EX-10.15



 





Exhibit 10.15




EMPLOYMENT AGREEMENT




     This EMPLOYMENT AGREEMENT (this “Agreement”) is made as of December 31, 2007 by and
between FX Real Estate and Entertainment Inc., a Delaware corporation (the “Employer”), and
Brett Torino (the “Executive”).



     WHEREAS, the Employer desires to retain the Executive; the Executive affirms that no
obligation germane to the Executive presently precludes, or exists now and in the future may
preclude, the Executive’s entry into and full and faithful performance of this Agreement; and the
Executive desires to accept employment with the Employer; and



     WHEREAS, the Board of Directors of the Employer (the “Board”) has determined that it
is in the Employer’s interest to enter into this Agreement with the Executive in order to secure,
and in the future to be assured of, the Executive’s abilities, services, and judgment as a member
of senior management of the Employer, upon the terms and provisions and subject to the conditions
stated in this Agreement;



     NOW, THEREFORE, the Employer and the Executive agree as follows:



     1. Employment. Upon the terms and subject to the conditions of this Agreement, the
Employer employs the Executive, and the Executive accepts employment.



     2. Term; Dates.



          2.1 The term of the Executive’s employment shall commence on the Effective Date (as defined
below) and continue until the third annual anniversary thereof (the “Employment Agreement
Term”), unless earlier terminated in accordance with this Agreement.




          2.2 This Agreement refers to the dates defined in this section, as follows: (i) the date of
commencement of employment is the “Effective Date”, which date shall be deemed the date on which
the registration statement of the Employer for the registered distribution of its shares of common
stock to the stockholders of CKX (the “Registered Distribution”) is declared effective by
the Securities and Exchange Commission (“SEC”); (ii) the period of time during which the
Executive is an employee of the Employer pursuant to and in accordance with the terms and
provisions of this Agreement is hereinafter referred to as the “Term”; and (iii) the last date of
employment is the “Expiration Date.”




     3. Executive’s Position, Duties, and Authority.



          3.1 The Employer shall employ the Executive, and the Executive shall serve as the Chairman -
Las Vegas Division of the Employer, and in such other positions with the Employer and its
subsidiaries that are reasonably acceptable to the Executive. The Executive shall have executive
duties, functions, authority, and responsibilities commensurate with the office or offices he from
time to time holds with the Employer, subject, in accordance with applicable law, to the
supervision and direction of the Board.




          3.2 The Executive agrees to tailor his conduct with the written employment policies which the
Employer generally applies to all of its employees, and additionally agrees




 









 







that the Employer may
amend its policies from time to time during the Term, to the extent not inconsistent with the terms
of this Agreement. The Executive and the Employer agree that these policies supplement, but do not
amend or otherwise modify, the express terms of this Agreement in the manner authorized by Section
17.5 of this Agreement.




          3.3 The Executive acknowledges that during the Term, the Employer may, without the necessity
of obtaining the Executive’s consent, implement one or more corporate reorganizations for
financial, tax, or related business reasons which do not constitute a Change in Control as such
event is defined in Section 12.2 of this Agreement. The Executive agrees that, so long as any such
reorganization does not constitute a Change in Control, the reorganized Employer shall be deemed
the Employer for all purposes in connection with this Agreement, and without a requirement that
additional consideration be delivered to the Executive in connection with the reorganization.




     4. Principal Occupation. The Executive shall devote his working time to the business
and affairs of the Employer and to the fulfillment of his duties under this Agreement in a diligent
and competent fashion, consistent with industry standards.



          4.1 The Employer acknowledges and agrees that during the Term:




               (a) the Executive may wish to continue, or commence, service as a director and officer (or in
a similar capacity) on the governing body of other business entities whose business is not
competitive with that of the Employer or any of its subsidiaries; and



               (b) the Executive agrees that his service as described in Section 4.1(a) shall be subject to
the approval of the Employer’s Board, so long as the Board’s discretion is not applied
unreasonably.



     Where the Board declines to approve the commencement of the Executive’s service or his
continued service, or the Board withdraws its approval for the continuation of the Executive’s
service as described in Section 4.1(a), the Executive agrees that he will resign from such
position, or withdraw himself from consideration. The Executive and Employer agree that nothing in
this Section 4.1 applies to the Executive’s membership or contribution of his non-working time or
services, in a non-remunerative capacity, to any: charitable or educational organization,
foundation, or association; political organization or campaign; religious group, foundation, or
organization; or non-profit trade, professional, community, or recreational
organization or club, so long as the purpose or aim of any such organization presents no
conflict with the business of the Employer, as reasonably determined by the Board.



          4.2 The Employer acknowledges and agrees that during the Term, the Executive may devote a
portion of his business time to personal investments and outside business commitments,
provided, however that: (a) such activities do not conflict with the business of
Employer, (b) such activities do not interfere, directly or indirectly, with the performance by the
Executive of his obligations under this Agreement, and (c) such activities do not result in a
breach by the Employer of any non-competition or any other similar type of agreement to which the
Employer, or any of its consolidated subsidiaries or any of their respective officers or directors,
may be a party.




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          4.3 No provision of this Agreement shall be construed to prohibit the Executive’s: (a) passive
acquisition, ownership, or trading, including without limitation the Executive’s direct or indirect
ownership, of less than five percent (5%) of the issued and outstanding stock (or comparable bonds,
options, derivatives, negotiable instruments or securities) of a business entity that is directly
or indirectly competitive with the business of the Employer and whose securities are publicly
traded anywhere in the world or registered under the Investment Company Act of 1940, as amended; or
(b) passive ownership of stock, partnership interests, or comparable ownership interests or
securities in any for-profit private business entity that is not directly competitive with the
business of the Employer or any of its subsidiaries. The Employer additionally agrees that nothing
in this Agreement shall operate to prohibit the Executive’s acceptance of a testamentary gift,
bequest or its equivalent, nor the Executive’s retention of any such gift, bequest, or its
equivalent following its delivery so long as the Executive retains the interest(s) solely for
investment purposes.




          4.4 In addition to the foregoing, the Executive may devote up to one-third of his business
time (a) providing services for or on behalf of Flag Luxury Properties, LLC and Flag Leisure Group,
LLC (collectively, the “Flag Services”) and (b) to the investments and activities set forth
on Schedule 4.5. The compensation committee of the Board (the “Compensation Committee”)
will review the amount of time the Executive spends providing Flag Services on a quarterly basis.
If the Compensation Committee determines that the Executive is engaging in Flag Services at a level
whereby he is being compensated by the Employer for time spent on such services, then the
Compensation Committee will require that Executive reduce the level of Flag Services being
performed. The Compensation Committee will also require the recipient of such Flag Services to
reimburse Employer for the compensation attributable to the time spent thereon during any such
quarterly period.




          4.5 Notwithstanding anything contained in this Section 4, the Employer acknowledges and agrees
that the Executive shall be entitled to continue to participate in the investments and activities
set forth on Schedule 4.5 attached hereto.




     5. Location of Employment. Unless the Executive otherwise consents in writing, the
usual place for the performance of his services shall be the Employer’s office located in Las
Vegas, Nevada, or such other location within Nevada, as established by the Employer. The Employer
shall provide the Executive at such office with an executive assistant dedicated to his needs and
with professional skills and experience reasonably satisfactory to the Executive, and
such other staff as the Executive deems reasonably necessary to perform his duties and
responsibilities hereunder; provided, however, the Employer’s obligations hereunder
shall be limited to an annual cost of Three Hundred Thousand Dollars ($300,000).



     6. Base Salary. During the Term, the Employer shall pay or cause to be paid to the
Executive an initial annualized base salary, payable in equal installments during each year of the
Term (the “Base Salary”) equal to Four Hundred Fifty Thousand Dollars ($450,000) (the
“Base Amount”). The Base Amount shall be increased upon each anniversary of the date of
this Agreement by an amount equal to the greater of: (a) five percent (5%) of the Base Amount then
in effect; or (b) the product derived by multiplying: (i) the Base Amount then in effect; by (ii)
the percentage increase in the Consumer Price Index published by the federal Bureau of Labor
Statistics for the New York, New York metropolitan area during the previous twelve (12) full



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calendar months. The Compensation Committee additionally shall review the Executive’s Base Amount
at least annually and the Compensation Committee may increase, but not decrease, the Base Amount in
an amount greater than the increase required by the preceding sentence.



          6.1 The Executive authorizes the Employer to deduct from the Base Salary and any other
consideration payable in cash to the Executive pursuant to this Agreement all tax withholdings, tax
related deductions, or other governmentally imposed charges against income as may be required by
law.




          6.2 The Executive acknowledges that his attendance and participation in executive retreats,
seminars, motivational or instructional programs, and business, corporate, and employee relations
training may be requested by the Employer during the Term. In such event, the Executive agrees that
he in good faith will make reasonable efforts to attend and participate in such events, provided
that the Executive will not be required to attend or participate in more than two such events in
any calendar year.




          6.3 The Executive shall be eligible to accrue the equivalent of six (6) weeks vacation during
each full year of the Term, in accordance with the accrual methodology and vacation day accrual
limitations in the vacation leave policy applied by the Employer to its employees, except
that the Employer will credit the Executive for his full annual accrual at the commencement of each
full year of the Term, i.e., not on a proportional basis during the course of each year of
the Term. The Executive additionally shall be entitled to remain away from work for as many or as
few days as required by the Executive due to the Executive’s bona fide illness, subject to the
provisions of Section 13 of this Agreement. The Executive may observe any legal holidays, other
holidays recognized by the Employer, and religious holidays that the Executive deems appropriate,
in the sound exercise of his business judgment.




     7. Bonus and Option Grants.



          7.1 The Executive shall be eligible to receive an annual discretionary bonus payable in any
combination of cash, stock or restricted stock, stock options, and/or other consideration
beneficial to the Executive during the continuance of the Executive’s employment hereunder (the
“Bonus”), after and as determined by the Compensation Committee. The
Compensation Committee’s decision to cause the Employer to make or to not make a discretionary
bonus payment to the Executive in any year (including, without limitation, the consideration to be
received or methodology applied by the Compensation Committee to a discretionary bonus eligibility
determination in any year) shall have no bearing on the Executive’s eligibility to earn a bonus in
any succeeding year, nor shall the amount, form, or payment timing of any such discretionary bonus
in any year have any bearing on any aspect of a discretionary bonus determination in any subsequent
year.




          7.2 Simultaneous with the execution of this Agreement, the Employer shall grant to the
Executive a stock option to purchase up to 400,000 shares of the common stock, par value $.01 per
share, of the Employer (the “Executive Stock Options”). The exercise price for the
Executive Stock Options shall be $20.00 per share. The Executive Stock Options shall be approved
by the Compensation Committee (or the Board) in accordance with Rule 16b-3 promulgated under the
Exchange Act (as defined in Section 12.2 below), and vest ratably over




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the five year period
following the Effective Date (1/5th on each anniversary of the Effective Date). The
Executive Stock Options shall contain cashless exercise provisions permitting payment of any
portion of the exercise price (x) pursuant to broker-assisted “cashless” exercise procedures, (y)
by the withholding of shares issuable upon exercise of the Options and/or (z) by the delivery of
shares held by the Executive to the extent held for such period of time, if any, required to avoid
a charge to the earnings of the Employer for financial accounting purposes, and otherwise be
governed by the provisions of a stock option agreement substantially in the same form as is used
for option grants to its other senior executives. As soon as practicable after the Effective Date,
Employer shall register with the SEC the shares of Common Stock issuable upon exercise of the
Executive Stock Options on a Form S-8 registration statement (or any successor registration form
then in effect).




     8. Expenses.



          8.1 The Employer shall reimburse the Executive for all reasonable expenses actually incurred
or paid by the Executive during the Term in the performance of the Executive’s services. The
Employer shall make reimbursement within a reasonable time following the Executive’s presentation
of expense statements, vouchers, receipts, or such other supporting information as the Employer
reasonably may require from the Executive. The Executive acknowledges that the Employer’s policies
regarding the documentation of expenses for which reimbursement is sought may change from time to
time, and the Executive agrees that he will comply with the Employer’s reasonable documentation
requirements. In no event shall expenses be reimbursed later than the end of the first quarter of
the calendar year immediately after the calendar year in which the expenses were incurred by the
Executive.




          8.2 The Executive at all times shall be entitled to: travel in first class seating (or its
equivalent) when the Executive travels by air in connection with the Employer’s business; to hotel
accommodations while outside New York on business at a full-service hotel offering a hotel room
with sufficient space, furnishings, and technological facilities and appointments for the
Executive’s comfortable and productive work in the room; and private car service when required to
travel in connection with the Employer’s business, attend business meetings, or work or attend
functions outside of normal business hours or on weekends or holidays.




          8.3 In the event that the Employer’s business requirements cause or require the Executive to
cancel personal vacation or travel plans for which the Executive or any member of his family is
unable to obtain a full refund of any deposit or comparable amount expended by the Executive or any
such family member in advance, the Employer agrees that it will reimburse to the Executive the full
amount not refunded or refundable to the Executive or any such family member. In no event shall
such amounts be reimbursed later than the end of the first quarter of the calendar year immediately
after the calendar year in which the amounts were incurred by Executive or such family member.




          8.4 Subject to the Executive providing the Employer with advanced written notice, the Employer
shall pay all fees and expenses associated with the Executive’s application for any license or
approval required by the Nevada Gaming Authorities and other governmental authorities from whom
approval, if any, is required under the laws of the State of Nevada and/or in any other state or
jurisdiction in which the Employer intends to conduct gaming operations.




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Alternatively, the
Executive may seek reimbursement from the Employer for such expenses pursuant to the terms of
Section 8.1.




     9. Benefits.



          9.1 During the Term, the Executive shall be eligible to participate in any pension, profit
sharing, incentive stock option, non qualified stock option, deferred share, performance share and
performance unit, stock purchase, stock grant program or plan, and retirement savings program or
plan established by the Employer or any of its subsidiaries for which the Executive provides
services hereunder (“Participating Subsidiaries”), including, without limitation, any such
program or plan offered by the Employer or Participating Subsidiaries to its executive or
non-executive employees. The Executive additionally shall be eligible to participate in any group
life insurance, hospitalization, medical, health and accident, dental, disability, or similar plan
or program made available by the Employer or Participating Subsidiaries to its executive or
non-executive employees. The Executive acknowledges that his participation in any benefit plan
described in this Section 9.1 may require, where required from other senior executives of the
Employer or Participating Subsidiaries, the Executive’s co-payment of a periodic premium as a
deduction from the Base Salary payable to him. The Executive additionally acknowledges that the
Executive’s actual ability to participate in any program, plan, or other benefit opportunity in
which the Executive otherwise is eligible to participate ultimately may be determined and governed
by the terms and conditions of a third-party provider’s plan or program, and the Executive affirms
that any third-party’s decision denying the Executive’s participation in a particular program or
plan, the provision of coverage or a benefit in respect of a particular circumstance or expense, or
a comparable decision adversely affecting the Executive shall not constitute a breach of this
Agreement by the Employer, so long as the Employer does not offer, designate, or select a program
or plan with the actual intention of excluding the Executive’s eligibility or participation in the
opportunity.




          9.2 The Executive acknowledges that the Employer may, as it deems appropriate, seek, obtain,
and maintain during all or part of the Term insurance connected with the life of the Executive, and
for the benefit of the Employer. In the event that the Employer elects to do so, the Executive
agrees: to provide any medical information required by the insurer issuing such coverage; to submit
no more frequently than semi-annually to any medical
examination required by the insurer in connection with the granting or renewal of such
coverage; and to otherwise cooperate reasonably with the Employer’s attempts to obtain such
coverage. Any insurer’s rejection of an application submitted by the Employer connected with this
Section 9.2 in no event shall constitute a breach of this Agreement by the Executive, and the
Employer shall not request nor in another manner seek any information from the Executive, the
insurer, or any other person(s) connected with the rejection.




          9.3 The Employer agrees that in the event of the Executive’s death during the Term, the
Employer will pay to the Executive’s estate the following, which shall be distributed in accordance
with the Executive’s will or testamentary plan, as directed by any court having jurisdiction over
such estate, or as directed by any duly appointed administrator or executor of the Executive’s
estate:




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               (a) all earned but unpaid Base Salary at the time of the Executive’s death, plus an amount
equal to three (3) times the Base Salary in effect at the time of the Executive’s death;



               (b) the full costs relating to the continuation of any group health, medical, dental, and life
insurance program or plan provided through the Employer in which the Executive participated at the
time of his death, and through which coverage was provided to any dependent(s) of the Executive at
the time of the Executive’s death, for a period of three (3) years following his death, without
regard to the availability or expiration of any continuation option or feature provided by the
program(s) or plan(s), or as otherwise provided to a lesser extent by applicable law at the time of
the Executive’s death;



               (c) the cash portion of all declared but unpaid Bonus through the time of the Executive’s
death;



               (d) all reimbursable business expenses incurred by the Executive through the time of his
death; and



               (e) the Employer additionally shall cause any stock options, restricted stock or other
equity-based instruments (collectively “Equity Awards”) that previously were issued by the
Employer or any of the Participating Subsidiaries to the Executive to vest fully and/or cause any
Equity Awards that were approved for issuance by the Employer or any of the Participating
Subsidiaries to the Executive and not so issued through the time of the Executive’s death to be
issued and fully vested. The Employer shall take all action necessary to cause the assignment or
transfer of such Equity Awards as directed by the Executive’s will or testamentary plan, or as
directed by any duly appointed administrator or executor of the Executive’s estate.



     The Executive acknowledges that the Employer at its option may, in the sole exercise of its
discretion, acquire and maintain a current whole life or term insurance policy (“Policy”)
on the life of the Executive from a reputable carrier which provides substantially equivalent
benefits on behalf of the Executive in respect of the amounts provided in Sections 9.3(a) and (b).
Such Policy, if acquired and maintained, is intended to meet the Employer’s obligations to the
Executive pursuant to Sections 9.3(a) and (b). The Executive shall have no preferred claim on, or
any beneficial ownership interest in, the Policy which will be subject to the claims of the
Employer’s general creditors under federal and state law in the event of insolvency. While the
Executive is an employee of the Employer, the Employer shall be the named beneficiary of the Policy
and the Policy shall not be assignable. However, upon termination without Cause, Constructive
Termination without Cause or termination following a Change in Control (all as defined in Section
12 below), the Employer shall assign the Policy to the Executive within thirty (30) days following
his termination of employment and, upon the assignment, the Executive shall have all rights with
respect to the Policy. Where the Employer elects to seek such insurance coverage, the Executive
agrees to provide any medical information reasonably required by the insurer issuing such coverage;
to submit to any medical examination reasonably required by the insurer in connection with the
granting or renewal of such coverage; and to otherwise cooperate reasonably with the Employer’s
attempts to obtain such coverage. Any insurer’s rejection of an application submitted by the
Employer in connection with this Section 9.3 in no event shall relieve the Employer of any of its
obligations hereunder.



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     10. Indemnification. The Employer shall indemnify the Executive against all losses,
claims, expenses, or other liabilities of any nature arising by reason of the fact that he: (a) is
or was a director, officer, employee, or agent of the Employer or any of its subsidiaries or
affiliates; or (b) while a director, officer, employee or agent of the Employer or any of its
subsidiaries or affiliates, is or was serving at the request of the Employer as a director,
officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another
corporation, partnership, joint venture, trust, employee benefit plan or other entity, in each case
to the fullest extent permitted under the Delaware General Corporation Law, as the same exists or
may hereafter be amended. Without limiting the generality of the foregoing, the Executive shall be
entitled in connection with his employment and in connection with his services as an officer and/or
director of the Employer to the benefit of the provisions relating to indemnification and
advancement of defense costs and expenses contained in the bylaws and certificate of incorporation
of the Employer, each in effect as of the Effective Date and thereafter as may be amended from time
to time (not including any amendments or additions that limit or narrow, but including any that add
to or broaden, the protection afforded to the Executive), to the fullest extent permitted by
applicable law. The Employer shall advance to the Executive all costs of investigation or defense
incurred by the Executive in connection with any pending or threatened claim for which the
Executive may be entitled to indemnification hereunder, provided that the Executive shall agree to
return to the Employer any such advanced amounts, without interest, if it is determined in a final,
non-appealable judgment by a Court of competent jurisdiction that the Executive is not entitled to
indemnification by the Employer for losses incurred in connection with such claim. The
indemnification obligations of the Employer shall survive from the Effective Date of this Agreement
and continue until three (3) months after the expiration of any applicable statute of limitations
with respect to any claim made against the Executive for which the Executive is or may be entitled
to indemnification (the “Survival Period”), and shall survive after the Survival Period
with respect to any indemnification claim as to which the Employer has received notice on or prior
to the end of the Survival Period. The Employer’s belief regarding a statute of limitations
applicable to a claim, any position taken by the Employer in response to a claim, or the
determination of any judicial, quasi-judicial, or arbitral body in connection with a claim and any
statute of limitations applicable to a claim(s) shall in no event relieve the Employer from its
obligation to indemnify the Executive. The Employer shall prepay in full, and maintain fully
during the Survival Period for the benefit of the Executive, on an “occurrence” basis, a
directors and officers errors and omissions insurance policy, or a similar insurance policy(ies),
providing coverage from a financially reputable carrier, in form and substance reasonably
acceptable to the Executive. Anything in this Agreement to the contrary notwithstanding, this
Section 10 shall survive the termination of this Agreement for any reason.



     11. Confidential Information. The Executive acknowledges that his employment will
fully familiarize the Executive with the trade secrets and confidential and proprietary information
of the Employer (the “Confidential Information”). Examples of the Employer’s Confidential
Information include, without limitation, information regarding the Employer’s costs, profits,
markets, sales, products, key personnel, operational methods, technical processes, business
strategies, and other information which the Employer engages in efforts to protect from disclosure
or discovery by its competitors, actual and prospective clients, and other third parties. The
Executive further acknowledges that the unintentional or intentional disclosure of the Employer’s
Confidential Information would have a material adverse effect on the operations and



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development of
the Employer’s business. The Executive therefore covenants and agrees as set forth below:



          11.1 The Executive will during the Term and for one (1) year thereafter, keep secret all
Confidential Information, and will not intentionally disclose Confidential Information to anyone
outside of the Employer and its subsidiaries and affiliates and their respective advisors,
directors, officers, employees, agents, consultants, financing sources and other representatives,
other than in connection with the Executive’s performance of his duties under this Agreement except
with the Employer’s consent, provided that: (i) the Executive shall have no such obligation to the
extent Confidential Information is or becomes publicly known, other than as a result of the
Executive’s breach of his obligations hereunder; and (ii) the Executive may, after giving prior
notice to the Employer to the extent practicable under the circumstances, disclose such matters to
the extent required by applicable laws or governmental regulations or judicial or regulatory
process; provided, however, that if the Executive is required (by oral questions, interrogatories,
requests for information or documents, subpoena, civil investigative demand or similar process) to
disclose any Confidential Information pursuant to the foregoing clause (ii), he agrees to use
reasonable efforts to provide the Employer with prompt notice of each such request so that the
Employer may seek an appropriate protective order or waive compliance by the Executive with the
provisions of this Agreement or both; provided, further, that if, absent the entry
of a protective order or the receipt of a waiver under this Agreement, the Executive is, in the
opinion of his counsel, legally compelled to disclose such Confidential Information under pain of
liability for contempt or other censure or penalty (civil or criminal), the Executive may disclose
such information to the persons and to the extent required without liability under this Agreement.
In such event, the Executive shall give the Employer written notice of such disclosure, in
reasonable detail, as soon as possible, but in any event not later than concurrently with making
such disclosure, and the Executive shall exercise his reasonable commercial efforts to obtain
reliable assurances that confidential treatment will be accorded any such Confidential Information
so disclosed.




          11.2 The Executive will, at his option: (i) deliver promptly to the Employer at the
termination of his employment by the Employer, or at any other time the Employer may so
request, all memoranda, notes, records, reports, and other documents (including, without
limitation, drafts, whole or partial copies, and information stored or maintained electronically,
magnetically, in a computer, or through any other medium invented in the future) relating to the
Employer’s business, which he obtained while employed by, or otherwise serving or acting on behalf
of, the Employer and which he may then possess or have under his control (the “Records”);
or (ii) in lieu of subclause (i) above, the Executive shall destroy all of the Records, return all
tangible property of the Employer containing any Records which is possessed by the Executive, and
shall deliver to the Employer a signed affirmation to that effect.




          11.3 The Executive’s duties may require that he enter into confidentiality agreements,
nondisclosure agreements, or comparable agreements with third parties, and a third party may
require the Executive’s entry into such an agreement(s) personally and on behalf of the Employer.
In any such event, the Executive agrees to engage in reasonable efforts to perform any such
agreement.




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          11.4 During the Term, the Employer may adopt or implement additional Confidential Information
policies, procedures, or requirements in connection with the Employer’s business, and any such
policies, procedures, or requirements will supplement this Section 11, without additional
consideration from the Employer to the Executive, except to the extent, if any, that they conflict
with this Agreement, in which event this Agreement shall control and govern.




     12. Termination. The following definitions shall apply to the use of such terms in
this Agreement:



          12.1 “Cause” means:




               (a) the Executive is convicted of, or enters a no contest plea to (i) a felony involving moral
turpitude, or (ii) a misdemeanor involving moral turpitude which would render the Executive unable
to perform his duties set forth in this Agreement;



               (b) the Executive engages in conduct that constitutes willful gross neglect or willful gross
misconduct in carrying out his duties under this Agreement, resulting in material economic harm to
the Employer;



               (c) the Executive’s disloyalty, willful non-performance or willful misconduct or neglect
(whether the neglect arises from an act(s) or failure(s) to act) of his duties under this Agreement
after: (i) written notice to the Executive from either the Board or the Chairman of the Board, with
reasonable specification of the matter(s) giving rise to the notice, including notice of the
Employer’s intent to terminate the Executive’s employment due to the matter(s) described in such
notice, and further stating the Board’s or the Chairman of the Board’s reasoned conclusion that it
is impossible for the Executive to cure the matter(s) giving rise to the notice within thirty (30)
days from the notice; (ii) the opportunity for the Executive to respond in writing to the written
notice, with the assistance of any counsel deemed appropriate by the Executive (but at the
Executive’s expense) not sooner than ten (10) regular business days after delivery of the written
notice; (iii) the opportunity for the Executive to be heard and to orally present his position,
with the assistance of any counsel deemed appropriate by the Executive (but
at the Executive’s expense), during a confidential meeting of the entire Board within ten (10)
business days after the Executive’s delivery to the Employer of the Executive’s written response to
the written notice; and (iv) a vote of not less than 662/3% of all members of
the Board (not including the Executive’s vote), finding that the matter(s) specified in the written
notice constitute “Cause” for purposes of this Agreement;



               (d) any finding by the SEC pertaining to the Executive which, in the opinion of independent
counsel selected by the Employer, could reasonably be expected to impair or impede the Employer’s
ability to register, list, or otherwise offer its stock to the public or to maintain itself as a
publicly-traded company; or



               (e) the Gaming Authorities of the State of Nevada or any other state or jurisdiction in which
the Employer shall conduct gaming operations shall determine or indicate in writing to the Employer
that the Executive’s continued employment as an executive would



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adversely impact the Employer’s
licensing status or gaming operations in any jurisdiction in which it is seeking to be licensed or
is so licensed.




     For purposes of this Section 12.1, no act, or failure to act, by the Executive shall be
“willful” unless committed without a reasonable belief that the act or omission was in the best
interest of the Employer.



          12.2 A “Change in Control” shall mean the occurrence of any of the following, as
supplemented by the defined terms in Section 12.2(g) of this Agreement:




               (a) any “person,” or “group” of related persons for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) (other than the Principal
or a Related Party of the Principal), shall become, directly or indirectly, a “beneficial owner,”
as such term is used in Rule 13d-3 promulgated under the Exchange Act, of Voting Stock representing
more than thirty-five percent (35%) of the total voting power of all Voting Stock of the Employer
on a fully-diluted basis; provided, however, the acquisition of beneficial
ownership of more than thirty-five percent (35%) of the total voting power of all Voting Stock of
the Employer on a fully-diluted basis in connection with a primary issuance of Voting Stock by the
Employer that has been approved by the Board shall not constitute a Change in Control for purposes
of this Agreement;



               (b) all or substantially all of the assets or business of the Employer are disposed of through
the consummation of a merger, consolidation, sale of assets or other transaction (unless the
shareholders of the Employer immediately prior to such merger, consolidation or other transaction
beneficially own, directly or indirectly, Voting Stock representing fifty percent (50%) or more of
the voting power of the outstanding Voting Stock of the entity or entities, if any, that succeed to
the assets or business of the Employer, determined on a fully-diluted basis);



               (c) the Employer combines with another entity and is the surviving entity but, immediately
after the combination, the shareholders of the Employer immediately prior to the combination
beneficially own, directly or indirectly, less than fifty percent (50%) of
the voting power of the outstanding Voting Stock of the combined entity, determined on a
fully-diluted basis;



               (d) the majority of the Board consists of individuals other than “Incumbent Directors,” which
term means members of the Board as of the Effective Date, except that any person who becomes a
director subsequent to such date whose election or nomination was supported by two-thirds of the
directors who then comprise the Incumbent Directors shall be considered an Incumbent Director;



               (e) there shall be consummated any consolidation or merger of the Employer in which the
Employer is not the continuing or surviving entity or pursuant to which the common stock of the
Employer would be converted into cash, securities, or other property, other than a merger or
consolidation of the Employer in which the shareholders of the Employer immediately prior to the
merger or consolidation beneficially own, directly or indirectly, fifty



11









 




percent (50%) or more of
the voting power of the outstanding Voting Stock of the combined entity, determined on a
fully-diluted basis; or




               (f) the approval of the shareholders of the Employer or the Board of any plan or proposal for
the liquidation or dissolution of the Employer and the effectuation of any such liquidation or
dissolution of the Employer.



               (g) For purposes of this Section 12.2, (i) “Voting Stock” means, with respect to any person,
equity securities of any class or classes in such person, entitling the holders thereof to vote
under ordinary circumstances in the election of members of the board of directors or other
governing body of such person; (ii) “Principal” means Robert F.X. Sillerman; and (iii) “Related
Party” means, with respect to the Principal, (x) any spouse or immediate family member of the
Principal, (y) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or persons beneficially holding a fifty-one percent (51%) or more
controlling interest of which consist of the Principal and/or such other persons referred to in the
immediately preceding clause (x) or (z) or the trustees of any trust referred to in the immediately
preceding clause (y).



          12.3 “Constructive Termination without Cause” means the termination of the Executive’s
employment at his initiative after, without the Executive’s prior written consent, one or more of
the following events:




               (a) a reduction in the Base Salary (unless such reduction is part of an overall and
nondiscriminatory reduction by the Employer to the base salaries of all of its senior executives
and such reduction is proportional in amount to the reductions suffered by all of such other senior
executives), or the uncured failure by the Employer to fulfill its obligations under this Agreement
within thirty (30) days after written notice thereof from the Executive to the Employer;



               (b) the failure to elect the Executive to any of the positions described in Section 3.1;



               (c) any material diminution or adverse change in the duties, authority, responsibilities, or
positions of the Executive; or any attempt to remove the Executive from any
executive management position in a manner contrary to this Agreement or the Employer’s then
effective certificate of incorporation or by-laws;



               (d) the assignment to the Executive of duties or responsibilities which are materially
inconsistent or different from those customarily performed by a person holding the executive
management positions to be held by the Executive pursuant to Section 3.1;



               (e) the failure of the Employer to obtain the assumption in writing of its obligation to
perform this Agreement by any successor to all or substantially all of the assets or business of
the Employer after a merger, consolidation, sale, or similar transaction, provided that such
transaction does not constitute a “Change in Control”;



               (f) the commencement by or against the Employer or any of its material subsidiaries of a
voluntary or involuntary proceeding seeking liquidation, reorganization




12












 




or other relief under any bankruptcy, insolvency or other similar law now or
hereafter in effect; or seeking the appointment of a trustee, receiver, liquidator,
or custodian of it or any substantial part of its property, and consent by the Employer or
any such material subsidiary to any such relief, provided that such relief does not constitute a
“Change in Control”; or




               (g) the Executive agrees that each of the following must occur before the Executive may assert
the existence of a Constructive Termination without Cause (other than with respect to Section
12.3(e)): (i) the Executive must provide written notice to the Board or the Chairman of the Board,
with reasonable specification of the matter(s) giving rise to the notice; (ii) the Employer must
have the opportunity, through the Chairman or a Board member designated by him, to respond in
writing to the written notice, with the assistance of any counsel deemed appropriate by the
Employer (at its expense) not sooner than ten (10) business days after delivery of the written
notice; and (iii) the Board must have the opportunity, acting collectively or through a designee,
to investigate, inquire, and otherwise inform itself of the assertion, followed by a hearing before
the Board during which the Executive is allowed the opportunity to orally present his position,
with the assistance of any counsel deemed appropriate by the Executive (but at the Executive’s
expense), during a confidential meeting of the entire Board, and the Employer is allowed to
respond, within ten (10) business days after the Employer delivers to the Executive its written
response to the Executive’s written notice.



          12.4 Termination by the Employer for Cause. If the Employer terminates this Agreement
for Cause, the Executive shall be paid (x) all earned but unpaid Base Salary through the date of
termination, (y) the cash portion of all declared but unpaid Bonus through the date of termination
and (z) all reimbursable business expenses incurred by the Executive through the date of
termination. In the event the Employer terminates the Executive’s employment for Cause, the
Executive shall have no further obligation or liability to the Employer in connection with his
performance of this Agreement (except the continuing obligations specified in Sections 11 and 14
hereof).




          12.5 Termination without Cause or Constructive Termination without Cause. In the event
the Executive’s employment is terminated without Cause, other than due to disability or death,
there is a Constructive Termination without Cause, the Executive shall be entitled to be paid by
the Employer:




               (a) the Base Salary through the date of termination;



               (b) the cash portion of all declared but unpaid Bonus through the date of termination;



               (c) all reimbursable business expenses incurred by the Executive through the date of
termination;



               (d) the Employer additionally shall cause any Equity Awards that previously were issued by the
Employer or any of the Participating Subsidiaries to the Executive to vest fully and/or cause any
Equity Awards that were approved for issuance by the Employer or any of the Participating
Subsidiaries to the Executive and not so issued through the date of termination to be issued and
fully vested;



13









 





               (e) the cash equivalent of the Base Salary, at the rate in effect on the date of termination
(or in the event a Base Salary reduction is the basis for a Constructive Termination without Cause,
the Base Salary in effect immediately prior to such a reduction) for the lesser of (i) three (3)
years or (ii) the remaining portion of the Employment Agreement Term following such termination
(the “Salary Payment”), with the pro rata equivalent of such amount payable from the
Employer to the Executive on the Employer’s ordinary paydays, but not less frequently than once per
month (or such later date as may be necessary to avoid any adverse tax consequences under Section
409A of the Internal Revenue Code as described in Section 12.8 below);



               (f) for each partial or full year remaining in the then unexpired Employment Agreement Term, a
cash bonus in full and complete satisfaction of any form of cash bonus or cash incentive
compensation amounts equal to the average of all Bonuses paid by the Employer to the Executive
during the Term prior to termination, provided, however, that if no Bonus has been paid prior to
termination, the amount shall be $100,000 (the “Base Bonus Amount”). The Base Bonus Amount
shall be payable in full on each anniversary of this Agreement for the remainder of the Employment
Agreement Term; provided that, the Employer shall pay to him the present value of the aggregate
Base Bonus Amount in a lump sum within thirty (30) days of the effective date of such termination
(using as the discount rate of seventy-five percent of the prime rate (as published by The Wall
Street Journal) for the first business day of the month in which such termination occurs) (or such
later date as may be necessary to avoid any adverse tax consequences under Section 409A of the
Internal Revenue Code as described in Section 12.8 below);



               (g) all benefits provided in Section 9 for the lesser of (i) three (3) years or (ii) the
remaining portion of the Employment Agreement Term following such termination (except that if
providing any such benefit under the terms of a plan is not permissible under the terms of the plan
or would cause an adverse tax effect, the Employer shall reimburse the Executive’s expenses
incurred in obtaining similar coverage on his own with such reimbursement being paid no later than
the end of the calendar year such expenses are incurred by Executive); and



               (h) the Executive shall have no further obligation or liability to the Employer in connection
with his performance of this Agreement (except the continuing obligations specified in Section 11
hereof).



          12.6 Additional Rights Following a Change in Control. In the event of a Change in
Control, the Executive shall be entitled: (a) at the Executive’s option, to accelerate this
Agreement’s Expiration Date to the date of the actual closing of any transaction which constitutes
a Change in Control (the “Change in Control Closing Date”) and (b) to all payments and
benefits provided in Section 12.5 in respect of a Constructive Termination without Cause. The
payments and benefits provided under Section 12.5, together with a bona fide, good faith estimate
of any amounts that may be payable pursuant to Section 12.5, (i) shall be paid to the Executive in
a lump sum on or prior to the Change in Control Closing Date (or such later date as may be
necessary to avoid any adverse tax consequences under Section 409A of the Internal Revenue Code as
described in Section 12.8 below), without any discount or reduction for the present value of any
monetary amount(s) payable; and (ii) in the case of non-monetary





14









 







consideration or stock options or
comparable consideration, delivered to the Executive on or prior to the Change in Control Closing
Date. Upon a Change in Control, all granted but unvested shares of restricted stock and all options
to purchase the Employer’s capital stock or similar instruments granted to or held, directly or
indirectly, by the Executive shall vest fully and immediately in the Executive and all options and
similar securities held, directly or indirectly, by the Executive shall remain exercisable for the
full maximum term of the original option grant or ten (10) years from the Change in Control Closing
Date, whichever is greater. In addition, Section 14 of this Agreement immediately, and without
additional action, shall be deemed and rendered null, void, and without any effect as against the
Executive upon the actual closing of any transaction which constitutes a Change in Control. The
Executive shall forfeit any rights granted pursuant to this Section 12.6 if the Executive, in his
sole and absolute discretion and without any obligation whatsoever to do so, accepts in writing a
written offer to remain with the surviving company in an executive position with equivalent duties,
authority, and responsibilities as the Executive held immediately prior to the transaction
resulting in the Change in Control.




          12.7 Payment Following a Change in Control.




               (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by the Employer to or for the benefit of the Executive,
whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or
otherwise in connection with or arising out of, the Executive’s employment with the Employer or a
change in ownership or effective control of the Employer or a substantial portion of its assets (a
“Payment”), would be nondeductible by the Employer for Federal income tax purposes under
the rules set forth in Section 280G of the Internal Revenue Code of 1986, as amended (the
“Code”), as in effect on the Effective Date (the “Effective Date Section 280G
Rules”), then the aggregate present value of amounts payable or distributable to or for the
benefit of the Executive pursuant to this Agreement (such payments or distributions pursuant to
this Agreement are hereinafter referred to as “Agreement Payments”) shall be reduced to the
Reduced Amount. The “Reduced Amount” shall be an amount expressed in present value which maximizes
the aggregate present value of Agreement Payments and that would not cause any Payment to be
nondeductible by the Employer under the Effective Date Section 280G Rules. Anything to the
contrary notwithstanding, if the Reduced Amount is zero and it is determined further that any
Payment which is not an Agreement Payment under the Effective Date Section 280G Rules would
nevertheless be nondeductible by the Employer under the Effective Date Section 280G Rules, then the
aggregate present value of Payments which are not Agreement Payments shall also be reduced (but not
below zero) to an amount expressed in
present value which maximizes the aggregate present value of Payments without causing any
Payment to be nondeductible by the Employer under the Effective Date Section 280G Rules. For
purposes of this Section 12.7(a), present value shall be determined in accordance with Section
280G(d)(4) of the Code and the Treasury Regulations promulgated thereunder, under the Effective
Date Section 280G Rules. The Executive shall determine which and how much of the Payments shall be
eliminated or reduced consistent with the requirements of this Section 12.7(a), provided that, if
the Executive does not make such determination within ten business days of the receipt of the
calculations made by the Accounting Firm (as defined below), the Employer shall elect which and how
much of the Payments shall be eliminated or reduced consistent with the requirements of this
Section 12.7(a) and shall notify the Executive promptly of such election. Within five business
days thereafter, or at such later time as such amounts otherwise would be



15









 




payable under this
Agreement, the Employer shall pay to or distribute to or for the benefit of the Executive such
amounts as are then due to the Executive under this Agreement.




               (b) If after any reduction pursuant to paragraph (a) of this Section 12.7, it shall be
determined that any Payment would be subject to the excise tax imposed by Section 4999 of the Code
as in effect at the time such Payment is to be made, or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Employer
shall make a payment to the Executive (a “Gross-Up Payment”) in an amount such that after
payment by the Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up Payment,
the Executive retains (or has had paid to the Internal Revenue Service on his behalf) an amount of
the Gross-Up Payment equal to the sum of (i) the Excise Tax imposed upon the Payments and (ii) the
product of any deductions disallowed because of the inclusion of the Gross-Up Payment in the
Executive’s adjusted gross income and the highest applicable marginal rate of federal income
taxation for the calendar year in which the Gross-Up Payment is to be made. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed to (x) pay federal
income taxes at the highest marginal rates of federal income taxation for the calendar year in
which the Gross-Up Payment is to be made, and (y) pay applicable state and local income taxes at
the highest marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be
made, net of the maximum reduction in federal income taxes which could be obtained from deduction
of such state and local taxes.



               (c) Any initial determinations required pursuant to this Agreement shall be made at the
Employer’s expense by the Employer’s regular outside auditors (the “Accounting Firm”). The
Accounting Firm shall provide its determination (the “Determination”), together with
detailed supporting calculations and documentation, to the Employer and the Executive within ten
days of the Termination Date, if applicable, or promptly upon request by the Employer or by the
Executive (provided the Executive reasonably believes that any of the Payments may be subject to
the Excise Tax) and if the Accounting Firm determines that there is a Reduced Amount or that no
Excise Tax is payable by the Executive with respect to a Payment or Payments, it shall furnish the
Executive with an opinion reasonably acceptable to the Executive that supports its
Determination[s]. Within ten days of the delivery of the Determination to the Executive, the
Executive shall have the right to dispute the Determination (the “Dispute”). The Reduced
Amount, if any, and the Gross-Up Payment, if any, as determined pursuant to this Section 12.7(b)
shall be paid by the Employer to the Executive, within ten days of the receipt of the Accounting
Firm’s determination notwithstanding the existence of any
Dispute, or in the case of the Reduced Amount, such later dates as the Payments comprising the
Reduced Amounts otherwise would have been payable pursuant to this Agreement. If there is no
Dispute, the Determination shall be binding, final and conclusive upon the Employer and the
Executive subject to the application of clause (iii) below. The Employer and the Executive shall
resolve any Dispute in accordance with the terms of this Agreement. Notwithstanding the foregoing,
in no event shall payment of the Gross-Up Payment occur later than the end of the Executive’s
taxable year following the Executive’s taxable year in which the Executive pays the taxes giving
rise to the Gross-Up Payment.



               (d) As a result of the uncertainty in the application of Sections 4999 and 280G of the Code,
the Employer and the Executive acknowledge that it is possible that a



16









 




Gross-Up Payment (or a
portion thereof) will be paid that should not have been paid (an “Excess Payment”) or that
either a reduction in the Payments to the Reduced Amount will be made that should not have been
made or that a Gross-Up Payment (or a portion thereof) that should have been paid will not have
been paid (in each case an “Underpayment”). An Underpayment shall be deemed to have
occurred (i) upon notice (formal or informal) to the Executive from any governmental taxing
authority that the Executive’s tax liability (whether in respect of the Executive’s current taxable
year or in respect of any prior taxable year) may be increased by reason of the imposition of the
Excise Tax on a Payment or Payments with respect to which the Employer has failed to make a
sufficient Gross-Up Payment, (ii) upon a determination by a court, (iii) by reason of determination
by the Employer (which shall include the position taken by the Employer, together with its
consolidated group, on its federal income tax return) or (iv) upon the resolution of the Dispute to
the Executive’s satisfaction. If an Underpayment occurs, the Executive shall promptly notify the
Employer and the Employer shall promptly, but in any event, at least five days prior to the date on
which the applicable government taxing authority has requested payment, pay to the Executive an
additional Gross-Up Payment equal to the amount of the Underpayment attributable to an underpayment
of the Gross-Up Payment plus any interest and penalties (other than interest and penalties imposed
by reason of the Executive’s failure to file timely a tax return or pay taxes shown to be due on
the Executive’s return) imposed on the Underpayment, and pay to the Executive any Underpayment that
is attributable to any reduction in Payments that was not required pursuant to Section 12.7(a)
hereto. An Excess Payment shall be deemed to have occurred upon a “Final Determination” (as
hereinafter defined) that the Excise Tax shall not be imposed upon a Payment or Payments (or
portion thereof) with respect to which the Executive had previously received a Gross-Up Payment. A
“Final Determination” shall be deemed to have occurred when the Executive has received from the
applicable government taxing authority a refund of taxes or other reduction in the Executive’s tax
liability by reason of the Excise Payment and upon either (x) the date a determination is made by,
or an agreement is entered into with, the applicable governmental taxing authority which finally
and conclusively binds the Executive and such taxing authority, or in the event that a claim is
brought before a court of competent jurisdiction, the date upon which a final determination has
been made by such court and either all appeals have been taken and finally resolved or the time for
all appeals has expired or (y) the statute of limitations with respect to the Executive’s
applicable tax return has expired. If an Excess Payment is determined to have been made, the
Executive shall pay to the Employer on demand (but not less than ten days after the determination
of such Excess Payment and written notice has been delivered to the Executive) the amount of the
Excess Payment. The Employer’s obligation to pay the Executive an Underpayment, and the
Executive’s obligation to pay the Employer an Excess Payment, shall
expire 30 days following the expiration of the applicable statute of limitations with respect
to the Parachute Payment.




               (e) Notwithstanding anything contained in this Agreement to the contrary, in the event that,
according to the Determination, an Excise Tax will be imposed on any Payment or Payments, the
Employer shall pay to the applicable government taxing authorities as Excise Tax withholding, the
amount of the Excise Tax that the Employer has actually withheld from the Payment or Payments or
the Gross Up Payment.



          12.8 Impact of Section 409A. Notwithstanding the foregoing, if any amount payable to
the Executive under this Agreement on account of the Executive’s termination of employment
constitutes a “deferral of compensation” within the meaning of United States





17









 







Treasury Regulation
(“Treasury Regulation”) Section 1.409A-1(b) (“Deferred Compensation”), the payment
of such Deferred Compensation shall commence no later than 90 days after Executive incurs a
Separation from Service (as defined below); provided, however, if on the date of the Executive’s
Separation from Service (as defined below), the Executive is a “specified employee” within the
meaning of Section 409A of the Code, any Deferred Compensation payable under this Agreement on
account of the Executive’s Separation from Service and within the first six (6) months following
the Executive’s Separation from Service, shall instead be paid in a lump sum on the first business
day of the seventh (7th) month following the Executive’s Separation from Service. Each payment of
Deferred Compensation shall be considered a separate payment for purposes of Treasury Regulation
Sections 1.409A-1(b)(4) and 1.409A-2(b)(2).  For purposes of this Agreement, “Separation from
Service” shall have the meaning set forth in Treasury Regulation Section 1.409A-1(h), and a
Separation from Service will be deemed to occur if the Employer and the Executive reasonably
anticipate that Executive shall perform no further services for the Employer (whether an employee
or an independent contractor) or that the level of bona fide services Executive will perform in the
future (whether as an employee or an independent contractor) will permanently decrease to no more
than 49 percent of the average level of bona fide services performed (whether as an employee or
independent contractor) over the immediately preceding 36-month period.




          12.9 Voluntary Termination. In the event of the termination of this Agreement at the
conclusion of the Employment Agreement Term, or by the Executive on his own initiative
other than: (i) a termination due to death or disability; (ii) a Constructive
Termination without Cause; or (iii) a Change in Control, the Executive shall have the same
entitlements as provided in Section 12.4 for a termination for Cause. A voluntary termination of
employment by the Executive shall be effective upon reasonable written notice to the Employer.
Written notice need not be provided in the event of a termination due to death or disability or the
consummation of a Change in Control.




          12.10 Stock Options and Restricted Stock. (a) Upon termination of the Executive’s
employment with the Employer without Cause or as a result of a Constructive Termination without
Cause, all restrictions on any Equity Award granted or issued by the Employer or any of the
Participating Subsidiaries to the Employee after the Effective Date, including any transferability
or vesting restrictions, immediately shall lapse. The Executive additionally shall have the
immediate right to exercise any Employer stock options in full (without regard to any restriction
on the underlying stock, and whether granted under this Agreement or otherwise), whether or not any
such option is fully exercisable on the date of
termination, for the remainder of the original full maximum term of each such stock option. In
addition, in the event that the Executive’s employment is terminated for any reason within one (1)
year following the consummation of a Change in Control (including, without limitation, the date of
the consummation) then the Executive shall be entitled, at the Executive’s option and without the
preclusion or reduction of any benefit otherwise available to him under this Agreement (pursuant to
Section 12.6 or otherwise), to exercise all options granted previously to the Executive during the
longest period permissible under the terms of the plan under which such options were issued from
the Change in Control Closing Date, and additionally to freely transfer any options held, directly
or indirectly, by the Executive as of the Change in Control Closing Date.




18









 








               (b) Option Grant Terms. The Employer agrees that it will cause the terms and
conditions of any options to purchase the Employer’s shares of capital stock or any other
equity-based instruments granted to the Executive during the Employment Agreement Term to conform
with the provisions of this Agreement. Where the terms of any grant Agreement with the Executive or
any stock incentive plan or stock option plan adopted by the Employer conflict with this Agreement,
the Employer agrees that the terms of this Agreement shall control, apply to and determine the
terms of the grant to the fullest extent permitted by applicable law.



          12.11 No Mitigation or Offset. At any termination of the Executive’s employment, the
Executive shall have no obligation to seek other employment. There shall be no offset against
amounts due the Executive under this Agreement on account of any remuneration attributable to any
later employment, consultancy, partnership, or other remunerative activity connected with the
Executive. However, the Employer may offset any amounts owed by the Executive to the Employer or
any of its subsidiaries or affiliates against amounts due to the Executive under this Agreement




     13. Disability.



          13.1 If during the Executive’s active employment the Executive becomes physically or mentally
disabled, whether totally or partially, so that he is prevented from performing his duties for a
period of six consecutive months, the Employer shall pay to the Executive his full Base Salary and
Bonus in respect of the period ending on the last day of the sixth consecutive month of disability
(the “Disability Date”), and the additional provisions set forth below shall apply:




          13.2 If the Executive has not resumed his usual duties on or prior to the Disability Date, the
Expiration Date of this Agreement automatically shall accelerate to the Disability Date, and the
Employer shall pay to the Executive, or as directed by any properly appointed guardian of the
Executive, seventy-five percent (75%) of his Base Salary from the Disability Date through the end
of the Employment Agreement Term (without giving effect to any early termination provisions
contained in this Agreement) and, the Employer shall have no obligation to pay any Bonus,
discretionary bonus, or other form of compensation or consideration to the Executive in respect of
periods after the Disability Date, unless applicable law requires the Employer to do so. Any Base
Salary payable pursuant to this section shall be reduced by the amount of any benefits payable to
the Executive under any group or individual
disability insurance plan or policy, where the premiums for such plan or policy are paid
primarily by the Employer;




          13.3 Unless the Employer voluntarily exercises its option under Section 13.4 to restore the
Executive to his full compensation, duties, functions, authority and responsibilities, the
Executive shall have no obligations to the Employer from and after the Disability Date (except for
his obligations under Section 11, which shall survive); and




          13.4 If during the Employment Agreement Term and after a Disability Date, the Executive shall
recover fully from a disability, the Employer, by action of the Board, shall have the right
(exercisable within sixty (60) days after notice from the Executive of such




19









 







recovery), but not the
obligation, to restore the Executive to employment, full compensation, and his full level of
duties, functions, authority and responsibilities hereunder.




     14. Non-competition. Except as set forth in Section 12.5(h) or elsewhere in this
Agreement, during the Employment Agreement Term the Executive will not, without the prior written
approval of the Board, (a) become employed by, or become an officer, director, or general partner
of, any partnership, corporation or other entity in the residential, media, entertainment, luxury
hotel or casino sectors which the Board may reasonably deem competitive with the Employer located
within fifty (50) miles of (i) Las Vegas, Nevada, (ii) Memphis, Tennessee, (iii) any site of a
current or planned development by the Employer or (iv) a jurisdiction (foreign or domestic) where
gaming is legally sanctioned during the Employment Agreement Term (each a “Prohibited Business”) or
(b) directly or indirectly, purchase, invest or otherwise participate in any significant manner, in
investments, businesses or commercial operations in a Prohibited Business, unless such purchase,
investment or participation is permitted under Section 4 above or conducted by and through Employer
or its subsidiaries. Nothing in this Section 14 shall prohibit the Executive from continuing to
fulfill his obligations as an officer, director or partner of companies or entities identified in
Section 4.



     15. Notices. All notices, requests, consents and other communications, required or
permitted to be given hereunder, shall be in writing and shall be deemed to have been duly given if
delivered personally or sent by prepaid telegram, or mailed first class, postage prepaid, by
registered or certified mail, as follows (or to such other or additional address as either party
shall designate by notice in writing to the other in accordance herewith):


If to the Employer:



FX Real Estate and Entertainment Inc.

650 Madison Avenue

New York, New York 10022

Attention: Board of Directors



If to the Executive:



Brett Torino



Copies of all communications given hereunder to the Employer shall also be delivered or sent, in
like fashion, to: Alan Annex, Esq., Greenberg Traurig, 200 Park Avenue, New York, New York 10166;
telephone: (212) 801-9323; facsimile: (212) 805-9323.




     16. Disputes.



          16.1 Arbitration of Monetary Disputes. Any action or claim seeking monetary damages
arising between the parties to this Agreement (including, without limitation, the Executive’s
representative following his death and any successor to the Employer), whether based on contract,
negligence, intentional tort, fraud or misrepresentation, statutorily prohibited discrimination,
including employment discrimination, or breach of other legal duty arising from or connected in any
manner with this Agreement or its performance shall be resolved exclusively through final and
binding arbitration, as follows:




20









 








               (a) The arbitration shall proceed in accordance with the National Rules for the Resolution of
Employment Disputes (the “Rules”) of the American Arbitration Association (the
“AAA”) in effect when the claim or dispute arose between the parties, or in the event that
the AAA no longer follows the National Rules for the Resolution of Employment Disputes, then the
AAA’s Commercial Arbitration Rules (if applicable, the “Rules”) in effect on the date of this
Agreement. Either party may, but neither party must, file or docket the dispute for administration
by the AAA, so long as the dispute proceeds in accordance with this Section 16.1 and the applicable
Rules.



               (b) The arbitrator(s) shall be selected as follows: Each party shall by written notice to the
other have the right to appoint one arbitrator. If, within thirty (30) days following the giving of
such notice by one party, the other shall not, by written notice, appoint another arbitrator, the
first arbitrator shall be the sole arbitrator. If two arbitrators are so appointed, they shall
appoint a third arbitrator. If thirty (30) days elapse after the appointment of the second
arbitrator and the two arbitrators are unable to agree upon the third arbitrator, then either party
may, in writing, request that the AAA appoint the third arbitrator.



               (c) Each party exclusively shall bear all costs, fees, and other expenses charged by or
associated with the arbitrator appointed by him or it, and the parties equally shall pay the costs
and expenses of any third appointed arbitrator. All proceedings connected with the arbitration,
including hearings, shall be held in Las Vegas, Nevada, and where a party appoints an arbitrator
who principally conducts his or her business outside of Las Vegas, Nevada, the appointing party
exclusively shall bear that arbitrator’s travel, temporary lodging, and related costs and expenses.
The general counsel of the AAA or his or her designee, after the filing of the dispute with the
AAA, exclusively shall have the jurisdiction and the authority, after written application filed by
a party with the AAA and the opportunity for the other party to respond in writing, to inequitably
allocate between the parties the AAA’s pre-hearing filing and administrative fees and the fees and
expenses of any appointed arbitrator(s), subject to reallocation among the parties by the
arbitrator(s) in any final award (or decision).



               (d) All proceedings, hearings, testimony, documents, or writings related to the arbitration
shall be confidential, i.e., not disclosed by a party, a party’s representative(s), or any
testifying witnesses to a person or entity not a party to, or interested in,
the arbitration. The parties further agree, without regard to any AAA rule to the contrary,
that where a written reasoned award(s) is made by the arbitrator(s), the arbitrator(s) also shall
issue a one-page award (or decision) in a form which permits a future need by any party to
judicially enforce the award, but that the written reasoned award shall not be disclosed by the
parties to any person or body not connected directly with the arbitration.



               (e) The arbitrator(s) appointed exclusively shall have jurisdiction to determine any claim,
including the arbitrability of any claim, submitted to him, her, or them. Each party shall bear its
or his own arbitration costs and expenses, including, without limitation, the costs and expenses
associated with any attorney or other expert or representative retained by the party in connection
with a claim, without regard to any pre-award application by the AAA of the last sentence of
Section 16.1(c). The interpretation and enforceability of the arbitration agreement memorialized in
this section shall be determined in accordance with the United States Federal Arbitration Act (9
U.S.C. §1, et seq. (the “FAA”), unless the Nevada Arbitration Act of



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2000
(the “Nevada Act”) (CPLR §7501, et seq.) would make enforceable this
Agreement after an appointed arbitrator(s) finds it unenforceable under the FAA, in which case the
Nevada Act shall be applied. Any process required or desirable in connection with any arbitration
under this Section 16.1 shall be issued and served as authorized by the FAA, the Nevada Act, or any
treaty to which the United States is a signatory, and upon a party by personal or permitted
substitute service anywhere in the world. The substantive law applied by the arbitrator(s) to the
determination of any claim or defense not connected with the enforceability of this arbitration
agreement shall be the internal laws of the State of Nevada, without reference to conflicts of law
principles.




               (f) The parties agree that the appointed arbitrator(s) shall have no power or authority to
make awards or issue orders of any kind, except as authorized by the FAA and the internal laws of
the State of Nevada. Any monetary award made shall be payable promptly in United States dollars,
free of any tax, offset, or deduction (unless required by law), and any costs, fees, or taxes
incident to enforcing the award shall, to the maximum extent permitted by law, be charged against
the party resisting enforcement.



          16.2 Claims for Equitable Relief. Any action or proceeding initiated by any party to
this Agreement seeking any form of temporary or preliminary injunctive relief, including, without
limitation, specific performance, connected with this Agreement or its performance may be brought
against any other party in the courts of the State of New York or, if the party has or can acquire
jurisdiction, in the United States District Court for the Southern District of New York, and each
of the parties consents to the jurisdiction of such courts in any such action or proceeding, and
each party waives any objection to venue laid therein. Process in any action or proceeding referred
to in the preceding sentence may be served on any party anywhere in the world. The parties agree
that the pursuit of any relief described in this Section 16.2 in no way may or shall diminish,
defeat, or otherwise impair the agreement expressed in Section 16.1.




     17. General.



          17.1 Governing Law. This Agreement shall be interpreted, construed, and enforced in
accordance with the internal laws of the State of Nevada, without regard to conflicts of law
principles.




          17.2 Captions. This Agreement contains section headings for reference only. The
headings in no way affect the meaning or interpretation of this Agreement.




          17.3 Entire Agreement. This Agreement fully memorializes the agreement and
understanding of its parties relating to its subject matter, and supersedes all prior or
contemporaneous agreements, arrangements and understandings, written or oral, between the parties
with respect to such subject matter




          17.4 Successors and Assigns. This Agreement, and the Executive’s rights and
obligations hereunder, may not be assigned by the Executive, except as set forth in Section 9.3,
and any prohibited assignment attempted by the Executive is void. This Agreement shall be binding
on any successor to the Employer, whether by merger, acquisition of substantially all of




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the
Employer’s assets, or otherwise, as fully as if such successor were a signatory hereto and the
Employer shall cause such successor to, and such successor shall, expressly assume the Employer’s
obligations hereunder. Notwithstanding anything else herein contained, the term “Employer” as used
in this Agreement, shall include all such successors.




          17.5 Amendments; Waivers. This Agreement cannot be changed, modified or amended, and
no provision or requirement hereof may be waived, without an affirmative vote of the Board or its
Compensation Committee and the consent in writing of the Executive and the Employer. The failure of
a party at any time or times to require performance of any provision hereof shall in no manner
affect the right of such party at a later time to enforce the same. No waiver by a party of the
breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of
any such breach, or a waiver of the breach of any other term or covenant contained in this
Agreement.




          17.6 Beneficiaries. Whenever this Agreement provides for any payment to the
Executive’s estate, such payment may be made instead to such beneficiary or beneficiaries as the
Executive may have designated in a writing filed with the Employer. The Executive shall have the
right to revoke any such designation and to redesignate a beneficiary or beneficiaries by written
notice to the Employer (and to any applicable insurance company) to such effect.




          17.7 Reformation. The Executive and the Employer agree that any provision of this
Agreement deemed unenforceable or invalid may be reformed to permit enforcement of the
objectionable provision to the fullest permissible extent. Any provision of this Agreement deemed
unenforceable after modification shall be deemed stricken from this Agreement, with the remainder
of the agreement being given its full force and effect.




          17.8 Full Negotiation. The Executive and the Employer each independently have made all
inquiries regarding the qualifications of the other which he or it deems necessary. The Executive
and the Employer affirm that he or it fully understands this Agreement’s meaning
and effect. Each party has participated fully and equally in the negotiation and drafting of
this Agreement. Each party assumes the risk of any misrepresentation or mistaken understanding or
belief relied upon by him or it in entering into this Agreement.




          17.9 Currency. Each and every reference to a monetary amount in this Agreement means
United States dollars.




[SIGNATURE PAGE FOLLOWS]




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     IN WITNESS WHEREOF, the parties have duly executed this Employment Agreement as of the date
first above.



	 	 	 	 	 	 	 
	 	 	FX REAL ESTATE AND ENTERTAINMENT

INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Mitchell J. Nelson
 

Name: Mitchell J. Nelson
	 	 
	 

	 	 	 	Title:   Executive Vice President and General
             Counsel	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Brett Torino
 

Brett Torino
	 	 






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