation), or a recapitalization effecting the transfer of over 50%
of the enterprise value of the Company.
2. LIMITATION OF SALES, GIFTS AND PLEDGES
(a) During the period from the date hereof through and including
July 1, 2006, ▇▇▇▇▇▇▇ will not sell, gift or pledge or enter into any agreement
to sell, gift or pledge any of the ▇▇▇▇▇▇▇ Shares except in strict compliance
with the terms and conditions of this Agreement, including, without limitation,
the right of first refusal provisions of SECTION 3 hereof.
(b) Notwithstanding the preceding SUBPARAGRAPH (A) but subject to
SECTION 1, ▇▇▇▇▇▇▇ and any permitted transferee under SUBPARAGRAPH (E) below
("PERMITTED TRANSFEREE") taken together may sell in any calendar quarter (with
the first quarter deemed to commence July 1, 2003 and end September 30, 2003) an
aggregate number of ▇▇▇▇▇▇▇ Shares (excluding any shares issued upon the
exercise of options (including any Option Shares), warrants or other rights to
acquire shares), equal to the greater of (such greater number as of any
particular date being referred to hereafter as the "AUTHORIZED NUMBER" of
▇▇▇▇▇▇▇ Shares):
(i) one percent (1%) of the number of outstanding shares of
the Company's common stock as of the date of the sale in question; and
(ii) the average weekly trading volume of the Company common
stock for the ten (10) weeks preceding the date of either the proposed
sale in question or the computation date, as the case may be (such
average volume, measured prior to a specific date, the "AVERAGE TRADING
VOLUME").
(c) All sales of shares of ▇▇▇▇▇▇▇ Shares by ▇▇▇▇▇▇▇ or a Permitted
Transferee pursuant to the preceding SUBPARAGRAPH (B) shall be made only:
(i) in unsolicited brokerage transactions subject to the
right of first refusal provided in SECTION 3 below; or
(ii) in block sales subject to the right of first refusal
provided in SECTION 3 below.
(d) ▇▇▇▇▇▇▇ shall not make any sales to any person or group (as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934) of persons
if, to his knowledge, such sales, when added to all other sales of the Company's
common stock by ▇▇▇▇▇▇▇ or any Permitted Transferee of ▇▇▇▇▇▇▇ to such person(s)
at any time after July 1, 2002, will exceed four percent (4%) of the Company's
outstanding common stock.
(e) Notwithstanding the foregoing or anything to the contrary
contained in this SECTION 2, at any time after the Approval Date, ▇▇▇▇▇▇▇ may
gift or transfer ▇▇▇▇▇▇▇ Shares (i) to the Foundation or (ii) to a trust for the
benefit of ▇▇▇▇▇▇▇ or any member of his immediate family; PROVIDED<184> HOWEVER,
as an express condition precedent to any such gift or transfer, the recipient or
transferee of such securities must first agree in writing (with a copy provided
to the Company) to be bound by the terms of this Agreement (other than those in
Section 6) to the same extent that ▇▇▇▇▇▇▇ was bound immediately prior to such
gift or transfer; PROVIDED, FURTHER, that
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any subsequent sales or transfers by the Foundation or such trust of any such
gifted or transferred or pledged ▇▇▇▇▇▇▇ Shares shall be deemed to be sales or
transfers by ▇▇▇▇▇▇▇ for purposes of SUBPARAGRAPH (B) of this SECTION 2 and
shall be subject to the right of first refusal set forth in SECTION 3 below to
the same extent as if such sales or transfers were made by ▇▇▇▇▇▇▇ or his
affiliates; PROVIDED, FURTHER, that in no event shall ▇▇▇▇▇▇▇ sell, transfer or
gift any ▇▇▇▇▇▇▇ Shares as contemplated by this SUBPARAGRAPH (E) if any such
sale, transfer or gift would result in there being fewer than five hundred
thousand (500,000) ▇▇▇▇▇▇▇ Shares available for sale to the Company or its
assignee(s) upon exercise of the Purchase Right free and clear of any and all
liens, claims or encumbrances thereon.
(f) Notwithstanding the foregoing or anything to the contrary
contained in this SECTION 2, at any time after the Approval Date, ▇▇▇▇▇▇▇ may
pledge ▇▇▇▇▇▇▇ Shares as security for indebtedness of ▇▇▇▇▇▇▇; PROVIDED<184>
HOWEVER, as an express condition precedent to any such pledge, the pledgee of
such securities must first agree in writing (with a copy provided to the
Company) to be bound by the terms of SECTIONS 1, 2 and 3 of this Agreement to
the same extent that ▇▇▇▇▇▇▇ was bound immediately prior to such pledge;
PROVIDED, FURTHER, that in no event shall ▇▇▇▇▇▇▇ pledge any ▇▇▇▇▇▇▇ Shares as
contemplated by this SUBPARAGRAPH (F) if any such pledge would result in there
being fewer than five hundred thousand (500,000) ▇▇▇▇▇▇▇ Shares available for
sale to the Company or its assignee(s) upon exercise of the Purchase Right free
and clear of any and all liens, claims or encumbrances thereon.
3. RIGHT OF FIRST REFUSAL
(a) During the period from the date hereof through and including
July 1, 2006, ▇▇▇▇▇▇▇ and each Permitted Transferee will not sell or transfer or
enter into any agreement to sell or transfer more than one hundred thousand
(100,000) ▇▇▇▇▇▇▇ Shares (a "LARGE SALE"), either in a single transaction or in
a series of related transactions with a single purchaser or group (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934) of purchasers, without
first complying with the provisions of this SECTION 3. Notwithstanding the
foregoing, all proposed Large Sales are subject to the applicable restrictions
of SECTION 1 (regarding the minimum number of ▇▇▇▇▇▇▇ Shares which must be
available for purchase upon exercise of the Purchase Right) and SECTION 2
(regarding the general prohibition on sales or transfers or pledges of ▇▇▇▇▇▇▇
Shares for the period provided, subject only to the limited exceptions in
SECTION 2).
(b) ▇▇▇▇▇▇▇ and each Permitted Transferee shall give written notice
to the Company of any such contemplated Large Sale (a "SALE NOTICE"), to the
extent otherwise permitted hereunder, in the manner provided in SECTION 11
below. Such Sale Notice shall disclose the name(s) of the proposed purchaser(s)
or transferee(s), the price at which the proposed Large Sale is to be made, the
form of consideration, the closing date for the Large Sale, and all other terms
and conditions of the proposed transaction. If requested by the Company, ▇▇▇▇▇▇▇
and each Permitted Transferee promptly shall provide copies of any final term
sheets or purchase offers received from the proposed purchaser with respect to
the proposed Large Sale referenced in the Sale Notice.
(c) Within two (2) business days following receipt of the Sale
Notice, the Company shall give written notice to ▇▇▇▇▇▇▇ and each Permitted
Transferee as to whether the Company or its assignee(s) wish to purchase all
(and not less than all) of the ▇▇▇▇▇▇▇ Shares
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which are the subject of the Sale Notice at the price, on the terms and at the
time set forth in the Sale Notice, it being understood and agreed that if the
consideration proposed to be paid is not cash, the Company or its assignee may
elect to pay the purchase price in cash equal to the fair market value of the
non-cash consideration. The "fair market value" of any non-cash consideration
shall be (i) calculated as provided in the Sale Notice, to the extent the
formula for determining the value of the non-cash consideration is provided
therein or (ii) if the form of consideration is stock or other securities that
are publicly traded on a national exchange or automated national quotation
system and there is no formula specified in the Sale Notice, the "fair market
value" shall be the closing price of such securities on the date the proposed
purchaser in the Large Sale made its offer to ▇▇▇▇▇▇▇ and each Permitted
Transferee; PROVIDED, that if the closing price is more than 10% higher or lower
than the volume weighted average trading price of a share or unit of such
securities over the five-day period preceding the date the proposed purchaser in
the Large Sale made its offer to ▇▇▇▇▇▇▇ and each Permitted Transferee, as
reported on such national exchange or quotation system, then the "fair market
value" shall be the volume weighted average trading price of such securities
over the five-day period preceding the date the proposed purchaser in the Large
Sale made its offer to ▇▇▇▇▇▇▇ and any Permitted Transferee, as the case may be.
(d) If the Company or its assignee(s) elect to purchase the ▇▇▇▇▇▇▇
Shares subject to the Sale Notice, the purchase shall be consummated on the
later of (i) the date specified in the Sale Notice and (ii) five (5) business
days after the date of the Company's or such assignee's purchase election, but
in either event subject to any delays necessary to obtain any required
regulatory approvals for such purchase and sale; PROVIDED, HOWEVER, that (A) any
such delays to obtain regulatory approvals may be no longer than forty-five (45)
days after the date of the Company's or any assignees' purchase election, (B)
the Company must agree to pay interest to ▇▇▇▇▇▇▇ on the purchase price payable
for the ▇▇▇▇▇▇▇ Shares subject to the Sale Notice at the prime rate PLUS 3%
during the period commencing with the later of the date specified in CLAUSE (I)
or (II) of this SUBPARAGRAPH (D) and ending on the earlier of (1) the date that
the Company or its assignee(s) purchase the ▇▇▇▇▇▇▇ Shares subject to the Sale
Notice and (2) the forty-fifth (45th) day after the date of the Company's or
such assignee's purchase election. The purchase price paid by the Company or its
assignee(s) shall be (x) if there is a fixed purchase price per share specified
in the Sale Notice, the fixed purchase price, or (y) if there is a formula set
forth in the Sale Notice for determining the purchase price for the ▇▇▇▇▇▇▇
Shares, then that formula shall apply; PROVIDED, HOWEVER, that if applying the
formula at the time that the Company or its assignee(s) actually make the
purchase would result in a lower price than applying the formula at the time the
original sale to the third party described in the Sale Notice would have
occurred, then ▇▇▇▇▇▇▇ shall be paid the higher amount that would have been paid
in the proposed sale to the third party. The parties acknowledge and agree that
the sole purpose of the preceding proviso is to provide downside purchase price
protection to ▇▇▇▇▇▇▇ against any declines in the purchase price otherwise
payable due to delays associated with obtaining regulatory approvals, but
▇▇▇▇▇▇▇ shall not be entitled to any increased price should the application of
any formula for determining the price of the ▇▇▇▇▇▇▇ Shares result in a higher
price by virtue of being calculated at a later date due to such delays.
(e) If the Company does not purchase the ▇▇▇▇▇▇▇ Shares subject to
the Sale Notice after electing to do so (whether as a result of failure to
obtain any required regulatory approvals or otherwise) within the period
specified in SUBPARAGRAPH (D) above, those ▇▇▇▇▇▇▇
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Shares subject to the Sale Notice shall thereafter be free from the restrictions
provided in SECTIONS 1, 2 and 3 hereof and the Company shall issue an unlegended
share certificate representing such shares to ▇▇▇▇▇▇▇ promptly after receipt of
the legended share certificate representing such shares from ▇▇▇▇▇▇▇. If the
Company's assignees' do not purchase the ▇▇▇▇▇▇▇ Shares subject to the Sale
Notice after electing to do so (whether as a result of failure to obtain any
required regulatory approvals or otherwise) within the time period specified in
SUBPARAGRAPH (D) above, then the Company shall be entitled to elect within two
(2) business days thereafter to either (i) purchase such ▇▇▇▇▇▇▇ Shares on the
terms provided in the Sale Notice (with the purchase price being calculated in a
manner which provides ▇▇▇▇▇▇▇ the downside purchase price protection
contemplated by the preceding SUBPARAGRAPH (C)) or (ii) decline to purchase such
▇▇▇▇▇▇▇ Shares, in which case those ▇▇▇▇▇▇▇ Shares subject to the Sale Notice
shall thereafter be free from the restrictions provided in SECTIONS 1, 2 and 3
hereof and the Company shall issue an unlegended share certificate representing
such shares to ▇▇▇▇▇▇▇ promptly after receipt of the legended share certificate
representing such shares from ▇▇▇▇▇▇▇. In addition, to the extent that ▇▇▇▇▇▇▇
does not sell the ▇▇▇▇▇▇▇ Shares subject to the Sale Notice to the original
proposed purchaser identified in the Sale Notice at or above the same price as
originally proposed and within sixty (60) days after the Company or its
assignee(s) fail to purchase such ▇▇▇▇▇▇▇ Shares as provided in this
SUBPARAGRAPH (E), the Company shall pay to ▇▇▇▇▇▇▇ the difference between that
original purchase price and the fair market value (calculated as provided in
SUBPARAGRAPH (C) above) of such ▇▇▇▇▇▇▇ Shares on the date that the Company or
its assignee(s), as the case may be, fails to purchase such ▇▇▇▇▇▇▇ Shares.
(f) If neither the Company or its assignee elects to purchase the
▇▇▇▇▇▇▇ Shares, ▇▇▇▇▇▇▇ and each Permitted Transferee may consummate the sale or
transfer on the terms and conditions set forth in the Sale Notice; PROVIDED,
that such sale or transfer occurs no later than the later of (i) the date
specified in the Sale Notice and (ii) ten (10) business days after the Company
or its assignee fails to exercise its right of first refusal; PROVIDED, FURTHER,
that if the terms and conditions of sale or transfer change, ▇▇▇▇▇▇▇ must first
provide the Company with a new Sale Notice reflecting such changes and the
Company or its assignee shall again have the opportunity to purchase the ▇▇▇▇▇▇▇
Shares on such revised terms and conditions as provided in SUBPARAGRAPHS (C),
(D) and (E) above. Notwithstanding the foregoing, the Company's or its
assignees' failure to purchase any ▇▇▇▇▇▇▇ Shares hereunder on any one occasion
shall not limit ▇▇▇▇▇▇▇'▇ and each Permitted Transferee's obligations to comply
with this right of first refusal with respect to other sales or transfers of
▇▇▇▇▇▇▇ Shares (to the extent such ▇▇▇▇▇▇▇ Shares are not released from the
restrictions hereunder as contemplated by SUBPARAGRAPH (E) above), nor act as a
waiver or otherwise mitigate any of ▇▇▇▇▇▇▇'▇ and each Permitted Transferee's
other obligations hereunder.
(g) Notwithstanding the Company's or its assignee's failure to
exercise any right of first refusal or other right hereunder, during the term of
such right, ▇▇▇▇▇▇▇ and each Permitted Transferee shall not make any sales to
any person or group (as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934) of persons if, to his knowledge, such sales, when added to all
other sales of the Company's common stock by ▇▇▇▇▇▇▇ and each Permitted
Transferee to such person(s) at any time after July 1, 2002, will exceed four
percent (4%) of the Company's outstanding common stock.
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4. REPRESENTATIONS AND WARRANTIES
(a) ▇▇▇▇▇▇▇ hereby represents and warrants to and covenants with
the Company, and the Company covenants with ▇▇▇▇▇▇▇ to the extent applicable, as
follows:
(i) ▇▇▇▇▇▇▇ is the sole beneficial owner of all right, title
and interest in and to the ▇▇▇▇▇▇▇ Shares and has, and at all times will
have, the full power, right and authority to transfer such securities to
the Company or its assignee upon exercise of the Purchase Right or upon
exercise of the right of first refusal provided herein, as the case may
be, in each case free and clear of any liens, claims, encumbrances or
rights of or in favor of any party, subject only to ▇▇▇▇▇▇▇'▇ right to
limited rights to gift, transfer or pledge ▇▇▇▇▇▇▇ Shares to the extent
expressly permitted by SECTIONS 2(E) and (F) hereof. ▇▇▇▇▇▇▇ has the full
right, power and authority to execute and deliver this Agreement and to
perform his obligations hereunder. Upon execution by ▇▇▇▇▇▇▇, this
Agreement will represent a legal, valid and binding obligation of
▇▇▇▇▇▇▇, enforceable against ▇▇▇▇▇▇▇ in accordance with its terms, except
as enforceability may be limited by bankruptcy law or limitations on the
enforcement of creditors' rights generally. Neither the execution and
delivery of this Agreement by ▇▇▇▇▇▇▇ nor the performance of his
obligations hereunder will violate any instrument or agreement to which
▇▇▇▇▇▇▇ is a party or by which ▇▇▇▇▇▇▇ or his property (including,
without limitation, any community property) is or may be bound.
(ii) ▇▇▇▇▇▇▇ has sought and obtained independent legal and
financial advice in connection with this Agreement and has entered into
this Agreement with full knowledge of its legal and economic
significance. To the extent that ▇▇▇▇▇▇▇'▇ spouse has any community
property interest in the ▇▇▇▇▇▇▇ Shares, ▇▇▇▇▇▇▇ has obtained and
delivered an executed spousal consent in the form attached hereto. If
▇▇▇▇▇▇▇ does not provide such a spousal consent at the time he executes
and delivers this Agreement, ▇▇▇▇▇▇▇ shall by such omission be deemed to
have affirmatively represented and warranted (A) that such spousal
consent is not necessary or legally required, (B) that all ▇▇▇▇▇▇▇ Shares
are solely and exclusively the separate and exclusive property of
▇▇▇▇▇▇▇, and (C) his spouse has no rights, title or interest or claims in
or to any such items. ▇▇▇▇▇▇▇ hereby agrees to indemnify and hold
harmless the Company for any Losses resulting from any claims or actions
asserted by his spouse with respect to this Agreement or the restrictions
or transactions contemplated hereby.
(iii) ▇▇▇▇▇▇▇ hereby consents to the legending of all stock
certificates representing any ▇▇▇▇▇▇▇ Shares with a legend in
substantially the form provided below (the "LEGEND") reflecting the
existence of, and the restrictions of, his Agreement, and hereby
covenants and agrees to deliver all stock certificates currently
outstanding representing any ▇▇▇▇▇▇▇ Shares to the Company within three
business days after the Approval Date for purposes of legending as
provided in this SUBSECTION (III). The parties acknowledge and agree that
the ▇▇▇▇▇▇▇ Shares shall be subject to such legending as follows:
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(A) During the Purchase Right Period, stock certificates
for at least five hundred thousand (500,000) ▇▇▇▇▇▇▇ Shares shall at
all times bear the Legend;
(B) The Company hereby covenants and agrees that during
each calendar quarter until July 1, 2006, unlegended stock
certificates for at least the Authorized Number of ▇▇▇▇▇▇▇ Shares
(computed as of the 15th day of the last month of the previous
calendar quarter) LESS the number of ▇▇▇▇▇▇▇ Shares sold during that
same calendar quarter shall at all times be available to ▇▇▇▇▇▇▇ for
purposes of ▇▇▇▇▇▇▇ and his Permitted Transferees making the sales
permitted by SECTION 2(B) hereof. The parties acknowledge and agree
that, due to the logistics involved with receiving stock certificates
and exchanging the same for legended or legendless stock
certificates, as the case may be, special arrangements will be
required to achieve the aforementioned objective, as follows:
(1) Within five (5) business days after ▇▇▇▇▇▇▇ delivers
his stock certificate to the Company for legending as provided in
SECTION 4(A)(III) hereof, ▇▇▇▇▇▇▇ shall be provided one (1)
unlegended stock certificate representing the Authorized Number of
▇▇▇▇▇▇▇ Shares (computed as of the 15th day of the last month of the
previous calendar quarter). The remainder of the stock certificates
representing the ▇▇▇▇▇▇▇ Shares shall be exchanged for additional
separate stock certificates bearing the Legend in increments of two
hundred fifty thousand (250,000) ▇▇▇▇▇▇▇ Shares. The legended and
unlegended stock certificates shall be issued in exchange for the
outstanding stock certificates representing the ▇▇▇▇▇▇▇ Shares as
promptly as practicable, but in no event later than three business
days, after the date that such stock certificates are delivered to
the Company or its transfer agent for exchange pursuant to this
SUBSECTION (III).
(2) No later than ten (10) days prior to September 30,
2003, ▇▇▇▇▇▇▇ shall provide to the Company one or more of the
legended stock certificates described in the preceding subparagraph
representing at least the Authorized Number of ▇▇▇▇▇▇▇ Shares
(computed as of September 15, 2003) and the Company shall within
three (3) business days thereafter provide ▇▇▇▇▇▇▇ with (a) an
unlegended stock certificate representing the Authorized Number of
▇▇▇▇▇▇▇ Shares (computed as of the 15th day of the last month of the
previous calendar quarter) and (b) a legended stock certificate for
the balance of the shares represented by the legended stock
certificates delivered by ▇▇▇▇▇▇▇ pursuant to this SUBSECTION 2.
(3) No later than ten (10) days before the end of each
subsequent calendar quarter until July 1, 2006, ▇▇▇▇▇▇▇ or his
representatives shall notify the Company of the number of ▇▇▇▇▇▇▇
Shares sold to date in that calendar quarter and the number of
additional ▇▇▇▇▇▇▇ Shares that ▇▇▇▇▇▇▇ is entitled to sell as
provided herein through the end of that calendar quarter (the
"ADDITIONAL SHARES"). Accompanying such notice shall be at least one
of the legended stock certificates representing at least the sum of
the Additional Shares plus the Authorized Number of ▇▇▇▇▇▇▇ Shares
(computed as of the 15th day of the last
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month of that calendar quarter) less the number of shares
represented by unlegended stock certificates in ▇▇▇▇▇▇▇'▇
possession (such number, the "NET UNLEGENDED SHARES"). On or
before the first business day of the following calendar quarter
(and each subsequent calendar quarter through July 1, 2006), the
Company shall cause to be delivered to ▇▇▇▇▇▇▇ (a) an unlegended
stock certificate representing the Net Unlegended Shares and (b)
a legended stock certificate for the balance of the shares
represented by the legended stock certificates delivered by
▇▇▇▇▇▇▇ pursuant to this SUBSECTION (3).
(4) The Legend shall be in substantially the following
form and the Company shall use this Stock Agreement to respond to
inquiries as provided below:
The shares of common stock of Pinnacle Entertainment, Inc.
represented by this stock certificate are subject to certain
restrictions on sales, transfers and pledges set forth in certain
provisions of an agreement dated as of July 1, 2003. In addition,
purchasers, transferees and pledgees of such shares may be required
as a condition thereto to agree to be bound by certain provisions
of such agreement. Copies of the relevant provisions may be
obtained from Pinnacle Entertainment, Inc. by any bona fide
prospective purchaser, transferee or pledgee of the shares
represented hereby upon written request to Pinnacle Entertainment,
Inc., after written confirmation of such proposed sale, transfer or
pledge by the record holder of such shares. In such event, only
those provisions specifically relating to sales, transfers or
pledges, and any obligations of purchasers, transferees or pledgees
of such shares, will be provided.
(5) To the extent that ▇▇▇▇▇▇▇ Shares are released from
the restrictions under this Agreement pursuant to SECTION 3(f) above,
the Company shall exchange unlegended stock certificates for any
legended stock certificates representing such released ▇▇▇▇▇▇▇ Shares
as promptly as practicable, but in no event later than three (3)
business days, after receipt of the stock certificates representing
such release ▇▇▇▇▇▇▇ Shares from ▇▇▇▇▇▇▇.
(6) The parties acknowledge and agree that nothing in
this SUBSECTION (III) is intended to or does modify or otherwise
supersede ▇▇▇▇▇▇▇'▇ other obligations with respect to the Purchase
Right, the right of first refusal, or the other prohibitions on
sales, transfers or pledges or ▇▇▇▇▇▇▇ Shares hereunder.
(iv) Neither ▇▇▇▇▇▇▇ nor his spouse (to the extent of any
community property interest) has pledged, sold or granted any rights or
interest in any claim or Losses waived or released hereunder.
(b) The Company hereby represents and warrants to ▇▇▇▇▇▇▇ as
follows:
(i) The Company has the full right, power and authority to
execute and deliver this Agreement and to perform its
obligations hereunder. Upon
9
execution by the Company, this Agreement will represent a
legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its
terms, except as enforceability may be limited by bankruptcy
law or limitations on the enforcement of creditors' rights
generally.
(ii) The Committee has authorized and approved the execution and
delivery of this Agreement by the Company and the performance
of the Company's obligations hereunder.
(iii) The Company has not pledged, sold or granted any rights or
interest in any claim or Losses waived or released by the
Company hereunder.
5. EXECUTION; COUNTERPARTS. This Agreement may be executed by
facsimile signature and in two or more counterparts, each of which shall
constitute an original and all of which when taken together shall constitute one
and the same document. This Agreement shall be binding on and inure to the
benefit of the respective parties hereto and their respective heirs, successors,
executors, beneficiaries and permitted transferees and assignees. The parties
further expressly agree that this Agreement shall be binding upon and inure to
the benefit of their heirs, successors, and assigns.
6. NOTICES. Any notice to be given or served upon any party hereto must be
in writing and will be deemed to have been given and received when transmitted
by telecopier with electronic confirmation of transmission and verbal
confirmation of receipt or when actually delivered (if hand delivered or sent by
overnight courier) or three (3) business days following deposit in the United
States Mail by certified mail, return receipt requested, to the following
addresses:
If to ▇▇▇▇▇▇▇:
▇. ▇. ▇▇▇▇▇▇▇
▇▇-▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
Pinnacle Entertainment, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
7. REPRESENTATION; INTERPRETATION; FURTHER ASSURANCES. The parties
acknowledge and warrant that they have been represented by independent counsel
of their own choice throughout all the negotiations which preceded the execution
of this Agreement, and that each has read all of this Agreement and has had it
explained to them by his or its attorneys and fully understands all
10
of the terms used in this Agreement and their significance. The Agreement is
deemed drafted by both parties, and shall not be interpreted for or against any
party in this respect. Each party hereto agrees to execute and deliver such
documents and instruments, and to take such further actions, as are necessary
from time to time to accomplish the purpose and intent of this Agreement.
8. INJUNCTIVE RELIEF. The parties acknowledge and agree that an action for
breach of contract and an award of monetary damages alone would not be adequate
to compensate the Company for the substantial harm which would result from any
breach or violation by ▇▇▇▇▇▇▇ or his Permitted Transferees of SECTIONS 1, 2, 3,
4 or 5(A) hereof. Accordingly, ▇▇▇▇▇▇▇ hereby unconditionally and irrevocably
agrees (and each Permitted Transferee who receives ▇▇▇▇▇▇▇ Shares shall be
deemed by such action to agree) that in the event of such a breach or violation,
the Company shall be entitled to issue stop-transfer instructions to its
transfer agents and to seek and obtain protective orders, injunctive relief and
other remedies (including, without limitation, seeking specific performance or
the rescission of sales, transfers and pledges not made in strict compliance
with this Agreement), in addition to any other rights or remedies available at
law or in equity, all of which shall be deemed to be cumulative and not
alternative or exclusive. Any such action taken by the Company without just
cause shall subject the Company to liability to ▇▇▇▇▇▇▇ for damages to the
extent required by law, including without limitation the legal fees and expenses
of ▇▇▇▇▇▇▇ in defending against such bad faith claims.
9. AMENDMENT; WAIVER; GOVERNING LAW; EXECUTION. This Agreement may be
amended only by a written agreement executed by each of the parties thereto. No
breach of any provision herein may be waived unless such waiver is in writing
and signed by the party to be bound. This Agreement shall be governed by and
construed in accordance with the law of the State of California without giving
effect to its conflicts or choice of law principles. The signatories of the
parties hereto represent and warrant that they have the authority and approval
to execute this Agreement on behalf of the parties they are identified as
representing.
[signature page follows]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
PINNACLE ENTERTAINMENT, INC.
By: /S/ ▇▇▇ ▇▇▇
--------------------------------
▇▇▇ ▇▇▇, Chief Executive Officer
▇. ▇. ▇▇▇▇▇▇▇
/S/ ▇.▇. ▇▇▇▇▇▇▇
--------------------------------------
12
CONSENT OF SPOUSE
The undersigned is the spouse of ▇. ▇. ▇▇▇▇▇▇▇ and hereby acknowledges on
her own behalf that: She has read the foregoing Agreement and she knows its
contents. She hereby consents to the encumbrances and restrictions on the
▇▇▇▇▇▇▇ Shares (including any such securities hereafter issued upon exercise of
the Options) as set forth in the Agreement, approves of the other provisions of
the Agreement, agrees that all ▇▇▇▇▇▇▇ Shares and her interest in such
securities, if any, are subject to the provisions of the Agreement and that she
will take no action at any time to challenge or hinder (a) the operation of the
Agreement on such ▇▇▇▇▇▇▇ Shares or her interest in them or (b) the consummation
of the transactions contemplated by the Agreement. The undersigned hereby
represents and warrants that she fully understands the legal and economic
significance of the Agreement and in particular such waiver and release of
claims and Losses and has executed this consent with full knowledge thereof and
after consulting her own independent legal and financial advisors to the extent
deemed appropriate.
Date: July 24, 2003 /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
[Name]