<PAGE>   1
                              EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on March
1, 1997, by and between Fitzgeralds Gaming Corporation, a Nevada corporation
(the "Company"), and Michael E. McPherson ("Executive").

1.   Term

     The Company hereby agrees to employ Executive, and Executive hereby agrees
     to serve the Company, on the terms and conditions of this Agreement for
     the period commencing on March 1, 1997 and terminating on February 28,
     1999 (such period, subject to earlier termination as provided herein,
     being referred to as the "Period of Employment").

2.   Duties and Services

     During the Period of Employment, Executive agrees to serve the Company as
     Senior Vice President of Operations and in such other offices and
     positions and to perform such reasonable and appropriate duties as may be
     requested of him by the President of Fitzgeralds Gaming Corporation
     ("Parent Company"), in accordance with the terms herein set forth. In
     performance of his duties, Executive shall be subject to the direction of
     the President. Excluding periods of vacation to which Executive is
     entitled, Executive shall devote his full time, energy and skill to the
     business and affairs of the Company and its subsidiaries and affiliates
     and to the promotion of their interests. The principal place of business
     of the Executive will be Reno, Nevada, or other such location as may be
     mutually agreed upon by the President and the Executive. Executive
     acknowledges and agrees that this Agreement is subject to the licensing
     and regulatory control of the Nevada Gaming Commission and the State
     Gaming Control Board (the "Nevada Gaming Authorities") and various other
     state, county and city gaming regulatory enforcement agencies (with the
     Nevada Gaming Authorities, collectively the "Gaming Authorities") which
     may require that Executive be investigated for personal suitability and
     licensing. Executive shall fully cooperate with the Gaming Authorities in
     order that he may obtain all required licenses, permits, approvals or
     findings of suitability required in connection with his employment
     hereunder.

3.   Compensation

     (a)  Salary and Bonuses. As compensation for his services hereunder, the
     Company shall pay Executive, during the Period of Employment, an annual
     base salary, which shall be payable in installments in accordance with the
     Company's compensation schedule as in existence from time to time. The
     Initial annual base salary shall be $145,000.
<PAGE>   2
        On March 1, 1998, the annual base salary payable to Executive shall be
        reviewed and an increase will be awarded if warranted based on
        performance. Executive shall be entitled to participate in the Company's
        bonus plan as approved by the Company's Board of Directors.

        (b) Fringe Benefits. During the Period of Employment, Executive shall be
        entitled to participate in a benefit plan, subject to the same
        definitions, qualifications and conditions as may exist from time to
        time, under the terms of the Employer's group benefit plan offered at
        any time to all other Executives of Employer. nothing contained herein
        shall preclude Executive from participating in the present or future
        employee benefit plans of the Company, including without limitation any
        pension plan, long term disability plan, profit sharing plan, savings
        plan, deferred compensation plan, stock option plan and
        health-and-accident plan or arrangement, if he meets the eligibility
        requirements therefor.

        (c) Expenses. All travel and other expenses incidental to the rendering
        of services by Executive hereunder shall be paid by the Company. If any
        such expenses are paid in the first instance by Executive, the Company
        shall reimburse him therefor on presentation of the appropriate
        documentation required by the Internal Revenue Code and Regulations or
        otherwise required under the Company policy in connection with such
        expenses. In the event that such travel incurred in the rendering of
        services by the Executive should result in the Executive incurring a
        state income tax liability, the Company agrees to reimburse the
        Executive for such state income tax liability, including penalties and
        interest and for the cost of preparing such state income tax returns.
        The Company's responsibility for the aforementioned state tax liability
        will not be extinguished with the termination of the Employee Agreement.

        (d) Vacation. Executive shall be entitled to paid vacation, to be take
        at times or times mutually satisfactory to Executive and the President.
        Unused vacation shall be paid to the Executive upon the termination of
        the contract.

4.      Termination.

        (a) Notwithstanding the provisions of Section 1, hereof, Executive may
        be discharged by the Company for Cause (as defined in Section 4(c)
        hereof), in which event the Period of Employment hereunder shall cease
        and terminate and the Company shall have no further obligation or duties
        under this Agreement, except for obligations accrued under Section 3 at
        the date of termination. In addition, the Period of Employment hereunder
        shall cease and terminate upon the earliest to occur of the following
        events: (i) the death of Executive or (ii) at the election of the Board
        of Directors, (subject to the Americans With Disabilities Act), the
        inability of Executive by reason of physical or mental disability to
        continue the proper performance of his duties hereunder for a period of
        180 consecutive days. Upon termination of the Period of Employment
        pursuant to the preceding sentence, the


                                      -2-
<PAGE>   3
     Company shall continue to pay to Executive or his estate, as the case may
     be, the entire compensation otherwise payable to him under Section 3(a)
     hereof for the lesser of 90 days or the remaining Period of Employment.

     (b)  In the event that Executive is discharged by the Company other than
     for Cause or other than pursuant to Section 4(a) hereof by reason or
     physical or mental disability, Executive shall have no further obligations
     or duties under this Agreement; provided, however, that Executive shall
     continue to be bound by the provisions of Section 5 and 6 hereof if the
     Company continues to make all payments to Executive pursuant to Section 3
     hereof based on a termination date of the date on which the Period of
     Employment would have expired, but for such termination pursuant to this
     Section 4(b).

     (c)  For purposes of this Agreement, cause ("Cause") shall be deemed to
     exist only upon (i) conviction of a felony; (ii) embezzlement or
     misappropriation of funds or property of the Company or any of its
     subsidiaries or affiliates; (iii) failure to obtain and maintain during the
     Period of Employment all licenses, permits, approvals or findings of
     suitability with the Gaming Authorities required in connection with his
     employment hereunder; (iv) commission of any criminal or other improper act
     which could result in the suspension or revocation of any such license,
     permit, approval or finding of suitability; or (v) Executive's consistent
     refusal to substantially perform, or willful misconduct in the substantial
     performance of, his duties and obligations hereunder.

     If during the pendency of any application for licensing or during the
     pendency of any formal investigation or disciplinary proceeding into the
     personal qualifications or suitability of the Executive, the Company
     determines that the Executive's personal suitability may be denied or
     determined to be unsuitable or may delay the Company's licensing, the
     Company may, in its sole discretion, to the extent permitted by the
     applicable Gaming Authorities, employ the Executive for other duties and
     services at a rate of compensation to be agreed upon until such matters are
     resolved. For purposes of this Section 4(c), "duties and responsibilities"
     of the Executive shall mean those duties and responsibilities which are
     consistent with Executive's current position with the Company and shall not
     include any additional duties or responsibilities assigned to Executive
     after the date hereof which, in the reasonable judgment of Executive, are
     inconsistent in any respect with Executive's current position or
     substantially increase his duties and responsibilities from those currently
     contemplated hereby.

5.   Non-Competition Clause

     If the Company is fulfilling its obligation under Section 4(b), the
     Executive shall not perform any kind of services, whether related directly
     or indirectly to another Gaming Licensee or Gaming Company.


                                      - 3-
<PAGE>   4
        If Executive terminates his contract prior to the expiration of the
        period of employment or if the company is continuing payments pursuant
        to Section 3, the Employee may not be employed or provide services for
        any Casino Licensee in either Reno, Sparks, Downtown Las Vegas or
        Tunica, Mississippi.

6.      Confidentiality

        The Company and Executive acknowledge that the services to be performed
        by Executive under this Agreement are unique and extraordinary and, as
        a result of such employment, executive will be in possession of
        confidential information, proprietary information and trade secrets
        (collectively, "Confidential Material") relating to the business
        practices of the company and its Affiliates Executive agrees that he
        will not, directly or indirectly, (i) disclose to any other person or
        entity either during or after his employment by the Company or (ii)
        use, except during his employment by the Company in the business and
        for the benefit of the Company or any of its Affiliates, any
        Confidential Material acquired by Executive during his employment by
        the Company, without the prior written consent of the Company. Upon
        termination of is employment with the Company for any reason, Executive
        agrees to return to the Company all tangible manifestations of
        Confidential Materials and all copies thereof. All programs, ideas,
        strategies, approaches, practices or inventions created, developed,
        obtained or conceived of by Executive prior to or during the term
        thereof, and all business opportunities presented to Executive during
        the term hereof by reason of his engagement by the Company, shall be
        owned by and belong exclusively to the Company, provided that they are
        related in any manner to its business or that of any of its Affiliates.
        Executive shall (i) promptly disclose all such programs, ideas,
        strategies, approaches, practices, inventions or business opportunities
        to the Company and (ii) execute and deliver to the Company, without
        additional compensation, such instruments as the Company may require
        from time to time to evidence its ownership of any such items.
        Executive agrees that the remedy at law for any breach by him of this
        Section 6 will be inadequate and that the Company shall be entitled to
        injunctive relief.

7.      Miscellaneous

        (a)     Notices. Any notice or other communication required or
        permitted to be given hereunder shall be made in writing and shall be
        delivered in person or mailed by prepaid registered or certified mail,
        return receipt requested, addressed to the parties as follows:

                If to the Company:

                                Fitzgeralds Gaming Corporation
                                302 Fremont Street
                                Las Vegas, Nevada 89101
                                Attention: President and General Counsel



                                     - 4 -
<PAGE>   5
     If to Executive:

          Michael E. McPherson
          Fitzgeralds Gaming Corporation
          300 E. 2nd Street, 15th Floor
          Reno, Nevada 89501

or to such other address as the party shall have furnished in writing in
accordance with this Section. Such notices or communications shall be effective
upon delivery if delivered in person and either upon actual receipt or three
(3) days after mailing, whichever is earlier, if delivered by mail.

(b)  Parties In Interest This Agreement shall be binding upon and inure to the
benefit of Executive, and it shall be binding upon and inure to the benefit of
the Company and any corporation succeeding to all or substantially all of the
business and assets of the Company by merger, consolidation, purchase of assets
or otherwise.

(c)  Entire Agreement. This Agreement supersedes any and all other agreements,
either oral or in writing, between the parties hereto with respect to the
employment of Executive by the Company and contains all of the covenants and
agreements between the parties with respect to such employment in any manner
whatsoever. Any modification of this Agreement will be effective only if it is
in writing signed by the party to be charged.

(d)  Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada, without giving effect to the
choice of law or conflicts of laws rules and laws of such jurisdiction.

(e)  Severability. In the event that any term or condition contained in this
Agreement shall for any reason be held by a court of competent jurisdiction to
be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other term or condition of
this Agreement, but this Agreement shall be construed as if such invalid or
illegal or unenforceable term or condition had never been contained herein.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
dates across from their respective signatures, effective as of the date first
written above.

   4/17/97                             FITZGERALDS GAMING CORPORATION
-----------------------------
Date                                   By:  /s/ PHILIP D. GRIFFITH
                                          --------------------------------------
                                           Philip D. Griffith
                                           President and Chief Executive Officer

   4/16/97                             By: /s/ MICHAEL E. MCPHERSON
-----------------------------             --------------------------------------
Date                                       Michael E. McPherson



                                      -5-