Motion for Executive Bonuses

8/14/2019 Motion for Executive Bonuses

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#4814-3405-8245

Paul S. Aronzon (CA State Bar No. 88781)Thomas R. Kreller (CA State Bar No. 161922)MILBANK, TWEED, HADLEY & McCLOY LLP601 South Figueroa Street, 30th FloorLos Angeles, California 90017Telephone: (213) 892-4000Facsimile: (213) 629-5063

Reorganization Counsel forDebtors and Debtors in Possession

Bruce T. Beesley (NV SBN 1164)Laury Macauley (NV SBN 11413)LEWIS AND ROCA LLP50 West Liberty Street, Suite 410Reno, Nevada 89501Telephone: (775) 823-2900Facsimile: (775) 823-2929

[email protected]; [email protected]

Local Reorganization Counsel forDebtors and Debtors in Possession

UNITED STATES BANKRUPTCY COURTDISTRICT OF NEVADA

In re:

STATION CASINOS, INC

Affects this Debtor

Affects all Debtors

Affects Reno Land Holdings, LLC

Affects River Central, LLC

Affects Tropicana Station, LLC

Affects FCP Holding, Inc.

Affects FCP Voteco, LLC

Affects Fertitta Partners LLC

Affects Northern NV Acquisitions, LLC

Affects FCP MezzCo Parent, LLCAffects FCP MezzCo Parent Sub, LLC

Affects FCP MezzCo Borrower VII, LLC

Affects FCP MezzCo Borrower VI, LLC

Affects FCP MezzCo Borrower V, LLC

Affects FCP MezzCo Borrower IV, LLC

Affects FCP MezzCo Borrower III, LLC

Affects FCP MezzCo Borrower II, LLC

Affects FCP MezzCo Borrower I, LLC

Affects FCP PropCo, LLC

Chapter 11

Case No. BK-09-52477Jointly Administered

DEBTORS MOTION PURSUANT TO11 U.S.C. 105(a) AND 363(b) FORORDER AUTHORIZING PAYMENTOF EMPLOYEE CONTRACTBONUSES

Hearing Date: TBDHearing Time: TBDPlace: 300 Booth Street

Reno, NV 89509

Motion to Shorten Notice Requested

Case 09-52477-gwz Doc 1065 Entered 03/09/10 16:04:52 Page 1 of 9

0952477100309000000000009


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TO THE HONORABLE UNITED STATES BANKRUPTCY JUDGE, UNITED

STATES TRUSTEE AND ALL PARTIES IN INTEREST:

Station Casinos, Inc. (SCI) and its affiliated debtors and debtors in possession

(collectively, the Debtors) in the above-captioned chapter 11 cases, hereby submit this motion

(the Motion) for an order pursuant to sections 105(a) and 363(b) of title 11 of the United States

Code, 11 U.S.C. 101 et seq. (the Bankruptcy Code), authorizing SCI to pay certain

employee-related contractual salary obligations. In support of the Motion, Debtors submit the

declaration of Thomas Friel (the Friel Declaration) and respectfully represent as follows:

I. Jurisdiction and Venue

This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. 157

and 1334. Venue is proper before this Court pursuant to 28 U.S.C. 1408 and 1409. This is a

core proceeding pursuant to 28 U.S.C. 157(b).

II. Factual Background

1. The Debtors commenced these chapter 11 cases (the Chapter 11 Cases)

on July 28, 2009 (the Petition Date). SCI and its non-debtor subsidiaries (collectively, the

Station Group) constitute a gaming entertainment enterprise that owns and operates under the

Station and Fiesta brand names ten major hotels/casinos (two of which are 50% owned) and

eight smaller casinos (three of which are 50% owned) in the Las Vegas metropolitan area.

2. Previously, as one of its first day motions Debtors filed Motion

Pursuant to 11 U.S.C. 105(a), 363(b) and 507(a) For Interim and Final Orders (I)

Authorizing Payment of Wages, Compensation and Employee Benefits, and (II) Authorizing and

Directing Financial Institutions to Honor and Process Checks and Transfers Related to Such

Obligations, dated July 28, 2009 (the Prior Wages & Benefits Motion).

3. In the Prior Wages & Benefits Motion, the Debtors sought and obtained an

interim and a final order authorizing the Debtors to pay in the ordinary course of business claims

for, inter alia, prepetition wages, accrued vacation, and other benefits, including, but not limited

to medical plans, dental plans, disability plans and incidental employee-related costs. The Court

granted the Prior Wages & Benefits Motion by interim order [Docket No. 24] and final order



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[Docket No. 620]. In the Prior Wages & Benefits Motion, however, the Debtors did not request

authority to pay any bonuses to employees under the Debtors various prepetition bonus

programs, which include, retention bonuses, guaranteed employment contract bonuses, stretch

bonuses, and discretionary target bonuses. To the contrary, the Debtors specifically excluded a

request to pay bonuses from the Prior Wages & Benefits Motion.

4. In this Motion, SCI seeks authority to pay three employees their

guaranteed employment contract bonuses (collectively, the Contract Bonuses) pursuant to the

terms of three separate, prepetition employment contracts (the Employment Contracts) entered

into with the subject employees (collectively, the Subject Employees).1

5. A chart of the Contract Bonuses to be paid is annexed hereto as Exhibit 1.

Redacted copies of the Employment Contracts are annexed hereto as Exhibit 2. The

Employment Contracts and the identities of the Subject Employees are redacted to protect the

privacy of the Subject Employees and pursuant to the confidentiality provisions of the

Employment Contracts. Moreover, redacting the Employment Contracts and maintaining the

privacy of the Subject Employees is in SCIs best interest as it ensures that confidential business

information is not available publicly to its competitors.

6. None of the Contract Bonuses, denominated either a supplemental

bonus or a guaranteed bonus in the Employment Contracts (see Exhibit 2: Employee A

Contract, p. 4, para. 3.3 [supplemental bonus of $180,000]; Employee B Contract, Letter

Addendum dated August 2, 2000, para. 1 [guaranteed bonus of $33,750]; Employee C

Contract, p. 5, para. 3.3 [supplemental bonus of $50,000]) are conditioned upon the

performance of SCI or of the subject employee and are not discretionary. Each of the Contract

Bonuses functions as annualized compensation to the respective Subject Employee. The Subject

Employees are each corporate vice-presidents of SCI and the Contract Bonuses, combined with

their other compensation, constitutes fair and appropriate compensation for the level of services

1The Debtors do not seek authority in this Motion to pay any retention bonuses, stretch bonuses, or

discretionary target bonuses.



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provided to SCI. Further, each Contract Bonus automatically becomes payable on its annual

payment date.

7. In 2009, the same amount of bonuses, $263,750, was paid to the Subject

Employees for the year 2008. No guaranteed bonuses remain unpaid for 2008.

8. In order to receive a Contract Bonus, each Subject Employee must be

employed on December 31, 2009 and also on the date that the Contract Bonus is paid in order to

be entitled to payment. Accordingly, Debtors believe the Contract Bonuses are post-petition

contract obligations which can be paid in the ordinary course. In an abundance of caution, and in

light of the fact that Contract Bonuses were excluded from the Prior Wages & Benefits Motion

and cover a twelve-month period of employment that includes several months of services

rendered prepetition, SCI now seeks Court authority to pay the Contract Bonuses. By seeking

authority to pay the Contract Bonuses, SCI does not seek to deviate in any way from the interim

or final orders approving the Prior Wages & Benefits Motion and does not seek to affect, alter or

otherwise modify the Employment Contracts. Most important, in the Motion, SCI does not seek

to assume the Employment Contracts or otherwise affect its rights (or the rights of the Subject

Employees) under the Employment Contracts, including, but not limited to SCIs rights under

section 365 of the Bankruptcy Code.

III. Basis for Relief Requested

9. The Bankruptcy Code provides a variety of bases for the relief requested

herein. As discussed in detail below, pursuant to section 363(b) of the Bankruptcy Code, a

debtor is authorized to use property of its estate in the ordinary course of business. The Debtors

contend that section 363(b) authorizes SCI to honor and pay the annual compensation set forth in

the Employment Contracts, including the Contract Bonuses due and owing to the Subject

Employees. Further, the retention of the Subject Employees is necessary for the continued

operation of SCIs business. Consequently, the necessity of payment doctrine set forth in

section 105 of the Bankruptcy Code also supports the requested relief.



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A. Paying the Contract Bonuses is Permissible under Section 363(b) of

the Bankruptcy Code

10. Section 363(b)(1) of the Bankruptcy Code further supports granting the

relief request herein. Section 363(b)(1) provides that [t]he trustee, after notice and a hearing,

may use, sell, or lease, other than in the ordinary course of business, property of the estate. 11

U.S.C. 363(b)(1). Courts acknowledge that a debtors relationship with its employees,

including the terms and conditions of employment, are matters that are subject to the business

judgment of the debtor and may be managed by the debtor in the ordinary course of business.

See, e.g., In re Pac. Forest Indus., Inc., 95 B.R. 740, 743 (Bankr. C.D. Cal. 1989) (debtors

employees do not need court permission to be paid and are usually paid as part of the ongoing

operation of the business.). Courts permit debtors to pay wage claims in the ordinary course of

business. See COLLIER ON BANKRUPTCY l507.05[1], at 507-26 (15th ed. rev. 2006).

Accordingly, the Debtors employee-relations matters are within the ordinary course of business,

including employee compensation and benefits matters.

11. Ultimately, payment of the Contract Bonuses in accordance with the

Employment Contracts and pursuant to SCIs business practices is in the best interests of the

Debtors estates, creditors and all parties in interest and will enable the Debtors to continue to

operate their businesses in an economic and efficient manner without disruption. Moreover, the

relief sought herein payment of $263,750 in guaranteed bonuses does not materially harm the

Debtors estates or creditors.

B. Paying the Contract Bonuses is Necessary for the Debtors

Rehabilitation

12. The necessity of payment doctrine of section 105 of the Bankruptcy

Code supports the request for relief. Under the necessity of payment doctrine, first enunciated

by the United States Supreme Court in Miltenberger v. Logansport, C. & S.W.R. Co., 106 U.S.

286 (1882), a bankruptcy court may use its equitable powers under section 105 of the

Bankruptcy Code to permit a debtor in possession to pay prepetition claims when payment is

necessary to effectuate the Debtors bankruptcy goals. See In re Ionosphere Clubs, Inc., 98 B.R.



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174, 175 (Bankr. S.D.N.Y. 1989) (approving payment of prepetition wages due current

employees where it is necessary to pay such claims in order to preserve and protect its business

and ultimately reorganize and retain its currently working employees and maintain positive

employee morale).

13. The Ninth Circuit Court of Appeals has acknowledged the doctrine of

necessity, stating in dicta: [c]ases have permitted unequal treatment of pre-petition debts when

necessary for rehabilitation, in such contexts as . . . pre-petition wages to key employees . . . .

Burchinal v. Cent. Wash. Bank(In re Adams Apple, Inc.), 829 F.2d 1484, 1490 (9th Cir. 1987).

14. The necessity of payment doctrine teaches no more than, if payment of a

claim which arose prior to reorganization is essential to the continued operation of the [business]

during [the] reorganization, payment may be authorized even if it is made out of [the] corpus.

In re Lehigh & New England Ry. Co., 657 F.2d 570, 581 (3d Cir. 1981);see also Am.

Hardwoods, Inc. v. Deutsche Credit Corp. (In re Am. Hardwoods, Inc.), 885 F.2d 621, 625 (9th

Cir. 1989) (section 105 endows the bankruptcy court with general equitable powers, where not

inconsistent with more specific law);In re Gulf Air, Inc., 112 B.R. 152, 154 (Bankr. W.D. La.

1989) ([R]etention of skills, organization, and reputation [. . .] must be considered valuable

assets contributing to going concern value and aiding rehabilitation.);In re Chateaugay Corp.,

80 B.R. 279, 287 (Bankr. S.D.N.Y. 1987) (explaining that a bankruptcy court may exercise its

equity powers under section 105 to authorize the payment of prepetition claims where such

payment is necessary to permit the greatest likelihood of survival of the debtor and payment of

creditors in full or at least proportionately).

15. Finally, since the Contract Bonuses are part of the Subject Employees

contractual compensation, any delay in paying the Contract Bonuses will adversely affect SCIs

relationship with the Subject Employees and cause the Subject Employees harm at a time when

the dedication, confidence and cooperation of these employees is most critical.



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IV. Conclusion

WHEREFORE, the Debtors respectfully request entry of an order, substantially

in the form attached hereto as Exhibit 3, granting the relief requested herein together with such

other and further relief as the Court may deem just and appropriate.

Dated: March 8, 2010 Respectfully submitted,

By: /s Robert C. ShenfeldPaul S. Aronzon, CA SBN 88781Thomas R. Kreller, CA SBN 161922Robert C. Shenfeld, CA SBN 228181MILBANK, TWEED, HADLEY & McCLOY LLP601 South Figueroa Street, 30th FloorLos Angeles, California 90017

Reorganization Counsel forDebtors and Debtors in Possession

Bruce T. Beesley, #1164Laury Macauley, #11413LEWIS AND ROCA LLP50 W. Liberty Street, Ste. 410Reno, NV [email protected]; [email protected]

Local Reorganization CounselFor Debtors and Debtors in Possession



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#4814-3405-8245

Exhibit 1

Exhibit 1



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#4814-3405-8245

Proposed Contract Bonus to Be Paid to

Subject Employees Pursuant to Employment ContractsThe actual names of the employees have been withheld to protect privacy. Debtors will

identify individual employees as required and pursuant to a confidentiality agreement.

Employee Proposed Bonus

Employee A $180,000

Employee B $33,750

Employee C $50,000



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Documents

Motion for Executive Bonuses