Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K/A
Amendment No. 1
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended December 31, 2001
Commission file number 001-13641
Pinnacle Entertainment, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
95-3667491
(IRS Employer Identification No.)
330 North Brand Boulevard, Suite 1100, Glendale, California 91203
(Address of Principal Executive Offices) (Zip Code)
(818) 662-5900
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Pinnacle entertainment, Inc.
Common Stock, $.10 par value
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. YES [X] NO [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates (therefore
excludes officers, directors and beneficial owners of 10% or more) of the
registrant at April 24, 2002, was $243,714,502 based on a closing price of
$11.05 per common share. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
The number of outstanding shares of the registrant's common stock, as of the
close of business on April 24, 2002: 25,757,563.
Documents incorporated by reference: None
PINNACLE ENTERTAINMENT, Inc.
Table of Contents
Explanatory Note.......................................................... 1
Part III
Item 10. Directors and Executive Officers of the Registrant.............. 1
Item 11. Executive Compensation.......................................... 4
Item 12. Security Ownership of Certain Beneficial Owners and Management.. 11
Item 13. Certain Relationships and Related Transactions.................. 12
Signatures................................................................ 14
Explanatory note
On April 1, 2002, Pinnacle Entertainment, Inc. (the "Company" or "Pinnacle
Entertainment") filed its Annual Report on Form 10-K for the fiscal year ended
December 31, 2001 (the "2001 10-K") with the Securities and Exchange Commission,
incorporating Part III (Items 10, 11, 12 and 13) of the 2001 10-K by reference
to the Company's definitive 2001 proxy statement (the "2001 Proxy Statement").
At the time of the filing of the 2001 10-K, the Company anticipated that it
would file the 2001 Proxy Statement on or before April 30, 2002. However, on
April 12, 2002, the Company announced it had rescheduled its 2002 shareholders
meeting from May 21, 2002 to June 18, 2002 and as such would not be mailing the
proxy material, including the 2001 Proxy Statement, until mid-May 2002.
Consequently, in accordance with paragraph 3 of General Instruction G to Form
10-K, the Company hereby amends its Annual Report on Form 10-K for the fiscal
year ended December 31, 2001 previously filed with the Securities and Exchange
Commission to add certain information in Items 10, 11, 12 and 13. Except as set
forth in Items 10, 11, 12 and 13 below, no other changes are made to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2001.
Updated information regarding recent developments is included in the Company's
proxy statement and other filings with the SEC and in press releases issued by
the Company.
Part III
Item 10. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------
The following table sets forth certain information with respect to the Directors
and Executive Officers of the Company:
Name Age Position
- ------------------------------------- ---------- ---------------------------------------------------------------------------
Daniel R. Lee (a) 45 Chairman of the Board of Directors and Chief Executive Officer
James L. Martineau (b) 61 Director
Gary G. Miller (c) 51 Director
Michael Ornest (c) 44 Director
Timothy J. Parrott (a), (c) 54 Director
Lynn P. Reitnouer (a), (b) 69 Director
Marlin Torguson 57 Director
Wade W. Hundley 36 Executive Vice President and Chief Operating Officer
G. Michael Finnigan 53 President and Chief Executive Officer of Realty Investment Group, Inc.,
a wholly-owned subsidiary of the Company
Bruce C. Hinckley 55 Senior Vice President, Chief Financial Officer and Treasurer
Loren S. Ostrow 50 Senior Vice President, Secretary and General Counsel
____
(a) Member of Executive Committee
(b) Member of Compensation Committee
(c) Member of Audit Committee
Mr. Lee has been Chairman of the Board of Directors and Chief Executive Officer
- -------
of the Company since April 11, 2002; owner of LVMR, LLC (developer of casino
hotels) from 2001 to 2002; Chief Financial Officer and Senior Vice President of
HomeGrocer.com, Inc. (internet grocery service) from 1999 until the sale of the
company in 2000; and Chief Financial Officer, Treasurer and Senior Vice
President of Finance and Development of Mirage Resorts, Incorporated (major
operator and developer of casino resorts) from 1992 to 1999.
1
Mr. Martineau has been a Director of the Company since May 1999; President (and
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Founder), Viracon, Inc. (auto glass corporation) from 1970 to 1996; Executive
Vice President, Apogee Enterprises, Inc. (glass design and development
corporation that acquired Viracon, Inc. in 1973) from 1996 to 1998; Director,
Apogee Enterprises, Inc. since 1973; Director, Northstar Photonics
(telecommunications business) since December 1998; Chairman, Genesis Portfolio
Partners, LLC, (start-up company development) since August 1998; Director,
Borgen Systems since 1994; and Trustee, Owatonna Foundation since 1973.
Mr. Miller has been a Director of the Company since May 1999; Chairman and Chief
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Executive Officer, Fore Star Golf (golf management) since 1993; President,
Cumberland Capital Corporation (personal investments) since 1990; Executive Vice
President--Finance and Administration, Treasurer, Director, AFG Industries, Inc.
(glass manufacturing) from 1977 to 1993; Director, Nordic Tugs since January
1999; and Director, United Stationers, Inc. from 1992 to October 1998.
Mr. Ornest has been a Director of the Company since October 1998; private
- ----------
investor since 1983; Director of the Ornest Family Partnership since 1983;
Director of the Ornest Family Foundation since 1993; Director of the Toronto
Argonauts Football Club from 1988 to 1990; President of the St. Louis Arena and
Vice President of the St. Louis Blues Hockey Club from 1983 to 1986; and
Managing Director of the Vancouver Canadians Baseball Club, Pacific Coast League
from 1979 to 1980.
Mr. Parrott has been a Director of the Company since June 1997; Consultant to
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the Company from November 1998 to present; Chief Executive Officer and Director,
On Stage Entertainment (entertainment production company) since October 2000,
President, October 2000 to January 2002; Chairman of the Board and Chief
Executive Officer, Boomtown, Inc. (Boomtown) (gaming operations) from September
1992 to October 1998; President and Treasurer, Boomtown from June 1987 to
September 1992; Director, Boomtown from 1987 to October 1998; Chairman of the
Board and Chief Executive Officer, Boomtown Hotel & Casino, Inc. since May 1988;
Chief Executive Officer, Parrott Investment Company (a family-held investment
company with agricultural interests in California) since April 1995; and
Director, The Chronicle Publishing Company since April 1995.
Mr. Reitnouer has been a Director of the Company since 1991; Director, Hollywood
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Park Operating Company from September 1991 to January 1992; Partner, Crowell
Weedon & Co. (stock brokerage) since 1969; Director and Chairman of the Board,
COHR, Inc. from 1986 to 1999; Director and Chairman, Forest Lawn Memorial Parks
Association since 1975; and Trustee, University of California Santa Barbara
Foundation (and former Chairman) since 1992.
Mr. Torguson has been a Director of the Company since October 1998 and a
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consultant to the Company from October 2001 to present; Chairman of the Board,
Casino Magic Corp. (Casino Magic) (gaming operations) since 1994; President and
Chief Executive Officer, Casino Magic from April 1992 through November 1994;
Chief Financial Officer and Treasurer, Casino Magic from April 1992 to February
1993; 50% owner and a Vice
2
President, G.M.T. Management Co. (casino management and operations) from
December 1983 to December 1994; and private investor.
Mr. Hundley has served as the Company's Executive Vice President and Chief
- -----------
Operating Officer since September 2001; Executive Vice President and Office of
the CEO, Harveys Casino Resorts (gaming operations) from December 2000 through
July 2001; Principal, Colony Capital (private equity investment), June 1993
through November 2000.
Mr. Finnigan has served as the President and Chief Executive Officer of Realty
- ------------
Investment Group, Inc., a wholly-owned subsidiary of the Company which conducts
all of the Company's real estate business and related development activities,
since December 1998; Chief Financial Officer and Executive Vice President of the
Company and Hollywood Park Operating Company from March 1989 to March 31, 1999;
President, Sports and Entertainment, from January 1996 to December 1998;
President, Gaming and Entertainment, from February 1994 to January 1996;
Treasurer of the Company and Hollywood Park Operating Company from March 1992 to
March 31, 1999; Chairman of the Board, Southern California Special Olympics
since 1996; Chairman of the Board, Centinela Hospital since 1996; and Director,
Shoemaker Foundation from 1993 to 2001.
Mr. Hinckley joined the Company in February 1999 and has served as its Chief
- ------------
Financial Officer, Senior Vice President and Treasurer since April 1, 1999;
Executive Vice President, Chief Financial Officer and Secretary, Iwerks
Entertainment, Inc. (movie simulation theaters) from September 1996 to February
1999; financial consultant from September 1995 to September 1996; and Vice
President, Controller and Chief Accounting Officer, Caesars World, Inc. (casino
and hotel company) from November 1985 to September 1995. Mr. Hinckley is a
certified public accountant.
Mr. Ostrow joined the Company in January 1999 and has served as its Senior Vice
- ----------
President, Secretary and General Counsel since January 1, 1999; General Counsel,
Horseshoe Gaming (gaming operations) from January 1996 through December 1998;
Senior Vice President, KII--Pasadena, Inc. (real estate and casino consulting)
from December 1988 to December 1998; and Senior Vice President, KOAR
International, Inc. (real estate and casino consulting) from 1991 to 1997.
Mr. R.D. Hubbard, a former director and Chairman of the Board of the Company,
resigned from his position as Chairman effective April 10, 2002 and resigned as
a director effective April 26, 2002. Mr. Robert T. Manfuso, a former director
of the Company, resigned effective April 29, 2002. Mr. Paul R. Alanis, a former
director, Chief Executive Officer and President of the Company, resigned
effective April 10, 2002.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of reports furnished to the Company during or with
respect to the year ended December 31, 2001 pursuant to Rule 16a-3(e) of the
Exchange Act, all required reports on Form 3, Form 4 and Form 5 were timely
filed by the Company's directors, officers and 10% stockholders, except that Mr.
Miller failed to file on a timely basis one Form 4 with respect to one
acquisition of 3,000 shares of Pinnacle Common Stock.
3
Item 11. Executive Compensation
- --------------------------------
The following tables summarize the annual and long-term compensation of, and
stock options held by, the Company's Chief Executive Officer during the fiscal
year ended December 31, 2001, the five additional most highly compensated
executive officers whose annual salaries and bonuses exceeded $100,000 in total
during the fiscal year ended December 31, 2001, and J. Michael Allen, who served
as an Executive Officer during the fiscal year ended December 31, 2001 but left
the Company in July 2001 (collectively, the ''Named Officers''). None of the
Named Officers held stock appreciation rights during the years reported in the
tables.
Summary Compensation Table
Long Term
Annual Compensation (a) Compensation Awards All Other Compensation
------------------------- ----------------------- ----------------------------------
Name and Principal Salary Bonus Securities Underlying Term Life
Position Year ($) ($) Options/SARs (#) 401(k) Match (b) Insurance (c)
- ----------------------- ---- -------- -------------- ----------------------- ---------------- ---------------
R. D. Hubbard 2001 $500,000 $ 0 0 $3,134 $3,183
Former Chairman of the 2000 500,000 500,000 0 3,371 4,115
Board (through 1999 500,000 700,000 100,000 790 549
April 10, 2002)
Paul R. Alanis 2001 $600,000 $100,000 0 $3,825 $1,035
Former Chief Executive 2000 600,000 300,000 0 3,626 1,069
Officer and President 1999 600,000 400,000 0 1,666 69
(through April 10, 2002)
Wade W. Hundley 2001 $133,333(d) $85,000(e) 200,000 $ 0 $ 162
Executive Vice President 2000 0 0 0 0 0
and Chief Operating Officer 1999 0 0 0 0 0
G. Michael Finnigan 2001 $400,000 $ 0 0 $3,825 $ 675
President and Chief 2000 400,000 400,000 0 3,755 861
Executive Officer of Realty 1999 400,000 500,000 40,000 790 213
Investment Group, Inc.
Bruce C. Hinckley 2001 $250,000 $ 0 10,000 $3,776 $ 473
Senior Vice President, 2000 250,000 50,000 0 3,531 590
Chief Financial Officer and 1999 192,514 75,000 25,000 1,687 69
Treasurer
Loren S. Ostrow 2001 $300,000 $ 0 0 $ 734 $ 446
Senior Vice President, 2000 300,000 50,000 0 2,822 512
Secretary and General 1999 300,000 75,000 0 1,875 30
Counsel
J. Michael Allen 2001 $375,000 $ 0 0 $3,825 $ 686
Former Senior Vice 2000 400,000 100,000 0 3,626 888
President and Chief 1999 400,000 125,000 0 1,666 69
Operating Officer of
Gaming Operations
- ----------------
(a) During the fiscal years shown, no Named Officer received perquisite
compensation having an aggregate value equal to or in excess of $50,000 or
10% of such Named Officer's salary and bonus for the applicable fiscal
year.
(b) Reflects the Company match contribution under the Company's 401(k) Plan.
(c) Reflects the premium paid by the Company with respect to term life
insurance.
(d) Mr. Hundley was employed at the Company as of September 1, 2001. Reflects
proportionate share of annual salary of $400,000.
(e) Includes one time signing bonus of $15,000 and guaranteed bonus of $70,000
for 2001.
4
Executive Deferred Compensation Plan
The Company has adopted the Executive Deferred Compensation Plan ("Executive
Plan"), which allows certain highly compensated employees of the Company and its
subsidiaries (each an "Employer") to defer, on a pre-tax basis, a portion of
their base annual salaries, bonuses, and cash payments received upon a change in
control (as defined in the Executive Plan) in consideration of the cancellation
of stock options held by such persons ("Option Cancellation Payment"). The
Executive Plan is administered by the Compensation Committee of the Board of
Directors and participation in the Executive Plan is limited to employees who
are (i) determined by an Employer to be includable within a select group of
management or highly compensated employees, (ii) specifically selected by an
Employer and (iii) approved by the Compensation Committee. A participating
employee may elect to defer up to 75% of his or her base annual salary, up to
100% of his or her bonus per year and up to 100% of his or her Option
Cancellation Payment. Any such deferred compensation is credited to a deferral
contribution account. A participating employee is at all times fully vested in
his or her deferred contributions, as well as any appreciation or depreciation
attributable thereto. The Company does not make contributions to the Executive
Plan for the benefit of such employees.
For purposes of determining the rate of return credited to a deferral
contribution account, each participating employee must select from a list of
hypothetical investment funds among which deferred contributions shall be
allocated. Although a participating employee's deferred compensation will not be
invested directly in the selected hypothetical investment funds, his or her
deferral compensation account shall be adjusted according to the performance of
such funds. Although the fund investment alternatives under the Executive Plan
are different from those under the Company's 401(k) plan, the Company doesn't
believe the participants in the Executive Plan are entitled to a preferential
return on amounts deferred in relation to the return available to employees
generally under the 401(k) plan. The payment of benefits under the Executive
Plan is an unsecured obligation of the Company. The Company is not obligated to
acquire or hold any investment fund assets.
Participating employees may elect in advance to receive their deferral
contribution account balances upon
5
retirement in a lump sum or in annual payments over five, ten or fifteen years
(except that, if an employee's account balance is less than $50,000, such
balance will be paid as a lump sum). A participating employee may make an
advance election to defer retirement distributions until age 75. In the event a
participating employee dies or suffers a disability (as defined in the Executive
Plan) during employment, such employee's account balance shall be paid (i) in
one lump sum if the account balance is less than $50,000, or (ii) if the account
balance is $50,000 or more, in five annual installments unless the employee has
elected, in advance and with the Compensation Committee's approval, to receive a
lump sum distribution. In the event of a voluntary or involuntary termination of
employment for any reason other than retirement, disability or death, a
participating employee shall receive his or her account balance (i) in one lump
sum if the account balance is less than $50,000, or (ii) if the account balance
is $50,000 or more, in five annual installments unless the employee has elected,
in advance and with the Compensation Committee's approval, to receive a lump sum
distribution; provided, however, that if such termination, retirement,
disability or death occurs within 18 months of a change in control (as defined
in the Executive Plan), then the employee's deferral contribution account
balance shall be paid in the form of one lump sum payment not later than 30 days
after the termination, retirement, disability or death.
A participating employee may make an advance election to receive interim
distributions from a deferral compensation account prior to retirement, but not
earlier than three years after the election is made. Such interim distributions
are distributed as lump sum payments. In the event of a financial emergency
(such as a sudden illness or accident, a loss of property due to casualty or
other extraordinary and unforeseeable events beyond the employee's control), a
participating employee may petition the Compensation Committee to suspend
deferrals and/or to request withdrawal of a portion of the account to satisfy
the emergency. A participating employee may request to receive all of his or her
account balance, without regard to whether benefits are due or the occurrence of
a financial emergency; any distribution made pursuant to such a request shall be
subject to forfeiture of 10% of the total account balance and temporary
suspension of the employee's participation in the Executive Plan.
An Employer may terminate, amend or modify the Executive Plan with respect to
its participating employees at any time, except that (i) no termination,
amendment or modification may decrease or restrict the value of a participating
employee's account balance and (ii) no amendment or modification shall be made
after a change in control which adversely affects the vesting, calculation or
payment of benefits or any other rights or protections of any participating
employee. Upon termination of the Executive Plan, all amounts credited to
participating employees' accounts shall be distributed in lump sums.
Stock Option Plans
In 1993, 1996 and 2001, the stockholders of the Company adopted stock option
plans ("Stock Option Plans"), which provided for the issuance of up to 625,000,
900,000 and 900,000 shares of the Company's Pinnacle Common Stock upon exercise
of options to purchase Pinnacle Common Stock ("Pinnacle Stock Options"),
respectively. Except for the provisions governing the number of shares issuable
thereunder, the provisions of the Stock Option Plans are similar. The most
important differences between the Stock Options Plans are (a) the 1993 and 1996
Stock Option Plans, but not the 2001 Stock Option Plan, permit the granting of
stock appreciation rights coupled with the grants of Pinnacle Stock Options, (b)
under the 2001 Stock Option Plan, but not the 1993 and 1996 Stock Option Plans,
an optionee whose employment is terminated for "Cause" cannot exercise any
Pinnacle Stock Options, even if they are vested, (c) the 2001 Stock Option Plan
permits more forms of payment of the option price than the 1996 Stock Option
Plan, which in turn permits more forms of payment of the option price than the
1993 Stock Option Plan, and (d) a number of technical changes have been made in
the later Stock Option Plans, many of which reflect changes in tax and
securities laws. The Stock Option Plans are administered and terms of option
grants are established by the Compensation Committee of the Board of Directors.
Under the Stock Option Plans, Pinnacle Stock Options alone or (under the 1993
and 1996 Stock Option Plans) coupled with stock appreciation rights may be
granted to selected key employees, directors, consultants and advisors of the
Company. Pinnacle Stock Options become exercisable according to a vesting period
as determined by the Compensation Committee at the date of grant and, unless
otherwise determined by the Compensation Committee, expire on the earlier of one
month after termination of
6
employment (three months in the case of an incentive stock option), six months
after the death or permanent disability (one year in the case of an incentive
stock option) of the optionee, or the expiration of the fixed option term set by
the Compensation Committee at the grant date (not to exceed ten years from the
grant date, or five years from the grant date in the case of an incentive stock
option granted to a holder of more than ten percent of the outstanding Pinnacle
Common Stock). The exercise prices of all Pinnacle Stock Options granted under
the Stock Option Plans are determined by the Compensation Committee on the grant
date, provided that the exercise price of an incentive stock option may not be
less than the fair market value of Pinnacle Common Stock at the date of the
grant (or not less than 110% of the fair market value of Pinnacle Common Stock
at the date of the grant of an incentive stock option granted to a holder of
more than ten percent of the outstanding Pinnacle Common Stock).
Under the Stock Option Plans, as of April 24, 2002, there were approximately
1,719,000 shares subject to outstanding Pinnacle Stock Options. As of such date,
options covering all of the shares eligible for issuance under the 1993 and 1996
Stock Option Plans had been granted and options covering approximately 562,000
shares had been granted under the 2001 Stock Option Plan. In addition, as of
April 24, 2002, there were approximately 760,000 shares subject to outstanding
options under the Boomtown and Casino Magic stock option plans. No additional
options will be granted under these plans. Finally, as of April 24, 2002, there
were 817,500 shares subject to outstanding options granted to Messrs. Alanis,
Allen, Ostrow and Cliff Kortman pursuant to their respective employment
agreements.
Option/SAR Grants in Last Fiscal Year
The following table summarizes the option grants to Named Officers during the
year ended December 31, 2001. None of the Named Officers held stock appreciation
rights during the year ended December 31, 2001.
Individual Grants
- ---------------------------------------------------------------------------------------
Percent of
Total
Number of Options/ Potential Realizable Value
Securities SARs at Assumed Annual Rates
Underlying Granted to Exercise of Stock Price Appreciation
Options/SARs Employees or for Option Term
Granted in Fiscal Base Price Expiration -----------------------------
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
- ------------------ --------------- ---------- ----------- ---------------- ------------- ------------
Wade Hundley (a) 100,000 16.81% $ 8.08 Sep. 1, 2011 $174,000 $756,000
50,000 8.40% 9.70 Sep. 1, 2011 6,000 297,000
50,000 8.40% 11.31 Sep. 1, 2011 0 217,000
Bruce C. Hinckley (b) 10,000 1.68% $ 10.65 Mar. 13, 2011 0 50,000
(a) The options granted to Mr. Hundley vest in three equal annual installments
beginning on September 1, 2002.
(b) The options granted to Mr. Hinckley vest in three equal annual installments
beginning on March 13, 2002.
7
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Options/SAR Values
The following table sets forth information with respect to the exercise of stock
options by Named Officers during the year ended December 31, 2001, and the final
year end value of unexercised options. None of the Named Officers held stock
appreciation rights during the year ended December 31, 2001.
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options/SARs Options/SARs
Acquired At Fiscal At Fiscal
On Value Year-End (#) Year-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- --------------------- ------------ ------------ -------------------- ------------------
R. D. Hubbard 0 $0 248,660/ 33,340 $0/ $0
Paul R. Alanis 0 $0 400,000/ 0 $0/ $0
Wade W. Hundley 0 $0 0/ 200,000 $0/ $0
G. Michael Finnigan 0 $0 121,664/ 13,336 $0/ $0
Bruce C. Hinckley 0 $0 16,665/ 18,335 $0/ $0
Loren S. Ostrow 0 $0 125,000/ 0 $0/ $0
J. Michael Allen 0 $0 200,000/ 0 $0/ $0
Director Compensation
All directors hold office until the next annual meeting of stockholders and
until their successors are duly elected and qualified, or until his earlier
death, retirement, resignation or removal from office. Directors are entitled to
receive an annual retainer of $25,000 per year plus $1,000 for each Board
meeting attended, which they may take in cash or in deferred compensation under
the Company's Amended and Restated Directors Deferred Compensation Plan as
outlined below. In addition, non-employee directors are entitled to receive a
minimum of 2,000 Pinnacle Stock Options (as defined below) per year, but no such
options were granted in 2001. Members of the Executive Committee, Audit
Committee and Compensation Committee, and directors serving on the Company's
Compliance Committee (which monitors the Company's compliance with gaming laws
in the jurisdictions in which it operates) receive an additional $1,000 for each
committee meeting attended, and such amounts are also eligible for the Amended
and Restated Directors Deferred Compensation Plan.
Amended and Restated Directors Deferred Compensation Plan
Participation in the Company's Amended and Restated Directors Deferred
Compensation Plan (the "Directors Plan") is limited to directors of the Company,
and each eligible director may elect to defer all or a portion of his annual
retainer and any fees for meetings attended. Any such deferred compensation is
credited to a deferred compensation account, either in cash or in shares of
Pinnacle Common Stock, at each director's election. As of the date the
director's compensation would otherwise have been paid, and depending on the
director's election, the director's deferred compensation account will be
credited with either (i) cash, (ii) the number of full and/or fractional shares
of Pinnacle Common Stock obtained by dividing the amount of the director's
compensation for the calendar quarter or month which he elected to defer, by the
average of the closing price of Pinnacle Common Stock on the New York Stock
Exchange on the last ten business days of the calendar quarter or month for
which such compensation is payable or (iii) a combination of cash and shares of
Pinnacle Common Stock as described in clause (i) and (ii). All cash amounts
credited to the director's deferred compensation account bear interest at an
amount to be determined from time to time by the Board of Directors. For 2001,
no director elected a cash deferral under the Directors Plan.
8
If a director has elected to receive shares of Pinnacle Common Stock in lieu of
his retainer and the Company declares a dividend, such director's deferred
compensation account is credited at the end of each calendar quarter with the
number of full and/or fractional shares of Pinnacle Common Stock obtained by
dividing the dividends which would have been paid on the shares credited to the
director's deferred compensation account as of the dividend record date, if any,
occurring during such calendar quarter if such shares had been shares of issued
and outstanding Pinnacle Common Stock on such date, by the closing price of
Pinnacle Common Stock on the New York Stock Exchange on the date such
dividend(s) was paid. In addition, if the Company declares a dividend payable in
shares of Pinnacle Common Stock, the director's deferred compensation account is
credited at the end of each calendar quarter with the number of full and/or
fractional shares of Pinnacle Common Stock which such shares would have been
entitled to if such shares had been shares of issued and outstanding Pinnacle
Common Stock on the record date for such stock dividend(s).
Participating directors do not have any interest in the cash and/or Pinnacle
Common Stock credited to their deferred compensation accounts until distributed
in accordance with the Directors Plan, nor do they have any voting rights with
respect to such shares until shares credited to their deferred compensation
accounts are distributed. The rights of a director to receive payments under the
Directors Plan are no greater than the rights of an unsecured general creditor
of the Company. Each participating director may elect to have the aggregate
amount of cash and shares credited to his deferred compensation account
distributed to him in one lump sum payment or in a number of approximately equal
annual installments over a period of time not to exceed fifteen years. The lump
sum payment or the first installment will be paid as of the first business day
of the calendar quarter immediately following the cessation of the director's
service as a director of the Company. Prior to the beginning of any calendar
year, a director may elect to change the method of distribution, but amounts
credited to a director's account prior to the effective date of such change may
not be affected, but rather will be distributed in accordance with the election
at the time such amounts were credited to the director's deferred compensation
account.
The maximum number of shares of Pinnacle Common Stock that can be issued
pursuant to the Directors Plan is 275,000 shares. The Company is not required to
reserve or set aside funds or shares of Pinnacle Common Stock for the payment of
its obligations pursuant to the Directors Plan. The Company is obligated to make
available, as and when required, a sufficient number of shares of Pinnacle
Common Stock to meet the needs of the Directors Plan. The shares of Pinnacle
Common Stock to be issued under the Directors Plan may be either authorized and
unissued shares or reacquired shares.
Amendment, modification or termination of the Directors Plan may not (i)
adversely affect any eligible director's rights with respect to amounts then
credited to his account or (ii) accelerate any payments or distributions under
the Directors Plan (except with regard to bona fide financial hardships).
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
The Company has entered into a sixteen-month employment agreement with Wade W.
Hundley, effective September 1, 2001. Mr. Hundley's annual compensation is
$400,000, with an annual bonus of up to $200,000. The bonus is payable as
follows: (a) $100,000 based on the Company's actual earnings before interest,
taxes, depreciation and amortization as compared to budget and the Company not
exceeding its capital budget and (b) the remaining $100,000 to be awarded at the
discretion of the Board of Directors. If Mr. Hundley terminates his employment
for good reason, or if the Company terminates Mr. Hundley without cause, and so
long as he does not compete with the Company or its subsidiaries in the gaming
business prior to the end of the employment contract term, Mr. Hundley will (a)
receive an annual salary of $400,000 through the balance of the contract period,
(b) retain his health and disability insurance for six months after termination,
and (c) immediately vest in all Pinnacle Stock Options granted to Mr. Hundley
under his employment agreement. If either Mr. Hundley or the Company terminates
Mr. Hundley's employment in connection with a Change of Control (as defined in
the employment agreement), then Mr. Hundley will (a) receive $400,000 plus the
9
maximum bonus payable under the employment agreement, (b) retain his health,
life and disability benefits for one year after termination, and (c) immediately
vest in all Pinnacle Stock Options.
Compensation Committee Interlocks and Insider Participation
Messrs. Reitnouer, Martineau and Manfuso served on the Compensation Committee
from January 1, 2001 to December 31, 2001. None of the members of the
Compensation Committee were officers or employees or former officers or
employees of the Company or its subsidiaries. No executive officer of the
Company served (i) on the compensation committee of another entity, one of whose
executive officers served as a director of, or on the Compensation Committee of,
the Company, or (ii) as a director of another entity, one of whose executive
officers served on the Compensation Committee of the Company.
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Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
The following table sets forth the name, address (address is provided for
persons listed as beneficial owners of 5% or more of the outstanding Common
Stock), number of shares and percent of the outstanding Common Stock
beneficially owned as of April 24, 2002 (except where a different date is
indicated below) by each person known to the Board of Directors of the Company
to be the beneficial owner of 5% or more of the outstanding shares of Common
Stock, each Director, each Named Officer, and all Directors and Executive
Officers as a group.
Shares Percent of
Beneficially Shares
Name and Address of Beneficial Owner Owned Outstanding (a)
- ------------------------------------------------------------- ----------------- -----------------
R.D. Hubbard 2,751,820 (b) 10.6%
Pinnacle Entertainment, Inc.
330 North Brand Boulevard, Suite 1100
Glendale, California 91203
Legg Mason, Inc. 1,869,236 (c) 7.3%
100 Light Street
Baltimore, Maryland 21202
AXA Financial, Inc. 1,350,200 (d) 5.2%
1290 Avenue of the Americas
New York, NY 10104
Paul R. Alanis 750,000 (e) 2.9%
Michael Ornest 376,500 (f) 1.5%
Timothy J. Parrott 330,090 (g) 1.3%
Lynn P. Reitnouer 66,000 (h) *
Robert T. Manfuso 44,333 (i) *
Marlin Torguson 27,460 (j) *
James L. Martineau 11,525 (k) *
Gary G. Miller 11,334 (l) *
Daniel R. Lee 3,700 *
J. Michael Allen 200,000 (m) *
Loren S. Ostrow 185,000 (n) *
G. Michael Finnigan 160,415 (o) *
Bruce C. Hinckley 38,333 (p) *
Wade W. Hundley 15,000 *
Directors and Executive Officers
as of April 24, 2002 as a group
(13 persons) 4,021,510 (q) 15.6%
- ----------------
* Less than one percent (1%) of the outstanding common shares.
(a) Assumes exercise of stock options beneficially owned by the named individual
or entity into shares of Pinnacle Common Stock. Based on 25,757,563 shares
outstanding as of April 24, 2002.
(b) Includes 282,000 shares of Pinnacle Common Stock, which Mr. Hubbard has the
right to acquire upon the exercise of options, which are exercisable within
60 days of April 24, 2002. These shares also include 249,990 shares of
Pinnacle Common Stock
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owned by the R.D. and Joan Dale Hubbard Foundation, a non-profit
organization; Mr. Hubbard may be deemed to have beneficial ownership of such
shares.
(c) Based upon information provided by the stockholder in Schedule 13G/A filed
with the Securities and Exchange Commission on February 11, 2002.
(d) Based upon information provided by the stockholder in Schedule 13G filed
with the Securities and Exchange Commission on February 11, 2002. According
to such Schedule 13G, Alliance Capital Management L.P. ("Alliance"), an
investment adviser registered under Section 203 of the Investment Advisers
Act of 1940 and a majority-owned subsidiary of AXA Financial, Inc., holds
the shares of Pinnacle Common Stock solely for investment purposes on behalf
of client discretionary investment advisory accounts. Alliance has sole
voting power as to 1,145,500 of the shares, shares voting power as to 12,900
of the shares and has sole dispositive power as to 1,350,200 of the shares.
AXA Financial, Inc. is owned by AXA, a French company. AXA is controlled by
AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, AXA Conseil
Vie Assurance Mutuelle and AXA Courtage Assurance Mutuelle, each a French
company.
(e) Includes 350,000 shares of Pinnacle Common Stock held by MBJJP, Ltd., a
family limited partnership for which Mr. Alanis and his wife Allison Alanis
act as general partners. Also includes 400,000 shares of Pinnacle Common
Stock, which Mr. Alanis has the right to acquire upon the exercise of
options, which are exercisable within 60 days of April 24, 2002.
(f) Includes 7,334 shares of Pinnacle Common Stock, which Mr. Ornest has the
right to acquire upon the exercise of options, which are exercisable within
60 days of April 24, 2002. These shares also include 70,000 shares of
Pinnacle Common Stock owned by the Ornest Family Foundation, a non-profit
organization; Mr. Ornest may be deemed to have beneficial ownership of such
shares.
(g) Includes 168,063 shares of Pinnacle Common Stock, which Mr. Parrott has the
right to acquire upon exercise of options which are exercisable within 60
days of April 24, 2002, including 164,063 options assumed by the Company in
connection with the Boomtown merger.
(h) Includes 16,000 shares of Pinnacle Common Stock, which Mr. Reitnouer has the
right to acquire upon the exercise of options, which are exercisable within
60 days of April 24, 2002.
(i) Includes 16,000 shares of Pinnacle Common Stock, which Mr. Manfuso has the
right to acquire upon the exercise of options, which are exercisable within
60 days of April 24, 2002.
(j) Includes 27,460 shares of Pinnacle Common Stock, which Mr. Torguson has the
right to acquire upon the exercise of options, which are exercisable within
60 days of April 24, 2002, including 23,460 shares covered by options
assumed by the Company in connection with the Casino Magic merger.
(k) Includes 6,191 shares of Pinnacle Common Stock owned by Mr. Martineau's
wife, beneficial ownership of which is disclaimed by Mr. Martineau, and
5,334 shares of Pinnacle Common Stock which Mr. Martineau has the right to
acquire upon the exercise of options, which are exercisable within 60 days
of April 24, 2002.
(l) Includes 5,334 shares of Pinnacle Common Stock, which Mr. Miller has the
right to acquire upon the exercise of options, which are exercisable within
60 days of April 24, 2002.
(m) Includes 200,000 shares of Pinnacle Common Stock, which Mr. Allen has the
right to acquire upon the exercise of options, which are exercisable within
60 days of April 24, 2002.
(n) Includes 60,000 shares of Pinnacle Common Stock held by the Ostrow Family
Partnership, of which Mr. Ostrow is the general and a limited partner. Also,
includes 125,000 shares of Pinnacle Common Stock, which Mr. Ostrow has the
right to acquire upon the exercise of options, which are exercisable within
60 days of April 24, 2002.
(o) Includes 135,000 shares of Pinnacle Common Stock, which Mr. Finnigan has the
right to acquire upon the exercise of options, which are exercisable within
60 days of April 24, 2002.
(p) Includes 28,333 shares of Pinnacle Common Stock, which Mr. Hinckley has the
right to acquire upon the exercise of options, which are exercisable within
60 days of April 24, 2002.
(q) Includes 815,858 shares of Pinnacle Common Stock of which the directors and
executive officers may be deemed to have beneficial ownership with respect
to options to purchase Pinnacle Common Stock, which are exercisable within
60 days of April 24, 2002. Excluding such shares, the directors and
executive officers of the Company have beneficial ownership of 3,205,652
shares of Pinnacle Common Stock, which represents 12.4% of the shares of
Pinnacle Common Stock outstanding as of April 24, 2002. The number of shares
shown does not include shares owned by Mr. Alanis or Mr. Allen as neither
was a director or executive officer as of April 24, 2002.
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
Transactions in Connection with Terminated Merger Agreement
In April 2000, the Company entered into a definitive agreement with PH Casino
Resorts ("PHCR"), a newly formed subsidiary of Harveys Casino Resorts, and
Pinnacle Acquisition Corporation ("Pinnacle Acq Corp"), a newly formed
subsidiary of PHCR, pursuant to which PHCR would have acquired by merger (the
"Merger") all of the outstanding capital stock of Pinnacle Entertainment for
cash consideration (the "Merger Agreement"). Certain members of the Company's
management were expected to have equity interests in PHCR if the Merger had been
consummated. Consummation of the Merger was subject to numerous conditions,
including PHCR obtaining the necessary financing for the transaction and
regulatory approvals. In January 2001, the Company announced that it had been
notified by PHCR that PHCR did not intend to further extend the outside closing
date (previously extended to January 31, 2001) of the Merger. Since all of the
conditions to consummation of the Merger would not be met by such date, the
Company, PHCR and Pinnacle Acq Corp mutually agreed that the Merger Agreement
would be terminated.
Other Transactions
On June 2, 1998, the Company and R.D. Hubbard Enterprises, Inc. (Hubbard
Enterprises), which is wholly owned by Mr. Hubbard, entered into a new Aircraft
Time Sharing Agreement. The former agreement was entered into in November 1993.
The June 2, 1998 Aircraft Time Sharing Agreement is identical to the former
agreement in all aspects, except for the type of aircraft covered by the
agreement. The Aircraft Time Sharing Agreement expired on December 31, 1999, and
automatically renews each month unless written notice of
12
termination is given by either party at least two weeks before a renewal date.
The Company reimburses Hubbard Enterprises for expenses incurred as a result of
the Company's use of the aircraft, which totaled approximately $55,000 in 2001,
$97,000 in 2000,and $176,000 in 1999.
On August 31, 1998, the Company received a promissory note for up to $3,500,000
from Paul R. Alanis. As of December 31, 1998, the Company had loaned Mr. Alanis
$3,232,000, who used the funds to purchase 300,000 shares of Pinnacle Common
Stock. The principal amount of the promissory note, along with accrued interest,
was paid in full in June 1999.
Timothy J. Parrott purchased 270,738 shares of Boomtown common stock in
connection with Boomtown's 1988 acquisition of Boomtown Hotel & Casino, Inc.
(which operates Boomtown Reno). Mr. Parrott paid an aggregate purchase price for
the common stock of $222,000, of which $1,000 was paid in cash and $221,000 was
paid by a promissory note secured by pledge to Boomtown of all of the shares
owned by Mr. Parrott. As of October 31, 1998, Mr. Parrott resigned his position
as Chairman of Boomtown, and was retained by the Company as a consultant to
provide services relating to gaming and other business issues. Mr. Parrott was
retained for a three-year period ending October 31, 2001, with an annual
retainer of $350,000 with health and disability benefits equivalent to those he
received as Chairman of Boomtown. Mr. Parrott's $221,000 note was forgiven in
three equal parts on each anniversary of the consulting agreement.
Marlin Torguson, who beneficially owned approximately 21.5% of the outstanding
common shares of Casino Magic prior to the Company's acquisition of Casino
Magic, agreed, in connection with such acquisition, to vote his Casino Magic
shares in favor of the acquisition by the Company. In addition, Mr. Torguson
agreed to continue to serve as an employee of Casino Magic until October 15,
2001 and, during such period, not to compete with the Company or Casino Magic in
any jurisdiction in which either the Company or Casino Magic operates. The
Company issued to Mr. Torguson 60,000 shares of the Company's Pinnacle Common
Stock as compensation for his three-year service as an employee, and paid him
$300,000 per year, during a three-year period, for his non-compete agreement. In
addition, the Company issued Mr. Torguson 30,000 Pinnacle Stock Options to
acquire Pinnacle Common Stock as of the October 15, 1998 acquisition of Casino
Magic, priced at the closing price of Pinnacle Common Stock on that date. All of
the foregoing payments have been made to Mr. Torguson as of December 31, 2001.
13
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Amendment No. 1 to its Annual
Report on Form 10-K to be signed on its behalf by the undersigned, thereunto
duly authorized.
Pinnacle Entertainment, Inc.
(Registrant)
By: /s/ Daniel R. Lee Dated: April 30, 2002
-------------------------------
Daniel R. Lee
Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Bruce C. Hinckley Dated: April 30, 2002
-------------------------------
Bruce C. Hinckley
Senior Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
14