**Exhibit 10.17**

 

**EMPLOYMENT AGREEMENT**

 

This Employment Agreement(this “Agreement”) is entered into as of June 19, 2003, between Hard RockHotel, Inc., a Nevada corporation (the “Company”), and Kevin Kelley, anindividual (“Executive”).

 

**Preliminary Statements**

 

A.                                   The Company currently operates that certainhotel/casino resort known as the “Hard Rock Hotel” located at 4455 ParadiseRoad, Las Vegas, Nevada.

 

B.                                     The Company desires to employ Executive, andExecutive desires to be so employed, on the terms and conditions hereincontained.

 

**Agreement**

 

NOW, THEREFORE, in consideration of the various covenants andagreements hereinafter set forth, the parties hereto agree as follows:

 

1.                                       *Term of Employment*.  TheCompany hereby employs Executive and Executive accepts such employmentcommencing on the date of this Agreement (the “Commencement Date”) andterminating on the  third anniversary ofthe Commencement Date, unless sooner terminated as hereinafter provided; *provided, however*, that this Agreement maybe extended for successive one (1) year terms upon the mutual agreement of theparties hereto.

 

2.                                       *Services to be Rendered*.

 

2.1.                              *Duties of Executive*. Executive shall be employed to serve in the capacity of President ,Chief Operating Officer, and General Manager of the Company.  Executive shall be responsible for theoverall supervision, direction, and control of the operations of the Hard RockHotel facility and shall direct the operating departments with a view to thesuccessful implementation of the business policies and plans for the Hard Rock.Executive shall provide support in the conceptual, strategic, and policyformulation functions of the Company and shall direct and coordinate theactivities of the Hard Rock to attempt to obtain optimum efficiency and economyof operations in order to maximize profits. Executive shall devote his fullbusiness time, attention and ability to the affairs of the Company during theterm of this Agreement; *provided, however*,that Employee shall not be precluded from involvement in charitable or civicactivities or his personal financial investments or to provide consultingservices, except that such consulting services may not relate to the gamingindustry, provided that the same do not interfere with his time and attentionto the affairs of the Company. Executive will report directly to the Chairman of the Board of Directors(“Chairman”) or such other person designated by the Chairman or Board ofDirectors of the Company (the “Board”).

 

3.                                       *Compensation and Benefits*. The Company shall pay the followingcompensation and benefits to Executive during the term hereof; and Executiveshall accept the same as payment in full for all services rendered by Executiveto or for the benefit of the Company:

 

3.1.                              *Base Salary*. Commencing on the Commencement Date, a basesalary (the “Base Salary”) of $375,000 per annum. The Base Salary shall accruein equal bi-weekly installments in arrears and shall be payable in accordancewith the payroll practices of the Company in effect from time to time.

 

3.2.                              *Annual Bonus*. Executive shall be eligible to receive an annual bonus (the “AnnualBonus”) to be determined by the Chairman based upon the achievement of thefinancial performance and other objectives of the Company and Executive’scontribution to such performance.  Suchbonus will be equal to sixty (60) percent of Executive’s base salary providedthe Company meets its annual budgeted EBITDA. It shall be increased ordecreased by the percentage that actual annual EBITDA varies from the annualbudgeted EBITDA.

 

1

----

 

3.3.                              *Stock*. Executive shall be entitled to participate in any stock option orphantom equity plans that the Company provides to its comparable seniorexecutive officers to the extent such plans are established by the Company.

 

3.4.                              *Expenses*.  TheCompany shall reimburse Executive for reasonable out-of-pocket expensesincurred in connection with the performance of his duties hereunder, subject to(i) such policies as the Board may from time to time establish and (ii)Executive furnishing the Company with evidence in the form of receiptssatisfactory to the Company substantiating the claimed expenditures.

 

3.5.                              *Vacation*. Executive shall be entitled to four weeks of vacation  per year.. Executive shall also be entitled to all paid holidays given to theCompany’s comparable senior executive officers.

 

3.6.                              *Benefits*. Executive shall be entitled to participate in the Company’s groupinsurance, hospitalization, and group health and benefit plans and all otherbenefits and plans as the Company provides to its comparable senior executiveofficers to the extent such plans are established by the Company and to theextent that Executive is eligible to participate in such plans.

 

3.7.                              *Withholding and other Deductions*.  Allcompensation payable to Executive hereunder shall be subject to such deductionsas the Company is from time to time required to make pursuant to law,governmental regulation or order.

 

4.                                       *Facilities*. Executive shall be furnished with an office, supplies and personnelwhich are necessary or appropriate for the adequate performance by Executive ofhis duties as set forth in this Agreement.

 

5.                                       *Representations andWarranties of Executive*.Executive represents and warrants to the Company that (i) Executive is under nocontractual or other restriction or obligation which is inconsistent with theexecution of this Agreement, the performance of his duties hereunder, or theother rights of the Company hereunder and (ii) Executive is under no physical ormental disability that would hinder the performance of his duties under thisAgreement.

 

6.                                       *Non-disclosure;Non-solicitation*.  During the term of this Agreement andthereafter, Executive shall hold in a fiduciary capacity for the benefit of theCompany all secret or confidential information, knowledge or data relating tothe Company or its affiliates, and their respective businesses, which shall notbe public knowledge (other than information which becomes public as a result ofacts of Executive or his representatives in violation of this Agreement),including, without limitation, customer/ client lists, matters subject tolitigation, and technology or financial information of the Company or itssubsidiaries, without the prior written consent of the Company.  In addition, during the term of thisAgreement and for a one (1)  year periodthereafter, Executive shall not, directly or indirectly, solicit or contact anyemployee of the Company or any affiliate of the Company, with a view toinducing or encouraging such employee to leave the employ of the Company or itsaffiliates, for the purpose of being employed by Executive, an employeraffiliated with Executive or any competitor of the Company or any affiliatethereof.  Executive acknowledges thatthe provisions of this Article 6 are reasonable and necessary for theprotection of the Company and that the Company will be irrevocably damaged ifsuch provisions are not specifically enforced. Accordingly, Executive agrees that, in addition to any other relief to whichthe Company may be entitled in the form of actual or punitive damages, theCompany shall be entitled to seek and obtain injunctive relief from a court ofcompetent jurisdiction (without posting a bond therefor) for the purpose ofrestraining Executive from any actual or threatened breach of such provisions.

 

7.                                       *Termination*.

 

7.1.                              *Death or Total Disabilityof Executive*. If Executivedies or becomes totally disabled during the term of this Agreement, Executive’semployment hereunder shall automatically terminate. For these purposesExecutive shall be deemed totally disabled if Executive shall become physicallyor mentally incapacitated or disabled or otherwise unable fully to dischargeExecutive’s essential duties hereunder for a period of ninety (90) consecutivecalendar days or for one hundred twenty (120) calendar days in any one hundredeighty (180) calendar-day period.

 

2

----

 

7.2.                              *Termination for Good Cause*. Executive’s employment hereunder may beterminated by the Company for “good cause.” The term “good cause is defined asany one or more of the following occurrences:

 

(a)                                  Executive’s breach of any of the covenantscontained in Article 6 of this Agreement;

 

(b)                                 Executive’s conviction by, or entry of a pleaof guilty or nolo contendere in, a court of competent and final jurisdictionfor any crime involving moral turpitude or punishable by imprisonment in thejurisdiction involved;

 

(c)                                  Executive’s commission of an act of criminalfraud that affects the Company, whether prior to or subsequent to the datehereof upon the Company;

 

(d)                                 Executive’s continuing repeated willfulfailure or refusal to perform Executive’s duties as required by this Agreement(including, without limitation, Executive’s inability to perform Executive’sduties hereunder as a result of drug or alcohol related misconduct and/or as aresult of any failure to comply with any laws, rules or regulations of anygovernmental entity with respect to Executive’s employment by the Company);

 

(e)                                  Executive’s gross negligence, insubordinationor material violation of any duty or loyalty to the Company, misappropriationof Company assets, or any other material misconduct on the part of Executive;

 

(f)                                    Not used.

 

(g)                                 the failure of Executive to obtain anyrequisite license, permit or approval based on suitability from any state,county, or other governmental authority having jurisdiction over the gamingoperations of the Company (the “Gaming Authorities”) which would precludeExecutive from carrying out his duties as set forth in this Agreement;

 

(h)                                 if, after the initial receipt by Executive ofany requisite license, permit or approval from the Gaming Authorities, theexecution of Executive’s duties as set forth in this Agreement will, asevidenced by communications from any senior official of any of the GamingAuthorities, materially preclude or unduly delay the issuance of, or result inthe imposition of unduly burdensome terms and conditions on, or revocation of,any liquor, gaming or other license, permit or approval, necessary orappropriate to the proposed, contemplated or actual operations of the Company; *provided, however*, that this Section7.2(h) shall not be applicable if Executive shall, within a reasonable periodof time after receipt of written notice from the Board specifying the nature ofthe issues involved hereunder, remedy the situation to the satisfaction of theapplicable Gaming Authorities; or

 

(i)                                     Executive’s breach of any other provision ofthis Agreement, provided that termination of Executive’s employment pursuant tothis subsection (i) shall not constitute valid termination for good causeunless Executive shall have first received written notice from the Boardstating with specificity the nature of such breach and affording Executive atleast fifteen (15) days to correct the breach alleged.

 

7.3.                              *Resignation of Executive*.  TheCompany shall have the right to terminate this Agreement and Executive’semployment hereunder due to the voluntary resignation of Executive, providedthat Executive shall deliver no less than sixty (60) days prior written noticeof such resignation to the Board, which notice may be waived by the Company inits sole discretion.

 

7.4.                              *Severance Compensation*. Notwithstanding anything contained in thisAgreement, upon a termination of this Agreement and Executive’s employmenthereunder due to the occurrence of any of the events referred to in Section7.1, 7.2 or 7.3 of this Agreement, Executive (or Executive’s heirs orrepresentatives) shall be entitled to receive only such portion (if any) of theBase Salary as may theretofore have accrued but be unpaid on the date on whichthe termination shall take effect.

 

3

----

 

7.5.                              *Termination for No Cause*.  Inaddition to the right to terminate this Agreement pursuant to Sections 7.1, 7.2and 7.3 of this Agreement, the Company shall have the right to terminate thisAgreement and Executive’s employment hereunder for any other reason or for noreason prior to the expiration of the term of this Agreement.  In the event that the Company terminatesthis Agreement and Executive’s employment hereunder pursuant to this Section7.5, the Company shall give ten (10) days prior written notice to Executive andpay a termination fee to Executive in an amount equal to (i) one years BaseSalary or (ii) $ 250,000, in the event such termination occurs in the  last eight (8) months of the contract term ,to be paid in the manner and at the rate Executive had received immediatelyprior to such termination pursuant to Section 3.1 of this Agreement and theCompany shall have no further obligation to Executive under this Agreement.

 

7.6.                              *Termination Obligations ofExecutive*.  In the event that this Agreement andExecutive’s employment hereunder is terminated, Executive, or his legalrepresentative in case of termination by death or Executive’s physical ormental incapacity to serve, shall:

 

(a)                                  by the close of the effective date oftermination, resign from all corporate positions held in the Company and any ofits subsidiary and affiliated companies;

 

(b)                                 promptly return to a representativedesignated by the Company all property, including but not limited to, keys,identification cards and credit cards of the Company or any of its subsidiariesor affiliated companies; and

 

(c)                                  incur no further expenses or obligations onbehalf of the Company, or any of its subsidiaries and affiliated companies.

 

8.                                       *Change of Control*. In the event of a “Change of Control” (asdefined below) the Executive shall be entitled to three years Base Salary ifwithin thirty (30) days after the Change in Control the Executive tenders hisresignation in conformity with Article 7.3 of the Agreement.  A Change in Control of the Company shallmean a change in control of a nature that would be required to be reported inresponse to Item 403(c) of Regulation S-K; provided that, without limitation,such a change in control shall not be deemed to have occurred if Peter Mortonis the beneficial owner as defined in Rule 13d-3 under the Exchange Act, directlyor indirectly, of securities of the Company representing 51% or more of thecombined voting power of the Company’s then outstanding securities.

 

9.                                       *Arbitration*. Any claim or controversy arising out of orrelating to this Agreement shall be settled by arbitration in Las Vegas.Nevada, in accordance with the Commercial Arbitration Rules of the AmericanArbitration Association, and judgment on the award rendered by the arbitratorsmay be entered in any court having jurisdiction. There shall be three arbitrators,one to be chosen directly by each party at will, and the third arbitrator to beselected by the two arbitrators so chosen. Each party shall pay the fees of thearbitrator it selects and of its own attorneys, the expenses of its witnessesand all other expenses connected with presenting its case. Other costs of thearbitration, including the cost of any record or transcripts of thearbitration, administrative fees, the fee of the third arbitrator, and allother fees and costs, shall be borne equally by the parties hereto unless it isdetermined that one or both parties were not acting in good faith in which casethe party determined to not have been acting in good faith shall bear all feesand expenses described above which would otherwise have been paid by theopposing party.

 

10.                                 *General Relationship*. Executive shall be considered an employeeof the Company within the meaning of all federal, state and local laws andregulations including, but not limited to, laws and regulations governingunemployment insurance, workers’ compensation, industrial accident, labor andtaxes.

 

11.                                 *General Provisions.*

 

11.1.                        *Binding Effect*. This Agreement shall be binding upon and inure to the benefit of theCompany and its successors and assigns and Executive, his assignees, and hisestate.  Neither Executive, hisdesignees, nor his estate shall commute, pledge, encumber, sell or otherwisedispose of the rights to receive the payments provided in this Agreement, whichpayments and the rights thereto are expressly declared to be nontransferableand nonassignable (except by death or otherwise by operation of law).

 

4

----

 

11.2.                        *Governing Law*. This Agreement shall be governed by the laws of the State of Nevada fromtime to time in effect.

 

11.3.                        *Counterparts*. This Agreement may be executed in one or more counterparts, each ofwhich shall be deemed an original, but all of which taken together shallconstitute one and the same Agreement.

 

11.4.                        *No Waiver*. Except as otherwise expressly set forth herein, no failure on the partof either party hereto to exercise and no delay in exercising any right, poweror remedy hereunder shall operate as a waiver hereof nor shall any single orpartial exercise of any right, power or remedy hereunder preclude any other orfurther exercise thereof or the exercise of any other right, power or remedy.

 

11.5.                        *Headings*.  Theheadings of the Articles and Sections of this Agreement have been inserted forconvenience of reference only and shall in no way restrict any of the terms orprovisions hereof.

 

11.6.                        *Notices*.  Anynotice under this Agreement shall be given in writing and delivered in personor mailed by certified or registered mail, addressed to the respective party atthe address as set out below, or at such other address as either party mayelect to provide in advance in writing, to the other party:

 

EXECUTIVE:

 

Kevin Kelley

636 Canyon Greens Dr.

Las Vegas, NV 89144

 

COMPANY:

 

Hard Rock Hotel, Inc.

510 North Robertson Boulevard

Los Angeles, California 90048

Attn:  Peter Morton

 

WITH A COPY TO:

Gordon & Silver, Ltd.

3960 Howard Hughes Pkwy

Ninth Floor

Las Vegas, NV 89109

Attn:  Jeff Silver, Esq.

 

11.7.                        *Severability*.  Ifany provision of this Agreement is held by a court of competent jurisdiction tobe invalid, illegal, or unenforceable by reason of any rule of law or publicpolicy, all other provisions of this Agreement shall nevertheless remain ineffect.  No provision of this Agreementshall be deemed dependent on any other provision unless so expressed herein.

 

11.8.                        *Compliance with Laws;Gaming Authorities Approval*.  Nothing contained in this Agreement shall beconstrued to require the commencement of any act contrary to law, and whenthere is any conflict between any provision of this Agreement and any statute,law, ordinance, or regulation, contrary to which the parties have no legalright to contract, then the latter shall prevail; but in such an event, theprovisions of this Agreement so affected shall be curtailed and limited only tothe extent necessary to bring it within the legal requirements.  Notwithstanding anything contained in thisAgreement to the contrary, this Agreement and the terms and conditionscontained herein shall be contingent upon receipt of all requisite approvals ofthe applicable Gaming Authorities.

 

11.9.                        *No Waiver*.  Theseveral rights and remedies provided for in this Agreement shall be construedas being cumulative, and no one of them shall be deemed to be exclusive of theothers or of any right or remedy allowed by law.  No waiver by the Company or Executive any failure of Executive orthe Company,

 

5

----

 

respectively, to keep or perform anyprovision of this Agreement shall be deemed to be a waiver of any preceding orsucceeding breach of the same or other provision.

 

11.10.                  *Merger*. This Agreement supersedes any and all other agreements, either oral orin writing, between the parties hereto with respect to the employment ofExecutive by the Company.

 

11.11.                  *No Representations*. Each party to this Agreement acknowledges that no representations,inducements, promises or other agreements, oral or otherwise, have been made byany party, anyone acting on behalf of any party, which are not embodied hereinand that no other agreement, statement or promise not contained in thisAgreement shall be valid or binding. Any addendum to or modification of this Agreement shall be effectiveonly if it is in writing and signed by the parties to be charged.

 

11.12.                  *Drafting Ambiguities*. Each party to this Agreement has been afforded an opportunity to havethis Agreement reviewed by his or its respective counsel. The normal rule ofconstruction to the effect that any ambiguities are to be resolved against thedrafting party shall not be employed in the interpretation of this Agreement orof any amendments or exhibits to this Agreement.

 

11.13.                  *Survival*.  Theterms and conditions of Article 6 and of this Agreement shall survive thetermination of this Agreement.

 

IN WITNESS WHEREOF, theparties hereto have caused this Agreement to be duly executed as of the datehereinabove set forth.

 
| COMPANY:                                     |                       | EXECUTIVE: |
|----------------------------------------------|----------------------------|------------|
|                                         |                       |       |
| Hard  Rock Hotel, Inc., a Nevada corporation |                       |       |
|                                         |                       |       |
|                                         |                       |       |
| By:                                          | /s/  Peter A. Morton       |       | /s/  Kevin Kelley |
|                                         | Peter  A. Morton, Chairman |       | Kevin  Kelley |

 

6

----