<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
STATION CASINOS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
STATION CASINOS, INC.
2411 WEST SAHARA AVENUE
LAS VEGAS, NEVADA 89102
(702) 367-2411
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD: OCTOBER 27, 1998
TO BE HELD AT: SUNSET STATION HOTEL & CASINO
To the Stockholders:
NOTICE is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Station Casinos, Inc., a Nevada corporation (the "Company") will be
held at Sunset Station Hotel & Casino on October 27, 1998, beginning at 10:00
a.m. local time, for the following purposes:
1. To elect two directors to serve for a term of three years
until the 2001 Annual Meeting of Stockholders and until their
respective successors have been duly elected and qualified;
2. To ratify the appointment of Arthur Andersen L.L.P. as the
Company's independent public accountants for the Company's 1999
fiscal year; and
3. To consider and transact such other business as may properly
come before the Annual Meeting or any adjournment thereof;
all as more fully described in the accompanying Proxy Statement.
Holders of Common Stock, par value $.01 per share, at the close of business
on September 22, 1998, the record date fixed by the Company's board of directors
(the "Board of Directors"), are entitled to notice of and to vote at the Annual
Meeting. The Board of Directors urges all stockholders of record to exercise
their right to vote at the Annual Meeting personally or by proxy. Accordingly,
we are sending you the following Proxy Statement and the enclosed proxy card.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING PLEASE SPECIFY YOUR
VOTE ON THE ACCOMPANYING PROXY CARD AND SIGN, DATE AND RETURN IT AS PROMPTLY AS
POSSIBLE IN THE ENCLOSED PRE-ADDRESSED, POSTAGE-PAID ENVELOPE.
Your prompt response will be appreciated.
By Order of the Board of Directors
Scott M Nielson
SECRETARY
Las Vegas, Nevada
September 23, 1998
<PAGE>
STATION CASINOS, INC.
2411 WEST SAHARA AVENUE
LAS VEGAS, NEVADA 89102
------------------------
PROXY STATEMENT
---------------------
The accompanying proxy is solicited by the board of directors (the "Board of
Directors") of Station Casinos, Inc., (the "Company") to be used at the Annual
Meeting of Stockholders on October 27, 1998 (the "Annual Meeting") to be held at
10:00 a.m. local time at the Sunset Station Hotel & Casino, 1301 West Sunset
Road, Henderson, Nevada. This Proxy Statement and the enclosed form of proxy are
being sent to Stockholders on or about September 23, 1998.
At the Annual Meeting, stockholders will be asked to consider and vote upon
the following matters:
ITEM I The election of two directors to serve until the 2001
Annual Meeting.
ITEM II A proposal to ratify the appointment of Arthur Andersen
LLP as the Company's independent public accountants for
the Company's 1999 fiscal year.
Any stockholder giving a proxy may revoke it at any time prior to its
exercise at the Annual Meeting by giving notice of such revocation either
personally or in writing to the Secretary of the Company at the Company's
executive offices, by subsequently executing and delivering another proxy or by
voting in person at the Annual Meeting.
The Board of Directors believes that the election of its director nominees
and the ratification of the appointment of the independent public accountants
are in the best interests of the Company and its stockholders and recommends the
approval of each of the proposals contained in this Proxy Statement.
VOTING
Shares represented by duly executed and unrevoked proxies in the enclosed
form received by the Board of Directors will be voted at the Annual Meeting in
accordance with the specifications made therein by the stockholders, unless
authority to do so is withheld. If no specification is made, shares represented
by duly executed and unrevoked proxies in the enclosed form will be voted FOR
the election as directors of the nominees listed herein, FOR the ratification of
the appointment of independent public accountants, and, with respect to any
other matter that may properly come before the Annual Meeting, in the discretion
of the persons voting at the respective proxies.
The cost of preparing, assembling and mailing of proxy materials will be
borne by the Company. The Company has retained D.F. King & Co., Inc. to solicit
proxies at an estimated base cost of $5000. Directors, executive officers and
other employees may also solicit proxies but without receiving special
compensation. Brokerage houses, nominees, fiduciaries and other custodians will
be requested to forward soliciting materials to beneficial owners and will be
reimbursed for their reasonable out-of-pocket expenses incurred in sending proxy
materials to beneficial owners.
Only holders of record at the close of business on September 22, 1998 (the
"Record Date") of the Company's common stock, $.01 par value (the "Common
Stock"), will be entitled to vote at the Annual Meeting. On the Record Date,
there were 35,311,792 shares of Common Stock outstanding. Each share of Common
Stock is entitled to one vote on all matters presented at the Annual Meeting.
1
<PAGE>
VOTE REQUIRED
The election of the director nominees requires a plurality of the votes cast
in person or by proxy at the Annual Meeting. Under Nevada law, the Company's
Restated Articles of Incorporation (the "Articles") and the Company's Restated
Bylaws (the "Bylaws"), shares as to which a stockholder abstains or withholds
from voting on the election of directors and shares to which a broker indicates
that it does not have discretionary authority to vote ("broker non-votes") on
the election of directors will not be counted as voting thereon and therefore
will not affect the election of the nominees receiving a plurality of the votes
cast.
Ratification of the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the Company's 1999 fiscal year requires the
affirmative vote of a majority of shares present in person or presented by proxy
at the Annual Meeting and entitled to vote at the Annual Meeting. Under the
Articles and Bylaws, each abstention and broker non-vote on this proposal has
the same legal effect as a vote against such proposal.
The stockholders of the Company have no dissenters or appraisal rights in
connection with any of items I and II.
ITEM 1
NOMINEES FOR ELECTION OF DIRECTORS
The Articles and Bylaws require that the number of directors on the Board of
Directors be not less than three (3) nor more than fifteen (15). Currently, the
Board of Directors has fixed the number of directors at seven (7). The Board of
Directors presently consists of the following persons: Frank J. Fertitta III,
Glenn C. Christenson, Blake L. Sartini, R. Hal Dean, Lorenzo J. Fertitta, Lowell
H. Lebermann, Jr. and Delise F. Sartini. The Board of Directors is staggered
into three classes. Class I consists of R. Hal Dean and Lowell H. Lebermann,
Jr., whose terms expire in 2000. Class II consists of Glenn C. Christenson and
Blake L. Sartini, whose terms expire in 1998. Class III consists of Frank J.
Fertitta III, Lorenzo J. Fertitta, and Delise F. Sartini, whose terms expire in
1999. At each annual meeting, the terms of one class of directors expire. Each
director nominee is elected to the Board of Directors for a term of three years.
At the Annual Meeting two directors are to be elected to serve until the
2001 Annual Meeting and until their successors are elected and qualified. Unless
authority to vote for directors is withheld in the proxy card, it is the
intention of the persons named in the enclosed form of proxy to vote FOR the re-
election of the two nominees listed below. The persons designated as proxies
will have discretion to cast votes for other persons in the event any nominee
for director is unable to serve. At present, it is not anticipated that any
nominee will be unable to serve.
The names and certain information concerning the persons to be nominated as
directors by the Board of Directors at the Annual Meeting are set forth below.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE NOMINEES
LISTED BELOW.
GLENN C. CHRISTENSON. Mr. Christenson was appointed Chief Administrative
Officer in March 1997 and has served as Executive Vice President of the Company
since February 1994. From 1989 to 1993, he served as Vice President of the
Company. He has served as Chief Financial Officer since 1989, as Treasurer since
1992 and as a director of the Company since 1993. Mr. Christenson is a Certified
Public Accountant. From 1983 to 1989, he was a partner of the international
accounting firm of Deloitte Haskins & Sells (now Deloitte & Touche), where he
served as partner-in-charge of audit services for the Nevada practice and
National Audit partner for the Hospitality Industry. Mr. Christenson has served
on the Board of Directors of the Nevada Resort Association and was Chairman of
the Nevada Resort Association's IRS Liaison Committee.
2
<PAGE>
BLAKE L. SARTINI. Mr. Sartini was appointed Chief Operating Officer in March
1997 and has served as Executive Vice President of the Company since February
1994. From February 1994 to March 1997 he also served as President - Nevada
Operations for the Company. From 1991 to 1993, he served as Vice President of
Gaming Operations for the Company. He has served as a director of the Company
since 1993 and has over 14 years of experience in the hotel and casino industry.
From 1985 to 1990, Mr. Sartini held various management positions at the Company
and served as President of Southwest Gaming Services, Inc., a subsidiary of the
Company until November 1995. In 1992, he co-founded Station Casino St. Charles
and serves as its President.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the directors, executive officers and certain
key management personnel of the Company and certain of its subsidiaries. All
directors hold their positions until their terms expire and until their
respective successors are elected and qualified. Executive officers are elected
by and serve at the discretion of the Board of Directors until their successors
are duly chosen and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ ----------- ---------------------------------------------------------------
<S> <C> <C>
Frank J. Fertitta III(*).................. 36 Chairman of the Board, President, Chief Executive Officer and
Director
Glenn C. Christenson...................... 48 Executive Vice President, Chief Financial Officer, Chief
Administrative Officer, Treasurer and Director
Scott M Nielson........................... 40 Executive Vice President, General Counsel and Secretary
Blake L. Sartini(*)....................... 39 Executive Vice President, Chief Operating Officer and Director
William W. Warner......................... 34 Vice President of Finance
R. Hal Dean............................... 82 Director
Lorenzo J. Fertitta(*).................... 29 Director
Lowell H. Lebermann, Jr................... 59 Director
Delise F. Sartini(*)...................... 39 Director
</TABLE>
- ------------------------
(*) Frank J. Fertitta III and Lorenzo J. Fertitta are brothers and Delise F.
Sartini is their sister. Delise F. Sartini is married to Blake L. Sartini.
Set forth below are the Class I and Class III directors whose terms do not
expire this year together with non-director executive officers of the Company,
along with certain information regarding these individuals.
FRANK J. FERTITTA III. Mr. Fertitta has served as Chairman of the Board of
the Company since February 1993, Chief Executive Officer since July 1992 and
President of the Company since 1989. He has held senior management positions
since 1985, when he was named General Manager of Palace Station. He was elected
a director of the Company in 1986, at which time he was also appointed Executive
Vice President and Chief Operating Officer. In 1992, he co-founded Station
Casino St. Charles and has served as Chairman of the Board of Directors of that
company since that time.
SCOTT M NIELSON. Mr. Nielson was appointed Executive Vice President of the
Company in June 1994. In 1991 he was appointed General Counsel and in 1992 he
was appointed Secretary of the Company. From 1991 through June 1994, he served
as Vice President of the Company. From 1986 to 1991, Mr. Nielson was in private
legal practice, most recently as a partner in the Las Vegas firm of Schreck,
Jones, Bernhard,
3
<PAGE>
Woloson & Godfrey (now Schreck Morris), where he specialized in gaming law and
land use planning and zoning. Mr. Nielson is a member of the American Bar
Association, the Nevada Bar Association and the International Association of
Gaming Attorneys.
WILLIAM W. WARNER. Mr. Warner has served as Vice President of Finance of
the Company since January 1996 and from August 1993 to January 1996 he served as
Director of Finance. Prior to his employment by the Company, Mr. Warner served
as Controller of Kentco Capital Corporation from 1991 to 1993 and from 1986 to
1991 he served with the international accounting firm of Arthur Andersen LLP,
most recently as an Audit Manager.
LORENZO J. FERTITTA. Mr. Fertitta has served as a director of the Company
since 1991. He has served as President and Chief Executive Officer of Fertitta
Enterprises, Inc. since June 1993, where he is responsible for managing an
investment portfolio consisting of marketable securities and real property. From
time to time, the investment portfolio contains investments in other gaming
operations. Mr. Fertitta was a co-founder of Southwest Gaming in 1990 and of
Station Casino St. Charles in 1992. From 1991 to 1993, he served as Vice
President of the Company. Mr. Fertitta has served as a commissioner on the
Nevada State Athletic Commission since November 1996.
DELISE F. SARTINI. Ms. Sartini was appointed a director of the Company on
August 30, 1995. She has served as Vice President of Community Affairs at Palace
Station in excess of five years. Ms. Sartini was a co-founder of Southwest
Gaming in 1990 and of Station Casino St. Charles in 1992. Ms. Sartini is
involved in various charitable organizations and serves on the Board of
Directors of St. Jude's Ranch for Children.
R. HAL DEAN. Mr. Dean has served as a director of the Company since June
1993 and is chairman of the Human Resources Committee. Mr. Dean presently is a
member of the Board of Directors of LaBarge, Inc. (from 1984) in St. Louis. Mr.
Dean retired in 1982 from the Ralston Purina Company, having served 44 years in
various capacities including Chairman of the Board (1968-1982) and Chief
Executive Officer (1964-1982). Mr. Dean has served on several other Boards of
Directors including those of Gulf Oil Corp., Pittsburgh, Pennsylvania
(1970-1985), Chase Manhattan Bank International Advisory Group, New York, New
York (1965-1970), Mercantile Trust Co., St. Louis, Missouri (1969-1987), General
American Life Insurance Co., St. Louis, Missouri (1972-1987), Barnes Hospital,
St. Louis, Missouri (1979-1985) and Chevron Corp., San Francisco, California
(1985-1989).
LOWELL H. LEBERMANN, JR. Mr. Lebermann has served as a director of the
Company since October 1993 and is chairman of the Audit Committee. He is also a
director of Valero Energy Corporation, San Antonio, serving as a member of the
executive committee. He is a former director of Franklin Federal Bancorp, Austin
(now Norwest), and founding member of the Board of Directors of the Texas
Workers' Compensation Fund. He is president and CEO of Centex Beverage, Inc.,
wholesale distributor of Miller beer and imported beverages. Since 1993, he has
been a member of the Board of Regents of The University of Texas System. He was
a Council Member on the Austin City Council from 1971-1977.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors met five times during the 1998 fiscal year. The Board
of Directors has standing Audit and Human Resources Committees. The Board of
Directors does not have a standing Nominations Committee. None of the members of
the Board of Directors attended less than 75% of the meetings of the Board of
Directors held or of the total number of meetings held by all committees of the
Board of Directors on which various members served during the fiscal year ended
March 31, 1998. The current members of each of the Board of Directors'
committees are listed below.
THE AUDIT COMMITTEE
The current members of the Audit Committee are Lowell H. Lebermann, Jr.,
Chairman and R. Hal Dean. During the 1998 fiscal year, the Audit Committee met
once.
4
<PAGE>
The Audit Committee, comprised solely of outside directors, meets
periodically with the Company's independent public accountants, management and
internal auditors to discuss accounting principles, financial and accounting
controls, the scope of the annual audit, internal controls, regulatory
compliance and other matters. The Audit Committee also advises the Board of
Directors on matters related to accounting and auditing and reviews management's
selection of independent public accountants. The independent public accountants
and the internal auditors have complete access to the Audit Committee without
management present to discuss results of their audit and their opinions on
adequacy of internal controls, quality of financial reporting and other
accounting and auditing matters.
THE HUMAN RESOURCES COMMITTEE
The Human Resources Committee, currently comprised solely of outside
directors, reviews and takes action regarding terms of compensation, employment
contracts and pension matters that concern officers and key employees of the
Company. The Human Resources Committee also reviews and takes action regarding
grants of options and restricted shares to employees that are issued under the
Stock Compensation Program other than awards under the Nonemployee Directors
Plan. The Human Resources Committee met four times during the 1998 fiscal year.
COMPENSATION OF DIRECTORS
Directors who are not directly or indirectly affiliated with the Company
received a fee of $1,500 for each board meeting attended, $1,000 for each
committee meeting attended, and a monthly fee of $3,000. All directors are
reimbursed for expenses connected with attendance at meetings of the Board of
Directors. All directors are eligible to participate in the Stock Compensation
Program. See "Executive Compensation -- Stock Compensation Program" as described
hereinafter.
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal year 1998, the Human Resources Committee consisted of R. Hal Dean
and Lowell H. Lebermann, Jr., both outside directors of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors and persons who own more than 10% of the Company's Common Stock to
file reports of ownership on Forms 3, 4 and 5 with the Commission. Executive
officers, directors and 10% stockholders are required by the Commission to
furnish the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all its executive officers, directors and
greater than 10% beneficial owners complied with all the filing requirements
applicable to them with respect to transactions during fiscal 1998 other than
Mr. Warner who made his initial filing on Form 3 this year.
LEGAL PROCEEDINGS INVOLVING DIRECTORS, OFFICERS, AFFILIATES OR BENEFICIAL OWNERS
No director, officer, affiliate or beneficial owner of the Company, or any
associate thereof, is a party adverse to the Company or any of its subsidiaries
in any lawsuit nor has a material adverse interest to the Company.
5
<PAGE>
PRINCIPAL STOCKHOLDERS OF THE COMPANY
The following table sets forth, as of August 31, 1998, certain information
regarding the shares of Common Stock beneficially owned by each stockholder who
is known by the Company to beneficially own in excess of 5% of the outstanding
shares of Common Stock, by each director and named executive officer and by all
executive officers and directors as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF SHARES
-------------------------
PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER (2) CLASS
- --------------------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Frank J. Fertitta III.................................................................. 5,814,556 16.0
Blake L. Sartini(3).................................................................... 4,910,329 13.8
Lorenzo J. Fertitta.................................................................... 4,787,277 13.5
Delise F. Sartini(3)................................................................... 4,733,519 13.4
Par Capital Management, Inc (2)........................................................ 2,605,000 7.4
Glenn C. Christenson................................................................... 263,346 *
Scott M Nielson........................................................................ 222,477 *
William W. Warner...................................................................... 10,807 *
R. Hal Dean............................................................................ 44,265 *
Lowell H. Lebermann, Jr................................................................ 21,000 *
Executive Officers and Directors as a Group (8 persons)................................ 16,088,686 43.5
------------ ---
------------ ---
</TABLE>
- ------------------------
* Less than one percent
(1) Except as otherwise noted, excludes shares of Common Stock issuable upon
conversion of Convertible Preferred Stock. Of the total number of shares
reported in this table, the following are the approximate number of vested
options beneficially owned by each individual in the table: Frank J.
Fertitta III 945,615; Blake L. Sartini 191,437, Delise F. Sartini 14,627;
Lorenzo J. Fertitta 99,000; Glenn C. Christenson 213,146; Scott M Nielson
168,477; William W. Warner 0; R. Hal Dean 22,500 and Lowell H. Lebermann,
Jr. 20,000. Of the total number of shares reported in this table, 457 shares
beneficially owned by Mr. Warner are held by the Company's 401 (k) Plan.
(2) Unless otherwise indicated in the footnotes to this table and subject to the
community property laws where applicable, each of the stockholders named in
this table has sole voting and investment power with respect to the shares
shown as beneficially owned. The address of each of the stockholders named
in this table other than Par Capital Management, Inc. is: c/o Station
Casinos, Inc., 2411 West Sahara Avenue, Las Vegas, Nevada 89102. The address
of Par Capital Management, Inc. is One Financial Center, Suite 1600, Boston,
Massachusetts 02111. The filing dated September 2, 1998 for Par Capital
Management, Inc. states that it is filed by Par Capital Management, Inc.,
Par Investment Partners, L.P. and Par Group, L.P.
(3) Reflects beneficial ownership shared by Blake and Delise Sartini. Blake and
Delise Sartini do not, however, share beneficial ownership of the vested
options reflected in note (1) and thus have different total ownership
figures.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company to the Chief Executive Officer of the Company and to each of the four
most highly compensated executive officers of the Company (other than the Chief
Executive Officer) (collectively, the "Executive Officers") for services
rendered to the Company in all capacities during the fiscal years ended March
31, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS(4)
------------------------------------ -------------------------
OTHER ANNUAL SECURITIES ALL OTHER
SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($)(3) OPTIONS(#) ($)(5)
- -------------------------------------- --------- ---------- --------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frank J. Fertitta III................. 1998 1,000,000 750,000 -- 160,000 293,313
Chairman of the Board, President and 1997 999,159 375,000 -- 1,000,000 247,600
Chief Executive Officer 1996 959,423 365,000 -- 106,027 227,681
Glenn C. Christenson.................. 1998 472,885 321,000 -- 180,000 284,861
Executive Vice President, Chief 1997 449,062 135,000 -- 65,000 271,234
Financial Officer, Chief 1996 392,312 130,000 -- 174,713 110,938
Administrative Officer and Treasurer
Scott M Nielson....................... 1998 380,385 240,000 -- 130,000 155,137
Executive Vice President, General 1997 374,543 93,750 -- 40,000 154,002
Counsel and Secretary 1996 342,365 95,000 -- 145,223 100,296
Blake L. Sartini...................... 1998 446,923 312,000 -- 110,000 165,240
Executive Vice President and Chief 1997 419,159 126,000 96,990 400,000 149,448
Operating Officer 1996 367,038 115,000 73,416 39,063 77,539
William W. Warner..................... 1998 206,250 150,000 -- 100,000 8,205
Vice President of Finance(6) 1997 174,904 30,625 -- 10,000 1,154
1996 132,692 23,200 -- 10,000 705
</TABLE>
- ------------------------
(1) For the fiscal years ended March 31, 1998, 1997 and 1996, amounts include
salary deferred under the Company's Deferred Compensation Plan of $34,615,
$0 and $70,369 for Mr. Fertitta, $75,298, $50,927 and $0 for Mr.
Christenson, $25,961, $35,365 and $34,240 for Mr. Nielson and $12,596,
$6,731 and $0 for Mr. Warner (also includes amounts deferred under the
Company's Deferred Compensation Plan for Management Employees, with respect
to Mr. Warner).
(2) Each of Messrs. Fertitta, Christenson, Nielson and Sartini was entitled to a
minimum annual bonus equal to 5% of his base salary under his employment
agreement prior to amendment of such agreements as of December 22, 1997.
Amounts shown are the amounts earned for the fiscal years without
consideration as to the year of payment. For fiscal years ended March 31,
1998, 1997 and 1996 amounts include bonuses deferred under the Company
Deferred Compensation Plan of $0, $0 and $21,500 for Mr. Fertitta, $0,
$117,449 and $100,000 for Mr. Christenson, $0, $9,375 and $9,000 for Mr.
Nielson, $0, $0 and $0 for Mr. Sartini and $15,000, $0 and $0 for Mr.
Warner.
(3) For the fiscal years ended March 31, 1998, 1997 and 1996, Other Annual
Compensation did not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus reported, except for Blake L. Sartini during the fiscal
years ended March 31, 1997 and 1996. The Company provides certain
perquisites, including certain personal services, to the named executive
officers. For the fiscal years
7
<PAGE>
ended March 31, 1997 and 1996, the costs of providing these services were
approximately $83,000 and $55,000 respectively, for Mr. Sartini.
(4) As of March 31, 1998, the total number of shares of restricted stock held by
Messrs. Fertitta, Christenson, Nielson, Sartini and Warner, and the value of
such shares as of the close of trading on such date, was 30,000, 7,200,
6,000, 4,800 and 2,000, and $442,500, $106,200, $88,500, $70,800 and
$29,500, respectively.
(5) These amounts represent premiums for life and disability insurance policies
provided by the Company and the Company's matching contribution to the
Executive Officers' Deferred Compensation Plan for the Executive's account,
and for Mr. Warner, the Company's matching contributions to Mr. Warner's
401(k) and Management Employee's Deferred Compensation Plan accounts. For
the fiscal years ended 1998 and 1997 these amounts include "split dollar"
life insurance premiums for Messrs. Fertitta, Christenson, Nielson and
Sartini. The "split dollar" life insurance premiums for 1996 have been
pro-rated from August 15, 1995, the date of the contract, through March 31,
1996. The policy premiums will be returned to the Company through the cash
surrender value upon termination of the agreement or in the form of death
benefit proceeds.
(6) In September 1997, the Company replaced certain of outstanding options to
purchase Common Stock, including those of Mr. Warner. The Company replaced
27,055 of Mr. Warner's options which carried exercise prices ranging from
$12.00 to $14.625 with options carrying an exercise price of $7.50. See "--
Replacement of and Grant of Stock Options."
OPTIONS GRANTED IN FISCAL 1998
The following table provides information related to options to purchase
Common Stock granted to the Executive Officers during the fiscal year ended
March 31, 1998 and the number and value of such options held as of the end of
such fiscal year. For the last fiscal year the Company did not grant any SARs.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATE OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO OPTION FOR
OPTIONS EMPLOYEES IN EXERCISE OR OPTION TERM
GRANTED FISCAL BASE PRICE EXPIRATION ---------------------
NAME (#)(1) YEAR(3) ($/SHARE) DATE 5%($) 10%($)
- ----------------------------------- ----------- ------------- ------------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Frank J. Fertitta III.............. 160,000 8.9 7.50 9/12/2007 754,674 1,912,491
Glenn C. Christenson............... 180,000 10.0 7.50 9/12/2007 849,008 2,151,552
Scott M Nielson.................... 130,000 7.2 7.50 9/12/2007 613,172 1,553,899
Blake L. Sartini................... 110,000 6.1 7.50 9/12/2007 518,838 1,314,838
William W. Warner(2)............... 100,000 5.6 7.50 9/12/2007 471,671 1,195,307
</TABLE>
- ------------------------
(1) Executive Officers receive options pursuant to the Stock Compensation
Program described elsewhere in this Proxy Statement. The material terms of
that program related to recipients, grant timing, number of options, option
price and duration are determined by the Program Administrators (as defined
herein), subject to certain limitations.
(2) Consists of replaced options to purchase 27,055 shares of Common Stock and
the grant of options to purchase additional shares. See "-- Replacement of
and Grant of Stock Options."
(3) Including options of all employees that were replaced during the fiscal
year. See "-- Replacement of and Grant of Stock Options."
8
<PAGE>
FISCAL YEAR END OPTION VALUES
The following table provides information related to options to purchase
Common Stock held by the Executive Officers at the end of the fiscal year ended
March 31, 1998. None of the Executive Officers exercised options to purchase
Common Stock during the fiscal year ended March 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END(#) FISCAL YEAR END($)(1)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Frank J. Fertitta III..................................... 742,410 1,398,617 15,904 1,308,856
Glenn C. Christenson...................................... 134,138 285,575 294,995 1,399,190
Scott M Nielson........................................... 109,818 205,405 246,543 1,014,174
Blake L. Sartini.......................................... 137,125 564,438 13,734 861,539
William W. Warner......................................... -- 100,000 -- 725,000
</TABLE>
- ------------------------
(1) Options are "in-the-money" if, on March 31, 1998, the market price of the
Common Stock ($14.750) exceeded the exercise price of such options. The
value of such options is calculated by determining the difference between
the aggregate market price of the Common Stock covered by the options on
March 31, 1998, and the aggregate exercise price of such options.
REPLACEMENT OF AND GRANT OF STOCK OPTIONS
In September 1997, the Human Resources committee authorized the replacement
of outstanding stock options of certain of its management employees (excluding
all of the Executive Officers except Mr. Warner). Pursuant to the replacement,
options to purchase shares of Common Stock at exercise prices ranging from
$9.375 per share to $15.00 per share held by such employees were cancelled and
options to purchase an aggregate of 1,794,742 shares of Common Stock at an
exercise price of $7.50 per share (the market value on the date of such grant
and replacement) were issued and are outstanding as of March 31, 1998, in lieu
of the cancelled options and as an additional incentive to such employees. The
vesting periods and other terms of the replacement options match those of the
additional options. The Human Resources Committee believes that the replacement
and additional grant was necessary in light of competitive conditions in the
gaming industry to retain and provide incentives to key management personnel. Of
the 100,000 options Mr. Warner currently holds, 27,055 were replaced as shown in
the following table.
10-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF NUMBER OF ORIGINAL
SECURITIES SECURITIES EXERCISE OPTION TERM
UNDERLYING UNDERLYING MARKET PRICE OF PRICE AT TIME NEW REMAINING AT
DATE OF OPTIONS REPLACED STOCK AT TIME OF EXERCISE DATE OF
NAME REPLACEMENT CANCELLED OPTION OF REPLACEMENT REPLACEMENT PRICE REPLACEMENT
- ----------------------- ------------- ------------- ------------- --------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William W. Warner...... 9/12/97 7,055 7,055 $ 7.50 $ 12.000 $ 7.50 5-6 years
9/12/97 10,000 10,000 $ 7.50 $ 14.375 $ 7.50 8 years
9/12/97 10,000 10,000 $ 7.50 $ 14.625 $ 7.50 9 years
</TABLE>
9
<PAGE>
EMPLOYMENT AGREEMENTS
The Company and each of Frank J. Fertitta III, Glenn C. Christenson, Scott M
Nielson, Blake L. Sartini and William W. Warner are parties to Employment
Agreements pursuant to which Mr. Fertitta has agreed to serve as the President
and Chief Executive Officer, Mr. Christenson has agreed to serve as the
Executive Vice President, Chief Financial Officer, Chief Administrative Officer
and Treasurer, Mr. Nielson has agreed to serve as Executive Vice President,
General Counsel and Secretary of the Company, Mr. Sartini has agreed to serve as
Chief Operating Officer and Executive Vice President and Mr. Warner has agreed
to serve as Vice President of Finance, in each case through December 21, 2002
subject to automatic 5 year extensions unless the employer or employee otherwise
gives notice at least one year prior to the end of the then-current term. Each
of the Employment Agreements was amended and restated or orginally entered into
on December 22, 1997. The Employment Agreements, as amended, provide that the
Executive Officers shall devote reasonable time and attention to the business
and affairs of the Company. Mr. Fertitta's Employment Agreement does not
prohibit Mr. Fertitta from engaging in any business or assisting any other
entity in competition with the Company during the term of his employment and
does not affect continuation of his health and welfare benefits thereafter. Each
Employment Agreement provides for a base salary (to be reviewed annually for
increase but not decrease), an annual cash bonus in an amount determined by
whether the Executive Officer has met predetermined goals set by the Human
Resources Committee of the Company, and the inclusion of the Executive Officer
in all plans and programs of the Company made available to the Company's
Executive Officers or salaried employees generally, including group life
insurance, accidental death and dismemberment insurance, hospitalization,
surgical and major medical coverage, long-term disability, vacations and
holidays. The Executive Officers' annual base salaries for fiscal year 1999 are
$1,050,000 for Mr. Fertitta, $562,000 for Mr. Christenson, $414,000 for Mr.
Nielson, $546,000 for Mr. Sartini and $275,000 for Mr. Warner. The Executive
Officers are also entitled to life insurance and certain other benefits and
perquisites in addition to those made available to Company management generally.
These other benefits include participation in the Supplemental Executive
Retirement Plan in the case of Mr. Fertitta, and participation in the
Supplemental Management Retirement Plan in the case of Messrs. Christenson,
Nielson, Sartini and Warner. Additionally, each of the Executive Officers is a
participant in the Company's Special Long-Term Disability Plan. Mr. Christenson,
Mr. Nielson and Mr. Sartini also participate in the Company's Long-Term Stay-On
Performance Incentive Plan.
In the event that an Executive Officer's employment is terminated as a
result of his death or Disability (as defined in his Employment Agreement), the
Executive Officer or his legal representative will receive, among other
payments, all amounts owed the Executive Officer under his Employment Agreement
as of the date of his death or Disability, including a pro-rated bonus, and his
then-current salary for 24 months, in the case of Mr. Fertitta, or 12 months, in
the case of the other Executive Officers, or until his disability insurance
payments begin. In the event an Executive Officer's employment is terminated
without Cause (as defined in his Employment Agreement) whether before or after a
Change of Control (as defined in the Employment Agreement), other than due to
death or Disability, among other payments, the Executive Officer will receive
the amounts payable under his Employment Agreement as of the date of
termination, plus a lump sum payment equal to five times his base salary, in the
case of Mr. Fertitta, or a lump sum payment equal to three times his base
salary, in the case of the other Executive Officers, any bonus awarded but not
yet paid, any deferred bonus, expense reimbursement and continuation of his
health and welfare benefit, at the level in effect at the time of his
termination of employment through the end of the 60th month, in the case of Mr.
Fertitta, or the 36th month, in the case of the other Executive Officers,
following such termination, or the economic equivalent, in each case, as if such
Executive were employed during such period.
Immediately upon a Change of Control, each Executive Officer will receive a
payment equal to three times his base amount (as defined in Section 280G of the
Code) less one dollar. Additionally, in the event
an Executive Officer's employment is terminated following a Change of Control,
either without Cause or
10
<PAGE>
by the Executive Officer for Good Reason (as defined in the Employment
Agreement), the Executive Officer will be entitled, among other payments, to an
amount of cash equal to the greater of (x) five times an amount equal to his
annual base amount at the time of the Change of Control or (y) five times his
annual base amount at the time of termination of his employment, immediate
vesting of any restricted stock of the Company held in the Executive Officer's
name or to his benefit, immediate vesting of any stock options and/or stock
appreciation rights granted by the Company which stock options and stock
appreciation rights will continue to be and remain exercisable for the remaining
term of such stock options and stock appreciation rights as set forth in the
agreement granting, or otherwise under the award of, such stock option or stock
appreciation right as if no termination had taken place, immediate vesting and
cash-out of any phantom stock units granted to the Executive Officer, immediate
vesting and pay out of incentive share units, continuation of all employee
benefits and perquisites for a period of 60 months, in the case of Mr. Fertitta,
or 36 months, in the case of the other Executive Officers, following such
termination of employment, or the economic equivalent thereof as if such
employee were an employee of the Company during such period, immediate vesting
of the Executive Officer's supplemental retirement benefit as set forth in the
Supplemental Executive Retirement Plan, in the case of Mr. Fertitta, and the
Supplemental Management Retirement Plan, in the case of the other Executives,
continued funding of the Executive Officer's split dollar insurance as if the
Executive Officer were employed by the Company through the maturity date of such
policies or payment in full of all premium obligations under such insurance,
immediate cash-out, in the case of all Executive Officers other than Mr.
Fertitta and Mr. Warner, of the Company's Long-Term Stay-On Performance Plan
and, in the case of Mr. Fertitta, an additional amount, grossed up for taxes,
equal to the positive difference, if any, of $20 million minus a tax-adjusted
amount received under the other provisions noted above.
If any payment or benefit paid or payable, or received or to be received, by
or on behalf of the Executive Officer in connection with a Change of Control or
the termination of the Executive Officer's employment, will or would be subject
to the excise tax imposed by Section 4999 of the Code, the Company will pay the
Executive Officer an additional amount such that, after payment by the Executive
of all taxes, the Executive retains an amount of such additional payment equal
to the excise tax imposed on such payments and benefits paid or payable or
received or to be received.
STOCK COMPENSATION PROGRAM
The Company has adopted the Stock Compensation Program which includes: (i)
an Incentive Stock Option Plan providing for the grant of incentive stock
options, (ii) a Compensatory Stock Option Plan providing for the grant of
nonqualified stock options, (iii) a Restricted Shares Plan providing for the
grant of restricted shares of Common Stock and (iv) a Nonemployee Directors
Stock Option Plan under which directors who are not employees of the Company are
granted nonqualified stock options. Officers, key employees, directors (whether
employees or non-employees) and independent contractors or consultants of the
Company or its Subsidiaries are eligible to participate in the Compensatory
Stock Option Plan and the Restricted Shares Plan. Only employees of the Company
and its Subsidiaries, however, are eligible to participate in the Incentive
Stock Option Plan. Only non-employee directors are eligible to participate in
the Nonemployee Directors Stock Option Plan.
The Stock Compensation Program is administered by a committee of at least
two non-employee directors (as defined in Rule 16b-3 of the Exchange Act (the
"Program Administrators")) appointed by the Board of Directors. Subject to the
provisions of the Stock Compensation Program, the Program Administrators have
sole authority, in their absolute discretion to determine, except with regard to
awards under the Nonemployee Directors Plan: (a) the individuals to whom options
and restricted shares shall be granted under the Program; (b) the time or times
at which the options and restricted shares may be granted under the Program; (c)
the number of shares subject to each option and restricted share, the option
price and the duration of each option granted under the Program; and (d) all of
the other terms and conditions of options and restricted shares granted under
the Stock Compensation Program.
11
<PAGE>
Under the Nonemployee Directors Plan, each nonemployee director receives
options to acquire shares of Common Stock pursuant to the following formula: (a)
10,000 shares of Common Stock upon the effective date of his or her initial
appointment to serve as a member of the Board of Directors and (b) an additional
2,500 shares of Common Stock upon each anniversary of such date if the
nonemployee director is a member of the Board of Directors on such anniversary.
The options are exercisable immediately and will expire on the tenth anniversary
of the grant. The exercise price of the options is the fair market value of the
shares at the time of the grant of the option.
A maximum of 6,307,000 shares of Common Stock have been reserved for
issuance under the Stock Compensation Program. As of March 31, 1998, options to
purchase an aggregate of 5,067,452 shares of Common Stock under the Program were
outstanding, 1,485,971 of which were exercisable as of such date. The Stock
Compensation Program will terminate on May 21, 2003, unless terminated earlier
by the Board of Directors, and no options or restricted shares may be granted
under the Stock Compensation Program after such date.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences applicable to the Stock Compensation Program. The summary does not
reflect any provisions of the income tax laws of any state or local taxing
jurisdiction. Because the tax consequences of events and transactions under the
Stock Compensation Program depend upon various factors, including an employee's
own tax status, each employee who receives a grant or award under the Stock
Compensation Program should consult his or her own tax advisor with respect
thereto.
INCENTIVE STOCK OPTIONS
Upon the grant of an incentive stock option, an optionee will not recognize
any income. No income will be recognized by an optionee upon the exercise of an
incentive stock option if the requirements of the Stock Compensation Program and
the Code are met, including, without limitation, the requirement that the
optionee remain an employee of the Company during the period beginning on the
date of the grant of the incentive stock option and ending on the day three
months (up to one year in the discretion of the Program Administrators if the
optionee becomes disabled) before the date the incentive stock option is
exercised.
The federal income tax consequences of a subsequent disposition of shares of
Common Stock acquired upon the exercise of an incentive stock option will depend
upon when the disposition occurs and the type of disposition.
If such shares are disposed of by the optionee more than two years after the
date of grant of the incentive stock option, and more than one year after such
shares are transferred to the optionee, any gain or loss realized upon such
disposition will be characterized as long-term capital gain or loss, and the
Company will not be entitled to any income tax deduction in respect of the
incentive stock option or its exercise.
If such shares are disposed of by the optionee within two years after the
date of grant of the incentive stock option, or within one year after such
shares are transferred to the optionee (a "disqualifying disposition") and the
disqualifying disposition is a taxable disposition, the excess, if any, of the
amount realized (up to the fair market value of such shares on the exercise
date) over the option price will be compensation taxable to the optionee as
ordinary income, and the Company will be entitled to a deduction (subject to the
provisions of Section 162 (m) of the Code) equal to the amount of ordinary
income recognized by the optionee. If the amount realized by the optionee upon
such disqualifying disposition exceeds the fair market value of such shares on
the exercise date, the excess will be characterized as short-term capital gain.
If the option price exceeds the amount realized upon such disqualifying
disposition, the difference will be characterized as short-term capital loss.
12
<PAGE>
If the disqualifying disposition is a non-taxable disposition (for example,
a gift or a sale to a related person), the excess, if any, of the fair market
value of such shares on the exercise date over the option price will be
compensation taxable as ordinary income, and the Company will a be entitled to a
deduction (subject to the provisions of Section 162 (m) of the Code) equal to
the amount of ordinary income recognized by the optionee.
If an optionee has not remained an employee of the Company during the period
beginning on the date of the grant of an incentive stock option and ending on
the day three months (up to one year in the discretion of the Program
Administrators if the optionee becomes disabled) before the date the incentive
stock option is exercised, the exercise of such option will be treated as the
exercise of a non-qualified stock option with the tax consequences described
below.
NON-QUALIFIED STOCK OPTIONS
Upon the grant of a non-qualified stock option, an optionee will not
recognize any income. At the time a non-qualified stock option is exercised, the
optionee will recognize compensation taxable as ordinary income, and the Company
will be entitled to a deduction (subject to the provisions of Section 162(m) of
the Code) in an amount equal to the difference between the fair market value on
the exercise date of the shares of Common Stock acquired pursuant to such
exercise and the option price. Upon a subsequent disposition of such shares, the
optionee will realize long-term or short-term capital gain or loss, depending on
the holding period of such shares. For purposes of determining the amount of
such gain or loss, the optionee's tax basis in such shares will be the sum of
the option price and the amount of ordinary income recognized upon exercise. In
order for any such gain or loss to qualify as long-term capital gain or loss,
the shares must be held for more than one year measured from the exercise date.
EFFECT OF SHARE FOR SHARE EXERCISE
If an optionee elects to tender shares of Common Stock in partial or full
payment of the option price for shares to be acquired upon the exercise of a
non-qualified stock option, the optionee will not recognize any gain or loss on
such tendered shares. The number of shares of Common Stock received by the
optionee upon any such exercise that are equal in number to the number of
tendered shares would retain the tax basis and the holding period of the
tendered shares for capital gain or loss purposes. The optionee will recognize
compensation taxable as ordinary income, and the Company will be entitled to a
deduction (subject to the provisions of Section 162 (m) of the Code), in an
amount equal to the fair market value of the number of shares received by the
optionee upon such exercise that is in excess of the number of tendered shares,
less any cash paid by the optionee. The fair market value of such excess number
of shares would then become the tax basis for those shares and the holding
period of such shares for capital gain or loss purposes will begin on the
exercise date. If the tendered shares were previously acquired upon the exercise
of an incentive stock option, the shares of Common Stock received by the
optionee upon the exercise of the non-qualified stock option that are equal in
number to the number of tendered shares will be treated as shares of Common
Stock acquired upon the exercise of such incentive stock option.
Except as discussed in the following paragraph, if an optionee elects to
tender shares of Common Stock in partial or full payment of the option price for
shares to be acquired upon the exercise of an incentive stock option, the
optionee will not recognize any gain or loss on such tendered shares. No income
will be recognized by the optionee in respect of the shares received by the
optionee upon the exercise of the incentive stock option if, as previously
stated, the requirements of the Stock Compensation Program and the Code are met.
The IRS has not yet issued final regulations with respect to a determination of
the basis and the holding period of the shares acquired upon such an exercise.
Regulations proposed by the IRS provide that for all shares of Common Stock
acquired upon such an exercise, the requisite two year and one year holding
periods for stock acquired upon exercise of an incentive stock option (described
above) must be satisfied, regardless of the holding period applicable to the
tendered shares. The tax basis (and holding period for all other federal income
tax purposes) of the tendered shares, however, will carry
13
<PAGE>
over to the same number of shares acquired upon the exercise. The number of
shares acquired which is in excess of the number of tendered shares will have a
tax basis of zero and a holding period for all purposes beginning on the date of
exercise. Any subsequent disqualifying disposition will be deemed first to have
been a disposition of the shares with a tax basis of zero, and then to have been
a disposition of the shares with a carry over tax basis. For purposes of
determining the amount of compensation taxable to the optionee upon a subsequent
disqualifying disposition, the option price of the shares with a tax basis of
zero will be deemed to be zero, and the option price of the shares with a carry
over basis will be deemed to be the fair market value of the shares on the
exercise date.
If an optionee elects to tender shares of Common Stock that were previously
acquired upon the exercise of an incentive stock option in partial or full
payment of the option price for shares to be acquired upon the exercise of
another incentive stock option, and such exercise occurs within two years of the
date of grant of such incentive stock option, or within one year after such
tendered shares were transferred to the optionee, the tender of such shares will
be a taxable disqualifying disposition with the tax consequences described above
regarding the disposition within two years of the date of grant of an incentive
stock option, or within one year after shares were acquired upon the exercise of
incentive stock options. The shares of Common Stock acquired upon such exercise
will be treated as shares of Common Stock acquired upon the exercise of an
incentive stock option and the holding period of such shares for all purposes
will begin on the exercise date.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Table I below sets forth the total benefits payable to the Chief Executive
Officer as the sole participant in the Supplemental Executive Retirement Plan
(the "SERP"). Amounts shown in Table 1 represent the annual benefits to which
the Chief Executive Officer is entitled under the SERP.
TABLE I*
<TABLE>
<CAPTION>
10 OR MORE
YEARS OF
REMUNERATION($) SERVICE
- ------------------------------------------------------------------------------ --------------
<S> <C>
1,000,000..................................................................... 500,000
1,025,000..................................................................... 512,500
1,075,000..................................................................... 537,500
1,100,000..................................................................... 550,000
1,125,000..................................................................... 562,500
1,150,000..................................................................... 575,000
1,175,000..................................................................... 587,500
</TABLE>
- ------------------------
* Assumes normal retirement
The SERP, which went into effect on November 30, 1994, is a defined benefit
plan that covers only the Chief Executive Officer of the Company. The SERP
provides a monthly supplemental retirement benefit (the "SERP SRB"), in addition
to any other qualified or non-qualified retirement plan of the Company, equal to
one-twelfth of the product of (a) 50% and (b) the Chief Executive Officer's
final annual compensation, as determined under the SERP. Amounts shown in Table
I represent the annual benefits to which the Chief Executive Officer is entitled
under the SERP, reduced by monthly benefits payable under all qualified and
non-qualified defined benefit retirement plans of the Company. The amounts
listed in Table I are not currently subject to any deductions for social
security because the Company currently has no other defined benefit plans. The
Chief Executive Officer will become vested in accrued SERP SRBs, upon the latter
of (a) the attainment of age 45 and (b) the completion of ten years of service
after the effective date of the plan, or, if a Change of Control (as defined in
the SERP) occurs, the Chief Executive Officer will become fully vested in the
SERP SRB.
14
<PAGE>
The SERP SRB is payable upon the later of the date on which the Chief
Executive Officer attains age 55 or the Chief Executive Officer's termination of
employment. Alternatively, the Chief Executive Officer may elect to commence
receiving the SERP SRB upon the later of the date on which the Chief Executive
Officer attains age 45 or the Chief Executive Officer's termination of
employment. In the event of such an early retirement election, the SERP SRB
shall be reduced by 6% of such otherwise payable benefit for each year that the
Chief Executive Officer is less than age 55.
The SERP SRB payments will be made for no less than 15 years after the date
on which the Chief Executive Officer begins to receive payments. If the Chief
Executive Officer dies after the Chief Executive Officer becomes vested and
prior to the date on which the Chief Executive Officer begins to receive SERP
SRB payments, the Company will pay a survivors benefit to the Chief Executive
Officer's spouse equal to the amount that would have been payable to such spouse
if the Chief Executive Officer had commenced receiving the SERP SRB at age 55 in
the form of a joint and 50% survivor annuity. The Company has no duty to set
aside or invest any amounts under or in respect of the SERP. As of September 1,
1998, Frank J. Fertitta III has four years of credited service under the SERP.
SUPPLEMENTAL MANAGEMENT RETIREMENT PLAN
Table II below sets forth the total benefits payable to Executive Officers,
other than the Chief Executive Officer, selected by the Human Resources
Committee of the Board of Directors to participate in the Company's Supplemental
Management Retirement Plan (the "SMRP"). Amounts shown in Table II represent the
annual benefits to which the covered Executive Officers are entitled under the
SMRP.
TABLE II*
<TABLE>
<CAPTION>
10 OR MORE
YEARS OF
REMUNERATION($) SERVICE
- ------------------------------------------------------------------------------ --------------
<S> <C>
200,000....................................................................... 80,000
250,000....................................................................... 100,000
300,000....................................................................... 120,000
350,000....................................................................... 140,000
400,000....................................................................... 160,000
450,000....................................................................... 180,000
500,000....................................................................... 200,000
550,000....................................................................... 220,000
600,000....................................................................... 240,000
</TABLE>
- ------------------------
* Assumes normal retirement
The SMRP, which went into effect on November 30, 1994, is a defined benefit
plan for the Executive Officers, other than the Chief Executive Officer,
selected by the Human Resources Committee of the Board of Directors. The SMRP
provides a monthly supplemental retirement benefit (the "SMRP SRB"), in addition
to any other qualified or non-qualified retirement plan of the Company, equal to
one-twelfth of the product of (a) 40% and (b) the Executive Officer's final
annual compensation, as determined under the SMRP, reduced by monthly benefits
payable under all qualified and non-qualified defined benefit retirement plans
of the Company. The amounts shown in Table II are not currently subject to any
deductions for social security or other offset amounts because the Company
currently has no other defined benefit plans. The Executive Officer will become
vested in the accrued SMRP SRBs, upon the latter of (a) the attainment of age 55
and (b) the completion of ten years of service after the effective date of the
plan, or, if a Change of Control (as defined in the SMRP) occurs, the Executive
Officer will become fully vested in the SMRP SRB.
15
<PAGE>
The SMRP SRB is payable upon the later of the date on which the Executive
Officer attains age 60 or the Executive Officer's termination of employment.
Alternatively, the Executive Officer may elect to commence receiving the SMRP
SRB upon the later of the date on which the Executive Officer attains age 55 or
the Executive Officer's termination of employment. In the event of such an early
retirement election, the SMRP SRB shall be reduced by 6% of such otherwise
payable benefit for each year that the Executive Officer is less than age 60.
The SMRP SRB payments will be made for no less than 15 years after the date
on which the Executive Officer begins to receive payments. If the Executive
Officer dies after becoming vested and prior to the date on which the Executive
Officer begins to receive SMRP SRB payments, the Company will pay a survivor's
benefit to the Executive Officer's spouse equal to the amount that would have
been payable to such spouse if the Executive Officer had commenced receiving the
SMRP SRB at age 60 in the form of a joint and 50% survivor annuity. The Company
has no duty whatsoever to set aside or invest any amounts under or in respect to
the SMRP. As of September 1, 1998, Messrs. Glenn C. Christenson, Scott M Nielson
and Blake L. Sartini have four years of service credited under the SMRP and
William W. Warner has two years of credited service.
DEFERRED COMPENSATION PLAN FOR EXECUTIVES
The Deferred Compensation Plan For Executives (the "DCPE"), in effect as of
November 30, 1994, is a deferred compensation plan for Executive Officers whose
base salaries are at a rate in excess of the amount specified in Section
401(a)(17) of the Code, and who are selected for participation by the Human
Resources Committee of the Board of Directors. Executive Officers may defer up
to 50% of their regular base salary and 100% of any special and/or discretionary
bonuses. The Company has agreed to match 100% of the first 10% of any base
salary and bonus deferred under the plan, pursuant to retroactive modifications
of the DCPE adopted by the Company on March 15, 1996. Additionally, the Company
may, in its sole discretion, credit supplemental contributions to an Executive
Officer's account. Earnings on deferrals are required to equal the greater of
(i) the annual return on Common Stock or (ii) an instrument paying 4% interest
per annum. Each participant's deferred compensation account will be adjusted at
the end of the plan year to reflect earnings and the account balance will be
reinvested for the next plan year. An Executive Officer's accrued balance in a
deferred compensation account will be fully vested at all times. The accrued
balance in an Executive Officer's matching and supplemental contributions
account will vest 20% each year and will be fully vested after five years of
continuous service. If a Change in Control (as defined in the DCPE) occurs, the
Executive Officer's accrued balance in the Matching Contributions Account and
the Supplemental Contributions Account (both as defined in the DCPE) become
fully vested as of the date of any such Change in Control. Vested accrued
balances shall be paid in cash in one lump sum payment within 15 days of the
termination of employment. If the Executive Officer is terminated for any reason
(other than death) prior to completion of five years of continuous service, any
accrued balance existing under the matching and supplemental accounts shall be
paid in cash. Hardship distributions are permitted under the plan in the event
of an unforeseeable emergency, and will be limited to the amount shown to be
necessary to meet the emergency.
SPECIAL LONG-TERM DISABILITY PLAN
The Special Long-Term Disability Plan provides disability benefits equal to
a combined monthly benefit amount of 66% of the average of base salary plus
bonus for the two plan years immediately preceding (but not including) the plan
year in which the participant's employment is terminated due to disability
divided by twelve; provided, however, that the monthly benefit will be reduced
by any benefit the participant receives from all other disability plans
sponsored by the Company, if any. Benefits begin on the first day of the second
month succeeding the month in which the participant's termination of employment
due to disability occurs. Individuals eligible to participate in the plan
consist of the Executive Officers as chosen by the Human Resources Committee of
the Board of Directors from key executives nominated by the Chief Executive
Officer. The Human Resources Committee may, in its sole discretion, terminate
the
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participation of any participant prior to the disability of such participant.
Each of the Executive Officers is a participant in this plan. The Company is
currently self-insured as to these long-term disability benefits.
LONG-TERM STAY-ON PERFORMANCE INCENTIVE PLAN
The Long-Term Stay-On Performance Incentive Plan, as amended as of June 19,
1997, will pay $1,000,000 to each of Messrs. Christenson, Nielson and Sartini
for continuous employment by all three Executive Officers through March 31,
2001. Failure by any such Executive Officer, for any reason, to complete the
length of service specified will result in the forfeiture of such Executive
Officers' award and will reduce each of the remaining two Executive Officers'
awards by 25%. The award will be issued on April 1, 2001 in shares of Common
Stock, valued at the award date, if available, or otherwise in cash. The award
will be restricted from April 1, 2001 through April 1, 2004 (the "Restriction
Period"). Each Executive Officer must continue in employment during the
Restriction Period to receive the full amount of his award. The award becomes
unrestricted as follows: (1) 50% of the total number of shares on April 1, 2003
and (2) 50% of the total number of shares on April 1, 2004. Termination of
employment, for any reason during the Restriction Period, will result in
forfeiture of any remaining restricted shares of the Company.
SPLIT-DOLLAR INSURANCE PROGRAM
In August 1995, split-dollar life insurance agreements were entered into for
the Chief Executive Officer and the Executive Officers other than Mr. Warner for
whom a policy was entered into in April 1998. Under the terms of the policies,
the Company will pay the premiums for such life insurance policies and the
Company will have an interest in the insurance benefits equal to the amount of
unreimbursed premiums it has paid, with the balance payable to the beneficiary
as named by the Executive Officer. The face value of each Executive Officer's
individual policy and second-to-die policy is as follows: $10 million and $30
million for Mr. Fertitta, $7 million and $0 for Mr. Christenson, $7 million and
$0 for Mr. Nielson, $5 million and $10 million for Mr. Sartini and $3.5 million
and $0 for Mr. Warner.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles eliminate liability of its directors and officers for damages
for breach of fiduciary duty as directors and officers, except to the extent
otherwise required by the NRS and in cases in which the breach involves
intentional misconduct, fraud or a knowing violation of the law.
Sections 78.7502 and 78.751 of Chapter 78 of the NRS and the Bylaws contain
provisions for indemnification of officers and directors of the Company and, in
certain cases, employees and other persons. The Bylaws require the Company to
indemnify such persons to the full extent permitted by Nevada law. Each such
person will be indemnified in any proceeding if such person acted in good faith
and in a manner which such person reasonably believed to be in, or not opposed
to, the best interest of the Company and, with respect to any criminal action,
had no reasonable cause to believe was unlawful. Indemnification would cover
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement.
Section 78.752 of Chapter 78 of the NRS and the Bylaws also provide that the
Board of Directors may cause the Company to purchase and maintain insurance on
behalf of any present or past director or officer insuring against any liability
asserted against such person incurred in the capacity of director or officer or
arising out of such status, whether or not the Company would have the power to
indemnify such person. The Company maintains directors' and officers' liability
insurance.
The Company has entered into indemnification agreements (the
"Indemnification Agreements") with each director and certain officers, employees
and agents of the Company. Each Indemnification Agreement provides for, among
other things: (i) indemnification to the fullest extent permitted by law for an
indemnified party (the "Indemnitee") unless it is determined, as provided in the
Indemnification Agreement, that indemnification is not permitted under law; and
(ii) prompt advancement of expenses to any Indemnitee in connection with his or
her defense against any claim.
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<PAGE>
REPORT ON EXECUTIVE COMPENSATION
This report is provided by the Human Resources Committee of the Board of
Directors to assist stockholders in understanding the Company's objectives and
procedures in establishing the compensation of the Company's Chief Executive
Officer and other executive officers. The Human Resources Committee is
responsible for (i) reviewing and approving all elements of the total
compensation program for the Company, (ii) aligning the total compensation
program with the Company's business strategy and (iii) assuring stockholders
that the pay delivery programs are effective, responsible, and competitive when
compared to similarly situated organizations.
EXECUTIVE COMPENSATION PROGRAM PHILOSOPHY AND OBJECTIVES.(1)
The Human Resources Committee's primary objectives in setting compensation
policies are to develop a program designed to retain the current management
team, reward them for outstanding performance, and attract those individuals
needed to implement its strategy. The Human Resources Committee set compensation
policies to account for continued significant growth and to retain highly
talented, motivated individuals with a long-term vision for the Company. The
Human Resources Committee also sought to align the financial interest of the
Company's executives with that of its stockholders. The Human Resources
Committee believes to achieve this goal a significant portion of the Company's
executives' compensation should be "at risk" and tied to the achievement of
annual and long-term corporate performance criteria. The Human Resources
Committee retained an outside consultant to assist with the design,
implementation and communication of its compensation program.
BASE SALARY
Base salaries are reviewed annually and may be adjusted (for increase but
not decrease) based on an evaluation of the executive's performance in
conjunction with a review of compensation normally received by other individuals
holding similar positions at other organizations with similar revenues and scope
of business. For fiscal year 1998 the Human Resources Committee identified a
group of fifteen similar casino and gaming companies that it believes are the
Company's competition for executive level employees. Due to the limited
availability of information, the group of fifteen similar casino and gaming
companies identified by the Human Resources Committee is a different group of
companies from that used to create the stock performance graph. As part of its
strategy to attract and retain high quality executive employees, the Human
Resources Committee has established a policy to pay executive base salaries
between the 50th and 75th percentile of the range of the base salaries paid by
the fifteen similar casino and gaming companies. Actual salaries are determined
based upon an assessment of the individual's contribution and value to the
organization and the competitive market for that position as reflected by the
base salaries paid by the fifteen similar casino and gaming companies.
ANNUAL INCENTIVES
The Human Resources Committee also sets executive compensation in a manner
designed to make it dependent upon the performance of the Company. To create
incentives for superior performance and to allow executives to share in the
success of the Company, the Human Resources Committee has made a portion of an
executive's compensation dependent upon the annual and long-term performance of
the Company.
Annual incentive awards for fiscal year 1998 performance were based upon the
Company's performance and assessments of the individual executive's contribution
to the success of the Company during fiscal
- ------------------------
(1) Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act or the Exchange Act,
the Report on Executive Compensation shall not be incorporated by reference
in any such filings.
18
<PAGE>
year 1998. The Human Resources Committee targeted total cash compensation paid
to the Company's executives to be between the 50th and 75th percentile of that
paid by its competitors for executive level employees. Actual annual incentive
payouts were adjusted for the Company's performance and the individual's
contribution during the performance period.
Executives participate in an annual incentive plan administered by the Human
Resources Committee that was implemented on April 1, 1994. This plan makes a
portion of the participant's compensation dependent upon the annual performance
of the Company and also has a component to reward the individual for superior
performance in the event targets are not met, but the individual's performance
has been exemplary. The purpose of this plan is to focus each executive on the
attainment of financial objectives that the Human Resources Committee believes
are primary determinants of the Company's share price over time. Each year,
specific cash flow and earnings per share goals are approved by the Human
Resources Committee under the plan. To ensure that the award amounts under the
plan are competitive, target award amounts are set at the beginning of each
performance period for each executive based upon the 50th percentile of
comparable award amounts paid by the Company's competitors for executive
employees. The amount of the target award is determined by comparison of actual
cash flow and earnings per share versus the goal cash flow and earnings per
share. The actual award amount may vary from zero to one and a half times the
targeted award amount. The Human Resources Committee has retained discretion to
change the actual award by up to 50% of the executive's target, positively or
negatively, based on individual performance.
LONG-TERM INCENTIVES
The Company has provided stock-based incentives to its officers since its
inception. The Human Resources Committee attempts to give the Company's
executives a stake in the long-term success of the business, and to pay a
considerable portion of the Company's executives total compensation in stock, to
give the executive a long-term stake in the business and to align the
executive's interests with those of the Company's stockholders. These grants of
stock options and restricted stock align the executive's interests with the
stockholder's interests as the size of the executive's reward is dependent on
the Company's stock performance. Grants made to the Company's executives
approximate the 75th percentile of expected grant values for those companies
that the Human Resources Committee has identified as the Company's competition
for executive level employees, with the value of any awards estimated using the
Black-Scholes valuation model. Awards have generally been granted with a vesting
schedule of 20% of the award each anniversary from the date of grant until fully
vested.
OTHER EXECUTIVE PROGRAMS
The Company also maintains certain executive benefits and perquisites that
are considered necessary to offer fully competitive opportunities to its
executives. These include, but are not limited to, supplemental retirement
arrangements, employment agreements, and change in control contracts. The
details of these programs are explained under the "Executive Compensation"
section of this proxy statement.
1998 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
The same philosophies described above for each executive position were used
by the Human Resources Committee to determine the compensation for the Chairman
of the Board, President, and Chief Executive Officer, Mr. Frank J. Fertitta III.
THE CHIEF EXECUTIVE OFFICER'S 1998 BASE SALARY
The Human Resources Committee established Mr. Fertitta's annual base salary
for fiscal year 1998 based upon a review of compensation by those fifteen casino
and gaming companies identified as having similar revenues and scope of
operations together with an evaluation of the Company's results in fiscal
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<PAGE>
year 1997. Although the survey data for fiscal year 1998 showed an increase in
base salary, Mr. Fertitta's base salary was not adjusted for fiscal year 1998.
His base salary remained at $1,000,000.
THE CHIEF EXECUTIVE OFFICER'S 1998 ANNUAL INCENTIVE
The annual incentive earned by the Chief Executive Officer for fiscal year
1998 performance was $750,000. This annual incentive award reflects the
Company's performance and the Chief Executive Officer's individual contribution
to the Company as evaluated by the Human Resources Committee for the year.
CERTAIN EXECUTIVE OFFICERS' 1998 LONG-TERM INCENTIVES
The committee granted options to Messrs. Fertitta and Sartini in fiscal year
1997 with the expectation that long-term incentives would not be granted during
fiscal year 1998.
LIMITATION OF TAX DEDUCTION FOR EXECUTIVE COMPENSATION
The Omnibus Budget Reconciliation Act of 1993 prevents publicly traded
companies from receiving a tax deduction on compensation paid to proxy-named
executive officers in excess of $1 million annually, effective for compensation
paid after 1993. The Human Resources Committee believes that there will be
little if any impact from this limitation to the Company in fiscal year 1998 due
to various exceptions to the $1 million limitation.
The Human Resources Committee believes that the Company's other compensation
programs which will result in amounts of compensation in fiscal year 1998 will
either qualify for exceptions to the $1 million limit or that in the aggregate
such amounts of compensation will not significantly exceed $1 million for each
executive.
Respectfully Submitted,
Station Casinos, Inc.
Human Resources Committee
R. Hal Dean, Chairman
Lowell H. Lebermann, Jr.
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<PAGE>
STOCK PERFORMANCE GRAPH(2)
The graph below compares the cumulative total stockholder return of the
Company, with the cumulative total return of the Standard & Poor's 500 Stock
Index ("S&P 500") and the cumulative total return of a peer group with
comparable market capitalization consisting of Ameristar Casinos Inc., Argosy
Gaming Corp., Aztar Corp., Boomtown, Inc., Boyd Gaming Corp., Casino America,
Inc., Casino Magic Corp., Circus Circus Enterprises, Grand Casinos, Inc.,
Hollywood Casino Corp., Jackpot Enterprises, Inc., President Casinos, Inc.,
Primadonna Resorts, Inc., Rio Hotel & Casino, Inc. and Showboat, Inc. The
performance graph assumes that $100 was invested on May 25, 1993 (the date of
the Company's initial public offering) in each of the Common Stock, common stock
of the selected peer group, and the S&P 500. The stock price performance shown
in this graph is neither necessarily indicative of nor intended to suggest
future stock price performance.
COMPARISON OF 58 MONTH CUMULATIVE TOTAL RETURN(*)
AMONG STATION CASINOS, INC., THE S&P 500 INDEX AND A PEER GROUP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STATION CASINOS INC. PEER GROUP S & P 500
<S> <C> <C> <C>
5/93 $100 $100 $100
3/94 87 80 102
3/95 58 66 117
3/96 58 65 155
3/97 41 46 186
3/98 74 49 275
</TABLE>
- ------------------------
* $100 INVESTED ON 5/25/93 IN STOCK OR INDEX. INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING MARCH 31.
(2) Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act or the Exchange Act,
this Performance Graph shall not be incorporated by reference in any such
filings.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
BOULDER STATION LEASE
Boulder Station is situated on 45 acres located on the east side of Las
Vegas, Nevada. The Company owns 18 acres and leases the remaining 27 acres from
a trust pursuant to a long-term ground lease. The trustee of such trust is Bank
of America NT&SA and the beneficiary is KB Enterprises, an affiliated company
owned by Frank J. Fertitta, Jr. and Victoria K. Fertitta (the "Related Lessor"),
the parents of Frank J. Fertitta III, Chairman of the Board and Chief Executive
Officer of the Company. The lease has a maximum term of 65 years, ending in June
2058. The lease provides for monthly payments of $125,000 until June 1998. In
July 1998, and every ten years thereafter, the rent will be adjusted by a cost
of living factor. In July 2003, and every ten years thereafter, the rent will be
adjusted to the product of the fair market value of the land and the greater of
(i) the then-prevailing annual rate of return for comparably situated property
or (ii) 8% per year. In no event will the rent for any period be less than the
immediately preceding period. Pursuant to the ground lease, the Company has an
option, exercisable at five-year intervals beginning in June 1998, to purchase
the land at fair market value. Boulder Station did not exercise its June 1998
option. The Company believes that the terms of the ground lease are as fair to
the Company as could be obtained from an independent third party.
TEXAS STATION LEASE
Texas Station is situated on 47 acres located in North Las Vegas, Nevada.
The Company leases the land from a trust pursuant to a long-term ground lease.
The trustee of such trust is Bank of America NT&SA and the beneficiary is Texas
Gambling Hall & Hotel, an affiliate company of the Related Lessor. The lease has
a maximum term of 65 years, ending in May 2060. The lease provides for monthly
rental payments of $150,000 until July 2000. In July 2000, and every ten years
thereafter, the rent will be adjusted to the product of the fair market value of
the land and the greater of (i) the then-prevailing annual rate of return being
realized by owners of comparable land in Clark County or (ii) 8% per year. The
rent will be further adjusted by a cost of living factor after the first ten
years and every ten years thereafter. In no event will the rent for any period
be less than the immediately preceding period. Pursuant to the ground lease, the
Company has an option, exercisable at five-year intervals beginning in May 2000,
to purchase the land at fair market value. Pursuant to the ground lease, the
lessor will have a right to put the land to the Company, exercisable no later
than one year after the first to occur of (a) a change of control (as defined in
the lease), or (b) delivery of written notice that such a change of control is
anticipated, at a purchase price equal to fair market value as determined by
negotiation. The Company believes that the terms of the ground lease are as fair
to the Company as could be obtained from an independent third party.
MCNABB/MCNABB/DESOTO/SALTER & CO.
The Company formerly employed McNabb/McNabb/DeSoto/Salter & Co. ("MMDS") to
provide advertising and marketing research services. Frank J. Fertitta III,
Blake L. and Delise F. Sartini and Lorenzo J. Fertitta collectively owned a 50%
interest in MMDS. In April 1997, the Company purchased the assets of MMDS for
approximately $800,000. The Company believes that the terms of the transactions
with MMDS were as fair to the Company as could have been obtained from an
independent third party.
GORDON BIERSCH BREWING COMPANY
The Company owns a 50% interest in Town Center Amusements, Inc., a Limited
Liability Company, a Nevada limited liability company, doing business as
Barley's Casino & Brewing Company ("Barley's"), which operates a casino and brew
pub located in southeast Las Vegas. Barley's commenced operations in January
1996. Barley's has entered into a consulting agreement with Gordon Biersch
Brewing Company ("Gordon Biersch"). Frank J. Fertitta III, Blake L. and Delise
F. Sartini and Lorenzo J. Fertitta collectively own a 15.7% interest in Gordon
Biersch. The Frank J. Fertitta and Victoria K. Fertitta Revocable Family
22
<PAGE>
Trust dated June 17, 1989 (the "Fertitta Trust") owns another 21.0% interest and
trusts for the children of the above named individuals collectively own a 7.9%
interest in Gordon Biersch. The consulting agreement requires Barley's to pay
Gordon Biersch $25 for each barrel of beer brewed, and to reimburse Gordon
Biersch for the brewer's salary and other related costs. Barley's paid Gordon
Biersch approximately $62,000 during the fiscal year ended March 31, 1998. In
addition Gordon Biersch was a tenant at Sunset Station until March 1998. Gordon
Biersch paid monthly rental amounts of $13,395 under the lease at Sunset
Station.
ITEM II
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Arthur Andersen L.L.P. ("AA") to serve
as the Company's independent public accountants to audit the financial
statements of the Company for the 1999 fiscal year. AA has served as the
Company's independent public accountants since fiscal year 1991. A
representative of AA will attend the Annual Meeting and will be given an
opportunity to make a statement and will be available to answer appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS, ON THE ADVICE OF ITS AUDIT COMMITTEE,
THAT THE STOCKHOLDERS VOTE FOR RATIFICATION OF THE APPOINTMENT OF ARTHUR
ANDERSEN L.L.P. AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL 1999.
Unless a contrary indication is made on the enclosed proxy card, it is the
intention of the persons named therein to vote FOR the selected accountants.
OTHER MATTERS
The Board of Directors is not aware of any other matters to be presented at
the Annual Meeting. If any other matters should properly come before the Annual
Meeting, the persons named in the proxy will vote the proxies according to their
best judgment.
STOCKHOLDER PROPOSALS
Stockholder proposals, if any, that may be considered for inclusion in the
Company's proxy materials for the 1999 Annual Meeting must be received by the
Company at its offices at 2411 West Sahara Avenue, Las Vegas, Nevada 89102 not
later than May 25, 1999.
23
<PAGE>
TO BE COMPLETED BY HOLDERS OF STATION COMMON STOCK, PAR VALUE $0.01 PER SHARE
STATION CASINOS, INC.
2411 WEST SAHARA AVENUE, LAS VEGAS, NEVADA 89102
The undersigned hereby appoints FRANK J. FERTITTA III and SCOTT M NIELSON,
and each of them, proxies each with full power of substitution, to vote all
stock of the undersigned at the annual meeting (the "Meeting") of stockholders
of Station Casinos, Inc. (the "Company") to be held October 27, 1998 at 10:00
a.m. local time at Sunset Station Hotel & Casino, 1301 West Sunset Road,
Henderson, Nevada and/or at any adjournment of the Meeting, in the manner
indicated below; all in accordance with and as more fully described in the
Notice of Annual Meeting and accompanying Proxy Statement for the Meeting,
receipt of which is hereby acknowledged.
THE SHARES REPRESENTED BY THIS PROXY SHALL BE VOTED AS INDICATED BELOW:
(1) To elect two directors to serve until the 2001 annual meeting of Station and
until their respective successors have been duly elected and qualified:
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for all
(except as marked to the contrary nominees listed below.
below).
(INSTRUCTIONS: TO WITHHOLD AUTHORITY FOR AN INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME BELOW.)
Glenn C. Christenson Blake L. Sartini
(2) To ratify the appointment of Arthur Andersen L.L.P. as Station's independent
public accountants for Station's 1999 fiscal year,
and / / FOR / / AGAINST / / ABSTAIN
(3) To vote in their discretion on such other business as may properly come
before the Meeting or any adjournment thereof.
(CONTINUED ON REVERSE SIDE)
<PAGE>
UNLESS AUTHORITY TO VOTE THEREFORE IS WITHHELD IN THIS PROXY CARD, IT IS THE
INTENTION OF THE PROXIES TO VOTE FOR THE PROPOSALS. IF ANY OTHER BUSINESS IS
PRESENTED, THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF
THE AFOREMENTIONED PROXIES
DATE _____________________________________________
SIGNATURE ________________________________________
PLEASE MARK, DATE AND SIGN AS YOUR NAME APPEARS TO
THE LEFT AND RETURN IN THE ENCLOSED ENVELOPE. IF
ACTING AS EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, STATE YOUR FULL TITLE AND AUTHORITY WHEN
SIGNING. IF THE SIGNER IS A CORPORATION, PLEASE
SIGN THE FULL CORPORATE NAME BY A DULY AUTHORITY
OFFICER. IF SHARES ARE HELD JOINTLY, EACH
STOCKHOLDER NAMED SHOULD SIGN.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR AN ANNUAL MEETING--OCTOBER 27,
1998,
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PRE-PAID
ENVELOPE.
