Table of Contents     


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
þ      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
For the quarterly period ended June 30, 2017
OR
¨      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to     
Commission file number 001-37754
RED ROCK RESORTS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
47-5081182
(I.R.S. Employer
Identification No.)
1505 South Pavilion Center Drive, Las Vegas, Nevada
(Address of principal executive offices)
89135
(Zip Code)
(702) 495-3000
Registrant’s telephone number, including area code
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ     No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ     No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer  o
Accelerated filer  o
Non-accelerated filer  þ
 (Do not check if a
smaller reporting company)
Smaller reporting company  o
Emerging growth company  o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  o     No  þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
 
Outstanding at July 31, 2017
Class A Common Stock, $0.01 par value
 
68,126,446
Class B Common Stock, $0.00001 par value
 
47,954,413

Table of Contents     


RED ROCK RESORTS, INC.
INDEX

 
 
 
 
 
 
 
 
 
 


Table of Contents     


Part I.    Financial Information
Item 1.    Financial Statements
RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
 
June 30, 2017
 
December 31, 2016
 
(unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
125,307

 
$
133,776

Restricted cash
2,829

 
2,377

Receivables, net
41,238

 
43,547

Income tax receivable
9,419

 
7,698

Inventories
11,131

 
11,956

Prepaid gaming tax
24,764

 
20,066

Prepaid expenses and other current assets
11,405

 
11,401

Assets held for sale
19,602

 
19,020

Total current assets
245,695

 
249,841

Property and equipment, net of accumulated depreciation of $641,125 and $566,081 at
June 30, 2017 and December 31, 2016, respectively
2,480,759

 
2,438,129

Goodwill
195,676

 
195,676

Intangible assets, net of accumulated amortization of $95,406 and $87,471 at
June 30, 2017 and December 31, 2016, respectively
137,964

 
149,199

Land held for development
163,700

 
163,700

Investments in joint ventures
10,005

 
10,572

Native American development costs
16,393

 
14,844

Deferred tax asset, net
250,296

 
244,466

Other assets, net
63,580

 
59,728

Total assets
$
3,564,068

 
$
3,526,155

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
33,549

 
$
30,710

Accrued interest payable
9,062

 
15,841

Other accrued liabilities
153,696

 
153,142

Current portion of payable pursuant to tax receivable agreement
874

 
1,021

Current portion of long-term debt
71,341

 
46,063

Total current liabilities
268,522

 
246,777

Long-term debt, less current portion
2,427,682

 
2,376,238

Deficit investment in joint venture
2,270

 
2,307

Other long-term liabilities
10,164

 
10,041

Payable pursuant to tax receivable agreement, net of current portion
274,405

 
257,440

Total liabilities
2,983,043

 
2,892,803

Commitments and contingencies (Note 13)

 

Stockholders’ equity:
 
 
 
  Preferred stock, par value $0.01 per share, 100,000,000 shares authorized; none issued and outstanding
—

 
—

  Class A common stock, par value $0.01 per share, 500,000,000 shares authorized; 68,140,197 and 65,893,439 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively
681

 
659

  Class B common stock, par value $0.00001 per share, 100,000,000 shares authorized; 47,954,413 and 49,956,296 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively
1

 
1

Additional paid-in capital
334,235

 
329,002

(Accumulated deficit) retained earnings
(1,879
)
 
17,628

Accumulated other comprehensive income
2,800

 
2,458

Total Red Rock Resorts, Inc. stockholders’ equity
335,838

 
349,748

Noncontrolling interest
245,187

 
283,604

Total stockholders’ equity
581,025

 
633,352

Total liabilities and stockholders’ equity
$
3,564,068

 
$
3,526,155


The accompanying notes are an integral part of these condensed consolidated financial statements.

3



Table of Contents     


RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data, unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Operating revenues:
 
 
 
 
 
 
 
Casino
$
258,396

 
$
233,796

 
$
521,368

 
$
473,567

Food and beverage
75,303

 
66,408

 
155,418

 
133,028

Room
44,641

 
32,979

 
94,405

 
67,363

Other
23,699

 
17,705

 
46,519

 
34,887

Management fees
30,676

 
27,455

 
60,903

 
54,104

Gross revenues
432,715

 
378,343

 
878,613

 
762,949

Promotional allowances
(29,222
)
 
(26,857
)
 
(57,388
)
 
(52,216
)
Net revenues
403,493

 
351,486

 
821,225

 
710,733

Operating costs and expenses:
 
 
 
 
 
 
 
Casino
103,170

 
88,986

 
204,824

 
176,407

Food and beverage
55,059

 
44,501

 
110,105

 
87,025

Room
18,239

 
11,893

 
38,306

 
24,278

Other
9,079

 
6,305

 
16,912

 
12,027

Selling, general and administrative
94,781

 
80,152

 
189,204

 
155,242

Preopening
368

 
373

 
398

 
721

Depreciation and amortization
46,807

 
38,436

 
92,060

 
77,863

Write-downs and other charges, net
8,826

 
10,966

 
9,850

 
13,334

Related party lease termination
98,393

 
—

 
98,393

 
—

 
434,722

 
281,612

 
760,052

 
546,897

Operating (loss) income
(31,229
)
 
69,874

 
61,173

 
163,836

Earnings from joint ventures
420

 
428

 
835

 
1,040

Operating (loss) income and earnings from joint ventures
(30,809
)
 
70,302

 
62,008

 
164,876

Other (expense) income:
 
 
 
 
 
 
 
Interest expense, net
(33,853
)
 
(34,078
)
 
(68,797
)
 
(69,146
)
Loss on extinguishment/modification of debt, net
(975
)
 
(7,084
)
 
(2,994
)
 
(7,084
)
Change in fair value of derivative instruments
3,330

 
90

 
3,369

 
87

 
(31,498
)
 
(41,072
)
 
(68,422
)
 
(76,143
)
(Loss) income before income tax
(62,307
)
 
29,230

 
(6,414
)
 
88,733

Benefit (provision) for income tax
11,813

 
(7,502
)
 
1,134

 
(7,502
)
Net (loss) income
(50,494
)
 
21,728

 
(5,280
)
 
81,231

Less: net (loss) income attributable to
noncontrolling interests
(24,574
)
 
16,075

 
857

 
17,939

Net (loss) income attributable to Red Rock Resorts, Inc.
$
(25,920
)
 
$
5,653

 
$
(6,137
)
 
$
63,292

 
 
 
 
 
 
 
 
(Loss) earnings per common share (Note 12):
 
 
 
 
 
 
 
(Loss) earnings per share of Class A common stock, basic and diluted
$
(0.39
)
 
$
0.01

 
$
(0.09
)
 
$
0.33

 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
67,311

 
30,031

 
66,506

 
19,960

Diluted
67,311

 
30,193

 
66,506

 
20,041

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.10

 
$
—

 
$
0.20

 
$
—


The accompanying notes are an integral part of these condensed consolidated financial statements.

4



Table of Contents     


RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(amounts in thousands, unaudited)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Net (loss) income
$
(50,494
)
 
$
21,728

 
$
(5,280
)
 
$
81,231

Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
(Loss) gain on interest rate swaps:
 
 
 
 
 
 
 
Unrealized loss arising during period
(2,606
)
 
(4,979
)
 
(1,491
)
 
(6,494
)
Reclassification into income
783

 
(28
)
 
2,011

 
1,238

(Loss) gain on interest rate swaps recognized in other comprehensive (loss) income
(1,823
)
 
(5,007
)
 
520

 
(5,256
)
Gain (loss) on available-for-sale securities:
 
 
 
 
 
 
 
Unrealized gain arising during period
—

 
19

 
8

 
38

Reclassification into income
—

 
—

 
(120
)
 
—

Gain (loss) on available-for-sale securities recognized in other comprehensive (loss) income
—

 
19

 
(112
)
 
38

Other comprehensive (loss) income, net of tax
(1,823
)
 
(4,988
)
 
408

 
(5,218
)
Comprehensive (loss) income
(52,317
)
 
16,740

 
(4,872
)
 
76,013

Less: comprehensive (loss) income attributable to noncontrolling interests
(24,348
)
 
12,536

 
1,083

 
14,400

Comprehensive (loss) income attributable to Red Rock Resorts, Inc.
$
(27,969
)
 
$
4,204

 
$
(5,955
)
 
$
61,613

The accompanying notes are an integral part of these condensed consolidated financial statements.


5



Table of Contents     


RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands, unaudited)

 
Six Months Ended June 30,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net (loss) income
$
(5,280
)
 
$
81,231

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
92,060

 
77,863

Change in fair value of derivative instruments
(3,369
)
 
(87
)
Reclassification of unrealized loss on derivative instruments into income
2,521

 
1,601

Write-downs and other charges, net
2,903

 
1,108

Amortization of debt discount and debt issuance costs
8,918

 
9,115

Interest—paid in kind
—

 
2,130

Share-based compensation
3,738

 
4,301

Settlement of liability-classified equity awards
—

 
(18,739
)
Earnings from joint ventures
(835
)
 
(1,040
)
Distributions from joint ventures
705

 
589

Loss on extinguishment/modification of debt, net

2,994

 
7,084

Deferred income tax
157

 
3,799

Changes in assets and liabilities:
 
 
 
Restricted cash
(452
)
 
—

Receivables, net
3,723

 
898

Interest on related party notes receivable
—

 
(247
)
Inventories and prepaid expenses
(4,092
)
 
(5,802
)
Accounts payable
6,939

 
(111
)
Accrued interest payable
(6,698
)
 
4,338

Income tax payable/receivable, net
(1,721
)
 
3,703

Other accrued liabilities
(1,528
)
 
(6,775
)
Other, net
1,847

 
1,023

Net cash provided by operating activities
102,530

 
165,982

Cash flows from investing activities:
 
 
 
Capital expenditures, net of related payables
(101,855
)
 
(87,633
)
Proceeds from asset sales
627

 
8,318

Acquisition of land from related party
(23,440
)
 
—

Proceeds from repayment of related party notes receivable
—

 
18,330

Deposit for business acquisition
—

 
(20,002
)
Distributions in excess of earnings from joint ventures
660

 
476

Native American development costs
(2,134
)
 
(933
)
Other, net
(6,539
)
 
(1,312
)
Net cash used in investing activities
(132,681
)
 
(82,756
)

6



Table of Contents     


RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(amounts in thousands, unaudited)
 
Six Months Ended June 30,
 
2017
 
2016
Cash flows from financing activities:
 
 
 
Proceeds from issuance of Class A common stock sold in initial public offering, net of underwriting discount and offering costs
—

 
531,949

Purchase of LLC Units from existing owners—deemed distribution
—

 
(112,474
)
Purchase of Fertitta Entertainment—deemed distribution
—

 
(389,054
)
Borrowings under credit agreements with original maturity dates greater than
three months
729,688

 
1,717,500

Payments under credit agreements with original maturity dates greater than three months
(627,453
)
 
(1,468,613
)
Payments under credit agreements with original maturity dates of three months or less, net
—

 
(53,900
)
Cash paid for early extinguishment of debt
(9,401
)
 
—

Proceeds from exercise of stock options
1,574

 
—

Distributions to members and noncontrolling interests
(23,691
)
 
(100,537
)
Dividends
(13,338
)
 
—

Payment of debt issuance costs
(21,098
)
 
(36,778
)
Payments on derivative instruments with other-than-insignificant financing elements
—

 
(10,831
)
Payments on other debt
(3,634
)
 
(21,216
)
Acquisition of subsidiary noncontrolling interests
(4,484
)
 
—

Other, net
(6,481
)
 
(4,485
)
Net cash provided by financing activities
21,682

 
51,561

Cash and cash equivalents:
 
 
 
(Decrease) increase in cash and cash equivalents
(8,469
)
 
134,787

Balance, beginning of period
133,776

 
116,623

Balance, end of period
$
125,307

 
$
251,410

Supplemental cash flow disclosures:
 
 
 
Cash paid for interest, net of $197 and $0 capitalized, respectively
$
63,456

 
$
55,545

Cash paid for income taxes
$
430

 
$
—

Non-cash investing and financing activities:
 
 
 
Capital expenditures incurred but not yet paid
$
26,465

 
$
27,855


The accompanying notes are an integral part of these condensed consolidated financial statements.

7



Table of Contents     


RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1 .    Organization, Basis of Presentation and Significant Accounting Policies
Organization     
Red Rock Resorts, Inc. (“Red Rock,” or the “Company”) was formed as a Delaware corporation in September 2015 to manage and own an equity interest in Station Casinos LLC (“Station LLC”). In May 2016, the Company completed an initial public offering (“IPO”) and used the proceeds to purchase newly issued limited liability company interests in Station Holdco LLC (“Station Holdco” and such units, the “LLC Units”), and outstanding LLC Units from existing members of Station Holdco. The Company owns all of the outstanding voting interests in Station LLC and has an indirect interest in Station LLC through its ownership interest in Station Holdco, which owns all of the economic interests in Station LLC. Station LLC, a Nevada limited liability company, is a gaming, development and management company that owns and operates ten major gaming and entertainment facilities and ten smaller casino properties ( three of which are 50% owned) in the Las Vegas regional market. Station LLC also manages a casino in Sonoma County, California and a casino in Allegan County, Michigan, both on behalf of Native American tribes.
At June 30, 2017 , the Company held approximately 59% of the economic interests in Station Holdco as well as 100% of the voting interest in Station LLC and 100% of the voting power in Station Holdco, subject to certain limited exceptions, and was designated as the sole managing member of both Station Holdco and Station LLC. The Company controls and operates all of the business and affairs of Station Holdco and Station LLC, and conducts all of its operations through these entities. The Company is a subchapter C corporation subject to federal income taxes and state income taxes in California and Michigan.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the results for the interim periods have been made. The interim results reflected in these condensed consolidated financial statements are not necessarily indicative of results to be expected for the full fiscal year. These financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10–K for the year ended December 31, 2016 . Certain amounts in the condensed consolidated financial statements for the prior year have been reclassified to be consistent with the current year presentation. These reclassifications had no effect on the previously reported net income.
Principles of Consolidation
Station Holdco and Station LLC are variable interest entities (“VIEs”), of which the Company is the primary beneficiary. Accordingly, the Company consolidates the financial position and results of operations of Station LLC and its consolidated subsidiaries and Station Holdco, and presents the interest in Station Holdco not owned by Red Rock within noncontrolling interest in the condensed consolidated financial statements. Substantially all of the Company’s assets and liabilities represent the assets and liabilities of Station Holdco and Station LLC, other than assets and liabilities related to income taxes and amounts payable under the tax receivable agreement. For periods prior to the Company’s IPO in May 2016, the accompanying condensed consolidated financial statements represent the financial statements of Station Holdco, the Company’s predecessor for accounting purposes. All intercompany accounts and transactions have been eliminated.
The amounts shown in the accompanying condensed consolidated financial statements also include the accounts of MPM Enterprises, LLC (“MPM”), which is a 50% owned, consolidated VIE that manages Gun Lake Casino. The financial position and results of operations attributable to third party holdings of MPM are reported within noncontrolling interest in the condensed consolidated financial statements. The Company consolidates MPM because it directs the activities of MPM that most significantly impact MPM’s economic performance and has the right to receive benefits and the obligation to absorb losses that are significant to MPM, and as such, is MPM’s primary beneficiary. The assets of MPM reflected in the Condensed Consolidated Balance Sheets at June 30, 2017 and December 31, 2016 included a management contract intangible asset with a carrying amount of $6.4 million and $11.5 million , respectively, and management fees receivable of $6.5 million and $3.3 million , respectively. MPM’s assets may be used only to settle MPM’s obligations, and MPM’s beneficial interest holders have no recourse to the general credit of the Company.

8



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

The Company has investments in three 50% owned smaller casino properties, which are accounted for using the equity method. The carrying amount of the Company’s investment in one of the smaller casino properties has been reduced below zero and is presented as a deficit investment balance on the Condensed Consolidated Balance Sheets because the Company has received distributions in excess of its investment in the casino. The Company also holds a 50% investment in a restaurant at one of its properties which is considered to be a VIE, of which the Company is not the primary beneficiary.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Significant Accounting Policies
A description of the Company’s significant accounting policies is included in the audited financial statements within its Annual Report on Form 10–K for the year ended December 31, 2016 .     
Recently Issued and Adopted Accounting Standards
In May 2017, the Financial Accounting Standards Board (“FASB”) issued accounting guidance that amends the scope of modification accounting for share-based payment arrangements. The amended guidance clarifies which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting. The amended guidance is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2017, and early application is permitted. The Company expects to adopt this guidance in the first quarter of 2018. The adoption is not expected to have a material impact on the Company’s financial position or results of operations.
In January 2017, the FASB issued amended accounting guidance to simplify the test for goodwill impairment. The amended guidance removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. Under the new guidance, a goodwill impairment is measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of the goodwill allocated to the reporting unit. The guidance is effective for annual and interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019, and should be applied on a prospective basis. Early adoption is permitted for annual or interim goodwill impairment tests performed after January 1, 2017. The Company is currently evaluating the impact this guidance will have on its financial position and results of operations and anticipates early adoption in 2017.
In February 2016, the FASB issued amended accounting guidance that changes the accounting for leases and requires expanded disclosures about leasing activities. Under the new guidance, lessees will be required to recognize a right-of-use asset and a lease liability, measured on a discounted basis, at the commencement date for all leases with terms greater than twelve months. Lessor accounting will remain largely unchanged, other than certain targeted improvements intended to align lessor accounting with the lessee accounting model and with the updated revenue recognition guidance issued in 2014. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The amended guidance is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2018, and early application is permitted. The Company is currently evaluating the impact this guidance will have on its financial position and results of operations.
In May 2014, the FASB issued a new accounting standard for revenue recognition which requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard supersedes the existing accounting guidance for revenue recognition, including industry-specific guidance, and amends certain accounting guidance for recognition of gains and losses on the transfer of non-financial assets. For public companies, the new guidance is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2017. Upon adoption, financial statement issuers may elect to apply the new standard either retrospectively to each prior reporting period presented, or using a modified retrospective approach by recognizing the cumulative effect of initial application and providing certain additional disclosures. The Company will adopt this guidance in the first quarter of 2018 and is currently assessing which adoption method it will elect. Under the new standard, the current presentation of gross revenues for complementary goods and services provided to guests with a corresponding offsetting amount included in promotional allowances will be eliminated. In addition, the Company will be required to recognize a liability for the retail value of its performance obligations for points earned by guests under the Company’s player rewards program (“Rewards Program”). Currently, the Company records a liability and a charge to casino expense for the estimated cost of outstanding points earned under the Rewards Program that management believes ultimately will be redeemed. Upon adoption, the Company’s liability for performance obligations under

9



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

the Rewards Program is expected to be recognized primarily as a reduction to casino revenue. When points are redeemed, revenues and expenses will be recognized and classified based on the goods and services provided and the associated liability will be relieved. The Company is currently evaluating the quantitative effects of the new standard on its financial statements and related disclosures.
2 .    Noncontrolling Interest in Station Holdco
As discussed in Note 1 , Red Rock holds a controlling interest in and consolidates the financial position and results of operations of Station LLC and its subsidiaries and Station Holdco, and presents the interests in Station Holdco not owned by Red Rock within noncontrolling interest in the condensed consolidated financial statements. During the three months ended June 30, 2017 , approximately 2.0 million LLC Units and Class B common shares held by related party noncontrolling interest holders were exchanged for Class A common shares, which increased Red Rock’s ownership interest in Station Holdco. The exchange also resulted in a $17.3 million increase in amounts payable under the tax receivable agreement liability, which is described in Note 10 , and an increase to deferred tax assets of $6.1 million , both of which were recorded through equity.
Following is a summary of LLC Unit ownership:        
 
June 30, 2017
 
December 31, 2016
 
Units
 
Ownership %
 
Units
 
Ownership %
Red Rock
68,140,197

 
58.7
%
 
65,893,439

 
56.9
%
Noncontrolling interest holders
47,954,413

 
41.3
%
 
49,956,296

 
43.1
%
Total
116,094,610

 
100.0
%
 
115,849,735

 
100.0
%
 
 
 
 
 
 
 
 
The Company uses monthly weighted average LLC Unit ownership to calculate the pretax income (loss) and other comprehensive income (loss) of Station Holdco attributable to Red Rock and the noncontrolling interest holders. There was no noncontrolling interest in Station Holdco prior to the Company’s IPO in May 2016.
3 .    Native American Development
Following is information about the Company’s Native American development activities.
North Fork Rancheria of Mono Indian Tribe
The Company has development and management agreements with the North Fork Rancheria of Mono Indians (the “Mono”), a federally recognized Native American tribe located near Fresno, California, which were originally entered into in 2003. In August 2014, the Mono and the Company entered into the Second Amended and Restated Development Agreement (the “Development Agreement”) and the Second Amended and Restated Management Agreement (the “Management Agreement”). Pursuant to those agreements, the Company will assist the Mono in developing and operating a gaming and entertainment facility (the “North Fork Project”) to be located in Madera County, California. The Company purchased a 305 -acre parcel of land adjacent to Highway 99 north of the city of Madera (the “North Fork Site”), which was taken into trust for the benefit of the Mono by the Department of the Interior (“DOI”) in February 2013.
As currently contemplated, the North Fork Project is expected to include approximately 2,000 slot machines, approximately 40 table games and several restaurants, and the cost of the project is expected to be between $250 million and $300 million . Development of the North Fork Project is subject to certain governmental and regulatory approvals, including, but not limited to, approval of the Management Agreement by the Chairman of the National Indian Gaming Commission (“NIGC”).
Under the terms of the Development Agreement, the Company has agreed to arrange the financing for the ongoing development costs and construction of the facility. The Company will contribute significant financial support to the North Fork Project. Through June 30, 2017 , the Company has paid approximately $31.5 million of reimbursable advances to the Mono, primarily to complete the environmental impact study, purchase the North Fork Site and pay the costs of litigation. The advances are expected to be repaid from the proceeds of third-party financing or from the Mono’s gaming revenues; however, there can be no assurance that the advances will be repaid. The carrying amount of the advances was reduced to fair value upon the Company’s adoption of fresh-start reporting in 2011. At June 30, 2017 , the carrying amount of the advances was $16.4 million . In accordance with the Company’s accounting policy, accrued interest on the advances will not be recognized in income until the carrying amount of the advances has been recovered.
The Company will receive a development fee of 4% of the costs of construction (as defined in the Development Agreement) for its development services, which will be paid upon the commencement of gaming operations at the facility. The Management Agreement allows the Company to receive a management fee of 40% of the North Fork Project’s net income. The Management Agreement and the Development Agreement have a term of seven years from the opening of the North Fork

10



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Project. The Management Agreement includes termination provisions whereby either party may terminate the agreement for cause, and the Management Agreement may also be terminated at any time upon agreement of the parties. There is no provision in the Management Agreement allowing the tribe to buy-out the agreement prior to its expiration. The Management Agreement provides that the Company will train the Mono tribal members such that they may assume responsibility for managing the North Fork Project upon the expiration of the agreement.
Upon termination or expiration of the Management Agreement and Development Agreement, the Mono will continue to be obligated to repay any unpaid principal and interest on the advances from the Company, as well as certain other amounts that may be due, such as management fees. Amounts due to the Company under the Development Agreement and Management Agreement are secured by substantially all of the assets of the North Fork Project except the North Fork Site. In addition, the Development Agreement and Management Agreement contain waivers of the Mono’s sovereign immunity from suit for the purpose of enforcing the agreements or permitting or compelling arbitration and other remedies.
The timing of this type of project is difficult to predict and is dependent upon the receipt of the necessary governmental and regulatory approvals. There can be no assurance as to when, or if, these approvals will be obtained. The Company currently estimates that construction of the North Fork Project may begin in the next 36 to 48 months and estimates that the North Fork Project would be completed and opened for business approximately 18  months after construction begins. There can be no assurance, however, that the North Fork Project will be completed and opened within this time frame or at all. The Company expects to assist the Mono in obtaining third-party financing for the North Fork Project once all necessary regulatory approvals have been received and prior to commencement of construction; however, there can be no assurance that the Company will be able to obtain such financing for the North Fork Project on acceptable terms or at all.
The Company has evaluated the likelihood that the North Fork Project will be successfully completed and opened, and has concluded that the likelihood of successful completion is in the range of 65% to 75% at June 30, 2017 . The Company’s evaluation is based on its consideration of all available positive and negative evidence about the status of the North Fork Project, including, but not limited to, the status of required regulatory approvals, as well as the progress being made toward the achievement of all milestones and the successful resolution of all litigation and contingencies. There can be no assurance that the North Fork Project will be successfully completed or that future events and circumstances will not change the Company’s estimates of the timing, scope, and potential for successful completion or that any such changes will not be material. In addition, there can be no assurance that the Company will recover all of its investment in the North Fork Project even if it is successfully completed and opened for business.


11



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

The following table summarizes the Company’s evaluation at June 30, 2017 of each of the critical milestones necessary to complete the North Fork Project.
 
As of June 30, 2017
Federally recognized as an Indian tribe by the Bureau of Indian Affairs (“BIA”)
Yes
Date of recognition
Federal recognition was terminated in 1966 and restored in 1983.
Tribe has possession of or access to usable land upon which the project is to be built
The DOI accepted approximately 305 acres of land for the project into trust for the benefit of the Mono in February 2013.

Status of obtaining regulatory and governmental approvals:
 
Tribal–state compact
A compact was negotiated and signed by the Governor of California and the Mono in August 2012. The California State Assembly and Senate passed Assembly Bill 277 (“AB 277”) which ratified the Compact in May 2013 and June 2013, respectively. Opponents of the North Fork Project qualified a referendum, “Proposition 48,” for a state-wide ballot challenging the legislature’s ratification of the Compact. In November 2014, Proposition 48 failed. The State took the position that the failure of Proposition 48 nullified the ratification of the Compact and, therefore, the Compact did not take effect under California law. In March 2015, the Mono filed suit against the State (see North Fork Rancheria of Mono Indians v. State of California)  to obtain a compact with the State or procedures from the Secretary of the Interior under which Class III gaming may be conducted on the North Fork Site. In July 2016, the DOI issued Secretarial procedures (the “Secretarial Procedures”) pursuant to which the Mono may conduct Class III gaming on the North Fork Site.
Approval of gaming compact by DOI
The Compact was submitted to the DOI in July 2013. In October 2013, notice of the Compact taking effect was published in the Federal Register. The Secretarial Procedures supersede and replace the Compact.
Record of decision regarding environmental impact published by BIA
In November 2012, the record of decision for the Environmental Impact Statement for the North Fork Project was issued by the BIA. In December 2012, the Notice of Intent to take land into trust was published in the Federal Register.
BIA accepting usable land into trust on behalf of the tribe
The North Fork Site was accepted into trust in February 2013.
Approval of management agreement by NIGC
In December 2015, the Mono submitted the Management Agreement, and certain related documents, to the NIGC. In July 2016, the Mono received a deficiency letter from the NIGC seeking additional information concerning the Management Agreement. Approval of the Management Agreement by the NIGC is expected to occur following the Mono’s response to the deficiency letter. The Company believes the Management Agreement will be approved because the terms and conditions thereof are consistent with the provisions of the Indian Gaming Regulatory Act (“IGRA”).
Gaming licenses:
 
Type
The North Fork Project will include the operation of Class II and Class III gaming, which are allowed pursuant to the terms of the Secretarial Procedures and IGRA, following approval of the Management Agreement by the NIGC.
Number of gaming devices allowed
The Secretarial Procedures allow for the operation of a maximum of 2,000 Class III slot machines at the facility during the first two years of operation and thereafter up to 2,500 Class III slot machines. There is no limit on the number of Class II gaming devices that the Mono can offer.
Agreements with local authorities
The Mono has entered into memoranda of understanding with the City of Madera, the County of Madera and the Madera Irrigation District under which the Mono agreed to pay one-time and recurring mitigation contributions, subject to certain contingencies. The memoranda of understanding with the City and County were amended in December 2016 to restructure the timing of certain payments due to delays in the development of the North Fork Project.


12



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Following is a discussion of legal matters related to the North Fork Project.
Stand Up For California! v. Dept. of the Interior. In December 2012, Stand Up for California!, several individuals and the Ministerial Association of Madera (collectively, the “Stand Up” plaintiffs) filed a complaint against the DOI, the BIA and the Secretary of Interior and Assistant Secretary of the Interior, in their official capacities, seeking to overturn the Secretary’s determination to take the North Fork Site into trust for the purposes of gaming (the “North Fork Determination”) and seeking declaratory and injunctive relief to prevent the United States from taking the North Fork Site into trust. The Mono filed a motion to intervene as a party to the lawsuit, which was granted. In January 2013, the Court denied the Stand Up plaintiffs’ Motion for Preliminary Injunction and the United States accepted the North Fork Site into trust for the benefit of the Mono in February 2013. The parties subsequently filed motions for summary judgment. In September 2016, the Court denied the Stand Up plaintiffs’ motions for summary judgment and granted the defendants’ and the Mono’s motions for summary judgment in part and dismissed the remainder of the Stand Up plaintiffs’ claims. The Stand Up plaintiffs appealed the district court’s decision and proceedings on the appeal are pending. All briefs have been filed and oral arguments have been scheduled for October 13, 2017.
Stand Up For California! v. Brown. In March 2013, Stand Up for California! and Barbara Leach, a local resident, filed a complaint for declaratory relief and petition for writ of mandate in California Superior Court for the County of Madera against California Governor Edmund G. Brown, Jr., alleging that Governor Brown violated the California constitutional separation-of-powers doctrine when he concurred in the North Fork Determination. The complaint sought to vacate and set aside the Governor’s concurrence. Plaintiffs’ complaint was subsequently amended to include a challenge to the constitutionality of AB 277. The Mono intervened as a defendant in the lawsuit. In March 2014, the court dismissed plaintiffs’ amended complaint, which dismissal was appealed by plaintiffs. In December 2016, the appellate court ruled in favor of the Stand Up plaintiffs concluding that Governor Brown exceeded his authority in concurring in the Secretary’s determination that gaming on the North Fork Site would be in the best interest of the Tribe and not detrimental to the surrounding community. The appellate court’s decision reversed the trial court’s previous ruling in favor of the Mono. The Mono and the State filed petitions in the Supreme Court of California seeking review of the appellate court’s decision. In March 2017, the Supreme Court of California granted the Mono and State’s petitions for review and deferred additional briefing or other action in this matter pending consideration and disposition of a similar issue in United Auburn Indian Community of Auburn Rancheria v. Brown.
Picayune Rancheria of Chukchansi Indians v. Brown . In March 2016, Picayune Rancheria of Chukchansi Indians (“Picayune”) filed a complaint for declaratory relief and petition for writ of mandate in California Superior Court for the County of Madera against Governor Edmund G. Brown, Jr., alleging that the referendum that invalidated the Compact also invalidated Governor Brown’s concurrence with the North Fork Determination. The complaint seeks to vacate and set aside the Governor’s concurrence. In July 2016, the court granted the Mono’s application to intervene and the Mono filed a demurrer seeking to dismiss the case. In November 2016, the district court dismissed Picayune’s complaint, but the court subsequently vacated its ruling based on the December 2016, decision by the Fifth District Court of Appeal in Stand Up for California! v. Brown . In May 2017, the court stayed the case for six months by agreement of the parties and scheduled a status conference on November 13, 2017 to address how the case should proceed in light of the California Supreme Court’s granting of the Mono and State’s petitions for review in Stand Up for California! v. Brown.
Picayune Rancheria of Chukchansi Indians v. United States Department of the Interior. In July 2016, Picayune filed a complaint in the United States District Court for the Eastern District of California for declaratory and injunctive relief against the DOI. The complaint seeks a declaration that the North Fork Site does not come under one of the exceptions to the general prohibition against gaming on lands taken into trust after October 1988 set forth in IGRA and therefore is not eligible for gaming. It also seeks a declaration that the North Fork Determination has expired because the legislature never ratified Governor Brown’s concurrence, and seeks injunctive relief prohibiting the DOI from taking any action under IGRA concerning the North Fork Site. The Mono filed a motion to intervene in September 2016, which was subsequently granted. The Mono and federal defendants filed motions for summary judgment in March 2017. On August 8, 2017, Picayune filed a brief arguing that the court should stay the proceedings in light of the Fifth District Court's decision in Stand Up for California! v. Brown and the appeal pending in the California Supreme Court.
Stand Up for California! et. al. v. United States Department of the Interior. In November 2016, Stand Up for California! and other plaintiffs filed a complaint in the United States District Court for the Eastern District of California alleging that the DOI’s issuance of Secretarial Procedures for the Mono was subject to the National Environmental Policies Act and the Clean Air Act, and violate the Johnson Act. The complaint further alleges violations of the Freedom of Information Act and the Administrative Procedures Act. The DOI filed its answer to the complaint in February 2017 denying plaintiffs’ claims and asserting certain affirmative defenses. A motion to intervene filed by the Mono was granted in March 2017. Plaintiffs’ subsequently filed a motion to stay the proceedings in May 2017. Briefing on the contested stay request concluded in July 2017 and briefing on cross-motions for summary judgment is scheduled to conclude in September 2017.

13



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

4 .    Long-term Debt
Long-term debt consisted of the following indebtedness of Station LLC (amounts in thousands):
 
June 30,
2017
 
December 31, 2016
$1.875 billion Term Loan B Facility, due June 8, 2023, interest at a margin above LIBOR or base rate (3.71% and 3.75% at June 30, 2017 and December 31, 2016, respectively), net of unamortized discount and deferred issuance costs of $57.8 million and $42.9 million at June 30, 2017 and December 31, 2016, respectively

$
1,775,642

 
$
1,449,591

$275 million Term Loan A Facility, due June 8, 2021, interest at a margin above LIBOR or base rate (3.17% and 3.20% at June 30, 2017 and December 31, 2016, respectively), net of unamortized discount and deferred issuance costs of $5.7 million and $7.4 million at June 30, 2017 and December 31, 2016, respectively
255,877

 
211,978

$685 million Revolving Credit Facility, due June 8, 2021, interest at a margin above LIBOR or base rate (3.31% and 3.44% weighted average at June 30, 2017 and December 31, 2016, respectively)
190,000

 
120,000

7.50% Senior Notes, due March 1, 2021, net of unamortized discount and deferred issuance costs of $4.2 million and $9.4 million at June 30, 2017 and December 31, 2016, respectively
245,770

 
490,568

Restructured Land Loan, due June 17, 2017, interest at a margin above LIBOR or base rate (5.27% at December 31, 2016), net of unamortized discount of $0.6 million
—

 
115,378

Other long-term debt, weighted-average interest of 3.68% and 3.92% at June 30, 2017 and December 31, 2016, respectively, maturity dates ranging from 2018 to 2037
31,734

 
34,786

Total long-term debt
2,499,023

 
2,422,301

Current portion of long-term debt
(71,341
)
 
(46,063
)
Total long-term debt, net
$
2,427,682

 
$
2,376,238

Credit Facility
In January 2017, Station LLC amended its credit facility to increase the existing Term Loan B Facility by $125.0 million and reduce the applicable margins for LIBOR and base rate loans by 50 basis points. Station LLC used the proceeds of the incremental Term Loan B Facility borrowings to repay outstanding borrowings under its Revolving Credit Facility and pay fees and costs incurred in connection with the transaction, including a repricing fee of $14.9 million , which represented 1.00% of the aggregate principal amount of the Term Loan B Facility outstanding prior to the $125.0 million increase in borrowings. Station LLC evaluated the transaction on a lender by lender basis in accordance with the accounting guidance for debt modifications and extinguishments. The majority of the transaction was accounted for as a debt modification and as a result, Station LLC capitalized $14.9 million in related fees and costs and recognized a $2.0 million loss on debt extinguishment and modification, which was primarily related to third-party fees it incurred in connection with the repricing.
In May 2017, Station LLC amended its credit facility to increase the Term Loan B Facility by an additional $250.0 million . Station LLC applied the proceeds of the incremental borrowings under the Term Loan B Facility, together with cash on hand, to pay for the redemption of $250.0 million of its 7.50% Senior Notes and to pay fees and costs incurred in connection with the transactions. Station LLC capitalized $3.8 million in fees and costs related to the $250.0 million in incremental borrowings. As a result of the January 2017 and May 2017 increases to the Term Loan B Facility, the required quarterly principal payments increased to $4.7 million . Depending on its consolidated total leverage ratio, Station LLC is required to apply a portion of its excess cash flow to repay amounts outstanding under the Term Loan B Facility, which reduces future quarterly principal payments.
Also in May 2017, Station LLC completed a series of amendments to its credit facility to increase the existing Term Loan A Facility by $50.0 million and reduce the applicable margins for LIBOR and base rate loans under the Revolving Credit Facility and Term Loan A Facility. As amended, the Revolving Credit Facility and the Term Loan A Facility bear interest at a rate per annum, at Station LLC’s option, equal to either LIBOR plus an amount ranging from 1.75% to 2.00% or base rate plus an amount ranging from 0.75% to 1.00% , depending on Station LLC’s consolidated leverage ratio. Prior to the amendments, the Revolving Credit Facility and the Term Loan A Facility bore interest at a rate per annum, at Station LLC’s option and subject to a leverage-based grid, of either LIBOR plus an amount ranging from 1.75% to 2.75% or base rate plus an amount ranging from 0.75% to 1.75% . Station LLC evaluated the transaction on a lender by lender basis in accordance with the accounting guidance for debt modifications and extinguishments and as a result, Station LLC capitalized $1.3 million in related fees and costs and

14



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

recognized a $2.1 million loss on debt extinguishment and modification, which was primarily related to the write-off of unamortized debt discount related to the extinguished debt.
The credit facility governing Station LLC’s term loans and revolver contains a number of customary covenants including the requirements that Station LLC maintain throughout the term of the credit facility and measured as of the end of each quarter a minimum interest coverage ratio of 2.50 to 1.00 and a maximum consolidated total leverage ratio ranging from 6.50 to 1.00 at June 30, 2017 to 5.25 to 1.00 at March 31, 2020 and thereafter. A breach of the financial ratio covenants shall only become an event of default under the Term B Loan Facility if the lenders providing the Term Loan A Facility and the Revolving Credit Facility take certain affirmative actions after the occurrence of a default of such financial ratio covenants. At June 30, 2017 , Station LLC’s interest coverage ratio was 4.58 to 1.00 and its consolidated total leverage ratio was 4.96 to 1.00 , both as defined in the credit facility. The Company believes it was in compliance with all applicable covenants at June 30, 2017 .
Revolving Credit Facility Availability
At June 30, 2017 , Station LLC’s borrowing availability under its Revolving Credit Facility, subject to continued compliance with the terms of its credit facility, was $461.0 million , which was net of $190.0 million in outstanding borrowings and $34.0 million in outstanding letters of credit and similar obligations.
Restructured Land Loan
In March 2017, Station LLC’s wholly owned subsidiary, CV Propco, LLC (“CV Propco”), as borrower, and Deutsche Bank AG Cayman Islands Branch (“Deutsche Bank”) and JPMorgan Chase Bank, N.A. (“JPMorgan”), as initial lenders, amended the $105 million Restructured Land Loan. Pursuant to the amendment, CV Propco paid $61.8 million in full settlement of the $72.6 million outstanding principal amount owed to Deutsche Bank under the Restructured Land Loan. In addition, the outstanding warrants held by Deutsche Bank and JPMorgan to purchase 60% of the interests of both CV Propco and NP Tropicana LLC were canceled. Prior to the cancellation, the warrants were accounted for as noncontrolling interests.
The Company accounted for the $61.8 million settlement as consideration paid to Deutsche Bank to (i) extinguish the debt and (ii) acquire the warrants held by Deutsche Bank. Accordingly, the Company attributed $57.3 million of the $61.8 million to extinguishment of the debt and $4.5 million to the acquisition of the warrants. The settlement resulted in a $14.9 million gain on debt extinguishment in June 2017, the date when all contingencies related to the settlement were satisfied. In June 2017, CV Propco repaid the remaining $43.3 million in outstanding principal under the Restructured Land Loan in full.
7.50% Senior Notes
As noted above, in May 2017, Station LLC redeemed $250.0 million in aggregate principal amount of its 7.50% Senior Notes at a redemption price equal to 103.75% of the principal amount of such notes. Following the redemption, $250.0 million in aggregate principal amount of 7.50% Senior Notes remain outstanding. Station LLC recognized a $13.8 million loss on debt extinguishment related to the 7.50% Senior Notes redemption, primarily comprising the write-off of $4.4 million in unamortized debt discount and issuance costs related to the extinguished debt and the redemption premium of $9.4 million .
5 .    Derivative Instruments
The Company’s objective in using derivative instruments is to manage its exposure to interest rate movements. To accomplish this objective, Station LLC uses interest rate swaps, including forward–starting swaps, as a primary part of its cash flow hedging strategy, which involves the receipt of variable–rate interest payments in exchange for fixed–rate payments without exchange of the underlying notional amount. The Company may elect not to apply hedge accounting to its derivative instruments; however, it does not use derivative financial instruments for trading or speculative purposes.
On June 30, 2017, the Company dedesignated the hedge accounting relationships of Station LLC’s 16 interest rate swaps that were previously designated as cash flow hedges of forecasted interest payments. The 16 interest rate swaps are with four different counterparties and have maturity dates that run concurrently. The interest rate swaps each have one -year terms that run consecutively which began in July 2016 and will end in July 2020 with predetermined fixed pay rates that increase with each new term to more closely align with the one –month LIBOR forward curve as of the trade date of the interest rate swaps. Station LLC paid a weighted–average fixed rate of 0.85% during the first one -year term that ended in July 2017, which will increase to a weighted–average rate of approximately 1.11% , 1.39% , and 1.69% in the second, third and fourth one -year terms, respectively. As a result of the June 2017 dedesignation, cumulative deferred gains of $8.6 million that had previously been recognized in accumulated other comprehensive income will be amortized as a reduction of interest expense as the hedged interest payments continue to occur through July 2020.

15



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

In June 2017, Station LLC entered into eight additional interest rate swaps for which hedge accounting was not elected. These swaps are also intended to meet the Company’s objectives noted above and are not speculative. The eight interest rate swaps are with two different counterparties and have maturity dates that run concurrently. The interest rate swaps each have one -year terms that run consecutively beginning July 2017 and will end in July 2021 with predetermined fixed pay rates that increase with each new term to more closely align with the one -month LIBOR forward curve as of the trade date of the interest rate swaps. Station LLC will pay a weighted-average fixed rate of 1.32% during the first one -year term ending in July 2018, which will increase to a weighted-average rate of approximately 1.59% , 1.78% and 1.94% during the second, third and fourth one -year terms, respectively.
At June 30, 2017 , Station LLC’s interest rate swaps effectively converted $1.0 billion of Station LLC’s variable interest rate debt (based on one -month LIBOR that is subject to a minimum of 0.75% ) to a fixed rate of 3.47% .
The fair values of Station LLC’s interest rate swaps, exclusive of accrued interest, as well as their classification on the Condensed Consolidated Balance Sheets, are presented below (amounts in thousands):
 
June 30,
2017
 
December 31, 2016
Interest Rate Swaps Designated in Cash Flow Hedging Relationships
 
 
 
Prepaid expenses and other current assets
$
—

 
$
19

Other assets, net
—

 
10,661

Other accrued liabilities
—

 
8

Interest Rate Swaps Not Designated in Cash Flow Hedging Relationships
 
 
 
Prepaid expenses and other current assets
61

 
—

Other assets, net
11,868

 
—

For derivative instruments that are designated and qualify as cash flow hedges of forecasted interest payments, the Company defers the gain or loss on the effective portion of the derivative’s change in fair value as a component of other comprehensive income (loss) until the interest payments being hedged are recorded as interest expense, at which time the amounts in accumulated other comprehensive income are reclassified as an adjustment to interest expense. The Company recognizes the gain or loss on any ineffective portion of the derivative’s change in fair value in the period in which the change occurs as a component of Change in fair value of derivative instruments in the Condensed Consolidated Statements of Operations . For derivative instruments that are not designated in cash flow hedge accounting relationships, the Company records the derivative’s change in the fair value in the period in which the change occurs as a component of Change in fair value of derivative instruments in the Condensed Consolidated Statements of Operations .
As a result of (i) the June 2017 dedesignation of Station LLC’s 16 interest rate swaps previously designated in cash flow hedging relationships and (ii) the Company’s election not to apply hedge accounting to its eight new interest rate swaps, beginning July 2017, the changes in fair value of all of Station LLC’s derivative instruments will be reflected in Change in fair value of derivative instruments in the Condensed Consolidated Statements of Operations in the period in which the change occurs. As such, interest expense will not reflect a fixed rate as it previously did under hedge accounting for that portion of the debt hedged. However, the economics will be unchanged and the Company will continue to meet its risk management objective and achieve fixed cash flows attributable to interest payments on the debt principal being hedged by its interest rate swaps.
At June 30, 2017 , approximately $2.6 million of deferred net gains from Station LLC’s previously designated interest rate swaps is expected to be reclassified from accumulated other comprehensive income into earnings during the next twelve months due to the amortization of deferred gains from the interest rate swaps that were dedesignated on June 30, 2017 and the amortization of deferred losses on a previously terminated interest rate swap.

16



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Information about pretax gains and losses on derivative financial instruments that were designated in cash flow hedging relationships and their location within the condensed consolidated financial statements is presented below (amounts in thousands):
Derivatives Designated in Cash Flow Hedging Relationships
 
Amount of Loss on Derivatives Recognized in Other Comprehensive (Loss) Income (Effective Portion)
 
Location of Loss Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion)
 
Amount of Loss Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion)
 
Location of (Loss) Gain on Derivatives Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Amount of (Loss) Gain on Derivatives Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Three Months Ended June 30,
 
 
Three Months Ended June 30,
 
 
Three Months Ended June 30,
 
2017
 
2016
 
 
2017
 
2016
 
 
2017
 
2016
Interest rate swaps
 
$
(3,268
)
 
$
(5,612
)
 
Interest expense, net
 
$
(986
)
 
$
(335
)
 
Change in fair value of derivative instruments
 
$
(37
)
 
$
90

Derivatives Designated in Cash Flow Hedging Relationships
 
Amount of Loss on Derivatives Recognized in Other Comprehensive (Loss) Income (Effective Portion)
 
Location of Loss Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion)
 
Amount of Loss Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion)
 
Location of Gain on Derivatives Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Amount of Gain on Derivatives Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Six Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
Six Months Ended June 30,
 
2017
 
2016
 
 
2017
 
2016
 
 
2017
 
2016
Interest rate swaps
 
$
(1,875
)
 
$
(7,127
)
 
Interest expense, net
 
$
(2,521
)
 
$
(1,601
)
 
Change in fair value of derivative instruments
 
$
2

 
$
87

Information about pretax gains on derivative financial instruments that were not designated in hedge accounting relationships and their location within the Condensed Consolidated Statements of Operations is presented below (amounts in thousands):
Derivatives Not Designated in Cash Flow Hedging Relationships
 
Location of Gain on Derivatives Recognized in Income
 
Amount of Gain on Derivatives Recognized in Income
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2017
 
2016
 
2017
 
2016
Interest rate swaps
 
Change in fair value of derivative instruments
 
$
3,367

 
$
—

 
$
3,367

 
$
—

Station LLC has not posted any collateral related to the interest rate swap agreements; however, Station LLC’s obligations under the interest rate swap agreements are subject to the security and guarantee arrangements applicable to the credit facility. The interest rate swap agreements contain a cross-default provision under which Station LLC could be declared in default on its obligation under such agreements if certain conditions of default exist on the credit facility. At June 30, 2017 , the termination value of Station LLC’s interest rate swaps, including accrued interest, was a net asset of $12.0 million .

17



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

6 .    Fair Value Measurements
Assets Measured at Fair Value on a Recurring Basis
Information about the Company’s financial assets and liabilities measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fall, is presented below (amounts in thousands):
 
 
 
Fair Value Measurement at Reporting Date Using
 
Balance at June 30, 2017
 
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Interest rate swaps
$
11,929

 
$
—

 
$
11,929

 
$
—

 
 
 
Fair Value Measurement at Reporting Date Using
 
Balance at December 31, 2016
 
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Available-for-sale securities
$
248

 
$
248

 
$
—

 
$
—

Interest rate swaps
10,680

 
—

 
10,680

 
—

Liabilities
 
 
 
 
 
 
 
Interest rate swaps
8

 
—

 
8

 
—

The fair values of Station LLC’s interest rate swaps were determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the interest rate swaps. This analysis reflects the contractual terms of the interest rate swaps, including the period to maturity, and uses observable market-based inputs, including forward interest rate curves. Station LLC incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the counterparty’s nonperformance risk in the fair value measurement.
Fair Value of Long-term Debt
The estimated fair value of Station LLC’s long-term debt compared with its carrying amount is presented below (amounts in millions):
 
 
June 30,
2017
 
December 31, 2016
Aggregate fair value
 
$
2,574

 
$
2,521

Aggregate carrying amount
 
2,499

 
2,422

The estimated fair value of Station LLC’s long-term debt is based on quoted market prices from various banks for similar instruments, which is considered a Level 2 input under the fair value measurement hierarchy.

18



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

7 .    Stockholders’ Equity     
The changes in stockholders' equity and noncontrolling interest for the six months ended June 30, 2017 were as follows (amounts in thousands):
 
Red Rock Resorts, Inc. Stockholders’ Equity
 
 
 
 
Common Stock
 
Additional paid-in capital
 
Retained earnings (accumulated deficit)
 
Accumulated other comprehensive income
Noncontrolling interest
Total stockholders’ equity
Class A
 
Class B
Shares
 
Amount
Shares
 
Amount
Balances,
December 31, 2016
65,893

 
$
659

 
49,956

 
$
1

 
$
329,002

 
$
17,628

 
$
2,458

 
$
283,604

 
$
633,352

Net (loss) income
—

 
—

 
—

 
—

 
—

 
(6,137
)
 
—

 
857

 
(5,280
)
Other comprehensive income, net of tax
—

 
—

 
—

 
—

 
—

 
—

 
182

 
226

 
408

Share-based compensation
—

 
—

 
—

 
—

 
3,764

 
—

 
—

 
—

 
3,764

Distributions
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(23,691
)
 
(23,691
)
Dividends
—

 
—

 
—

 
—

 
—

 
(13,370
)
 
—

 
—

 
(13,370
)
Issuance of restricted stock awards, net of forfeitures
167

 
1

 
—

 
—

 
(1
)
 
—

 
—

 
—

 
—

Stock option exercises
81

 
1

 
—

 
—

 
1,573

 
—

 
—

 
—

 
1,574

Exchanges of noncontrolling interests for Class A common stock
2,002

 
20

 
(2,002
)
 
—

 
11,200

 
—

 
180

 
(11,400
)
 
—

Recognition of tax receivable agreement liability resulting from exchanges of noncontrolling interests for Class A common stock
—

 
—

 
—

 
—

 
(17,261
)
 
—

 
—

 
—

 
(17,261
)
Deferred tax assets resulting from exchanges of noncontrolling interests for Class A common stock
—

 
—

 
—

 
—

 
6,086

 
—

 
—

 
—

 
6,086

Repurchase of Class A common stock
(3
)
 
—

 
—

 
—

 
(73
)
 
—

 
—

 
—

 
(73
)
Acquisition of subsidiary noncontrolling interests
—

 
—

 
—

 
—

 
2,850

 
—

 
—

 
(7,334
)
 
(4,484
)
Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco
—

 
—

 
—

 
—

 
(2,905
)
 
—

 
(20
)
 
2,925

 
—

Balances,
June 30, 2017
68,140

 
$
681

 
47,954

 
$
1

 
$
334,235

 
$
(1,879
)
 
$
2,800

 
$
245,187

 
$
581,025

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At June 30, 2017 , noncontrolling interest represented the 41% ownership interest in Station Holdco not held by Red Rock, as well as a 50% ownership interest in MPM.

19



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

On August 4, 2017 , the Company announced that it would pay a dividend of $6.8 million , or $0.10 per share of Class A common stock, to holders of record as of August 15, 2017 to be paid on August 31, 2017 . Prior to the payment of the dividend, Station Holdco will pay a cash distribution to all LLC Unit holders, including the Company, of $0.10 per unit for a total distribution of approximately $11.6 million , of which $4.8 million will be paid to noncontrolling interest holders.
Changes in Accumulated Other Comprehensive Income
The following table presents changes in accumulated other comprehensive income, net of tax and noncontrolling interest, by component for the six months ended June 30, 2017 (amounts in thousands):
 
Accumulated Other Comprehensive Income
 
Unrealized Gain on Interest Rate Swaps
 
Unrealized Gain on Available-for-sale Securities
 
Unrecognized Pension Liability
 
Total
Balances, December 31, 2016
$
2,404

 
$
52

 
$
2

 
$
2,458

Unrealized (loss) gain arising during
the period (a)
(702
)
 
4

 
—

 
(698
)
Amounts reclassified from accumulated other comprehensive income into income (b)
936

 
(56
)
 
—

 
880

Net current-period other comprehensive income (loss)
234

 
(52
)
 
—

 
182

Exchanges of noncontrolling interests for Class A common stock
180

 
—

 
—

 
180

Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco
(20
)
 
—

 
—

 
(20
)
Balances, June 30, 2017
$
2,798

 
$
—

 
$
2

 
$
2,800

____________________________________
(a)
Net of $0.4 million tax benefit.
(b)
Net of $0.5 million tax expense.
Net (Loss) Income Attributable to Red Rock Resorts, Inc. and Transfers from (to) Noncontrolling Interests
The table below presents the effect on Red Rock Resorts, Inc. stockholders’ equity from net (loss) income and transfers from (to) noncontrolling interests (amounts in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Net (loss) income attributable to Red Rock Resorts, Inc.
$
(25,920
)
 
$
5,653

 
$
(6,137
)
 
$
63,292

Transfers from (to) noncontrolling interests:
 
 
 
 
 
 
 
Allocation of equity to noncontrolling interests of Station Holdco in the reorganization transactions
—

 
(362,908
)
 
—

 
(362,908
)
Exchanges of noncontrolling interests for Class A
common stock
11,400

 
—

 
11,400

 
—

Acquisition of subsidiary noncontrolling interests
—

 
—

 
2,850

 
—

Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco
(2,388
)
 
—

 
(2,925
)
 
—

Net transfers from (to) noncontrolling interests
9,012

 
(362,908
)
 
11,325

 
(362,908
)
Change from net (loss) income attributable to Red Rock Resorts, Inc. and net transfers from (to) noncontrolling interests
$
(16,908
)
 
$
(357,255
)
 
$
5,188

 
$
(299,616
)
 
 
 
 
 
 
 
 

20



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

8 .    Share-Based Compensation
The Company maintains an equity incentive plan which is designed to attract, retain and motivate employees and to align the interests of those individuals with the interests of the Company. A total of 11.6 million shares of Class A common stock are reserved for issuance under the plan, of which 5.0 million shares were available for issuance at June 30, 2017 .
The following table presents information about share-based compensation awards under the equity incentive plan:
 
Restricted Class A
 Common Stock
 
Stock Options
 
Shares
 
Weighted-average grant date fair value
 
Shares
 
Weighted-average exercise price
Outstanding at January 1, 2017
222,487

 
$
15.70

 
1,637,029

 
$
19.71

Activity during the period:
 
 
 
 
 
 
 
Granted
258,143

 
21.92

 
3,276,164

 
21.76

Vested/exercised
(85,811
)
 
11.89

 
(80,727
)
 
19.50

Forfeited
(90,824
)
 
20.23

 
(463,400
)
 
21.07

Outstanding at June 30, 2017
303,995

 
$
20.71

 
4,369,066

 
$
21.11

 
 
 
 
 
 
 
 
The Company recognized share-based compensation expense of $2.3 million and $3.7 million , respectively, for the three and six months ended June 30, 2017 and $3.7 million and $4.3 million , respectively, for the three and six months ended June 30, 2016 . At June 30, 2017 , unrecognized share-based compensation cost was $28.7 million , which is expected to be recognized over a weighted-average period of 3.4 years.         
9 .    Write-downs and Other Charges, Net     
Write-downs and other charges, net include various charges to record net losses on asset disposals and non-routine transactions. For the three and six months ended June 30, 2017 , write-downs and other charges, net were $8.8 million and $9.9 million , respectively. These amounts included $3.5 million in tenant lease termination expenses, as well as losses on fixed asset disposals of $5.5 million and $5.6 million , respectively, for the three and six months ended June 30, 2017 .
For the three and six months ended June 30, 2016 , write-downs and other charges, net were $11.0 million and $13.3 million , respectively. Included in this amount was $7.8 million and $9.0 million , respectively, in IPO-related advisory, legal and other transaction-related costs that were not deferred as direct and incremental costs of the IPO, as well as costs related to the acquisition of Fertitta Entertainment. The Company also incurred $1.3 million in costs associated with various development and acquisition activities, including the acquisition of Palms Casino Resort completed during the fourth quarter of 2016.
10 .    Income Taxes
Red Rock is taxed as a corporation and pays corporate federal, state and local taxes on income allocated to it from Station Holdco based upon Red Rock’s economic interest held in Station Holdco. Station Holdco is treated as a pass-through partnership for income tax reporting purposes. Station Holdco’s members, including the Company, are liable for federal, state and local income taxes based on their share of Station Holdco’s pass-through taxable income.     
The Company’s effective tax rates for the three and six months ended June 30, 2017 were 18.96% and 17.68% , respectively, as compared to 25.67% and 8.45% , respectively, for the three and six months ended June 30, 2016 . The Company’s effective tax rate is significantly less than the statutory rate of 35% primarily because its effective tax rate includes a rate benefit attributable to the fact that Station Holdco operates as a limited liability company which is not subject to federal income tax. Accordingly, the Company is not liable for income taxes on the portion of Station Holdco’s earnings attributable to noncontrolling interests. Station Holdco operates in Nevada, California and Michigan. Nevada does not impose a state income tax and the Company’s activities in California and Michigan are minimal; as a result, state income taxes do not have a significant impact on the Company’s effective rate. The effective tax rates for the three and six months ended June 30, 2016 are also lower than statutory rates because income for the period prior to the IPO was not taxable to the Company as it did not yet hold an equity interest in Station Holdco. The Company recognized an income tax benefit of $11.8 million and $1.1 million for the three and six months ended June 30, 2017 , respectively, and income tax expense of $7.5 million for the three and six months ended June 30, 2016 .

21



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)


As a result of the IPO and certain reorganization transactions, the Company recorded a net deferred tax asset resulting from the outside basis difference of its interest in Station Holdco. The Company also recorded a deferred tax asset for its liability related to payments to be made pursuant to the tax receivable agreement representing 85% of the tax savings the Company expects to receive from the amortization deductions associated with the step up in the basis of depreciable assets under Section 754 of the Internal Revenue Code. This deferred tax asset will be recovered as cash payments are made to the tax receivable agreement participants.
The Company determined that the deferred tax asset related to acquiring its interest in Station Holdco through the newly issued LLC Units is not expected to be realized unless the Company disposes of its investment in Station Holdco. Accordingly, as part of the reorganization transactions in May 2016, the Company recognized a charge to equity to establish a $109.4 million valuation allowance against this portion of its deferred tax asset. The Company recognizes subsequent changes to the valuation allowance through the provision for income tax or other comprehensive income, as applicable, and at June 30, 2017 and December 31, 2016 , the valuation allowance was $101.3 million and $103.7 million , respectively.
Tax Receivable Agreement
In connection with the IPO, the Company entered into a tax receivable agreement with certain pre-IPO owners of Station Holdco. In the event that such parties exchange any or all of their Holdco Units for Class A common stock, the tax receivable agreement requires the Company to make payments to such holders for 85% of the tax benefits realized by the Company as a result of such exchange. The Company expects to realize these tax benefits based on current projections of taxable income. The annual tax benefits are computed by calculating the income taxes due, including such tax benefits, and the income taxes due without such benefits. At June 30, 2017 and December 31, 2016 , the Company's liability under the tax receivable agreement was $275.3 million and $258.5 million , respectively, of which $0.9 million and $1.0 million was presented within current liabilities, respectively. As a result of exchanges of approximately 2.0 million LLC Units and Class B common shares for Class A common shares during the three months ended June 30, 2017 , the Company recognized a $17.3 million increase in the liability.
The timing and amount of aggregate payments due under the tax receivable agreement may vary based on a number of factors, including the amount and timing of the taxable income the Company generates each year and the tax rate then applicable. The payment obligations under the tax receivable agreement are Red Rock’s obligations and are not obligations of Station Holdco or Station LLC. Payments are generally due within a specified period of time following the filing of the Company’s annual tax return and interest on such payments will accrue from the original due date (without extensions) of the income tax return until the date paid. Payments not made within the required period after the filing of the income tax return generally accrue interest at a rate of LIBOR plus 5.00% .
The tax receivable agreement will remain in effect until all such tax benefits have been utilized or expired, unless the Company exercises its right to terminate the tax receivable agreement. The tax receivable agreement will also terminate if the Company breaches its obligations under the tax receivable agreement or upon certain mergers, asset sales or other forms of business combinations, or other changes of control. If the Company exercises its right to terminate the tax receivable agreement, or if the tax receivable agreement is terminated early in accordance with its terms, Red Rock’s payment obligations would be accelerated based upon certain assumptions, including the assumption that the Company would have sufficient future taxable income to utilize such tax benefits.
11 .    Related Party Transactions
Prior to April 27, 2017, the Company leased the land on which each of Boulder Station and Texas Station is located pursuant to long-term ground leases which provided for monthly payments of $222,933 and $366,435 , respectively, subject to future increases. The Company leased this land from entities owned by the Frank J. Fertitta and Victoria K. Fertitta Revocable Family Trust. Frank J. Fertitta, Jr. and Victoria K. Fertitta are the parents of Frank J. Fertitta III, the Company’s Chairman and Chief Executive Officer, and Lorenzo J. Fertitta, the Company’s Vice Chairman. On April 27, 2017, the Company acquired the land subject to the ground leases, including the residual interest in the gaming and hotel facilities and other real property improvements thereon, for aggregate consideration of $120.0 million . As a result of such acquisition and the termination of the ground leases, the Company recognized a charge of $98.4 million in related party lease termination costs, which was an amount equal to the difference between the aggregate consideration paid by the Company and the acquisition date fair value of the land and residual interests. In addition, the transaction generated a tax benefit of approximately $35 million to Red Rock and the other owners of Station Holdco.

22



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Under the tax receivable agreement described in Note 10 , the Company is required to make payments to certain pre-IPO owners of Station Holdco for 85% of the tax benefits realized by the Company as a result of certain transactions with the pre-IPO owners. At June 30, 2017 and December 31, 2016 , $22.5 million and $21.6 million , respectively, of the Company’s liability under the tax receivable agreement was payable to related parties.
12 .    (Loss) Earnings Per Share
Basic (loss) earnings per share is calculated by dividing net (loss) income attributable to Red Rock by the weighted average number of shares of Class A common stock outstanding during the period. The calculation of diluted earnings per share gives effect to all potentially dilutive shares, including shares issuable pursuant to outstanding stock options and nonvested restricted shares of Class A common stock, based on the application of the treasury stock method, and outstanding Class B common stock that is exchangeable, along with an equal number of LLC Units, for Class A common stock, based on the application of the if-converted method. For the three and six months ended June 30, 2017 , the Company incurred a net loss. As a result, all potentially dilutive securities, which included outstanding shares of Class B common stock, nonvested restricted shares of Class A common stock and outstanding stock options, were excluded from the calculation of diluted loss per share because their inclusion would have been antidilutive.
For purposes of calculating earnings per share for the three and six months ended June 30, 2016 the Company has retrospectively presented earnings per share as if the IPO had occurred at the beginning of the earliest period presented. Such retrospective presentation reflects approximately 10 million Class A shares outstanding, representing certain LLC Units that were exchanged for shares of Class A common stock in connection with the IPO. Accordingly, for the three and six months ended June 30, 2016 , the Company has applied a hypothetical allocation of net income to the Class A common stock, with the remainder of net income being allocated to noncontrolling interests. This hypothetical allocation of net income differs from the allocation of net income to Red Rock and noncontrolling interests presented in the Condensed Consolidated Statements of Operations, which assumes no noncontrolling interest in Station Holdco existed prior to the IPO.
A reconciliation of the numerator and denominator used in the calculation of basic and diluted (loss) earnings per share is presented below (amounts in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Net (loss) income
$
(50,494
)
 
$
21,728

 
$
(5,280
)
 
$
81,231

Less: net (loss) income attributable to noncontrolling interests
(24,574
)
 
21,426

 
857

 
74,614

Net (loss) income attributable to Red Rock, basic
and diluted
$
(25,920
)
 
$
302

 
$
(6,137
)
 
$
6,617

 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Weighted average shares of Class A common stock outstanding, basic
67,311

 
30,031

 
66,506

 
19,960

Effect of dilutive securities
—

 
162

 
—

 
81

Weighted average shares of Class A common stock outstanding, diluted
67,311

 
30,193

 
66,506

 
20,041

The calculation of diluted (loss) earnings per share of Class A common stock excluded the following potentially dilutive shares because their inclusion would have been antidilutive (amounts in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Shares issuable in exchange for Class B common stock and LLC Units
47,954

 
74,427

 
47,954

 
74,427

Share issuable upon exercise of stock options
4,369

 
1,687

 
4,369

 
1,687

Shares issuable upon vesting of restricted stock
293

 
—

 
293

 
—


23



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Shares of Class B common stock are not entitled to share in the earnings of the Company and are not participating securities. Accordingly, earnings per share of Class B common stock under the two-class method has not been presented.
13 .    Commitments and Contingencies
The Company and its subsidiaries are defendants in various lawsuits relating to routine matters incidental to their business. As with all litigation, no assurance can be provided as to the outcome of any legal matters and litigation inherently involves significant costs.
14 .    Segments
The Company views each of its Las Vegas casino properties and each of its Native American management arrangements as individual operating segments. The Company aggregates all of its Las Vegas operating segments into one reportable segment because all of its Las Vegas properties offer similar products, cater to the same customer base, have the same regulatory and tax structure, share the same marketing techniques, are directed by a centralized management structure and have similar economic characteristics. The Company also aggregates its Native American management arrangements into one reportable segment.

24



RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

The Company utilizes Adjusted EBITDA as its primary performance measure. The Company’s segment information and a reconciliation of net (loss) income to Adjusted EBITDA are presented below (amounts in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Net revenues
 
 
 
 
 
 
 
Las Vegas operations
$
371,492

 
$
322,876

 
$
757,730

 
$
654,334

Native American management
30,543

 
27,320

 
60,648

 
53,807

Reportable segment net revenues
402,035

 
350,196

 
818,378

 
708,141

Corporate and other
1,458

 
1,290

 
2,847

 
2,592

Net revenues
$
403,493

 
$
351,486

 
$
821,225

 
$
710,733

 
 
 
 
 
 
 
 
Net (loss) income
$
(50,494
)
 
$
21,728

 
$
(5,280
)
 
$
81,231

Adjustments
 
 
 
 
 
 
 
Preopening
368

 
373

 
398

 
721

Depreciation and amortization
46,807

 
38,436

 
92,060

 
77,863

Share-based compensation
2,326

 
3,681

 
3,738

 
4,301

Write-downs and other charges, net
8,826

 
10,966

 
9,850

 
13,334

Related party lease termination
98,393

 
—

 
98,393

 
—

Interest expense, net
33,853

 
34,078

 
68,797

 
69,146

Loss on extinguishment/modification of debt, net
975

 
7,084

 
2,994

 
7,084

Change in fair value of derivative instruments
(3,330
)
 
(90
)
 
(3,369
)
 
(87
)
Adjusted EBITDA attributable to MPM
noncontrolling interest
(6,418
)
 
(5,211
)
 
(11,056
)
 
(9,332
)
(Benefit) provision for income tax
(11,813
)
 
7,502

 
(1,134
)
 
7,502

Other
—

 
(1,133
)
 
—

 
(1,133
)
Adjusted EBITDA (a)
$
119,493

 
$
117,414

 
$
255,391

 
$
250,630

 
 
 
 
 
 
 
 
Adjusted EBITDA
 
 
 
 
 
 
 
Las Vegas operations
$
104,711

 
$
104,627

 
$
225,277

 
$
223,637

Native American management
22,695

 
20,096

 
46,012

 
40,528

Reportable segment Adjusted EBITDA
127,406

 
124,723

 
271,289

 
264,165

Corporate and other
(7,913
)
 
(7,309
)
 
(15,898
)
 
(13,535
)
Adjusted EBITDA
$
119,493

 
$
117,414

 
$
255,391

 
$
250,630

 
 
 
 
 
 
 
 
____________________________________
(a)
Adjusted EBITDA includes net (loss) income plus preopening, depreciation and amortization, share-based compensation, write-downs and other charges, net, related party lease termination, interest expense, net, loss on extinguishment/modification of debt, net, change in fair value of derivative instruments and income taxes, and excludes Adjusted EBITDA attributable to the noncontrolling interests of MPM.

25





Item 2.    
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes (the “Condensed Consolidated Financial Statements”) included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2016 .
Overview
Red Rock Resorts, Inc. (“we,” “our,” “us,” or the “Company”) was formed as a Delaware corporation in September 2015 to manage and own an indirect equity interest in Station Casinos LLC (“Station LLC”). In May 2016, we completed an initial public offering (“IPO”) and used the proceeds to purchase newly issued limited liability company interests in Station Holdco LLC (“Station Holdco,” and such units, the “LLC Units”), and outstanding LLC Units from existing members of Station Holdco. We own all of the outstanding voting interests in Station LLC and have an indirect economic interest in Station LLC through our ownership interest in Station Holdco, which owns all of the economic interests in Station LLC. Station LLC is a gaming, development and management company that owns and operates ten major gaming and entertainment facilities and ten smaller casinos ( three of which are 50% owned) in the Las Vegas regional market, including its recent acquisition of Palms Casino Resort (“Palms”) in October 2016. In addition, Station LLC manages Graton Resort & Casino (‘‘Graton Resort’’) in Sonoma County, California and Gun Lake Casino (‘‘Gun Lake’’) in Allegan County, Michigan, both on behalf of Native American tribes.
At June 30, 2017 , we held approximately 59% of the economic interests in Station Holdco, as well as 100% of the voting interest in Station LLC and 100% of the voting power in Station Holdco, subject to certain limited exceptions, and were designated as the sole managing member of both Station Holdco and Station LLC. We control and operate all of the business and affairs of Station Holdco and Station LLC, and conduct all of our operations through these entities. Our Condensed Consolidated Financial Statements reflect the consolidation of Station LLC and its consolidated subsidiaries, and Station Holdco. The financial position and results of operations attributable to LLC Units we do not own are reported separately as noncontrolling interest. Station Holdco is our predecessor for accounting purposes and accordingly, for all periods prior to May 2, 2016, the financial information presented herein represents the information of the predecessor.
Our principal source of revenue and operating income is gaming, and our non-gaming offerings include restaurants, hotels and other entertainment amenities. Approximately 80% to 85% of our casino revenue is generated from slot play. The majority of our revenue is cash-based and as a result, fluctuations in our revenues have a direct impact on our cash flows from operations. Because our business is capital intensive, we rely heavily on the ability of our properties to generate operating cash flow to repay debt financing and fund capital expenditures.
A significant portion of our business is dependent upon customers who live and/or work in the Las Vegas metropolitan area. The Las Vegas economy, although severely impacted by the recession and housing crisis that spanned from 2008 to 2011, began to stabilize in 2012 and, based on population and employment growth, is once again one of the fastest growing economies in the United States. Based on a recent U.S. Census Bureau release, Nevada was second among all states in percentage growth of population from July 2015 to July 2016. In addition, based on preliminary data for June 2017 from the U.S. Bureau of Labor Statistics, Las Vegas experienced a 3.7% year-over-year increase in employment to 981,000 jobs which is an all-time high. This resulted in an unemployment rate of 5.1% which has declined from 14.1% in July 2011. Businesses and consumers in Las Vegas continue to increase their spending as evidenced by 47 consecutive months of year-over-year increases in taxable retail sales from July 2013 to May 2017. Home values have also improved significantly over the past several years with the median price of an existing single family home in Las Vegas up approximately 130% at June 2017 compared to January 2012, as reported by the Greater Las Vegas Association of Realtors.
The Las Vegas economy has shown improvements in employment, taxable sales and home prices, and we believe the stabilization of the local economy, positive trends in many of the key economic indicators and future projects and infrastructure investments provide a foundation for future growth in our business. Although we experienced improved operating results over the past few years due, in part, to more favorable local economic conditions, we cannot be sure if, or how long, these favorable market conditions will persist or that they will continue to positively impact our results of operations .

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Our Key Performance Indicators
We use certain key indicators to measure our performance.
Gaming revenue measures:
•
Slot handle and table game drop are measures of volume. Slot handle represents the dollar amount wagered in slot machines, and table game drop represents the total amount of cash and net markers issued that are deposited in table game drop boxes.
•
Win represents the amount of wagers retained by us and recorded as casino revenue.
•
Hold represents win as a percentage of slot handle or table game drop.
As our customers are primarily Las Vegas residents, our hold percentages are generally consistent from period to period. Fluctuations in our casino revenue are primarily due to the volume and spending levels of customers at our properties.
Food and beverage revenue measures:
•
Average guest check is a measure of sales and represents the average amount spent per customer visit.
•
Number of guests served is an indicator of volume.
Room revenue measures:
•
Occupancy is calculated by dividing total occupied rooms, including complimentary rooms, by total rooms available.
•
Average daily rate (“ADR”) is calculated by dividing total room revenue, which includes the retail value of complimentary rooms, by total rooms occupied, including complimentary rooms.
•
Revenue per available room is calculated by dividing total room revenue by total rooms available.

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Results of Operations
Information about our results of operations is presented below (dollars in thousands):
 
Three Months Ended June 30,
 
Percent
change
 
Six Months Ended June 30,
 
Percent
change
 
2017
 
2016
 
 
2017
 
2016
 
Net revenues
$
403,493

 
$
351,486

 
14.8
 %
 
$
821,225

 
$
710,733

 
15.5
 %
Operating (loss) income
(31,229
)
 
69,874

 
n/m

 
61,173

 
163,836

 
(62.7
)%
 
 
 
 
 
 
 
 
 
 
 
 
Casino revenues
258,396

 
233,796

 
10.5
 %
 
521,368

 
473,567

 
10.1
 %
Casino expenses
103,170

 
88,986

 
15.9
 %
 
204,824

 
176,407

 
16.1
 %
Margin
60.1
%
 
61.9
%
 


 
60.7
%
 
62.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Food and beverage revenues
75,303

 
66,408

 
13.4
 %
 
155,418

 
133,028

 
16.8
 %
Food and beverage expenses
55,059

 
44,501

 
23.7
 %
 
110,105

 
87,025

 
26.5
 %
Margin
26.9
%
 
33.0
%
 
 
 
29.2
%
 
34.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Room revenues
44,641

 
32,979

 
35.4
 %
 
94,405

 
67,363

 
40.1
 %
Room expenses
18,239

 
11,893

 
53.4
 %
 
38,306

 
24,278

 
57.8
 %
Margin
59.1
%
 
63.9
%
 
 
 
59.4
%
 
64.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other revenues
23,699

 
17,705

 
33.9
 %
 
46,519

 
34,887

 
33.3
 %
Other expenses
9,079

 
6,305

 
44.0
 %
 
16,912

 
12,027

 
40.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
Management fee revenue
30,676

 
27,455

 
11.7
 %
 
60,903

 
54,104

 
12.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
94,781

 
80,152

 
18.3
 %
 
189,204

 
155,242

 
21.9
 %
Percent of net revenues
23.5
%
 
22.8
%
 
 
 
23.0
%
 
21.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
46,807

 
38,436

 
21.8
 %
 
92,060

 
77,863

 
18.2
 %
Write-downs and other charges, net
8,826

 
10,966

 
(19.5
)%
 
9,850

 
13,334

 
(26.1
)%
Related party lease termination
98,393

 
—

 
n/m

 
98,393

 
—

 
n/m

Interest expense, net
33,853

 
34,078

 
(0.7
)%
 
68,797

 
69,146

 
(0.5
)%
Loss on extinguishment/modification of debt, net
975

 
7,084

 
n/m

 
2,994

 
7,084

 
n/m

Benefit (provision) for income tax
11,813

 
(7,502
)
 
n/m

 
1,134

 
(7,502
)
 
n/m

Net (loss) income attributable to noncontrolling interests
(24,574
)
 
16,075

 
n/m

 
857

 
17,939

 
n/m

Net (loss) income attributable to
Red Rock
(25,920
)
 
5,653

 
n/m

 
(6,137
)
 
63,292

 
n/m

____________________________________
n/m = Not meaningful
We view each of our Las Vegas casino properties as individual operating segments. We aggregate all of our Las Vegas operating segments into one reportable segment because all of our Las Vegas properties offer similar products, cater to the same customer base, have the same regulatory and tax structure, share the same marketing techniques, are directed by a centralized management structure and have similar economic characteristics. We also aggregate our Native American management arrangements into one reportable segment. The results of operations for our Native American management segment are

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discussed in the section entitled “Management Fee Revenue” below and the results of operations of our Las Vegas operations are discussed in the remaining sections. For the three and six months ended June 30, 2017 , references to same-store basis represents results of operations excluding the impact of operations of Palms, which was acquired in the fourth quarter of 2016.
Net Revenues . Net revenues for the three and six months ended June 30, 2017 increased by 14.8% and 15.5% , respectively, as compared to the prior year periods primarily due to the acquisition of Palms. Same-store net revenues for the three and six months ended June 30, 2017 , which are further discussed below, increased 3.5% and 3.6% as compared to the prior year periods, despite the negative impact related to construction disruption at Palace Station associated with the upgrade and expansion project that commenced during the fourth quarter of 2016.
Operating (Loss) Income. Operating loss was $31.2 million for the three months ended June 30, 2017 and operating income was $61.2 million for the six months ended June 30, 2017 , and was negatively impacted by a $98.4 million loss on a related party lease termination during the second quarter, which is discussed further below. Operating income for the three and six months ended June 30, 2016 was $69.9 million and $163.8 million , respectively. Same-store operating income excluding the loss from the related party lease termination was $71.5 million and $159.3 million for the three and six months ended June 30, 2017 , respectively. Components of operating income for the three and six month comparative periods are discussed below.
Casino.   Casino revenues increased by 10.5% and 10.1% for the three and six months ended June 30, 2017 , respectively, as compared to the prior year periods primarily due to the acquisition of Palms. Casino revenues on a same-store basis increased by 2.8% and 2.5% for the three and six months ended June 30, 2017 , respectively, as compared to the prior year periods due to higher slot, table games and race and sports revenue. The increase in slot revenue on a same-store basis for the  three and six  month periods was primarily attributable to a  2.6% and 2.0%  increase in slot handle, respectively, as compared to the prior year periods. The increase in table games revenue on a same-store basis for the  three and six  months ended  June 30, 2017  was primarily due to an increase in drop of 5.7% and 2.5% , respectively, as compared to the prior year periods. Race and sports revenue was higher on a same-store basis for the  three and six  months ended  June 30, 2017  due to increases in volume.
For the three and six months ended June 30, 2017 , casino expenses increased by 15.9% and 16.1% , respectively, as compared to the prior year periods as a result of the increase in revenues, as well as increases in gaming promotions and employee expenses.
Food and Beverage.   For the three and six months ended June 30, 2017 , food and beverage revenue increased by 13.4% and 16.8% , respectively, as compared to the prior year periods largely due to the acquisition of Palms. Food and beverage revenue on a same-store basis remained relatively flat for the three months ended June 30, 2017 and increased 1.1% for the six months ended June 30, 2017 , as compared to the prior year periods, primarily due to the opening of several new restaurants during the first half of 2016, partially offset by lower catering revenues in the current year periods. The average guest check increased 4.7% and 2.7% on a same-store basis for the three and six months ended June 30, 2017 , respectively, as compared to the prior year periods and same-store covers decreased by 3.5% and 1.4% , respectively, as compared to the prior year periods. Food and beverage expenses increased by 23.7% and 26.5% for the three and six months ended June 30, 2017 , respectively, as compared to the prior year periods due to the acquisition of Palms, the addition of the new restaurants and increases in employee expenses, as well as enhancements to our food and beverage product offerings and service levels.
Room.   Information about our hotel operations is presented below:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Occupancy
91.5
%
 
95.0
%
 
91.8
%
 
94.2
%
Average daily rate
$
91.28

 
$
84.00

 
$
96.74

 
$
87.00

Revenue per available room
$
83.48

 
$
79.76

 
$
88.82

 
$
81.99

     For the three and six months ended June 30, 2017 , room revenues increased by 35.4% and 40.1% , respectively, primarily due to the acquisition of Palms. ADR increased by 8.7% and 11.2% , respectively, as compared to the prior year periods, partially offset by a 3.5 and 2.4 percentage point decrease, respectively, in occupancy rate. Room revenues on a same-store basis increased 1.6% and 4.2% and same-store ADR increased 3.8% and 6.4% , respectively, as compared to the prior year periods. Room expenses also increased for the three and six months ended June 30, 2017 as compared to the prior year periods, primarily due to the acquisition of Palms, as well as increases in employee expenses.
Other.   Other primarily represents revenues and their corresponding expenses from tenant leases, retail outlets, bowling, spas and entertainment. Other revenues increased by $6.0 million and $11.6 million for the three and six months ended June 30, 2017 , respectively, as compared to the prior year periods, and other expenses increased $2.8 million and $4.9

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million for the three and six months ended June 30, 2017 , respectively, as compared to the prior year periods, primarily due to the acquisition of Palms.
Management Fee Revenue.   Management fee revenue primarily represents management and development fees earned from our management agreements with Graton Resort and Gun Lake. Management fee revenue increased 11.7% and 12.6% to $30.7 million and $60.9 million for the three and six months ended June 30, 2017 , respectively, as compared to $27.5 million and $54.1 million , respectively, for the prior year periods. The increase was due to higher slot and table games revenue as well as the opening of an expansion at Graton Resort, which included a 200-room hotel, convention space and other resort amenities, in the fourth quarter of 2016. In addition, a portion of the casino expansion at Gun Lake opened in May 2017, and the remaining expansion is expected to open in September 2017. The Gun Lake management agreement expires in February 2018.
Selling, General and Administrative (“SG&A”). For the three and six months ended June 30, 2017 , SG&A expenses increased by $14.6 million and $34.0 million or 18.3% and 21.9% , respectively, as compared to the prior year periods, primarily due to SG&A expense of Palms, as well as higher employee expenses and additional costs associated with being a public company. These increases were partially offset by decreased rent expense due to the related party lease termination discussed further below and decreased advertising and promotions expense as compared to the prior year periods.
Depreciation and Amortization.   For the three and six months ended June 30, 2017 , depreciation and amortization expense increased to $46.8 million and $92.1 million as compared to $38.4 million and $77.9 million for the prior year periods, respectively, primarily due to the acquisition of Palms, as well as accelerated depreciation related to the upgrade and expansion at Palace Station.
Write-downs and Other Charges, net. Write-downs and other charges, net include various charges to record net losses on asset disposals and non-routine transactions. For the three and six months ended June 30, 2017 , write-downs and other charges, net were $8.8 million and $9.9 million , respectively. These amounts included $3.5 million in tenant lease termination expenses, as well as losses on fixed asset disposals of $5.5 million and $5.6 million , respectively, for the three and six months ended June 30, 2017 .
For the three and six months ended June 30, 2016 , write-downs and other charges, net were $11.0 million and $13.3 million , respectively. Included in this amount was $7.8 million and $9.0 million , respectively, in IPO-related advisory, legal and other transaction-related costs that were not deferred as direct and incremental costs of the IPO, as well as costs related to the Fertitta Entertainment Acquisition. We also incurred $1.3 million in costs associated with various development and acquisition activities, including the acquisition of Palms completed during the fourth quarter of 2016.
Related Party Lease Termination.   In April 2017, we purchased entities that own certain land on which Texas Station and Boulder Station are located for aggregate consideration of $120.0 million . The land was previously leased under long-term operating leases with a related party lessor. As a result of the land acquisition and the termination of the ground leases, we recognized a $98.4 million charge representing the difference between the aggregate consideration paid to the related party lessor and the acquisition date fair value of the land and residual interests acquired. In addition, the transaction generated a tax benefit of approximately $35 million to Red Rock and the other owners of Station Holdco. Annual rent expense will decrease by approximately $7.1 million as a result of the land acquisition.
Interest Expense, net.   Interest expense, net decreased slightly to $33.9 million and $68.8 million , respectively, for the three and six months ended June 30, 2017 as compared to $34.1 million and $69.1 million , respectively, for the prior year periods. As a result of the credit facility repricings in January and May 2017, the redemption of $250.0 million in aggregate principal amount of the 7.50% Senior Notes in May 2017, and the repayment of the Restructured Land Loan, the weighted average interest rate on our outstanding debt decreased, which was offset by the impact of an increase in our outstanding indebtedness. Additional information about debt activity is included in Note 4 to the Condensed Consolidated Financial Statements.
Loss on Extinguishment/Modification of Debt, net. For the three and six months ended June 30, 2017 , we recorded $1.0 million and $3.0 million , respectively, net loss on extinguishment/modification of debt. During the three and six months ended June 30, 2017 , we recognized a loss of $2.1 million and $4.1 million , respectively, related to the repricing and upsizing of the credit facility. During the three months ended June 30, 2017 , we also recognized a loss on extinguishment/modification of debt of $13.8 million related to the redemption of the 7.50% Senior Notes, which was partially offset by a $14.9 million gain on debt extinguishment related to the Restructured Land Loan recognized in June 2017.
For the three and six months ended June 30, 2016 , we recorded $7.1 million loss on extinguishment/modification of debt, primarily related to the refinancing of the prior credit facility in June 2016.

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Benefit (Provision) for Income Tax. For the three and six months ended June 30, 2017 , we recognized an income tax benefit of $11.8 million and $1.1 million , respectively, which was primarily attributable to the loss on related party lease termination in April 2017. Station Holdco is treated as a partnership for income tax reporting and Station Holdco’s members are liable for federal, state and local income taxes based on their share of Station Holdco’s taxable income. We are not liable for income tax on the noncontrolling interests’ share of Station Holdco’s taxable income and therefore our effective tax rate of 18.96% and 17.68% for the three and six months ended June 30, 2017 , respectively, was significantly less than the statutory rate. Income tax expense totaled $7.5 million for the three and six months ended June 30, 2016 .
Net (Loss) Income Attributable to Noncontrolling Interests. Net (loss) income attributable to noncontrolling interests for the three and six months ended June 30, 2017 represented the portion of net income attributable to the approximately 41% ownership interest in Station Holdco not held by us, as well as the portion of MPM Enterprises, LLC’s (“MPM”) net income that was not attributable to us. Net income attributable to noncontrolling interests for the three and six months ended June 30, 2016 represented the portion of net income attributable to the ownership interest in Station Holdco not held by us for the period from May 2, 2016 through June 30, 2016 , as well as the portion of MPM’s net income that was not attributable to us.

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Adjusted EBITDA
Adjusted EBITDA for the three and six months ended June 30, 2017 and 2016 for our two reportable segments and a reconciliation of net (loss) income to Adjusted EBITDA are presented below (amounts in thousands). The Las Vegas operations segment includes all of our Las Vegas area casino properties and the Native American management segment includes our Native American management arrangements.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Net revenues
 
 
 
 
 
 
 
Las Vegas operations
$
371,492

 
$
322,876

 
$
757,730

 
$
654,334

Native American management
30,543

 
27,320

 
60,648

 
53,807

Reportable segment net revenues
402,035

 
350,196

 
818,378

 
708,141

Corporate and other
1,458

 
1,290

 
2,847

 
2,592

Consolidated net revenues
$
403,493

 
$
351,486

 
$
821,225

 
$
710,733

 
 
 
 
 
 
 
 
Net (loss) income
$
(50,494
)
 
$
21,728

 
$
(5,280
)
 
$
81,231

Adjustments
 
 
 
 
 
 
 
Preopening
368

 
373

 
398

 
721

Depreciation and amortization
46,807

 
38,436

 
92,060

 
77,863

Share-based compensation
2,326

 
3,681

 
3,738

 
4,301

Write-downs and other charges, net
8,826

 
10,966

 
9,850

 
13,334

Related party lease termination
98,393

 
—

 
98,393

 
—

Interest expense, net
33,853

 
34,078

 
68,797

 
69,146

Loss on extinguishment/modification of debt, net
975

 
7,084

 
2,994

 
7,084

Change in fair value of derivative instruments
(3,330
)
 
(90
)
 
(3,369
)
 
(87
)
Adjusted EBITDA attributable to MPM
noncontrolling interest
(6,418
)
 
(5,211
)
 
(11,056
)
 
(9,332
)
(Benefit) provision for income tax
(11,813
)
 
7,502

 
(1,134
)
 
7,502

Other
—

 
(1,133
)
 
—

 
(1,133
)
Adjusted EBITDA
$
119,493

 
$
117,414

 
$
255,391

 
$
250,630

 
 
 
 
 
 
 
 
Adjusted EBITDA
 
 
 
 
 
 
 
Las Vegas operations
$
104,711

 
$
104,627

 
$
225,277

 
$
223,637

Native American management
22,695

 
20,096

 
46,012

 
40,528

Reportable segment Adjusted EBITDA
127,406

 
124,723

 
271,289

 
264,165

Corporate and other
(7,913
)
 
(7,309
)
 
(15,898
)
 
(13,535
)
Adjusted EBITDA
$
119,493

 
$
117,414

 
$
255,391

 
$
250,630

 
 
 
 
 
 
 
 
The increase in Adjusted EBITDA for the three and six months ended June 30, 2017 as compared to the prior year periods is due to the factors described above.
Adjusted EBITDA is a non-GAAP measure that is presented solely as a supplemental disclosure. We believe that Adjusted EBITDA is a widely used measure of operating performance in our industry and is a principal basis for valuation of gaming companies. We believe that in addition to net (loss) income, Adjusted EBITDA is a useful financial performance measurement for assessing our operating performance because it provides information about the performance of our ongoing core operations excluding non-cash expenses, financing costs, and other non-operational items. Adjusted EBITDA includes net (loss) income plus preopening, depreciation and amortization, share-based compensation, write-downs and other charges, net, related party lease termination, interest expense, net, loss on extinguishment/modification of debt, net, change in fair value of derivative instruments and income taxes, and excludes Adjusted EBITDA attributable to the noncontrolling interests of MPM.

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To evaluate Adjusted EBITDA and the trends it depicts, the components should be considered. Each of these components can significantly affect our results of operations and should be considered in evaluating our operating performance, and the impact of these components cannot be determined from Adjusted EBITDA. Further, Adjusted EBITDA does not represent net (loss) income or cash flows from operating, investing or financing activities as defined by GAAP and should not be considered as an alternative to net income as an indicator of our operating performance. Additionally, Adjusted EBITDA does not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity. In addition, it should be noted that not all gaming companies that report EBITDA or adjustments to this measure may calculate EBITDA or such adjustments in the same manner as we do, and therefore, our measure of Adjusted EBITDA may not be comparable to similarly titled measures used by other gaming companies.
Liquidity and Capital Resources
The following liquidity and capital resources discussion contains certain forward-looking statements with respect to our business, financial condition, results of operations, dispositions, acquisitions, investments and subsidiaries, which involve risks and uncertainties that cannot be predicted or quantified, and consequently, actual results may differ materially from those expressed or implied herein. Such risks and uncertainties include, but are not limited to, the risks described in Item 1A—Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2016 .
At June 30, 2017 , we had $125.3 million in cash and cash equivalents used for the day-to-day operations of our properties. At June 30, 2017 , Station LLC’s borrowing availability under the Revolving Credit Facility, subject to continued compliance with the terms of the credit facility, was $461.0 million , which was net of $190.0 million in outstanding borrowings and $34.0 million in outstanding letters of credit and similar obligations.
Our anticipated uses of cash for the remainder of 2017 include (i) principal and interest payments on Station LLC’s indebtedness totaling approximately $9.8 million and $49.9 million , respectively, (ii) approximately $125.0 million to $150.0 million for capital expenditures, which includes amounts related to the upgrade and expansion project at Palace Station and reinvestment in Palms, and (iii) distributions to noncontrolling interest holders of Station Holdco and dividends to our Class A common stockholders, including dividends of $6.8 million that we expect to pay on August 31, 2017 .
We are obligated to make payments under the tax receivable agreement, which is described in Note 10 to the Condensed Consolidated Financial Statements. At June 30, 2017 , such obligations totaled $275.3 million , of which $ 0.9 million is expected to be paid in the fourth quarter of 2017. Although the amount of any payments that must be made under the tax receivable agreement may be significant, the timing of these payments will vary and will generally be limited to one payment per year. The amount of such payments is also limited to the extent we utilize the related deferred tax assets. The payments that we are required to make will generally reduce the amount of overall cash that might have otherwise been available to us, but we expect the cash tax savings we will realize from the utilization of the related deferred tax assets to fund the required payments.
We believe that cash flows from operations, available borrowings under Station LLC’s credit facility and existing cash balances will be adequate to satisfy our other anticipated uses of capital for the next twelve months. We regularly assess our projected capital requirements for capital expenditures, repayment of debt obligations, and payment of other general corporate and operational needs. In the long term, we expect that we will fund our capital requirements with a combination of cash generated from operations, borrowings under Station LLC’s Revolving Credit Facility and the issuance of new debt or equity as market conditions may permit. However, our cash flow and ability to obtain debt or equity financing on terms that are satisfactory to us, or at all, may be affected by a variety of factors, many of which are outside of our control, including competition, general economic and business conditions and financial markets. As a result, we cannot provide any assurance that we will generate sufficient income and liquidity to meet all of our liquidity requirements or other obligations.
A summary of our cash flow information is presented below (amounts in thousands):
 
Six Months Ended June 30,
 
2017
 
2016
Net cash provided by (used in):
 
 
 
Operating activities
$
102,530

 
$
165,982

Investing activities
(132,681
)
 
(82,756
)
Financing activities
21,682

 
51,561

Cash Flows from Operations
Our operating cash flows primarily consist of operating income generated by our properties (excluding depreciation and other non-cash charges), interest paid and normal fluctuations in working capital accounts such as inventories, prepaid

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expenses, receivables and payables. The majority of our revenue is generated from our slot machine and table game play, which is conducted mainly on a cash basis. Our food and beverage, room and other revenues are also primarily cash-based. As a result, fluctuations in our revenues have a direct impact on our cash flow from operations. For the six months ended June 30, 2017 , cash provided by operating activities was $102.5 million as compared to $166.0 million for the prior year period. Operating cash flows were negatively impacted by the $98.4 million loss on related party lease termination and additional costs associated with being a public company. These negative impacts were partially offset by operating results from Palms, which we acquired in October 2016, as well as improved operating results at our properties and our Native American managed properties as described under Results of Operations above.
Cash Flows from Investing Activities
For the six months ended June 30, 2017 , capital expenditures were $101.9 million , which were primarily related to various renovation projects, including the upgrade and expansion project at Palace Station which commenced in October 2016, as well as the purchase of slot machines and related gaming equipment. During the same period, we paid $23.4 million to a related party to purchase the land subject to the ground leases on which each of Boulder Station and Texas Station is located. During the six months ended June 30, 2016 , capital expenditures were $87.6 million and were primarily related to various renovation projects at our properties. In addition, during the same period, we collected $18.3 million of related party notes and we deposited $20.0 million into an escrow account in connection with the acquisition of Palms.
Cash Flows from Financing Activities
During the six months ended June 30, 2017 , we completed an aggregate $425.0 million upsizing and repricing of Station LLC’s credit facility and paid $20.9 million in related fees and costs. During the same period, we paid $105.1 million in full settlement of the outstanding principal owed under the Restructured Land Loan and to acquire outstanding warrants of CV Propco and NP Tropicana. During the six months ended June 30, 2017 , we redeemed $250.0 million of the 7.50% Senior Notes and paid a redemption premium of $9.4 million . In addition, we paid $13.3 million in dividends to Class A common shareholders and $23.7 million in cash distributions, consisting of $16.9 million paid to the noncontrolling interest holders of Station Holdco and $6.8 million paid by MPM to its noncontrolling interest holders.
During the six months ended June 30, 2016 , we received net proceeds from the IPO of approximately $532.0 million and used $112.5 million to purchase outstanding LLC Units from existing members of Station Holdco. In addition, Station LLC completed the purchase of Fertitta Entertainment, which included a deemed distribution of $389.1 million to Fertitta Entertainment’s equity holders. During the same period, Station LLC entered into a new credit facility with an initial principal balance of $1.725 billion, the proceeds of which were used to repay the principal balance outstanding under its prior credit facility. For the six months ended June 30, 2016 , cash distributions totaled $100.5 million , consisting of $94.1 million paid to members of Station Holdco and $6.4 million paid by MPM to its noncontrolling interest holders.
Credit Facility Amendments
In January 2017, we amended Station LLC’s credit facility to increase the existing Term Loan B Facility by $125.0 million and reduce the applicable margins for LIBOR and base rate loans by 50 basis points. Station LLC used the proceeds of the incremental Term Loan B Facility borrowings to repay outstanding borrowings under the Revolving Credit Facility and pay fees and costs incurred in connection with the transaction, including a repricing fee of $14.9 million , which represented 1.00% of the aggregate principal amount of the Term Loan B Facility outstanding prior to the $125.0 million increase in borrowings.
In May 2017, we amended Station LLC’s credit facility to increase the Term Loan B Facility by an additional $250.0 million . Station LLC applied the proceeds of the incremental borrowings under the Term Loan B Facility, together with cash on hand, to pay for the redemption of $250.0 million of its 7.50% Senior Notes and to pay fees and costs incurred in connection with the transactions. As a result of the January 2017 and May 2017 increases to the Term Loan B Facility, the required quarterly principal payments increased to $4.7 million . Depending on Station LLC’s consolidated leverage ratio, we are required to apply a portion of its excess cash flow to repay amounts outstanding under the Term Loan B Facility, which reduces future quarterly principal payments.
Also in May 2017, we completed a series of amendments to Station LLC’s credit facility to increase the existing Term Loan A Facility by $50.0 million and reduce the applicable margins for LIBOR and base rate loans under the Revolving Credit Facility and Term Loan A Facility. As amended, the Revolving Credit Facility and the Term Loan A Facility bear interest at a rate per annum, at Station LLC’s option, equal to either LIBOR plus an amount ranging from 1.75% to 2.00% or base rate plus an amount ranging from 0.75% to 1.00% , depending on Station LLC’s consolidated leverage ratio. Prior to the amendments, the Revolving Credit Facility and the Term Loan A Facility bore interest at a rate per annum, at Station LLC’s option and subject to a leverage-based grid, of either LIBOR plus an amount ranging from 1.75% to 2.75% or base rate plus an amount ranging from 0.75% to 1.75% .

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Restructured Land Loan
In March 2017, we paid $61.8 million in full settlement of the $72.6 million outstanding principal amount owed to Deutsche Bank AG Cayman Islands Branch under the Restructured Land Loan. In June 2017, we repaid the remaining $43.3 million in outstanding principal amount owed to JPMorgan Chase Bank, N.A. under the Restructured Land Loan. Annual interest payments will decrease by approximately $3.6 million as a result of the repayment of the Restructured Land Loan.
7.50% Senior Notes
As noted above, in May 2017 we redeemed $250.0 million in aggregate principal amount of Station LLC’s 7.50% Senior Notes (the “Partial Notes Redemption”) at a redemption price equal to 103.75% of the principal amount of such notes. Following the Partial Notes Redemption, $250.0 million in aggregate principal amount of 7.50% Senior Notes remain outstanding. Annual interest payments will decrease by approximately $10.0 million as a result of the Partial Notes Redemption.
Restrictive Covenants
During the six months ended June 30, 2017 , there were no changes in the covenants included in Station LLC’s credit facility or the indenture governing the 7.50% Senior Notes. A description of these covenants is included in Liquidity and Capital Resources in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2016 . We believe that as of June 30, 2017 , Station LLC was in compliance with the covenants contained in the credit facility and the indenture governing the 7.50% Senior Notes.
Off-Balance Sheet Arrangements
We have not entered into any transactions with special purpose entities and our derivative arrangements are described in Note 5 to the Condensed Consolidated Financial Statements. We do not have any retained or contingent interest in assets transferred to an unconsolidated entity. At June 30, 2017 , we had outstanding letters of credit and similar obligations totaling $34.0 million .
Contractual Obligations
During the six months ended June 30, 2017 , changes in our indebtedness, hedging activity, lease obligations and tax receivable agreement liability caused a material change to the contractual obligations previously reported in our Annual Report on Form 10-K for the year ended December 31, 2016 . The impact of these changes is summarized in the table below (amounts in millions):
 
Payments Due by Period
 
Less than 1 year
 
1-3 years
 
3-5 years
 
Thereafter
 
Total
Long-term debt (a)
$
71.3

 
$
118.3

 
$
689.4

 
$
1,687.7

 
$
2,566.7

Interest on long-term debt and interest rate swaps (b)
98.8

 
203.2

 
155.0

 
56.9

 
513.9

Operating leases
3.0

 
6.1

 
9.0

 
213.1

 
231.2

Obligation under the tax receivable agreement
0.9

 
18.6

 
17.1

 
238.7

 
275.3

____________________________________________________________
(a)
Includes scheduled principal payments and estimated excess cash flow payments on long-term debt outstanding at June 30, 2017 .
(b)
Includes contractual interest payments based on outstanding amounts and interest rates in effect at June 30, 2017 and projected net cash payments on our interest rate swaps.
Native American Development
We have development and management agreements with the North Fork Rancheria of Mono Indians, a federally recognized Native American tribe located near Fresno, California, pursuant to which we will assist the tribe in developing and operating a gaming and entertainment facility to be located on Highway 99 north of the city of Madera, California. See Note  3 to the Condensed Consolidated Financial Statements for information about this project.

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Regulation and Taxes
We are subject to extensive regulation by Nevada gaming authorities as well as the National Indian Gaming Commission, the California Gambling Control Commission, the Federated Indians of Graton Rancheria Gaming Commission and the Gun Lake Tribal Gaming Commission. In addition, we will be subject to regulation, which may or may not be similar to that in Nevada, by any other jurisdiction in which we may conduct gaming activities in the future.
The gaming industry represents a significant source of tax revenue, particularly to the State of Nevada and its counties and municipalities. From time to time, various state and federal legislators and officials have proposed changes in tax law, or in the administration of such law, affecting the gaming industry. The Nevada legislature meets every two years for 120 days and when special sessions are called by the Governor. The most recent regular legislative session ended in June 2017. There are currently no specific proposals to increase taxes on gaming revenue, but there are no assurances that an increase in taxes on gaming or other revenue will not be proposed and passed by the Nevada legislature in the future.
Description of Certain Indebtedness
A description of our indebtedness is included in Note 12 to the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 and in Note 4 to the Condensed Consolidated Financial Statements.
Derivative and Hedging Activities
A description of our derivative and hedging activities is included in Note 5 to the Condensed Consolidated Financial Statements.
Critical Accounting Policies and Estimates
A description of our critical accounting policies and estimates is included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2016 . There were no material changes to our critical accounting policies and estimates during the six months ended June 30, 2017 .
Forward-looking Statements
When used in this report and elsewhere by management from time to time, the words “may”, “might”, “could”, “believes”, “anticipates”, “expects” and similar expressions are intended to identify forward-looking statements with respect to our financial condition, results of operations and our business including our expansions, development and acquisition projects, legal proceedings and employee matters. Certain important factors, including but not limited to, financial market risks, could cause our actual results to differ materially from those expressed in our forward-looking statements. Further information on potential factors which could affect our financial condition, results of operations and business including, without limitation, our ability to integrate the operations of Palms and realize cost savings and other synergies related to the acquisition; the impact of our substantial indebtedness; the effects of local and national economic, credit and capital market conditions on consumer spending and the economy in general, and on the gaming and hotel industries in particular; the effects of competition, including locations of competitors and operating and market competition; changes in laws, including increased tax rates, regulations or accounting standards, third-party relations and approvals, and decisions of courts, regulators and governmental bodies; risks associated with construction projects, including disruption of our operations, shortages of materials or labor, unexpected costs, unforeseen permitting or regulatory issues and weather; litigation outcomes and judicial actions, including gaming legislative action, referenda and taxation; acts of war or terrorist incidents or natural disasters; risks associated with the collection and retention of data about our customers, employees, suppliers and business partners; and other risks described in our filings with the Securities and Exchange Commission. All forward-looking statements are based on our current expectations and projections about future events. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date thereof. We undertake no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date hereof.

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Item 3.        Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices.
Our primary exposure to market risk is interest rate risk associated with our long-term debt. We evaluate our exposure to market risk by monitoring interest rates in the marketplace. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term and short-term borrowings and by using interest rate swaps to hedge against the earnings effects of interest rate fluctuations. At June 30, 2017 , $2.3 billion of the outstanding borrowings under our credit facility was based on variable rates, primarily LIBOR, plus applicable margins. See Note 4 to the Condensed Consolidated Financial Statements for additional information about our long-term debt.
Following is information about future principal maturities, excluding original issue discounts, of our long-term debt and the related weighted-average contractual interest rates in effect at June 30, 2017 (dollars in millions):
 
Expected maturities during the twelve months ending June 30,
 
 
 
2018
 
2019
 
2020
 
2021
 
2022
 
Thereafter
 
Total
 
Fair value
Long-term debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed rate
$
2.7

 
$
2.4

 
$
2.6

 
$
252.7

 
$
2.9

 
$
18.4

 
$
281.7

 
$
291.4

Weighted-average interest rate
3.96
%
 
3.60
%
 
3.60
%
 
7.46
%
 
3.60
%
 
3.69
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable rate (a)
$
68.6

 
$
37.7

 
$
75.6

 
$
419.7

 
$
14.1

 
$
1,669.3

 
$
2,285.0

 
$
2,282.7

Weighted-average interest rate
3.39
%
 
3.35
%
 
3.40
%
 
3.19
%
 
3.45
%
 
3.45
%
 
 
 
 
____________________________________________________________
(a)
Based on variable interest rates and margins in effect at June 30, 2017 .
The weighted-average interest rates for variable-rate debt shown in the long-term debt table above were calculated using the rates in effect at June 30, 2017 . We cannot predict the LIBOR or base rate interest rates that will be in effect in the future, and actual rates will vary. Based on our outstanding borrowings at June 30, 2017 , an assumed 1% increase in variable interest rates would cause our annual interest cost to increase by approximately $12.5 million, after giving effect to our interest rate swaps.
We are also exposed to interest rate risk related to our interest rate swap agreements which we use to hedge a portion of our variable-rate debt. Our interest rate swaps are matched with specific debt obligations and are not used for trading or speculative purposes. At June 30, 2017 , our variable-to-fixed interest rate swaps effectively hedged the interest rate risk on $1.0 billion of the borrowings under our credit agreements.
On June 30, 2017, we dedesignated the hedge accounting relationships of our interest rate swaps that were previously designated as cash flow hedges of forecasted interest payments. Although we will no longer apply hedge accounting to these interest rate swaps, they continue to meet our risk management objectives by achieving fixed cash flows attributable to interest payments on the debt principal being hedged. See Note 5 to the Condensed Consolidated Financial Statements for detailed information about our interest rate swaps.
Interest rate movements affect the fair value of our interest rate swaps. We determine the fair values of our interest rate swaps using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the instrument. This analysis reflects the contractual terms of the agreements, including the period to maturity, and uses observable market-based inputs, including forward interest rate curves. We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurement. Fair value is subject to significant estimation and a high degree of variability between periods. As a result of our election to discontinue hedge accounting, changes in the fair values of the previously designated interest rate swaps will be recognized in our Consolidated Statements of Operations in the period of change, which could result in earnings volatility in future periods.
We are exposed to credit risk should the counterparties fail to perform under the terms of the interest rate swap agreements; however, we seek to minimize our exposure to this risk by entering into interest rate swap agreements with highly rated counterparties, and we do not believe we were exposed to significant credit risk at June 30, 2017 .

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Following is information about the combined notional amount and weighted average interest rate by contractual maturity date for our interest rate swap agreements, as well as the fair value of the combined net asset at June 30, 2017 (dollars in millions):
 
Contractual maturities during the twelve months ending June 30,
 
 
 
2018
 
2019
 
2020
 
2021
 
2022
 
Thereafter
 
Total
 
Fair value
Interest rate swaps:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notional amount
$
44.1

 
$
52.3

 
$
54.9

 
$
885.9

 
$
—

 
$
—

 
$
1,037.2

 
$
11.9

Fixed interest rate payable (a)
1.18
%
 
1.46
%
 
1.73
%
 
1.94
%
 
—
%
 
—
%
 
 
 
 
Variable interest rate receivable (b)
1.09
%
 
1.09
%
 
1.09
%
 
1.09
%
 
—
%
 
—
%
 
 
 
 
____________________________________________________________
(a)
Represents the weighted average fixed interest rate payable on our interest rate swaps.
(b)
Represents the variable receive rate in effect at June 30, 2017 .
There have been no other material changes in our market risk from those disclosed in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2016 .
Item 4.        Controls and Procedures
The Company’s management conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of June 30, 2017 . In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, the principal executive officer and principal financial officer concluded that, as of June 30, 2017 , the Company’s disclosure controls and procedures were effective, at the reasonable assurance level, and are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
There was no change in the Company’s internal control over financial reporting during the Company’s most recently completed fiscal quarter that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Part II.    Other Information
Item 1.    Legal Proceedings
The Company and its subsidiaries are defendants in various lawsuits relating to routine matters incidental to their business. As with all litigation, no assurance can be provided as to the outcome of such matters, and litigation inherently involves significant costs.
Item 1A.    Risk Factors
There have been no material changes in the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016 .
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
In April and May 2017, we issued an aggregate of 1,628,910 and 372,973 shares, respectively, of Class A common stock in exchange for an equivalent number of shares of Class B common stock and LLC Units pursuant to the terms of the

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exchange agreement entered into in connection with our initial public offering. Such shares were issued in reliance on an exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933.
Item 3.    Defaults Upon Senior Securities— None.
Item 4.    Mine Safety Disclosures— None.
Item 5.    Other Information— None.
Item 6.    Exhibits
(a)
Exhibits
No. 10.1—Second Amendment to Credit Agreement dated as of April 5, 2017, by and among Station Casinos LLC, the guarantors party thereto, Red Rock Resorts, Inc., Station Holdco LLC, the lenders party thereto and Deutsche Bank AG Cayman Islands Branch, as administrative agent. (Incorporated herein by reference to the Company’s Current Report on Form 8-K filed April 6, 2017.)
No. 10.2—Incremental Joinder Agreement No. 2 and Third Amendment to Credit Agreement dated as of May 2, 2017, by and among Station Casinos LLC, the guarantors party thereto, Red Rock Resorts, Inc., Station Holdco LLC, each of the Incremental Term A-3 Facility Lenders party thereto and Deutsche Bank AG Cayman Islands Branch, as administrative agent. (Incorporated herein by reference to the Company’s Current Report on Form 8-K filed May 3, 2017.)
No. 10.3—Incremental Joinder Agreement No. 3 dated as of May 10, 2017, by and among Station Casinos LLC, the guarantors party thereto, Red Rock Resorts, Inc., Station Holdco LLC, each of the Incremental Term B Lenders party thereto and Deutsche Bank AG Cayman Islands Branch, as administrative agent. (Incorporated herein by reference to the Company’s Current Report on Form 8-K filed May 10, 2017.)
No. 10.4—Supplemental Indenture dated as of July 25, 2017 by and among Palms Leaseco LLC, NP Landco Holdco LLC, NP Tropicana LLC, CV Propco LLC, Station Casinos LLC and Wells Fargo Bank, National Association as trustee.
No. 10.5—Employment Agreement, dated as of March 1, 2017 among Red Rock Resorts, Inc., Station Casinos LLC and Joseph J. Hasson.
No. 10.6—Employment Agreement, dated as of May 25, 2017 among Red Rock Resorts, Inc., Station Casinos LLC and Jeffrey T. Welch.
No. 10.7—Consulting Agreement dated as of May 24, 2017 by and between Station Casinos, LLC and Marc J. Falcone.
No. 10.8—Consulting Agreement dated as of May 15, 2017 by and between Station Casinos LLC and Daniel Roy.
No. 10.9—Credit Agreement Joinder Agreement dated as of July 25, 2017 by and among Palms Leaseco LLC, NP Landco Holdco LLC, NP Tropicana LLC, CV Propco, LLC and Deutsche Bank AG Cayman Islands Branch, as administrative agent.
No. 31.1—Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
No. 31.2—Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
No. 32.1—Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
No. 32.2—Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
No. 101—The following information from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 formatted in eXtensible Business Reporting Language: (i) the Condensed Consolidated Balance Sheets at June 30, 2017 (unaudited) and December 31, 2016 , (ii) the Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2017 and 2016 , (iii) the Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and six months ended June 30, 2017 and 2016 , (iv) the Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016 and (v) the Notes to Unaudited Condensed Consolidated Financial Statements.

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Table of Contents     


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
RED ROCK RESORTS, INC.,
Registrant
 
 
 
Date:
August 9, 2017
/s/ STEPHEN L. COOTEY
 
 
Stephen L. Cootey
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)


40





 
 
 
 
Exhibit 10.4
    
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of July 25, 2017, by and among Palms Leaseco LLC, a Nevada limited liability company, NP Landco Holdco LLC, a Nevada limited liability company, NP Tropicana LLC, a Nevada limited liability company and CV PropCo, LLC, a Nevada limited liability company (collectively, the “ Guarantying Subsidiaries ” and each a “ Guarantying Subsidiary ”), each a subsidiary of Station Casinos LLC, a Nevada limited liability company (the “ Company ”), the Company, and Wells Fargo Bank, National Association, a national banking association, as trustee under the Indenture referred to below (the “ Trustee ”).

W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture, dated as of March 1, 2013 (as heretofore supplemented, the “ Indenture ”) providing for the issuance of 7.50% Senior Notes due 2021 (the “ Notes ”);
WHEREAS, the Indenture provides that under certain circumstances the Guarantying Subsidiaries shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guarantying Subsidiaries shall unconditionally guarantee all of the Company’s Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the “ Guaranty ”);
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture; and
WHEREAS, this Supplemental Indenture shall not result in a material modification of the Notes for purposes of compliance with the Foreign Accounts Tax Compliance Act.
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, each Guarantying Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:
1.    CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.
2.    AGREEMENT TO GUARANTY. Each Guarantying Subsidiary hereby agrees to provide, and does hereby provide, an unconditional Guaranty on the terms and subject to the conditions set forth in the Guaranty and in the Indenture including but not limited to Article 11 thereof (which is hereby incorporated by reference).
4.    NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, agent, manager, partner, member, incorporator or stockholder of each Guarantying Subsidiary (or of any stockholder of the Company), as such, shall have any liability for any obligations of the Company or any Guarantying Subsidiary under the Notes, any Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.
5.    NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
6.    COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. The exchange of copies of this Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Indenture as to the parties hereto and may be used in lieu of the original Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.




7.    EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.
8.    THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by each Guarantying Subsidiary and the Company.





IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written.
Dated: July 25, 2017
ISSUER
STATION CASINOS LLC
By: /s/ MATTHEW L. HEINHOLD    
Name: Matthew L. Heinhold
Title: Senior Vice President, General Counsel, and Secretary





NEW GUARANTORS

PALMS LEASECO LLC
NP LANDCO HOLDCO LLC
NP TROPICANA LLC
CV PROPCO, LLC

By: /s/ MATTHEW L. HEINHOLD    
Name: Matthew L. Heinhold
Title: Authorized Person





TRUSTEE

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee

By: /s/ MICHAEL TU    
Name: Michael Tu
Title: Vice President





 
 
 
 
 Exhibit 10.5
EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made as of this 1st day of March, 2017 , by and between STATION CASINOS LLC , a Nevada limited liability company (the “Company”), and Joseph J. Hasson (the “Employee”).

WHEREAS, Station Casinos LLC and the Employee are parties to an Employment Agreement dated June 21, 2012 (the “Former Agreement”); and
WHEREAS, the Employee has agreed to continue his employment with the Company on the terms and conditions set forth herein; and
WHEREAS, the parties 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 promises and mutual covenants contained herein and for other good and valuable consideration, the Company and the Employee agree as follows:

1. DEFINITIONS . In addition to certain terms defined elsewhere in this Agreement, the following terms used in this Agreement shall have the following 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 salary provided for in Section 3.1 of this Agreement.

1.3     " Cause " shall mean the Employee’s:

(a)    commission of a “serious crime” (for the purposes of this Agreement, a “serious crime” is a crime that the Company believes could prohibit the Employee from obtaining or maintaining any work card, license, or finding of suitability necessary for the Employee to perform the duties described herein or assigned to him);

(b)    gross negligence or gross misconduct in the carrying out of his duties under this Agreement;

(c)    chronic alcohol or drug abuse;



 
Employee's Initials:
JH
 
 
Company's Initials:
RJH
 
 
 
 
 
Employment Agreement
 
Page 1
Station Casinos LLC
 
 
 


(d)    failure to cooperate with requests for information requested by the Company’s Compliance Committee, and/or failure to fully disclose information relating thereto; or

(e)    conduct that causes damage to the reputation of the Company.

1.4     " Competing Business " shall mean any Person engaged in (or proposing to engage in) gaming and/or hotel activities (including, without limitation, gaming operators, gaming manufacturers, and gaming suppliers) that directly or through an affiliate or subsidiary conducts (or proposes to conduct) its business within the Restricted Area.

1.5     " Confidential Information " shall mean all nonpublic information respecting the business of the Company or any Affiliate, including, without limitation, its products, programs, projects, promotions, marketing, business plans or practices, business operations, employees, research and development, intellectual property, accounting, and financing. Confidential Information also includes information concerning the Company’s or any Affiliate’s customers such as their identity, address, preferences, playing patterns, and ratings or any other information kept by the Company or any Affiliate concerning its customers whether or not such information has been reduced to documentary form. Confidential Information does not include information that has been disclosed to the public unless such disclosure occurs through an unauthorized act on the part of the Employee, nor does it include information that may be disclosed by legal right.

1.6     “ Disability ” shall mean a physical or mental incapacity that prevents the Employee from performing the essential functions of his position with the Company for a period of ninety (90) days as determined (a) in accordance with any long-term disability plan provided by the Company of which the Employee is a member, or (b) by the following procedure: The Employee 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 Employee 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 Employee’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 Employee, and the opinion of such third licensed healthcare professional shall be dispositive.



 
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1.7     “ Duties ” shall have the meaning set forth in Section 2.3 hereof.

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

1.9     “ Restricted Area ” shall mean (a) the City of Las Vegas, Nevada, and the area within a thirty (30) mile radius of that city (as measured from the intersection of Charleston Boulevard and Las Vegas Boulevard South) and (b) any area in or within a thirty (30) mile radius of any other jurisdiction in which the Company or any of its Affiliates is directly or indirectly engaged in the development, ownership, operation or management of any gaming and/or hotel activities or is actively pursuing any such activities.

1.10     “ Restriction Period ” shall mean either (a) any period after the termination of the Term of Employment during which the Employee is entitled to continued payments of Base Salary pursuant to Section 5.4(a) hereof, or (b) (i) if this Agreement expires, (ii) the Employee voluntarily terminates this Agreement, or (iii) the Employee is terminated by the Company for Cause, then a period of twelve (12) months following expiration or termination of the Term of Employment; provided , however , that if the expiration of this Agreement is based upon the Company’s election not to extend the Term of Employment pursuant to Section 2.2 hereof, the Restriction Period shall not apply.

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

2.     TERM OF EMPLOYMENT, POSITION AND DUTIES .

2.1     Employment Accepted . The Company hereby employs the Employee, and the Employee hereby accepts employment with the Company, for the Term of Employment, in the position and with the duties and responsibilities set forth in Section 2.3 hereof, and upon such other terms and conditions as are stated in this Agreement.

2.2     Term of Employment . The initial Term of Employment of the Employee shall commence upon the date of this Agreement and, unless earlier terminated pursuant to Section 5 hereof, shall terminate upon the close of business on the day immediately preceding the fifth anniversary of the date of this Agreement; provided that such initial term shall automatically be extended thereafter for successive one (1) year periods if neither party has advised the other party in writing at least thirty (30) days prior to the end of the then current Term of Employment, that such Term of Employment shall not be extended for


 
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an additional one (1) year period. If the Term of Employment is terminated on any date pursuant to Section 5 hereof, the same day shall be the last day of the Term of Employment.

2.3     Position and Duties . During the Term of Employment, the Employee shall be employed as Senior Vice President of Operations for the Company, or in such other capacity as the Company may direct, and shall have such duties and responsibilities as the Company may direct from time to time (the “Duties”). During the Term of Employment, the Employee shall devote his full time and attention to the business and affairs of the Company and shall use his best efforts, skills and abilities to promote the interests of the Company and its Affiliates. The Employee shall perform the Duties in the place or at the location where directed by the Company. The Employee further agrees to perform, without additional compensation, such Duties for any Affiliate as the Company may designate.

3.     COMPENSATION .

3.1     Base Salary . During the Term of Employment, the Employee shall be entitled to receive a base salary (the “Base Salary”) payable no less frequently than in equal semi-monthly installments at an annualized rate of not less than $500,000.00. The Base Salary will be reviewed annually by the Company and may be increased from time to time by the Company in its sole discretion.

3.2     Annual Discretionary Bonus . The Employee shall be eligible to participate in the Company’s discretionary bonus plan, pursuant to which the Employee’s target bonus shall be equal to one hundred percent (100%) of his Base Salary, with the actual bonus amount to be based on (a) achievement of mutually agreed upon goals and objectives and (b) overall performance of the Company.

4.     BENEFIT PROGRAMS, EXPENSE REIMBURSEMENT AND PERQUISITIES.

4.1     Welfare Benefit Plans . During the Term of Employment, the Employee shall be entitled to participate in all employee benefit plans and programs made available to the Company’s salaried employees generally.

4.2     Expense Reimbursement . During the Term of Employment, the Employee shall be entitled to receive reimbursement by the Company for all reasonable out-of-pocket expenses incurred by him in performing the Duties hereunder, subject to providing the proper documentation of such expenses.



 
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4.3     Relocation . The Company shall pay the Employee’s actual relocation expenses in connection with the Employee’s move from California, including, without limitation, packing, transporting and unpacking services, in accordance with the terms and conditions of the Company’s relocation policy at the same levels provided to similarly situated executives. In the alternative, at the Employee’s election, the Employee will obtain a minimum of three (3) bids in connection with such relocation. The Company agrees to reimburse the Employee in an amount equal to the lowest bid within thirty (30) days following the Employee’s submission of appropriate documentation. In addition, the Company shall reimburse the Employee for selling expenses and realtors’ sales commissions associated with the sale of residential real estate pertaining to the Employee’s California residence. The Employee agrees to repay all such relocation costs and expenses set forth above (within thirty (30) days after his last day with the Company) in the event that the Employee voluntarily terminates his employment with the Company prior to the first anniversary of the Commencement Date. The Employee agrees and acknowledges that he shall be responsible for any and all tax consequences relating to the reimbursement of such relocation costs and expenses by the Company.
4.4     Vacation . During the Term of Employment, the Employee shall be entitled to vacation of four (4) weeks per year.
5.     TERMINATION OF EMPLOYMENT .

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

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

(b)    any annual bonus awarded but not yet paid;

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

(d)    such rights to other benefits as may be provided in the 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.



 
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5.2     Termination by the Company for Cause . The Company may terminate the Employee's employment for Cause at any time during the Term of Employment by giving written notice to the Employee. In the event of a termination for Cause, the Employee shall be entitled to receive, in lieu of any other compensation whatsoever:

(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 awarded but not yet paid;

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

(d)    such rights to other benefits as may be provided in the 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.

5.3     Termination by the Employee . The Employee may terminate his employment on his own initiative for any reason upon thirty (30) days prior written notice to the Company. Such termination shall have the same consequences as a termination for Cause under Section 5.2 above.

5.4     Termination by the Company Without Cause . Notwithstanding any other provision of this Agreement, the Company may terminate the Employee's employment without Cause, other than due to death or Disability, at any time during the Term of Employment by giving written notice to the Employee. In the event the Company terminates the Employee’s employment without Cause, the Employee shall be entitled to receive, in lieu of any other compensation whatsoever:

(a)    Base Salary at the rate in effect at the time of his termination for a period of twelve ( 12 ) months following the date of termination of employment, and the Employee shall be subject to, among other things, the Restrictive Covenants contained in Section 8 hereof during such period;

(b)    any annual bonus awarded but not yet paid;

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

(d)    reimbursement for actual costs incurred in maintaining COBRA coverage for the Employee and his authorized dependents,


 
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at the Company’s expense, for that period specified by the Company pursuant to Section 5.4(a) above; and

(e)    such rights to other benefits as may be provided in the 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.

5.5     Termination Due to Expiration of Term of Employment . If either party elects not to extend the initial Term of Employment, the Employee shall not be entitled to any additional compensation 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.

5.6     No Mitigation; Exclusive Remedies; No Offset; No Public Comment . In the event of any termination of employment under this Section 5, the Employee shall be under no obligation to seek other employment, and there shall be no offset against amounts due the Employee under this Agreement on account of any remuneration attributable to any subsequent employment that the Employee may obtain. Notwithstanding any contrary provision contained herein, in the event of any termination of employment of the Employee, the exclusive remedies available to the Employee shall be the amounts due under this Section 5. Any amounts due under this Section 5 are in the nature of severance payments, or liquidated damages, or both, and are not in the nature of a penalty. In the event of a termination of this Agreement, neither party shall publish in any way or make any negative comment or statement concerning the reasons for such termination or about the other party. The provisions of this Section 5.6 shall survive the expiration or earlier termination of this Agreement.

6.     CONDITIONS OF PAYMENT UPON TERMINATION . NO PAYMENTS OR BENEFITS PAYABLE TO THE EMPLOYEE UPON THE TERMINATION OF HIS EMPLOYMENT PURSUANT TO SECTION 5 HEREOF SHALL BE MADE TO THE EMPLOYEE:

(A)    UNLESS AND UNTIL HE EXECUTES A GENERAL RELEASE (THE “GENERAL RELEASE”) SUBSTANTIALLY IN THE FORM ATTACHED HERETO AS EXHIBIT “A” (AS MAY BE MODIFIED CONSISTENT WITH THE PURPOSES OF SUCH GENERAL RELEASE TO REFLECT CHANGES IN LAW FOLLOWING THE DATE HEREOF); AND

(B)    UNLESS HE COMPLIES WITH SECTION 5.6 AND SECTIONS 7 AND 8 HEREOF.



 
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7.     CONFIDENTIAL INFORMATION AND PROPRIETARY INTERESTS .

7.1     General . The Employee understands and acknowledges that Confidential Information constitutes a valuable asset of the Company and its Affiliates, and may not be converted to the Employee’s own use. Accordingly, the Employee hereby agrees that he shall not directly or indirectly, during the Term of Employment or any time thereafter, disclose any Confidential Information to any Person not expressly authorized by the Company to receive such Confidential Information. The Employee further agrees that he shall not directly or indirectly, during the Term of Employment or any time thereafter, 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 Employee’s obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. The provisions of this Section 7 shall survive the expiration or earlier termination of this Agreement.

7.2     Required Disclosure . In the event the Employee is required by law or court order to disclose any Confidential Information, the Employee 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 law, provide the Company an adequate opportunity, at its own expense, to contest such law or court order, prior to any such required disclosure by the Employee.

7.3     Company Property . All Confidential Information and all files, records, documents, drawings, specifications, equipment, memoranda, notes, records, reports, manuals, computer disks, videotapes, drawings, blueprints and other documents (and all copies, abstracts, and summaries thereof) relating to the Company, its Affiliates or their respective customers and similar items relating to the business of the Company or its Affiliates, whether prepared by the Employee or others, and any and all copies, abstracts, and summaries thereof (collectively, “Company Property”) are and shall remain exclusively the property of the Company. Unless authorized in writing to the contrary, the Employee 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 Employee may then possess or have under his control.

7.4     Innovations or Inventions . The Employee shall, during the Term of Employment, disclose to the Company, immediately after the same is made, discovered or devised, any improvement, process, development, discovery or invention (whether or not related to technical or commercial matters)


 
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that the Employee may make, discover or devise (alone or in conjunction with others) either:

(a)    in the course of normal duties (or of duties specifically assigned to the Employee);

(b)    as a result of knowledge gained during employment with the Company; or

(c)    as a result of the Employee’s use of materials, equipment or facilities of the Company.

All such items shall become the absolute property of the Company without further payment and the Employee shall satisfy all obligations in this regard by presenting the same to the Company. The Employee shall not during the Term of Employment (except in the performance of normal duties) or any time thereafter, disclose any such improvement, process, development, discovery, or invention to any third party and, further, shall, if and whenever required so to do by the Company (at the Company’s sole expense), do all acts and things as the Company may reasonably require for obtaining any patent or other rights therein in the Company or as the Company may direct.

7.5     Nonassertion . The Employee agrees and covenants that he shall not, directly or indirectly, assert any rights under any inventions, discoveries, concepts or ideas or improvements thereof, or know how related thereto, as having been made or acquired by the Employee prior to the Employee being employed by the Company, or since the date of his employment and not otherwise covered by this Agreement.

8.     RESTRICTIVE COVENANTS .

8.1     General . The parties understand and agree that the purpose of the restrictive covenants contained in this Section 8 (the “Restrictive Covenants”) is to protect the goodwill and other legitimate business interests of the Company, and that the Company would not have entered into this Agreement in the absence of such restrictions. The Employee acknowledges and agrees that the Restrictive Covenants are reasonable and do not, and will not, unduly impair his ability to make a living after the termination of his employment with the Company. The provisions of this Section 8 shall survive the expiration or sooner termination of this Agreement.

8.2     Restrictions During Term of Employment and Following Employment . In consideration for this Agreement to employ the Employee and the other valuable consideration provided hereunder, the Employee agrees and


 
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covenants that during the Term of Employment and the Restriction Period, the Employee shall not directly or indirectly, for himself or any third party, alone or as a member of a partnership or limited liability company, or as an officer, director, shareholder or otherwise:

(a)    divert or attempt to divert any existing business of the Company or any Affiliate;

(b)    accept any position or affiliation with, or render any services on behalf of, any Competing Business; or

(c)    solicit, attempt to solicit, encourage, divert, cause or attempt to cause any employee or prospective employee of the Company or any Affiliate to terminate and/or leave the employment of the Company or any Affiliate.

8.3     Equitable Tolling .    The Restriction Period shall be tolled and extended by one month for each month or portion of each month during which Employee is in violation of any provisions contained in this Agreement. If the Company initiates legal action to enforce the restrictions and obtains an injunction against Employee, then the appropriate Restricted Period will begin to run on the date that the injunction is entered.

9.     RIGHT TO SEEK INJUNCTIVE RELIEF . In the event that the Employee breaches, or threatens to commit a breach of, any of the terms or conditions of the covenants contained in Sections 7 or 8 hereof, the Company shall, in addition to any other right or remedy available at law or in equity, have the right and remedy to enjoin, preliminarily and permanently, the Employee from breaching or threatening to breach any such covenants and to have the covenants specifically enforced by any court of competent jurisdiction in Clark County, Nevada. The Employee acknowledges and agrees that any breach or threatened breach of such covenants would cause irreparable harm to the Company, and that money damages would not provide an adequate remedy to the Company. The Employee further acknowledges and agrees that the Restrictive Covenants are reasonable and valid in time, scope, geographic area and all other respects, and are necessary to protect the legitimate business interests of the Company. In the event that any of the provisions of the Restrictive Covenants are adjudicated to exceed the time, scope, geographic area or other limitations permitted by applicable law, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, scope, geographic area or other limitations permitted by applicable law, and that the provision otherwise be enforced to the maximum extent permitted by law. The Employee also acknowledges that the Term of Employment hereunder, the amount of salary, benefits and other consideration provided by the Company


 
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hereunder are, in part, provided by the Company to secure the Employee's agreement to the Restrictive Covenants. The Employee agrees to waive and hereby waives any requirement for the Company to secure any bond in connection with the obtaining of such injunction or other equitable relief.

10.     MUTUAL ARBITRATION AGREEMENT .

10.1     Arbitrable Claims . Other than disputes specifically excluded in this Section 10, all disputes between the Employee (and his attorneys, successors and assigns) and the Company (and its trustees, beneficiaries, officers, directors, managers, affiliates, employees, agents, successors, attorneys and assigns) relating in any manner whatsoever to the employment or termination of employment of the Employee, including, without limitation, all disputes arising under this Agreement (“Arbitrable Claims”), shall be resolved by binding arbitration pursuant to this Section 10 (the “Mutual Arbitration Agreement”). Arbitrable Claims shall include, but are not limited to, claims for compensation, claims for breach of any contract or covenant (express or implied), and tort claims of all kinds, as well as all claims based on any federal, state or local law, statute or regulation, but shall not include the Company’s right to seek injunctive relief as provided in Section 9 hereof. Arbitration shall be final and binding upon the parties and shall be the exclusive remedy for all Arbitrable Claims. THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JUDGE OR JURY IN REGARD TO ARBITRABLE CLAIMS.

10.2     Procedure . Arbitration of Arbitrable Claims shall be in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association, as amended, and as augmented in this Agreement. Either party may bring an action in court to compel arbitration under this Agreement and to enforce an arbitration award. Otherwise, neither party shall initiate or prosecute any lawsuit, appeal or administrative action in any way related to an Arbitrable Claim. The initiating party must file and serve an arbitration claim within sixty (60) days of learning the facts giving rise to the alleged claim. All arbitration hearings under this Agreement shall be conducted in Las Vegas, Nevada. The Federal Arbitration Act shall govern the interpretation and enforcement of this Agreement. Each party shall bear its own attorneys’ fees and costs incurred in any such arbitration proceeding.

10.3     Confidentiality . All proceedings and all documents prepared in connection with any Arbitrable Claim shall be confidential and, unless otherwise required by law, the content and subject matter thereof shall not be disclosed to any persons other than the parties to the proceedings, their counsel, witnesses and experts, the arbitrator, and, if involved, the court and court staff.



 
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10.4     Applicability . This Section 10 shall apply to all disputes under this Agreement other than disputes relating to the enforcement of the Company’s rights under Sections 7 and 8 of this Agreement.

10.5     Acknowledgments . The Employee acknowledges that he:

(a)    has carefully read this Section 10;

(b)    understands its terms; and

(c)    has entered into this Mutual Arbitration Agreement voluntarily and not in reliance on any promises or representations by the Company other than those contained in the Mutual Arbitration Agreement itself.

(d)    Pursuant to Nevada Revised Statutes Sections 38.219 and 597.995, Company and Employee specifically authorize and affirmatively agree to the arbitration procedures set forth above.

 
 
 
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11.     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.

12.     NOTICES . All notices, demands and requests required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly 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 given below or such changed address as such party may subsequently give notice of:

If to the Company:
Station Casinos LLC
1505 South Pavilion Center Drive
Las Vegas, Nevada 89135
Attention: Matthew L. Heinhold
 
 
 
 
If to the Employee:
 



 
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13.     SURVIVORSHIP . The respective rights and obligations of the parties hereunder shall survive the expiration or earlier termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. The provisions of this Section 13 are in addition to the survivorship provisions of any other Section of this Agreement.

14.     ENTIRE AGREEMENT . This Agreement contains the entire agreement between the parties concerning the subject matter hereof and supersedes all prior agreements (including, without limitation, the Former Agreement), understandings, discussions, negotiations and undertakings between the parties, written or oral, express or implied, between the parties with respect thereto. No representations, inducements, promises or agreements, oral or otherwise, not embodied herein, shall be of any force or effect.

15.     ASSIGNABILITY; BINDING NATURE . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, heirs and assigns; provided, however, that no rights or obligations of the Employee under this Agreement may be assigned or transferred by the Employee, 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. By entering into this Agreement, the Employee hereby expressly consents to any future assignment of this Agreement by the Company and hereby acknowledges that a portion of the consideration received hereunder shall be deemed to be additional, separate and independent consideration to support any such assignment of this Agreement (including, without limitation, the Restrictive Covenants) by the Company.

16.     AMENDMENT OR WAIVER . No provision of this Agreement may be amended or waived unless such amendment or waiver is agreed to in writing and signed by a duly authorized officer of the Company. No waiver by the Company of any breach by the Employee of any condition or provision of this Agreement shall be deemed a waiver of any 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 Employee 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.

17.     REPRESENTATION AND WARRANTY BY EMPLOYEE . The Employee hereby represents and warrants to the Company, the same being part of the essence of this Agreement that, as of the date of this Agreement, he is not a party to any agreement, contract or understanding, and that no facts or circumstances exist, which would in any way conflict with the terms of this Agreement or would restrict or prohibit the Employee in any material way from


 
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undertaking or performing any obligations under this Agreement. The foregoing representation and warranty shall remain in effect throughout the Term of Employment.

18.     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 that it is not an Arbitrable Claim, 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.

19.     HEADINGS . The headings of the 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.

20.     COUNTERPARTS . This Agreement may be executed in counterparts, each of which shall deemed an original and all of which together shall constitute one and the same agreement with the same effect as if both parties hereto had signed the same signature page.

21.     CONFIDENTIALITY . The Employee shall not disclose the existence or contents of this Agreement to any person except his immediate family, accountant or attorney without the prior written consent of the Company.


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


“Employee”



By: /s/ JOSEPH J. HASSON     
Joseph J. Hasson

                

“Company”

STATION CASINOS LLC,
a Nevada limited liability company


By: /s/ RICHARD J. HASKINS    
RICHARD J. HASKINS
President
                        









 
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EXHIBIT “A”
GENERAL RELEASE

This GENERAL RELEASE (this “Release”) is executed and delivered by Joseph J. Hasson (the “Employee”) to STATION CASINOS LLC , a Nevada limited liability company (the “Company”).

In consideration of the agreement by the Company to provide the severance payments in Section 5 of the Employment Agreement between the Employee and the Company, dated as of this 1st day of March, 2017 (the “Employment Agreement”), and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Employee hereby agrees as follows:

1. General Release . Except as set forth in Section 4 below, the Employee, of his own free will, voluntarily releases and forever discharges the Company and its subsidiaries and affiliates, and each of their respective past and present agents, employees, managers, representatives, officers, directors, attorneys, accountants, trustees, shareholders, partners, insurers, heirs, predecessors-in-interest, advisors, successors and assigns (collectively, the “Released Parties”) from any and all past or present causes of action, suits, agreements or other rights or claims which the Employee, his dependents, relatives, heirs, executors, administrators, successors and assigns has or have against any of the Released Parties upon or by reason of any matter arising out of his employment by the Company and the cessation of said employment, and including, but not limited to, any alleged violation of the Civil Rights Acts of 1964 and 1991, the Equal Pay Act of 1963, the Age Discrimination in Employment Act of 1967 (including the Older Workers Benefit Protection Act of 1990), the Rehabilitation Act of 1973, the Family and Medical Leave Act of 1993, the Americans with Disabilities Act of 1990, the Employment Retirement Income Security Act of 1974, the Nevada Fair Employment Practices Act, the labor laws of the United States and Nevada, and any other federal, state or local law, regulation or ordinance, or public policy, contract or tort law, common or statutory, providing a cause of action that can be the subject of a release under applicable law, having any bearing whatsoever on the terms and conditions or cessation of his employment with the Company, which may have arisen, or which may arise, prior to or at the time of the execution of this Release. Nothing in this Release shall be construed to waive any claims that cannot be waived as a matter of law.
2.     Due Care . Employee expressly acknowledges and agrees that age discrimination is specifically intended to be included as a Released Action. Employee specifically intends that this Release shall include a complete release


 
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of claims under the Age Discrimination in Employment Act of 1967 (ADEA; 29 U.S.C. §§ 621 et seq.), as amended by the Older Workers’ Benefit Protection Act of 1990, except for any allegation that a breach of this Act occurred following the effective date of this Release. The Employee acknowledges that he has received a copy of this Release prior to its execution and has been advised hereby of his opportunity to review and consider this Release for twenty-one (21) days prior to its execution. The Employee further acknowledges that he has been advised hereby to consult with an attorney prior to executing this Release. The Employee is entering into this Release having freely and knowingly elected, after due consideration, to execute this Release and to fulfill the promises set forth herein. This Release shall be revocable by the Employee during the seven (7) day period following its execution, and shall not become effective or enforceable until the expiration of such seven (7) day period. In the event of such a revocation, the Employee shall not be entitled to the consideration for this Release set forth above.
3.     Company Property . All Confidential Information and Company Property (as those terms are defined in the Employment Agreement), which means all nonpublic information respecting the business of the Company or any Affiliate, including, without limitation, its products, programs, projects, promotions, marketing, business plans or practices, business operations, employees, research and development, intellectual property, accounting, and financing, and all files, records, documents, drawings, specifications, equipment, memoranda, notes, records, reports, manuals, computer disks, videotapes, drawings, blueprints and other documents (and all copies, abstracts, and summaries thereof) relating to the Company, its Affiliates or their respective customers and employees and similar items relating to the business of the Company or its Affiliates, whether prepared by the Employee or others, and any and all copies, abstracts, and summaries thereof shall promptly, and without charge, be delivered to the Company within seven (7) days following the execution of this Release.
4.     Administrative Actions .     This Release does not prohibit Employee from filing a charge or participating in any Investigation or proceeding conducted by the EEOC, NLRB, or a comparable federal, state or local agency. These agencies have the authority to carry out their statutory duties by investigating the charge, issuing a determination, filing a lawsuit in federal or state court in their own name, or taking any other action authorized under these statutes. However, Employee agrees to waive Employee’s right to recover monetary damages or any other individual relief in connection with any charge, compliant or lawsuit filed by Employee or anyone else on Employee’s behalf related to the matters released in this Release.



 
Employee's Initials:
JH
 
 
Company's Initials:
RJH
 
 
 
 
 
Employment Agreement
 
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5.     Reliance By The Employee; Representations . The Employee acknowledges that, in his decision to enter into this Release, he has not relied on any representations, promises or arrangement of any kind, including oral statements by representatives of the Company, except as set forth in this Release. The Employee declares and represents that he intends this release to be complete and not subject to any claim of mistake, and that the release herein expresses a full and complete release and the Employee intends the release herein to be final and complete. The Employee executes this Release with the full knowledge that this Release covers all possible claims against the Released Parties, to the fullest extent permitted by law.

6.     Miscellaneous . Except as otherwise provided in Section 4, unless required by law, the Employee shall not disclose the existence or contents of this Release to anyone other than his immediate family, accountants or attorneys, and the Employee shall instruct such third parties not to disclose the same. This Release 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. If any provision of this Release is held invalid or unenforceable for any reason, the remaining provisions shall be construed as if the invalid or unenforceable provision had not been included.


 
Employee's Initials:
JH
 
 
Company's Initials:
RJH
 
 
 
 
 
Employment Agreement
 
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This GENERAL RELEASE is executed by the Employee and delivered to the Company on ______________, 201_.

“Employee”


By:     
Joseph J. Hasson






State of ___________        )
) ss:
County of _________        )

On this _____ day of ________________, 201_, before me, a Notary Public of the State of __________, personally appeared Joseph J. Hasson and known to me to be the person described and who executed the foregoing Release and did then and there acknowledge to me that he voluntarily executed the same.

                    
NOTARY PUBLIC


(Stamp)


[Not to be signed upon execution of Employment Agreement]






 
Employee's Initials:
JH
 
 
Company's Initials:
RJH
 
 
 
 
 
Employment Agreement
 
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Exhibit 10.6
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “ Agreement ”) is made and entered into as of May 25, 2017 (the “Execution Date” ), by and among STATION CASINOS LLC , a Nevada limited liability company (the “ Company ”), RED ROCK RESORTS, INC. , a Delaware corporation (the “ Parent ”), and JEFFREY T. WELCH (the “ Executive ”).
WHEREAS, the Company, the Parent and the Executive (each individually a “ Party ” and together the “ Parties ”) desire to enter into this Agreement, as set forth herein;
NOW, THEREFORE , in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, 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 directly or indirectly controlling, controlled by or under common control with the Company (including the Parent and any Person directly or indirectly controlling, controlled by or under common control with the Parent).
1.2    “ Base Salary ” shall mean the salary provided for in Section 3.1 of this Agreement, as the same may be increased thereunder.
1.3    “ Board ” shall mean the Board of Directors of the Parent, including any successor of the Parent in the event of a Change in Control.
1.4    “ Cause ” shall mean that the Executive: (a) has been found unsuitable to hold a gaming license by final, non-appealable decision of the Nevada Gaming Commission; (b) has been convicted of any felony; (c) has engaged in acts or omissions constituting gross negligence or willful misconduct resulting, in either case, in material economic harm to the Company; or (d) has materially breached this Agreement.
1.5    “ Change in Control ” shall mean the occurrence of any of the following events:
(a)    The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)), other than a Permitted Holder, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the combined voting power of the then-outstanding securities entitled to vote generally in the election of members of the Board (the “ Voting Power ”) at such time; provided that the following acquisitions shall not constitute a Change in Control: (i) any such acquisition directly from the Parent; (ii) any such acquisition by the Parent; (iii) any such acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Parent or any of its subsidiaries; or (iv) any such acquisition pursuant to a transaction that complies with clauses (i), (ii) and (iii) of paragraph (c) below; or
(b)    individuals who, as of the Effective Date, constitute the Board (the “ Incumbent Board ”) cease for any reason (other than death or disability) to constitute at



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least a majority of the Board; provided , that any individual becoming a director subsequent to the Effective Date, whose election, or nomination for election by the Parent’s stockholders, was approved by a vote of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Parent in which such person is named as a nominee for director, without objection to such nomination) shall be considered as though such individual was a member of the Incumbent Board, but excluding for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than either the Board or any Permitted Holder; or
(c)    consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Parent (a “ Business Combination ”), in each case, unless following such Business Combination, (i) either (A) Permitted Holders or (B) all or substantially all of the individuals and entities who were the beneficial owners of the Voting Power immediately prior to such transaction beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such transaction (including an entity that, as a result of such transaction, owns the Parent or substantially all of the Parent’s assets either directly or through one or more subsidiaries) and, in the case of the foregoing clause (B), in substantially the same proportions relative to each other as their ownership immediately prior to such transaction of the securities representing the Voting Power, (ii) no Person (excluding any Permitted Holder, any entity resulting from such transaction or any employee benefit plan (or related trust) sponsored or maintained by the Parent or such entity resulting from such transaction) beneficially owns, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock of the entity resulting from such transaction, or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to such transaction, and (iii) at least a majority of the members of the board of directors of the entity resulting from such transaction were members of the Incumbent Board at the time of the execution of the initial agreement with respect to, or the action of the Board providing for, such transaction; or
(d)    approval by the stockholders of the Parent of a complete liquidation or dissolution of the Parent.
Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any deferred compensation that is subject to Section 409A of the Code, then, to the extent required to avoid the imposition of additional taxes under Section 409A of the Code, the transaction or event described in paragraph (a), (b), (c) or (d) above, with respect to such deferred compensation, shall only constitute a Change in Control for purposes of the payment timing of such deferred compensation if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation §1.409A-3(i)(5).
1.6    “ Code ” shall mean the Internal Revenue Code of 1986, as amended.



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1.7    “ Company Group ” shall mean the Parent together with its subsidiaries.
1.8    “ Company Property ” shall mean all property, items and materials provided by the Company or any Affiliate to the Executive, or to which the Executive has access, in the course of his employment, including all files, records, documents, drawings, specifications, memoranda, notes, reports, manuals, equipment, computer disks, videotapes, blueprints and other documents and similar items relating to the Company or any Affiliate, or their respective customers, whether prepared by the Executive or others, and any and all copies, abstracts and summaries thereof.
1.9    “ Confidential Information ” shall mean all nonpublic and/or proprietary information respecting the business of the Company or any Affiliate, including 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 or any Affiliate’s customers, such as their identity, address, preferences, playing patterns and ratings or any other information kept by the Company or any Affiliate concerning 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 or another person with an obligation to maintain the confidentiality of such information.
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 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, any 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    “ Good Reason ” shall mean and exist if there has been a Change in Control and, thereafter, without the Executive’s prior written consent, one or more of the following events occurs:
(a)    the Executive suffers a material reduction in the authorities, duties or responsibilities associated with his position as described in Section 2.3 , or the Executive



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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 ;
(b)    the Executive is required to relocate from, or maintain his principal office outside of, Las Vegas, Nevada;
(c)    the Executive’s Base Salary is decreased by the Company;
(d)    the Company discontinues its bonus plan and equity incentive plan in which the Executive participates without immediately replacing such bonus plan and equity plan with plans that are the substantial economic equivalent of such bonus plan and equity plan, or amends such bonus plan and equity plan so as to materially reduce the Executive’s potential bonus and equity incentives at any given level of economic performance of the Company;
(e)    the Company materially reduces the employee benefit programs provided to the Executive as described in Section 4 , and such reduction does not also apply to similarly situated executives (other than Frank J. Fertitta III) of the Company;
(f)    the Company or the Parent materially breaches this Agreement; or
(g)    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.
1.13    “ Permitted Holder ” shall mean (a) (i) Frank J. Fertitta III and Lorenzo J. Fertitta and (ii) any lineal descendants of such persons; (b) executors, administrators or legal representatives of the estate of any person listed in clause (a) of this sentence; (c) heirs, distributees and beneficiaries of any person listed in clause (a) of this sentence; (d) any trust as to which any of the foregoing is a settlor or co-settlor; and (e) any corporation, partnership or other entity which is, directly or indirectly, controlling, controlled by or under common control with, any of the foregoing.
1.14    “ Person ” shall mean any individual, firm, partnership, association, trust, company, corporation, limited liability company, joint-stock company, unincorporated organization, government, political subdivision or other entity.
1.15    “ 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.
1.16    “ Restricted Area ” shall mean (a) the City of Las Vegas, Nevada, and the area within a 30-mile radius of that city, and (b) any area in or within a 30-mile radius of any other jurisdiction in which the Company or any of its Affiliates is directly or indirectly engaged in the development, ownership, operation or management of any gaming activities or is actively pursuing any such activities.



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1.17    “ Restricted Period ” shall mean the first anniversary of the date of the Executive’s termination of employment with the Company Group.
1.18    “ Target Annual Bonus ” shall mean an amount that is no less than 100% of the Executive’s then current Base Salary.
1.19     “Target Annual Equity Incentive” shall mean an amount that is no less than 200% of the Executive’s then current Base Salary.
1.20    “ Term of Employment ” shall mean the period specified in Section 2.2 .
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.
2.2     Term of Employment . The Term of Employment shall commence on June 21, 2017 or, if later, the first day thereafter that the Executive shall no longer be employed by his prior employer (such date on which the Executive actually commences employment with the Company, the “ Effective Date ”) 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 Effective Date. Notwithstanding anything herein to the contrary, if the Executive does not commence employment with the Company on or before August 24, 2017, then this Agreement shall be null and void ab initio, and no Party shall have any obligations or liabilities whatsoever to any other Party under, in respect of, relating to, or arising out of this Agreement or the Executive’s employment.
2.3     Title and Responsibilities . During the Term of Employment, the Executive shall be employed as the Executive Vice President and Chief Legal Officer. In carrying out his duties under this Agreement, the Executive shall report directly to the President and/or Chief Executive Officer of the Company. During the Term of Employment, the Executive shall devote full time and attention to the business and affairs of the Company and shall use his best efforts, skills and abilities to promote the interests of the Company Group. Anything herein to the contrary notwithstanding, the Executive shall not be precluded from engaging in charitable and community affairs and managing his personal investments, to the extent such activities do not materially interfere with the Executive’s duties and obligations under this Agreement, it being 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 in writing prior to the date of this Agreement, the continued conduct of such activities (or, in lieu thereof, 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.



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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 $600,000 (the “ Base Salary ”). The Base Salary shall be reviewed annually for increase (but not decrease) in the discretion of the Board. 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 comparable competitor(s) of the Company Group), the performance of the Executive, the results and projections of the Company Group and 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 may 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 performance of the Executive and of the business of the Company Group, but with a targeted annual payment amount (based upon achievement of applicable target-level performance) equal to the Target Annual Bonus; provided, however , that the Executive’s Annual Bonus for the calendar year ending December 31, 2017 shall not be less than $600,000. 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.
3.3     Equity Incentives . The Executive shall be eligible to participate in the Company’s and the Parent’s long-term incentive plans on terms and amounts to be determined by the Board in its sole discretion, but with a targeted annual payment amount equal to the Target Annual Equity Incentive.
3.4     Initial Equity Award . Not later than 15 days following the Effective Date, the Parent shall grant to the Executive an initial equity grant (the “ Initial Equity Award ”) as follows: (a) a stock option to acquire shares of the Parent’s common stock, at an exercise price per share equal to the per share price of the Parent’s common stock as of such grant date, with the number of shares subject to such stock option being that necessary to cause the Black-Scholes-Merton value of such stock option on the grant date to be equal to 200% of the Base Salary (determined using inputs consistent with those the Parent uses for its financial reporting purposes), which will vest 25% on each of the first four anniversaries of the Effective Date (subject to the Executive’s continued employment on the applicable vesting date); and (b) a number of restricted shares of the Parent equal to 100% of the Base Salary divided by the per share price of the Parent’s common stock as of such grant date, which will vest 50% on each of the third and fourth anniversaries of the Effective Date (subject to the Executive’s continued employment on the applicable vesting date). The Initial Equity Award shall be subject to the terms of the Red Rock Resorts, Inc. 2016 Equity Incentive Plan and the terms of the applicable award agreements.
4.     EMPLOYEE BENEFIT PROGRAMS .
4.1     Pension and Welfare Benefit Plans . During the Term of Employment, the Executive and his dependents where applicable shall be entitled to participate in all employee



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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 pension and other retirement plans, group life insurance, group health insurance, accidental death and dismemberment insurance, long-term disability, sick leave (including salary continuation arrangements), vacations (of at least four weeks per year), holidays and other employee benefit programs sponsored by the Company; provided , however , that such benefits shall not duplicate the benefits provided pursuant to Section 4.2 . Employer agrees, that until such time as the Executive and his dependents where applicable are eligible to participate in the Company’s group health, executive medical, disability and life insurance-related coverage and/or benefits as described in Section 4.2 , the Company shall reimburse Executive for the premium payments that the Executive is required to make to the Executive’s prior employer in order to maintain the benefits that the Executive is entitled to receive pursuant to under Section 601 through 607 of the Employee Retirement Income Security Act of 1974, as amended.
4.2     Additional Pension, Welfare and Other Benefits . During the Term of Employment, the Company shall also provide the Executive and his dependents where applicable with substantially the same group health, executive medical, disability and life insurance-related coverage and/or benefits and tax preparation services as provided to similarly situated executives (other than Frank J. Fertitta III) of the Company as of the Effective Date.
5.     BUSINESS EXPENSE REIMBURSEMENT; RELOCATION EXPENSES . 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. The Company shall also be entitled to receive reimbursement by the Company for all reasonable relocation expenses incurred by him in relocating from Westchester County, New York to Las Vegas, Nevada, including, without limitation, packing, transporting and unpacking services, in accordance with the terms and conditions of the Company’s relocation policy at the same levels provided to similarly situated executives of the Company. Without limiting the generality of the foregoing, the Company shall reimburse the Executive for reasonable and customary selling expenses (including, without limitation, realtors’ sales commissions) associated with the sale of the Executive’s existing residence in Westchester County, New York. In the event that the Executive voluntarily terminates his employment with the Company for any reason other than Good Reason prior to the first anniversary of the Effective Date, the Executive shall be required to repay any and all such relocation expenses previously reimbursed by the Company, with such repayment to be made within 30 days following such termination date.
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 through the date of termination of employment;



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(b)    any accrued but unpaid vacation or holiday pay through the date of termination of employment;
(c)    any Annual Bonus awarded but not yet paid, payable as specified in Section 3.2 ;
(d)    a Pro Rata Annual Bonus for the fiscal year in which death or Disability occurs, payable as specified in Section 3.2 ;
(e)    subject to Section 5 , reimbursement for expenses incurred but not paid prior to such termination of employment; and
(f)    such rights to other compensation and benefits as may be provided in applicable plans and programs of the Company, including 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 to the Executive within 90 days of the Company first becoming aware of the existence of Cause, and, unless the Executive takes remedial action resulting in the cessation of Cause within 30 days of receipt of such notification, the Company may terminate his employment for Cause at any time during the 40-day period following the expiration of such 30-day period (or, if such act or failure to act is not susceptible to remedy, during the 40-day period following the Company’s provision of notice regarding the existence of Cause). 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 accrued but unpaid vacation or holiday pay through the date of termination of employment;
(c)    any Annual Bonus awarded but not yet paid, payable as specified in Section 3.2 ;
(d)    subject to Section 5 , 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 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 . The Executive may terminate his employment on his own initiative for any reason upon 30 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 Group. Such termination shall have the same consequences as a termination for Cause under Section 6.2 .



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6.4     Termination by the Company Without Cause . 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 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)    Any unpaid Base Salary at the rate in effect at the time of his termination through the date of termination of employment;
(b)    any accrued but unpaid vacation or holiday pay through the date of termination of employment;
(c)    subject to Section 7.3 , an amount equal to the Executive’s annual Base Salary at the rate in effect at the time of his termination, paid in 12 equal monthly installments;
(d)    any Annual Bonus awarded but not yet paid, payable as specified in Section 3.2 ;
(e)    subject to Section 7.3 , a Pro Rata Annual Bonus for the fiscal year in which such termination of employment occurs, payable as specified in Section 3.2 ;
(f)    subject to Section 5 , reimbursement of expenses incurred but not paid prior to such termination of employment;
(g)    (i) continuation of the Executive’s group health insurance and long‑term disability insurance, at the level in effect at the time of his termination of employment, through the end of the 12th month following such termination, or (ii) in the event the Company determines that continuation of such coverage is not permitted, a lump-sum payment to the Executive of the economic equivalent thereof (as if the 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 applicable employee benefit plans and programs, according to the terms and conditions of such plans and programs.
6.5     Termination by the Executive With Good Reason . 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 any action, or fails to take any action, in violation of the proceeding sentence, then the Executive shall give, within 90 days of the Executive first becoming aware of the occurrence of such action or failure to act, written notice to the Company of the existence of Good Reason, and, unless the Company takes remedial action resulting in the cessation of Good Reason within 30 days of receipt of such notification, the Executive may terminate his employment for Good Reason at any time during the 40-day period following the expiration of such 30-day period (or, if such act or failure to act is not susceptible to remedy, during the 40-day period following the Executive’s provision of notice regarding the existence of Good Reason). Such termination shall have the same consequences as a termination without Cause under Section 6.4 . For the avoidance of doubt, in addition to the provisions set forth in Section 6.4 , any unvested Initial Equity Award



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granted under Section 3.4 as well as any unvested awards granted under Section 3.4 during Term of Employment shall immediately vest upon the termination date to the extent required under the terms of the Red Rock Resorts, Inc. 2016 Equity Incentive Plan.
7.     CONDITIONS TO PAYMENTS .
7.1     Timing of Payments . Unless otherwise provided herein or required by law, any payments to which the Executive shall be entitled under Section 6 following the termination of his employment shall be made as promptly as practicable and in no event later than five business days following such termination of employment; provided , however , that any amounts payable pursuant to Section 6.4(a) (or the same amounts payable pursuant to Section 6.5 ) shall be payable beginning upon the Company’s first ordinary payroll date after the 30 th day following the termination of his employment, subject to the satisfaction of the conditions set forth in Section 7.3 prior to such date.
7.2     No Mitigation; No Offset . In the event of any termination of employment under Section 6 , 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.
7.3     General Release . No amounts payable to the Executive upon the termination of his employment pursuant to Section 6.4(a) or (c) (or the same amounts payable pursuant to Section 6.5 ) shall be made to the Executive unless and until he executes a general release substantially in the form annexed to this Agreement as Exhibit A and such general release becomes effective within 30 days after the date of termination pursuant to its terms. If such release does not become effective within the time period prescribed above, the Company’s obligations under Section 6.4(a) or (c) (or the same amounts payable pursuant to Section 6.5 ) shall cease immediately.
8.     EXCISE TAX .
8.1    Notwithstanding any other provisions in this Agreement, in the event that any payment or benefit received or to be received by the Executive (including any payment or benefit received in connection with a change in control of the Company or the termination of the Executive’s employment, whether pursuant to the terms of this Agreement or any other plan, program, arrangement or agreement) (all such payments and benefits, together, the “ Total Payments ”) would be subject (in whole or part), to any excise tax imposed under Section 4999 of the Code, or any successor provision thereto (the “ Excise Tax ”), then, after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, program, arrangement or agreement, the Company will reduce the Total Payments to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax (but in no event to less than zero); provided , however , that the Total Payments will only be reduced if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state, municipal and local income and employment taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments), is greater than or equal to (ii) the net



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amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state, municipal and local income and employment taxes on such Total Payments and the amount of Excise Tax to which the Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).
8.2    In the case of a reduction in the Total Payments, the Total Payments will be reduced in the following order (unless reduction in another order is required to avoid adverse consequences under Section 409A of the Code, in which case, reduction will be in such other order): (i) payments that are payable in cash that are valued at full value under Treasury Regulation Section 1.280G-1, Q&A 24(a) will be reduced (if necessary, to zero), with amounts that are payable last reduced first; (ii) payments and benefits due in respect of any equity valued at full value under Treasury Regulation Section 1.280G-1, Q&A 24(a), with the highest values reduced first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24) will next be reduced; (iii) payments that are payable in cash that are valued at less than full value under Treasury Regulation Section 1.280G-1, Q&A 24, with amounts that are payable last reduced first, will next be reduced; (iv) payments and benefits due in respect of any equity valued at less than full value under Treasury Regulation Section 1.280G-1, Q&A 24, with the highest values reduced first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24) will next be reduced; and (v) all other non-cash benefits not otherwise described in clauses (ii) or (iv) will be next reduced pro-rata. Any reductions made pursuant to each of clauses (i)-(v) above will be made in the following manner: first, a pro-rata reduction of cash payment and payments and benefits due in respect of any equity not subject to Section 409A of the Code, and second, a pro-rata reduction of cash payments and payments and benefits due in respect of any equity subject to Section 409A of the Code as deferred compensation.
8.3    For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax: (i) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code will be taken into account; (ii) no portion of the Total Payments will be taken into account which, in the opinion of tax counsel (“ Tax Counsel ”) reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the change in control, the Company’s independent auditor (the “ Auditor ”), does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments will be taken into account which, in the opinion of Tax Counsel, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as set forth in Section 280G(b)(3) of the Code) that is allocable to such reasonable compensation; and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments will be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
8.4    At the time that payments are made under this Agreement, the Company will provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations, including any opinions or other advice the Company received from Tax Counsel or the Auditor. If the Executive objects to the Company’s calculations, the Company will pay to the Executive such portion of the Total Payments (up to



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100% thereof) as the Executive determines is necessary to result in the proper application of this Section 8 . All determinations required by this Section 8 (or requested by either the Executive or the Company in connection with this Section 8 ) will be at the expense of the Company. The fact that the Executive’s right to payments or benefits may be reduced by reason of the limitations contained in this Section 8 will not of itself limit or otherwise affect any other rights of the Executive under this Agreement.
9.     INDEMNIFICATION .
9.1     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 the Parent or is or was serving at the request of the Company or the Parent 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 and the Parent to the fullest extent authorized by Nevada law and the Company’s and the Parent’s by-laws, as the same exist or may hereafter be amended (but, in the case of any such amendment to the Company’s or the Parent’s by-laws, only to the extent such amendment permits the Company or the Parent to provide broader indemnification rights than the Company’s or the Parent’s by-laws permitted the Company or the Parent to provide before such amendment, as applicable), against all expense, liability and loss (including attorneys’ fees, judgments, fines, or penalties and amounts paid or to be paid in settlement) incurred or suffered by the Executive in connection therewith. The indemnification provided to the Executive pursuant to this Section 9 shall be in addition to, and not in lieu of, any indemnification provided to the Executive pursuant to (a) any separate indemnification agreement between the Executive and any member of the Company Group, (b) the Company’s and/or the Parent’s charter and/or bylaws, and/or (c) applicable law; provided that nothing herein or therein shall entitle the Executive to recover any expense, liability or loss more than once.
9.2     Procedure . The indemnification provided to the Executive pursuant to this Section 9 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



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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.
9.3     Advancement of Costs and Expenses . The Company agrees to advance all costs and expenses referred to in Sections 9.1 and 9.6 ; 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 or the Parent 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 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 9 .
9.4     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 9 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 or the Parent, agreement, vote of stockholders or disinterested directors or otherwise.
9.5     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.
9.6     Witness Expenses . Notwithstanding any other provision of this Agreement, the Company and the Parent 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 (except for time spent actually testifying), 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.



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9.7     Survival . The provisions of this Section 9 shall survive the expiration or earlier termination of this Agreement, regardless of the reason for such termination.
10.     DUTY OF LOYALTY .
10.1     General . The Parties hereto understand and agree that the purpose of the restrictions contained in this Section 10 is to protect the goodwill and other legitimate business interests of the Company and its Affiliates and that the Company would not have entered into this Agreement in the absence of such restrictions. The Executive acknowledges and agrees that the restrictions are reasonable and do not, and will not, unduly impair his ability to earn a living after the termination of his employment with the Company.
10.2     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 at any time 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 at any time 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 the Company’s or the Parent’s rights, or the Executive’s obligations, under any state or federal statutory or common law regarding trade secrets and unfair trade practices.
10.3     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.
10.4     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.
10.5     Non-Solicitation of Employees . The Executive agrees that, during the Restricted Period, he will not, directly or indirectly, for himself, or as agent, or on behalf of or in conjunction with any other person, firm, partnership, corporation or other entity, induce or entice any employee of the Company or any Affiliate to leave such employment, or otherwise hire or retain any employee of the Company or any Affiliate, or cause or assist anyone else in doing so. For the purposes of this Section 10.5 , the term “employee” shall include consultants and independent contractors, and shall be deemed to include current employees and any employee who left the employ of the Company or any Affiliate within six months prior to any such



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inducement or enticement or hiring or retention of that person. The term “employee” as used in this Section 10.5 does not include the Executive’s executive assistant.
10.6     Non-Competition . The Executive agrees that, during the Restricted Period, the Executive shall not, without the express written consent of the Board, directly or indirectly enter the employ of, act as a consultant to or otherwise render any services on behalf of, act as a lender to, or be a director, officer, principal, agent, stockholder, member, owner or partner of, or permit the Executive’s name to be used in connection with the activities of any other business, organization or third party engaged in the gaming industry or otherwise in the same business as the Company or any Affiliate and that directly or indirectly conducts its business in the Restricted Area .
10.7     Remedies . The Executive and the Company acknowledge that the covenants contained in this Section 10 are reasonable under the circumstances. Accordingly, if, in the opinion of any court of competent jurisdiction, any such covenant is not reasonable in any respect, such court will have the right, power and authority to sever or modify any provision or provisions of such covenants as to the court will appear not reasonable and to enforce the remainder of the covenants as so amended. The Executive further acknowledges that the remedy at law available to the Company Group for breach of any of the Executive’s obligations under this Section 10 may be inadequate and that damages flowing from such a breach may not readily be susceptible to being measured in monetary terms. Accordingly, in addition to any other rights or remedies that the Company Group may have at law, in equity or under this Agreement, upon proof of the Executive’s violation of any such provision of this Agreement, the Company Group will be entitled to seek immediate injunctive relief and may seek a temporary order restraining any threatened or further breach, without the necessity of proof of actual damage or the posting of any bond.
10.8     Protected Disclosures .
(a)    Nothing in this Agreement will preclude, prohibit or restrict the Executive from (i) communicating with any federal, state or local administrative or regulatory agency or authority, including but not limited to the Securities and Exchange Commission (the “ SEC ”); (ii) participating or cooperating in any investigation conducted by any governmental agency or authority; or (iii) filing a charge of discrimination with the United States Equal Employment Opportunity Commission or any other federal state or local administrative agency or regulatory authority.
(b)    Nothing in this Agreement, or any other agreement between the parties, prohibits or is intended in any manner to prohibit, the Executive from (i) reporting a possible violation of federal or other applicable law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the SEC, the U.S. Congress, and any governmental agency Inspector General, or (ii) making other disclosures that are protected under whistleblower provisions of federal law or regulation. This Agreement does not limit the Executive’s right to receive an award (including, without limitation, a monetary reward) for information provided to the SEC. The Executive does not need the prior authorization of anyone at the Company to make any such reports or disclosures, and the Executive is not required to notify the Company that the Executive has made such reports or disclosures.



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(c)    Nothing in this Agreement or any other agreement or policy of the Company is intended to interfere with or restrain the immunity provided under 18 U.S.C. §1833(b). The Executive cannot be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (i) (A) in confidence to federal, state or local government officials, directly or indirectly, or to an attorney, and (B) for the purpose of reporting or investigating a suspected violation of law; (ii) in a complaint or other document filed in a lawsuit or other proceeding, if filed under seal; or (iii) in connection with a lawsuit alleging retaliation for reporting a suspected violation of law, if filed under seal and does not disclose the trade secret, except pursuant to a court order.
(d)    The foregoing provisions regarding Protected Disclosures are intended to comply with all applicable laws. If any laws are adopted, amended or repealed after the execution of this Agreement, this Agreement shall be deemed to be amended to reflect the same.
10.9     Survival . The Executive agrees that the provisions of this Section 10 shall survive the termination of this Agreement and the termination of the Executive’s employment to the extent provided above.
11.     DISPUTE RESOLUTION; FEES . Except as otherwise provided in Section 9.3 , the Parties agree that in the event any Party finds it necessary to initiate any legal action to obtain any payments, benefits or rights provided by this Agreement to such Party, the other Party shall reimburse such Party for all reasonable attorney’s fees and other related expenses incurred by him or it to the extent such Party is successful in such action.
12.     NOTICES . All notices, demands and requests required or permitted to be given to a 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 LLC
1505 S. Pavilion Center Drive
Las Vegas, Nevada 89135
Attention: President
With a copy (which shall not constitute notice) to:
Milbank, Tweed, Hadley & McCloy LLP
601 South Figueroa Street, 30th Floor
Los Angeles, California 90017
Attention: Kenneth J. Baronsky
If to the Parent:
Red Rock Resorts, Inc.
1505 S. Pavilion Center Drive
Las Vegas, Nevada 89135
Attention: President



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With a copy (which shall not constitute notice) to:
Milbank, Tweed, Hadley & McCloy LLP
601 South Figueroa Street, 30th Floor
Los Angeles, California 90017
Attention: Kenneth J. Baronsky
If to the Executive:
To the Executive’s most current home address, as set forth in the employment records of the Company
With a copy (which shall not constitute notice) to:
Jeffrey T. Welch
1505 S. Pavilion Center Drive
Las Vegas, NV 89135
13.     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.
14.     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, whether or not survival is specifically set forth in the applicable provisions. The provisions of this Section 14 are in addition to the survivorship provisions of any other Section of this Agreement.
15.     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.
16.     ENTIRE AGREEMENT . This Agreement contains the entire agreement among the Parties concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, among the Parties with respect thereto (including the prior employment agreement among the Parties). No representations, inducements, promises or agreements not embodied herein shall be of any force or effect.
17.     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



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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.
18.     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 all Parties. No waiver by one Party of any breach by any 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.
19.     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. Without limiting the generality of the immediately preceding sentence, in the event that a court of competent jurisdiction or an arbitrator appointed in accordance with Section 21 determines that the provisions of this Agreement would be unenforceable as written because they cover too extensive a geographic area, too broad a range of activities or too long a period of time, or otherwise, then such provisions will automatically be modified to cover the maximum geographic area, range of activities and period of time as may be enforceable, and, in addition, such court or arbitrator (as applicable) is hereby expressly authorized to so modify this Agreement and to enforce it as so modified.
20.     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. By way of specific example, if the Executive is a “specified employee” (within the meaning of Section 409A of the Code), at the time of the Executive’s “ Separation From Service ” (within the meaning of Section 409A of the Code) and if any portion of the payments or benefits to be received by the Executive upon Separation From Service would be considered deferred compensation under Section 409A of the Code and cannot be paid or provided to the Executive without the Executive incurring the 409A Tax, then such amounts that would otherwise be payable pursuant to this Agreement during the six-month period immediately following the Executive’s Separation From Service (which, for the avoidance of doubt, will be considered a part of the Deferred Amount) will instead be paid or made available on the earlier of (i) the first business day of the seventh month following the date of Executive’s Separation From Service or (ii) the Executive’s death. 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. With



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respect to any amount of expenses eligible for reimbursement or the provision of any in-kind benefits under this Agreement, to the extent such payment or benefit would be considered deferred compensation under Section 409A of the Code or is required to be included in the Executive’s gross income for federal income tax purposes, such expenses (including expenses associated with in-kind benefits) will be reimbursed no later than December 31st of the year following the year in which the Executive incurs the related expenses. In no event will the reimbursements or in-kind benefits to be provided by the Company in one taxable year affect the amount of reimbursements or in-kind benefits to be provided in any other taxable year, nor will the Executive’s right to reimbursement or in-kind benefits be subject to liquidation or exchange for another benefit. Each payment under this Agreement is intended to be a “separate payment” and not one of a series of payments for purposes of Section 409A of the Code.
21.     MUTUAL ARBITRATION AGREEMENT .
21.1     Arbitrable Claims . All disputes between the Executive (and his attorneys, successors, and assigns) and the Company (and its trustees, beneficiaries, officers, directors, managers, affiliates, employees, agents, successors, attorneys, and assigns) relating in any manner whatsoever to the employment or termination of the Executive, including all disputes arising under this Agreement (“ Arbitrable Claims ”), shall be resolved by binding arbitration as set forth in this Section 21 (the “ Mutual Arbitration Agreement ”). Arbitrable Claims shall include claims for compensation, claims for breach of any contract or covenant (express or implied), and tort claims of all kinds, as well as all claims based on any federal, state, or local law, statute or regulation, but shall not include the Company’s right to seek injunctive relief as provided in Section 10.7 . Arbitration shall be final and binding upon the Parties and shall be the exclusive remedy for all Arbitrable Claims. THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JUDGE OR JURY IN REGARD TO ARBITRABLE CLAIMS, EXCEPT AS PROVIDED BY SECTION 21.4 .
21.2     Procedure . Arbitration of Arbitrable Claims shall be in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association, as amended, and as augmented in this Agreement. Either Party may bring an action in court to compel arbitration under this Agreement and to enforce an arbitration award. Otherwise, neither Party shall initiate or prosecute any lawsuit, appeal or administrative action in any way related to an Arbitrable Claim. The initiating Party must file and serve an arbitration claim within 60 days of learning the facts giving rise to the alleged claim. All arbitration hearings under this Agreement shall be conducted in Las Vegas, Nevada. The Federal Arbitration Act shall govern the interpretation and enforcement of this Agreement. Subject to Section 11 , the fees of the arbitrator shall be divided equally between both Parties.
21.3     Confidentiality . All proceedings and all documents prepared in connection with any Arbitrable Claim shall be confidential and, unless otherwise required by law, the subject matter and content thereof shall not be disclosed to any Person other than the Parties, their counsel, witnesses and experts, the arbitrator and, if involved, the court and court staff.
21.4     Applicability . This Section 21 shall apply to all disputes under this Agreement other than disputes relating to the enforcement of the Company’s rights under Section 10 of this Agreement.



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21.5     Acknowledgements . The Executive acknowledges that he:
(a)    has carefully read this Section 21 ;
(b)    understands its terms and conditions; and
(c)    has entered into this Mutual Arbitration Agreement voluntarily and not in reliance on any promises or representations made by the Company other than those contained in this Mutual Arbitration Agreement.
22.     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 that is not an Arbitrable Claim, 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.
23.     HEADINGS; INTERPRETATION . 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. The word “including” (in its various forms) means including without limitation. All references in this Agreement to “days” refer to “calendar days” unless otherwise specified.
24.     CLAWBACK . Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to the Executive pursuant to this Agreement or any other agreement or arrangement with any member of the Company Group or any Affiliate, which is subject to recovery under any law, government regulation or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by any member of the Company Group or an Affiliate pursuant to any such law, government regulation or stock exchange listing requirement).
25.     WITHHOLDING . The Company and any Affiliate will have the right to withhold from any amount payable hereunder any federal, state, city, local, foreign or other taxes in order for the Company or any Affiliate to satisfy any withholding tax obligation it may have under any applicable law, regulation or ruling.
26.     GUARANTEE . The Parent and Station Holdco LLC, to the fullest extent permitted by applicable law, hereby 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 Agreement.
27.     COUNTERPARTS . This Agreement may be executed in counterparts, including by email delivery of a scanned signature page in pdf or tiff format, 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 delivered 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.



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[Remainder of page intentionally left blank]



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IN WITNESS WHEREOF , the undersigned have executed this Agreement on the respective dates set forth below.
STATION CASINOS LLC
By: /s/ RICHARD J. HASKINS    
Name: Richard J. Haskins
Title: President
Date: May 25, 2017    

RED ROCK RESORTS, INC.
(for itself and on behalf of Station Holdco LLC)
By: /s/ RICHARD J. HASKINS    
Name: Richard J. Haskins
Title: President
Date: May 25, 2017    

By: /s/ JEFFREY T. WELCH    
JEFFREY T. WELCH
Date: May 25, 2017    




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EXHIBIT A
GENERAL RELEASE AND COVENANT NOT TO SUE
This GENERAL RELEASE AND COVENANT NOT TO SUE (this “ Release ”) is executed and delivered by JEFFREY T. WELCH (the “ Executive ”) to RED ROCK RESORTS, INC. , STATION CASINOS LLC , and STATION HOLDCO LLC (collectively, the “ Company ”).
In consideration of the agreement by the Company or its affiliates to provide certain separation payments pursuant to Section 6 of the Employment Agreement between the Executive and the Company, dated as of May 25, 2017 (the “ Employment Agreement ”), and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Executive hereby agrees as follows:
1.     RELEASE AND COVENANT . THE EXECUTIVE, OF HIS OWN FREE WILL, VOLUNTARILY RELEASES AND FOREVER DISCHARGES THE COMPANY AND ITS SUBSIDIARIES AND AFFILIATES, AND EACH OF THEIR RESPECTIVE PAST AND PRESENT AGENTS, EMPLOYEES, MANAGERS, REPRESENTATIVES, OFFICERS, DIRECTORS, ATTORNEYS, ACCOUNTANTS, TRUSTEES, SHAREHOLDERS, PARTNERS, INSURERS, HEIRS, PREDECESSORS-IN-INTEREST, ADVISORS, SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE “ RELEASED PARTIES ”) FROM, AND COVENANTS NOT TO SUE OR PROCEED AGAINST ANY OF THE FOREGOING ON THE BASIS OF, ANY AND ALL PAST OR PRESENT CAUSES OF ACTION, SUITS, AGREEMENTS OR OTHER RIGHTS OR CLAIMS WHICH THE EXECUTIVE, HIS DEPENDENTS, RELATIVES, HEIRS, EXECUTORS, ADMINISTRATORS, SUCCESSORS AND ASSIGNS HAS OR HAVE AGAINST ANY OF THE RELEASED PARTIES UPON OR BY REASON OF ANY MATTER ARISING OUT OF HIS EMPLOYMENT BY THE COMPANY AND ITS SUBSIDIARIES AND THE CESSATION OF SAID EMPLOYMENT, AND INCLUDING, BUT NOT LIMITED TO, ANY ALLEGED VIOLATION OF THE CIVIL RIGHTS ACTS OF 1964 AND 1991, THE EQUAL PAY ACT OF 1963, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967 (INCLUDING THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990), THE REHABILITATION ACT OF 1973, THE FAMILY AND MEDICAL LEAVE ACT OF 1993, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE EMPLOYMENT RETIREMENT INCOME SECURITY ACT OF 1974, THE NEVADA FAIR EMPLOYMENT PRACTICES ACT, THE LABOR LAWS OF THE UNITED STATES AND NEVADA, AND ANY OTHER FEDERAL, STATE OR LOCAL LAW, REGULATION OR ORDINANCE, OR PUBLIC POLICY, CONTRACT OR TORT LAW, HAVING ANY BEARING WHATSOEVER ON THE TERMS AND CONDITIONS OR CESSATION OF HIS EMPLOYMENT WITH THE COMPANY AND ITS SUBSIDIARIES. THIS RELEASE DOES NOT AFFECT ANY RIGHTS THE EXECUTIVE MAY HAVE TO FILE A CHARGE WITH ANY FEDERAL OR STATE ADMINISTRATIVE AGENCY; PROVIDED, HOWEVER, THAT THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT THE EXECUTIVE IS NOT ENTITLED TO ANY PERSONAL RECOVERY IN ANY SUCH AGENCY PROCEEDINGS (EXCEPT AS OTHERWISE PERMITTED PURSUANT TO SECTION 10.8 OF THE EMPLOYMENT AGREEMENT).



Page 24 of 24

2.     DUE CARE . THE EXECUTIVE ACKNOWLEDGES THAT HE HAS RECEIVED A COPY OF THIS RELEASE PRIOR TO ITS EXECUTION AND HAS BEEN ADVISED HEREBY OF HIS OPPORTUNITY TO REVIEW AND CONSIDER THIS RELEASE FOR TWENTY-ONE (21) DAYS PRIOR TO ITS EXECUTION. THE EXECUTIVE FURTHER ACKNOWLEDGES THAT HE HAS BEEN ADVISED HEREBY TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS RELEASE. THE EXECUTIVE ENTERS INTO THIS RELEASE HAVING FREELY AND KNOWINGLY ELECTED, AFTER DUE CONSIDERATION, TO EXECUTE THIS RELEASE AND TO FULFILL THE PROMISES SET FORTH HEREIN. THIS RELEASE SHALL BE REVOCABLE BY THE EXECUTIVE DURING THE SEVEN (7) DAY PERIOD FOLLOWING ITS EXECUTION, AND SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD. IN THE EVENT OF SUCH A REVOCATION, THE EXECUTIVE SHALL NOT BE ENTITLED TO THE CONSIDERATION FOR THIS RELEASE SET FORTH ABOVE.
3.     RELIANCE BY THE EXECUTIVE . THE EXECUTIVE ACKNOWLEDGES THAT, IN HIS DECISION TO ENTER INTO THIS RELEASE, HE HAS NOT RELIED ON ANY REPRESENTATIONS, PROMISES OR ARRANGEMENT OF ANY KIND, INCLUDING ORAL STATEMENTS BY REPRESENTATIVES OF THE COMPANY, EXCEPT AS SET FORTH IN THIS RELEASE.
4.     MISCELLANEOUS . THIS RELEASE 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. IF ANY PROVISION OF THIS RELEASE IS HELD INVALID OR UNENFORCEABLE FOR ANY REASON, THE REMAINING PROVISIONS SHALL BE CONSTRUED AS IF THE INVALID OR UNENFORCEABLE PROVISION HAD NOT BEEN INCLUDED.
This GENERAL RELEASE AND COVENANT NOT TO SUE is executed by the Executive and delivered to the Company on ___________________, 20___.
“Executive”
_______________________________
JEFFREY T. WELCH




 
 
 
 
Exhibit 10.7
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this “ Agreement ”) is made and entered as of the 24th day of May, 2017, by and between STATION CASINOS LLC , a Nevada limited liability company (the “ Company ”), and MARC J. FALCONE (the “ Consultant ”).
WHEREAS , the Company desires to engage the Consultant to render consulting services for the Company and its subsidiaries and affiliates; and
WHEREAS , the Consultant desires to be retained by the Company to render consulting services to the Company upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the Company and the Consultant (each individually a “ Party ” and together the “ Parties ”) agree as follows:

1. Term of Engagement . The term of engagement (the “ Term of Engagement ”) shall commence on June 1, 2017 (the “ Commencement Date ”), and shall terminate upon the close of business on the day immediately preceding the twelfth (12th) month anniversary of the Commencement Date (the “Expiration Date” ), unless earlier terminated pursuant to Section 5 below.
2.     Consulting Services . During the Term of Engagement, the Consultant shall provide consulting services as requested by the Company (the “ Consulting Services ”) regarding the operations of the Company and its subsidiaries and affiliates. All Consulting Services to be provided by the Consultant hereunder shall be performed solely by Consultant unless otherwise agreed in writing by the Company. The Consultant shall provide such Consulting Services to the Company by telephone and/or in person at the Company’s offices as reasonably requested by the Company.
3.     Consideration and Expenses .
3.1     Consideration . The Parties agree and acknowledge that the continued payments of Consultant’s base salary a period of twelve (12) months, pursuant to the terms of the Separation Agreement and General Release dated May 24, 2017, is fair and adequate consideration for providing the Consulting Services provided hereunder.
3.2     Business Expense Reimbursement . The Company shall reimburse the Consultant for all reasonable out-of-pocket expenses incurred by it in performing the Consulting Services under this Agreement, provided , however , that such expenses shall not exceed Five Hundred and No/100 Dollars ($500.00) in any month without the prior written consent of the Company. The Consultant shall submit monthly invoices to the Company for such expenses,


1



which invoices shall include, at a minimum, the amount of each expense, a description of the purpose of the expense and appropriate backup or supporting documentation.
4.     Termination . Either Party may terminate this Agreement for any or no reason upon thirty (30) days’ prior written notice to the Company. For the avoidance of doubt, in the event that the Company terminates this Agreement, the Consultant shall continue to receive the consideration provided in the Separation Agreement through the Expiration Date. Upon the expiration or earlier termination of this Agreement or at such earlier time as the Company may request, the Consultant shall deliver to an appropriate officer of the Company all memoranda, diaries, notes, records, cost information, customer lists, marketing plans and strategies and any other documents relating or referring to any Confidential Information (as such term is defined that Employment Agreement dated May 2, 2016, among Red Rock Resorts, Inc., the Company and the Executive) made available to the Consultant by the Company prior to or during the Term of Engagement.
5.     Independent Contractor . All services provided by the Consultant shall be performed by the Consultant directly and independently and not as an agent, employee or representative of the Company. This Agreement is not intended to and does not constitute, create, or otherwise give rise to a joint venture, partnership or other type of business association or organization of any kind by or between the Company and the Consultant. The rights and obligations of the Company and the Consultant under this Agreement shall be limited to the express provisions hereof. Specifically, and without limitation, the Consultant has no power or authority to contract for, or bind, the Company in any manner.
Consultant acknowledges and agrees that, during the Term of Engagement, Consultant will not be treated as an employee of the Company or any of its subsidiaries or affiliates for purposes of federal, state or local income or other tax withholding, nor unless otherwise specifically provided by law, for purposes of the Federal Insurance Contributions Act, the Social Security Act, the Federal Unemployment Tax Act or any Workers’ Compensation law of any state or country (or subdivision thereof), or for purposes of benefits provided to employees of the Company or any of its subsidiaries or affiliates under any employee benefit plan, program, policy or arrangement (including, without limitation, vacation, holiday and sick leave benefits, insurance coverage and retirement benefits). Consultant acknowledges and agrees that, as an independent contractor, Consultant will be required, during the Term of Engagement, to pay any applicable taxes on the fees paid to Consultant, and to provide workers’ compensation insurance and any other coverage required by law.
6.     Indemnification . The Company agrees that if the Consultant 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 ”), arising out of or relating to the Consulting Services as a consultant under this Agreement, the Consultant shall be indemnified and held harmless by the Company against all expense, liability and loss (including, without limitation, attorneys’ fees, judgments, fines, taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Consultant in connection therewith, except as


2


otherwise prohibited by law and except to the extent that the Consultant was negligent or engaged in willful misconduct in the course of providing the Consulting Services. The provisions of this Section 7 shall survive the expiration or earlier termination of this Agreement.
7.     Dispute Resolution .
7.1     Arbitrable Claims . All disputes between the Parties arising out of or relating to this Agreement or any alleged breach thereof (“ Arbitrable Claims ”), shall be resolved by binding arbitration set as set forth in this Section 6 . Notwithstanding the foregoing, any claim for injunctive relief brought by the Company shall not be considered an Arbitrable Claim. THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JUDGE OR JURY IN REGARD TO ARBITRABLE CLAIMS .
7.2     Procedure . Arbitration of Arbitrable Claims shall be in accordance with the Commercial Rules of the American Arbitration Association, as amended, and as augmented in this Agreement. Either Party may bring an action in any court of competent jurisdiction located in Clark County, Nevada, to enforce the provisions of Section 6 or to compel arbitration under this Agreement and to enforce an arbitration award. Otherwise, neither Party shall initiate or prosecute any lawsuit, appeal or administrative action in any way related to an Arbitrable Claim. The initiating Party must file and serve an arbitration claim within sixty (60) days of learning the facts giving rise to the alleged claim. All arbitration hearings under this Agreement shall be conducted in Las Vegas, Nevada. The Federal Arbitration Act shall govern the interpretation and enforcement of this Agreement. The fees of the arbitrator shall be divided equally between both Parties.
7.3     Confidentiality . All proceedings and all documents prepared in connection with any Arbitrable Claim shall be confidential and, unless otherwise required by law, the subject matter thereof shall not be disclosed to any Person other than the Parties to the proceedings, their counsel, witnesses and experts, the arbitrator, and, if involved, the court and court staff.
8.     Compliance with Laws . The Consultant shall fully comply with all applicable federal, state and local laws, rules and regulations in performing the Consulting Services hereunder.
9.     Cooperation . The Parties agree to cooperate fully with each other in order to achieve the purposes of this Agreement and to take all actions not specifically described that may be required to carry out the purposes and intent of this Agreement.


3


10.     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 LLC
1505 South Pavilion Centre Drive
Las Vegas, Nevada 89135
Attention: Matthew L. Heinhold, Esq.
If to the Consultant:        
                        


11.     Entire Agreement . This Agreement and the Separation Agreement contain the entire agreement between the Parties concerning the subject matter hereof and supersede all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, express or implied, between the Parties with respect hereto. No representations, inducements, promises or agreements not embodied herein shall be of any force or effect.
12.     Assignability . Neither Party shall have the right to assign any rights or obligations under this Agreement without the prior written approval of the other Party other than an assignment to a successor of the Company; provided that such successor assumes the liabilities, obligations and duties of the Company under this Agreement, either contractually or as a matter of law. The Parties acknowledge and agree that the provisions of this Section 11 were negotiated at arms’ length and that the Consultant received separate and adequate consideration in return for providing the Company the right to assign this Agreement.
13.     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.
14.     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.
15.     Construction . The Parties agree that this Agreement is the product of negotiations between sophisticated parties, both of whom were represented by counsel, and each


4


of whom had an opportunity to participate in and did participate in, the drafting of each provision hereof. Accordingly, this Agreement shall be construed as if both parties prepared this Agreement, and any rules of construction to the contrary are hereby waived.
16.     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 that is not an Arbitrable Claim, 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.
17.     Headings . The headings of the sections and subsections 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.
18.     Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF , the undersigned have executed this Agreement as of the date first written above.
“COMPANY”

STATION CASINOS LLC
By: /s/ RICHARD J. HASKINS    
Name:    Richard J. Haskins
Title:    President
“CONSULTANT”

By: /s/ MARC J. FALCONE    
Marc J. Falcone


5


 
 
 
 
 Exhibit 10.8
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this “ Agreement ”) is made and entered as of the 15th day of May, 2017, by and between STATION CASINOS LLC , a Nevada limited liability company (the “ Company ”), and DANIEL ROY (the “ Consultant ”).
WHEREAS , the Company desires to engage the Consultant to render consulting services for the Company and its subsidiaries and affiliates; and
WHEREAS , the Consultant desires to be retained by the Company to render consulting services to the Company upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the Company and the Consultant (each individually a “ Party ” and together the “ Parties ”) agree as follows:

1. Term of Engagement . The term of engagement (the “ Term of Engagement ”) shall commence on May 16, 2017 (the “ Commencement Date ”), and shall terminate upon the close of business on the day immediately preceding the sixth (6th) month anniversary of the Commencement Date (the “Expiration Date” ), unless earlier terminated pursuant to Section 5 below.
2.     Consulting Services . During the Term of Engagement, the Consultant shall provide up to fifty (50) hours per month of consulting services as requested by the Company (the “ Consulting Services ”) regarding the operations of the Company and its subsidiaries and affiliates. All Consulting Services to be provided by the Consultant hereunder shall be performed solely by Consultant unless otherwise agreed in writing by the Company. The Consultant shall provide such Consulting Services to the Company by telephone and/or in person at the Company’s offices as reasonably requested by the Company.
3.     Consideration and Expenses .
3.1     Consideration . The Parties agree and acknowledge that the continued payments of Consultant’s base salary of $50,000 per month for a period of six (6) months, pursuant to the terms of the Separation Agreement and General Release dated May 15, 2017, is fair and adequate consideration for providing the Consulting Services provided hereunder.
3.2     Business Expense Reimbursement . The Company shall reimburse the Consultant for all reasonable out-of-pocket expenses incurred by it in performing the Consulting Services under this Agreement, provided , however , that such expenses shall not exceed Five Hundred and No/100 Dollars ($500.00) in any month without the prior written consent of the Company. The Consultant shall submit monthly invoices to the Company for such expenses, which invoices shall include, at a minimum, the amount of each expense, a description of the purpose of the expense and appropriate backup or supporting documentation.
4.     Termination . Either Party may terminate this Agreement for any or no reason upon thirty (30) days’ prior written notice to the Company. For the avoidance of doubt, in the event that the Company terminates this Agreement, the Consultant shall continue to receive the consideration provided in the Separation Agreement through the Expiration Date. . Upon the expiration or earlier termination of this Agreement or at such earlier time as the Company may request, the Consultant shall deliver to an appropriate officer of the Company all memoranda, diaries, notes, records, cost information, customer lists, marketing plans and strategies and any other documents relating or referring to any Confidential Information (as such term is defined that Employment Agreement dated January 1, 2104, between the Company and the Executive) made available to the Consultant by the Company prior to or during the Term of Engagement.
5.     Independent Contractor . All services provided by the Consultant shall be performed by the Consultant directly and independently and not as an agent, employee or representative of the Company. This Agreement is not intended to and does not constitute, create, or otherwise give rise to a joint venture, partnership or other type of business association or organization of any kind by or between the Company and the Consultant. The rights and obligations of the Company and the Consultant under this Agreement shall be limited to the express provisions hereof. Specifically, and without limitation, the Consultant has no power or authority to contract for, or bind, the Company in any manner.

1



Consultant acknowledges and agrees that, during the Term of Engagement, Consultant will not be treated as an employee of the Company or any of its subsidiaries or affiliates for purposes of federal, state or local income or other tax withholding, nor unless otherwise specifically provided by law, for purposes of the Federal Insurance Contributions Act, the Social Security Act, the Federal Unemployment Tax Act or any Workers’ Compensation law of any state or country (or subdivision thereof), or for purposes of benefits provided to employees of the Company or any of its subsidiaries or affiliates under any employee benefit plan, program, policy or arrangement (including, without limitation, vacation, holiday and sick leave benefits, insurance coverage and retirement benefits). Consultant acknowledges and agrees that, as an independent contractor, Consultant will be required, during the Term of Engagement, to pay any applicable taxes on the fees paid to Consultant, and to provide workers’ compensation insurance and any other coverage required by law.
6.     Indemnification . The Company agrees that if the Consultant 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 ”), arising out of or relating to the Consulting Services as a consultant under this Agreement, the Consultant shall be indemnified and held harmless by the Company against all expense, liability and loss (including, without limitation, attorneys’ fees, judgments, fines, taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Consultant in connection therewith, except as otherwise prohibited by law and except to the extent that the Consultant was negligent or engaged in willful misconduct in the course of providing the Consulting Services. The provisions of this Section 7 shall survive the expiration or earlier termination of this Agreement.
7.     Dispute Resolution .
7.1     Arbitrable Claims . All disputes between the Parties arising out of or relating to this Agreement or any alleged breach thereof (“ Arbitrable Claims ”), shall be resolved by binding arbitration set as set forth in this Section 6 . Notwithstanding the foregoing, any claim for injunctive relief brought by the Company shall not be considered an Arbitrable Claim. THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JUDGE OR JURY IN REGARD TO ARBITRABLE CLAIMS .
7.2     Procedure . Arbitration of Arbitrable Claims shall be in accordance with the Commercial Rules of the American Arbitration Association, as amended, and as augmented in this Agreement. Either Party may bring an action in any court of competent jurisdiction located in Clark County, Nevada, to enforce the provisions of Section 6 or to compel arbitration under this Agreement and to enforce an arbitration award. Otherwise, neither Party shall initiate or prosecute any lawsuit, appeal or administrative action in any way related to an Arbitrable Claim. The initiating Party must file and serve an arbitration claim within sixty (60) days of learning the facts giving rise to the alleged claim. All arbitration hearings under this Agreement shall be conducted in Las Vegas, Nevada. The Federal Arbitration Act shall govern the interpretation and enforcement of this Agreement. The fees of the arbitrator shall be divided equally between both Parties.
7.3     Confidentiality . All proceedings and all documents prepared in connection with any Arbitrable Claim shall be confidential and, unless otherwise required by law, the subject matter thereof shall not be disclosed to any Person other than the Parties to the proceedings, their counsel, witnesses and experts, the arbitrator, and, if involved, the court and court staff.
8.     Compliance with Laws . The Consultant shall fully comply with all applicable federal, state and local laws, rules and regulations in performing the Consulting Services hereunder.
9.     Cooperation . The Parties agree to cooperate fully with each other in order to achieve the purposes of this Agreement and to take all actions not specifically described that may be required to carry out the purposes and intent of this Agreement.
10.     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 LLC
1505 South Pavilion Centre Drive
Las Vegas, Nevada 89135
Attention: Matthew L. Heinhold, Esq.

2



If to the Consultant:        
                        
                        

11.     Entire Agreement . This Agreement and the Separation Agreement contain the entire agreement between the Parties concerning the subject matter hereof and supersede all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, express or implied, between the Parties with respect hereto. No representations, inducements, promises or agreements not embodied herein shall be of any force or effect.
12.     Assignability . Neither Party shall have the right to assign any rights or obligations under this Agreement without the prior written approval of the other Party other than an assignment to a successor of the Company; provided that such successor assumes the liabilities, obligations and duties of the Company under this Agreement, either contractually or as a matter of law. The Parties acknowledge and agree that the provisions of this Section 11 were negotiated at arms’ length and that the Consultant received separate and adequate consideration in return for providing the Company the right to assign this Agreement.
13.     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.
14.     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.
15.     Construction . The Parties agree that this Agreement is the product of negotiations between sophisticated parties, both of whom were represented by counsel, and each of whom had an opportunity to participate in and did participate in, the drafting of each provision hereof. Accordingly, this Agreement shall be construed as if both parties prepared this Agreement, and any rules of construction to the contrary are hereby waived.
16.     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 that is not an Arbitrable Claim, 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.
17.     Headings . The headings of the sections and subsections 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.
18.     Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF , the undersigned have executed this Agreement as of the date first written above.
“COMPANY”

STATION CASINOS LLC
By: /s/ RICHARD J. HASKINS    
Name:    Richard J. Haskins
Title:    President
“CONSULTANT”

By: /s/ DANIEL ROY    
Daniel Roy

3



 
 
 
 
Exhibit 10.9
CREDIT AGREEMENT JOINDER AGREEMENT
This JOINDER AGREEMENT, dated as of July 25, 2017, is made by Palms Leaseco LLC, NP Landco Holdco LLC, NP Tropicana LLC and CV PropCo, LLC (the “ Additional Credit Parties ”), in favor of Deutsche Bank AG Cayman Islands Branch, as administrative agent (in such capacity, “ Administrative Agent ”) for the several banks and other financial institutions (“ Lenders ”) from time to time party to the Credit Agreement, dated as of June 8, 2016 (as amended by that certain First Amendment to Credit Agreement, dated as of January 30, 2017, as modified by that certain Incremental Joinder Agreement, dated as of January 30, 2017, as further amended by that certain Second Amendment to Credit Agreement, dated as of April 5, 2017, as further amended and modified by the Incremental Joinder No. 2 and Third Amendment to Credit Agreement, dated as of May 2, 2017, as further modified by the Incremental Joinder Agreement No. 3, dated as of May 10, 2017, as further amended, amended and restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”; capitalized terms not defined herein have the same meanings given to them in the Credit Agreement), among Station Casinos LLC (“ Borrower ”), the Guarantors from time to time party thereto, the Lenders from time to time party thereto, Administrative Agent, Deutsche Bank AG Cayman Islands Branch, as Collateral Agent, and the other parties party thereto.
W I T N E S S E T H :
WHEREAS, the parties to this Joinder Agreement wish to add each Additional Credit Party as a Credit Party under the Credit Agreement;
NOW, THEREFORE, in consideration of the premises herein contained, the parties hereto hereby agree as follows:
1.    Each undersigned Additional Credit Party hereby acknowledges that it has received and reviewed a copy of the Credit Agreement and acknowledges and agrees to:
(a)    join the Credit Agreement as a “Guarantor,” as indicated with its signature below;
(b)    be bound by all covenants, agreements and acknowledgments attributable to a Guarantor in the Credit Agreement; and
(c)    perform all obligations and duties required of it by the Credit Agreement as a Guarantor.
2.    Without limiting the foregoing, the Additional Credit Parties, jointly and severally with Borrower and each other Guarantor, hereby guarantee as primary obligors and not as sureties to each Secured Party and its successors and assigns, as provided in the Guarantee, prompt payment and performance in full when due (whether at stated maturity, by acceleration, demand or otherwise) of the Guaranteed Obligations strictly in accordance with the terms thereof.
3.    Each of the undersigned hereby represents and warrants that the representations and warranties with respect to it contained in Article VIII of the Credit Agreement and in each of the other Credit Documents to which such signatory is a party, by virtue of this Joinder Agreement or otherwise, are true and correct in all material respects on the date hereof as if made on and as of the date hereof (it being understood and agreed that any such representation or warranty which by its terms is made as of an earlier date is true and correct in all material respects only as of such earlier date, and that any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language is true and correct in all respects on the applicable date).
4.    The address and jurisdiction of organization or incorporation, as applicable, of each Additional Credit Party is set forth below its name on the signature pages hereto.
5.    This Joinder Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Joinder Agreement by facsimile or electronic mail shall be effective as delivery of a manually executed counterpart of this Joinder Agreement.



6.    THIS JOINDER AGREEMENT AND ANY CLAIMS, CONTROVERSIES, DISPUTES, OR CAUSES OF ACTION (WHETHER ARISING UNDER CONTRACT LAW, TORT LAW OR OTHERWISE) BASED UPON OR RELATING TO THIS JOINDER AGREEMENT, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW PRINCIPLES THAT WOULD APPLY THE LAW OF ANOTHER JURISDICTION.
[Signature Pages Follow]




IN WITNESS WHEREOF, each of the undersigned has caused this Joinder Agreement to be duly executed and delivered by its proper and duly authorized officer as of the date set forth below.
Dated: July 25, 2017





PALMS LEASECO LLC , a Nevada limited liability company
NP LANDCO HOLDCO LLC , a Nevada limited liability
company
NP TROPICANA LLC , a Nevada limited liability company
CV PROPCO, LLC , a Nevada limited liability company
each, as Guarantor

/s/ MATTHEW L. HEINHOLD    
Name: Matthew L. Heinhold
Title: Authorized Person

Address:
1505 South Pavilion Center Drive
Las Vegas, NV 89135
Attn: General Counsel
Fax: 702-495-4245



ACKNOWLEDGED AND AGREED TO:
DEUTSCHE BANK AG CAYMAN ISLANDS BRANCH,
as Administrative Agent
/s/ MARY KAY COYLE    
Name: Mary Kay Coyle
Title: Managing Director
/s/ ANCA TRIFAN    
Name: Anca Trifan
Title: Managing Director






Exhibit 31.1

CERTIFICATION
I, Frank J. Fertitta III, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Red Rock Resorts, Inc.;
2.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(b)
designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
disclosed in this report any change in the registrant's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 9, 2017
/s/ FRANK J. FERTITTA III
Frank J. Fertitta III
Chief Executive Officer





Exhibit 31.2

CERTIFICATION
I, Stephen L. Cootey, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Red Rock Resorts, Inc.;
2.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(b)
designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
disclosed in this report any change in the registrant's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 9, 2017
/s/ STEPHEN L. COOTEY
Stephen L. Cootey
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)





Exhibit 32.1

Red Rock Resorts, Inc.
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)
        Pursuant to the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sections 1350(a) and (b)), the undersigned hereby certifies as follows:
1.
Frank J. Fertitta III is the Chief Executive Officer of Red Rock Resorts, Inc. (the "Company").
2.
The undersigned certifies to the best of his knowledge:
(A)
The Company's Form 10-Q for the quarter ended June 30, 2017 accompanying this Certification, in the form filed with the Securities and Exchange Commission (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (the "Exchange Act"); and
(B)
The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: August 9, 2017
/s/ FRANK J. FERTITTA III
Frank J. Fertitta III
Chief Executive Officer





Exhibit 32.2

Red Rock Resorts, Inc.
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)
        Pursuant to the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sections 1350(a) and (b)), the undersigned hereby certifies as follows:
1.
Stephen L. Cootey is the Principal Financial Officer of Red Rock Resorts, Inc. (the "Company").
2.
The undersigned certifies to the best of his knowledge:
(A)
The Company's Form 10-Q for the quarter ended June 30, 2017 accompanying this Certification, in the form filed with the Securities and Exchange Commission (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (the "Exchange Act"); and
(B)
The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: August 9, 2017
/s/ STEPHEN L. COOTEY
Stephen L. Cootey
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)