<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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.:
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(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: MAY 24, 1999
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 May 24, 1999, beginning at 10:00 a.m.
local time, for the following purposes:
1. To elect three directors to serve for a term of three years until the
2002 Annual Meeting of Stockholders and until their respective successors
have been duly elected and qualified;
2. To ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the Company's 1999 fiscal year;
3. To approve the Company's Stock Compensation Program as amended to
increase the maximum aggregate number of shares of the Company's common
stock subject to the Stock Compensation Program and to remove the
requirement of stockholder approval to materially increase the benefits
accruing to participants under the Nonemployee Director Stock Option
Plan; and
4. 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 March 26, 1999, 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
/s/ SCOTT M NIELSON
Scott M Nielson
SECRETARY
Las Vegas, Nevada
April 9, 1999
<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 May 24, 1999 (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 April 9, 1999.
At the Annual Meeting, stockholders will be asked to consider and vote upon
the following matters:
<TABLE>
<CAPTION>
<S> <C>
ITEM I The election of three directors to serve until the 2002 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.
ITEM III Approval of the Company's Stock Compensation Program as amended to increase the
maximum aggregate number of shares of the Company's common stock subject to the
Stock Compensation Program and to remove the requirement of stockholder
approval to materially increase the benefits accruing to participants under the
Nonemployee Director Stock Option Plan.
</TABLE>
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,
the ratification of the appointment of the independent public accountants and
the approval of the Stock Compensation Program as amended 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, FOR the approval of the
Company's Stock Compensation Program as amended, and, with respect to any other
matter that may properly come before the Annual Meeting, in the discretion of
the persons voting the respective proxies.
The cost of preparing, assembling and mailing of proxy materials will be
borne by the Company. 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
1
<PAGE>
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 March 26, 1999 (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 35,312,192 shares of Common Stock outstanding. Each share of Common
Stock is entitled to one vote on all matters presented at the Annual Meeting.
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, approval of
the Company's Stock Compensation Program as amended to increase the maximum
aggregate number of shares of common stock subject to the Stock Compensation
Program and to remove the requirement of stockholder approval to materially
increase the benefits accruing to participants under the Nonemployee Director
Stock Option Plan, each require the affirmative vote of a majority of shares
present in person or represented 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, II or III.
ITEM I
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 2001. 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 three directors are to be elected to serve until the
2002 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 three 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.
2
<PAGE>
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.
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.
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. In February 1999, the
Company entered into a consulting agreement with Mr. Fertitta to provide
financial advisory services.
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 eight 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.
3
<PAGE>
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(*)............................. 37 Chairman of the Board, President, Chief Executive
Officer and Director
Glenn C. Christenson................................. 49 Executive Vice President, Chief Financial Officer,
Chief Administrative Officer, Treasurer and Director
Scott M Nielson...................................... 41 Executive Vice President, General Counsel and
Secretary
Blake L. Sartini(*).................................. 40 Executive Vice President, Chief Operating Officer and
Director
William W. Warner.................................... 34 Vice President of Finance
R. Hal Dean.......................................... 82 Director
Lorenzo J. Fertitta(*)............................... 30 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 II directors whose terms do not
expire this year together with non-director executive officers and certain key
management personnel of the Company, along with certain information regarding
these individuals.
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. He currently serves on
the Executive Committee and Board of Directors of the Boulder Dam Area Boy
Scouts Council.
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, 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.
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
4
<PAGE>
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 16 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.
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.
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 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), LaBarge, Inc., St. Louis, Missouri (1984-1999) 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., a
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 seven times during the nine months ended December
31, 1998 (the "Transition Period 1998"). 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 Transition Period 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 Transition Period 1998, the Audit Committee
met once.
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.
5
<PAGE>
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 three times during the Transition Period
1998.
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 "Stock Compensation Program" as described hereinafter.
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In the Transition Period 1998, the Human Resources Committee consisted of R.
Hal Dean and Lowell H. Lebermann, Jr., both outside directors of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 the Transition Period
1998.
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.
6
<PAGE>
PRINCIPAL STOCKHOLDERS OF THE COMPANY
The following table sets forth, as of February 28, 1999, 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 (solely based on information reported on Forms 13D or 13G
filed with the Securities and Exchange Commission), 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)(2) NUMBER (3) CLASS
- ---------------------------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Frank J. Fertitta III................................................................... 5,851,819 16.1
Blake L. Sartini(4)..................................................................... 4,908,833 13.8
Lorenzo J. Fertitta..................................................................... 4,781,511 13.5
Delise F. Sartini(4).................................................................... 4,727,023 13.4
Bear Stearns & Co., Inc.(5)............................................................. 2,615,000 7.4
Par Capital Management, Inc.(6)......................................................... 1,994,617 5.3
Glenn C. Christenson(7)................................................................. 275,551 *
Scott M Nielson(7)...................................................................... 228,430 *
William W. Warner(7).................................................................... 15,693 *
R. Hal Dean............................................................................. 44,265 *
Lowell H. Lebermann, Jr................................................................. 23,500 *
Executive Officers and Directors as a Group (9 persons)................................. 16,144,229 43.6
</TABLE>
- ------------------------
* Less than one percent
(1) 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 970,616; Blake L. Sartini 196,437;
Lorenzo J. Fertitta 99,000; Delise F. Sartini 14,627; Glenn C. Christenson
218,094; Scott M Nielson 171,776; William W. Warner 0; R. Hal Dean 22,500
and Lowell H. Lebermann, Jr. 22,500. 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) The address of each of the stockholders named in this table other than Bear
Stearns & Co., Inc. and Par Capital Management, Inc. is: c/o Station
Casinos, Inc., 2411 West Sahara Avenue, Las Vegas, Nevada 89102.
(3) 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.
(4) 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.
(5) The address of Bear Stearns & Co., Inc. is 245 Park Avenue, New York, New
York, 10167. The SEC filing date is December 31, 1998 for Bear Stearns &
Co., Inc.
(6) The address of Par Capital Management, Inc. is One Financial Center, Suite
1600, Boston, Massachusetts, 02111. The SEC filing date is March 3, 1999 for
Par Capital Management, Inc. Beneficial ownership includes 944,617 shares
resulting from the assumed conversion of Company's convertible preferred
stock.
(7) Includes 3,257 shares of Common Stock for Glenn C. Christenson, 1,954 shares
of Common Stock for Scott M Nielson and 4,886 shares of Common Stock for
William W. Warner issuable upon conversion of the Company's immediately
convertible preferred stock.
7
<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 nine month period ended
December 31, 1998 (the "Transition Period 1998" or "1998T") and the fiscal years
ended March 31, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS(5)
------------------------------------ ----------------------------
OTHER ANNUAL SECURITIES ALL OTHER
SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION PERIOD(1) ($)(2) ($)(3) ($)(4) OPTIONS(#) ($)(6)
- --------------------------------- ----------- ---------- --------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frank J. Fertitta III ........... 1998T 765,962 790,000 -- 250,000 271,647
Chairman of the Board, 1998 1,000,000 750,000 -- 160,000 293,313
President and Chief Executive 1997 999,159 375,000 -- 1,000,000 247,600
Officer
Glenn C. Christenson ............ 1998T 409,965 325,000 -- 150,000 237,937
Executive Vice President, Chief 1998 472,885 321,000 -- 180,000 284,861
Financial Officer, Chief 1997 449,062 135,000 -- 65,000 271,234
Administrative Officer and
Treasurer
Scott M Nielson ................. 1998T 302,025 260,000 -- 100,000 99,079
Executive Vice President, 1998 380,385 240,000 -- 130,000 155,137
General Counsel and Secretary 1997 374,543 93,750 -- 40,000 154,002
Blake L. Sartini ................ 1998T 398,300 325,000 -- 150,000 137,678
Executive Vice President and 1998 446,923 312,000 -- 110,000 165,240
Chief Operating Officer 1997 419,159 126,000 96,990 400,000 149,448
William W. Warner ............... 1998T 199,616 150,000 -- 50,000 58,767
Vice President of Finance(7) 1998 206,250 150,000 -- 100,000 8,205
1997 174,904 30,625 -- 10,000 1,154
</TABLE>
- ------------------------
(1) On November 6, 1998, the Company filed a Form 8-K announcing its change in
fiscal year end from March 31 of each year to December 31 of each year. This
change is effective for the Transition Period 1998.
(2) For the Transition Period 1998 and the fiscal years ended March 31, 1998 and
1997, amounts include salary deferred under the Company's Deferred
Compensation Plan of $43,462, $34,615 and $0 for Mr. Fertitta, $105,775,
$75,298 and $50,927 for Mr. Christenson, $0, $25,961 and $35,365 for Mr.
Nielson and $19,135, $12,596 and $6,731 for Mr. Warner (for the fiscal years
ended March 31, 1998 and 1997 for Mr. Warner, a portion of the amounts were
deferred under the Company's Deferred Compensation Plan for Management
Employees).
(3) 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 the Transition Period 1998 and
the fiscal years ended March 31, 1998 and 1997 amounts include bonuses
deferred under the Company Deferred
8
<PAGE>
Compensation Plan of $320,288, $0 and $117,449 for Mr. Christenson,
$250,000, $0 and $9,375 for Mr. Nielson, and $15,000, $15,000 and $0 for Mr.
Warner.
(4) For the Transition Period 1998 and the fiscal years ended March 31, 1998 and
1997, 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 year ended March 31, 1997. The Company provides certain
perquisites, including certain personal services, to the named executive
officers. For the fiscal year ended March 31, 1997, the costs of providing
these services were approximately $83,000 for Mr. Sartini.
(5) As of December 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 15,000, 3,600,
3,000, 2,400 and 1,000, and $122,813, $29,475, $24,563, $19,650 and $8,188,
respectively.
(6) 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 Transition Period 1998 and the fiscal years ended 1998 and 1997 these
amounts include "split dollar" life insurance premiums for Messrs. Fertitta,
Christenson, Nielson, Sartini and Warner. 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.
(7) In September 1997, the Company replaced certain 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 $7.50.
OPTIONS GRANTED IN THE TRANSITION PERIOD 1998
The following table provides information related to options to purchase
Common Stock granted to the Executive Officers during the Transition Period 1998
and the number and value of such options held as of the end of such fiscal year.
For the last fiscal year the Company did not grant any SARs.
OPTION GRANTS IN TRANSITION PERIOD 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS GRANTED PRICE APPRECIATION
UNDERLYING TO EMPLOYEES EXERCISE OR OPTION FOR OPTION TERM
OPTIONS IN TRANSITION BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#)(1) PERIOD 1998 ($/SHARE) DATE 5%($) 10%($)
- ------------------------- -------------- ------------------- ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Frank J. Fertitta III.... 250,000 24.3 7.88 12/8/2008 1,235,000 3,142,500
Glenn C. Christenson..... 150,000 14.6 7.88 12/8/2008 741,000 1,885,500
Scott M Nielson.......... 100,000 9.7 7.88 12/8/2008 494,000 1,257,000
Blake L. Sartini......... 150,000 14.6 7.88 12/8/2008 741,000 1,885,500
William W. Warner........ 30,000 2.9 7.88 12/8/2008 148,200 377,100
William W. Warner........ 20,000 1.9 5.38 9/25/2008 67,800 171,600
</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.
9
<PAGE>
TRANSITION PERIOD 1998 OPTION VALUES
The following table provides information related to options to purchase
Common Stock held by the Executive Officers at the end of the Transition Period
1998. None of the Executive Officers exercised options to purchase Common Stock
during the Transition Period 1998.
AGGREGATED OPTION EXERCISES IN TRANSITION PERIOD 1998 AND
THE TRANSITION PERIOD 1998 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
1998 (#) DECEMBER 31, 1998 ($)(1)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Frank J. Fertitta III..................................... 945,616 1,445,410 22,000 166,125
Glenn C. Christenson...................................... 213,144 356,566 24,750 145,875
Scott M Nielson........................................... 168,475 246,746 17,875 102,750
Blake L. Sartini.......................................... 191,437 660,125 15,125 107,375
William W. Warner......................................... -- 150,000 -- 134,375
</TABLE>
- ------------------------
(1) Options are "in-the-money" if, on December 31, 1998, the market price of the
Common Stock ($8.19) 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
December 31, 1998, and the aggregate exercise price of such options.
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
Executive Vice President and Chief Operating Officer 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 Company or Executive Officer
otherwise gives notice at least one year prior to the end of the then-current
term or unless otherwise terminated pursuant to the terms of the Employment
Agreements. Each of the Employment Agreements was amended and restated or
originally 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. 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' current annual base salaries 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
10
<PAGE>
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 due to the Executive Officer under his Employment
Agreement as of the date of his death or Disability, plus 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 long-term
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 Amount, (as defined in Section 280G of the Code) in the case of
Mr. Fertitta, or a lump sum payment equal to three times his Base Amount, 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
benefits, 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.
Immediately upon a Change of Control, each Executive Officer will receive a
payment equal to three times his Base Amount less one dollar. Additionally, in
the event an Executive Officer's employment is terminated following a Change of
Control, either by the Company for any reason other than for Cause or by the
Executive Officer on his own initiative for Good Reason (as defined in the
Employment Agreement), the Executive Officer will be entitled to, among other
payments, an amount of cash equal to the greater of (x) five times his Base
Amount at the time of the Change of Control or (y) five times his 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, 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 Executive Officers, 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 $20 million minus a tax-adjusted amount received under
the other provisions noted above.
If any payment or benefit paid or payable, or received or to be received, by
or on behalf of the Executive Officer in connection with a Change of Control or
the termination of the Executive Officer's employment, will or would be subject
to the excise tax imposed by Section 4999 of the Code, the Company will pay the
Executive Officer an additional amount such that, after payment by the Executive
of all taxes, the Executive retains an amount of such additional payment equal
to the excise tax imposed on such payments and benefits paid or payable or
received or to be received.
11
<PAGE>
The Company is currently negotiating new employment agreements with the
Executive Officers and expects to enter into these agreements during 1999.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Table I below sets forth the total benefits payable to the Chief Executive
Officer as the sole participant in the Supplemental Executive Retirement Plan
(the "SERP"). Amounts shown in Table I represent the annual benefits to which
the Chief Executive Officer is entitled under the SERP.
TABLE I*
<TABLE>
<CAPTION>
10 OR MORE
YEARS OF
REMUNERATION($) 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 (equal to the amount
reported as annual salary in the Summary Compensation Table). Amounts shown in
Table I represent the annual benefits to which the Chief Executive Officer is
entitled under the SERP, which amounts are then 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.
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 December 31,
1998, Frank J. Fertitta III has four years of credited service under the SERP.
12
<PAGE>
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 (equal to the amount reported
as annual salary in the Summary Compensation Table), which amounts are then
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.
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 December 31, 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.
13
<PAGE>
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 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
14
<PAGE>
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.
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.
15
<PAGE>
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 retains 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 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 the
Transition Period 1998, the Human Resources Committee identified a group of
similar casino and gaming companies that it believes are the Company's
competition for executive level employees. Due to the limited availability of
information, this group of 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 these 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.
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 the Transition Period 1998 performance were
based upon the Company's performance and assessments of the individual
executive's contribution to the success of the Company during the Transition
Period 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
- ------------------------------
(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.
16
<PAGE>
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.
TRANSITION PERIOD 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 TRANSITION PERIOD 1998 BASE SALARY
The Human Resources Committee established Mr. Fertitta's annual base salary
for the Transition Period 1998 based upon a review of compensation by casino and
gaming companies identified as having similar revenues and scope of operations
together with an evaluation of the Company's results in fiscal year 1998. Mr.
Fertitta's annual base salary was increased during the Transition Period 1998
from $1,000,000 to $1,050,000.
THE CHIEF EXECUTIVE OFFICER'S TRANSITION PERIOD 1998 ANNUAL INCENTIVE
The annual incentive earned by the Chief Executive Officer for the
Transition Period 1998 performance was $790,000. 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.
LIMITATION OF TAX DEDUCTION FOR EXECUTIVE COMPENSATION
Internal Revenue Code Section 162(m) prevents publicly traded companies from
receiving a tax deduction on compensation paid to proxy-named executive officers
in excess of $1 million in any taxable
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year, effective for compensation paid after 1993. The Human Resources Committee
believes that there will not be material amounts of non-deductible compensation
in the Transition Period 1998 due to various exceptions to the $1 million
limitation. While the Human Resources Committee is mindful of the provisions of
Section 162(m), the Human Resources Committee does not allow Section 162(m) to
drive compensation decisions.
The Human Resources Committee believes that the Company's other compensation
programs which will result in amounts of compensation in the Transition Period
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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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., Boyd Gaming Corp., Circus Circus Enterprises, Inc.,
Grand Casinos, Inc., Hollywood Casino Corp., Jackpot Enterprises, Inc.,
President Casinos, Inc., Primadonna Resorts, Inc., and Rio Hotel & Casino, Inc.
Certain companies in the peer group from the prior year have been acquired and,
as a result, are no longer reflected in the cumulative total return of the peer
group. 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 67 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>
DOLLARS 5/25/93 3/94 3/95 3/96 3/97 3/98 12/98
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATION CASINOS, INC. 100 88 58 58 41 74 41
PEER GROUP 100 81 69 68 48 50 27
S & P 500 100 102 117 155 186 275 310
</TABLE>
* $100 INVESTED ON 5/25/93 IN STOCK OR INDEX--INCLUDING REINVESTMENT OF
DIVIDENDS.
(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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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
BOULDER STATION LEASE
Boulder Station is situated on 46 acres located on the east side of Las
Vegas, Nevada. The Company owns 19 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 currently has a maximum term of 65 years,
ending in June 2058. The lease currently provides for monthly payments of
$135,525 until June 2008. In July 2008, 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 July 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.
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 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 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 required Barley's to pay
Gordon Biersch $25 for each barrel of beer brewed. The consulting agreement with
Gordon Biersch ended in January 1999. Barley's paid Gordon Biersch approximately
$45,000 and $62,000 during the Transition Period 1998 and the fiscal year ended
March 31, 1998, respectively. 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.
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DIRECTORS
The Company employs Delise F. Sartini as Vice President of Community Affairs
at Palace Station. During the Transition Period 1998 and the fiscal year ended
March 31, 1998, the Company paid salary to Delise F. Sartini of $48,872 and
$65,000 respectively.
In February 1999, the Company entered into a consulting agreement with
Lorenzo J. Fertitta to provide financial and strategic advisory services to the
Company. The consulting agreement is for a term of five years and provides for
an annual fee of $240,000, payable in equal monthly installments and monthly
premium payments necessary to maintain $15 million in term life insurance
coverage. In connection with his provision of the consulting services, Mr.
Fertitta was granted 100,000 options to purchase the Company's Common Stock at
$7.88 in December 1998.
TRAVELSCAPE.COM, INC.
The Company has maintained a wholesale travel agent contract to provide
varying amounts of hotel rooms to Las Vegas Reservation Systems since 1993. The
Company received hotel revenue of approximately $145,378 and $145,071 during the
Transition Period 1998 and the fiscal year ended March 31, 1998, respectively
from Las Vegas Reservation Systems. Zucchero, LLC, a Nevada limited liability
company, beneficially owned by the Fertitta Trust, Frank J. Fertitta, III, Blake
L. Sartini and Lorenzo J. Fertitta currently holds a 10% investment in
Travelscape.com, Inc. which is an affiliate of Las Vegas Reservation Systems.
Lorenzo J. Fertitta is a director of Travelscape.com, Inc.
ITEM II
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP ("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 LLP 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.
ITEM III
PROPOSED APPROVAL OF THE
STATION CASINOS, INC.
STOCK COMPENSATION PROGRAM
In 1993, the Board approved, and the Company adopted the Station Casinos,
Inc. Stock Compensation Program (the "Program"). The Program provides for the
granting of options to purchase shares or the granting of restricted shares of
common stock of the Company, par value $0.01 ("Common Stock") to certain
employees, directors, independent contractors and consultants of the Company and
its subsidiaries or any parent company.
On March 19, 1999, the Board proposed an amendment to the Program to
increase the maximum aggregate number of shares of Common Stock available for
award under the Program from 6,307,000 to 10,807,000. The Board of Directors
believes that the Company's executive and key employees should have
21
<PAGE>
a stake in the long-term success of the business of the Company and,
accordingly, that a considerable portion of their total compensation should be
paid in stock. The Board of Directors is proposing increasing the percentage of
the Company's shares of Common Stock available for issuance under the Program
from 15% of the outstanding Common Stock and Common Stock issuable on conversion
of the Company's $3.50 Convertible Preferred Stock, to approximately 26% of such
stock. The Company's consultants, Towers Perrin, have informed the Company that
26% will allow the Company to continue to remain competitive within the gaming
industry, making grants to executives that 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.
The Board also proposed an amendment to the Program to remove the
requirement of stockholder approval to materially increase the benefits accruing
to participants under the Nonemployee Director Stock Option Plan. The approval
of stockholders for amendments materially increasing the benefits accruing to
participants under the Plan was required by rules applicable to insiders under
Section 16 of the Securities Exchange Act of 1934. However, the Section 16 rules
have been amended and no longer require stockholder approval for such
amendments. Thc Company believes that this amendment will give the Company
additional flexibility in granting options to purchase Common Stock to attract
and retain persons of desired ability as nonemployee directors at the Company,
and to motivate such persons to exert their best effort on behalf of the
Company. In connection with these amendments, the Board is currently considering
an amendment to the Plan to increase the number of options to acquire shares of
Common Stock granted annually to nonemployee directors. The approval of the
Program, as amended, will allow the Board to adopt such an increase without the
approval of the Company's stockholders.
A general description of the basic features of the Program, as amended, is
set forth below. Such description is qualified in its entirety by reference to
the full text of the Program, as amended, as set forth in Appendix A to this
Proxy Statement.
PURPOSE OF THE PROGRAM
The Program is intended to secure for the Company and its subsidiaries and
its stockholders the benefits arising from ownership of Common Stock by those
selected key individuals of the Company and its subsidiaries who will be
responsible for the future growth of such corporations. The Program is designed
to help attract and retain superior personnel for positions of substantial
responsibility with the Company and its subsidiaries, and to provide key
individuals with an additional incentive to contribute to the success of the
corporations.
ELEMENTS OF THE PROGRAM
In order to maintain flexibility in the award of stock benefits, the Program
is composed of four parts. The first part is the Incentive Stock Option Plan
(the "Incentive Plan") under which are granted incentive stock options
("Incentive Options"). The second part is the Nonqualified Stock Option Plan
(the "Nonqualified Plan") under which are granted nonqualified stock options
("Nonqualified Options"). The third part is the Restricted Shares Plan (the
"Restricted Plan") under which are granted restricted shares of Common Stock.
The fourth part is the Nonemployee Directors Stock Option Plan (the "Nonemployee
Plan") under which nonemployee directors are granted nonqualified stock options.
The Incentive Plan, Nonqualified Plan, Restricted Plan, and Nonemployee Plan are
included herebelow as Part I, Part II, Part III, and Part IV respectively, and
are collectively referred to herein as the "Plans". The grant of an option or
restricted share under one of the Plans will not be construed to prohibit the
grant of an option or restricted share under any of the other Plans, except that
a grant to a nonemployee director may only be made under Part IV.
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<PAGE>
GENERAL PROVISIONS OF STOCK COMPENSATION PROGRAM
ADMINISTRATION. The program will be administered by the Board or by a
committee appointed by the Board, consisting of not less than two directors of
the Company who are "disinterested" directors within the meaning of SEC Rule
16b-3 (the "Committee") and "outside" directors within the meaning of Section
162(m) of the Code. The Board may from time to time remove members from the
Committee, fill all vacancies on the Committee, however caused, and may select
one of the members of the Committee as its Chairman. The members of the Board or
Committee, when acting to administer the Program, are herein collectively
referred to as the "Program Administrators."
AUTHORITY OF PROGRAM ADMINISTRATORS. The Program Administrators will have
sole authority, in their absolute discretion, to, except with regard to awards
under Part IV: (a) construe and interpret the Program; (b) define the terms used
herein; (c) determine the individuals to whom options and restricted shares
shall be granted under the Program; (d) determine the time or times at which
options and restricted shares shall be granted under the Program; (e) determine
the number of shares subject to each option and restricted share, the option
price, and the duration of each option granted under the Program; (f) determine
all of the other terms and conditions of options and restricted shares granted
under the Program; and (g) make all other determinations necessary or advisable
for the administration of the Program and to do everything necessary or
appropriate to administer the Program. All decisions, determinations, and
interpretations made by the Program Administrators will be binding and
conclusive on all participants in the Program and on their legal
representatives, heirs, and beneficiaries.
MAXIMUM NUMBER OF SHARES SUBJECT TO THE PROGRAM. The maximum aggregate
number of shares of Common Stock subject to the Plans after stockholder approval
is 10,807,000 shares. The shares of Common Stock to be issued upon exercise of
an option, to the extent exercised for shares of Common Stock, or issued as
restricted shares may be authorized but unissued shares, shares issued and
reacquired by the Company or shares purchased by the Company on the open market.
If any of the options granted under the Program expire or terminate for any
reason before they have been exercised in full, the unpurchased shares subject
to those expired or terminated options shall cease to reduce the number of
shares available for purposes of the Program. If the conditions associated with
the grant of restricted shares are not achieved within the period specified for
satisfaction of the applicable conditions, or if the restricted share grant
terminates for any reason before the date on which the conditions must be
satisfied, the shares of Common Stock associated with such restricted shares
will cease to reduce the number of shares available for purposes of the Program.
The number of shares of Common Stock underlying Incentive Options and
Nonqualified Options granted under the Incentive Plan and the Nonqualified Plan
of the Program, respectively, in any calendar year to any individual
participating in the Program may not exceed the maximum number of shares
issuable under the Program.
ELIGIBILITY AND PARTICIPATION. Officers, key employees, directors (whether
employees or nonemployees), and independent contractors or consultants of the
Company or its subsidiaries who are responsible for or contribute to the
management, growth, or profitability of the business of the Company or its
subsidiaries will be eligible for selection by the Program Administrators to
participate in Part I, Part II and/ or Part III of the Program. However,
Incentive Options may be granted under the Incentive Plan only to a person who
is an employee of the Company or its subsidiaries. Only nonemployee directors
are eligible to receive grants under the Nonemployee Plan.
EFFECTIVE DATE AND TERM OF PROGRAM. The Program became effective on June 2,
1993. The Program will continue in effect for a term of 10 years unless sooner
terminated as provided below.
ADJUSTMENTS. If the outstanding shares of Common Stock are increased,
decreased, changed into, or exchanged for a different number or kind of shares
or securities through merger, consolidation, combination, exchange of shares,
other reorganization, recapitalization, reclassification, stock dividend, stock
split or reverse stock split, an appropriate and proportionate adjustment will
be made in the maximum number
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and kind of shares as to which options and restricted shares may be granted
under this Program. A corresponding adjustment changing the number and kind of
shares allocated to unexercised options, restricted shares, or portions thereof,
which have been granted prior to any such change, will likewise be made. Any
such adjustment in outstanding options will be made without change in the
aggregate purchase price applicable to the unexercised portion of the option,
but with a corresponding adjustment in the price for each share or other unit of
any security covered by the option.
TERMINATION AND AMENDMENT OF PROGRAM. The Program will terminate on June 1,
2003 or will terminate at such earlier time as the Board may so determine. No
options or restricted shares will be granted under the Program after that date.
Subject to the limitation contained below, the Plan Administrators may at any
time amend or revise the terms of the Program, including the form and substance
of the option and restricted share agreements to be used hereunder. No amendment
or revision may (a) materially increase the maximum number of shares that may be
issued under this Program; (b) increase the maximum term established under the
Plans for any option or restricted share; (c) materially modify the requirements
as to eligibility for participation in the Program; or (d) materially increase
the benefits accruing to participants under the Program, provided that no
stockholder approval will be required to materially increase the benefits
accruing to participants under the Nonemployee Director Stock Option Plan upon
stockholder approval of the amended Program. In addition, no such amendment or
revision shall be effective if it would disqualify the Program from the
exemptions provided by SEC Rule 16b-3. In addition, no amendment, suspension, or
termination of the Program may, without the consent of the individual who has
received an option or restricted share, alter or impair any of that person's
rights or obligations under any option or restricted share granted under the
Program prior to that amendment, suspension, or termination.
PRIVILEGES OF STOCK OWNERSHIP. No individual will have any of the rights or
privileges of a stockholder of the Company in respect of any shares of stock
issuable upon the exercise of his or her option or the satisfaction of his or
her restricted share conditions until certificates representing the shares have
been issued and delivered. No shares will be required to be issued and delivered
upon exercise of any option or satisfaction of any conditions with respect to a
restricted share unless and until all of the requirements of law and of all
regulatory agencies having jurisdiction over the issuance and delivery of the
securities shall have been fully complied with.
RESERVATION OF SHARES OF COMMON STOCK. The Company, during the term of the
Program, will at all times reserve and keep available such number of shares of
its Common Stock as shall be sufficient to satisfy the requirements of the
Program.
TAX WITHHOLDING. The exercise of any option or the satisfaction of the
conditions imposed upon any restricted share granted under this Program is
subject to the condition that if at any time the Company determines, in its
discretion, that the satisfaction of withholding tax or other withholding
liabilities under any state or federal law is necessary or desirable as a
condition of, or in connection with, such exercise or the delivery or purchase
of shares pursuant thereto, then in such event, the exercise of the option or
the satisfaction of the conditions imposed upon the restricted share will not be
effective unless such withholding shall have been effected or obtained in a
manner acceptable to the Company.
SEC COMPLIANCE. With respect to persons subject to Section 16 of the
Exchange Act, transactions under the Program are intended to comply with all
applicable conditions of SEC Rule 16b-3. To the extent any provision of the
Program or any action of the Program Administrators fails to comply with such
rule, it will be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee. If a person subject to Section 16 of the Exchange
Act exercises his or her rights under a grant under the Program or receives
unrestricted Common Stock through a grant under Part III of the Program before
six months have passed from the date of the grant, the Company will hold in its
custody any resulting stock certificate until six months has passed from the
date of the grant.
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PLAN I--STATION CASINOS, INC. INCENTIVE STOCK OPTION PLAN
PURPOSE. The purpose of the Station Casinos, Inc. Incentive Stock Option
Plan (the "Incentive Plan") is to promote the growth and general prosperity of
the Company by permitting the Company to grant options to purchase shares of its
Common Stock. The Incentive Plan is designed to help attract and retain superior
personnel for positions of substantial responsibility with the Company and its
subsidiaries, and to provide key individuals with an additional incentive to
contribute to the success of the Company. The Company intends that options
granted pursuant to the provisions of the Incentive Plan (the "Incentive
Options") will qualify as "incentive stock options" within the meaning of Code
Section 422 or any successor to such section.
DURATION OF INCENTIVE OPTIONS. Each Incentive Option and all rights
thereunder granted pursuant to the terms of the Incentive Plan will expire on
the date determined by the Program Administrators, but in no event may any
Incentive Option granted under the Incentive Plan expire later than 10 years
from the date on which the Incentive Option is granted. If at the time the
Incentive Option is granted the grantee ("Optionee") owns or would be considered
to own by reason of Code Section 424(d) more than 10% of the total combined
voting power of all classes of stock of the Company or its subsidiaries, such
Incentive Option may expire not more than 5 years from the date the Incentive
Option is granted.
PURCHASE PRICE. The purchase price for shares acquired pursuant to the
exercise, in whole or in part, of any Incentive Option may not be less than the
fair market value of the shares at the time of the grant of the Incentive
Option. If at the time an Incentive Option is granted the Optionee owns or would
be considered to own by reason of Code Section 424(d) more than 10% of the total
combined voting power of all classes of stock of the Company or its
subsidiaries, the purchase price of the shares covered by such Incentive Option
may not be less than 110% of the fair market value of a share of Common Stock on
the date the Incentive Option is granted.
MAXIMUM AMOUNT OF INCENTIVE OPTIONS EXERCISABLE IN ANY CALENDAR YEAR. The
aggregate fair market value (determined at the time any Incentive Option is
granted) of the Common Stock with respect to which Incentive Options become
exercisable for the first time by any employee during any calendar year under
all stock option plans of the Company and its subsidiaries may not exceed
$100,000.
EXERCISE OF INCENTIVE OPTIONS. Each Incentive Option will be exercisable in
one or more installments during its term, and the right to exercise may be
cumulative as determined by the Program Administrators. No Incentive Option may
be exercised for a fraction of a share of Common Stock. The purchase price of
any shares purchased must be paid in full in cash or by certified or cashier's
check payable to the order of the Company or by shares of Common Stock, if
permitted by the Program Administrators, or by a combination of cash, check, or
shares of Common Stock, at the time of exercise of the Incentive Option. If any
portion of the purchase price is paid in shares of Common Stock, those shares
must be tendered at their then fair market value. Payment in shares of Common
Stock includes the automatic application of shares of Common Stock received upon
exercise of an Incentive Option to satisfy the exercise price for additional
Incentive Options.
REORGANIZATION. In the event of the dissolution or liquidation of the
Company, any Incentive Option granted under the Incentive Plan will terminate as
of a date to be fixed by the Plan Administrators; provided that not less than 30
days' written notice of the date so fixed must be given to each Optionee and
each such Optionee will have the right during such period (unless such Incentive
Option shall have previously expired) to exercise any Incentive Option,
including any Incentive Option that would not otherwise be exercisable by reason
of an insufficient lapse of time.
WRITTEN NOTICE REQUIRED. Any Incentive Option granted pursuant to the terms
of the Incentive Plan will be exercised when written notice of that exercise has
been given to the Company at its principal office
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by the person entitled to exercise the Incentive Option and full payment for the
shares with respect to which the Incentive Option is exercised has been received
by the Company.
EMPLOYMENT OF OPTIONEE. Each Optionee, if requested by the Program
Administrators, must agree in writing as a condition of receiving his or her
Incentive Option, that he or she will remain in the employment of the Company or
its subsidiary corporations following the date of the granting of that Incentive
Option for a period specified by the Program Administrators.
INCENTIVE OPTION RIGHTS UPON TERMINATION OF EMPLOYMENT. If an Optionee
ceases to be employed by the Company or any subsidiary corporation for any
reason other than death or disability, his or her Incentive Option will
immediately terminate. The Program Administrators may, in their discretion,
allow the Incentive Option to be exercised (to the extent exercisable on the
date of termination of employment) at any time within three months after the
date of termination of employment, unless either the Incentive Option or the
Incentive Plan otherwise provides for earlier termination.
INCENTIVE OPTION RIGHTS UPON DISABILITY. If an Optionee becomes disabled
within the meaning of Code Section 22(e)(3) while employed by the Company or any
subsidiary corporation, the Program Administrators, in their discretion, may
allow the Incentive Option to be exercised, to the extent exercisable on the
date of termination of employment, at any time within one year after the date of
termination of employment due to disability, unless either the Incentive Option
or the Incentive Plan otherwise provides for earlier termination.
INCENTIVE OPTION RIGHTS UPON DEATH OF OPTIONEE. Except as otherwise limited
by the Program Administrators at the time of the grant of an Incentive Option,
if an Optionee dies while employed by the Company or any subsidiary corporation,
or within three months after ceasing to be an employee thereof, his or her
Incentive Option will expire one year after the date of death unless by its
terms it expires sooner. During this one year or shorter period, the Incentive
Option may be exercised, to the extent that it remains unexercised on the date
of death, by the person or persons to whom the Optionee's rights under the
Incentive Option will pass by will or by the laws of descent and distribution,
but only to the extent that the Optionee is entitled to exercise the Incentive
Option at the date of death.
INCENTIVE OPTIONS NOT TRANSFERABLE. Incentive Options granted pursuant to
the terms of the Incentive Plan may not be sold, pledged, assigned, or
transferred in any manner otherwise than by will or the laws of descent or
distribution and may be exercised during the lifetime of an Optionee only by
that Optionee. No such Incentive Options may be pledged or hypothecated in any
way nor may they be subject to execution, attachment, or similar process.
PLAN II--STATION CASINOS, INC. NONQUALIFIED STOCK OPTION PLAN
PURPOSE. The purpose of the Station Casinos, Inc. Nonqualified Stock Option
Plan (the "Nonqualified Plan") is to permit the Company to grant options to
purchase shares of its Common Stock. The Nonqualified Plan is designed to help
attract and retain superior personnel for positions of substantial
responsibility with the Company and its subsidiaries, and to provide key
individuals with an additional incentive to contribute to the success of the
Company. Any option granted pursuant to the Nonqualified Plan (a "Nonqualified
Option") must be clearly and specifically designated as not being an incentive
stock option, as defined in Code Section 422. The Nonqualified Plan is Part II
of the Program.
DURATION OF NONQUALIFIED OPTIONS. Each Nonqualified Option and all rights
thereunder granted pursuant to the terms of this Nonqualified Plan will expire
on the date determined by the Program Administrators, but in no event will any
Nonqualified Option granted under the Plan expire later than 10 years from the
date on which the Nonqualified Option is granted. In addition, each Nonqualified
Option will be subject to early termination as provided in the Nonqualified
Plan.
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PURCHASE PRICE. The purchase price for shares acquired pursuant to the
exercise, in whole or in part, of any Nonqualified Option shall not be less than
the fair market value of the shares at the time of the grant of the Nonqualified
Option.
EXERCISE OF NONQUALIFIED OPTIONS. Each Nonqualified Option will be
exercisable in one or more installments during its term and the right to
exercise may be cumulative as determined by the Program Administrators. No
Nonqualified Option may be exercised for a fraction of a share of Common Stock.
The purchase price of any shares purchased must be paid in full in cash or by
certified or cashier's check payable to the order of the Company or by shares of
Common Stock, if permitted by the Program Administrators, or by a combination of
cash, check, or shares of Common Stock, at the time of exercise of the
Nonqualified Option. If any portion of the purchase price is paid in shares of
Common Stock, those shares must be tendered at their then fair market value.
Payment in shares of Common Stock includes the automatic application of shares
of Common Stock received upon exercise of a Nonqualified Option to satisfy the
exercise price for additional Nonqualified Options.
REORGANIZATION. In the event of the dissolution or liquidation of the
Company, any Nonqualified Option granted under the Nonqualified Plan will
terminate as of a date to be fixed by the Program Administrators; provided that
not less than 30 days' written notice of the date so fixed must be given to each
Optionee and each such Optionee will have the right during such period (unless
such Nonqualified Option shall have previously expired) to exercise any
Nonqualified Option, including any Nonqualified Option that would not otherwise
be exercisable by reason of an insufficient lapse of time.
WRITTEN NOTICE REQUIRED. Any Nonqualified Option granted pursuant to the
terms of this Compensation Plan will be exercised when written notice of that
exercise has been given to the Company at its principal office by the person
entitled to exercise the Nonqualified Option and full payment for the shares
with respect to which the Nonqualified Option is exercised has been received by
the Company.
CONTINUED EMPLOYMENT OR SERVICE. Each Optionee, if requested by the Program
Administrators, must agree in writing as a condition of the granting of his or
her Nonqualified Option, to remain in the employment of, or service to, the
Company or any of its subsidiaries following the date of the granting of that
Nonqualified Option for a period specified by the Program Administrators.
NONQUALIFIED OPTION RIGHTS UPON TERMINATION OF EMPLOYMENT OR SERVICE. If an
Optionee under the Nonqualified Plan ceases to be employed by, or provide
services to, the Company or any of its subsidiaries for any reason other than
death or disability, his or her Nonqualified Option will immediately terminate.
The Program Administrators may, in their discretion, allow the Nonqualified
Option to be exercised, to the extent exercisable on the date of termination of
employment or service, at any time within three months after the date of
termination of employment or service, unless either the Nonqualified Option or
this Nonqualified Plan otherwise provides for earlier termination.
NONQUALIFIED OPTION RIGHTS UPON DISABILITY. If an Optionee becomes disabled
within the meaning of Code Section 22(e)(3) while employed by the Company or any
subsidiary corporation, the Program Administrators, in their discretion, may
allow the Nonqualified Option to be exercised, to the extent exercisable on the
date of termination of employment, at any time within one year after the date of
termination of employment due to disability, unless either the Nonqualified
Option or the Nonqualified Plan otherwise provides for earlier termination.
NONQUALIFIED OPTION RIGHTS UPON DEATH OF OPTIONEE. Except as otherwise
limited by the Program Administrators at the time of the grant of a Nonqualified
Option, if an Optionee dies while employed by, or providing services to, the
Company or any of its subsidiaries, his or her Nonqualified Option will expire
one year after the date of death unless by its terms it expires sooner. During
this one year or shorter period, the Nonqualified Option may be exercised, to
the extent that it remains unexercised on the date of death, by the person or
persons to whom the Optionee's rights under the Nonqualified Option will pass by
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will or by the laws of descent and distribution, but only to the extent that the
Optionee is entitled to exercise the Nonqualified Option at the date of death.
NONQUALIFIED OPTIONS NOT TRANSFERABLE. Nonqualified Options granted
pursuant to the terms of the Nonqualified Plan may not be sold, pledged,
assigned, or transferred in any manner otherwise than by will or the laws of
descent or distribution and may be exercised during the lifetime of an Optionee
only by that Optionee. No such Nonqualified Options may be pledged or
hypothecated in any way nor may they be subject to execution, attachment, or
similar process.
PLAN III--STATION CASINOS, INC. RESTRICTED SHARE PLAN
PURPOSE. The purpose of the Station Casinos, Inc. Restricted Share Plan
(the "Restricted Plan") is to promote the growth and general prosperity of the
Company by permitting the Company to grant restricted shares to help attract and
retain superior personnel for positions of substantial responsibility with the
Company and its subsidiaries and to provide key individuals with an additional
incentive to contribute to the success of the Company. The Restricted Plan is
Part III of the Program.
TERMS AND CONDITIONS. The terms and conditions of restricted shares granted
under the Restricted Share Plan ("Restricted Shares") may differ from one
another as the Program Administrators, in their discretion, determine as long as
all Restricted Shares granted under the Restricted Plan satisfy the requirements
of the Restricted Plan.
Each grant of Restricted Shares will provide to the recipient ("Holder") the
transfer of a specified number of shares of Common Stock of the Company that
will become nonforfeitable upon the achievement of specified service or
performance conditions within a specified period ("Restriction Period") as
determined by the Program Administrators. At the time that the Restricted Share
is granted, the Program Administrators will specify the service or performance
conditions and the period of duration over which the conditions apply.
The Holder of Restricted Shares will not have any rights with respect to
such award, unless and until such Holder has executed an agreement evidencing
the terms and conditions of the award ("Restricted Share Award Agreement"). Each
individual who is awarded Restricted Shares will be issued a stock certificate
in respect of such shares. Such certificate will be registered in the name of
the Holder and will bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award.
The Program Administrators will require that the stock certificates
evidencing such shares be held in the custody of the Company until the
restrictions thereon have lapsed, and that, as a condition of any grant of
Restricted Shares, the Holder shall have delivered a stock power, endorsed in
blank, relating to the stock covered by such award. At the expiration of each
Restriction Period, the Company will redeliver to the Holder certificates held
by the Company representing the shares with respect to which the applicable
conditions have been satisfied.
PERFORMANCE-BASED RESTRICTED SHARES. The Committee may also grant
Restricted Shares that are subject to a risk of forfeiture if specified
performance criteria are not met within a specified period ("Performance-Based
Restricted Shares"). Performance-Based Restricted Shares will be forfeited
unless preestablished performance criteria specified by the Committee are met
during the applicable restriction period. Performance-Based Restricted Shares
subject to performance criteria are intended to be "qualified performance-based
compensation" within the meaning of Code Section 162(m) and will be paid solely
on account of the attainment of one or more preestablished, objective
performance goals within the meaning of Code Section 162(m). Until otherwise
determined by the Committee, Performance-Based Restricted Shares will become
nonforfeitable upon the attainment of one or more preestablished levels of net
income, earnings per share, total shareholder return, return on equity employed
or cash flow. The payout of any Performance-Based Restricted Shares to any
individual may be reduced, but not increased, based on the degree of attainment
of the performance criteria or otherwise at the discretion of the Committee.
Subject
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to adjustment under Section 8 of this Plan, all individuals in the aggregate may
not receive in any calendar year Performance-Based Restricted Shares exceeding,
in the aggregate, 1,000,000 shares of Common Stock and any one individual may
not receive in any calendar year Performance-Based Restricted Shares exceeding
500,000 shares of Common Stock.
AWARDS NOT TRANSFERABLE. During the Restriction Period, the Holder will not
be permitted to sell, transfer, pledge, or assign shares of Restricted Shares
awarded under the Restricted Share Plan, other than by will and the laws of
descent and distribution.
RESTRICTED SHARE RIGHTS UPON EMPLOYMENT OR SERVICE. If a Holder terminates
employment or service with the Company prior to the expiration of the
Restriction Period, any Restricted Shares granted to him subject to such
Restriction Period will be forfeited by the Holder and will be transferred to
the Company. The Plan Administrators may, in their sole discretion, accelerate
the lapsing of, or waive, such restrictions in whole or in part based upon such
factors and such circumstances as the Plan Administrators may determine, in
their sole discretion, including, but not limited to, the Holder's retirement,
death, or disability.
STOCKHOLDER RIGHTS. The Holder will have, with respect to the Restricted
Shares granted, all of the rights of a stockholder of the Company, including the
right to vote the shares, and the right to receive any dividends thereon.
Certificates for shares of unrestricted stock will be delivered to the grantee
promptly after, and only after, the Restriction Period in respect of such
Restricted Shares expires without forfeiture, and any conditions with respect to
such shares shall have been satisfied.
CONTINUED EMPLOYMENT OR SERVICE. Each Holder, if requested by the Program
Administrators, must agree in writing as a condition of the granting of his or
her Restricted Shares, to remain in the employment of, or service to, the
Company or any of its subsidiaries following the date of the granting of that
Restricted Share for a period specified by the Program Administrators.
PLAN IV--STATION CASINOS, INC. NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
PURPOSE. The purpose of the Station Casinos, Inc. Nonemployee Directors
Stock Option Plan (the "Nonemployee Plan") is to permit the Company to grant
options to purchase shares of its Common Stock. The Nonemployee Plan is designed
to help attract and retain the services of experienced and knowledgeable
nonemployee directors and to provide such nonemployee directors with an
additional incentive to contribute to the success of the Company. The
Nonemployee Plan is Part IV of the Program.
OPTION TERMS AND CONDITIONS. Each nonemployee director shall receive (a) a
Director Option to acquire 10,000 shares of Common Stock upon his or her
acceptance of an initial appointment to serve as a member of the Board and (b) a
Director Option to acquire an additional 2,500 shares on each anniversary of
such date if the nonemployee director is a member of the Board on such
anniversary.
DURATION OF DIRECTOR OPTIONS. Each Director Option and all rights
thereunder granted pursuant to the terms of the Nonemployee Plan will expire 10
years from the date on which the Director Option is granted. In addition, each
Director Option will be subject to early termination as provided in the
Nonemployee Plan.
PURCHASE PRICE. The purchase price for shares acquired pursuant to the
exercise, in whole or in part, of any Director Option will be the fair market
value of the shares at the time of the grant of the Director Option.
EXERCISE OF DIRECTOR OPTIONS. Each Director Option will be exercisable upon
the date of grant. The Director Option may be exercised for all or a portion of
the shares of Common Stock subject to such Director Option, but no Director
Option may be exercised for a fraction of a share of Common Stock. The purchase
price of any shares purchased must be paid in full in cash, by certified or
cashier's check payable
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to the order of the Company, by shares of Common Stock, or by a combination of
cash, check, or shares of Common Stock, at the time of exercise of the Director
Option. If any portion of the purchase price is paid in shares of Common Stock,
those shares must be tendered at their then fair market value. Payment in shares
of Common Stock includes the automatic application of shares of Common Stock
received upon exercise of a Director Option to satisfy the exercise price for
additional Director Options.
REORGANIZATION. In the event of the dissolution or liquidation of the
Company, any Director Option granted under the Nonemployee Plan will terminate
as of the date of such dissolution or liquidation; provided that not less than
30 days' written notice of such date must be given to each nonemployee director
and each such nonemployee director will have the right during such period
(unless such Director Option shall have previously expired) to exercise any
Director Option.
WRITTEN NOTICE REQUIRED. Any Director Option granted pursuant to the terms
of this Nonemployee Plan will be exercised when written notice of that exercise
has been given to the Company at its principal office by the person entitled to
exercise the Director Option and full payment for the shares with respect to
which the Director Option is exercised has been received by the Company.
DIRECTOR OPTION RIGHTS UPON TERMINATION OF BOARD SERVICE. If a nonemployee
director who receives Director Options under the Nonemployee Plan ceases to be a
member of the Board for any reason other than death or disability, his or her
Director Option shall be exercisable at any time within three months after such
date.
DIRECTOR OPTION RIGHTS UPON DISABILITY. If a nonemployee director who
receives Director Options under this Nonemployee Plan becomes disabled within
the meaning of Code Section 22(e)(3) while a member of the Board, his or her
Director Option will be exercisable at any time within one year after such date.
DIRECTOR OPTION RIGHTS UPON DEATH. If a nonemployee director who receives
Director Options under this Nonemployee Plan dies while a member of the Board,
his or her Director Option will expire one year after the date of death unless
by its terms it expires sooner. During this one year period, the Director Option
may be exercised, to the extent that it remains unexercised on the date of
death, by the person or persons to whom the nonemployee director's rights under
the Director Option will pass by will or by the laws of descent and
distribution, but only to the extent that the nonemployee director is entitled
to exercise the Director Option at the date of death.
DIRECTOR OPTIONS NOT TRANSFERABLE. Director Options granted pursuant to the
terms of the Nonemployee Plan may not be sold, pledged, assigned, or transferred
in any manner otherwise than by will or the laws of descent or distribution and
may be exercised during the lifetime of a nonemployee director only by that
nonemployee director. No such Director Options may be pledged or hypothecated in
any way nor may they be subject to execution, attachment, or similar process.
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
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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.
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.
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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 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.
RESTRICTED SHARES.
A participant will not recognize any income upon the award of restricted
shares unless the participant makes an election under Section 83(b) of the Code
in respect of such grant, as described below. Unless a participant has made an
election under Section 83(b) of the Code in respect of any restricted shares,
any
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dividends received by the participant with respect to restricted shares prior to
the date the participant recognizes income with respect to such award (as
described below) must be treated by the participant as compensation taxable as
ordinary income, and the Company will be entitled to a deduction, in an amount
equal to the amount of ordinary income recognized by the participant. After the
terms and conditions applicable to the restricted shares are satisfied, or if
the participant has made an election under Section 83(b) of the Code in respect
of the restricted shares, any dividends received by the participant in respect
of such award will be treated as a dividend taxable as ordinary income, and the
Company will not be entitled to a deduction in respect of any such dividend
payment.
At the time the terms and conditions applicable to the restricted shares are
satisfied, a participant will recognize compensation taxable as ordinary income,
and the Company will be entitled to a deduction, in an amount equal to the then
fair market value of the shares of unrestricted Common Stock received by the
participant. The participant's tax basis for any such shares of Common Stock
would be the fair market value on the date such terms and conditions are
satisfied.
A participant may irrevocably elect under Section 83(b) of the Code to
recognize compensation taxable as ordinary income, and the Company will be
entitled to a corresponding deduction, in an amount equal to the fair market
value of such restricted shares (determined without regard to any restrictions
thereon) on the date of grant. Such an election must be made by the participant
not later than 30 days after the date of grant. If such an election is made, no
income would be recognized by the participant (and the Company will not be
entitled to a corresponding deduction) at the time the applicable terms and
conditions are satisfied. The participant's tax basis for the restricted shares
received and for any shares of Common Stock subsequently held in respect thereof
would be the fair market value of the restricted shares (determined without
regard to any restrictions thereon) on the date of grant. If a participant makes
such an election and subsequently all or part of the award is forfeited, the
participant will not be entitled to a deduction as a result of such forfeiture.
The holding period for capital gain or loss purposes in respect of the
Common Stock underlying an award of restricted shares shall commence when the
terms and conditions applicable to the restricted shares are satisfied, unless,
the participant makes a timely election under Section 83(b) of the Code. In such
case, the holding period will commence immediately after the grant of such
restricted shares.
LIMITS ON DEDUCTIONS.
Under Section 162(m) of the Code, the amount of compensation paid to the
chief executive officer and the four other most highly paid executive officers
of the Company in the year for which a deduction is claimed by the Company
(including its subsidiaries) is limited to $1,000,000 per person in any year,
except that compensation which is performance-based will be excluded for
purposes of calculating the amount of compensation subject to this $1,000,000
limitation. The ability of the Company to claim a deduction for compensation
paid to any other executive officer or employee of the Company (including its
subsidiaries) is not affected by this provision.
The Company has structured the Plan so that any compensation for which the
Company may claim a deduction in connection with the exercise of non-qualified
stock options and the disposition by an optionee of shares acquired upon the
exercise of incentive stock options will be performance-based within the meaning
of Section 162(m) of Code. Only Performance-Based Restricted Share awards under
the Program qualify as performance-based under Section 162(m) of the Code. Other
restricted share awards under the Program are not deemed to be performance-based
under Section 162(m) of the Code. Therefore, amounts for which the Company may
claim a deduction upon the lapse of any restrictions on such restricted share
awards will be subject to the limitations on deductibility under Section 162(m).
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ADDITIONAL INFORMATION.
The recognition by an employee of compensation income with respect to a
grant or an award under the Plan will be subject to withholding for federal
income and employment tax purposes. If an employee, to the extent permitted by
the terms of a grant or award under the Plan, uses shares of Common Stock to
satisfy the federal income and employment tax withholding obligation, or any
similar withholding obligation for state and local tax obligations, the employee
will recognize a capital gain or loss, short-term or long-term, depending on the
tax basis and holding period for such shares of Common Stock.
APPROVAL OF THE STATION CASINO, INC. STOCK INCENTIVE PROGRAM
The Board of Directors recommends that the stockholders vote FOR approval of
this proposal. If not otherwise specified, proxies will be voted FOR approval.
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 December 8, 1999.
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APPENDIX A
STATION CASINOS, INC.
AMENDED AND RESTATED
STOCK COMPENSATION PROGRAM
THE DATE OF THIS DOCUMENT IS
JUNE 2, 1993
1. PURPOSE. This Station Casinos, Inc. Stock Compensation Program
("Program") is intended to secure for Station Casinos, Inc. ("Company") and its
subsidiaries and its stockholders the benefits arising from ownership of the
Company's common stock ("Common Stock") by those selected key individuals of the
Company and its subsidiaries who will be responsible for the future growth of
such corporations. The Program is designed to help attract and retain superior
personnel for positions of substantial responsibility with the Company and its
subsidiaries, and to provide key individuals with an additional incentive to
contribute to the success of the corporations.
2. ELEMENTS OF THE PROGRAM. In order to maintain flexibility in the award
of stock benefits, the Program is composed of four parts. The first part is the
Incentive Stock Option Plan ("Incentive Plan") under which are granted incentive
stock options ("Incentive Options"). The second part is the Compensatory Stock
Option Plan ("Nonqualified Plan") under which are granted nonqualified stock
options ("Nonqualified Options"). The third part is the Restricted Shares Plan
("Restricted Plan") under which are granted restricted shares of Common Stock.
The fourth part is the Nonemployee Directors Stock Option Plan ("Nonemployee
Plan") under which nonemployee directors are granted nonqualified stock options.
The Incentive Plan, Nonqualified Plan, Restricted Plan, and Nonemployee Plan are
included herein as Part I, Part II, Part III, and Part IV respectively, and are
collectively referred to herein as the "Plans". The grant of an option or
restricted share under one of the Plans shall not be construed to prohibit the
grant of an option or restricted share under any of the other Plans, except that
a grant to a nonemployee director may only be made under Part IV.
3. APPLICABILITY OF GENERAL PROVISIONS. Unless any Plan specifically
indicates to the contrary, all Plans shall be subject to the General Provisions
of the Stock Compensation Program set forth below.
4. ADMINISTRATION OF THE PLANS. The Plans shall be administered,
construed, governed, and amended in accordance with their respective terms
PROVIDED, HOWEVER, in no case shall any action be taken by the Program
Administrators (as defined below) if such action would result in the loss of
"disinterested administrator" status, within the meaning of Rule 16b-3, as
promulgated by the Securities and Exchange Commission ("SEC") under Section
16(b) of the Securities Exchange Act of 1934 ("Exchange Act"), or any successor
rule or regulation thereto, as such Rule is amended or applied from time to time
("SEC Rule 16b-3"), of any director who is a member of the Committee (as defined
below).
GENERAL PROVISIONS OF STOCK COMPENSATION PROGRAM
Article 1. ADMINISTRATION. The program shall be administered by the Board
of Directors of the Company (the "Board") or by a committee appointed by the
Board, consisting of not less than two directors of the Company who are
"disinterested" directors within the meaning of SEC Rule 16b-3 (the
"Committee"); provided, however, that if not all members of the Board are
"disinterested" directors, then the Board shall appoint such a Committee;
PROVIDED, FURTHER, HOWEVER, that the Committee may be comprised solely of two or
more "outside directors" within the meaning of Code Section 162(m) and the
regulations thereunder, as amended from time to time, ("Code Section 162(m)") to
effect grants that are intended to qualify as "performance-based compensation"
within the meaning of Code Section 162(m)". Notwithstanding the foregoing, prior
to the date the Company first registers the Common Stock under Section 12 of the
Exchange Act, as amended, the Program shall be administered by the Board or by a
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committee thereof without regard to the "disinterestedness" of members of the
Board or such committee. Subject to the foregoing limitations, as applicable,
the Board may from time to time remove members from the Committee, fill all
vacancies on the Committee, however caused, and may select one of the members of
the Committee as its Chairman. The members of the Board or Committee, when
acting to administer the Program, are herein collectively referred to as the
"Program Administrators."
The Program Administrators shall hold meetings at such times and places as
they may determine, shall keep minutes of their meetings, and shall adopt,
amend, and revoke such rules and procedures as they may deem proper with respect
to the Program. Any action of the Program Administrators shall be taken by
majority vote or the unanimous written consent of the Program Administrators.
Article 2. AUTHORITY OF PROGRAM ADMINISTRATORS. Subject to the other
provisions of this Program, and with a view to effecting its purpose, the
Program Administrators shall have sole authority, in their absolute discretion,
to, except with regard to awards under Part IV: (a) construe and interpret the
Program; (b) define the terms used herein; (c) determine the individuals to whom
options and restricted shares shall be granted under the Program; (d) determine
the time or times at which options and restricted shares shall be granted under
the Program; (e) determine the number of shares subject to each option and
restricted share, the option price, and the duration of each option granted
under the Program; (f) determine all of the other terms and conditions of
options and restricted shares granted under the Program; and (g) make all other
determinations necessary or advisable for the administration of the Program and
to do everything necessary or appropriate to administer the Program; PROVIDED,
HOWEVER, in no case shall any action be taken by the Program Administrators if
such action would result in the loss of the SEC Rule 16b-3 "disinterested
administrator" status of any director who is a member of the Committee. All
decisions, determinations, and interpretations made by the Program
Administrators shall be binding and conclusive on all participants in the
Program and on their legal representatives, heirs, and beneficiaries; PROVIDED,
FURTHER, HOWEVER, that without approval by the stockholders of the Company
representing a majority of the voting power, no amendment or revision shall (a)
materially increase the maximum number of shares that may be issued under this
Program (see Section 3(a) below); (b) change the minimum purchase price for
shares (see Section 5(b), (c) and (d) below); (c) increase the maximum term
established under the Plans for any Option or Restricted Share (see Section
5(b), (c), (d) and (e) below); (d) materially modify the requirements as to
eligibility for participation in the Program; (e) change the term of the Program
or the requirement of approval of the Program (including amendments thereto); or
(f) materially increase the benefits accruing to participants under the Program,
provided that no stockholder approval shall be required to materially increase
the benefits accruing to participants under the Nonemployee Directors Stock
Option Plan.
Article 3. MAXIMUM NUMBER OF SHARES SUBJECT TO THE PROGRAM. The maximum
aggregate number of shares of Common Stock subject to the Program shall be
10,807,000 shares. The shares of Common Stock to be issued upon exercise of an
option, to the extent exercised for shares of Common Stock, or issued as
restricted shares may be authorized but unissued shares, shares issued and
reacquired by the Company or shares purchased by the Company on the open market.
If any of the options granted under the Program expire or terminate for any
reason before they have been exercised in full, the unpurchased shares subject
to those expired or terminated options shall cease to reduce the number of
shares available for purposes of the Program. If the conditions associated with
the grant of restricted shares are not achieved within the period specified for
satisfaction of the applicable conditions, or if the restricted share grant
terminates for any reason before the date on which the conditions must be
satisfied, the shares of Common Stock associated with such restricted shares
shall cease to reduce the number of shares available for purposes of the
Program.
The proceeds received by the Company from the sale of its Common Stock
pursuant to the exercise of options or transfer of restricted shares under the
Program, if in the form of cash, shall be added to the Company's general funds
and used for general corporate purposes.
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Article 4. ELIGIBILITY AND PARTICIPATION. Officers, key employees,
directors (whether employees or nonemployees), and independent contractors or
consultants of the Company or its subsidiaries who are responsible for or
contribute to the management, growth, or profitability of the business of the
Company or its subsidiaries shall be eligible for selection by the Program
Administrators to participate in Part I, Part II and/or Part III of the Program.
However, Incentive Options may be granted under the Incentive Plan only to a
person who is an employee of the Company or its subsidiaries. An employee may be
granted Nonqualified Options under the Program; provided, however, that the
grant of Nonqualified Options and Incentive Options to an employee shall be the
grant of separate options and each Nonqualified Option and each Incentive Option
shall be specifically designated as such in accordance with applicable
provisions of the Treasury regulations. Only nonemployee directors are eligible
to receive grants under Part IV of the Program.
Article 5. EFFECTIVE DATE AND TERM OF PROGRAM. The Program shall become
effective upon its adoption by the Board of Directors of the Company subject to
approval of the Program by a majority of the stockholders of the Company voting
in person or by proxy at a meeting of stockholders following adoption of the
Program by the Board of Directors, which vote shall be taken within 12 months of
adoption of the Program by the Company's Board of Directors; provided, however,
that options and restricted shares may be granted under this Program prior to
obtaining stockholder approval of the Program, but any such options or
restricted shares shall be contingent upon such stockholder approval being
obtained and may not be exercised prior to such approval. The Program shall
continue in effect for a term of 10 years unless sooner terminated under Article
7 of these General Provisions.
Article 6. ADJUSTMENTS. If the outstanding shares of Common Stock are
increased, decreased, changed into, or exchanged for a different number or kind
of shares or securities through merger, consolidation, combination, exchange of
shares, other reorganization, recapitalization, reclassification, stock
dividend, stock split or reverse stock split, an appropriate and proportionate
adjustment shall be made in the maximum number and kind of shares as to which
options and restricted shares may be granted under this Program. A corresponding
adjustment changing the number and kind of shares allocated to unexercised
options, restricted shares, or portions thereof, which shall have been granted
prior to any such change, shall likewise be made. Any such adjustment in
outstanding options shall be made without change in the aggregate purchase price
applicable to the unexercised portion of the option, but with a corresponding
adjustment in the price for each share or other unit of any security covered by
the option.
Article 7. TERMINATION AND AMENDMENT OF PROGRAM. The Program shall
terminate 10 years from the date such program is adopted by the Board of
Directors, or the date such program is approved by the stockholders, whichever
is earlier, or shall terminate at such earlier time as the Board of Directors
may so determine. No options or restricted shares shall be granted under the
Program after that date. Subject to the limitation contained in Article 8 of
these General Provisions, the Plan Administrators may at any time amend or
revise the terms of the Program, including the form and substance of the option
and restricted share agreements to be used hereunder; PROVIDED, HOWEVER, that
the terms and provisions of the Program which determine the eligibility of
nonemployee directors to receive grants under Part IV and the amount, price and
timing of the formula grants under such Part IV shall not be amended more than
once every six months, other than to comport with changes in the Internal
Revenue Code of 1986, as amended, (the "Code"), the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder; PROVIDED, FURTHER,
HOWEVER, that without approval by the stockholders of the Company representing a
majority of the voting power (as contained in Article 5 of these General
Provisions) no amendment or revision shall (a) materially increase the maximum
number of shares that may be issued under this Program; (b) change the minimum
purchase price for shares under Section 4 of Plans I, II and IV; (c) increase
the maximum term established under the Plans for any option or restricted share;
(d) materially modify the requirements as to eligibility for participation in
the Program; (e) change the term of the Program described in Article 5 of these
General Provisions; or (f) materially increase the
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benefits accruing to participants under the Program. In addition, no such
amendment or revision shall be effective if it would disqualify the Program from
the exemptions provided by SEC Rule 16b-3.
Article 8. PRIOR RIGHTS AND OBLIGATIONS. No amendment, suspension, or
termination of the Program shall, without the consent of the individual who has
received an option or restricted share, alter or impair any of that person's
rights or obligations under any option or restricted share granted under the
Program prior to that amendment, suspension, or termination.
Article 9. PRIVILEGES OF STOCK OWNERSHIP. Notwithstanding the exercise of
any option granted pursuant to the terms of this Program or the achievement of
any conditions specified in any restricted share granted pursuant to the terms
of this Program, no individual shall have any of the rights or privileges of a
stockholder of the Company in respect of any shares of stock issuable upon the
exercise of his or her option or the satisfaction of his or her restricted share
conditions until certificates representing the shares have been issued and
delivered. No shares shall be required to be issued and delivered upon exercise
of any option or satisfaction of any conditions with respect to a restricted
share unless and until all of the requirements of law and of all regulatory
agencies having jurisdiction over the issuance and delivery of the securities
shall have been fully complied with.
Article 10. RESERVATION OF SHARES OF COMMON STOCK. The Company, during the
term of this Program, will at all times reserve and keep available such number
of shares of its Common Stock as shall be sufficient to satisfy the requirements
of the Program. In addition, the Company will from time to time, as is necessary
to accomplish the purposes of this Program, seek or obtain from any regulatory
agency having jurisdiction any requisite authority in order to issue and sell
shares of Common Stock hereunder. The inability of the Company to obtain from
any regulatory agency having jurisdiction the authority deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any shares of its
stock hereunder shall relieve the Company of any liability in respect of the
nonissuance or sale of the stock as to which the requisite authority shall not
have been obtained.
Article 11. TAX WITHHOLDING. The exercise of any option or the
satisfaction of the conditions imposed upon any restricted share granted under
this Program is subject to the condition that if at any time the Company shall
determine, in its discretion, that the satisfaction of withholding tax or other
withholding liabilities under any state or federal law is necessary or desirable
as a condition of, or in connection with, such exercise or the delivery or
purchase of shares pursuant thereto, then in such event, the exercise of the
option or the satisfaction of the conditions imposed upon the restricted share
shall not be effective unless such withholding shall have been effected or
obtained in a manner acceptable to the Company.
Article 12. SEC COMPLIANCE. With respect to persons subject to Section 16
of the Exchange Act, transactions under the Program are intended to comply with
all applicable conditions of SEC Rule 16b-3. To the extent any provision of the
Program or any action of the Program Administrators fails to comply with such
rule, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee. If a person subject to Section 16 of the
Exchange Act exercises his or her rights under a grant under the Program or
receives unrestricted Common Stock through a grant under Part III of the Program
before six months have passed from the date of the grant, the Company shall hold
in its custody any resulting stock certificate until six months has passed from
the date of the grant.
Article 13. GOVERNING LAW. The validity, construction, interpretation and
effect of the Program shall exclusively be governed by and determined in
accordance with the law of the State of Nevada (without reference to the
principles of conflict of laws thereof), except to the extent preempted by
federal law which shall govern to that extent.
Article 14. MAXIMUM NUMBER OF OPTIONS GRANTED IN ANY CALENDAR
YEAR. Notwithstanding any other provision of the Program, the number of shares
of Common Stock underlying Incentive Options and Nonqualified Options granted
under the Incentive Plan and the Nonqualified Plan of the Program,
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respectively, in any calendar year to any individual participating in the
Program shall not exceed the maximum number of shares issuable under the
Program.
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PLAN I
STATION CASINOS, INC.
INCENTIVE STOCK OPTION PLAN
Section 1. PURPOSE. The purpose of this Station Casinos, Inc. Incentive
Stock Option Plan ("Plan") is to promote the growth and general prosperity of
the Company by permitting the Company to grant options to purchase shares of its
Common Stock. The Plan is designed to help attract and retain superior personnel
for positions of substantial responsibility with the Company and its
subsidiaries, and to provide key individuals with an additional incentive to
contribute to the success of the Company. The Company intends that options
granted pursuant to the provisions of the Plan (the "Incentive Options") will
qualify as "incentive stock options" within the meaning of Code Section 422 or
any successor to such section. This Plan is Part I of the Program. Unless any
provision herein indicates to the contrary, this Plan shall be subject to the
General Provisions of the Program.
Section 2. INCENTIVE OPTION TERMS AND CONDITIONS. The terms and conditions
of Incentive Options granted under the Plan may differ from one another as the
Program Administrators shall, in their discretion, determine as long as all
Incentive Options granted under the Plan satisfy the requirements of the Plan.
Section 3. DURATION OF INCENTIVE OPTIONS. Each Incentive Option and all
rights thereunder granted pursuant to the terms of the Plan shall expire on the
date determined by the Program Administrators, but in no event shall any
Incentive Option granted under the Plan expire later than 10 years from the date
on which the Incentive Option is granted. However, notwithstanding the above
portion of this Section 3, if at the time the Incentive Option is granted the
grantee ("Optionee") owns or would be considered to own by reason of Code
Section 424(d) more than 10% of the total combined voting power of all classes
of stock of the Company or its subsidiaries, such Incentive Option shall expire
not more than 5 years from the date the Incentive Option is granted. In
addition, each Incentive Option shall be subject to early termination as
provided in the Plan.
Section 4. PURCHASE PRICE. The purchase price for shares acquired pursuant
to the exercise, in whole or in part, of any Incentive Option shall not be less
than the fair market value of the shares at the time of the grant of the
Incentive Option. Fair market value ("Fair Market Value") shall be determined by
the Program Administrators on the basis of such factors as they deem
appropriate; provided, however, that Fair Market Value on any day shall be
deemed to be, if the Common Stock is traded on a national securities exchange,
the closing price (or, if no reported sale takes place on such day, the mean of
the reported bid and asked prices) of the Common Stock on such day on the
principal such exchange, or, if the stock is included on the composite tape, the
composite tape. In each case, the Plan Administrators' determination of Fair
Market Value shall be conclusive.
Notwithstanding the above portion of this Section 4, if at the time an
Incentive Option is granted the Optionee owns or would be considered to own by
reason of Code Section 424(d) more than 10% of the total combined voting power
of all classes of stock of the Company or its subsidiaries, the purchase price
of the shares covered by such Incentive Option shall not be less than 110% of
the Fair Market Value of a share of Common Stock on the date the Incentive
Option is granted.
Section 5. MAXIMUM AMOUNT OF INCENTIVE OPTIONS EXERCISABLE IN ANY CALENDAR
YEAR. Notwithstanding any other provision of this Plan, the aggregate Fair
Market Value (determined at the time any Incentive Option is granted) of the
Common Stock with respect to which Incentive Options become exercisable for the
first time by any employee during any calendar year under all stock option plans
of the Company and its subsidiaries shall not exceed $100,000.
Section 6. EXERCISE OF INCENTIVE OPTIONS. Each Incentive Option shall be
exercisable in one or more installments during its term, and the right to
exercise may be cumulative as determined by the Program Administrators. No
Incentive Option may be exercised for a fraction of a share of Common Stock. The
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purchase price of any shares purchased shall be paid in full in cash or by
certified or cashier's check payable to the order of the Company or by shares of
Common Stock, if permitted by the Program Administrators, or by a combination of
cash, check, or shares of Common Stock, at the time of exercise of the Incentive
Option. If any portion of the purchase price is paid in shares of Common Stock,
those shares shall be tendered at their then Fair Market Value as determined by
the Program Administrators in accordance with Section 4 of this Plan. Payment in
shares of Common Stock includes the automatic application of shares of Common
Stock received upon exercise of an Incentive Option to satisfy the exercise
price for additional Incentive Options.
Section 7. REORGANIZATION. In the event of the dissolution or liquidation
of the Company, any Incentive Option granted under the Plan shall terminate as
of a date to be fixed by the Plan Administrators; provided that not less than 30
days' written notice of the date so fixed shall be given to each Optionee and
each such Optionee shall have the right during such period (unless such
Incentive Option shall have previously expired) to exercise any Incentive
Option, including any Incentive Option that would not otherwise be exercisable
by reason of an insufficient lapse of time.
In the event of a Reorganization (as defined below) in which the Company is
not the surviving or acquiring company, or in which the Company is or becomes a
subsidiary of another company after the effective date of the Reorganization,
then:
(a) if there is no plan or agreement respecting the Reorganization
("Reorganization Agreement") or if the Reorganization Agreement does not
specifically provide for the change, conversion or exchange of the
outstanding Incentive Options for options of another corporation, then
exercise and termination provisions equivalent to those described in this
Section 7 shall apply; or
(b) if there is a Reorganization Agreement and if the Reorganization
Agreement specifically provides for the change, conversion, or exchange of
the outstanding Incentive Options for options of another corporation, then
the Plan Administrators shall adjust the outstanding unexercised Incentive
Options (and shall adjust the Incentive Options remaining under the Plan
which have not yet been granted if the Reorganization Agreement makes
specific provision for such an adjustment) in a manner consistent with the
applicable provisions of the Reorganization Agreement.
The term "Reorganization" as used in this Section 7 shall mean any statutory
merger, statutory consolidation, sale of all or substantially all of the assets
of the Company or a sale of the Common Stock pursuant to which the Company is or
becomes a subsidiary of another company after the effective date of the
Reorganization.
Adjustments and determinations under this Section 7 shall be made by the
Plan Administrators, whose decisions as to such adjustments or determinations
shall be final, binding, and conclusive.
Section 8. WRITTEN NOTICE REQUIRED. Any Incentive Option granted pursuant
to the terms of the Plan shall be exercised when written notice of that exercise
has been given to the Company at its principal office by the person entitled to
exercise the Incentive Option and full payment for the shares with respect to
which the Incentive Option is exercised has been received by the Company.
Section 9. COMPLIANCE WITH SECURITIES AND GAMING LAWS. Shares of Common
Stock shall not be issued with respect to any Incentive Option granted under the
Plan unless the exercise of that Incentive Option and the issuance and delivery
of those shares pursuant to that exercise shall comply with all relevant
provisions of state and federal law including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. The Program Administrators may also
require an Optionee to furnish evidence satisfactory to the Company, including a
written and signed representation letter and consent to be bound by any transfer
restriction imposed by law, legend, condition, or otherwise, that the shares are
being purchased only for investment and without any present intention to sell or
distribute the
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shares in violation of any state or federal law, rule, or regulation. Further,
each Optionee shall consent to the imposition of a legend on the shares of
Common Stock subject to his or her Incentive Option restricting their
transferability as required by law or by this section 9. Finally, shares of
Common Stock shall not be issued with respect to any Incentive Option granted
under the Plan unless the exercise of that Incentive Option and the issuance and
delivery of those shares pursuant to that exercise shall comply with all
relevant provisions of gaming laws or regulations and any registration,
approval, or action thereunder.
Section 10. EMPLOYMENT OF OPTIONEE. Each Optionee, if requested by the
Program Administrators, must agree in writing as a condition of receiving his or
her Incentive Option, that he or she will remain in the employment of the
Company or its subsidiary corporations following the date of the granting of
that Incentive Option for a period specified by the Program Administrators.
Nothing in the Plan or in any Incentive Option granted hereunder shall confer
upon any Optionee any right to continued employment by the Company or its
subsidiary corporations or limit in any way the right of the Company or its
subsidiary corporations at any time to terminate or alter the terms of that
employment.
Section 11. INCENTIVE OPTION RIGHTS UPON TERMINATION OF EMPLOYMENT. If an
Optionee ceases to be employed by the Company or any subsidiary corporation for
any reason other than death or disability, his or her Incentive Option shall
immediately terminate; provided, however, that the Program Administrators may,
in their discretion, allow the Incentive Option to be exercised (to the extent
exercisable on the date of termination of employment) at any time within three
months after the date of termination of employment, unless either the Incentive
Option or the Plan otherwise provides for earlier termination.
Section 12. INCENTIVE OPTION RIGHTS UPON DISABILITY. If an Optionee
becomes disabled within the meaning of Code Section 22(e)(3) while employed by
the Company or any subsidiary corporation, the Program Administrators, in their
discretion, may allow the Incentive Option to be exercised, to the extent
exercisable on the date of termination of employment, at any time within one
year after the date of termination of employment due to disability, unless
either the Incentive Option or the Plan otherwise provides for earlier
termination.
Section 13. INCENTIVE OPTION RIGHTS UPON DEATH OF OPTIONEE. Except as
otherwise limited by the Program Administrators at the time of the grant of an
Incentive Option, if an Optionee dies while employed by the Company or any
subsidiary corporation, or within three months after ceasing to be an employee
thereof, his or her Incentive Option shall expire one year after the date of
death unless by its terms it expires sooner. During this one year or shorter
period, the Incentive Option may be exercised, to the extent that it remains
unexercised on the date of death, by the person or persons to whom the
Optionee's rights under the Incentive Option shall pass by will or by the laws
of descent and distribution, but only to the extent that the Optionee is
entitled to exercise the Incentive Option at the date of death.
Section 14. INCENTIVE OPTIONS NOT TRANSFERABLE. Incentive Options granted
pursuant to the terms of the Plan may not be sold, pledged, assigned, or
transferred in any manner otherwise than by will or the laws of descent or
distribution and may be exercised during the lifetime of an Optionee only by
that Optionee. No such Incentive Options shall be pledged or hypothecated in any
way nor shall they be subject to execution, attachment, or similar process.
Section 15. ADJUSTMENTS TO NUMBER AND PURCHASE PRICE OF OPTIONED
SHARES. All Incentive Options granted pursuant to the terms of this Plan shall
be adjusted in the manner prescribed by Article 6 of the General Provisions of
this Program.
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PLAN II
STATION CASINOS, INC.
COMPENSATORY STOCK OPTION PLAN
Section 1. PURPOSE. The purpose of this Station Casinos, Inc. Compensatory
Stock Option Plan ("Plan") is to permit the Company to grant options to purchase
shares of its Common Stock. The Plan is designed to help attract and retain
superior personnel for positions of substantial responsibility with the Company
and its subsidiaries, and to provide key individuals with an additional
incentive to contribute to the success of the Company. Any option granted
pursuant to this Plan (a "Nonqualified Option") shall be clearly and
specifically designated as not being an incentive stock option, as defined in
Code Section 422. This Plan is Part II of the Program. Unless any provision
herein indicates to the contrary, this Plan shall be subject to the General
Provisions of the Program.
Section 2. NONQUALIFIED OPTION TERMS AND CONDITIONS. The terms and
conditions of Nonqualified Options granted under this Plan may differ from one
another as the Program Administrators shall in their discretion determine as
long as all Nonqualified Options granted under the Plan satisfy the requirements
of the Plan.
Section 3. DURATION OF NONQUALIFIED OPTIONS. Each Nonqualified Option and
all rights thereunder granted pursuant to the terms of this Plan shall expire on
the date determined by the Program Administrators, but in no event shall any
Nonqualified Option granted under the Plan expire later than 10 years from the
date on which the Nonqualified Option is granted. In addition, each Nonqualified
Option shall be subject to early termination as provided in the Plan.
Section 4. PURCHASE PRICE. The purchase price for shares acquired pursuant
to the exercise, in whole or in part, of any Nonqualified Option shall not be
less than the fair market value of the shares at the time of the grant of the
Nonqualified Option. Fair market value ("Fair Market Value") shall be determined
by the Program Administrators on the basis of such factors as they deem
appropriate; provided, however, that Fair Market Value on any day shall be
deemed to be, if the Common Stock is traded on a national securities exchange,
the closing price (or, if no reported sale takes place on such day, the mean of
the reported bid and asked prices) of the Common Stock on such day on the
principal such exchange, or, if the stock is included on the composite tape, the
composite tape. In each case, the Program Administrators' determination of Fair
Market Value shall be conclusive.
Section 5. EXERCISE OF NONQUALIFIED OPTIONS. Each Nonqualified Option
shall be exercisable in one or more installments during its term and the right
to exercise may be cumulative as determined by the Program Administrators. No
Nonqualified Option may be exercised for a fraction of a share of Common Stock.
The purchase price of any shares purchased shall be paid in full in cash or by
certified or cashier's check payable to the order of the Company or by shares of
Common Stock, if permitted by the Program Administrators, or by a combination of
cash, check, or shares of Common Stock, at the time of exercise of the
Nonqualified Option. If any portion of the purchase price is paid in shares of
Common Stock, those shares shall be tendered at their then Fair Market Value as
determined by the Program Administrators in accordance with Section 4 of this
Plan. Payment in shares of Common Stock includes the automatic application of
shares of Common Stock received upon exercise of a Nonqualified Option to
satisfy the exercise price for additional Nonqualified Options.
Section 6. REORGANIZATION. In the event of the dissolution or liquidation
of the Company, any Nonqualified Option granted under the Plan shall terminate
as of a date to be fixed by the Program Administrators; provided that not less
than 30 days' written notice of the date so fixed shall be given to each
Optionee and each such Optionee shall have the right during such period (unless
such Nonqualified Option shall have previously expired) to exercise any
Nonqualified Option, including any Nonqualified Option that would not otherwise
be exercisable by reason of an insufficient lapse of time.
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In the event of a Reorganization (as defined below) in which the Company is
not the surviving or acquiring company, or in which the Company is or becomes a
subsidiary of another company after the effective date of the Reorganization,
then:
(a) if there is no plan or agreement respecting the Reorganization
("Reorganization Agreement") or if the Reorganization Agreement does not
specifically provide for the change, conversion or exchange of the
outstanding Nonqualified Options for options of another corporation, then
exercise and termination provisions equivalent to those described in this
Section 6 shall apply; or
(b) if there is a Reorganization Agreement and if the Reorganization
Agreement specifically provides for the change, conversion, or exchange of
the outstanding Nonqualified Options for options of another corporation,
then the Program Administrators shall adjust the outstanding unexercised
Nonqualified Options (and shall adjust the Nonqualified Options remaining
under the Plan which have not yet been granted if the Reorganization
Agreement makes specific provision for such an adjustment) in a manner
consistent with the applicable provisions of the Reorganization Agreement.
The term "Reorganization" as used in this Section 6 shall mean any statutory
merger, statutory consolidation, sale of all or substantially all of the assets
of the Company or a sale of the Common Stock pursuant to which the Company is or
becomes a subsidiary of another company after the effective date of the
Reorganization.
Adjustments and determinations under this Section 6 shall be made by the
Program Administrators, whose decisions as to such adjustments or determinations
shall be final, binding, and conclusive.
Section 7. WRITTEN NOTICE REQUIRED. Any Nonqualified Option granted
pursuant to the terms of this Plan shall be exercised when written notice of
that exercise has been given to the Company at its principal office by the
person entitled to exercise the Nonqualified Option and full payment for the
shares with respect to which the Nonqualified Option is exercised has been
received by the Company.
Section 8. COMPLIANCE WITH SECURITIES AND GAMING LAWS. Shares shall not be
issued with respect to any Nonqualified Option granted under the Plan unless the
exercise of that Nonqualified Option and the issuance and delivery of the shares
pursuant thereto shall comply with all relevant provisions of state and federal
law, including, without limitation, the Securities Act of 1933, as amended, the
rules and regulations promulgated thereunder and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance. The
Program Administrators may also require an Optionee to furnish evidence
satisfactory to the Company, including a written and signed representation
letter and consent to be bound by any transfer restrictions imposed by law,
legend, condition, or otherwise, that the shares are being purchased only for
investment purposes and without any present intention to sell or distribute the
shares in violation of any state or federal law, rule, or regulation. Further,
each Optionee shall consent to the imposition of a legend on the shares of
Common Stock subject to his or her Incentive Option restricting their
transferability as required by law or by this Section 8. Finally, shares of
Common Stock shall not be issued with respect to any Nonqualified Option granted
under the Plan unless the exercise of that Nonqualified Option and the issuance
and delivery of those shares pursuant to that exercise shall comply with all
relevant provisions of gaming laws or regulations and any registration,
approval, or action thereunder.
Section 9. CONTINUED EMPLOYMENT OR SERVICE. Each Optionee, if requested by
the Program Administrators, must agree in writing as a condition of the granting
of his or her Nonqualified Option, to remain in the employment of, or service
to, the Company or any of its subsidiaries following the date of the granting of
that Nonqualified Option for a period specified by the Program Administrators.
Nothing in this Plan or in any Nonqualified Option granted hereunder shall
confer upon any Optionee any right to continued employment by, or service to,
the Company or any of its subsidiaries, or limit in any way the right of the
Company or any subsidiary at any time to terminate or alter the terms of that
employment or service arrangement.
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Section 10. NONQUALIFIED OPTION RIGHTS UPON TERMINATION OF EMPLOYMENT OR
SERVICE. If an Optionee under this Plan ceases to be employed by, or provide
services to, the Company or any of its subsidiaries for any reason other than
death or disability, his or her Nonqualified Option shall immediately terminate;
provided, however, that the Program Administrators may, in their discretion,
allow the Nonqualified Option to be exercised, to the extent exercisable on the
date of termination of employment or service, at any time within three months
after the date of termination of employment or service, unless either the
Nonqualified Option or this Plan otherwise provides for earlier termination.
Section 11. NONQUALIFIED OPTION RIGHTS UPON DISABILITY. If an Optionee
becomes disabled within the meaning of Code Section 22(e)(3) while employed by
the Company or any subsidiary corporation, the Program Administrators, in their
discretion, may allow the Nonqualified Option to be exercised, to the extent
exercisable on the date of termination of employment, at any time within one
year after the date of termination of employment due to disability, unless
either the Nonqualified Option or the Plan otherwise provides for earlier
termination.
Section 12. NONQUALIFIED OPTION RIGHTS UPON DEATH OF OPTIONEE. Except as
otherwise limited by the Program Administrators at the time of the grant of a
Nonqualified Option, if an Optionee dies while employed by, or providing
services to, the Company or any of its subsidiaries, his or her Nonqualified
Option shall expire one year after the date of death unless by its terms it
expires sooner. During this one year or shorter period, the Nonqualified Option
may be exercised, to the extent that it remains unexercised on the date of
death, by the person or persons to whom the Optionee's rights under the
Nonqualified Option shall pass by will or by the laws of descent and
distribution, but only to the extent that the Optionee is entitled to exercise
the Nonqualified Option at the date of death.
Section 13. NONQUALIFIED OPTIONS NOT TRANSFERABLE. Nonqualified Options
granted pursuant to the terms of this Plan may not be sold, pledged, assigned,
or transferred in any manner otherwise than by will or the laws of descent or
distribution and may be exercised during the lifetime of an Optionee only by
that Optionee. No such Nonqualified Options shall be pledged or hypothecated in
any way nor shall they be subject to execution, attachment, or similar process.
Section 14. ADJUSTMENTS TO NUMBER AND PURCHASE PRICE OF OPTIONED
SHARES. All Nonqualified Options granted pursuant to the terms of this Plan
shall be adjusted in a manner prescribed by Article 6 of the General Provisions
of the Program.
PLAN III
STATION CASINOS, INC.
RESTRICTED SHARE PLAN
Section 1. PURPOSE. The purpose of this Station Casinos, Inc. Restricted
Share Plan ("Plan") is to promote the growth and general prosperity of the
Company by permitting the Company to grant restricted shares to help attract and
retain superior personnel for positions of substantial responsibility with the
Company and its subsidiaries and to provide key individuals with an additional
incentive to contribute to the success of the Company. The Plan is Part III of
the Program. Unless any provision herein indicates to the contrary, this Plan
shall be subject to the general provisions of the Program.
Section 2. TERMS AND CONDITIONS. The terms and conditions of restricted
shares granted under the Plan ("Restricted Shares") may differ from one another
as the Program Administrators shall, in their discretion, determine as long as
all Restricted Shares granted under the Plan satisfy the requirements of the
Plan.
Each grant of Restricted Shares shall provide to the recipient ("Holder")
the transfer of a specified number of shares of Common Stock of the Company that
shall become nonforfeitable upon the achievement of specified service or
performance conditions within a specified period ("Restriction Period") as
determined by the Program Administrators. At the time that the Restricted Share
is granted, the Program
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Administrators shall specify the service or performance conditions and the
period of duration over which the conditions apply.
The Holder of Restricted Shares shall not have any rights with respect to
such award, unless and until such Holder has executed an agreement evidencing
the terms and conditions of the award ("Restricted Share Award Agreement"). Each
individual who is awarded Restricted Shares shall be issued a stock certificate
in respect of such shares. Such certificate shall be registered in the name of
the Holder and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award, substantially in the
following form:
The transferability of this certificate and the shares of stock represented
hereby are subject to the terms and conditions (including forfeiture) of the
Station Casinos, Inc., Restricted Share Plan and Restricted Share Award
Agreement entered into between the registered owner and Station Casinos,
Inc. Copies of such Plan and Agreement are on file in the offices of Station
Casinos, Inc.
The Program Administrators shall require that the stock certificates
evidencing such shares be held in the custody of the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any grant of
Restricted Shares, the Holder shall have delivered a stock power, endorsed in
blank, relating to the stock covered by such award. At the expiration of each
Restriction Period, the Company shall redeliver to the Holder certificates held
by the Company representing the shares with respect to which the applicable
conditions have been satisfied.
Section 3. AWARDS NOT TRANSFERABLE. During the Restriction Period, the
Holder shall not be permitted to sell, transfer, pledge, or assign shares of
Restricted Shares awarded under the Plan, other than by will and the laws of
descent and distribution.
Section 4. RESTRICTED SHARE RIGHTS UPON EMPLOYMENT OR SERVICE. If a Holder
terminates employment or service with the company prior to the expiration of the
Restriction Period, any Restricted Shares granted to him subject to such
Restriction Period shall be forfeited by the Holder and shall be transferred to
the Company. The Plan Administrators may, in their sole discretion, accelerate
the lapsing of, or waive, such restrictions in whole or in part based upon such
factors and such circumstances as the Plan Administrators may determine, in
their sole discretion, including, but not limited to, the Holder's retirement,
death, or disability.
Section 5. STOCKHOLDER RIGHTS. The Holder shall have, with respect to the
Restricted Shares granted, all of the rights of a stockholder of the Company,
including the right to vote the shares, and the right to receive any dividends
thereon. Certificates for shares of unrestricted stock shall be delivered to the
grantee promptly after, and only after, the Restriction Period in respect of
such Restricted Shares shall expire without forfeiture, and any conditions with
respect to such shares shall have been satisfied.
Section 6. COMPLIANCE WITH SECURITIES AND GAMING LAWS. Shares shall not be
issued under the Plan unless the issuance and delivery of the shares pursuant
thereto shall comply with all relevant provisions of state and federal law,
including, without limitation, the Securities Act of 1933, as amended, the rules
and regulations promulgated thereunder and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance. The
Program Administrators may also require a Holder to furnish evidence
satisfactory to the Company, including a written and signed representation
letter and consent to be bound by any transfer restrictions imposed by law,
legend, condition, or otherwise, that the shares are being purchased only for
investment purposes and without any present intention to sell or distribute the
shares in violation of any state or federal law, rule, or regulation. Further,
each Holder shall consent to the imposition of a legend on the shares of Common
Stock subject to his or her grant of Restricted Shares restricting their
transferability as required by law or by this Section 6. Finally, shares of
Common Stock shall not be issued and delivered under the Plan unless the
issuance and delivery of those shares shall comply with all relevant provisions
of gaming laws or regulations and any registration, approval, or action
thereunder.
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Section 7. CONTINUED EMPLOYMENT OR SERVICE. Each Holder, if requested by
the Program Administrators, must agree in writing as a condition of the granting
of his or her Restricted Shares, to remain in the employment of, or service to,
the Company or any of its subsidiaries following the date of the granting of
that Restricted Share for a period specified by the Program Administrators.
Nothing in this Plan or in any Restricted Share granted hereunder shall confer
upon any Holder any right to continued employment by, or service to, the Company
or any of its subsidiaries, or limit in any way the right of the Company or any
subsidiary at any time to terminate or alter the terms of that employment or
service arrangement.
Section 8. ADJUSTMENTS TO NUMBER OF RESTRICTED SHARES. All Restricted
Shares granted pursuant to the terms of this Plan shall be adjusted in a manner
prescribed by Article 6 of the General Provisions of the Program.
Section 9. PERFORMANCE-BASED RESTRICTED SHARES. The Committee may also
grant Restricted Shares that are subject to a risk of forfeiture if specified
performance criteria are not met within a specified period ("Performance-Based
Restricted Shares"). Performance-Based Restricted Shares shall be forfeited
unless preestablished performance criteria specified by the Committee are met
during the applicable restriction period. Performance-Based Restricted Shares
subject to performance criteria are intended to be "qualified performance-based
compensation" within the meaning of Code Section 162(m) and shall be paid solely
on account of the attainment of one or more preestablished, objective
performance goals within the meaning of Code Section 162(m). Until otherwise
determined by the Committee, Performance-Based Restricted Shares shall become
nonforfeitable upon the attainment of one or more preestablished levels of net
income, earnings per share, total shareholder return, return on equity employed
or cash flow. The payout of any Performance-Based Restricted Shares to any
individual may be reduced, but not increased, based on the degree of attainment
of the performance criteria or otherwise at the discretion of the Committee.
Subject to adjustment under Section 8 of this Plan, all individuals in the
aggregate may not receive in any calendar year Performance-Based Restricted
Shares exceeding, in the aggregate, 1,000,000 shares of Common Stock and any one
individual may not receive in any calendar year Performance-Based Restricted
Shares exceeding 500,000 shares of Common Stock.
PLAN IV
STATION CASINOS, INC.
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
Section 1. PURPOSE. The purpose of this Station Casinos, Inc. Nonemployee
Directors Stock Option Plan ("Plan") is to permit the Company to grant options
to purchase shares of its Common Stock. The Plan is designed to help attract and
retain the services of experienced and knowledgeable nonemployee directors and
to provide such nonemployee directors with an additional incentive to contribute
to the success of the Company. The Plan is intended to constitute a "formula
plan" for purposes of SEC Rule 16b-3. Any option granted pursuant to this Plan
(a "Director Option") shall be clearly and specifically designated as not being
an incentive stock option, as defined in Code Section 422. This Plan is Part IV
of the Program. Unless any provision herein indicates to the contrary, this Plan
shall be subject to the General Provisions of the Program.
Section 2. OPTION TERMS AND CONDITIONS. Each nonemployee director shall
receive (a) a Director Option to acquire 10,000 shares of Common Stock upon his
or her acceptance of an initial appointment to serve as a member of the Board
and (b) a Director Option to acquire an additional 2,500 shares on each
anniversary of such date if the nonemployee director is a member of the Board on
such anniversary.
Section 3. DURATION OF DIRECTOR OPTIONS. Each Director Option and all
rights thereunder granted pursuant to the terms of this Plan shall expire 10
years from the date on which the Director Option is granted. In addition, each
Director Option shall be subject to early termination as provided in the Plan.
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Section 4. PURCHASE PRICE. The purchase price for shares acquired pursuant
to the exercise, in whole or in part, of any Director Option shall be the fair
market value of the shares at the time of the grant of the Director Option. Fair
market value ("Fair Market Value") shall be the closing price (or, if no
reported sale takes place on such day, the mean of the reported bid and asked
prices) of the Common Stock on such day on the principal national securities
exchange on which the Common Stock is traded, or if the stock is included on the
composite tape, the composite tape. Notwithstanding the immediately preceding
sentence, if a nonemployee director becomes a member of the Board prior to or
upon the closing of the initial public offering of the Common Stock by the
Company, the Fair Market Value of the shares at the time of the nonemployee
director's initial appointment to the Board will be the initial public offering
price of the Common Stock.
Section 5. EXERCISE OF DIRECTOR OPTIONS. Each Director Option shall be
exercisable upon the date of grant. The Director Option may be exercised for all
or a portion of the shares of Common Stock subject to such Director Option, but
no Director Option may be exercised for a fraction of a share of Common Stock.
The purchase price of any shares purchased shall be paid in full in cash, by
certified or cashier's check payable to the order of the Company, by shares of
Common Stock, or by a combination of cash, check, or shares of Common Stock, at
the time of exercise of the Director Option. If any portion of the purchase
price is paid in shares of Common Stock, those shares shall be tendered at their
then Fair Market Value as determined in accordance with Section 4 of this Plan.
Payment in shares of Common Stock includes the automatic application of shares
of Common Stock received upon exercise of a Director Option to satisfy the
exercise price for additional Director Options.
Section 6. REORGANIZATION. In the event of the dissolution or liquidation
of the Company, any Director Option granted under the Plan shall terminate as of
the date of such dissolution or liquidation; provided that not less than 30
days' written notice of such date shall be given to each nonemployee director
and each such nonemployee director shall have the right during such period
(unless such Director Option shall have previously expired) to exercise any
Director Option.
In the event of a Reorganization (as defined below) in which the Company is
not the surviving or acquiring company, or in which the Company is or becomes a
subsidiary of another company after the effective date of the Reorganization,
then:
(a) if there is no plan or agreement respecting the Reorganization
("Reorganization Agreement") or if the Reorganization Agreement does not
specifically provide for the change, conversion or exchange of the
outstanding Director Options for options of another corporation, then
exercise and termination provisions equivalent to those described in this
Section 6 shall apply; or
(b) if there is a Reorganization Agreement and if the Reorganization
Agreement specifically provides for the change, conversion, or exchange of
the outstanding Director Options for options of another corporation, then
the outstanding unexercised Director Options shall be adjusted (as well the
Director Options remaining under the Plan which have not yet been granted if
the Reorganization Agreement makes specific provision for such an
adjustment) in a manner consistent with the applicable provisions of the
Reorganization Agreement.
The term "Reorganization" as used in this Section 6 shall mean any statutory
merger, statutory consolidation, sale of all or substantially all of the assets
of the Company or a sale of the Common Stock pursuant to which the Company is or
becomes a subsidiary of another company after the effective date of the
Reorganization.
Adjustments and determinations under this Section 6 shall be final, binding,
and conclusive.
Section 7. WRITTEN NOTICE REQUIRED. Any Director Option granted pursuant
to the terms of this Plan shall be exercised when written notice of that
exercise has been given to the Company at its principal office by the person
entitled to exercise the Director Option and full payment for the shares with
respect to which the Director Option is exercised has been received by the
Company.
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Section 8. COMPLIANCE WITH SECURITIES AND GAMING LAWS. Shares shall not be
issued with respect to any Director Option granted under the Plan unless the
exercise of that Director Option and the issuance and delivery of the shares
pursuant thereto shall comply with all relevant provisions of state and federal
law, including, without limitation, the Securities Act of 1933, as amended, the
rules and regulations promulgated thereunder and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance. The
nonemployee directors may also be required to furnish evidence satisfactory to
the Company, including a written and signed representation letter and consent to
be bound by any transfer restrictions imposed by law, legend, condition, or
otherwise, that the shares are being purchased only for investment purposes and
without any present intention to sell or distribute the shares in violation of
any state or federal law, rule, or regulation. Further, each nonemployee
director shall consent to the imposition of a legend on the shares of Common
Stock subject to his or her Director Option restricting their transferability as
required by law or by this Section 8. Finally, shares of Common Stock shall not
be issued with respect to any Director Option granted under the Plan unless the
exercise of that Director Option and the issuance and delivery of those shares
pursuant to that exercise shall comply with all relevant provisions of gaming
laws or regulations and any registration, approval, or action thereunder.
Section 9. CONTINUED SERVICE. Nothing in this Plan or in any Director
Option granted hereunder shall confer upon any nonemployee director any right to
continued membership on the Board.
Section 10. DIRECTOR OPTION RIGHTS UPON TERMINATION OF BOARD SERVICE. If a
nonemployee director who receives Director Options under this Plan ceases to be
a member of the Board for any reason other than death or disability, his or her
Director Option shall be exercisable at any time within three months after such
date.
Section 11. DIRECTOR OPTION RIGHTS UPON DISABILITY. If a nonemployee
director who receives Director Options under this Plan becomes disabled within
the meaning of Code Section 22(e)(3) while a member of the Board, his or her
Director Option shall be exercisable at any time within one year after such
date.
Section 12. DIRECTOR OPTION RIGHTS UPON DEATH. If a nonemployee director
who receives Director Options under this Plan dies while a member of the Board,
his or her Director Option shall expire one year after the date of death unless
by its terms it expires sooner. During this one year period, the Director Option
may be exercised, to the extent that it remains unexercised on the date of
death, by the person or persons to whom the nonemployee director's rights under
the Director Option shall pass by will or by the laws of descent and
distribution, but only to the extent that the nonemployee director is entitled
to exercise the Director Option at the date of death.
Section 13. DIRECTOR OPTIONS NOT TRANSFERABLE. Director Options granted
pursuant to the terms of this Plan may not be sold, pledged, assigned, or
transferred in any manner otherwise than by will or the laws of descent or
distribution and may be exercised during the lifetime of a nonemployee director
only by that nonemployee director. No such Director Options shall be pledged or
hypothecated in any way nor shall they be subject to execution, attachment, or
similar process.
Section 14. ADJUSTMENTS TO NUMBER AND PURCHASE PRICE OF OPTIONED
SHARES. All Director Options granted pursuant to the terms of this Plan shall
be adjusted in a manner prescribed by Article 6 of the General Provisions of the
Program.
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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 May 24, 1999 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 three directors to serve until the 2002 annual meeting of the
Company 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.)
Frank J. Fertitta III Lorenzo J. Fertitta Delise
F. Sartini
(2) To ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the Company's 1999 fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
(3) To approve the Company's Stock Compensation Program as amended to increase
the maximum aggregate number of shares of the Company's common stock subject
to the Stock Compensation Program and to remove the requirement of
stockholder approval to materially increase the benefits accruing to
participants under the Nonemployee Director Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
(4) To vote in their discretion on such other business as may properly come
before the Meeting or any adjournment thereof.
/ / FOR / / AGAINST / / ABSTAIN
(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--MAY 24, 1999,
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PRE-PAID
ENVELOPE.
