Document:

Exhibit 10.6

 

SUBLEASE

 

(Palace Station)

 

THIS SUBLEASE, made as of the 7th day
of November, 2007, by and between STATION CASINOS, INC., a Nevada corporation (“Sublessor”),
as Sublessor, and Palace Station Hotel & Casino, Inc., a Nevada corporation
(“Sublessee”), as Sublessee.

 

W  I
T  N  E  S  S  E  T  H:

 

WHEREAS, under that certain Master Lease
Agreement (as the same may be amended from time to time, the “Master Lease”)
dated as of even date herewith, by and between FCP PropCo, LLC, a Delaware
limited liability company (“Master Landlord”), as landlord, and Sublessor, as
tenant, Master Landlord leased to Sublessor all of Master Landlord’s right
title and interest in and to certain land, improvements and fixtures located in
Clark County, Nevada (the “Master Leased Property”) as more particularly
described therein; and

 

WHEREAS, Sublessor has agreed to sublet a
portion of the Master Leased Property to Sublessee upon and subject to the
terms, covenants, conditions and provisions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the
foregoing recitals which are incorporated herein by reference, and for other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Sublessor and Sublessee hereby agree as follows:

 

1.             Sublessor
hereby represents and warrants that:

 

(a)           attached hereto as Exhibit A
is a true copy of the Master Lease (including all amendments and other
modifications as of the date hereof); and

 

(b)           the Master Lease is in
full force and effect, Sublessor is not in default thereunder, and no event has
occurred, which, with the passage of time or the giving of notice, or both,
would constitute a default by Sublessor thereunder.

 

2.             Sublessor,
as sublessor, hereby sublets to Sublessee, as sublessee, and Sublessee hereby
sublets from Sublessor that portion of the Master Leased Property located in
the County of Clark, State of Nevada, more particularly described on Exhibit
B attached hereto (collectively, the “Subleased Property”).

 

3.             This
Sublease shall be for a term (the “Sublease Term”) commencing on the date
hereof (the “Commencement Date”), and ending on the expiration of the Term
under the Master Lease; provided that, subject to the rights of Master Landlord
under Section 6(d) below, the term of this Sublease shall end on the earlier of
the expiration or termination of Sublessor’s interest in the Subleased Property
under the Master Lease. Sublessee is in possession of the Subleased Property
and accepts the same in its “AS IS” condition on the Commencement Date.

 

 

4.             Except
as expressly modified herein, all of the terms, covenants, conditions and
provisions contained in the Master Lease (other than the first paragraph of
Section 3.1 and Sections 10.1, 11.1, 11.2, 12.4), together with all Exhibits
and Schedules attached thereto (other than Schedule 3.1(d)), are hereby
incorporated into this Sublease by reference. (Said terms, covenants,
conditions, provisions and schedules are sometimes hereinafter referred to as
the “incorporated provisions of the Master Lease.”)  For purposes of integrating the incorporated
provisions of the Master Lease into this Sublease, references to “Landlord” in
the Master Lease shall signify and apply to Sublessor, references to “Tenant”
in the Master Lease shall signify and apply to Sublessee, references to “Leased
Property” in the Master Lease shall signify and apply to the Subleased
Property, and references to “this Lease” in the Master Lease shall signify and
apply to this Sublease. Notwithstanding the foregoing, all references to “Landlord’s
Debt,” Landlord’s Lender,” “Landlord’s Loan Documents,” “Lease Shortfall
Reserve Period” and “Tenant Security Period” shall not signify or apply to
Sublessor but shall retain the meanings set forth in the Master Lease. All
references to “Rent” and “rental” in the incorporated provisions of the Master
Lease shall herein mean the rental payable pursuant to Section 7 hereof.

 

5.             (a)           Sublessor and Sublessee hereby assume and
agree to perform and be bound by each and all of the terms, covenants and
conditions in the incorporated provisions of the Master Lease, on the part of
Sublessor to be kept and performed and Sublessor and Sublessee each agree to
indemnify, defend and hold the other harmless from and against all claims,
costs, damages, demands, expenses (including reasonable attorneys’ fees, costs
and expenses whether or not an action, suit or proceeding is brought),
liability and loss arising out of or resulting from any breach by such party in
the performance of the foregoing covenant.

 

(b)           Except as herein
otherwise specifically provided with respect to payment of Rent or additional
rent under the Master Lease, which Sublessor specifically agrees to timely pay
and perform, Sublessee shall assume and discharge all of the undertakings and
obligations of Sublessor under the Master Lease with respect to the Subleased
Property as fully and completely as though it were the lessee under the Master
Lease, and any failure by Sublessee to perform and discharge such undertakings
and obligations with respect to the Subleased Property shall be deemed to be a
default by Sublessee hereunder. In addition to the foregoing agreement by
Sublessor to timely pay rent and additional rent under the Master Lease,
Sublessor agrees not to take any action that would constitute a default, breach
or surrender under the Master Lease. Sublessee shall be entitled to exercise,
either separately or jointly with Sublessor, all the rights and benefits
conferred upon Sublessor under the Master Lease with respect to the Subleased
Property and in the event of any failure on the part of the Master Landlord
under the Master Lease to carry out and discharge any of its undertakings and
obligations thereunder, Sublessee shall be entitled to take any and all action
which Sublessor would be entitled to take, and such action may be taken by
Sublessee in either its own name or in the name of Sublessor.

 

6.             Anything
herein to the contrary notwithstanding, it is expressly understood and agreed
by Sublessor and Sublessee to the following:

 

 

(a)           this Sublease is subject
and subordinate to all of the terms and conditions of the Master Lease and
Landlord’s Loan Documents;

 

(b)           the use of the
Subleased Property shall not conflict with Landlord’s Loan Documents, any Legal
Requirement, Property Document, Insurance Requirement or other provision of the
Master Lease;

 

(c)           Sublessee shall be
permitted to further sublet all or any part of the Subleased Property, assign
or Transfer the Sublease only insofar as the same would be permitted if it were
a sublease, assignment or Transfer by Sublessor under the Master Lease;

 

(d)           that, in the event of
cancellation or termination of the Master Lease for any reason whatsoever or of
the surrender of the Master Lease (whether voluntary, involuntary or by
operation of law) prior to the expiration date of the Sublease, including
extensions and renewals granted hereunder, then, at Master Landlord’s option,
Sublessee shall make full and complete attornment to Master Landlord for the
balance of the term of the Sublease, which attornment shall be evidenced by an
agreement in form and substance satisfactory to Master Landlord and which
Sublessee shall execute and deliver within thirty (30) days after request by
Master Landlord and Sublessee shall waive the provisions of any law now or
hereafter in effect which may give Sublessee any right of election to terminate
the Sublease or to surrender possession in the event any proceeding is brought
by Master Landlord to terminate the Master Lease, and

 

(e)           in the event Sublessee
receives a written notice from Master Landlord stating that an Event of Default
exists under the Master Lease, Sublessee shall thereafter be obligated to pay
all rentals accruing under this Sublease directly to Master Landlord (or
Landlord’s Lender if Master Landlord shall so direct); all rentals received
from Sublessee by Master Landlord shall be credited against the amounts owing
by Sublessor under the Master Lease.

 

7.             Sublessee
hereby covenants to pay Sublessor, in lawful money of the United States of
America which shall be legal tender for the payment of public and private
debts, at an account designated by Sublessor (the “Sublease Designated
Account”), without demand, deduction, or set-off,  annual base rent for the Subleased Property
in the amounts set forth on Exhibit C attached hereto (the “Sublease
Base Rent”). The Sublease Base Rent shall be payable in advance in twelve
(12) equal installments, on the day that is the third (3rd) Business
Day preceding the fifteen (15th) day of each calendar month of the
Sublease Term (the “Sublease Rent Payment Date”). The Sublease Base Rent
shall be paid for the period of the fifteenth (15th) of each month
(or, if applicable, the Commencement Date) through the fourteenth (14th) of the
next month (or, if applicable, the expiration of the Sublease Term) (each, a “Sublease
Rental Period”), provided that
the first and last payments of Sublease Base Rent shall be prorated as to any
partial Sublease Rental Period, based on the number of days within the Sublease
Term during such Sublease Rental Period and the number of days in such Sublease
Rental Period. Sublessee hereby agrees to make any reasonable changes with
respect to the definitions of “Sublease Rent Payment Date” or “Sublease Rental
Period,” including, without limitation, changing the Sublease Rent Payment Date
and Sublease Rental Period, to conform with changes to the terms “Rent 

 

 

Payment Date”
and “Rental Period” under the Master Lease. The first installment payment of
Sublease Base Rent has been made as of the date hereof. The second installment
shall be payable on November 12, 2007, for the Sublease Rental Period beginning
November 15, 2007 and ending December 4, 2007. Notwithstanding the above, if
Sublessor is in default in the payment of rent under the Master Lease and upon
notice by Master Landlord to Sublessor and Sublessee, Master Landlord may
require all rent and additional rental payable by Sublessee hereunder to be
paid directly to Master Landlord or its agent, successor or assign. Any rent or
rental so paid by Sublessee shall be credited to the rent or additional rental
then due and payable from Sublessor under the Master Lease.

 

8.             In
addition to the Sublease Base Rent payable hereunder in accordance with Section
7 hereof, Sublessee hereby agrees to pay additional rental relating to the
Subleased Property as required under the provisions of the Master Lease. Sublessor
shall deliver to Sublessee copies of all calculations of Taxes and Other
Charges relating to the Subleased Property received from Master Landlord under
the Master Lease.

 

9.             All
notices, demands, requests, consents, approvals and other communications
(hereafter, “Notices”) by or between Sublessee and Sublessor under or in
connection with this Sublease and the Subleased Property shall at the same time
be delivered by the sending party to Master Landlord. Similarly, all Notices by
or between Sublessor and Master Landlord under or in connection with the Master
Lease and the Subleased Property, including without limitation any Notice
relating to the occurrence of a Noticed Default, Event of Default, Lease
Shortfall Reserve Period or Tenant Security Period shall at the same time (or
promptly after receipt by Sublessor) be delivered by Sublessor to Sublessee.

 

10.           Subject
to the representations and warranties of Sublessor in Section 1 hereof,
Sublessee hereby agrees that it is leasing the Subleased Property from
Sublessor “AS IS” without representation or warranty, express or implied, as to
the merchantability or fitness of the Subleased Property for a particular
purpose.

 

11.           Sublessor
and Sublessee each hereby represent and warrant to each other that it has not
entered into any agreement or done any other act which might result in the
obligation to pay a sales or brokerage commission or finder’s fee with respect
to this transaction. Sublessor and Sublessee each agree to indemnify, defend
and hold the other parties and Master Landlord harmless from and against any
claims, costs, damages, demands, expenses (including without limitation
reasonable attorneys’ fees and costs whether or not an action, suit or
proceeding is brought), liability or loss which the other parties may sustain
because or by reason of any material breach of or inaccuracy in the foregoing
representation and warranty.

 

12.           During
the Sublease Term, Sublessee shall maintain or cause to be maintained the
insurance required under Section 10.1 of the Master Lease with respect to the
Subleased Property except as specifically provided herein. All coverage
provided in the incorporated provisions of the Master Lease shall be maintained
for the limits specified thereunder and shall provide coverage for the mutual
benefit of Sublessor and Sublessee. All policies of insurance shall name Master
Landlord and Landlord’s Lender (if any) and their successors and assigns as additional
insureds or loss payees (except that in the case of general liability
insurance, Master Landlord and Landlord’s Lender shall be named as additional
insureds 

 

 

and not a loss
payee) and conform to the requirements for policies of insurance under Section
10.1 of the Master Lease.

 

13.           Sublessee
hereby agrees to cooperate with Sublessor and Master Landlord and to execute
any and all instruments reasonably requested by Sublessor and Master Landlord
(including, if necessary, the execution of an amendment to this Sublease), in
the establishment and maintenance of reserve accounts and cash management
procedures reasonably requested by any Landlord’s Lender in connection with
Landlord’s Loan Documents (the “Cash Management Procedures”). For the
avoidance of doubt, such Cash Management Procedures shall not affect Sublessee’s
internal procedures for handling cash in conjunction with gaming operations or
complying with, and being subject to, applicable Gaming Laws. Without limiting
the foregoing, Sublessee shall maintain with respect to the Subleased Property
a reserve (the “Sublease FF&E Reserve”) for capital and FF&E
expenditures in the amount of 2.5% of gross revenues derived from operations of
such Subleased Property (including, without limitation, from operations of the
hotel and casino components of such Subleased Property) which Sublease FF&E
Reserve shall constitute a portion of the FF&E Reserve under the Master
Lease. So long as no Lease Reserve Shortfall Period or Event of Default under
either the Master Lease or Sublease shall exist or be in effect, funds in the
Sublease FF&E Reserve may be withdrawn at the discretion of Sublessee for
the payment or reimbursement of FF&E expenditures. An Operating Budget for
the Subleased Property (the “Sublease Operating Budget”) shall be submitted by
Sublessee to Sublessor and Landlord’s Lender not later than the expiration of
the then current Fiscal Year, provided that Sublessor and Landlord’s Lender
shall have no right to approve same except as provided in the following
sentence. If a Lease Shortfall Reserve Period is in effect, Sublessee shall
submit the then-current Sublease Operating Budget and, when due, all subsequent
Sublease Operating Budgets for Fiscal Years during a Lease Shortfall Reserve
Period, and any requested interim Modifications thereto, to Sublessor and
Landlord’s Lender, and Landlord’s Lender shall have the right to approve all
aspects of the Sublease Operating Budget relating to FF&E expenditures,
which approval shall not be unreasonably withheld, delayed or conditioned. During
the continuance of any Lease Reserve Shortfall Period or Event of Default under
the Master Lease or Sublease, any disbursement from the Sublease FF&E
Reserve shall be subject to the prior review of and confirmation by Master
Landlord and Landlord’s Lender that the requested disbursement is in accordance
with the Sublease Operating Budget for the Subleased Property approved for such
Fiscal Year by Master Landlord and Landlord’s Lender and only amounts of
expenses incurred consistent with (or up to the amounts set forth in) such
approved Sublease Operating Budget shall be released from the Sublease FF&E
Reserve to Sublessee; provided that in the event that cash expenditures exceed
the budgeted amount or amounts in the Sublease FF&E Reserve, expenditures
for FF&E to be made in the succeeding period will be credited with such
excess cash expenditures during the current period and Sublessee shall be
entitled to be reimbursed from the Sublease FF&E Reserve in the succeeding
period for such excess cash expenditures during the current period.

 

14.           The
Sublease FF&E Reserve and (i) all cash, checks, funds, drafts,
certificates, instruments and other property, including, without limitation,
all deposits and/or wire transfers from time to time deposited or held in,
credited to or made to the Sublease FF&E Reserve, (ii) all interest,
dividends, cash, instruments and other property from time to time received,
receivable or otherwise payable in respect of, or in exchange for, any or all of
the foregoing; (iii) any replacement deposit account designated by Landlord’s
Lender, and (iv) to the 

 

 

extent not
covered by clauses (i), (ii), or (iii) above, all proceeds (as defined under
the Uniform Commercial Code) of any or all of the foregoing and the funds
deposited therein and any securities and other assets credited thereto (the
Sublease FF&E Reserve and all such other items noted above are referred to,
collectively, as “Sublease FF&E Reserve Collateral”) shall serve as
additional security for the Sublessor’s obligations under the Master Lease. At
all times the Master Landlord shall have control over the Sublease FF&E
Reserve Collateral (subject to Sublessee’s rights to withdraw funds from the
Sublease FF&E Reserve in accordance with Section 13 above), as further set
forth in the Deposit and Control Agreement of even date herewith by and among
Master Landlord, Sublessor, Sublessee, Landlord’s Lender, the Deposit Bank (as
defined therein) and, if applicable, others, a true and correct copy of which is
attached hereto as Exhibit D (the “Sublease Control Agreement”).

 

15.           The
parties acknowledge and agree that the operating covenant set forth in Section
6.1(a)(iii) of the Master Lease (as incorporated into this Sublease pursuant to
Section 4 above) constitutes material consideration for Sublessor’s willingness
to enter into this Sublease on the terms and conditions set forth herein, and
that any discontinuation of operations of the Primary Intended Use other than
as expressly permitted under this Sublease may have a material adverse effect
on the Subleased Property. The parties further acknowledge and agree that the
Sublessee’s obligation to maintain the Subleased Property and the FF&E as
otherwise provided in this Sublease, constitutes further material consideration
to Sublessor for entering into the Sublease on the terms provided herein, and
that the failure to maintain the FF&E as required hereunder would have a
direct and material adverse effect on the Subleased Property, and interfere
with the timely reletting of the Subleased Property were the Sublease to be
terminated following an Event of Default under either the Master Lease or this
Sublease.

 

16.           In
the event of any sale or assignment of Sublessor’s leasehold interest in the
Subleased Property or any portion thereof, Sublessor shall be entirely relieved
of all liability under any and all of its covenants and obligations contained
in this Sublease arising out of any act, occurrence or omission relating to the
Subleased Property or this Sublease occurring after the consummation of such
sale or assignment.

 

17.           All
Notices shall be in writing and delivered by hand or mailed (by registered or
certified mail, return receipt requested or reputable nationally recognized
overnight courier service and postage prepaid), addressed to the respective
parties, as follows:

 

	
  If to Master Landlord:

  	
   

  
	
   

  	
  FCP PropCo, LLC

  1505 South Pavilion Center Drive

  Las Vegas, Nevada 
  89135

  Attention: 
  General Counsel

  Fax:  (702)
  495-4260

  

 

 

	
  If to Sublessor:

  	
   

  
	
   

  	
  Station Casinos, Inc.

  1505 South Pavilion Center Drive

  Las Vegas, Nevada 
  89135

  Attention: 
  General Counsel

  Fax:  (702)
  495-4260

  
	
   

  	
   

  
	
  If to Sublessee:

  	
   

  
	
   

  	
  Palace Station Hotel & Casino, Inc.

  1505 South Pavilion Center Drive

  Las Vegas, Nevada 
  89135

  Attention: 
  General Counsel

  Fax:  (702)
  495-4260

  

 

or to such other
address as either party may hereunder designate, and shall be effective upon
receipt.

 

18.           This
Sublease shall be construed with respect to the Subleased Property under the
substantive laws of the State in which such Subleased Property is situated.

 

19.           This
Sublease contains the entire understanding among the parties relating to the
transactions contemplated hereby and all prior or contemporaneous agreements,
understandings, representations and statements, oral or written, are merged
herein and shall be of no further force or effect.

 

20.           Exhibits
A, B, C and D are hereby incorporated into this Sublease as if set out in
full herein.

 

21.           If
a party commences an action, suit or proceeding (arbitration or otherwise) against
another party because of the breach or anticipated breach by such party of, or
due to any dispute concerning, this Sublease, the losing or defaulting party
shall pay to the prevailing party reasonable attorneys’ and arbitrators’ fees,
costs and expenses incurred in connection with such action, suit or proceeding.

 

22.           This
Sublease shall be binding upon and shall inure to the benefit of the respective
successors and permitted assigns of the parties hereto.

 

23.           This
Sublease may be executed in any number of counterparts, each of which shall be
an original and all of which shall be deemed to be one in the same instrument
with the same effect as if all parties hereto had signed the same signature
page. Any signature page of this Sublease may be detached from any counterpart
of this Sublease identical in form hereto but having attached to it one or more
additional signature pages.

 

 

24.           Nothing
herein shall be construed as releasing or discharging Sublessor from any of the
obligations under the Master Lease, and its liability under said Master Lease
shall be that of principal and not surety. The liability of Sublessor and
Sublessee under said Master Lease with respect to the Subleased Property shall
be joint and several, and Master Landlord may enforce such terms, covenants and
conditions of said Lease and Modifications against either Sublessor or
Sublessee without first proceeding against the other.

 

[signature page follows]

 

 

IN WITNESS WHEREOF, the parties hereto have
executed or have caused this Sublease to be executed as of the date first above
written.

 

	
   

  	
  “Sublessor”

  
	
   

  	
   

  
	
   

  	
  STATION CASINOS, INC.,

  
	
   

  	
  a Nevada corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
        /s/ Thomas M.
  Friel

  	
   

  
	
   

  	
  Name: Thomas M. Friel

  
	
   

  	
  Title:   Executive Vice President,
  Chief

  
	
   

  	
              Accounting
  Officer & Treasurer

  
	
   

  	
   

  
	
   

  	
  “Sublessee”

  
	
   

  	
   

  
	
   

  	
  PALACE STATION HOTEL & CASINO, INC.,

  
	
   

  	
  a Nevada corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
        /s/ Thomas M.
  Friel

  	
   

  
	
   

  	
  Name: Thomas M. Friel

  
	
   

  	
  Title:   Senior Vice President &
  TreasurerExhibit 10.7

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT
(this “Agreement”) is made and entered into as
of the 7th day of November, 2007, by and between STATION
CASINOS, INC., a Nevada corporation (the “Company”),
and FRANK J. FERTITTA III (the “Executive”).

 

WHEREAS, the Company
and the Executive are parties to an Executive Employment Agreement dated May
20, 2003 as amended by that First Amendment to Employment Agreement dated
January 21, 2005 (as so amended, the “Former Agreement”);
and

 

WHEREAS, the
Executive has agreed to continue his employment with the Company, and to serve
as Chief Executive Officer and Chairman of the Board of the Company, on the
terms and conditions set forth herein; and

 

WHEREAS, the parties to this Agreement desire to
replace the Former Agreement in its entirety with this Agreement, and the
Former Agreement shall no longer be of any force or effect;

 

NOW, THEREFORE, in consideration of the
premises and mutual covenants contained herein and for other good and valuable
consideration, the Company and the Executive (each individually a “Party” and together the “Parties”)
agree as follows.

 

1.             DEFINITIONS.
In addition to certain terms defined elsewhere in this Agreement, the following
terms shall have the following respective meanings:

 

1.1           “Affiliate” shall mean any Person controlling, controlled by
or under common control with the Company,

 

1.2           “Base Salary” shall mean the greater of (a) the salary
provided for in Section 3.1 of this Agreement, as the same may be
increased thereunder, (b) any increased salary granted to the Executive by
the Board (in accordance with the terms of the LLC Agreement) or (c) any
increased salary provided for in Section 7.1(a).

 

1.3           “Board” shall mean the Board of Directors of the Company,
including any successor of the Company in the event of a Change in Control.

 

1.4           “Cause” shall mean that the Executive has been found
unsuitable to hold a gaming license by final, non-appealable decision of the
Nevada Gaming Commission.

 

1.5           “Change of Control” shall mean the following:  (A) prior to the occurrence of an Initial
Public Offering (as defined in the LLC Agreement), the consummation of any
transaction (including, without limitation, any merger or consolidation) as a
result of which any “person” or “group” (in each case, as such term is used in
Section 13(d)(3) of the Exchange Act), other than any Member of HoldCo LLC who
is an Existing Equity Holder or Permitted Transferee (as defined in the LLC
Agreement) of such a Member of HoldCo LLC, or an Affiliate thereof, becomes the
“beneficial owner” (as such term is defined in rule 13d-3 promulgated
under the Exchange Act) of more than fifty percent (50%) of the total issued
and outstanding Class A Units 

 

 

and Class B Units of HoldCo LLC; (B) after the occurrence of
an Initial Public Offering, the consummation of any transaction (including,
without limitation, any merger or consolidation) as a result of which any
person or group, other than a Member of HoldCo LLC who is an Existing Equity
Holder or Permitted Transferee of such a Member of HoldCo LLC, or any Affiliate
thereof, becomes the beneficial owner of more than thirty-five percent (35%) of
the total issued and outstanding shares of Voting Stock of the IPO Corporation;
or (C) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation) in one or a series of related
transactions, of more than 50% (as measured by fair market value at the time of
transfer) of the assets of the Company to any person (other than the Company or
a Company subsidiary), other than (x) any Member of HoldCo LLC on the date
hereof or Permitted Transferee of such a Member of HoldCo LLC or Affiliate
thereof or (y) as part of any financing transaction engaged in by the
Company or a Company subsidiary. In addition, no Change of Control shall be
deemed to have occurred as a result of any reorganization of or similar
transaction engaged in by the Company or any subsidiary of the Company
(including in respect of an Initial Public Offering). The Executive
acknowledges and agrees that the consummation of the transactions contemplated
by that Agreement and Plan of Merger dated February 23, 2007, and amended as of
May 4, 2007, among HoldCo LLC, FCP Acquisition Sub and the Company shall not
constitute a “Change in Control” hereunder.

 

1.6           “Code” shall mean the Internal Revenue Code of 1986, as
amended.

 

1.7           “Company Property” shall mean all items and materials
provided by the Company to the Executive, or to which the Executive has access,
in the course of his employment, including, without limitation, all files,
records, documents, drawings, specifications, memoranda, notes, reports,
manuals, equipment, computer disks, videotapes, drawings, blueprints and other
documents and similar items relating to the Company, HoldCo LLC, Affiliates
under the Company’s control, or their respective customers, whether prepared by
the Executive or others, and any and all copies, abstracts and summaries
thereof.

 

1.8           “Confidential Information” shall mean all nonpublic and/or
proprietary information respecting the business of the Company, HoldCo LLC or
any Affiliate of either of them, including, without limitation, its products,
programs, projects, promotions, marketing plans and strategies, business plans
or practices, business operations, employees, research and development,
intellectual property, software, databases, trademarks, pricing information and
accounting and financing data. Confidential Information also includes
information concerning the Company’s, HoldCo LLC’s or any Affiliate’s
customers, such as their identity, address, preferences, playing patterns and
ratings or any other information kept by the Company, HoldCo LLC or any
Affiliate concerning its customers whether or not such information has been
reduced to documentary form. Confidential Information does not include
information that is, or becomes, available to the public unless such
availability occurs through an unauthorized act on the part of the Executive.

 

1.9           “Deferred Compensation Plan for Executives” shall mean the
Company’s Deferred Compensation Plan for Executives, effective as of
November 30, 1994, as the same may be amended from time to time.

 

 

1.10         “Disability” shall mean a physical or mental incapacity that
prevents the Executive from performing the essential functions of his position
with the Company for a minimum period of ninety (90) days as determined
(a) in accordance with any long-term disability plan provided by the
Company of which the Executive is a participant, or (b) by the following procedure:  The Executive agrees to submit to medical
examinations by a licensed healthcare professional selected by the Company, in
its sole discretion, to determine whether a Disability exists. In addition, the
Executive may submit to the Company documentation of a Disability, or lack
thereof, from a licensed healthcare professional of his choice. Following a
determination of a Disability or lack of Disability by the Company’s or the
Executive’s licensed healthcare professional, the other Party may submit
subsequent documentation relating to the existence of a Disability from a
licensed healthcare professional selected by such other party. In the event
that the medical opinions of such licensed healthcare professionals conflict,
such licensed healthcare professionals shall appoint a third licensed
healthcare professional to examine the Executive, and the opinion of such third
licensed healthcare professional shall be dispositive.

 

1.11         “ERISA” shall mean the Employee Retirement Income Security
Act of 1974, as amended.

 

1.12         “Existing Equity Holders” shall mean (a) the Sponsor Equity
Holder and (b) the Executive, Blake L. Sartini, Delise F. Sartini, Lorenzo
J. Fertitta, Scott M Nielson, William W. Warner and Richard J. Haskins, and
their executors, administrators or the legal representatives of their estates,
their heirs, distributees and beneficiaries, and any trust as to which any of
the foregoing is a settlor or co-settlor and any corporation, partnership or
other entity which is an Affiliate of any of the foregoing, and any lineal
descendants of such persons (but only to the extent that the beneficial
ownership of the Class A Units and/or Class B Units of HoldCo LLC held by
such lineal descendants was directly received by gift, trust or sale from any
such person).

 

1.13         “Good Reason” shall mean and exist if, without the Executive’s
prior written consent, one or more of the following events occurs:

 

(a)           the Executive is not appointed to or is
otherwise removed from the office(s) provided for in Section 2.3, for
any reason other than the termination of his employment;

 

(b)           the Executive is assigned any duties or
responsibilities that are inconsistent with the scope of duties and
responsibilities associated with the Executive’s position as described in Section 2.3;

 

(c)           unless the Minimum Ownership Threshold is
not satisfied, the Company gives the Executive notice pursuant to Section
2.2 that it does not intend to extend the Term of Employment for an
additional five year period;

 

(d)           the Executive is not appointed to or is
removed from membership on the Board other than for Cause;

 

(e)           the Executive is required to relocate from,
or maintain his principal office outside of, Las Vegas, Nevada;

 

 

(f)            the Executive suffers a material reduction
in the authorities, duties or responsibilities associated with his position as
described in Section 2.3;

 

(g)           the Executive’s Base Salary is decreased by
the Company or is not increased as provided for in Section 3.1 and/or
Section 7.1(a);

 

(h)           the Executive is excluded from participation
in any employee benefit or incentive plan or program (other than equity-based
compensation) offered to other executives of the Company or his benefits or
opportunities under any employee benefit or incentive plan or program of the
Company is or are materially reduced;

 

(i)            the Executive is not permitted to
participate in the Deferred Compensation Plan for Executives or any other
incentive compensation plans or programs offered by the Company to senior
executives;

 

(j)            the Company fails to pay the Executive any
deferred payments that have become payable under the Deferred Compensation Plan
for Executives or any other bonus or incentive plans;

 

(k)           the Company fails to reimburse the Executive
for business expenses in accordance with the Company’s policies, procedures or
practices;

 

(l)            the Company fails to agree to or to
actually indemnify the Executive for his actions and/or inactions, as either a
director or officer of the Company, to the fullest extent permitted by Nevada
law and the Company’s by-laws, and/or the Company fails to maintain reasonably
sufficient levels of directors’ and officers’ liability insurance coverage for
the Executive when such insurance is available;

 

(m)          the Company fails to make any of the payments
or to provide any of the benefits required under Section 7.1; or

 

(n)           the Company fails to obtain a written
agreement satisfactory to the Executive from any successor or assign of the
Company to assume and perform this Agreement.

 

For purposes of this Agreement, a determination by the Executive that
the Executive has “Good Reason” shall be final and binding on the Company and
the Executive absent a showing of bad faith on the part of the Executive; provided,
however, that if the occurrence of any of the events listed in this Section
1.13 is the result of, or caused by, the actions, or failure to act, of the
Executive or Lorenzo J. Fertitta, then the occurrence of such events(s) shall
not constitute “Good Reason” for purposes of this Agreement.

 

1.14         “HoldCo LLC” shall mean Fertitta Colony Partners LLC.

 

1.15         “IPO Corporation” shall mean the Company (or Affiliate
thereof) which is the issuer of the equity interests offered and sold in the
Initial Public Offering.

 

 

1.16         “LLC Agreement” shall mean that Second Amended and Restated Operating
Agreement of Fertitta Colony Partners LLC, dated of even date herewith, as the
same may be amended from time to time in accordance with the terms thereof.

 

1.17         “Minimum Annual Bonus” shall mean an amount equal to fifty
percent (50%) of the Executive’s then current Target Annual Bonus.

 

1.18         “Minimum Ownership Threshold” shall mean the direct or
indirect ownership by the Executive and Lorenzo J. Fertitta, in the aggregate,
of not less than two and one-half percent (2.5%) of the outstanding
Class A Units of HoldCo LLC, including any successor of the Company in the
event of a Change in Control.

 

1.19         “Person” shall mean any individual, firm, partnership,
association, trust, company, corporation or other entity.

 

1.20         “Pro Rata Annual Bonus” shall mean the amount of Annual
Bonus, multiplied by a fraction, the numerator of which is the number of days
in such year during which the Executive was actually employed by the Company
(or its predecessor) and the denominator of which is 365.

 

1.21         “Special Long-Term Disability Plan” shall mean the Company’s
Special Long-Term Disability Plan, effective as of November 30, 1994, as
the same may be amended from time to time.

 

1.22         “Sponsor Equity Holder” shall mean the affiliates of Colony
Capital, LLC, including FC Investor, LLC and its affiliated funds and
controlled accounts.

 

1.23         “Supplemental Executive Retirement Plan” shall mean the
Company’s Supplemental Executive Retirement Plan, effective as of
November 30, 1994, as amended by that First Amendment to Supplemental
Executive Retirement Plan, effective as of January 21, 2005,  as the same may be amended from time to time.

 

1.24         “Target Annual Bonus” shall mean an amount that is no less
than two hundred percent (200%) of the Executive’s then current Base Salary.

 

1.25         “Term of Employment” shall mean the period specified in Section 2.2.

 

1.26         “Voting Stock” shall mean capital stock or other equity
interests of any class or classes whose holders are entitled under ordinary
circumstances (irrespective of whether at the time stock or other equity
interests of any other class or classes shall have or might have voting power
by reason of the happening of any contingency) to vote for the election of a
majority of the directors, managers, trustees or other governing body of such
Person.

 

2.             TERM OF EMPLOYMENT, POSITIONS AND RESPONSIBILITIES.

 

2.1           Employment
Accepted. The Company hereby employs the Executive, and the Executive
hereby accepts employment with the Company, for the Term of Employment, in the
positions and with the duties and responsibilities set forth in Section 2.3,
and upon such other terms and conditions as are stated in this Agreement. The
Former Agreement is hereby deemed to be superceded by this Agreement and shall
no longer be in force or effect.

 

2.2           Term
of Employment. The initial Term of Employment shall commence upon the
date of this Agreement and, unless earlier terminated pursuant to the
provisions of this Agreement, shall terminate upon the close of business on the
day immediately preceding the fifth anniversary of the date of this Agreement; provided,
however, that the initial Term of Employment shall automatically be
extended for successive five-year periods if neither Party has advised the
other in writing in accordance with Section 13 at least six (6) months
prior to the end of the then current Term of Employment that such Term of
Employment will not be extended for an additional five (5) year period
and, provided, further, so long as the Minimum Ownership
Threshold is satisfied, the Company shall have no right to provide a notice of
non-extension to the Executive. In the event that such notice is given,
(i) the Executive’s employment shall terminate upon the close of business
on the day immediately preceding the expiration of the then current Term of
Employment, and (ii) the Executive shall not be entitled to any additional
compensation hereunder after the expiration thereof, but such termination of
employment shall not otherwise affect accrued but unpaid compensation or
benefits provided under this Agreement or pursuant to any Company plan or
program.

 

2.3           Title
and Responsibilities. During the Term of Employment, the Executive
shall be employed as the Chief Executive Officer and Chairman of the Board and
shall serve as a member of the Board. In carrying out his duties under this
Agreement, the Executive shall only report to the Board. During the Term of
Employment, the Executive shall devote reasonable time and attention to the
business and affairs of the Company and shall use his best efforts, skills and
abilities to promote the Company’s interests. Anything herein to the contrary
notwithstanding, the Executive shall not be precluded from engaging in
charitable and community affairs and managing his personal investments. It is
expressly understood and agreed that, to the extent any such activities have
been conducted by the Executive prior to the date of this Agreement and
disclosed to the Board, the continued conduct of such activities (or activities
similar in nature and scope thereto) after the date of this Agreement shall be
deemed not to interfere with the Executive’s duties and obligations to the
Company under this Agreement. The Executive may serve as a member of the board
of directors of other corporations, subject to the approval of a majority of
the Board, which approval shall not be unreasonably withheld or delayed.

 

3.             COMPENSATION.

 

3.1           Base Salary. During the Term of
Employment, the Executive shall be entitled to receive a base salary payable no
less frequently than in equal bi-weekly installments at an annualized rate of
no less than (a) $2,500,000 during the first year of the Term of Employment;
(b)  $2,750,000 during the second year of the Term of Employment; (c) $3,000,000
during the third year of the Term of Employment; (d) $3,250,000 during the
fourth year of the Term of 

 

 

Employment; and (e) $3,500,000 during the fifth year of the Term
of Employment (the “Base Salary”). Following
the fifth year of the Term of Employment, the Base Salary shall be reviewed
annually for increase (but not decrease) in the discretion of the Board; provided,
however, that the Base Salary shall be increased by a minimum of five
percent (5%) per year following the fifth year of the Term of Employment,
(which guaranteed minimum increases shall continue through the reminder of the
Term of Employment). In conducting any such annual review, the Board shall take
into account any change in the Executive’s responsibilities, increases in the
compensation of other executives of the Company or any Affiliate (or any competitor(s)
of either or both), the performance of the Executive and/or other pertinent
factors. Such increased Base Salary shall then constitute the Executive’s “Base
Salary” for purposes of this Agreement.

 

3.2           Annual Bonus. The Company shall pay
the Executive an annual bonus (the “Annual Bonus”)
for each calendar year ending during the Term of Employment in an amount that
will be determined by the Board based on the Executive’s performance; provided,
however, that the Annual Bonus for each such calendar year shall be no
less than the Minimum Annual Bonus. The Annual Bonus awarded to the Executive
shall be paid at the same time as annual bonuses are paid to other senior
officers of the Company, and in any event no later than March 1 of the year
following the calendar year in which such bonus is earned, unless the Executive
has elected to defer receipt of all or part of the bonus amounts to which he is
entitled in respect of any such calendar year, in accordance with the terms and
provisions of any deferred compensation program maintained by the Company.

 

3.3           Supplemental Performance Bonus. In
addition to the Annual Bonus, the Company shall also pay to the Executive a
supplemental performance bonus (the “Supplemental Performance
Bonus”) for each calendar year ending during the Term of Employment
in the event that the Company and its subsidiaries, on a consolidated basis,
exceed the target financial performance benchmarks established pursuant to
clause (ii) of Schedule II of the LLC Agreement, (as the same may be subject to
equitable adjustment thereunder), for such calendar year by ten percent (10%)
or more.

 

3.4           Deferred Compensation. The
Executive shall be eligible to participate in the Company’s Deferred
Compensation Plan for Executives, and any other deferred compensation plans
that the Company may adopt for executives, pursuant to the terms of the plans.

 

4.             EMPLOYEE
BENEFIT PROGRAMS.

 

4.1           Pension and Welfare Benefit Plans. During
the Term of Employment, the Executive shall be entitled to participate in all employee
benefit programs made available to the Company’s executives or salaried
employees generally, as such programs may be in effect from time to time,
including, without limitation, pension and other retirement plans, profit
sharing plans, group life insurance, group health insurance, accidental death
and dismemberment insurance, long-term disability, sick leave (including salary
continuation arrangements), vacations, holidays and other employee benefit
programs sponsored by the Company; provided, however, that the
Executive shall not be entitled to receive any equity-based compensation (other
than the equity-based compensation provided to the Executive under the terms of
the LLC Agreement) without the approval of a Supermajority (as defined in the
LLC Agreement) of the Board of Managers of HoldCo LLC.

 

 

4.2           Additional Pension and Welfare Benefits.
In addition to the foregoing, the Company shall provide the Executive with the
following benefits:

 

(a)           Executive Group Health Insurance coverage
pursuant to such plan or plans as the Company may select and which shall be
fully paid for by the Company;

 

(b)           full salary continuation during the first
ninety (90) days of any physical or mental incapacity that prevents the
Executive from performing his duties and, for any Disability that continues
thereafter, benefits pursuant to the Company’s Special Long-Term Disability
Plan and any other long-term disability benefits pursuant to any other
disability plan of which the Executive is a participant;

 

(c)           an annual supplemental retirement benefit as
set forth in the Supplemental Executive Retirement Plan, in addition to any
other benefit pursuant to any other retirement plan under which the Executive
is covered; provided, however, that the Supplemental Executive
Retirement Plan may not be amended or modified in any respect without the prior
written consent of the Executive;

 

(d)           life insurance coverage in an aggregate
amount of not less than $70,000,000 through individual and/or group policies,
including split dollar policies and term life policies; and

 

(e)           the Executive shall be eligible to
participate in any long-term compensation programs maintained by the Company to
the extent provided in the applicable plan documents.

 

5.             BUSINESS EXPENSE REIMBURSEMENT AND PERQUISITES.

 

5.1           Expense Reimbursement; Security Arrangements.
During the Term of Employment, the Executive shall be entitled to receive
reimbursement by the Company for all reasonable out-of-pocket expenses incurred
by him in performing services under this Agreement, subject to providing the
proper documentation of said expenses. During the Term of Employment, the
Company shall also provide the Executive, if he so chooses, with security
arrangements similar to these in effect for the Executive as of the date of this
Agreement at his residences and when traveling (for both business and personal
purposes); provided, however, that any security equipment
installed at such residences shall become the sole property of the Executive
upon the expiration or earlier termination of this Agreement.

 

5.2           Perquisites. During the Term of
Employment, the Executive shall also be entitled to any of the Company’s
executive perquisites in accordance with the terms and provisions of the
applicable policies, including, without limitation:

 

(a)           use of an automobile;

 

(b)           payment or reimbursement of the cost of an
annual physical examination;

 

(c)           vacation of at least four (4) weeks per
year;

 

 

(d)           payment or reimbursement of initiation fees
and annual membership fees and assessments for a country club, a luncheon club
and a physical fitness program of the Executive’s choice; and

 

(e)           payment or reimbursement of fees and
expenses, up to a maximum amount of $10,000.00, incurred in connection with
having this Agreement reviewed by legal counsel prior to execution.

 

6.             TERMINATION OF EMPLOYMENT.

 

6.1           Termination Due to Death or Disability.
The Executive’s employment shall be terminated immediately in the event of his
death or Disability. In the event of a termination due to the Executive’s death
or Disability, the Executive or his estate, as the case may be, shall be
entitled, in lieu of any other compensation whatsoever, to:

 

(a)           Base Salary at the rate in effect at the
time of his termination for a period of twenty-four (24) months following
the termination of employment;

 

(b)           any Annual Bonus and Supplemental
Performance Bonus awarded but not yet paid;

 

(c)           a Pro Rata Annual Bonus for the fiscal year
in which death or Disability occurs;

 

(d)           any deferred compensation or bonuses,
including interest or other credits on the deferred amounts to the extent
provided in the plans or programs providing for deferral;

 

(e)           immediate vesting of all restricted stock,
stock options, phantom stock units, stock appreciation rights and similar
stock-based or performance-based interests, which stock options, stock
appreciation rights and similar exercisable interests shall continue to be and
shall remain exercisable for the remaining term of such stock options, stock
appreciation rights and similar exercisable interests, as applicable, as set
forth in the agreement granting or otherwise awarding such stock option, stock
appreciation right or similar exercisable interest as if no termination of
employment had occurred;

 

(f)            reimbursement for expenses incurred but not
paid prior to such termination of employment;

 

(g)           in the case of Disability,
(i) continuation of the Executive’s health and welfare benefits at the
level in effect on the date of termination through the end of the 60th month
following the termination of the Executive’s employment, or (ii) at the
Executive’s option, a lump-sum payment to the Executive of the economic
equivalent thereof, as if the Executive’s employment had continued during such
period; and

 

(h)           such rights to other compensation and benefits
as may be provided in applicable plans and programs of the Company, including,
without limitation, applicable 

 

 

employee benefit plans and programs, according to the terms and
provisions of such plans and programs.

 

6.2           Termination by the Company for Cause.
The Company may terminate the Executive for Cause at any time during the Term
of Employment by giving written notice of the Executive in the event (and only
in the event) that the Executive has been found unsuitable to hold a gaming
license by a final, non-appealable decision of the Nevada Gaming Commission. In
the event of a termination for Cause, the Executive shall be entitled, in lieu
of any other compensation whatsoever, to:

 

(a)           Base Salary at the rate in effect at the
time of his termination through the date of termination of employment;

 

(b)           any Annual Bonus and Supplemental
Performance Bonus awarded but not yet paid;

 

(c)           any deferred compensation or bonuses,
including interest or other credits on the deferred amounts to the extent provided
in the plans or programs providing for deferral;

 

(d)           reimbursement for expenses incurred but not
paid prior to such termination of employment; and

 

(e)           such rights to other benefits as may be
provided in applicable plans and programs of the Company, including, without
limitation, applicable employee benefit plans and programs, according to the
terms and conditions of such plans and programs.

 

6.3           Termination by the Executive Without Good Reason
Prior to a Change in Control. The Executive may terminate his
employment on his own initiative for any reason prior to a Change in Control
upon one hundred eighty (180) days’ prior written notice to the Company; provided,
however, that during such notice period, the Executive shall reasonably
cooperate with the Company (at no cost to the Executive) in minimizing the
effects of such termination on the Company and its subsidiaries. Such
termination shall have the same consequences as a termination for Cause under Section 6.2.

 

6.4           Termination by the Company Without Cause Prior to
Change in Control. Notwithstanding any other provision of this
Agreement, the Company may terminate the Executive’s employment without Cause,
other than due to death or Disability, at any time during the Term of
Employment that the Minimum Ownership Threshold is not satisfied by giving
written notice to the Executive. In the event of such termination, the
Executive shall be entitled, in lieu of any other compensation whatsoever, to:

 

(a)           a lump-sum payment equal to four times two
hundred twenty percent (220%) of the Executive’s Base Salary at the rate
in effect at the time of his termination;

 

(b)           any Annual Bonus and Supplemental
Performance Bonus awarded but not yet paid;

 

 

(c)           a Pro-Rata Annual Bonus for the fiscal year
in which such termination of employment occurs;

 

(d)           any deferred bonus, including interest or
other credits on the deferred amounts, to the extent provided in the Deferred
Compensation Plan for Executives;

 

(e)           immediate vesting of all restricted stock,
stock options, phantom stock units, stock appreciation rights and similar
stock-based or performance-based interests, which stock options, stock
appreciation right and similar exercisable interests shall continue to be and
shall remain exercisable for the remaining term of such stock options, stock
appreciation rights and similar exercisable interests, as applicable, as set
forth in the agreement granting or otherwise awarding such stock option, stock
appreciation right or similar exercisable interest as if no termination of employment
had occurred;

 

(f)            reimbursement of expenses incurred but not
paid prior to such termination of employment;

 

(g)           (i) continuation of all benefits provided to
the Executive pursuant to Section 4.2, including, without
limitation, the Executive’s group health insurance and participation in the
Company’s Special Long-Term Disability Plan and any other long-term disability
insurance generally provided to senior executives of the Company, at the level
in effect at the time of his termination of employment, through the end of the
60th month following such termination, or (ii) at the Executive’s option,
a lump-sum payment to the Executive of the economic equivalent thereof, as if
such Executive were employed during such period; and

 

(h)           such rights to other benefits as may be
provided in applicable plans and programs of the Company, including, without
limitation, applicable employee benefit plans and programs, according to the
terms and conditions of such plans and programs.

 

For the avoidance of doubt, so long as the Minimum Ownership Threshold
is satisfied, the Company shall have no right to terminate the Executive
without Cause under this Agreement.

 

6.5           Termination by the Executive With Good Reason
Prior to a Change in Control. The Company covenants and agrees
that it will not take any action, or fail to take any action, that will provide
Good Reason for the Executive to terminate this Agreement. In the event that
the Company takes such action, or fails to take such action, in violation of
the proceeding sentence, then in addition to any other remedies available to
the Executive at law or in equity, the Executive may terminate his employment
on his own initiative for Good Reason at any time prior to a Change in Control
upon thirty (30) days prior written notice to the Company. Such
termination shall have the same consequences as a termination without Cause
under Section 6.4.

 

7.             CHANGE IN CONTROL.

 

7.1           Change in Control. Immediately upon
a Change in Control, in addition to any other compensation or benefits payable
pursuant to this Agreement or otherwise, the Executive shall be entitled to:

 

 

(a)           an Annual Bonus of at least one hundred
twenty percent (120%) of his then applicable Base Salary;

 

(b)           immediate vesting of all benefits, without
penalty or reduction in rights or benefits, including, without limitation,
immediate vesting of all restricted stock, stock options, phantom stock units,
stock appreciation rights and similar stock-based or performance-based
interests, which stock options, stock appreciation rights and similar
exercisable interests shall continue to be and shall remain exercisable for the
remaining term of such stock options, stock appreciation rights and similar
exercisable interests, as applicable, as set forth in the agreement granting or
otherwise awarding such stock option, stock appreciation right, or similar
exercisable interest;

 

(c)           a lump-sum payment to the Executive of the
economic equivalent of the Executive receiving payments under the Supplemental
Executive Retirement Plan for a period of fifteen (15) years (with such amount
to be determined as if the Executive were immediately eligible for retirement
under such Plan as of his termination date without penalty for early
retirement); provided, however, that all of the Executive’s
rights under such Plan shall terminate upon receiving such lump-sum payment;

 

(d)           immediate vesting of any deferred
compensation or bonuses, including interest or other credits on the deferred
amount to the extent provided in the plans or programs providing for deferral;

 

(e)           (i) continued funding of the Executive’s
split dollar and term life insurance policies and any other life insurance
policies maintained by the Company on behalf of the Executive as of the date of
the Change in Control, as if the Executive were employed by the Company through
the maturity date of such policies or payment in full of all premium
obligations under such policies, or (ii) at the Executive’s option, a
lump-sum payment to the Executive of the economic equivalent thereof, as if the
Executive were employed by the Company through the maturity date of such
policies; and

 

(f)            such rights to other benefits as may be
provided in applicable plans and programs of the Company, including, without
limitation, applicable employee benefit plans and programs, according to the
terms and conditions of such plans and programs.

 

7.2           Termination of the Executive’s Employment After a
Change in Control. If subsequent to a Change in Control, the
Executive’s employment is terminated by the Company without Cause (which
termination may only occur if the Executive fails to satisfy the Minimum
Ownership Threshold at the time of such termination) or by the Executive for
Good Reason, the Executive shall be entitled, in addition to any compensation
and benefits provided pursuant to Section 7.1 above, to:

 

(a)           a lump-sum payment equal to the greater of
(i) four (4) times two hundred twenty percent (220%) of his Base
Salary at the time of the Change in Control or (ii) four (4) times two
hundred twenty percent (220%) of his Base Salary at the time of the
termination of his employment;

 

 

(b)           any Annual Bonus and Supplemental
Performance Bonus awarded but not yet paid;

 

(c)           a Pro Rata Annual Bonus for the fiscal year
in which such termination of employment occurs;

 

(d)           (i) continuation of all employee benefits
provided to the Executive pursuant to Section 4.2 for a period of sixty
(60) months following such termination of employment, or (ii) at the
Executive’s option, a lump-sum payment to the Executive of the economic
equivalent thereof, as if the Executive were an employee of the Company during
such period; and

 

(e)           reimbursement of expenses incurred but not
paid prior to such termination of employment.

 

For the avoidance of doubt, so long as the Minimum Ownership Threshold
is satisfied, the Company shall have no right to terminate the Executive
without Cause under this Agreement.

 

7.3           Termination by Executive without Good Reason After
a Change in Control. If the Executive terminates his employment
without Good Reason following a Change in Control, in addition to any
compensation and benefits provided pursuant to Section 7.1, but in
lieu of any other compensation and benefits whatsoever, he shall be entitled to
the following:

 

(a)           if such termination occurs in the first
twelve (12) months following a Change in Control, the Executive shall be
entitled to (i) a lump-sum payment equal to eighty percent (80%) of
the amount payable to the Executive pursuant to Section 7.2(a), and
(ii) all of the benefits provided in Sections 6.4(a), (b), (d) and
(e);

 

(b)           if such termination occurs at any time after
the first twelve (12) months following a Change in Control, the Executive
shall be entitled to (i) one hundred percent (100%) of the amount
payable to the Executive pursuant to Section 7.2(a), and
(ii) all of the benefits provided in Sections 6.4 (a), (b), (d)
and (e); and

 

(c)           in either instance, the Executive shall be
entitled to such rights to benefits as may be provided in applicable plans and
programs of the Company, including, without limitation, applicable employee
benefit plans and programs, according to the terms and conditions of such plans
and programs; and

 

(d)           reimbursement of expenses incurred but not
paid prior to such termination of employment.

 

7.4           Termination for Other Reasons After a Change in
Control. If the Executive’s employment is terminated by the
Company for any reason not provided by Section 7.2 or Section 7.3,
his rights shall be determined in accordance with the applicable subsection of Section 6.

 

7.5           Funding of Payments. All payments
payable to the Executive pursuant to this Section 7, except for
payments payable as a lump sum, shall be made to a trust which shall be 

 

 

established for such purpose and shall provide for Towers Perrin (or
such other trustee mutually acceptable to the Company and the Executive) to
serve as the trustee thereof.

 

8.             CONDITIONS TO PAYMENTS.

 

8.1           Timing of Payments. Unless
otherwise provided herein, any payments to which the Executive shall be
entitled under Sections 6 and 7 following the termination of his
employment shall be made as promptly as possible and in no event later than
five (5) business days following such termination of employment.

 

8.2           No Mitigation; No Offset. In the
event of any termination of employment under Sections 6 or 7, the
Executive shall be under no obligation to seek other employment and there shall
be no offset against amounts due to the Executive on account of any
remuneration attributable to any subsequent employment that the Executive may
obtain. Any amounts payable to the Executive are in the nature of severance
payments, or liquidated damages, or both, and are not in the nature of a
penalty.

 

9.             SPECIAL REIMBURSEMENT.

 

9.1           If
any payment or benefit paid or payable, or received or to be received, by or on
behalf of the Executive, whether any such payments or benefits are pursuant to
the terms of this Agreement or any other plan, program, arrangement or
agreement of or with the Company, any Affiliate, any Person, or otherwise (the “Total Payments”), will or would be subject to the excise tax
imposed under Section 4999 of the Code (the “Excise Tax”),
the Company shall pay to the Executive an additional amount (the “Gross-Up Payment”) such that, after payment by the Executive
of all taxes (including any interest or penalties imposed with respect to such
taxes) imposed upon or in respect of the Total Payments and the Gross-Up
Payments, including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and any Excise Tax imposed thereon, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Total Payments.

 

9.2           For
purposes of determining whether any of the Total Payments will be subject to
the Excise Tax and the amount of such Excise Tax,

 

(a)           the
Total Payments shall be treated as “parachute payments” within the meaning of
Section 280G(b)(2) of the Code, and all “excess parachute payments” within
the meaning of Section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax, unless in the opinion of tax counsel selected by the Company
and reasonably acceptable to the Executive (which opinion shall be provided to
the Executive) such Total Payments (in whole or in part) (i) do not
constitute parachute payments, including (without limitation) by reason of
Section 280G(b)(4)(A) of the Code, (ii) such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered, within the meaning of Section 280G(b)(4)(B) of the
Code, or (iii) are not, in the opinion of legal counsel, otherwise subject
to the Excise Tax, and

 

(b)           the
value of any non-cash benefits or any deferred payment or benefit shall be
determined by the Company’s independent auditors in accordance with the principles
of Sections 280G(d)(3) and (4) of the Code.

 

 

9.3           In
the event that the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder, the Executive shall repay to the Company,
at the time that the amount of such reduction in Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable to such reduction
plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined
to exceed the amount taken into account hereunder at the time of the
termination of the Executive’s employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the
initial Gross-Up Payment), the Company shall make an additional Gross-Up
Payment in accordance with Section 9.1 in respect of such excess
Excise Tax (plus any interest, penalties or additions payable by the Executive
with respect to such excess Excise Tax) at the time that the amount of such
excess Excise Tax is finally determined. The Executive and the Company shall
each reasonably cooperate with each other in connection with any administrative
or judicial proceedings concerning the existence or amount of any such
subsequent liability for Excise Tax with respect to the Total Payments.

 

10.           INDEMNIFICATION.

 

10.1         General. The Company agrees that if
the Executive is made a party or is threatened to be made a party to any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (an “Indemnifiable Action”),
by reason of the fact that he is or was a director or officer of the Company or
is or was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether or not the basis of such Indemnifiable Action is alleged action
in an official capacity as a director, officer, member, employee or agent he
shall be indemnified and held harmless by the Company to the fullest extent
authorized by Nevada law and the Company’s by-laws, as the same exist or may
hereafter be amended (but, in the case of any such amendment to the Company’s
by-laws, only to the extent such amendment permits the Company to provide
broader indemnification rights than the Company’s by-laws permitted the Company
to provide before such amendment), against all expense, liability and loss
(including, without limitation, attorneys’ fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) incurred or
suffered by the Executive in connection therewith.

 

10.2         Procedure. The indemnification
provided pursuant to this Section 10 shall be subject to the
following conditions:

 

(a)           The Executive must promptly give the Company
written notice of any actual or threatened Indemnifiable Action and, upon
providing such notice, the Executive shall be presumed to be entitled to
indemnification under this Agreement and the Company shall have the burden of
proof to overcome that presumption in reaching any contrary determination;
provided, however, that the Executive’s failure to give such notice shall not
affect the Company’s obligations hereunder;

 

(b)           The Company will be permitted, at its
option, to participate in, or to assume, the defense of any Indemnifiable
Action, with counsel approved by the Executive; provided, however, that
(i) the Executive shall have the right to employ his own counsel in such
Indemnifiable Action at the Executive’s expense; and (ii) if (A) the 

 

 

retention of counsel by the Executive has been previously authorized by
the Company, (B) the Executive shall have concluded, based on the advice
of his legal counsel, that there may be a conflict of interest between the
Company and the Executive in the conduct of any such defense, or (C) the
Company shall not, in fact, have retained counsel to assume the defense of such
Indemnifiable Action, the fees and expenses of the Executive’s counsel shall be
at the expense of the Company; and provided, further, that the Company shall
not settle any action or claim that would impose any limitation or penalty on
the Executive without obtaining the Executive’s prior written consent, which
consent shall not be unreasonably withheld;

 

(c)           The Executive must provide reasonable
cooperation to the Company in the defense of any Indemnifiable Action; and

 

(d)           The Executive must refrain from settling any
Indemnifiable Action without obtaining the Company’s prior written consent,
which consent shall not be unreasonably withheld.

 

10.3         Advancement of Costs and Expenses. The
Company agrees to advance all costs and expenses referred to in Sections 10.1
and 10.6; provided, however, that the Executive agrees to repay to the
Company any amounts so advanced only if, and to the extent that, it shall
ultimately be determined by a court of competent jurisdiction that the
Executive is not entitled to be indemnified by the Company as authorized by
this Agreement. The advances to be made hereunder shall be paid by the Company
to or on behalf of the Executive within twenty (20) days following
delivery of a written request therefor by the Executive to the Company. The
Executive’s entitlement to advancement of costs and expenses hereunder shall
include those incurred in connection with any action, suit or proceeding by the
Executive seeking a determination, adjudication or arbitration in award with
respect to his rights and/or obligations under this Section 10.

 

10.4         Non-Exclusivity of Rights. The
right to indemnification and the payment of expenses incurred in defending an
Indemnifiable Action in advance of its final disposition conferred in this Section 10
shall not be exclusive of any other right which the Executive may have or hereafter
may acquire under any statute, provision of the certificate of incorporation or
by-laws of the Company, agreement, vote of stockholders or disinterested
directors or otherwise.

 

10.5         D&O Insurance. The Company will
maintain a directors’ and officers’ liability insurance policy covering the
Executive that provides coverage that is reasonable in relation to the
Executive’s position during the Term of Employment.

 

10.6         Witness Expenses. Notwithstanding
any other provision of this Agreement, the Company shall indemnify the
Executive if and whenever he is a witness or threatened to be made a witness to
any action, suit or proceeding to which the Executive is not a party, by reason
of the fact that the Executive is or was a director or officer of the Company
or its Affiliates or by reason of anything done or not done by him in such
capacity, against all expense, liability and loss incurred or suffered by the
Executive in connection therewith; provided, however, that if the Executive is
no longer employed by the Company, the Company will compensate him, on an 

 

 

hourly basis, for all time spent, at either his then current
compensation rate or his Base Salary at the rate in effect as of the
termination of his employment, whichever is higher.

 

10.7         Survival. The provisions of this Section 10
shall survive the expiration or earlier termination of this Agreement,
regardless of the reason for such termination.

 

11.           CONFIDENTIAL INFORMATION.

 

11.1         Confidential Information. The
Executive understands and acknowledges that Confidential Information
constitutes a valuable asset of the Company and its Affiliates and may not be
converted to the Executive’s own or any third party’s use. Accordingly, the
Executive hereby agrees that he shall not, directly or indirectly, during the
Term of Employment or for a period of twelve (12) months after the
termination of his employment, disclose any Confidential Information to any
Person not expressly authorized by the Company to receive such Confidential
Information. The Executive further agrees that he shall not, directly or
indirectly, during the Term of Employment or for a period of twelve
(12) months after the termination of his employment, use or make use of
any Confidential Information in connection with any business activity other
than that of the Company. The Parties acknowledge and agree that this Agreement
is not intended to, and does not, alter either the Company’s rights or the
Executive’s obligations under any state or federal statutory or common law
regarding trade secrets and unfair trade practices.

 

11.2         Company Property. All Company
Property is and shall remain exclusively the property of the Company. Unless
authorized in writing to the contrary, the Executive shall promptly, and
without charge, deliver to the Company on the termination of employment
hereunder, or at any other time the Company may so request, all Company
Property that the Executive may then possess or have under his control.

 

11.3         Required Disclosure. In the event
the Executive is required by law or court order to disclose any Confidential
Information or to produce any Company Property, the Executive shall promptly
notify the Company of such requirement and provide the Company with a copy of
any court order or of any law which requires such disclosure and, if the
Company so elects, to the extent permitted by applicable law, give the Company
an adequate opportunity, at its own expense, to contest such law or court order
prior to any such required disclosure or production by the Executive.

 

11.4         Survival. The Executive agrees that
the provisions of this Section 11 shall survive the termination of
this Agreement and the termination of the Executive’s employment to the extent
provided above.

 

12.           DISPUTE RESOLUTION; FEES. Except as
otherwise provided in Section 10.3, the Company agrees that in the
event the Executive finds it necessary to initiate any legal action to obtain
any payments, benefits or rights provided by this Agreement to him, the Company
shall reimburse the Executive for all attorney’s fees and other related
expenses incurred by him to the extent the Executive is successful in such
action.

 

13.           NOTICES. All notices, demands and
requests required or permitted to be given to either Party under this Agreement
shall be in writing and shall be deemed to have been given when 

 

 

delivered personally or sent by certified or registered mail, postage
prepaid, return receipt requested, duly addressed to the Party concerned at the
address indicated below or to such changed address as such Party may subsequently
give notice of:

 

	
  If to the Company:

  	
  Station Casinos, Inc.

  
	
   

  	
  1505 S. Pavilion Center Drive

  
	
   

  	
  Las Vegas, Nevada 89135

  
	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
  With a copy to:

  	
  Milbank, Tweed, Hadley & McCloy LLP

  
	
   

  	
  601 South Figueroa Street, 30th Floor

  
	
   

  	
  Los Angeles, California 90017

  
	
   

  	
  Attention: Kenneth J. Baronsky

  
	
   

  	
   

  
	
  If to the Executive:

  	
  Frank J. Fertitta III

  
	
   

  	
  1505 S. Pavilion Center Drive

  
	
   

  	
  Las Vegas, Nevada 89135

  

 

14.           EMPLOYEE BENEFIT PLAN DOCUMENTS. In
the event that any provision of this Agreement conflicts with the terms and
provisions of any employee benefit plan document, the provisions of this
Agreement shall govern; and the Company shall take any and all actions that may
be necessary, including amendment of any plan document, to the extent necessary
to effect the provision of benefits expressly provided upon termination of the
Executive’s employment pursuant to Sections 6 and 7.

 

15.           BENEFICIARIES/REFERENCES. The
Executive shall be entitled to select a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following the Executive’s death,
and may change such election, by giving the Company written notice thereof. In
the event of the Executive’s death or a judicial determination of his
incompetence, reference in this Agreement to the Executive shall be deemed,
where appropriate, to refer to his beneficiary, estate or other legal
representative.

 

16.           SURVIVORSHIP. The respective rights
and obligations of the Parties hereunder shall survive any termination of this
Agreement to the extent necessary to the intended preservation of such rights
and obligations. The provisions of this Section 16 are in addition
to the survivorship provisions of any other Section of this Agreement.

 

17.           REPRESENTATIONS AND WARRANTIES. Each
Party represents and warrants that he or it is fully authorized and empowered
to enter into this Agreement and that the performance of his or its obligations
under this Agreement will not violate any agreement between that Party and any
other Person.

 

18.           ENTIRE AGREEMENT. This Agreement
contains the entire agreement between the Parties concerning the subject matter
hereof and supersedes all prior agreements, understandings, discussions,
negotiations and undertakings, whether written or oral, between the Parties with
respect thereto. No representations, inducements, promises or agreements not
embodied herein shall be of any force or effect.

 

 

19.           ASSIGNABILITY; BINDING NATURE. This
Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors, heirs and assigns; provided, however,
that no rights or obligations of the executive under this Agreement may be
assigned or transferred by the Executive, other than rights to compensation and
benefits hereunder, which may be transferred only by will or operation of law
and subject to the limitations of this Agreement; and provided, further,
that no rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company, except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation in which
the Company is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of the Company, provided that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company under this Agreement, either
contractually or as a matter of law. Upon the consummation of the Initial
Public Offering, this Agreement shall be assumed by the IPO Corporation
and the Company and any other Company Affiliate having obligations hereunder
shall thereupon be released from any liabilities or obligations hereunder.

 

20.           AMENDMENT OR WAIVER. No provision
in this Agreement may be amended or waived unless such amendment or waiver is
agreed to in writing, signed by both Parties. No waiver by one Party of any
breach by the other Party of any condition or provision of this Agreement to be
performed by such other Party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same or any prior or subsequent time. No
failure of the Company to exercise any power given it hereunder or to insist
upon strict compliance by the Executive with any obligation hereunder, and no
custom or practice at variance with the terms hereof, shall constitute a waiver
of the right of the Company to demand strict compliance with the terms hereof.

 

21.           SEVERABILITY. In the event that any
provision or portion of this Agreement shall be determined to be invalid or
unenforceable for any reason, in whole or in part, the remaining provisions of
this Agreement shall be unaffected thereby and shall remain in full force and
effect to the fullest extent permitted by law.

 

22.           SECTION 409A. Notwithstanding
anything in this Agreement to the contrary, no payment under this Agreement
shall be made to the Executive at a time or in a form that would subject
Executive to the penalty tax of Section 409A of the Code (the “409A Tax”). If any payment under any other provision of this
Agreement would, if paid at the time or in the form called for under such
provision, subject the Executive to the 409A Tax, such payment (the “Deferred Amount”) shall instead be paid at the earliest
time that it could be paid without subjecting the Executive to the 409A Tax,
and shall be paid in a form that would not subject the Executive to the 409A
Tax. The Deferred Amount shall accrue simple interest at the prime rate of
interest as published by Bank of America N.A. (or its successor) during the
deferral period and shall be paid with the Deferred Amount. The Company will
place an amount in a “rabbi trust” with Towers Perrin (or such other trustee
mutually acceptable to the Company and the Executive) equal to the Deferred
Amount, plus the interest that will accrue thereon.

 

23.           GOVERNING LAW. This Agreement shall
be governed by and construed and interpreted in accordance with the laws of the
State of Nevada without reference to the principles of conflict of laws thereof.
In the event of any dispute or controversy arising out of or relating to 

 

 

this Agreement, the Parties mutually and irrevocably consent to, and
waive any objection to, the exclusive jurisdiction of any court of competent
jurisdiction in Clark County, Nevada, to resolve such dispute or controversy.

 

24.           HEADINGS. The headings of the
Sections and Sections contained in this Agreement are for convenience only and
shall not be deemed to control or affect the meaning or construction of any
provision of this Agreement.

 

25.           COUNTERPARTS. This Agreement may be
executed in counterparts, each of which shall be deemed an original and all of
which shall constitute one and the same Agreement with the same effect as if
all Parties had signed the same signature page. Any signature page of this
Agreement may be detached from any counterpart of this Agreement and reattached
to any other counterpart of this Agreement identical in form hereto but having
attached to it one or more additional signature pages.

 

IN WITNESS WHEREOF,
the undersigned have executed this Agreement as of the date first written
above.

 

	
   

  	
  STATION CASINOS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard J. Haskins

  	
   

  
	
   

  	
  Name:

  	
  Richard J. Haskins

  
	
   

  	
  Title:

  	
  Executive Vice President,

  
	
   

  	
   

  	
  General Counsel and Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Frank J. Fertitta III

  	
   

  
	
   

  	
  FRANK J. FERTITTA III

  
					

 

 

GUARANTEE

 

Fertitta Colony Partners LLC, a Nevada limited liability company,
hereby, to the fullest extent permitted by applicable law, irrevocably and
unconditionally guarantees to the Executive the prompt performance and payment
in full when due of all obligations of the Company to the Executive under this
Employment Agreement; provided, however, that upon an Initial
Public Offering, such guarantee shall automatically terminate and be of no
further force or effect.

 

 

	
   

  	
  FERTITTA COLONY PARTNERS LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lorenzo J. Fertitta

  	
   

  
	
   

  	
  Name:

  	
  Lorenzo J. Fertitta

  
	
   

  	
  Title:

  	
  Vice President

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