Entertainment Centers and be responsible for and assist with the acquisition, design and development of new Family Entertainment Centers (as defined in ¶16 below), and shall have such power and authority as shall reasonably be required to enable him to perform his duties hereunder; provided, however, that in exercising such power and authority and performing such duties, he shall at all times be subject to the authority of the Chief Operating Officer, the Chief Executive Officer and the Board of Directors of the Company. The Executive shall report to the Chief Operating Officer and the Chief Executive Officer of the Company. The Executive agrees to devote substantially all of his business time, attention and services to the diligent, faithful and competent discharge of such duties for the successful operation of the Company’s business, and use his best efforts to advance the Company’s interests.

5.             Compensation.   (a)  Base Salary. In consideration of the services rendered by Executive under this Agreement, the Company shall pay him a base salary at an annual rate equal to $267,000.00. The Executive shall receive such increases in his base salary as the Board of Directors of the Company may from time to time approve in its discretion. The base salary shall be payable in accordance with the Company’s regular payroll practice, but in no event less frequently than bi-weekly. All applicable withholding taxes and insurance contributions shall be deducted from such payments.

(b)           Annual Bonus. Executive will be eligible to receive a performance-based bonus based on achieving annual performance goals that may be determined by the Board of Directors or the compensation committee thereof on an annual basis and communicated to Executive if established. The Board of Directors or its compensation committee may establish an additional bonus pool for any fiscal year to benefit members of management. Executive may participate in such a bonus pool if and to the extent that the Board of Directors or its compensation committee so determines.

(c)           Stock Options. Executive will be eligible to receive incentive units (as defined in the limited liability company agreement of Palace Holdings Group, LLC (the “LLC Agreement”) as may be awarded by its board of directors or its compensation committee from time to time in accordance with the terms of the LLC Agreement and any related incentive award program adopted by its board of directors.

6.             Benefit Plan and Program. Executive shall, during the Engagement Period, be entitled to and receive benefits under the Company’s 401(k) plan, group life, health (including hospitalization, medial and major medical), prescription drug, dental, vision and such other employee benefit plans and programs, including but not limited to any other incentive compensation plans or programs (whether or not employee benefit plan or programs) as the Company may maintain from time to time, and in accordance with the Company’s customary practices to the extent maintained by the Company provided that Executive is a member of the class of employees authorized to participate in such plan or programs.

7.             Outside Activities. While employed by the Company, Executive shall not, directly or indirectly, provide services on behalf of any competing Family Entertainment Center business as defined in ¶16 below or on behalf for any subsidiary or affiliate of any such competing Family Entertainment Center business as an employee, consultant, independent contractor, agent, sole proprietor, partner, joint venturer, corporate officer, director or lender; nor

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shall Executive acquire while employed by the Company, the ownership of more than 5% of the outstanding equity interest in any such competitive entity. Subject to the foregoing, Executive may serve on board of directors of unaffiliated corporations, who do not compete with the Company, subject to Company’s approval. Except as specifically set forth herein, and subject to any restrictions thereon, Executive may engage in personal business and investment activities that do not conflict with the business of the Company. Notwithstanding the foregoing, in no event shall Executive’s outside activities, services, personal business and investments materially interfere with the performance of his duties under this Agreement.

8.             Working Facilities. Executive shall perform his duties at Splish Splash, Riverhead, New York. The Company shall provide Executive with support services suitable and appropriate to his position with the Company and necessary or appropriate in connection with the performance of his assigned duties under this Agreement.

9.             Vacation and Expenses. (a)  Executive shall be entitled to a minimum of four (4) weeks of paid vacation time each year during the Engagement Period to be taken at a time which does not conflict with the Executive’s duties hereunder. Accrued vacation may be carried forward and used in subsequent calendar years.

(b)           The Executive shall also be entitled to reimbursement for all reasonable and preapproved expenses necessarily incurred by him in the performance of his duties upon presentation of a voucher indicating the amount and business purposes and consistent with the Company’s policies. The Executive’s reimbursement shall include, but not be limited to, transportation costs, travel expenses, trade show expenses, cellular phone expenses and expenses incurred by Executive and his spouse in connection with IAAPA functions and meetings.

10.           Termination of Engagement. (a)  Executive’s engagement with the Company shall terminate during the Engagement Period on account of Executive being convicted of a felony or misdemeanor involving moral turpitude, including entry of a plea. If the Executive’s employment terminates in accordance with this ¶10(a), (x) the Company shall pay and provide to Executive:  (i) his earned but unpaid salary as of the date of the termination of his engagement, (ii) the benefits, if any, to which he is entitled under the Company’s benefit plan and programs and compensation plan and programs; (iii) accrued but unpaid bonus; and (iv) payment for unused vacation days through the date of termination, and (y) the Executive shall not be entitled to any severance or other benefits. For purposes of this Agreement, moral turpitude shall include embezzlement of the Company’s property.

(b)           The Company shall have the right to terminate this Agreement for “good cause” upon twenty (20) days written notice to the Executive setting forth the grounds for terminating the Agreement. For purposes of this ¶10(b), “good cause” shall be defined as the following:  (i) Executive’s failure to perform his duties in a manner consistent with the Company’s performance standards and the terms of this Agreement; (ii) Executive’s failure to devote substantially all of his business time and attention to the business of the Company and otherwise comply with his duties under ¶4; and (iii) Executive’s violation of ¶7 and ¶12 of this Agreement. In the event Executive fails to cure his breach of the Agreement as set forth in the notice, then and in that event, this Agreement shall automatically terminate at the expiration of said twenty (20) day period. The Company shall pay and provide to Executive:  (i) his earned but unpaid

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salary as of the date of the termination of his engagement; (ii) the benefits, if any, to which he is entitled under the Company’s benefit plan and programs and compensation plan and programs; (iii) accrued but unpaid bonus; and (iv) payment for unused vacation days through the date of termination.

(c)           The Company may at any time during the Engagement Period, upon twenty (20) days written notice to Executive, terminate this Agreement. Except in the event of a termination of Executive’s employment in accordance with the provisions of ¶10(a) and ¶10(b), the restrictive covenant set forth in ¶12 of this Agreement shall continue only so long as the Company makes the payment set forth in ¶10(f).

(d)           This Agreement shall automatically terminate upon the death of Executive.

(e)           Executive shall have the right to terminate this Agreement for “good reason” upon twenty (20) days written notice to the Company setting forth the grounds for terminating the Agreement. For purposes of this ¶10(e), “good reason” shall be defined as follows:  (i) a material breach of the Company’s obligations under this Agreement; (ii) the Board by vote, but excluding those directors who are officers or employees, or former officers or employees, of the Company, or its subsidiaries, determines in its sole discretion that the voluntary termination of the Executive is for “good reason” under the